<PAGE>
1999
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark
One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to
Commission File No. 1-9117
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RYERSON TULL, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3425828
(State of Incorporation) (I.R.S. Employer Identification No.)
2621 West 15th Place, Chicago, Illinois 60608
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (773) 762-2121
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
<S> <C>
Common Stock ($1.00 par value), New York Stock Exchange, Inc.
including Preferred Stock Purchase Rights
</TABLE>
----------------
Securities registered pursuant to Section 12(g) of the Act:
None
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_] .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of March 20, 2000 the aggregate market value of the voting stock of the
registrant held by nonaffiliates of the registrant was approximately
$384,778,355.(/1/)
The number of shares of Common Stock ($1.00 par value) of the registrant
outstanding as of March 20, 2000 was 24,766,421.
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(1) Excluding stock held by directors and executive officers of registrant,
without admission of affiliate status of such individuals for any other
purpose.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II of this Report on Form 10-K incorporate by reference certain
information from the Annual Report to Stockholders for the fiscal year ended
December 31, 1999. Part III of this Report on Form 10-K incorporates by
reference certain information from the registrant's definitive Proxy Statement
which has been furnished to stockholders in connection with the Annual Meeting
of Stockholders of the registrant scheduled to be held on April 27, 2000.
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<PAGE>
PART I
ITEM 1. BUSINESS.
Ryerson Tull, Inc. ("Ryerson Tull"), a Delaware corporation, is the sole
stockholder of Joseph T. Ryerson & Son, Inc. ("Ryerson") and J.M. Tull Metals
Company, Inc. ("Tull") (unless the context indicates otherwise, Ryerson Tull,
Ryerson and Tull, together with their subsidiaries, are collectively referred
to herein as the "Company"). The Company has a single business segment, which
is comprised primarily of Ryerson and Tull, leading steel service,
distribution and materials processing organizations. The Company also owns
certain joint venture interests, which are not material, in certain foreign
operations discussed below.
Operations
The Company conducts its materials distribution operations in the United
States through its operating subsidiaries, Ryerson and Tull; in Canada through
Washington Specialty Metals, Inc.; in Mexico through Ryerson de Mexico, S.A.
de C.V.; in China through Shanghai Ryerson Limited; and in India through Tata
Ryerson Limited; and is organized into five business units along regional and
product lines. The Company is a leading metals service center in the United
States based on sales revenue, with 1999 sales of $2.76 billion. It has a
current U.S. market share of approximately 11%, based on its analysis of data
prepared by the Steel Service Center Institute ("SSCI"). The Company
distributes and processes metals and other materials throughout the
continental United States, and is among the largest purchasers of steel in the
United States.
Industry Overview
Primary steel producers typically sell steel in the form of standard-sized
coils, sheets, plates, structurals, bars and tubes, and generally sell in
large volumes with long lead times for production and delivery. Other primary
metals producers, such as producers of stainless steel and aluminum, also
typically sell their products in large volumes with long lead times for
production and delivery. However, many customers seek to purchase metals with
customized specifications, including value-added processing, in smaller
volumes, on shorter lead times and with more reliable delivery than primary
metals producers are able to provide. Metals service centers act as
intermediaries between primary metals producers and customers by purchasing
metals in a variety of shapes and sizes from primary metals producers in large
volumes, allowing metals service centers to take advantage of producer
economies of scale resulting in lower costs of materials purchased, and
engaging in a variety of distribution and value-added processing operations to
meet the demands of specific customers. Because metals service centers
purchase metals from a number of primary producers, they can maintain a
consistent supply of various types of metal used by their customers. By
purchasing products from metals service centers, customers may be able to
lower their inventory levels, decrease the time between the placement of an
order and receipt of materials and reduce internal expenses, thereby lowering
their total cost of raw materials. The Company believes that the increased
prevalence of just-in-time inventory needs of manufacturers and intermediate
processors has made and will continue to make the value-added inventory,
processing and delivery functions performed by metals service centers more
important in the metals market.
The industry is cyclical, impacted both by market demand and metals supply.
Periods of strong and weak market demand principally are due to the cyclical
nature of the industries in which the largest consumers of metals operate. Any
significant slowdown in one or more of those industries could have a material
adverse effect on the demand for metals, resulting in lower prices for metals
and reduced profitability for metals service centers, including the Company.
Metals prices and metals service center profitability generally improve as
metal-consuming industries recover from economic downturns. However, excess
supply of metals can, even in periods of strong demand, result in lower prices
for metals and adversely impact profitability.
The industry is comprised of many companies, the majority of which have
operations limited as to product line and size of inventory, with customers
located in a specific geographic area. Based on SSCI data, the
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Company believes that the industry is comprised of between 750 and 1,000
service centers, operating out of approximately 2,000 locations and servicing
approximately 300,000 customers. The industry is highly fragmented, consisting
of a large number of small companies and a few relatively large companies. In
general, competition is based on quality, service, price and geographic
proximity. Based on the Company's analysis of SSCI data, the industry handled
approximately 29.4 million tons or approximately 28.6% of the metals
distributed in the United States in 1999.
The industry is divided into three major groups: general line service
centers, specialized service centers and processing centers, each of which
targets different market segments. General line service centers handle a broad
line of metals products and tend to concentrate on distribution rather than
processing. General line service centers range in size from one location to a
nationwide network of locations. For general line service centers, individual
order size in terms of dollars and tons tends to be small relative to
processing centers, while the total number of orders is typically very high.
Specialized service centers focus their activities on a narrower range of
product and service offerings than general line companies. Such service
centers provide a narrower range of services to their customers and emphasize
product expertise and lower operating costs, while maintaining a moderate
level of investment in processing equipment. Processing centers typically
process large quantities of steel purchased from primary producers for resale
to large industrial customers, such as the automotive industry. Because orders
are typically large, operation of a processing center requires a significant
investment in processing equipment.
The Company competes with many other general line service centers,
specialized service centers and processing centers on a regional and local
basis, some of which may have greater financial resources and flexibility than
the Company. The Company also competes to a lesser extent with primary steel
producers. Primary steel producers typically sell to very large customers that
require regular shipments of large volumes of steel. Although these large
customers sometimes use metals service centers to supply a portion of their
metals needs, metals service center customers typically are consumers of
smaller volumes of metals than customers of primary steel producers. Although
the Company purchases metals from steelmakers, some of the Company's
competitors purchase a higher percentage of metals than the Company from
foreign steelmakers. Such competitors may benefit from favorable exchange
rates or other economic or regulatory factors that may result in a competitive
advantage. This competitive advantage may be offset somewhat by higher
transportation costs and less dependable delivery times associated with
importing metals into the United States. Excess capacity of metals relative to
demand in the industry since mid-1995 led to a weakening in prices. As a
result, the Company was reducing its prices from mid-1995 through mid-1999 to
remain competitive. Pricing stabilized in the second half of 1999.
Products and Services
The Company carries a full line of carbon steel, stainless steel and
aluminum, and a limited line of alloy steel, nickel, red metals and plastics.
These materials are inventoried in a number of shapes, including coils,
sheets, rounds, hexagons, square and flat bars, plates, structurals and
tubing.
The following table shows the Company's percentage of sales revenue by
major product lines for 1997, 1998 and 1999:
<TABLE>
<CAPTION>
Percentage of
Sales
----------------
Revenues
----------------
Product Line 1997 1998 1999
------------ ---- ---- ----
<S> <C> <C> <C>
Carbon flat rolled...................................... 27% 30% 32%
Stainless and aluminum.................................. 27 25 29
Bars, tubing and structurals............................ 20 20 17
Fabrication and carbon plate............................ 20 20 18
Other................................................... 6 5 4
--- --- ---
Total............................................... 100% 100% 100%
=== === ===
</TABLE>
3
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More than one-half of the materials sold by the Company is processed. The
Company uses techniques such as sawing, slitting, blanking, pickling, cutting
to length, leveling, flame cutting, laser cutting, edge trimming, edge
rolling, fabricating and grinding to process materials to specified thickness,
length, width, shape and surface quality pursuant to specific customer orders.
Among the most common processing techniques used by the Company are pickling,
a chemical process using an acidic solution to remove surface oxide, commonly
called "scale," from steel which develops after the steel is hot rolled;
slitting, which is cutting coiled metals to specified widths along the length
of the coil; leveling, which is flattening metals and cutting them to exact
lengths; and edge rolling, a process which imparts round or smooth edges.
Although the Company often uses third-party fabricators to outsource certain
limited processes that the Company is not able to perform internally,
outsourcing these processes does not affect a significant part of the
Company's operations or constitute a significant part of the its operating
costs and expenses.
The plate burning and fabrication processes are particularly important to
the Company. These processes require sophisticated and expensive processing
equipment. As a result, rather than making investments in such equipment,
manufacturers have increasingly outsourced these processes to metals service
centers. The Company has flame or laser cutting capacity in 43 of its 67
facilities.
The Company also provides services and technical advice to its customers as
an integral part of providing products to its customers. It does not charge
customers separately for such services or advice, but rather includes the
costs of such services and advice in the price of products sold to such
customers.
The Company's services include: just-in-time delivery, production of kits
containing multiple products for ease of assembly by the customer, the
provision of the Company-owned materials to the customer and the placement of
the Company employees at a customer's site for inventory management,
production and technical assistance. The Company also provides special
stocking programs in which products that would not otherwise be stocked by the
Company are held in inventory to meet certain customers' needs. The foregoing
services are designed to reduce customers' costs by minimizing their
investment in inventory and improving their production efficiency.
Customer Base
The Company's customer base is diverse, numbering over 50,000. No customer
accounted for more than 5% of Company sales in 1999, and the top ten customers
accounted for approximately 13% of its sales in 1999. The Company's customer
base includes most metal-consuming industries, most of which are cyclical. The
following table shows the Company's percentage of sales revenue by class of
customers for 1997, 1998 and 1999:
<TABLE>
<CAPTION>
Percentage of
Sales
----------------
Revenues
----------------
Class of Customer 1997 1998 1999
----------------- ---- ---- ----
<S> <C> <C> <C>
Machinery manufacturers ................................ 37% 35% 31%
Fabricated metals producers............................. 26 26 27
Electrical machinery producers.......................... 8 10 11
Transportation equipment producers...................... 9 10 10
Construction-related purchasers......................... 5 4 5
Wholesale distributors.................................. 4 4 4
Metals mills and foundries.............................. 3 2 2
Other .................................................. 8 9 10
--- --- ---
Total............................................... 100% 100% 100%
=== === ===
</TABLE>
The Company's flat-rolled processing business unit, Ryerson Tull Coil
Processing, generally serves a customer base that differs from the Company's
general line service center business. A large portion of Ryerson Tull Coil
Processing's customers has supply contracts typically at fixed prices and from
three months to one
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year in duration. Ryerson Tull Coil Processing has a small number of
arrangements with large customers that extend beyond one year. Ryerson Tull
Coil Processing attempts to limit its financial exposure on these fixed-price
sales arrangements by entering into fixed-price supply arrangements with one
or more suppliers for comparable periods of time. Ryerson Tull Coil
Processing's customers often seek large quantities of carbon sheet product
that have undergone one or more of the following processes: pickling, cutting
to length, slitting, tension leveling, texturing or blanking. Many of Ryerson
Tull Coil Processing's approximately 650 customers are in the transportation
equipment, appliance, office furniture or cabinetry businesses.
Suppliers
In 1999, the Company purchased approximately 3.4 million tons of materials
from many suppliers throughout the world. The Company's top 25 suppliers
accounted for approximately 60% of 1999 purchase dollars. The only supplier
that accounted for 10% or more of the 1999 purchase dollars was Ispat Inland
Inc. ("Ispat") which accounted for approximately 13.5% of purchase dollars.
The terms of these arrangements were negotiated between the Company and Ispat
and are similar to other large supply arrangements the Company has with other
suppliers for similar products.
The Company purchases the majority of its inventories in the open market at
prevailing market prices. However, occasionally the Company enters into long-
term, fixed-price supply contracts to offset its long-term, fixed-price sales
contracts in order to minimize its financial exposure.
Because the Company uses many suppliers and because there is a substantial
overlap of product offerings from these suppliers, the Company believes it
will be able to meet its materials requirements for the foreseeable future.
The Company works with and monitors its suppliers in order to obtain
improvements in price, quality, service, delivery and performance. The Company
believes it has good relationships with most of its suppliers.
Sales and Marketing
Each of the Company's business units maintains its own sales and marketing
force. In addition to its office sales staff, the Company markets and sells
its products through the use of its field sales force that has extensive
product and customer knowledge and through a comprehensive catalog of the
Company's products. The Company's office and field sales staffs, which
together consist of approximately 800 employees, include technical and
metallurgical personnel. In addition, its technically oriented marketing
departments develop advertising materials and maintain product expertise for
each of the various types of materials sold and industries serviced by it.
Capital Expenditures
In recent years the Company has made capital expenditures to maintain,
improve and expand processing capabilities. Additions by the Company to
property, plant and equipment, together with retirements for the five years
ended December 31, 1999, excluding the initial purchase price of acquisitions,
are set forth below. Net capital additions during such period aggregated $85.8
million.
<TABLE>
<CAPTION>
Dollars in Millions
---------------------------------
Retirements Net Capital
Additions or Sales Additions
--------- ----------- -----------
<S> <C> <C> <C>
1999.................................... 31.6 20.1 11.5
1998.................................... 40.1 30.2 9.9
1997.................................... 41.3 12.0 29.3
1996.................................... 25.1 6.0 19.1
1995.................................... 20.7 4.7 16.0
</TABLE>
NOTE: The above does not include capital expenditures related to
discontinued operations.
The Company anticipates that capital expenditures, excluding acquisitions,
will be in the range of $40 million to $50 million for 2000, which it expects
will be funded from cash generated by operations.
5
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Employees
As of December 31, 1999, the Company employed approximately 5,050 persons,
of which approximately 2,480 were salaried employees and approximately 2,570
were hourly employees. Approximately 33% of the hourly employees were members
of various unions, including the United Steelworkers and the Teamsters, and an
additional approximately 30% of the hourly employees have voted for union
certification in proceedings currently on appeal before the Washington D.C.
Federal Circuit Court. The Company's relationship with the various unions
generally has been good and over the last five years, there have been no work
stoppages. During 2000, contracts covering approximately 100 employees at four
facilities will expire. During 2001, contracts covering approximately 100
employees at three facilities will expire. The current agreement with the
United Steelworkers will expire on July 31, 2003, and agreements with the
Teamsters expire on various dates during the period March 31, 2000 through
June 26, 2004. While management does not expect any unresolvable issues to
arise in connection with the renewal of any of these contracts, no assurances
can be given that any of these contracts will be extended prior to their
expiration.
Environmental, Health and Safety Matters
The Company's operations are subject to many federal, state and local
regulations relating to the protection of the environment and to workplace
health and safety. In particular, its operations are subject to extensive
federal, state and local laws and regulations governing waste disposal, air
and water emissions, the handling of hazardous substances, environmental
protection, remediation, workplace exposure and other matters. The Company's
management believes that it is presently in substantial compliance with all
such laws and does not currently anticipate that it will be required to expend
any substantial amounts in the foreseeable future in order to meet current
environmental, workplace health or safety requirements. However, additional
costs and liabilities may be incurred to comply with current and future
requirements, which costs and liabilities could have a material adverse effect
on the Company's results of operations or financial condition.
There are no known pending remedial actions or claims relating to
environmental matters that are expected to have a material effect on the
Company's financial position or results of operations. Some of the properties
owned or leased by the Company, however, are located in industrial areas or
have a history of heavy industrial use. These properties may potentially incur
environmental liabilities in the future that could have a material adverse
effect on the Company's financial condition or results of operations.
Capital and operating expenses for pollution control projects were less
than $500,000 per year for the past five years and are expected to remain at
similar levels.
Patents and Trademarks
The Company owns several U.S. and foreign trademarks, service marks and
copyrights. Certain of the trademarks are registered with the U.S. Patent and
Trademark Office and, in certain circumstances, with the trademark offices of
various foreign countries. The Company considers certain other information
owned by it to be trade secrets. It protects its trade secrets by, among other
things, entering into confidentiality agreements with its employees regarding
such matters and implementing measures to restrict access to sensitive data
and computer software source code on a need-to-know basis. The Company
believes that these safeguards adequately protect its proprietary rights and
vigorously defends these rights. While the Company considers all of its
intellectual property rights as a whole to be important, it does not consider
any single right to be essential to its operations as a whole.
Corporate Restructuring
In 1998, the Company, formerly Inland Steel Industries, Inc. ("Inland"),
sold its wholly owned subsidiary, Inland Steel Company, to Ispat
International, N.V. for approximately $1.1 billion in cash. On February 25,
1999, Inland's majority-owned subsidiary, then named Ryerson Tull, Inc. ("Pre-
merger Ryerson Tull"), became its
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wholly owned subsidiary and each share of Pre-merger Ryerson Tull Class A
common stock was converted into 0.61 shares of Inland's common stock. Pre-
merger Ryerson Tull then merged with Inland and the Company changed its name
to Ryerson Tull, Inc. These mergers are together referred to as the RT Merger.
On January 31, 1999 Ryerson Tull purchased Washington Specialty Metals
Corporation ("WSM") and Washington Specialty Metals, Inc., a Canadian
corporation. On December 31, 1999, WSM was merged with and into Ryerson.
Washington Specialty Metals, Inc. now is a wholly owned indirect subsidiary of
Ryerson Tull.
Ryerson International
In 1994, the Company formed Ryerson International, Inc. (formerly Inland
International, Inc.) to conduct the Company's international operations, and it
organized Ryerson International Trading, Inc. (formerly Inland International
Trading, Inc.) to sell products and services of the Company and its affiliates
and purchase materials for them abroad. In 1995, Ryerson International
Trading, Inc. organized I.M.F. Steel International Limited, a Hong Kong
company (in which it and a subsidiary of MacSteel Holdings (Pte.), Ltd. (South
Africa) each holds a 50% interest), to engage in the worldwide purchase and
sale of steel and related products, principally on behalf of the Company.
Ryerson de Mexico
The Company owns a 50% interest in Ryerson de Mexico, S.A. de C.V., a joint
venture with Altos Hornos de Mexico, S.A. de C.V., an integrated steel
manufacturer in Mexico. Ryerson de Mexico, which was formed in 1994, is a
general line metals service center and processor with 8 facilities in Mexico.
The impact of Ryerson de Mexico's operations on the Company's results of
operations has not been material.
Shanghai Ryerson Limited
The Company owns a 49% interest in Shanghai Ryerson Limited, a joint
venture with a unit of Baoshan Iron and Steel Corporation, an integrated steel
manufacturer in China. Shanghai Ryerson Limited, which was formed in 1996, is
a metals service center and processor with a facility at Pudong, Shanghai,
China. The impact of Shanghai Ryerson's operations on the Company's results of
operations has not been material.
Tata Ryerson Limited
The Company owns a 50% interest in Tata Ryerson Limited, a joint venture
with The Tata Iron & Steel Corporation, an integrated steel manufacturer in
India. Tata Ryerson Limited, which was formed in 1997, is a metals service
center and processor with facilities at Jamshedpur and Pune, India. The impact
of Tata Ryerson's operations on the Company's results of operations has not
been material.
ITEM 2. PROPERTIES.
Joseph T. Ryerson & Son, Inc.
Ryerson owns its regional business unit headquarters offices in Chicago
(IL) and leases regional headquarters offices in West Chester (PA) and Tukwila
(WA). Ryerson East's service centers are at Buffalo (NY), Chattanooga (TN),
Cleveland (OH), Devens (MA), Easton (PA), Fairless Hills (PA), Long Island
City (NY), Philadelphia (PA), Pinellas Park (FL) and Pittsburgh (PA). Ryerson
Central's service centers are at Bettendorf (IA), Chicago (IL) (two
facilities), Cincinnati (OH), Dallas (TX), Des Moines (IA), Detroit (MI),
Holland (MI), Indianapolis (IN), Kansas City (MO), Milwaukee (WI), Omaha (NE),
Plymouth (MN), Schofield (WI), St. Louis (MO), Tulsa (OK) and Wheeling (IL)
with office space at Buffalo Grove (IL). Ryerson West's service centers are at
Emeryville (CA), Commerce City (CO), Phoenix (AZ), Portland (OR), Renton (WA),
Spokane (WA), Salt Lake City (UT) and Vernon (CA). Ryerson Tull Coil
Processing's facilities are located in Chicago (IL), Knoxville (TN),
Marshalltown (IA), Plymouth (MN) and New Hope (MN) with office space at
Franklin (OH).
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All of Ryerson's operating facilities are held in fee with the exception of
the facilities at Bettendorf (IA) (long-term lease) Buffalo Grove (IL) (short-
term lease), Chicago (IL) (short-term lease), Easton (PA) (long-term lease),
Fairless Hills (PA) (long-term lease), Franklin (OH) (long term lease),
Holland (MI) (long-term lease), Knoxville (TN) (long term lease), Long Island
City (NY) (short-term lease), a satellite facility at Omaha (NE) (long-term
lease), Pinellas Park (FL) (long term lease), Plymouth (MN) (long term lease),
a portion of the property at St. Louis (MO) (long-term lease), Salt Lake City
(UT) (short-term lease), Schofield (WI) (short-term lease) and Wheeling (IL)
(long-term lease). Ryerson has short-term leases for former operating
facilities at Carol Stream (IL) and Carrolton (TX). The facility at Carol
Stream (IL) is subleased. Ryerson's properties are adequate to serve its
present and anticipated needs.
J. M. Tull Metals Company, Inc.
Tull maintains service centers at, Baton Rouge (LA), Birmingham (AL),
Charlotte (NC) (three facilities), Columbia (SC), Greensboro (NC), Greenville
(SC), Jacksonville (FL) (two facilities), Lawrenceville (GA), Miami (FL), New
Orleans (LA), Pounding Mill (VA), Richmond (VA), Tampa (FL), Youngsville (NC)
and Norcross (GA), where its headquarters is located. All of Tull's operating
facilities are held in fee, with the exception of the facilities at Columbia
(SC) (long-term lease), Charlotte (NC) (short-term lease), Jacksonville (FL)
(short-term lease), Lawrenceville (GA) (long term lease), Tampa (FL) (long
term lease) and Youngsville (NC) (short term lease). Tull also leases former
operating facilities in Tampa (FL) and Alabaster (AL). AFCO Metals, Inc., a
wholly owned subsidiary of Tull, operates service centers at Fort Smith (AR),
Jackson (MS), Little Rock (AR), Oklahoma City (OK), Shreveport (LA), West
Memphis (AR) and Wichita (KS). AFCO's headquarters are located at Norcross
(GA), where it leases space owned in fee by Tull. Each of AFCO's facilities is
held in fee except the Wichita facility, which is held under a long-term
lease. Tull's properties are adequate to serve its present and anticipated
needs.
Washington Specialty Metals, Inc.
Washington Specialty Metals, Inc., a wholly-owned, indirect Canadian
subsidiary of Ryerson Tull, has two facilities in Canada. It leases the
facility at Vaudreuil (Que.) (long-term lease) and a facility at Brampton
(Ont.) is held in fee. The properties of Washington Specialty Metals, Inc. are
adequate to serve its present and anticipated needs.
Ryerson de Mexico
Ryerson de Mexico, S.A. de C.V., a joint venture in which the Company owns
a 50% interest, owns eight general line metals service centers and processing
centers in Mexico. Ryerson de Mexico's properties are adequate to serve its
present and anticipated needs.
Shanghai Ryerson Limited
Shanghai Ryerson Limited, a joint venture company in which the Company owns
a 49% interest, has a metals service center in Pudong, Shanghai, China.
Shanghai Ryerson's properties are adequate to serve its present and
anticipated needs.
Tata Ryerson Limited
Tata Ryerson Limited, a joint venture company in which the Company owns a
50% interest, has two metals service centers in India, at Jamshedpur and Pune.
Tata Ryerson's properties are adequate to serve its present and anticipated
needs.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, the Company is named as a defendant in legal actions
arising in the ordinary course of its business. The Company is a party to the
following pending legal proceedings in addition to routine litigation
8
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incidental to its business. Management does not believe that the resolution of
these claims will have a material adverse effect on the Company's financial
condition or results of operations.
