<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 7, 1996
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
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
</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.
----------------
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 7, 1996
5,220,000 SHARES
[LOGO]
RYERSON TULL, INC.
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."
Subsequent to the Offerings, the Company proposes 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 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.
----------
<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]
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."
Immediately 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 upon 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.
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 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 materials sold by the Company are processed. The
Company's services include special stocking program, 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 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. In addition, 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, positions 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 and
jointly markets its products and services with, and supplies materials to,
Ryerson de Mexico, a joint venture of ISI that operates as a general line
service center and processor in Mexico. The Company intends to continue these
relationships after the Offerings.
The Company purchases support functions from ISI 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 Ryerson Tull 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 on , and
bearing
6
<PAGE>
interest at a specified prime rate. The Note Payable may be prepaid without
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 , 1996, the Company declared 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") payable
to ISI on May , 1996. 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 intends to use 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'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 completion 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.................... 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. All of the
net proceeds of the Note Offering, if con-
summated, 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 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, each to be issued upon consummation of the Offerings as described
below. Effective upon consummation of the Offerings, most of 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. The number of shares of Class A
Common Stock that will be issued as restricted stock or subject to options
will 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 $24.625 (the last reported sales price on the NYSE on
May 1, 1996) and 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), shares of Class A Common Stock would be issued in the form
of restricted stock and 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 facility 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 made 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 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 giving effect to the issuance
of the Notes in the Note Offering and the borrowing of $50 million under
credit facilities would be $ for the year ended December 31, 1995
and $ and $ for the three months ended March 31, 1995 and
1996, respectively.
(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 Common Stock Offerings
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 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") contains covenants that currently 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 intends to solicit consents of 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 and guarantees
of Ryerson Tull, Inc.'s subsidiaries 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 guarantees. 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
Employment 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 is
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") and 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. 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 $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, each to be issued upon
consummation of the Offerings. Effective upon consummation of the Offerings,
most of 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. The number of shares of Class A
Common Stock that will be issued as restricted stock or subject to options
will 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 $24.625 (the last reported sales price on the NYSE on May 1, 1996) and 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), shares
of Class A Common Stock would be issued in the form of restricted stock and
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 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
16
<PAGE>
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. 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 such 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 Offerings, 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,
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, 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, most of 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. The number of
shares of Class A Common Stock that will be issued as restricted stock or
subject to options will 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 $24.625 (the last reported sales
price on the NYSE on May 1, 1996) and 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), shares of Class A Common Stock
would be issued in the form of restricted stock and 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, most of 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. The number of
shares of Class A Common Stock that will be issued as restricted stock or
subject to options will 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 $24.625 (the last reported sales
price on the NYSE on May 1, 1996) and 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), shares of Class A Common Stock
would be issued in the form of restricted stock and shares of
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
included herein. 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 thereto included herein, 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
included 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 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 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 gives effect to the issuance of the
Notes in the Note Offering, together with the borrowing of $50 million
under credit facilities, would be $ for the year ended December 31,
1995 and $ and $ for the three months ended March 31, 1995 and
1996, respectively.
(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.
20
<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
21
<PAGE>
in First Quarter 1996 as in First Quarter 1995. According to the SSCI, the
number of tons of steel 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 upon 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.
22
<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.
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 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.
23
<PAGE>
OPERATING PROFIT. Operating profit rose 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
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.
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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 , 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 is limited to the sum of $30 million
plus 80% of net income (decreased by 100% of net losses) earned by Ryerson
since December 31, 1989 (minus the dollar amount of dividends paid and capital
stock repurchased and the balance of advances outstanding, 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, or if ISI's
stockholders' equity falls below $400 million. The New Credit Facility will
expire in 2000.
The Company proposes to offer $250 million aggregate principal amount of
Notes subsequent to 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
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<PAGE>
by the Company 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 intends to
solicit 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, will not 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 , 1996, the Company declared a dividend in the amount of $75
million in cash payable to ISI on May , 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's cash will no longer be held
in ISI's accounts. On May , 1996, Ryerson declared a dividend in the amount
of $75 million in cash payable to the Company on May , 1996. The Company
used the proceeds of this dividend to pay the May 1996 Dividend to ISI. 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 will mature on , 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
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<PAGE>
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 be repaid from cash 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 at this
time 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.
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 upon 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.
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 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 (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, with facilities in Portland, Oregon, Phoenix, Arizona and
Salt Lake City, Utah, expanding the Company's presence in the western United
States.
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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
Ryerson Central Primarily general line service
centers Chicago, IL
with substantial processing Cincinnati, OH
capabilities 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 Baton Rouge, LA
capabilities 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>
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<PAGE>
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 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
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<PAGE>
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.
