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 JUNE 28, 1997
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 AUGUST 1, 1997
Common Stock, $.01 Par Value, 14,940,779
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Statements of Earnings
(Dollars and shares in thousands except per share amounts)
<TABLE>
<CAPTION>
SECOND QUARTER YEAR-TO-DATE
Thirteen Weeks Ended Twenty-six Weeks Ended
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net Sales $ 258,247 255,955 506,365 520,127
Operating Costs and Expenses
Cost of products sold 238,253 236,343 472,090 488,807
Selling and administrative expenses 13,026 13,042 25,412 27,866
Unusual item - work force reduction provision -- 10,782 -- 10,782
--------- --------- --------- ---------
Total operating costs and expenses 251,279 260,167 497,502 527,455
Operating Earnings (Loss) 6,968 (4,212) 8,863 (7,328)
Interest expense 4,803 4,045 9,532 7,895
--------- --------- --------- ---------
Earnings (Loss) Before Income Taxes 2,165 (8,257) (669) (15,223)
Income tax expense (benefit) (Note 5) 984 (2,524) 128 (5,115)
--------- --------- --------- ---------
Net Earnings (Loss) $ 1,181 (5,733) (797) (10,108)
--------- --------- --------- ---------
Dividend requirements for preferred stock (501) (500) (1,000) (996)
Net Earnings (Loss) Applicable to Common Stock $ 680 (6,233) (1,797) (11,104)
--------- --------- --------- ---------
Earnings (Loss) Per Common Share
Primary $ .05 (.42) (.12) (.75)
Fully diluted $ .05 (.42) (.12) (.75)
Common Shares and Equivalents Outstanding
Primary 14,828 14,780 14,806 14,768
Fully diluted 16,252 16,257 16,234 16,247
Cash Dividends on Common Stock - Per Share $ .25 .25 .50 .50
--------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these statements
1
<PAGE>
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
June 28, December 28,
1997 1996
Assets
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 5,389 10,282
Receivables, less allowance of $7,542 in 1997 and $7,750 in 1996 127,098 92,356
Inventories
Products finished and in process 130,439 116,477
Raw materials 30,482 27,762
Supplies 5,079 4,686
------------------------------------------------------------------------------------------ --------------
166,000 148,925
Deferred income taxes (Note 5) 13,724 13,129
Prepaid expenses and other 1,505 1,964
------------------------------------------------------------------------------------------ --------------
Total current assets 313,716 266,656
Plant and Equipment 959,930 953,753
Less accumulated depreciation 443,200 420,427
------------------------------------------------------------------------------------------ --------------
Net plant and equipment 516,730 533,326
Intangible Assets, net of accumulated amortization of $10,200 in 1997
and $9,114 in 1996 56,133 57,158
Deferred Income Taxes (Note 5) 32,327 29,937
Other Assets 1,723 1,674
------------------------------------------------------------------------------------------ --------------
Total Assets $ 920,629 888,751
-----------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Investment
Current Liabilities
Accounts payable $ 101,726 92,252
Accrued employment costs 42,581 46,603
Other accrued expenses (Notes 5 and 6) 40,094 23,765
Current maturities of long-term debt 5,710 4,878
------------------------------------------------------------------------------------------ --------------
Total current liabilities 190,111 167,498
Long-Term Debt (Note 4) 265,435 248,695
Retirement Benefits
Pensions 46,295 43,995
Medical and life insurance 151,771 148,479
Other Liabilities (Note 6) 16,202 22,015
------------------------------------------------------------------------------------------ --------------
Total liabilities 669,814 630,682
Commitments and Contingencies (Note 6)
Redeemable Stock
Series preferred stock, 1,000,000 shares authorized
Series B ESOP convertible preferred
(472,202 shares outstanding in 1997 and 480,018 in 1996) 28,332 28,801
Deferred compensation - ESOP (13,250) (15,374)
------------------------------------------------------------------------------------------ --------------
Total redeemable stock 15,082 13,427
Stockholders' Investment
Common stock, 40,000,000 shares authorized and 15,813,259 issued 158 158
Capital in excess of par value (Note 3) 87,081 86,002
Earnings invested 162,457 171,730
Foreign currency translation adjustments (1,331) (1,332)
Deferred compensation - restricted stock (Note 3) (2,349) -
Repurchased stock, at cost (872,480 shares in 1997 and 1,010,988 in 1996)
(Note 3) (10,283) (11,916)
------------------------------------------------------------------------------------------ --------------
Total stockholders' investment 235,733 244,642
------------------------------------------------------------------------------------------ --------------
Total Liabilities and Stockholders' Investment $ 920,629 888,751
-----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR-TO-DATE
Twenty-six Weeks Ended
June 28, June 29,
1997 1996
Operating Activity
<S> <C> <C>
Net earnings (loss) $ (797) (10,108)
Adjustments to Reconcile Net Earnings (Loss) to
Cash Flow Used for Operating Activity
Depreciation and amortization 25,395 24,441
Income taxes deferred (1,124) (8,747)
Provision for uncollectible accounts 3,140 4,293
Retirement benefit funding less than expense 5,074 12,966
Changes in working capital affecting operations
Accounts receivable (34,260) 2,960
Inventories (17,075) (10,662)
Prepaid expenses and other 459 471
Accounts payable 14,623 (12,209)
Accrued expenses (3,916) (7,536)
Other, net (303) 1,236
- ------------------------------------------------------------------------------------------------ -------------
Cash flow used for operating activity (8,784) (2,895)
Financing Activity
Long-term debt
Proceeds from issuance of notes - 74,538
Other borrowed 19,800 -
Other repaid (159) (30,349)
Dividends paid (8,548) (8,562)
Proceeds from stock options exercised - 802
Other, net - (537)
- ------------------------------------------------------------------------------------------------ -------------
Net from financing activity 11,093 35,892
Investing Activity
Capital expenditures (8,212) (36,824)
Proceeds from sale of assets/subsidiaries 421 400
Other, net 589 (849)
- ------------------------------------------------------------------------------------------------ -------------
Net for investing activity (7,202) (37,273)
Cash and Cash Equivalents
Increase (decrease) (4,893) (4,276)
Start of period 10,282 11,056
- ------------------------------------------------------------------------------------------------ -------------
End of period $ 5,389 6,780
- -----------------------------------------------------------------------------------------------------------------
</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 1996
Annual Report to Stockholders. Results from any interim period are not
necessarily indicative of the results for a full year.
2. Future Accounting Changes
In February 1997, Statement of Financial Accounting Standards (SFAS)
No. 128, "Earnings per Share," was issued. This statement specified the
computation, presentation and disclosure requirements for earnings per
share (EPS). The main objectives of the statement were to simplify the
EPS calculation and to make EPS comparable on an international basis.
Effective in the 1997 Annual Report, primary and fully diluted EPS will
be replaced by basic and diluted EPS. Prior period results will be
restated. A significant difference is that basic EPS no longer assumes
potentially dilutive securities in the computation. Calculating EPS
under the new method would have an immaterial impact on 1996 and 1997
EPS figures.