On July 20, 1998, the Company commenced a tender offer to repurchase a
portion of its outstanding shares. On August 5, 1998, Greenway Partners, L.P.
and related parties ("Greenway") filed suit in the Delaware Chancery Court
seeking to enjoin the Company from consummating the tender offer. Greenway
alleged that given the number of shares of Common Stock that it owned, the
size of the tender offer and the terms of the Company's rights agreement,
Greenway was coerced into tendering its shares of Common Stock in the tender
offer or risk being declared an "adverse person" by the Company's Board of
Directors, triggering the separation of the rights under the Company's rights
agreement. The court denied Greenway's request for a temporary restraining
order, and Greenway tendered all of its Common Stock into the offer. Greenway
has reserved its rights to seek appropriate remedies, including rescission of
the purchase of its approximately 2.9 million shares of Common Stock or
damages. It is unclear what measure of damages the court would apply in the
case. If Greenway is successful in its suit, the Company does not anticipate
that other stockholders who participated in the tender offer will be entitled
to rescission or damages.
On September 23, 1998, the Company issued a press release stating that it
had offered to acquire all of the outstanding publicly held shares of Pre-
merger Ryerson Tull Class A common stock in a merger transaction, pursuant to
which the Pre-merger Ryerson Tull stockholders (other than the Company and its
subsidiaries) would receive 0.54 of a share of Common Stock for each share of
Pre-merger Ryerson Tull Class A common stock (the "Proposal").
After the September 23, 1998 public announcement of the Proposal, three
lawsuits were filed by certain Pre-merger Ryerson Tull stockholders in the
Delaware Court of Chancery against the Company, Pre-merger Ryerson Tull and
certain directors of the Company and Pre-merger Ryerson Tull. These lawsuits
are purported class actions on behalf of all Pre-merger Ryerson Tull
stockholders and allege that the Proposal was unfair and inadequate because,
among other things, the intrinsic value of the Pre-merger Ryerson Tull Class A
common stock was allegedly materially in excess of the Proposal's exchange
ratio. The lawsuits also allege that the Company breached its duty of loyalty
to Pre-merger Ryerson Tull stockholders by using its control of Pre-merger
Ryerson Tull to seek to force Pre-merger Ryerson Tull stockholders to exchange
their equity interest in Pre-merger Ryerson Tull for unfair consideration. The
lawsuits sought to enjoin consummation of the Proposal or, in the alternative,
request rescission and monetary damages.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
Not applicable.
9
<PAGE>
EXECUTIVE OFFICERS OF REGISTRANT
Officers are elected by the Board of Directors of Ryerson Tull to serve for
a period ending with the next succeeding annual meeting of the Board of
Directors held immediately after the Annual Meeting of Stockholders. All
executive officers of Ryerson Tull, with the exception of Glenn J. Decker,
Joyce E. Mims and Darell R. Zerbe, have been employed by the Company or an
affiliate of the Company throughout the past five years.
Set forth below are the executive officers of Ryerson Tull as of March 1,
2000, and the age of each as of such date. Their principal occupations at
present and during the past five years, including positions and offices held
with the Company or a significant subsidiary or affiliate of the Company, are
shown below.
<TABLE>
<CAPTION>
Name, Age and Present Positions and Offices Held During the Past Five
Position with Registrant Years
------------------------ --------------------------------------------------
<C> <S>
Neil S. Novich, 45 Mr. Novich has been Chairman, President and Chief
Chairman, President and Executive Officer and a director of Ryerson Tull
Chief Executive Officer since February 1999. He served as President, Chief
Executive Officer, Chief Operating Officer and a
director of Pre-merger Ryerson Tull from June 1994
to February 1999. He was a Senior Vice President
of Inland from January 1995 to May 1996. Prior to
joining Inland, he led the Distribution and
Logistics Practice at Bain & Company, an
international management consulting firm. Mr.
Novich is also a director of W.W. Grainger, Inc.
and MetalSite General Partner, LLC.
Jay M. Gratz, 47 Mr. Gratz has been Executive Vice President and
Executive Vice President Chief Financial Officer of Ryerson Tull since
and Chief Financial February 1999. He was Vice President of Pre-merger
Officer Ryerson Tull from September 1994 to February 1999
and was Chief Financial Officer of Pre-merger
Ryerson Tull from April 1996 to February 1999. He
was Vice President and Chief Financial Officer of
Inland from May 1996 to December 1998.
Gary J. Niederpruem, 48 Mr. Niederpruem has been Executive Vice President
Executive Vice President of Ryerson Tull since February 1999. He was
President of Ryerson Central, a unit of Ryerson,
from April 1998 until February 1999. He was
President of Ryerson East, a unit of Ryerson, from
January 1993 to March 1998.
Thomas S. Cygan, 55 Mr. Cygan has been President of Ryerson West, a
President--Ryerson West unit of Ryerson, since November 1994. He served as
General Manager of Ryerson Central's Kansas City
plant from May 1981 to November 1994.
Glenn J. Decker, 42 Mr. Decker has been President of Ryerson Tull Coil
President--Ryerson Processing, a unit of Ryerson, since October 1999.
Tull Coil Processing He was President of Phelps Dodge High Performance
Conductors, a subsidiary of Phelps Dodge
Corporation, a mining and manufacturing firm, from
May 1995 to August 1999; and Vice President,
Planning and Administration of Colombian Chemicals
Company, a subsidiary of Phelps Dodge Corporation,
from August 1993 to May 1995.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Name, Age and Present Positions and Offices Held During the Past
Position with Registrant Five Years
------------------------ ---------------------------------------------
<C> <S>
James M. Delaney, 42 Mr. Delaney has been President of Ryerson
President--Ryerson Central Central, a unit of Ryerson, since February
1999. He was Vice President and General
Manager of Ryerson Central, a unit of
Ryerson, from April 1997 until January 1999.
He was Vice President and General Manager of
Ryerson East, a unit of Ryerson, from January
1993 until April 1997.
Stephen E. Makarewicz, 53 Mr. Makarewicz has been President, Chief
President--Tull Executive Officer and Chief Operating Officer
of Tull since October 1994. Mr. Makarewicz
was Vice President and General Manager of
Ryerson Central's Chicago plant from April
1992 to October 1994.
James J. Reinert, 50 Mr. Reinert has been President of Ryerson
President--Ryerson East East, a unit of Ryerson, since April 1998. He
was Vice President and General Manager of
Ryerson Central's Chicago plant from October
1994 until March 1998 and Vice President of
Operations, Ryerson Central from 1992 until
October 1994.
William Korda, 52 Mr. Korda has been Vice President--Human
Vice President--Human Resources Resources of Ryerson Tull since February
1999. He served as Vice President--Human
Resources of Pre-merger Ryerson Tull from
October 1993 to February 1999. He served as
Pre-merger Ryerson Tull's Manager of Human
Resources from August 1992 to October 1993.
Joyce E. Mims, 57 Ms. Mims has been Vice President, General
Vice President, Counsel and Secretary of Ryerson Tull since
General Counsel and June 1999. She was Senior Vice President and
Secretary General Counsel of Ancilla Systems
Incorporated, a multi-hospital health care
system from 1995 through 1997. She was Vice
President and Assistant General Counsel of
Bayer Corporation from 1992 to 1995.
Darell R. Zerbe, 57 Mr. Zerbe has been Vice President--
Vice President Information Technology and Chief Information
--Information Technology Officer of Ryerson Tull since February 1999.
He served as Vice President--Information
Technology and Chief Information Officer of
Pre-merger Ryerson Tull from February 1996 to
February 1999. He served as Senior Vice
President, Management Information Systems,
for Venture Stores, Inc. from 1988 to
February 1996.
Lily L. May, 50 Ms. May has been Controller of Ryerson Tull
Controller since February 1999. She was Controller of
Pre-merger Ryerson Tull from May 1996 to
February 1999. She was Vice President--
Finance and Purchasing and Controller of
Inland Steel Company from January 1995
through May 1996. Prior to that, she was
Director of Purchases and Energy of the
Inland Steel Flat Products Company division
of Inland Steel Company from November 1993 to
January 1995.
Terence R. Rogers, 40 Mr. Rogers has been Treasurer of Ryerson Tull
Treasurer since February 1999. He served as Treasurer
of Pre-merger Ryerson Tull from September
1998 to February 1999 and as Director--
Pension & Risk Management of Inland from
December 1994 to September 1998.
</TABLE>
11
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
The Common Stock of Ryerson Tull is listed and traded on the New York Stock
Exchange. As of March 20, 2000, the number of holders of record of Common
Stock of Ryerson Tull was 11,328.
The remaining information called for by this Item 5 is set forth under the
caption "Summary by Quarter" in the Company's Annual Report to Stockholders
for the fiscal year ended December 31, 1999, and is hereby incorporated by
reference herein.
ITEM 6. SELECTED FINANCIAL DATA.
The information called for by this Item 6 with respect to each of the last
five years of the Company is set forth under the caption "Five-Year Summary of
Selected Financial Data and Operating Results--Continuing Operations" in the
Company's Annual Report to Stockholders for the fiscal year ended December 31,
1999, and is hereby incorporated by reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION.
The information called for by this Item 7 is set forth in "Management's
Discussion of Operations and Financial Condition" section of the Company's
Annual Report to Stockholders for the fiscal year ended December 31, 1999, and
is hereby incorporated by reference herein.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value. The Company has only limited involvement with derivative financial
instruments and does not use them for speculative or trading purposes. Cash
equivalents are highly liquid, short-term investments with maturities of three
months or less that are an integral part of the Company's cash management
portfolio. The carrying amount of cash equivalents approximates fair value
because of the short maturity of those instruments. The estimated fair value
of the Company's long-term debt and the portions thereof using quoted market
prices of Company debt securities recently traded and market-based prices of
similar securities for those securities not recently traded was $264 million
at December 31, 1999 and $282 million at December 31, 1998, as compared with
the carrying value of $259 million and $257 million at year-end 1999 and 1998,
respectively.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of the Company called for by this
Item 8, together with the report thereon of the independent accountants dated
February 14, 2000, are set forth under the captions "Report of Independent
Accountants" and "Statement of Accounting and Financial Policies" as well as
in all consolidated financial statements and schedules of the Company and the
"Notes to Consolidated Financial Statements" in the Company's Annual Report to
Stockholders for the fiscal year ended December 31, 1999, and is incorporated
by reference herein. The financial statement schedule listed under Item 14(a)2
of this Annual Report on Form 10-K, together with the report thereon of the
independent accountants dated February 14, 2000, should be read in conjunction
with the consolidated financial statements. Financial statement schedules not
included in this Annual Report on Form 10-K have been omitted because they are
not applicable or because the information called for is shown in the
consolidated financial statements or notes thereto.
Consolidated quarterly sales, earnings and per share Common Stock
information for 1998 and 1999 are set forth under the caption "Summary by
Quarter" in the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1999, and are hereby incorporated by reference herein.
12
<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information called for by this Item 10 with respect to directors of
Ryerson Tull is set forth under the caption "Election of Directors" in Ryerson
Tull's definitive Proxy Statement which was furnished to stockholders in
connection with the Annual Meeting of Stockholders to be held on April 27,
2000, and is hereby incorporated by reference herein. The information called
for with respect to executive officers of Ryerson Tull is included in Part I
of this Annual Report on Form 10-K under the caption "Executive Officers of
Registrant."
ITEM 11. EXECUTIVE COMPENSATION.
The information called for by this Item 11 is set forth under the caption
"Executive Compensation" in Ryerson Tull's definitive Proxy Statement which
was furnished to stockholders in connection with the Annual Meeting of
Stockholders to be held on April 27, 2000, and is hereby incorporated by
reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) The information called for by this Item 12 with respect to security
ownership of more than five percent of Ryerson Tull's common stock is set
forth under the caption "Additional Information Relating to Voting Securities"
in Ryerson Tull's definitive Proxy Statement which was furnished to
stockholders in connection with the Annual Meeting of Stockholders scheduled
to be held on April 27, 2000, and is hereby incorporated by reference herein.
(b) The information called for by this Item 12 with respect to the security
ownership of directors and of management is set forth under the caption
"Security Ownership of Directors and Management" in Ryerson Tull's definitive
Proxy Statement, which was furnished to stockholders in connection with the
Annual Meeting of Stockholders to be held on April 27, 2000, and is hereby
incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information called for by this Item 13 is set forth under the caption
"Certain Relationships and Related Transactions" in Ryerson Tull's definitive
Proxy Statement which was furnished to stockholders in connection with the
Annual Meeting of Stockholders to be held on April 27, 2000, and is hereby
incorporated by reference herein.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents Filed as a Part of This Report.
1. Consolidated Financial Statements of the Company. The consolidated
financial statements listed below are set forth in the Company's Annual
Report to Stockholders for the fiscal year ended December 31, 1999, and
are incorporated by reference in Item 8 of this Annual Report on Form
10-K.
Report of Independent Accountants dated February 14, 2000.
Statement of Accounting and Financial Policies.
Consolidated Statements of Income and Reinvested Earnings for the
three years ended December 31, 1999.
13
<PAGE>
Consolidated Statement of Cash Flows for the three years ended
December 31, 1999.
Consolidated Balance Sheet at December 31, 1999 and 1998.
Consolidated Statement of Comprehensive Income for the three years
ended December 31, 1999.
Schedules to Consolidated Financial Statements: Property, Plant and
Equipment; Long-Term Debt.
Notes to Consolidated Financial Statements.
Report of Independent Accountants on Financial Statement Schedule
dated February 14, 2000. (Included on page 15 of this Annual Report)
Consent of Independent Accountants. (Included on page 15 of this
Annual Report)
Schedule II--Reserves for the three years ended December 31, 1999,
1998 and 1997. (Included on page 16 of this Annual Report)
2. Exhibits. The exhibits required to be filed by Item 601 of Regulation S-
K are listed in the Exhibit Index which is attached hereto, and
incorporated by reference herein.
(b) Reports on Form 8-K.
On October 5, 1999, the Company filed a Current Report on Form 8-K, as
amended on October 21, 1999, announcing that the Board of Directors approved
an amendment to the Rights Agreement, as amended and restated as of December
10, 1998, between Ryerson Tull and Harris Trust and Savings Bank, as Rights
Agent. This amendment, among other things, reduces the threshold beneficial
ownership level of common stock which triggers distribution and exercisability
of the rights issued pursuant to the Rights Agreement from 20% to 10%. Also,
the Board of Directors approved an amendment to its By-laws to change the
advance notice period required for shareholder proposals and nominations for
election of directors to not less than 90 days nor more than 120 days.
14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Ryerson Tull, Inc.
Our audits of the consolidated financial statements referred to in our
report dated February 14, 2000 appearing on page 16 of the 1999 Annual Report
to Stockholders of Ryerson Tull, Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item
14(a)2 of this Annual Report on Form 10-K. In our opinion, this Financial
Statement Schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
PricewaterhouseCoopers LLP
Chicago, Illinois
February 14, 2000
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statement on Form S-8 (No. 33-59783),
Registration Statement on Form S-8 (No. 33-48770), Registration Statement on
Form S-8 (No. 33-22902), Post-Effective Amendment No. 1 to Registration
Statement on Form S-8 (No. 33-1329), Registration Statement on Form S-8 (No.
33-32504), Registration Statement on Form S-3 (No. 33-59161) and Registration
Statement on Form S-3 (No. 33-62897) of Inland Steel Industries, Inc. (or, for
registrations prior to 1986, Inland Steel Company) and Registration Statement
on Form S-8 (No. 333-06977), Registration Statement on Form S-8 (No. 333-
06989), Registration Statement on Form S-3 (No. 333-59009) and Registration
Statement on Form S-8 (No. 333-78429) of Ryerson Tull, Inc. of our report
dated February 14, 2000 appearing on page 16 of the 1999 Annual Report to
Stockholders of Ryerson Tull, Inc., which is incorporated by reference in this
Annual Report on Form 10-K. We also consent to the incorporation by reference
of our report on the Financial Statement Schedule which appears above.
PricewaterhouseCoopers LLP
Chicago, Illinois
March 22, 2000
15
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
SCHEDULE II--RESERVES
For the Years Ended December 31, 1999, 1998 and 1997
(Dollars in Millions)
<TABLE>
<CAPTION>
Provisions for Allowances
--------------------------------------------
Balance at Additions Deductions Balance at
Beginning Charged from End of
Years Ended December 31, of Year to Income Reserves Year
- ------------------------ ---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
1999.............................. $ 6.9 $4.2 $ (3.4)(A) $ 7.2
(0.5)(B)
1998.............................. $23.5 $3.7 $ (3.1)(A) $ 6.9
(1.9)(B)
(15.3)(C)
1997.............................. $22.5 $7.1 $ (1.3)(A) $23.5
$ (4.8)(B)
</TABLE>
NOTES:
(A) Bad debts written off during the year
(B) Allowances granted during the year
(C) To eliminate reserve from discontinued operation
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Ryerson Tull, Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
RYERSON TULL, INC.
/s/ Neil S. Novich
By: _________________________________
Neil S. Novich
Chairman, President and Chief
Executive Officer
Date: March 23, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Ryerson
Tull, Inc. and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Neil S. Novich Chairman, President and March 23, 2000
____________________________________ Chief Executive Officer and
Neil S. Novich Director (Principal
Executive Officer)
/s/ Jay M. Gratz Executive Vice President and March 23, 2000
____________________________________ Chief Financial Officer
Jay M. Gratz (Principal Financial
Officer)
/s/ Lily L. May Controller March 23, 2000
____________________________________ (Principal Accounting
Lily L. May Officer)
Jameson A. Baxter Director
Richard G. Cline Director
Gary L. Crittenden Director
/s/ Jay M. Gratz
James A. Henderson Director By: ___________________
Jay M. Gratz
Attorney-in-fact
Gregory P. Josefowicz Director March 23, 2000
Jerry K. Pearlman Director
Ronald L. Thompson Director
</TABLE>
17
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S> <C>
3.1 Copy of Certificate of Incorporation, as amended, of
Ryerson Tull. (Filed as Exhibit 3.(i) to the Company's
Annual Report on Form 10-K for the year ended December 31,
1995 (File No. 1-9117), and incorporated by reference
herein.)
3.2 By-Laws, as amended.......................................
4.1 Certificate of Designations, Preferences and Rights of
Series A $2.40 Cumulative Convertible Preferred Stock of
Ryerson Tull. (Filed as part of Exhibit B to the
definitive Proxy Statement of Inland Steel Company dated
March 21, 1986 that was furnished to stockholders in
connection with the annual meeting held April 23, 1986
(File No. 1-2438), and incorporated by reference herein.)
4.2 Certificate of Designation, Preferences and Rights of
Series D Junior Participating Preferred Stock of Ryerson
Tull. (Filed as Exhibit 4-D to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1987
(File No. 1-9117), and incorporated by reference herein.)
4.3 Rights Agreement, dated as of November 25, 1997, as
amended and restated as of September 22, 1999, between the
Ryerson Tull and Harris Trust and Savings Bank, as Rights
Agent. (Filed as Exhibit 4.1 to the Company's amended
Registration Statement on Form 8-A/A-2 filed on October 6,
1999 (File No. 1-9117), and incorporated by reference
herein.)
4.4 Indenture, dated as of July 1, 1996, between Pre-merger
Ryerson Tull and The Bank of New York. (Filed as Exhibit
4.1 to Pre-merger Ryerson Tull's Quarterly Report on Form
10-Q for the quarter ended June 30, 1996 (File No.
1-11767), and incorporated by reference herein.)
4.5 First Supplemental Indenture, dated as of February 25,
1999, between the Ryerson Tull and The Bank of New York.
(Filed as Exhibit 4.5 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1998 (File No.
1-9117), and incorporated by reference herein.)
4.6 Specimen of 8 1/2% Notes due July 15, 2001. (Filed as
Exhibit 4.6 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998 (File No. 1-9117),
and incorporated by reference herein.)
4.7 Specimen of 9 1/8% Notes due July 15, 2006. (Filed as
Exhibit 4.7 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998 (File No. 1-9117),
and incorporated by reference herein.)
[The registrant hereby agrees to provide a copy of any
other agreement relating to long-term debt at the request
of the Commission.]
10.1* Ryerson Tull Annual Incentive Plan. (Filed as Exhibit 10.2
to Pre-merger Ryerson Tull's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997 (File No.
1-11767), and incorporated by reference herein.)
10.2* Ryerson Tull 1999 Incentive Stock Plan, as amended. (Filed
as Exhibit 10.4 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999 (File No.
1-11767), and incorporated by reference herein.)
10.3* Ryerson Tull 1996 Incentive Stock Plan, as amended. (Filed
as Exhibit 10.D to Pre-merger Ryerson Tull Annual Report
on Form 10-K for the year ended December 31, 1997 (File
No. 1-9117), and incorporated by reference herein.)
10.4* Ryerson Tull 1995 Incentive Stock Plan, as amended. (Filed
as Exhibit 10.E to the Company's Annual Report on Form
10-K for the year ended December 31, 1997 (File No.
1-9117), and incorporated by reference herein.)
10.5* Ryerson Tull 1992 Incentive Stock Plan, as amended. (Filed
as Exhibit 10.C to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995 (File No.
1-9117), and incorporated by reference herein.)
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S> <C>
10.6* Ryerson Tull 1988 Incentive Stock Plan, as amended. (Filed
as Exhibit 10.B to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995 (File No. 1-
9117), and incorporated by reference herein.)
10.7* Ryerson Tull Supplemental Retirement Plan for Covered
Employees, as amended. (Filed as Exhibit 10.1 to Pre-
merger Ryerson Tull's Form 10-Q for the quarter ended
September 30, 1997 (File No. 1-11767), and incorporated by
reference herein.)
10.8* Ryerson Tull Nonqualified Savings Plan, effective January
1, 1998. (Filed as Exhibit 10.S.(2) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 (File No. 1-9117), and incorporated by
reference herein.)
10.9* Outside Directors Accident Insurance Policy. (Filed as
Exhibit 10.12 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999 (File No. 1-
9117), and incorporated by reference herein.)
10.10* Ryerson Tull Directors' 1999 Stock Option Plan. (Filed as
Exhibit 10.19 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998 (File No. 1-9117),
and incorporated by reference herein.)
10.11* Ryerson Tull Directors' Compensation Plan, as amended.
(Filed as Exhibit 10.20 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1998 (File No.
1-9117), and incorporated by reference herein.)
10.12* Form of Severance Agreement, dated January 28, 1998,
between the Company and each of the four executive
officers of the Company identified on the exhibit relating
to terms and conditions of termination of employment
following a change in control of the Company. (Filed as
Exhibit 10.R to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 (File No. 1-
9117), and incorporated by reference herein.)
10.13* Amendment dated November 6, 1998 to the Severance
Agreement dated January 28, 1998 referred to in Exhibit
10.21 above between the Company and Jay M. Gratz. (Filed
as Exhibit 10.23 to the Company's Annual Report on Form
10-K for the year ended December 31, 1998 (File No. 1-
9117), and incorporated by reference herein.)
10.14* Amendment dated February 19, 1999 to the Severance
Agreement dated January 28, 1998 referred to in Exhibit
10.21 above between the Company and George A. Ranney, Jr.
(Filed as Exhibit 10.24 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1998 (File No.
1-9117), and incorporated by reference herein.)
10.15* Form of Change in Control Agreement between the Company
and the parties listed on the schedule thereto. (Filed as
Exhibit 10.25 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998 (File No. 1-9117),
and incorporated by reference herein.)
10.16* Form of Change in Control Agreement between the Company
and the party listed on the schedule thereto. (Filed as
Exhibit 10.26 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998 (File No. 1-9117),
and is incorporated by reference herein.)
10.17* Employment Agreement dated September 1, 1999 between the
Company and Jay M. Gratz. (Filed as Exhibit 10.22 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999 (File No. 1-9117), and
incorporated by reference herein.)
10.18* Employment Agreement dated September 1, 1999 between the
Company and Gary J. Niederpruem. (Filed as Exhibit 10.23
to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999 (File No. 1-9117), and
incorporated by reference herein.)
10.19* Employment Agreement dated December 1, 1999 between the
Company and Neil S. Novich................................
10.20* Confidentiality and Non-Competition Agreement between the
Company and Stephen E. Makarewicz. (Filed as Exhibit 10.24
to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999 (File No. 1-9117), and
incorporated by reference herein.)
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S> <C>
10.21* Employment Agreement dated as of August 18, 1995 between
the Company and George A. Ranney, Jr. (Filed as Exhibit
10.X to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 (File No. 1-9117), and
incorporated by reference herein.)
10.22* Letter of Retainer dated as of November 16, 1999 between
the Company, George A. Ranney, Jr. and Mayer, Brown &
Platt.....................................................
13 Information incorporated by reference from Annual Report
to Stockholders for the fiscal year ended December 31,
1999......................................................
21 List of Certain Subsidiaries of the Registrant............
23 Consent of Independent Accountants appearing on page 15 of
the Annual Report on Form 10-K.
24 Powers of Attorney........................................
27 Financial Data Schedule...................................
</TABLE>
- --------
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to the Company's Annual Report on Form 10-K.
20
<PAGE>
-1-
Exhibit 3.2
-----------
BY-LAWS
OF
RYERSON TULL, INC.
