<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 24, 1996
REGISTRATION NO. 333-3229
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
RYERSON TULL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 5051 36-3431962
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
2621 WEST 15TH PLACE
CHICAGO, ILLINOIS 60608
(312) 762-2121
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
GEORGE A. RANNEY, JR.
VICE PRESIDENT AND GENERAL COUNSEL
30 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
(312) 346-0300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------
COPIES TO:
ROBERT E. CURLEY ROBERT H. CRAFT, JR.
MAYER, BROWN & PLATT SULLIVAN & CROMWELL
190 SOUTH LASALLE STREET 1701 PENNSYLVANIA AVENUE, N.W.
CHICAGO, ILLINOIS 60603 WASHINGTON, D.C. 20006
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock ($1.00
par value) including
preferred share purchase
rights...................... 6,000,000 shares $19.00 $114,000,000 $39,310.34(3)
</TABLE>
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(1) Includes 780,000 shares issuable upon exercise of options granted to the
Underwriters by the Company to cover over-allotments.
(2) Estimated solely for purposes of determining the registration fee.
(3) Previously paid.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
RYERSON TULL, INC.
CROSS REFERENCE SHEET
(PURSUANT TO ITEM 501(B) OF REGULATION S-K)
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER AND
CAPTIONS HEADING OR LOCATION IN PROSPECTUS
------------------------ ---------------------------------
<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Front Facing Page; Cross Reference Sheet; Outside
Cover Page of Prospectus..... Front Cover Page of Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus.... Inside Front and Outside Back Cover Pages
of Prospectus
3. Summary Information and Risk Prospectus Summary; Risk Factors
Factors......................
4. Use of Proceeds............... Use of Proceeds
5. Determination of Offering Underwriting
Price........................
6. Dilution...................... Dilution
7. Selling Security Holders...... *
8. Plan of Distribution.......... Risk Factors; Underwriting
9. Description of Securities to Description of Capital Stock
be Registered................
10. Interest of Named Experts and Validity of Class A Common Stock
Counsel......................
11. Information with Respect to Prospectus Summary; Risk Factors; Use of
the Registrant............... Proceeds; Dividend Policy; Capitalization;
Dilution; Selected Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management;
Relationship with ISI; Principal
Stockholder; Ownership of ISI Stock;
Description of Capital Stock; Shares
Eligible for Future Sale; Index to
Financial Statements
12. Disclosure of Commission
Position on Indemnification
for Securities Act *
Liabilities..................
</TABLE>
- --------
* Not applicable.
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two separate prospectuses. The first
prospectus relates to a public offering of Ryerson Tull, Inc.'s Class A Common
Stock ("Class A Common Stock") in the United States (the "U.S. Offering"). The
second prospectus relates to a concurrent offering of Class A Common Stock
outside the United States (the "International Offering"). The prospectuses for
the U.S. Offering and the International Offering will be identical with the
exceptions of the front cover page, a "Certain U.S. Tax Consequences to Non-
U.S. Stockholders" section, an "Underwriting" section and a back cover page
for the International Offering. Such alternate pages appear in this
Registration Statement immediately following the complete prospectus for the
U.S. Offering.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 24, 1996
5,220,000 SHARES
RYERSON TULL, INC.
LOGO CLASS A COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
----------
Of the 5,220,000 shares of Class A Common Stock offered, 4,176,000 shares are
being offered hereby in the United States and 1,044,000 shares are being
offered in a concurrent international offering outside the United States. The
initial public offering price and aggregate underwriting discount per share
will be identical for both Offerings. See "Underwriting."
All of the 4,176,000 shares of Class A Common Stock offered hereby are being
sold by the Company. Prior to the Offerings, there has been no public market
for the Class A Common Stock of the Company. It is currently estimated that the
initial public offering price per share will be between $16.00 and $19.00. For
factors to be considered in determining the initial public offering price, see
"Underwriting."
The Company is currently a wholly-owned subsidiary of Inland Steel
Industries, Inc. and, upon consummation of the Offerings, Inland Steel
Industries, Inc. will beneficially own 100% of the Company's outstanding
Class B Common Stock, which will represent approximately 86.7% of the economic
interest in the Company (85% if the Underwriters' over-allotment options are
exercised in full). See "Principal Stockholder."
Each share of Class A Common Stock entitles its holder to one vote, whereas
each share of Class B Common Stock entitles its holder to four votes. After
consummation of the Offerings, Inland Steel Industries, Inc. will beneficially
own shares having approximately 96.3% of the combined outstanding voting power
of all classes of voting stock of the Company (95.8% if the Underwriters' over-
allotment options are exercised in full). See "Description of Capital Stock--
Common Stock."
The Company intends to offer publicly $150,000,000 aggregate principal amount
of its Notes due 2001 and $100,000,000 aggregate principal amount of its Notes
due 2006. See "Proposed Note Offering."
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE CLASS A COMMON STOCK.
Application has been made to list the Class A Common Stock on the New York
Stock Exchange under the symbol "RT."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIESAND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HASTHE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
-------------- ------------ -----------
<S> <C> <C> <C>
Per Share............................... $ $ $
Total(3)................................ $ $ $
</TABLE>
- -----
(1) The Company and Inland Steel Industries, Inc. have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(2) Before deducting estimated expenses of $900,000 payable by the Company.
(3) The Company has granted the U.S. Underwriters an option for 30 days to
purchase up to an additional 624,000 shares at the initial public offering
price per share, less the underwriting discount, solely to cover over-
allotments. Additionally, the Company has granted the International
Underwriters a similar option with respect to an additional 156,000 shares
as part of the concurrent international offering. If such options are
exercised in full, the total initial public offering price, underwriting
discount and proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
----------
The shares offered hereby are offered severally by the U.S. Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York,
on or about , 1996, against payment therefor in immediately available
funds.
GOLDMAN, SACHS & CO. CS FIRST BOSTON
----------
The date of this Prospectus is , 1996.
<PAGE>
[PICTURES]
Page 2 Map of United States showing Ryerson Tull, Inc.'s
top facilities.
Caption: Ryerson Tull also owns 50% of Ryerson de
Mexico, a general line metals service center and
processor operating out of 18 facilities in Mexico.
Page 2 Photograph of warehouse interior, trucks loaded
bottom with metals and forklift.
Caption: Just-In-Time Deliveries
Ryerson Tull has a nationwide network of 52
facilities that place the Company within several
hundred miles of most of its customers. Information
technology integrates this network and generally
enables delivery of stock items to customers from
the most economical location within 24 hours.
Page 2A Photograph of computer screens illustrating
top electronic data interface for ordering products and
services.
Caption: Electonic Data Interfaces
All of Ryerson Tull's products and services can be
ordered by customers through EDI. Customers can
also transmit orders through other direct ordering
systems and can electronically transmit intricate
design specifications.
Page 2A Photograph of engineer viewing computer screen
Bottom Left illustration for part design.
Caption: Engineering and Cost Reduction Services
Ryerson Tull helps customers reduce their costs by
providing technical advice on part design.
Page 2A Photograph of metal rods and bars.
center Caption: Material Management Services
Ryerson Tull provides services such as material
selection and specification that help customers
find, purchase, inventory and take delivery of a
wide variety of industrial materials.
Page 2B Photograph of coil slitter in operation.
Top Left Caption: Material Processing Services
More than one-half of the material sold by Ryerson
Tull is processed. The Company uses techniques such
as sawing, slitting, pickling, cutting to length,
flame cutting, laser cutting, plate burning,
fabricating and grinding to process materials to
meet customer specifications.
Page 2B Photograph of Company employee marking parts for a
Top Right customer's inventory.
Caption: Outsourcing by Manufacturers
Ryerson Tull provides inventory management and
first stage processing and assembling for many
customers, allowing them to reduce capital and
respond more quickly to competition.
Page 2B Photograph of metals sawing process.
Bottom left
Bottom right Photograph of laser cutting process.
IN THIS PROSPECTUS, REFERENCE TO "DOLLARS" AND "$" ARE UNITED STATES
DOLLARS.
----------------
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A
COMMON STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK
STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
DURING THE OFFERINGS, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR
THE ACCOUNTS OF OTHERS IN THE CLASS A COMMON STOCK PURSUANT TO EXEMPTIONS FROM
RULES 10B-6, 10B-7 AND 10B-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information appearing elsewhere in this Prospectus. Unless otherwise
indicated, all information contained in this Prospectus assumes that the over-
allotment options granted to the Underwriters are not exercised. In addition,
unless the context requires otherwise, (i) "Ryerson Tull" or "Company" refers
to Ryerson Tull, Inc. and its consolidated subsidiaries, (ii) "ISI" refers to
Inland Steel Industries, Inc. and its consolidated subsidiaries, (iii) "U.S.
Offering" refers to the offering of shares of the Company's Class A Common
Stock, par value $1.00 per share (the "Class A Common Stock"), in the United
States, "International Offering" refers to the offering of such shares outside
the United States and "Offerings" refers to the U.S. Offering and the
International Offering collectively and (iv) "Note Offering" refers to the
proposed offering of $150 million aggregate principal amount of the Company's
Notes due 2001 and $100 million aggregate principal amount of the Company's
Notes due 2006 (collectively, the "Notes"). The Class A Common Stock and the
Company's Class B Common Stock, par value $1.00 per share (the "Class B Common
Stock"), are sometimes collectively referred to in this Prospectus as the
"Common Stock."
Prior to the consummation of the Offerings, the Company intends to effect a
recapitalization (the "Recapitalization") pursuant to which the one share
currently outstanding of the Company's common stock, par value $1.00 per share,
will be exchanged for 34,000,000 shares of Class B Common Stock. Unless
otherwise noted, information relating to the Company's Common Stock set forth
in this Prospectus assumes that the Recapitalization took place on December 31,
1995.
THE COMPANY
The Company, through its wholly-owned operating subsidiaries Joseph T.
Ryerson & Son, Inc. ("Ryerson") and J. M. Tull Metals Company, Inc. ("Tull"),
is a leading general line metals service center and processor of metals. The
Company believes that it is the largest metals service center in the United
States based on sales revenue, with 1995 sales of $2.5 billion and a current
U.S. market share of approximately 9%, more than twice the U.S. market share of
its nearest competitor, based on the Company's analysis of Steel Service Center
Institute (the "SSCI") data. The Company distributes and processes metals and
other materials throughout the continental United States and is among the
largest purchasers of steel in the United States. With 52 interconnected
facilities that place it within several hundred miles of most of its customers,
the Company is able to be responsive to specific customer requests and is
generally able to make deliveries of stock items within 24 hours of receipt of
a customer's order. Utilizing this network of facilities and the Company's
regionalized management systems, the Company believes it can be responsive to
individual customers while providing a broad range of products and services.
The Company also owns a 50% interest in Ryerson de Mexico, S.A. de C.V.
("Ryerson de Mexico"), a general line metals service center and processor with
18 facilities in Mexico.
Ryerson Tull was incorporated under the laws of the state of Delaware in
March 1986 as Inland Steel Services Holding, Inc., and its name was changed
from Inland Materials Distribution Group, Inc. to Ryerson Tull, Inc. in May
1996. Ryerson, the predecessor of the Company, was founded in 1842. The
Company's principal executive offices are located at 2621 West 15th Place,
Chicago, Illinois 60608, telephone number (312) 762-2121.
INDUSTRY OVERVIEW
The Company believes that the U.S. metals service center industry (the
"Industry") occupies a growing niche between primary producers of carbon, alloy
and stainless steels, aluminum and other metals and purchasers of those
products, including manufacturers and intermediate processors. Metals service
centers, including the Company, provide services not typically available from
primary
3
<PAGE>
producers, such as more reliable deliveries, smaller order sizes, the
convenience of dealing with a smaller number of suppliers, just-in-time
inventory management and customer-specific, value-added processing. The Company
believes that the role of metals service centers is expanding as a result of a
number of factors, including the increased outsourcing of inventory management
functions and metals processing operations by manufacturers and the lower cost
and more reliable service available from service centers as compared to primary
producers.
OPERATIONS
The Company is organized into five business units along regional and product
lines. This structure enables the Company to centralize certain administrative
support services while maintaining local organizations that are responsive to
the needs of specific customers and markets.
Each of the Company's facilities maintains a wide variety of inventory that
varies depending on the facility's size and customer demand, including carbon,
alloy and stainless steels, aluminum, red metals (such as brass and copper),
nickel and plastics. The Company purchases inventories from a number of
producers, primarily domestic. Purchases are typically made in large lots and
held in distribution centers until sold, usually in smaller quantities. These
materials are inventoried in a number of shapes, including coils, sheets,
rounds, hexagons, square and flat bars, plate, structurals and tubing. The
Company uses techniques such as sawing, slitting, blanking, pickling, cutting
to length, levelling, flame cutting, laser cutting, edge trimming, edge
rolling, fabricating and grinding to process materials to specified thickness,
length, width, shape and surface quality pursuant to specific customer orders.
More than one-half of the material sold by the Company is processed. The
Company's services include special stocking programs, just-in-time delivery,
inventory management (which includes the placement of Company employees at
customer sites), kits ready for assembly, programs that provide customers at
their places of business with Company-owned material which can be used as
needed by the customer, technical advice on part design and material
specification, and early stage material processing and fabrication.
BUSINESS STRATEGY
The Company's strategy is to expand its market leadership position as a
nationwide general line metals service center and processor of metals by
providing its customers with high quality products and services at competitive
prices. The Company believes that increasing its market share will be an
effective means of increasing its profitability. One of the Company's goals is
to enhance its competitive position through the aggressive pursuit of organic
growth, strategic acquisitions, ongoing unit cost reductions and increased
asset productivity, although there can be no assurance that the Company will
achieve this goal. As part of its overall business strategy, the Company has
made substantial investments in management information systems that link its
operations and enhance interactions between the Company and its customers and
suppliers. Based on its size, which leads to cost efficiencies, the trend
towards consolidation in the number of suppliers used by customers, strategic
plant locations, broad product and service offerings and management's
acquisition strategy, the Company believes that it is well positioned to take
advantage of the anticipated growth and consolidation in the Industry.
ORGANIC GROWTH
One of the Company's goals is to expand its market leadership position within
the Industry through competitive pricing, broad product and service offerings
and the use of technology to improve customer service. The Company's large
size, buying power and competitive cost structure enable it to negotiate
favorable prices for raw materials and to take advantage of producer economies
of scale resulting in lower costs of material purchased, allowing it to offer
its products and services at competitive prices. In addition, the Company's
broad product and service offerings provide customers one-stop shopping,
positioning the Company to capitalize on what it believes to be a continuing
trend towards
4
<PAGE>
consolidation in the number of suppliers used by customers. To this end, the
Company has initiated a national accounts program targeting customers that
purchase metal from a number of suppliers throughout the country. The Company
believes it can better serve these customers by providing competitive pricing
and superior delivery and quality. The Company's goal is to differentiate
itself from its competitors by providing materials and services on a more
timely basis and with fewer rejections than its competitors through increased
emphasis on quality control. The Company has received International Standards
Organization 9002 certification for five facilities and will seek certification
for additional facilities in the future.
STRATEGIC ACQUISITIONS
The Company believes that the fragmented nature of the Industry, combined
with the Company's strong national reputation, nationwide operations, market
leadership position and experience in integrating facility operations, make the
Company well situated to become a strategic buyer of service center assets. The
Company will seek selective acquisitions of businesses that complement, or
strategically extend, the Company's existing businesses. Acquired companies can
be either integrated into the Company's network or, depending on the
circumstances, operated as stand-alone facilities. In either case, the Company
believes that such acquisitions could enable it to realize further economies of
scale (particularly in operating cost, asset utilization and purchasing
leverage) and could better utilize the Company's existing facilities and
systems capability.
UNIT COST REDUCTIONS AND INCREASED PRODUCTIVITY
Another of the Company's goals is to decrease unit costs through initiatives
which include increasing volume, thereby taking advantage of economies of
scale, and increasing asset and employee productivity. The Company has made and
will continue to make investments in computer-based and automated systems that
track profitability by customer, product and cost of process, allowing the
Company to determine where changes can be made to reduce cost and increase
profitability. The Company intends to increase its emphasis on the use of
electronic links known as electronic data interfaces or "EDIs" with its
suppliers and customers to reduce the paperwork and administrative costs
associated with customer orders, shipment tracking, billing and remittance
processing. The Company continues to re-engineer its various work processes
through benchmarking analyses across its 52 facilities. Re-engineering enables
the Company to increase output without increasing its labor force by increasing
the efficiency with which work processes are performed.
COMPETITIVE STRENGTHS
The Company has a number of competitive strengths that it believes will
facilitate the implementation of the Company's strategy, including its market
leadership position and its management systems and practices.
MARKET LEADERSHIP POSITION
ECONOMIES OF SCALE. Because of the Company's large size, its costs of
operations can be spread across a large base of sales, resulting in lower fixed
costs per ton sold. The Company believes that available capacity at many of its
plants will allow it to achieve further economies of scale to the extent it
increases sales in the future. In addition, the size of the Company's material
purchases enables its suppliers to realize economies of scale and thereby
provide the Company with competitive prices.
SCOPE OF PRODUCTS AND SERVICES. The Company's broad product and service
offerings provide customers one-stop shopping for most of their metals needs.
In addition, the Company believes that its 52 facilities located throughout the
continental United States, generally within one day's delivery time of almost
all U.S. manufacturing centers, position it to target national customers that
currently
5
<PAGE>
buy metals from a variety of suppliers in different locations. The Company's
ability to transfer inventory among facilities enables it to have available
specialized items at regional locations throughout its network and to provide
such inventory on a timely basis more profitably than if it were required to
maintain inventory of all products at each location.
RELATIONSHIPS WITH SUPPLIERS. The Company is among the largest purchasers of
steel in the United States and is also a significant purchaser of aluminum in
the United States. The Company buys from and has developed relationships with
many U.S. steel producers as well as other metal producers. The Company's
relationships with numerous metal producers provide it access to high quality
metals, timely delivery and new product and service ideas from many suppliers.
In addition, because the Company purchases large volumes of metals, it can
negotiate competitive prices from its suppliers. In part because of its buying
power, the Company has been able to secure product from primary manufacturers
during times of tight supply.
MANAGEMENT SYSTEMS AND PRACTICES
The Company's management information systems have allowed management to
develop an internal benchmarking system and to track profitability by customer
and product. This detailed information enables management to make continuous
improvements such as reallocating slow-moving inventory to different locations
to increase inventory turns, improving purchasing, targeting customers or
changing suppliers as needed. The Company's 52 facilities provide it with a
large base for testing, comparing and implementing new management practices.
RELATIONSHIP WITH ISI
The Company is currently a wholly-owned subsidiary of ISI, which also owns
Inland Steel Company ("ISC"), the sixth largest steel producer in the United
States based on the number of tons shipped. Following the consummation of the
Offerings, the Company will continue to be controlled by ISI, which will
beneficially own all of the outstanding Class B Common Stock, representing
approximately 96.3% of the aggregate voting power of all of the Company's
Common Stock. The Company purchases steel from ISI and its affiliates. The
Company also purchases support functions from and has a tax sharing arrangement
with ISI. The Company intends to continue these relationships after the
Offerings. Ryerson is the guarantor of an obligation of the Inland Steel
Industries Thrift Plan ESOP Trust (the "ESOP Trust"), and the Company's
employees participate in the employee benefit plans of ISI other than the
Inland Steel Industries Pension Plan (the "ISI Pension Plan"). Effective April
30, 1996, that portion of the ISI Pension Plan covering the Company's current
and former employees was separated and became a new and separate plan sponsored
by the Company (the "Pension Plan"). See "Relationship with ISI."
RATIONALE FOR THE OFFERINGS AND NOTE OFFERING
The Company and ISI have decided to pursue the Offerings and the Note
Offering to assist them in realizing the strategic and financial objectives
that the managements of the Company and ISI have established for their
respective businesses. Prior to the consummation of the Offerings, the Company
will declare a dividend payable in cash in an amount equal to the estimated net
proceeds of the Offerings (estimated to be $84.4 million at an assumed initial
offering price of $17.50 per share (the mid-point of the price range set forth
on the cover page of this Prospectus)) and a dividend consisting of a $293.8
million note payable to ISI (the "Note Payable") maturing five years from its
date of issuance and bearing interest at a specified prime rate. The Note
Payable may be prepaid without
6
<PAGE>
penalty at the option of the Company. The estimated net proceeds from the
Offerings will be used to pay the cash dividend to ISI and will not be
available to the Company. All of the net proceeds from the Note Offering, if
consummated, together with a portion of the Company's available cash and/or
borrowings under credit facilities, will be used to discharge the Note Payable
to ISI. On May 20, 1996, the Company paid to ISI a dividend in the amount of
$75 million in cash (the "May 1996 Dividend" and, together with the dividends
to be declared prior to the consummation of the Offerings, the "Dividends").
Purchasers of Class A Common Stock in the Offerings will not receive any
portion of the Dividends. If the Note Offering is not consummated, the Note
Payable will remain an obligation of the Company and must be repaid from cash
generated from operations and/or future financings, the source, nature and
amount of which cannot currently be determined. The Company has historically
been dependent on cash flow from operations, limited borrowings from third
party lenders and contributions from ISI to fund its growth. The Company
believes that consummation of the Offerings and the Note Offering should
provide the Company with access to additional sources of capital to fund its
future growth.
ISI used a portion of the proceeds from the May 1996 Dividend to repay
intercompany indebtedness owed by ISI to the Company arising out of a
corporate-wide cash management program. After the repayment of such
indebtedness, the Company ceased participation in such program and the
Company's cash will no longer be held in ISI's accounts. ISI has informed the
Company that ISI intends to use the remaining proceeds from the Dividends to
retire ISI and ISC indebtedness and for general corporate purposes. See "Use of
Proceeds" and "Proposed Note Offering."
POTENTIAL DISTRIBUTION AND OTHER TRANSACTIONS
Upon consummation of the Offerings, ISI will beneficially own all of the
Class B Common Stock. ISI has advised the Company that after consummation of
the Offerings, ISI may hold such stock indefinitely, may distribute all or part
of such stock (in the form of Class A Common Stock) to ISI's stockholders (a
"Spin-off") or may sell such stock (in the form of Class A Common Stock) to
third parties in one or more transactions, although it has no commitments or
understandings to do any of the foregoing. See "Description of Capital Stock--
Common Stock--Conversion Rights." The completion of any such transaction would
be subject to a number of factors, including a determination by the Board of
Directors of ISI that the transaction would be in the best interests of its
stockholders and, in the case of a Spin-off, could be subject to the receipt of
a favorable ruling from the Internal Revenue Service (the "IRS") or an opinion
of counsel as to the tax-free nature of such transaction. Substantially all of
the shares of Class A Common Stock distributed in such a Spin-off or sale could
be eligible for immediate resale in the public market. See "Shares Eligible for
Future Sale--Potential Distribution and Other Transactions."
RISK FACTORS
Prospective purchasers of the Class A Common Stock offered hereby should
consider carefully the information set forth under "Risk Factors," in addition
to the other information set forth in this Prospectus, before purchasing any of
the Class A Common Stock, such as the risk factors set forth under the
following headings: "Control by Principal Stockholder," "Highly Competitive
Industry," "Cyclical Nature of Business," "Dividends to ISI and Resulting
Indebtedness," "Labor Contracts; Risk of Work Stoppage," "Potential for
Interruption in Sources of Supply and Volatile Price of Inventory," "Dependence
On Computer-Based Systems," "Reliance On Acquisitions for Expansion," "Holding
Company Structure; Restrictions on Dividends," "Benefits of the Offerings and
Note Offering to the Principal Stockholder," "Pension and Other Postretirement
Benefits," "Costs of Environmental Compliance," "Certain Relationships with
ISI," "Anti-Takeover Provisions," "Dilution," "No Prior Market for Class A
Common Stock" and "Shares Eligible for Future Sale."
7
<PAGE>
THE OFFERINGS
<TABLE>
<CAPTION>
Class A Common Stock offered by the
Company:
<S> <C>
U.S. Offering..................... 4,176,000 shares of Class A Common Stock
International Offering............ 1,044,000 shares of Class A Common Stock
Total............................ 5,220,000 shares of Class A Common Stock
Common Stock to be outstanding
after the Offerings:
Class A Common Stock.............. 5,220,000 shares(1)
Class B Common Stock.............. 34,000,000 shares
Total............................ 39,220,000 shares
Use of Proceeds.................... The estimated net proceeds of the Offerings
will be paid to ISI in the form of a cash
dividend declared prior to the consummation
of the Offerings. All of the net proceeds
of the Note Offering, if consummated, to-
gether with a portion of the Company's
available cash and/or borrowings under
credit facilities, will be used to dis-
charge the Note Payable that will be de-
clared as a dividend to ISI prior to the
consummation of the Offerings. See "Use of
Proceeds."
Voting Rights...................... The Class A Common Stock and Class B Common
Stock vote together as a single class on
all matters, except as otherwise required
by law, with each share of Class A Common
Stock entitling its holder to one vote and
each share of Class B Common Stock enti-
tling its holder to four votes. All of the
outstanding Class B Common Stock is held by
ISI. See "Description of Capital Stock--
Common Stock--Voting Rights." Under certain
circumstances, Class B Common Stock auto-
matically converts to Class A Common Stock.
See "Description of Capital Stock--Common
Stock--Conversion Rights."
Proposed New York Stock Exchange
("NYSE") Symbol................... RT
</TABLE>
- --------
(1) Assumes that the Underwriters' over-allotment options are not exercised. If
the over-allotment options are exercised in full, 6,000,000 shares of the
Class A Common Stock will be outstanding upon completion of the Offerings.
Excludes an aggregate of 2,400,000 shares of Class A Common Stock that has
been reserved for issuance under the Incentive Stock Plan (as defined
herein) and the Directors' Compensation Plan (as defined herein), including
shares of Class A Common Stock to be issued in the form of restricted stock
and shares of Class A Common Stock reserved for issuance upon exercise of
options, in each case to be issued upon consummation of the Offerings as
described below. Effective upon consummation of the Offerings, the
outstanding shares of restricted ISI common stock and options to purchase
shares of ISI common stock held by the Company's employees will be
converted into shares of restricted Class A Common Stock and options to
purchase shares of Class A Common Stock, to the extent provided by the
Compensation Committee. The number of shares of Class A Common Stock that
will be issued as restricted stock or subject to options will also vary
depending on the relative value of a share of ISI common stock and a share
of Class A Common Stock on the applicable valuation date. Assuming that as
of the applicable valuation date the value of a share of ISI common stock
is $22.875 (the last reported sales price on the NYSE on May 21, 1996),
that the value of a share of Class A Common Stock is $17.50 (the mid-point
of the offering range set forth on the cover page of this Prospectus) and
that no shares of restricted ISI common stock or options to purchase ISI
common stock held by Company officers who are also ISI officers will be
converted into shares of restricted Class A Common Stock or options to
purchase shares of Class A Common Stock, 39,149 shares of Class A Common
Stock would be issued in the form of restricted stock and 870,898 shares of
Class A Common Stock would be reserved for issuance upon exercise of
options outstanding upon consummation of the Offerings. See "Management--
Directors' Compensation" and "--Ryerson Tull 1996 Incentive Stock Plan."
8
<PAGE>
PROPOSED NOTE OFFERING
The Company has filed a registration statement with the Securities and
Exchange Commission (the "Commission") relating to the Note Offering. All of
the net proceeds of the Note Offering, if consummated, together with a portion
of the Company's available cash and/or borrowings under credit facilities, will
be used to discharge the Note Payable to ISI that will be declared as a
dividend to ISI prior to the consummation of the Offerings. Because the Note
Offering is subject to a variety of market, economic and other factors, there
can be no assurance that the Note Offering will be consummated. It is expected
that the Note Offering would be consummated shortly after the consummation of
the Offerings. See "Proposed Note Offering" and "Use of Proceeds."
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- -----------
(IN MILLIONS, EXCEPT PER SHARE DATA, NUMBER OF EMPLOYEES AND
RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net sales............... $1,655.9 $1,716.6 $1,893.3 $2,197.5 $2,450.1 $ 652.3 $625.3
Operating costs......... 1,639.7 1,689.5 1,836.9 2,099.4 2,301.4 610.2 588.7
-------- -------- -------- -------- -------- -------- ------
Operating profit........ 16.2 27.1 56.4 98.1 148.7 42.1 36.6
General corporate
expense, net of income
items.................. 10.6 8.4 7.4 6.9 0.7 0.4 (0.7)
Interest and other ex-
pense on debt.......... 17.1 12.8 10.9 2.9 2.6 0.7 0.6
-------- -------- -------- -------- -------- -------- ------
Income or (loss) before
income taxes........... (11.5) 5.9 38.1 88.3 145.4 41.0 36.7
Provision for income
taxes.................. 2.3Cr. 2.6 11.4 35.0 56.9 16.5 14.3
-------- -------- -------- -------- -------- -------- ------
Income or (loss) before
cumulative
effect of changes in
accounting
principles............. (9.2) 3.3 26.7 53.3 88.5 24.5 22.4
Cumulative effect of
changes in accounting
principles(1).......... -- (84.1) -- -- -- -- --
-------- -------- -------- -------- -------- -------- ------
Net income or (loss).... $ (9.2) $ (80.8) $ 26.7 $ 53.3 $ 88.5 $ 24.5 $ 22.4
======== ======== ======== ======== ======== ======== ======
PRO FORMA DATA(2):
Earnings per share of
Common Stock........... $ 1.86 $ 0.53 $ 0.47
Weighted average number
of shares of Common
Stock outstanding...... 39.2 39.2 39.2
OPERATING DATA:
Tons shipped............ 1.74 1.87 2.08 2.33 2.35 .63 .64
Number of employees at
period end............. 5,224 5,040 5,093 5,158 4,993 5,206 4,965
EBITDA(3)............... $ 25.3 $ 38.8 $ 69.6 $ 112.4 $ 169.8 $ 47.1 $ 42.9
Capital Expenditures.... 9.8 9.3 19.3 20.4 19.3 3.0 3.0
Ratio of earnings to
fixed charges(4)....... 0.5x 1.3x 3.3x 11.8x 19.2x 21.5x 21.4x
<CAPTION>
AS OF MARCH 31,1996
---------------------
AS
ACTUAL ADJUSTED(5)
-------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET (END OF
PERIOD):
Operating working capi-
tal(6)................. $ 320.9 $ 296.9 $ 363.5 $ 366.7 $ 373.0 $ 423.3 $423.3
Total assets............ 748.1 765.4 842.3 891.3 972.6 1,010.9 935.9
Long-term debt.......... 31.0 25.7 28.2 23.6 18.9 18.4 312.2
Stockholder's equi-
ty(7).................. 430.7 350.0 526.7 580.0 668.5 690.9 322.1
</TABLE>
9
<PAGE>
(1) The cumulative effect on prior years' results of operations of adopting,
effective January 1, 1992, Financial Accounting Standards Board ("FASB")
Statement No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," was $72.3 million and of adopting FASB Statement No. 109,
"Accounting for Income Taxes," was $11.8 million.
(2) The pro forma data gives effect to the Offerings at an assumed initial
public offering price of $17.50 per share (the mid-point of price range set
forth on the cover page of this Prospectus) and the dividend of the Note
Payable (at an assumed average interest rate of 8.80% for the year ended
December 31, 1995 and 8.50% for the three months ended March 31, 1996) as
if such transactions had occurred on January 1, 1995. The pro forma
earnings per share of the Common Stock do not give effect to the Note
Offering or the borrowing of up to $50 million under credit facilities,
both of which will result in increased interest expense in an amount that
cannot presently be determined.
(3) Earnings before interest, taxes, depreciation and amortization ("EBITDA")
for any relevant period presented above represents operating profit less
general corporate expense, net of income items, plus depreciation and
amortization of goodwill and other intangibles. While EBITDA should not be
construed as a substitute for operating income or a better indicator of
liquidity than cash flow from operating activities, which are determined in
accordance with generally accepted accounting principles, it is included
herein to provide additional information with respect to the ability of the
Company to meet its future debt service, capital expenditure and working
capital requirements. EBITDA is not necessarily a measure of the Company's
ability to fund its cash needs. See the Company's Consolidated Financial
Statements and the related notes thereto appearing elsewhere in this
Prospectus.
(4) Earnings for the calculation of the ratio of earnings to fixed charges
consist of income before income taxes. Earnings are increased by fixed
charges and previously capitalized interest amortized during the period.
Fixed charges consist of total interest charges (including capitalized
interest), amortization of debt expense and an appropriate share of rental
expense.
(5) Adjusted to reflect the Dividends to ISI and the Offerings at an assumed
initial public offering price of $17.50 per share (the mid-point of price
range set forth on the cover page of this Prospectus) and the application
of the estimated net proceeds therefrom. Giving effect to the Note Offering
and the application of the estimated net proceeds therefrom, together with
the borrowing of $50 million under credit facilities, to discharge the Note
Payable, long-term debt would be $268.4 million.
(6) Includes trade receivables and inventories less trade accounts payable and
accrued current liabilities.
(7) During the year ended December 31, 1993, ISI made a $150 million capital
contribution to the Company.
10
<PAGE>
RISK FACTORS
Prospective purchasers should carefully consider the following factors,
together with other information in this Prospectus, in evaluating an
investment in the Class A Common Stock.
CONTROL BY PRINCIPAL STOCKHOLDER
Upon consummation of the Offerings, ISI will own in the aggregate 34,000,000
shares of Class B Common Stock, representing all of the outstanding shares of
Class B Common Stock. Each share of Class A Common Stock is entitled to one
vote, while each share of Class B Common Stock is entitled to four votes.
Consequently, ISI will control approximately 96.3% of the voting power of the
Company and will be able to elect the entire Board of Directors, thereby
controlling the management, policies and conduct of the business of the
Company, as well as most matters submitted to a vote of the Company's
stockholders, including decisions regarding the acquisition or disposition of
the Company's assets, future issuances of Common Stock or other securities of
the Company and the declaration and payment of dividends on the Common Stock.
In addition, certain Directors and officers of the Company are also Directors
and officers of ISI. See "--Anti-Takeover Provisions," "Relationship with
ISI," "Principal Stockholder," "Description of Capital Stock--Common Stock"
and "--Corporate Governance."
ISI has advised the Company that after the consummation of the Offerings,
ISI may hold such stock indefinitely, may distribute all or part of such stock
(in the form of Class A Common Stock) to ISI's stockholders by means of a
Spin-off or may sell such stock (in the form of Class A Common Stock) to third
parties in one or more transactions, although it has no commitments or
understandings to do any of the foregoing. See "Description of Capital Stock--
Common Stock--Conversion Rights." The completion of such a transaction would
be subject to a number of factors, including a determination by the Board of
Directors of ISI that the transaction would be in the best interests of its
stockholders and, in the case of a Spin-off, could be subject to the receipt
of a favorable ruling from the IRS or an opinion of counsel as to the tax-free
nature of such transaction. Substantially all of the shares of Class A Common
Stock distributed in such a Spin-off or sale could be eligible for immediate
resale in the public market. See "Shares Eligible for Future Sale--Potential
Distribution and Other Transactions."
HIGHLY COMPETITIVE INDUSTRY
The Company is engaged in a highly fragmented and competitive Industry. In
general, competition is based on quality, service, price and geographic
proximity. The Company competes with many other metals service centers on a
regional and local basis, some of which may have greater financial resources
and flexibility than the Company. Some of the Company's competitors are
affiliated with foreign steelmakers, which at times can make price competition
intense. See "Business--Competition."
CYCLICAL NATURE OF BUSINESS
The Company's principal operations are cyclical due to its dependence on
customers in cyclical industries. During 1995, the Company shipped
approximately 38% of its product (by sales revenue) to machinery
manufacturers, 25% to metal producers and fabricators, 10% to transportation
equipment producers and 9% to electrical machinery producers, all of which
operate in cyclical industries. Any significant slowdown in any of these
industries could have a material adverse effect on the Company's results of
operations. See "Business--Customer Base."
DIVIDENDS TO ISI AND RESULTING INDEBTEDNESS
Prior to the consummation of the Offerings, the Company will declare a
dividend payable in cash in an amount equal to the estimated net proceeds of
the Offerings (estimated to be $84.4 million at an assumed initial offering
price of $17.50 per share (the mid-point of the price range set forth on the
cover page of this Prospectus)), and a dividend consisting of the Note
Payable. The estimated net
11
<PAGE>
proceeds from the Offerings will be used to pay the cash dividend to ISI and
will not be available to the Company. The Company anticipates that the Note
Payable will be discharged from the net proceeds of the Note Offering, if
consummated, together with a portion of the Company's available cash and/or
borrowings under credit facilities. Purchasers of Class A Common Stock in the
Offerings will not receive any portion of these dividends. If the Note
Offering is not consummated, the Note Payable will remain an obligation of the
Company and must be repaid from cash generated from operations and/or future
financings, the source, nature and amount of which cannot currently be
determined.
The payment of the Dividends to ISI and the associated indebtedness incurred
by the Company will result in the Company having substantial indebtedness in
relation to its total invested capital. At March 31, 1996, on a pro forma
basis after giving effect to the Offerings, the Note Offering and the payment
of the Dividends to ISI, the Company would have a ratio of long-term debt to
stockholders' equity of approximately .8 to 1. As a result, the Company's
ability to respond to changes in financial, business and economic conditions
may be limited. In addition, the indenture governing the Notes is expected to
contain covenants that may limit the Company's financial flexibility or
otherwise affect the conduct of the Company's future business.
The Company has received a definitive commitment letter from its lead
commercial bank to provide a four year, $250 million revolving credit facility
(the "New Credit Facility"), subject to certain customary conditions. The
Company expects that the New Credit Facility will contain covenants that may
limit the Company's financial flexibility or otherwise affect the conduct of
the Company's future business.
Finally, the indenture (the "ISI Note Indenture") governing ISI's 12 3/4%
Notes due 2002 (the "ISI Notes") currently contains covenants that prohibit
the Company from issuing debt, including the Notes, and otherwise limit the
Company's financial flexibility, and that may affect the conduct of the
Company's future business. Although ISI is soliciting consents from the
holders of the ISI Notes to amend the ISI Note Indenture to eliminate certain
of these covenants, there can be no assurance that ISI will be successful in
obtaining sufficient consents to such an amendment. See "Dividend Policy" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Financing."
LABOR CONTRACTS; RISK OF WORK STOPPAGE
The Company has experienced only minor localized disruptions in operations
as a result of labor-related issues. A portion of the employees at ten of the
Company's 52 facilities are organized by the United Steelworkers of America
(the "United Steelworkers"), representing approximately 485 employees, and a
portion of the employees at ten facilities are organized by the International
Brotherhood of Teamsters, Chauffeurs, Warehousemen & Helpers (the
"Teamsters"), representing approximately 280 employees. The Company's labor
contracts expire on staggered dates. The next material labor contract to
expire is the contract with the United Steelworkers, relating to all United
Steelworkers-represented facilities and employees, which expires on July 31,
1996. While management does not expect that work stoppages will arise in
connection with the renewal of labor agreements expiring in the foreseeable
future, no assurance can be given that work stoppages will not occur. A
widespread work stoppage could have a material adverse effect on the Company's
results of operations if it were to last for a significant period of time. See
"Business--Employees."
POTENTIAL FOR INTERRUPTION IN SOURCES OF SUPPLY AND VOLATILE PRICE OF
INVENTORY
The Company purchases its principal inventory, such as carbon steel,
stainless steel, alloy steel, aluminum and a variety of other metals and
plastics, from a number of producers, primarily domestic. Any interruption or
reduction in the supply of any of these materials may make it difficult or
impossible to satisfy customers' just-in-time delivery requirements, which
could have a material adverse effect on the Company's results of operations.
The domestic metals and plastics industries are cyclical due to
12
<PAGE>
significant excess capacity in times of reduced demand in the United States,
labor costs, foreign and domestic competition and other factors which can
result in volatile pricing of such metals and plastics. Because the Company
maintains substantial inventories of steel, other metals and plastics in order
to meet the just-in-time delivery requirements of its customers, price
decreases of such raw materials usually require the Company to lower its
selling prices, resulting in lower profit margins or, in some cases, losses.
In addition, the Company occasionally enters into fixed-price supply contracts
to purchase materials. If the market price of raw materials were to decline
below the fixed price set in such contracts, the Company could be required to
lower its selling prices, resulting in lower margins or, in some cases,
losses. Any long-term price decreases of materials, in light of the Company's
large inventories and fixed-price supply contracts, may have a material
adverse effect on the Company's results of operations. Further, during periods
of rapid price decreases of such materials, the Company may be unable to lower
its prices quickly enough to remain price competitive, which could have a
material adverse effect on sales. See "Business--Suppliers."