In 1997, Lukens will also adopt SFAS No. 129, "Disclosure of
Information about Capital Structure." This statement was issued in
conjunction with the earnings per share statement discussed above and
was intended to centralize capital structure disclosure requirements
and to expand the number of companies subject to the requirements.
Since we were in compliance with the existing capital structure
disclosure requirements, we do not expect to materially change our
disclosures under the new standard.
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was
released. Comprehensive income is a concept that includes the total of
net earnings(loss) reported in the Consolidated Statements of Earnings,
plus revenues, expenses, gains and losses that are recognized directly
in the stockholders' investment section of the Consolidated Balance
Sheets. The purpose of the statement was to more prominently highlight
comprehensive income items and to report a total amount for a reporting
period. Effective in 1998, Lukens will be required to disclose
comprehensive income and its components within our financial
statements. Prior period financial statements will be restated for
comparative purposes.
4
<PAGE>
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," was also issued in June of 1997. Beginning in 1998,
disclosures will be based on the way management organizes business
segments to make decisions about resource allocation and to measure
performance. Disclosures will include interim reporting requirements.
Previously reported information will be restated for comparative
purposes. Based on our initial review of the reporting and disclosure
requirements, we do not expect to materially change our segment
disclosures under the new standard.
3. Compensation Plans - Restricted Stock
The Board of Directors approved the issuance of performance vested
restricted stock to officers and other executives as part of an
incentive compensation program. During the first quarter of 1997,
134,000 restricted shares were awarded. The shares carry voting and
dividend rights and were recorded at fair market value on the grant
date. A corresponding charge to deferred compensation was recorded in
the stockholders' investment section of the Consolidated Balance
Sheets. The deferred compensation balance was subsequently adjusted for
the change in the quarter-end market price of Lukens common stock and
for compensation expense recognized. The awards vest at the end of
three years, contingent on continued employment and the achievement of
performance goals that are tied to Lukens' total shareholder return
relative to other steel companies. Compensation expense recognized for
these awards totaled $214 through the first half of 1997.
4. Financial Instruments - Notes Payable
During the second quarter of 1997, Standard & Poor's lowered its rating
from BBB+ to BBB on $150,000 of Lukens notes due in 2004 and on $75,000
of Medium-Term Notes, Series A, due in 2006. The Standard & Poor's
outlook is characterized as stable.
5. Income Taxes
Year-to-date results were used to develop the effective tax rates in
1997 and 1996. Consequently, the second quarter effective rates
included the impact of changing rates from the first quarter. At the
end of the first half of 1997, income tax expense was recognized on a
loss before income taxes. The expense represented the impact of state
taxes and non-deductible expenses that offset the tax benefit generated
from the loss.
Because of the unusual nature of the 1996 work force reduction
provision, the tax impact of 36.4 percent was recognized separately in
the second quarter 1996 income tax provision. Excluding the work force
provision, an effective rate of 27.1 percent was applied to 1996 first
half results.
During the second quarter of 1997, a settlement was reached in the
Internal Revenue Service audits of 1993 and 1994. The audit assessment
was recognized in the Consolidated Balance Sheets by a reclassification
to other accrued expenses with a corresponding offset to deferred
income taxes.
5
<PAGE>
6. Commitments and Contingencies
During the second quarter of 1997, a tentative settlement was reached
in a Superfund remediation contingency where Lukens was designated a
potentially responsible party. The obligation for the Superfund site
was previously recognized in the fourth quarter of 1996. The tentative
settlement resulted in a reclassification from other long-term
liabilities to other accrued expenses in the Consolidated Balance
Sheets.
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
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
(Dollars in thousands)
Changes in Financial Condition during
the Twenty-six Weeks Ended June 28, 1997
Capital Structure
Cash and cash equivalents totaled $5,389 at the end of the second quarter, a
decrease of $4,893 from the end of 1996. Working capital of $123,605 was up
$24,447 from the end of 1996. Higher accounts receivable and inventories were
partially offset by a build in accounts payable and an increase in other accrued
expenses. The current ratio was 1.7 at the end of the quarter and 1.6 at
year-end 1996.
Included in other accrued expenses at the end of the second quarter were income
taxes payable that included an Internal Revenue Service audit assessment for
1993 and 1994. Also included in other accrued expenses was an environmental
reserve that was reclassified from other liabilities in the long-term section of
the Consolidated Balance Sheets. The reclassification reflected a tentative
settlement agreement negotiated in the second quarter for a Superfund site where
we were designated a potentially responsible party.
Debt at the end of the second quarter was $271,145, an increase of $17,572 from
the beginning of the year. The increase reflected borrowings under our revolving
credit agreement. Based on conditions at the end of the quarter, additional
borrowings were limited to approximately $46,000 under the committed line of
credit covenant. The ratio of long-term debt to capital was 54.3 percent, which
compared to 51.7 percent at year-end 1996.
The Board of Directors approved the issuance of performance vested restricted
stock to officers and other executives as part of an incentive compensation
program. During the first quarter of 1997, 134,000 restricted shares were
awarded. The shares carry voting and dividend rights and were recorded at fair
market value on the grant date. A corresponding charge to deferred compensation
was recorded in the stockholders' investment section of the Consolidated Balance
Sheets. The deferred compensation balance was subsequently adjusted for the
change in the quarter-end market price of Lukens common stock and for
compensation expense recognized. The awards vest at the end of three years,
contingent on continued employment and the achievement of performance goals that
are tied to Lukens' total shareholder return relative to other steel companies.
During the second quarter of 1997, Standard & Poor's lowered its rating from
BBB+ to BBB on $150,000 of Lukens notes due in 2004 and on $75,000 of
Medium-Term Notes, Series A, due in 2006. The Standard & Poor's outlook is
characterized as stable.
7
<PAGE>
Liquidity
Operating activity required cash of $8,784 compared to cash required for
operations of $2,895 in the first half of 1996. Higher cash requirements in 1997
were due to increased working capital requirements.
Financing activity generated $11,093 with net borrowings of $19,641 partially
offset by dividend payments of $8,548. Investing activity required $7,202,
primarily for capital expenditures of $8,212.
Profitability in the second half of 1997 is dependent on the continuation of
strong shipments in the Carbon & Alloy Group. Although we did see some
improvement in stainless selling prices during the first half of the year,
prices remain a concern and will continue to limit results in the Stainless
Group. Results should benefit from our continued focus on cost reduction
initiatives and increased utilization of key facilities from the capital
expenditure program.
In addition to the earnings factors discussed above, inventory reduction will be
a key to producing a capital structure at the end of 1997 that is similar to
year-end 1996.
During the first half of 1997, integration of the Steckel Mill Advanced Rolling
Technology (SMART(R)) system, located in Conshohocken, Pennsylvania, and the
wide anneal and pickle line, located in Massillon, Ohio, was initiated.
Commercialization of products from the wide anneal and pickle line is
continuing. Although shipments are expected to double during the third quarter,
utilization of the facility is anticipated to be low for the balance of the
year.
Order backlog was $127,800 at the end of the second quarter, which was slightly
higher than year-end 1996 order backlog and 17 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. Primarily
because of our aggressive capital expenditure program, we continue to exceed our
target long-term debt-to-capital ratio.
