-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RNkASA1yJBgvMZVVE3tyR+ybwQ/sdTsQND3UFBkKj1AQZmwNDBrHfH1VK3qH2Pvy Slgpvo8LmZinPd+bCgFoPg== 0000950131-02-000979.txt : 20020415 0000950131-02-000979.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950131-02-000979 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020320 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RYERSON TULL INC /DE/ CENTRAL INDEX KEY: 0000790528 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 363425828 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-09117 FILM NUMBER: 02579293 BUSINESS ADDRESS: STREET 1: 2621 WEST 15TH PLACE CITY: CHICAGO STATE: IL ZIP: 60608 BUSINESS PHONE: 7737622121 MAIL ADDRESS: STREET 1: 2621 WEST 15TH PLACE CITY: CHICAGO STATE: IL ZIP: 60608 FORMER COMPANY: FORMER CONFORMED NAME: INLAND STEEL INDUSTRIES INC /DE/ DATE OF NAME CHANGE: 19920703 10-K405 1 d10k405.txt FORM 10-K YEAR ENDED DECEMBER 31, 2001 2001 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- 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, 2001 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 ----------------- 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: Name of each exchange on Title of each class which registered ------------------- ---------------- Common Stock ($1.00 par New York Stock Exchange, value), including Inc. Preferred Stock Purchase Rights ----------------- 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 15, 2002 the aggregate market value of the voting stock of the registrant held by nonaffiliates of the registrant was approximately $269,461,401./(1) / The number of shares of Common Stock ($1.00 par value) of the registrant outstanding as of March 15, 2002 was 24,806,917. - -------- (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 Part III of this Report on Form 10-K incorporates by reference certain information from the registrant's definitive Proxy Statement which will be furnished to stockholders in connection with the Annual Meeting of Stockholders of the registrant scheduled to be held on May 8, 2002. ================================================================================ This Annual Report on Form 10-K contains statements which constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places, including Item 1. "Business," Item 3. "Legal Proceedings" and Item 7. "Management's Discussion of Operations and Financial Condition." Such statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "estimates," "will," "should," "plans" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of various factors. These factors include the effectiveness of management's strategies and decisions; general economic and business conditions; developments in technology and e-commerce; new or modified statutory or regulatory requirements; sales volumes; pricing pressures; cost of purchased materials; ability to maintain market share; inventory management; market competition; the company's mix of products and services; reliance on large customers; implementation, cost and financial risks associated with increasing use of multi-year contracts; the Company's ability to lower costs and expenses; industry and customer consolidation; customer and supplier insolvencies; labor relations; the outcome of pending and future litigation and claims; continued availability of financing and financial resources required to support the Company's future business; timing and costs of completing planned restructurings, reorganizations and consolidations of facilities; and other factors. This report identifies other factors that could cause such differences. No assurance can be given that these are all of the factors that could cause actual results to vary materially from the forward-looking statements. 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 Ryerson Tull Canada, Inc., formerly known as Washington Specialty Metals, Inc.; in Mexico through an arrangement with G. Collado S.A. de C.V.; in China through Shanghai Ryerson Limited; and in India through Tata Ryerson Limited; and is organized into four business units along regional and product lines. The Company is a leading metals service center in the United States based on sales revenue, with 2001 sales of $2.2 billion. It had a year-end 2001 U.S. market share of approximately 10.7 percent, based on its analysis of data prepared by the Metals Service Center Institute ("MSCI"). 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 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 MSCI data, the Company believes that the industry is comprised of over 5,000 service center locations, operating throughout the U.S. in every state and servicing over 300,000 customers. The industry is highly fragmented, consisting of a large 1 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 MSCI data, the industry handled approximately 25.7 million tons, or approximately 25.6 percent, of the metals distributed in the United States in 2001. 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 from foreign 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. Notwithstanding brief periods of price increases, the Company was generally reducing its prices from mid-1995 through 2001 to remain competitive. 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 1999, 2000 and 2001:
Percentage of Sales Revenues ------------- Product Line 1999 2000 2001 ------------ ---- ---- ---- Carbon flat rolled.......... 32% 33% 35% Stainless and aluminum...... 29 29 30 Fabrication and carbon plate 18 18 16 Bars, tubing and structurals 17 16 15 Other....................... 4 4 4 --- --- --- Total.................... 100% 100% 100% === === ===
2 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 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 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 30,000. No customer accounted for more than 8 percent of Company sales in 2001, and the top ten customers accounted for approximately 15 percent of its sales in 2001. 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 1999, 2000 and 2001:
Percentage of Sales Revenues ------------- Class of Customer 1999 2000 2001 ----------------- ---- ---- ---- Machinery manufacturers............ 31% 30% 30% Fabricated metal products producers 27 26 25 Electrical machinery producers..... 11 13 14 Transportation equipment producers. 10 9 10 Construction-related purchasers.... 5 5 4 Wholesale distributors............. 4 4 4 Metals mills and foundries......... 2 3 2 Other.............................. 10 10 11 --- --- --- Total........................... 100% 100% 100% === === ===
The Company's flat-rolled processing business unit, Ryerson Tull Coil Processing ("RTCP"), generally serves a customer base that differs from the Company's general line service center business. A large portion of 3 RTCP's customers has supply contracts typically at fixed prices and from three months to one year in duration. RTCP has a small number of arrangements with large customers that extend beyond one year. RTCP 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. RTCP'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 RTCP's approximately 500 customers are in the transportation equipment, appliance, office furniture or cabinetry businesses. Suppliers In 2001, the Company purchased approximately 2.8 million tons of materials from many suppliers throughout the world. The Company's top 25 suppliers accounted for approximately 68 percent of 2001 purchase dollars. The only supplier that accounted for 10 percent or more of the 2001 purchase dollars was Ispat Inland Inc. ("Ispat") which accounted for approximately 15 percent of purchase dollars. The Company purchases the majority of its inventories at prevailing market rates from strategic suppliers with which it has established relationships in order to obtain improvements in price, quality, service, delivery and performance. In order to minimize its financial exposure, the Company generally matches its long-term fixed-price sales contracts for specific customers with long-term fixed-price supply contracts. However, because of the competitive nature of the business, when metal prices increase due to product demand, supplier consolidation or other factors that in turn lead to longer mill lead times, the Company may not be able to pass its increased material costs fully to customers. Because the Company uses many suppliers, because there is a substantial overlap of product offerings from these suppliers, and because there are a number of other suppliers able to provide identical or similar products, the Company believes it will be able to meet its materials requirements for the foreseeable future. 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 643 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 the Company. 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, 2001, excluding the initial purchase price of acquisitions, are set forth below. Net capital additions during such period aggregated $75.8 million (excluding capital expenditures related to discontinued operations).
Dollars in Millions --------------------------------- Retirements Net Capital Additions or Sales Additions --------- ----------- ----------- 2001 13.4 11.5 1.9 2000 34.7 11.5 23.2 1999 31.6 20.1 11.5 1998 40.1 30.2 9.9 1997 41.3 12.0 29.3
4 The Company anticipates that capital expenditures, excluding acquisitions, will be in the range of $10 million to $20 million for 2002, which it expects will be funded from cash generated by operations. Employees As of December 31, 2001, the Company employed approximately 3,800 persons, of which approximately 1,800 were salaried employees and approximately 2,000 were hourly employees. Approximately 62 percent of the hourly employees were members of various unions, including the United Steelworkers and the Teamsters. The Company's relationship with the various unions generally has been good and over the last five years, there have been no work stoppages. The Company is currently negotiating with the Joint Teamsters and Steelworkers Unions regarding a first contract covering approximately 600 employees at four locations in Chicago, with the UAW in Marshalltown, Iowa covering 40 employees and with the Sheet Metal Workers in Quebec covering 20 employees. During 2002, contracts covering approximately 55 employees at three facilities will expire. During 2003, contracts covering approximately 350 employees at twelve facilities will expire. The current agreement covering approximately 250 employees with the United Steelworkers will expire on July 31, 2003, and agreements with the Teamsters expire on various dates during the period April 30, 2002 through October 31, 2004. While management does not expect any unresolvable issues to arise in connection with the renewal of existing contracts or negotiations of the first contract in Chicago, no assurances can be given that labor disruptions will not occur or 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 the Company's operations are 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 future requirements, which costs and liabilities could have a material adverse effect on the Company's results of operations or financial condition. 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. The Company is aware of contamination at, and has established a reserve for anticipated remediation costs for, the soil floor and interior of a building at one of the properties it intends to dispose of in its 2001 restructuring (discussed elsewhere in this report). The Company believes that the costs of remediating this contamination from a prior owner's operations will not have a material adverse effect on the Company's financial position or results of operations. The Company has retained an environmental consultant to conduct Phase I and Phase II environmental studies at this property to determine whether other buildings or site acreage may require remediation, but is not able to determine at the present time what effect any additional remediation costs will have on its financial condition or results of operations. Except as described above, the Company is not aware of any pending remedial actions or claims relating to environmental matters at properties presently used for Company operations that are expected to have a material adverse effect on the Company's financial position or results of operations. Capital and operating expenses for pollution control projects were less than $500,000 per year for the past five years. Excluding any potential additional remediation costs resulting from the environmental studies for the property described above, the Company expects spending for pollution control projects to remain at historical levels. 5 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 2001, the Company took restructuring charges which included a workforce reduction and consolidation of certain service center operations. The Company expects that the restructuring actions will be completed by year- end 2002. Ryerson Tull Receivables LLC In 2001, the Company formed Ryerson Tull Receivables LLC in connection with the Company's 364-day trade receivables securitization facility. Ryerson Tull Receivables LLC is a special-purpose, wholly-owned, bankruptcy-remote subsidiary for the sole purpose of buying receivables of certain subsidiaries of the Company and selling an undivided interest in all eligible receivables to certain commercial paper conduits. Foreign Operations Ryerson International In 1994, the Company formed Ryerson International, Inc. (formerly Inland International, Inc.) to hold the Company's non-North American 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. During the third quarter of 2001, the Company and The MacSteel Group dissolved their joint venture, IMF Steel International, Inc. This transaction had no impact on the net earnings for the period. Ryerson Industries de Mexico The Company, through Ryerson Industries de Mexico, S.A. de C.V., owned a 50 percent interest in Centro de Servicio Placa y Lamina, S. A. de C.V., formerly known as 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 ("AHMSA"). Centro de Servicio Placa y Lamina, which was formed in 1994, is a general line metals service center and processor with 8 facilities in Mexico. In March 2000, the Company and AHMSA entered into an agreement to sell the Company's 50 percent interest in the joint venture to AHMSA for $15 million, with payment due in July 2000. Upon finalizing the terms of payment for the sale, the Company exchanged its ownership in the joint venture for inventory and the joint venture's Guadalajara facility. On December 27, 2001, the Company sold its subsidiary, Ryerson Industries de Mexico, S.A. de C.V. to Grupo Collado S.A. de C.V. Shanghai Ryerson Limited The Company owns a 49 percent 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, 6 which was formed in 1996, is a metals service center 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 percent 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. As of January 1, 2002, the Company's facilities were: Joseph T. Ryerson & Son, Inc. Ryerson owns its regional business unit headquarters offices in Chicago (IL) and Renton (WA) and leases office space in Westmont (IL). Ryerson North's service centers are at Bettendorf (IA), Buffalo (NY), Charlotte (NC), Chattanooga (TN), Chicago (IL) (three facilities), Cincinnati (OH), Cleveland (OH), Dallas (TX), Des Moines (IA), Detroit (MI), Devens (MA), Easton (PA), Fairless Hills (PA), Holland (MI), Indianapolis (IN), Kansas City (MO), Milwaukee (WI), Philadelphia (PA), Pittsburgh (PA), Plymouth (MN), Pounding Mill (VA) and St. Louis (MO) with office space at Long Island City (NY). Ryerson West's service centers are at Commerce City (CO), Emeryville (CA), Phoenix (AZ), Portland (OR), Renton (WA), Salt Lake City (UT), Spokane (WA) and Vernon (CA). Ryerson Tull Coil Processing Division's facilities are located in Chicago (IL), Knoxville (TN), Marshalltown (IA) and Plymouth (MN) with office space in Franklin (OH) and New Hope (MN). All of Ryerson's operating facilities are held in fee with the exception of the facilities at Bettendorf (IA) (long-term lease), one Chicago (IL) facility (long-term lease), Easton (PA) (long-term lease), Fairless Hills (PA) (long-term lease), Franklin (OH) (long-term lease), Holland (MI) (short-term lease), Knoxville (TN) (long-term lease), Plymouth (MN) (short-term lease), a portion of the property at St. Louis (MO) (short-term lease), Salt Lake City (UT) (long-term lease) and offices at Long Island City (NY) (long-term lease) and New Hope (MN) (long-term lease). Ryerson has leases for the former operating facilities at Schofield (WI) (short-term lease) and Wheeling (IL) (long-term lease) with leases on former office spaces at Buffalo Grove (IL) (long-term lease) and Southfield (MI) (short-term lease). 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), Charleston (SC), Fort Smith (AR), Greensboro (NC), Greenville (SC), Jackson (MS), Jacksonville (FL), Little Rock (AR), Miami (FL), New Orleans (LA), Oklahoma City (OK), Pinellas Park (FL), Richmond (VA), Shreveport (LA), Tampa (FL), Tulsa (OK), West Memphis (AR), 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 Charleston (SC) (long-term lease), Pinellas Park (FL) (long-term lease), and Youngsville (NC) (short-term lease). Tull has a lease for the former operating facility at Lawrenceville (GA) (long-term lease). Tull's properties are adequate to serve its present and anticipated needs. Ryerson Tull Canada, Inc. Ryerson Tull Canada, Inc., a wholly-owned, indirect Canadian subsidiary of Ryerson Tull, has three facilities in Canada. It leases the facilities at Vaudreuil (QC) (long-term lease) and Brampton (ON) (long-term lease) and a separate facility at Brampton (ON) is held in fee. The properties of Ryerson Tull Canada, Inc. are adequate to serve its present and anticipated needs. 7 Ryerson Tull Mexico Ryerson Tull Mexico, S.A. de C.V., owns a general line metals processing and service center in Guadalajara, Mexico and leases such facility to G. Collado S.A. de C.V. Shanghai Ryerson Limited Shanghai Ryerson Limited, a joint venture company in which the Company owns a 49 percent 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 percent 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 which arise primarily in the ordinary course of 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. ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS. Not applicable. 8 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 Joyce E. Mims, 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, 2002, 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. References to Pre-merger Ryerson Tull refer to a subsidiary wholly owned by the Company and merged into the Company in 1999. References to Inland refer to Inland Steel Industries, Inc., the former name of the Company.
