<PAGE>
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 QUARTER ENDED MARCH 30, 1996
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 1-3258
LUKENS INC.
50 South First Avenue
Coatesville, PA 19320-0911
(610) 383-2000
Incorporated in Delaware
I.R.S. Employer Identification Number 23-2451900
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
SHARES OUTSTANDING AS OF MAY 4, 1996
Common Stock, $.01 Par Value, 14,779,052
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars and shares in thousands except per share amounts)
<TABLE>
<CAPTION>
FIRST QUARTER
Thirteen Weeks Ended
March April
30, 1996 1, 1995
----------- ----------
<S> <C> <C>
NET SALES $ 264,172 259,957
OPERATING COSTS AND EXPENSES
Cost of products sold 252,464 228,687
Selling and administrative expenses 14,824 14,287
----------- ----------
Total operating costs and expenses 267,288 242,974
OPERATING EARNINGS (LOSS) (3,116) 16,983
Interest expense 3,850 2,360
----------- ----------
EARNINGS (LOSS) BEFORE INCOME TAXES (6,966) 14,623
Income tax expense (benefit) (2,591) 5,527
----------- ----------
NET EARNINGS (LOSS) $ (4,375) 9,096
=========== ==========
Dividend requirements for preferred stock (496) (490)
----------- ----------
NET EARNINGS (LOSS) APPLICABLE TO COMMON STOCK $ (4,871) 8,606
=========== ==========
EARNINGS (LOSS) PER COMMON SHARE
Primary $ (.33) .58
Fully diluted $ (.33) .55
COMMON SHARES AND EQUIVALENTS OUTSTANDING
Primary 14,757 14,752
Fully diluted 16,300 16,325
CASH DIVIDENDS ON COMMON STOCK - PER SHARE $ .25 .25
</TABLE>
The accompanying notes are an integral part of these statements.
1
<PAGE>
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March December
30, 1996 30, 1995
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 10,424 11,056
Receivables, less allowance of $6,990 in 1996 and $6,632 in 1995 128,391 130,601
Inventories
Products finished and in process 145,673 131,886
Raw materials 30,125 26,240
Supplies 5,117 4,999
------------- -------------
180,915 163,125
Deferred income taxes 8,311 8,442
Prepaid expenses and other 1,160 1,667
------------- -------------
Total current assets 329,201 314,891
PLANT AND EQUIPMENT (NOTE 2) 928,437 908,379
Less accumulated depreciation 390,244 378,947
------------- -------------
Net plant and equipment 538,193 529,432
INTANGIBLE ASSETS, net of accumulated amortization of $7,586 in 1996
and $7,076 in 1995 (Note 2) 82,068 57,861
DEFERRED INCOME TAXES 18,655 16,301
OTHER ASSETS 1,252 1,178
------------- -------------
Total Assets $ 969,369 919,663
============= =============
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES
Accounts payable $ 118,436 121,923
Accrued employment costs 33,525 53,688
Other accrued expenses 23,009 22,209
Current maturities of long-term debt 10,501 10,850
------------- -------------
Total current liabilities 185,471 208,670
LONG-TERM DEBT 268,183 217,339
RETIREMENT BENEFITS
Pensions 65,287 39,275
Medical and life insurance 148,001 146,401
OTHER LIABILITIES 10,018 9,259
------------- -------------
Total liabilities 676,960 620,944
COMMITMENTS AND CONTINGENCIES (NOTE 5)
STOCKHOLDERS' INVESTMENT
Series preferred stock, 1,000,000 shares authorized
Series B ESOP convertible preferred 29,607 29,665
(493,459 shares outstanding in 1996 and 494,413 in 1995)
Common stock, 40,000,000 shares authorized and 15,813,259 issued (Note 3) 158 158
Capital in excess of par value 85,699 85,204
Earnings invested 208,368 216,934
Foreign currency translation adjustments (1,072) (1,141)
Deferred compensation - ESOP (18,120) (19,404)
Repurchased stock, at cost (1,037,700 shares in 1996 and 1,077,305 in 1995) (12,231) (12,697)
------------- -------------
Total stockholders' investment 292,409 298,719
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $ 969,369 919,663
============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
FIRST QUARTER
Thirteen Weeks Ended
March April
30, 1996 1, 1995
----------- ------------
<S> <C> <C>
OPERATING ACTIVITY
Net earnings (loss) $ (4,375) 9,096
Adjustments to Reconcile Net Earnings (Loss) to
Cash Flow Used for Operating Activity
Depreciation and amortization 11,910 10,534
Income taxes deferred (2,223) 1,400
Provision for uncollectible accounts 1,666 2,398
Retirement benefit funding less than expense 3,665 3,628
Changes in working capital affecting operations
Accounts receivable 544 (20,105)
Inventories (17,790) (16,017)
Prepaid expenses and other 507 375
Accounts payable (3,486) 12,896
Accrued expenses (19,804) (17,349)
Other, net 727 (333)
----------- ------------
Cash flow used for operating activity (28,659) (13,477)
FINANCING ACTIVITY
Long-term debt
Proceeds from issuance of notes 74,538 -
Other borrowed - 47,550
Other repaid (22,783) (2,447)
Dividends paid (4,279) (4,277)
Proceeds from stock options exercised 802 -
Other, net (501) (9)
----------- ------------
Net from financing activity 47,777 40,817
INVESTING ACTIVITY
Capital expenditures (19,648) (25,262)
Proceeds from sale of assets/subsidiaries 363 17
Other, net (465) (3,947)
----------- ------------
Net for investing activity (19,750) (29,192)
CASH AND CASH EQUIVALENTS
Increase (decrease) (632) (1,852)
Start of period 11,056 9,806
----------- ------------
End of period $ 10,424 7,954
=========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
1. BASIS OF PRESENTATION
The financial statements are unaudited but reflect all adjustments
(consisting of normal recurring accruals) which are, in the opinion of
management, necessary to a fair statement of the results for the interim
periods presented. The preparation of our financial statements in
conformity with generally accepted accounting principles requires estimates
and assumptions that affect the reported amounts and contingency
disclosures. These financial statements should be read in conjunction with
the financial statements and related notes in the 1995 Annual Report to
Stockholders. Results from any interim period are not necessarily
indicative of the results for a full year.