DEPENDENCE ON COMPUTER-BASED SYSTEMS
The Company depends to a significant degree on its computer-based systems in
the operation of its business and has taken customary precautions to protect
such systems. The destruction or the failure of any of such computer-based
systems for any significant period of time would have a material adverse
effect on the Company's results of operations. See "Business--Management
Information Systems."
RELIANCE ON ACQUISITIONS FOR EXPANSION
The Company seeks to pursue growth through acquisitions as well as through
joint ventures and expansions of its existing facilities. However, the Company
has not made any acquisitions since 1990 and there can be no assurance that
the Company will be able to negotiate and complete acquisitions, enter into
joint ventures or effectively expand its facilities in the future. Moreover,
the cost of acquisitions, joint ventures and expansions could adversely affect
the Company's results of operations, liquidity and financial stability as a
result of the incurrence of additional debt, start-up costs and
underutilization of new facilities during the start-up phase. Acquisitions and
joint ventures may result in unanticipated difficulties in integrating
acquired businesses with the Company's existing business and may absorb a
disproportionate amount of management time. In addition, any issuances of
capital stock in connection with an acquisition or joint venture would dilute
the ownership of the Company's existing stockholders. While the Company has
achieved profitable operation of businesses acquired in the past, there can be
no assurance that any future acquisitions, if completed, would be profitable.
See "Business--Business Strategy--Strategic Acquisitions."
HOLDING COMPANY STRUCTURE; RESTRICTIONS ON DIVIDENDS
Ryerson Tull, Inc. is a holding company and has no direct business
operations. As such, Ryerson Tull, Inc. is dependent on dividends or other
intercompany transfers of funds from its subsidiaries to enable it to pay
dividends and to meet its obligations. Certain debt instruments of Ryerson
Tull, Inc.'s subsidiaries and the ESOP Guarantee (as defined herein) permit
the payment of dividends and advances to Ryerson Tull, Inc. only if such
subsidiaries are in compliance with financial covenants contained in those
instruments and such guarantee. In addition, the indenture governing the
Notes, as well as the New Credit Facility, are expected to restrict Ryerson
Tull, Inc.'s ability to pay dividends and make other distributions on Ryerson
Tull, Inc.'s capital stock. As a result, Ryerson Tull, Inc.'s ability to pay
dividends on the Common Stock may be limited. See "Management's Discussion and
Analysis of Financial Conditions and Results of Operations--Liquidity and
Financing" and "Proposed Note Offering."
Following the consummation of the Offerings and the payment of the
Dividends, the Company does not anticipate paying any dividends for the
foreseeable future. See "Dividend Policy."
13
<PAGE>
BENEFITS OF THE OFFERINGS AND NOTE OFFERING TO THE PRINCIPAL STOCKHOLDER
All of the estimated net proceeds of the Offerings will be paid to ISI in
the form of a dividend declared prior to the consummation of the Offerings and
will not be available to the Company. All of the net proceeds of the Note
Offering, if consummated, together with a portion of the Company's available
cash and/or borrowings under credit facilities, will be paid to ISI to
discharge the Note Payable. Purchasers of Class A Common Stock in the
Offerings will not receive any portion of these dividends. See "Use of
Proceeds" and "Capitalization."
PENSION AND OTHER POSTRETIREMENT BENEFITS
Prior to April 30, 1996, certain employees of the Company were eligible to
participate in the ISI Pension Plan. Effective April 30, 1996, that portion of
the ISI Pension Plan covering the Company's current and former employees was
separated and became the Pension Plan, a new and separate plan sponsored by
the Company. If the Pension Plan had been in existence at the September 30,
1995 valuation date of the ISI Pension Plan, the projected benefit obligation
thereunder would have been $266 million and the share of the assets allocable
to the Pension Plan would have been $249 million, resulting in an underfunding
of $17 million for financial reporting purposes under Generally Accepted
Accounting Principles ("GAAP"). For purposes of calculating funding under the
Employee Retirement Income Security Act ("ERISA"), there will be no required
contribution in 1996 for the Pension Plan. However, regulations resulting from
recent federal legislation may accelerate future funding requirements. In
addition to pension benefits, the Company provides health care and life
insurance benefits to its eligible employees and retirees. The pension
benefits have been and will continue to be funded through a pension trust,
while health care and life insurance benefits are paid as incurred.
Under GAAP, the ISI Pension Plan, with $1.92 billion in assets, had unfunded
liabilities of $127 million at September 30, 1995. On an annualized basis,
individual yearly returns earned in the ISI Pension Plan have been volatile,
with the plan earning less than 1% in 1994, compared with over 20% in 1995.
The average annual return on the ISI Pension Plan over the last ten years has
been approximately 11%. ISI was required to record a $103 million additional
pension liability, offset by an intangible pension asset, on its year-end 1995
balance sheet. In May 1995, ISI contributed 3.9 million shares of its common
stock with an aggregate value of $100 million to the ISI Pension Plan. Most of
such shares continue to be held by the ISI Pension Plan and the Pension Plan
in amounts proportional to the assets in such plans. Under ERISA standards,
which take a longer term view than GAAP in determining the interest rate to
use in valuing liabilities, no contribution will be required in 1996 for the
ISI Pension Plan. See "--Certain Relationships with ISI."
Liabilities for health care and life insurance benefits are not funded. The
unfunded benefit liability reflected on the balance sheet of the Company as of
December 31, 1995 and March 31, 1996 was approximately $141.1 million and
$141.9 million (unaudited), respectively. The unfunded liability will continue
to grow as long as accrual-basis costs exceed cash benefit payments.
COSTS OF ENVIRONMENTAL COMPLIANCE
The Company's facilities and operations are subject to numerous federal,
state and local requirements relating to the protection of the environment,
including requirements governing air emissions, wastewater discharges,
hazardous materials handling and waste disposal. The Company has made and will
continue to make expenditures to comply with such provisions. Although the
Company believes that its facilities are presently in substantial compliance
with environmental laws and regulations, future events or regulatory
requirements could require the Company to make additional expenditures. While
the Company does not currently anticipate that costs of future compliance will
have a material adverse effect on the Company's results of operations or
financial
14
<PAGE>
condition, the amount and timing of future environmental expenditures are
subject to significant uncertainties and could vary substantially from those
presently anticipated and could have a material adverse effect on the
Company's financial condition. See "--Certain Relationships with ISI" and
"Business--Environmental, Health and Safety Matters."
CERTAIN RELATIONSHIPS WITH ISI
Ryerson is the guarantor of the ESOP Trust's obligation to repay the
principal amount of indebtedness incurred by the ESOP Trust, amounting to
$110.8 million as of March 31, 1996, plus interest. In addition, for purposes
of the ISI Pension Plan, the Company is a member of a "control group of
companies," which includes ISI and ISC, as determined by regulations
promulgated by the Pension Benefit Guaranty Corporation. The Company is also
part of ISI's consolidated group for tax purposes. As a result of these and
other relationships, under certain circumstances the Company could be jointly
and severally liable for certain of ISI's and ISC's ESOP Trust, pension,
environmental or tax liabilities.
ANTI-TAKEOVER PROVISIONS
ISI will be in a position to block any takeover as long as it retains voting
control of the Company. In addition, the Delaware General Corporation Law (the
"Delaware GCL"), the Certificate of Incorporation (as defined herein) and the
Company's amended and restated By-Laws which will become effective prior to
the consummation of the Offerings (the "By-Laws"), contain provisions that may
have the effect of delaying, preventing or making more difficult a takeover or
change in control of the Company, including, without limitation, a classified
Board of Directors, permitting stockholder action only by a meeting rather
than by written consent in lieu of a meeting, certain notice provisions and
authorization of the Company to issue preferred stock without the approval of
the Company's stockholders, the terms of which may be fixed by the Board of
Directors. Prior to the consummation of the Offerings, the Company intends to
adopt a stockholders' rights plan that may have the effect of delaying,
preventing or making more difficult a takeover or change in control of the
Company. Under certain conditions, Section 203 of the Delaware GCL would
impose a three-year moratorium on certain business combinations between a
Delaware corporation and an "interested stockholder" (in general, a
stockholder owning 15% or more of the Company's outstanding voting stock, but
excluding shares of voting stock held by ISI). See "Description of Capital
Stock--Preferred Stock," "--Anti-Takeover Effects of Delaware Law and
Certificate of Incorporation and By-Laws" and "--Rights Plan."
DILUTION
Purchasers of Class A Common Stock in the Offerings will experience
immediate dilution of approximately $9.88 per share of Class A Common Stock
purchased. See "Dilution."
NO PRIOR MARKET FOR CLASS A COMMON STOCK
Prior to the Offerings, there has been no public market for the Class A
Common Stock. Although the Company has applied to have the Class A Common
Stock listed on the NYSE, there can be no assurance that an active trading
market will develop or, if developed, that such market will be sustained. The
initial public offering price of the Class A Common Stock will be determined
by negotiation between the Company and Goldman, Sachs & Co. and CS First
Boston Corporation (as the representatives of the Underwriters) and may not be
indicative of the market price for shares of the Class A Common Stock after
the Offerings. There can be no assurance that a purchaser of Class A Common
Stock in the Offerings will be able to resell such Class A Common Stock at or
above the initial public offering price. See "Underwriting" for factors to be
considered in determining the initial public offering price of the Class A
Common Stock.
15
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Class A Common Stock or Class B
Common Stock (which would convert into shares of Class A Common Stock upon
such sale) in the public market following the Offerings could adversely affect
the market price for the Class A Common Stock. All of the shares of Class A
Common Stock sold in the Offerings will be freely saleable unless acquired by
affiliates of the Company. The Company and ISI have agreed not to offer, sell,
contract to sell or otherwise dispose of any additional shares of Class A
Common Stock or any shares of Class B Common Stock, any securities
substantially similar to the Class A Common Stock or Class B Common Stock or
any securities convertible into or exchangeable for Class A Common Stock or
Class B Common Stock or any such similar security (other than pursuant to
employee benefit plans existing, or on the conversion or exchange of
convertible or exchangeable securities outstanding, on the date of this
Prospectus), for a period of 180 days after the date of this Prospectus
without the prior written consent of the representatives of the Underwriters.
After expiration or waiver of such 180 day lock-up period, all of the shares
of Class B Common Stock (or shares of Class A Common Stock into which such
shares of Class B Common Stock may be converted) held by ISI will become
eligible for sale, without registration, under Rule 144 ("Rule 144") under the
Securities Act of 1933, as amended (the "Securities Act"), subject to the
volume and other restrictions of Rule 144. In addition, after the expiration
or waiver of such 180 day lock-up period, ISI will have the right to demand
registration under the Securities Act of shares of the Class A Common Stock
issuable upon conversion of its Class B Common Stock and shall have the right
to have such shares included in future registered public offerings of Class A
Common Stock by the Company. Finally, ISI has advised the Company that after
the consummation of the Offerings, ISI may continue to hold its shares of
Class B Common Stock indefinitely, may distribute all or part of such shares
to ISI's stockholders (in the form of Class A Common Stock) at some future
date by means of a Spin-off or may sell such stock to third parties (in the
form of Class A Common Stock) in one or more transactions, although it has no
commitments or understandings to do any of the foregoing. Substantially all of
the shares of Class A Common Stock distributed in a Spin-off or sale could be
eligible for immediate resale in the public market. See "Shares Eligible for
Future Sale."
An aggregate of 2,400,000 shares of Class A Common Stock has been reserved
for issuance under the Ryerson Tull 1996 Incentive Stock Plan (the "Incentive
Stock Plan") and the Ryerson Tull Directors' Compensation Plan (the
"Directors' Compensation Plan"), including shares of Class A Common Stock to
be issued in the form of restricted stock and shares of Class A Common Stock
reserved for issuance upon exercise of options, in each case to be issued upon
consummation of the Offerings as described below. Effective upon consummation
of the Offerings, the outstanding shares of restricted ISI common stock and
options to purchase shares of ISI common stock held by the Company's employees
will be converted into shares of restricted Class A Common Stock or options to
purchase shares of Class A Common Stock, provided that the Compensation
Committee may determine that any employee may receive restricted shares of
Class A Common Stock or options to purchase shares of Class A Common Stock
with respect to less than all of his or her shares of restricted ISI common
stock or options to purchase ISI common stock. The number of shares of Class A
Common Stock that will be issued as restricted stock or subject to options
will also vary depending on the relative value of a share of ISI common stock
and a share of Class A Common Stock on the applicable valuation date. Assuming
that as of the applicable valuation date the value of a share of ISI common
stock is $22.875 (the last reported sales price on the NYSE on May 21, 1996),
that the value of a share of Class A Common Stock is $17.50 (the mid-point of
the offering range set forth on the cover page of this Prospectus) and that no
shares of restricted ISI common stock or options to purchase ISI common stock
held by Company officers who are also ISI officers will be converted into
shares of restricted Class A Common Stock or options to purchase shares of
Class A Common Stock, 39,149 shares of Class A Common Stock would be issued in
the form of restricted stock and 870,898 shares of Class A Common Stock would
be reserved for issuance upon exercise of options outstanding upon
consummation of the Offerings. See "Management--Directors' Compensation" and
"--Ryerson Tull 1996 Incentive Stock Plan."
16
<PAGE>
Within 90 days after the date of this Prospectus, the Company intends to
register under the Securities Act an aggregate of 2,400,000 shares of Class A
Common Stock issuable in the form of restricted stock or upon exercise of
options or stock appreciation rights, or the vesting of performance awards,
granted or to be granted under the Incentive Stock Plan and the Directors'
Compensation Plan. Some of the holders of these shares of restricted stock and
stock options are subject to lock-up restrictions that will expire 180 days
after the date of this Prospectus. Shares of Class A Common Stock held in the
form of restricted stock as to which the restrictions have lapsed and shares
of Class A Common Stock issued upon the exercise of stock options or stock
appreciation rights, or the vesting of performance awards, will be eligible
for immediate resale in the public market, subject, as to shares held by
affiliates of the Company, to the volume and certain other limitations of Rule
144, and subject to the 180-day lock-up period described in the preceding
sentence. See "Shares Eligible for Future Sale."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Class A
Common Stock offered hereby are estimated to be approximately $84.4 million
($97.1 million if the Underwriters' over-allotment options are exercised in
full) assuming an initial public offering price of $17.50 per share (the mid-
point of the price range set forth on the cover page of this Prospectus),
after deducting estimated underwriting discounts and commissions and expenses
of the Offerings payable by the Company. All of the estimated net proceeds of
the Offerings will be paid to ISI in the form of a cash dividend declared
prior to the consummation of the Offerings and will not be available to the
Company. All of the net proceeds of the Note Offering, if consummated,
together with a portion of the Company's available cash and/or borrowings
under credit facilities, will be used to discharge the Note Payable that will
be declared as a dividend to ISI prior to the consummation of the Offerings.
DIVIDEND POLICY
The Company did not pay a cash dividend on its capital stock during 1994,
1995 or the first three months of 1996. Other than the Dividends to ISI
declared prior to the consummation of the Offerings, the Company anticipates
that it will retain all of its earnings for use in the expansion and operation
of its business and does not anticipate paying any cash dividends in the
foreseeable future. Purchasers of shares of Class A Common Stock will not
receive any portion of the Dividends. The Certificate of Incorporation
provides that any subsequent cash dividend declared must be paid equally,
share for share, on the outstanding Class A Common Stock and Class B Common
Stock. Any determination as to the payment of dividends will depend upon
future results of operations, capital requirements, the financial condition of
the Company and such other factors as the Board of Directors may consider,
including any contractual restrictions on the Company's ability to pay
dividends. The Company's subsidiaries are parties to agreements that, among
other things, require the Company's subsidiaries to meet certain financial
tests and restrict the ability of the Company's subsidiaries to pay dividends
and make other distributions on their shares of capital stock. In addition,
the indenture governing the Notes, as well as the New Credit Facility, are
expected to contain, among other things, provisions restricting the Company's
ability to pay dividends. See "Risk Factors--Holding Company Structure;
Restrictions on Dividends," "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Financing" and Notes 3 and
4 to the Company's Consolidated Financial Statements.
17
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1996 (i) after giving effect to the Recapitalization and the declaration
of the Dividends, (ii) as adjusted to give effect to the sale of the shares of
Class A Common Stock in the Offerings at an assumed initial offering price of
$17.50 per share (the mid-point of the price range set forth on the cover of
this Prospectus) and the application of the estimated net proceeds therefrom
to pay the cash dividend to ISI as set forth under "Use of Proceeds" and (iii)
as further adjusted to give effect to the Offering and the application of the
estimated net proceeds therefrom, the sale of the Notes in the Note Offering
and the application of the estimated net proceeds therefrom, together with
borrowings under credit facilities of $50 million, to discharge the Note
Payable as set forth under "Use of Proceeds." This table should be read in
conjunction with the Company's Consolidated Financial Statements and the
related notes thereto included elsewhere in this Prospectus. See "Use of
Proceeds" and "Description of Capital Stock."
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------------
AS ADJUSTED
FOR OFFERINGS
AS ADJUSTED AND NOTE
ACTUAL FOR OFFERINGS OFFERING
------ ------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
SHORT-TERM DEBT:
Short-term borrowings under credit
facility.................................. $ -- $ -- $ 50.0
Long-term debt due within one year......... 4.7 4.7 4.7
------ ------ ------
Total short-term debt..................... $ 4.7 $ 4.7 $ 54.7
====== ====== ======
LONG-TERM DEBT:
Notes due 2001............................. $ -- $ -- $150.0
Notes due 2006............................. -- -- 100.0
Note Payable............................... 293.8 293.8 --
Other...................................... 18.4 18.4 18.4
------ ------ ------
Total long-term debt...................... 312.2 312.2 268.4
------ ------ ------
STOCKHOLDERS' EQUITY:
Class A Common Stock, $1.00 par value,
100,000,000 shares authorized; no shares
issued or outstanding actual; 5,220,000
issued and outstanding as adjusted(1)..... -- 5.2 5.2
Class B Common Stock, $1.00 par value,
34,000,000 shares authorized; 34,000,000
shares issued and outstanding actual and
as adjusted............................... 34.0 34.0 34.0
Preferred Stock, $1.00 par value,
16,000,000 shares authorized; no shares
issued or outstanding actual or as
adjusted.................................. -- -- --
Additional paid-in capital................. 203.7 282.9 282.9
Retained earnings.......................... -- -- --
------ ------ ------
Total stockholders' equity................. 237.7 322.1 322.1
------ ------ ------
Total capitalization..................... $549.9 $634.3 $590.5
====== ====== ======
</TABLE>
- --------
(1) Excludes an aggregate of 2,400,000 shares that has been reserved for
issuance under the Incentive Stock Plan and the Directors' Compensation
Plan, including shares of Class A Common Stock to be issued in the form of
restricted stock and shares of Class A Common Stock reserved for issuance
upon exercise of options, in each case to be issued upon consummation of
the Offerings as described below. Effective upon consummation of the
Offerings, the outstanding shares of restricted ISI common stock and
options to purchase shares of ISI common stock held by the Company's
employees will be converted into shares of restricted Class A Common Stock
and options to purchase shares of Class A Common Stock, provided that the
Compensation Committee may determine that any employee may receive
restricted shares of Class A Common Stock or options to purchase shares of
Class A Common Stock with respect to less than all of his or her shares of
restricted ISI common stock or options to purchase ISI common stock. The
number of shares of Class A Common Stock that will be issued as restricted
stock or subject to options will also vary depending on the relative value
of a share of ISI common stock and a share of Class A Common Stock at the
applicable valuation date. Assuming that as of the applicable valuation
date the value of a share of ISI common stock is $22.875 (the last
reported sales price on the NYSE on May 21, 1996), that the value of a
share of Class A Common Stock is $17.50 (the mid-point of the offering
range set forth on the cover page of this Prospectus) and that no shares
of restricted ISI common stock or options to purchase shares of ISI common
stock held by Company officers who are also ISI officers will be converted
into shares of restricted Class A Common Stock or options to purchase
shares of Class A Common Stock, 39,149 shares of Class A Common Stock
would be issued in the form of restricted stock and 870,898 shares of
Class A Common Stock would be reserved for issuance upon exercise of
options outstanding upon consummation of the Offerings. See "Management--
Directors' Compensation" and "--Ryerson Tull 1996 Incentive Stock Plan."
18
<PAGE>
DILUTION
As of March 31, 1996, the Company had a net tangible book value of $214.4
million or $6.31 per share of Common Stock, after giving effect to the
Recapitalization and the declaration of the Dividends to ISI. Net tangible
book value per share is defined as the book value of the Company's tangible
assets, less all liabilities, divided by the number of shares of Common Stock
outstanding. After giving effect to the sale by the Company of the 5,220,000
shares of Class A Common Stock in the Offerings at an assumed initial public
offering price of $17.50 per share (the mid-point of the price range set forth
in the cover page of this Prospectus), after deduction of estimated
underwriting discounts and commissions and expenses of the Offerings payable
by the Company, and the application of the estimated net proceeds therefrom to
pay the cash dividend to ISI, the Company's pro forma net tangible book value
as of March 31, 1996 would have been $298.8 million or $7.62 per share of
Common Stock, representing an immediate increase in net tangible book value of
$1.31 per share to the existing stockholder and an immediate dilution to new
investors of $9.88 per share. The following table illustrates the dilution in
net tangible book value per share to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $17.50
Net tangible book value per share at March 31, 1996.......... $6.31
Increase in net tangible book value per share attributable to
new investors............................................... 1.31
-----
Pro forma net tangible book value per share after the Offer-
ings.......................................................... 7.62
------
Dilution per share to new investors............................ $ 9.88(1)
======
</TABLE>
- --------
(1) Excludes an aggregate of 2,400,000 shares that has been reserved for
issuance under the Incentive Stock Plan and the Directors' Compensation
Plan, including shares of Class A Common Stock to be issued in the form of
restricted stock and shares of Class A Common Stock reserved for issuance
upon exercise of options, in each case to be issued upon consummation of
the Offerings as described below. Effective upon consummation of the
Offerings, the outstanding shares of restricted ISI common stock and
options to purchase shares of ISI common stock held by the Company's
employees will be converted into shares of restricted Class A Common Stock
and options to purchase shares of Class A Common Stock, provided that the
Compensation Committee may determine that any employee may receive
restricted shares of Class A Common Stock or options to purchase shares of
Class A Common Stock with respect to less than all of his or her shares of
restricted ISI common stock or options to purchase ISI common stock. The
number of shares of Class A Common Stock that will be issued as restricted
stock or subject to options will also vary depending on the relative value
of a share of ISI common stock and a share of Class A Common Stock at the
applicable valuation date. Assuming that as of the applicable valuation
date the value of a share of ISI common stock is $22.875 (the last
reported sales price on the NYSE on May 21, 1996), that the value of a
share of Class A Common Stock is $17.50 (the mid-point of the offering
range set forth on the cover page of this Prospectus) and that no shares
of restricted ISI common stock or options to purchase ISI common stock
held by Company officers who are also ISI officers will be converted into
shares of restricted Class A Common Stock or options to purchase shares of
Class A Common Stock, 39,149 shares of Class A Common Stock would be
issued in the form of restricted stock and 870,898 shares of Class A
Common Stock would be reserved for issuance upon exercise of options
outstanding upon consummation of the Offerings. For a more detailed
explanation of the formula see "Management--Directors' Compensation" and
"--Ryerson Tull 1996 Incentive Stock Plan." The issuance of such
restricted Class A Common Stock and the exercise of any of such options
for Class A Common Stock may result in further dilution to new investors.
19
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data presents the consolidated results of
operations for the five years ended December 31, 1995 and the three-month
periods ended March 31, 1995 and 1996, and should be read in conjunction with
the Company's Consolidated Financial Statements and the related notes thereto
appearing elsewhere in this Prospectus. The summary for each of the years in
the three-year period ended December 31, 1995 has been derived from the
Company's Consolidated Financial Statements and related notes appearing
elsewhere in this Prospectus, which have been audited by Price Waterhouse LLP,
the Company's independent accountants. The summary for each of the years in
the two-year period ended December 31, 1992 has been derived from separate
audited Consolidated Financial Statements of the Company.
The summary for the three-month periods ended March 31, 1995 and 1996 has
been derived from the Company's unaudited consolidated financial statements
appearing elsewhere in this Prospectus. The information for interim periods is
unaudited, but, in the opinion of the Company, reflects all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the results of operations and financial condition for such
periods. Results for interim periods should not be considered as indicative of
results for any other periods or for the year. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- ------ --------
(IN MILLIONS, EXCEPT PER SHARE DATA, NUMBER OF EMPLOYEES AND
RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net sales............... $1,655.9 $1,716.6 $1,893.3 $2,197.5 $2,450.1 $652.3 $ 625.3
Operating costs......... 1,639.7 1,689.5 1,836.9 2,099.4 2,301.4 610.2 588.7
-------- -------- -------- -------- -------- ------ --------
Operating profit........ 16.2 27.1 56.4 98.1 148.7 42.1 36.6
General corporate
expense, net of income
items.................. 10.6 8.4 7.4 6.9 0.7 0.4 (0.7)
Interest expense and
other expense on debt.. 17.1 12.8 10.9 2.9 2.6 0.7 0.6
-------- -------- -------- -------- -------- ------ --------
Income or (loss) before
income taxes........... (11.5) 5.9 38.1 88.3 145.4 41.0 36.7
Provision for income
taxes.................. 2.3Cr. 2.6 11.4 35.0 56.9 16.5 14.3
-------- -------- -------- -------- -------- ------ --------
Income or (loss) before
cumulative effect of
changes in accounting
principles............. (9.2) 3.3 26.7 53.3 88.5 24.5 22.4
Cumulative effect of
changes in accounting
principles(1).......... -- (84.1) -- -- -- -- --
-------- -------- -------- -------- -------- ------ --------
Net income or (loss).... $ (9.2) $ (80.8) $ 26.7 $ 53.3 $ 88.5 $ 24.5 $ 22.4
======== ======== ======== ======== ======== ====== ========
PRO FORMA DATA(2):
Earnings per share of
Common Stock........... $ 1.86 $ 0.53 $ 0.47
Weighted average number
of shares of Common
stock outstanding...... 39.2 39.2 39.2
OPERATING DATA:
Tons shipped............ 1.74 1.87 2.08 2.33 2.35 .63 .64
Number of employees at
period end............. 5,224 5,040 5,093 5,158 4,993 5,206 4,965
EBITDA(3)............... $ 25.3 $ 38.8 $ 69.6 $ 112.4 $ 169.8 $ 47.1 $ 42.9
Capital Expenditures.... 9.8 9.3 19.3 20.4 19.3 3.0 3.0
Ratio of earnings to
fixed charges(4)....... 0.5x 1.3x 3.3x 11.8x 19.2x 21.5x 21.4x
BALANCE SHEET (END OF
PERIOD):
Operating working capi-
tal(5)................. $ 320.9 $ 296.9 $ 363.5 $ 366.7 $ 373.0 $425.9 $ 423.3
Total assets............ 748.1 765.4 842.3 891.3 972.6 924.0 1,010.9
Long-term debt.......... 31.0 25.7 28.2 23.6 18.9 23.0 18.4
Stockholder's equi-
ty(6).................. 430.7 350.0 526.7 580.0 668.5 604.5 690.9
</TABLE>
- --------
(1) The cumulative effect on prior years' results of operations of adopting,
effective January 1, 1992, FASB Statement No. 106, "Employers' Accounting
for Postretirement Benefits Other Than
20
<PAGE>
Pensions" was $72.3 million and for adopting FASB Statement No. 109,
"Accounting for Income Taxes" was $11.8 million.
(2) The pro forma data gives effect to the Offerings at an assumed initial
public offering price of $17.50 per share (the mid-point of the price
range set forth on the cover page of this Prospectus) and the dividend of
the Note Payable (at an assumed interest rate of 8.80% for the year ended
December 31, 1995 and 8.50% for the three months ended March 31, 1996) as
if such transactions had occurred on January 1, 1995. The pro forma
earnings per share of the Common Stock do not give effect to the Note
Offering or the borrowing of $50 million under credit facilities, both of
which will result in increased interest expense in an amount that cannot
presently be determined.
(3) EBITDA for any relevant period presented above represents operating profit
less general corporate expense, net of income items, plus depreciation and
amortization of goodwill and other intangibles. While EBITDA should not be
construed as a substitute for operating income or a better indicator of
liquidity than cash flow from operating activities, which are determined
in accordance with generally accepted accounting principles, it is
included herein to provide additional information with respect to the
ability of the Company to meet its future debt service, capital
expenditure and working capital requirements. EBITDA is not necessarily a
measure of the Company's ability to fund its cash needs. See the Company's
Consolidated Financial Statements and the related notes thereto appearing
elsewhere in this Prospectus.
(4) Earnings for the calculation of the ratio of earnings to fixed charges
consist of income before income taxes. Earnings are increased by fixed
charges and previously capitalized interest amortized during the period.
Fixed charges consist of total interest charges (including capitalized
interest), amortization of debt expense and an appropriate share of rental
expense.
(5) Includes trade accounts receivable and inventories less trade accounts
payable and accrued current liabilities.
(6) During the year ended December 31, 1993, ISI made a $150 million capital
contribution to the Company.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's net sales increased 48% to $2.5 billion in 1995 from $1.7
billion in 1991. During that same period, operating profit increased to 6.1%
of sales, totalling $148.7 million in 1995, from 1% of sales, totalling $16.2
million in 1991, and the number of tons shipped by the Company increased 36%
while the number of the Company's employees declined 4.4%. The Company
attributes the increase in its net sales, operating profit and tons shipped
and the decrease in the number of its employees to an improved economic
environment, an increased emphasis on cost control and productivity
improvements and marketing and sales programs targeted at sales of products
with higher profit margins.
Beginning in 1990, the Company instituted a number of initiatives intended
to reduce costs and improve asset utilization. The Company reorganized its
operations into five business units along product and geographic lines,
providing each business unit with the flexibility to meet customer needs while
making each business unit fully accountable for its results of operations. The
Company upgraded, and intends to continue upgrading, its computer-based
inventory and management information systems to measure and improve
productivity for each of its facilities and each of its processes. Since the
fourth quarter of 1994, the number of the Company's employees has decreased 4%
(mostly through attrition), while daily shipment levels have increased 6%.
During the same period, the Company successfully integrated the operations of
under-performing facilities in Jersey City and Boston into existing plants in
Philadelphia and Wallingford, Connecticut. The Company has also updated its
inventory measurement system and made significant changes in compensation,
recruiting and career management processes to better align employee goals with
the Company's objectives. The Company believes that these initiatives have
contributed significantly to the decline in the Company's operating costs (as
a percentage of sales) since 1991.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain income
statement data of the Company expressed as a percentage of net sales.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------- --------------
1993 1994 1995 1995 1996
------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Net sales....................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs................. 97.0 95.5 93.9 93.5 94.1
------- ------- ------- ------ ------
Operating profit................ 3.0 4.5 6.1 6.5 5.9
General corporate expense, net
of income items................ 0.4 0.3 0.0 0.1 (0.1)
Interest expense and other
expense on debt................ 0.6 0.2 0.2 0.1 0.1
------- ------- ------- ------ ------
Income before income taxes...... 2.0 4.0 5.9 6.3 5.9
Provision for income taxes...... 0.6 1.6 2.3 2.5 2.3
------- ------- ------- ------ ------
Net income...................... 1.4% 2.4% 3.6% 3.8% 3.6%
======= ======= ======= ====== ======
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31,
1995
NET SALES. Net sales decreased 4.1% to $625.3 million for the three months
ended March 31, 1996 ("First Quarter 1996") from $652.3 million for the three
months ended March 31, 1995 ("First Quarter 1995"). Tons shipped increased
1.8% in First Quarter 1996 from First Quarter 1995, while selling prices per
ton declined 5.9%. The demand for metals and the U.S. economy were not as
strong in First Quarter 1996 as in First Quarter 1995. According to the SSCI,
the number of tons of steel
22
<PAGE>
shipped in the U.S. market by the Industry decreased 6.9% in First Quarter
1996 from the year earlier quarter. However, the Company was able to increase
its number of tons shipped by increasing its market share in First Quarter
1996 from First Quarter 1995, based on the Company's analysis of SSCI data.
The relative weakness in demand in First Quarter 1996 caused selling prices
per ton to decline 5.9% to $979 in First Quarter 1996 from $1,040 in First
Quarter 1995.
OPERATING COSTS. Operating costs decreased 3.5% to $588.7 million in First
Quarter 1996 from $610.2 million in First Quarter 1995. The Company's
operating costs consist of material purchases and other operating costs.
Material purchases decreased 4.3% to $477.2 million in First Quarter 1996 from
$498.4 million in First Quarter 1995. Material purchases per ton decreased 6%
or $48 to $747 in First Quarter 1996 from $795 in First Quarter 1995 due to
falling prices as demand weakened.
Other operating costs decreased 0.3% to $111.5 million in First Quarter 1996
from $111.8 million in First Quarter 1995. These costs include such expenses
as plant and office employee-related costs (e.g., wages, salaries, benefits,
incentive pay), freight expenses, plant supplies and maintenance, systems
costs, depreciation and state and local taxes. Since tons shipped increased
1.8% in First Quarter 1996 from First Quarter 1995, the decline in operating
costs is attributable to a reduction in other operating costs per ton of $3 to
$175 in First Quarter 1996 from $178 in the year earlier quarter. The total
number of Company employees declined 4.6% to 4,965 at March 31, 1996 from
5,206 at March 31, 1995 as tons shipped increased over the same period.
OPERATING PROFIT. Operating profit decreased 13.1% to $36.6 million in First
Quarter 1996 from $42.1 million in First Quarter 1995 as lower demand resulted
in reduced selling prices and lower gross profit per ton, partly offset by
lower expenses. Since selling prices per ton declined $61 in First Quarter
1996 from First Quarter 1995 and material purchases per ton fell $48 over that
period, gross profit per ton decreased $13 to $232 in First Quarter 1996 from
$245 in First Quarter 1995.
GENERAL CORPORATE EXPENSE, NET OF INCOME ITEMS. General corporate expense,
which represents the charge from ISI for services rendered to the Company,
decreased slightly to $1.7 million in First Quarter 1996 from $1.8 million in
First Quarter 1995. Other revenue, principally interest income from
investments in short-term marketable securities and from intercompany loans to
ISI, increased to $2.4 million in First Quarter 1996 from $1.4 million in
First Quarter 1995, primarily due to increased cash flow generated in 1995.
INTEREST EXPENSE AND OTHER EXPENSE ON DEBT. Interest expense and other
expense on debt decreased slightly to $0.6 million in the First Quarter 1996
from $0.7 million in the First Quarter 1995 due to reduced debt levels.
INCOME BEFORE INCOME TAXES. Income before income taxes decreased to 5.9% of
net sales in the First Quarter 1996 from 6.3% in the First Quarter 1995 for
the reasons discussed above.
PROVISION FOR INCOME TAXES. Provision for income taxes decreased 13.3% to
$14.3 million in the First Quarter 1996 from $16.5 million in the First
Quarter 1995 due primarily to the decrease in taxable income and to a slight
reduction in the effective tax rate, which decreased to 39.0% in the First
Quarter 1996 from 40.2% in the First Quarter 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
NET SALES. Net sales increased 11.5% to $2.5 billion in 1995 from $2.2
billion in 1994. Tons shipped rose 0.8% in 1995 from 1994, while selling
prices per ton increased 10.6% over the same period. Tons shipped increased
due to a slight improvement in demand, which according to the SSCI increased
by 1% in 1995 compared to 1994. Based on the Company's analysis of SSCI data,
the Company's market share remained relatively constant from 1994 to 1995. The
Company's selling prices per ton increased $100 to $1,044 in 1995 from $944 in
1994, primarily due to higher prices in the Industry.
23
<PAGE>
OPERATING COSTS. Operating costs increased 9.6% to $2.3 billion in 1995 from
$2.1 billion in 1994. Material purchases increased 11.4% to $1.9 billion in
1995 from $1.7 billion in 1994. Material purchases per ton increased 10.4% or
$75 to $798 in 1995 from $723 in 1994, as a result of higher market prices.
Other operating costs increased 2.6% to $428 million in 1995 from $417
million in 1994 and increased 1.7% on a per ton basis to $182 in 1995 from
$179 in 1994. The increase in other operating costs is partly attributable to
the 0.8% increase in tons shipped in 1995 compared to 1994. The increase in
other operating costs on a per ton basis resulted from higher incentive pay
due to improved profits, recognition of costs associated with the Company's
closing of its facility located in New Jersey, higher spending for systems-
related activities and inflation. The Company's total number of employees
declined 3.2% to 4,993 at the end of 1995 from 5,158 at the end of 1994 as
tons shipped increased over the same period.
OPERATING PROFIT. Operating profit increased 51.6% to $148.7 million in 1995
from $98.1 million in 1994, primarily due to improved gross profit per ton and
a modest increase in the volume of tons shipped. Since selling prices per ton
increased by $100 in 1995 compared to 1994, and material purchases per ton
rose $75, gross profit per ton for the Company increased by $25 to $246 in
1995 from $221 in 1994.
GENERAL CORPORATE EXPENSE, NET OF INCOME ITEMS. General corporate expense
decreased slightly to $6.8 million in 1995 from $7.4 million in 1994 because
of continued cost reduction efforts at ISI. Other revenue, principally
interest income, increased to $6.1 million in 1995 from $0.5 million in 1994.
This improvement in interest income was primarily the result of increased
average balances on intercompany loans to ISI and short-term marketable
securities in 1995 compared to 1994.
INTEREST EXPENSE AND OTHER EXPENSE ON DEBT. Interest expense and other
expense on debt decreased 10.3% to $2.6 million in 1995 from $2.9 million in
1994, principally due to reduced debt levels.
INCOME BEFORE INCOME TAXES. Income before income taxes increased to 5.9% of
net sales in 1995 from 4.0% in 1994 for the reasons discussed above.
PROVISION FOR INCOME TAXES. Provision for income taxes increased 62.6% to
$56.9 million in 1995 from $35.0 million in 1994 due to the increase in
taxable income as the effective tax rate remained virtually unchanged at 39.1%
in 1995 compared to 39.6% in 1994.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
NET SALES. Net sales increased 16.1% to $2.2 billion in 1994 from $1.9
billion in 1993. Tons shipped increased 12.0% in 1994 from 1993, while selling
prices per ton increased 3.6% over the same period. Based on the Company's
analysis of SSCI data, the increase in tons shipped was due both to greater
demand and a modest increase in the Company's market share. The Company's
selling prices per ton increased $33 to $944 in 1994 from $911 in 1993.
OPERATING COSTS. Operating costs increased 14.3% to $2.1 billion in 1994
from $1.8 billion in 1993. Material purchases increased 17.2% to $1.7 billion
in 1994 from $1.4 billion in 1993. Material purchases per ton increased 4.6%
or $32 to $723 in 1994 from $691 in 1993.
Other operating costs increased 3.8% to $417 million in 1994 from $401
million in 1993. Since tons shipped rose 12.0% in 1994 compared to 1993, and
other operating costs increased only 3.8% over the same period, these costs on
a per ton basis declined $14 to $179 in 1994 from $193 in 1993. The Company's
total number of employees increased only 1.3% to 5,158 at the end of 1994 from
5,093 at the end of 1993, despite the significant increase in tons shipped in
1994 compared to 1993. This productivity improvement, along with other cost
reduction initiatives, contributed to the reduction in other operating costs
per ton.
24
<PAGE>
OPERATING PROFIT. Operating profit increased by 73.9% to $98.1 million in
1994 from $56.4 million in 1993, primarily due to increased volume of tons
shipped and reduced other operating costs per ton. Since selling prices per
ton increased by $33 in 1994 compared to 1993, and material purchases per ton
rose $32, gross profit per ton for the Company increased by $1, to $221 in
1994 from $220 in 1993.
GENERAL CORPORATE EXPENSE, NET OF INCOME ITEMS. General corporate expense
was unchanged at $7.4 million. Other revenue, principally interest income, was
$0.5 million in 1994 compared to zero in 1993.
INTEREST EXPENSE AND OTHER EXPENSE ON DEBT. Interest expense and other
expense on debt decreased 73.4% to $2.9 million in 1994 from $10.9 million in
1993. Interest expense on intercompany loans from ISI was zero in 1994
compared to $7.7 million in 1993. This reduction resulted from the Company's
repayment late in 1993 of its loan balance due to ISI with funds received from
an ISI capital contribution.
INCOME BEFORE INCOME TAXES. Income before income taxes increased to 4.0% of
net sales in 1994 from 2.0% in 1993 for the reasons discussed above.
