<PAGE>
Third Quarter - 1997
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
-------------------------
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the period ended September 30, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from __________ to __________
-------------------------
Commission file number 1-11767
I.R.S. Employer Identification Number 36-3431962
RYERSON TULL, INC.
(a Delaware Corporation)
2621 West 15th Place
Chicago, Illinois 60608
Telephone: (773) 762-2121
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 5,277,732 shares of the
Company's Class A Common Stock and 34,000,000 shares of the Company's Class B
Common Stock (each $1.00 par value per share) were outstanding as of November 6,
1997.
<PAGE>
PART I. FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
RYERSON TULL, INC.
AND SUBSIDIARY COMPANIES
(A majority-owned subsidiary of Inland Steel Industries, Inc.)
Consolidated Statement of Operations (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions (except per share data)
-----------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ----------------------
1997 1996 1997 1996
------ ------ -------- --------
<S> <C> <C> <C> <C>
NET SALES $715.8 $592.3 $2,106.4 $1,825.1
Cost of materials sold 562.8 457.3 1,643.1 1,400.3
------ ------ -------- --------
GROSS PROFIT 153.0 135.0 463.3 424.8
Operating expenses 115.9 103.0 344.6 312.4
Depreciation and amortization 7.1 5.7 20.4 16.8
(Gain) on sale of assets -- -- (8.9) --
------ ------ -------- --------
OPERATING PROFIT 30.0 26.3 107.2 95.6
General corporate and other expense,
net of income items 2.0 1.6 5.1 1.1
Interest and other expense on debt 8.7 6.4 24.1 8.0
------ ------ -------- --------
INCOME BEFORE INCOME TAXES 19.3 18.3 78.0 86.5
PROVISION FOR INCOME TAXES 7.9 6.9 31.0 33.8
------ ------ -------- --------
NET INCOME $ 11.4 $ 11.4 $ 47.0 $ 52.7
====== ====== ======== ========
PRIMARY EARNINGS PER SHARE
OF COMMON STOCK (Note 5) $ 0.29 $ 0.29 $ 1.20 $ 1.34
====== ====== ======== ========
OPERATING DATA
- --------------
SHIPMENTS (Tons in Thousands) 781.1 627.0 2,270.3 1,900.4
</TABLE>
See notes to consolidated financial statements
-1-
<PAGE>
RYERSON TULL, INC.
AND SUBSIDIARY COMPANIES
(A majority-owned subsidiary of Inland Steel Industries, Inc.)
Consolidated Statement of Cash Flows (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions
-------------------
Nine Months Ended
September 30
-------------------
1997 1996
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 47.0 $ 52.7
------- -------
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation and amortization 20.4 16.8
Gain on sale of assets (8.9) -
Deferred employee benefit cost (3.5) 1.9
Deferred income taxes (0.4) 0.2
Change in assets and liabilities, excluding effects of acquisitions:
Receivables (55.4) (16.1)
Inventories (35.2) (47.2)
Other assets 4.6 (5.9)
Accounts payable 54.6 10.1
Payables to related companies 0.2 10.9
Accrued liabilities (16.8) (0.3)
Other deferred items ( 6.4) -
------- ------
Net adjustments (46.8) (29.6)
------- ------
Net cash provided from operating activities 0.2 23.1
------- ------
INVESTING ACTIVITIES
Acquisitions (Note 3) (139.5) -
Capital expenditures (25.8) (12.5)
Investments in and advances to joint ventures, net (0.4) (1.2)
Proceeds from sales of assets 17.2 1.3
------- ------
Net cash used for investing activities (148.5) (12.4)
------- ------
FINANCING ACTIVITIES
Sale of Series A common stock - 77.1
Debt issued - 243.8
Debt retirement (2.0) (8.1)
Dividends paid - (445.9)
Reduction of debt assumed in acquisition (25.3) -
Borrowing from related company, net 151.7 68.8
------- ------
Net cash provided from (used for) financing activities 124.4 (64.3)
------- ------
Net decrease in cash and cash equivalents (23.9) (53.6)
Cash and cash equivalents - beginning of year 23.9 53.6
------- ------
Cash and cash equivalents - end of period $ - $ -
======= ======
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest $ 28.5 $ 1.9
Income taxes, net 32.4 35.4
Debt assumed in acquisition 25.3 -
</TABLE>
See notes to consolidated financial statements
-2-
<PAGE>
RYERSON TULL, INC.
AND SUBSIDIARY COMPANIES
(A majority-owned subsidiary of Inland Steel Industries, Inc.)
Consolidated Balance Sheet (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions
-------------------
ASSETS September 30, 1997 December 31, 1996
- ------ ------------------ -----------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ - $ 23.9
Receivables 336.7 234.4
Inventories - principally at LIFO 427.3 314.3
Deferred income taxes 13.2 13.6
-------- -------
Total current assets 777.2 586.2
INVESTMENTS AND ADVANCES 21.5 19.8
PROPERTY, PLANT AND EQUIPMENT
Valued on basis of cost $531.7 $494.4
Less accumulated depreciation 255.3 276.4 243.4 251.0
------ ------
DEFERRED INCOME TAXES 38.0 37.9
PREPAID PENSION COSTS 6.6 1.3
EXCESS OF COST OVER NET ASSETS ACQUIRED 75.5 22.3
OTHER ASSETS 9.9 13.7
-------- -------
Total Assets $1,205.1 $ 932.2
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable $181.4 $98.4
Note payable to related company 151.7 -
Payables to related companies - trade and other 17.4 17.2
Accrued liabilities 33.9 42.9
Long-term debt due within one year 6.3 2.1
--------- -------
Total current liabilities 390.7 160.6
LONG-TERM DEBT 257.0 263.2
DEFERRED EMPLOYEE BENEFITS AND OTHER 145.8 144.0
--------- -------
Total liabilities 793.5 567.8
STOCKHOLDERS' EQUITY (Schedule A) 411.6 364.4
-------- -------
Total Liabilities and Stockholders' Equity $1,205.1 $ 932.2
======== =======
</TABLE>
See notes to consolidated financial statements
-3-
<PAGE>
RYERSON TULL, INC.
AND SUBSIDIARY COMPANIES
(A majority-owned subsidiary of Inland Steel Industries, Inc.)
Notes to Consolidated Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 1/FINANCIAL STATEMENTS
Results of operations for any interim period are not necessarily indicative of
results of any other periods or for the year. The financial statements as of
September 30, 1997 and for the three-month and nine-month periods ended
September 30, 1997 and 1996 are unaudited, but in the opinion of management
include all adjustments necessary for a fair presentation of results for such
periods. These financial statements should be read in conjunction with the
financial statements and related notes contained in the Annual Report on Form
10-K for the year ended December 31, 1996.