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.
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<PAGE>
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
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 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.
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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 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. In addition, 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, positions 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.
32
<PAGE>
The Company has spent $40 million to maintain and improve its management
information system 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 and 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.
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.
33
<PAGE>
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 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 has
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 business.
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
34
<PAGE>
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 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
35
<PAGE>
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 stoppages have occurred. Over the last five years work stoppages have
occurred at two facilities (approximately 4% of the total) and 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.
36
<PAGE>
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 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 and
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.
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.
37
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Company's directors and executive officers and their ages as of May 1,
1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert J. Darnall.................. 57 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
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 and Chief
Executive Officer of ISI and a Director 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
has been a Senior Vice President of ISI since January 1995, prior to which he
was a Vice President of ISI from June 1994. 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. Although Mr. Novich is also an executive officer of ISI, he
has devoted substantially all of his time to the Company and is expected to
continue to do so in the foreseeable future.
Jay M. Gratz has been Vice President, Finance of the Company since September
1994. Prior to that time, 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, 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 August 1990 to April
1992 and District Manager for Tull's Charlotte facility from October 1988 to
August 1990. Mr. Makarewicz originally joined Tull in September 1983.
38
<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. Prior to joining the
Company, he served as Senior Vice President, Management Information Systems,
for Venture Stores, Inc. Mr. Zerbe has also been employed by PepsiCo., Inc.,
Dr. Pepper, Inc., Baxter International, Inc. and Procter & Gamble Co.
Vicki L. Avril has been Treasurer of the Company since February 1994. She
has also been Treasurer of Ryerson and Tull since 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.
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 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.
Prior to the consummation of the Offerings, the Company intends to increase
the number of Directors to a total of , including three independent
Directors (as defined in the Certificate of Incorporation). The Company
intends to appoint the three independent Directors prior to the consummation
of the Offerings. Immediately prior to the consummation of the Offerings, the
Company's Board of Directors will be divided into three classes. and
will serve in the class whose term expires on the date of the annual meeting
of stockholders to be held in 1997.
39
<PAGE>
and will serve in the class whose term expires on the date of the annual
meeting to be held in 1998. and will serve in the class whose term
expires on the date of the annual meeting to be held in 1999. 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 Company's Certificate of
Incorporation requires that at all times at least one-third of the members of
the Board of Directors be independent Directors. 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
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.
40
<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.
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 (#) 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(4) 18,788
President, Chief
Executive Officer and
Director
Jay M. Gratz............ 173,752 109,200 0 28,250 4,000(4) 8,696
Vice President,
Finance, Chief
Financial Officer and
Director
Carl G. Lusted.......... 223,384 206,250 0 39,550 7,000(4) 11,181
President,
Ryerson Central
Stephen E. Makarewicz... 167,504 125,500 13,333(5) 33,900 6,000(4) 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
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 ISI
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.
(4) All options are for ISI common stock. 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
41
<PAGE>
for Class A Common Stock, 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."
(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 (paid in the first quarter 1995) under Inland Steel
Industries' 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
under ISI's incentive stock option plan, 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 (a) his monthly base salary in effect at the time of such
termination times the number of months remaining in the 36-month period, plus
(b) 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 ISI would pay Mr. Lusted the amount by which the purchase price of his
Atlanta home exceeded the net sales price of such home. The agreement also
provides 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 occurs. 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: (a) any person becomes the beneficial owner of 40% or
more of the combined voting power of ISI's then outstanding securities; (b)
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
42
<PAGE>
was previously so approved; (c) the ISI 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); (d) 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 (e) 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 (a) by ISI
other than for "cause" or other than as a consequence of death, disability or
retirement (all as defined in such agreements), or (b) 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 (1) the executive's current annual base salary plus (2) 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 for a period of 24 months after termination of employment; and (vi)
an amount in cash in lieu of two years of additional accrued benefits under
ISI's pension plan. 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 occurs
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 (a) ISI
enters into an agreement, the consummation of which would result in the
occurrence of a change in control of ISI, (b) any person (other than ISI or
any of its subsidiaries, including the Company) publicly announces an
intention to take or to consider taking actions which, if consummated, would
constitute a change in control, (c) any person becomes the owner of securities
of ISI representing 9.5% or more of the combined voting power of ISI's then
outstanding securities, or increases such person's beneficial ownership of
such securities by 5% or more over the percentage so owned on the date of the
43
<PAGE>
agreement, or (d) 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 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 executive officers named in the table under the
heading "Summary Compensation Table," 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
44
<PAGE>
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.