PROVISION FOR INCOME TAXES. Provision for income taxes increased to $35.0
million in 1994 from $11.4 million in 1993. This increase in 1994 income taxes
was primarily the result of improved pre-tax earnings. In addition, 1993
income taxes were reduced by credits of $3.2 million representing prior year
adjustments and a change in the statutory income tax rate. These credits
resulted in an effective tax rate of 29.9% in 1993 compared to 39.6% in 1994.
LIQUIDITY AND FINANCING
The Company has historically financed its operations and growth primarily
through net cash provided by operating activities, limited borrowings from
third parties and capital contributions from ISI. The Company believes that
the New Credit Facility, if entered into, should provide the Company with
access to an additional source of capital to fund its future growth. Net cash
provided from (used for) operating activities amounted to $(25.3) million,
$79.7 million and $84.4 million for the years ended December 31, 1993, 1994
and 1995, respectively, and $(24.3) million and $(20.3) million for the three
months ended March 31, 1995 and 1996, respectively. Cash flow from operating
activities in 1995 improved only $5 million over 1994 despite an increase of
$35 million of net income due to a $13 million pension contribution and
increased operating working capital levels in 1995. The $105 million
improvement in cash flow from operating activities in 1994 compared to 1993
resulted primarily from increased net income of $27 million and an increase in
operating working capital of $67 million in 1993 compared to only a $3 million
increase in 1994. The negative cash flow from operating activities of $(24.3)
million and $(20.3) million in the first quarter of 1995 and 1996,
respectively, reflects the seasonal build-up of operating working capital as
increases in receivables and inventories exceeded the income reported for
those quarters.
During 1995, the total committed credit facilities of the Company's
subsidiaries increased to $225 million. Ryerson increased its $100 million
unsecured revolving credit facility (the "Ryerson Credit Facility") to $200
million and negotiated an extension of its term to March 31, 2000. The $25
million unsecured revolving credit facility (the "Tull Credit Facility")
expires on December 15, 1997. There was no borrowing under either of these
facilities during 1995 or the first three months of 1996. The Ryerson Credit
Facility and the Tull Credit Facility each require compliance with various
financial covenants including minimum net worth and leverage ratio tests. The
covenants also limit the amount of cash (or equivalents) that each of Ryerson
and Tull and its subsidiaries can transfer to the Company or ISI in the form
of dividends and advances. As of December 31, 1995 and March 31, 1996, Ryerson
and Tull were each in compliance with all of the covenants under its
respective credit facility. The interest rates on borrowing under the Ryerson
Credit Facility and the Tull Credit Facility are, at the Company's option,
based on Eurodollar, certificates of deposit, or the greater of federal funds
or prime rate. At year-end, the highest rate option for borrowing under either
of these credit agreements was the applicable prime rate.
25
<PAGE>
As of March 31, 1996, Ryerson was also the guarantor of $110.8 million of
the Inland Steel Industries Thrift Plan ESOP notes (the "ESOP Guarantee"). The
ESOP notes are payable in installments through July 2004. The ESOP Guarantee
requires compliance with various financial covenants including minimum net
worth and leverage ratio tests and also limits Ryerson's ability to advance
funds or make dividend payments to the Company.
At March 31, 1996, approximately $200 million in the aggregate would have
been available for payment of dividends and advances to the Company under the
covenants contained in the Tull Credit Facility, the Ryerson Credit Facility,
the ESOP Guarantee and other debt agreements of the Company. This availability
was reduced on May 20, 1996 after a $75 million dividend was paid from Ryerson
to the Company. At March 31, 1996, after adjusting for this dividend,
approximately $125 million in the aggregate would have been available for
payment of dividends and advances to the Company under these agreements.
With respect to Ryerson's ability to advance funds or make dividend payments
to the Company, the most restrictive covenants on March 31, 1996 were
contained in the ESOP Guarantee. Under this agreement, Ryerson's ability to
dividend or advance funds to the Company at any time is limited to $30 million
(i) plus 80% of net income (decreased by 100% of net losses) earned by Ryerson
since December 31, 1989, (ii) minus the dollar amount of dividends paid and
capital stock repurchased and the balance of any advances outstanding and
(iii) plus capital contributions to Ryerson and the proceeds from the issuance
of any capital stock or certain other investments during such period. At March
31, 1996, approximately $145 million was available for making advances and
paying dividends to the Company under the ESOP Guarantee. At March 31, 1996,
after adjusting for the dividend referred to above, Ryerson's ability to
advance funds or make further dividend payments to the Company would have been
$70 million.
With respect to Tull's ability to advance funds or pay dividends to the
Company, the Tull Credit Facility and its senior notes contained the most
restrictive covenants on March 31, 1996. In the Tull Credit Facility, Tull's
ability to pay dividends is limited by minimum tangible net worth and net
income requirements. The required minimum tangible net worth increases by 40%
of net income each quarter, but is not reduced in the event of a net loss.
Under the terms of the senior notes, advances outstanding can be no more than
15% of tangible net worth. At March 31, 1996, approximately $55 million was
available for making advances and paying dividends to the Company under Tull's
debt agreements. Other covenants which could restrict dividends or advances to
the Company include tangible net worth and leverage tests at Ryerson and
cumulative earnings, leverage and working capital tests at Tull.
The Company has received a definitive commitment letter from its lead
commercial bank with respect to the New Credit Facility. Borrowings under the
New Credit Facility will rank pari passu with the Notes. The commitment is
subject to certain conditions, including among other things, that the Ryerson
Credit Facility and the Tull Credit Facility be terminated. Management
estimates that the initial borrowing under the New Credit Facility will be $50
million, with a remaining availability of $200 million.
The New Credit Facility is expected to contain customary restrictive
covenants, including, among other things, leverage, minimum net worth and
fixed charge coverage requirements, and restrictions on restricted payments
(including dividends), the addition of subsidiary debt (except for debt of
acquired companies and up to $50 million of purchase money debt), new
agreements that limit upstreaming of cash from subsidiaries, transactions with
affiliates, the existence of liens, and mergers and sales of assets. In
addition, the commitment will be reduced or eliminated in the event of a
change of control (as defined) of ISI or the Company. The New Credit Facility
will expire in June 2000.
The Company expects that the Note Offering will be consummated shortly after
the consummation of the Offerings. However, the ISI Note Indenture currently
contains covenants that, among other things, prohibit or restrict (i) the
incurrence of debt and the issuance of preferred stock by the Company
26
<PAGE>
or any of the other Restricted Subsidiaries (as defined) of ISI, (ii) the
making of Restricted Payments (as defined) by ISI or any of its subsidiaries,
(iii) the incurrence of limitations on the ability of the Company or any other
Restricted Subsidiary to pay dividends or distributions, make loans or
advances to ISI or any of its subsidiaries and transfer assets to ISI, (iv)
the incurrence of liens by ISI, the Company or any other Restricted
Subsidiary, (v) sale and leaseback transactions by ISI, the Company or any
other Restricted Subsidiary, (vi) investments by ISI, the Company or any other
Restricted Subsidiary in unrestricted subsidiaries, (vii) certain transactions
by ISI, the Company or any other Restricted Subsidiary with affiliates and
(viii) the consummation of certain mergers, asset sales and acquisitions of
the stock, assets or business of other persons of or by ISI, the Company or
any other Restricted Subsidiary. Although ISI is soliciting the consent of the
holders of ISI Notes to amend the ISI Note Indenture to eliminate these
covenants, there can be no assurance that ISI will be successful in obtaining
sufficient consents to such an amendment. If ISI does not obtain sufficient
consents to amend the ISI Note Indenture, the Company will not issue the Notes
or enter into the New Credit Facility, and the Company's financial flexibility
will continue to be limited by the restrictions imposed by the covenants in
the ISI Note Indenture. In addition, the ISI Note Indenture contains a
provision restricting the Company from engaging in certain sales of its assets
or capital stock unless the net proceeds of such sale are invested in assets
related to the business of the Company or are used to repay certain
indebtedness of ISI or the Company. ISI is not seeking to amend this provision
of the ISI Note Indenture, which would require the consent of all outstanding
holders of the ISI Notes.
The Company expects that the indenture governing the Notes will contain
covenants that may limit the Company's financial flexibility and that may
affect the Company's conduct of future business, including covenants which
limit or prohibit (i) the incurrence of certain secured indebtedness, (ii)
certain sale and leaseback transactions, (iii) the payment of dividends, the
repurchase of capital stock and the prepayment of subordinated debt, (iv)
transactions with affiliates and (v) mergers, consolidations and certain sales
of assets.
The Company believes that available borrowings under its credit facilities
and anticipated cash flow from operations will provide sufficient liquidity to
meet its scheduled debt retirements, fund its capital program and meet any
operating cash requirements that may arise for at least the next 12 months.
In 1993, ISI made a $150 million capital contribution to the Company.
Proceeds from this capital contribution, along with cash generated internally
over the three-year period ended December 31, 1995 (after subtracting
increased working capital requirements resulting from increased activity
levels and funding capital projects), were used to repay borrowings from ISI
and subsequently to lend funds to ISI. At December 31, 1992, the Company owed
$108 million to ISI. Between December 31, 1992 and March 31, 1996, the Company
advanced an aggregate of $162 million to ISI, leaving a balance owed to the
Company at March 31, 1996 of $54 million.
On May 20, 1996, Ryerson paid a dividend of $75 million in cash to the
Company. The Company used the proceeds of this dividend to pay the May 1996
Dividend to ISI on May 20, 1996. ISI used a portion of the proceeds from the
May 1996 Dividend to repay intercompany indebtedness owed to the Company
arising out of a corporate-wide cash management program. Following the
repayment of such indebtedness, the Company ceased participation in such
program and the Company's cash will no longer be held in ISI's accounts. With
the May 20, 1996 dividend payments and repayment of intercompany indebtedness,
all outstanding indebtedness for borrowed money between ISI and the Company
(including the Company's subsidiaries) was discharged.
Prior to the consummation of the Offerings, the Company will declare a
dividend payable in cash in an amount equal to the estimated net proceeds of
the Offerings (estimated to be $84.4 million at an assumed initial offering
price of $17.50 per share (the mid-point of the price range set forth on the
cover page of this Prospectus)) and a dividend consisting of the Note Payable
to ISI. The Note Payable
27
<PAGE>
will mature five years from its date of issuance and will bear interest at a
specified prime rate. The Note Payable may be prepaid, without penalty, at the
option of the Company. An amount equal to the estimated net proceeds of the
Offerings will be used to pay the cash dividend to ISI and will not be
available to the Company. All of the net proceeds of the Note Offering, if
consummated, together with a portion of the Company's available cash and/or
borrowings under credit facilities, will be used to discharge the Note Payable
to ISI. If the Note Offering is not consummated, the Company anticipates that
the Note Payable will remain an obligation of the Company and must be repaid
from cash generated from operations and/or future financings, the source,
nature and amount of which cannot currently be determined. See "Use of
Proceeds."
CAPITAL EXPENDITURES AND INVESTMENTS IN JOINT VENTURE
Capital expenditures for 1993, 1994 and 1995 were $19.3 million, $20.4
million and $19.3 million, respectively. Capital expenditures were primarily
used for buildings, machinery and equipment. In 1996, the Company anticipates
making capital expenditures of approximately $45 million to upgrade and expand
facilities and equipment. No assurances can be given, however, that
anticipated capital spending will occur. The Company expects that its
depreciation and amortization expense in future periods will increase due to
its anticipated capital investments.
In addition to the $45 million of planned capital expenditures in 1996 to
update and expand facilities, the Company expects to invest approximately $15
million in a previously announced joint venture with Geneva Steel. The Geneva
Steel joint venture, if completed, will own or lease and operate a coil plate
processing facility in the Chicago area. No assurance can be given that the
joint venture will be completed.
Most of the Company's assets are in working capital. At year-end 1995, the
Company had $409 million in inventory measured at current or approximate
replacement cost versus a book value of $263 million, $244 million in accounts
receivable and $107 million in accounts payable. The Company turned inventory
4.2 times during 1995 and averaged 40 days' sales outstanding in receivables
during 1995, both better than industry averages according to information
provided by the SSCI. For 1994 and 1993, inventory turnover was 4.1 times and
3.8 times, respectively, and the number of days' sales outstanding averaged 39
days and 40 days, respectively. The Company utilizes sophisticated inventory
management and profitability systems to monitor whether all working capital
assets remain current and profitable and to make changes when appropriate.
SUBSEQUENT EVENT
Effective June 1, 1996, ISI transferred to the Company its 50% interest in
Ryerson de Mexico, a joint venture with Altos Hornos de Mexico, S.A. de C.V.,
an integrated steel mill operating in Mexico. Ryerson de Mexico, which was
formed in 1994, is a general line metals service center and processor with 18
facilities in Mexico. As of April 30, 1996, ISI's investment in Ryerson de
Mexico totalled approximately $18 million. The impact of Ryerson de Mexico on
the Company's results of operations has not been material.
28
<PAGE>
BUSINESS
GENERAL
The Company, through its wholly-owned operating subsidiaries Ryerson and
Tull, is a leading general line metals service center and processor of metals.
The Company believes that it is the largest metals service center in the
United States based on sales revenue, with 1995 sales of $2.5 billion and a
current U.S. market share of approximately 9%, more than twice the U.S. market
share of its nearest competitor, based on the Company's analysis of SSCI data.
The Company distributes and processes metals and other material throughout the
continental United States, and is among the largest purchasers of steel in the
United States. With 52 interconnected facilities that place it within several
hundred miles of most of its customers, the Company is able to be responsive
to specific customer requests and is generally able to make deliveries of
stock items within 24 hours of receipt of a customer's order. Utilizing this
network of facilities and the Company's regionalized management systems, the
Company believes it can be responsive to individual customers while providing
a broad range of products and services. The Company also owns a 50% interest
in Ryerson de Mexico, a general line metals service center and processor with
18 facilities in Mexico.
Ryerson, the predecessor of the Company, was founded in 1842 by Joseph T.
Ryerson. Between 1986 and 1990, the Company implemented a strategy of growth
through acquisitions, expanding its geographic coverage by purchasing five
service center companies with 26 facilities for approximately $210 million,
plus assumed debt of $63 million. The Company acquired Tull, AFCO Metals, Inc.
and Southern Metals Corporation in 1986, 1988 and 1989, respectively,
establishing the Company's presence in the southeastern United States. The
Company's acquisition in 1989 of Processed Metals, Inc. (doing business under
the "Keelor Steel" and "Select Steel" names) expanded the Company's processing
capability in the midwestern United States, adding facilities in Minneapolis,
Minnesota and Marshalltown, Iowa. In 1990, the Company acquired the Metra
division of Schnitzer Steel, Inc., with facilities in Portland, Oregon,
Phoenix, Arizona and Salt Lake City, Utah, expanding the Company's presence in
the western United States.
The Company is divided into five operating business units along regional and
product lines with the following operations and locations:
<TABLE>
<CAPTION>
BUSINESS UNIT DESCRIPTION LOCATIONS
------------- ----------- ---------
<C> <S> <C>
Ryerson East Primarily general line service
centers Buffalo, NY
with substantial processing
capabilities Charlotte, NC
Chattanooga, TN
Cleveland, OH
Philadelphia, PA
Pittsburgh, PA
Wallingford, CT
Ryerson West Primarily general line service Denver, CO
centers with substantial processing Los Angeles, CA
capabilities Phoenix, AZ
Portland, OR
Salt Lake City, UT
San Francisco, CA
Seattle, WA
Spokane, WA
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
BUSINESS UNIT DESCRIPTION LOCATIONS
------------- ----------- ---------
<C> <S> <C>
Ryerson Central Primarily general line service
centers Chicago, IL
with substantial processing
capabilities Cincinnati, OH
Dallas, TX
Des Moines, IA
Detroit, MI
Houston, TX
Indianapolis, IN
Kansas City, MO
Milwaukee, WI
Minneapolis, MN
Omaha, NE
St. Louis, MO
Tulsa, OK
Tull/AFCO General line service centers Atlanta, GA
with some processing capabilities Baton Rouge, LA
Birmingham, AL
Charlotte, NC
Columbia, SC
Fort Smith, AR
Greensboro, NC
Greenville, SC
Jackson, MS
Jacksonville, FL
Little Rock, AR
Miami, FL
New Orleans, LA
Oklahoma City, OK
Richmond, VA
Shreveport, LA
Tampa, FL
West Memphis, AR
Wichita, KS
Ryerson Coil Processing Processors Chicago, IL (two facilities)
Marshalltown, IA
Minneapolis, MN (two facilities)
</TABLE>
The Company also owns a 50% interest in Ryerson de Mexico, a general line
metals service center and processor with 18 facilities located in Mexico. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Subsequent Event."
INDUSTRY OVERVIEW
Primary steel producers typically sell steel in the form of standard-sized
coils, sheets, plate, structurals, bars and tubes and generally sell in large
volumes with long lead times for production and delivery. Other primary metal
producers, such as producers of stainless steel and aluminum, also typically
sell their products in large volumes with long lead times for production and
delivery. However, many customers seek to purchase metals with customized
specifications, including value-added processing, in smaller volumes, on
shorter lead times and with more reliable delivery than primary metal
producers are able to provide. Metal service centers act as intermediaries
between primary metal producers and customers by purchasing metals in a
variety of shapes and sizes from primary metal producers in large volumes,
allowing metal service centers to take advantage of producer economies of
scale resulting in lower costs of material purchased, and engaging in a
variety of distribution and value-added processing operations to meet the
demands of specific customers. Because metal service centers purchase metals
from a number of primary producers, they can maintain a consistent supply of
various types of metal used by their customers. Most importantly, however,
metal service centers generally have lower fixed costs than primary metal
producers. By
30
<PAGE>
purchasing products from metal service centers, customers may be able to lower
their inventory levels, decrease the time between the placement of an order
and receipt of materials and reduce internal expenses, thereby lowering their
total cost of raw materials. The Company believes that the increased
prevalence of just-in-time inventory needs of manufacturers and intermediate
processors has made and will continue to make the value-added inventory,
processing and delivery functions performed by metal service centers more
important in the metals market.
The Industry is comprised of many companies, the majority of which have
operations limited as to product line and size of inventory and with customers
located in a specific geographic area. Based on SSCI data, the Company
believes that the Industry is comprised of between 750 and 1,000 service
centers, operating out of approximately 2,000 locations and servicing
approximately 300,000 customers. The Industry is highly fragmented, consisting
of a large number of small companies and a few relatively large companies.
Based on the Company's analysis of SSCI data, the Industry handled
approximately 27 million tons or approximately 25% of the metals distributed
in the United States in 1995.
The Industry is divided into three major groups: general line service
centers, specialized service centers and processing centers, each of which
targets different market segments. General line service centers handle a broad
line of metal products and tend to concentrate on distribution rather than
processing. General line service centers range in size from one location to a
nationwide network of locations. For general line service centers, individual
order size in terms of dollars and tons tends to be small relative to
processing centers, while the total number of orders is typically very high.
Specialized service centers focus their activities on a narrower range of
product and service offerings than general line companies. Such service
centers provide a narrower range of services to their customers and emphasize
product expertise and lower operating costs, while maintaining a moderate
level of investment in processing equipment. Processing centers typically
process large quantities of steel purchased from primary producers for resale
to large industrial customers, such as the automotive industry. Because orders
are typically large, operation of a processing center requires a significant
investment in processing equipment.
Because of the difficulty of differentiating commodity-like products, many
service centers attempt to differentiate themselves through the use of
sophisticated information systems and unique processing services, which
facilitate the provision of enhanced services at reduced cost. To varying
degrees at all service centers, but particularly at the larger, more
sophisticated companies, elaborate computer-based systems are used to automate
tasks such as order entry, material tracking, work-order scheduling and
processing, inventory management, billing and accounts payable and receivable
tracking. Some companies are creating and enhancing EDIs between themselves
and their suppliers and customers. The introduction and development of these
systems have increased the quality of products and services provided by
service centers.
Management believes that, in recent years, there has been a trend towards
increased outsourcing by manufacturers of certain operations and the
production of component parts, with manufacturers concentrating on producing
finished products. Many industrial companies have been unwilling or unable to
invest the significant amount of capital in the space, technology and
equipment necessary to store and process metals required for their operations.
By outsourcing certain operations, including inventory management, processing,
blanking and precision burning, many manufacturers are able to accommodate
shorter production runs and changeover times. This increased flexibility
allows them to better respond to competitive pressures. Moreover, many
manufacturers find it beneficial, from a cost and quality standpoint, to
outsource many of the component parts that are utilized in the production of
their products. At the same time, manufacturers have been reducing the number
of suppliers that they rely on in order to reduce the administrative cost of
dealing with multiple suppliers and to take advantage of volume discounts.
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<PAGE>
Management believes that, in recent years, there has also been a trend in
the Industry towards consolidation, which the Company believes will continue
as long as the introduction of sophisticated operational and computer-based
systems continues to create economies of scale. Based on the Company's
analysis of SSCI data, the Industry has increased its share of metals
distributed in the United States from approximately 17% in 1980 to
approximately 25% in 1995. The Company believes that it is well positioned to
take advantage of acquisition opportunities that may arise from consolidation
in the Industry because of its capital resources, acquisition experience and
nationwide presence.
BUSINESS STRATEGY
The Company's strategy is to expand its market leadership position as a
nationwide general line metals service center and processor of metals by
providing its customers with high quality products and services at competitive
prices. The Company believes that increasing its market share will be an
effective means of increasing its profitability. One of the Company's goals is
to enhance its competitive position through the aggressive pursuit of organic
growth, strategic acquisitions, ongoing unit cost reductions and increased
asset productivity, although there can be no assurance that the Company will
achieve this goal. As part of its overall business strategy, the Company has
made substantial investments in management information systems that link its
operations and enhance interactions between the Company and its customers and
suppliers. Based on its size, which leads to cost efficiencies, the trend
towards consolidation in the number of suppliers used by customers, strategic
plant locations, broad product and service offerings and management's
acquisition strategy, the Company believes that it is well positioned to take
advantage of the anticipated growth and consolidation in the Industry.
ORGANIC GROWTH
The Company believes that it can benefit from both the anticipated growth of
the Industry and the growth of its market share within the Industry.
The Company believes that the Industry occupies a growing niche between
primary producers of carbon, alloy and stainless steel, aluminum and other
metals and purchasers of those products, including manufacturers and
intermediate processors. Metals service centers, including the Company,
provide services not typically available from primary producers, such as more
reliable deliveries, smaller order sizes, the convenience of dealing with a
smaller number of suppliers, just-in-time inventory management and customer-
specific, value-added processing. The Company believes that the role of metals
service centers is expanding as a result of a number of factors, including the
increased outsourcing of inventory management functions and metals processing
operations by manufacturers and the lower cost and more reliable service
available from service centers as compared to primary producers.
One of the Company's goals is to expand its market leadership position
within the Industry through competitive pricing, broad product and service
offerings and the use of technology to improve customer service. The Company's
large size, buying power and competitive cost structure enable it to negotiate
favorable prices for raw materials and to take advantage of producer economies
of scale resulting in lower costs of materials purchased, allowing it to offer
its products and services at competitive prices. In addition, the Company's
broad product and service offerings provide customers one-stop shopping,
positioning the Company to capitalize on what it believes to be a continuing
trend towards consolidation in the number of suppliers used by customers. To
this end, the Company has initiated a national accounts program targeting
customers that purchase metal from a number of suppliers throughout the
country. The Company believes it can better serve these customers by providing
competitive pricing and superior delivery and quality. One of the Company's
goals is to differentiate itself from its competitors by providing materials
and services on a more timely basis and with fewer rejections than its
competitors through increased emphasis on quality control. The Company has
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<PAGE>
received International Standards Organization 9002 certification for five
facilities and will seek certification for additional facilities in the
future.
STRATEGIC ACQUISITIONS
The Company believes that the fragmented nature of the Industry, combined
with the Company's strong national reputation, nationwide operations, market
leadership position and experience in integrating facility operations, make
the Company well situated to become a strategic buyer of service center
assets. The Company will seek selective acquisitions of businesses that
complement, or strategically extend, the Company's existing businesses.
Acquired companies can be either integrated into the Company's network or,
depending on the circumstances, operated as stand-alone facilities. In either
case, the Company believes that such acquisitions could enable it to realize
further economies of scale (particularly in operating cost, asset utilization
and purchasing leverage) and could better utilize the Company's existing
facilities and systems capability.
The Company believes that its ability to efficiently integrate acquired
operations into its existing facility operations is critical to the ongoing
success of its acquisition strategy. During 1994 and 1995, the Company closed
two low-profit facilities in Boston and Jersey City, integrating these
operations with plants in Wallingford, Connecticut and Philadelphia. These
consolidations resulted in a high level of customer retention, comparable
customer service, increased profitability and a significantly lower cost and
asset base. While the Company has achieved profitable operations of businesses
acquired in the past, there can be no assurance that any future acquisitions,
if completed, would be profitable.
UNIT COST REDUCTIONS AND INCREASED PRODUCTIVITY
Another of the Company's goals is to decrease unit costs through initiatives
which include increasing volume, thereby taking advantage of economies of
scale, and increasing asset and employee productivity. The Company has made
and will continue to make investments in computer-based and automated systems
that track profitability by customer, product and cost of process, allowing
the Company to determine where changes can be made to reduce cost and increase
profitability. The Company intends to increase its emphasis on the use of EDI
with its suppliers and customers to reduce the paperwork and administrative
costs associated with customer orders, shipment tracking, billing and
remittance processing. The Company continues to re-engineer its various work
processes through benchmarking analyses across its 52 facilities. Re-
engineering enables the Company to increase output without increasing its
labor force by increasing the efficiency with which work processes are
performed.
Finally, the Company has continued to improve its inventory management
systems and processes. Management believes improved forecasting and aggressive
supplier management should increase asset productivity. Also, to the extent
that sales grow, the Company believes that it can improve inventory management
and reduce total inventory per dollar of sales. The Company has installed
computer-based systems to enable it to more accurately measure and control the
appropriate inventory level.
COMPETITIVE STRENGTHS
The Company has a number of competitive strengths that it believes will
facilitate the implementation of the Company's strategy, including its market
leadership position and its management systems and practices.
MARKET LEADERSHIP POSITION
With $2.5 billion of sales in 1995, the Company has a U.S. market share of
approximately 9%, more than twice the U.S. market share of the next largest
competitor, based on the Company's
33
<PAGE>
analysis of SSCI data. The Company sells its products through 52 facilities
located throughout the United States.
ECONOMIES OF SCALE. Because of the Company's large size, its costs of
operations can be spread across a large base of sales, resulting in lower
fixed costs per ton sold. The Company believes that available capacity at many
of its plants will allow it to achieve further economies of scale to the
extent it increases sales in the future. In addition, the size of the
Company's material purchases enables its suppliers to realize economies of
scale and thereby provide the Company with competitive prices.
SCOPE OF PRODUCTS AND SERVICES. The Company's broad product and service
offerings provide customers one-stop shopping for most of their metals needs.
In addition, the Company believes that its 52 facilities located throughout
the continental United States, generally within one day's delivery time of
almost all U.S. manufacturing centers, position it to target national
customers that currently buy metals from a variety of suppliers in different
locations. The Company's ability to transfer inventory among facilities
enables it to have available specialized items at regional locations
throughout its network and to provide such inventory on a timely basis more
profitably than if it were required to maintain inventory of all products at
each location.
RELATIONSHIPS WITH SUPPLIERS. The Company is among the largest purchasers of
steel in the United States and is also a significant purchaser of aluminum in
the United States. The Company buys from and has developed relationships with
many U.S. steel producers as well as other metal producers. The Company's
relationships with numerous metal producers provide it access to high quality
metals, timely delivery and new product and service ideas from many suppliers.
In addition, because the Company purchases large volumes of metals, it can
negotiate competitive prices from its suppliers. In part because of its buying
power, the Company has been able to secure product from primary manufacturers
during times of tight supply.
DIVERSE CUSTOMER BASE. The Company's diverse customer base, consisting of
over 50,000 customers, reduces its exposure to the failure of a single
customer's business or a downturn in a particular industry. No customer
accounted for more than 2% of 1995 sales and the top ten customers accounted
for approximately 10% of 1995 sales. The Company sells to customers in most of
the metal-consuming industries, including machinery manufacturers, metal
producers and fabricators, transportation equipment producers and electric
machinery producers.
MANAGEMENT SYSTEMS AND PRACTICES
The Company's management information systems have allowed management to
develop an internal benchmarking system and to track profitability by customer
and product. This detailed information enables management to make adjustments
such as reallocating slow-moving inventory to different locations to increase
inventory turns, improving purchasing, targeting customers or changing
suppliers as needed. The Company's 52 facilities provide it with a large base
for testing, comparing and implementing new management practices.
The Company has spent $40 million to maintain and improve its management
information systems over the last three years. The Company operates data
processing systems that, among other functions, are used to purchase, monitor
and allocate inventory throughout its interconnected production facilities.
The Company believes that this monitoring has enabled it to effectively manage
inventory costs and achieve improved turnover rates. These systems also
include computerized order entry, sales analysis, inventory and work-in-
process status, invoicing and payment, and are designed to improve
productivity for both the Company and its customers. The Company also uses
EDI, which offers customers a paperless process for shipment tracking,
billing, remittance processing and other routine matters.
34
<PAGE>
PRODUCTS AND SERVICES
The Company carries a full line of carbon steel, stainless steel and
aluminum, and a limited line of alloy steel, nickel, red metals and plastics.
These materials are inventoried in a number of shapes, including coils,
sheets, rounds, hexagons, square and flat bars, plate, structurals and tubing.
The following table sets forth the Company's shipments (by sales revenue)
for 1993, 1994 and 1995 for each of the Company's product lines.
<TABLE>
<CAPTION>
PERCENTAGE OF
SALES REVENUE
----------------
PRODUCT LINE 1993 1994 1995
- ------------ ---- ---- ----
<S> <C> <C> <C>
Stainless and aluminum........................................ 23% 23% 27%
Carbon flat rolled............................................ 28 28 24
Bars, tubing and structurals.................................. 23 23 22
Fabrication and carbon plate.................................. 19 19 20
Other......................................................... 7 7 7
--- --- ---
Total....................................................... 100% 100% 100%
=== === ===
</TABLE>
More than one-half of the material sold by the Company is processed. The
Company uses techniques such as sawing, slitting, blanking, pickling, cutting
to length, levelling, flame cutting, laser cutting, edge trimming, edge
rolling, fabricating and grinding to process materials to specified thickness,
length, width, shape and surface quality pursuant to specific customer orders.
Among the most common processing techniques used by the Company are pickling,
a chemical process using an acidic solution to remove surface oxide, commonly
called "scale," from steel which develops after the steel is hot rolled;
slitting, which is cutting coiled metals to specified widths along the length
of the coil; levelling, which is flattening metals and cutting them to exact
lengths; and edge rolling, a process which imparts round or smooth edges. The
Company often uses third party fabricators to outsource processes that the
Company is not able to perform internally.
The plate burning and fabrication processes are particularly important to
the Company. These processes require sophisticated and expensive processing
equipment. As a result, rather than making investments in such equipment,
manufacturers have increasingly outsourced these processes to material service
centers. The Company has made significant investments in flame and laser
cutting equipment to enable it to perform these processes.
The Company's services include special stocking programs, just-in-time
delivery, inventory management (which includes placement of Company employees
at customer sites), kits ready for assembly, programs that provide customers
at their places of business with Company-owned material which can be used as
needed by the customer, technical advice on part design and material
specification, and early stage material processing and fabrication. The
Company can generally deliver any item normally stocked within 24 hours of
receipt of an order.
All of the Company's products and services can be ordered through EDI, a
sophisticated electronic network that connects the Company's plants, as well
as certain of the Company's vendors and customers. Orders can also be
transmitted through direct ordering systems. Intricate design specifications
for particular jobs also can be electronically transmitted. Order entry
through scheduling, processing and shipping are monitored by the Company's
computer system and bar coding is available to aid in, and reduce the cost of,
tracking material at customer sites.
CUSTOMER BASE
The Company's customer base is diverse, numbering over 50,000. No customer
accounted for more than 2% of the Company's sales in 1995 and the top ten
customers accounted for approximately
35
<PAGE>
10% of the Company's sales in 1995. The Company's customer base includes most
metal-consuming industries, most of which are cyclical. The Company's
shipments (by sales revenue) for 1993, 1994 and 1995 for each class of the
Company's customers were as set forth in the table below.
<TABLE>
<CAPTION>
PERCENTAGE OF
SALES REVENUE
----------------
CLASS OF CUSTOMER 1993 1994 1995
- ----------------- ---- ---- ----
<S> <C> <C> <C>
Machinery manufacturers....................................... 35% 36% 38%
Metal producers and fabricators............................... 25 25 25
Transportation equipment producers............................ 9 10 10
Electrical machinery producers................................ 10 9 9
Wholesale distributors........................................ 4 3 3
Construction-related purchasers............................... 5 4 3
Metal mills and foundries..................................... 3 3 3
Other......................................................... 9 10 9
--- --- ---
Total....................................................... 100% 100% 100%
=== === ===
</TABLE>
The Company believes it is particularly well suited to service regional or
national customers that value the Company's nationwide network of facilities,
broad product and service offerings, technical expertise and emphasis on
customer service. The Company believes that many of these customers value the
technical capability and single sourcing of most or all of their multiple
product needs that the Company is able to provide.
The Company's flat rolled processing business unit, Ryerson Coil Processing
("Ryerson Coil"), generally serves a customer base that differs from the
Company's general line service center business. A large portion of Ryerson
Coil's customers have long-term supply contracts with Ryerson Coil. Ryerson
Coil's customers often seek large quantities of carbon sheet product that have
undergone one or more of the following processes: pickling, cutting to length,
slitting, tension levelling, texturing or blanking. Many of Ryerson Coil's
approximately 625 customers are in the transportation, appliance, office
furniture or cabinetry businesses.
SUPPLIERS
In 1995, the Company purchased in excess of 2.3 million tons of material
from many suppliers, including approximately 400,000 tons from ISC, a wholly-
owned subsidiary of ISI. The Company expects to continue purchasing
significant amounts of steel from ISC in the future, although there can be no
assurance that such purchases will continue. See "Relationship with ISI--
Supply Arrangements." Excluding ISC, the Company's top 25 suppliers accounted
for approximately 50% of 1995 purchases.
Because the Company uses many suppliers and because there is a substantial
overlap of product offerings from these suppliers, the Company believes it
will be able to meet its materials requirements for the foreseeable future.
The Company works with and monitors its suppliers in order to obtain
improvements in price, quality, service, delivery and performance. The Company
believes it has good relationships with most of its suppliers.
SALES AND MARKETING
Each of the Company's business units maintains its own sales and marketing
force. In addition to its internal sales staff, the Company markets and sells
its products through the use of an outside sales force that has extensive
product and customer knowledge and through a comprehensive catalog of the
Company's products. The Company's internal and external sales staffs include
technical and
36
<PAGE>
metallurgical personnel. In addition, the Company's technically-oriented
marketing department develops advertising materials and maintains product
expertise for each of the various types of materials sold and industries
serviced by the Company.
During 1995, the Company began a number of sales and marketing programs
which it believes will enhance its ability to grow. As part of this effort,
the Company appointed a national sales director to market its products and
services to customers with a national presence. These customers typically
place orders from each of their plants with local suppliers, resulting in
national customers having multiple suppliers for similar products. The Company
believes that it can better serve these customers by providing competitive
pricing and superior delivery and quality. The Company believes that no
competitor of the Company currently has as broad a national coverage as the
Company.
In addition, the Company recently began a sales territory market analysis to
improve sales force productivity. One of the primary goals of the analysis is
to determine what products can be sold to metal-consuming manufacturers and
processors with whom the Company currently does little or no business.
DISTRIBUTION
The Company has a nationwide distribution network and management information
systems that generally enable delivery of a customer's order from the most
economic plant location within 24 hours. The Company's management information
systems create an integrated network of plants and distribution facilities
that has contributed to a reduction in inventory levels and lower overall
product delivery costs while improving customer service.
MANAGEMENT INFORMATION SYSTEMS
The Company operates data processing systems that, among other functions,
are used to purchase, monitor and allocate inventory throughout its production
facilities. The Company believes that this monitoring enables it to
effectively manage inventory costs and achieve improved turnover rates. These
systems also include computerized order entry, sales analysis, inventory
status, work-in-process status, invoicing and payment. The systems are
designed to improve productivity for both the Company and its customers. The
Company also uses EDI, which has the advantage of offering customers with EDI
capability a paperless process for shipment tracking, customer billing,
remittance processing and other routine matters. In addition, an activity-
based costing system is available to help the Company measure profitability
and facilitate changes in process when needed.
PROPERTIES
The Company's headquarters are located in Chicago, Illinois. Of the
Company's 52 facilities, 45 are owned, five are leased and two are owned in
part and leased in part. Additionally, two of the five regional offices are
leased. Most leases have initial terms of more than one year and include
options to renew. While some of the Company's leases expire in the near term,
the Company does not believe that it will have difficulty either renewing such
leases or finding alternative sites. The Company's facilities are capable of
being utilized at higher capacities, if necessary. The Company believes that
its facilities are adequate for the purposes for which they are presently
used.
EMPLOYEES
As of March 31, 1996, the Company employed 4,965 persons. Of these
employees, 2,327 were salaried employees and 2,638 were hourly employees.
Approximately 40% of the hourly employees were members of various unions,
including the United Steelworkers and the Teamsters. The Company's
relationship with the various unions generally has been good, but occasional
work
37
<PAGE>
stoppages have occurred. Over the last five years, work stoppages have
occurred at two facilities (approximately 4% of the total), have involved an
average of 46 employees and have lasted an average of eight days. The current
agreement with the United Steelworkers will expire on July 31, 1996, and
agreements with the Teamsters expire on various dates during the period
beginning June 30, 1996 and ending May 15, 1999. Excluding these agreements
with the United Steelworkers and the Teamsters, one contract covering 27
employees is due to expire in 1996, and four contracts covering 83 employees
are due to expire in 1997. While the Company's management does not expect any
unresolvable issues to arise in connection with the renewal of any of these
contracts, no assurances can be given that any of these contracts will be
extended prior to their expiration.
Prior to April 30, 1996, certain of the Company's employees were eligible to
participate in the ISI Pension Plan, a noncontributory defined benefit pension
plan. Effective April 30, 1996, that portion of the ISI Pension Plan covering
the Company's current and former employees was separated and became the
Pension Plan. See "Management--Pension Benefits" and "Relationship with ISI."
Almost all employees are covered by Company-provided life insurance and a
health benefits plan which provides broad health coverage for employees and
their families. Premiums for this health coverage are shared between the
Company and its employees. The Company believes that its salary and benefits
structure is competitive in the Industry.
COMPETITION
The Company is engaged in a highly fragmented and competitive Industry.
Based on SSCI data, the Company believes that the Industry is comprised of
between 750 and 1,000 service centers, operating out of approximately 2,000
locations. In general, competition is based on quality, service, price and
geographic proximity. The Company competes with many other general line
service centers, specialized service centers and processing centers on a
regional and local basis, some of which may have greater financial resources
and flexibility than the Company. Some of the Company's competitors are
affiliated with foreign steelmakers, which at times can make price competition
intense.
The Company believes that it is well positioned in the Industry because of
its large number of locations, highly trained technical sales force,
sophisticated computer systems, modern equipment, broad-based inventory and
the economies of scale provided by its highly interconnected network of
facilities. In addition, the Company believes that it is strong in processing
materials, particularly in cutting materials to length, slitting, sawing,
plate burning and fabrication. Based on Industry data, the Company believes
that it is the largest general line metals service center in the United States
based on sales revenues.
The Company intends to differentiate itself from the competition based on
improved service and quality through investments in systems, equipment,
product and service offerings and by attaining a low-cost position compared to
many of its competitors. The Company believes that it has initiatives in place
that will produce results in these areas and that it is well positioned
operationally and financially to make advantageous capital investments and
acquisitions.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
The Company's operations are subject to many federal, state and local
regulations relating to the protection of the environment and to workplace
health and safety. In particular, the Company's operations are subject to
extensive federal, state and local laws and regulations governing waste
disposal, air and water emissions, the handling of hazardous substances,
environmental protection, remediation, workplace exposure and other matters.
The Company's management believes that the Company is presently in substantial
compliance with all such laws and does not currently anticipate that the
Company will be required to expend any substantial amounts in the foreseeable
future in order to meet current environmental, workplace health or safety
requirements. However, additional costs and
38
<PAGE>
liabilities may be incurred to comply with current and future requirements,
which costs and liabilities could have a material adverse effect on the
Company's results of operations or financial condition.
There are no known pending remedial actions or claims relating to
environmental matters that are expected to have a material effect on the
Company's financial position or results of operations. Some of the properties
owned or leased by the Company, however, are located in industrial areas or
have a history of heavy industrial use. These properties may potentially incur
environmental liabilities in the future that could have a material adverse
effect on the Company's financial condition or results of operations.