NOTE 2/RECAPITALIZATION
In the second quarter of 1996, Inland Steel Industries, Inc. ("Industries")
undertook a recapitalization that involved the Company. As part of the
recapitalization, the Company exchanged existing shares of Company common stock,
all of which were owned by Industries, for 34.0 million shares of new-issue
Class B common stock ($1.00 par value). The Company also sold 5.2 million shares
of new-issue Class A common stock ($1.00 par value) in a public offering, the
net proceeds of which approximated $77.1 million.
Prior to the issuance of the Class A common stock, the Company declared and paid
dividends of $445.9 million to Industries, of which $152.1 million was in cash
and $293.8 million was in the form of a note payable. Industries used $63.2
million of the cash dividend to repay intercompany borrowing from the Company
and its subsidiaries. Of the $445.9 million of dividends paid to Industries,
$198.3 million eliminated the reinvested earnings balance that existed at June
26, 1996, while the remaining $247.6 million reduced capital in excess of par
value.
In July 1996, the Company sold $150 million of 8.5 percent Notes due July 15,
2001 and $100 million of 9.125 percent Notes due July 15, 2006 (collectively,
the "Notes") in a public offering. The net proceeds of the offering along with
a portion of the Company's cash on hand were used to pay the $293.8 million note
balance due Industries.
Effective June 1, 1996, as the result of a capital contribution from Industries
to the Company, Inland Industries de Mexico and its 50 percent-owned Ryerson de
Mexico joint venture became part of the Company. The contribution increased both
investments in joint ventures and capital in excess of par value by $18.9
million. The impact of Ryerson de Mexico on the Company's results of operations
has not been material.
-4-
<PAGE>
NOTE 3/ACQUISITIONS
During the first nine months of 1997, the Company, through its subsidiaries,
acquired Thypin Steel Co., Inc., Omni Metals, Inc. and the assets of Cardinal
Metals, Inc. for an aggregate of $139.5 million in cash plus assumption of debt.
The acquisitions have been accounted for by the purchase method of accounting
and the purchase price has been allocated to assets acquired and liabilities
assumed. Results of operations since acquisition for each company are included
in the consolidated results. The pro forma effect for 1997 and 1996 had these
acquisitions occurred at the beginning of each such year is not material.
NOTE 4/RELATED PARTY TRANSACTIONS
The Company has agreed to procedures established by Industries for charging
Industries' administrative expenses to the operating companies owned by it.
Pursuant to these procedures, the Company was charged $4.7 million and $5.2
million by Industries for the first nine months of 1997 and 1996, respectively,
for management, financial and legal services provided to the Company.
Prior to the recapitalization in the second quarter of 1996, procedures had been
established to charge interest on all intercompany loans within the Industries
group of companies. Such loans arose as part of a corporate-wide cash management
program and bore interest at the prime rate. In May 1996, after all such
intercompany loans were repaid, the Company ceased participation in such
programs and the Company's cash is not and will no longer be held in Industries'
accounts. Net intercompany interest income for the first nine months of 1996 was
$1.5 million.
On March 27, 1997, the Company established the ability to borrow from Industries
through a five-year $250 million uncommitted line of credit. As of September 30,
1997, $151.7 million of borrowing was outstanding under this facility.
The Company sells to and purchases products from related companies at prevailing
market prices. These transactions are summarized as follows:
<TABLE>
<CAPTION>
Dollars in Millions
--------------------------------------
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
1997 1996 1997 1996
----- ----- ------ ------
<S> <C> <C> <C> <C>
Net Product Sales $ 2.2 $ 3.0 $ 8.0 $ 12.1
Net Product Purchases 46.5 48.8 158.3 154.9
</TABLE>
-5-
<PAGE>
NOTE 5/EARNINGS PER SHARE
Pro forma earnings per share presented for the first nine months of 1996 assumes
39,220,000 average shares outstanding. For the third quarter of 1997, 39,321,723
shares, which reflects the actual average common shares outstanding during the
quarter of 39,280,763 shares and the dilutive effect of stock options of 40,960
shares, was used in the calculation of earnings per share.
The Company is required to adopt Financial Accounting Standards Board Statement
No. 128, "Earnings per Share", at year-end 1997. Basic Earnings per Share as
defined in that Statement is not materially different from the Primary Earnings
per Share amount presented.
-6-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations - Comparison of Third Quarter 1997 to Third Quarter 1996
- ------------------------------------------------------------------------------
The Company reported consolidated net income of $11.4 million, or $.29 per
common share, in the third quarter of 1997 as compared with $11.4 million, or
$.29 per common share in the year-ago quarter. Quarter-to-quarter earnings were
negatively impacted by lower selling prices which pressured gross margins, and
from a 36% increase in interest expense and a lack of interest income resulting
from the recapitalization and spending for acquisitions. Offsetting these
factors were increased tonnage volumes and reduced expenses per ton, leaving
quarter-to-quarter earnings unchanged.
Consolidated net sales of $715.8 million were 21% higher than the year-
earlier period. Volume increased 25% to 781,100 tons from 627,000 tons, as a
result of market share gains in part due to acquisitions in 1997, as well as
increased service center industry shipment levels. Average selling price
declined 3% to $916 per ton from $945 per ton a year ago.
Gross profit per ton decreased to $196 from $215 in the year-ago quarter
due to continued pressure from declining industrywide metals prices. Expenses,
defined as operating expenses, depreciation and amortization, were reduced to
$158 per ton from $173 per ton in the third quarter of 1996.
Operating profit of $30.0 million was 14% higher than the $26.3 million
recorded in the year-ago quarter.
Comparison of First Nine Months of 1997 to First Nine Months of 1996
- --------------------------------------------------------------------
For the first nine months of 1997, the Company reported net income of $47.0
million, or $1.20 per common share, compared to $52.7 million or $1.34 per
common share on a pro forma basis, for the same period a year ago.
Net sales of $2.11 billion were up 15% from the year-ago level due to
market share gains in part due to acquisitions, as well as increased service
center industry shipment levels.
Operating profit increased 12% to $107.2 million in the first nine months
of 1997 from $95.6 million in the same period a year ago. The increase is mainly
attributable to the gains on the sale of the Boston and Jersey City facilities.
-7-
<PAGE>
Liquidity and Financing
- -----------------------
As part of the recapitalization that took place in 1996, the Company issued
$250 million of long-term debt ("Notes") and established a committed four-year
$250 million bank revolving credit facility. During the third quarter of 1997,
the Company extended its $250 million credit facility to September 5, 2002,
while reducing both the commitment fee and interest rate related to the
facility. Restrictions contained in the bank facility and the Notes indenture
prohibit the Company from, among other things, declaring or paying dividends on
Company common stock under certain conditions. At September 30, 1997, up to $69
million of common dividends could have been paid.