Results of Operations for the Quarters Ended
June 28, 1997 and June 29, 1996
Operating Results
Second quarter operating earnings of $6,968 compared to an operating loss of
$4,212 in the second quarter of 1996. The loss in 1996 was the result of a
$10,782 work force reduction provision recorded in the second quarter. Excluding
the provision for comparison purposes, operating earnings were up 6 percent in
1997. Improved results in the Carbon & Alloy Group were partially
8
<PAGE>
offset by an operating loss recorded by the Stainless Group. Despite some price
relief, Stainless Group results continued to be impacted by depressed selling
prices throughout the second quarter.
Sales for the second quarter were $258,247, up slightly from 1996 sales of
$255,955. Most of the increase in sales resulted from higher shipments in the
Carbon & Alloy Group, partially offset by lower selling prices in the Stainless
Group.
Interest Expense
Interest expense of $4,803 was up 19 percent compared to 1996 expense of $4,045.
The increase primarily related to higher amounts of capitalized interest
recorded in 1996.
Income Tax Expense (Benefit)
The effective tax rate was 45.5 percent in 1997 and 30.6 percent in 1996.
Because of the unusual nature of the 1996 work force reduction provision, the
tax impact of 36.4 percent was recognized separately in the second quarter 1996
income tax provision. Excluding the work force provision, an effective rate of
27.1 percent was applied to 1996 first half results. Year-to-date results were
used to develop the effective tax rates in 1997 and 1996. Consequently, the
second quarter effective rates included the impact of changing rates from the
first quarter.
Net Earnings (Loss)
Net earnings of $1,181 were recorded for the second quarter of 1997 compared to
a net loss of $5,733 for the same period in 1996. On an after-tax basis, the
work force reduction provision reduced results by $6,859 in 1996.
Business Group Results
Operating
Net Sales Earnings (Loss)
2Q 1997 2Q 1996 2Q 1997 2Q 1996
Carbon & Alloy $129,321 125,395 13,304 1,287
Stainless 128,926 130,560 (2,818) (812)
Corporate -- -- (3,518) (4,687)
-------- -------- -------- --------
$258,247 255,955 6,968 (4,212)
-------- -------- -------- --------
9
<PAGE>
Carbon & Alloy Group
Net sales increased 3 percent. The increase reflected higher shipments,
particularly in the carbon steel product line due to increased utilization of
the SMART system. Shipped tons were a record 188,700 in 1997 compared to 170,300
tons in 1996. With the growth in carbon shipments in 1997, sales reflected a
lower-value shipment mix.
Operating earnings for the second quarter were up significantly. Included in
second quarter 1996 earnings was a work force reduction charge of $6,178.
Excluding the unusual charge for comparison purposes, operating earnings were up
78 percent in 1997. Earnings in 1997 benefited from a continued focus on cost
reduction initiatives, increased utilization of the SMART system and lower scrap
costs.
Stainless Group
The group recorded an operating loss in the second quarters of 1997 and 1996.
Included in second quarter 1996 results was a work force reduction charge of
$3,695. Excluding the unusual charge for comparison purposes, an operating loss
in 1997 compared to operating earnings recorded in 1996. Depressed selling
prices across most product lines continued to limit results.
In spite of a favorable shipment mix, depressed selling prices led to a slight
decline in sales. Shipments of 69,600 tons in 1997 were flat compared to 69,700
tons in 1996. Higher shipments in the cold rolled and hot rolled product lines
were offset by lower conversion shipments.
Results of Operations for the Twenty-six Weeks Ended
June 28, 1997 and June 29, 1996
Operating Results
First half operating earnings of $8,863 compared to an operating loss of $7,328
in 1996. The loss in 1996 was the result of a $10,782 work force reduction
provision recorded in the second quarter. Excluding the provision for comparison
purposes, operating earnings more than doubled in 1997. Improved results in the
Carbon & Alloy Group were partially offset by an operating loss recorded by the
Stainless Group. Stainless Group results continued to be impacted by depressed
selling prices throughout the first half of the year, despite some price relief.
Selling and administrative expenses were lower through two quarters primarily
due to the 1996 work force reduction.
Sales for the first half were $506,365, down 3 percent from 1996 sales of
$520,127. Most of the decrease in sales resulted from lower selling prices in
the Stainless Group, partially offset by higher shipments in the Carbon & Alloy
Group.
10
<PAGE>
Interest Expense
Interest expense of $9,532 was up 21 percent compared to 1996 expense of $7,895.
The increase primarily related to higher amounts of capitalized interest
recorded in 1996.
Income Tax Expense (Benefit)
Year-to-date results were used to develop the effective tax rates in 1997 and
1996. At the end of the first half of 1997, income tax expense was recognized on
a loss before income taxes. The expense represented the impact of state taxes
and non-deductible expenses that offset the tax benefit generated from the loss.
Because of the unusual nature of the 1996 work force reduction provision, the
tax impact of 36.4 percent was recognized separately in the second quarter 1996
income tax provision. Excluding the work force provision, an effective rate of
27.1 percent was applied to 1996 first half results.
Net Earnings (Loss)
A net loss of $797 in 1997 compared to a net loss of $10,108 in 1996. On an
after-tax basis, the work force reduction provision reduced results by $6,859 in
1996.
Business Group Results
Operating
Net Sales Earnings (Loss)
YTD 1997 YTD 1996 YTD 1997 YTD 1996
Carbon & Alloy $252,331 246,822 21,200 (4,373)
Stainless 254,034 273,305 (5,884) 5,773
Corporate -- -- (6,453) (8,728)
-------- -------- -------- --------
$506,365 520,127 8,863 (7,328)
-------- -------- -------- --------
Carbon & Alloy Group
Sales for the first half increased 2 percent. Shipped tons were 364,100 in 1997
compared to 339,200 tons in 1996. The 7 percent increase reflected higher
utilization of the SMART system, particularly in the carbon product line. With
the growth in carbon shipments in 1997, sales reflected a lower-value shipment
mix.
Operating earnings for the first half compared to an operating loss in 1996.
Included in 1996 results was a work force reduction charge of $6,178. Excluding
the unusual charge for comparison
11
<PAGE>
purposes, operating earnings improved significantly in 1997. Results in 1996
also included a $3,756 charge for labor agreement signing bonuses, the impact of
severe winter weather and disruptions from the commissioning of the SMART
system. Earnings in 1997 benefited from a continued focus on cost reduction
initiatives, increased utilization of the SMART system and lower scrap costs.
Stainless Group
The group recorded an operating loss through two quarters in 1997 versus
operating earnings in 1996. Included in 1996 results was a work force reduction
charge of $3,695. Excluding the unusual charge for comparison purposes,
operating results deteriorated significantly in 1997. Depressed selling prices
across product lines continued to limit results.
Despite a significant increase in cold rolled stainless shipments, depressed
selling prices led to a 7 percent sales decline. Shipments of 140,800 tons in
1997 compared to 140,700 tons in 1996.