RYERSON DE MEXICO
The Company also owns a 50% interest in Ryerson de Mexico, a joint venture
with Altos Hornos de Mexico, S.A. de C.V., an integrated steel mill operating
in Mexico. Ryerson de Mexico, which was formed in 1994, is a general line
metals service center and processor with 18 facilities in Mexico. As of April
30, 1996, the Company's investment in Ryerson de Mexico totalled approximately
$18 million. The impact of Ryerson de Mexico on the Company's results of
operations has not been material.
PATENTS AND TRADEMARKS
The Company owns several U.S. patents and U.S. and foreign trademarks,
service marks and copyrights. Certain of the trademarks are registered with
the U.S. Patent and Trademark Office and, in certain circumstances, with the
trademark offices of various foreign countries. The Company's patents expire
over various periods of time.
The Company considers certain other information owned by it to be trade
secrets and the Company takes measures to protect the confidentiality and
control the disclosure of such information. The Company believes that these
safeguards adequately protect its proprietary rights and the Company
vigorously defends these rights.
The Company's operating subsidiaries own or have obtained licenses for
various trademarks, service marks, trade names, copyrights, inventions, know-
how, trade secrets, confidential information and other intellectual property
that are necessary for the conduct of its businesses (collectively,
"Intellectual Property"). Neither the Company nor its operating subsidiaries
is aware of any claim (or of any facts that would reasonably be expected to
result in any such claim) or challenge by any third party that would
significantly limit the rights of the Company or its operating subsidiaries
with respect to any such Intellectual Property or to challenge the validity or
scope of any such Intellectual Property. The Company has no pending claim
against a third party with respect to the infringement by such third party to
any such Intellectual Property that, if determined adversely to the Company,
would individually or in the aggregate have a material adverse effect on the
Company's financial condition or results of operations. While the Company
considers all of its intellectual property rights as a whole to be important,
the Company does not consider any single right to be essential to its
operations as a whole.
LEGAL PROCEEDINGS
From time to time the Company is named as a defendant in legal actions
arising in the ordinary course of its business. The Company is not a party to
any pending legal proceedings other than routine litigation incidental to its
business. Management does not believe that the resolution of these claims will
have a material adverse effect on the Company's financial condition or results
of operations.
39
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Company's Directors and executive officers and their ages as of May 21,
1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert J. Darnall.................. 58 Chairman and Director
President, Chief Executive Officer and
Neil S. Novich..................... 41 Director
Jay M. Gratz....................... 43 Vice President, Finance, Chief Financial
Officer and Director
Stephen E. Makarewicz.............. 49 President, Tull
Carl G. Lusted..................... 60 President, Ryerson Central
Gary J. Niederpruem................ 44 President, Ryerson East
Thomas S. Cygan.................... 51 President, Ryerson West
Timothy L. LaPerre................. 49 President, Ryerson Coil
William Korda...................... 48 Vice President, Human Resources
Darell R. Zerbe.................... 53 Vice President, Information Technology
Lily L. May........................ 46 Controller
Vicki L. Avril..................... 41 Treasurer
Charles B. Salowitz................ 47 Secretary
</TABLE>
Robert J. Darnall has been Chairman of the Company and Chairman and Chief
Executive Officer of Ryerson since April 1995. He formerly was Chairman of the
Company from November 1990 to June 1994. He has been President, Chief
Executive Officer and a Director of ISI since April 1986 and became Chairman
of ISI in 1992. He is also Chairman, President and Chief Executive Officer of
ISC and has been a Director of ISC since 1983. He joined ISC in 1962, has
served as its Chairman since 1992, as its Chief Executive Officer from 1992 to
1995 and since April 1996 and as its President from 1984 to 1986, 1987 to 1992
and since April 1996. Mr. Darnall is also a Director of Cummins Engine
Company, Inc. and Household International, Inc. Although Mr. Darnall devotes a
substantial portion of his time to the Company, most of his time is devoted to
ISI and its other subsidiaries.
Neil S. Novich has been President, Chief Executive Officer and Chief
Operating Officer of the Company, President of Ryerson and Chairman of Tull
since June 1994. Mr. Novich was also appointed a Director of the Company in
June 1994. He served as Chairman of Ryerson from June 1994 to April 1995. He
was a Senior Vice President of ISI from January 1995 to May 1996 and served as
a Vice President of ISI from June 1994 to January 1995. Prior to joining ISI
in 1994, he led the Distribution and Logistics Practice at Bain & Company
("Bain"), an international management consulting firm, from 1987 and was
employed by Bain beginning in 1981.
Jay M. Gratz has been Vice President, Finance of the Company since September
1994 and Vice President, Finance and Chief Financial Officer of ISI since May
1996. He was Vice President, Finance of ISC from March 1993 to September 1994
and Vice President, Finance of the Inland Steel Flat Products Company division
of ISC from November 1991 to March 1993. Mr. Gratz also served as General
Manager of Financial Planning and Analysis of ISI from December 1989 to
November 1990 and Manager of Financial Planning and Analysis of ISI from July
1986 to December 1989. Mr. Gratz was appointed a Director in April 1995. Mr.
Gratz joined ISC in August 1975.
Stephen E. Makarewicz has been President, Chief Executive Officer and Chief
Operating Officer of Tull since October 1994. Mr. Makarewicz was Vice
President and General Manager of Ryerson Chicago from April 1992 to October
1994, Vice President and General Manager of Tull from June 1990 to April 1992
and District Manager for Tull's Charlotte facility from June 1988 to June
1990. Mr. Makarewicz originally joined Tull in September 1983.
40
<PAGE>
Carl G. Lusted has been President of the Ryerson Central division of Ryerson
since August 1990. Mr. Lusted was Vice President and General Manager of Tull
from August 1984 to August 1990, Vice President, Merchandising of Tull from
January 1983 until August 1984, Vice President, Marketing of Tull from
September 1979 to January 1983 and Corporate Secretary of Tull from April 1979
to September 1979. Mr. Lusted originally joined Tull in January 1968.
Gary J. Niederpruem has been President of Ryerson East since January 1993.
He served as General Manager of Ryerson's Buffalo location from August 1985 to
January 1993 and General Order Manager of Ryerson's Minneapolis location from
November 1980 to August 1985. Mr. Niederpruem joined Ryerson in May 1973.
Thomas S. Cygan has been President of Ryerson West since November 1994. He
served as General Manager of Ryerson's Kansas City location from May 1981 to
November 1994. He also served as Inside Sales Manager for Ryerson-Detroit from
August 1976 to May 1981 and Inside Sales Manager for Ryerson's Machinery
Division from January 1973 to August 1976. Mr. Cygan joined Ryerson in
February 1966.
Timothy L. LaPerre has been President of Ryerson Coil since January 1993. He
served as Vice President and General Manager of Ryerson Coil from March 1990
to January 1993. He also served as Executive Vice President and General
Manager of Keelor Steel from March 1987 to March 1990. Mr. LaPerre originally
joined Keelor in April 1972.
William Korda has been Vice President of Human Resources of the Company
since October 1993. He served as the Company's Manager of Human Resources from
August 1992 to October 1993 and as Manager of Benefits and Salary
Administration for the Company from January 1991 to August 1992. He also
served as a Human Resources Manager for Ryerson from January 1986 to January
1991, Manager of Human Resources Development of ISC from April 1985 to January
1986 and Personnel Manager of ISC from September 1982 to April 1985. Mr. Korda
joined ISC in June 1969.
Darell R. Zerbe has been Vice President, Information Technology and Chief
Information Officer of the Company since February 1996. He served as Senior
Vice President, Management Information Systems, for Venture Stores, Inc. from
1988 to February 1996. Mr. Zerbe has also been employed by PepsiCo., Inc., Dr.
Pepper, Inc., Baxter International, Inc. and Procter & Gamble Co.
Lily L. May has been Controller of the Company since May 1996. She was Vice
President, Finance and Purchasing, and Controller of ISC from January 1995
through May 1996. Prior to that, she was Director of Purchases and Energy of
the Inland Steel Flat Products Company division of ISC from November 1993 to
January 1995. She also served as Director of Internal Auditing of ISI from
February 1992 to November 1993, Director of Corporate Accounting of ISI from
February 1991 to February 1992 and Manager of Pension Investments of ISI from
September 1990 to February 1991. Ms. May joined ISC in December 1973.
Vicki L. Avril has been Treasurer of the Company since February 1994. She
has also been Treasurer of Ryerson and Tull since February 1994 and of ISI and
ISC since January 1994 and Director-Corporate Planning of ISI since January
1995. In addition, she was Director of Pension Investments and Administration
of ISI from June 1991 to January 1995, Assistant Treasurer of ISI from May
1993 to January 1994 and Manager of Distribution Business Development-
Corporate Planning and Development from February 1990 to June 1991. Ms. Avril
joined ISC in September 1976. Although Ms. Avril devotes a substantial portion
of her time to the Company, most of her time is devoted to ISI and its other
subsidiaries.
Charles B. Salowitz has been Secretary of the Company since April 1996.
Since September 1995 he has been Secretary of ISI and ISC. He has also been
Associate General Counsel of ISI since
41
<PAGE>
January 1995. He was an Assistant General Counsel of ISI from July 1989 and
Assistant Secretary from July 1989 to September 1995. Mr. Salowitz joined ISC
in September 1983. Although Mr. Salowitz devotes a substantial portion of his
time to the Company, most of his time is devoted to ISI and its other
subsidiaries.
Within 60 days of the consummation of the Offerings, the Company intends to
increase the number of Directors to a total of eight, including three
Independent Directors (as defined in the Certificate of Incorporation). Within
60 days of the consummation of the Offerings, the Company intends to appoint
the three Independent Directors. Prior to the consummation of the Offerings,
the Company's Board of Directors will be divided into three classes. Upon the
expiration of the term of each class of Directors, the Directors comprising
such class will be elected for a three-year term at the annual meeting of
stockholders in the year in which such term expires. All officers serve at the
discretion of the Board of Directors. The Certificate of Incorporation
requires that after the date 60 days after the consummation of the Offerings,
when any shares of Class A Common Stock are outstanding, at least one-third of
the members of the Board of Directors be Independent Directors, except under
specific limited circumstances. The Certificate of Incorporation also requires
that the Independent Directors be allocated as evenly as possible among the
classes of Directors. See "Description of Capital Stock--Corporate
Governance."
DIRECTORS' COMPENSATION
Prior to the consummation of the Offerings, the Directors were not
compensated for their services in such capacity. After consummation of the
Offerings, pursuant to the terms of the Directors' Compensation Plan, each
Director who is not an employee of the Company or any of its subsidiaries or
affiliates, will receive an annual retainer of $40,000, which will be paid 50%
in shares of Class A Common Stock and 50% in cash, provided that a Director
may elect to receive all or any portion of the cash portion of his retainer in
shares of Class A Common Stock. Such Directors will also receive $1,000 for
each special meeting of the Board of Directors, and for each special committee
meeting not held in conjunction with a regular or special meeting of the Board
of Directors, attended by them. No fees will be paid for any meeting of the
Executive Committee and membership on the Compensation and Nominating
Committees is regarded as membership on only one committee for purposes of
payment of fees for special meetings. Each Director who serves as chairman of
a standing committee of the Board of Directors will receive an additional
annual retainer of $4,000. Pursuant to the terms of the Directors'
Compensation Plan, each such Director may also elect, prior to January 1 of
each year, to defer payment of all or any portion of the retainer and fees to
which he or she would otherwise become entitled during such year as a Director
of the Company. If a Director becomes a Director during a calendar year, the
deferral election may be made within 30 days after he or she becomes a
Director and will be effective for the remainder of that year subsequent to
the election. Deferred amounts will be distributed in a lump sum or
installments in cash or shares of Class A Common Stock, all as elected by the
Director at the time of the deferral. Interest on cash deferrals will be
credited at the prime rate in effect from time to time at The First National
Bank of Chicago (or its successor). Stock deferrals will be credited with
dividends paid on shares of Class A Common Stock from time to time. A total of
100,000 shares of Class A Common Stock has been reserved for issuance under
the Directors' Compensation Plan, subject to adjustment for certain corporate
transactions affecting the number or type of outstanding shares. The
Directors' Compensation Plan has been approved by ISI as the sole stockholder
of the Company. The Company also pays the premiums on a business accident
insurance policy insuring each non-employee Director for amounts up to
$500,000.
42
<PAGE>
EXECUTIVE COMPENSATION
The following table presents the compensation for 1995 paid to the chief
executive officer and the four other most highly compensated executive
officers of the Company (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------ -------------------------
SECURITIES
RESTRICTED UNDERLYING
NAME AND OTHER ANNUAL STOCK STOCK ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION AWARDS(1) OPTIONS (#)(4) COMPENSATION(2)
------------------ -------- -------- ------------ ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Darnall(3).... $192,778 $143,908 $ 0 $47,291 8,370 $ 9,430
Chairman and Director
Neil S. Novich.......... 387,113 400,400 0 84,750 14,000 18,788
President, Chief
Executive Officer and
Director
Jay M. Gratz............ 173,752 109,200 0 28,250 4,000 8,696
Vice President,
Finance, Chief
Financial Officer and
Director
Carl G. Lusted.......... 223,384 206,250 0 39,550 7,000 11,181
President,
Ryerson Central
Stephen E. Makarewicz... 167,504 125,500 13,333(5) 33,900 6,000 2,533
President, Tull
</TABLE>
- --------
(1) Awards consist of restricted ISI common stock and are valued at the
aggregate market value as of the date of grant, based on the closing
market price of ISI's common stock on such date. Dividends are paid on
such shares to the extent paid on the ISI common stock. The vesting
schedule for the restricted stock awards made in 1995 to the executives
identified in the table provides that all shares will vest at the end of a
three-year period beginning May 24, 1995. However, vesting may be
accelerated at the discretion of ISI's Compensation Committee in the event
of exceptional individual performance and/or significant progress by ISI
or the appropriate business unit in meeting its operating and financial
objectives. The number and value of the aggregate restricted stock
holdings at December 31, 1995, based on the closing market price of the
ISI common stock on December 29, 1995, were: Mr. Darnall, 6,696
shares/$168,237; Mr. Novich, 10,800 shares/$271,350; Mr. Gratz, 5,000
shares/$125,625; Mr. Lusted, 5,800 shares/$145,725; and Mr. Makarewicz,
4,700 shares/$118,088. Effective upon consummation of the Offerings, the
outstanding shares of restricted ISI common stock held by the Company's
employees will be converted into shares of restricted Class A Common
Stock, provided that the Compensation Committee may determine that any
employee may receive restricted Class A Common Stock with respect to less
than all of his or her restricted ISI common stock. See "--Ryerson Tull
1996 Incentive Stock Plan."
(2) Amounts represent the value of vested and unvested employer contributions
and allocations to the Inland Steel Industries Thrift Plan and the Inland
Steel Industries Non-Qualified Thrift Plan (the "Non-Qualified Thrift
Plan") (or, in the case of Mr. Makarewicz, the J. M. Tull Metals Company,
Inc. Employees' Profit Sharing Plan).
(3) Amounts shown for Mr. Darnall represent 27.9% of Mr. Darnall's total
compensation for 1995. Such percentage is based on the ratio of the
Company's operating assets to ISI's consolidated operating assets and was
used to determine the percentage of ISI's overhead expenses allocable to
the Company for 1995. All of Mr. Darnall's 1995 compensation was paid by
ISI.
43
<PAGE>
(4) All options are for ISI common stock. Effective upon consummation of the
Offerings, most of the options for ISI common stock held by the Company's
officers and employees will be converted into options for Class A Common
Stock, provided that the Compensation Committee may determine that any
employee may receive options to purchase shares of Class A Common Stock
for less than all of his or her options to purchase ISI common stock. See
"--Ryerson Tull 1996 Incentive Stock Plan."
(5) Represents reimbursement of relocation expenses and related tax gross-up.
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
ISI entered into an agreement with Mr. Novich, dated April 8, 1994,
providing that he would serve as Vice President of ISI, Chief Operating
Officer of the Company and President of Ryerson. Pursuant to the agreement,
Mr. Novich received a base annualized salary for calendar year 1994 of
$330,000 and an award of $112,900 under the Inland Steel Industries, Inc.
Annual Incentive Plan (the "AIP"). In 1994, under the agreement, Mr. Novich
received a restricted stock award of 5,000 shares of ISI common stock and a
grant of options to purchase 20,000 shares of ISI common stock, each of which
vests over a three-year period. ISI also reimbursed Mr. Novich for moving
expenses from West Newton Hill, Massachusetts to the Chicago area, including
the amount by which the purchase price, plus the cost of capital improvements,
as defined by the IRS, of Mr. Novich's home in West Newton Hill exceeded the
sales price of such home and an amount sufficient to pay all taxes on the
reimbursement such that he would have no after tax cost or loss. This
reimbursement totaled $94,034. In addition, Mr. Novich was paid a bonus of
$100,000 upon signing the agreement.
ISI also entered into a severance agreement with Mr. Novich, dated April 8,
1994, providing that, in the event of termination of his employment for any
reason other than malfeasance or voluntary termination prior to the third
anniversary of his employment with the Company, the Company will pay the
present value of (i) his monthly base salary in effect at the time of such
termination times the number of months remaining in the 36-month period, plus
(ii) 1/12th of the average annual award paid to him under the AIP or a
successor plan times the number of months remaining in the 36-month period. In
addition, all of his restricted stock will become fully vested, all options
will become fully exercisable and ISI will continue life insurance, disability
insurance and dental and health care coverage for Mr. Novich and his immediate
family until the third anniversary of his date of hire upon terms consistent
with such coverages for active employees until such date.
ISI entered into an agreement with Mr. Lusted, dated June 27, 1990,
providing that upon Mr. Lusted reaching age 62 or at any other mutually
agreeable time, ISI will reimburse Mr. Lusted for his reasonable moving
expenses from the Chicago area to the Atlanta area, or to any other mutually
agreeable location. In connection with such a relocation, ISI has agreed to
pay Mr. Lusted the amount, if any, by which the lesser of Mr. Lusted's
purchase price or the appraised value of his home in the Chicago area exceeds
the net sales price of such home.
On March 27, 1996, ISI entered into agreements (the "ISI Agreements") with
each of the Named Executive Officers, the present terms of which expire on
December 31, 1996, but are automatically extended for additional one-year
periods thereafter unless ISI gives prior notice that it does not wish to
extend such agreements for another year or unless a change in control (as
defined below) of ISI or certain other limited events occur. ISI has not given
notice of non-renewal. For purposes of the ISI Agreements, a change in control
will generally be deemed to have occurred if: (i) with certain limited
exceptions, any person becomes the beneficial owner of 40% or more of the
combined voting power of ISI's then outstanding securities; (ii) during any
two-year period, the majority of the membership of the ISI Board of Directors
changes without the approval of two-thirds of the Directors who either were
Directors at the beginning of the period or whose election was previously so
approved; (iii) the ISI
44
<PAGE>
stockholders approve a merger or consolidation of ISI with another company in
which ISI's voting securities, in combination with voting securities held by
any trustee or fiduciary under any ISI employee benefit plan, do not continue
to represent at least 60% of the combined voting power of the voting
securities of the surviving entity (excepting certain recapitalizations of
ISI); (iv) the ISI stockholders approve a plan of complete liquidation of ISI
or an agreement for the sale or disposition by ISI of all or substantially all
of its assets; or (v) there occurs with respect to a Related Company (defined
below) a sale or disposition of securities representing 50% or more of the
combined voting power of the Related Company's securities, or a merger or
consolidation of a Related Company with another company in which a majority-
owned direct or indirect subsidiary of ISI does not own at least 50% of the
combined voting power of the voting securities of the surviving entity or a
sale or disposition of all or substantially all of the assets of a Related
Company to a person other than a majority-owned direct or indirect subsidiary
of ISI. A "Related Company" is a covered employee's employer (or any direct or
indirect parent company of such employer, or subsidiary of such employer that
is a significant subsidiary (within the meaning of Rule 405 of the Securities
Act) of ISI). A change in control of ISI shall not be deemed to have occurred
with respect to any employee, however, if the sale or other transaction
includes or involves a sale to the public or a distribution to the
stockholders of ISI of more than 50% of the voting securities of the
employee's employer or a direct or indirect parent of his or her employer and
the employee's employer (or a direct or indirect parent of the employee's
employer) agrees to become a successor to ISI under the employee's ISI
Agreement.
The ISI Agreements provide that if a covered executive's employment is
terminated within two years after a change in control of ISI either (i) by ISI
other than for "cause" or other than as a consequence of death, disability or
retirement (all as defined in such agreements), or (ii) by such executive for
"good reason," generally relating to a diminution of responsibilities,
compensation or benefits or significant relocation of his or her principal
office, the executive will receive: (i) a lump-sum payment equal to two times
the sum of (a) the executive's current annual base salary plus (b) the
executive's average incentive bonus paid for the five years preceding
termination of employment; (ii) an amount in cash in lieu of any allocations,
unpaid awards or rights under ISI's annual or other incentive compensation
plans; (iii) an amount in cash equal to the value of outstanding stock options
granted under ISI's stock option plans at specified prices; (iv) an amount in
cash equal to the value of shares of common stock awarded or issuable as
performance and/or restricted shares under ISI's incentive stock plans; (v)
life, disability, accident and health insurance as provided in ISI's insurance
programs and financial advisory and outplacement services for a period of 24
months after termination of employment; (vi) an amount in cash in lieu of two
years of additional accrued benefits under ISI's pension plan and (vii) legal
fees and expenses incurred as a result of such termination. In addition to the
foregoing, Mr. Novich's agreement provides that payments under the agreement
will not limit or reduce any benefits that he may be entitled to receive
pursuant to his severance agreement (discussed above). Each ISI Agreement
contains an excise tax "gross-up" provision pursuant to which the executive
will be paid an additional amount upon the imposition of any excise tax. While
this provision will preserve the benefits receivable under the agreement for
the executive, ISI will not be entitled to a federal income tax deduction for
a portion of the severance payments provided thereunder.
The ISI Agreements provide benefits in the event the employee is terminated
by ISI for reasons other than cause within 12 months after the occurrence of a
"potential change in control" of ISI if a change in control of ISI or certain
other limited events occur within 6 months after his or her termination. A
"potential change in control" shall be deemed to have occurred for purposes of
the agreements if (i) ISI enters into an agreement, the consummation of which
would result in the occurrence of a change in control of ISI, (ii) any person
(including ISI) publicly announces an intention to take or to consider taking
actions which, if consummated, would constitute a change in control, (iii)
with certain limited exceptions, any person who is or becomes the owner of
securities of ISI representing 9.5% or more of the combined voting power of
ISI's then outstanding securities increases such person's beneficial ownership
of such securities by 5% or more over the percentage so owned
45
<PAGE>
on the date of the agreement, or (iv) the Board of Directors of ISI adopts a
resolution that a potential change in control of ISI has occurred for purposes
of the agreements. The Offerings will not, and the Company and ISI anticipate
that a Spin-off will not, constitute a change in control or potential change
in control for purposes of the ISI Agreements with respect to employees of the
Company. In the event of a Spin-off, employees of the Company will no longer
be entitled to benefits under the ISI Agreements.
The Company will enter into agreements (the "Company Agreements") with each
of the named executive officers which will provide benefits substantially
similar to those provided under the ISI Agreements in the event that the
executive's employment with the Company is terminated following a change in
control of the Company (defined to include events with respect to the Company
similar to those which constitute a change in control under the ISI Agreement
with respect to ISI). To the extent that an executive becomes entitled to
benefits under a Company Agreement, no benefits will be payable under the ISI
Agreement. Similarly, if the executive becomes entitled to benefits under the
ISI Agreement, no benefits will be payable under the Company Agreement. The
Offerings will not, and the Company and ISI anticipate that a Spin-off will
not, constitute a change in control for purposes of the Company Agreements.
PENSION BENEFITS
Prior to April 30, 1996, certain employees of the Company were eligible to
participate in the ISI Pension Plan. Effective April 30, 1996, that portion of
the ISI Pension Plan covering the Company's current and former employees was
separated and became the Pension Plan. Employees covered by the Pension Plan
will be credited with the number of years of service credited to them under
the ISI Pension Plan as of the separation date. The following table shows the
maximum annual pension benefits payable on a straight life annuity basis to
employees in various earnings classifications upon retirement at age 65. All
benefit amounts shown in such table are subject to offset based upon Social
Security earnings.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE
ANNUAL
EARNINGS FOR
THE APPLICABLE ANNUAL PENSION BENEFITS FOR YEARS OF SERVICE SHOWN
YEAR-OF-SERVICE --------------------------------------------------------------
PERIOD 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
--------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 200,000...... $ 17,000 $ 34,000 $ 51,000 $ 68,000 $ 85,000 $102,000 $119,000
400,000...... 34,000 68,000 102,000 136,000 170,000 204,000 238,000
600,000...... 51,000 102,000 153,000 204,000 255,000 306,000 357,000
800,000...... 68,000 136,000 204,000 272,000 340,000 408,000 476,000
1,000,000...... 85,000 170,000 255,000 340,000 425,000 510,000 595,000
1,200,000...... 102,000 204,000 306,000 408,000 510,000 612,000 714,000
1,400,000...... 119,000 238,000 357,000 476,000 595,000 714,000 833,000
1,600,000...... 136,000 272,000 408,000 544,000 680,000 816,000 952,000
</TABLE>
As of April 1, 1996, the Named Executive Officers were credited with the
following years of service under the appropriate plan: Robert J. Darnall--33
years; Neil S. Novich--1 year; Jay M. Gratz--20 years; Carl G. Lusted--28
years; and Stephen E. Makarewicz--2 years.
Pensions are provided under the Pension Plan to eligible employees
(including employees who are Directors or officers) who, at retirement, have
met certain service or service and age requirements. In general for salaried
employees, benefits are based on years of service and individual earnings for
the highest consecutive 36-month period of earnings during the last ten 12-
month periods of service prior to retirement. For this purpose, earnings
generally consist of salary compensation plus bonus compensation as reported
in the Summary Compensation Table.
46
<PAGE>
The Company has established the Company Supplemental Retirement Plan for
Covered Employees (the "Supplemental Plan"), which provides supplemental
pension benefits to employees of the Company and its affiliates who
participate in the Pension Plan and whose benefits under that plan are limited
by certain provisions of the Internal Revenue Code of 1986, as amended (the
"Code"). The Supplemental Plan is non-contributory and benefits payable under
the Supplemental Plan are paid from the general assets of the Company.
However, the Supplemental Plan provides that, for any officer or employee with
at least five years of service, with annual compensation in excess of $150,000
and who is age 55 or older, the Company may elect to satisfy its obligations
for benefits payable upon retirement at age 65 by (i) the purchase of an
annuity contract either prior to or at the time of retirement (and a tax
gross-up payment to the officer or employee at the time of purchase) or (ii)
the payment of a lump sum amount at the time of retirement. Prior to
establishing the Supplemental Plan, certain employees of the Company
participated in the ISI Supplemental Retirement Plan for Covered Employees and
the ISI Special Retirement Benefit Plan for Covered Employees (collectively,
the "ISI Supplemental Plans"). The ISI Supplemental Plans provided benefits
similar to the Supplemental Plan. The Company has assumed ISI's liabilities
under the ISI Supplemental Plans with respect to current and former employees
of the Company.
All accrued benefits under the Pension Plan vest, and all benefits accrued
under the Supplemental Plan will become fully and irrevocably vested and
distributable to participants as provided by the terms of such plans then in
effect, in the event of a change in control (as defined in those plans) of the
Company. Any surplus assets under the Pension Plan are to be used to provide
additional benefits in the event of a termination, merger or consolidation of
the Pension Plan, or a transfer of assets to another plan, within three years
of such a change in control, and limitations have been placed on amendments to
the Pension Plan within such three-year period. The Offerings will not, and
the Company and ISI anticipate that a Spin-off will not, constitute a change
in control under the Pension Plan or the Supplemental Plan.
Pension benefits are provided to eligible salaried employees of Tull under a
separate benefit schedule of the Pension Plan. The maximum annual pension
benefits payable under such schedule are approximately 3% higher than those
shown in the above table for comparable earnings and service. Stephen E.
Makarewicz is covered by the Tull benefit schedule and credited with 10 years
of service under that schedule.
INLAND STEEL INDUSTRIES NONQUALIFIED THRIFT PLAN
The Company also participates in the Nonqualified Thrift Plan, which
provides supplemental benefits to employees of ISI and its affiliates who are
eligible to participate in the Inland Steel Industries Thrift Plan (the "ISI
Thrift Plan") and whose salary reduction contributions to the ISI Thrift Plan
are limited by the Code provision which generally restricts the amount of
compensation that can be taken into account under the ISI Thrift Plan. Under
the Nonqualified Thrift Plan, eligible employees can elect to defer, on a pre-
tax basis, between 1% and 10% of their salary. ISI will match 100% of the
deferral, up to 5% of the participant's salary. All amounts contributed
pursuant to the Nonqualified Thrift Plan are credited to a bookkeeping account
and are credited with hypothetical earnings at the rate of interest earned by
the assets in the Stable Value Fixed Income Fund (as defined) under the ISI
Thrift Plan. Upon termination of a participant's employment, all amounts
credited to his account under the Nonqualified Thrift Plan will be paid in a
lump sum from the general assets of ISI within 60 days after the first
anniversary of his termination of employment. If a participant terminates
employment prior to completing five years of service with ISI (other than on
account of certain limited events), he will not be entitled to any of the ISI
contributions relating to the two-year period prior to the termination of
employment. Special payment rules may apply if the participant terminates
employment on account of disability or retirement. Interim distributions may
be permitted on account of hardship. All benefits under the Nonqualified
Thrift Plan become fully vested upon a change in control (as defined) of ISI.
The Offerings will not, and the Company and ISI anticipate that a Spin-off
will not, constitute a change in control for purposes of the Nonqualified
Thrift Plan.
47
<PAGE>
INDIVIDUAL OPTION GRANTS IN 1995
The following table presents information with respect to (i) individual
grants of options for ISI's common stock that were made during 1995 under the
ISI Incentive Plan to the Named Executive Officers and (ii) the grant date
present value of such options.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES IN PRICE(2) EXPIRATION PRESENT
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE VALUE(3)
---- ---------- ------------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Robert J. Darnall....... 30,000 6.4% $28.50 May 23, 2005 $376,200
Neil S. Novich.......... 14,000 3.0 28.50 May 23, 2005 175,560
Jay M. Gratz............ 4,000 0.8 28.50 May 23, 2005 50,160
Carl G. Lusted.......... 7,000 1.5 28.50 May 23, 2005 87,780
Stephen E. Makarewicz... 6,000 1.3 28.50 May 23, 2005 75,240
</TABLE>
- --------
(1) All options are for ISI common stock and were granted on May 24, 1995.
They become exercisable with respect to 50% of the shares after May 24,
1996 and are fully exercisable after May 24, 1997. Options granted in 1995
to each of these executives are transferable, with the advance written
consent of ISI's Compensation Committee of the Board of Directors, to (i)
a spouse or descendants, (ii) to a trust for the benefit of the optionee,
his spouse or descendants or (iii) as a charitable contribution. See "--
Employment and Change in Control Agreements" for provisions relating to
payout of options upon a change in control of ISI or the Company.
Effective upon consummation of the Offerings, the options for ISI common
stock held by the Company's officers and employees will be substituted
with options for Class A Common Stock in accordance with the methodology
described in Section 424 of the Code and regulations thereunder, provided
that the Compensation Committee may determine that any employee may
receive Substitute Options with respect to less than all of his or her
options on ISI common stock. See "--Ryerson Tull 1996 Incentive Stock
Plan."
(2) The exercise price is equal to the average of the high and low price of
ISI's common stock on the NYSE Composite Transactions on the date of
grant. The exercise price may be paid by delivery of already-owned shares
and an optionee may elect to have ISI withhold shares of ISI common stock
(or accept already-owned shares) to satisfy tax withholding obligations
with respect to option exercises or payments.
(3) In accordance with Commission rules, the Black-Scholes option pricing
model was chosen to estimate the grant date present value of the options
granted during 1995. Use of this model should not be construed as an
endorsement of the model's accuracy at valuing options. The following
assumptions were made for purposes of calculating the present value of the
options as of the grant date: the option term is ten years, the volatility
of ISI's common stock is 35.215% (calculated using daily stock prices for
the one-year period prior to the grant date), the ten-year risk-free
interest rate is 6.63%, the annualized dividend rate is $0.20 per share
and a reduction of approximately 20.16% reflects the probability of (i)
forfeiture due to termination prior to vesting and (ii) a shortened option
term due to termination of employment prior to the option expiration date.
The value of the options granted in 1995 depends upon the actual
performance of ISI's common stock during the applicable period; the actual
value, if any, that an optionee will realize upon exercise of an option
will depend on the excess of the market value of ISI's common stock over
the exercise price on the date the option is exercised.
48
<PAGE>
AGGREGATED OPTION EXERCISES IN 1995 AND YEAR-END OPTION/SAR VALUES
The following table presents the number of securities underlying the
option/SAR holdings of the Named Executive Officers at the end of 1995 and the
value of such holdings. No options for ISI common stock or SARs were exercised
by the Named Executive Officers during 1995.
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS/SARS AT
OPTIONS/SARS AT FISCAL FISCAL YEAR-END(1)
YEAR-END (EXERCISABLE/ (EXERCISABLE/
UNEXERCISABLE) UNEXERCISABLE)
---------------------- ------------------
<S> <C> <C>
Robert J. Darnall..................... 125,667/58,333 $101,250/$0
Neil S. Novich........................ 17,000/31,000 0/0
Jay M.Gratz........................... 15,467/8,333 0/0
Carl G. Lusted........................ 18,300/14,500 0/0
Stephen E. Makarewicz................. 13,750/7,750 0/0
</TABLE>
- --------
(1) All such options are for ISI common stock; value is based on the closing
price of ISI's common stock on the NYSE Composite Transactions on December
29, 1995.
RYERSON TULL 1996 INCENTIVE STOCK PLAN
The Company has adopted, and ISI has approved, the Incentive Stock Plan.
Long-term incentive compensation grants may be made by the Compensation
Committee under the Incentive Stock Plan. These grants and awards may consist
of stock options (both incentive and nonqualified), stock appreciation rights,
restricted stock awards and performance awards, or combinations thereof. Stock
options and stock appreciation rights may be granted at not less than 100% of
the fair market value of the Class A Common Stock on the date of grant and are
generally exercisable for a period not exceeding ten years. Restricted stock
awards, consisting of shares of Class A Common Stock, are contingent on
continuing employment with the Company for specified periods, and performance
awards, payable in shares of Class A Common Stock or cash, are contingent on
the achievement over specified periods of such performance objectives as shall
be established by the Compensation Committee. Restricted stock awards may also
be contingent upon the achievement of performance measures. Grants and awards
made by the Compensation Committee under the Plan are intended to provide
executive officers not only with additional incentives for outstanding
individual performance but also with the opportunity to acquire an ownership
stake in the Company, thereby more closely aligning their interests with those
of the stockholders. Upon a change in control (as defined below) of the
Company, with certain exceptions: (i) the value of all outstanding stock
options, stock appreciation rights and restricted stock awards (whether or not
then fully exercisable or vested) will be cashed out at specified prices as of
the date of the change in control, except that (a) any stock options or stock
appreciation rights outstanding for less than six months will not be cashed
out until six months after the applicable date of grant and (b) the
Compensation Committee may provide for immediate vesting instead of cashing
out of restricted stock awards and (ii) all outstanding performance awards
will be cashed out in the amounts and manner determined by the Compensation
Committee.
For purposes of the Incentive Stock Plan, a change in control of the Company
shall generally be defined in the same manner as under the Company Agreements.
The Offerings will not, and the Company and ISI anticipate that a Spin-off
will not, constitute a change in control of the Company for purposes of the
Incentive Stock Plan.
Generally, a participant who is granted a stock option will not be subject
to federal income tax at the time of grant and the Company will not be
entitled to a tax deduction by reason of such grant. Upon exercise of a
nonqualified option, generally the difference between the option price and the
fair market value of the Class A Common Stock on the date of exercise will be
considered ordinary income to the participant and generally the Company will
be entitled to a corresponding tax deduction.
49
<PAGE>
Upon exercise of an incentive stock option, no taxable income will be
recognized by the participant and the Company is not entitled to a tax
deduction by reason of such exercise. However, if Class A Common Stock
purchased pursuant to the exercise of an incentive stock option is sold within
two years from the date of grant or within one year after the transfer of such
Class A Common Stock to the participant, then the difference, with certain
adjustments, between the fair market value of the Class A Common Stock at the
date of exercise and the option price will be considered ordinary income to
the participant and generally the Company will be entitled to a corresponding
tax deduction. If the participant disposes of the Class A Common Stock after
such holding periods, any gain or loss upon such disposition will be treated
as a capital gain or loss and the Company will not be entitled to a deduction.
The maximum number of shares of Class A Common Stock reserved for issuance
under the Incentive Stock Plan is 2,300,000, subject to adjustment as provided
in the Incentive Stock Plan to reflect certain corporate transactions
affecting the number or type of outstanding shares.
NEW PLAN BENEFITS
It is currently estimated that approximately 100 Company employees will be
eligible to participate in the Incentive Stock Plan. No determinations have
been made concerning the issuance of awards under the Incentive Stock Plan,
other than the issuances of shares of restricted Class A Common Stock and
options to purchase shares of Class A Common Stock in exchange for certain
outstanding restricted shares of ISI common stock and options to purchase ISI
common stock, as described below.
Effective upon consummation of the Offerings, shares of restricted stock
under the Incentive Stock Plan will be substituted for outstanding shares of
restricted stock that have been granted to employees of the Company under the
Inland 1995 Incentive Stock Plan and prior ISI plans (collectively, the "ISI
Incentive Plans"). Generally, the number of restricted shares of Class A
Common Stock to be substituted shall bear the same ratio to the number of
restricted shares of ISI common stock held by the employee as the average
value (defined below) of a share of ISI common stock bears to the average
value of a share of Class A Common Stock. Average value with respect to a
share of ISI common stock or Class A Common Stock means the average closing
price of such stock for the first ten trading days following the consummation
of the Offerings. Similarly, options granted under the Incentive Stock Plan
("Substitute Options") will be substituted for outstanding options granted to
employees of the Company under the ISI Incentive Plans, with the number of
shares of Common Stock that will be subject to the Substitute Options and the
exercise price thereof determined in accordance with Section 424 of the Code
and regulations thereunder. The Compensation Committee may determine, however,
that any employee may receive restricted shares of Class A Common Stock or
Substitute Options with respect to less than all of his or her outstanding
restricted stock or options under the ISI Incentive Plans.
The following table sets forth the number of shares of restricted Class A
Common Stock and the number of shares of Class A Common Stock subject to
options to be substituted for restricted shares of ISI common stock and
options to purchase ISI common stock (assuming that as of the applicable
valuation date the value of a share of ISI common stock is $22.875 (the last
reported sales price on the NYSE on May 21, 1996), that the value of a share
of Class A Common Stock is $17.50 (the mid-point of the offering range set
forth on the cover page of this Prospectus) and that no shares of ISI common
stock or options to purchase shares of ISI common stock held by Company
officers who are also ISI officers will be converted into shares of restricted
Class A Common Stock or options to purchase shares of Class A Common Stock for
(i) the Named Executive Officers, (ii) the Company's executive officers, as a
group, and (iii) all employees, including all current officers who are not
executive officers of the Company, as a group.
50
<PAGE>
RYERSON TULL 1996 INCENTIVE STOCK PLAN
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES OF SHARES
RESTRICTED SUBJECT
NAME AND POSITION STOCK(1) TO OPTIONS(1)
----------------- ---------- -------------
<S> <C> <C>
Robert J. Darnall.................................... 0 0
Chairman and Director
Neil S. Novich....................................... 14,117 117,643
President, Chief Executive Officer and Director
Jay M. Gratz......................................... 0 0
Vice President, Finance, Chief Financial Officer and
Director
Carl G. Lusted....................................... 3,660 70,324
President, Ryerson Central
Stephen E. Makarewicz................................ 2,876 51,632
President, Tull
Executive Group...................................... 31,633 418,645
Non-Executive Officer Employee Group................. 7,516 452,253
</TABLE>
- --------
(1) Assumes that no shares of restricted ISI common stock or options to
purchase shares of ISI common stock held by Company officers who are also
ISI officers will be converted into shares of restricted Class A Common
Stock or options to purchase shares of Class A Common Stock.