In order to provide additional borrowing flexibility, the Company
established a five-year $250 million uncommitted line of credit with its parent,
Inland Steel Industries, Inc. ("Industries"), on March 27, 1997. Interest under
this credit line is at market rates. Under terms of the agreement, Industries
may, at its sole option, demand repayment of any or all amounts outstanding at
any time.
At September 30, 1997, the Company had outstanding borrowing under the
Industries line of credit of $151.7 million. The short-term borrowings were used
entirely for the acquisition of Thypin Steel and Cardinal Metals during the
first quarter and Omni Metals during the third quarter of 1997, including the
repayment of debt assumed in the Thypin and Omni acquisitions. On a combined
basis, the Company had committed and uncommitted lines of credit of $348.3
million unused as of September 30, 1997. However, the Company currently intends
to have outstanding at any time under the Industries line no more than is
available under the bank credit facility. Additionally, a covenant contained in
the bank credit facility restricts the amount of additional debt, including
additional borrowings under the credit lines that the Company can incur, to $209
million as of September 30, 1997.
-8-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3.1 Restated Certificate of Incorporation of the Company (Filed as Exhibit
3.1 to the Company's Registration Statement on Form S-1 (File No. 333-
3235), and incorporated by reference herein.)
3.2 By-Laws of the Company. (Filed as Exhibit 3.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996 and incorporated
by reference herein.)
10.1* Ryerson Tull, Inc. Supplemental Retirement Plan for Covered Employees,
as amended September 24, 1997.
10.2* Ryerson Tull, Inc. Annual Performance Improvement Incentive Plan, as
approved July 23, 1997.
27 Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the third quarter of 1997.
- -----------
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to the Company's Quarterly Report on Form 10-Q.
- 9 -
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RYERSON TULL, INC.
By Lily L. May
-----------------------------
Lily L. May
Controller and
Principal Accounting Officer
Date: November 12, 1997
-10-
<PAGE>
Part I -- Schedule A
RYERSON TULL, INC.
AND SUBSIDIARY COMPANIES
(A majority-owned company of Inland Steel Industries, Inc.)
SUMMARY OF STOCKHOLDERS' EQUITY
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions
------------------------------------
September 30, 1997 December 31, 1996
------------------ -----------------
(unaudited)
STOCKHOLDERS' EQUITY
- --------------------
<S> <C> <C> <C> <C>
Series A common stock ($1 par value) -
5,280,763 shares and 5,277,127 shares issued
as of September 30, 1997 and
December 31, 1996, respectively $ 5.3 $ 5.3
Series B common stock ($1 par value) -
34,000,000 shares issued and outstanding
as of September 30, 1997 and December 31, 1996 34.0 34.0
Capital in excess of par value (1) (2) 304.6 304.5
Retained earnings
Balance beginning of year $22.4 $173.9
Net income 47.0 63.3
Retained earnings impact of Pension Plan split - (16.5)
Dividends on common stock (2) - 69.4 (198.3) 22.4
----- -------
Cumulative translation adjustment (1.3) (1.3)
Restricted stock awards (0.3) (0.5)
Treasury stock, at cost -
2,673 shares as of September 30, 1997 (0.1) -
------ ------
Total Stockholders' Equity $411.6 $364.4
====== ======
</TABLE>
(1) Capital in excess of par at December 31, 1996 was increased from December
31, 1995 by $71.9 million due to the issuance of Series A common stock and
$18.9 million as a result of the contribution of Inland Industries de
Mexico to Ryerson Tull. It was decreased by $34.0 million for the issuance
of Series B common stock as part of the recapitalization of Ryerson Tull.
(2) Of the $445.9 million of dividends paid in the 1996 second quarter, $198.3
million eliminated the balance in retained earnings at June 26, 1996 while
the remaining $247.6 million reduced capital in excess of par.
-11-
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
-----------------
Sequential
Number Description Page No.
- ------ ----------- ----------
<S> <C> <C>
3.1 Restated Certificate of Incorporation of the Company. (Filed as Exhibit 3.1 -
to the Company's Registration Statement on Form S-1 (File No. 333-3235),
and incorporated by reference herein.)
3.2 By-Laws of the Company. (Filed as Exhibit 3.2 to the Company's Quarterly -
Report on Form 10-Q for the quarter ended June 30, 1996 and incorporated
by reference herein.)
10.1* Ryerson Tull, Inc. Supplemental Retirement Plan for Covered Employees,
as amended September 24, 1997..............................................
10.2* Ryerson Tull, Inc. Annual Performance Improvement Incentive Plan, as
approved July 23, 1997.....................................................
27 Financial Data Schedule....................................................
</TABLE>
- ---------------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to the Company's Quarterly Report on Form 10-Q.
- 12 -
<PAGE>
EXHIBIT 10.1
RYERSON TULL
SUPPLEMENTAL RETIREMENT PLAN
FOR COVERED EMPLOYEES
As Amended September 24, 1997
ARTICLE 1
1.1 Purpose.
It is the intention of Ryerson Tull, Inc. (the "Company") to
maintain appropriate levels of retirement benefits for individuals who are
entitled to benefits under the Ryerson Tull Pension Plan, including any
supplements thereto (collectively, the "Pension Plan"). Accordingly, the Company
hereby establishes the Ryerson Tull Supplemental Retirement Plan for Covered
Employees (the "Plan") to provide benefits to eligible persons in a manner so as
to maintain the level of total retirement benefits which, but for the
limitations on benefits required by Section 415 and 401(a)(17) of the Internal
Revenue Code of 1986, as amended (the "Code"), would otherwise be payable to
such persons under the Pension Plan. The Plan shall maintain such total
retirement benefit levels by means of supplemental unfunded payments made by the
Employers (as defined in Section 1.3) to the individuals eligible for such
payments as more fully described in Articles 3 and 4. The Plan is intended to be
an "excess benefit plan" described in Section 3(36) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"); provided, however, that, to
the extent, if any, that the Plan provides benefits which cannot be provided by
an excess benefit plan, the Plan shall constitute an unfunded plan maintained
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees.
1.2 Effective Date.
The Plan is effective as of April 30, 1996 (the "Effective
Date").
1.3 Employers. The Company and any of its affiliates which, with the
consent of the Company, adopt the Plan are referred to collectively herein as
the "Employers" and individually as an "Employer".