(as Amended to and Including January 26, 2000)
ARTICLE I
OFFICES
Section 1. The registered office of the Corporation shall be in the City
of Wilmington, County of New Castle, State of Delaware. The Corporation may also
have offices at such other places both within and without the State of Delaware
as the Board of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
STOCKHOLDERS
Section 1. Time and Place of Meetings. All meetings of the stockholders
--------------------------
for the election of directors or for any other purpose shall be held at such
time and place, within or without the State of Delaware, as shall be designated
by the Board of Directors.
Section 2. Annual Meetings; Nomination of Directors. An annual meeting
----------------------------------------
of stockholders shall be held for the purpose of electing Directors and for the
transaction of only such other business as is properly brought before the
meeting in accordance with these By-Laws. The date of the annual meeting shall
be the third Wednesday of April each year or such other date as may be
determined by the Board of Directors.
To be properly brought before the meeting, business must be either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board, (b) otherwise properly brought before the meeting by
or at the direction of the Board or (c) otherwise properly brought before the
meeting by a stockholder. In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation, (a)
not less than ninety days nor more than one hundred twenty days in advance of a
day corresponding to the date of mailing the Corporation's
<PAGE>
-2-
Exhibit 3.2
-----------
proxy statement in connection with the previous year's annual meeting, or (b) if
no annual meeting was held in the previous year or the date of the applicable
annual meeting has been changed by more than 30 days from the date contemplated
at the time of the previous year's proxy statement, not later than the close of
business on the fifteenth day following the day on which notice of the date of
the annual meeting was mailed or publicly disclosed, whichever occurs first. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and record
address of the stockholder proposing such business, (iii) the class and number
of shares of the Corporation which are beneficially owned by the stockholder and
(iv) any material interest of the stockholder in such business.
Notwithstanding anything in the By-Laws to the contrary, no business shall
be conducted at the annual meeting except in accordance with the procedures set
forth in this Article II, Section 2, provided, however, that nothing in this
-------- -------
Article II, Section 2 shall be deemed to preclude discussion by any stockholder
of any business properly brought before the annual meeting.
The Chairman of an annual meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Article II, Section 2, and if
he should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
Only persons who are nominated in accordance with the following procedures
shall be eligible for election as Directors. Nominations of persons for election
to the Board of the Corporation at the annual meeting may be made at a meeting
of stockholders by or at the direction of the Board of Directors by any
nominating committee or person appointed by the Board or by any stockholder of
the Corporation entitled to vote for the election of Directors at the meeting
who complies with the notice procedures set forth in this Article II, Section 2.
Such nominations, other than those made by or at the direction of the Board,
shall be made pursuant to timely notice in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal executive offices of the Corporation, (a)
not less than ninety days nor more than one hundred twenty days in advance of a
day corresponding to the date of mailing the Corporation's proxy statement in
connection with the previous year's annual meeting, or (b) if no annual meeting
was held in the previous year or the date of the applicable annual meeting has
been changed by more than 30 days from the date contemplated at the time
<PAGE>
-3-
Exhibit 3.2
-----------
of the previous year's proxy statement, not later than the close of business on
the fifteenth day following the day on which notice of the date of the annual
meeting was mailed or publicly disclosed, whichever occurs first. Such
stockholder's notice to the Secretary shall set forth: (a) as to each person
whom the stockholder proposes to nominate for election or re-election as a
Director, (i) the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the person, (iii) the
class and number of shares of capital stock of the Corporation which are
beneficially owned by the person and (iv) any other information relating to the
person that is required to be disclosed in solicitations for proxies for
election of Directors pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended; and (b) as to the stockholder giving the notice, (i)
the name and record address of such stockholder and (ii) the class and number of
shares of capital stock of the Corporation which are beneficially owned by such
stockholder. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as a Director of the
Corporation. No person shall be eligible for election as a Director of the
Corporation unless nominated in accordance with the procedures set forth herein.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
Section 3. Special Meetings. Special meetings of the stockholders, for
----------------
any purpose or purposes, unless otherwise prescribed by law, may be called by
the Chairman of the Board, Vice Chairman of the Board, the President or the
Board of Directors and shall be called by the Secretary at the direction of the
Chairman of the Board, Vice Chairman of the Board, the President or the Board of
Directors.
Section 4. Notice of Meetings. Written notice of each meeting of the
------------------
stockholders stating the place, date and time of the meeting shall, unless
otherwise required by law, be given not less than ten nor more than sixty days
before the date of the meeting to each stockholder entitled to vote at such
meeting. The notice of any special meeting of stockholders shall state the
purpose or purposes for which the meeting is called. If mailed, such notice
shall be deemed to be delivered to a stockholder when deposited in the United
States mail in a sealed envelope addressed to the stockholder at his or her
address as it appears on the records of the Corporation with postage thereon
paid.
<PAGE>
-4-
Exhibit 3.2
-----------
Section 5. Quorum. A majority of the votes of the voting securities
------
entitled to vote, present in person or represented by proxy, shall constitute a
quorum at a meeting of stockholders. If a quorum is not present or represented,
the holders of the voting securities present in person or represented by proxy
at the meeting and entitled to vote thereat shall have power, by the affirmative
vote of the holders of a majority of the votes of such voting securities, to
adjourn the meeting to another time and/or place, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting, at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the original
meeting. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each holder of record entitled to vote
at the meeting.
Section 6. Voting. At all meetings of the stockholders, each holder of
------
record on the record date for the meeting shall be entitled to vote as set forth
in the Corporation?s Certificate of Incorporation (including any Certificates of
Designations) or as otherwise required by law, in person or by proxy, the voting
securities owned of record by such holder on the record date. In all matters
other than the election of directors, the affirmative vote of a majority of the
votes of the voting securities present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
holders, unless the question is one upon which, by express provision of law or
of the Certificate of Incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Directors shall be elected by a plurality of the votes of the voting securities
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
--------------
shall be managed and controlled by or under the direction of a Board of
Directors, which may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by law or by the Certificate of Incorporation
or by these By-Laws directed or required to be exercised or done by the
stockholders.
Section 2. Number, Qualification and Tenure. Prior to the first annual
--------------------------------
meeting of stockholders, the Board of Directors shall
<PAGE>
-5-
Exhibit 3.2
-----------
consist of not fewer than three (3) Directors nor more than eighteen (18)
Directors. Thereafter, the Board of Directors shall consist of not fewer than
six (6) Directors nor more than twelve (12) Directors. Within the limits above
specified, the number of Directors shall be determined from time to time by
resolution of the Board of Directors. The Directors shall be elected at the
annual meeting of the stockholders, except as provided in Section 3 of this
Article, and each Director elected shall hold office until his or her successor
is elected and qualified or until his or her earlier resignation or removal.
Directors need not be stockholders. Except as provided in Article III, Section 3
of these By-Laws, the Directors shall designate from among their number a
Chairman of the Board, who shall preside at all meetings of the stockholders and
of the Board of Directors of the Corporation and who, if he or she is an
employee of the Corporation, shall exercise all of the powers and duties
conferred on the Chairman of the Board by the provisions of these By-Laws. If
the person selected by the Directors as the Chairman of the Board is not, or
ceases to be, an employee of the Corporation, then, notwithstanding any other
provision of these By-Laws to the contrary, he or she shall exercise only such
powers and duties conferred on the Chairman of the Board by these By-Laws as the
Directors shall determine by resolution duly adopted and any other powers and
duties, including those of chief executive officer of the Corporation, shall be
exercised by the President of the Corporation.
Section 3. Vacancies. Vacancies and newly created directorships
---------
resulting from any increase in the number of directors may be filled by a
majority of the Directors then in office (even if less than a quorum), and each
Director so chosen shall hold office until his or her successor is elected and
qualified or until his or her earlier resignation or removal. If there are no
Directors in office, then an election of Directors may be held in the manner
provided by law.
Immediately upon the Chairman of the Board's death, physical or mental
incapacity, or other inability to act (other than due to absence for a brief and
identifiable period), the Chairman of the committee responsible for recommending
candidates to fill vacancies on the Board of Directors of the Corporation (the
"Nominating Committee Chairman") shall assume the position of Chairman of the
Board and responsibility for performing all functions, authorities and duties
thereof, and shall serve in such capacity until his or her successor is duly
elected and qualified pursuant to Article III, Section 2 and any other
applicable provision of these By-Laws or until his or her earlier resignation or
removal. The Nominating Committee Chairman shall have sole discretion to
determine, at any time and from time to time, whether the Chairman of the Board
is physically or mentally incapacitated, otherwise unable to act, or
<PAGE>
-6-
Exhibit 3.2
-----------
absent for other than a brief and identifiable period and shall, immediately
upon making such a determination or learning of the death of the Chairman of the
Board, notify each member of the Board of Directors and each officer of the
Corporation of the relevant facts and circumstances.
Section 4. Place of Meetings. The Board of Directors may hold meetings,
-----------------
whether regular or special, within or without the State of Delaware.
Section 5. Regular Meetings. The Board of Directors shall hold a regular
----------------
meeting, to be known as the annual meeting, immediately following each annual
meeting of the stockholders. Other regular meetings of the Board of Directors
shall be held at such time and place as shall from time to time be determined by
the Board. No notice of regular meetings need be given.
Section 6. Special Meetings. Special meetings of the Board may be called
----------------
by the Chairman of the Board, the Vice Chairman of the Board, any five Directors
or the President. Special meetings shall be called by the Secretary on the
written request of any Director. Notice of special meetings shall be given at
least one day before any such meeting.
Section 7. Quorum. At all meetings of the Board of Directors a majority
------
of the total number of Directors shall constitute a quorum for the transaction
of business and the act of a majority of the Directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by law. If a quorum shall not be present
at any meeting of the Board of Directors, the Directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 8. Organization. The Chairman of the Board, if elected, shall
------------
act as chairman at all meetings of the Board of Directors. If a Chairman of the
Board is not elected or, if elected, is not present, the Vice Chairman of the
Board, if any, or if the Vice Chairman of the Board is not present, the
President or, in the absence of the President, a Director chosen by a majority
of the Directors present, shall act as chairman at meetings of the Board of
Directors.
Section 9. Executive Committee. The Board of Directors, by resolution
-------------------
adopted by a majority of the whole Board, may designate not fewer than four (4)
and not more than nine (9) Directors to constitute an Executive Committee, to
serve as such, unless the resolution designating the Executive Committee is
sooner amended or
<PAGE>
-7-
Exhibit 3.2
-----------
rescinded by the Board of Directors, until the next annual meeting of the Board
or until their respective successors are designated. The Board of Directors, by
resolution adopted by a majority of the whole Board, may also designate
additional Directors as alternate members of the Executive Committee (so long as
the aggregate number of members of the Executive Committee does not exceed nine
(9)) to serve as members of the Executive Committee in the place and stead of
any regular member or members thereof who may be unable to attend a meeting or
otherwise unavailable to act as a member of the Executive Committee. In the
absence or disqualification of a member and all alternate members who may serve
in the place and stead of such member, the member or members thereof present at
any meeting and not disqualified from voting, whether or not such member or
members constitute a quorum, may unanimously appoint another Director to act at
the meeting in the place of any such absent or disqualified member.
Except as expressly limited by the General Corporation Law of the State of
Delaware or the Certificate of Incorporation, the Executive Committee shall have
and may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation between the meetings
of the Board of Directors, but subject always to the final control of the Board
of Directors except where rights of third parties have intervened. The
Executive Committee shall keep a record of its acts and proceedings, which shall
form a part of the records of the Corporation in the custody of the Secretary,
and all actions of the Executive Committee shall be reported to the Board of
Directors at the next meeting of the Board.
Meetings of the Executive Committee may be called at any time by the
Chairman of the Board, the Chairman of the Executive Committee or any two (2)
members of the Executive Committee. A majority of the members of the Executive
Committee shall constitute a quorum for the transaction of business and, except
as expressly limited by this Section, the act of a majority of the members
present at any meeting at which there is a quorum shall be the act of the
Executive Committee. Except as expressly provided in this Section, the
Executive Committee shall fix its own rules of procedure. Notice of Executive
Committee meetings shall be given at least one day before such meetings.
Section 10. Finance and Retirement Committee. The Board of Directors may,
--------------------------------
annually, by resolution passed by a majority of the whole Board of Directors,
designate not fewer than four (4) and not more than eleven (11) Directors to
constitute a Finance and Retirement Committee. Such designation may be made
either at the first meeting of the Board of Directors held after each annual
meeting of the stockholders of the Corporation, or at any subsequent regular or
special meeting of the Board of Directors.
<PAGE>
-8-
Exhibit 3.2
-----------
Vacancies in the Finance and Retirement Committee may be filled, or additional
members of the Finance and Retirement Committee (so long as the aggregate number
of the Finance and Retirement Committee does not exceed eleven (11)) may be
designated, at any meeting of the Board of Directors. Each member of the Finance
and Retirement Committee shall hold office until his or her successor shall have
been duly elected, or until his or her death, or until he or she shall resign or
shall have been removed. Any member of the Finance and Retirement Committee may
be removed by the Board of Directors whenever in its judgment the best interests
of the Corporation would be served thereby.
The Finance and Retirement Committee, from time to time, shall consider the
fiscal affairs of the Corporation and make recommendations with respect thereto
to the Board of Directors and the Executive Committee. The Finance and
Retirement Committee shall also administer and act with respect to pension or
retirement plans and trusts of the Corporation and such other matters as shall
from time to time be specified in resolutions passed by a majority of the whole
Board of Directors, subject, however, to any conditions and provisions set forth
in such resolutions. The Pension and Retirement Committee is designated as the
Pension Plan Retirement Committee.
The Finance and Retirement Committee shall meet at the call of the Chairman
of the Board, the Vice Chairman of the Board, the Chairman of the Finance and
Retirement Committee, or any two (2) members of the Finance and Retirement
Committee. Three (3) members of the Finance Committee shall constitute a
quorum. The Finance and Retirement Committee shall keep a record of its acts
and proceedings and all actions of the Finance Committee shall be reported to
the Board of Directors at its next regular meeting, and the minute books of the
Finance and Retirement Committee shall be open to the inspection of any
Directors.
Section 11. Other Committees. The Board of Directors, by resolution
----------------
adopted by a majority of the whole Board, may designate one or more other
committees, each such committee to consist of one or more Directors. Except as
expressly limited by the General Corporation Law of the State of Delaware or the
Certificate of Incorporation, any such committee shall have and may exercise
such powers as the Board of Directors may determine and specify in the
resolution designating such committee. The Board of Directors, by resolution
adopted by a majority of the whole Board, also may designate one or more
additional Directors as alternate members of any such committee to replace any
absent or disqualified member at any meeting of the committee, and at any time
may change the membership of any committee or amend or rescind the resolution
designating the committee. In the absence or disqualification of a member or
alternate member of a committee, the member or members
<PAGE>
-9-
Exhibit 3.2
-----------
thereof present at any meeting and not disqualified from voting, whether or not
such member or members constitute a quorum, may unanimously appoint another
Director to act at the meeting in the place of any such absent or disqualified
member, provided that the Director so appointed meets any qualifications stated
in the resolution designating the committee. Each committee shall keep a record
of proceedings and report the same to the Board of Directors to such extent and
in such form as the Board of Directors may require. Unless otherwise provided in
the resolution designating a committee, a majority of all of the members of any
such committee may select its Chairman, fix its rules or procedure, fix the time
and place of its meetings and specify what notice of meetings, if any, shall be
given.
Section 12. Action without Meeting. Unless otherwise restricted by the
----------------------
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 13. Attendance by Telephone. Members of the Board of Directors,
-----------------------
or of any committee, may participate in a meeting of the Board of Directors, or
of such committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
Section 14. Compensation. The Board of Directors shall have the authority
------------
to fix the compensation of Directors, which may include reimbursement of their
expenses, if any, of attendance of each meeting of the Board of Directors or of
a committee.
Section 15. Honorary Directors. Any person who has at any time been chief
------------------
executive officer of the Corporation (or of Inland Steel Company prior to May 1,
1986), may, after retirement or resignation from the Board of Directors (or
having retired or resigned from the Board of Directors of Inland Steel Company),
be appointed by the Board of Directors as an Honorary Director for one or more
year terms. Honorary Directors shall serve in an advisory capacity to the Board
of Directors, shall have no vote and shall not be considered as Directors for
the purposes of determining a quorum. Honorary Directors shall be reimbursed
for their expenses in attending meetings of the Board of Directors. Any
Honorary Director who is not at the time otherwise regularly employed by the
Corporation or any subsidiary shall receive such fees (which may include
reimbursement of expenses, if any) for attendance at each
<PAGE>
-10-
Exhibit 3.2
-----------
meeting of the Board of Directors as may be fixed from time to time by the Board
of Directors, but shall not receive any other director's fees or any other
compensation for his or her services.
ARTICLE IV
OFFICERS
Section 1. Enumeration. The officers of the Corporation shall be chosen
-----------
by the Board of Directors and shall be a President, a Secretary, a Treasurer, a
General Counsel and a Controller. The Board of Directors may also elect a
Chairman of the Board, a Vice Chairman, one or more Assistants to the Chairman,
one or more Vice Presidents, one or more Assistant Secretaries and Assistant
Treasurers and such other officers and agents as it shall deem appropriate. Any
number of offices may be held by the same person.
Section 2. Term of Office. The officers of the Corporation shall be
--------------
elected at the annual meeting of the Board of Directors and shall hold office
until their successors are elected and qualified. Any officer elected or
appointed by the Board of Directors may be removed at any time by the Board of
Directors. Any vacancy occurring in any office of the Corporation required by
this Article shall be filled by the Board of Directors, and any vacancy in any
other office may be filled by the Board of Directors.
Section 3. Chairman of the Board. Subject to the provisions of Article
---------------------
III, Section 2 of these By-Laws, the Chairman of the Board, when elected, shall
be the Chief Executive Officer of the Corporation and, as such, shall have
general supervision, direction and control of the business and affairs of the
Corporation, subject to the control of the Board of Directors, shall preside at
meetings of stockholders and shall have such other functions, authority and
duties as customarily appertain to the office of the chief executive of a
business corporation or as may be prescribed by the Board of Directors.
Section 4. Vice Chairman of the Board. The Vice Chairman of the Board
--------------------------
shall, in the case of absence of the Chairman of the Board for any brief and
identifiable period, have and exercise the powers and duties of the Chairman of
the Board. He or she shall have such other duties and powers as may be assigned
to him by the Board of Directors, the Executive Committee or the Chairman of the
Board.
Section 5. President. During any period when there shall be a Chairman
---------
of the Board, the President shall be the Chief Operating Officer of the
Corporation and shall have such functions, authority
<PAGE>
-11-
and duties as may be prescribed by the Board of Directors or the Chairman of the
Board. During any period when there shall not be a Chairman of the Board or Vice
Chairman of the Board, the President shall be the Chief Executive Officer of the
Corporation and, as such, shall have the functions, authority and duties
provided for the office of Chairman of the Board.
Section 6. Executive and Senior Vice Presidents. Each Executive Vice
------------------------------------
President shall have such duties and powers as may be assigned to him or her by
the Board of Directors, the Executive Committee, the Chairman of the Board, the
Vice Chairman of the Board, or the President. An Executive Vice President,
designated by the Board of Directors, shall (in the event of absence, death or
other inability to act of the President) have and exercise the powers and duties
of the President.
Each Senior Vice President shall have such duties and powers as may be
assigned to him or her by the Board of Directors, the Executive Committee, the
Chairman of the Board, the Vice Chairman of the Board or the President.
Section 7. Vice Presidents. Each Vice President shall perform such duties
---------------
and have such other powers as may from time to time be prescribed by the Board
of Directors, the Chairman of the Board or the President or the Executive
Committee.
Section 8. Secretary. The Secretary shall keep a record of all
---------
proceedings of the stockholders of the Corporation and of the Board of
Directors, Finance Committee and Executive Committee, and shall perform like
duties for any other standing committees when required. The Secretary shall
give, or cause to be given, notice, if any, of all meetings of the stockholders
and shall perform such other duties as may be prescribed by the Board of
Directors, the Chairman of the Board, the President, or the Executive Committee.
The Secretary shall have custody of the corporate seal of the Corporation and
the Secretary, or in the absence of the Secretary any Assistant Secretary, shall
have authority to affix the same to any instrument requiring it, and when so
affixed it may be attested by the signature of the Secretary or an Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest such affixing of the
seal.
Section 9. Assistant Secretary. The Assistant Secretary, or if there be
-------------------
more than one, the Assistant Secretaries in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Secretary or in the event of the
Secretary's inability or failure to act, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may
<PAGE>
-12-
from time to time be prescribed by the Board of Directors, the Chairman of the
Board, the President or the Secretary.
Section 10. Treasurer. The Treasurer shall have the custody of the
---------
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors or the Executive Committee. The Treasurer shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, keeping proper
records of such disbursements, and shall render to the Chairman of the Board,
Vice Chairman of the Board, the Chairman of the Executive Committee, the
Chairman of the Finance Committee, the President, the officer designated by the
Board of Directors as Chief Financial Officer, if any, and the Board of
Directors, the Executive Committee and the Finance Committee at their regular
meetings or when the Board of Directors so requires, an account of all
transactions as Treasurer and of the financial condition of the Corporation.
The Treasurer shall perform such other duties as may from time to time be
prescribed by the Board of Directors, the Chairman of the Board, the President
or the Chief Financial Officer.
Section 11. Assistant Treasurer. The Assistant Treasurer, or if there
-------------------
shall be more than one, the Assistant Treasurers in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the Treasurer or in the event of the
Treasurer's inability or refusal to act, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have such other
powers as may from time to time be prescribed by the Board of Directors, the
Chairman of the Board, the President or the Treasurer.
Section 12. Assistant to the Chairman. The Assistant to the Chairman of
-------------------------
the Board shall have and exercise such powers and duties as may be assigned to
him or her by the Chairman of the Board.
Section 13. General Counsel. The General Counsel shall be responsible for
---------------
the legal affairs of the Corporation and shall have such other duties as from
time to time may be assigned to him or her by the Chairman of the Board, the
Vice Chairman of the Board, the President, the Board of Directors or the
Executive Committee.
Section 14. Controller. The Controller shall be the chief accounting
----------
officer of the Corporation. He or she shall, when proper, approve all bills for
purchases, payrolls, and similar
<PAGE>
-13-
instruments providing for disbursement of money by the Corporation, for payment
by the Treasurer. He or she shall be in charge of and maintain books of account
and accounting records of the Corporation. He or she shall perform such other
acts as are usually performed by a Controller of a corporation. He or she shall
render to the Chairman of the Board, the Vice Chairman of the Board, the
Chairman of the Executive Committee, the Chairman of the Finance Committee, the
President, the Chief Financial Officer, the Board of Directors, the Executive
Committee and the Finance Committee, such reports as any thereof may require.
Section 15. Other Officers. Any officer who is elected or appointed from
--------------
time to time by the Board of Directors and whose duties are not specified in
these By-Laws shall perform such duties and have such powers as may be
prescribed from time to time by the Board of Directors, the Chairman of the
Board, the Vice Chairman of the Board, the President or the Executive Committee.
Section 16. Surety Bonds. The Board of Directors or Executive Committee
------------
may by resolution, require any officers of the Corporation to give bonds for the
faithful discharge of their duties in such sums and with such sureties as the
Board of Directors or Executive Committee shall determine, the expense of which
shall be paid by the Corporation.
ARTICLE V
CERTIFICATES OF STOCK
Section 1. Form. The shares of the Corporation shall be represented by
----
certificates; provided, however, that the Board of Directors may provide by
resolution or resolutions that some or all of any or all classes or series of
the Corporation's stock shall be uncertificated shares. Certificates of stock
in the Corporation, if any, shall be signed by or in the name of the Corporation
by the Chairman of the Board or the President or a Vice President and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
of the Corporation. The signatures of the Chairman of the Board, the President
or a Vice President and the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary may be facsimiles. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, the certificate may be issued by
the Corporation with the same effect as if such officer, transfer agent or
registrar were such officer, transfer agent or registrar at the date of its
issue.
<PAGE>
-14-
Section 2. Transfer. Upon surrender to the Corporation or the transfer
--------
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction on its books.