RELATIONSHIP WITH ISI
DIVIDENDS
Prior to the consummation of the Offerings, the Company will declare a
dividend payable in cash to ISI in an amount equal to the estimated net
proceeds of the Offerings (estimated to be $84.4 million at an assumed initial
offering price of $17.50 per share (the mid-point of the price range set forth
on the cover page of this Prospectus)) and a dividend consisting of the Note
Payable. The net proceeds of the Offerings will be used to pay the dividend
and will not be available to the Company. All of the net proceeds of the Note
Offering, if consummated, together with a portion of the Company's available
cash and/or borrowings under credit facilities, will be used to discharge the
Note Payable. In the event that the Note Offering is not consummated, the Note
Payable will remain an obligation of the Company, and must be repaid with cash
generated from operations and/or from the proceeds of future financings, the
source, nature and amount of which cannot currently be determined. On May 20,
1996, the Company paid the May 1996 Dividend.
SHARED MANAGEMENT
Mr. Darnall, Chairman of the Board and a Director, Mr. Gratz, Vice
President, Finance, Chief Financial Officer and a Director, Ms. Avril,
Treasurer, and Mr. Salowitz, Secretary, are also executive officers of ISI.
Upon consummation of the Offerings, the Company and ISI also will have four
common Directors. The Company expects that such arrangements will continue for
the foreseeable future following the consummation of the Offerings. Until May
1996, Mr. Novich, President, Chief Executive Officer and a Director, was also
an executive officer of ISI. See "Management--Executive Officers and
Directors."
POTENTIAL DISTRIBUTION AND OTHER TRANSACTIONS
Immediately following the consummation of the Offerings, the Company will
continue to be controlled by ISI, which will beneficially own all of the
outstanding Class B Common Stock, representing approximately 96.3% of the
aggregate voting power of all of the Company's outstanding Common Stock (95.8%
if the over-allotment options granted to the Underwriters are exercised in
full). ISI has advised the Company that after the consummation of the
Offerings, ISI may hold such stock indefinitely, may distribute all or a part
of such stock (in the form of Class A Common Stock) to ISI's stockholders by
means of a Spin-off or may sell such stock (in the form of Class A Common
Stock) to
51
<PAGE>
third parties in one or more transactions, although it has no commitments or
understandings to do any of the foregoing. See "Description of Capital Stock--
Common Stock--Conversion Rights." The completion of any such transaction would
be subject to a number of factors, including a determination by the Board of
Directors of ISI that such a transaction would be in the best interest of its
stockholders, and in the case of a Spin-off, could be subject to the receipt
of a favorable ruling from the IRS or an opinion of counsel as to the tax-free
nature of such transaction. Substantially all of the shares of Class A Common
Stock distributed in such Spin-off or sale could be eligible for immediate
resale in the public market. See "Shares Eligible for Future Sale--Potential
Distribution and Other Transactions."
SUPPLY ARRANGEMENTS
During 1995, the Company purchased approximately 400,000 tons of steel
having a value of $177 million from ISC, a wholly-owned subsidiary of ISI.
Purchases of steel from ISC amounted to $174 million in 1993 and $184 million
in 1994. The terms of these arrangements were negotiated between the Company
and ISC and are similar to other large supply arrangements the Company has
with other suppliers. The Company expects to continue purchasing significant
amounts of material from ISC, although there can be no assurances that such
purchases will continue. All future transactions, if any, will continue to be
on an arm's length basis. ISC also buys material from the Company, which
purchases amounted to approximately $11 million in each of 1993 and 1994 and
approximately $12 million in 1995, and may continue to buy material from the
Company in the future.
SUPPORT SERVICES; INDEMNIFICATION AND CORPORATE SEPARATENESS
Concurrent with the consummation of the Offerings, the Company and ISI will
enter into a corporate separation agreement (the "Corporate Separation
Agreement") relating to, among other things, the provision of support services
by ISI to the Company, indemnification by and between the Company and ISI, and
procedures intended to maintain separation between the Company and ISI.
In the past, ISI has provided certain support services to the Company in the
following areas: finance (including tax administration, cash management,
pension and employee benefit plan administration, auditing and corporate
communications), legal (including public affairs and corporate secretary),
human resources and information technology, as well as senior management
services. Charges by ISI to the Company for these services amounted to $7.4
million in each of 1993 and 1994 and $6.8 million in 1995. The Corporate
Separation Agreement provides that ISI will continue to provide these services
to the Company for a period of five years, cancellable by either party upon 60
days written notice to the other party or immediately by mutual consent of the
parties. The Corporate Separation Agreement provides that, consistent with
past practice, specific distinguishable costs incurred by ISI in providing
services to the Company will be charged to the Company and that other support
costs will be allocated to the Company based on the percentage of ISI
consolidated operating assets attributable to the Company.
The Corporate Separation Agreement also provides that the Company on the one
hand, and ISI and its other subsidiaries on the other, will indemnify each
other for losses, claims and damages that they may suffer or for which they
may become liable, including those relating to tax, environmental, ERISA and
pension liabilities, that arise out of the relationship of the parties prior
to the Offerings or as a result of ISI's control of the Company.
Provisions intended to maintain the existence of the Company and ISI as
separate corporate entities also are included in the Corporate Separation
Agreement. Such provisions provide that, among other things: other than the
Company's Chairman, no more than one-half of the Company's executive officers
will be officers or employees of ISI or any of its other subsidiaries; the
Company and ISI each will maintain its assets separate from those of the other
and the other's subsidiaries; the Company and ISI each will account for and
manage its liabilities separately from those of the other and the other's
52
<PAGE>
subsidiaries; the Company will maintain offices separate from the offices of
ISI and ISI's other subsidiaries; and, other than the ESOP Guarantee, the
Company and ISI each will not pledge its assets for the benefit of, or grant
guarantees or otherwise hold out its credit as being available to satisfy the
obligations of, the other or any of the other's subsidiaries. These provisions
automatically terminate when ISI's voting control falls below 50% of all votes
that may be cast by the holders of Class A Common Stock and Class B Common
Stock voting together as a class.
TAX SHARING ARRANGEMENTS
The Company, ISI and ISC are parties to a tax-sharing agreement under which
current and deferred federal income tax provisions are determined for each
company in the ISI group on a stand-alone basis. Any current tax liability for
any member of the ISI group, including the Company, is paid to ISI. If the
Company is unable to use all of its allocated tax attributes (net operating
loss and tax credit carryforwards) in a given year but other companies in the
consolidated group are able to utilize them, then ISI will pay the Company for
the use of such tax attributes. A state tax sharing agreement, similar to the
agreement described above with respect to federal taxes, also exists with ISI
for those states in which the consolidated group is charged state taxes on a
unitary or combined basis.
CROSS-LICENSE AGREEMENT
Prior to the consummation of the Offerings, the Company and ISI will enter
into a cross-license agreement (the "Cross-License Agreement") pursuant to
which the Company will license on a royalty- free basis the "Ryerson"
tradename for use in Inland International Inc. and its affiliates and pursuant
to which ISI will license on a royalty-free basis the ISI "red diamond"
trademark for use by the Company. The Cross-License Agreement terminates
automatically (i) upon the sale or transfer by Ryerson Tull, in one or more
transactions, of assets or earning power aggregating 50% or more of the assets
or earning power of Ryerson Tull to any person other than ISI or any of ISI's
wholly-owned subsidiaries or (ii) at any time that the number of outstanding
shares of Class B Common Stock represents less than 50% of the total number of
outstanding shares of Class A Common Stock and Class B Common Stock. The
Cross-License Agreement may also be terminated by either party upon 60 days
written notice to the other party or immediately by mutual consent of Ryerson
Tull and ISI.
GUARANTOR ARRANGEMENT
Ryerson is the guarantor of the ESOP Trust's obligation to repay principal
amounting to $110.8 million as of March 31, 1996 plus accrued interest. The
notes are payable in installments through July 2004 and bear interest rates
ranging from 7.96% to 8.80%. Ryerson could be required to make payments
pursuant to the guarantee after a failure by ISI to provide funds to cover any
deficiency in the ESOP Trust.
PENSIONS
Prior to April 30, 1996, certain Company employees were eligible to
participate in the ISI Pension Plan. In 1995, ISI elected to change the
measurement date for pension plan assets and liabilities from December 31 to
September 30 in order to provide for more timely information and to achieve
administrative efficiencies in the collection of data. The change in the
measurement date had no effect on 1995 pension expense and had an immaterial
impact on the 1995 funded status. At September 30, 1995, the market value of
the ISI Pension Plan assets totaled $1.92 billion. The ISI Pension Plan's
accumulated benefit obligation as of such date was $1.96 billion and the
projected benefit obligation as of such date was $2.05 billion. For financial
reporting purposes, the funded status of the ISI Pension Plan has appeared
very volatile over the past several years. This volatility is due to
significant fluctuations in the interest rate on high-grade fixed-income
obligations that must be used for valuing pension liabilities. This rate
increased from 7.25% in 1993, a twenty year low, to 8.8% in 1994 and decreased
to 7.75% in 1995. ISI was required to record a $102.6 million additional
pension liability,
53
<PAGE>
offset by an intangible pension asset, on its year-end 1995 balance sheet. In
1995, ISI contributed 3.9 million shares of its common stock with an estimated
aggregate value of $100 million to the ISI Pension Plan. This contribution,
ISI's first since 1984, strengthened the plan's funded status. In 1995, the
Company paid $13.1 million to ISI for its share of this contribution.
Effective April 30, 1996, that portion of the ISI Pension Plan covering the
Company's current and former employees was separated and became the Pension
Plan. The Pension Plan assumed the liabilities of the ISI Pension Plan
attributed to current and former Company employees and a corresponding
percentage of the assets. If the Pension Plan had been in existence at the
September 30, 1995 valuation date of the ISI Pension Plan, the Company's
projected benefit obligation would have been $266 million and the Company's
share of the Pension Plan assets would have been $249 million, resulting in an
under-funding of $17 million for financial reporting purposes. However, under
ERISA funding guidelines, which take a longer term view in determining the
interest rate to use in valuing liabilities, no contribution will be required
for the ISI Pension Plan or the Pension Plan in 1996. The separation will not
have a material impact on the financial statements of the Company.
PRINCIPAL STOCKHOLDER
Prior to the consummation of the Offerings, ISI will own all of the
outstanding shares of the capital stock of the Company. Upon consummation of
the Offerings, ISI will own 100% of the Class B Common Stock and, accordingly,
will own Common Stock representing approximately 86.7% of the economic
interest in the Company (85% if the Underwriters' over-allotment options are
exercised in full) and representing approximately 96.3% of the combined voting
power of the Company's outstanding Common Stock (or 95.8% if the Underwriters
over-allotment options are exercised in full). The address of ISI is 30 West
Monroe Street, Chicago, Illinois 60603.
OWNERSHIP OF ISI STOCK
The following table presents, as of May 21, 1996, the ISI equity securities
beneficially owned (as that term is defined by the Commission) by all
Directors of the Company, the Named Executive Officers of the Company and the
Directors and executive officers as a group, in each case, except as
indicated, with sole voting and investment power. ISI common stock, in each
case, includes ISI preferred stock purchase rights distributed in 1987 to
holders of ISI common stock. The shares of ISI Series E ESOP Convertible
Preferred Stock (the "ISI Series E ESOP Preferred Stock") shown as
beneficially owned by the executive officers are held for their respective
accounts in the ISI Thrift Plan and could be converted upon retirement or
other termination of employment into an equal number of shares of ISI common
stock (subject to adjustment in certain events). Excluded from the number of
shares of ISI Series E ESOP Preferred Stock listed as beneficially owned are
allocated shares of ISI Series E ESOP Preferred Stock that the ESOP Trustee is
required to vote or dispose of in the manner and proportion in which allocated
shares are directed to be voted or disposed of.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
AMOUNT AND NATURE OF OF BENEFICIAL
BENEFICIAL OWNERSHIP OWNERSHIP OF ISI SERIES E
OF ISI COMMON STOCK(1) ESOP PREFERRED STOCK(2)
---------------------- -------------------------
<S> <C> <C>
Robert J. Darnall............ 230,102 1,791
Neil S. Novich............... 51,899 339
Jay M. Gratz................. 29,200 1,076
Carl G. Lusted............... 34,965 1,240
Stephen E. Makarewicz........ 22,699 427
All Directors and Executive
Officers as a Group
(13 persons)................ 486,116 10,338
</TABLE>
54
<PAGE>
(1) Excludes shares of ISI common stock into which ISI Series E ESOP Preferred
Stock may be converted. No Director or Named Executive Officer
individually owns 1% or more of the outstanding ISI common stock; all
Directors and executive officers as a group own 1% of the outstanding ISI
common stock. Includes shares held jointly with other persons, as
follows--Mr. Darnall-290 and all Directors and executive officers as a
group-1,281; shares which the following have the right to acquire under
options exercisable within 60 days of May 1, 1996--Mr. Darnall-169,000,
Mr. Novich-41,000, Mr. Gratz-21,800, Mr. Lusted-29,300, Mr. Makarewicz-
18,500, and all Directors and executive officers as a group--377,035; and
shares of ISI common stock held under restricted stock awards as follows--
Mr. Darnall-12,000, Mr. Novich-10,800, Mr. Gratz-4,400, Mr. Lusted-2,800,
Mr. Makarewicz-2,200, and all Directors and executive officers as a group-
44,600. Also includes 250 shares of ISI common stock held by the spouse of
an executive officer, for which beneficial ownership is disclaimed.
(2) Each Named Executive Officer individually owns, and all executive officers
as a group collectively own, less than 1% of the ISI Series E ESOP
Preferred Stock.
PROPOSED NOTE OFFERING
The Company proposes to offer publicly $150 million aggregate principal
amount of its Notes due 2001 and $100 million aggregate principal amount of
its Notes due 2006, which will be unsecured obligations of the Company. The
net proceeds to the Company from the Note Offering (after deducting
underwriting discounts and expenses paid by the Company) are estimated to be
approximately $243.8 million. All of such proceeds of the Note Offering, if
consummated, together with the Company's available cash and borrowings under
credit facilities, will be used to discharge the Note Payable that will be
declared as a dividend to ISI prior to the Offerings. The indenture governing
the Notes is expected to include covenants that may affect the conduct of
future business and restrictions on dividends and other distributions on the
Company's capital stock. See "Dividend Policy" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Financing." Because the Note Offering is subject to a variety of market,
economic and other factors, there can be no assurance that the Note Offering
will be consummated. It is expected that the Note Offering will be consummated
shortly after the consummation of the Offerings.
DESCRIPTION OF CAPITAL STOCK
GENERAL
Prior to the consummation of the Offerings, the Company will amend and
restate its Certificate of Incorporation (as so amended and restated, the
"Certificate of Incorporation") to, among other things, effect the
Recapitalization pursuant to which the one issued share of the Company's
common stock, par value $1.00 per share, currently outstanding will be
exchanged for 34,000,000 shares of Class B Common Stock.
Under the Certificate of Incorporation, the authorized capital stock of the
Company consists of 100,000,000 shares of Class A Common Stock, 34,000,000
shares of Class B Common Stock and 16,000,000 shares of preferred stock, $1.00
par value (the "Preferred Stock"). Upon consummation of the Offerings, there
will be 5,220,000 shares of Class A Common Stock (6,000,000 shares if the
Underwriters' over-allotment options are exercised in full), 34,000,000 shares
of Class B Common Stock and no shares of Preferred Stock outstanding. The
Company has reserved for issuance 416,200 shares of Preferred Stock to be
issued as shares of Series A Participating Preferred Stock, par value $1.00
per share (the "Junior Participating Preferred Shares") pursuant to the Rights
Agreement (as defined herein). All outstanding shares will be fully paid and
non-assessable. Under the Certificate of Incorporation, the Company may not
issue any additional shares of Class B Common Stock other than in the form of
a distribution or stock split on the shares of Class B Common Stock, as more
fully described below.
55
<PAGE>
COMMON STOCK
VOTING RIGHTS
The holders of Class A Common Stock have one vote per share and the holders
of the Class B Common Stock have four votes per share on all matters voted
upon by the stockholders of the Company. Except as otherwise required by law,
the holders of the Class A Common Stock and the Class B Common Stock vote
together as a single class with respect to all matters submitted for a vote of
stockholders. Under the Delaware GCL, the holders of Class A Common Stock are
entitled to vote together as a single class and the holders of Class B Common
Stock are entitled to vote together as a single class on any proposal to amend
the Certificate of Incorporation to adversely alter or change the powers,
preferences or special rights of the Class A Common Stock or the Class B
Common Stock, respectively. Shares of Class A Common Stock and Class B Common
Stock do not have cumulative voting rights.
Until such time as a sufficient number of shares of Class B Common Stock are
converted to shares of Class A Common Stock or the Company issues a sufficient
number of shares of Class A Common Stock to dilute the voting power of ISI or
any subsequent holder or holders of the Class B Common Stock, ISI or such
holder or holders of Class B Common Stock will have the power to defeat any
attempt to acquire control of the Company even though such a change in control
may be favored by stockholders holding substantially more than a majority of
the Company's outstanding shares of Class A Common Stock. This may have the
effect of precluding holders of Class A Common Stock from receiving any
premium above market price for their shares which may be offered in connection
with any such attempt to acquire control. ISI, or any subsequent holder or
holders of Class B Common Stock, will also generally have the power to effect
certain fundamental corporate changes, such as a sale of substantially all of
the Company's assets, a merger of the Company or an amendment to the
Certificate of Incorporation that does not adversely alter or change the
powers, preferences or special rights of Class A Common Stock, without the
approval of holders of Class A Common Stock.
DIVIDEND RIGHTS
Each share of Class A Common Stock and Class B Common Stock is entitled to
dividends if, as and when dividends are declared by the Board of Directors.
Any dividend declared and payable in cash, capital stock of the Company or
other property must be paid equally on a share for share basis on Class A
Common Stock and Class B Common Stock, except as described below. Dividends
and distributions payable in shares of Class A Common Stock may be paid only
on shares of Class A Common Stock, and dividends and distributions payable in
shares of Class B Common Stock may be paid only on shares of Class B Common
Stock. If a dividend or distribution payable in shares of Class A Common Stock
is made on Class A Common Stock, a simultaneous and equivalent dividend or
distribution in shares of Class B Common Stock must be made on Class B Common
Stock. If a dividend or distribution payable in shares of Class B Common Stock
is made on Class B Common Stock, a simultaneous and equivalent dividend or
distribution in shares of Class A Common Stock must be made on Class A Common
Stock.
CONVERSION RIGHTS
The Class A Common Stock is not convertible. Each share of Class B Common
Stock is convertible into one share of Class A Common Stock at any time at the
option of the holder thereof. All of the outstanding shares of the Class B
Common Stock will automatically convert into shares of Class A Common Stock
immediately (i) upon the consolidation or merger of the Company into another
entity, (ii) upon the consolidation or merger of another entity into the
Company where the Company is the surviving entity and, in connection with such
merger, all or part of the Class A Common Stock and Class B Common Stock is
changed into or exchanged for stock or other securities of any other entity
56
<PAGE>
or cash or any other property, (iii) upon the sale or transfer by the Company,
in one or more transactions, of assets or earning power aggregating 50% or
more of the assets or earning power of the Company to any person or persons or
(iv) at any time that the number of outstanding shares of Class B Common Stock
represents less than 50% of the total number of outstanding shares of Class A
Common Stock and Class B Common Stock.
LIQUIDATION RIGHTS
The holders of the Class A Common Stock and the holders of the Class B
Common Stock are entitled to participate equally on a share for share basis in
all distributions to the holders of Common Stock in any liquidation,
distribution or winding up of the Company, subject to the rights of the
holders of any series of Preferred Stock.
PREEMPTIVE RIGHTS
Neither the holders of Class A Common Stock nor the holders of Class B
Common Stock have preemptive rights to purchase shares of any class of the
Company's capital stock.
REDEMPTION AND SINKING FUND PRIVILEGES
Neither the holders of the Class A Common Stock nor the holders of the Class
B Common Stock have any redemption or sinking fund privileges.
The rights, preference and privileges of holders of both classes of Common
Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future.
TRANSFER RESTRICTION
Any shares of Class B Common Stock transferred by the holder of such Class B
Common Stock to any person other than a person owning 100% of such holder's
capital stock or a wholly-owned direct or indirect subsidiary of such holder
will automatically convert into shares of Class A Common Stock upon such
transfer.
REGISTRAR AND TRANSFER AGENT
Harris Trust and Savings Bank, Chicago, Illinois is the registrar and
transfer agent for the Common Stock.
PREFERRED STOCK
The Certificate of Incorporation authorizes the Board of Directors to create
and issue one or more series of Preferred Stock and determine the rights and
preferences of each series, to the extent permitted by the Certificate of
Incorporation and applicable law. Among other rights, the Board of Directors
may determine: (i) the number of shares constituting the series and the
distinguishing designation of the series; (ii) whether the shares shall have
voting rights in addition to the voting rights provided by law and, if so, the
terms and extent of such voting rights; (iii) whether the shares shall be
convertible into or exchangeable for other securities of the Company at the
option of the Company or at the option of the holder or holders thereof or
upon the happening of a specified event or events, and the terms and
conditions of the conversion or exchange, including provision for adjustment
of the conversion or exchange rate in circumstances determined by the Board of
Directors; (iv) whether the shares may be redeemed at the option of the
Company or at the option of the holder or holders thereof or upon the
happening of a specified event or events, and the terms and conditions of the
conversion or exchange, and, if so, the terms and conditions on which they may
be redeemed (including, without limitation, the dates upon or after which they
may be redeemed and the price or prices at which they
57
<PAGE>
may be redeemed, which price or prices may be different in different
circumstances or at different redemption dates); (v) the dividend rate, or the
method of determining such rate, on the shares, if any, any conditions upon
which such dividends shall be paid, the date or dates on which such dividends
shall be payable, the manner of calculating any dividends, and the preference
of any dividends; (vi) the rights of shares in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Company and the
rights or priority of shares on the distribution of assets on dissolution; and
(vii) any other relative rights, preferences, limitations and powers of that
series. The holders of any series of Preferred Stock will not have preemptive
rights to purchase shares of any class of the Company's capital stock.
The Junior Participating Preferred Shares which would be issuable upon
exercise of Rights (as defined herein) distributed pursuant to the Rights
Agreement (should the Rights become exercisable) would not be redeemable. Each
Junior Participating Preferred Share would entitle the holder thereof to
receive a preferential quarterly dividend equal to (i) the greater of $1.00 or
100 times the aggregate per share amount of all cash dividends declared on the
Class A Common Stock during such quarter (ii) plus 100 times the aggregate per
share amount (payable in kind) of all non-cash dividends and other
distributions (other than in shares of Class A Common Stock or a subdivision
of the outstanding shares of Class A Common Stock) declared on the Class A
Common Stock during such quarter, in each case adjusted to give effect to any
dividend on the Class A Common Stock payable in shares of Class A Common Stock
or any subdivision or combination of the Class A Common Stock (each, a
"Dilution Event"). Each one one-hundredth of a Junior Participating Preferred
Share would entitle the holder thereof to one vote (adjusted to give effect to
any Dilution Event) on all matters submitted to a vote of the stockholders of
the Company, voting together as a single class with the holders of the Class A
Common Stock and the holders of any other class of capital stock having
general voting rights. If at any time dividends payable on the Junior
Participating Preferred Shares are in arrears and unpaid in an amount equal to
or exceeding the amount of dividends payable thereon for six quarterly
dividend periods, the holders of Junior Participating Preferred Shares (voting
separately as a class with the holders of any other class of Preferred Stock
with dividends similarly in arrears) will have the exclusive right at a
special meeting of stockholders or at the Company's next annual meeting of
stockholders to elect two Directors, such Directors to be in addition to the
number of Directors constituting the Board of Directors immediately prior to
the accrual of such right. Such voting right will continue until all dividends
accumulated and payable on the Junior Participating Preferred Shares have been
paid in full, at which time such voting right will terminate, subject to re-
vesting in the event of a subsequent similar arrearage. Upon any termination
of such voting right, subject to the requirements of the Delaware GCL, the
term of office of all of the Directors elected by the holders of the Junior
Participating Preferred Shares will terminate. In the event of liquidation of
the Company, the holder of each Junior Participating Preferred Share would be
entitled to receive a preferential liquidation payment equal to $1.00 per
share (adjusted to give effect to any Dilution Event) plus an amount equal to
any accrued and unpaid dividends and distributions on such Junior
Participating Preferred Share, whether or not declared, to the date of such
payment, and to participate ratably in the distribution of any assets of the
Company remaining after the holders of the Class A Common Stock have received
a liquidation payment of $.01 per share of Class A Common Stock at a ratio of
100 to 1, adjusted to give effect to any Dilution Event. In the event of any
merger, consolidation or other transaction in which the outstanding shares of
Class A Common Stock of the Company are exchanged for or converted into other
stock, securities, cash or other property, each Junior Participating Preferred
Share would be similarly exchanged for or converted into 100 times the
aggregate amount of such stock, securities, cash or other property for or into
which each share of the Class A Common Stock is exchanged or converted,
adjusted to give effect to any Dilution Event.
CORPORATE GOVERNANCE
The Certificate of Incorporation contains several provisions intended to
maintain separation between the Company and ISI. The Certificate of
Incorporation requires that beginning 60 days from
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the date of consummation of the Offerings, when any shares of Class A Common
Stock are outstanding, at least one-third of the Directors be Independent
Directors, except as provided in the following sentence. In the event that a
vacancy occurs in a position held by an Independent Director, the Company
shall have six months to fill such vacancy with an Independent Director. An
Independent Director is defined in the Certificate of Incorporation as a
person who is not, and who has not within the previous 12 months been, an
officer or employee of the Company or an officer, Director or employee of ISI
or any of ISI's other subsidiaries or affiliates, or an owner of more than 5%
of ISI's outstanding common stock or of any of ISI's subsidiaries or
affiliates. The Certificate of Incorporation also requires, when any shares of
Class A Common Stock are outstanding, the affirmative vote of a majority of
the Directors, including at least two-thirds of the Independent Directors, to
commence or consent to a voluntary bankruptcy proceeding involving the
Company. The Certificate of Incorporation requires, when any shares of Class A
Common Stock are outstanding, the affirmative vote of a majority of the
Directors, including at least two-thirds of the Independent Directors, to
merge or consolidate the Company with or into any other entity unless the
surviving entity is not affiliated with ISI or has a charter with provisions
comparable to those described in this paragraph. Finally, the Certificate of
Incorporation requires that, when any shares of Class A Common Stock are
outstanding, the Independent Directors review transactions between ISI or
ISI's other subsidiaries or affiliates and the Company entered into since the
preceding meeting of the Board of Directors where the amount involved exceeds
$25 million, other than transactions pursuant to agreements entered into in
connection with the Offerings, to determine whether such transactions were on
a basis at least as favorable as that which could have been obtained from an
unaffiliated third party and to report such findings to the Board of
Directors. See "Relationships with ISI." The foregoing provisions may be
amended only with the approval of the holders of a majority of the shares of
Class A Common Stock then outstanding and will terminate automatically when
ISI's voting control falls below 50% of all of the votes that may be cast by
the holders of Class A Common Stock and Class B Common Stock voting together
as a class.
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND CERTIFICATE OF INCORPORATION AND BY-
LAWS
The Certificate of Incorporation, the By-Laws and Section 203 of the
Delaware GCL contain certain provisions that may make more difficult the
acquisition of control of the Company by means of a tender offer, open market
purchase, a proxy fight or otherwise. These provisions are designed to
encourage persons seeking to acquire control of the Company to negotiate with
the Board of Directors. However, these provisions could have the effect of
discouraging a prospective acquiror from making a tender offer or otherwise
attempting to obtain control of the Company. To the extent that these
provisions discourage takeover attempts, they could deprive stockholders of
opportunities to realize takeover premiums for their shares or could depress
the market price of the shares of the Class A Common Stock.
DELAWARE GENERAL CORPORATION LAW AND BUSINESS COMBINATION PROVISION
Section 203 of the Delaware GCL prohibits certain "business combination"
transactions between certain publicly-held Delaware corporations, such as the
Company after the Offerings, and any "interested stockholder" for a period of
three years after the date on which the latter became an interested
stockholder, unless (i) prior to that date either the proposed business
combination or the proposed acquisition of stock resulting in its becoming an
interested stockholder is approved by the Board of Directors, (ii) in the same
transaction in which it becomes an interested stockholder, the interested
stockholder acquires at least 85% of those shares of the voting stock of the
corporation that are not held by the Directors, officers or certain employee
stock plans or (iii) the business combination with the interested stockholder
is approved by the Board of Directors and also approved at a stockholders'
meeting by the affirmative vote of the holders of at least two-thirds of the
outstanding shares of the corporation's voting stock other than shares held by
the interested stockholder. An "interested stockholder" is defined in Section
203 of the Delaware GCL, with certain exceptions, as
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any person that (i) is the owner of 15% or more of the outstanding voting
stock of a corporation or (ii) is an affiliate or associate of the corporation
and was the owner of 15% or more of the outstanding voting stock of the
corporation at any time within the three-year period immediately prior to the
date on which the determination is to be made as to such person's status as an
interested stockholder.
AVAILABILITY OF SHARES OF CAPITAL STOCK FOR FUTURE ISSUANCE
The availability for issue of shares of Preferred Stock and authorized but
unissued Class A Common Stock by the Company without further action by
stockholders (except as may be required by NYSE or other applicable
regulations) could be viewed as enabling the Board of Directors to make more
difficult a change in control of the Company. The issuance of warrants or
rights to acquire shares of Preferred Stock or Class A Common Stock may
discourage or defeat unsolicited stock accumulation programs and acquisition
proposals, and the issuance of shares in a private placement or public
offering to dilute or deter stock ownership of persons seeking to obtain
control of the Company may have a similar effect. The Company has no present
plans to issue any shares of Preferred Stock or Class A Common Stock other
than as offered hereby or as contemplated under the Incentive Stock Plan and
Directors' Compensation Plan.
NO ACTIONS BY WRITTEN CONSENT; SPECIAL MEETINGS
The Certificate of Incorporation provides that stockholder action can be
taken only at an annual or special meeting of stockholders and cannot be taken
by written consent in lieu of a meeting. The Certificate of Incorporation
provides that, except as otherwise required by law, special meetings of the
stockholders can only be called by a majority of the entire Board of
Directors, the Chairman of the Board of Directors, the Vice Chairman of the
Board of Directors or the President. Only those matters set forth on the
notice of the special meeting may be considered or acted upon at such special
meeting, except as otherwise provided by law.
CLASSIFIED BOARD OF DIRECTORS AND RELATED PROVISIONS
The Certificate of Incorporation provides that the Board of Directors is
divided into three classes of Directors serving staggered three-year terms. As
a result, approximately one-third of the Company's Board of Directors will be
elected each year. See "Management--Executive Officers and Directors." The
classified board provision may prevent a party who acquires control of a
majority of the outstanding voting stock of the Company from obtaining control
of the Board of Directors until the second annual stockholders' meeting
following the date the acquiror obtains the controlling interest. The
Certificate of Incorporation also requires that the Independent Directors be
allocated as evenly as possible among the classes of Directors.
The Certificate of Incorporation provides that the number of Directors will
not be less than three and that the Directors will have the exclusive power to
set the exact number of Directors from time to time by resolution adopted by
vote of a majority of the entire Board of Directors. The Certificate of
Incorporation further provides that Directors may be removed only for cause by
the affirmative vote of the holders of at least 80% of the votes that could be
cast by the holders of all shares of capital stock of the Company entitled to
vote for the election of Directors at a meeting duly called for such purpose.
This provision, in conjunction with the provisions of the Certificate of
Incorporation authorizing the Board of Directors to fill vacant directorships,
may prevent stockholders from removing incumbent Directors without cause and
filling the resulting vacancies with their own nominees.
The foregoing provisions of the Certificate of Incorporation may be changed
only by the affirmative vote of holders of at least 80% of the votes that
could be cast by the holders of all shares of capital stock of the Company
entitled to vote on such matters at a meeting duly called for such purpose.
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STOCKHOLDER PROPOSALS
The By-Laws provide that, if a stockholder desires to submit a proposal at
an annual or special stockholders' meeting or to nominate persons for election
to the Board of Directors, the stockholder must submit notice to the Company
at least 90 days but not more than 115 days prior to the meeting or within 15
days after notice of a meeting is sent or given to stockholders by the Company
if such notice is sent or given less than 105 days in advance of such meeting.
Notices of stockholder proposals must set forth the reasons for conducting
such business, the name and address of the person proposing such business, the
class and number of shares of capital stock of the Company beneficially owned
by such stockholder and any material interest of the stockholder in such
business. Director nomination notices must set forth: (i) as to each person
whom the stockholder proposes to nominate for election or re-election as a
Director, (a) the name, age, business address and residence address of the
person, (b) the principal occupation or employment of the person, (c) the
class and number of shares of capital stock of the Company beneficially owned
by the person, (d) such person's signed consent to serve as a Director if
elected and (e) any other information relating to the person that is required
to be disclosed in solicitations for proxies for election of Directors
pursuant to Regulation 14A under the Exchange Act; and (ii) as to the
stockholder giving the notice, (a) the name and record address of such
stockholder and (b) the class and number of shares of capital stock of the
Company beneficially owned by such stockholder. The presiding officer of the
meeting may refuse to acknowledge a proposal or nomination not made in
compliance with the procedures contained in the By-Laws.
The advance notice requirements regulating stockholder nominations and
proposals may have the effect of precluding a contest for the election of
Directors or the introduction of a stockholder proposal if the established
procedures are not followed.
The foregoing provisions of the By-Laws may be changed by the Board of
Directors or by the stockholders only upon the affirmative vote of the holders
of 80% of the votes that could be cast by the holders of all shares of capital
stock of the Company entitled to vote on such matters at a meeting duly called
for such purpose.
RIGHTS PLAN
Prior to the consummation of the Offerings, the Board of Directors will
declare a dividend distribution of one right (a "Right") for each outstanding
share of Common Stock of the Company to stockholders of record at the close of
business on the date the shares of Common Stock are first offered to the
public (the "Record Date") and will further authorize the issuance of one
right for each share of Common Stock that shall become outstanding between the
Record Date and the earlier of the Final Expiration Date (as defined herein)
and the date the Rights are redeemed. Except as described below, each Right,
when exercisable, entitles the registered holder thereof to purchase from the
Company one one-hundredth of a Junior Participating Preferred Share, at a
price of $ per one one-hundredth of a share (the "Purchase Price"), subject
to adjustment. The description and terms of the Rights are set forth in the
Rights Agreement (the "Rights Agreement") between the Company and Harris Trust
and Savings Bank, as Rights Agent. A copy of the Rights Agreement has been
filed with the Commission as an exhibit to the registration statement of which
this Prospectus is a part. This summary of certain provisions of the Rights
Agreement and the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement.
Initially, the Rights will be evidenced by Common Stock certificates
representing shares then outstanding, and no separate certificates evidencing
the Rights will be distributed. Until the later of (i) the Effective Date (as
defined herein) and (ii) the earlier to occur of (a) ten days following a
public announcement that a person or group of affiliated or associated
persons, with certain limited exceptions (an "Acquiring Person"), has
acquired, or obtained the right to acquire, beneficial
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ownership of capital stock of the Company representing 10% or more of the
voting power of the Company (the "Shares Acquisition Date") or (b) 15 business
days (or such later date as may be determined by action of the Board of
Directors prior to the time that any person becomes an Acquiring Person)
following the commencement of (or a public announcement of an intention to
make) a tender or exchange offer if, upon consummation thereof, such person or
group would be the beneficial owner of capital stock of the Company
representing 10% or more of the voting power of the Company (such earlier date
being called the "Distribution Date"), the Rights will be evidenced by the
Common Stock certificates and not by separate certificates. The "Effective
Date" is the close of business on the first date that ISI and its affiliates
and associates, in the aggregate, collectively beneficially own capital stock
of the Company then outstanding representing less than 50% of the voting power
of the Company.
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with, and only with, the Common Stock. Until the
Distribution Date (or earlier redemption, expiration or termination of the
Rights), the transfer of any Common Stock certificates will also constitute
the transfer of the Rights associated with the Common Stock represented by
such certificates. As soon as practicable following the Distribution Date,
separate certificates evidencing the Rights ("Right Certificates") will be
mailed to holders of record of the Common Stock as of the close of business on
the Distribution Date and, thereafter, such separate Right Certificates alone
will evidence the Rights.
The Rights are not exercisable until the Distribution Date, and will expire
upon the earliest of (i) the close of business on the tenth anniversary of the
date of the Rights Agreement (the "Final Expiration Date"), (ii) the
redemption of the Rights by the Company as described below or (iii) the
exchange of all Rights for Common Stock as described below.
A person will not become an Acquiring Person under the Rights Agreement if
such person is the Company or an affiliate of the Company or obtained 10% or
more of the voting power of the Company through (i) an issuance of Common
Stock by the Company directly to such person (for example, in a private
placement or an acquisition by the Company in which Common Stock is used as
consideration), (ii) a repurchase by the Company of Common Stock or (iii) a
sale by ISI of Class B Common Stock, provided in each case that such person
does not acquire any additional shares of Common Stock. The Rights Agreement
also provides that ISI and its affiliates and associates will in no event be
deemed to be an Acquiring Person prior to the first date that ISI and its
affiliates and associates, in the aggregate, collectively beneficially own
capital stock of the Company then outstanding representing less than 10% of
the voting power of the Company.
In the event that any person or group becomes an Acquiring Person, each
holder of a Right will thereafter have the right to receive, upon exercise at
the then current exercise price of the Right, Class A Common Stock (or, in
certain circumstances, cash, property or other securities of the Company)
having a value equal to two times the exercise price of the Right.
In the event that, at any time following a Shares Acquisition Date, the
Company is acquired by the Acquiring Person in a merger or other business
combination transaction or 50% or more of the Company's assets or earning
power are sold to the Acquiring Person, proper provision will be made so that
each holder of a Right will thereafter have the right to receive, upon
exercise at the then current exercise price of the Right, common stock of the
acquiring or surviving company having a value equal to two times the exercise
price of the Right.
Notwithstanding the foregoing, following the occurrence of any of the events
set forth in the preceding two paragraphs (the "Triggering Events"), any
Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will immediately
become null and void.
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The Purchase Price payable, the number of Junior Preferred Shares, shares of
Common Stock or other securities or property issuable upon exercise of the
Rights and the number of Rights outstanding, are subject to adjustment from
time to time to prevent dilution, among other circumstances, in the event of a
stock dividend on, or a subdivision, split, combination, consolidation or
reclassification of, the Junior Preferred Shares or the Common Stock, or a
reverse split of the outstanding Junior Preferred Shares or shares of Common
Stock.
With certain exceptions, no adjustment to the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% to
the Purchase Price. Upon the exercise of a Right, the Company will not be
required to issue fractional Junior Preferred Shares or fractional shares of
Common Stock (other than fractions in multiples of one one-hundredth of a
Junior Preferred Share) and, in lieu thereof, an adjustment in cash may be
made based on the market price of the Junior Preferred Shares or Common Stock
on the last trading date prior to the date of exercise.
At any time after a person or group becomes an Acquiring Person and prior to
the acquisition by such person or group of capital stock of the Company
representing 50% or more of the voting power of the Company, the Board of
Directors may exchange the Rights (other than Rights owned by such person or
group, which have become void), in whole or in part, at an exchange ratio of
one share of Class A Common Stock per Right (subject to adjustment).
At any time after the date of the Rights Agreement until the earlier of the
time that a person becomes an Acquiring Person or the Final Expiration Date,
the Board of Directors may redeem the Rights in whole, but not in part, at a
price of $.01 per Right (the "Redemption Price"), which may (at the option of
the Company) be paid in cash, shares of Class A Common Stock or other
consideration deemed appropriate by the Board of Directors. Upon the
effectiveness of any action of the Board of Directors ordering redemption of
the Rights, the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends.
The provisions of the Rights Agreement may be amended by the Company, except
that any amendment adopted after the time that a person becomes an Acquiring
Person may not adversely affect the interests of holders of Rights.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
without conditioning the offer on the Rights being redeemed or a substantial
number of Rights being acquired by the Acquiring Person. Under certain
circumstances the Rights beneficially owned by such a person or group may
become void. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors because, if the Rights would
become exercisable as a result of such merger or business combination, the
Board of Directors may, at its option, at any time prior to the time that any
Person becomes an Acquiring Person, redeem all (but not less than all) of the
then outstanding Rights at the Redemption Price.
SHARES ELIGIBLE FOR FUTURE SALE
GENERAL
Prior to the Offerings, there has been no public market for the Class A
Common Stock or the Class B Common Stock. The effect, if any, of public sales
of Class A Common Stock or the availability of Class A Common Stock for sale
at prevailing market prices cannot be predicted. Nevertheless, sales of
substantial amounts of Class A Common Stock or Class B Common Stock (which
would convert
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into shares of Class A Common Stock upon such sale) in the public market could
adversely affect the market price for the Class A Common Stock.