1.4 Source of Benefit Payments; Funding Not Required.
The amount of any benefit payable under the Plan to any Participant (as
defined in Section 3.1) (or Beneficiary (as defined in Section 3.2)) shall be
paid from the general revenues of the Employer that employed such Participant;
provided, however, that if a Participant has been employed by more than one
Employer, the portion of his Plan benefits payable by any such
<PAGE>
Employer shall be in proportion to the benefit he accrued under the Pension Plan
for his period of service with the applicable Employer. An Employer's obligation
under the Plan shall be reduced to the extent that any amounts due under the
Plan are paid from one or more trusts, the assets of which are subject to the
claims of general creditors of the Employers; provided, however, that nothing in
the Plan shall require the Company or any Employer to establish any trust to
provide benefits under the Plan. None of the individuals entitled to benefits
under the Plan will have any claim on, or any beneficial ownership interest in,
any assets of any Employer, and any rights of such individuals under the Plan
will constitute unsecured contractual rights only.
1.5 Definitions.
Unless the context clearly requires otherwise, any word, term
or phrase used in the Plan will have the same meaning as is assigned to it under
the terms of the Pension Plan.
ARTICLE 2
2.1 Retirement Committee.
The Company hereby delegates authority to administer the Plan
to the Pension Plan Retirement Committee (the "Committee") as established under
the Pension Plan. Any action by the Committee shall be evidenced by a written
document, certified by the Secretary of the Committee. References to the
Company's authority, right, or power to act contained in any notice, disclosure,
or communication which is made with a view toward effectuating the purposes of
the Plan shall be construed to include such actions by the Committee on the
Company's behalf and such actions by others to whom the Committee has delegated
its authority.
2.2 Authority of Committee.
The Committee shall have authority to control and manage the
operation and administration of the Plan, including the authority and discretion
to construe and interpret the Plan, decide all questions of eligibility for and
the amount, manner and time of payment of Supplemental Retirement Benefits (as
defined in Section 3.1) hereunder and such other rights and powers necessary or
convenient to the carrying out of its functions hereunder. The authority and
responsibilities of the Committee shall be coextensive with its authority and
responsibilities under the Pension Plan.
-2-
<PAGE>
ARTICLE 3
3.1 Participation.
Each employee or former employee of an Employer who, on or
after the Effective Date, is entitled to an accrued benefit under the Pension
Plan the amount of which is limited by reason of the application of the
limitations imposed by Code Sections 415 or 401(a)(17), as amended from time to
time, and the regulations and rulings thereunder or the terms of the Pension
Plan implementing those limitations (the "Code Limitations") shall be a
"Participant" in the Plan and shall be entitled to receive the benefits (the
"Supplemental Retirement Benefits"), if any, determined in accordance with
Article 4 hereof. Any individual who had an accrued benefit under the Inland
Steel Industries Supplemental Retirement Benefit Plan for Covered Employees and
the Inland Steel Industries Special Retirement Benefit Plan for Covered
Employees Plan (collectively, the "ISI Supplemental Plans") which was assumed by
the Company effective as of the Effective Date shall also be a Participant in
the Plan, subject to the terms and conditions thereof, regardless of whether
such individual would otherwise be a Participant under the foregoing provisions
of this Section 3.1.
3.2 Beneficiary.
The spouse or other person entitled to a benefit under the
Pension Plan upon the death of a Participant hereunder shall, upon the death of
the Participant, be a "Beneficiary" under the Plan entitled to receive the
Supplemental Retirement Benefit, if any, determined in accordance with Article 4
hereof.
3.3 Restricted Participation.
Notwithstanding any other provision of the Plan to the
contrary, if the Committee determines that participation by one or more
Participants (or payment of benefits to any Beneficiary) shall cause the Plan as
applied to any Employer to be subject to Part 2, 3 or 4 of Title I of ERISA, the
entire interest of such Participant or Beneficiary under the Plan shall, in the
discretion of the Committee, be immediately paid to such Participant or
Beneficiary, as applicable, by the applicable Employer, or shall otherwise be
segregated from the Plan, and such Participant(s) or Beneficiary(ies) shall
cease to have any interest under the Plan.
-3-
<PAGE>
ARTICLE 4
4.1 Amount of Supplemental Retirement Benefit.
The amount of the Supplemental Retirement Benefit which a
Participant or Beneficiary shall be entitled to receive and the Employers shall
be obligated to pay under the Plan as of any date shall be equal to the greater
of the amount determined under paragraph (a) or (b) below:
(a) the excess, if any, of the amount described in
subparagraph (i) of this Section 4.1 over the amount described in
paragraph (ii) of this Section 4.1:
(i) The amount of the benefit (expressed in the same
form and commencing at the same time as that of the benefit
that the Participant is actually receiving under the Pension
Plan) that the Participant would have been entitled to receive as
of that date under the Pension Plan, determined without regard to
the Code Limitations.
(ii) The amount of benefit which the Participant or
Beneficiary actually receives under the Pension Plan as of
that date (determined with regard to the Code Limitations
applicable under the Pension Plan).
OR
(b) The aggregate amount of the benefit accrued by the
Participant or Beneficiary, as applicable, as of the Effective Date
under the provisions of the ISI Supplemental Plans.
It is the intent of this Section 4.1 that the Supplemental Retirement Benefit
described above shall be determined at all times in a manner consistent with
then current Code Limitations. Accordingly, the determinations made pursuant to
this Section 4.1 shall be based upon adjustments employed in determining the
amount of the benefit described above, and shall be subject to adjustments which
reflect the Code Limitations with respect to the computation of benefits under
the Pension Plan. No Supplemental Retirement Benefit shall be payable to any
Participant or Beneficiary unless, at the time of the Participant's termination
of employment with the Employers and their affiliates, the Participant has been
credited with at least five Years of Vesting Service under the Pension Plan;
provided, however, that, in the event of a Change in Control (as defined in
Section 5.3), all benefits accrued under the Plan as of the date such Change in
Control shall become fully and irrevocably vested and shall become distributable
to Participants (and
-4-
<PAGE>
Beneficiaries) at such time and in such manner pursuant to the provisions of the
Plan as in effect on the day immediately preceding the date of such Change in
Control.
4.2 Payment of Supplemental Retirement Benefit.
(a) Except as otherwise provided herein, the Supplemental
Retirement Benefit which a Participant or Beneficiary is eligible to
receive shall be paid by the Employers at the same time, in the same
form and subject to substantially the same conditions, as is the
benefit paid to such Participant or Beneficiary under the Pension Plan.
(b) To the extent provided by Section 4.4, the Employers may
purchase an annuity with respect to any portion of a Participant's or
Beneficiary's Supplemental Retirement Benefit in full satisfaction
thereof.
(c) The Employers may, in their sole discretion, distribute
the Supplemental Retirement Benefit of any Participant described in
Section 4.4(a) in a lump sum at the time of the Participant's
retirement.