Name, Age and Present Position with Registrant Positions and Offices Held During the Past Five Years - ------------------------ ----------------------------------------------------- Neil S. Novich, 47 Mr. Novich has been Chairman, President and Chief Executive Officer and a Chairman, President and director of Ryerson Tull since February 1999. He served as President, Chief Chief Executive Officer 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, Inc. Jay M. Gratz, 49 Mr. Gratz has been Executive Vice President and Chief Financial Officer of Executive Vice President, Ryerson Tull since February 1999 and President of Ryerson Tull Coil Chief Financial Officer and Processing Division since November 2001. He was Vice President of Pre- President--RTCP merger 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, 50 Mr. Niederpruem has been Executive Vice President of Ryerson Tull since Executive Vice President February 1999. He was President of Ryerson Central, a unit of Ryerson Tull, from April 1998 until February 1999. He was President of Ryerson East, a unit of Ryerson Tull, from January 1993 to March 1998. Thomas S. Cygan, 57 Mr. Cygan has been President, Ryerson Tull North, a unit of Ryerson Tull, President, Ryerson since June 2000. He was President of Ryerson West, a unit of Ryerson Tull, Tull North from November 1994 to May 2000. James M. Delaney, 44 Mr. Delaney has been President, Customer Solutions Team and Chief President, Customer Solutions Customer Officer since June 2000 and Chief Procurement Officer since Team, Chief Customer September 2001. He was President of Ryerson Central, a unit of Ryerson Officer and Tull, from February 1999 to June 2000. He was Vice President and General Chief Procurement Officer Manager of Ryerson Central from April 1997 until January 1999. He was Vice President and General Manager of Ryerson East, a unit of Ryerson Tull, from January 1993 until April 1997.
9
Name, Age and Present Position with Registrant Positions and Offices Held During the Past Five Years - ------------------------ ----------------------------------------------------- Robert M. Lampi, 45 Mr. Lampi has been President, Ryerson Tull West, a unit of Ryerson Tull, since President, Ryerson June 2000. He was Vice President and General Manager of Ryerson West from Tull West November 1998 to May 2000. He was Marketing General Manager of Ryerson West from November 1997 to October 1998. He served as General Manager of Ryerson West's Salt Lake City location from February 1993 to October 1997. Stephen E. Makarewicz, 55 Mr. Makarewicz has been President, Ryerson Tull South, a unit of Ryerson Tull, President, Ryerson since June 2000 and President, Chief Executive Officer and Chief Operating Tull South Officer of Tull since October 1994. William Korda, 54 Mr. Korda has been Vice President--Human Resources of Ryerson Tull since Vice President-- February 1999. He served as Vice President--Human Resources of Pre-merger Human Resources Ryerson Tull from October 1993 to February 1999. Joyce E. Mims, 59 Ms. Mims has been Vice President and General Counsel of Ryerson Tull since Vice President and January 2001. She was Vice President, General Counsel and Secretary of Ryerson General Counsel Tull from June 1999 until January 2001 and Senior Vice President and General Counsel of Ancilla Systems Incorporated, a multi-hospital health care system, from 1995 through 1997. Darell R. Zerbe, 59 Mr. Zerbe has been Vice President--Information Technology and Chief Vice President-- Information Officer of Ryerson Tull since February 1999. He served as Vice Information Technology 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. Terence R. Rogers, 42 Mr. Rogers has been Vice President--Finance since September 2001 and Treasurer Vice President-- since February 1999. He was Chief Procurement Officer from April 2000 to Finance and Treasurer September 2001. 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. Lily L. May, 52 Ms. May has been Controller of Ryerson Tull since February 1999. She was Controller 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.
10 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 15, 2002, the number of holders of record of Common Stock of Ryerson Tull was 9,989. The Company's Common Stock trades on the New York Stock Exchange. The following table sets forth the high and low sale prices for and the frequency and amount of cash dividends declared on the Common Stock for the period January 1, 2000 through December 31, 2001. RYERSON TULL, INC. AND SUBSIDIARY COMPANIES SUMMARY BY QUARTER (UNAUDITED) (Dollars in millions, except per share data)
Per Common Share Income (Loss) ------------------------------------------------- From Continuing Net Income (Loss) Market Price Net Gross Operations Net Income ---------------- -------------------- Dividend Sales Profit Before Taxes (Loss) Basic Diluted High Low Close Paid -------- ------ --------------- ---------- ------ ------- ------ ------ ------ -------- 2001 First Quarter $ 638.1 $136.3 $ 2.8 $ 1.3 $ 0.05 $ 0.05 $12.05 $ 8.19 $10.05 $0.05 Second Quarter 582.6 119.2 (8.8) (4.9) (0.20) (0.20) 13.99 9.65 13.49 0.05 Third Quarter 543.0 102.3 (18.1) (11.6) (0.47) (0.47) 13.35 10.39 12.55 0.05 Fourth Quarter 479.8 63.9 (75.7)* (45.0)* (1.82)* (1.82)* 12.76 10.60 10.95 0.05 -------- ------ ------ ------ ------ ------ ------ ------ ------ ----- Year $2,243.5 $421.7 $(99.8) $(60.2) $(2.44) $(2.44) $13.99 $ 8.19 $10.95 $0.20 ======== ====== ====== ====== ====== ====== ====== ====== ====== ===== 2000 First Quarter $ 786.3 $166.0 $ 20.8 $ 11.0 $ 0.44 $ 0.44 $20.19 $12.38 $15.50 $0.05 Second Quarter 760.8 149.9 (16.7)** (13.6)** (0.55)** (0.55)** 15.50 8.63 10.38 0.05 Third Quarter 695.6 135.8 (4.5) (3.6) (0.15) (0.15) 10.69 8.63 9.44 0.05 Fourth Quarter 619.7 118.0 (33.1)^ (23.7)^# (0.96)^# (0.96)^# 9.94 6.94 8.25 0.05 -------- ------ ------ ------ ------ ------ ------ ------ ------ ----- Year $2,862.4 $569.7 $(33.5) $(29.9) $(1.22) $(1.22) $20.19 $ 6.94 $ 8.25 $0.20 ======== ====== ====== ====== ====== ====== ====== ====== ====== =====
* The fourth quarter of 2001 includes a $19.4 million restructuring charge, $11.9 million after tax, or $0.48 per share. ** The second quarter of 2000 includes a $23.3 million restructuring charge, $16.5 million after tax, or $0.67 per share. ^ The fourth quarter of 2000 includes a $16.2 million bad debt provision for a single customer, $9.3 million after tax, or $0.37 per share. # The fourth quarter of 2000 includes a $4.8 million loss on the sale of Inland Steel Company, or $0.19 per share. See Note 15. Restrictions in the Company's financing that limit the Company's ability to pay dividends are described in Item 7 "Management's Discussion and Analysis of Financial Condition" at page 13. ITEM 6. SELECTED FINANCIAL DATA. The following historical consolidated financial information should be read in conjunction with the audited historical Consolidated Financial Statements of Ryerson Tull, Inc. and Subsidiaries and the Notes thereto included in Item 8. "Financial Statements and Supplementary Data." The historical consolidated financial information for the fiscal years 1997 through 2001 reflects the historical financial statements of the Company. 11 FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA AND OPERATING RESULTS--CONTINUING OPERATIONS (Dollars in millions, except per share and per ton data)
2001 2000 1999 1998 1997 -------- -------- -------- -------- -------- Summary of Earnings Net sales................................... $2,243.5 $2,862.4 $2,763.5 $2,782.7 $2,804.0 Gross profit................................ 421.7 569.7 631.9 625.8 626.0 Operating profit (loss)..................... (74.6)(1) (4.1)(2) 97.1(3) 96.0(4) 133.1(5) Income (loss) before income taxes, minority interest, discontinued operations, and extraordinary loss........................ (99.8)(1) (33.5)(2) 73.9(3) 83.0(4) 119.5(5) Income (loss) from continuing operations.... (60.2)(1) (25.1)(2) 38.4(3) 47.7(4) 64.5(5) Earnings (loss) per share--basic............ (2.44)(1) (1.03)(2) 1.56(3) 1.03(4) 1.13(5) Earnings (loss) per share--diluted.......... (2.44)(1) (1.03)(2) 1.56(3) 0.99(4) 1.08(5) Financial Position at Year-End Inventory--current value(6)................. $ 409.2 $ 608.9 $ 606.1 $ 571.6 $1,013.1 Working capital............................. 396.6 418.3 610.5 572.0 660.2 Property, plant and equipment............... 249.7 274.7 273.2 293.6 1,641.8 Total assets................................ 1,009.9 1,372.1 1,387.2 1,391.0 3,646.5 Long-term debt.............................. 100.6 100.7 258.8 257.0 704.9 Stockholders' equity........................ 551.7 661.7 697.8 563.6 900.1 Financial Ratios Inventory turnover--current value(6)........ 3.6 3.4 3.7 3.8 4.0 Operating asset turnover.................... 2.2 2.3 2.5 2.5 2.8 Operating profit on operating assets (OP/OA) (7.3)% (0.3)% 8.7% 8.6% 13.1% Return on ending stockholders' equity....... (10.9) (3.8) 5.5 8.5 7.2 Volume and Per Ton Data Tons shipped (000).......................... 2,817 3,339 3,333 3,108 3,020 Average selling price per ton............... $ 796 $ 857 $ 829 $ 895 $ 928 Gross profit per ton........................ 150 171 190 201 207 Expenses per ton(7)......................... 168 165 160 172 169 Operating profit per ton(8)................. (18) 6 30 29 38 Profit Margins Gross profit as a percent of sales.......... 18.8% 19.9% 22.9% 22.5% 22.3% Expenses as a percent of sales(7)........... 21.1 19.2 19.3 19.3 18.2 Operating profit as a percent of sales(8)... (2.3) 0.7 3.6 3.2 4.1 Other Data Average number of employees................. 4,198 4,848 5,128 5,266 5,442 Tons shipped per average employee........... 671 689 650 590 555 Capital expenditures........................ $ 13.4 $ 34.7 $ 31.6 $ 40.1 $ 41.3 Cash flow provided by (used for) operating activities................................ 246.5 (62.7) 38.6 (29.0) 57.4 Dividends per common share.................. 0.20 0.20 0.20 0.20 0.20
- -------- Data in the "Financial Position at Year-End" section for the year 1997 includes amounts related to discontinued operations. 12 (1) Includes restructuring costs of $19.4 million pretax, loss on the sale of Mexican interests of $3.3 million pretax, the write-off of the investment in MetalSite, Inc. of $1.0 million pretax and a $1.3 million pretax gain on the sale of assets. Before these items, operating loss was $52.2 million, loss before taxes was $77.4 million, loss from continuing operations was $46.5 million, and basic and diluted loss per share were $1.88. (2) Includes restructuring and plant closure costs of $27.8 million pretax, bad debt expense for a single customer of $16.2 million pretax, and a $4.4 million pretax pension curtailment gain. Before these items, operating profit was $35.5 million, income before income taxes was $6.1 million, income from continuing operations was $4.6 million, and basic and diluted earnings per share were $0.18. (3) Includes a $1.8 million pretax gain on the sale of assets and plant closure costs of $3.6 million. Before these items, operating profit was $98.9 million, income before income taxes was $75.7 million, income from continuing operations was $39.3 million, and basic and diluted earnings per share were $1.60. (4) 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 $0.94 and $0.90, respectively. (5) Includes a $8.9 million pretax pension curtailment gain and a $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 $55.0 million, and basic and diluted earnings per share were $0.94 and $0.90, respectively. (6) Current value of inventory consists of book value of inventory plus LIFO reserve. (7) Expenses are defined as operating expenses (excluding the restructuring charge) plus depreciation and amortization. (8) Operating profit is defined as gross profit minus expenses. ITEM 7. MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION. Background This section contains statements which constitute "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. See disclosure presented on the inside of the front cover of this Report on Form 10-K for cautionary information with respect to such forward-looking statements. Critical Accounting Policies The Company's critical accounting policies, including the assumptions and judgments underlying them, are disclosed under the caption "Statement of Accounting and Financial Policies" under Item 8. These policies have been consistently applied and address such matters as revenue recognition, depreciation methods, inventory valuation, asset impairment recognition and pension and postretirement expense. While policies associated with estimates and judgments may be affected by different assumptions or conditions, the Company believes its estimates and judgments associated with the reported amounts are appropriate in the circumstances. 13 The following discussion should be read in conjunction with Item 6. "Selected Financial Data" and the Company's Consolidated Financial Statements and related Notes thereto in Item 8. "Financial Statements and Supplementary Data." Management's Discussion and Analysis
Results of Operations ---------------------------- 2001 2000 1999 -------- -------- -------- (Figures in millions, except per share data) Net sales from continuing operations.............................. $2,243.5 $2,862.4 $2,763.5 Operating profit (loss) from continuing operations................ (74.6) (4.1) 97.1 Income (loss) from continuing operations.......................... (60.2) (25.1) 38.4 Gain (loss) on sale of discontinued operations.................... -- (4.8) 17.3 Net income (loss)................................................. (60.2) (29.9) 55.7 Income (loss) per common share from continuing operations--diluted $ (2.44) $ (1.03) $ 1.56 Net income (loss) per common share--diluted....................... (2.44) (1.22) 2.26 Average shares outstanding--diluted............................... 25.1 24.8 24.6