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 (a) 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 (b)
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 ISI Nonqualified Thrift Plan (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
45
<PAGE>
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.
INDIVIDUAL OPTION GRANTS IN 1995
The following table presents information with respect to (a) 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 (b) 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 (a)
a spouse or descendants, (b) to a trust for the benefit of the optionee,
his spouse or descendants or (c) 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. Upon
consummation of the Offerings, most of 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 (a)
forfeiture due to termination prior to vesting
46
<PAGE>
and (b) 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 stock over the exercise price on the date the option is exercised.
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: (a) 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 (i) any stock options or stock
appreciation rights outstanding for less than six months are not cashed out
until six months after the applicable date of grant and (ii) the Compensation
Committee may provide for immediate vesting instead of cashing out of
restricted stock awards and (b) 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 did not, and the
47
<PAGE>
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.
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 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 as of the date of the Offering, 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
ISI 1995 Incentive Stock Plan and prior ISI plans (collectively, the "ISI
Incentive Plan"). 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 Class A Common Stock bears to the average value of a
share of ISI 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 Plan, 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 Substitute Options with respect to less than all of his
or her outstanding options under the ISI Incentive Plan.
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 $24.625 (the last
reported sales price on
48
<PAGE>
the NYSE on May 1, 1996) and 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) for (i) the chief executive officer and the four other most
highly compensated executive officers of the Company, (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.
RYERSON TULL 1996 INCENTIVE STOCK PLAN
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES OF SHARES
RESTRICTED SUBJECT
NAME AND POSITION STOCK TO OPTIONS
----------------- ---------- ----------
<S> <C> <C>
Robert J. Darnall........................................
Chairman and Director
Neil S. Novich...........................................
President, Chief Executive Officer and Director.........
Jay M. Gratz.............................................
Vice President, Finance, Chief Financial Officer, and
Director
Carl G. Lusted...........................................
President, Ryerson Central..............................
Stephen E. Makarewicz....................................
President, Tull
Executive Group..........................................
Non-Executive Officer Employee Group.....................
</TABLE>
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 cash
portion of 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 , 1996, the Company also declared the May
1996 Dividend.
SHARED MANAGEMENT
The Company's Chairman of the Board, President and Chief Executive Officer,
Treasurer and Secretary are also executive officers of ISI. Upon consummation
of the Offerings, the Company and ISI will also have four common Directors.
The Company expects that such arrangements will continue for the foreseeable
future following the consummation of the Offerings. See "Management--Executive
Officers and Directors."
POTENTIAL DISTRIBUTIONS 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,
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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 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
distribution. 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 in the future.
SUPPORT SERVICES
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. Charges by ISI to the Company for
these services amounted to $7.4 million in 1993 and 1994 and $6.8 million in
1995. The Company intends to enter into an agreement concurrent with the
consummation of the Offerings pursuant to which ISI will continue to provide
these services to the Company for the next years at a price of $ .
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.
TRADEMARK/TRADENAME LICENSE AGREEMENT
Prior to the consummation of the Offerings, the Company and ISI will enter
into a trademark/tradename license agreement pursuant to which the Company
will license the "Ryerson" tradename for use by Inland International Inc. and
its affiliates and pursuant to which ISI will license the ISI "red diamond"
trademark to the Company.
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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.
RYERSON DE MEXICO
Ryerson de Mexico, a joint venture in which ISI owns a 50% interest,
operates as a general line service center and processor in Mexico and had
sales of $75 million in 1995, its first full year of operation. The Company
jointly markets its products and services with, and supplies materials to,
Ryerson de Mexico.
PENSIONS
Prior to April 30, 1996, certain Ryerson Tull 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 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,
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 Trust. 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, the Ryerson Tull portion of the ISI Pension Plan
was separated and became the Pension Plan. The Pension Plan assumed the
liabilities of the ISI 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 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 funding is 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 Ryerson Tull.
INDEMNIFICATION AGREEMENT
Concurrent with the consummation of the Offerings, the Company and ISI and
ISC will enter into an indemnification agreement pursuant to which the Company
on the one hand and ISI and ISC on the other hand will agree to indemnify each
other for losses, claims and damages that they may suffer or for which they
may become liable, including tax and environmental claims, that arise out of
the relationship of the parties prior to the Offerings or as a result of ISI's
control of the Company.
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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 1, 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............ 230,098 1,784
Neil S. Novich............... 51,899 320
Jay M. Gratz................. 26,800 1,058
Carl G. Lusted............... 34,960 1,217
Stephen E. Makarewicz........ 22,699 411
All Directors and Executive
Officers as a Group
(12 persons)................ 474,650 10,301
</TABLE>
- --------
(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 0.97% 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--
369,610; and shares of ISI common stock held under restricted stock awards
as follows--Mr. Darnall--12,000, Mr. Novich--10,800, Mr. Gratz--2,000, Mr.