(d) Notwithstanding any other provision of this Plan, a
Participant who, as of the Effective Date, was a Participant in and had
an accrued benefit under the ISI Supplemental Plans (or any Beneficiary
of such a Participant) shall not be entitled to any portion of his
Supplemental Retirement Benefit which is attributable to benefits
accrued under the ISI Supplemental Plans unless such Participant (or
Beneficiary, if applicable) agrees that his right to benefits
supplemental to those of the Pension Plan is limited to his rights
under this Plan and that he shall have no claim under or against the
ISI Supplemental Plans or against Inland Steel Industries, Inc. or any
of its affiliates for any benefits accrued under the ISI Supplemental
Plans.
(e) Notwithstanding any other provision of the Plan to the
contrary, if a Participant's or Beneficiary's Supplemental Retirement
Benefit is paid in a lump sum, such payment shall be in complete
satisfaction of all amounts otherwise payable to such Participant or
Beneficiary under the Plan and neither the Participant nor Beneficiary
shall have any further rights to benefits under the Plan (other than
benefits based on additional accruals of benefits (other than increases
described in Section 4.3) under the Pension Plan). Any optional form of
benefit payable under the Plan, including a lump sum, shall be the
actuarial equivalent of the benefit otherwise payable to the
Participant or Beneficiary, determined by applying the
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appropriate interest rate and other actuarial assumptions then set
forth in the Pension Plan.
4.3 Pension Plan Increase.
In the event the Pension Plan is amended to increase the
benefit payable to participants or beneficiaries then receiving benefits under
the Pension Plan, benefits payable under the Plan shall be adjusted or commenced
accordingly for Participants or Beneficiaries; provided that no such adjustment
shall be made if the Participant or Beneficiary received a single sum
distribution under the Plan; and provided, further, that no such adjustment
shall be made with respect to any portion of a Participant's or Beneficiary's
Supplemental Retirement Benefit for which an annuity has been purchased pursuant
to Section 4.4.
4.4 Purchase of Annuities.
The Employers shall not be obligated to purchase an annuity for any
Participant or for any portion of a Participant's Supplemental Retirement
Benefit, notwithstanding the purchase of an annuity with respect to any other
Participant or any other portion of the Participant's Supplemental Retirement
Benefit. The purchase of annuities under the Plan shall be governed by the
following:
(a) The purchase of annuities under this Section 4.4 shall be
limited to Supplemental Retirement Benefits payable to Participants who
meet all of the following requirements:
(i) completion of at least five years of Vesting
Service under the Pension Plan;
(ii) annual compensation in excess of $150,000; and
(iii) attainment of age 55.
(b) Any annuity purchased with respect to any Participant's
Supplemental Retirement Benefit shall be issued to and distributed to
such Participant, who shall be the sole owner of such annuity and shall
contain such terms not inconsistent with this Section 4.4 as the
Committee shall determine in its sole discretion.
(c) Annuity payments to a Participant under any annuity
purchased pursuant to this Section 4.4 shall commence as of the date on
which the Participant attains age 65 or the first day of the month
thereafter; provided, however, that any such annuity may provide that,
in the event of the Participant's death prior to attainment of age
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65, benefits payable to any Beneficiary may commence as of any earlier
date provided by the terms of the annuity.
(d) The monthly benefit amount to be provided by any annuity
purchased pursuant to this Section 4.4 shall be such amount as the
Committee, in its sole discretion, determines would provide, on an
after-tax basis, an amount equal to the amount estimated to be the
after-tax benefit to the Participant of monthly benefits payable by the
Employers under Section 4.2, commencing at the Participant's age 65.
Such determination shall be made by the Committee, in its sole
discretion, based upon such rates and factors as the Committee, in its
sole discretion, deems appropriate. No change in annuity benefits shall
be required by reason of any subsequent change in such rates and
factors; provided, however, that in determining the amount of any
subsequent annuity purchased under this Section 4.4, the Committee may,
in its sole discretion, take into account any change in such rates and
factors and the benefits payable under any annuity previously purchased
under this Section 4.4. Notwithstanding the foregoing, with the consent
of the Participant, the Committee may substitute any form of fixed or
variable annuity in lieu of the annuity otherwise provided by this
paragraph (d), provided that such substitution does not result in a
change in the cost of the annuity or the commencement date of the
annuity payments.
(e) The Company shall make a tax gross-up payment to any
Participant for whom an annuity is purchased under this Section 4.4 in
such amount as the Committee shall determine, in its sole discretion,
would be necessary to make such Participant whole for federal, state
and local income taxes attributable to the receipt of the annuity and
the gross-up payment, based upon such tax rates as the Committee shall
determine in its sole discretion.
(f) To the extent that the Company has purchased an annuity
under this Section 4.4 with respect to any portion of a Participant's
Supplemental Retirement Benefit, such annuity and the tax gross-up
payment under paragraph (e) above shall be in full satisfaction of all
obligations of the Employers to the Participant or his Beneficiary
attributable to such portion of the Participant's Supplemental
Retirement Benefit.
(g) A purchase of an annuity under this Section 4.4 shall have
no effect on the monthly benefits payable to the Participant under
Sections 4.1 and 4.3 prior to the Participant's attainment of age 65.
In the event of the Participant's death prior to attainment of age 65,
the benefit payable to any Beneficiary of the Participant shall
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<PAGE>
be determined solely on the basis of the monthly benefits which would
otherwise have been payable to the Participant under the Plan prior to
attainment of age 65 and taking into account the amount payable to the
Beneficiary under the Pension Plan.
(h) If an annuity has not been purchased in accordance with
the foregoing provisions of this Section 4.4 with respect to any
portion of the Supplemental Retirement Benefit payable after attainment
of age 65 to a Participant who meets all of the requirements of
paragraph (a) above then, except for any portion payable in the form of
a lump sum in accordance with Section 4.2, upon such Participant's
termination of employment with the Employers and their affiliates, the
Company may purchase an annuity for such portion in accordance with
paragraphs (b) through (g) above.
ARTICLE 5
5.1 Amendment to Conform with Law.
The Company may make such changes in, additions to, and
substitutions in the provisions of the Plan, to take effect retroactively or
otherwise, as deemed necessary or advisable for the purpose of conforming the
Plan to any present or future law relating to plans of this or a similar nature,
and to the administrative regulations and rulings promulgated thereunder.