The Company and ISI have agreed not to offer, sell, contract to sell or
otherwise dispose of any shares of Class A Common Stock or Class B Common
Stock, any securities substantially similar to the Class A Common Stock or
Class B Common Stock or any securities convertible into or exchangeable for
Class A Common Stock or Class B Common Stock or any such similar security
(other than pursuant to employee benefit plans existing, or on the conversion
or exchange of convertible or exchangeable securities outstanding, on the date
of this Prospectus), for a period of 180 days after the date of this
Prospectus without the prior written consent of the representatives of the
Underwriters. After expiration or waiver of such 180 day lock-up period, all
of the shares of Class B Common Stock (or shares of Class A Common Stock into
which such shares of Class B Common Stock may be converted) held by ISI will
become eligible for sale without registration under Rule 144, subject to the
restrictions of Rule 144 described below.
RULE 144
Upon consummation of the Offerings, the Company will have 5,220,000 shares
of Class A Common Stock issued and outstanding (6,000,000 shares if the
Underwriters' over-allotment options are exercised in full) and 34,000,000
shares of Class B Common Stock issued and outstanding. All of the shares of
the Class A Common Stock offered hereby may be resold without restriction or
further registration under the Securities Act unless acquired by an
"affiliate" of the Company as that term is defined in Rule 144. The 34,000,000
shares of Class B Common Stock outstanding will be "restricted securities"
within the meaning of Rule 144 and may not be sold in the absence of
registration under the Securities Act unless an exemption from registration is
available, including the exemption contained in Rule 144.
In general, under Rule 144 under the Securities Act, beginning 90 days after
the date of this Prospectus, a person (and persons whose shares must be
aggregated with those of such person) who has beneficially owned restricted
shares for at least two years, including an "affiliate" of the Company as that
term is defined in Rule 144, will be entitled to sell, within any three-month
period, a number of shares that does not exceed the greater of (i) the average
weekly trading volume of the class of stock being sold during the four
calendar weeks preceding the filing of a notice of sale with the Commission
or, if no such notice is required, the sale date or (ii) 1% of the then
outstanding shares of the class of stock being sold (approximately 52,200
shares, in the case of the Class A Common Stock, upon consummation of the
Offerings). Sales pursuant to Rule 144 are also subject to certain
requirements as to the manner of sale, notice and availability of current
public information about the Company. A person who is deemed not to have been
an affiliate of the Company at any time during the 90 days preceding a sale by
such person and who has beneficially owned shares for at least three years is
entitled to sell those shares under Rule 144 without regard to the volume
limitation, provisions concerning manner of sale or notice requirements of
Rule 144. Shares of Common Stock eligible for sale under Rule 144 may also be
sold pursuant to any exemption from registration which might be available
without compliance with the requirements of Rule 144. A proposed amendment to
Rule 144 would, if adopted, reduce the two and three year holding periods
referred to above to one and two years, respectively.
REGISTRATION RIGHTS AGREEMENT
The Company and ISI are parties to a registration rights agreement (the
"Registration Rights Agreement") pursuant to which ISI may make two demands
for registration under the Securities Act of shares of Class A Common Stock
received by ISI upon conversion of Shares of Class B Common Stock held by it
within any twelve-month period, subject to ISI's agreement not to sell any
shares of Common Stock prior to the expiration of 180 days from the date of
this Prospectus without the prior
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written consent of the representatives of the Underwriters, and subject to
certain other conditions. The Company may postpone such registration if (i)
the Company is, at such time, conducting an underwritten public offering of
Class A Common Stock (or securities convertible into Class A Common Stock) and
is advised in writing by the managing underwriter or underwriters that such
offering would in its or their opinion be adversely affected by such
registration, (ii) the Company determines that such registration would
interfere with any pending or imminent financing, acquisition, corporate
reorganization or other material transaction involving the Company or any of
its subsidiaries or (iii) such registration would require the Company to make
public disclosure of information which the Company determines it is precluded
from making, either due to circumstances beyond its control or because it is
unwilling for valid corporate purposes to make such disclosure. In addition,
ISI may request the Company to use its best efforts to include shares of Class
A Common Stock held by it in any registration proposed by the Company of its
Class A Common Stock under the Securities Act, subject to certain conditions.
However, the Company is not required to include Class A Common Stock held by
ISI therein if the managing underwriter or underwriters of the offering
advises the Company in writing that it believes that such inclusion would in
its or their opinion create a substantial possibility of adversely affecting
the price, timing or distribution of the Class A Common Stock to be offered by
the Company.
POTENTIAL DISTRIBUTION AND OTHER TRANSACTIONS
Upon completion of the Offerings, ISI will beneficially own all of the Class
B Common Stock. ISI has advised the Company that after the consummation of the
Offerings, ISI may distribute all or part of such stock (in the form of Class
A Common Stock) to ISI's stockholders by means of a Spin-off or the sale of
such stock (in the form of Class A Common Stock) to third parties in one or
more transactions, although it has no commitments or understandings to do any
of the foregoing. The completion of any such transaction would be subject to a
number of factors, including a determination by the Board of Directors of ISI
that the transaction would be in the best interests of its stockholders, and,
in the case of a Spin-off, could be subject to the receipt of a favorable
ruling from the IRS or an opinion of counsel as to the tax-free nature of such
transaction. Shares of Class A Common Stock distributed to ISI's stockholders
in the Spin-off generally would be freely transferrable, except for such
shares received by "affiliates" of the Company as that term is defined in Rule
144.
INCENTIVE STOCK PLAN AND DIRECTORS' COMPENSATION PLAN
An aggregate of 2,400,000 shares of Class A Common Stock has been reserved
for issuance under the Incentive Stock Plan and the Directors' Compensation
Plan, including shares of Class A Common Stock to be issued in the form of
restricted stock and shares of Class A Common Stock reserved for issuance upon
exercise of options, in each case to be issued upon consummation of the
Offerings as described below. Effective upon consummation of the Offerings,
the outstanding shares of restricted ISI common stock and options to purchase
shares of ISI common stock held by the Company's employees will be converted
into shares of restricted Class A Common Stock or options to purchase shares
of Class A Common Stock, provided that the Compensation Committee may
determine that any employee may receive restricted shares of Class A Common
Stock and options to purchase shares of Class A Common Stock with respect to
less than all of his or her shares of restricted ISI common stock or options
to purchase ISI common stock. The number of shares of Class A Common Stock
that will be issued as restricted stock or subject to options will also vary
depending on the relative value of a share of ISI common stock and a share of
Class A Common Stock on the applicable valuation date. Assuming that as of the
applicable valuation date the value of a share of ISI common stock is $22.875
(the last reported sales price on the NYSE on May 21, 1996), that the value of
a share of Class A Common Stock is $17.50 (the mid-point of the offering range
set forth on the cover page of this Prospectus) and that no shares of
restricted ISI common stock or options to purchase ISI common stock held by
Company officers who are also ISI officers will be converted into shares of
restricted Class A Common Stock or options to purchase shares of Class A
Common Stock, 39,149 shares of Class A Common Stock would be issued in the
form of restricted stock and 870,898
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shares of Class A Common Stock would be reserved for issuance upon exercise of
options outstanding upon consummation of the Offerings. See "Management--
Directors' Compensation" and "--Ryerson Tull 1996 Incentive Stock Plan."
Within 90 days after the date of this Prospectus, the Company intends to
register under the Securities Act an aggregate of 2,400,000 shares of Class A
Common Stock issuable in the form of restricted stock or upon exercise of
options or stock appreciation rights to be granted, or performance awards to
be made, under the Incentive Stock Plan and the Directors' Compensation Plan.
Some of the holders of these shares of restricted stock and options are
subject to lock-up restrictions that will expire 180 days after the date of
this Prospectus. Shares of Class A Common Stock held in the form of restricted
stock as to which the restrictions have lapsed and shares of Class A Common
Stock issued upon the exercise of such options or stock appreciation rights,
or the vesting of performance awards, will be eligible for immediate resale in
the public market, subject, as to shares held by affiliates of the Company, to
the volume and other limitations of Rule 144 and subject to restrictions
contained in lock-up agreements.
VALIDITY OF CLASS A COMMON STOCK
The validity of the shares of Class A Common Stock being offered hereby and
certain other legal matters will be passed upon for the Company by Mayer,
Brown & Platt, Chicago, Illinois. Certain legal matters will be passed upon
for the Underwriters by Sullivan & Cromwell, New York, New York. George A.
Ranney, Jr., Vice President and General Counsel of ISI, is a partner in the
law firm of Mayer, Brown & Platt. As of April 1, 1996, Mr. Ranney owned 7,300
shares of ISI's common stock and also held options to purchase 48,000 shares
of ISI's common stock, of which none are currently exercisable.
EXPERTS
The consolidated financial statements as of December 31, 1994 and 1995, and
for each of the three years in the period ended December 31, 1995 included in
this Prospectus and the financial statement schedules in the registration
statement have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts
in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Commission a registration statement on Form
S-1 (the "Registration Statement") under the Securities Act with respect to
the shares of Class A Common Stock offered hereby. For the purposes hereof,
the term "Registration Statement" means the original Registration Statement
and any and all amendments thereto. This Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and
such Class A Common Stock, reference is hereby made to the Registration
Statement, exhibits and schedules, which may be inspected and copied at the
public reference facilities maintained by the Commission at its principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549 and at certain regional offices of the Commission located at Citicorp
Center, 500 West Madison Street, Chicago, Illinois 60661 and at Seven World
Trade Center, New York, New York 10048. Copies of the Registration Statement
can be obtained at prescribed rates from the Public Reference Section of the
Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549.
Statements contained in this Prospectus as to the contents of any contract
or other document are not necessarily complete, and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all
respects by such reference.
66
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OF RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Statements of Operations and Reinvested Earnings for the
three years ended December 31, 1995 and (unaudited) for the three months
ended March 31, 1995 and 1996............................................ F-3
Consolidated Statement of Cash Flows for the three years ended December
31, 1995 and (unaudited) for the three months ended March 31, 1995 and
1996..................................................................... F-4
Consolidated Balance Sheet at December 31, 1994 and 1995 and (unaudited)
March 31, 1996........................................................... F-5
Statement of Accounting and Financial Policies............................ F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of Ryerson Tull, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing on page F-1 present fairly, in all material respects, the financial
position of Ryerson Tull, Inc. (formerly Inland Materials Distribution Group,
Inc.) (a wholly-owned subsidiary of Inland Steel Industries, Inc.) and
Subsidiary Companies at December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Chicago, Illinois
February 19, 1996
F-2
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS
DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------- -------------
1993 1994 1995 1995 1996
-------- -------- -------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
Net sales............................ $1,893.3 $2,197.5 $2,450.1 $652.3 $625.3
-------- -------- -------- ------ ------
Operating costs and expenses:
Cost of goods sold (excluding
depreciation)..................... 1,663.8 1,927.7 2,118.1 563.5 541.6
Selling, general and administrative
expenses.......................... 144.4 142.1 153.2 39.1 39.5
Depreciation and amortization...... 20.6 21.2 21.8 5.4 5.6
State, local and miscellaneous
taxes............................. 8.1 8.4 8.3 2.2 2.0
-------- -------- -------- ------ ------
Total............................ 1,836.9 2,099.4 2,301.4 610.2 588.7
-------- -------- -------- ------ ------
Operating profit..................... 56.4 98.1 148.7 42.1 36.6
Other expense:
General corporate expense, net of
income items...................... 7.4 6.9 .7 .4 (.7)
Interest and other expense on
debt.............................. 10.9 2.9 2.6 .7 .6
-------- -------- -------- ------ ------
Income before income taxes........... 38.1 88.3 145.4 41.0 36.7
Provision for income taxes (Note 7).. 11.4 35.0 56.9 16.5 14.3
-------- -------- -------- ------ ------
Net income........................... $ 26.7 $ 53.3 $ 88.5 $ 24.5 $ 22.4
======== ======== ======== ====== ======
CONSOLIDATED STATEMENT OF REINVESTED EARNINGS
Balance at beginning of year......... $ 5.4 $ 32.1 $ 85.4 $ 85.4 $173.9
Net income for the year.............. 26.7 53.3 88.5 24.5 22.4
-------- -------- -------- ------ ------
Reinvested earnings at end of year... $ 32.1 $ 85.4 $ 173.9 $109.9 $196.3
======== ======== ======== ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH
--------------------------------------------
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------- --------------
1993 1994 1995 1995 1996
-------- -------- -------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income...................... $ 26.7 $ 53.3 $ 88.5 $ 24.5 $ 22.4
-------- -------- -------- ------ ------
Adjustments to reconcile net in-
come to net cash provided from
(used for) operating activi-
ties:
Depreciation and
amortization................. 20.6 21.2 21.8 5.4 5.6
Net gain on sales of assets... (.1) (.5) (.2) -- --
Deferred employee benefit
cost......................... 3.9 3.9 (14.4) (1.1) .9
Deferred income taxes......... (8.3) .7 .5 1.1 1.7
Change in:
Receivables.................. (22.8) (31.1) (16.7) (63.7) (30.8)
Inventories.................. (18.2) 5.7 10.4 (12.0) (34.5)
Other assets................. -- (1.6) (2.3) (.6) (.6)
Accounts payable............. (31.5) 22.6 (7.0) 13.0 21.4
Payables to related
companies................... 1.7 5.8 (.4) 13.8 .9
Accrued liabilities.......... 2.7 (.3) 4.2 (4.7) (7.3)
-------- -------- -------- ------ ------
Net adjustments............. (52.0) 26.4 (4.1) (48.8) (42.7)
-------- -------- -------- ------ ------
Net cash provided from (used
for) operating activities.. (25.3) 79.7 84.4 (24.3) (20.3)
-------- -------- -------- ------ ------
INVESTING ACTIVITIES
Capital expenditures............ (19.3) (20.4) (19.3) (3.0) (3.0)
Proceeds from sales of assets... .9 5.8 1.9 .3 1.2
-------- -------- -------- ------ ------
Net cash used for investing
activities................. (18.4) (14.6) (17.4) (2.7) (1.8)
-------- -------- -------- ------ ------
FINANCING ACTIVITIES
Long-term debt issued........... 7.5 -- -- -- --
Long-term debt retired.......... (5.3) (4.9) (4.7) (.6) (.5)
Capital contribution from Inland
Steel Industries............... 150.0 -- -- -- --
Change in notes to and from re-
lated companies................ (79.0) (87.2) (11.2) 41.9 14.4
-------- -------- -------- ------ ------
Net cash provided from (used
for) financing activities.. 73.2 (92.1) (15.9) 41.3 13.9
-------- -------- -------- ------ ------
Net increase (decrease) in cash
and cash equivalents........... 29.5 (27.0) 51.1 14.3 (8.2)
Cash and cash equivalents--be-
ginning of period............ -- 29.5 2.5 2.5 53.6
-------- -------- -------- ------ ------
Cash and cash equivalents--end
of period.................... $ 29.5 $ 2.5 $ 53.6 $ 16.8 $ 45.4
======== ======== ======== ====== ======
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest, net of amount capi-
talized...................... $ 11.3 $ 2.9 $ 3.0 $ .8 $ .6
Income taxes, net............. 22.6 30.5 56.4 9.4 12.5
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
CONSOLIDATED BALANCE SHEET
DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------- AT MARCH 31,
1994 1995 1996
------- ------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $ 2.5 $ 53.6 $ 45.4
Receivables less provision for allowances, claims
and doubtful accounts of $6.3, $6.4 and $6.7
(unaudited) respectively........................ 227.1 243.8 274.6
Inventories (Note 2)............................. 273.2 262.8 297.3
Notes receivable from related companies.......... 57.6 68.8 54.4
Deferred income taxes (Note 7)................... 13.0 15.6 13.0
------- ------- --------
Total current assets.......................... 573.4 644.6 684.7
------- ------- --------
Property, plant and equipment, at cost:
Buildings, machinery and equipment............... 433.9 448.2 448.8
Land and land improvements....................... 27.7 28.0 28.0
------- ------- --------
461.6 476.2 476.8
Less accumulated depreciation.................... 209.1 226.5 230.6
------- ------- --------
252.5 249.7 246.2
------- ------- --------
Prepaid pension costs (Note 6).................... 12.2 27.3 27.8
Excess of cost over net assets acquired, net of
accumulated amortization......................... 25.0 23.6 23.3
Deferred income taxes (Note 7).................... 26.6 23.5 24.4
Other assets...................................... 1.6 3.9 4.5
------- ------- --------
Total assets.................................. $891.3 $972.6 $1,010.9
======= ======= ========
LIABILITIES
Current liabilities:
Accounts payable................................. $ 99.8 $ 92.8 $ 114.2
Payables to related companies.................... 14.8 14.4 15.3
Accrued liabilities:
Salaries and wages.............................. 17.6 20.0 13.2
Taxes other than federal income taxes........... 7.4 8.9 8.9
Other........................................... 3.3 3.6 3.1
Long-term debt due within one year............... 4.7 4.7 4.7
------- ------- --------
Total current liabilities..................... 147.6 144.4 159.4
------- ------- --------
Long-term debt (Note 4)........................... 23.6 18.9 18.4
Deferred employee benefits and other liabilities
(Note 6)......................................... 140.1 140.8 142.2
------- ------- --------
Total liabilities............................. 311.3 304.1 320.0
------- ------- --------
STOCKHOLDER'S EQUITY
Common stock, par value $1.00; 3,000 shares
authorized; one share issued..................... -- -- --
Additional paid-in capital (Note 8)............... 494.6 494.6 494.6
Earnings reinvested in the business............... 85.4 173.9 196.3
------- ------- --------
Total stockholder's equity.................... 580.0 668.5 690.9
------- ------- --------
Total liabilities and stockholder's equity.... $891.3 $972.6 $1,010.9
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
STATEMENT OF ACCOUNTING AND FINANCIAL POLICIES
The following briefly describes the Company's principal accounting and
financial policies.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Joseph T. Ryerson & Son, Inc., and J. M. Tull Metals Company, Inc., which are
wholly-owned subsidiaries of the Company. The accounts of J. M. Tull Metals
Company, Inc. are consolidated with its wholly-owned subsidiary, AFCO Metals,
Inc.
INVENTORY VALUATION
Inventories are valued at cost which is not in excess of market. Cost is
determined principally by the last-in, first-out (LIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is depreciated, for financial reporting
purposes, using the straight-line method over the estimated useful lives of
the assets. Expenditures for normal repair and maintenance are charged against
income in the period incurred.
EXCESS OF COST OVER NET ASSETS ACQUIRED
The excess of cost over fair value of net assets of businesses acquired
(goodwill) is amortized on the straight-line method over a 25-year period.
Accumulated amortization of goodwill totaled $8.8 million at December 31,
1994, $10.2 million at December 31, 1995 and (unaudited) $10.5 million at
March 31, 1996.
BENEFITS FOR RETIRED EMPLOYEES
Effective April 30, 1996, that portion of the Inland Steel Industries
Pension Plan (the "Industries Pension Plan") covering the Company's current
and former employees was separated and became the Ryerson Tull Pension Plan
(the "Ryerson Tull Pension Plan"). Pension benefits are provided by the
Company to substantially all employees under such trusteed noncontributory
plan. Life insurance and certain medical benefits are provided for
substantially all retired employees.
The estimated costs of pension, medical, and life insurance benefits are
determined annually by consulting actuaries. The cost of these benefits for
retirees is accrued during their term of employment (see Note 6). Pensions are
funded in accordance with ERISA requirements in a trust established under the
Industries Pension Plan and Ryerson Tull Pension Plan. Costs for retired
employee medical benefits are funded when claims are submitted.
CASH EQUIVALENTS
Cash equivalents are highly liquid, short-term investments with maturities
of three months or less.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and related notes to financial statements. Changes in such
estimates may affect amounts reported in future periods.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
In 1995, the Company adopted Financial Accounting Standards Board ("FASB")
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." Adoption of this Statement had no
material impact on the results of operations or financial position of the
Company.
F-6
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1/FINANCIAL STATEMENTS
Results of operations for any interim period are not necessarily indicative
of results for any other periods or for the year. The financial statements as
of March 31, 1996 and for the three-month periods ended March 31, 1995 and
1996 are unaudited, but in the opinion of management include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of results for such periods.
NOTE 2/INVENTORIES
The Company's inventories consist principally of finished steel, nonferrous
metals and industrial plastic products for sale at service center locations.
The difference between LIFO values and approximate replacement costs for the
LIFO inventories was $132.6 million at December 31, 1994 and $146.4 million at
December 31, 1995 and (unaudited) $145.1 million at March 31, 1996.
During 1994 and 1995, various inventory quantities were reduced, resulting
in liquidations of LIFO inventory quantities carried at costs prevailing in
prior years that were different from current year costs. The effect on cost of
goods sold of LIFO liquidations in 1993, 1994 and 1995 was not material.
NOTE 3/BORROWING ARRANGEMENTS
At December 31, 1995 and March 31, 1996, the Company's subsidiaries had
available two unused credit facilities totalling $225 million. Each facility,
as well as the Inland Steel Industries Thrift Plan ESOP notes guarantee and
certain other debt agreements, requires compliance with various financial
covenants including minimum net worth and leverage ratio tests. The covenants
also limit the amount of cash that the subsidiaries can transfer to the
Company in the form of dividends and other advances to $180 million at year-
end 1995 and (unaudited) $200 million at March 31, 1996.
A $200 million unsecured credit agreement between Joseph T. Ryerson & Son,
Inc. and a group of banks provides a revolving credit facility to March 31,
2000.
J. M. Tull Metals Company, Inc. has a $25 million unsecured revolving credit
agreement with other banks, which extends to December 15, 1997.
F-7
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4/LONG-TERM DEBT
The Company's long-term debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------- MARCH 31,
1994 1995 1996
------ ------ -----------
(UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Joseph T. Ryerson & Son, Inc.
Industrial Revenue Bond, floating interest rate set
weekly based on 13-week Treasury bills, due
November 1, 2007.................................. $ 7.0 $ 7.0 $ 7.0
Other long-term debt, 10.25%, due through November
30, 1997.......................................... 1.8 1.6 1.6
J. M. Tull Metals Company, Inc.
Senior Notes, 9.43%, due through July 29, 1997..... 10.7 7.1 7.1
Term note ("Tull Term Note"), LIBOR plus 62.5 basis
points per annum, due through August 17, 1998..... 7.1 6.8 6.8
Industrial Revenue Bonds, interest rates ranging
from 6.5% to 65% of the prime rate, due through
January 1, 1997................................... 1.4 .9 .5
Other.............................................. .3 .2 .1
------ ------ -----
28.3 23.6 23.1
Less maturities due within one year................ 4.7 4.7 4.7
------ ------ -----
Long-term debt................................... $23.6 $18.9 $18.4
====== ====== =====
</TABLE>
At year-end 1995, maturities of long-term debt are: $4.7 million in 1996,
$5.6 million in 1997, $6.3 million in 1998, and $7.0 million in 2007.
Under the provisions of certain loan agreements, the Company's subsidiaries
are required to maintain specified amounts of working capital and net worth
and meet leverage tests, as outlined in the agreements, and are restricted as
to loans or dividends that may be paid to the Company.
Property with a net recorded carrying value of approximately $13.5 million
at December 31, 1995 is pledged as collateral on the industrial revenue bonds
and mortgage loans.
NOTE 5/DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
DERIVATIVES
The Company has only limited involvement with derivative financial
instruments and does not use them for speculative or trading purposes. The
Company has entered into an interest rate swap agreement to reduce the effects
of changes in interest rates on the Tull Term Note. At December 31, 1995, the
Company had outstanding an interest rate swap agreement with a bank having a
notional principal amount equal to the outstanding principal of the Tull Term
Note. This agreement effectively changes the Company's interest rate exposure
on the Tull Term Note from LIBOR plus 0.625% (a floating rate) to a fixed rate
of 5.925%. This interest rate swap matures on August 17, 1998. Gains and
losses associated with this hedging transaction will be reported as part of
the interest expense of
F-8
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the Tull Term Note. The Company is exposed to potential credit loss in the
event of nonperformance by the bank; however, the Company does not anticipate
such nonperformance.
CASH AND CASH EQUIVALENTS
The carrying amount of cash equivalents approximates fair value because of
the short maturity of those instruments.
LONG-TERM DEBT
The estimated fair value of the Company's long-term debt (including current
portions thereof) using quoted market prices of Company debt securities
recently traded and market-based prices of similar securities for those
securities not recently traded was $27.4 million at December 31, 1994 and
$23.6 million at December 31, 1995, as compared with the carrying value of
$28.3 million and $23.6 million included in the balance sheet at year-end 1994
and 1995, respectively.
NOTE 6/RETIREMENT BENEFITS
In 1995, the measurement date for pensions and benefits other than pensions
was changed from December 31 to September 30 in order to provide for more
timely information and to achieve administrative efficiencies in the
collection of data. The change in the measurement date had no effect on 1995
expense and had an immaterial impact on the 1995 funded status of the pension
plan.
PENSIONS
The Industries Pension Plan covers certain employees, retirees and their
beneficiaries of Industries and its subsidiaries, including the Company. The
Industries Pension Plan is a noncontributory defined benefit plan that
provides benefits based on final pay and years of service for all salaried
employees and certain wage employees, and years of service and a fixed rate
(in most instances based on frozen pay level or on job class) for all other
wage employees, including employees under collective bargaining agreements.
Because the fair value of pension plan assets pertains to all participants in
the Industries Pension Plan, no separate determination of the fair value of
such assets is made solely with respect to the Company.
The actuarial present value of benefits for service rendered to date and the
fair value of plan assets available for benefits for the Industries
consolidated group were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995
------------ -------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Fair value of plan assets....................... $1,652 $1,919
Actuarial present value of benefits for service
rendered to date:
Accumulated Benefit Obligation based on
compensation to date......................... 1,641 1,956
Additional benefits based on estimated future
compensation levels.......................... 98 90
------ ------
Projected Benefit Obligation.................. 1,739 2,046
------ ------
Plan asset shortfall to Projected Benefit
Obligation..................................... $ (87) $ (127)
====== ======
</TABLE>
F-9
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In 1995, Industries recorded an additional minimum pension liability of
$102.6 million representing the excess of the unfunded Accumulated Benefit
Obligation over previously accrued pension costs. A corresponding intangible
asset was recorded as an offset to this additional liability as prescribed.
Neither was required in 1994.
The calculation of benefit obligations was based on a discount (settlement)
rate of 8.8% in 1994 and 7.75% in 1995; a rate of compensation increase of
5.0% in 1994 and 4.0% in 1995; and a rate of return on plan assets of 9.5% in
both 1994 and 1995.
The Company recorded a pension charge of $.1 million in 1993 and $1.8
million in 1994, and a credit of $2.3 million in 1995. In 1995, the Company
paid $13.1 million to Industries for its share of a contribution to the
Industries Plan trust.
The cost of other industry welfare and retirement funds, for bargaining unit
employees, was $2.9 million in 1993, $2.6 million in 1994 and $3.3 million in
1995.
Effective April 30, 1996, the Ryerson Tull portion of the Industries Pension
Plan was separated and became the Ryerson Tull Pension Plan. The Ryerson Tull
Pension Plan assumed the liabilities of the Industries Pension Plan attributed
to active and retired Ryerson Tull employees and a corresponding percentage of
the assets. If the Ryerson Tull Pension Plan had been in existence at the
September 30, 1995 valuation date of the Industries Pension Plan, the Ryerson
Tull's projected benefit obligation would have been $266 million (unaudited)
and Ryerson Tull's share of the Pension Plan assets would have been $249
million (unaudited), resulting in an under-funding of $17 million (unaudited)
for financial reporting purposes. There is no ERISA-required funding for
either the Industries Pension Plan or the Ryerson Tull Pension Plan in 1996,
nor will there be funding as a result of the separation. The separation will
not have a material impact on the financial statements of Ryerson Tull.
Benefits Other Than Pensions
Substantially all of the Company's employees are covered under
postretirement life insurance and medical benefit plans that involve
deductible and co-insurance requirements. The postretirement life insurance
benefit formula used in the determination of postretirement benefit cost is
primarily based on applicable annual earnings at retirement for salaried
employees and specific amounts for hourly employees. The Company does not
prefund any of these postretirement benefits.
The amount of net periodic postretirement benefit cost for 1993, 1994 and
1995 is composed of the following:
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Service cost..................................... $ 3.2 $ 2.7 $ 2.2
Interest cost.................................... 8.0 7.3 8.4
Net amortization and deferral.................... (1.9) (2.0) (3.4)
------- ------- -------
Total net periodic postretirement benefit
cost.......................................... $ 9.3 $ 8.0 $ 7.2
======= ======= =======
</TABLE>
F-10
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth components of the accumulated postretirement
benefit obligation:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995
------------ -------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation
attributable to:
Retirees...................................... $ 44.4 $ 59.5
Fully eligible plan participants.............. 15.9 17.6
Other active plan participants................ 24.9 28.2
------ ------
Accumulated postretirement benefit
obligation................................... 85.2 105.3
Unrecognized net gain........................... 33.7 16.7
Unrecognized prior service credit............... 20.3 18.9
------ ------
Accrued postretirement benefit obligation....... $139.2 140.9
======
Expense net of benefits provided, October
through December 1995.......................... .2
------
Accrued postretirement benefit obligation at
December 31, 1995.............................. $141.1
======
</TABLE>
Any net gain or loss in excess of 10% of the accumulated postretirement
benefit obligation is amortized over the remaining service period of active
plan participants.
The assumptions used to determine the plan's accumulated postretirement
obligation are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995
------------ -------------
<S> <C> <C>
Discount Rate..................................... 8.8% 7.75%
Rate of Compensation increase..................... 5.0% 4.0%
Medical cost trend rate........................... 6%-5% 4.5%
Year ultimate rate reached........................ 1996 1996
</TABLE>
A one percentage point increase in the assumed health care cost trend rates
for each future year increases annual periodic postretirement benefit cost and
the accumulated postretirement benefit obligation as of September 30, 1995 by
$2.7 million and $12.2 million, respectively.
NOTE 7/TAXES ON INCOME
The Company participates in a tax-sharing agreement under which current and
deferred federal income tax provisions are determined for each company in the
Industries group on a stand-alone basis. Any current liability is paid to
Industries. If the Company is unable to use all of its allocated tax
attributes (net operating loss and tax credit carryforwards) in a given year
but other companies in the consolidated group are able to utilize them, then
the Company will be paid by Industries for the use of its attributes. Net
operating loss ("NOL") and tax credit carryforwards are allocated to each
company in accordance with applicable tax regulations as if a company were to
leave the consolidated group. Companies with taxable losses record current
income tax credits not to exceed current income tax charges recorded by
profitable companies. If Industries uses NOL carryforwards, the Company will
use the appropriate portion of that year's carryforward previously allocated
to it, if any.
F-11
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A state tax sharing agreement, similar to the agreement described above with
respect to federal taxes, also exists with Industries for those states in
which the consolidated group is charged state taxes on a unitary or combined
basis.
The elements of the provision for income taxes for the periods indicated
below are as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------- -------------
1993 1994 1995 1995 1996
-------- -------- -------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current income taxes:
Federal...................... $17.3 $30.4 $49.7 $12.7 $10.9
State and local.............. 2.6 3.9 6.7 2.7 1.7
-------- -------- -------- ------ ------
19.9 34.3 56.4 15.4 12.6
Deferred income taxes.......... 8.5Cr. .7 .5 1.1 1.7
-------- -------- -------- ------ ------
Total provision for income tax-
es............................ $11.4 $35.0 $56.9 $16.5 $14.3
======== ======== ======== ====== ======
</TABLE>
- --------
Cr. = Credit
In accordance with FASB Statement No. 109, the Company adjusted its deferred
tax assets and liabilities for the effect of the change in the corporate
federal income tax rate from 34 percent to 35 percent, effective January 1,
1993. A credit to income of $.6 million, which includes the effect of the rate
change on deferred tax asset and liability balances as of January 1, 1993 as
well as the effect on 1993 tax benefits recorded by the Company prior to the
enactment date of August 10, 1993, was recorded in the third quarter of 1993.
The components of the deferred income tax assets and liabilities arising
under FASB Statement No. 109 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995
---------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Deferred tax assets (excluding postretirement
benefits other than pensions):
Net operating loss and tax credit
carryforwards.................................. $15.1 $ 16.2
Other deductible temporary differences.......... 29.0 27.9
---------- -----------
44.1 44.1
---------- -----------
Deferred tax liabilities:
Fixed asset basis difference.................... 39.7 37.2
Other taxable temporary differences............. 14.0 17.2
---------- -----------
53.7 54.4
---------- -----------
Net deferred tax liability (excluding
postretirement benefits other than pensions)..... (9.6) (10.3)
FASB Statement No. 106 impact (post retirement
benefits other than pensions).................... 49.2 49.4
---------- -----------
Net deferred tax asset............................ $39.6 $ 39.1
========== ===========
</TABLE>
F-12
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
For tax purposes, the Company had available, at December 31, 1995,
approximately $43 million of NOL carryforwards available for regular federal
income tax purposes, expiring as follows: $8 million in 2005, $21 million in
2006, $7 million in 2007, $6 million in 2008 and $1 million in 2009.
Additionally, in conjunction with the Alternative Minimum Tax ("AMT") rules,
the Company had available AMT credit carryforwards for tax purposes of
approximately $1.1 million, which may be used indefinitely to reduce regular
federal income taxes.
The Company believes that it is more likely than not that all of the NOL
carryforwards will be utilized prior to their expiration. This belief is based
upon the factors discussed below.
The NOL carryforwards and existing deductible temporary differences
(excluding those relating to FASB Statement No. 106) are offset by existing
taxable temporary differences reversing within the carryforward period.
Furthermore, any such recorded tax benefits which would not be so offset are
expected to be realized by continuing to achieve future profitable operations.
Subsequent to the adoption of FASB Statement No. 109, the Company adopted
FASB Statement No. 106 and recognized the entire transition obligation at
January 1, 1992 as a cumulative effect charge in 1992. At December 31, 1995,
the deferred tax asset related to the Company's FASB Statement No. 106
obligation was $49.4 million. To the extent that future annual charges under
FASB Statement No. 106 continue to exceed deductible amounts, this deferred
tax asset will continue to grow. Thereafter, even if the Company should have a
tax loss in any year in which the deductible amount would exceed the financial
statement expense, the tax law provides for a 15-year carryforward period of
that loss. Because of the extremely long period that is available to realize
these future tax benefits, a valuation allowance for this deferred tax asset
is not necessary.
Total income taxes reflected in the Consolidated Statement of Operations
differ from the amounts computed by applying the federal tax rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Federal income tax provision computed at
statutory tax rate
of 35%...................................... $13.4 $30.9 $50.9
Additional taxes or credits from:
State and local income taxes, net of
federal income tax effect............... 1.7 2.5 4.5
Change in federal statutory rate......... .6Cr. -- --
All other, net........................... 3.1Cr. 1.6 1.5
-------- -------- --------
Total income tax provision............. $11.4 $35.0 $56.9
======== ======== ========
</TABLE>
- --------
Cr. = Credit
F-13
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8/RELATED PARTY TRANSACTIONS
The Company sells products to and purchases products from related companies
at prevailing market prices. These transactions were as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------- -------------
1993 1994 1995 1995 1996
-------- -------- -------- ------ ------
(DOLLARS IN MILLIONS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net product sales................... $ 10.7 $ 10.7 $ 15.7 $ 3.4 $ 5.2
Net product purchases............... $174.2 $184.1 $176.6 $44.5 $57.7
</TABLE>
Administrative expenses covering management, financial and legal services
provided to the Company were charged to the Company by Industries. Such
charges totaled $7.4 million in 1993 and 1994 and $6.8 million in 1995.
Cash management activities are performed by Industries and cash is
periodically transferred to Industries. Funds transferred to Industries are
supported by interest-bearing notes receivable. Interest, at prevailing prime
market rates, is charged on all intercompany loans within the Industries
consolidated group. There was $7.7 million of net intercompany interest
expense in 1993, no net intercompany interest expense in 1994 and $3.9 million
of net intercompany interest income in 1995.
In December 1993, Industries made a capital contribution of $150 million to
the Company. The capital contribution has been recorded as "additional paid-in
capital."
NOTE 9/COMMITMENTS AND CONTINGENCIES
The Company has noncancellable operating leases for which future minimum
rental commitments are estimated to total $38.3 million, including
approximately $8.6 million in 1996, $8.0 million in 1997, $7.0 million in
1998, $6.1 million in 1999, $4.8 million in 2000 and $3.8 million thereafter.
Rental expense under operating leases totaled $16.8 million in 1993 and
$15.9 million in 1994 and 1995.
Ryerson is the guarantor of $115.2 million at year-end 1995 and $110.8
million at March 31, 1996 (unaudited) of the Inland Steel Industries Thrift
Plan ESOP notes. The notes are payable in installments through July 2004.
There are various claims and pending actions against the Company. The amount
of liability, if any, for these claims and actions at December 31, 1995 is not
determinable but, in the opinion of management, such liability, if any, will
not have a materially adverse effect on the Company's financial position or
results of operations.
F-14
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the U.S. Underwriters named below, and
each of such U.S. Underwriters, for whom Goldman, Sachs & Co. and CS First
Boston Corporation are acting as representatives, has severally agreed to
purchase from the Company, the respective number of shares of Class A Common
Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
CLASS A
UNDERWRITER COMMON STOCK
----------- ------------
<S> <C>
Goldman, Sachs & Co.............................................
CS First Boston Corporation.....................................
---------
Total......................................................... 4,176,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered
hereby, if any are taken.
The U.S. Underwriters propose to offer the shares of Class A Common Stock in
part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus and in part to certain securities dealers at
such price less a concession of $ per share. The U.S. Underwriters may
allow, and such dealers may reallow, a concession not in excess of $ per
share to certain brokers and dealers. After the shares of Class A Common Stock
are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the representatives.
The Company and ISI have entered into an underwriting agreement (the
"International Underwriting Agreement") with the underwriters of the
International Offering (the "International Underwriters") providing for the
concurrent offer and sale of 1,044,000 shares of Class A Common Stock in an
international offering outside the United States. The initial offering price
and aggregate underwriting discounts and commissions per share for the two
offerings are identical. The closing of the offering made hereby is a
condition to the closing of the International Offering, and vice versa. The
representatives of the International Underwriters are Goldman Sachs
International and CS First Boston Limited.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the Offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution
of the shares offered hereby and subject to certain exceptions, it will offer,
sell or deliver the shares of Class A Common Stock, directly or indirectly,
only in the United States of America (including the States and the District of
Columbia), its territories, its possessions and other areas subject to its
jurisdiction (the "United States") and to U.S. persons, which term shall mean,
for purposes of this paragraph: (a) any individual who is a resident of the
United States or (b) any corporation, partnership or other entity organized in
or under the laws of the United States or any political subdivision thereof
and whose office most directly involved with the purchase is located in the
United States. Each of the International Underwriters has agreed or will agree
pursuant to the
U-1
<PAGE>
Agreement Between that, as a part of the distribution of the shares offered as
part of the International Offering, and subject to certain exceptions, it will
(i) not, directly or indirectly, offer, sell or deliver shares of Class A
Common Stock (a) in the United States or to any U.S. persons or (b) to any
person who it believes intends to reoffer, resell or deliver the shares in the
United States or to any U.S. persons, and (ii) cause any dealer to whom it may
sell such shares at any concession to agree to observe a similar restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Class A Common Stock as may be mutually agreed. The price of any shares so
sold shall be the initial public offering price, less an amount not greater
than the selling concession.
The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of
624,000 additional shares of Class A Common Stock solely to cover over-
allotments, if any. If the U.S. Underwriters exercise their over-allotment
option, the U.S. Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
number of shares to be purchased by each of them, as shown in the foregoing
table, bears to the 4,176,000 shares of Class A Common Stock offered hereby.
The Company has granted the International Underwriters a similar option to
purchase up to an aggregate of 156,000 additional shares of Class A Common
Stock.
The Company and ISI have agreed that, during the period beginning from the
date of this Prospectus and continuing to and including the date 180 days
after the date of this Prospectus, they will not offer, sell, contract to sell
or otherwise dispose of any shares of Class A Common Stock or Class B Common
Stock, any securities substantially similar to the Class A Common Stock or
Class B Common Stock or any securities convertible or exchangeable for Class A
Common Stock or Class B Common Stock or any such similar security (other than
pursuant to employee benefit plans existing, or on the conversion or exchange
of convertible or exchangeable securities outstanding, on the date of this
Prospectus) without the prior written consent of the representatives, except
for the shares of Class A Common Stock offered in connection with the
Offerings.