Section 3. Replacement. In case of the loss, destruction or theft of a
-----------
certificate for any stock of the Corporation, a new certificate of stock or
uncertificated shares in place of any certificate therefor issued by the
Corporation may be issued upon satisfactory proof of such loss, destruction or
theft and upon such terms as the Board of Directors may prescribe. The Board of
Directors may in its discretion require the owner of the lost, destroyed or
stolen certificate, or his or her legal representative, to give the Corporation
a bond, in such sum and in such form and with such surety or sureties as it may
direct, to indemnify the Corporation against any claim that may be made against
it with respect to a certificate alleged to have been lost, destroyed or stolen.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Each person who was or is made a party or is threatened to be
made a party to or is involved in or called as a witness in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, and any
appeal therefrom (hereinafter, collectively a "proceeding"), by reason of the
fact that he or she, or a person of whom he or she is the legal representative,
is, was or had agreed to become a director of the Corporation or is, was or had
agreed to become an officer of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, shall be indemnified
and held harmless by the Corporation to the fullest extent permitted under the
General Corporation Law of the State of Delaware (the "DGCL"), as the same now
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than the DGCL permitted the Corporation to provide prior
to such amendment), against all expenses, liabilities and losses (including
attorneys' fees, judgments, fines, excise taxes or penalties pursuant to the
Employee Retirement Income Security Act of 1974, as amended, and amounts paid or
to be paid in settlement) reasonably incurred or suffered by such person in
<PAGE>
-15-
connection therewith; provided, that except as explicitly provided herein, prior
to a Change in Control, as defined herein, a person seeking indemnity in
connection with a proceeding (or part thereof) initiated by such person against
the Corporation or any director, officer, employee or agent of the Corporation
shall not be entitled thereto unless the Corporation has joined in or consented
to such proceeding (or part thereof). For purposes of this Article, a "Change
in Control of the Corporation" shall be deemed to have occurred if (i) any
"Person" (as is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended) is or becomes (except in a transaction approved in advance
by the Board of Directors of the Corporation) the beneficial owner (as defined
in Rule 13d-3 under such Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the
Corporation's then outstanding securities or (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Corporation cease for any reason to constitute at
least a majority thereof unless the election of each director who was not a
director at the beginning of the period was approved by a vote of at least two-
thirds of the directors then still in office who were directors at the beginning
of the period.
Any indemnification under this Section 1 (unless ordered by a court) shall
be paid by the Corporation unless within 60 days of such request for
indemnification a determination is made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
proceeding, (ii) if such quorum is not obtainable, or even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel (who
may be the regular counsel of the Corporation) in a written opinion or (iii) by
the stockholders, that indemnification of such person is not proper under the
circumstances because such person has not met the necessary standard of conduct
under Delaware law; provided, however, that following a Change in Control of the
Corporation, with respect to all matters thereafter arising out of acts,
omissions or events prior to the Change in Control of the Corporation concerning
the rights of any person seeking indemnification under this Section 1, such
determination shall be made by special independent counsel selected by such
person and approved by the Corporation (which approval shall not be unreasonably
withheld), which counsel has not otherwise performed services (other than in
connection with similar matters) within the five years preceding its engagement
to render such opinion for such person or for the Corporation or any affiliates
(as such term is defined in Rule 405 under the Securities Act of 1933, as
amended) of the Corporation (whether or not they were affiliates when services
were so performed) ("Independent Counsel"). Unless such person has theretofore
selected Independent Counsel pursuant to this Section 1 and such Independent
Counsel has been approved by
<PAGE>
-16-
the Corporation, legal counsel approved by a resolution or resolutions of the
Board of Directors prior to a Change in Control of the Corporation shall be
deemed to have been approved by the Corporation as required. Such Independent
Counsel shall determine as promptly as practicable whether and to what extent
such person would be permitted to be indemnified under applicable law and shall
render its written opinion to the Corporation and such person to such effect.
The Corporation agrees to pay the reasonable fees of the Independent Counsel
referred to above and to fully indemnify such Independent Counsel against any
and all expenses, claims, liabilities and damages arising out of or relating to
this Article or its engagement pursuant hereto.
Section 2. Expenses. Expenses, including attorneys' fees, incurred by a
--------
person referred to in Section 1 of this Article in defending or otherwise being
involved in a proceeding shall be paid by the Corporation in advance of the
final disposition of such proceeding, including any appeal therefrom, upon
receipt of an undertaking (the "Undertaking") by or on behalf of such person to
repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the Corporation.
Section 3. Right of Claimant to Bring Suit. If a claim under Section 1
-------------------------------
hereof is not paid in full by the Corporation within 60 days after a written
claim has been received by the Corporation or if expenses pursuant to Section 2
hereof have not been advanced within 10 days after a written request for such
advancement accompanied by the Undertaking has been received by the Corporation,
the claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim or the advancement of expenses. (If the
claimant is successful, in whole or in part, in such suit or any other suit to
enforce a right for expenses or indemnification against the Corporation or any
other party under any other agreement, such claimant shall also be entitled to
be paid the reasonable expense of prosecuting such claim.) It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required Undertaking has been tendered to the Corporation)
that the claimant has not met the standards of conduct which make it permissible
under the DGCL for the Corporation to indemnify the claimant for the amount
claimed. After a Change in Control, the burden of proving such defense shall be
on the Corporation, and any determination by the Corporation (including its
Board of Directors, independent legal counsel or its stockholders) that the
claimant had not met the applicable standard of conduct required under the DGCL
shall not be a defense to the action nor create a presumption that claimant had
not met such applicable standard of conduct.
<PAGE>
-17-
Section 4. Non-Exclusivity of Rights. The rights conferred on any
-------------------------
person by this Article shall not be exclusive of any other right which such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, By-Law, agreement, vote of stockholders or
disinterested directors or otherwise. The Board of Directors shall have the
authority, by resolution, to provide for such other indemnification of
directors, officers, employees or agents as it shall deem appropriate.
Section 5. Insurance. The Corporation may purchase and maintain
---------
insurance to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expenses, liabilities or losses, whether or not the
Corporation would have the power to indemnify such person against such expenses,
liabilities or losses under the DGCL.
Section 6. Enforceability. The provisions of this Article shall be
--------------
applicable to all proceedings commenced after its adoption, whether such arise
out of events, acts, omissions or circumstances which occurred or existed prior
or subsequent to such adoption, and shall continue as to a person who has ceased
to be a director or officer and shall inure to the benefit of the heirs,
executors and administrators of such person. This Article shall be deemed to
grant each person who, at any time that this Article is in effect, serves or
agrees to serve in any capacity which entitles him to indemnification hereunder
rights against the Corporation to enforce the provisions of this Article, and
any repeal or other modification of this Article or any repeal or modification
of the DGCL or any other applicable law shall not limit any rights of
indemnification then existing or arising out of events, acts, omissions,
circumstances occurring or existing prior to such repeal or modification,
including, without limitation, the right to indemnification for proceedings
commenced after such repeal or modification to enforce this Article with regard
to acts, omissions, events or circumstances occurring or existing prior to such
repeal or modification.
Section 7. Severability. If this Article or any portion hereof shall be
------------
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director and officer of the
Corporation as to costs, charges and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement with respect to any proceeding,
whether civil, criminal, administrative or investigative, including an action by
or in the right of the Corporation, to the full extent permitted by any
applicable portion of this Article that shall not have been invalidated and to
the full extent permitted by applicable law.
<PAGE>
-18-
ARTICLE VII
GENERAL PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be the
-----------
calendar year.
Section 2. Corporate Seal. The corporate seal shall be in such form as
---------------
may be approved from time to time by the Board of Directors. The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
Section 3. Waiver of Notice. Whenever any notice is required to be
----------------
given under law or the provisions of the Certificate of Incorporation or these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent to notice.
ARTICLE VIII
AMENDMENTS
These By-Laws may be altered, amended or repealed or new By-Laws may be
adopted by the Board of Directors. The fact that the power to amend, alter,
repeal or adopt the By-Laws has been conferred upon the Board of Directors shall
not divest the stockholders of the same powers.
<PAGE>
Exhibit 10.19
-------------
EMPLOYMENT AGREEMENT
THIS AGREEMENT, by and between Ryerson Tull, Inc. (the "Company") and Neil
S. Novich (the "Executive") effective as of December 1, 1999 (the "Effective
Date");
WITNESSETH THAT:
WHEREAS, the Company has appointed Executive to the position of Chairman,
President and CEO, and Executive has accepted such appointment; and
WHEREAS, in connection with such appointment, the Company and Executive
desire to enter into this Agreement;
NOW, THEREFORE, in consideration of the Executive's appointment as
Chairman, President and CEO, and for other good and valuable consideration the
receipt of which is hereby acknowledged, it is agreed by the Executive and
Company as follows:
1. Duties. The Executive agrees that while he is employed by the
------
Company, he will devote his full business time, energies and talents to serving
as the Chairman, President and CEO of the Company and providing services for the
Company at the direction of the Board of Directors of the Company. The
Executive shall have such duties and responsibilities as may be assigned to him
from time to time by the Board of Directors, shall perform all duties assigned
to him faithfully and efficiently, subject to the direction of the Board of
Directors, and shall have such authorities and powers as are inherent to the
undertakings applicable to his position and necessary to carry out the
responsibilities and duties required of him hereunder; provided, however, that
the Executive shall not be required to perform any duties while he is disabled.
Both parties understand and agree that the Executive may serve on boards of
directors of other businesses which are not in competition with the Company and
may engage in civic and charitable activities provided that such service and
activities do not materially interfere with the performance of the Executive's
duties.
2. Compensation. Subject to the terms and conditions of this
------------
Agreement, during the Employment Period while the Executive is employed by the
Company, the Company shall compensate him for his services as follows:
<PAGE>
Exhibit 10.19
-------------
(A) The Executive shall receive, for each twelve-consecutive month period
beginning on February 8, 1999, and each anniversary thereof, an annual
salary not less than $500,000 (the "Salary"), which Salary shall be
payable in substantially equal bi-weekly installments. The Executive's
rate of Salary shall be reviewed annually beginning in February, 2000
and may be increased at that time with the Compensation Committees
approval.
(B) The Executive shall be entitled to receive bonuses from the Company in
accordance with the bonus plans of the Company as in effect from time
to time. As Chairman, President and CEO his target bonus award
percentage shall be 70% of the median annual salary of the CEO
position within the Hewitt comparator survey, subject to annual
approval of the Compensation Committee of the Board of Directors.
(C) Except as otherwise specifically provided to the contrary in this
Agreement, the Executive shall be provided with health, welfare and
other fringe benefits to the same extent and on the same terms as
those benefits are provided by the Company from time to time to the
Company's other senior management executives.
(D) The Executive shall be reimbursed by the Company, on terms and
conditions that are substantially similar to those that apply to other
similarly situated senior management executives of the Company, for
reasonable out-of-pocket expenses for entertainment, travel, meals,
lodging and similar items which are consistent with the Company's
expense reimbursement policy and actually incurred by the Executive in
the promotion of the Company's business.
(E) The Company shall pay or shall reimburse the Executive for both of his
monthly club dues and assessments;
(F) The Company shall pay the Executive for the amount of the monthly
lease payment for the automobile that the Executive uses for business;
provided, however, that the Company shall report as income to the
Executive any amounts required by law or the policies of the Company
relating to the Executive's personal use of such automobile.
-2-
<PAGE>
Exhibit 10.19
-------------
(G) The Executive shall be recommended for stock awards in the future
utilizing the methodology in place for the 1999 grant. The methodology
in place for 1999 will not be changed in a manner which is less
favorable to the Executive.
(H) The Executive shall be provided financial services counseling.
3. Rights and Payments Upon Termination. The Executive's right to
------------------------------------
benefits and payments, if any, for periods after the date on which his
employment with the Company terminates for any reason (his "Termination Date")
shall be determined in accordance with this Section 3:
(A) Termination by the Company for Reasons Other Than Cause; Termination
--------------------------------------------------------------------
by the Executive for Good Reason. If the Executive's termination by
--------------------------------
the Company occurs for any reason other than Cause or is a result of
the Executive's termination of employment for Good Reason (and is not
on account of the Executive's death, disability, or voluntary
resignation, the mutual agreement of the parties or any other reason),
then the Executive shall receive from the Company for the period
commencing on his Termination Date and ending on the earliest of (i)
the thirty-sixth month after the Executive's Termination Date; (ii)
the date on which the Executive violates the provisions of Sections 4,
5 or 6 of this Agreement; or (iii) the date of the Executive's death,
the Salary, bonus and benefits in effect as of his Termination Date,
payable in accordance with the provisions of Paragraph 3(B). The
biweekly salary amounts will continue as described above. Benefits
that will continue will include medical, dental, basic life insurance,
financial counseling services, any optional life insurance and any
optional accidental death and dismemberment insurance. Bonus shall
mean three payments of the average annual amount of the award paid to
the Executive pursuant to the annual incentive plan or successor plan
with respect to the three years immediately preceding that in which
the Termination Date occurs; excluding any years in which the bonus
was zero. If all three immediately preceding bonus payments were equal
to zero, then no bonus payment would be continued for the next three
years.
Base salary payments to the Executive during the aforementioned
thirty-six month period shall not preclude the Executive's eligibility
for payments under the Companys severance plan.
-3-
<PAGE>
Exhibit 10.19
-------------
Thirty-six months of additional age and service credit will be
provided to the Executives RT Pension and the RT Supplemental Plan
using the methodology described in the Executives Change in Control
Agreement except that any lump sum payment will be made thirty-six
months after the Executives Termination Date and only if the Executive
has not violated the Confidentiality, Nonsolicitation and
Noncompetition provisions of this Agreement.
All existing unvested options as of the Termination Date will become
vested and the Executive shall be afforded a 36 month extension period
of time (but not beyond the original Termination Date of the option)
from the Termination Date to exercise any remaining unexercised
options that had not expired before the Termination Date.
It is expected that the Executive would have an opportunity to
exercise said options in a cashless exchange from the first window
period (post earnings public release period) after the Executive's
Termination Date and thereafter. The Company expects that such a
transaction could be accomplished very promptly at the beginning of
said window period and thereafter. The Executive may exercise a
cashless exchange of options before the date mentioned above if the
Company is in agreement on the efficacy of such action and such
agreement would not be unreasonably withheld by the Company.
The Company will, to the maximum extent permitted by law, defend,
indemnify and hold harmless the Executive and the Executive's heirs,
estate, executors and administrators against any costs, losses,
claims, suits, proceedings, damages or liabilities to which the
Executive may become subject which arise out of, are based upon or
relate to the Executive's employment by the Company (and any
predecessor company to the Company), or the Executive's service as an
officer or member of the Board of Directors of the Company (or any
predecessor company to the Company), including without limitation
reimbursement for any legal or other expenses reasonably incurred by
the Executive in connection with investigation and defending against
any such costs, losses, claims, suits, proceedings, damages or
liabilities. The Company shall maintain directors and officers
liability insurance in commercially reasonable amounts (as reasonably
determined by the Board), and the Executive shall be covered under
such
-4-
<PAGE>
Exhibit 10.19
-------------
insurance to the same extent as other senior management employees of
the Company with respect to matters which occurred during such period
of employment.
The Executive will be provided one-on-one Executive out placement and
office services following his Termination Date. Such services will be
paid for by the Company and consistent with the existing Company
program and appropriate to his level.
The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking outside employment
or otherwise and such payments shall not be reduced by any other
income earned by Executive.
(B) Termination By Company for Cause. If the Executive's termination is a
--------------------------------
result of the Company's termination of the Executive's employment on
account of Cause, then, except as agreed in writing between the
Executive and the Company, the Executive shall have no right to future
payments or benefits under this Agreement (and the Company shall have
no obligation to make any such future payments or provide any such
future benefits) for periods after the Executive's Termination Date.
(C) Termination for Death or Disability. If the Executive's termination is
-----------------------------------
caused by the Executive's death or permanent disability, then the
Executive (or in the event of his death, his estate) shall be entitled
to continuing payments of his Salary for the period commencing on his
Termination Date and ending on the earlier of (i) the last day of the
calendar month in which his Termination Date occurs or (ii) the date
on which the Executive violates the provisions of Sections 4, 5 or 6
of this Agreement.
(D) Termination for Voluntary Resignation, Mutual Agreement or Other
----------------------------------------------------------------
Reasons. If the Executive's termination occurs on account of his
-------
voluntary resignation, mutual agreement of the parties, or any reason
other than those specified in Paragraphs (A), (B) or (C) above then,
except as agreed in writing between the Executive and the Company, the
Executive shall have no right to future payments or benefits under
this Agreement (and the Company shall have no obligation to make any
such future payments or provide any such future benefits) for periods
after the Executive's Termination Date. The Executive's
-5-
<PAGE>
Exhibit 10.19
-------------
termination of employment for Good Reason shall not be treated as a
voluntary resignation for purposes of this Agreement.
(E) Definitions. For purposes of this Agreement:
-----------
(i) The term "Cause" shall mean:
(a) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its
affiliates, monetarily or otherwise, as determined by the
Board of Directors; or
(b) conduct by the Executive that involves theft, fraud or
dishonesty; or
(c) the Executive's violation of the provisions of Sections 4, 5
or 6 hereof.
(ii) The term "Good Reason" means (a) the assignment to the Executive
duties which are materially inconsistent with his duties as
Chairman, President and CEO of the Company, including, without
limitation, a material diminution or reduction in his title,
office or responsibilities or a reduction in his rate of Salary,
failure to provide bonus opportunities or stock awards in
accordance with the requirements in Section 2, or (b) the
relocation of the Executive to a location that is not within the
greater Chicago metropolitan area.
Notwithstanding any other provision of this Agreement, the Executive shall
automatically cease to be an employee of the Company and its affiliates as of
his Termination Date and, to the extent permitted by applicable law, any and all
monies that the Executive owes to the Company shall be repaid before any post-
termination payments are made pursuant to the Executive pursuant to this
Agreement.
4. Confidential Information. The Executive agrees that:
------------------------
(A) Except as may be required by the lawful order of a court or agency of
competent jurisdiction, or except to the extent that the Executive has
express authorization from the Company, he shall keep secret and
confidential indefinitely all non-
-6-
<PAGE>
Exhibit 10.19
-------------
public information (including, without limitation, information
regarding litigation and pending litigation) concerning the Company
and its affiliates which was acquired by or disclosed to the Executive
during the course of his employment with the Company, and not to
disclose the same, either directly or indirectly, to any other person,
firm, or business entity, or to use it in any way.
(B) Upon his Termination Date or at the Company's earlier request, he will
promptly return to the Company any and all records, documents,
physical property, information, computer disks or other materials
relating to the business of the Company and its affiliates obtained by
him during his course of employment with the Company.
(C) The Executive shall keep the Company informed of, and shall execute
such assignments as may be necessary to transfer to the Company or its
affiliates the benefits of, any inventions, discoveries, improvements,
trade secrets, developments, processes, and procedures made by the
Executive, in whole or in part, or conceived by the Executive either
alone or with others, which result from any work which the Executive
may do for or at the request of the Company, whether or not conceived
by the Executive while on holiday, on vacation, or off the premises of
the Company, including such of the foregoing items conceived during
the course of employment which are developed or perfected after the
Executive's termination of employment. The Executive shall assist the
Company or other nominated by it, to obtain patents, trademarks and
service marks and the Executive agrees to execute all documents and to
take all other actions which are necessary or appropriate to secure to
the Company and its affiliates the benefits thereof. Such patents,
trademarks and service marks shall become the property of the Company
and its affiliates. The Executive shall deliver to the Company all
sketches, drawings, models, figures, plans, outlines, descriptions or
other information with respect thereto.
(D) To the extent that any court or agency seeks to have the Executive
disclose confidential information, he shall promptly inform the
Company, and he shall take such reasonable steps to prevent disclosure
of Confidential Information until the Company has been informed of
such requested disclosure. To the extent that the Executive obtains
information on behalf of the Company or any of its affiliates that may
be subject to attorney-client privilege as to the
-7-
<PAGE>
Exhibit 10.19
-------------
Company's attorneys, the Executive shall take reasonable steps to
maintain the confidentiality of such information and to preserve such
privilege.
(E) Nothing in the foregoing provisions of this Section 4 shall be
construed so as to prevent the Executive from using, in connection
with his employment for himself or an employer other than the Company
or any of its affiliates, knowledge which was acquired by him during
the course of his employment with the Company and its affiliates, and
which is generally known to persons of his experience in other
companies in the same industry.
5. Nonsolicitation. While the Executive is employed by the Company and
---------------
its affiliates and for a period of three years after the date the Executive
terminates employment with the Company and its affiliates for any reason, the
Executive covenants and agrees that he will not, whether for himself or for any
other person, business, partnership, association, firm, company or corporation,
directly or indirectly, call upon, solicit, divert or take away or attempt to
solicit, divert or take away, any of the customers or employees of the Company
or its affiliates in existence from time to time during his employment with the
Company and its affiliates.
6. Noncompetition. While the Executive is employed by the Company and
--------------
its affiliates, and for a period of three years after the date the Executive
terminates employment with the Company and its affiliates, the Executive
covenants and agrees that he will not, directly or indirectly, engage in,
assist, perform services for, plan for, establish or open, or have any financial
interest (other than (i) ownership of 1% or less of the outstanding stock of any
corporation listed on the New York or American Stock Exchange or included in the
National Association of Securities Dealers Automated Quotation System or (ii)
ownership of securities in any entity affiliated with the Company) in any
person, firm, corporation, or business entity (whether as an employee, officer,
director or consultant) that engages in an activity in any state in which the
Company or its affiliates is conducting or has reasonable expectations of
commencing business activities at the date of the Executive's termination of
employment, which is the same as, similar to, or competitive with the metals
service center, processing and distribution business of the Company and its
affiliates.
Employment of the Executive by a metals manufacturing organization is not
considered a violation of this noncompetition section as long as the Executive
does not personally engage in
-8-
<PAGE>
Exhibit 10.19
-------------
activities with the metals manufacturer to obtain or increase business from the
Company's customers through mill direct or competitor supported business
activities.
7. Equitable Remedies. The Executive acknowledges that the Company
------------------
would be irreparably injured by a violation of Sections 4, 5 and 6 and agrees
that the Company, in addition to other remedies available to it for such breach
or threatened breach, shall be entitled to a preliminary injunction, temporary
restraining order, other equivalent relief, restraining the Executive from any
actual or threatened breach of Sections 4, 5 and 6 without any bond or other
security being required.
8. Defense of Claims. The Executive agrees that, during his employment
-----------------
with the Company and after his termination, he will cooperate with the Company
and its affiliates in the defense of any claims that may be made against the
Company or its affiliates to the extent that such claims may relate to services
performed by him for the Company. To the extent travel is required to comply
with the requirements of this Section 8, the Company, shall to the extent
possible, provide the Executive with notice at least 10 days prior to the date
on which such travel would be required and the Company agrees to reimburse the
Executive for all of his reasonable actual expenses associated with such travel;
provided, however, that if the Company reasonably expects the travel to be
extensive or unduly burdensome to the Executive from a financial perspective,
the Company may provide to the Executive pre-paid tickets for transportation in
connection with such travel.
9. Notices. Notices provided for in this Agreement shall be in writing
-------
and shall be deemed to have been duly received when delivered in person or sent
by facsimile transmission, on the first business day after it is sent by air
express courier service or on the second business day following deposit in the
United States registered or certified mail, return receipt requested, postage
prepaid and addressed, in the case of the Company to the following address:
Ryerson Tull, Inc.
2621 W. 15th Place
Chicago, IL 60608
Attention: William Korda
or to the Executive:
Neil S. Novich
431 Washington Avenue
Wilmette, IL 60091
-9-
<PAGE>
Exhibit 10.19
-------------
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that a notice of change of address shall be
effective only upon actual receipt.
10. Withholding. All compensation payable under this Agreement shall
-----------
be subject to customary withholding taxes and other employment taxes as required
with respect to compensation paid by a corporation to an employee and the amount
of compensation payable hereunder shall be reduced appropriately to reflect the
amount of any required withholding. The Company shall have no obligation to
make any payments to the Executive or to make the Executive whole for the amount
of any required taxes.
11. Successors. This Agreement shall be binding on, and inure to
----------
the benefit of, the Company and its successors and assigns and any person
acquiring, whether by merger, reorganization, consolidation, by purchase of
assets or otherwise, all or substantially all of the assets of the Company.
12. Nonalienation. The interests of the Executive under this Agreement
-------------
are not subject to the claims of his creditors, other than the Company, and may
not otherwise be voluntarily or involuntarily assigned, alienated or encumbered.
13. Waiver of Breach. The waiver by either the Company or the
----------------
Executive of a breach of any provision of this Agreement shall not operate as or
be deemed a waiver of any subsequent breach by either the Company or the
Executive. Continuation of payments hereunder by the Company following a breach
by the Executive of any provision of this Agreement shall not preclude the
Company from thereafter terminating said payments based upon the same violation.