5.2 Other Amendments and Termination.
The Company may amend or terminate the Plan at any time,
without the consent of any Participant or Beneficiary; provided, however, that:
(a) the provisions of Section 5.3 may not be amended after the
date of a Change in Control without the written consent of a majority
in both number and interest of the Participants in the Plan, other than
those Participants who are both (i) not employed by the Company and its
affiliates (collectively "RTI") as of the date of the Change in
Control, and (ii) not receiving nor could have commenced receiving
benefits under the Pension Plan as of the date of the Change in
Control, both immediately prior to the Change in Control and at the
date of such amendment; and
(b) the Plan shall not be amended or terminated so as to
reduce or cancel the benefits which have accrued to a Participant or
Beneficiary prior to the later of the date of adoption of the amendment
or termination or the effective date thereof, and in the event of such
amendment or
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<PAGE>
termination, any such accrued benefit hereunder shall not be reduced or
cancelled.
Notwithstanding the provisions of paragraph (b) next above, in the event the
Pension Plan is terminated or curtailed with the result that pension payments to
retired employees and survivor and contingent annuity payments to beneficiaries
are discontinued or reduced the Supplemental Retirement Benefit then being
paid or in the future payable pursuant to the Plan shall similarly be
discontinued or reduced in the same ratio as payments under the Pension Plan are
discontinued or reduced.
5.3 Manner and Form of Amendment or Termination.
Any amendment or termination of the Plan by the Company shall
be made by action of the Board of Directors of the Company; provided, however,
that (i) the Treasurer of the Company, and (ii) the Vice President-Human
Resources of the Company (or such other person as designated by the Chairman of
the Board of Directors of the Company) are jointly authorized, by written action
signed by both individuals, to adopt and place in effect any amendments to the
Plan and any related documents as they jointly deem necessary or advisable:
(a) to maintain the Plan and any related documents in compliance with
applicable law;
(b) to relieve administrative burdens with respect to those
documents;
(c) to conform the Plan to the provisions of any applicable
collective bargaining agreement; or
(d) to provide for other changes in the best interests of
Participants and Beneficiaries.
without the necessity for further action by the Board of Directors of the
Company or subsequent ratification: provided, however, that any action or
amendment that would have the effect of:
(i) terminating the Plan;
(ii) changing the structure of the Committee under which the Plan
is administered;
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<PAGE>
(iii) authorizing an Affiliate to adopt the Plan;
(iv) materially changing the benefits under the Plan; or
(v) materially increasing anticipated costs associated with
the Plan by more than $15 million, except for changes
to comply with applicable law;
may not be made without approval or ratification by the Board of Directors of
the Company.
Notwithstanding the foregoing, either of the Board of Directors of the Company
or the Chairman of the Company may from time to time authorize another officer
or officers to adopt and place into effect (without the further need for Board
authorization) amendments to the Plan and any related documents within the
parameters set forth in subparagraphs (a) through (d) above and subject to the
limitations in subparagraphs (i) through (v) above. If and to the extent the
Board or the Chairman does so authorize other officer(s), that officer or those
officers will have the powers described above in this Section 5.3. Certification
of any amendment or termination of the Plan shall be furnished to the Committee
by the Company.
5.4 Notice of Amendment or Termination.
The Committee shall notify Participants or Beneficiaries who are
affected by any amendment or termination of the Plan within a reasonable time
thereof.
5.5 Change in Control. For purposes of this Section 5.5, a "Change in
Control" shall be deemed to have occurred if:
(a) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), other than (i) the Company and its affiliates (collectively
referred to herein as "RTI"), (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of RTI, (iii) an underwriter
temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly
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<PAGE>
or indirectly, of securities of the Company (not including in the
securities beneficially owned by such person any securities acquired
directly from RTI) representing 40% or more of the combined voting
power of the Company's then outstanding securities;
(b) during any period of two consecutive years individuals who
at the beginning of such period constitute the Board of Directors of
the Company and any new director (other than a director designated by a
person who has entered into an agreement with the Company to effect a
transaction described in paragraphs (a), (c) or (d) of this Section
5.5, whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute
a majority thereof;
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (i)
a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) in combination with the
ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of RTI, at least 60% of the combined voting power
of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or (ii) a
merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no person acquires more than
50% of the combined voting power of the Company's then outstanding
securities; or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets.
A Change in Control shall also be deemed to occur with respect to any
Participant or Beneficiary for purposes of the Plan if there occurs:
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<PAGE>
(1) a sale or disposition, directly or indirectly, other than
to a person described in clause (i), (ii) or (iii) of paragraph (a)
next above, of securities of the Participant's employer, any direct or
indirect parent company of the Participant's employer or any company
that is a subsidiary of the Participant's employer and is also a
significant subsidiary (as defined below) of the Company (the
Participant's employer and such a parent or subsidiary being a "Related
Company"), representing 50% or more of the combined voting power of the
securities of such Related Company then outstanding;
(2) a merger or consolidation of a Related Company with any
other corporation, other than a merger or consolidation which would
result in 50% or more of the combined voting power of the surviving
company being beneficially owned by a majority owned direct or indirect
subsidiary of the Company; or
(3) the sale or disposition of all or substantially all the
assets of a Related Company to a person other than a majority owned
direct or indirect subsidiary of the Company.
Notwithstanding the foregoing, no Change in Control shall be deemed to
have occurred with respect to a Participant for purposes of the Plan if (I) such
transaction includes or involves a sale to the public or a distribution to the
stockholders of the Company of more than 50% of the voting securities of the
Participant's employer or a direct or indirect parent of the Participant's
employer, and (II) the Participant's employer or a direct or indirect parent of
the Participant's employer agrees to become a successor to the Company under an
individual agreement between the Company and the Participant or the Participant
is covered by an agreement providing for benefits upon a change in control of
his or her employer following an event described clauses (1), (2) or (3) next
above. For purposes of the Plan, the term "significant subsidiary" has the
meaning given to such term under Rule 405 of the Securities Act of 1933, as
amended.
ARTICLE 6
6.1 No Right to Employment.
Neither the creation of the Plan nor anything contained herein
shall be construed as giving any Participant hereunder or
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<PAGE>
other employees of the Employers any right to remain in the employ of the
Employers or any affiliate thereof.
6.2 Successors and Assigns.
All rights and obligations of this Plan shall inure to, and be
binding upon the successors and assigns of the Company.
6.3 Inalienability.
Except so far as may be contrary to the laws of any state having
jurisdiction in the premises, a Participant or Beneficiary shall have no right
to assign, transfer, hypothecate, encumber, commute or anticipate his interest
in any payments under the Plan and such payments shall not in any way be subject
to any claim against any Participant or Beneficiary.