2. ACCOUNTING CHANGES
In 1996, Lukens adopted Statement of Financial Accounting Standards (SFAS)
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of." This statement requires review and
measurement methods to calculate impairment of long-lived assets, including
certain identifiable intangible assets and goodwill. The statement also
requires that long-lived assets to be disposed of be reported at the lower
of the carrying amount or fair value less costs to sell. The adoption of
the statement, based on conditions existing at the beginning of the year,
did not require a write-down of assets.
In 1996, Lukens will also adopt SFAS No. 123, "Accounting for Stock-Based
Compensation." This statement provides for an implementation option,
reflecting the controversy surrounding the measurement of compensation
expense for stock options and other stock-based compensation. One option
is to recognize compensation expense in the consolidated financial
statements using a fair-value based method, applied to virtually all stock-
based compensation. The alternative would not change the current
intrinsic-value approach to expense recognition, but would require pro
forma disclosure in the notes to the consolidated financial statements
using the fair-value method. We plan on adopting the pro forma disclosure
option in the 1996 Annual Report to Stockholders, which will not have a
material effect on our consolidated financial condition or results of
operations.
3. STOCK OPTIONS
At the Annual Meeting of Stockholders on April 24, 1996, stockholders
approved an amendment to the 1985 Stock Option and Appreciation Plan that
increased the number of shares of common stock available for issuance by
900,000 to a maximum of 2,737,500.
4. BUSINESS GROUP REPORTING
With the continued integration of our facilities, effective in 1996
business group results are reported on a product line basis. The new
groups are the Carbon & Alloy Group and the Stainless Group. Prior year
results have been restated to conform with these business groups.
4
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5. COMMITMENTS AND CONTINGENCIES
The company is party to various claims, disputes, legal actions and other
proceedings involving product liability, contracts, equal employment
opportunity, occupational safety, environmental issues and various other
matters. In the opinion of management, the outcome of these matters should
not have a material adverse effect on the consolidated financial condition
or results of operations of the company.
6. SUBSEQUENT EVENT
During the second quarter of 1996, a work force reduction program was
announced. A charge estimated at $11,000 will be recognized primarily for
severance and other benefit costs associated with the elimination of
approximately 150 salaried positions. On an after-tax basis, the charge
will be approximately $7,000.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
(Dollars in thousands)
CHANGES IN FINANCIAL CONDITION DURING
THE THIRTEEN WEEKS ENDED MARCH 30, 1996
CAPITAL STRUCTURE
Cash and cash equivalents totaled $10,424 at the end of the first quarter, a
decrease of $632 from the end of 1995. Working capital of $143,730 was up
$37,509 from the balance at the end of 1995. Higher inventory partially
contributed to the working capital increase. In addition, incentive
compensation, related to prior-year results, was paid during the first quarter,
which lowered accrued employment costs. The current ratio was 1.8 compared to
1.5 at year-end 1995.
Included in intangible assets and retirement benefits - pensions was $25,570 of
pension minimum liabilities recognized during the first quarter. The additional
minimum liabilities resulted from a new labor contract for the Coatesville,
Pennsylvania, facility.
Debt at the end of the first quarter was $278,684, an increase of $50,495 from
the beginning of the year. The increase reflected the issuance of $75,000 of
Medium-Term Notes, Series A, under a $100,000 shelf registration completed in
June 1994. The notes are due in February 2006 and are rated BBB+ by Standard
and Poor's and Baa2 by Moody's. Interest is paid semi-annually and the notes
carry a coupon rate of 6.5 percent with an effective rate of 6.585 percent. Net
proceeds were primarily used to repay the outstanding balance of revolving
credit agreements. The ratio of long-term debt to capital (long-term debt plus
stockholders' investment) was 47.8 percent, which compared to 42.1 percent at
year-end 1995.
At the Annual Meeting of Stockholders on April 24, 1996, stockholders approved a
900,000 increase in the number of shares of common stock available for issuance
under the 1985 Stock Option and Appreciation Plan, increasing the total to
2,737,500.