14. Severability. It is mutually agreed and understood by the parties
------------
that should any of the agreements and covenants contained herein be determined
by any court of competent jurisdiction to be invalid by virtue of being vague or
unreasonable, including but not limited to the provisions of Sections 4, 5 and
6, then the parties hereto consent that this Agreement shall be amended
retroactive to the date of its execution to include the terms and conditions
said court deems to be reasonable and in conformity with the original intent of
the parties and the parties hereto consent that under such circumstances, said
court shall have the power and authority to determine what is reasonable and in
conformity with the original intent of the parties to the extent that said
covenants and/or agreements are enforceable.
-10-
<PAGE>
Exhibit 10.19
-------------
15. Applicable Law. This Agreement shall be construed in accordance with
--------------
the laws of the State of Illinois.
16. Amendment. This Agreement may be amended or cancelled by mutual
---------
Agreement of the parties in writing without the consent of any other person.
17. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
Each counterpart may consist of a copy hereof containing multiple signature
pages, each signed by one party hereto, but together signed by both of the
parties hereto.
18. Arbitration & Legal Fees. Disputes arising out of or in connection
------------------------
with the interpretation and application of this Agreement shall be discussed by
the Executive and the Company in good faith negotiations for the purpose of
reaching an amicable resolution. Without prejudice to the Company's rights
under Section 7 of this Agreement, any such disputes which cannot be settled
amicably within thirty (30) days after written notice by one party to the other
(or after such longer period agreed to in writing by the parties), shall
thereafter be settled by binding arbitration in Chicago, Illinois, to be
conducted pursuant to the rules and procedures then obtaining of the American
Arbitration Association and judgement on the award rendered in such arbitration
may be entered in any court of competent jurisdiction.
The Executive is entitled to timely payments (not later than 30 calendar
days after notice from the Executive) from the Company of reasonable attorney
fees incurred by the Executive in the event of a dispute arising out of or in
connection with the interpretation and application of this Agreement.
19. Other Agreements. This Agreement constitutes the sole and complete
----------------
Agreement between the Company and the Executive and supersedes all other
agreements, both oral and written, between the Company and the Executive with
respect to the matters contained herein, provided, however, that this Agreement
does not supersede the Change in Control Agreement or Severance Plan. No verbal
or other statements, inducements, or representations have been made to or relied
upon by the Executive. The parties have read and understand this Agreement.
RYERSON TULL, INC.
-11-
<PAGE>
Exhibit 10.19
-------------
Dated: 11/24/99 /s/ William Korda
--------------- ------------------------------------
William Korda
Vice President Human Resources
Dated: 12/15/99 /s/ Neil S. Novich
--------------- ------------------------------------
Neil S. Novich
Chairman, President & CEO
-12-
<PAGE>
Exhibit 10.22
-------------
[LOGO]
[LETTERHEAD OF RYERSON TULL]
November 16, 1999
Mr. George A. Ranney, Jr.
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Re: Retainer Arrangement
--------------------
Dear George:
This will confirm our arrangement under which you have agreed to provide
professional services to Ryerson Tull, Inc. on a retainer basis. We will pay
Mayer, Brown & Platt a retainer fee of $10,000 per month, plus reasonable
expenses, for these services.
You agree to make yourself personally available, on request, to me, our
General Counsel Joyce Mims, the other members of our senior management team and
our Board of Directors from time to time for advice and counsel on strategic and
other issues.
Ryerson Tull, Inc. is a regular client of your Firm. We understand,
however, that you will not bill us on an hourly basis for these services. In the
event that any particular project requires a major commitment of your time, then
the Firm and we shall discuss whether your services on that project should be
billed to us in the traditional manner as part of your Firm's regular monthly
statements.
This retainer arrangement may be terminated by either of us at any time
upon notice to the other.
<PAGE>
Mr. George a Ranney, Jr.
Page 2
November 16, 1999
If this letter correctly sets forth our understanding, please so indicate in the
appropriate space below and return a signed copy hereof to us.
Very truly yours,
RYERSON TULL, INC.
By: /s/ Neil S. Novich
-------------------------
Chairman, President and
Chief Executive Officer
Accepted and Agreed to:
/s/ George A. Ranney, Jr
- ------------------------
George A. Ranney, Jr
MAYER, BROWN & PLATT
By: /s/ Debora de Hoyos
--------------------
Managing Partner
<PAGE>
Exhibit 13
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
AND OPERATING RESULTS -- CONTINUING OPERATIONS
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS,
EXCEPT PER SHARE AND PER TON DATA
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
SUMMARY OF EARNINGS
Net sales $2,763.5 $2,782.7 $2,804.0 $2,407.9 $2,464.0
Gross profit 631.9 625.8 626.0 564.2 580.5
Operating profit 97.1(1) 96.0(2) 133.1(3) 110.7 134.7
Income before income taxes 73.9(1) 83.0(2) 119.5(3) 128.5 125.8
Income from continuing operations 38.4(1) 47.7(2) 64.5(3) 78.1 77.7
Earnings per share - basic 1.56(1) 1.03(2) 1.13(3) 1.42 1.24
Earnings per share - diluted 1.56(1) 0.99(2) 1.08(3) 1.34 1.18
FINANCIAL POSITION AT YEAR-END
Inventory - current value(4) $ 606.1 $ 571.6 $1,013.1 $ 900.6 $ 867.0
Working capital 610.5 572.0 660.2 691.0 618.1
Property, plant and equipment 273.2 293.6 1,641.8 1,637.0 1,600.4
Total assets 1,387.2 1,391.0 3,646.5 3,541.6 3,558.3
Long-term debt 258.8 257.0 704.9 773.2 784.5
Stockholders' equity 697.8 563.6 900.1 789.0 748.6
FINANCIAL RATIOS
Inventory turnover - current value(4) 3.7 3.8 4.0 4.2 4.6
Operating asset turnover 2.5 2.5 2.8 2.8 2.8
Operating profit on operating assets (OP/OA) 8.7% 8.6% 13.1% 13.0% 15.4%
Return on ending stockholders' equity 5.5 8.5 7.2 9.9 10.4
VOLUME AND PER TON DATA
Tons shipped (000) 3,333 3,108 3,020 2,514 2,347
Average selling price per ton $ 829 $ 895 $ 928 $ 958 $ 1,050
Gross profit per ton 190 201 207 224 247
Expenses per ton(5) 161 172 169 180 190
Operating profit per ton(6) 29 29 38 44 57
PROFIT MARGINS
Gross profit as a percent of sales 22.9% 22.5% 22.3% 23.4% 23.6%
Expenses as a percent of sales(5) 19.4 19.3 18.2 18.8 18.1
Operating profit as a percent of sales(6) 3.5 3.2 4.1 4.6 5.5
OTHER DATA
Average number of employees 5,128 5,266 5,442 5,038 5,245
Tons shipped per average employee 650 590 555 499 447
Capital expenditures $ 31.6 $ 40.1 $ 41.3 $ 25.1 $ 20.7
Cash flow provided by (used for) operating activities 33.2 (29.0) 57.4 55.1 130.2
Dividends per common share 0.20 0.20 0.20 0.20 0.20
</TABLE>
Data in the "Financial Position at Year-End" section for the years 1997 through
1995 include amounts related to discontinued operations.
(1) Includes a $1.8 million pretax gain on the sale of assets. Before this gain,
operating profit was $95.3 million, income before income taxes was $72.1
million, income from continuing operations was $37.4 million, and basic and
diluted earnings per share were $1.52.
(2) Includes a $5.9 million pretax gain on the sale of assets. Before this gain,
operating profit was $90.1 million, income before taxes was $77.1 million,
income from continuing operations was $44.0 million, and basic and diluted
earnings per share were $.94 and $.90, respectively.
(3) Includes an $8.9 million pretax pension curtailment gain and an $8.9 million
pretax gain on the sale of assets. Before these gains, operating profit
was $115.3 million, income before taxes was $101.7 million, income from
continuing operations was $55.3 million, and basic and diluted earnings
per share were $.94 and $.90, respectively.
(4) Current value of inventory consists of book value of inventory plus LIFO
reserve.
(5) Expenses are defined as operating expenses plus depreciation and
amortization.
(6) Operating profit is defined as gross profit minus expenses.
10
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION
<TABLE>
<CAPTION>
Figures in millions, except per share data 1999 1998 1997
<S> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales from continuing operations $2,763.5 $2,782.7 $2,804.0
Operating profit from continuing operations 97.1 96.0 133.1
Income from continuing operations 38.4 47.7 64.5
Income (loss) from discontinued operations -- 13.8 54.8
Gain on sale of discontinued operations 17.3 510.8 --
Extraordinary loss on early retirement of debt -- (21.4) --
Net income 55.7 550.9 119.3
Income per common share
from continuing operations - diluted $ 1.56 $ 0.99 $ 1.08
Net income per common share - diluted 2.26 13.04 2.13
Average shares outstanding - diluted 24.6 41.7 51.9
</TABLE>
The Company's primary business is metals distribution and processing. The
Company's operations changed substantially in 1998 as a result of the
disposition of the Company's steel manufacturing segment. In October 1998, the
boards of directors for both the Company and its majority-owned subsidiary,
Ryerson Tull, Inc. ("RT") agreed to merge the companies through the process of
exchanging 0.61 share of the Company's common stock for each share of the RT
Class A common stock not held by either Company. On February 25, 1999, the
merger of the two companies took place, pursuant to the approval of RT
shareholders at a special meeting. All references to RT in this financial review
refer to the pre-merger, majority-owned subsidiary of the Company.
The Company reported net income from continuing operations of $38.4 million,
or $1.56 per share, in 1999; $47.7 million, or $0.99 per share, in 1998; and
$64.5 million, or $1.08 per share, in 1997. The 1999 income from continuing
operations included $1.0 million after tax, or $0.04 per share, related to the
gain from the sale of real estate. The 1998 income from continuing operations
included $3.7 million after tax, or $0.09 per share, related to the gain from
the sale of Inland Engineered Materials Corporation, a subsidiary of the
Company. The 1997 income from continuing operations included $9.5 million after
tax, or $0.18 per share, related to gains from asset sales and a pension
curtailment gain at RT.
On July 16, 1998, Ispat International N.V. ("Ispat") acquired Inland Steel
Company ("ISC"), the Company's wholly owned subsidiary that constituted the
steel manufacturing and related operations segment of the Company's consolidated
operations, pursuant to an agreement and plan of merger dated May 27, 1998, as
amended as of July 16, 1998, among the Company, ISC, Ispat and Inland Merger
Sub, Inc. (an Ispat subsidiary). Pursuant to the merger, the Company received
$1.1 billion in cash in exchange for the outstanding common stock and preferred
stock of ISC and repayment of intercompany debt of ISC held by the Company. The
Company recorded a $510.8 million after-tax gain from this transaction.
Accordingly, the results of operations of ISC, as well as the gain from the
disposition, have been excluded from the results of continuing operations and
reported separately on the statement of operations. In the second quarter of
1999, the Company recorded a favorable $17.3 million adjustment to taxes related
to the gain on the sale of ISC.
11
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
MANAGEMENT'S DISCUSSION OF OPERATIONS
AND FINANCIAL CONDITION (CONT.)
COMPARISON OF 1999 WITH 1998 -- CONTINUING OPERATIONS
NET SALES Net sales of $2.76 billion in 1999 declined 0.7 percent,
compared with $2.78 billion in 1998. A 7.2 percent increase
in tons shipped -- to 3.33 million tons from 3.11 million
tons -- was offset by a 7.4 percent decrease in the average
selling price per ton to $829 from $895. The increase in
shipments was primarily the result of internal growth
initiatives and secondarily the acquisition of Washington
Specialty Metals in February 1999. During 1999, the Company
grew its share of the market to 11.1 percent, compared with
10.1 percent in 1998, based on data from the Steel Service
Center Institute.
GROSS PROFIT Gross profit -- the difference between net sales and the
cost of materials sold -- increased 1.0 percent to $631.9
million in 1999 from $625.8 million in 1998. While gross
profit as a percentage of sales increased to 22.9 percent in
1999 from 22.5 percent in 1998 -- due to the Company's gross
margin management initiatives -- gross profit per ton
declined to $190 from $201, due to lower metal prices in
1999.
EXPENSES Expenses -- which consist of operating expenses,
depreciation and amortization -- increased 0.2 percent in
1999 to $536.6 million from $535.7 million in 1998. Expenses
on a per ton basis declined 6.4 percent to $161 in 1999 from
$172 in 1998. The average number of employees decreased 3
percent from 1998 to 1999, and tons shipped per employee, a
key measure of productivity, increased from 590 tons to 650
tons.
OPERATING PROFIT Operating profit was $97.1 million in 1999 and $96.0 million
in 1998. Operating profit benefited from a $1.8 million gain
on the sale of real estate in 1999 and a $5.9 million gain
on the sale of Inland Engineered Materials Corporation in
1998. Excluding gains in both periods, operating profit
increased 5.8 percent to $95.3 million in 1999 from $90.1
million in 1998.
OTHER EXPENSES Other revenues and expense, including interest income,
declined to $1.0 million in 1999 from $20.6 million in 1998
as the average cash and cash equivalents balance declined
following the 1998 common stock repurchase program. Interest
and other expense on debt decreased to $24.2 million in 1999
from $33.6 million in the prior year. The decrease was
primarily due to the early retirement of the Company's
10.23% subordinated voting note and ESOP notes in the second
half of 1998.
PROVISION FOR Income taxes increased to $34.8 million in 1999 from $30.6
INCOME TAXES million in 1998. The effective tax rate was 47.1 percent in
1999, compared with 36.9 percent in 1998, due to an increase
in non-tax-deductible losses and expenses in relationship to
pretax income.
EARNINGS PER SHARE Diluted earnings per share from continuing operations were
$1.56 in 1999 compared with $0.99 in 1998. Diluted earnings
per share in 1998, including the net gain on the sale of
Inland Steel Company, were $13.04. For 1999, the average
number of shares of common stock outstanding declined to
24.6 million from 41.7 million shares in 1998 due to the
1998 tender offer, redemption of Series E ESOP convertible
preferred stock, and open market repurchases.
12
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
COMPARISON OF 1998 WITH 1997 -- CONTINUING OPERATIONS
Net sales of $2.78 billion in 1998 declined 0.8 percent from $2.80 billion in
1997. The primary reason for the decrease in the Company's net sales was lower
average selling prices. The effect of a 2.9 percent increase in tons shipped --
to 3.11 million tons from 3.02 million tons -- was more than offset by a 3.6
percent decrease in the average selling price per ton to $895 from $928. Demand
also softened during the year due to weakness in the manufacturing sector of the
U.S. economy. Market share for RT was 10.1 percent in 1998, compared with 10.2
percent in 1997, based on data from the Steel Service Center Institute.
Gross profit decreased slightly in 1998 to $625.8 million from $626.0 million in
1997. While gross profit as a percent of sales was relatively stable from year
to year, the lower metal prices negatively impacted gross profits in 1998. On a
per ton basis, gross profit declined to $201 in 1998, compared with $207 in
1997.
Expenses increased 4.9 percent in 1998 to $535.7 million from $510.7 million in
1997. The increase was primarily due to a 2.9 percent increase in shipments and
an increase in depreciation and amortization expense. Expenses on a per ton
basis increased to $172 in 1998 from $169 per ton in 1997. Average number of
employees decreased 3.2 percent from 1997 to 1998, and tons shipped per employee
increased from 555 tons to 590 tons.
Operating profit of $96.0 million in 1998 decreased $37.1 million, or 27.9
percent, from $133.1 million in 1997. Operating profit in 1998 benefited from a
$5.9 million gain on the sale of Inland Engineered Materials. In 1997, operating
profit benefited from $17.8 million in unusual gains. Excluding gains in both
periods, operating income of $90.1 million in 1998 decreased 21.9 percent from
$115.3 million in 1997, due to lower gross profit and higher expenses.
Other revenues and expenses, including interest income, declined to $20.6
million in 1998 from $26.7 million in 1997, due to a reduction in loan
receivables. Interest and other expense on debt decreased to $33.6 million for
1998 from $40.3 million in the prior year. The decrease was primarily due to the
early retirement of the Company's 10.23% subordinated voting note and ESOP notes
during 1998.
Income taxes decreased to $30.6 million in 1998 from $46.6 million in 1997 due
to the decrease in taxable income. The effective tax rate in 1998 was 36.9
percent, compared with 39.0 percent in the prior year.
Diluted earnings per share from continuing operations were $0.99 in 1998
compared with $1.08 in 1997. Including the discontinued operations of Inland
Steel Company and the net gain on its sale, diluted earnings per share were
$13.04 in 1998, compared with $2.13 in 1997. The average number of shares of
common stock outstanding declined to 41.7 million in 1998 from 51.9 million in
1997 due to the 1998 tender offer, redemption of Series E ESOP Convertible
Preferred Stock, and open market repurchases.
13
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
MANAGEMENT'S DISCUSSION OF OPERATIONS
AND FINANCIAL CONDITION (CONT.)
LIQUIDITY AND FINANCING
The Company finished 1999 with cash and cash equivalents of $39.5 million,
compared with $99.6 million at year-end 1998. There was no short-term bank
borrowing at year-end 1999. For 1999, net cash provided from operating
activities was $33.2 million. For 1998, net cash used for operating activities
amounted to $29.0 million, compared with cash provided from operating activities
of $57.4 million for 1997.
The Company has a committed bank revolving credit facility of $250 million
that extends until September 5, 2002. During 1999, maximum borrowings under this
line were $40 million. There were no borrowings under this facility in 1998. The
revolving credit agreement contains covenants that, among other things, limit
the amount of dividends and restrict the amount of additional debt. The maximum
amount of dividends that could have been paid as of December 31, 1999, was $114
million. Additionally, the revolving credit agreement contains financial
covenants, including a minimum level of stockholders' equity, a leverage ratio,
and a fixed charge coverage ratio.
The indenture under which RT issued $250 million of debt in 1996 ("RT Notes")
contains covenants limiting, among other things, the creation of secured
indebtedness, sale and leaseback transactions, the repurchase of capital stock,
transactions with affiliates and mergers, consolidations, and certain sale of
assets. In addition, the RT Notes restrict the payment of dividends, although to
a lesser extent than the bank credit facility described above. Effective with
the merger of RT and the Company on February 26, 1999, the Company assumed the
Notes.
As discussed previously, on July 16, 1998, Ispat acquired Inland Steel Company
for $1.1 billion in cash in exchange for the outstanding common stock and
preferred stock of ISC and repayment of intercompany debt of ISC held by the
Company. Proceeds from the sale of ISC and available cash were used to
repurchase $794.5 million of Company common stock through a Dutch auction self
tender offer, to repurchase $35.1 million of the Company's common stock in the
open market, to retire the Subordinated Voting Note to NS Finance III, Inc. for
$116.7 million (including principal, interest and premium), and to redeem the
Series E ESOP Convertible Preferred Stock and repay the ESOP notes for a total
cost of $187 million. The Company recorded an extraordinary after-tax loss of
$21.4 million from the early retirement of debt during 1998.
During the fourth quarter of 1998, the Company sold its Inland Engineered
Materials Corporation subsidiary for $28.8 million, which resulted in a pre-tax
gain of $5.9 million. This operating unit no longer fit the Company's strategic
focus once ISC had been sold.
During 1998, the Company utilized all of its net operating loss carryforwards
for regular federal income tax purposes to minimize the tax liability resulting
from the gain on the sale of ISC. The Company also utilized a portion of its
Alternative Minimum Tax ("AMT") credit carryforwards and ended the year 1998
with $41.0 million of these credits remaining. As of December 31, 1999, the
Company's AMT credit carryforward was $28.2 million. These credits can be
carried forward indefinitely.
The Company believes that its present cash position and the cash flow
anticipated from operations, augmented by the revolving credit facility, will
provide sufficient liquidity to fund its capital program and meet any operating
cash requirements that may arise for at least the next two years.
<TABLE>
<CAPTION>
DEBT RATINGS AT YEAR END 1999 1998
<S> <C> <C>
Ryerson Tull Notes
Moody's Baa3 Baa3
Standard & Poor's BBB BBB
</TABLE>
The ratio of the Company's long-term debt to total capitalization was 27 percent
at December 31, 1999, compared with 29 percent at year-end 1998.
CAPITAL EXPENDITURES AND ACQUISITIONS
Capital expenditures during 1999 totaled $31.6 million, compared to $40.1
million in 1998. Capital expenditures were primarily for buildings, machinery
and equipment.
On February 1, 1999, the Company purchased all of the outstanding stock of
Washington Specialty Metals Corporation, an eight-location metals service center
specializing in value-added stainless steel, for approximately $66 million in
cash.
The Company anticipates capital expenditures, excluding acquisitions, to be in
the range of $40 million to $50 million in 2000, which will continue to expand
the Company's processing capacity.
PENSIONS
Effective January 1, 1998, RT froze the benefits accrued under the Ryerson Tull
Pension Plan, a defined benefit pension plan, for certain salaried employees,
and instituted a defined contribution plan. Salaried employees vested in their
benefits accrued under the defined benefit plan at December 31, 1997, will be
entitled to those benefits upon retirement. Certain transition rules have been
established for those salaried employees meeting the specified age and service
requirements. The change in pension plan for salaried employees resulted in a
one-time pretax curtailment gain of $8.9 million that was recognized in 1997.
Effective July 16, 1998 (the "Transfer Date"), the Inland Pension Plan (the
"ISC Pension Plan"), in which the employees of both ISC and the Company
participated, was transferred to ISC. The Company's remaining employees who
formerly had participated in the ISC Pension Plan became participants in the RT
Pension Plan. These employees were credited with the number of years of service
credited to them under the ISC Pension Plan at the Transfer Date. As of the
Transfer Date, benefits for those salaried employees whose benefits were
transferred to the RT Pension Plan were frozen in the same manner as described
above.
The Company's pension plan currently meets the minimum funding requirements of
the Employee Retirement Income Security Act of 1974, as amended. The Company's
current policy is to continue to fund the plan in the future to at least meet
these minimum funding standards. Although the Company was not required to make
any pension plan contributions during 1999, the Company elected to make a
voluntary cash contribution of $11.0 million to enhance the pension plan's
funded status.
In 1998, the Company recorded an additional minimum pension liability of $56.8
million representing the excess of the unfunded accumulated benefit obligation
over previously accrued pension costs. As proscribed by FAS 87, an intangible
asset, to the extent of unrecognized prior service cost, of $4.5 million was
recorded as a partial offset with the remaining difference of $52.3 million
recorded as a direct charge net of tax to equity.
14
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
At year-end 1999, the additional minimum pension liability was eliminated due
to higher discount rates and returns on plan assets. As a result, the intangible
asset was eliminated as well.
ISC SALE CONTINGENCIES
Pursuant to the ISC/Ispat Merger Agreement, the Company agreed to indemnify
Ispat for losses, if they should arise, exceeding certain minimum amounts in
connection with breaches of representations and warranties contained in the
ISC/Ispat Merger Agreement and for expenditures and losses, if they should
arise, relating to certain environmental liabilities exceeding, in most
instances, minimum amounts. The maximum liability for which the Company can be
responsible with respect to such obligations is $90 million in the aggregate.
There are also certain other covenant commitments made by the Company contained
in the ISC/Ispat Merger Agreement which are not subject to a maximum amount.
In general, Ispat must make indemnification claims with respect to breaches of
representations and warranties prior to March 31, 2000. However, claims relating
to breaches of representations and warranties related to tax matters and certain
organizational matters must be made within 90 days after the expiration of the
applicable statute of limitations, and claims with respect to breaches of
representations and warranties related to environmental matters must be made
prior to July 16, 2003. The Company has purchased environmental insurance with
coverage up to $90 million payable directly to Ispat and ISC. The insurance is
expected to cover substantially the same environmental matters for which the
Company has agreed to indemnify Ispat.
As part of the ISC/Ispat transaction, the ISC Pension Plan, in which employees
of both ISC and the Company participated, was transferred to ISC. The ISC
Pension Plan has unfunded benefit liabilities on a termination basis, as
determined by the Pension Benefit Guaranty Corporation ("PBGC"), an agency of
the U.S. government. As a condition to completing the ISC/Ispat transaction,
Ispat, ISC, RT and the Company entered into an agreement with the PBGC to
provide certain financial commitments to reduce the underfunding of the ISC
Pension Plan and to secure ISC Pension Plan unfunded benefit liabilities on a
termination basis. These requirements include a five-year Company guaranty of
$50 million of the obligations of Ispat and ISC to the PBGC in the event of a
distress or involuntary termination of the ISC Pension Plan. The guaranty is
included in the $90 million limit on the Company's indemnification obligations.
In the second quarter of 1999, Ispat publicly disclosed that it had been
informed by the United States Attorney for the Middle District of Louisiana that
it is named as a defendant in a civil proceeding filed under seal in Baton
Rouge, Louisiana. The suit was filed by an individual on behalf of the United
States Government and asserts violations of the False Claims Act, 31 U.S.C. Sec.