12
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
As of the end of the quarter, approximately 50 active workers' compensation
hearing loss claims remained against Lukens Steel Company. Claims previously
reported for Washington Steel Corporation were included in the Lukens Steel
Company totals because the subsidiaries merged on December 29, 1996.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(10.1) Lukens Inc. Non-Employee Director Equity Compensation Plan,
effective May 1, 1997
(10.2) Lukens Inc. 1997 Performance-Vested Restricted Stock Plan,
effective February 26, 1997
(11) Statement regarding computation of per share earnings
(27) Financial Data Schedule
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter ended June 28, 1997.
13
<PAGE>
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.
August 5, 1997 /s/ R. W. Van Sant
--------------
R. W. Van Sant
Chairman and Chief Executive Officer
August 5, 1997 /s/ John C. van Roden, Jr.
----------------------
John C. van Roden, Jr.
Senior Vice President and Chief Financial
Officer
August 5, 1997 /s/ P. Blaine Clemens
-----------------
P. Blaine Clemens
Vice President and Controller
14
Exhibit 10.1
LUKENS INC.
NON-EMPLOYEE DIRECTOR EQUITY COMPENSATION PLAN
I. PURPOSE
A. The purpose of the Lukens Inc. Non-Employee Director Equity
Compensation Plan is to advance the interest of the Company and its shareholders
by providing for the payment of a greater portion of the compensation of
Non-Employee Directors in the form of equity equivalents by the grant to such
Non-Employee Directors of Deferred Stock Units under the terms set forth herein.
By thus compensating Non-Employee Directors and increasing their equity
equivalent position in the Company, the Company seeks to attract, retain,
compensate and motivate these highly competent individuals upon whose judgment,
initiative, leadership, and continued efforts the success of the Company in
large measure depends.
II. DEFINITIONS
A. As used in this Plan, the following definitions apply to the terms
indicated below:
a. "ABO" means the Accumulated Benefit Obligation of the Company
for each Non-Employee Director under the Retirement Plan as of April 30, 1997,
as determined by the Plan Actuary. For purposes of the Plan, (i) the ABO for
each Non- Employee Director shall be determined by taking Service from the
Non-Employee Director's Anniversary Date through April 30, 1997 into account,
and (ii) the ABO for each Non- Employee Director shall be determined without
regard to whether or not the Non-Employee Director's right to payment under the
Retirement Plan is vested.
b. "Account" means the bookkeeping account established for each
Non-Employee Director to which Deferred Stock Units shall be credited.
c. "Allocation Amount" means the amount determined by discounting
the Annual Retainer in effect as of the Allocation Date (i) at the 30-year
Treasury bond rate in effect at the Allocation Date for (ii) 10 years. The
Allocation Amount shall be determined by the Plan Actuary.
d. "Allocation Date" means each April 30 after the Effective Date.
e. "Anniversary Date" means the anniversary of the date a Non-
Employee Director commenced Service that next precedes or coincides with April
30, 1997.
f. "Anniversary Date ABO" means the Accumulated Benefit Obligation
of the Company for each Non-Employee Director under the Retirement Plan as of
the Non-Employee Director's Anniversary Date, as determined by the Plan Actuary.
For purposes of the Plan, the Anniversary Date ABO for each Non-Employee
Director shall be adjusted to include interest creditable from the Non-Employee
Director's Anniversary Date through April 30, 1997, as determined by the Plan
Actuary.
<PAGE>
g. "Annual Retainer" means the annual rate of retainer fees
payable to Non-Employee Directors as compensation for Service.
h. "Board" means the Board of Directors of the Company.
i. "Committee" means the Committee on the Board.
j. "Company" means Lukens Inc., a Delaware corporation, and any
successors thereto.
k. "Deferred Stock Unit" means a hypothetical Share.
l. "Director" means a duly elected member of the Board.
m. "Effective Date" means the date specified in Section 3.1
hereof.
n. "Employee" means a person employed by the Company or its
Subsidiaries in any capacity.
o. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
p. "Fair Market Value Per Share" as of any date, means the closing
price for sales of Shares as reported on the Composite Transaction Reporting
System on the New York Stock Exchange, which includes other participating
exchanges and over-the-counter markets, on such date, or if the Shares are not
listed on such exchange, on the principal United States securities exchange
registered under the Exchange Act on which the Shares are listed.
q. "Non-Employee Director" means any Director who is not a
person employed by the Company or its subsidiaries in any capacity.
r. "Plan" means this Lukens Inc. Non-Employee Director Equity
Compensation Plan, as in effect from time to time.
s. "Plan Actuary" means the actuary designated from time to time
as the Plan Actuary for purposes of the Plan by the Company's Chief Financial
Officer.
t. "Pro-Rated Deferred Stock Units" means the number of Deferred
Stock Units determined as the quotient of (i) the excess, if any, of a
Non-Employee Director's ABO over the Non-Employee Director's Anniversary Date
ABO, divided by (ii) the average Fair Market Value per Share for May 1997,
provided that the number of Deferred Stock Units determined under this Section
2.1(t) shall not be less than zero.
<PAGE>
u. "Retirement Plan" means the Retirement Plan for Non-Employee
Directors of Lukens Inc.
v. "Service" means service as a Non-Employee Director.
w. "Share" means a share of the Company's common stock, $.01 par
value.
III. EFFECTIVE DATE
A. This Plan shall be effective as of May 1, 1997.
IV. PARTICIPATION
A. Each Non-Employee Director serving on the Board on or after the
Effective Date shall participate in the Plan.
V. CREDITING ACCOUNTS
A. Deferred Stock Units.
a. Annual Credits. As of each Allocation Date, the Account of each
Non-Employee Director shall be credited with the number of Deferred Stock Units
determined as the quotient of (i) the Allocation Amount divided by (ii) the Fair
Market Value Per Share on such Allocation Date, provided that if such Allocation
Date is not a business day, Fair Market Value Per Share shall be determined as
of the next succeeding business day.
b. Adjustments. In the event of any merger, reorganization,
consolidation, recapitalization, Share distribution or dividend, or other change
in structure affecting the Shares, Deferred Stock Units shall be adjusted
accordingly, as determined in the sole discretion of the Committee.
B. Dividend Credits.
a. Annual Credits. The Account of each Non-Employee Director shall
be credited with dividend equivalents at the same rate per Deferred Stock Unit
as are actually paid per Share. Pending conversion to Deferred Stock Units
pursuant to Section 5.2(b), no earnings shall be credited with respect to
dividend equivalents credited to Accounts.
b. Conversion to Deferred Stock Units. As of each Allocation Date,
dividend equivalents credited to each Account shall be converted to the number
of Deferred Stock Units determined as the quotient of (i) the aggregate of
dividend equivalents credited to such Account, divided by (ii) the Fair Market
Value per Share on such Allocation Date, provided that if such Allocation Date
is not a business day, Fair Market Value Per Share shall be determined as of the
next succeeding business day.