LIQUIDITY
Operating activity required cash of $28,659 compared to 1995 first quarter cash
required for operations of $13,477. Higher cash requirements in 1996 were
primarily due to lower results. First quarter incentive compensation payments,
related to prior-year results, had a negative impact on cash flow from
operations in both years.
Financing activity generated $47,777. Proceeds from the issuance of the notes
discussed in the Capital Structure section above were offset by net repayments
of $22,783 and dividend payments of $4,279. Investing activity required
$19,750, primarily for capital expenditures of $19,648.
6
<PAGE>
Second quarter results will be impacted by an estimated $11,000 pre-tax charge
for a recently announced work force reduction program. Almost half of the
charge represents pension-related severance benefits that will be funded through
pension plan assets.
Improving cash flow from operations in 1996 to reach the 1995 level is dependent
on improving earnings and reducing inventory. Earnings in the second half of
the year are anticipated to improve. Higher selling prices in the Carbon &
Alloy Group, and benefits from the Steckel Mill Advanced Rolling Technology
(SMART/(R)/) system and wide anneal & pickle (A&P) line projects are all
expected to be positive factors.
During the first quarter, stainless hot bands were produced and wide, light-
gauge carbon plate products were released for commercial production on the SMART
system. The wide A&P line project is still expected to be ready for production
in the second half of 1996.
Order backlog was $166,200 at the end of the first quarter, which was 23 percent
higher than year-end 1995 order backlog and 24 percent lower than at the same
time last year.
In the long term, Lukens relies on the ability to generate sufficient cash flows
from operating activity to fund investing and financing requirements and to
maintain a target long-term debt-to-capital ratio of 35 percent. Because of our
aggressive capital expenditure program, we continue to exceed our target long-
term debt-to-capital ratio. The projected benefits of the program should
improve cash flow from operations and enable us to reach our target in the long
term.
RESULTS OF OPERATIONS FOR THE QUARTERS ENDED
MARCH 30, 1996 AND APRIL 1, 1995
OPERATING RESULTS
The first quarter operating loss of $3,116 compared to operating earnings of
$16,983 in the first quarter of 1995. The Carbon & Alloy Group reported a loss
for the first quarter. Results were impacted by higher utility costs caused by
severe weather and signing bonuses associated with the new labor agreement. The
Stainless Group also reported lower results due to reduced cold-rolled shipments
and higher raw material costs.
Sales for the first quarter were $264,172, up 2 percent from 1995 sales of
$259,957. Most of the increase in sales resulted from higher shipments in the
Carbon & Alloy Group, partially offset by lower sales in the Stainless Group.
INTEREST EXPENSE
Interest expense of $3,850 was up 63 percent compared to 1995 expense of $2,360.
Approximately half of the increase resulted from lower capitalized interest in
1996. The remainder primarily related to higher debt levels in 1996 compared to
1995.
7
<PAGE>
INCOME TAX EXPENSE (BENEFIT)
The effective tax rate was 37.2 percent in 1996 and 37.8 percent in 1995.
NET EARNINGS (LOSS)
A net loss of $4,375 was recorded through the first quarter of 1996 compared to
net earnings of $9,096 for the same period in 1995.
<TABLE>
<CAPTION>
BUSINESS GROUP RESULTS
OPERATING
NET SALES EARNINGS (LOSS)
1Q 1996 1Q 1995 1Q 1996 1Q 1995
<S> <C> <C> <C> <C>
Carbon & Alloy $121,427 106,880 (5,660) 2,129
Stainless 142,745 153,077 6,585 19,939
Corporate - - (4,041) (5,085)
-------- ------- ------ ------
$264,172 259,957 (3,116) 16,983
======== ======= ====== ======
</TABLE>
CARBON & ALLOY GROUP
Net sales increased 14 percent. The increase was largely attributable to a 17
percent increase in shipments, particularly in the carbon steel product line.
Shipped tons were 168,900 tons in 1996 compared to 144,100 tons in 1995. Despite
the increase in shipments, sales were unfavorably impacted by a lower-value
shipment mix.
The group recorded a loss in the first quarter of 1996 primarily due to a $3,756
charge for signing bonuses associated with the new labor agreement at the
Coatesville, Pennsylvania, facility. Higher utility costs caused by severe
weather, strike preparation costs and an unfavorable shipment mix also
negatively impacted earnings. Results continued to be impacted by production
disruptions and expenses associated with the start-up of the SMART system.
STAINLESS GROUP
Weaker market conditions in the group's cold-rolled product line led to a 7
percent decrease in sales. The inventory corrections by our customers continued
through the first quarter, significantly reducing cold-rolled stainless
shipments and selling prices. A lower-value shipment mix combined with lower
selling prices also contributed to the decrease. Shipments increased 2 percent,
from 69,400 tons in 1995 to 71,000 tons in 1996.
Earnings were down 67 percent. Lower margins in the cold-rolled product line
combined with higher raw material costs contributed to the earnings erosion.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
Disclosures concerning the increase in the number of shares of common stock
available for issuance under the 1985 Stock Option and Appreciation Plan are
incorporated herein by reference from Item 4 below.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The issues listed below were voted upon at the Annual Meeting of Stockholders on
April 24, 1996.