6.4 Incompetency.
If any Participant or Beneficiary is, in the opinion of the
Committee, legally incapable of giving a valid receipt and discharge for any
payment, the Committee may, at its option, direct that such payment or any part
thereof be made to such person or persons who in the opinion of the Committee
are caring for and supporting such Participant or Beneficiary, unless it has
received due notice of claim from a duly appointed guardian or conservator of
the estate of the Participant or Beneficiary. A payment so made will be a
complete discharge of the obligations under this Plan to the extent of and as to
that payment, and neither the Committee nor the Employers will have any
obligation regarding the application of the payment.
6.5 Controlling Law.
To the extent not preempted by the laws of the United States of
America, the laws of the State of Illinois shall be the controlling state law in
all matters relating to the Plan.
6.6 Severability.
If any provisions of the Plan shall be held illegal or invalid for
any reason, the illegality or invalidity shall not affect the remaining parts of
the Plan, but the Plan shall be construed and enforced as if the illegal and
invalid provisions never had been included herein.
6.7 Limitations on Provisions.
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<PAGE>
The provisions of the Plan and any Supplemental Retirement
Benefits shall be limited as described herein. Any benefit payable under the
Pension Plan shall be paid solely in accordance with the terms and provisions of
the Pension Plan, as appropriate, and nothing in the Plan shall operate or be
construed in any way to modify, amend, or affect the terms and provisions of the
Pension Plan.
6.8 Gender and Number.
Whenever the context requires or permits, the gender and
number of words shall be interchangeable.
ARTICLE 7
7.1 Application for Benefits and Review Procedures.
The Claims Procedure set forth in the Pension Plan shall apply
to any claim for benefits under the Plan. The "Plan Administrator" for purposes
of applying such Claims Procedure to this Plan shall be the Committee.
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<PAGE>
EXHIBIT 10.2
As adopted 7-23-97
RYERSON TULL, INC.
ANNUAL PERFORMANCE IMPROVEMENT INCENTIVE PLAN
1. Purpose
The purpose of the Ryerson Tull, Inc. Annual Performance Improvement
Incentive Plan (the "Plan") is to promote the interests of Ryerson Tull, Inc.
(the "Company") and its stockholders by (i) attracting and retaining salaried
employees of outstanding ability; (ii) strengthening the Company's capability to
develop, maintain and direct a competent employee population; (iii) motivating
salaried employees, by means of performance-related incentives, to achieve
financial rewards; (iv) providing annual incentive compensation opportunities
which are competitive with those of other major corporations; and (v) enabling
salaried employees to participate in the growth and financial success of the
Company.
2. Definitions
"Affiliate" means any corporation or other entity which is not a Subsidiary
but as to which the Company possesses a direct or indirect ownership interest
and has power to exercise management control.
"Award" means an amount for an Award Period determined to be payable to a
Participant under the Plan.
"Award Period" means such calendar quarters or calendar years as the
Committee may establish from time to time with respect to any applicable salary
grade designation, to any Corporate Unit or to a combination of these factors.
"Award Schedule" means the schedule to be used for determining Awards as
established by the Committee and set forth in the Addendum to the Plan
applicable to the Corporate Unit covered thereby.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation Committee of the Board of Directors of
the Company.
"Corporate Unit" means the Company, Joseph T. Ryerson & Son/East, Joseph T.
Ryerson & Son/Central, Joseph T. Ryerson & Son/West, Ryerson Coil Processing,
J.M. Tull Metals Company, Inc., Inland Industries de Mexico, S.A. de C.V., and
any Affiliate, other Subsidiary or any division or group of the Company or any
Subsidiary designated as a Corporate Unit from time to time by the
<PAGE>
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Committee of the Company.
"Employee" means an employee eligible to be designated as a Participant in
the Plan.
"Named Executive Officer" means a Participant who is one of the group of
"covered employees" as defined in the regulations promulgated under Section
162(m) of the Code.
"Participant" means an Employee who is designated by the Committee to be
eligible to receive an Award under the Plan.
"Performance-Based Exception" means the performance-based exception from
the deductibility limitations as set forth in Section 162(m) of the Code.
"Subsidiary" means any corporation in which the Company possesses directly
or indirectly more than fifty percent (50%) of the total combined voting power
of all classes of its stock.
"Target Award" means the percentage of a Participant's base salary earnings
or base annual salary for an Award Period as established by the Committee
pursuant to paragraph 6 of the Plan and set forth in the Addendum to the Plan
applicable to the Corporate Unit in which such Participant is employed.
"Threshold" means the minimum financial performance (established by the
Committee and set forth in the Addendum to the Plan applicable to such Corporate
Unit) required by a Corporate Unit before an Award may be paid to a Participant
employed in such Corporate Unit.
3. Administration
The Plan shall be administered by the Committee. No member of the Committee
shall be eligible to receive an Award while serving on the Committee. The
Committee shall have the authority to interpret the Plan and to establish, amend
and rescind rules and regulations for the administration of the Plan, and all
such interpretations, rules and regulations shall be conclusive and binding on
all persons. In addition, the Committee may delegate to one or more senior
executive officers of the Company the right to administer the Plan as it
pertains to employees who are not officers of the Company or of any other
Corporate Unit. Subject to the provisions of paragraph 7 hereof, the Committee
may impose such conditions on participation in and Awards under the Plan as it
deems appropriate.
4. Eligibility
Except as otherwise provided by the Committee and subject to paragraph 9
hereof, all full-time salaried employees of a Corporate Unit as of the first day
and the last day of an Award Period are eligible to be designated as
Participants in the Plan for such Award Period; provided, however, that,
<PAGE>
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with respect to Award Periods that extend for at least one year, individuals who
are full-time salaried employees of a Corporate Unit on August 1 of the first
year of the Award Period and the last day of the Award Period shall also be
eligible to be designated as Participants in the Plan for such Award Period.
Notwithstanding the foregoing, the Committee may adopt criteria restricting the
number of full-time salaried employees of a Corporate Unit eligible to be
designated as Participants in the Plan for any Award Period, which criteria
shall be set forth in the Addendum to the Plan applicable to such Corporate
Unit.
5. Designation of Participants
The Committee shall determine and designate from time to time those
Employees who shall be Participants. The designation of an Employee as a
Participant in the Plan for any Award period shall not bestow upon such Employee
any right to receive an Award for such Award Period or the right to be
designated as a Participant for any subsequent Award Period.
6. Individual Award Opportunity
For each Award Period, the Committee shall establish for each Participant a
Target Award, expressed as a percentage of his or her base salary earnings or
base annual salary for such Award Period, on the basis of his or her salary
grade designation.
7. Determination of Awards
Awards for each Award Period for Participants in each Corporate Unit shall
be determined in accordance with the Award Schedule established by the Committee
for such Corporate Unit. No Award shall be paid to any Participant in a
Corporate Unit for any Award Period in which the performance of such Corporate
Unit does not equal or exceed the Threshold applicable to such Corporate Unit.