The Company's primary business is metals distribution and processing. The Company reported a loss from continuing operations in 2001 of $60.2 million, or $2.44 per share, as compared with a loss from continuing operations of $25.1 million, or $1.03 per share, in 2000, and income of $38.4 million, or $1.56 per share, in 1999. Included in the 2001 results were restructuring charges of $11.9 million after tax, or $0.48 per share, and related inventory write-downs of $4.5 million after tax, or $0.18 per share. The 2000 results included restructuring charges of $17.7 million after tax, or $0.71 per share, and an additional provision (discussed below) of $12.3 million after tax, or $0.50 per share, to fully reserve for a receivable from a company that filed for bankruptcy. 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 Company, like many other companies in the industry, experienced a significant reduction in demand for its products in 2001. During the same period, metal prices also declined as demand from metal-using industries fell rapidly with the Company's volume dropping by 16% year over year. These extremely weak market conditions negatively impacted the Company's profitability for the year 2001. Regarding discontinued operations, 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. In 1998, the Company recorded a $510.8 million after-tax gain from this transaction. 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. In the fourth quarter of 2000, the Company recorded a $4.8 million after-tax charge related to a claim by Ispat in connection with the sale of ISC. Management's Discussion of Operations and Financial Condition Comparison of 2001 with 2000--Continuing Operations Net Sales. Net sales of $2.24 billion in 2001 declined 22 percent from $2.86 billion in 2000 as a result of a 16 percent decrease in tons shipped and a 7 percent drop in average selling price per ton. Both volume and price were impacted by the weak market conditions. During 2001, the Company's share of the market declined to 10.6 percent from 11.0 percent in 2000 based on data from the Metals Service Center Institute. 14 Gross Profit. Gross profit--the difference between net sales and the cost of materials sold--decreased 26 percent to $421.7 million in 2001 from $569.7 million in 2000. Gross profit as a percentage of sales decreased to 18.8 percent from 19.9 percent a year ago. The Company's decision to aggressively reduce inventory, coupled with worsening market conditions, reduced gross profit by $32 million in 2001, of which $22 million was incurred in the fourth quarter. The $32 million reduction consists of a $22 million impact due to the inclusion of older and higher-cost material in the cost of goods sold and a $10 million impact from inventory liquidation. Furthermore, 2001 gross profit was adversely impacted by $7.4 million in inventory write-downs associated with the restructuring. Excluding the restructuring related inventory write-down, gross profit as a percentage of sales decreased to 19.1 percent in 2001 from 19.9 percent a year earlier. Gross profit per ton declined to $150 ($152 excluding the restructuring-related inventory write-downs) from $171 in 2000. Expenses. Expenses--which consist of operating expenses (excluding restructuring charges, Mexico loss and MetalSite write-off discussed below), depreciation, and amortization--decreased 11 percent in 2001 to $473.9 million from $534.2 million excluding a $16.2 million bad debt provision in 2000. The decline was due to lower volume and further fixed cost reductions in 2001. Expenses per ton increased to $168 from $160, a 5 percent increase due to the volume decline. The average number of employees decreased 13 percent from 2000 to 2001 while tons shipped per employee, a key measure of productivity, decreased from 689 tons to 671 tons. In addition to the 2001 restructuring charge, excluded from the above expenses for 2001 are a $3.3 million loss resulting from the disposition of the Company's interests in Mexico and a $1 million write-off of the Company's investment in MetalSite, Inc. Operating Profit (Loss). Operating loss was $74.6 million in 2001 and $4.1 million in 2000. Volume decline and the erosion of gross profit margins in addition to the restructuring costs and the inventory write-downs were the primary factors in the widening operating loss. In 2001, operating results were negatively impacted by a restructuring charge of $19.4 million and related inventory write-downs of $7.4 million, a Mexico loss of $3.3 million and a $1.0 million write-off of the Company's investment in MetalSite, Inc., offset in part by a gain on the sale of assets of $1.3 million. In 2000, operating results were negatively impacted by an additional $16.2 million bad debt provision, restructuring and plant closure costs of $27.8 million, offset in part by a pension curtailment gain of $4.4 million. Excluding these items in both periods, operating profit of $35.5 million in 2000 declined to a loss of $44.8 million in 2001. Other Expense. Other expenses, primarily interest and financing costs, decreased to $25.2 million in 2001 from $29.4 million in 2000. Lower levels of short term borrowing, due primarily to lower working capital requirements, as well as the substitution of lower cost financing for higher cost debt in the second half of 2001, were responsible for the decrease. Provision for Income Taxes. In 2001, the Company recorded an income tax benefit of $39.6 million compared to $8.4 million in 2000. The effective tax rate was 39.7 percent in 2001 compared with 25.0 percent in 2000. In 2000, the effect of non-tax-deductible expense on the lower pretax loss was primarily responsible for the lower effective tax rate. 15 Earnings Per Share. Diluted earnings per share from continuing operations was a loss of $2.44 in 2001 and $1.03 in 2000. Comparison of 2000 with 1999--Continuing Operations Net Sales. Net sales of $2.86 billion in 2000 were 3.6 percent higher than the $2.76 billion reported in 1999. The higher net sales was due primarily to a $28 per ton increase in average selling price, from $829 in 1999 to $857 in 2000, as tons shipped remained virtually unchanged. Almost all of the change in average selling price was attributable to surcharges on stainless products, which were passed through to customers. During 2000, the Company's share of the market remained virtually unchanged at 11 percent based on data from the Metals Service Center Institute. Gross Profit. Gross profit decreased 9.8 percent to $569.7 million in 2000 from $631.9 million in 1999. Gross profit as a percentage of sales decreased to 19.9 percent in 2000 from 22.9 percent in 1999 due primarily to the Company's inability to pass along to customers increases in material costs, as gross profit per ton declined to $171 from $190. Expenses. Expenses increased 3.3 percent in 2000 to $550.4 million from $533.0 million in 1999. Negatively impacting year 2000 was the additional provision to fully reserve for a $16.2 million receivable due from a west central Indiana coil converter which filed for bankruptcy. The converter, with which the Company had anticipated a long-term business relationship, experienced financial and operating problems, which precipitated its bankruptcy petition in January 2001. Excluding the additional provision, expenses of $534.2 million increased minimally from 1999. On that basis, expenses per ton remained unchanged at $160. The average number of employees decreased 5.5 percent from 1999 to 2000, and tons shipped per employee increased from 650 tons to 689 tons. Operating Profit (Loss). Operating loss in 2000 was $4.1 million compared with an operating profit of $97.1 million in 1999. In 2000, in addition to the $16.2 million receivable reserve discussed above, operating results were negatively impacted by restructuring and plant closure charges of $27.8 million, offset in part by a pension curtailment gain of $4.4 million. Operating profit in 1999 was negatively impacted by plant closure costs of $3.6 million, offset in part by a $1.8 million gain on the sale of real estate. Excluding these items in both periods, operating profit declined to $35.5 million in 2000 from $98.9 million in 1999, primarily due to gross profit margin erosion. Other Expense. Interest and other expense on debt increased to $29.7 million in 2000 from $24.2 million in the prior year. Higher average short-term borrowing in 2000, due to lower earnings and higher working capital requirements, was responsible for the increase in interest expense. Provision for Income Taxes. In 2000, the Company booked an income tax credit of $8.4 million as compared with an income tax expense of $34.8 million in 1999. The effective tax rate was 25.0 percent in 2000 and 47.1 percent in 1999. The effect of non-tax-deductible expense on the pretax loss reported in 2000 was primarily responsible for the change in the effective tax rate between the two years. 16 Earnings Per Share. Diluted earnings per share from continuing operations was a loss of $1.03 in 2000 compared with earnings of $1.56 in 1999. Liquidity and Financing The Company finished 2001 with cash and cash equivalents of $20.5 million compared with $23.8 million at year-end 2000. Net cash provided from operating activities was $246.5 million in 2001 compared with net cash used for operating activities of $62.7 million in 2000. The primary reasons for the increase in net cash provided from operations were the reduction of inventory and the sale of receivables. At the end of 2001, the Company had $105 million outstanding fundings under its trade receivables securitization facility, no short-term funded borrowing under its credit facility and $61 million of letters of credit issued under the credit facility. At year-end 2000, the Company had $97 million of borrowing and no letters of credit issued under the credit facility and did not have the trade receivables securitization facility. At year-end 2001, the Company had total short-term funding sources available of $116 million comprised of $42 million from the trade receivables securitization and $74 million from the credit facility, compared to 2000 year-end availability of $153 million under the credit facility. The Company ended 2001 with a $250 million trade receivables securitization facility and a $175 million credit facility secured by inventory (the latter amending its $250 million unsecured credit facility in 2001). On March 29, 2001, the Company closed a 364-day $250 million trade receivables securitization facility, in connection with which the Company formed a special-purpose, wholly-owned, bankruptcy-remote subsidiary for the sole purpose of buying receivables of certain subsidiaries of the Company and selling an undivided interest in all eligible receivables to certain commercial paper conduits. This subsidiary is part of the Company's consolidated financial statements. Fundings under this facility were limited to the lesser of a funding base, comprised of eligible receivables, and $250 million. The availability of funds under this facility was based on the level of the Company's receivables, which would have allowed $42 million of additional funding at December 31, 2001. The facility required the Company to comply with various affirmative and negative covenants. The facility required early amortization if the special-purpose subsidiary did not maintain a minimum equity requirement and terminated on the occurrence and failure to cure certain events, including, among other things, any failure of the special-purpose subsidiary to maintain certain ratios related to the collectability of the receivables. The facility also terminated if the Company failed to maintain long-term unsecured debt ratings of at least B by Standard and Poor's and B2 by Moody's. On March 15, 2002, the Company's lenders renewed the facility for a 364-day period ending March 14, 2003. The facility was amended to reduce maximum availability to $200 million. The amended facility does not terminate in the event the Company fails to maintain specified unsecured long-term debt ratings. The Company will be required to meet certain additional financial covenants, as described under "Subsequent Event" below. At December 31, 2000, the Company's credit facility was unsecured and had a borrowing limit of $250 million. In January 2001, availability was reduced to $125 million when the banks granted a temporary waiver due to the Company's technical default of the fixed charge coverage ratio related to fourth quarter 2000 results. On February 22, 2001, the Company revised the credit agreement terms with its banks to include a change of the credit line to $150 million, collateralization with the Company's inventory, and an adjustment of the interest rate to market, which was approximately one percentage point higher than the rate under the previous agreement. Subsequently, in July 2001, the Company amended the credit facility, increasing the amount to $175 million, extending the maturity from September 5, 2002 to July 19, 2004, amending certain covenants, and adjusting pricing. On December 21, 2001, the Company and lenders amended the facility, revising the minimum net worth covenant calculation. The $175 million credit facility remains secured by inventory and contains covenants that, among other things, restrict the payment of dividends, the amount of capital stock repurchases, the creation of certain kinds of secured indebtedness and of certain kinds of subsidiary debt, take or pay contracts, transactions with affiliates, 17 mergers and consolidations, and sales of assets. The facility also contains certain financial covenants, including covenants regarding net worth and the Company's debt-to-capital ratio, with which the Company is in compliance, and cross-default provisions to other financing arrangements. During 2001 the maximum borrowing under the credit facility was $104 million compared to $188 million the prior year. At December 31, 2001, $40 million of the $175 million credit facility was not available for borrowing. Of that $40 million, $15 million will become available if the Company meets certain financial ratios and the remainder will become available upon consent of all the lenders. Letters of credit issued under the facility reduce the amount available for borrowing. At December 31, 2001, the Company had $61 million of letters of credit outstanding, primarily related to the PBGC guaranty discussed below, and no short-term borrowings under the credit facility. Therefore, the Company had $74 million available under its credit facility at year-end 2001. As a condition of completing the ISC/Ispat Transaction, Ispat, ISC and the Company entered into an agreement with the Pension Benefit Guaranty Corporation ("PBGC") to provide certain financial commitments to reduce the underfunding of the ISC Pension Plan on a termination basis. These obligations include a guaranty of $50 million to the