. The directors listed below were elected for a term of three years.
<TABLE>
<S> <C>
Michael O. Alexander
Votes For: 12,435,636
Votes Withheld: 635,669
David B. Price, Jr.
Votes For: 12,435,525
Votes Withheld: 635,779
Joab L. Thomas
Votes For: 12,365,822
Votes Withheld: 705,483
</TABLE>
. An amendment to the 1985 Stock Option and Appreciation Plan was approved to
increase by 900,000 the number of shares of common stock authorized for
issuance under the Plan.
<TABLE>
<S> <C>
Votes For: 9,496,855
Votes Against: 1,491,303
Abstained: 166,030
Broker Non-Votes: 1,917,123
</TABLE>
ITEM 5. OTHER INFORMATION.
During the first quarter, David B. Price, Jr. was appointed to the Board of
Directors. He was subsequently elected to a three-year term on the Board as
indicated above in Item 4. Mr. Price, 50, is president of the Monsanto
Company's Performance Materials Division, based in St. Louis, Missouri.
9
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(10) Lukens Inc. 1985 Stock Option and Appreciation Plan, as amended
(11) Statement regarding computation of per share earnings
(27) Financial Data Schedule
(b) Reports on Form 8-K
During the first quarter ended March 30, 1996, three Reports on Form 8-K
were filed.
. On January 24, 1996, a report was filed for Item 5. Other Events.,
concerning 1995 results for the year and fourth quarter.
. On February 20, 1996, a report was filed for Item 5. Other Events. and
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits., concerning the issuance of notes under a shelf
registration.
. On March 20, 1996, a report was filed for Item 5. Other Events.,
concerning first quarter 1996 results.
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LUKENS INC.
May 9, 1996 JOHN C. VAN RODEN, JR.
----------------------
John C. van Roden, Jr.
Senior Vice President, Chief Financial Officer
and Treasurer
<PAGE>
Exhibit 10
LUKENS INC.
1985 STOCK OPTION AND APPRECIATION PLAN
AS AMENDED DECEMBER 17, 1986, FEBRUARY 25, 1987
APRIL 27, 1988, AUGUST 15, 1988, JANUARY 31, 1990
APRIL 28, 1993 AND APRIL 24, 1996
The Lukens, Inc. 1985 Stock Option and Appreciation Plan is hereby
amended and renamed the Lukens Inc. 1985 Stock Option and Appreciation Plan (the
"Plan). This Plan has been amended to conform to the changes in the law under
the Tax Reform Act of 1986, to reflect a deletion of the requirement of tender
of Shares by the Participant to the Company, to increase the number of Shares
issuable under the Plan, to reflect a three for two stock split effected August
15, 1988, and to provide for acceleration of Options upon a Change in Control.
The purpose of the Plan is to furnish an incentive to those officers
and other key employees who have demonstrated a capacity to contribute to the
success of the Company and its present or future subsidiaries by making
available to them a larger common stock ownership in the Company, to induce the
continued service of such employees, and to stimulate their efforts for the
continued success of the Company. Options granted under the Plan may be either
incentive stock options, as defined in Section 422A(b) of the Internal Revenue
Code of 1986, as amended (the "Code"), or options which do not meet the
requirements of said Section 422A(b) of the Code, herein referred to as non-
qualified stock options.
ARTICLE I. DEFINITIONS
-----------
1.1 As used in this Plan, the following definitions apply to the
terms indicated below:
(a) "Board" means the Board of Directors of Lukens Inc.
(b) "Change in Control" means any of the following events:
(i) Any "person" or "group" (as such terms are used in
Sections 3(a)(9), 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934,
as amended), considered together with its or their "affiliates" and "associates"
(as such terms are defined in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended), is or becomes the
beneficial owner (as defined in Rule 13d-3 of the General Rules and Regulations
under the Securities Exchange Act
<PAGE>
of 1934, as amended), or acquires or holds voting control, directly or
indirectly, of securities of the Company which, when considered together with
any other securities which by their terms are convertible, even if not then
convertible, represent twenty percent (20%) or more of the voting power of the
then outstanding securities of the Company; or
(ii) A change in the composition of a majority of the
Board within 24 months after any "person" or "group" (as such terms are used in
Sections 3(a)(9), 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934,
as amended), considered together with its or their "affiliates" or "associates"
(as such terms are defined in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended), is or becomes the
beneficial owner (as defined in Rule 13d-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended) or acquires or holds
voting control, directly or indirectly, of securities of the Company which, when
considered together with any other securities held by such person or group or
their affiliates or associates which by their terms are convertible, even if not
then convertible, represent twenty percent (20%) of the voting power of the then
outstanding securities of the Company; or
(iii) Any "person" or "group" (as such terms are used in
Section 3(a)(9), 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934,
as amended) commences a tender offer or exchange offer for securities of the
Company if, upon consummation thereof, the offeror, considered together with its
"affiliates" and "associates" (as such terms are defined in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended), would own or control, directly or indirectly, securities of the
Company which, when considered together with any other securities held by such
person or group or their affiliates or associates which by their terms are
convertible, even if not then convertible, represent thirty percent (30%) or
more of the voting power of the then outstanding securities of the Company.