Lusted--2,800, Mr. Makarewicz--2,200, and all Directors and executive
officers as a group--38,200. 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.
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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 made
shortly after the consummation of the Offerings.
DESCRIPTION OF CAPITAL STOCK
GENERAL
Immediately 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 shares of Class A Common Stock, 34,000,000 shares of
Class B Common Stock and 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. 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.
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
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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 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 outstanding shares of Class B Common Stock represent less
than 50% of the sum of the 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.
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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: (1) the number of shares constituting the series and the
distinguishing designation of the series; (2) 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; (3) 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; (4) 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 may be redeemed, which price or
prices may be different in different circumstances or at different redemption
dates); (5) 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; (6) 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 (7) 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.
CORPORATE GOVERNANCE
The Certificate of Incorporation contains several provisions intended to
maintain separation between the Company and ISI. The Certificate of
Incorporation requires that at least one-third of the Directors be
"independent Directors." 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 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
the
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<PAGE>
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 the independent
Directors review transactions between ISI or ISI's other subsidiaries or
affiliates and the Company where the amount involved exceeds $25 million,
other than transactions pursuant to agreements entered into in connection with
the Offerings. 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 (1) 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, (2) 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 (3) 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 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.
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
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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 will 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
and 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.
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: (a) as to each person
whom the stockholder proposes to nominate for election or re-election as a
Director, (i) the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the person, (iii) the
class and number of shares of capital stock of the Company beneficially owned
by the person, (iv) such person's signed consent to serve as a Director if
elected and (v) 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 (b) as to the
stockholder giving the notice, (i) the name and record address of such
stockholder and (ii) 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.
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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 share of Series A Junior Participating
Preferred Stock, par value $1.00 per share (the "Junior Preferred Shares"), 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 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 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.
58
<PAGE>
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 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 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.
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.
59
<PAGE>
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.
Upon consummation of the Offerings, there will be 39,220,000 shares of
Common Stock outstanding and 2,400,000 shares of Common Stock reserved for
issuance under employee benefit plans. Each outstanding share of Common Stock
will receive one Right. shares of Junior Preferred Shares will be reserved
for issuance in the event of the exercise of the 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 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 are "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.
60
<PAGE>
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 (1) 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 (2) 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 completion 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 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,
61
<PAGE>
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
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.
Options to purchase shares of Class A Common Stock and shares of
restricted Stock will be outstanding under the Incentive Stock Plan upon
consummation of the Offerings. 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, Chicago, Illinois. As of April 1, 1996, Mr.
Ranney owned 4,900 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
62
<PAGE>
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.
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by its independent auditors and with
quarterly reports containing unaudited financial statements for each of the
first three quarters of each fiscal year.
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.
63
<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
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 is required to
maintain specified amounts of working capital and net worth, as outlined in
the agreements, and is restricted as to dividends that may be paid to
Industries.
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 related
term note. This agreement effectively changes the Company's interest rate
exposure on the 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 the related
F-8
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
debt. 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>
[MAP OF COMPANY FACILITIES]
<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........................................................... 21
Business................................................................. 27
Management............................................................... 38
Relationship with ISI.................................................... 49
Principal Stockholder.................................................... 52
Ownership of ISI Stock................................................... 52
Proposed Note Offering................................................... 53
Description of Capital Stock............................................. 53
Shares Eligible for Future Sale.......................................... 60
Validity of Class A Common Stock......................................... 62
Experts.................................................................. 62
Additional Information................................................... 62
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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION, DATED MAY 7, 1996
5,220,000 SHARES
[LOGO]
RYERSON TULL, INC.
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."
Subsequent to the Offerings, the Company proposes 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>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
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 Internal Revenue Act of
1986, as amended 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.
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.
Alternate Page 2
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
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 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
Alternate Page 3
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
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.
Alternate Page 4
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
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.
Alternate Page U-1
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
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
Alternate Page U-2
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
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 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.
Alternate Page U-3
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESEN-
TATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITA-
TION 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 SECURI-
TIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEI-
THER 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 INFORMATION 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........................................................... 21
Business................................................................. 27
Management............................................................... 38
Relationship with ISI.................................................... 49
Principal Stockholder.................................................... 52
Ownership of ISI Stock................................................... 52
Proposed Note Offering................................................... 53
Description of Capital Stock............................................. 53
Shares Eligible for Future Sale.......................................... 60
Certain U.S. Tax Consequences to Non-U.S. Stockholders...................