PBGC in the event of a distress or involuntary termination of the ISC Pension Plan (now the Ispat Inland Inc. Pension Plan). The agreement also required the Company to provide collateral for its guarantee in the event of a downgrade of the Company's unsecured debt rating below specified levels. On May 1, 2001, Moody's Investors Services reduced its rating on such unsecured debt to Ba3, below the specified levels; and in July 2001, the Company provided a letter of credit in the amount of $50 million to the PBGC under the credit facility discussed above. On July 16, 2001, the Company redeemed the $142.2 million outstanding balance of its 8-1/2% Notes that matured on that date. $100 million of the Company's 9-1/8% Notes due July 15, 2006 remain outstanding. The indenture under which the Notes were issued in 1996 contains covenants limiting, among other things, the creation of certain types of secured indebtedness, sale and leaseback transactions, the repurchase of capital stock, transactions with affiliates and mergers, consolidations and certain sales of assets. In addition, the Notes restrict the payment of dividends, although to a lesser extent than the credit facility described above. The Notes also include a cross-default provision in the event of a default in the revolving credit facility. The Company may not pay dividends or repurchase stock if the availability of funds under the credit facility is less than $25 million. The Company is also limited to a maximum payment of $10 million in dividends and stock purchases, excluding certain employee benefit transactions, in any calendar year. The Company has noncancellable operating leases for which future minimum rental commitments are estimated to total $57.9 million, including approximately $14.5 million in 2002, $11.7 million in 2003, $9.9 million in 2004, $4.6 million in 2005, $4.0 million in 2006 and $13.2 million thereafter. The Company believes that its present cash position, cash flow anticipated from operations, and cash available from the above facilities will provide sufficient liquidity to fund its capital program and meet any operating cash requirements that may arise for at least the next year. The ratio of the Company's long-term debt, including the portion due within one year, to total capitalization was 15 percent at December 31, 2001, compared with 26 percent at year-end 2000. Subsequent Event On March 15, 2002, the Company's lenders renewed its trade receivables securitization for a 364-day period ending March 14, 2003, reducing the facility from $250 million to $200 million, and modifying certain termination events and covenants including, among other things, eliminating the termination of the facility if the Company fails to maintain specified debt ratings on its long-term unsecured debt. Fundings under the renewed facility are limited to the lesser of a funding base, comprised of eligible receivables, and $200 million. The 18 amended facility requires the Company to comply with various affirmative and negative covenants and certain financial covenants, including covenants on net worth and the Company's debt-to-capital ratio. The Company is in compliance with these covenants. The amended facility requires early amortization if the special-purpose subsidiary does not maintain a minimum equity requirement. Additionally, the facility terminates on the occurrence and failure to cure certain events, including, among other things, any failure of the special-purpose subsidiary to maintain certain ratios related to the collectibility of the receivables and failure of the Company to meet the debt to capital ratio and net worth covenants. The facility also contains cross-default provisions to other financing arrangements. At March 15, 2002, the Company had total short-term funding sources available of $145 million comprised of $73 million from the trade receivables securitization facility and $72 million from the credit facility, compared to 2001 year end total short-term funding availability of $116 million. Capital Expenditures Capital expenditures during 2001 totaled $13.4 million, compared with $34.7 million in 2000. Capital expenditures were primarily for buildings, machinery and equipment. The Company anticipates capital expenditures, excluding acquisitions, to be in the range of $10 million to $20 million in 2002, which will continue to maintain or improve the Company's processing capacity. Restructuring During the fourth quarter of 2001, the Company recorded a pretax restructuring charge of $19.4 million to reflect costs associated with a reduction in workforce of approximately 180 people ($6.4 million), asset write-offs ($10.3 million) and lease obligations ($2.7 million) due to plant consolidation. In addition, the Company recorded inventory write-downs of $7.4 million resulting from streamlining certain product lines to facilitate consolidation of facilities. As part of the restructuring, certain facilities in Detroit and Holland, Michigan will be closed and the Company plans to consolidate two facilities in Chicago into one location. It is expected that the restructuring actions will be completed by year-end 2002. In preparation for the Company's planned disposition of one property, the Company has initiated environmental studies to determine the extent of any remediation that may be required. The result of the study and its potential impact on the Company's financial position is not yet known or estimable. During the second quarter of 2000, the Company recorded a $23.3 million restructuring provision to reflect costs associated with plant closings and regional office consolidations. The 2000 restructuring actions have been completed. ISC Sale Contingencies Pursuant to the ISC/Ispat Merger Agreement, the Company agreed to indemnify Ispat up to $90 million 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. There are also certain other covenant commitments made by the Company contained in the ISC/Ispat Merger Agreement which are not subject to the $90 million limit. In general, Ispat must have made 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. On May 29, 2001, the Company settled a number of disputes with Ispat that had arisen under the ISC/Ispat Merger Agreement. The settled disputes included Ispat's claim against the Company for indemnification in 19 connection with the resolution of a federal lawsuit and investigation relating to the sale of polymer-coated steel by ISC to a culvert fabricator for use in highway construction projects in Louisiana and other claims, but excluded environmental claims, for which Ispat may make claims until July 2003. Pursuant to the May 29, 2001 settlement, the Company paid $7.5 million to Ispat and the parties released certain claims each had against the other. The Company had recorded a $7.5 million pretax charge in 2000 for the potential exposure related to the Louisiana proceedings. Therefore, there was no impact of the settlement on 2001 results. The Company has purchased environmental insurance with coverage up to $90 million covering certain environmental matters payable directly to Ispat and ISC. Ispat has notified the Company of certain environmental matters and of certain environmental expenses that Ispat has incurred. Based on the current status of these matters, the Company is unable to determine whether any such environmental matters and expenses will result in indemnification payments to 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, the Company and a formerly majority-owned subsidiary of the Company that merged into the Company in 1999, 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 Company 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. As discussed previously, the Company provided a $50 million letter of credit to the PBGC in July 2001. The guaranty is included in the $90 million limit on the Company's indemnification obligations. Deferred Tax Asset At December 31, 2001, the Company had a net deferred tax asset of $105 million. The Company will be required to generate approximately $18 million of future taxable income to fully utilize the $6 million NOL carryforward asset related to regular federal income tax purposes at December 31, 2001, which expires in 2021. The Company will also be required to generate approximately $190 million of future taxable income to fully utilize the $9 million NOL carryforward asset available for state income tax purposes, which expires between 2010 and 2021. In addition to income generated by future profitable operations, these deferred tax assets will be partially offset by existing deferred tax liabilities within the carryforward period. The Company believes that it is more likely than not that this net deferred tax asset will be realized prior to its expiration. In addition to the NOL carryforward tax assets, in conjunction with the Alternative Minimum Tax ("AMT") rules, the Company had available at December 31, 2001, AMT credit carryforwards of approximately $54 million, which may be used indefinitely to reduce regular federal income taxes. The Company also had other general business credit carryforwards for tax purposes of approximately $3 million, which expire during the years 2003 through 2010. The Company believes that it is more likely than not that all of its tax credits will be realized. Recent Accounting Pronouncements The Company adopted Financial Accounting Standards Board Statement No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities," in the first quarter of 2001. The Company is currently not involved with derivative instruments or hedging activity as addressed in the Statement. In the past the Company had only limited involvement with hedges and did not use derivative financial instruments for speculative or trading purposes. The adoption of SFAS 133 had no impact on the Company's financial statements. 20 In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations." SFAS 141 addresses financial accounting and reporting for business combinations. Under the new standard, all business combinations entered into after June 30, 2001 are to be accounted for by the purchase method. In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets." SFAS 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets. SFAS 142 requires that goodwill no longer be amortized, but instead requires a transitional goodwill impairment assessment and annual impairment tests thereafter. SFAS 142 will also require that recognized intangible assets be amortized over their respective estimated useful lives. Any recognized intangible asset determined to have an indefinite useful life will not be amortized, but instead tested for impairment in accordance with the standard until its life is determined to no longer be indefinite. The Company will adopt SFAS 142 beginning January 1, 2002 and has determined that an impairment charge of $91.1 million will be required. The Company will record a non-cash charge of $91.1 million, or $82.2 million after tax, to write off the entire goodwill asset in the first quarter of 2002 and will report the charge as the cumulative effect of a change in accounting principle. In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143 ("SFAS 143"), "Accounting for Asset Retirement Obligations." This statement requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS 143 will become effective for the Company beginning January 1, 2003. The Company does not expect the adoption of this standard to have a material impact on the Company's financial statements. In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-Lived Assets" and it will be effective for the Company beginning January 1, 2002. SFAS 144 provides a single, comprehensive accounting model for impairment and disposal of long-lived assets and discontinued operations. The Company does not expect the adoption of this standard to have a material impact on the Company's financial statements. Other Matters Mexico In March 2000, the Company and Altos Hornos de Mexico, S.A. de C.V. ("AHMSA") entered into an agreement to sell the Company's 50 percent interest in their joint venture to AHMSA for $15 million, with payment due in July 2000. Upon finalizing the terms of payment for the sale, the Company exchanged its ownership in the joint venture for inventory and the joint venture's Guadalajara facility. Through December 31, 2001, the Company has received $8.4 million from the sale of a portion of the inventory. The cash received is accounted for as cash inflow from operating activities. On December 27, 2001, the Company sold its subsidiary, Ryerson Industries de Mexico S.A de C.V. to Grupo Collado, S.A. de C.V. As a result of the above transactions, the Company recorded a $3.3 million loss on the sale of its Mexican interests. IMF Steel International, Inc. During the third quarter of 2001, the Company and The MacSteel Group dissolved their joint venture, IMF Steel International, Inc. As a result of the dissolution, the Company received $2.9 million, which is accounted for as a cash inflow from investing activities. This transaction had no impact on the net earnings for 2001. 21 MetalSite, Inc. During the second quarter of 2001, the Company recorded a $1.0 million charge to write-off its investment in MetalSite, Inc. which was an Internet steel marketplace that halted commercial operations in the second quarter. Bankrupt Coil Converter In 2000, the Company fully reserved for a $16.2 million receivable due from a west central Indiana coil converter which filed for bankruptcy. In 2001, the Company wrote off the $16.2 million receivable. Outlook The Company's business has been impacted by decreasing volumes and declining prices starting in the second half of 2000 and continuing through year-end 2001, due to softening demand from customers in the cyclical downturn in the U.S. economy. We have yet to see sustainable signs of improvement in business conditions. During 2001 and 2000, the Company implemented cost-reduction programs to lower its cost structure, including workforce reduction and facility consolidations, which will be completed during 2002. Despite the implementation of these cost-savings measures, if weakness in product demand continues and volumes and pricing remain low, reduced sales could materially adversely affect operating income and earnings. If metal prices increase due to product demand, supplier consolidations, trade law changes or other factors, it is possible that we may not be able to pass our increased material costs fully to customers due to the competitive nature of the business. The Company's pension plan currently meets the minimum funding requirements under the Employee Retirement Income Security Act (ERISA). However, pension trust investment returns have been negatively impacted by the recent poor performance of the stock market. Although we do not expect to have any ERISA-required pension plan contributions during 2002, we may elect to make voluntary contributions to improve the plan's funded status. In the event that asset returns do not improve, the Company could have future sizeable pension contribution requirements beginning as soon as 2003. The Company is unable to determine the amount or timing of any such contributions required by ERISA or whether any such contributions would have a material adverse effect on the Company's financial condition or results of operations. 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 no 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 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 $105 million at December 31, 2001 and $252 million at December 31, 2000, as compared with the carrying value of $101 million and $243 million at year-end 2001 and 2000, respectively. 22 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Index to Consolidated Financial Statements