VI. RETIREMENT PLAN CONVERSION
<PAGE>
A. Vested Non-Employee Directors. On or before June 15, 1997, each Non-
Employee Director who has completed five (5) years of continuous Service as of
May 1, 1997 and thus has a vested benefit under the Retirement Plan, shall make
one of the following elections with respect to the benefit accrued by such
Non-Employee Director under the Retirement Plan as of May 1, 1997. Such vested
Non-Employee Director shall elect:
a. Freeze Benefit Under Retirement Plan. To have the benefit
accrued under the Retirement Plan as of May 1, 1997 paid under the terms of the
Retirement Plan in effect as of that date, provided that:
(1) the Non-Employee Director's Pro-Rated Deferred Stock
Units shall be credited to his Account as of May 1, 1997;
(2) benefits with respect to all Service after April 30,
1997 shall be determined under the terms of the Plan; and
(3) no further benefits shall accrue under the
Retirement Plan; or
b. Convert Benefit to Deferred Stock Units. To convert the benefit
accrued under the Retirement Plan as of May 1, 1997 to Deferred Stock Units
under the Plan. For each Non-Employee Director, the number of Deferred Stock
Units shall be determined as the quotient of (i) such Non-Employee Director's
ABO, divided by (ii) the average Fair Market Value per Share for May 1997. The
resulting number of Deferred Stock Units shall be credited to such Non-Employee
Director's Account under the Plan.
A Non-Employee Director who fails to file an election under this Section 6.1 on
or before June 15, 1997 shall be deemed to have elected to freeze the benefit
under the Retirement Plan pursuant to Section 6.1(a).
B. Other Non-Employee Directors. Any benefit accrued under the
Retirement Plan as of May 1, 1997 by Non-Employee Directors who have completed
fewer than five (5) years of Service as of such date automatically shall be
converted to the number of Deferred Stock Units determined as the quotient of
(i) such Non-Employee Director's ABO, divided by (ii) the average Fair Market
Value per Share for May 1997. The resulting number of Deferred Stock Units shall
be credited to such Non-Employee Director's Account under the Plan.
VII. DISTRIBUTIONS
A. General. Except as otherwise provided in Section 7.4, the balance of
each Non-Employee Director's Account shall be paid to the Non-Employee Director
in cash in a lump sum, unless the Non-Employee Director elects to receive
distributions in installments pursuant to a procedure established by the
Committee.
B. Lump Sum.
a. Time of Distribution. Unless a Non-Employee Director elects to
receive distributions in installments pursuant to a procedure established by the
Committee, the
<PAGE>
Company shall pay the balance of the Non-Employee Director's Account in a cash
lump sum on or as soon as administratively practicable following the first day
of the calendar quarter next following such Non-Employee Director's termination
of Service.
b. Valuation of Distribution. The amount of the lump sum
distribution shall be calculated as the product of (i) the average Fair Market
Value per Share for the six-month period ending on the effective date of the
Non-Employee Director's termination of Service, times (ii) the number of
Deferred Stock Units credited to such Non- Employee Director's Account as of
such date.
C. Installments. A Non-Employee Director may, pursuant to a procedure
established by the Committee, elect to receive distributions in monthly,
quarterly or annual installments over a period not longer than the lesser of (a)
such Non-Employee Director's full years of Service or (b) 10 years.
a. Time of Distribution. If a Non-Employee Director elects to
receive distributions in installments, installment payments shall commence on or
as soon as administratively practicable following the first day of the calendar
quarter next following such Non-Employee Director's termination of Service.
Installment payments shall be paid on the first day of each month, quarter or
benefit commencement anniversary date, as applicable.
b. Valuation of Distribution. The total beginning Account balance
subject to installment distribution shall be determined as the product of (i)
the average Fair Market Value per Share for the six-month period ending on the
effective date of the Non- Employee Director's termination of Service, times
(ii) the number of Deferred Stock Units credited to such Non-Employee Director's
Account as of such date. Thereafter, the unpaid balance of the Account shall be
credited with earnings at the 30-year Treasury bond rate. The amount of each
installment shall be determined as the quotient of (iii) the undistributed
Account balance as of the installment payment date, divided by (iv) the number
of remaining unpaid installments.
c. Death Prior to Completion of Installments. In the event of the
death of a Non-Employee Director prior to the payment of all installments due
under the Plan, the payments which would have been payable hereunder shall be
paid to the Non- Employee Director's designated beneficiary for the remainder of
the installment term.
D. Termination of Service Due to Death.
a. Time of Distribution. If a Non-Employee Director dies while in
Service, the balance of such Non-Employee Director's Account shall be paid in a
lump sum in cash to the designated beneficiary or estate of such Non-Employee
Director within sixty (60) days of the date of death.
b. Valuation. The amount subject to lump sum distribution shall be
determined in accordance with Section 7.2(b), provided that the relevant
valuation date shall be the date of such Non-Employee Director's death.
<PAGE>
VIII. NO FUNDING
A. This Plan shall not be deemed to create any trust, escrow or other
funding arrangement. No benefit payable hereunder shall be considered segregated
funds and all such amounts shall, at all times prior to the payment of same, be
and continue to be the property of the Company commingled with its other assets.
The right of any Non-Employee Director to benefits under this Plan shall be an
unsecured claim against the general assets of the Company.
IX. PLAN ADMINISTRATION
A. The general administration of this Plan and the responsibility for
carrying out its provisions shall be vested in the Committee. The Committee may
adopt such rules and regulations as it may deem necessary for the proper
administration of this Plan, and its decision in all matters shall be final,
conclusive, and binding. If one or more members of the Committee are
disqualified by personal interest from taking part in a particular decision, the
remaining member or members of the Committee (although less than a quorum) shall
have full power to act on the matter. The Committee may delegate to the benefits
department of the Company the responsibility for day to day administration of
this Plan.
X. TERMINATION OF THE PLAN
A. The Board reserves the right to terminate this Plan at any time
without the consent of any current or former Non-Employee Director. Upon
termination of this Plan, all Non-Employee Directors shall continue to have the
right to receive benefits earned and accrued hereunder prior to such
termination.
XI. AMENDMENT OF THE PLAN
A. The Board has the right to amend this Plan at any time and from time
to time without the consent of any current or former Director, provided however,
that no amendment shall divest any Non-Employee Director of rights to which he
or she would have been entitled if the Plan had been terminated on the effective
date of such amendment.
XII. CHANGE IN CONTROL
A. Within sixty days of a Change in Control as defined in Section 12.2,
any Non- Employee Director, including any Non-Employee Director who is receiving
installment payments, shall receive a lump sum payment of his Account balance
under this Plan.
B. For purposes of the Plan, the term "Change in Control" shall mean
any of the following events:
a.
(1) Any "person" or "group" (as such terms are used in
Sections 3(a)(9), 13(d)(3) and 14(d)(2) of the Exchange Act), 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 Exchange
Act), is or becomes the beneficial owner (as defined in Rule 13d-3 of the
General Rules and Regulations under the Exchange Act), or acquires or holds
voting control, directly or indirectly, of securities of the Company which,
<PAGE>
when considered together with any other securities of the Company held by such
person or group of their affiliates or associates 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; and
(2) the Board as it existed immediately prior to any
such acquisition of or change in ownership or control, after having been advised
thereof, does not, within ten days after being so advised, adopt a resolution
specifically determining that such acquisition of or change in ownership or
control does not constitute a change of control event within the meaning of this
Section 12.2; or
b. 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 Exchange Act), 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 Exchange
Act), is or becomes the beneficial owner (as defined in Rule 13d-3 of the
General Rules and Regulations under the Exchange Act) 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 of
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
c.