The terms "person and "group", as used in this Section (b),
shall not include (i) the Company; (ii) any corporation in which the Company
owns, directly or indirectly, voting securities sufficient to elect at least a
majority of the directors of such corporation; (iii) any employee benefit plan
of the Company or of any corporation described in clause (ii) above; (iv) any
individual or entity organized, appointed or established by the Company for, or
pursuant to the terms of any employee benefit plan described in clause (iii)
above; and (v) a Participant. (as amended January 31, 1990)
2
<PAGE>
(c) "Committee" means the Committee appointed pursuant to
Section 9.1 of the Plan.
(d) "Company" means Lukens Inc.
(e) "Eligible Employee" means any employee, who on the date of
the granting of an Option hereunder, is an officer or other key employee of the
Company or of any Subsidiary Corporation and who, in the opinion of the
Committee, has demonstrated a capacity for contributing to the success of the
Company and its subsidiaries.
(f) "Option" means a right to purchase Shares granted pursuant
to the Plan and evidenced by an option certificate in such form as the Committee
may adopt for general use from time to time.
(g) "Participant" means an Eligible Employee to whom an Option
is granted pursuant to this Plan.
(h) "Plan" means the Lukens Inc. 1985 Stock Option and
Appreciation Plan.
(i) "Shares" mean shares of the Company's common stock, par
value $.01.
(j) "Subsidiary Corporation" means any corporation, as defined
in Section 425(f) of the Code, now or hereafter existing in which the Company
owns, directly or indirectly, in an unbroken chain of corporations, stock
possessing 50% or more of the total combined voting power of all classes of
stock of such corporation.
1.2 An Option shall be deemed "granted" under this Plan on the date
on which the Committee, by appropriate action, awards the Option to an Eligible
Employee, or on such subsequent date as the Committee may designate.
1.3 As used herein, the masculine includes the feminine and the
plural includes the singular.
1.4 For purposes of the Plan, the fair market value of the Shares on
a valuation date shall be the mean between the highest and lowest prices at
which the Company's stock was sold on the New York Stock Exchange on such date
(or if such date shall not be a business day, then the next preceding day which
shall be a business day), or if no sale takes place, then the mean between the
bid and asked prices on such date; if no bid and asked prices are quoted for
such date then such value as shall be determined by such method as the Committee
shall deem to reflect fair market value as of such date.
3
<PAGE>
ARTICLE II. SHARES SUBJECT TO THE PLAN
--------------------------
2.1 The aggregate number of Shares which may be delivered upon
exercise of Options granted under the Plan (including Shares delivered under
Section 4.7 hereof) shall not exceed 2,737,500, subject to appropriate
adjustment in the event the number of issued Shares shall be increased or
reduced by a change in par value, combination, split-up, merger,
reclassification, distribution of a dividend payable in stock, or the like.
Shares covered by Options which have lapsed or expired may again be optioned
pursuant to the Plan. (as amended April 27, 1988, August 15, 1988, April 28,
1993 and April 24, 1996)
ARTICLE III. GRANTS OF OPTIONS
-----------------
3.1 The Committee may, at any time during the term of the Plan, grant
to any Eligible Employee an Option to purchase any number of Shares, subject to
the limitation in Section 3.2 hereof.
3.2 With respect to incentive stock options granted prior to January
1, 1987, the aggregate fair market value (determined as of the date the Option
is granted) of the Shares for which any Participant may be granted Options
intended to be incentive stock options in any calendar year (under all plans of
the Company and its subsidiaries) shall not exceed $100,000 plus any unused
limit carry-over (as described in Section 422A(c)(4) of the Code prior to
amendment by the Tax Reform Act of 1986) to such year. With respect to all
incentive stock options granted after December 31, 1986, the aggregate fair
market value (determined as of the date the Option is granted) of the Shares for
which any Participant may first exercise Options intended to be incentive stock
options in any calendar year (under all plans of the Company and its
subsidiaries) shall not exceed $100,000. (as amended December 17, 1986)
3.3 No Option intended to be an incentive stock option shall be
granted to an employee who, at the time the Option is granted, owns (within the
meaning of Section 422A(b)(6) of the Code) stock possessing more than 10 percent
of the total combined voting power of all classes of stock of the corporation
employing such employee or of its parent corporation or subsidiary corporation
(as defined in Sections 425(e) and 425(f), respectively, of the Code).
3.4 The Committee may in its discretion grant Options that are not
intended to constitute incentive stock options. Such Options may be granted in
excess of the limitations provided in this Section or on terms differing from
those provided in Section 4.4 hereof.
4
<PAGE>
3.5 Each Option shall be evidenced by a written instrument, in such
form as the Committee shall from time to time approve, which shall state the
terms and conditions of the Option in accordance with the Plan and also shall
contain such additional provisions as may be necessary or appropriate under
applicable laws, regulations and rules.