Page ---- Financial Statements Report of Independent Accountants....................................................................... 24 Consolidated Statements of Operations and Reinvested Earnings for the three years ended December 31, 2001..................................................................................... 25 Consolidated Statement of Cash Flows for the three years ended December 31, 2001........................ 26 Consolidated Balance Sheet at December 31, 2001 and 2000................................................ 27 Consolidated Statement of Comprehensive Income for the three years ended December 31, 2001.............. 28 Schedules to Consolidated Financial Statements: Property, Plant and Equipment........................... 28 Statement of Accounting and Financial Policies.......................................................... 29 Notes to Consolidated Financial Statements.............................................................. 30 Financial Statements Schedule II--Valuation and Qualifying Accounts................................................................... 45 All other schedules are omitted because they are not applicable. The required information is shown in the Financial Statements or Notes thereto.
23 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Ryerson Tull, Inc. In our opinion, the consolidated financial statements listed in the index appearing under Item 8 on page 23 present fairly, in all material respects, the financial position of Ryerson Tull, Inc. and its subsidiaries at December 31, 2001 and December 31, 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 8 on page 23 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, 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 our opinion. /s/ PRICEWATERHOUSECOOPERS LLP PricewaterhouseCoopers LLP Chicago, Illinois February 20, 2002 24 RYERSON TULL, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS (Dollars in millions, except per share data)
Year ended December 31, ---------------------------- 2001 2000 1999 -------- -------- -------- Net sales....................................................................... $2,243.5 $2,862.4 $2,763.5 Cost of materials sold....................................................... 1,821.8 2,292.7 2,131.6 -------- -------- -------- Gross profit.................................................................... 421.7 569.7 631.9 Operating expense............................................................ 442.1 518.6 500.9 Depreciation and amortization................................................ 31.8 31.8 32.1 Restructuring and plant closure costs........................................ 19.4 27.8 3.6 Loss on sale of Mexican interests............................................ 3.3 -- -- Write-off of investment in MetalSite, Inc.................................... 1.0 -- -- Pension curtailment gain..................................................... -- (4.4) -- Gain on sale of assets....................................................... (1.3) -- (1.8) -------- -------- -------- Operating profit (loss)......................................................... (74.6) (4.1) 97.1 Other expense Other income and expense, net................................................ (5.9) 0.3 1.0 Interest and other expense on debt........................................... (19.3) (29.7) (24.2) -------- -------- -------- Income (loss) before income taxes, minority interest and discontinued operations (99.8) (33.5) 73.9 Provision (benefit) for income taxes (Note 12).................................. (39.6) (8.4) 34.8 -------- -------- -------- Income (loss) before minority interest and discontinued operations.............. (60.2) (25.1) 39.1 Minority interest in RT......................................................... -- -- 0.7 -------- -------- -------- Income (loss) from continuing operations........................................ (60.2) (25.1) 38.4 Discontinued operations--Inland Steel Company Gain (loss) on sale (net of tax of $2.7 cr. in 2000)......................... -- (4.8) 17.3 -------- -------- -------- Net income (loss)............................................................... (60.2) (29.9) 55.7 Dividend requirements for preferred stock....................................... 0.2 0.2 0.2 -------- -------- -------- Net income (loss) applicable to common stock.................................... $ (60.4) $ (30.1) $ 55.5 ======== ======== ======== Per share of common stock Basic: Income (loss) from continuing operations................................... $ (2.44) $ (1.03) $ 1.56 Inland Steel Company--gain (loss) on sale.................................. -- (0.19) 0.71 -------- -------- -------- Basic earnings (loss) per share............................................ $ (2.44) $ (1.22) $ 2.27 ======== ======== ======== Diluted: Income (loss) from continuing operations................................... $ (2.44) $ (1.03) $ 1.56 Inland Steel Company--gain (loss) on sale.................................. -- (0.19) 0.70 -------- -------- -------- Diluted earnings (loss) per share.......................................... $ (2.44) $ (1.22) $ 2.26 ======== ======== ======== Retained earnings at beginning of year.......................................... $ 506.8 $ 541.8 $ 491.2 Net income (loss) for the year.................................................. (60.2) (29.9) 55.7 Dividends declared: Common ($0.20 per share)..................................................... (5.0) (4.9) (4.9) Preferred (Note 6)........................................................... (0.2) (0.2) (0.2) -------- -------- -------- Retained earnings at end of year................................................ $ 441.4 $ 506.8 $ 541.8 ======== ======== ========
See Notes to Consolidated Financial Statements on pages 30-44. 25 RYERSON TULL, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in millions)
Increase (decrease) in Cash Years ended December 31 -------------------------------- 2001 2000 1999 ------- ------ ------ Operating Activities Net income (loss)................................................. $ (60.2) $(29.9) $ 55.7 ------- ------ ------ Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation and amortization.................................. 31.8 31.8 32.1 Deferred income taxes.......................................... (7.2) (12.8) 27.6 Deferred employee benefit cost................................. (2.1) (6.2) (5.9) Restructuring and plant closure costs.......................... 19.4 27.8 3.6 (Gain) loss from sale of ISC, net of tax....................... -- 4.8 (17.3) Loss on the sale of Mexican interests.......................... 3.3 -- -- Write-off of investment in MetalSite, Inc...................... 1.0 -- -- Gain from sale of assets....................................... (1.3) -- (1.8) Change in: Receivables................................................ 168.8 22.5 (7.7) Inventories................................................ 176.7 (25.1) (8.2) Accounts payable........................................... (44.1) (63.6) (13.7) Other accrued liabilities.................................. (36.3) (18.0) (28.5) Other items.................................................... (3.3) 6.0 2.7 ------- ------ ------ Net adjustments............................................ 306.7 (32.8) (17.1) ------- ------ ------ Net cash provided by (used for) operating activities....... 246.5 (62.7) 38.6 ------- ------ ------ Investing Activities Capital expenditures.............................................. (13.4) (34.7) (31.6) Acquisitions (Note 13)............................................ -- -- (66.0) Proceeds from sale of investment.................................. 2.9 -- -- Proceeds from sales of assets..................................... 5.1 4.7 9.4 ------- ------ ------ Net cash used for investing activities..................... (5.4) (30.0) (88.2) ------- ------ ------ Financing Activities Long-term debt retired............................................ (142.2) (14.8) -- Net change in short-term borrowing................................ (97.0) 97.0 -- Dividends paid.................................................... (5.2) (5.1) (5.1) Acquisition of treasury stock..................................... -- (0.1) (5.4) ------- ------ ------ Net cash provided by (used for) financing activities....... (244.4) 77.0 (10.5) ------- ------ ------ Net decrease in cash and cash equivalents......................... (3.3) (15.7) (60.1) Cash and cash equivalents - beginning of year..................... 23.8 39.5 99.6 ------- ------ ------ Cash and cash equivalents - end of year........................... $ 20.5 $ 23.8 $ 39.5 ======= ====== ====== Supplemental Disclosures Cash paid (received) during the year for: Interest....................................................... $ 23.9 $ 28.7 $ 23.8 Income taxes, net.............................................. (23.5) 9.5 22.5
See Notes to Consolidated Financial Statements on pages 30-44. 26 RYERSON TULL, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET (Dollars in millions)
At December 31 ------------------ 2001 2000 -------- -------- Assets Current assets: Cash and cash equivalents................................................................. $ 20.5 $ 23.8 Receivables less provision for allowances, claims and doubtful accounts of $10.7 and $24.5, respectively...................................................................... 119.6 285.4 Inventories (Note 2)...................................................................... 399.5 567.8 Deferred income taxes (Note 12)........................................................... 0.7 -- -------- -------- Total current assets...................................................................... 540.3 877.0 Investments and advances..................................................................... 6.0 22.3 Property, plant and equipment, at cost, less accumulated depreciation (see details on page 28)......................................................................................... 249.7 274.7 Deferred income taxes (Note 12).............................................................. 104.7 69.4 Intangible pension asset..................................................................... 8.4 -- Prepaid pension costs (Note 10).............................................................. -- 23.5 Excess of cost over net assets acquired, less accumulated amortization of $40.5 and $35.6, respectively................................................................................ 91.1 96.5 Deferred charges and other assets............................................................ 9.7 8.7 -------- -------- Total assets.............................................................................. $1,009.9 $1,372.1 ======== ======== Liabilities Current liabilities: Accounts payable.......................................................................... $ 93.5 $ 137.6 Accrued liabilities:...................................................................... Salaries, wages and commissions........................................................ 17.1 19.4 Taxes.................................................................................. 12.9 22.6 Interest on debt....................................................................... 4.2 10.5 Terminated facilities costs (Note 11).................................................. 9.7 7.7 Other accrued liabilities.............................................................. 6.3 20.6 Deferred income taxes (Note 12).............................................................. -- 0.8 Short-term borrowing (Note 4)................................................................ -- 97.0 Long-term debt due within one year: Ryerson Tull 8.5% Notes (Note 5)......................... -- 142.5 -------- -------- Total current liabilities................................................................. 143.7 458.7 Long-term debt: Ryerson Tull 9.125% Notes due July 15, 2006 (Note 5)......................... 100.6 100.7 Deferred employee benefits (Note 10)......................................................... 213.9 151.0 -------- -------- Total liabilities......................................................................... 458.2 710.4 -------- -------- Commitments and contingencies (Note 15)...................................................... -- -- -------- -------- Stockholders' Equity Preferred stock, $1.00 par value, 15,000,000 shares authorized for all series, aggregate liquidation value of $3.5 in 2001 and 2000 (Note 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)...................................................... 862.5 862.8 Retained earnings............................................................................ 441.4 506.8 Restricted stock awards...................................................................... (0.1) (0.2) Treasury stock at cost--Common stock of 25,767,918 shares in 2001 and 25,782,477 shares in 2000 (Note 6)............................................................................ (753.6) (754.1) Accumulated other comprehensive income (Note 6).............................................. (49.2) (4.3) -------- -------- Total stockholders' equity................................................................ 551.7 661.7 -------- -------- Total liabilities and stockholders' equity................................................ $1,009.9 $1,372.1 ======== ========