3729, et seq. Ispat also disclosed that it is the target of a federal criminal
grand jury investigation in connection with the alleged violations and that the
U.S. Attorney and Ispat have agreed that no criminal charges will be filed
against Ispat prior to March 5, 2000, while Ispat reviews the matter. Ispat
further disclosed that it had been informed by the U.S. Attorney's office of a
damage claim in the civil litigation, which, if successfully proved, would be
material to its financial position and results of operations. Ispat has stated
that it has not had an opportunity to review the factual basis of the claim or
the method by which the damages have been calculated, and that it has not yet
determined the extent to which other potential corporate defendants are
involved.
By letter dated May 11, 1999, Ispat notified the Company that it views the
civil lawsuit and the criminal grand jury investigation (together the
"Proceedings") as implicating Ispat's contractual rights against the Company
including, without limitation, Ispat's indemnification rights under the Merger
Agreement. The letter stated that Ispat was notifying the Company of the
Proceedings in order to preserve Ispat's rights under the Merger Agreement. The
Company's maximum liability for claims relating to breaches of representations
and warranties under the Merger Agreement is $90 million in the aggregate. At
present, the Company does not know what claims will be made against Ispat as a
result of the Proceedings or to what extent any specific claims for
indemnification will be made against the Company by Ispat. The Company is
therefore unable at the present time to determine Ispat's right to
indemnification under the Merger Agreement or whether an adverse outcome in the
Proceedings would have a material adverse effect on the Company's financial
condition or results of operations.
YEAR 2000
The Company and its subsidiaries and divisions operated as usual before, during
and after the calendar rollover to the year 2000.
The Company had extensive employee participation in the testing of its systems
and system environment on December 31, 1999, January 1, 2000 and January 2,
2000. During this period the Company experienced a few minor problems related to
the date conversion which had no impact on the Company's operations.
The Company has had no incidents in which it has been unable to perform normal
business. To the Company's knowledge, there have been no reported incidents in
its supply chain or from critical utility providers. The Company is doing
business without consequence from the calendar rollover to the year 2000.
The Company continues to monitor its systems carefully as various functions
are performed for the first time in the new year. These functions were covered
in enterprise testing and the Company has no reason to believe they will cause
any issues.
Projected costs for the Year 2000 conversion were $7 million to $8 million,
covering the time period of 1996 through 2000. The current cost estimate is
approximately $6.6 million.
Additionally, there was considerable time from existing personnel outside of
the systems departments expended on this project. These efforts did not add
directly to the Company's costs but delayed and deflected work from other
business objectives.
Of the time and resources expended on this issue, the Company estimates that
60 percent was involved in project planning, systems inventory tasks, systems
assessments, remediation, and reinstallation; 20 percent was involved in testing
and contingency planning; and 20 percent was expended on communications with
customers and suppliers (either to respond to their inquiries or to perform
inquiries of our own).
At this time the Company has no evidence to indicate there are material risks
to its continued operation or financial performance as a result of specific Year
2000 computer-related issues. The contingency planning performed will have many
valuable uses as means to mitigate future potential interruptions in the
Company's supply chain or of critical utility dependencies.
15
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
FINANCIAL RESPONSIBILITY
Senior management is responsible for the integrity and objectivity of the
financial data reported by Ryerson Tull, Inc. and its subsidiary companies. The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, and in management's judgment reflect
fairly the consolidated financial position, cash flows and results of operations
of Ryerson Tull and its subsidiary companies.
The Company maintains systems of internal accounting controls and
procedures to provide reasonable assurance of the safeguarding and
accountability of Company assets, and to ensure that its financial records
provide a reliable basis for the preparation of financial statements and other
data.
Internal accounting control is maintained through:
. The ongoing activities of corporate staff, line officers and accounting
management to monitor the adequacy of internal accounting control systems
throughout the Company
. The selection and proper training of qualified personnel
. The appropriate separation of duties in organizational arrangements
. The establishment and communication of accounting and business policies
together with detailed procedures for their implementation
. The use of an intensive ongoing program of internal auditing
. The use of a detailed budgeting system to ensure that expenditures are
properly approved and charged
The Audit Committee annually recommends to the Board of Directors the
appointment of a firm of independent auditors to audit the annual financial
statements for the Board's approval. The current report of the independent
auditors appears below. The principal role of the Audit Committee of the Board
of Directors (consisting entirely of non-management Directors) is to review the
conclusions reached by management in its evaluation of internal accounting
controls, approve the scope of audit programs and evaluate audit results of both
independent accountants and internal auditors. Both groups have unrestricted
access to the Audit Committee, without the presence of management.
REPORT OF INDEPENDENT AUDITORS
[LOGO OF PRICEWATERHOUSECOOPERS]
To the Board of Directors and Stockholders of Ryerson Tull, Inc.
In our opinion, the consolidated financial statements on pages 18 through 31
present fairly, in all material respects, the financial position of Ryerson
Tull, Inc. (formerly Inland Steel Industries, Inc.) and subsidiary companies at
December 31, 1999 and 1998, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Chicago, Illinois
February 14, 2000
16
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
FINANCIALS
18 CONSOLIDATED STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS
19 CONSOLIDATED STATEMENT OF CASH FLOWS
20 CONSOLIDATED BALANCE SHEET
21 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND
SCHEDULES TO CONSOLIDATED FINANCIAL STATEMENTS
22 SUMMARY BY QUARTER AND STATEMENT OF ACCOUNTING
AND FINANCIAL POLICIES
23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS
YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA 1999 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $2,763.5 $2,782.7 $2,804.0
Cost of materials sold 2,131.6 2,156.9 2,178.0
Gross profit 631.9 625.8 626.0
Operating expense 504.5 502.5 483.0
Depreciation and amortization 32.1 33.2 27.7
Pension curtailment gain -- -- (8.9)
Gain on sale of assets (1.8) (5.9) (8.9)
-------------------------------
Operating profit 97.1 96.0 133.1
Other expense
Other revenue and expense, including interest income 1.0 20.6 26.7
Interest and other expense on debt (24.2) (33.6) (40.3)
-------------------------------
Income before income taxes, minority interest, discontinued
operations and extraordinary loss 73.9 83.0 119.5
Provision for income taxes (Note 11) 34.8 30.6 46.6
-------------------------------
Income before minority interest, discontinued operations
and extraordinary loss 39.1 52.4 72.9
Minority interest in RT 0.7 4.7 8.4
-------------------------------
Income from continuing operations 38.4 47.7 64.5
Discontinued operations - Inland Steel Company
Income from operations (net of tax of $7.9 and $33.7,
respectively) -- 13.8 54.8
Gain on sale (net of tax of $76.9 in 1998) 17.3 510.8 --
-------------------------------
Income before extraordinary loss 55.7 572.3 119.3
Extraordinary loss on early retirement of debt
(net of tax of $7.1 cr.) -- (21.4) --
-------------------------------
Net income 55.7 550.9 119.3
Dividend requirements for preferred stock (net of
tax benefits related to leveraged ESOP shares) 0.2 6.9 9.1
-------------------------------
Net income applicable to common stock $ 55.5 $ 544.0 $ 110.2
===============================
Per share of common stock
Basic
Income from continuing operations $ 1.56 $ 1.03 $ 1.13
Inland Steel Company - discontinued operations -- 0.35 1.12
- gain on sale 0.71 12.95 --
Extraordinary loss on early retirement of debt -- (0.54) --
-------------------------------
Basic earnings per share $ 2.27 $ 13.79 $ 2.25
===============================
Diluted
Income from continuing operations $ 1.56 $ 0.99 $ 1.08
Inland Steel Company - discontinued operations -- 0.33 1.05
- gain on sale 0.70 12.23 --
Extraordinary loss on early retirement of debt -- (0.51) --
-------------------------------
Diluted earnings per share $ 2.26 $ 13.04 $ 2.13
===============================
Retained earnings (accumulated deficit) at beginning of year $ 491.2 $ (45.6) $ (146.0)
Net income for the year 55.7 550.9 119.3
Dividends declared
Common ($0.20 per share) (4.9) (7.2) (9.8)
Preferred (Note 6) (0.2) (6.9) (9.1)
-------------------------------
Retained earnings (accumulated deficit) at end of year $ 541.8 $ 491.2 $ (45.6)
===============================
</TABLE>
See Notes to Consolidated Financial Statements on pages 22-31.
18
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH
YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS 1999 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 55.7 $ 550.9 $ 119.3
Adjustments to reconcile net income to net cash provided by
(used for) operating activities
Income from discontinued operations -- (13.8) (54.8)
Depreciation and amortization 32.1 33.2 27.7
Deferred income taxes 27.6 2.8 3.9
Deferred employee benefit cost (5.9) 0.4 (11.3)
Stock issued for coverage of employee benefit plans -- 39.4 21.8
Gain from sale of ISC, net of tax (17.3) (510.8) --
Gain from sale of assets (1.8) (5.9) (8.9)
Change in
Receivables (7.7) 21.7 (12.0)
Inventories (8.2) (77.5) (33.8)
Accounts payable (13.7) 7.4 8.4
Other accrued liabilities (28.5) (78.4) (6.4)
Other items 0.9 1.6 3.5
----------------------------------
Net adjustments (22.5) (579.9) (61.9)
----------------------------------
Net cash provided by (used for) operating activities 33.2 (29.0) 57.4
----------------------------------
INVESTING ACTIVITIES
Capital expenditures (31.6) (40.1) (41.3)
Acquisitions (Note 12) (66.0) (7.7) (139.9)
Investments in and advances to joint ventures, net -- (4.2) (8.1)
Proceeds from sales of assets 9.4 919.8 18.2
----------------------------------
Net cash provided by (used for) investing activities (88.2) 867.8 (171.1)
----------------------------------
FINANCING ACTIVITIES
Long-term debt retired -- (202.8) (17.3)
Reduction of debt assumed in acquisitions -- -- (25.3)
Redemption of Series E Preferred Stock -- (81.7) --
Dividends paid (5.1) (17.5) (20.8)
Acquisition of treasury stock -- (839.6) (6.7)
----------------------------------
Net cash used for financing activities (5.1) (1,141.6) (70.1)
----------------------------------
Cash provided by discontinued operations -- 279.4 41.0
----------------------------------
Net decrease in cash and cash equivalents (60.1) (23.4) (142.8)
Cash and cash equivalents - beginning of year 99.6 123.0 265.8
----------------------------------
Cash and cash equivalents - end of year $ 39.5 $ 99.6 $ 123.0
==================================
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for
Interest $ 23.8 $ 32.8 $ 39.3
Income taxes, net 22.5 63.4 27.5
</TABLE>
See Notes to Consolidated Financial Statements on pages 22-31.
19
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
CONSOLIDATED BALANCE SHEET
AT DECEMBER 31
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS 1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 39.5 $ 99.6
Receivables less provision for allowances, claims and
doubtful accounts of $7.2 and $6.9, respectively 307.9 284.5
Inventories (Note 2) 542.7 500.4
Deferred income taxes (Note 11) -- 5.6
----------------------
Total current assets 890.1 890.1
Investments and advances 30.0 34.9
Property, plant and equipment, at cost, less accumulated
depreciation (see details page 21) 273.2 293.6
Deferred income taxes (Note 11) 56.4 76.9
Intangible pension asset (Note 10) -- 4.5
Prepaid pension costs (Note 10) 19.7 --
Excess of cost over net assets acquired, less accumulated
amortization of $24.1 and $19.0, respectively 108.0 78.2
Deferred charges and other assets 9.8 12.8
----------------------
Total assets $1,387.2 $1,391.0
======================
LIABILITIES
Current liabilities
Accounts payable $ 201.2 $ 199.6
Accrued liabilities
Salaries, wages and commissions 25.7 22.9
Taxes 25.7 53.7
Interest on debt 10.2 10.2
Other accrued liabilities 13.6 31.7
Deferred income taxes (Note 11) 3.2 --
----------------------
Total current liabilities 279.6 318.1
Long-term debt (see details page 21 and Note 4) 258.8 257.0
Deferred employee benefits (Note 10) 151.0 193.6
----------------------
Total liabilities 689.4 768.7
----------------------
Minority interest in RT -- 58.7
Commitments & contingencies (Note 14) -- --
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value, 15,000,000 shares authorized for all series,
aggregate liquidation value of $3.4 in 1999 and 1998 (Notes 5 and 6) 0.1 0.1
Common stock, $1.00 par value; authorized - 100,000,000 shares; issued -
50,556,350 shares (Notes 6 through 8) 50.6 50.6
Capital in excess of par value (Note 6) 863.3 897.2
Retained earnings 541.8 491.2
Restricted stock awards (0.4) --
Treasury stock at cost - Common stock of 25,782,759 shares in 1999 and
28,799,249 shares in 1998 (754.7) (845.3)
Accumulated other comprehensive income (Note 6) (2.9) (30.2)
----------------------
Total stockholders' equity 697.8 563.6
----------------------
Total liabilities, minority interest and stockholders' equity $1,387.2 $1,391.0
======================
</TABLE>
See Notes to Consolidated Financial Statements on pages 22-31.
20
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS 1999 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $ 55.7 $ 550.9 $ 119.3
Other comprehensive income:
Foreign currency translation adjustments 0.4 -- --
Minimum pension liability adjustment, net of tax of $18.3
and $18.3 cr., respectively 26.9 (26.9) --
----------------------------------
Comprehensive income $ 83.0 $ 524.0 $ 119.3
==================================
</TABLE>
SCHEDULES TO CONSOLIDATED FINANCIAL STATEMENTS
AT DECEMBER 31
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements $ 29.0 $ 28.8
Buildings, machinery and equipment 545.8 549.6
Transportation equipment 4.2 5.4
----------------------
Total 579.0 583.8
Less -
Accumulated depreciation 305.8 290.2
----------------------
Net property, plant and equipment $ 273.2 $ 293.6
======================
LONG-TERM DEBT
Ryerson Tull, Inc.
Notes, 8.5% due July 15, 2001 $ 151.0 $ 150.0
Notes, 9.125% due July 15, 2006 100.8 100.0
Joseph T. Ryerson & Son, Inc.
Obligation for Industrial Revenue Bond with floating rate,
set weekly based on 13-week Treasury bills, due November 1, 2007 7.0 7.0
----------------------
Total long-term debt $ 258.8 $ 257.0
======================
</TABLE>
See Notes to Consolidated Financial Statements on pages 22-31.
21
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
SUMMARY BY QUARTER (UNAUDITED)
<TABLE>
<CAPTION>
1998
- ----------------------------------------------------------------------------------------------------------
Dollars in millions, EXCEPT PER SHARE DATA 1Q 2Q 3Q 4Q YEAR
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 740.8 $ 724.9 $ 688.5 $ 628.5 $2,782.7
Gross profit 167.3 166.7 152.4 139.4 625.8
Income from continuing
operations before taxes 30.4 29.1 16.6 4.9 83.0
Net income 21.8 28.4 489.7+ 11.0 550.9+
---------------------------------------------------------
Earnings per common share
Basic $ 0.40 $ 0.53 $ 12.72 $ 0.47 $ 13.79*
Diluted 0.38 0.51 12.02 0.46 13.04*
---------------------------------------------------------
Market price per common share
High $ 29 1/2 $ 30 1/2 $29 3/4 $ 22 $ 30 1/2
Low 17 1/16 26 17 7/8 14 1/8 14 1/8
Close 27 5/8 28 3/16 21 3/4 16 7/8 16 7/8
</TABLE>
<TABLE>
<CAPTION>
1999
- --------------------------------------------------------------------------------------------------------------
Dollars in millions, EXCEPT PER SHARE DATA 1Q 2Q 3Q 4Q YEAR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 691.4 $ 708.1 $ 686.9 $ 677.1 $2,763.5
Gross profit 157.6 165.0 156.9 152.4 631.9
Income from continuing
operations before taxes 19.6 19.6 17.7 17.0 73.9
Net income 9.8 27.6+ 9.6 8.7 55.7+
-------------------------------------------------------------
Earnings per common share
Basic $ 0.42 $ 1.10 $ 0.38 $ 0.35 $ 2.27*
Diluted 0.42 1.10 0.38 0.34 2.26*
-------------------------------------------------------------
Market price per common share
High $19 13/16 $ 25 1/16 $23 3/4 $ 24 3/4 $25 1/16
Low 14 14 11/16 18 7/8 18 14
Close 14 11/16 22 9/16 23 1/8 19 7/16 19 7/16
</TABLE>
+ Includes gain on sale of Inland Steel Company.
* Amounts for the quarters do not total to the amount reported for the year due
to differences in the average numbers of shares outstanding.
STATEMENT OF ACCOUNTING AND FINANCIAL POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include all domestic and foreign
subsidiaries that are more than 50-percent-owned and controlled. The Company's
investments in less than majority-owned joint ventures are accounted for under
the equity method. Minority interests represent outside shareholders' 13 percent
interest in RT prior to February 25, 1999.
REVENUE RECOGNITION
Revenue is recognized upon shipment of goods to customers.
PER SHARE RESULTS
Basic per share results are based on the weighted average number of common
shares outstanding and take into account the dividend requirements of preferred
stock, net of tax benefits related to the leveraged Series E ESOP Convertible
Preferred shares. Diluted per share results reflect the dilutive effect of
outstanding stock options, the further dilutive effect of the assumed conversion
into common stock of the outstanding shares of convertible preferred stock, and
the elimination of the related preferred stock dividends. Also reflected in
diluted earnings per common share is an adjustment for the additional ESOP
contribution, net of tax benefits, that would be necessary to meet debt service
requirements that would arise upon conversion of the leveraged Series E ESOP
Convertible Preferred Stock, due to the excess of the preferred dividend over
the common dividend. (See Note 5 for additional information regarding the ESOP.)
CASH EQUIVALENTS
Cash equivalents reflected in the financial statements are highly liquid, short-
term investments with maturities of three months or less that are an integral
part of the Company's cash management portfolio.
INVENTORY VALUATION
Inventories are valued at cost, which is not in excess of market. Cost is
determined by the last-in, first-out ("LIFO") method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is depreciated, for financial reporting purposes,
using the straight-line method over the estimated useful lives of the assets.
The provision for depreciation is based on the estimated useful lives of the
assets (45 years for buildings and 14.5 years for machinery and equipment).
Expenditures for normal repairs and maintenance are charged against income in
the period incurred.
EXCESS OF COST OVER NET ASSETS ACQUIRED
The excess of cost over the fair value of net assets of businesses acquired is
being amortized over 25-year periods.
LONG-LIVED ASSETS
Long-lived assets and certain identifiable intangibles held and used by the
Company are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
Company estimates the future cash flows expected to result from the use of the
asset and its eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying amount of
the asset, an impairment is recognized.
STOCK-BASED COMPENSATION
Financial Accounting Standards Board ("FASB") Statement No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of the grant
over the amount an employee must pay to acquire the stock. Compensation cost for
stock appreciation rights and performance equity units is recorded annually
based on the quoted market price of the Company's stock at the end of the
period.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements and related
notes to financial statements. Changes in such estimates may affect amounts
reported in future periods.
RECLASSIFICATION
Certain items previously reported have been reclassified to conform with the
1999 presentation.
22
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Reorganization and Recapitalization
On February 25, 1999, the Company and its majority-owned subsidiary Ryerson
Tull, Inc. ("RT") merged through the process of converting each share of RT
Class A common stock into 0.61 share of Company common stock. After the merger,
the Company changed its name from Inland Steel Industries, Inc. to Ryerson Tull,
Inc. All references to RT in these financial statements refer to the pre-merger,
majority-owned subsidiary of the Company.
The merger was accounted for as a purchase for financial reporting
purposes. Under the purchase method of accounting, the assets and liabilities of
RT in proportion to the 13% minority interest were recorded at their fair values
at the effective time of the merger.
On July 16, 1998, Ispat International N.V. ("Ispat") acquired Inland Steel
Company ("ISC"), the Company's wholly owned subsidiary that constituted the
steel manufacturing and related operations segment of the Company's consolidated
operations, pursuant to an agreement and plan of merger dated May 27, 1998, as
amended as of July 16, 1998 (the "Merger Agreement"), among the Company, ISC,
Ispat and Inland Merger Sub, Inc. (an Ispat subsidiary). Pursuant to the merger,
the Company received $1.1 billion in cash in exchange for the outstanding common
stock and preferred stock of ISC and repayment of intercompany debt of ISC held
by the Company. The results of operations of ISC have been segregated from the
results of continuing operations and reported as a separate item on the
statement of operations. The Company's primary business is currently metals
distribution and processing.
In the second quarter of 1999, the Company reported a favorable $17.3
million adjustment to taxes for the gain on the sale of ISC.
ISC's revenues, including intercompany sales, were $1,310.0 million through
July 16, 1998, the date of the ISC/Ispat Transaction, and $2,467.5 million in
1997.
Subsequent to the completion of the ISC/Ispat Transaction, the Company
undertook a Dutch auction self-tender program that resulted in its repurchase of
approximately 26.5 million shares at $30 per share in 1998. Additionally, in
1998, 1.8 million common shares were repurchased in the open market for
approximately $35 million following the completion of the self-tender program.
During the third quarter of 1998, the Company elected to prepay its $100
million Subordinated Voting Note held by an affiliate of Nippon Steel
Corporation ("NSC"). The Company recognized an after-tax loss on the prepayment
of the debt of $11.2 million.
During the fourth quarter of 1998, the Company redeemed all remaining
outstanding shares of its Series E Convertible Preferred Stock (Note 5). The
ESOP Trustee repaid all existing notes within the Employee Stock Ownership Plan
("ESOP") Trust. This termination included the prepayment of ESOP Notes upon
which the Company recognized an after-tax loss of $10.2 million.
Note 2: Inventories
Inventories were classified on December 31 as follows:
- -------------------------------------------------------
DOLLARS IN MILLIONS 1999 1998
- -------------------------------------------------------
In process and finished products $ 542.4 $ 500.0
Supplies 0.3 0.4
------------------
Total $ 542.7 $ 500.4
Replacement costs for the LIFO inventories exceeded LIFO values by approximately
$63 million and $71 million on December 31, 1999 and 1998, respectively.
Note 3: Borrowing Arrangements
At December 31, 1999, the Company had available an unused credit facility
totaling $250 million. The facility, which extends to September 5, 2002,
requires compliance with various financial covenants including minimum net worth
and leverage ratios. In the fourth quarter of 1998, the committed banks waived
certain provisions of the credit agreement to facilitate the merger of RT with
the Company.
Note 4: Long-Term Debt
In July 1996, RT sold $150 million of 8.5 percent Notes, due July 15, 2001, and
$100 million of 9.125 percent Notes, due July 15, 2006, in a public offering.
The indenture under which the Notes were issued contains covenants limiting,
among other things, the creation of secured indebtedness, sale and leaseback
transactions, the repurchase of capital stock, transactions with affiliates, and
mergers, consolidations and certain sales of assets. On February 26, 1999, the
indenture trustee agreed to a supplement to the indenture agreement allowing the
Company to succeed its subsidiary, RT, as obligee for the Notes.
On February 1, 2000, the Company's subsidiary, Joseph T. Ryerson & Son,
Inc., redeemed its $7.0 million Industrial Revenue Bond obligation. As a result,
this subsidiary is no longer required to maintain specified amounts of working
capital and net worth and to meet leverage tests as outlined in the loan
agreement.
Maturity of long-term debt due within five years is $150 million in 2001.
See Note 14 regarding commitments and contingencies for other scheduled
payments.
Note 5: Employee Stock Ownership Plan
The Company sponsored a 401(k) plan through which eligible salaried employees
could defer a portion of their salary. Through December 31, 1998, the Company
matched the first five percent of each eligible participant's salary
contributed, subject to certain IRS limitations. In July 1989, the Board of
Directors amended this plan to include a leveraged ESOP. The ESOP Trust
purchased 3.1 million newly issued shares of Series E ESOP Convertible Preferred
Stock from the Company with the proceeds of loans totaling $150 million. As a
result, effective January 1, 1990, the Company's matching contribution in the
401(k) plan was made in shares of Series E ESOP Convertible Preferred Stock
provided principally by the Company's ESOP, supplemented as needed by newly
issued shares. The Company accounted for its ESOP in accordance with American
Institute of Certified Public Accountants Statement of Position 76-3.
The Company made semiannual contributions to the ESOP equal to the ESOP
Trust's debt service less dividends on leveraged shares (shares purchased by the
ESOP Trust in July 1989) received by the ESOP Trust. All dividends received by
the ESOP Trust were used to pay debt service. Dividends on Series E ESOP
Convertible Preferred Stock were recorded when declared as reductions to
retained earnings, net of applicable tax benefits on unallocated shares.