(1) Any "person" or "group" (as such terms are used in
Section 3(a)(9), 13(d)(3) and 14(d)(2) of the Exchange Act) 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 Exchange Act), 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, and
(2) the Board of Directors of the Company as it existed
immediately prior to any such offer, after having been advised thereof, does
not, within ten business days after being so advised, adopt a resolution
specifically determining that such offer does not constitute a change of control
event within the meaning of this Section 12.2.
C. The terms "person" and "group," as used in this Article 12, 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 Section 12.2(b); (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 Section
12.2(c).
D. Payment of the lump sum payment described in Section 12.1 shall
constitute full payment of all obligations of the Company under this Plan.
<PAGE>
XIII. MISCELLANEOUS PROVISIONS
A. Gender and Number. The masculine pronoun wherever used herein shall
include the feminine gender; and the feminine, the masculine, and the singular
number as used herein shall include the plural unless the context clearly
indicates otherwise.
B. No Agreement to Retain Directors. This Plan does not in any way
obligate the shareholders of the Company to continue to retain a Non-Employee
Director on the Board, nor does this Plan limit the right of such shareholders
to terminate a Non-Employee Director's Service.
C. Rights Non-Assignable and Non-Transferable. Deferred Stock Units (or
dividend equivalents, prior to their conversion to Deferred Stock Units) may not
be assigned, pledged, mortgaged or hypothecated other than by will or by the
laws of descent and distribution, and, to the extent permitted by law, no
Deferred Stock Unit or dividend equivalent shall be subject to legal process or
attachment for the payment of any claims against any person entitled to receive
the same.
D. Facility of Payment. If a current or former Non-Employee Director
entitled to receive any payments hereunder is adjudged by a court of competent
jurisdiction to be legally incapable of giving valid receipt and discharge for
such payments, such payments shall be paid to the duly appointed guardian of
such Non-Employee Director. Such payments shall, to the extent paid, be deemed
complete discharge for liabilities of the Company under this Plan.
E. Nonforfeiture. All Deferred Stock Units and dividend equivalents are
fully vested and nonforfeitable once credited to a Non-Employee Director's
Account.
F. Withholding. Payments made by the Company under this Plan to any
Non- Employee Director shall be subject to withholding as shall, at the time of
such payment, be required under any income tax or other laws, whether of the
United States or any other jurisdiction.
G. Successorship. It is the intent that the obligations of the Company
to pay benefits accrued or payable hereunder shall be binding upon any successor
corporation or organization which shall succeed to substantially all of the
assets and business of the Company and the term "Company" wherever used herein
shall mean and include any such corporation or organization after such
succession and such obligations shall be deemed to have been expressly assured
by any such corporation or other organization.
H. Compliance with Laws. The Plan and the grant of Deferred Stock Units
thereunder shall be conditioned on and subject to all applicable federal and
state laws, including, without limitation, applicable securities laws and
regulations.
I. Expenses. All expense and costs incurred in the operation of this
Plan shall be paid by the Company.
J. Titles and Headings. The titles to articles and headings of sections
of this Plan are for convenience or reference only. In case of any conflict, the
text of the Plan, rather than such titles and headings, shall control.
K. Acceptance. The acceptance of payments under this Plan by any
Non-Employee Director constitutes his acceptance of the terms of the Plan and
his agreement to be bound thereby.
L. Governing Law and Severability. This Plan shall be construed in
accordance with the laws of the Commonwealth of Pennsylvania to the extent not
superseded by any
<PAGE>
federal law. In the event any provision hereof shall be held illegal or invalid
for any reason, the remaining provisions shall be construed and enforced as if
such illegal or invalid provisions had never been contained herein.
As adopted by the Board of Directors on April 30, 1997.
Dated: May 16, 1997 /s/ William D. Sprague
Exhibit 10.2
LUKENS INC.
1997 PERFORMANCE-VESTED RESTRICTED STOCK PLAN
1. PURPOSE
The purpose of the Plan is to promote the ability of Lukens Inc. (the
"Company") to retain certain key employees and enhance the growth and
profitability of the Company by providing the incentive of long-term awards for
continued employment and the attainment of performance objectives.
2. DEFINITIONS
(a) "Award" means an award of Restricted Stock granted
under the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Change of Control"means the occurrence of any of the
following events:
(i)
A. Any "person" or "group" (as such terms are
used in Sections 3(a)(9), 13(d)(3) and
14(d)(2) of the 1934 Act), 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 1934 Act), is or
becomes the beneficial owner (as defined in
Rule 13d-3 of the General Rules and
Regulations under the 1934 Act), or acquires
or holds voting control, directly or
indirectly, of securities of the Company
which, when considered together with any
other securities of the Company held by such
person or group of their affiliates or
associates which by their terms are
convertible, even if not then convertible,
represent fifteen percent (15%) or more of
the voting power of the then outstanding
securities of the Company; and
B. The Board as it existed immediately prior to
any such acquisition of or change in
ownership or control, after having been
advised thereof, does not, within ten days
after being so advised, adopt a resolution
specifically determining that such
acquisition of or change in ownership or
control does not constitute a change of
control event within the meaning of this
Paragraph 2(c); or
<PAGE>
(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 1934 Act), 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 1934 Act), is or
becomes the beneficial owner (as defined in Rule 13d-3 of the General Rules and
Regulations under the 1934 Act) 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 of their affiliates or
associates which by their terms are convertible, even if not then convertible,
represent fifteen percent (15%) of the voting power of the then outstanding
securities of the Company; or
(iii)
A. Any "person" or "group" (as such terms are
used in Section 3(a)(9), 13(d)(3) and
14(d)(2) of the 1934 Act) 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 1934 Act),
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,
and
B. The Board of Directors of the Company as it
existed immediately prior to any such offer,
after having been advised thereof, does not,
within ten business days after being so
advised, adopt a resolution specifically
determining that such offer does not
constitute a change of control event within
the meaning of this Paragraph 2(c).
The terms "person" and "group," as used in this Paragraph 2(c), 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 Paragraph 2(c); (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 Paragraph 2(c).
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Executive Development and Compensation
Committee of the Board, or such other committee of the Board as may be
designated by the Board for this purpose from time to time.
<PAGE>
(f) "Company" means Lukens Inc., a Delaware corporation, including any
successor thereto by merger, consolidation, acquisition of all or substantially
all the assets thereof, or otherwise.
(g) "Date of Grant" means the date as of which an Award is granted.
(h) "Eligible Employee" means a management employee of the Company or a
Subsidiary.
(i) "Grantee" means an Eligible Employee who is granted an Award.
(j) "Other Steel Companies" means the companies comprising the S&P
Super Iron & Steel Index against which the Company compares its five-year Total
Shareholder Return in accordance with the rules promulgated by the Securities
Exchange Commission regarding performance graph disclosure by the Company in its
annual proxy statement.
(k) "Performance Period" means the period commencing on the first day
of the Plan Year in which the Date of Grant occurs and ending on the earlier of
(i) the last day of the second Plan Year beginning after the Date of Grant, or
(ii) a Change of Control.