See Notes to Consolidated Financial Statements on pages 30-44. 27 RYERSON TULL, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Dollars in millions)
Year ended December 31 ---------------------- 2001 2000 1999 ------- ------ ----- Net income (loss)............................................................ $ (60.2) $(29.9) $55.7 Other comprehensive income (loss):........................................... Foreign currency translation adjustments.................................. 2.2 (1.4) 0.4 Minimum pension liability adjustment, net of tax of $29.6 cr. in 2001 and $18.3 in 1999........................................................... (47.1) -- 26.9 ------- ------ ----- Comprehensive income (loss).................................................. $(105.1) $(31.3) $83.0 ======= ====== =====
SCHEDULES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions)
At December 31 -------------- 2001 2000 ------ ------ Property, Plant and Equipment Land and land improvements........... $ 28.9 $ 28.7 Buildings, machinery and equipment... 563.6 564.6 Transportation equipment............. 2.6 3.4 ------ ------ Total............................. 595.1 596.7 Less: Accumulated depreciation....... 345.4 322.0 ------ ------ Net property, plant and equipment. $249.7 $274.7 ====== ======
See Notes to Consolidated Financial Statements on pages 30-44. 28 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 interest represents outside shareholders' 13 percent interest in a majority-owned subsidiary of the Company prior to this subsidiary's merger into the Company on 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. 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 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. Shipping and Handling Fees and Costs. Shipping and handling fees and costs, primarily distribution costs, are classified as an operating expense in the financial statements. These costs totaled $64.1 million in 2001, $77.7 million in 2000 and $79.0 million in 1999. 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 2001 presentation. 29 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). In the fourth quarter of 2000, the Company recorded a $7.5 million pretax charge related to Ispat's claim for indemnification in connection with the resolution of a federal lawsuit. 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. Note 2:__Inventories Inventories were classified on December 31 as follows:
2001 2000 ------ ------ (Dollars in Millions) In process and finished products $399.3 $567.6 Supplies........................ 0.2 0.2 ------ ------ Total........................... $399.5 $567.8 ====== ======
Replacement costs for the LIFO inventories exceeded LIFO values by approximately $10 million and $41 million on December 31, 2001 and 2000, respectively. The liquidation of LIFO layers had a $22 million unfavorable impact on material cost in 2001. Note 3:__Accounts Receivable Securitization On March 29, 2001, the Company and certain of its subsidiaries completed arrangements for a $250 million 364-day trade receivables securitization facility with a group of financial institutions. The Company formed a special-purpose, wholly-owned, bankruptcy-remote subsidiary ("Ryerson Tull Receivables LLC") for the sole purpose of buying receivables of certain subsidiaries of the Company and selling an undivided interest in all eligible trade accounts receivable to certain commercial paper conduits. This securitization facility includes substantially all of the Company's accounts receivable. Fundings under the facility are limited to the lesser of a funding base, comprised of eligible receivables, or $250 million. Sales of accounts receivable are reflected as a reduction of "receivables less provisions for allowances, claims and doubtful accounts" in the Consolidated Balance Sheet and the proceeds received are included in cash flows from operating activities in the Consolidated Statement of Cash Flows. Proceeds from the sales of receivables are less than the face amount of accounts receivable sold by an amount equal to a discount on sale that approximates the conduits' financing cost of issuing their own commercial paper, which is backed by their ownership interests in the accounts receivable sold by the special purpose subsidiary, plus an agreed-upon margin. These costs, totaling $8.5 million in 2001, are charged to "other income and expense, net" in the Consolidated Statement of Operations. 30 Generally, the facility provides that as payments are collected from the sold accounts receivable, the special- purpose subsidiary may elect to have the commercial paper conduits reinvest the proceeds in new accounts receivable. The commercial paper conduits, in addition to their rights to collect payments from that portion of the interests in the accounts receivable owned by them, also have rights to collect payments from that portion of the ownership interest in the accounts receivable that is owned by the special-purpose subsidiary. In calculating the fair market value of the Company's retained interest in the receivables, the book value of the receivables represented the best estimate of the fair market value due to the current nature of these receivables. The facility, scheduled to expire March 28, 2002, requires the Company to comply with various affirmative or negative covenants and requires early amortization if the special-purpose subsidiary does not maintain a minimum equity requirement. The facility also terminates on the occurrence and failure to cure certain events, including, among other things, any failure of the special-purpose subsidiary to maintain certain ratios related to the collectability of the receivables, or the Company's failure to maintain long-term unsecured debt ratings of at least B by Standard and Poor's and B2 by Moody's. The table below summarizes certain cash flows from and paid to securitization trusts ($ in millions):
Twelve Months Ended December 31, 2001 ------------------- Proceeds from new securitizations... $ 200 Proceeds from collections reinvested $1,084
Note 4:__Borrowing Arrangements On December 31, 2001, the Company had no borrowing outstanding under its credit facility. The facility, which extends to July 2004, requires compliance with various financial covenants including minimum net worth and debt-to-capital ratios. Due to fourth quarter 2000 results, the Company was in technical default of the fixed charge coverage ratio under its revolving credit agreement. The committed banks granted a temporary waiver of the default, in connection with which the amount available under the Company's line was reduced from $250 million to $125 million. On February 22, 2001, the Company negotiated revised revolving credit agreement terms with its banks. Included in the revised terms were a change of the credit line to $150 million collateralized with the Company's inventory and an adjustment of the interest rate to market, which was approximately one percentage point higher than the rate under the previous agreement. On July 25, 2001, the Company amended the facility, increasing the credit line to $175 million, extending the maturity to July 19, 2004, amending certain covenants, and adjusting pricing. On December 21, 2001, the Company and lenders amended the facility, revising the minimum net worth covenant calculation. Note 5:__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. The Notes also include a cross-default provision in the event of a default in the revolving credit facility. 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. On June 21, 2000, the Company purchased and retired $4.8 million of the $150 million 8.5% Notes maturing on July 15, 2001. On August 28, 2000, the Company purchased and retired an additional $3.0 million of the $150 million 8.5% Notes. 31 On July 16, 2001, the Company redeemed the $142.2 million outstanding balance of its 8.5% Notes that matured on that date. Maturity of long-term debt due within five years is $100 million in 2006. See Note 15 regarding commitments and contingencies for other scheduled payments. Note 6:__Capital Stock and Accumulated Other Comprehensive Income On December 31, 2001, 3,805,661 shares of common stock remained reserved for issuance under the Company's various stock plans and 80,230 are reserved for issuance 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. The following table details changes in capital accounts:
Accumulated Other Comprehensive Capital in Income Preferred Excess of -------------------- Common Stock Treasury Stock Stock Series A Par Value Foreign Minimum -------------- ---------------- -------------- ---------- Currency Pension Shares Dollars Shares Dollars Shares Dollars Dollars Translation Liability ------ ------- ------- ------- ------ ------- ------- ----------- --------- (Shares in Thousands and Dollars in Millions) Balance at January 1, 1999................... 50,556 $50.6 (28,799) $(845.3) 82 $0.1 $897.2 $(3.3) $(26.9) Conversion of RT Class A Common........... -- -- 3,265 95.6 -- -- (33.7) -- -- Acquisition of treasury stock............. -- -- (264) (5.4) -- -- -- -- -- Issued under employee stock plans......... -- -- 6 0.2 -- -- (0.1) -- -- Minimum pension liability (net of tax of $18.3)................................... -- -- -- -- -- -- -- -- 26.9 Foreign currency translation.............. -- -- -- -- -- -- -- 0.4 -- Other changes............................. -- -- 9 0.2 -- -- (0.1) -- -- ------ ----- ------- ------- -- ---- ------ ----- ------ Balance at December 31, 1999................. 50,556 50.6 (25,783) (754.7) 82 0.1 863.3 (2.9) -- Acquisition of treasury stock............. -- -- (3) (0.1) -- -- -- -- -- Issued under employee stock plans......... -- -- (2) -- -- -- (0.1) -- -- Conversion of Series A Preferred Stock.... -- -- 1 0.1 (1) -- -- -- -- Foreign currency translation.............. -- -- -- -- -- -- -- (1.4) -- Other changes............................. -- -- 5 0.6 -- -- (0.4) -- -- ------ ----- ------- ------- -- ---- ------ ----- ------ Balance at December 31, 2000................. 50,556 50.6 (25,782) (754.1) 81 0.1 862.8 (4.3) -- Issued under employee stock plans......... -- -- 5 0.2 -- -- (0.1) -- -- Conversion of Series A Preferred Stock.... -- -- 1 -- (1) -- -- -- -- Foreign currency translation.............. -- -- -- -- -- -- -- 2.2 -- Minimum pension liability (net of tax of $29.6 cr.)............................... -- -- -- -- -- -- -- -- (47.1) Other changes............................. -- -- 8 0.3 -- -- (0.2) -- -- ------ ----- ------- ------- -- ---- ------ ----- ------ Balance at December 31, 2001................. 50,556 $50.6 (25,768) $(753.6) 80 $0.1 $862.5 $(2.1) $(47.1) ====== ===== ======= ======= == ==== ====== ===== ======
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 32 in 2001, 2000 and 1999 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:
2001 2000 1999 ------ ------ ----- (Dollars in Millions (except per share data)) Net income (loss)--as reported. $(60.2) $(29.9) $55.7 Net income (loss)--pro forma... $(61.9) $(32.8) $53.0 Earnings per share--as reported $(2.44) $(1.22) $2.27 Earnings per share--pro forma.. $(2.51) $(1.34) $2.16
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 2001: dividend yield of 1.00%; expected volatility of 47.20%; risk-free interest rate of 5.11%; and expected term of five years. In March 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. 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, 2001, a total of 595,127 shares were available for future grants. Options remain outstanding and exercisable under the 1995 and 1992 Incentive Stock Plans; however, no further options may be granted under these plans. 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. During 2001, options were granted to 13 executive officers under the 1999 Plan. The following summarizes the status of options under the plans for the periods indicated:
Weighted Option Exercise Average Number of Price or Range Exercise Shares Per Share Price --------- --------------- -------- 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 Granted....................................................... 450,100 12.13-19.56 19.47 Exercised..................................................... -- -- -- Forfeited..................................................... (30,919) 17.13-45.42 27.70 Expired....................................................... (144,434) 21.38-45.42 32.44 --------- ------------ ------
33
Weighted Option Exercise Average Number of Price or Range Exercise Shares Per Share Price --------- --------------- -------- Options (granted and unexercised) at December 31, 2000 (1,402,360 exercisable)................................................... 2,206,783 12.13-48.44 24.48 Granted....................................................... 1,045,000 8.88 8.88 Exercised..................................................... -- -- -- Forfeited..................................................... (187,482) 8.88-41.55 19.44 Expired....................................................... (161,817) 17.13-41.55 26.71 --------- ----------- ----- Options (granted and unexercised) at December 31, 2001 (1,505,018 exercisable)................................................... 2,902,484 8.88-48.44 19.06 ========= =========== =====
- -------- The weighted-average fair value of options granted during 2001 was $3.94. The following table summarizes information about fixed-price stock options outstanding at December 31, 2001:
Options Outstanding Options Exercisable ------------------------------------------ ------------------------ Weighted- Weighted- Weighted- Number of Average Remaining Average Number of Average Range of Exercise Prices Shares Contractual Life Exercise Price Shares Exercise Price - ------------------------ --------- ----------------- -------------- --------- -------------- $25.50 to $34.31........ 27,087 1/2 year $34.15 27,087 $34.15 26.13 to 35.16........ 48,357 1 years 34.72 48,357 34.72 30.88.................. 92,000 2 years 30.88 92,000 30.88 41.55 to 48.44........ 78,886 2 years 42.85 78,886 42.85 28.50 to 38.35........ 122,818 3 years 34.52 122,818 34.52 24.69 to 33.22........ 252,690 4 years 32.64 252,690 32.64 23.05.................. 168,425 5 years 23.05 168,425 23.05 21.93 to 24.18........ 223,870 6 years 21.95 223,870 21.95 32.07.................. 17,080 6 years 32.07 17,080 32.07 16.03 to 24.81........ 468,311 7 years 16.81 338,518 16.91 19.56.................. 404,460 8 years 19.56 133,472 19.56 12.13.................. 5,500 8 years 12.13 1,815 12.13 8.88.................. 993,000 9 years 8.88 -- N/A
Stock appreciation rights ("SARs") may also be granted with respect to shares subject to outstanding options. No SAR has been granted since 1990 under the Company Plan. However, in 1998, SARs were granted under the Ryerson Tull 1996 Incentive Stock Plan and were substituted by Company SARs after the merger of the Company and RT. 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 and 1992 Plans, for the granting of restricted stock and performance awards to officers and other key employees. During 2001, no performance awards were granted while 3,337 shares subject to performance awards were forfeited. Also during 2001, 2,995 shares of restricted stock were issued, no shares of previously granted restricted stock vested, while 3,500 shares were forfeited. During 2000, performance awards totaling 56,800 shares were granted, while 3,014 shares subject to performance awards were forfeited. Also during 2000, 2,440 shares of previously granted restricted stock vested, while 7,252 shares were forfeited. No new restricted stock was issued in 2000. 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. At December 31, 2001, there were 18,600 shares of restricted stock issued, but not vested, and 8,050 shares from performance awards earned, but not issued and not vested. 34 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 may not be exercised prior to the day after the six-month anniversary of the grant date and expire no later than 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 18, 2001, seven directors were granted a total of 31,990 option shares at an option price of $10.48 per share. Half of the options vested on October 19, 2001 with the remaining option shares vesting on April 18, 2002. On April 27, 2000, seven directors were granted a total of 26,180 option shares at an option price of $12.13. All of the option shares granted in 2000 have vested. 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 was not 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:
Option Exercise Number of Price or Range Weighted Average Shares Per Share Exercise Price ---------- --------------- ---------------- 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.......................... -- -- --
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. 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 upon 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 35 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 it holds 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 no involvement with derivative financial instruments and does not use them for speculative or trading purposes. 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 $105 million at December 31, 2001 and $252 million at December 31, 2000, as compared with the carrying value of $101 million and $243 million at year-end 2001 and 2000, respectively. 36 Note 10:__Retirement Benefits Prior to January 1, 1998, the Company's non-contributory defined benefit pension plan covered certain employees, retirees and their beneficiaries. Benefits provided to participants of the plan were 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 (the "Ryerson Tull Savings Plan"). Effective March 31, 2000, benefits for certain salaried employees of J. M. Tull Metals Company and AFCO Metals under the Ryerson Tull Pension Plan were similarly frozen, with the employees becoming participants in the Ryerson Tull Savings Plan. Salaried employees vested in their benefits accrued under the defined benefit plan at December 31, 1997, and March 31, 2000, respectively, are entitled to those benefits upon retirement. Certain transition rules have been established for those salaried employees meeting specified age and service requirements. For 2001, 2000 and 1999, expense recognized for such defined contribution plan was $6.5 million, $6.5 million and $5.3 million, respectively. The Company has other deferred employee benefit plans, including a supplemental pension plan, the liability for which totaled $5.8 million at year-end 2001 and $8.1 million at year-end 2000. 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 postretirement benefits, primarily retired health care, were as follows:
2001 2000 ---- ---- Discount rate for calculating obligations.............. 7.50% 8.00% Discount rate for calculating net periodic benefit cost 8.00 7.75 Expected rate of return on plan assets................. 9.50 9.50 Rate of compensation increase.......................... 4.00 4.00
37 The data in the following tables pertain to continuing operations only.
Year ended September 30 ------------------------- Pension Benefits Other Benefits - ---------- ------------- 2001 2000 2001 2000 ---- ---- ----- ----- (Dollars in millions) Change in Benefit Obligation Benefit obligation at beginning of year........ $330 $315 $ 133 $ 106 Service cost................................... 4 5 2 2 Interest cost.................................. 25 23 10 8 Plan amendments................................ 2 2 -- (1) Actuarial loss................................. 20 12 25 25 Company restructuring.......................... 3 1 1 1 Curtailment.................................... -- (4) -- -- Benefits paid.................................. (25) (24) (9) (8) ---- ---- ----- ----- Benefit obligation at end of year................. $359 $330 $ 162 $ 133 ---- ---- ----- ----- Accumulated benefit obligation at end of year..... $357 $328 N/A N/A ==== ==== ===== ===== Change in Plan Assets Plan assets at fair value at beginning of year. $368 $325 -- -- Actual return on plan assets................... (49) 67 -- -- Benefits paid.................................. (25) (24) -- -- ---- ---- ----- ----- Plan assets at fair value at end of year.......... $294 $368 -- -- ==== ==== ===== ===== Reconciliation of Prepaid (Accrued) and Total Amount Recognized Funded status.................................. $(65) $ 38 $(162) $(133) Unrecognized net (gain)/loss................... 79 (21) 30 5 Unrecognized prior service cost................ 8 7 (15) (17) ---- ---- ----- ----- Prepaid (accrued) benefit cost at September 30. 22 24 (147) (145) Change in account, October-December............ -- -- 2 2 ---- ---- ----- ----- Net amount recognized at December 31.............. $ 22 $ 24 $(145) $(143) ==== ==== ===== ===== Amounts recognized in statement of financial position consist of: Prepaid (accrued) benefit cost................. $ -- $ 24 $(145) $(143) Accrued benefit liability...................... (63) -- -- -- Intangible asset............................... 8 -- -- -- Accumulated other comprehensive income......... 77 -- -- -- ---- ---- ----- ----- Net amount recognized.......................... $ 22 $ 24 $(145) $(143) ==== ==== ===== =====
For measurement purposes, the annual rate of increase in the per capita cost of covered health care benefits was 4.5 percent in 2001 and 7 percent in 2002, grading down to 5 percent in 2006, the level at which it is expected to remain. 38
Pension Benefits Other Benefits --------------- ------------- 2001 2000 2001 2000 ---- ---- ---- ---- (Dollars in millions) Components of net periodic benefit cost Service cost........................ $ 4 $ 5 $ 2 $ 2 Interest cost....................... 25 23 10 8 Expected return on assets........... (31) (30) -- -- Amortization of prior service cost.. 1 1 (2) (2) Recognized actuarial (gain)/loss.... -- -- -- (1) ---- ---- ---- ---- Net periodic benefit cost........... $ (1) $ (1) $ 10 $ 7 ==== ==== ==== ====
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:
1% 1% increase decrease -------- -------- (Dollars in Thousands) Effect on service cost plus interest cost.. $ 449 $ (359) Effect on postretirement benefit obligation 6,019 (4,815)
Note 11: Restructuring Charge In the fourth quarter of 2001, the Company recorded a restructuring charge of $19.4 million as a result of workforce reductions and plant consolidation. As part of the restructuring, certain facilities in Detroit and Holland, Michigan will be closed and the Company plans to consolidate two facilities into one location in Chicago. Included in the charge is severance for 178 employees. As of December 31, 2001, 56 employees have been separated from the Company as a result of the restructuring initiative. Details of the restructuring charge are as follows:
Restructuring Balance at Charge Utilized December 31, 2001 ------------- -------- ----------------- (In millions) Write-down of long-lived assets $10.3 $10.3 $-- Employee costs................. 6.4 4.1 2.3 Tenancy costs and other........ 2.7 -- 2.7 ----- ----- ---- $19.4 $14.4 $5.0 ===== ===== ====
It is expected that the restructuring actions will be completed by year-end 2002. In preparation for the Company's planned disposition of one property, the Company has initiated environmental studies to determine the extent of any remediation that may be required. The result of the study and its potential impact on the Company's financial position is not yet unknown or estimable. During 2000, the Company recorded restructuring and plant closure costs of $27.8 million, $23.3 million of which related to a restructuring charge taken in the second quarter. The charge was the result of realigning geographic divisions to improve responsiveness to local markets, exiting non-core businesses and centralizing administrative services to achieve economies of scale. Included in the charge was severance for 319 employees. There are no employees remaining to be separated from the Company as a result of the restructuring initiative. The balance related to employee costs at December 31, 2001 will be paid through mid-2002 pursuant to severance agreements with certain former employees. The balance related to tenancy costs will be paid through 2008. Details of the restructuring charge are as follows:
Balance at Restructuring December 31, Charge Utilized 2001 - ------------- -------- ------------ (In millions) Write-down of long-lived assets $ 9.3 $ 9.3 $ -- Employee costs................. 7.4 7.3 0.1 Tenancy costs and other........ 6.6 2.0 4.6 ----- ----- ----- $23.3 $18.6 $ 4.7
39 The restructuring actions were completed by December 31, 2000. Note 12:__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:
Years Ended December 31 - ----------------------- 2001 2000 1999 - ------ ------ ----- (Dollars in Millions) Current income taxes: Federal.................... $ (1.8) $ 3.7 $14.0 State and foreign.......... (0.1) 1.4 6.3 ------ ------ ----- (1.9) 5.1 20.3 Deferred income taxes....... (37.7) (13.5) 14.5 ------ ------ ----- Total tax expense (benefit) $(39.6) $ (8.4) $34.8 ====== ====== =====
The components of the deferred income tax assets and liabilities arising under FASB Statement No. 109 were as follows:
December 31 -------------------- 2001 2000 - - ---- ---- (Dollars in Millions) Deferred tax assets (excluding post-retirement benefits other than pensions): Net operating loss and tax credit carryforwards........................... $ 72 $29 Bad debt allowances....................................................... 2 9 Pension liability......................................................... 22 7 Other deductible temporary differences.................................... 21 18 Less valuation allowances................................................. -- (1) ---- --- 117 62 ==== === Deferred tax liabilities: Fixed asset basis difference.............................................. 45 41 Inventory basis difference................................................ 26 --- Other taxable temporary differences....................................... -- 9 ---- --- 71 50 ==== === Net deferred asset (excluding post-retirement benefits other than pensions).. 46 12 FASB Statement No. 106 impact (post-retirement benefits other than pensions). 59 57 ---- --- Net deferred tax asset....................................................... $105 $69 ==== ===
The Company will be required to generate approximately $18 million of future taxable income to fully utilize the $6 million NOL carryforward asset related to federal income tax purposes at December 31, 2001, which expires in 2021. The Company will also be required to generate approximately $190 million of pretax income to fully utilize the $9 million NOL carryforward asset available for state income tax purposes which expires between 2010 and 2021. In addition to income generated by future profitable operations, these deferred tax assets will be partially offset by existing deferred tax liabilities within the carryforward period. The Company believes that it is more likely than not that this net deferred tax asset will be realized prior to its expiration. In addition to the NOL carryforward tax assets, in conjunction with the Alternative Minimum Tax ("AMT") rules, the Company had available at December 31, 2001, AMT credit carryforwards of approximately $54 40 million, which may be used indefinitely to reduce regular federal income taxes. The Company also had other general business credit carryforwards for tax purposes of approximately $3 million, which expire during the years 2003 through 2010. 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, 2001, the deferred tax asset related to the Company's FASB Statement No. 106 obligation was $59 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. Income taxes on continuing operations differ from the amounts computed by applying the federal tax rate as follows:
Years ended December 31 ----------------------- 2001 2000 1999 - - ------ ------ ----- (Dollars in millions) Federal income tax expense computed at statutory tax rate of 35% $(34.9) $(11.7) $25.9 Additional taxes or credits from: State and local income taxes, net of federal income tax effect. (4.0) (0.3) 3.8 Non-deductible expenses........................................ 2.9 4.9 3.0 Capital loss carryback......................................... (2.3) -- -- Foreign losses not includable in federal taxable income........ 0.6 1.5 1.3 Canadian taxes................................................. (0.5) 0.2 0.4 Change in estimate............................................. (1.0) (3.0) -- All other, net.................................................. (0.4) -- 0.4 ------ ------ ----- Total income tax provision (benefit)..................... $(39.6) $ (8.4) $34.8 ====== ====== =====