ARTICLE IV. TERMS OF OPTIONS
----------------
4.1 At the time of granting the Option the Committee shall establish
an Option exercise price per Share not less than 100 percent of the fair market
value of a Share on the date the Option is granted.
4.2 Options shall not be transferable otherwise than by will or the
laws of descent and distribution. No Option shall be subject, in whole or in
part, to attachment, execution or levy of any kind.
4.3 A Participant may exercise an Option, subject to the terms of
this Plan and applicable rules and regulations of the Committee, only after such
Participant has completed one year of full time employment immediately following
the date of the grant of such Option.
4.4 Any Option granted before January 1, 1987, intended to be an
incentive stock option may not be exercised in whole or in part while there is
outstanding any incentive stock option which was granted before the granting of
such Option to such Participant to purchase stock in his or her employer
corporation or in a corporation which at the time of grant of such Option is a
parent corporation or subsidiary corporation (as defined in Section 425(e) and
425(f) respectively, of the Code prior to amendment by the Tax Reform Act of
1986) of the employer corporation or in a predecessor of any such corporations.
For this purpose, an incentive stock option shall be treated as outstanding
until it is exercised in full or expires by reason of lapse of time. (as
amended December 17, 1986)
4.5 The expiration date of each Option shall be no more than ten
years after the date of grant.
4.6 All Options shall be exercisable during a Participant's lifetime
only by such Participant.
4.7 An Option may, in the discretion of the Committee, provide that
upon the exercise of the Option the Participant shall receive, in addition to
the Shares purchased upon exercise of the Option, an amount equal to the excess
of the then fair market value of the Shares purchasable on exercise of the
Option over the exercise price of the Option provided that such amount
5
<PAGE>
receivable shall not exceed the exercise price of the Option. Such additional
amount shall be delivered to the Participant in cash, in Shares (valued at their
then fair market value) or in a combination of cash and Shares as the Committee
in its sole discretion shall determine.
4.8 No Participant shall have any rights to dividends or other rights
of a stockholder with respect to Shares subject to an Option prior to the
purchase of such Shares upon the exercise of the Option.
4.9 An Option may, in the discretion of the Committee, provide that
in the event of a Change in Control, such Option shall automatically become
fully exercisable, notwithstanding any other provisions of the Plan to the
contrary. (as amended January 31, 1990)
ARTICLE V. EXERCISE RIGHTS UPON TERMINATION OF EMPLOYMENT
----------------------------------------------
5.1 If a Participant retires, the Participant's Option shall
terminate three years after the date of such retirement, but in no event later
than the date on which it would have expired if the Participant had not retired;
provided, however, that if the Option is exercised later than three months after
the date of retirement, it shall not constitute an incentive stock option.
After the date of retirement, the Participant may exercise the Option, in whole
or in part, notwithstanding the limitations of Section 4.3 hereof.
5.2 If a Participant becomes disabled, the Participant may exercise
the Option (i) within one year after the date of disability, but in no event
later than the date on which it would have expired if the Participant had not
become disabled, or (ii) within such other period, not exceeding three years
after the date of disability as shall be prescribed in the Option instrument;
provided, however, that if the Option is exercised later than one year after the
date of disability it shall not constitute an incentive stock option. During
any such period the Participant may exercise the Option in whole or in part,
notwithstanding the limitations of Section 4.3 hereof. For this purpose, a
Participant shall be deemed to be disabled if he or she is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or which
has lasted or can be expected to last for continuous period of not less than 12
months.
5.3 If a Participant dies during a period in which he or she is
entitled to exercise an Option (including the periods referred to in Sections
5.1, 5.2 and 5.4 hereof), the Participant's Option shall terminate three years
after the date
6
<PAGE>
of death, but in no event later than the date on which it would have expired if
the Participant had lived. During such period, the Option may be exercised by
the Participant's executor or administrator or by any person or persons who
shall have acquired the Option directly from the Participant by bequest or
inheritance. The Option may be exercised in whole or in part notwithstanding
the limitations of Section 4.3 hereof.
5.4 If a Participant ceases to be employed by the Company or a
Subsidiary Corporation for any reason other than retirement, disability or
death, the Participant's Option shall terminate three months after the date of
such cessation of employment, but in no event later than the date on which it
would have expired if such cessation of employment had not occurred. During
such period the Option may be exercised only to the extent that the Participant
was entitled to do so under Section 4.3 hereof at the date of cessation of
employment unless the Committee, in its sole discretion, permits exercise of the
Option to a greater extent. The employment of a Participant shall not be deemed
to have ceased upon his or her absence from the Company or a Subsidiary
Corporation on a leave of absence granted in accordance with the usual
procedures of the Company or such Subsidiary Corporation.