(l) "Plan" means the Lukens Inc. 1997 Performance-Vested Restricted
Stock Plan, as set forth herein, and as amended from time to time.
(m) "Plan Year" means the calendar year.
(n) "Restricted Stock" means Shares subject to the restrictions imposed
pursuant to Paragraph 7(d) of the Plan and the Award.
(o) "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, as in
effect from time to time.
(p) "Share" or "Shares" means a share or shares of the Company's common
stock, $.01 par value.
(q) "Subsidiary" means a corporation that, at the time in question, is
a subsidiary corporation of the Company within the meaning of section 424(f) of
the Code.
(r) "Total Shareholder Return" means the appreciation in Share price
over the Performance Period, assuming that dividends are reinvested as paid;
provided that the calculation of Total Shareholder Return shall be made in
accordance with the rules prescribed by the Securities Exchange Commission for
purposes of performance graph disclosure.
(s) "1933 Act" means the Securities Act of 1933, as amended.
<PAGE>
(t) "1934 Act" means the Securities Exchange Act of 1934, as amended.
3. RIGHTS TO BE GRANTED
Rights that may be granted under the Plan are rights to Restricted
Stock, which give the Grantee ownership rights in the Shares subject to the
Award, subject to a substantial risk of forfeiture, as set forth in Paragraph 7.
4. SHARES SUBJECT TO THE PLAN
(a) The Shares issued under the Plan may, at the Company's option, be
either Shares held in treasury or Shares originally issued for such purpose. Not
more than 100,000 Shares in the aggregate may be issued under the Plan to any
single individual in any calendar year pursuant to the grant of Awards, subject
to adjustment in accordance with Paragraph 10.
(b) If Restricted Stock is forfeited pursuant to the terms of an Award,
other Awards with respect to such Shares may be granted.
5. ADMINISTRATION OF THE PLAN
(a) Administration. The Plan shall be administered by the Committee.
(b) Grants. Subject to the express terms and conditions set forth in
the Plan, the Committee shall have the power, from time to time, to:
(i) select those Eligible Employees to whom Awards shall be
granted under the Plan and to determine the number of Shares to be granted
pursuant to each Award; and
(ii) interpret the Plan's provisions, prescribe, amend and
rescind rules and regulations for the Plan, and make all other determinations
necessary or advisable for the administration of the Plan.
The determination of the Committee in all matters as stated above shall be
conclusive.
(c) Meetings. The Committee shall hold meetings at such times and
places as it may determine. Acts approved at a meeting by a majority of the
members of the Committee or acts approved in writing by the unanimous consent of
the members of the Committee shall be the valid acts of the Committee.
(d) Exculpation. No member of the Committee shall be personally liable
for monetary damages for any action taken or any failure to take any action in
connection with the administration of the Plan or the granting of Awards
thereunder unless (i) the member of the Committee has breached or failed to
perform the duties of his office, and (ii) the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness; provided, however,
that the provisions of this Paragraph 5(d) shall not apply to the responsibility
or liability of a member of the Committee pursuant to any criminal statute.
<PAGE>
(e) Indemnification. Service on the Committee shall constitute service
as a member of the Board. Each member of the Committee shall be entitled without
further act on his part to indemnity from the Company to the fullest extent
provided by applicable law and the Company's Articles of Incorporation and
By-laws in connection with or arising out of any action, suit or proceeding with
respect to the administration of the Plan or the granting of Awards thereunder
in which he may be involved by reason of his being or having been a member of
the Committee, whether or not he continues to be such member of the Committee at
the time of the action, suit or proceeding.
6. ELIGIBILITY
Awards may be granted only to Eligible Employees of the Company and its
Subsidiaries, as determined by the Committee. No Awards shall be granted to an
individual who is not an Eligible Employee of the Company or a Subsidiary of the
Company.
7. RESTRICTED STOCK AWARDS
The Committee may grant Awards in accordance with the Plan. The terms
and conditions of Awards shall be set forth in writing as determined from time
to time by the Committee, consistent, however, with the following:
(a) Time of Grant. All Awards shall be granted within ten (10) years
from the date of adoption of the Plan by the Board.
(b) Shares Awarded. The provisions of Awards need not be the same with
respect to each Grantee. No cash or other consideration shall be required to be
paid by the Grantee in exchange for an Award.
(c) Awards and Agreements. A certificate shall be issued to each
Grantee in respect of Shares subject to an Award. Such certificate shall be
registered in the name of the Grantee and shall bear an appropriate legend
referring to the terms, conditions and restrictions applicable to such Award.
The Company may require that the certificate evidencing such Restricted Stock be
held by the Company until all restrictions on such Restricted Stock have lapsed.
(d) Restrictions on Restricted Stock. Unless provided otherwise by the
terms of an Award, the Grantee shall not be permitted to sell, transfer, pledge
or assign Restricted Stock awarded under the Plan during the Performance Period.
(e) Performance Goals. Upon the expiration of a Performance Period
(other than by reason of a Change of Control), a Grantee shall vest in all or a
portion of the Restricted Stock subject to an Award based on the attainment of
performance goals, as follows:
(i) Full Vesting. All of the Restricted Stock subject to an Award
shall vest in full if the Company's Total Shareholder Return ranks in the top
one-third as compared to Other Steel Companies.
<PAGE>
(ii) Fifty Percent Vesting. Fifty percent (50%) of the Restricted
Stock subject to an Award shall vest and fifty percent (50%) shall be forfeited
if the Company's Total Shareholder Return ranks in the middle one-third as
compared to Other Steel Companies.
(iii) No Vesting. The Grantee shall forfeit all of the Restricted
Stock subject to an Award if the Company's Total Shareholder Return ranks in the
bottom one-third as compared to Other Steel Companies.
In the event the composition of the Other Steel Companies changes during the
Performance Period, the number of Other Steel Companies at the end of the
Performance Period will be divided by three, and any resulting decimals will be
rounded to the nearest whole number, in order to determine the one-third
rankings in accordance with this Paragraph 7(e).
(f) Lapse of Restrictions. Unless provided otherwise by the terms of an
Award, or unless a Change in Control has occurred prior to the end of a
Performance Period, the restrictions with respect to Restricted Stock subject to
an Award shall lapse at the end of a Performance Period; provided, however, that
the Restricted Stock subject to an Award has vested pursuant to Paragraph 7(e).
Notwithstanding the preceding, the Committee may, in its sole discretion, waive,
in whole or in part, any remaining restrictions with respect to such Grantee's
Restricted Stock.
(g) Forfeiture. In the event that a Grantee terminates employment with
the Company and its Subsidiaries during a Performance Period, all Restricted
Stock shall be forfeited by the Grantee and deemed canceled by the Company.
(h) Rights of the Grantee. Grantees may have such rights with respect
to Shares subject to an Award as may be determined by the Committee and set
forth in the Award, including the right to vote such Shares, and the right to
receive dividends paid with respect to such Shares; provided, however, that
dividends shall be held in escrow and subject to forfeiture in accordance with
Paragraph 8.