Dividends on allocated leveraged shares were replaced with additional Series E
ESOP Convertible Preferred shares. Dividends on unallocated leveraged shares
served to reduce interest expense recognized by the Company.
Effective January 1, 1998, salaried employees at RT no longer participated
in the above-described plan. At that date, RT established a new savings plan to
which RT employees' account balances, including Series E ESOP Convertible
Preferred shares, were transferred. The employer matching contribution in the
savings plan
23
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
was made in cash, and such participants no longer received shares, except for
dividend replacement shares which continued to be allocated to their accounts
consistent with plan provisions. Compensation expense recognized at RT was not
materially impacted as a result of the change in savings plans.
Upon completion of the ISC/Ispat Transaction, ISC salaried employees no
longer participated in the ESOP. The Company redeemed 1.1 million shares of
Series E Preferred Stock held in the 401(k) plan accounts of ISC employees prior
to the transfer of account balances to a savings plan sponsored by Ispat.
With ISC and RT employees no longer participating, there were very few
participants remaining in this 401(k) plan. During the fourth quarter of 1998,
the Company requested that the plan trustee repay all existing Notes of the ESOP
Trust. The Company redeemed all outstanding Series E Preferred Stock. The Trust
used the proceeds of unallocated shares and additional contributions from the
Company to repay the Notes. The Company was required to recognize an
extraordinary loss during the fourth quarter as a result of the early retirement
of this debt (Note 1). At December 31, 1998, the Company's 401(k) plan merged
with RT's savings plan.
In 1998, the ESOP Trust received $5.2 million in dividends and $8.2 million
in contributions, and in 1997, received $10.6 million in dividends and $8.1
million in contributions from the Company to make required scheduled principal
and interest payments.
As principal and interest payments were made, Series E ESOP Convertible
Preferred shares were made available for allocation based on the proportion of
current payments to the total of current plus future payments. As shares were
allocated, the Company recorded compensation expense equal to the original
stated value of the shares of Series E ESOP Convertible Preferred Stock
allocated to the participants during the period. Compensation expense related to
the ESOP recognized by the Company totaled $3.3 million in 1998 and $8.4 million
in 1997.
Interest expense was recognized as it was incurred by the ESOP Trust.
Interest expense incurred by the ESOP Trust totaled $6.6 million in 1998 and
$8.6 million in 1997.
Note 6: Capital Stock and Accumulated Other Comprehensive Income
On December 31, 1999, 4,026,036 shares of common stock remained reserved for
issuance under the Company's various stock plans and upon conversion of shares
of preferred stock.
The Series A $2.40 Cumulative Convertible Preferred Stock, $1.00 par value
per share ("Series A Preferred Stock"), is convertible into common stock at the
rate of one share of common stock for each share of Series A Preferred Stock and
is redeemable, at the Company's option, at $44 per share plus any accrued and
unpaid dividends. Each such share is entitled to one vote and generally votes
together with holders of common stocks as one class.
Shares of Series E Preferred Stock, $1.00 par value per share, entitled the
holder to cumulative annual dividends of $3.523 per share, payable semiannually,
and to 1.25 votes per share. Shares of Series E ESOP Convertible Preferred Stock
were convertible into the Company's common stock on a one-for-one basis. During
the fourth quarter of 1998, all outstanding shares of Series E Preferred Stock
were redeemed.
The following table details changes in capital accounts:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Preferred Stock
Common Stock Treasury Stock Series A
- --------------------------------------------------------------------------------------------------------------------
SHARES IN THOUSANDS AND
DOLLARS IN MILLIONS Shares Dollars Shares Dollars Shares Dollars
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 50,556 $50.6 (1,648) $ (44.2) 94 $0.1
Acquisition of treasury stock -- -- (299) (6.7) -- --
Issued under employee benefit plans -- -- 415 11.0 -- --
Redemption of Series E
Preferred Stock -- -- -- -- -- --
Other changes -- -- (26) (0.6) -- --
--------------------------------------------------------------------
Balance at December 31, 1997 50,556 50.6 (1,558) (40.5) 94 0.1
Tender offer buy-back -- -- (26,485) (797.7) -- --
Acquisition of treasury stock -- -- (2,089) (41.9) -- --
Issued under employee benefit plans -- -- 1,395 36.7 -- --
Redemption of Series E Preferred -- -- -- -- -- --
Conversion of Series A
Preferred stock -- -- 12 0.3 (12) --
Minimum pension liability
(net of tax of $18.3 cr.) -- -- -- -- -- --
Other changes -- -- (74) (2.2) (4) --
--------------------------------------------------------------------
Balance at December 31, 1998 50,556 50.6 (28,799) (845.3) 78 0.1
Conversion of RT Class A Common -- -- 3,265 95.6 -- --
Acquisition of treasury stock -- -- (264) (5.4) -- --
Issued under employee stock plans -- -- 6 0.2 -- --
Minimum pension liability
(net of tax of $18.3) -- -- -- -- -- --
Foreign currency translation -- -- -- -- -- --
Other changes -- -- 9 0.2 -- --
--------------------------------------------------------------------
Balance at December 31, 1999 50,556 $50.6 (25,783) $(754.7) 78 $0.1
====================================================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Capital in Accumulated Other
Preferred Stock Excess of Comprehensive
Series E Par Value Income
- --------------------------------------------------------------------------------------------------------------------
Foreign Minimum
SHARES IN THOUSANDS AND Currency Pension
DOLLARS IN MILLIONS Shares Dollars Dollars Translation Liability
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 3,081 $ 3.1 $1,040.2 $ (3.3) $--
Acquisition of treasury stock -- -- -- -- --
Issued under employee benefit plans 58 -- -- -- --
Redemption of Series E
Preferred Stock (124) (0.1) (6.0) -- --
Other changes -- -- (1.7) -- --
-----------------------------------------------------------------------
Balance at December 31, 1997 3,015 3.0 1,032.5 (3.3)
Tender offer buy-back -- -- -- -- --
Acquisition of treasury stock -- -- -- -- --
Issued under employee benefit plans 10 -- (2.5) -- --
Redemption of Series E Preferred (3,025) (3.0) (144.0) -- --
Conversion of Series A
Preferred stock -- -- (0.4) -- --
Minimum pension liability
(net of tax of $18.3 cr.) -- -- -- -- (26.9)
Other changes -- -- 11.6 -- --
-----------------------------------------------------------------------
Balance at December 31, 1998 -- -- 897.2 (3.3) (26.9)
Conversion of RT Class A Common -- -- (33.7) -- --
Acquisition of treasury stock -- -- -- -- --
Issued under employee stock plans -- -- (0.1) -- --
Minimum pension liability
(net of tax of $18.3) -- -- -- -- 26.9
Foreign currency translation -- -- -- 0.4 --
Other changes -- -- (0.1) -- --
-----------------------------------------------------------------------
Balance at December 31, 1999 -- $ -- $ 863.3 $ (2.9) $--
=======================================================================
</TABLE>
24
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
Note 7: Stock Option Plans
The Company has adopted the disclosure-only provisions of FASB Statement No.
123, "Accounting for Stock-Based Compensation." Accordingly, no compensation
cost has been recognized for the stock option plans. Had compensation cost for
the option plans been determined based on the fair value at the grant date for
awards in 1999, 1998 and 1997 consistent with the provisions of FASB Statement
No. 123, the Company's net income and earnings per share would have been reduced
to the pro forma amounts indicated below:
- -------------------------------------------------------------------
DOLLARS IN MILLIONS
(EXCEPT PER SHARE DATA) 1999 1998 1997
- -------------------------------------------------------------------
Net income - as reported $ 55.7 $ 550.9 $ 119.3
Net income - pro forma $ 53.0 $ 547.0 $ 116.0
Earnings per share - as reported $ 2.27 $ 13.79 $ 2.25
Earnings per share - pro forma $ 2.16 $ 13.69 $ 2.18
----------------------------
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1999: dividend yield of 1.00%; expected
volatility of 41.93%; risk-free interest rate of 5.27%; and expected term of 5
years.
In February 1999, after the merger of the Company and RT, the Compensation
Committee of the Board of Directors of the Company authorized the substitution
of Company common stock options for RT common stock options. As the exercise
price of substituted options exceeded the then current market price of Company
stock and all other terms of the options remained unchanged, there was no
material increase in value to the employees resulting from the substitution and
no material increase in cost to the Company. 1,005,375 of Company stock options
were substituted for 1,648,297 RT stock options. Options substituted retain
their originally granted vesting schedules. During 1998 and 1997, RT granted
options to employees under a separate plan. 87 percent of the compensation cost
for these options, had they been determined on the fair value at the grant date
consistent with the provisions of FASB Statement No. 123, is included in the
above pro forma numbers.
Company Plan
The 1999 Incentive Stock Plan, approved by stockholders on April 28, 1999,
provides for the issuance, pursuant to options and other awards, of 1.0 million
shares of common stock plus shares available for issuance under the 1995 and
1992 Incentive Stock Plans, to officers and other key employees. As of December
31, 1999, a total of 1,694,197 shares were available for future grants under the
Plan. Options remain outstanding and exercisable under the 1995, 1992 and 1988
Incentive Stock Plans; however, no further options may be granted under these
plans after April 28, 1999. During 1999, options were granted to 12 executive
officers under the 1995 Plan and two executive officers under the 1999 Plan.
Under the various plans, the per share option exercise price may not be less
than 100 percent of the fair market value per share on the date of grant.
Generally, options become exercisable over a three year period with one-third
becoming fully exercisable at the end of each year. Options expire ten years
from the date of grant. The following summarizes the status of options under the
plans for the periods indicated:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Weighted
Option Exercise Average
Number of Price or Range Exercise
Shares Per Share Price
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Options (granted and unexercised)
at December 31, 1996
(1,610,246 exercisable) 2,703,946 $21.38 - 39.75 $27.72
Granted 34,300 24.38 24.38
Exercised (17,400) 21.38 - 26.13 21.78
Forfeited (97,500) 22.69 - 39.75 27.46
Expired (38,110) 25.50 - 39.75 32.65
------------------------------------------
Options (granted and unexercised)
at December 31, 1997
(1,978,823 exercisable) 2,585,236 21.38 - 39.75 27.72
Granted 205,000 18.16 - 19.22 18.83
Exercised (1,214,950) 19.22 - 28.50 24.26
Forfeited (9,700) 24.69 - 33.75 26.49
Expired (210,104) 25.50 - 39.75 35.53
------------------------------------------
Options (granted and unexercised)
at December 31, 1998
(1,280,482 exercisable) 1,355,482 18.16 - 39.75 28.14
Granted 433,500 16.03 - 24.81 16.73
Exercised -- -- --
Forfeited (171,797) 17.13 - 39.75 25.77
Expired (690,524) 21.38 - 53.49 30.71
Substituted for RT options 1,005,375 21.93 - 53.49 30.87
------------------------------------------
Options (granted and unexercised)
at December 31, 1999
(1,262,170 exercisable) 1,932,036 16.03 - 48.44 26.29
==========================================
</TABLE>
The weighted-average fair value of options granted during 1999 was $6.91.
25
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
The following table summarizes information about fixed-price stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
- ---------------------------------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Range of Number of Average Remaining Average Number of Average
Exercise Prices Shares Contractual Life Exercise Price Shares Exercise Price
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$21.38 to 28.76 8,466 1 year 28.18 8,466 28.18
33.75 to 45.42 62,366 1 year 39.11 62,366 39.11
25.50 to 34.31 49,352 2 years 30.43 49,352 30.43
26.13 to 35.16 94,581 3 years 30.92 94,581 30.92
30.88 163,200 4 years 30.88 163,200 30.88
41.55 to 48.44 85,420 4 years 42.75 85,420 42.75
28.50 to 38.35 189,394 5 years 32.71 189,394 32.71
22.69 to 33.22 319,125 6 years 31.20 319,125 31.20
23.05 to 25.82 181,343 7 years 23.12 127,643 23.12
19.22 to 21.93 256,809 8 years 21.61 106,987 21.17
32.07 17,080 8 years 32.07 5,636 32.07
18.16 75,000 9 years 18.16 50,000 18.16
16.03 to 24.81 429,900 10 years 16.72 -- N/A
------------------------------------------------------------------------------------
</TABLE>
Stock appreciation rights ("SARs") may also be granted under the 1999 Plan
and were granted under the 1988 Plan with respect to shares subject to
outstanding options. No SAR has been granted since 1990. SAR compensation
expense recorded by the Company was not material for any of the last three
years.
The 1999 Plan also provides, as did the 1995, 1992 and 1988 Plans, for the
granting of restricted stock and performance awards to officers and other key
employees. During 1999, restricted stock awards totaling 8,500 shares and
performance awards totaling 55,000 shares were granted. Also during 1999, 12,964
shares of previously granted restricted stock awards vested while 1,372 shares
of restricted stock awards were forfeited, 33,132 shares of restricted stock
were substituted for RT restricted stock, and 2,848 shares were issued to
recipients of performance awards previously granted while 45,413 shares subject
to performance awards were forfeited. During the first half of 1998, 10
restricted stock awards totaling 30,000 shares were granted. At the effective
time of the ISC/Ispat Transaction, 55,000 shares of restricted stock awards,
which represented all unvested restricted stock awards and included the 1998
awards, vested. In addition, 276,760 performance shares were issued while 9,020
performance shares were forfeited. During 1997, 139 performance awards were
granted covering 571,560 shares of stock and the equivalent of an additional
294,440 shares of stock payable in either stock or cash. None of these
performance awards were paid in 1997, and 285,780 shares were forfeited when
performance goals were not achieved. Also during 1997, no restricted stock
awards were granted; however, 59,500 shares of previously granted restricted
stock awards vested while 5,600 shares of restricted stock were forfeited, and
6,618 shares were issued to recipients of performance awards previously granted
while no shares were forfeited.
At December 31, 1999, there were 27,753 shares of restricted stock granted,
but not vested, and 21,784 shares from performance awards earned, but not
vested.
Until July 31, 1998, the Company also sponsored an employee stock purchase
plan under which employees could utilize payroll deductions to purchase stock at
the end of six-month periods at a price equal to 90 percent of the fair market
value price on the last day of the period. In 1998 and 1997, employees received
stock with a total value that was approximately $60,000 and $100,000,
respectively, greater than the price paid for the stock issued. During the third
quarter of 1998, the Company elected to terminate the employee stock purchase
plan.
Director Plan
The Ryerson Tull Directors' 1999 Stock Option Plan (the "Directors' Option
Plan") provides that each person who is a non-employee director as of the close
of each annual meeting, beginning with the 1999 annual meeting, will be awarded
a stock option for shares having a value of $20,000 (based on the Black-Scholes
option pricing model) and an exercise price equal to the fair market value of
the Company's common stock on the date of grant. Individuals who become non-
employee directors other than at an annual meeting are, at the time of their
election or appointment as a non-employee director, awarded stock options for
shares having a value that is prorated to reflect a partial year's service. The
options awarded under the Directors' Option Plan are exercisable 50 percent
after six months and 100 percent after one year of the grant date. The options
expire 10 years after the date of grant. A total of 300,000 shares of the
Company's common stock are reserved for issuance under the Directors' Option
Plan.
On April 28, 1999, 7 directors were granted a total of 13,090 option shares
at an exercise price of $21.84 per share. Half of these option shares vested
after six months with the remaining option shares vesting at the time of the
2000 Annual Meeting of Stockholders.
RT Plan
The Ryerson Tull 1996 Incentive Stock Plan (the "RT Plan") provided for the
issuance, pursuant to options and other awards, of 2.3 million shares of RT
common stock to officers and other key employees. Under this plan, the per share
option exercise price may not be less than 100 percent of the fair market value
per share on the date of grant. With the completion of the merger of the Company
and RT on February 25, 1999, no further shares were or will be issued under the
RT Plan. The following summarizes the status of RT options under the RT Plan for
the periods indicated:
26
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Weighted
Option Exercise Average
Number of Price or Range Exercise
Shares Per Share Price
==========================================================================================
<S> <C> <C> <C>
Substituted for Company options 1,041,949 $17.55 - 32.63 $22.79
Forfeited (8,768) 20.26 - 25.34 21.50
------------------------------------------
Options (granted and unexercised)
at December 31, 1996
(511,359 exercisable) 1,033,181 17.55 - 32.63 22.80
Granted 324,500 14.06 - 15.75 14.10
Expired (4,625) 25.50 25.50
Forfeited (20,971) 14.06 - 32.63 23.15
------------------------------------------
Options (granted and unexercised)
at December 31, 1997
(713,514 exercisable) 1,332,085 14.06 - 32.63 20.67
Granted 421,500 13.38 - 19.56 13.79
Exercised (31,469) 14.06 - 20.93 17.86
Expired (20,881) 30.99 30.99
Forfeited (48,015) 13.38 - 32.63 20.98
------------------------------------------
Options (granted and unexercised)
at December 31, 1998
(920,176 exercisable) 1,653,220 13.38 - 32.63 18.83
Forfeited (4,923) 13.38 - 20.26 17.61
Substituted by Company
options (1,648,297) 13.38 - 32.63 18.83
Options at December 31, 1999 -- -- --
------------------------------------------
</TABLE>
The RT Plan provided that SARs may be granted with substantially the same
terms as the Company Plan. In 1998, SARs were granted with respect to 90,000
shares payable in cash, except under limited circumstances, at the rate of one
SAR for each share subject to option.
The Plan provided for the granting of restricted stock and performance
awards to officers and other key employees. During 1998, restricted stock awards
totaling 31,750 shares were granted 46 key employees. Performance awards
totaling 91,800 shares were granted while shares totaling 81,911 were forfeited
when performance thresholds were not met. Also during 1998, 13,267 shares of
previously granted restricted stock awards vested while 2,500 shares of
restricted stock were forfeited. During 1997, restricted stock awards totaling
5,500 shares were granted to three executives and 94 performance awards totaling
90,900 shares were granted. Performance shares totaling 63,885 were forfeited
when performance thresholds were not met. Also during 1997, 23,050 shares of
previously granted restricted stock awards vested while 1,218 shares of
restricted stock were forfeited.
Upon completion of the merger of the Company and RT, each RT option, SAR
and restricted stock share was substituted by 0.61 share of Company options and
restricted stock. In addition, the exercise price of each option was adjusted by
dividing the pre-merger exercise price per share of each RT option by 0.61.
Note 8: Stockholder Rights Plan
Pursuant to a stockholder rights plan, on November 25, 1997, the Company's Board
of Directors declared a dividend distribution, payable to stockholders of record
on December 17, 1997, of one preferred stock purchase right (a "Right") for each
outstanding share of the Company's common stock. The Rights will expire December
17, 2007. On September 22, 1999, the stockholder rights plan was amended. Under
this amended Plan, the Rights will separate from the common stock and a
distribution will occur the earlier of (i) ten days following an announcement
that a person or group has acquired beneficial ownership of 10% or more of the
outstanding common stock or the date a person enters an agreement providing for
certain acquisition transactions or (ii) ten business days following publication
of a tender or exchange offer that would result in any person or group
beneficially owning 10% or more of the common stock (or a later date as the
Board determines). Any person that publicly announced prior to September 22,
1999, that they hold 10% or more of the outstanding common stock ("Existing 10%
Stockholder") will not cause a distribution to occur unless that person acquires
additional common stock resulting in ownership of 15% or more.
In the event that any person or group acquires 10% or more of the
outstanding shares of common stock (15% in the case of an Existing 10%
Stockholder), each Right will entitle the holder, other than such acquiring
person or group, to purchase that number of shares of common stock of the
Company having a market value of twice the exercise price of the Right. At any
time thereafter, if the Company consummates certain business combination
transactions or sells substantially all of its assets, each Right will entitle
the holder, other than the person or group acquiring 10% or more of the
outstanding shares of common stock, to purchase that number of shares of the
surviving company stock which at the time of the transaction would have a market
value of twice the exercise price of the Right. The preceding sentences will not
apply to (i) persons who acquire common stock pursuant to an offer for all
outstanding shares of common stock which the independent directors determine to
be fair to and otherwise in the best interest of the Company and its
stockholders after receiving advice from one or more investment banking firms
and (ii) certain persons owning less than 15% of the outstanding common stock
(20% of the outstanding common stock in the case of an Existing 10% Stockholder)
who report their ownership on Schedule 13G under the Securities Exchange Act of
1934 or on Schedule 13D under the Exchange Act, provided that they do not state
any intention to or reserve the right to control or influence the Company and
such persons certify that they acquired their shares inadvertently and will not
acquire any additional shares of common stock.
The Rights will not have voting rights and, subject to certain exceptions,
will be redeemable at the option of the Company at a price of one cent per Right
(subject to adjustments) at any time prior to the close of business on the
fifteenth day following public announcement that a person or group has acquired
beneficial ownership of 10% or more of the outstanding common stock or the date
a person enters an agreement providing for certain acquisition transactions. Any
Rights held by a person triggering a distribution date will become null and
void. The Board may exchange all or part of the Rights, except for those
acquired by the person or group acquiring 10% or more of the outstanding shares
of common stock, for shares of common or preferred stock of the Company. Until a
Right is exercised, the holder will have no rights as a stockholder. While the
distribution of the Rights will not be taxable to stockholders or the Company,
stockholders may recognize taxable income if the rights become exercisable.
Note 9: Derivatives and Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value.
Derivatives
The Company has only limited involvement with derivative financial instruments
and does not use them for speculative or trading purposes.
27
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
Cash and Cash Equivalents
The carrying amount of cash equivalents approximates fair value because of the
short maturity of those instruments.
Long-Term Debt
The estimated fair value of the Company's long-term debt and the current
portions thereof using quoted market prices of Company debt securities recently
traded and market-based prices of similar securities for those securities not
recently traded was $264 million at December 31, 1999, and $282 million at
December 31, 1998, as compared with the carrying value of $259 million and $257
million at year-end 1999 and 1998, respectively.
Note 10: Retirement Benefits
Prior to January 1, 1998, the Company's non-contributory defined benefit pension
plans covered substantially all Company employees, retirees and their
beneficiaries. Benefits provided participants of the plans were based on final
pay and years of service for all salaried employees and certain wage employees,
and years of service and a fixed rate for all other wage employees.
Effective April 30, 1996, that portion of the Company's Plan covering RT's
current and former employees was separated and became the Ryerson Tull Pension
Plan, a new and separate plan sponsored by RT, which covers certain employees,
retirees and their beneficiaries of RT and its subsidiaries. The Ryerson Tull
Pension Plan is a noncontributory defined benefit plan that provides benefits
based on pay and years of service for salaried employees, and years of service
and a fixed rate or a rate determined by job grade for all wage employees,
including employees under collective bargaining agreements.
Effective January 1, 1998, RT froze the benefits accrued under its defined
benefit pension plan for certain salaried employees, and instituted a defined
contribution plan. For 1999 and 1998, expense recognized for such defined
contribution plan was $5.3 million and $4.6 million, respectively. Salaried
employees vested in their benefits accrued under the defined benefit plan at
December 31, 1997, are entitled to those benefits upon retirement. Certain
transition rules have been established for those salaried employees meeting
specified age and service requirements. The change in pension plan for salaried
employees resulted in a one-time pretax curtailment gain of $8.9 million in
1997.
As part of the ISC/Ispat Transaction, the Inland Steel Industries Pension Plan
(the "ISC Pension Plan"), in which employees of both ISC and the Company
participated, was transferred to ISC. The Company's remaining employees that
formerly had participated in the ISC Pension Plan became participants in the
Ryerson Tull Pension Plan.
The tables included below provide reconciliations of benefit obligations and
fair value of plan assets of the Company plans as well as the funded status and
components of net periodic benefit costs for each period related to each plan.
The assumptions used to determine the information below related to pension
benefits and other post-retirement benefits, primarily retired health care, were
as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
1999 1998
- ----------------------------------------------------------------
<S> <C> <C>
Discount rate for calculating obligations 7.75% 6.75%
Discount rate for calculating net
periodic benefit cost 6.75 7.50
Expected rate of return on plan assets 9.50 9.50
Rate of compensation increase 4.00 4.00
</TABLE>
The data in the following tables pertain to continuing operations only.