The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares
of Class A Common Stock offered by them.
Prior to this Offering, there has been no public market for the Class A
Common Stock. The initial public offering price will be negotiated among the
Company and the representatives of the U.S. Underwriters and the International
Underwriters. Among the factors to be considered in determining the initial
public offering price of the Class A Common Stock, in addition to prevailing
market conditions, will be the Company's historical performance, estimates of
the business potential and earnings prospects of the Company, an assessment of
the Company's management and the consideration of the above factors in
relation to market valuation of companies in related businesses.
Application has been made to list the Class A Common Stock on the New York
Stock Exchange under the symbol "RT." In order to meet one of the requirements
for listing the Class A Common Stock on the New York Stock Exchange, the
Underwriters have undertaken to sell lots of 100 or more shares to a minimum
of 2,000 beneficial holders.
Certain of the U.S. Underwriters have provided from time to time, and expect
to provide in the future, investment banking services to the Company and ISI
and their subsidiaries, for which such U.S. Underwriters have received and
will receive customary fees and commissions. ISI has agreed to pay Goldman,
Sachs & Co. a fee for financial advisory services rendered to ISI.
The Company and ISI have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act.
U-2
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFOR-
MATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 11
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 19
Selected Financial Data.................................................. 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Business................................................................. 29
Management............................................................... 40
Relationship with ISI.................................................... 51
Principal Stockholder.................................................... 54
Ownership of ISI Stock................................................... 54
Proposed Note Offering................................................... 55
Description of Capital Stock............................................. 55
Shares Eligible for Future Sale.......................................... 63
Validity of Class A Common Stock......................................... 66
Experts.................................................................. 66
Additional Information................................................... 66
Index to Consolidated Financial Statements............................... F-1
Underwriting............................................................. U-1
</TABLE>
THROUGH AND INCLUDING , 1996 (THE 25TH DAY AFTER THE DATE OF THIS PRO-
SPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOT-
MENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
5,220,000 SHARES
RYERSON TULL, INC.
CLASS A COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
------------
LOGO
------------
GOLDMAN, SACHS & CO.
CS FIRST BOSTON
REPRESENTATIVES OF THE UNDERWRITERS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 24, 1996
5,220,000 SHARES
RYERSON TULL, INC.
LOGO
CLASS A COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
----------
Of the 5,220,000 shares of Class A Common Stock offered, 1,044,000 shares are
being offered hereby in an international offering outside the United States and
4,176,000 shares are being offered in a concurrent United States offering. The
initial public offering price and aggregate underwriting discount per share
will be identical for both Offerings. See "Underwriting."
All of the 1,044,000 shares of Class A Common Stock offered hereby are being
sold by the Company. Prior to the Offerings, there has been no public market
for the Class A Common Stock of the Company. It is currently estimated that the
initial public offering price per share will be between $16.00 and $19.00. For
factors to be considered in determining the initial public offering price, see
"Underwriting."
The Company is currently a wholly-owned subsidiary of Inland Steel
Industries, Inc. and, upon consummation of the Offerings, Inland Steel
Industries, Inc. will beneficially own 100% of the Company's outstanding Class
B Common Stock, which will represent approximately 86.7% of the economic
interest in the Company (85% if the Underwriters' over-allotment options are
exercised in full). See "Principal Stockholder."
Each share of Class A Common Stock entitles its holder to one vote, whereas
each share of Class B Common Stock entitles its holder to four votes. After
consummation of the Offerings, Inland Steel Industries, Inc. will beneficially
own shares having approximately 96.3% of the combined outstanding voting power
of all classes of voting stock of the Company (95.8% if the Underwriters' over-
allotment options are exercised in full). See "Description of Capital Stock--
Common Stock."
The Company intends to offer publicly $150,000,000 aggregate principal amount
of its Notes due 2001 and $100,000,000 aggregate principal amount of its Notes
due 2006. See "Proposed Note Offering."
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE CLASS A COMMON STOCK.
Application has been made to list the Class A Common Stock on the New York
Stock Exchange under the symbol "RT."
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
-------------- ------------ -----------
<S> <C> <C> <C>
Per Share............................... $ $ $
Total(3)................................ $ $ $
</TABLE>
- -----
(1) The Company and Inland Steel Industries, Inc. have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(2) Before deducting estimated expenses of $900,000 payable by the Company.
(3) The Company has granted the International Underwriters an option for 30
days to purchase up to an additional 156,000 shares at the initial public
offering price per share, less the underwriting discount, solely to cover
over-allotments. Additionally, the Company has granted the U.S.
Underwriters a similar option with respect to an additional 624,000 shares
as part of the concurrent U.S. offering. If such options are exercised in
full, the total initial public offering price, underwriting discount and
proceeds to Company will be $ , $ and $ , respectively. See
"Underwriting."
----------
The shares offered hereby are offered severally by the International
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that certificates for the shares will be ready for delivery in New
York, New York on or about , 1996, against payment therefor in immediately
available funds.
GOLDMAN SACHS INTERNATIONAL CS FIRST BOSTON
----------
The date of this Prospectus is , 1996.
<PAGE>
shares of Class A Common Stock would be reserved for issuance upon exercise of
options outstanding upon consummation of the Offerings. See "Management--
Directors' Compensation" and "--Ryerson Tull 1996 Incentive Stock Plan."
Within 90 days after the date of this Prospectus, the Company intends to
register under the Securities Act an aggregate of 2,400,000 shares of Class A
Common Stock issuable in the form of restricted stock or upon exercise of
options or stock appreciation rights to be granted, or performance awards to
be made, under the Incentive Stock Plan and the Directors' Compensation Plan.
Some of the holders of these shares of restricted stock and options are
subject to lock-up restrictions that will expire 180 days after the date of
this Prospectus. Shares of Class A Common Stock held in the form of restricted
stock as to which the restrictions have lapsed and shares of Class A Common
Stock issued upon the exercise of such options or stock appreciation rights,
or the vesting of performance awards, will be eligible for immediate resale in
the public market, subject, as to shares held by affiliates of the Company, to
the volume and other limitations of Rule 144 and subject to restrictions
contained in lock-up agreements.
CERTAIN U.S. TAX CONSEQUENCES TO NON-U.S. STOCKHOLDERS
The following is a general discussion of certain U.S. federal tax
consequences of the ownership and disposition of a share of Class A Common
Stock by a beneficial owner of such shares that is not a U.S. person (a "non-
U.S. holder"). For purposes of this discussion, a "U.S. person" means a
citizen or resident of the United States, a corporation or partnership created
or organized in the United States or under the law of the United States or of
any State or political subdivision of the foregoing, or any estate or trust
whose income is includable in gross income for U.S. federal income tax
purposes regardless of its source. This discussion does not deal with all
aspects of U.S. federal income and estate taxation that may be relevant to
non-U.S. holders in light of their particular circumstances, and does not
address state, local or non-U.S. tax considerations. Furthermore, the
following discussion is based on provisions of the Code, the regulations
promulgated thereunder and administrative and judicial interpretations as of
the date hereof, all of which are subject to change, possibly with retroactive
effect. Treasury regulations were recently proposed that would, if adopted in
their present form, revise in certain respects the rules applicable to non-
U.S. holders of Class A Common Stock (the "Proposed Regulations"). The
Proposed Regulations are generally proposed to be effective with respect to
payments made after December 31, 1997. It is not certain whether, or in what
form, the Proposed Regulations will be adopted as final regulations. Each
prospective investor is urged to consult its own tax adviser with respect to
the U.S. federal, state and local consequences of owning and disposing of a
share of Class A Common Stock, as well as any tax consequences arising under
the laws of any other taxing jurisdiction.
U.S. INCOME AND ESTATE TAX CONSEQUENCES
It is not currently contemplated that the Company will pay dividends on the
Class A Common Stock in the foreseeable future. If the Company were to pay a
dividend in the future, such a dividend paid to a non-U.S. holder would be
subject to U.S. withholding tax at a 30% rate, or if applicable, a lower
treaty rate, unless the dividend is effectively connected with the conduct of
a trade or business in the United States by a non-U.S. holder (and, if certain
tax treaties apply, is attributable to a United States permanent establishment
maintained by such non-U.S. holder). A dividend that is effectively connected
with the conduct of a trade or business in the United States by the non-U.S.
holder (and, if certain tax treaties apply, is attributable to a United States
permanent establishment maintained by such non-U.S. Holder) will be exempt
from the withholding tax described above and subject instead (i) to the U.S.
federal income tax on net income that applies to U.S. persons and (ii) with
respect to corporate holders under certain circumstances, a 30% (or, if
applicable, lower treaty rate) branch profits tax that in general is imposed
on its "effectively connected earnings and profits" (within the meaning of the
Code) for the taxable year, as adjusted for certain items.
66
<PAGE>
Under current Treasury Regulations, dividends paid to an address in a foreign
country are presumed to be paid to a resident of that country (unless the payor
has knowledge to the contrary) for purposes of the withholding discussed above
and, under the current interpretation of the Treasury Regulations, for purposes
of determining the applicability of a tax treaty rate. Under the Proposed
Regulations, however, a non-United States holder of Class A Common Stock who
wishes to claim the benefit of an applicable treaty rate would be required to
satisfy applicable certification and other requirements. In the case of a
foreign partnership, the certification requirement would generally be applied
to the partners of the partnership. In addition, the Proposed Regulations would
also require the partnership to provide certain information, including a United
States taxpayer identification number, and would provide look-through rules for
tiered partnerships. A non-U.S. holder that is eligible for a reduced rate of
U.S. withholding tax pursuant to an income tax treaty may obtain a refund of
any excess amounts withheld by filing an appropriate claim for refund with the
IRS.
Under current law, a non-U.S. holder generally will not be subject to U.S.
federal income tax on any gain recognized on a sale or other disposition of a
share of Class A Common Stock unless (i) the Company is or has been during the
five-year period ending on the date of disposition a "United States real
property holding corporation" for U.S. federal income tax purposes (which the
Company does not believe that it has been or is currently and does not
anticipate becoming), (ii) the gain is effectively connected with the conduct
of a trade or business within the United States of the non-U.S. holder and, if
certain tax treaties apply, is attributable to a United States permanent
establishment maintained by the non-U.S. holder, (iii) the gain is not
described in clause (ii) above, the non-U.S. holder is an individual who holds
the share as a capital asset, is present in the United States for 183 days or
more in the taxable year of the disposition and either (a) such individual has
a "tax home" (as defined for U.S. federal income tax purposes) in the United
States or (b) the gain is attributable to an office or other fixed place of
business maintained in the United States by such individual, or (iv) the non-
U.S. holder is subject to tax pursuant to the Code provisions applicable to
certain U.S. expatriates. In the case of a non-U.S. holder that is described
under clause (ii) above, its gain will be subject to the U.S. federal income
tax on net income that applies to U.S. persons and, in addition, if such non-
U.S. holder is a foreign corporation, it may be subject to the branch profits
tax as described in the second preceding paragraph. An individual non-U.S.
holder that is described under clause (iii) above will be subject to a flat 30%
tax on the gain derived from the sale, which may be offset by U.S. capital
losses (notwithstanding the fact that he or she is not considered a resident of
the United States). Thus, individual non-U.S. holders who have spent 183 days
or more in the United States in the taxable year in which they contemplate a
sale of the Class A Common Stock are urged to consult their tax advisers as to
the tax consequences of such sale.
Class A Common Stock owned or treated as owned by an individual who is not a
citizen or resident (as specially defined for United States federal estate tax
purposes) of the United States at the date of death, or Class A Common Stock
subject to certain lifetime transfers made by such an individual, will be
included in such individual's estate for United States federal estate tax
purposes and may be subject to United States federal estate tax, unless an
applicable estate tax treaty provides otherwise.
BACK-UP WITHHOLDING AND INFORMATION REPORTING
DIVIDENDS
Except as provided below, the Company must report annually to the IRS and to
each non-U.S. holder the amount of dividends paid to and the tax withheld with
respect to such holder. These information reporting requirements apply
regardless of whether withholding was reduced or eliminated by an applicable
tax treaty. Copies of these information returns may also be available under the
provisions of a specific treaty or agreement with the tax authorities in the
country in which the non-U.S. holder resides. In general, backup withholding at
a rate of 31% and additional information reporting will
67
<PAGE>
apply to dividends paid on shares of Class A Common Stock to holders that are
not "exempt recipients" and that fail to provide in the manner required certain
identifying information (such as the holder's name, address and taxpayer
identification number). Generally, individuals are not exempt recipients,
whereas corporations and certain other entities generally are exempt
recipients. However, dividends that are subject to U.S. withholding tax at the
30% statutory rate or at a reduced tax treaty rate are exempt from backup
withholding of U.S. federal income tax and such additional information
reporting.
BROKER SALES
If a non-U.S. holder sells shares of Class A Common Stock through a U.S.
office of a U.S. or foreign broker, the broker is required to file an
information return and is required to withhold 31% of the sale proceeds unless
the non-U.S. holder is an exempt recipient or has provided the broker with the
information and statements, under penalties of perjury, necessary to establish
an exemption from backup withholding. If payment of the proceeds of the sale of
a share by a non-U.S. holder is made to or through the foreign office of a
broker, that broker will not be required to backup withhold or, except as
provided in the next sentence, to file information returns. In the case of
proceeds from a sale of a share by a non-U.S. holder paid to or through the
foreign office of a U.S. broker or a foreign office of a foreign broker that is
(i) a controlled foreign corporation for U.S. tax purposes or (ii) a person 50%
or more of whose gross income for the three-year period ending with the close
of the taxable year preceding the year of payment (or for the part of that
period that the broker has been in existence) is effectively connected with the
conduct of a trade or business within the United States (a "Foreign U.S.
Connected Broker"), information reporting is required unless the broker has
documentary evidence in its files that the payee is not a U.S. person and
certain other conditions are met, or the payee otherwise establishes an
exemption. In addition, the Treasury Department has indicated that it is
studying the possible application of backup withholding in the case of such
foreign offices of U.S. and Foreign U.S. Connected Brokers.
REFUNDS
Any amounts withheld under the backup withholding rules from a payment to a
non-U.S. holder may be refunded or credited against the non-U.S. holder's U.S.
federal income tax liability, provided that the required information is
furnished to the IRS.
VALIDITY OF CLASS A COMMON STOCK
The validity of the shares of Class A Common Stock being offered hereby and
certain other legal matters will be passed upon for the Company by Mayer, Brown
& Platt, Chicago, Illinois. Certain legal matters will be passed upon for the
Underwriters by Sullivan & Cromwell, New York, New York. George A. Ranney, Jr.,
Vice President and General Counsel of ISI, is a partner in the law firm of
Mayer, Brown & Platt. As of April 1, 1996, Mr. Ranney owned 7,300 shares of
ISI's common stock and also held options to purchase 48,000 shares of ISI's
common stock, of which none are currently exercisable.
EXPERTS
The consolidated financial statements as of December 31, 1994 and 1995, and
for each of the three years in the period ended December 31, 1995 included in
this Prospectus and the financial statement schedules in the registration
statement have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
68
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Commission a registration statement on Form S-
1 (the "Registration Statement") under the Securities Act with respect to the
shares of Class A Common Stock offered hereby. For the purposes hereof, the
term "Registration Statement" means the original Registration Statement and any
and all amendments thereto. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and such
Class A Common Stock, reference is hereby made to the Registration Statement,
exhibits and schedules, which may be inspected and copied at the public
reference facilities maintained by the Commission at its principal office at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and
at certain regional offices of the
Commission located at Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661 and at Seven World Trade Center, New York, New York 10048.
Copies of the Registration Statement can be obtained at prescribed rates from
the Public Reference Section of the Commission at its principal office at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549.
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete, and in each instance reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
69
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the International Underwriters named
below, and each of such International Underwriters, for whom Goldman Sachs
International and CS First Boston Limited are acting as representatives, has
severally agreed to purchase from the Company, the respective number of shares
of Class A Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
CLASS A
UNDERWRITER COMMON STOCK
----------- ------------
<S> <C>
Goldman Sachs International ....................................
CS First Boston Limited.........................................
---------
Total....................................................... 1,044,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
International Underwriters are committed to take and pay for all of the shares
offered hereby, if any are taken.
The International Underwriters propose to offer the shares of Class A Common
Stock in part directly to the public at the initial public offering price set
forth on the cover page of this Prospectus and in part to certain securities
dealers at such price less a concession of $ per share. The International
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per share to certain brokers and dealers. After the shares of
Class A Common Stock are released for sale to the public, the offering price
and other selling terms may from time to time be varied by the representatives.
The Company has entered into an underwriting agreement (the "U.S.
Underwriting Agreement") with the underwriters of the U.S. Offering (the "U.S.
Underwriters") providing for the concurrent offer and sale of 4,176,000 shares
of Class A Common Stock in a U.S. offering in the United States. The offering
price and aggregate underwriting discounts and commissions per share for the
two offerings are identical. The closing of the offering made hereby is a
condition to the closing of the U.S. Offering, and vice versa. The
representatives of the U.S. Underwriters are Goldman, Sachs & Co. and CS First
Boston Corporation.
U-1
<PAGE>
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the Offerings, each of the
U.S. Underwriters has agreed that, as a part of the distribution of the shares
offered hereby and subject to certain exceptions, it will offer, sell or
deliver the shares of Class A Common Stock, directly or indirectly, only in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") and to U.S. persons, which term shall mean, for purposes
of this paragraph: (a) any individual who is a resident of the United States or
(b) any corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States. Each of
the International Underwriters named herein has agreed pursuant to the
Agreement Between that, as a part of the distribution of the shares offered as
a part of the International Offering, and subject to certain exceptions, it
will (i) not, directly or indirectly, offer, sell or deliver shares of Class A
Common Stock (a) in the United States or to any U.S. persons or (b) to any
person who it believes intends to reoffer, resell or deliver the shares in the
United States or to any U.S. persons, and (ii) cause any dealer to whom it may
sell such shares at any concession to agree to observe a similar restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Class A Common Stock as may be mutually agreed. The price of any shares so sold
shall be the initial public offering price, less an amount not greater than the
selling concession.
The Company has granted the International Underwriters an option exercisable
for 30 days after the date of this Prospectus to purchase up to an aggregate of
156,000 additional shares of Class A Common Stock solely to cover over-
allotments, if any. If the International Underwriters exercise their over-
allotment option, the International Underwriters have severally agreed, subject
to certain conditions, to purchase approximately the same percentage thereof
that the number of shares to be purchased by each of them, as shown in the
foregoing table, bears to the 1,044,000 shares of Class A Common Stock offered.
The Company has granted the U.S. Underwriters a similar option to purchase up
to an aggregate of 624,000 additional shares of Class A Common Stock.
The Company and ISI have agreed that, during the period beginning from the
date of this Prospectus and continuing to and including the date 180 days after
the date of this Prospectus, they will not offer, sell, contract to sell or
otherwise dispose of any shares of Class A Common Stock or Class B Common
Stock, any securities substantially similar to the Class A Common Stock or
Class B Common Stock or any securities convertible or exchangeable for Class A
Common Stock or Class B Common Stock or any such similar security (other than
pursuant to employee benefit plans existing, or on the conversion or exchange
of convertible or exchangeable securities outstanding, on the date of this
Prospectus) without the prior written consent of the representatives, except
for the shares of Class A Common Stock offered in connection with the
Offerings.
Each International Underwriter has also agreed that (a) it has not offered or
sold and prior to the date six months after the date of issue of the shares of
Class A Common Stock will not offer or sell any shares of Class A Common Stock
to persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995, (b) it has complied, and will comply, with all
applicable provisions of the Financial Services Act 1986 of Great Britain with
respect to anything done by it in relation to the shares of Class A Common
Stock in, from or otherwise involving the United Kingdom and (c) it has only
issued or passed on and will only issue or pass on in the United Kingdom any
U-2
<PAGE>
document received by it in connection with the issuance of the shares of Class
A Common Stock to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995
of Great Britain or is a person to whom the document may otherwise lawfully be
issued or passed on.
Buyers of shares of Class A Common Stock offered hereby may be required to
pay stamp taxes and other charges in accordance with the laws and practice of
the country of purchase in addition to the initial public offering price.
The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares of
Class A Common Stock offered by them.
Prior to this Offering, there has been no public market for the Class A
Common Stock. The initial public offering price will be negotiated among the
Company and the representatives of the U.S. Underwriters and the International
Underwriters. Among the factors to be considered in determining the initial
public offering price of the Class A Common Stock, in addition to prevailing
market conditions, will be the Company's historical performance, estimates of
the business potential and earnings prospects of the Company, an assessment of
the Company's management and the consideration of the above factors in relation
to market valuation of companies in related businesses.
Application has been made to list the Class A Common Stock on the New York
Stock Exchange under the symbol "RT." In order to meet one of the requirements
for listing the Class A Common Stock on the New York Stock Exchange, the
Underwriters have undertaken to sell lots of 100 or more shares to a minimum of
2,000 beneficial holders.
Certain of the International Underwriters have provided from time to time,
and expect to provide in the future, investment banking services to the Company
and ISI and their subsidiaries, for which such International Underwriters have
received and will receive customary fees and commissions. ISI has agreed to pay
Goldman, Sachs & Co. a fee for financial advisory services rendered to ISI.
The Company and ISI have agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act.
U-3
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFOR-
MATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 11
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 19
Selected Financial Data.................................................. 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Business................................................................. 29
Management............................................................... 40
Relationship with ISI.................................................... 51
Principal Stockholder.................................................... 54
Ownership of ISI Stock................................................... 54
Proposed Note Offering................................................... 55
Description of Capital Stock............................................. 55
Shares Eligible for Future Sale.......................................... 63
Certain U.S. Tax Consequences to Non-U.S. Stockholders................... 66
Validity of Class A Common Stock......................................... 68
Experts.................................................................. 68
Additional Information................................................... 69
Index to Consolidated Financial Statements............................... F-1
Underwriting............................................................. U-1
</TABLE>
THROUGH AND INCLUDING , 1996 (THE 25TH DAY AFTER THE DATE OF THIS PRO-
SPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOT-
MENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
5,220,000 SHARES
RYERSON TULL, INC.
CLASS A COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
-----------
LOGO
-----------
GOLDMAN SACHS INTERNATIONAL
CS FIRST BOSTON
REPRESENTATIVES OF THE UNDERWRITERS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION(S)
The following are the estimated expenses in connection with the distribution
of the securities being registered:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee................ $ 39,310
NASD Filing Fee.................................................... 11,900
Printing and Engraving Expenses.................................... 300,000
Accounting Fees and Expenses....................................... 75,000
Attorneys' Fees and Expenses....................................... 250,000
Transfer Agent's and Registrar's Fees.............................. 15,000
Blue Sky Fees and Expenses (including attorneys' fees)............. 25,000
NYSE Listing Fees.................................................. 88,100
Miscellaneous...................................................... 95,690
--------
Total............................................................ $900,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) The Delaware GCL (Section 145) (i) gives Delaware corporations broad
power to indemnify their present and former directors and officers and those
of affiliated corporations against expenses incurred in the defense of any
lawsuit to which they are made parties by reason of being or having been such
directors or officers, subject to specified conditions and exclusions, (ii)
gives a director or officer who successfully defends an action the right to be
so indemnified, and (iii) authorizes the Registrant to buy directors' and
officers' liability insurance. Such indemnification is not exclusive of any
other rights to which those indemnified may be entitled under any by-laws,
agreement, vote of stockholders or disinterested directors or otherwise.
(b) Article VI of the By-Laws of the Registrant provides for
indemnification of directors, officers, employees and agents to the fullest
extent not prohibited by law.
(c) Reference is made to Section 8 of the U.S. Underwriting Agreement and
the International Underwriting Agreement (the forms of which are included as
Exhibits 1.1 and 1.2 to this Registration Statement) for provisions regarding
the indemnification under certain circumstances of the Registrant, its
directors and certain of its officers by the Underwriters.
(d) In accordance with Section 102(b)(7) of the Delaware GCL, the
Registrant's Certificate of Incorporation provides that directors shall not be
liable for monetary damages for breaches of their fiduciary duty as directors
except to the extent such exemption from liability or limitation thereof is
not permitted under the Delaware GCL as the same exists or may be amended.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
None.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS:
A list of the exhibits included as part of this Registration Statement is
set forth in the Exhibit Index which immediately precedes such exhibits and is
incorporated herein by reference.
II-1
<PAGE>
(b) FINANCIAL STATEMENT SCHEDULES:
SCHEDULE I--CONDENSED FINANCIAL INFORMATION
Statements of Operations for the Years Ended December 31, 1993, 1994
and 1995
Statements of Cash Flows for the Years Ended December 31, 1993, 1994
and 1995
Balance Sheets at December 31, 1994 and 1995
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreements certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referred to in Item 14, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDED REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
CHICAGO, STATE OF ILLINOIS, ON MAY 24, 1996.
Ryerson Tull, Inc.
/s/ Robert J. Darnall
By___________________________________
ROBERT J. DARNALL CHAIRMAN AND
DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDED REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON MAY 24, 1996.
NAME TITLE
* Chairman and Director
_____________________________________
ROBERT J. DARNALL
* President, Chief Executive Officer and
_____________________________________ Director
NEIL S. NOVICH
* Vice President, Finance, Chief
_____________________________________ Financial Officer and Director
JAY M. GRATZ (Principal Financial and Accounting
Officer)
/s/ Charles B. Salowitz
*By _________________________________
ATTORNEY-IN-FACT
II-3
<PAGE>
RYERSON TULL, INC.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Equity in income of subsidiaries.................... $32.1 $53.3 $86.5
Intercompany interest expense....................... 8.3 .1 .1
----- ----- -----
Income before income taxes.......................... 23.8 53.2 86.4
Provision for income taxes.......................... 2.9Cr. .1Cr. 2.1Cr.
----- ----- -----
Net income.......................................... $26.7 $53.3 $88.5
===== ===== =====
</TABLE>
- --------
Cr. = Credit
<PAGE>
RYERSON TULL, INC.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1993 1994 1995
------ ----- -----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income.............................................. $ 26.7 $53.3 $88.5
Adjustments to reconcile net income to net cash provided
from (used for) operating activities:
Equity in undistributed earnings of subsidiaries...... (32.1) (53.3) (86.5)
Deferred income taxes................................. (2.0) 2.0 (.1)
------ ----- -----
Net adjustments..................................... (34.1) (51.3) (86.6)
------ ----- -----
Net cash provided from (used for) operating
activities......................................... (7.4) 2.0 1.9
------ ----- -----
FINANCING ACTIVITIES:
Change in notes to and from related companies........... (142.6) (2.0) (1.9)
Capital contribution from Inland Steel Industries,
Inc.................................................... 150.0 -- --
------ ----- -----
Net cash provided from (used for) financing
activities........................................... 7.4 (2.0) (1.9)
------ ----- -----
Net increase in cash and cash equivalents............... -- -- --
Cash and cash equivalents--Beginning of year............ -- -- --
------ ----- -----
Cash and cash equivalents--End of year.................. $ -- $ -- $ --
====== ===== =====
</TABLE>
<PAGE>
RYERSON TULL, INC.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
BALANCE SHEETS
AT DECEMBER 31, 1994 AND 1995
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
ASSETS
Current Assets:
Cash.......................................................... $ -- $ --
Notes receivable from related companies....................... -- 1.9
------ ------
Total current assets........................................ -- 1.9
Investment in subsidiary companies.............................. 571.0 657.5
Deferred income taxes........................................... 9.0 9.1
------ ------
Total assets................................................ $580.0 $668.5
====== ======
STOCKHOLDER'S EQUITY
Common Stock, $1.00 par; 3,000 shares authorized; 1 share is-
sued........................................................... $ -- $ --
Additional paid-in capital...................................... 494.6 494.6
Earnings reinvested in business................................. 85.4 173.9
------ ------
Total stockholder's equity.................................. $580.0 $668.5
====== ======
</TABLE>
<PAGE>
RYERSON TULL, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PROVISION FOR ALLOWANCES
CLAIMS AND DOUBTFUL ACCOUNTS
-------------------------------------
BALANCE AT ADDITIONS DEDUCTIONS BALANCE OF
BEGINNING CHARGED TO FROM END OF
YEARS ENDED DECEMBER 31, OF YEAR INCOME RESERVES(A) YEAR
- ------------------------ ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1993.......................... $5.4 $2.0 $1.9 $5.5
1994.......................... $5.5 $1.4 $ .6 $6.3
1995.......................... $6.3 $1.2 $1.1 $6.4
</TABLE>
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(A) Bad debts written off during year.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER EXHIBIT PAGE
------ ------- ------------
<C> <S> <C>
1.1 Form of U.S. Underwriting Agreement......................
1.2 Form of International Underwriting Agreement.............
3.1 Form of Restated Certificate of Incorporation of the
Registrant.............................................. *
3.2 Form of Restated By-Laws of the Registrant............... *
4.1 Rights Agreement between the Registrant and Harris Trust
and Savings Bank, as Rights Agent, dated as of
, 1996................................................ *
4.2 Form of Indenture relating to the Notes.................. *
4.3 Form of Class A Common Stock Certificate................. *
4.4 Indenture, dated as of December 15, 1992, between Inland
Steel Industries, Inc. and Harris Trust and Savings
Bank.................................................... *
Note: No long-term debt instruments issued by the Company
exceed 10% of the consolidated total assets of the
Company and its subsidiaries. In accordance with
paragraph 4(iii) of Item 601 of Regulation S-K, the
Company will furnish to the Commission upon request
copies of long-term debt instruments and related
agreements
5 Opinion of Mayer, Brown & Platt.......................... *
10.1 Form of Registration Rights Agreement between the
Registrant and Inland Steel Industries, Inc............. *
10.2 Employment Agreement dated as of April 8, 1994 between
Inland Steel Industries, Inc. and Neil S. Novich (Filed
as Exhibit 10.N.(8) to Inland Steel Industries, Inc.'s
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 and incorporated by reference herein.)
10.3 Severance Agreement dated as of April 8, 1994 between
Inland Steel Industries, Inc. and Neil S. Novich (Filed
as Exhibit 10.N.(9) to Inland Steel Industries, Inc.'s
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, and incorporated herein by reference
herein.)
10.4 Employment Agreement between Inland Steel Industries,
Inc. and Carl G. Lusted, dated June 27, 1990............ *
10.5 Change in Control Agreement dated as of March 27, 1996,
between Inland Steel Industries, Inc. and Robert J.
Darnall................................................. *
10.6 Change in Control Agreement dated as of March 27, 1996
between Inland Steel Industries, Inc. and Neil S.
Novich.................................................. *
10.7 Change in Control Agreement dated as of March 27, 1996
between Inland Steel Industries, Inc. and Jay M. Gratz.. *
10.8 Change in Control Agreement dated as of March 27, 1996
between Inland Steel Industries, Inc. and Carl G.
Lusted.................................................. *
10.9 Change in Control Agreement dated as of March 27, 1996
between Inland Steel Industries, Inc. and Stephen E.
Makarewicz.............................................. *
10.10 Change in Control Agreement dated as of , 1996
between the Registrant and Robert J. Darnall............ *
10.11 Change in Control Agreement dated as of , 1996
between the Registrant and Neil S. Novich............... *
10.12 Change in Control Agreement dated as of , 1996
between the Registrant and Jay M. Gratz................. *
10.13 Change in Control Agreement dated as of , 1996
between the Registrant and Carl G. Lusted............... *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER EXHIBIT PAGE
------ ------- ------------
<C> <S> <C>
10.14 Change in Control Agreement dated as of , 1996
between the Registrant and Stephen E. Makarewicz....... *
10.15 Ryerson Tull Directors' Compensation Plan............... *
10.16 Ryerson Tull Supplemental Retirement Plan for Covered
Employees.............................................. *
10.17 Ryerson Tull 1996 Incentive Stock Plan.................. *
10.18 Form of Corporate Separation Agreement between the
Registrant and Inland Steel Industries, Inc. .......... *
10.19 Form of Cross-License Agreement between the Registrant
and Inland Steel Industries, Inc....................... *
10.20 Tax Sharing Agreement between the Registrant and Inland
Steel Industries, Inc., dated as of ........ *
10.21 Form of ESOP Guarantee Agreement between Joseph T.
Ryerson and Son, Inc. and ....................... *
10.22 Copy of Inland Steel Industries, Inc. Non-Qualified
Thrift Plan, as amended. (Filed as Exhibit 10.D to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995, and incorporated by reference
herein.)
10.23 Inland Steel Industries, Inc. Supplemental Retirement
Plan for Covered Employees, as amended (Filed as
Exhibit 10.I to Inland Steel Industries, Inc.'s Annual
Report on Form 10-K for the fiscal year ended December
31, 1993, and incorporated by reference herein.)
10.24 Inland Steel Industries, Inc. Special Retirement Benefit
Plan for Covered Employees (Filed as Exhibit 10.J to
Inland Steel Industries, Inc.'s Annual Report on Form
10-K for the fiscal year ended December 31, 1993, and
incorporated by reference herein.)
10.25 Inland 1995 Incentive Stock Plan (Filed as Exhibit A to
Inland Steel Industries, Inc.'s definitive Proxy
Statement dated April 17, 1995 and was furnished to
stockholders in connection with the annual meeting held
May 24, 1995, and incorporated by reference herein.)
10.26 Inland Steel Industries, Inc. Annual Incentive Plan
(Filed as Exhibit 10.A to Inland Steel Industries,
Inc.'s Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995, and incorporated by reference
herein.)
10.27 Inland Steel Industries, Inc. Special Achievement Award
Plan (Filed as Exhibit 10.I to Inland Steel Industries,
Inc.'s Annual Report on Form 10-K for the fiscal year
ended December 31, 1987, and incorporated by reference
herein.)
10.28 Inland 1984 Incentive Stock Plan (Filed as Exhibit 10.A
to Inland Steel Industries, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995, and
incorporated by reference herein.)
10.29 Inland 1988 Incentive Stock Plan (Filed as Exhibit 10.B
to Inland Steel Industries, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995, and
incorporated by reference herein.)
10.30 Inland 1992 Incentive Stock Plan, as amended (Filed as
Exhibit 10.C to Inland Steel Industries, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995, and incorporated by reference herein.)
10.31 Inland Steel Industries, Inc. Deferred Compensation Plan
for Certain Employees (Filed as Exhibit 10.J to Inland
Steel Industries, Inc.'s Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, and
incorporated by reference herein.)
12 Statement re: Computation of Ratio of Earnings to Fixed
Charges................................................ **
21 Subsidiaries of the Registrant.......................... **
</TABLE>
<PAGE>
RYERSON TULL, INC.
CLASS A COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
UNDERWRITING AGREEMENT
(U.S. VERSION)
June __, 1996
Goldman, Sachs & Co.,
CS First Boston Corporation,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Ryerson Tull, Inc. (the "Company"), a Delaware corporation and the wholly
owned subsidiary of Inland Steel Industries, Inc., a Delaware corporation
("ISI"), proposes, subject to the terms and conditions stated herein, to issue
and sell to the Underwriters named in Schedule I hereto (the "Underwriters") an
aggregate of 4,176,000 shares (the "Firm Shares") and, at the election of the
Underwriters, up to 624,000 additional shares (the "Optional Shares") of Class A
Common Stock, par value $1.00 per share ("Stock"), of the Company (the Firm
Shares and the Optional Shares that the Underwriters elect to purchase pursuant
to Section 2 hereof being collectively called the "Shares").
It is understood and agreed to by all parties that the Company is
concurrently entering into an agreement (the "International Underwriting
Agreement") providing for the sale by the Company of up to a total of 1,200,000
shares of Stock (the "International Shares"), including the overallotment option
thereunder, through arrangements with certain underwriters outside the United
States (the "International Underwriters"), for whom Goldman Sachs International
and CS First Boston Limited are acting as lead managers. Anything herein or
therein to the contrary notwithstanding, the respective closings under this
Agreement and the International Underwriting Agreement are hereby expressly made
conditional on one another. The Underwriters hereunder and the International
Underwriters are simultaneously entering into an Agreement between U.S. and
International Underwriting Syndicates (the "Agreement between Syndicates") which
provides, among other things, for the transfer of shares of Stock between the
two syndicates. Two forms of prospectus are to be used in connection with the
offering and sale of shares of Stock contemplated by the foregoing, one relating
to the Shares hereunder and the other relating to the International Shares. The
latter form of prospectus will be identical to the former except for certain
substitute pages as included in the registration statement and amendments
thereto as mentioned below. Except as used in Sections 2, 3, 4, 9 and 11 herein,
and except as the context may otherwise require, references hereinafter to the
Shares shall include all the shares of Stock which may be sold pursuant to
either
<PAGE>
this Agreement or the International Underwriting Agreement, and references
herein to any prospectus whether in preliminary or final form, and whether as
amended or supplemented, shall include both the U.S. and the international
versions thereof.
1. Each of the Company and ISI, jointly and severally, represents and
warrants to, and agrees with, each of the Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-3229) (the
"Initial Registration Statement") in respect of the Shares has been filed
with the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement and any post-effective amendment thereto, each in
the form heretofore delivered to you, and, excluding exhibits thereto, to
you for each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any,
increasing the size of the offering (a "Rule 462(b) Registration
Statement"), filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended (the "Act"), no other document with respect to the Initial
Registration Statement has heretofore been filed with the Commission; and
no stop order suspending the effectiveness of the Initial Registration
Statement, any post-effective amendment thereto or the Rule 462(b)
Registration Statement, if any, has been issued and no proceeding for that
purpose has been initiated or threatened by the Commission (any preliminary
prospectus included in the Initial Registration Statement or filed with the
Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission under the Act is hereinafter called a "Preliminary Prospectus";
the various parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and
including the information contained in the form of final prospectus filed
with the Commission pursuant to Rule 424(b) under the Act in accordance
with Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to
be part of the Initial Registration Statement at the time it was declared
effective, each as amended at the time such part of the registration
statement became effective or such part of the Rule 462(b) Registration
Statement, if any, became or hereafter becomes effective, are hereinafter
collectively called the "Registration Statement"; and such final
prospectus, in the form first filed pursuant to Rule 424(b) under the Act
is hereinafter called the "Prospectus");
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company or ISI by an Underwriter
through Goldman, Sachs & Co. expressly for use therein;
(c) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will
-2-
<PAGE>
conform, in all material respects, to the requirements of the Act and the
rules and regulations of the Commission thereunder and do not and will not,
as of the applicable effective date as to the Registration Statement and
any amendment thereto and as of the applicable filing date as to the
Prospectus and any amendment or supplement thereto, contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company or ISI by
an Underwriter through Goldman, Sachs & Co. expressly for use therein;
(d) Neither the Company nor any of its subsidiaries has sustained since
the date of the latest audited financial statements included in the
Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus; and, since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the capital
stock or increase in long-term debt issued or guaranteed by the Company or
any of its subsidiaries or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, stockholder's equity or
results of operations of the Company and its subsidiaries, taken as a
whole, otherwise than as set forth or contemplated in the Prospectus;
(e) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
power and authority to own its properties and conduct its business as
described in the Prospectus, and has been duly qualified as a foreign
corporation for the transaction of business and is in good standing under
the laws of each other jurisdiction in which it owns or leases properties
or conducts any business so as to require such qualification, or is subject
to no material liability or disability by reason of the failure to be so
qualified in any such jurisdiction; and each subsidiary of the Company has
been duly incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation and is duly
qualified as a foreign corporation for the transaction of business and in
good standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification or is subject to no liability or disability by reason of
failure to be so qualified in any such jurisdiction, which liability or
disability is material to the Company and its subsidiaries taken as a
whole;
(f) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and non-
assessable and conform to the description of the Stock contained in the
Prospectus; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized
-3-
<PAGE>
and issued, are fully paid and non-assessable and (except for directors'
qualifying shares) are owned directly or indirectly by the Company, free
and clear of all liens, encumbrances, equities or claims;
(g) The Shares have been duly and validly authorized and, when issued
and delivered against payment therefor as provided herein and in the
International Underwriting Agreement, will be duly and validly issued and
fully paid and non-assessable and will conform in all material respects to
the description of the Stock contained in the Prospectus;
(h) The issue and sale of the Shares by the Company hereunder and under
the International Underwriting Agreement, the use of the net proceeds
received by the Company from the sale of the Shares in the manner specified
in the Prospectus under the caption "Use of Proceeds" and the compliance by
the Company and ISI with all of the provisions of this Agreement and the
International Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which ISI, the Company or any
of their respective subsidiaries is a party or by which ISI, the Company or
any of their respective subsidiaries is bound or to which any of the
property or assets of ISI, the Company or any of their respective
subsidiaries is subject, nor will such action result in any violation of
the provisions of the certificate of incorporation or by-laws of ISI, the
Company's restated certificate of incorporation (the "Restated Certificate
of Incorporation"), or the amended by-laws of the Company (the "Amended By-
Laws") or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over ISI, the Company or
any of their respective subsidiaries or any of their properties; and no
consent, approval, authorization, order, registration or qualification of
or with any such court or governmental agency or body is required for the
issue and sale of the Shares, the use of the net proceeds received by the
Company from the sale of the Shares in the manner specified in the
Prospectus under the caption "Use of Proceeds" or the consummation by the
Company or ISI of the transactions contemplated by this Agreement and the
International Underwriting Agreement, except the registration under the Act
of the Shares and such consents, approvals, authorizations, registrations
or qualifications as may be required under state or foreign securities or
Blue Sky laws in connection with the purchase and distribution of the
Shares by the Underwriters and the International Underwriters;
(i) The Company is not in violation of its Restated Certificate of
Incorporation or Amended By-Laws, none of its subsidiaries is in violation
of its certificate of incorporation or by-laws and neither the Company nor
any of its subsidiaries is in default in the performance or observance of
any material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which it is a party or by which it or any of its
properties may be bound;
-4-
<PAGE>
(j) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, and under the captions "Certain U.S.