Validity of Class A Common Stock......................................... 62
Experts.................................................................. 62
Additional Information................................................... 62
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 PRO-
SPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS
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>
- --------
* To be supplied by amendment.
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 foregoing provisions, 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 REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CHICAGO,
STATE OF ILLINOIS, ON MAY , 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
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON MAY , 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>
- --------
(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 ,
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>
- --------
*To be filed by amendment
<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 Plan for Covered Employees..... *
10.17 Ryerson Tull 1996 Incentive Stock Plan................... *
10.18 Form of Indemnification Agreement between the Registrant
and Inland Steel Industries, Inc. ...................... *
10.19 Form of Trademark/Tradename 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 , 1996 ... *
10.21 Tax Sharing Agreement between the Registrant and Inland
Steel Industries, Inc., dated as of .............. *
10.22 Form of Support Agreement between Inland Steel
Industries, Inc. and the Registrant..................... *
10.23 Form of ESOP Guarantee Agreement between the Registrant
and .............................................. *
10.24 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.)
12 Statement re: Computation of Ratio of Earnings to Fixed
Charges.................................................
21 Subsidiaries of the Registrant...........................
23.1 Consent of Price Waterhouse LLP..........................
23.2 Consent of Mayer, Brown & Platt is contained in their
Opinion filed as Exhibit 5 to this Registration
Statement
24 Powers of Attorney....................................... *
27 Financial Data Schedule..................................
</TABLE>
- --------
*To be filed by amendment
<PAGE>
EXHIBIT 12
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
MARCH 31,
YEAR ENDED DECEMBER 31, (UNAUDITED)
----------------------------------- ------------
1991 1992 1993 1994 1995 1995 1996
------ ----- ----- ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Available:
Pretax income or (loss)... $(11.5) $ 5.9 $38.1 $88.3 $145.4 $41.0 $36.7
Amortization of
capitalized interest..... -- -- -- -- -- -- --
Fixed charges:
Interest and
amortization of debt
expense................ 17.1 12.8 10.9 2.9 2.6 0.7 0.6
Rents (one-third of all
rentals)*.............. 6.4 6.0 5.6 5.3 5.4 1.3 1.2
------ ----- ----- ----- ------ ----- -----
Fixed charges included
in income............ 23.5 18.8 16.5 8.2 8.0 2.0 1.8
------ ----- ----- ----- ------ ----- -----
Total Earnings
Available.......... $ 12.0 $24.7 $54.6 $96.5 $153.4 $43.0 $38.5
====== ===== ===== ===== ====== ===== =====
Total Fixed Charges:
Total fixed charges per
above.................... $ 23.5 $18.8 $16.5 $ 8.2 $ 8.0 $ 2.0 $ 1.8
Capitalized interest...... .4 -- -- -- -- -- --
------ ----- ----- ----- ------ ----- -----
Total Fixed
Charges............ $ 23.9 $18.8 $16.5 $ 8.2 $ 8.0 $ 2.0 $ 1.8
====== ===== ===== ===== ====== ===== =====
Ratio of Earnings to Fixed
Charges.................... .5x 1.3x 3.3x 11.8x 19.2x 21.5x 21.4x
====== ===== ===== ===== ====== ===== =====
</TABLE>
- --------
*Deemed to be appropriate interest portion of all rental expense
<PAGE>
EXHIBIT 21
SUBSIDIARIES
1. Joseph T. Ryerson & Son, Inc.
Organized in the State of Delaware.
2. J. M. Tull Metals Company, Inc.
Organized in the State of Georgia.
3. AFCO Metals, Inc.
Organized in the State of Arkansas.
<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 6, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 53600 45400
<SECURITIES> 0 0
<RECEIVABLES> 250200 281300
<ALLOWANCES> 6400 6700
<INVENTORY> 262800 297300
<CURRENT-ASSETS> 644600 684700
<PP&E> 476200 476800
<DEPRECIATION> 226500 230600
<TOTAL-ASSETS> 972600 1010900
<CURRENT-LIABILITIES> 144400 159400
<BONDS> 18900 18400
<COMMON> 0 0
0 0
0 0
<OTHER-SE> 668500 690900
<TOTAL-LIABILITY-AND-EQUITY> 972600 1010900
<SALES> 2450100 625300
<TOTAL-REVENUES> 2450100 625300
<CGS> 2144000 548100
<TOTAL-COSTS> 2144000 548100
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2600 600
<INCOME-PRETAX> 145400 36700
<INCOME-TAX> 56900 14300
<INCOME-CONTINUING> 88500 22400
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 88500 22400
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