<TABLE>
<CAPTION>
Years ended September 30
- ----------------------------------------------------------------------------
Pension Benefits Other Benefits
----------------------------------
DOLLARS IN MILLIONS 1999 1998 1999 1998
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in Benefit Obligation
Benefit obligation at
beginning of year $ 336 $ 283 $ 105 $ 104
Service cost 6 4 2 2
Interest cost 22 21 7 8
Plan amendments 3 -- -- --
Actuarial (gain)/loss (32) 38 (3) (5)
Business combination -- 10 -- 1
Curtailment 1 -- 1 --
Benefits paid (21) (20) (6) (5)
- ----------------------------------------------------------------------------
Benefit obligation at end of year $ 315 $ 336 $ 106 $ 105
- ----------------------------------------------------------------------------
Accumulated benefit
obligation at end of year $ 307 $ 324 N/A N/A
============================================================================
Change in Plan Assets
Plan assets at fair value at
beginning of year $ 286 $ 293 -- --
Actual return on plan assets 49 (2) -- --
Employer contribution 11 6 -- --
Business combination -- 9 -- --
Benefits paid (21) (20) -- --
- ----------------------------------------------------------------------------
Plan assets at fair value at
end of year $ 325 $ 286 -- --
============================================================================
Reconciliation of Prepaid
(Accrued) and Total Amount
Recognized
Funded status $ 10 $ (50) $(106) $(105)
Unrecognized net (gain)/loss 4 64 (21) (18)
Unrecognized prior
service cost 6 5 (18) (24)
- ----------------------------------------------------------------------------
Prepaid (accrued) benefit
cost at September 30 20 19 (145) (147)
Change in account,
October-December -- -- 1 1
- ----------------------------------------------------------------------------
Net amount recognized at
December 31 $ 20 $ 19 $(144) $(146)
============================================================================
Amounts recognized in statement
of financial position consist of:
Prepaid (accrued) benefit cost $ 20 $ -- $(144) $(146)
Accrued benefit liability -- (38) -- --
Intangible asset -- 5 -- --
Accumulated other
comprehensive income -- 52 -- --
- ----------------------------------------------------------------------------
Net amount recognized $ 20 $ 19 $(144) $(146)
============================================================================
</TABLE>
28
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
For measurement purposes, the annual rate of increase in the per capita cost
of covered health care benefits was 4.5 percent, the level at which it is
expected to remain.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Pension Benefits Other Benefits
----------------------------------
DOLLARS IN MILLIONS 1999 1998 1999 1998
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------
Components of Net Periodic
Benefit Cost
Service cost $ 6 $ 4 $ 2 $ 2
Interest cost 22 21 7 8
Expected return on assets (27) (24) -- --
Amortization of prior
service cost 1 1 (2) (3)
Recognized actuarial
(gain)/loss 1 -- -- --
- -----------------------------------------------------------------
Net periodic benefit cost $ 3 $ 2 $ 7 $ 7
=================================================================
</TABLE>
The assumed health care cost trend rate has an effect on the amounts reported
for the health care plans. A one-percentage-point change in the assumed health
care cost trend rate would have the following effects:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
DOLLARS IN THOUSANDS 1% INCREASE 1% DECREASE
- -----------------------------------------------------------------------
<S> <C> <C>
Effect on service cost plus interest cost $ 456 $ (364)
Effect on postretirement benefit obligation 5,020 (4,016)
</TABLE>
Note 11: Income Taxes
The elements of the provisions for income taxes related to continuing
operations for each of the three years indicated below were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------
December 31
- -----------------------------------------------------------
DOLLARS IN MILLIONS 1999 1998 1997
- -----------------------------------------------------------
<S> <C> <C> <C>
Current income taxes:
Federal $14.0 $ 8.6 $36.8
State and foreign 6.3 5.7 5.9
----------------------------
20.3 14.3 42.7
Deferred income taxes 14.5 16.3 3.9
----------------------------
Total tax expense $34.8 $30.6 $46.6
============================
</TABLE>
The components of the deferred income tax assets and liabilities arising under
FASB Statement No. 109 were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
December 31
- ----------------------------------------------------------------
DOLLARS IN MILLIONS 1999 1998
- ----------------------------------------------------------------
<S> <C> <C>
Deferred tax assets (excluding post-
retirement benefits other than pensions):
Net operating loss and tax credit
carryforwards $ 28 $ 46
Other deductible temporary
differences 14 36
Less valuation allowances -- --
-------------
42 82
-------------
Deferred tax liabilities:
Fixed asset basis difference 31 43
Other taxable temporary differences 15 11
-------------
46 54
-------------
Net deferred asset (liability) (excluding post-
retirement benefits other than pensions) (4) 28
FASB Statement No. 106 impact (post-
retirement benefits other than pensions) 57 55
-------------
Net deferred tax asset $ 53 $ 83
=============
</TABLE>
For tax purposes, in conjunction with the Alternative Minimum Tax ("AMT")
rules, the Company had available at December 31, 1999, AMT credit carryforwards
for tax purposes of approximately $28 million, which may be used indefinitely to
reduce regular federal income taxes. The Company believes that it is more likely
than not that all of its tax credits will be realized.
Subsequent to the adoption of FASB Statement No. 109, the Company adopted FASB
Statement No. 106 and recognized the entire transition obligation at January 1,
1992, as a cumulative effect charge in 1992. At December 31, 1999, the deferred
tax asset related to the Company's FASB Statement No. 106 obligation was $57
million. To the extent that future annual charges under FASB Statement No. 106
continue to exceed deductible amounts, this deferred tax asset will continue to
grow. Thereafter, even if the Company should have a tax loss in any year in
which the deductible amount would exceed the financial statement expense, the
tax law provides for a 20-year carryforward period of that loss. Because of the
extremely long period that is available to realize these future tax benefits, a
valuation allowance for this deferred tax asset is not necessary.
29
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
(EXCEPT PER SHARE DATA)
Income taxes on continuing operations differ from the amounts computed by
applying the federal tax rate as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Years ended December 31
- -----------------------------------------------------------------
DOLLARS IN MILLIONS
YEARS ENDED DECEMBER 31 1999 1998 1997
- -----------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax expense computed
at statutory tax rate of 35% $25.9 $29.0 $41.8
Additional taxes or credits from:
State and local income taxes, net
of federal income tax effect 3.8 4.0 4.1
Non-deductible expenses 3.0 2.5 2.1
Foreign (income) or loss not includable
in federal taxable income 1.3 (1.2) (0.1)
Canadian taxes 0.4 -- --
All other, net 0.4 (3.7) (1.3)
--------------------
Total income tax provision $34.8 $30.6 $46.6
====================
</TABLE>
Note 12: Acquisitions
During 1999, the Company acquired Washington Specialty Metals Corporation for
approximately $66 million in cash. The acquisition has been accounted for by the
purchase method of accounting and the purchase price has been allocated to
assets acquired and liabilities assumed. Results of operations since the
acquisition are included in the consolidated results. The pro forma effect for
1999 and 1998 had this acquisition occurred at the beginning of each such year
is not material.
During 1997, the Company acquired Thypin Steel Co., Inc., Omni Metals, Inc.
and the assets of Cardinal Metals, Inc. for an aggregate of $139.9 million in
cash plus the assumption of debt. The acquisitions have been accounted for by
the purchase method of accounting and the purchase price has been allocated to
assets acquired and liabilities assumed. Results of operations since acquisition
for each company are included in the consolidated results.
During the first quarter of 1998, the Company acquired Brockway Pressed
Metals, Inc., a powder metallurgy company. During the fourth quarter of 1998,
Brockway was sold as part of the sale of Inland Engineered Materials
Corporation.
<TABLE>
<CAPTION>
Note 13: Earnings Per Share
Basic earnings per share
- ------------------------------------------------------------------
DOLLARS AND SHARES IN MILLIONS
(EXCEPT PER SHARE DATA) 1999 1998 1997
- ------------------------------------------------------------------
<S> <C> <C> <C>
Income from continuing operations
before discontinued operations
and extraordinary items $38.4 $ 47.7 $ 64.5
Less preferred stock dividends 0.2 6.9 9.1
-----------------------
Income from continuing operations
available to common stockholders 38.2 40.8 55.4
Discontinued operations -- 13.8 54.8
Gain on sale of discontinued operations 17.3 510.8 --
Extraordinary loss on early
retirement of debt -- (21.4) --
-----------------------
Net income available to common
stockholders $55.5 $544.0 $110.2
=======================
Average shares of common stock
outstanding 24.4 39.4 48.9
=======================
Basic earnings per share
From continuing operations $1.56 $ 1.03 $ 1.13
Discontinued operations -- 0.35 1.12
Gain on sale of discontinued operations 0.71 12.95 --
Extraordinary loss on early
retirement of debt -- (0.54) --
-----------------------
Basic earnings per share $2.27 $13.79 2.25
=======================
</TABLE>
<TABLE>
<CAPTION>
Diluted earnings per share
- ------------------------------------------------------------------
DOLLARS AND SHARES IN MILLIONS
(EXCEPT PER SHARE DATA) 1999 1998 1997
- ------------------------------------------------------------------
<S> <C> <C> <C>
Income from continuing operations
available to common stockholders $38.2 $ 40.8 $ 55.4
Effective of dilutive securities
Series E Leveraged Preferred Stock -- 6.3 8.7
Additional ESOP funding required on
conversion of Series E Leveraged
Preferred Stock, net of tax -- (5.9) (8.1)
-----------------------
Income available to common stock-
holders and assumed conversions
before discontinued operations
and extraordinary items 38.2 41.2 56.0
Discontinued operations -- 13.8 54.8
Gain on sale of discontinued operations 17.3 510.8 --
Extraordinary loss on early
retirement of debt -- (21.4) --
-----------------------
Net income available to common stock-
holders and assumed conversions $55.5 $544.4 $110.8
=======================
Average shares of common stock
outstanding 24.4 39.4 48.9
Assumed conversion of Series E
leveraged preferred stock -- 2.2 3.0
Dilutive effect of stock options 0.2 0.1 --
-----------------------
Shares outstanding for diluted earnings
per share calculation 24.6 41.7 51.9
=======================
Diluted earnings per share
From continuing operations $1.56 $ 0.99 $ 1.08
Discontinued operations -- 0.33 1.05
Gain on sale of discontinued operations 0.70 12.23 --
Extraordinary loss on early
retirement of debt -- (0.51) --
-----------------------
Diluted earnings per share $2.26 $13.04 $ 2.13
=======================
</TABLE>
30
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
Note 14: Commitments and Contingencies
Pursuant to the ISC/Ispat Merger Agreement, the Company agreed to indemnify
Ispat for losses, if they should arise, exceeding certain minimum amounts in
connection with breaches of representations and warranties contained in the
ISC/Ispat Merger Agreement and for expenditures and losses, if they should
arise, relating to certain environmental liabilities exceeding, in most
instances, minimum amounts. The maximum liability for which the Company can be
responsible with respect to such obligations is $90 million in the aggregate.
There are also certain other covenant commitments made by the Company contained
in the ISC/Ispat Merger Agreement which are not subject to a maximum amount. In
general, Ispat must make indemnification claims with respect to breaches of
representations and warranties prior to March 31, 2000; however, claims relating
to breaches of representations and warranties related to tax matters and certain
organizational matters must be made within 90 days after the expiration of the
applicable statute of limitations, and claims with respect to breaches of
representations and warranties related to environmental matters must be made
prior to July 16, 2003. Ispat has advised the Company of certain environmental
expenses which Ispat has incurred, but they are below the minimum
indemnification thresholds of the ISC/Ispat Merger Agreement and the Company has
not made any indemnification payments to Ispat. The Company has purchased
environmental insurance with coverage up to $90 million payable directly to
Ispat and ISC. The insurance is expected to cover substantially the same
environmental matters for which the Company has agreed to indemnify Ispat.
As part of the ISC/Ispat Transaction, the Inland Steel Industries Pension
Plan (the "ISC Pension Plan"), in which employees of both ISC and the Company
participated, was transferred to ISC. The Company's remaining employees that
formerly had participated in the ISC Pension Plan became participants in Ryerson
Tull's pension plan. The ISC Pension Plan has unfunded benefit liabilities on a
termination basis, as determined by the Pension Benefit Guaranty Corporation
("PBGC"), an agency of the U.S. government. As a condition to completing the
ISC/Ispat Transaction, Ispat, ISC, RT and the Company entered into an agreement
with the PBGC to provide certain financial commitments to reduce the
underfunding of the ISC Pension Plan and to secure ISC Pension Plan unfunded
benefit liabilities on a termination basis. These requirements include a RT
guaranty of $50 million, for five years, of the obligations of Ispat and ISC to
the PBGC in the event of a distress or involuntary termination of the ISC
Pension Plan. The guaranty is included in the $90 million limit on the Company's
indemnification obligations.
In the second quarter of 1999, Ispat publicly disclosed that it had been
informed by the United States Attorney for the Middle District of Louisiana that
it is named as a defendant in a civil proceeding filed under seal in Baton
Rouge, Louisiana. The suit was filed by an individual on behalf of the United
States Government and asserts violations of the False Claims Act, 31 U.S.C. Sec.
3729, et seq. Ispat also disclosed that it is the target of a federal criminal
grand jury investigation in connection with the alleged violations and that the
U.S. Attorney and Ispat have agreed that no criminal charges will be filed
against Ispat Inland prior to March 5, 2000, while Ispat reviews the matter.
Ispat further disclosed that it had been informed by the U.S. Attorney's office
of a damage claim in the civil litigation, which, if successfully proved, would
be material to its financial position and results of operations. Ispat has
stated that it has not had an opportunity to review the factual basis of the
claim or the method by which the damages have been calculated, and that it has
not yet determined the extent to which other potential corporate defendants are
involved.
By letter dated May 11, 1999, Ispat notified the Company that they view the
civil lawsuit and the criminal grand jury investigation (together the
"Proceedings") as implicating Ispat's contractual rights against the Company
including, without limitation, Ispat's indemnification rights under the Merger
Agreement. The letter stated that Ispat was notifying the Company of the
Proceedings in order to preserve Ispat's rights under the Merger Agreement. The
Company's maximum liability for claims relating to breaches of representations
and warranties under the Merger Agreement is $90 million in the aggregate. At
present, the Company does not know what claims will be made against Ispat as a
result of the Proceedings or to what extent any specific claims for
indemnification will be made against the Company by Ispat. The Company is
therefore unable at the present time to determine Ispat's right to
indemnification under the Merger Agreement or whether an adverse outcome in the
Proceedings would have a material adverse effect on the Company's financial
condition or results of operations.
The Company has noncancellable operating leases for which future minimum
rental commitments are estimated to total $94.6 million, including approximately
$20.5 million in 2000, $17.5 million in 2001, $9.7 million in 2002, $5.3 million
in 2003, $4.8 million in 2004 and $36.8 million thereafter.
Rental expense under operating leases totaled $25.1 million in 1999, $20.7
million in 1998 and $19.3 million in 1997.
There are various claims and pending actions against the Company. The
amount of liability, if any, for these claims and actions at December 31, 1999
is not determinable but, in the opinion of management, such liability, if any,
will not have a materially adverse effect on the Company's financial position or
results of operations.
31
Ryerson Tull, Inc. and Subsidiary Companies
<PAGE>
Exhibit 21
----------
SUBSIDIARIES OF RYERSON TULL, INC.
----------------------------------
The subsidiaries of Ryerson Tull, Inc. (other than certain subsidiaries which,
considered in the aggregate as a single subsidiary, do not constitute a
significant subsidiary), one of which is incoporated in the State of Delaware
and one of which is incorporated in the State of Georgia, as noted below, and
each of which is wholly owned by Ryerson Tull, Inc. are as follows:
Joseph T. Ryerson & Son, Inc.
(a Delaware corporation)
J. M. Tull Metals Company, Inc.
(a Georgia corporation)
<PAGE>
Exhibit 24
----------
RYERSON TULL, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Ryerson Tull, Inc., a Delaware corporation, do hereby
nominate, constitute and appoint Jay M. Gratz, Neil S. Novich, Terence R. Rogers
and Joyce E. Mims, or any one or more of them, my true and lawful attorneys and
agents to do any and all acts and things and execute any and all instruments
which said attorneys and agents, or any of them, may deem necessary or advisable
to enable said Ryerson Tull, Inc. to comply with the Securities Exchange Act of
1934, as amended, and any requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Annual
Report on Form 10-K of said Ryerson Tull, Inc. for the fiscal year ended
December 31, 1999, including specifically, but without limitation thereof, full
power and authority to sign my name as a director and(or) officer of said
Ryerson Tull, Inc. to said Annual Report on Form 10-K and any amendment thereto,
hereby ratifying and confirming all that said attorneys and agents, or any of
them, shall do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 7/th/ day of March,
2000.
/s/ Jameson A. Baxter
--------------------------
Jameson A. Baxter
<PAGE>
RYERSON TULL, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Ryerson Tull, Inc., a Delaware corporation, do hereby
nominate, constitute and appoint Jay M. Gratz, Neil S. Novich, Terence R. Rogers
and Joyce E. Mims, or any one or more of them, my true and lawful attorneys and
agents to do any and all acts and things and execute any and all instruments
which said attorneys and agents, or any of them, may deem necessary or advisable
to enable said Ryerson Tull, Inc. to comply with the Securities Exchange Act of
1934, as amended, and any requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Annual
Report on Form 10-K of said Ryerson Tull, Inc. for the fiscal year ended
December 31, 1999, including specifically, but without limitation thereof, full
power and authority to sign my name as a director and(or) officer of said
Ryerson Tull, Inc. to said Annual Report on Form 10-K and any amendment thereto,
hereby ratifying and confirming all that said attorneys and agents, or any of
them, shall do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 7/th/ day of March,
2000.
/s/ Richard G. Cline
---------------------------
Richard G. Cline
<PAGE>
RYERSON TULL, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Ryerson Tull, Inc., a Delaware corporation, do hereby
nominate, constitute and appoint Jay M. Gratz, Neil S. Novich, Terence R. Rogers
and Joyce E. Mims, or any one or more of them, my true and lawful attorneys and
agents to do any and all acts and things and execute any and all instruments
which said attorneys and agents, or any of them, may deem necessary or advisable
to enable said Ryerson Tull, Inc. to comply with the Securities Exchange Act of
1934, as amended, and any requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Annual
Report on Form 10-K of said Ryerson Tull, Inc. for the fiscal year ended
December 31, 1999, including specifically, but without limitation thereof, full
power and authority to sign my name as a director and(or) officer of said
Ryerson Tull, Inc. to said Annual Report on Form 10-K and any amendment thereto,
hereby ratifying and confirming all that said attorneys and agents, or any of
them, shall do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 7/th/ day of March,
2000.
/s/ Gary L. Crittenden
--------------------------------
Gary L. Crittenden
<PAGE>
RYERSON TULL, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Ryerson Tull, Inc., a Delaware corporation, do hereby
nominate, constitute and appoint Jay M. Gratz, Neil S. Novich, Terence R. Rogers
and Joyce E. Mims, or any one or more of them, my true and lawful attorneys and
agents to do any and all acts and things and execute any and all instruments
which said attorneys and agents, or any of them, may deem necessary or advisable
to enable said Ryerson Tull, Inc. to comply with the Securities Exchange Act of
1934, as amended, and any requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Annual
Report on Form 10-K of said Ryerson Tull, Inc. for the fiscal year ended
December 31, 1999, including specifically, but without limitation thereof, full
power and authority to sign my name as a director and(or) officer of said
Ryerson Tull, Inc. to said Annual Report on Form 10-K and any amendment thereto,
hereby ratifying and confirming all that said attorneys and agents, or any of
them, shall do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 7/th/ day of March,
2000.
/s/ James A. Henderson
-----------------------------
James A. Henderson
<PAGE>
RYERSON TULL, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Ryerson Tull, Inc., a Delaware corporation, do hereby
nominate, constitute and appoint Jay M. Gratz, Neil S. Novich, Terence R. Rogers
and Joyce E. Mims, or any one or more of them, my true and lawful attorneys and
agents to do any and all acts and things and execute any and all instruments
which said attorneys and agents, or any of them, may deem necessary or advisable
to enable said Ryerson Tull, Inc. to comply with the Securities Exchange Act of
1934, as amended, and any requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Annual
Report on Form 10-K of said Ryerson Tull, Inc. for the fiscal year ended
December 31, 1999, including specifically, but without limitation thereof, full
power and authority to sign my name as a director and(or) officer of said
Ryerson Tull, Inc. to said Annual Report on Form 10-K and any amendment thereto,
hereby ratifying and confirming all that said attorneys and agents, or any of
them, shall do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 7/th/ day of March,
2000.
/s/ Gregory P. Josefowicz
-------------------------------
Gregory P. Josefowicz
<PAGE>
RYERSON TULL, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Ryerson Tull, Inc., a Delaware corporation, do hereby
nominate, constitute and appoint Jay M. Gratz, Neil S. Novich, Terence R. Rogers
and Joyce E. Mims, or any one or more of them, my true and lawful attorneys and
agents to do any and all acts and things and execute any and all instruments
which said attorneys and agents, or any of them, may deem necessary or advisable
to enable said Ryerson Tull, Inc. to comply with the Securities Exchange Act of
1934, as amended, and any requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Annual
Report on Form 10-K of said Ryerson Tull, Inc. for the fiscal year ended
December 31, 1999, including specifically, but without limitation thereof, full
power and authority to sign my name as a director and(or) officer of said
Ryerson Tull, Inc. to said Annual Report on Form 10-K and any amendment thereto,
hereby ratifying and confirming all that said attorneys and agents, or any of
them, shall do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 7/th/ day of March,
2000.
/s/ Neil S. Novich
--------------------------
Neil S. Novich
<PAGE>
RYERSON TULL, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Ryerson Tull, Inc., a Delaware corporation, do hereby
nominate, constitute and appoint Jay M. Gratz, Neil S. Novich, Terence R. Rogers
and Joyce E. Mims, or any one or more of them, my true and lawful attorneys and
agents to do any and all acts and things and execute any and all instruments
which said attorneys and agents, or any of them, may deem necessary or advisable
to enable said Ryerson Tull, Inc. to comply with the Securities Exchange Act of
1934, as amended, and any requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Annual
Report on Form 10-K of said Ryerson Tull, Inc. for the fiscal year ended
December 31, 1999, including specifically, but without limitation thereof, full
power and authority to sign my name as a director and(or) officer of said
Ryerson Tull, Inc. to said Annual Report on Form 10-K and any amendment thereto,
hereby ratifying and confirming all that said attorneys and agents, or any of
them, shall do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 7/th/ day of March,
2000.
/s/ Jerry K. Pearlman
--------------------------
Jerry K. Pearlman
<PAGE>
RYERSON TULL, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Ryerson Tull, Inc., a Delaware corporation, do hereby
nominate, constitute and appoint Jay M. Gratz, Neil S. Novich, Terence R. Rogers
and Joyce E. Mims, or any one or more of them, my true and lawful attorneys and
agents to do any and all acts and things and execute any and all instruments
which said attorneys and agents, or any of them, may deem necessary or advisable
to enable said Ryerson Tull, Inc. to comply with the Securities Exchange Act of
1934, as amended, and any requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Annual
Report on Form 10-K of said Ryerson Tull, Inc. for the fiscal year ended
December 31, 1999, including specifically, but without limitation thereof, full
power and authority to sign my name as a director and(or) officer of said
Ryerson Tull, Inc. to said Annual Report on Form 10-K and any amendment thereto,
hereby ratifying and confirming all that said attorneys and agents, or any of
them, shall do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 17/th/ day of January,
2000.
/s/ Ronald L. Thompson
-------------------------------
Ronald L. Thompson
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATION STATEMENT OF OPERATIONS, THE CONSOLIDATED BALANCE SHEET AND
THE SUMMARY OF STOCKHOLDERS EQUITY CONTAINED IN THE ANNUAL REPORT ON FORM 10-K
TO WHICH THIS EXHIBIT IS ATTACHED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL SCHEDULES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 DEC-31-1999
<CASH> 99,600 39,500
<SECURITIES> 0 0
<RECEIVABLES> 291,400 315,100
<ALLOWANCES> 6,900 7,200
<INVENTORY> 500,400 542,700
<CURRENT-ASSETS> 890,100 890,100
<PP&E> 583,800 579,000
<DEPRECIATION> 290,200 305,800
<TOTAL-ASSETS> 1,391,000 1,387,200
<CURRENT-LIABILITIES> 318,100 279,600
<BONDS> 257,000 258,800
0 0
100 100
<COMMON> 50,600 50,600
<OTHER-SE> 512,900 647,100
<TOTAL-LIABILITY-AND-EQUITY> 1,391,000 1,387,200
<SALES> 2,782,700 2,763,500
<TOTAL-REVENUES> 2,782,700 2,763,500
<CGS> 2,478,100 2,450,200
<TOTAL-COSTS> 2,478,100 2,450,200
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 33,600 24,200
<INCOME-PRETAX> 83,000 73,900
<INCOME-TAX> 30,600 34,800
<INCOME-CONTINUING> 52,400 39,100
<DISCONTINUED> 13,800 0
<EXTRAORDINARY> 489,400 17,300
<CHANGES> 0 0
<NET-INCOME> 550,900 55,700
<EPS-BASIC> 13.79 2.27
<EPS-DILUTED> 13.04 2.26
</TABLE>