ARTICLE VI. DELIVERY OF SHARES
------------------
6.1 No Shares will be delivered upon exercise of an Option until the
exercise price of the Option is paid (i) in full in cash, (ii) by the delivery
to the Company of Shares with fair market value equal to the exercise price of
the Option, or (iii) partly in cash and partly in Shares valued at their fair
market value provided, however, that Shares received upon exercise of an Option
under this Plan may be delivered in payment of the exercise price only after
they have been held by the Participant for one year subsequent to such prior
exercise. The Committee will establish procedures implementing the holding
period requirement. Fair market value shall be determined as of the close of
the business day immediately preceding the date on which the Option is
exercised, in the manner described in Section 1.4 hereof. If required by the
Committee, no Shares will be delivered upon the exercise of the Option unless a
Participant has given the Company a satisfactory written statement that the
Shares are being acquired for the Participant's account and not with a view to
the distribution of the Shares.
6.2 Share certificates issued to Participants upon exercise of
Options may, at the sole discretion of the Committee, bear language limiting
their transfer otherwise than in accordance with the Plan and applicable state
and federal law.
7
<PAGE>
ARTICLE VII. CONTINUATION OF EMPLOYMENT
--------------------------
7.1 Neither this Plan nor the grant of any Option hereunder shall
confer upon any Participant the right to continue in the employ of the Company
or any Subsidiary Corporation or limit in any respect the right of the Company
or any Subsidiary Corporation to terminate his employment at any time.
ARTICLE VIII. REORGANIZATION OF THE COMPANY
-----------------------------
8.1 In the event the Company is succeeded by another corporation in a
reorganization, which term includes a merger, consolidation, acquisition of all
or substantially all of the assets or common stock of the Company, separation or
liquidation, the Participant shall, at the same cost, be entitled upon the
exercise of an Option, to receive (subject to any required action by
stockholders) such securities of the surviving or resulting corporation and such
additional amount as provided in Section 4.7 hereof as the board of directors of
such corporation shall determine to be equivalent, as nearly as practicable, to
the nearest whole number and class of shares of stock or other securities and
related additional amount determined under Section 4.7 to which the Participant
would have been entitled under the terms of the agreement of reorganization,
(without adjustment for any fractional interest thereby eliminated), as if,
immediately prior to such event, the Participant had been the holder of record
of the number of Shares which were then subject to such Option. Such shares of
stock or other securities shall, after such reorganization be deemed to be
Shares for all purposes of the Plan including the right to an additional amount
as provided in Section 4.7 of the Plan.
ARTICLE IX. ADMINISTRATION
--------------
9.1 The Plan shall be administered by a Committee, consisting of not
less than three directors, appointed by the Board to serve at the pleasure of
the Board. No member of the Committee shall be eligible to receive Options
hereunder while serving thereon.
9.2 The Committee shall be empowered, subject to the provisions of
the Plan and to any other directives issued by the Board, to prescribe, amend
and rescind rules and regulations of general application relating to the
operation of the Plan and to make all other determinations necessary or
desirable for its proper administration. Decisions of the Committee shall be
final, conclusive and binding upon all parties, including the Company, the
stockholders and the Eligible Employees.
9.3 Neither the Company, any Subsidiary Corporation, nor any director
or officer thereof, nor the Committee nor any
8
<PAGE>
member of the Committee shall be liable for any act, omission, interpretation,
construction or determination made in connection with the Plan in good faith.
The Committee and each of its members shall be entitled to indemnification and
reimbursement by the Company in respect of any claim, loss, damage or expense
(including counsel fees) arising therefrom to the full extent permitted by law
and under any directors and officers liability insurance coverage which may be
in effect from time to time.
ARTICLE X. DISPOSITION OF SHARES
---------------------
10.1 Each Participant, by accepting an incentive stock option
hereunder prior to February 28, 1987, agrees that, before disposing of any
Shares acquired pursuant to such Option, he will tender such Shares to the
Company. The Company shall have the right, within five (5) days following the
receipt of tender of such Shares, to purchase such Shares at a price equal to
the fair market value of such Shares, on the date of such tender. If the
Company does not accept the offer to purchase the Shares so tendered within the
five (5) day period such Shares shall thereafter be free of all restrictions
affecting their disposition under this Article X. (as amended February 28,
1987)
10.2 The instruments evidencing Options intended to be incentive
stock options shall provide that if, within two years from the date of grant of
the Option or within one year after the transfer of Shares of Common Stock to
the Participant on exercise of the Option, the Participant makes a disposition
(as defined in Section 425(c) of the Code) of any such Shares, the Participant
shall notify the Secretary of the Company within 10 days after such disposition.
The Committee may direct that a legend restricting transfer in the absence of
appropriate notification be affixed to any stock certificates representing
Shares transferred under the Plan.
ARTICLE XI. AMENDMENT AND DISCONTINUANCE
----------------------------
11.1 The Board is authorized to make such changes in the Plan as
shall be necessary to bring it into conformity with any regulations of any
governmental body having jurisdiction; and may otherwise alter the Plan subject,
however, to the prior approval of the stockholders of the Company if such
alteration would: (a) materially increase benefits to Participants, (b)
materially increase the number of Shares issuable under the Plan, or (c)
materially modify the requirements as to eligibility for participation in the
Plan. The Board may at any time suspend or discontinue the Plan. No action of
the Board or of the stockholders, however, shall alter or impair any Option
theretofore granted under the Plan except as herein provided.