(i) Delivery of Shares. When the Performance Period has expired with
respect to an Award, and the Company has determined whether any portion of the
Shares subject to such Award shall be forfeited in accordance with Paragraph
7(e), the Company shall deliver to the Grantee (or the person to whom ownership
rights may have passed by will or the laws of descent and distribution) a
certificate for the number of Shares for which restrictions have lapsed and for
which the performance goals have been met, without any legend or restrictions
(except those that may be imposed by the Committee, in its sole judgment, under
Paragraph 9(a)). The right to payment of any fractional Shares that may have
accrued shall be satisfied in cash, measured by the product of the fractional
amount times the fair market value of a Share at the time the applicable
restrictions lapse, as determined by the Committee.
8. DIVIDENDS
<PAGE>
During the Performance Period applicable to an Award, any dividends
paid on the Shares subject to such Award shall accrue, but shall be held in
escrow by the Company until the expiration of the Performance Period. The
accrued dividends shall be paid to the Grantee at the same time that Share
certificates are delivered in accordance with Paragraph 7(i); provided that all
or a portion of such dividends shall be forfeited in the same proportion as
Shares are forfeited, in accordance with Paragraph 7(e). Upon a Change of
Control before the expiration of the Performance Period, the accrued dividends
shall be paid to the Grantee in full.
9. SECURITIES LAWS; TAXES
(a) Securities Laws. The Committee shall have the power to make each
grant of Awards under the Plan subject to such conditions as it deems necessary
or appropriate to comply with the then-existing requirements of the 1933 Act and
the 1934 Act, including Rule 16b-3. Such conditions may include the delivery by
the Grantee of an investment representation to the Company in connection with
the lapse of restrictions and forfeiture provisions on Shares subject to an
Award, or the execution of an agreement by the Grantee to refrain from selling
or otherwise disposing of the Shares acquired for a specified period of time or
on specified terms.
(b) Payment of Tax Liabilities. In connection with the grant of any
Award or the lapse of restrictions and forfeiture provisions under any Award,
the Company shall have the right to (i) require the Grantee to remit to the
Company an amount sufficient to satisfy any federal, state and/or local
withholding tax requirements prior to the delivery or transfer of any
certificate or certificates for Shares subject to such Award, or (ii) take any
action whatever that it deems necessary to protect its interests with respect to
tax liabilities. The Company shall not be obligated to make any delivery or
transfer of Shares until the Grantee has complied, to the Company's
satisfaction, with any withholding requirement, or until the Company has been
indemnified to its satisfaction for any applicable tax, charge or assessment.
10. CHANGES IN CAPITALIZATION
The aggregate number of Shares and class of Shares as to which Awards
may be granted and the number of Shares covered by each outstanding Award shall
be appropriately adjusted in the event of a stock dividend, stock split,
recapitalization or other change in the number or class of issued and
outstanding equity securities of the Company resulting from a subdivision or
consolidation of the Shares and/or other outstanding equity security or a
recapitalization or other capital adjustment (not including the issuance of
Shares and/or other outstanding equity securities on the conversion of other
securities of the Company which are convertible into Shares and/or other
outstanding equity securities) affecting the Shares which is effected without
receipt of consideration by the Company. The Committee shall have authority to
determine the adjustments to be made under this Paragraph 10 and any such
determination by the Committee shall be final, binding and conclusive.
<PAGE>
11. CHANGE OF CONTROL
Upon a Change of Control, any performance goal requirements and
restrictions with respect to Restricted Stock (other than Restricted Stock that
has previously been forfeited) shall be eliminated in full.
12. AMENDMENT AND TERMINATION
The Plan may be terminated by the Board at any time. The Plan may be
amended by the Board or the Committee at any time, subject to shareholder
approval, if required by applicable securities and/or tax laws. No Award shall
be affected by any such termination or amendment without the written consent of
the Grantee.
13. EFFECTIVE DATE
The effective date of the Plan is the date on which it is adopted by
the Board.
14. GOVERNING LAW
The Plan and all determinations made and actions taken pursuant to the
Plan shall be governed in accordance with Pennsylvania law.
As adopted by the Board of Directors on February 26, 1997.
Dated: May 12, 1997 /s/ William D. Sprague
------------ ----------------------
Secretary
<TABLE>
<CAPTION>
SECOND QUARTER YEAR-TO-DATE
Thirteen Weeks Ended Twenty-six Weeks Ended
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
Primary Earnings (Loss) per Common Share
Net earnings (loss) applicable to common stock
<S> <C> <C> <C> <C>
Net earnings (loss) $ 1,181 (5,733) (797) (10,108)
ESOP dividend requirements
Preferred stock dividends declared (567) (588) (1,137) (1,180)
Tax benefit on dividends - unallocated shares 66 88 137 184
--------- -------- --------- ---------
Net earnings (loss) applicable to common stock $ 680 (6,233) (1,797) (11,104)
--------- -------- --------- ---------
Weighted average number of common shares and
equivalents outstanding
Weighted average number of common shares outstanding 14,807 14,780 14,806 14,768
Common stock equivalents 21 - * - * - *
--------- -------- --------- ---------
Weighted average number of common shares and
equivalents outstanding 14,828 14,780 14,806 14,768
--------- -------- --------- ---------
Primary Earnings (Loss) per Common Share $ 0.05 (0.42) (0.12) (0.75)
========= ======== ========= =========
Fully Diluted Earnings (Loss) per Common Share
Net earnings (loss) applicable to common stock
Net earnings (loss) $ - - - -
Incremental cash contribution to the ESOP assuming conversion
of preferred stock to common - - - -
Tax benefit on the incremental cash contribution - - - -
--------- -------- --------- ---------
Net earnings (loss) applicable to common stock $ - - - -
--------- -------- --------- ---------
Weighted average number of common shares and equivalents outstanding
Weighted average number of common shares outstanding - - - -
Common stock equivalents - - - -
Assumed conversion of Series B ESOP preferred stock - - - -
--------- -------- --------- ---------
Weighted average number of common shares and
equivalents outstanding - - - -
--------- -------- --------- ---------
Fully Diluted Earnings (Loss) per Common Share $ 0.05 (0.42) (0.12) (0.75)
========= ======== ========= =========
</TABLE>
* Not applicable because it would result in an antidilutive calculation.
** Fully diluted calculation is not presented because it is antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LUKENS INC.
FINANCIAL STATEMENTS FOR THE TWENTY-SIX WEEKS ENDED JUNE 28, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> JUN-28-1997
<CASH> 5,389
<SECURITIES> 0
<RECEIVABLES> 134,640
<ALLOWANCES> 7,542
<INVENTORY> 166,000
<CURRENT-ASSETS> 313,716
<PP&E> 959,930
<DEPRECIATION> 443,200
<TOTAL-ASSETS> 920,629
<CURRENT-LIABILITIES> 190,111
<BONDS> 265,435
<COMMON> 158
15,082
0
<OTHER-SE> 235,575
<TOTAL-LIABILITY-AND-EQUITY> 920,629
<SALES> 506,365
<TOTAL-REVENUES> 506,365
<CGS> 472,090
<TOTAL-COSTS> 472,090
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,140
<INTEREST-EXPENSE> 9,532
<INCOME-PRETAX> (669)
<INCOME-TAX> 128
<INCOME-CONTINUING> (797)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (797)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