Federal Tax Considerations for Non-U.S. Holdings", "Relationship with ISI
and ISC" and "Underwriting", insofar as they purport to describe the
provisions of the laws and documents referred to therein, are accurate and
complete in all material respects;
(k) There are no legal or governmental proceedings pending to which the
Company or any of its subsidiaries is a party or of which any property of
the Company or any of its subsidiaries is the subject, other than as set
forth in the Prospectus, and other than litigation incident to the kind of
business conducted by the Company and its subsidiaries which will not
individually or in the aggregate have a material adverse effect on the
financial position, stockholder's equity or results of operations of the
Company and its subsidiaries taken as a whole; and, to the best of the
Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(l) Price Waterhouse LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder; and
(m) The Company's Board of Directors and stockholder have each duly
approved the Restated Certificate of Incorporation and the Company's Board
of Directors has duly approved the Amended By-Laws.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per share of $........................, the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule I hereto and
(b) in the event and to the extent that the Underwriters shall exercise the
election to purchase Optional Shares as provided below, the Company agrees to
issue and sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at the purchase price
per share set forth in clause (a) of this Section 2, that portion of the number
of Optional Shares as to which such election shall have been exercised (to be
adjusted by you so as to eliminate fractional shares) determined by multiplying
such number of Optional Shares by a fraction, the numerator of which is the
maximum number of Optional Shares which such Underwriter is entitled to purchase
as set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the maximum number of Optional Shares that all of the
Underwriters are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at their
election up to 624,000 Optional Shares, at the purchase price per share set
forth in the paragraph above, for the sole purpose of covering overallotments in
the sale of the Firm Shares. Any such election to purchase Optional Shares may
be exercised only by written notice from you to the Company, given within a
period of 30 calendar days after the date of this Agreement, setting forth the
aggregate number of Optional Shares to be purchased and the date on which such
Optional Shares
-5-
<PAGE>
are to be delivered, as determined by you but in no event earlier than the First
Time of Delivery or, unless you and the Company otherwise agree in writing,
earlier than two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) Certificates representing the Shares to be purchased by each
Underwriter hereunder, in definitive form, and in such authorized denominations
and registered in such names as Goldman, Sachs & Co. may request upon at least
forty-eight hours' prior notice to the Company, shall be delivered by or on
behalf of the Company to Goldman, Sachs & Co., against payment by or on behalf
of such Underwriter of the purchase price therefor by wire transfer, payable to
the order of the Company in Federal (same day) funds. The Company will cause the
certificates representing the Shares to be made available for checking and
packaging at least twenty-four hours prior to the Time of Delivery (as defined
below) with respect thereto at the office of Goldman, Sachs & Co., 85 Broad
Street, New York, New York 10004 (the "Designated Office"). The time and date of
such delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m.,
New York City time, on June __, 1996 or such other time and date as Goldman,
Sachs & Co. and the Company may agree upon in writing, and, with respect to the
Optional Shares, 9:30 a.m., New York time, on the date specified by Goldman,
Sachs & Co. in the written notice given by Goldman, Sachs & Co. of the
Underwriters' election to purchase such Optional Shares, or such other time and
date as Goldman, Sachs & Co. and the Company may agree upon in writing. Such
time and date for delivery of the Firm Shares is herein called the "First Time
of Delivery", such time and date for delivery of the Optional Shares, if not the
First Time of Delivery, is herein called the "Second Time of Delivery", and each
such time and date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross receipt
for the Shares and any additional documents requested by the Underwriters
pursuant to Section 7(l) hereof, will be delivered at the offices of Mayer,
Brown & Platt, 190 South LaSalle Street, Chicago, Illinois 60603 (the "Closing
Location"), and the Shares will be delivered at the Designated Office, all at
such Time of Delivery. A meeting will be held at the Closing Location at 2:00
p.m., New York City time, on the New York Business Day next preceding such Time
of Delivery, at which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the parties
hereto. For the purposes of this Section 4, "New York Business Day" shall mean
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company and ISI, jointly and severally, agree with each of the
Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus prior to the last Time of Delivery which shall be disapproved by
you promptly
-6-
<PAGE>
after reasonable notice thereof; to advise you, promptly after it receives
notice thereof, of the time when any amendment to the Registration
Statement has been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed and to furnish you with
copies thereof; to advise you, promptly after it receives notice thereof,
of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Shares for
offering or sale in any jurisdiction, of the initiation or threatening of
any proceeding for any such purpose, or of any request by the Commission
for the amending or supplementing of the Registration Statement or
Prospectus or for additional information; and, in the event of the issuance
of any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such qualification,
promptly to use its best efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to use its best efforts to qualify the
Shares for offering and sale under the securities laws of such
jurisdictions as you may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such jurisdictions
for as long as may be necessary to complete the distribution of the Shares,
provided that in connection therewith the Company shall not be required to
qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction, and, provided further, that the cost of
maintaining such qualification on or after a date nine months from the date
hereof shall be borne by the Underwriters requesting the same;
(c) Prior to 12:00 p.m., New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to
furnish the Underwriters with copies of the Prospectus in New York City in
such quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Prospectus in connection with the offering
or sale of the Shares and if at such time any event shall have occurred as
a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the Prospectus, to
notify you and upon your request to prepare and furnish without charge to
each Underwriter and to any dealer in securities as many copies as you may
from time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or omission
or effect such compliance, and in case any Underwriter is required to
deliver a prospectus in connection with sales of any of the Shares at any
time nine months or more after the time of issue of the Prospectus, upon
your request but at the expense of such Underwriter, to prepare and deliver
to such Underwriter as many copies as you may request of an amended or
supplemented Prospectus complying with Section 10(a)(3) of the Act;
(d) To make generally available to the securityholders of the Company
as soon as practicable, but in any event not later than eighteen months
after the effective date of the Registration Statement (as defined in Rule
158(c) under the Act), an earning statement of
-7-
<PAGE>
the Company and its subsidiaries (which need not be audited) complying with
Section 11(a) of the Act and the rules and regulations thereunder
(including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing to
and including the date 180 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder and under the International Underwriting Agreement, the Stock,
the Company's Class B Common Stock, par value $1.00 per share ("Class B
Common Stock"), or any securities of the Company that are substantially
similar to the Stock or Class B Common Stock, including but not limited to
any securities that are convertible into or exchangeable for, or that
represent the right to receive, Stock, Class B Common Stock or any such
substantially similar securities (other than pursuant to employee and
director plans existing on, or upon the conversion or exchange of
convertible or exchangeable securities outstanding as of, the date of this
Agreement), without your prior written consent;
(f) To furnish to the Company's holders as soon as practicable after
the end of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries certified by independent public
accountants);
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to holders of the Stock, and
to deliver to you as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed;
(h) To use the net proceeds received by the Company from the sale of
the Shares pursuant to this Agreement and the International Underwriting
Agreement in the manner specified in the Prospectus under the caption "Use
of Proceeds";
(i) To use its best efforts to list, subject to notice of issuance, the
Shares on the New York Stock Exchange (the "Exchange");
(j) To file with the Commission such reports on Form SR as may be
required by Rule 463 under the Act;
(k) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act; and
(l) ISI has not taken and will not take, directly or indirectly, any
action which is designed to or which has constituted or which might
reasonably be expected to cause or result in stabilization or manipulation
of the price of any security of the Company to facilitate
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the sale or resale of the Shares.
6. The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Shares under the Act and all other expenses in connection
with the preparation, printing and filing of the Registration Statement, any
Preliminary Prospectus and the Prospectus and amendments and supplements thereto
and the mailing and delivering of copies thereof to the Underwriters and dealers
(except as provided in Section 5(c) hereof); (ii) the cost of producing any
Agreement among Underwriters, this Agreement, the International Underwriting
Agreement, the Agreement between Syndicates, the Selling Agreement, the Blue Sky
Memorandum, closing documents (including compilations thereof) and any other
documents in connection with the offering, purchase, sale and delivery of the
Shares; (iii) all expenses in connection with the qualification of the Shares
for offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification for a period of up to nine months from the
date hereof and in connection with the Blue Sky survey; (iv) all fees and
expenses in connection with listing the Shares on the Exchange; (v) the filing
fees incident to any required review by the National Association of Securities
Dealers, Inc. of the terms of the sale of the Shares; (vi) the cost of preparing
stock certificates; (vii) the cost and charges of any transfer agent or
registrar; and (viii) all other costs and expenses incident to the performance
of its obligations hereunder which are not otherwise specifically provided for
in this Section. It is understood, however, that, except as provided in this
Section, and Sections 8 and 11 hereof, the Underwriters will pay all of their
own costs and expenses, including the fees of their counsel, stock transfer
taxes on resale of any of the Shares by them, and any advertising expenses
connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and ISI herein are, at and as of such Time of Delivery, true and
correct, the condition that the Company and ISI each shall have performed all of
its obligations hereunder theretofore to be performed, and the following
additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with Section
5(a) hereof, if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 p.m.,
Washington, D.C. time, on the date of this Agreement; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Sullivan & Cromwell, counsel for the Underwriters, shall have
furnished to you such opinion or opinions (a draft of each such opinion is
attached as Annex II(a) hereto), dated such Time of Delivery, with respect
to the validity of the Shares being delivered at such Time of Delivery, the
Registration Statement, the Prospectus, and other related matters as you
may reasonably request, and such counsel shall have received such papers
and
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information as they may reasonably request to enable them to pass upon such
matters;
(c) George Ranney, Jr., Vice President and General Counsel of ISI,
shall have furnished to you his written opinion (a draft of each such
opinion is attached as Annex II(b) hereto), dated such Time of Delivery, in
form and substance satisfactory to you, to the effect that:
(i) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company (including the Shares being delivered at such Time of
Delivery) have been duly and validly authorized and issued and are
fully paid and non-assessable; and the Shares conform in all material
respects to the description of the Stock contained in the Prospectus;
(ii) The Company has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws
of each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, or is
subject to no material liability or disability by reason of failure to
be so qualified in any such jurisdiction (such counsel being entitled
to rely in respect of the opinion in this clause upon opinions of
local counsel, certificates of governmental agencies and in respect of
matters of fact upon certificates of officers of the Company, provided
that such counsel shall state that they believe that both you and they
are justified in relying upon such opinions and certificates);
(iii) Each subsidiary of the Company has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation; and all of the issued
shares of capital stock of each such subsidiary have been duly and
validly authorized and issued, are fully paid and non-assessable, and
(except for directors' qualifying shares and except as otherwise set
forth in the Prospectus) are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims
(such counsel being entitled to rely in respect of the opinion in this
clause upon opinions of local counsel, certificates of governmental
agencies and in respect to matters of fact upon certificates of
officers of the Company or its subsidiaries, provided that such
counsel shall state that they believe that both you and they are
justified in relying upon such opinions and certificates);
(iv) To the best of such counsel's knowledge, there are no legal
or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any
of its subsidiaries is the subject, other than as set forth in the
Prospectus, and other than litigation incident to the kind of business
conducted by the Company and its subsidiaries which will not
individually or in the aggregate have a material adverse effect on the
financial position, stockholder's equity or results of operations of
the Company and its subsidiaries; and, to the best of such counsel's
knowledge, no such proceedings are
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threatened or contemplated by governmental authorities or threatened
by others;
(v) This Agreement and the International Underwriting Agreement
have been duly authorized, executed and delivered by each of the
Company and ISI;
(vi) The issue and sale of the Shares being delivered at such Time
of Delivery by the Company, the use of the net proceeds received by
the Company from the sale of the Shares in the manner specified in the
Prospectus under the caption "Use of Proceeds" and the compliance by
the Company and ISI with all of the provisions of this Agreement and
the International Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument known to such counsel
to which ISI, the Company or any of their respective subsidiaries is a
party or by which ISI, the Company or any of their respective
subsidiaries is bound or to which any of the property or assets of
ISI, the Company or any of their respective subsidiaries is subject,
nor will such action result in any violation of the provisions of the
certificate of incorporation or by-laws of ISI, Restated Certificate
of Incorporation or Amended By-Laws of the Company or any statute or
any order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over ISI, the Company
or any of their respective subsidiaries or any of their properties;
and
(vii) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the issue and sale of the Shares or the consummation
by the Company or ISI of the transactions contemplated by this
Agreement and the International Underwriting Agreement, except the
registration under the Act of the Shares, and such consents,
approvals, authorizations, registrations or qualifications as may be
required under state or foreign securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the
Underwriters and the International Underwriters.
In rendering such opinion, such counsel may state that they
express no opinion as to the laws of any jurisdiction outside the
United States.
(d) Mayer, Brown & Platt, special counsel for the Company, shall have
furnished to you their written opinion (a draft of each such opinion is
attached as Annex II(c) hereto), dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) Each of the Company and ISI has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the State of Delaware, with corporate power and authority to own its
properties and conduct its business as described in the Prospectus;
(ii) This Agreement and the International Underwriting Agreement
have been duly authorized, executed and delivered by each of the
Company and ISI;
(iii) The issue and sale of the Shares being delivered at such
Time of
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Delivery by the Company, the use of the net proceeds received by the
Company from the sale of the Shares in the manner specified in the
Prospectus under the caption "Use of Proceeds", and the compliance by
the Company and ISI with all of the provisions of this Agreement and
the International Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument known to such counsel
to which ISI, the Company or any of their respective subsidiaries is a
party or by which ISI, the Company or any of their respective
subsidiaries is bound or to which any of the property or assets of
ISI, the Company or any of their respective subsidiaries is subject,
nor will such action result in any violation of the provisions of the
certificate of incorporation or by-laws of ISI, the Restated
Certificate of Incorporation or Amended By-Laws of the Company or any
statute or any order, rule or regulation known to such counsel of any
court or governmental agency or body having jurisdiction over ISI, the
Company or any of their respective subsidiaries or any of their
properties;
(iv) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company prior to such
Time of Delivery comply as to form in all material respects with the
requirements of the Act and the rules and regulations thereunder; no
facts have come to the attention of such counsel which lead them to
believe that, as of the effective date of the Registration Statement,
either the Registration Statement or the Prospectus (or, as of its
date, any further amendment or supplement thereto made by the Company
prior to such Time of Delivery) (other than the financial statements
and related schedules and other financial data contained in any such
documents, as to which such counsel need express no opinion) contained
an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, or that, as of its date, the Prospectus or any
further amendment or supplement thereto made by the Company prior to
such Time of Delivery (other than the financial statements and related
schedules and other financial data contained in any such documents, as
to which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or that, as
of such Time of Delivery, either the Registration Statement or the
Prospectus (or any such further amendment or supplement thereto)
contains an untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein not misleading;
and
(v) Such counsel does not know of any contracts or other documents
of a character required to be filed as an exhibit to the Registration
Statement or required to be incorporated by reference in the
Prospectus or required to be described in the Registration Statement
or the Prospectus which are not filed or incorporated by reference or
described as required;
In rendering such opinion, such counsel may state that they
express no opinion as to the laws of any jurisdiction outside the
United States.
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<PAGE>
(e) On the date of the Prospectus at a time prior to the execution
of this Agreement, at 9:30 a.m., New York City time, on the effective date
of any post-effective amendment to the Registration Statement filed
subsequent to the date of this Agreement and also at each Time of Delivery,
Price Waterhouse LLP shall have furnished to you a letter or letters, dated
the respective dates of delivery thereof, in form and substance
satisfactory to you, to the effect set forth in Annex I hereto (the
executed copy of the letter delivered prior to the execution of this
Agreement is attached as Annex I(a) hereto, and a draft of the form of
letter to be delivered on the effective date of any post-effective
amendment to the Registration Statement and as of each Time of Delivery, is
attached as Annex I(b) hereto);
(f) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus,
and (ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock or
increase in long-term debt issued or guaranteed by the Company or any of
its subsidiaries as determined in accordance with generally accepted
accounting principles or any change, or any development involving a
prospective change, in or affecting the general affairs, management,
financial position, stockholder's equity or results of operations of the
Company and its subsidiaries taken as a whole, otherwise than as set forth
or contemplated in the Prospectus, the effect of which, in any such case
described in Clause (i) or (ii), is, in the judgment of the
Representatives, so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(g) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a suspension or
material limitation in trading in the Company's or ISI's securities on the
New York Stock Exchange; (iii) a general moratorium on commercial banking
activities declared by either Federal or New York State authorities; or
(iv) the outbreak or escalation of hostilities involving the United States
or the declaration by the United States of a national emergency or war, if
the effect of any events specified in clauses (i) through (iv) in the
judgment of the Representatives makes it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares being
delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
(h) The Shares to be sold at such Time of Delivery shall have been duly
listed subject to notice of issuance, on the Exchange;
(i) The Company shall have complied with the provisions of Section 5(c)
hereof with respect to the furnishing of Prospectuses on the New York
Business Day next succeeding the date of this Agreement;
(j) The Company has obtained and delivered to the Underwriters executed
copies of an agreement from each executive officer or Director of the
Company listed on Schedule II hereto substantially to the effect set forth
in Section 5(e) hereof in form and substance satisfactory to you; and
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(k) The Company shall have furnished or caused to be furnished to you
at such Time of Delivery certificates of officers of the Company
satisfactory to you as to the accuracy of the representations and
warranties of the Company herein at and as of such Time of Delivery, as to
the performance by the Company of all of its obligations hereunder to be
performed at or prior to such Time of Delivery, as to the matters set forth
in subsections (a) and (f) of this Section and as to such other matters as
you may reasonably request.
8. (a) The Company and ISI, jointly and severally, will indemnify and hold
harmless each Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that neither the Company nor ISI shall
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Prospectus,
the Registration Statement or the Prospectus or any such amendment or supplement
in reliance upon and in conformity with written information furnished to the
Company or ISI by any Underwriter through Goldman, Sachs & Co. expressly for use
therein; and provided, further, that neither the Company nor ISI shall be liable
to any Underwriter under the indemnity agreement in this subsection (a) with
respect to any Preliminary Prospectus, or with respect to any Prospectus that
has been amended or supplemented to reflect an event subsequent to the effective
date of the Registration Statement, to the extent that any such loss, claim,
damage or liability of such Underwriter results from the fact that such
Underwriter (i) sold Shares to a person to whom there was not sent or given, at
or prior to the written confirmation of such sale, a copy of the Prospectus
(excluding documents incorporated by reference) as then amended or supplemented
(excluding documents incorporated by reference) and (ii) a prospectus relating
to such Shares was required to be delivered by such Underwriter under the Act in
connection with such sale, if the Company has previously furnished copies
thereof to such Underwriter.
(b) Each Underwriter will indemnify and hold harmless the Company and ISI
against any losses, claims, damages or liabilities to which the Company or ISI
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through Goldman, Sachs
& Co. expressly for use therein; and will reimburse the Company or ISI for any
legal or other expenses reasonably incurred by the Company or ISI in
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connection with investigating or defending any such action or claim as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written
consent of the indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified party is an actual or potential
party to such action or claim) unless such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and ISI on the one hand and the Underwriters on the other from
the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (c) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and ISI on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations, including, but not limited to, if applicable, failure to give a
notice required under subsection (c) above. The relative benefits received by
the Company and ISI on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Shares purchased under this Agreement (before deducting expenses)
received by the Company bear to the total underwriting discounts and commissions
received by the Underwriters with respect to the Shares purchased under this
Agreement, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
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supplied by the Company and ISI on the one hand or the Underwriters on the other
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. ISI, the Company
and the Underwriters agree that it would not be just and equitable if
contributions pursuant to this subsection (d) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this subsection
(d), no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of the Company and ISI under this Section 8 shall be in
addition to any liability which the Company or ISI may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and ISI
(including any person who, with his or her consent, is named in the Registration
Statement as about to become a director of the Company) and to each person, if
any, who controls the Company or ISI within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of such Shares,
then the Company shall be entitled to a further period of thirty-six hours
within which to procure another party or other parties satisfactory to you to
purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for the
purchase of such Shares, or the Company notifies you that it has so arranged for
the purchase of such Shares, you or the Company shall have the right to postpone
such Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments to the Registration Statement or
the Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by the non-defaulting
Underwriters or other persons as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not
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exceed one-eleventh of the aggregate number of all the Shares to be purchased at
such Time of Delivery, then the Company shall have the right to require each
non-defaulting Underwriter to purchase the number of Shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or with respect to the Second Time of Delivery, obligations
of the Underwriters to purchase, and of the Company to sell, the Optional
Shares) shall thereupon terminate, without liability on the part of the non-
defaulting Underwriter or the Company, except for the expenses to be borne by
the Company and any Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of ISI, the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or ISI or the
Company, or any officer or director or controlling person of ISI or the Company,
and shall survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither ISI nor the Company shall then be under any liability to any Underwriter
except as provided in Sections 6 and 8 hereof; but, if for any other reason, any
Shares are not delivered by or on behalf of the Company as provided herein, the
Company will reimburse the Underwriters through you for all out-of-pocket
expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of the Shares not so delivered, but the Company
shall then be under no further liability to any Underwriter in respect of the
Shares not so delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
Representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the Representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8(c)
-17-
<PAGE>
hereof shall be delivered or sent by mail, telex or facsimile transmission to
such Underwriter at its address set forth in its Underwriters' Questionnaire, or
telex constituting such Questionnaire, which address will be supplied to the
Company by you upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company, ISI and, to the extent provided in Sections 8
and 10 hereof, the officers and directors of the Company, ISI and each person
who controls the Company, ISI or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Shares from any Underwriter shall be deemed a successor or assign by
reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the term
"business day" shall mean any day when the Commission's office in Washington,
D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us six counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Underwriters and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement among
-18-
<PAGE>
Underwriters (U.S. Version), the form of which shall be submitted to the Company
for examination upon request, but without warranty on your part as to the
authority of the signers thereof.
Very truly yours,
Ryerson Tull, Inc.
By:
Name:
Title:
Inland Steel Industries, Inc.
By:...........................
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
CS First Boston Corporation
By: ...............................
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
-19-
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
- ----------- --------------- ------------------
<S> <C> <C>
Goldman, Sachs & Co.
CS First Boston Corporation
[NAMES OF OTHER UNDERWRITERS]
---------- ----------
Total
========== ==========
</TABLE>
-1-
<PAGE>
ANNEX I
Pursuant to Section 7(e) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, financial
forecasts and/or pro forma financial information) examined by them and
included in the Prospectus or the Registration Statement comply as to form
in all material respects with the applicable accounting requirements of the
Act and the related published rules and regulations thereunder; and, if
applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited consolidated interim financial statements, selected financial
data, pro forma financial information, financial forecasts and/or condensed
financial statements derived from audited financial statements of the
Company for the periods specified in such letter, as indicated in their
reports thereon, copies of which have been furnished separately to the
representatives of the Underwriters (the "Representatives");
(iii) They have made a review in accordance with standards established
by the American Institute of Certified Public Accountants of the unaudited
condensed consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the Prospectus as
indicated in their reports thereon copies of which have been separately
furnished to the Representatives and on the basis of specified procedures
including inquiries of officials of the Company who have responsibility for
financial and accounting matters regarding whether the unaudited condensed
consolidated financial statements referred to in paragraph (vi)(A)(i) below
comply as to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations,
nothing came to their attention that caused them to believe that the
unaudited condensed consolidated financial statements do not comply as to
form in all material respects with the applicable accounting requirements
of the Act and the related published rules and regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company
for the five most recent fiscal years included in the Prospectus agrees
with the corresponding amounts (after restatements where applicable) in the
audited consolidated financial statements for such five fiscal years which
were included or incorporated by reference in the Company's Annual Reports
on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under selected
captions with the disclosure requirements of Regulation S-K and on the
basis of limited procedures specified in such letter nothing came to their
attention as a result of the foregoing
1
<PAGE>
procedures that caused them to believe that this information does not
conform in all material respects with the disclosure requirements of Items
301, 302, 402 and 503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries, inspection of the
minute books of the Company and its subsidiaries since the date of the
latest audited financial statements included in the Prospectus, inquiries
of officials of the Company and its subsidiaries responsible for financial
and accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believe that:
(A) (i) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the related published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed consolidated
statements of income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus for them to be in
conformity with generally accepted accounting principles;
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding
items in the unaudited consolidated financial statements from which
such data and items were derived, and any such unaudited data and
items were not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited consolidated
financial statements included in the Prospectus;
(C) the unaudited financial statements which were not included in
the Prospectus but from which were derived any unaudited condensed
financial statements referred to in Clause (A) and any unaudited
income statement data and balance sheet items included in the
Prospectus and referred to in Clause (B) were not determined on a
basis substantially consistent with the basis for the audited
consolidated financial statements included in the Prospectus;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the
Act and the published rules and regulations thereunder or the pro
forma adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options and stock appreciation rights,
2
<PAGE>
upon earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on the
date of the latest financial statements included in the Prospectus) or
any increase in the consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current assets or
stockholders' equity or other items specified by the Representatives,
or any increases in any items specified by the Representatives, in
each case as compared with amounts shown in the latest balance sheet
included in the Prospectus, except in each case for changes, increases
or decreases which the Prospectus discloses have occurred or may occur
or which are described in such letter; and
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred
to in Clause (E) there were any decreases in consolidated net revenues
or operating profit or the total or per share amounts of consolidated
net income or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each case
as compared with the comparable period of the preceding year and with
any other period of corresponding length specified by the
Representatives, except in each case for decreases or increases which
the Prospectus discloses have occurred or may occur or which are
described in such letter; and
(vii) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraphs (iii) and
(vi) above, they have carried out certain specified procedures, not
constituting an examination in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by the Representatives, which are derived from the
general accounting records of the Company and its subsidiaries, which
appear in the Prospectus, or in Part II of, or in exhibits and schedules
to, the Registration Statement specified by the Representatives, and have
compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and have
found them to be in agreement.
3
<PAGE>
RYERSON TULL, INC.
CLASS A COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
-----------------------
UNDERWRITING AGREEMENT
(INTERNATIONAL VERSION)
-----------------------
June __, 1996
Goldman Sachs International,
CS First Boston Limited,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman Sachs International,
Peterborough Court,
133 Fleet Street,
London EC4A 2BB, England.
Ladies and Gentlemen:
Ryerson Tull, Inc. (the "Company"), a Delaware corporation and a wholly-
owned subsidiary of Inland Steel Industries, Inc., a Delaware corporation
("ISI"), proposes, subject to the terms and conditions stated herein, to issue
and sell to the Underwriters named in Schedule I hereto (the "Underwriters") an
aggregate of 1,044,000 shares (the "Firm Shares") and, at the election of the
Underwriters, up to 156,000 additional shares (the "Optional Shares") of Class A
Common Stock, par value $1.00 per share (the "Stock"), of the Company (the Firm
Shares and the Optional Shares which the Underwriters elect to purchase pursuant
to Section 2 hereof being collectively called the "Shares").
It is understood and agreed to by all parties that the Company is
concurrently entering into an agreement, a copy of which is attached hereto (the
"U.S. Underwriting Agreement"), providing for the offering by the Company of up
to a total of 4,800,000 shares of Stock (the "U.S. Shares") including the
overallotment option thereunder through arrangements with certain underwriters
in the United States (the "U.S. Underwriters"), for whom Goldman, Sachs & Co.
and CS First Boston Corporation are acting as representatives. Anything herein
and therein to the contrary notwithstanding, the respective closings under this
Agreement and the U.S. Underwriting Agreement are hereby expressly made
conditional on one another. The Underwriters hereunder and the U.S.
Underwriters are simultaneously entering into an Agreement between U.S. and
International Underwriting Syndicates (the "Agreement between Syndicates") which
provides, among other things, for the transfer of shares of Stock between the
two syndicates and for consultation by the Lead Managers hereunder with Goldman,
Sachs & Co. prior to exercising the rights of the Underwriters under Section 7
hereof. Two forms of prospectus are to be used in connection with
<PAGE>
the offering and sale of shares of Stock contemplated by the foregoing, one
relating to the Shares hereunder and the other relating to the U.S. Shares. The
latter form of prospectus will be identical to the former except for certain
substitute pages as included in the registration statement and amendments
thereto as mentioned below. Except as used in Sections 2, 3, 4, 9 and 11
herein, and except as the context may otherwise require, references hereinafter
to the Shares shall include all of the shares of Stock which may be sold
pursuant to either this Agreement or the U.S. Underwriting Agreement, and
references herein to any prospectus whether in preliminary or final form, and
whether as amended or supplemented, shall include both of the U.S. and the
international versions thereof.
In addition, this Agreement incorporates by reference certain provisions
from the U.S. Underwriting Agreement (including the related definitions of
terms, which are also used elsewhere herein) and, for purposes of applying the
same, references (whether in these precise words or their equivalent) in the
incorporated provisions to the "Underwriters" shall be to the Underwriters
hereunder, to the "Shares" shall be to the Shares hereunder as just defined, to
"this Agreement" (meaning therein the U.S. Underwriting Agreement) shall be to
this Agreement (except where this Agreement is already referred to or as the
context may otherwise require) and to the representatives of the Underwriters or
to Goldman, Sachs & Co. shall be to the addressees of this Agreement and to
Goldman Sachs International ("GSI"), and, in general, all such provisions and
defined terms shall be applied mutatis mutandis as if the incorporated
provisions were set forth in full herein having regard to their context in this
Agreement as opposed to the U.S. Underwriting Agreement.
1. Each of the Company and ISI, jointly and severally, hereby makes with
the Underwriters the same representations, warranties and agreements as are set
forth in Section 1 of the U.S. Underwriting Agreement, which Section is
incorporated herein by this reference.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per share of $......, the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto and (b) in the event
and to the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company agrees to issue and sell to each
of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at the purchase price per share set forth
in clause (a) of this Section 2, that portion of the number of Optional Shares
as to which such election shall have been exercised (to be adjusted by you so as
to eliminate fractional shares) determined by multiplying such number of
Optional Shares by a fraction the numerator of which is the maximum number of
Optional Shares which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is the maximum number of Optional Shares that all of the Underwriters
are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at their
election up to 156,000 Optional Shares, at the purchase price per share set
forth in the paragraph above, for the sole purpose of covering overallotments in
the sale of the Firm Shares. Any such election to purchase Optional Shares may
be exercised only by written notice from you to the Company, given within a
period of 30 calendar days after the date of this Agreement, setting forth the
aggregate number of Optional Shares to be purchased and the date on which such
Optional Shares are to be
2
<PAGE>
delivered, as determined by you but in no event earlier than the First Time of
Delivery (as defined in Section 4 hereof) or, unless you and the Company
otherwise agree in writing, earlier than two or later than ten business days
after the date of such notice.
3. Upon the authorization by GSI of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus and in the forms of Agreement among
Underwriters (International Version) and Selling Agreements, which have been
previously submitted to the Company by you. Each Underwriter hereby makes to and
with the Company the representations and agreements of such Underwriter as a
member of the selling group contained in Sections 3(d) and 3(e) of the form of
Selling Agreements.
4. (a) Certificates representing the Shares to be purchased by each
Underwriter hereunder, in definitive form, and in such authorized denominations
and registered in such names as GSI may request upon at least forty-eight hours'
prior notice to the Company shall be delivered by or on behalf of the Company to
GSI, for the account of such Underwriter, against payment by or on behalf of
such Underwriter of the purchase price therefor by wire transfer, in Federal
(same day) funds. The Company will cause the certificates representing the
Shares to be made available for checking and packaging at least twenty-four
hours prior to the Time of Delivery (as defined below) with respect thereto at
the office of GSI, 85 Broad Street, New York, New York 10004 (the "Designated
Office"). The time and date of such delivery and payment shall be, with respect
to the Firm Shares, 9:30 a.m., New York City time, on June __, 1996 or such
other time and date as GSI and the Company may agree upon in writing, and, with
respect to the Optional Shares, 9:30 a.m., New York City time, on the date
specified by GSI in the written notice given by GSI of the Underwriters'
election to purchase such Optional Shares, or such other time and date as GSI
and the Company may agree upon in writing. Such time and date for delivery of
the Firm Shares is herein called the "First Time of Delivery", such time and
date for delivery of the Optional Shares, if not the First Time of Delivery, is
herein called the "Second Time of Delivery", and each such time and date for
delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 of the U.S. Underwriting Agreement,
including the cross receipt for the Shares and any additional documents
requested by the Underwriters pursuant to Section 7(k) of the U.S. Underwriting
Agreement hereof, will be delivered at the offices of Mayer, Brown & Platt, 190
South LaSalle Street, Chicago, Illinois 60603 (the "Closing Location"), and the
Shares will be delivered at the Designated Office, all at such Time of Delivery.
A meeting will be held at the Closing Location at 2:00 p.m., New York City time,
on the New York Business Day next preceding such Time of Delivery, at which
meeting the final drafts of the documents to be delivered pursuant to the
preceding sentence will be available for review by the parties hereto. For the
purposes of this Section 4, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.
5. Each of the Company and ISI, jointly and severally, hereby makes to the
Underwriters the same agreements as are set forth in Section 5 of the U.S.
Underwriting Agreement, which Section is incorporated herein by this reference.
3
<PAGE>
6. The Company and the Underwriters hereby agree with respect to certain
expenses on the same terms as are set forth in Section 6 of the U.S.
Underwriting Agreement, which Section is incorporated herein by this reference.
7. Subject to the provisions of the Agreement between Syndicates, the
obligations of the Underwriters hereunder shall be subject, in their discretion,
at each Time of Delivery, to the condition that all representations and
warranties and other statements of the Company and ISI herein are, at and as of
such Time of Delivery, true and correct, the condition that the Company and ISI
shall have performed all of their obligations hereunder theretofore to be
performed, and additional conditions identical to those set forth in Section 7
of the U.S. Underwriting Agreement, which Section is incorporated herein by this
reference.
8. (a) The Company and ISI, jointly and severally, each will indemnify and
hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such
action or claim as such expenses are incurred; provided, however, that neither
the Company nor ISI shall be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company or ISI by any Underwriter through GSI
expressly for use therein; provided, further, that neither the Company nor ISI
shall be liable to any Underwriter under the indemnity agreement in this
subsection (a) with respect to any Preliminary Prospectus, or with respect to
any Prospectus that has been amended or supplemented to reflect an event
subsequent to the effective date of the Registration Statement, to the extent
that any such loss, claim, damage or liability of such Underwriter results from
the fact that such Underwriter (i) sold Shares to a person to whom there was not
sent or given, at or prior to the written confirmation of such sale, a copy of
the Prospectus (excluding documents incorporated by reference) as then amended
or supplemented (excluding documents incorporated by reference) and (ii) a
prospectus relating to such Shares was required to be delivered by such
Underwriter under the Act in connection with such sale, if the Company has
previously furnished copies thereof to such Underwriter.
(b) Each Underwriter will indemnify and hold harmless the Company and ISI
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
4
<PAGE>
Preliminary Prospectus, the Registration Statement or Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through GSI expressly
for use therein; and will reimburse the Company or ISI for any legal or other
expenses reasonably incurred by the Company or ISI in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written
consent of the indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified party is an actual or potential
party to such action or claim) unless such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and ISI on the one hand and the Underwriters on the other from
the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (c) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and ISI on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations, including, but not limited to, if applicable, failure to give a
notice required under subsection (c) above. The relative benefits received by
the Company and ISI on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Shares purchased under this Agreement (before deducting expenses)
received by the Company bear to the
5
<PAGE>
total underwriting discounts and commissions received by the Underwriters with
respect to the Shares purchased under this Agreement, in each case as set forth
in the table on the cover page of the Prospectus relating to such Shares. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company and ISI on the one hand or the Underwriters on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. ISI, the Company and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and ISI under this Section 8 shall be in
addition to any liability which the Company or ISI may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and ISI
(including any person who, with his or her consent, is named in the Registration
Statement as about to become a director of the Company) and to each person, if
any, who controls the Company or ISI within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of such Shares,
then the Company shall be entitled to a further period of thirty-six hours
within which to procure another party or other parties satisfactory to you to
purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for the
purchase of such Shares, or the Company notifies you that it has so arranged for
the purchase of such Shares, you or the Company shall have the right to postpone
such Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments to the Registration Statement or
the Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this
6
<PAGE>
Section with like effect as if such person had originally been a party to this
Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by the non-defaulting
Underwriters or other persons as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all the Shares to be purchased at such Time of Delivery,
then the Company shall have the right to require each non-defaulting Underwriter
to purchase the number of Shares which such Underwriter agreed to purchase
hereunder at such Time of Delivery and, in addition, to require each non-
defaulting Underwriter to purchase its pro rata share (based on the number of
Shares which such Underwriter agreed to purchase hereunder) of the Shares of
such defaulting Underwriter or Underwriters for which such arrangements have not
been made; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or with respect to the Second Time of Delivery, obligations
of the Underwriters to purchase, and of the Company to sell the Optional Shares)
shall thereupon terminate, without liability on the part of the non-defaulting
Underwriter or the Company, except for the expenses to be borne by the Company
and any Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of ISI, the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or ISI or the
Company, or any officer or director or controlling person of ISI or the Company,
and shall survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither ISI nor the Company shall then be under any liability to any Underwriter
except as provided in Section 6 and Section 8 hereof, but, if for any other
reason any Shares are not delivered by or on behalf of the Company as provided
herein, the Company will reimburse the Underwriters through GSI for all out-of-
pocket expenses approved in writing by GSI, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of the Shares not so delivered, but the Company
shall then be under no further liability to any Underwriter in respect of the
Shares not so delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by GSI on behalf of you as the representatives of the
Underwriters.
7
<PAGE>
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the Underwriters in care of GSI, Peterborough Court,
133 Fleet Street, London EC4A 2BB, England, Attention: Equity Capital Markets,
Telex No. 94012165, facsimile transmission No. (071) 774-1550; and if to the
Company shall be delivered or sent by registered mail, telex or facsimile
transmission to the address of the Company set forth in the Registration
Statement, Attention: Secretary; provided, however, that any notice to an
Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by mail,
telex or facsimile transmission to such Underwriter at its address set forth in
its Underwriters' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company by GSI upon request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company, ISI and, to the extent provided in Sections 8
and 10 hereof, the officers and directors of the Company, ISI and each person
who controls the Company, ISI or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Shares from any Underwriter shall be deemed a successor or assign by
reason merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
8
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us six counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement among
Underwriters (International Version), the form of which shall be furnished to
the Company for examination upon request, but without warranty on your part as
to the authority of the signers thereof.
Very truly yours,
Ryerson Tull, Inc.
By: ...........................
Name:
Title:
Inland Steel Industries, Inc.
By: ...........................
Name:
Title:
Accepted as of the date hereof:
Goldman Sachs International
CS First Boston Limited
By: Goldman Sachs International
By: .............................
(Attorney-in-fact)
On behalf of each of the Underwriters
9
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
- ----------- --------------- ------------------
<S> <C> <C>
Goldman Sachs International.
CS First Boston Limited
[NAMES OF OTHER MANAGERS]
---------- ----------
Total
========== ==========
</TABLE>
1
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated February 19, 1996,
relating to the financial statements of Ryerson Tull, Inc. (formerly Inland
Materials Distribution Group, Inc.), which appears in such Prospectus. We also
consent to the application of such report to the Financial Statement Schedules
for the three years ended December 31, 1995 listed under Item 16(b) of this
Registration Statement when such schedules are read in conjunction with the
financial statements referred to in our report. The audits referred to in such
report also included these schedules. We also consent to the references to us
under the headings "Experts" and "Selected Financial Data" in such Prospectus.
However, it should be noted that Price Waterhouse LLP has not prepared or
certified such "Selected Financial Data."
PRICE WATERHOUSE LLP
Chicago, Illinois
May 23, 1996