9
<PAGE>
ARTICLE XII. MISCELLANEOUS
-------------
12.1 It is expressly understood that this Plan grants powers to the
Committee but does not require their exercise; nor shall any person, by reason
of the adoption of this Plan, be deemed to be entitled to the grant of any
Option; nor shall any rights be deemed to accrue under the Plan except as
Options may actually be granted hereunder.
12.2 The adoption of this Plan shall not preclude the Board from
granting options to purchase Shares to any person in connection with his
employment by the Company or by a Subsidiary Corporation without reference to,
and outside of, this Plan.
12.3 All expenses of the Plan, including the cost of maintaining
records, shall be borne by the Company.
12.4 The Company and any Subsidiary Corporation shall have the right
to deduct from all cash payments any federal, state, or local taxes required by
law to be withheld with respect to such cash payments.
12.5 The Plan shall be construed in accordance with and be governed
by the laws of the Commonwealth of Pennsylvania.
ARTICLE XIII. PLAN ADOPTION AND TERM
----------------------
13.1 This Plan shall become effective upon its adoption by the Board,
and Options may thereafter be granted, provided, however, that the Plan shall be
submitted to the Company's stockholders for their approval at the next following
Annual Meeting of Stockholders. If the Plan is not approved by the affirmative
vote of the holders of at least a majority of the Shares entitled to vote at the
meeting, then the Plan and all Options then outstanding shall immediately
automatically terminate and be of no force or effect.
13.2 Subject to the provisions of the Plan relating to amendment or
discontinuance, this Plan shall continue in effect until February 26, 1998. No
Option may be granted hereunder after such date, but Options granted before such
date may extend beyond the termination date of the Plan. (as amended April 28,
1993)
Executed this _____ day of _______________, 1996.
___________________________________
Secretary to the Board
of Lukens Inc.
10
<PAGE>
Exhibit 11
COMPUTATION OF EARNINGS PER COMMON SHARE
(Dollars and shares in thousands except per share amounts)
<TABLE>
<CAPTION>
FIRST QUARTER
Thirteen Weeks Ended
March April
30, 1996 1, 1995
------------ -----------
<S> <C> <C>
PRIMARY EARNINGS (LOSS) PER COMMON SHARE
NET EARNINGS (LOSS) APPLICABLE TO COMMON STOCK
Net earnings (loss) $ (4,375) 9,096
ESOP dividend requirements
Preferred stock dividends declared (592) (610)
Tax benefit on dividends - unallocated shares 96 120
------------- -----------
Net earnings (loss) applicable to common stock $ (4,871) 8,606
------------- -----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND EQUIVALENTS OUTSTANDING
Weighted average number of common shares outstanding 14,757 14,656
Common stock equivalents:
Stock options, assuming exercised at average market price - * 96
------------- -----------
Weighted average number of common shares and equivalents outstanding 14,757 14,752
------------- -----------
PRIMARY EARNINGS (LOSS) PER COMMON SHARE $ (0.33) 0.58
============= ===========
FULLY DILUTED EARNINGS (LOSS) PER COMMON SHARE
NET EARNINGS (LOSS) APPLICABLE TO COMMON STOCK
Net earnings (loss) $ - 9,096
Incremental cash contribution to the ESOP assuming conversion
of preferred stock to common - (229)
Tax benefit on the incremental cash contribution - 80
------------- -----------
Net earnings (loss) applicable to common stock $ - 8,947
------------- -----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND EQUIVALENTS OUTSTANDING
Weighted average number of common shares outstanding - 14,656
Common stock equivalents:
Stock options, assuming exercised at greater of ending or average
market price - 141
Series B ESOP preferred stock - 1,528
------------- -----------
Weighted average number of common shares and equivalents outstanding - 16,325
------------- -----------
FULLY DILUTED EARNINGS (LOSS) PER COMMON SHARE $ (0.33)** 0.55
============= ===========
</TABLE>
* Not applicable because it would result in an anti-dilutive calculation.
** Fully diluted calculation is not presented because it is anti-dilutive.
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LUKENS INC.
FINANCIAL STATEMENTS FOR THE THIRTEEN WEEKS ENDED MARCH 30, 1996, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> MAR-30-1996
<CASH> 10,424
<SECURITIES> 0
<RECEIVABLES> 135,381
<ALLOWANCES> 6,990
<INVENTORY> 180,915
<CURRENT-ASSETS> 329,201
<PP&E> 928,437
<DEPRECIATION> 390,244
<TOTAL-ASSETS> 969,369
<CURRENT-LIABILITIES> 185,471
<BONDS> 268,183
0
29,607
<COMMON> 158
<OTHER-SE> 262,644
<TOTAL-LIABILITY-AND-EQUITY> 969,369
<SALES> 264,172
<TOTAL-REVENUES> 264,172
<CGS> 252,464
<TOTAL-COSTS> 252,464
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,666
<INTEREST-EXPENSE> 3,850
<INCOME-PRETAX> (6,966)
<INCOME-TAX> (2,591)
<INCOME-CONTINUING> (4,375)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,375)
<EPS-PRIMARY> (.33)
<EPS-DILUTED> (.33)
</TABLE>