The Award for each Participant in a Corporate Unit shall be his or her Target
Award multiplied by the Percent Attainment (determined in accordance with the
applicable Award Schedule), subject to the following:
(a) Subject to paragraph 3 and the provisions of this paragraph 7, the
Committee may adjust such Award for individual performance on the basis of such
quantitative and qualitative performance measures and evaluations as it deems
appropriate.
(b) The Committee may make such adjustments as it deems appropriate in the
case of any Participant whose salary grade designation has changed during the
applicable Award Period or who has been employed in more than one Corporate Unit
during an Award Period.
(c) Unless and until the Committee proposes for stockholder vote a change
in the general performance measures set forth in this paragraph 7(c), the
attainment of which may determine the
<PAGE>
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degree of payout with respect to Awards under the Plan which are designed to
qualify for the Performance-Based Exception, the performance measure(s) to be
used for purposes of such Awards shall be chosen from among the following
alternatives: return on operating assets, operating profit, return on equity,
net income, stock price, revenue growth, expense management, inventory
management, quality management, customer service performance, shareholder
return, gross margin management and market share improvement. The Committee
shall have the discretion to establish performance goals based upon the
foregoing performance measures and to adjust such goals and the methodology used
to measure the determination of the degree of attainment of such goals;
provided, however, that Awards under the Plan that are intended to qualify for
the Performance-Based Exception and that are issued to or held by any Named
Executive Officer may not be adjusted in a manner that increases such Award. The
Committee shall retain the discretion to adjust such Awards in a manner that
does not increase such Awards. Furthermore, the Committee shall not make any
adjustment to Awards under the Plan issued to or held by any Named Executive
Officer that are intended to comply with the Performance-Based Exception if the
result of such adjustment would be the disqualification of such Award under the
Performance-Based Exception. In the event that applicable laws change to permit
the Committee greater discretion to amend or replace the foregoing performance
measures applicable to Awards to Named Executive Officers without obtaining
stockholder approval of such changes, the Committee shall have sole discretion
to make such changes without obtaining such approval. In addition, in the event
that the Committee determines that it is advisable to grant Awards under the
Plan to Named Executive Officers that may not qualify for the Performance-Based
Exception, the Committee may make such grants upon any performance measures it
deems appropriate with the understanding that they may not satisfy the
requirements of Section 162(m) of the Code.
Notwithstanding any other provision of the Plan, in no event may a
Participant be paid an Award in any calendar year in excess of $2,000,000. No
segregation of any moneys or the creation of any trust or the making of any
special deposit shall be required in connection with any awards made or to be
made under the Plan.
8. Payment of Awards
Awards shall be paid in cash as soon as practicable after the end of the
Award Period for which the Award is made. If a Participant to whom an Award has
been made dies prior to the payment of the Award, such Award shall be delivered
to his or her legal representative or to such other person or persons as shall
be determined by the Chairman, the President, the Chief Executive Officer or the
Vice President-Human Resources of the Company. The Company or other applicable
Corporate Unit shall have the right to deduct from all Awards payable under the
Plan any taxes required by law to be withheld by the Company or other Corporate
Unit with respect thereto; provided, however, that to the extent provided by the
Committee, any payment under the Plan may be deferred and to the extent
deferred, may be credited with an interest or earnings factor as determined by
the Committee.
<PAGE>
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9. Termination of Employment
Except in the case of death, disability, normal retirement (determined in
accordance with the qualified retirement plans of the Corporation) or release
(determined in accordance with the Inland Steel Industries Severance Pay Plan
for Eligible Salaried Employees or any successor or substituted plan) or except
as provided in paragraph 10, a Participant must be an employee as of the end of
the Award Period in order to be eligible for an Award.
10. Change of Control
In the event of a Change of Control of the Company (as hereinafter
defined), the Plan shall remain in full force and effect for the remainder of
any Award Period (or, if longer, the remainder of the calendar year) during
which such Change of Control of the Company occurs, and each Participant shall
receive an Award for such Award Periods (or any Award Periods occurring in such
calendar year), at least equal to his or her Target Awards, regardless of
whether or not Awards would otherwise have been payable under the Plan for such
Award Periods and regardless of whether or not such Participant was an Employee
at the end of any such Award Period. A "Change of Control of the Company" shall
be deemed to have occurred if there shall have been a change in the composition
of the Board of Directors of the Company such that a majority of the Board of
Directors shall have been members of the Board of Directors for less than 24
months, unless the election of each new director who was not a director at the
beginning of the 24 month period was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of
such period.
11. Transferability
Any payment to which a Participant may be entitled under the Plan shall be
free from the control or interference of any creditor of such Participant and
shall not be subject to attachment or susceptible of anticipation or alienation.
The interest of a Participant shall not be transferable except by will or the
laws of descent and distribution.
12. No Right to Participate; Employment
Neither the adoption of the Plan nor any action of the Committee shall be
deemed to give any Employee any right to be designated as a Participant under
the Plan. Further, nothing contained in the Plan, nor any action by the
Committee or any other person hereunder, shall be deemed to confer upon any
Employee any right of continued employment with any Corporate Unit or to limit
or diminish in any way the right of any Corporate Unit to terminate his or her
employment at any time with or without cause.
<PAGE>
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13. Nonexclusivity of the Plan
This Plan is not intended to and shall not preclude the Board of Directors
of the Company from adopting or continuing such additional compensation
arrangements as it deems desirable for Participants under this Plan, including
any thrift, savings, investment, stock purchase, stock option, profit sharing,
pension, retirement, insurance or other incentive, compensation or benefit plan
or program.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED STATEMENT OF OPERATIONS, THE CONSOLIDATED BALANCE SHEET, AND
THE SUMMARY OF STOCKHOLDERS' EQUITY CONTAINED IN THE QUARTERLY REPORT ON FORM
10-Q TO WHICH THIS EXHIBIT IS ATTACHED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL SCHEDULES
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 345,100
<ALLOWANCES> 8,400
<INVENTORY> 427,300
<CURRENT-ASSETS> 777,200
<PP&E> 531,700
<DEPRECIATION> 255,300
<TOTAL-ASSETS> 1,205,100
<CURRENT-LIABILITIES> 390,700
<BONDS> 257,000
<COMMON> 39,300
0
0
<OTHER-SE> 372,300
<TOTAL-LIABILITY-AND-EQUITY> 1,205,100
<SALES> 2,106,400
<TOTAL-REVENUES> 2,106,400
<CGS> 1,865,000
<TOTAL-COSTS> 1,865,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,100
<INCOME-PRETAX> 78,000
<INCOME-TAX> 31,000
<INCOME-CONTINUING> 47,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,000
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 1.20
</TABLE>