Note 13:__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 had this acquisition occurred at the beginning of the year is not material. 41 Note 14:__ Earnings Per Share
2001 2000 1999 ------ ------ ----- Basic earnings (loss) per share (Dollars and Shares in Millions - ------------------------------- (except per share data)) Income (loss) from continuing operations before discontinued operations and extraordinary items...................................................... $(60.2) $(25.1) $38.4 Less preferred stock dividends............................................. 0.2 0.2 0.2 ------ ------ ----- Income (loss) from continuing operations available to common stockholders.. (60.4) (25.3) 38.2 Gain (loss) on sale of discontinued operations............................. -- (4.8) 17.3 ------ ------ ----- Net income (loss) available to common stockholders......................... $(60.4) $(30.1) $55.5 ====== ====== ===== Average shares of common stock outstanding................................. 24.8 24.8 24.4 ====== ====== ===== Basic earnings (loss) per share From continuing operations................................................ $(2.44) $(1.03) $1.56 Gain (loss) on sale of discontinued operations............................ -- (0.19) 0.71 ------ ------ ----- Basic earnings (loss) per share............................................ $(2.44) $(1.22) $2.27 ====== ====== =====
2001 2000 1999 ------ ------ ----- Diluted earnings (loss) per share (Dollars and Shares in Millions - --------------------------------- (except per share data)) Income (loss) from continuing operations available to common stockholders. $(60.4) $(25.3) $38.2 Gain (loss) on sale of discontinued operations............................ -- (4.8) 17.3 ------ ------ ----- Net income (loss) available to common stockholders and assumed conversions $(60.4) $(30.1) $55.5 ====== ====== ===== Average shares of common stock outstanding................................ 24.8 24.8 24.4 Dilutive effect of stock options.......................................... 0.3 -- 0.2 ------ ------ ----- Shares outstanding for diluted earnings per share calculation............. 25.1 24.8 24.6 ====== ====== ===== Diluted earnings (loss) per share From continuing operations............................................... $(2.44) $(1.03) $1.56 Gain (loss) on sale of discontinued operations........................... -- (0.19) 0.70 ------ ------ ----- Diluted earnings (loss) per share......................................... $(2.44) $(1.22) $2.26 ====== ====== =====
Note 15:__ Commitments and Contingencies ISC/Ispat Transaction 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 have made 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. By letter dated May 11, 1999, Ispat advised the Company of its involvement in a civil lawsuit and federal criminal grand jury proceeding in Louisiana and notified the Company of its intention to seek indemnification from the Company in connection with the Louisiana proceedings. In letters dated March 31, 2000, Ispat notified the Company that Ispat was asserting claims against the Company under the Merger Agreement related to certain pension liabilities, insurance premiums, property taxes, environmental matters, intellectual property and the Louisiana proceedings. In January 2001, Ispat settled the Louisiana proceedings for $15 million. Ispat made a 42 demand on the Company for indemnification of that settlement amount. On May 29, 2001, the Company entered into a settlement agreement with Ispat and settled the claims, excluding environmental matters, for which Ispat may make claims until July 2003. The Company paid $7.5 million to Ispat and the parties released certain claims each had against the other. The Company had recorded a $7.5 million pretax charge in 2000 for the potential exposure related to the Louisiana proceedings and therefore there was no impact of the settlement on fiscal 2001 results. The Company has purchased environmental insurance with coverage up to $90 million covering certain environmental matters payable directly to Ispat and ISC. Ispat has notified the Company of certain environmental matters and of certain environmental expenses that Ispat has incurred. Based on the current status of these matters, the Company is unable to determine whether any such environmental matters and expenses will result in indemnification payments to 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. In July 2001, the Company provided a $50 million letter of credit to the PBGC. The guaranty is included in the $90 million limit on the Company's indemnification obligations. Bankrupt Coil Converter In 2000, the Company fully reserved for a $16.2 million receivable due from a west central Indiana coil converter which filed for bankruptcy. In 2001, the Company wrote off the $16.2 million receivable. Mexico In March 2000, the Company and Altos Hornos de Mexico, S.A. de C.V. ("AHMSA") entered into an agreement to sell the Company's 50 percent interest in their joint venture, Ryerson de Mexico, to AHMSA for $15 million, with payment due in July 2000. Upon finalizing the terms of payment for the sale, the Company exchanged its ownership in the joint venture for inventory and the joint venture's Guadalajara facility. Through December 31, 2001, the Company has received $8.4 million from the sale of a portion of the inventory. The cash received is accounted for as cash inflow from operating activities. On December 27, 2001, the Company sold its subsidiary, Ryerson Industries de Mexico, S.A. de C.V. to Grupo Collado, S.A. de C.V. As a result of the above transactions, the Company recorded a $3.3 million loss on the sale of its Mexican interests. IMF Steel International, Inc. During the third quarter of 2001, the Company and The MacSteel Group dissolved their joint venture, IMF Steel International, Inc. As a result of the dissolution, the Company received $2.9 million, which is accounted for as a cash inflow from investing activities. This transaction had no impact on the net earnings for the period. MetalSite, Inc. During the second quarter of 2001, the Company recorded a $1.0 million charge to write-off its investment in MetalSite, Inc., which was an Internet steel marketplace that halted commercial operations in the second quarter. 43 Lease Obligations & Other The Company has noncancellable operating leases for which future minimum rental commitments are estimated to total $57.9 million, including approximately $14.5 million in 2002, $11.7 million in 2003, $9.9 million in 2004, $4.6 million in 2005, $4.0 million in 2006 and $13.2 million thereafter. Rental expense under operating leases totaled $19.3 million in 2001, $19.7 million in 2000 and $20.2 million in 1999. There are various claims and pending actions against the Company other than those related to the ISC/Ispat Transaction. The amount of liability, if any, for those claims and actions at December 31, 2001 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. Note 16:__Subsequent Event The Company has completed its assessment of the impact of FAS 142, Goodwill and Other Intangible Assets, which came into effect on January 1, 2002. As a result, the Company will record a non-cash charge of $91.1 million, or $82.2 million after tax, to write off the entire goodwill amount as of January 1, 2002 as a cumulative effect of change in accounting principle in the first quarter of 2002. The write-down is largely dictated by the fact the Company's market value is less than its book value. The adoption of the new accounting rule will reduce annual amortization expense by approximately $5 million. 44 RYERSON TULL, INC. AND SUBSIDIARY COMPANIES SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS For the Years Ended December 31, 2001, 2000 and 1999 (Dollars in Millions)
Provisions for Allowances - --------------------------------------- Balance at Additions Deductions Balance Beginning Charged from at End Years Ended December 31, of Year to Income Reserves of Year ------------------------ ---------- --------- ---------- ------- 2001.......... $24.5 $ 7.3 $(20.2)(A) $10.7 (0.9)(B) 2000.......... $ 7.2 $19.8 $ (2.5)(A) $24.5 1999.......... $ 6.9 $ 4.2 $ (3.4)(A) $ 7.2 (0.5)(B)
NOTES: (A) Bad debts written off during the year (B) Allowances granted during the year 45 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 will be furnished to stockholders in connection with the Annual Meeting of Stockholders to be held on May 8, 2002, 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 will be furnished to stockholders in connection with the Annual Meeting of Stockholders to be held on May 8, 2002, 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 will be furnished to stockholders in connection with the Annual Meeting of Stockholders scheduled to be held on May 8, 2002, 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 will be furnished to stockholders in connection with the Annual Meeting of Stockholders to be held on May 8, 2002, and is hereby incorporated by reference herein. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) Documents Filed as a Part of This Report. 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. None. 46 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 By: /S/ NEIL S. NOVICH ----------------------------- Neil S. Novich Chairman, President and Chief Executive Officer Date: March 19, 2002 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.
Signature Title Date --------- ----- ---- /S/ NEIL S. NOVICH Chairman, President and March 19, 2002 - ------------------------- Chief Executive Neil S. Novich Officer and Director (Principal Executive Officer) /S/ JAY M. GRATZ Executive Vice March 19, 2002 - ------------------------- President and Chief Jay M. Gratz Financial Officer (Principal Financial Officer) /S/ LILY L. MAY Controller (Principal March 19, 2002 - ------------------------- Accounting Officer) Lily L. May JAMESON A. BAXTER Director ) ) ) ) ) ) RICHARD G. CLINE Director ) ) GARY L. CRITTENDEN Director ) ) JAMES A. HENDERSON Director ) /S/ JAY M. GRATZ ) By: ) ----------------- GREGORY P. JOSEFOWICZ Director ) Jay M. Gratz ) Attorney-in-fact JERRY K. PEARLMAN Director ) March 19, 2002 ) RONALD L. THOMPSON Director ) )
47 EXHIBIT INDEX
Exhibit Number Description - ------ ----------- 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. (Filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 1-9117), and incorporated by reference herein.) 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 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 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 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, as amended........................................................ 10.2* Ryerson Tull 1999 Incentive Stock Plan, as amended.................................................... 10.3* Ryerson Tull 1996 Incentive Stock Plan, as amended. (Filed as Exhibit 10.14 to Pre-merger Ryerson Tull Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 1-11767), 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.) 10.6* Ryerson Tull Supplemental Retirement Plan for Covered Employees, as amended........................... 10.7* Ryerson Tull Nonqualified Savings Plan, as amended.................................................... 10.8* Outside Directors Accident Insurance Policy, with endorsement (Filed as Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 (File No. 1- 9117), and incorporated by reference herein.)
- -------- * Management contract or compensatory plan or arrangement required to be filed as an exhibit to the Company's Annual Report on Form 10-K. 48
Exhibit Number Description - ------ ----------- 10.9* 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.) 10.10* Ryerson Tull Directors' Compensation Plan, as amended. (Filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000 (File No. 1-9117), and incorporated by reference herein.) 10.11* 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.) 10.12* Amendment dated November 6, 1998 to the Severance Agreement dated January 28, 1998 referred to in Exhibit 10.11 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.) 10.13* Amendment dated June 30, 2000 to the Severance Agreement dated January 28, 1998 referred to in Exhibit 10.11 between the Company and Jay M. Gratz. (Filed as Exhibit 10.14 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 (File No. 1-9117), and incorporated by reference herein.) 10.14* 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.) 10.15* 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.) 10.16* Schedule to Change in Control Agreement as referred to in Exhibit 10.15 (Filed as Exhibit 10.18 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 (File No. 1- 9117), and 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. (Filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 1-9117), and incorporated by reference herein.) 10.20* Confidentiality and Non-Competition Agreement dated July 1, 1999 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.) 10.21* Employment Agreement dated as of May 29, 2000 between the Company and Thomas S. Cygan. (Filed as Exhibit 10.25 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 (File No. 1-9117), and incorporated by reference herein.)
- -------- * Management contract or compensatory plan or arrangement required to be filed as an exhibit to the Company's Annual Report on Form 10-K. 49
Exhibit Number Description ------ ----------- 21 List of Certain Subsidiaries of the Registrant. 23 Consent of Independent Accountants............. 24 Powers of Attorney.............................
Pursuant to the requirements of Regulation 14a-3(b)(10), the Company will furnish any exhibit listed above upon the payment of $10.00, upon written request, accompanied by such payment, to: Corporate Secretary Ryerson Tull, Inc. 2621 West 15/th Place / Chicago, Illinois 60608 50 EX-10.1 3 dex101.txt ANNUAL INCENTIVE PLAN EXHIBIT 10.1 As adopted 7-23-97 and amended 6-28-00 and 1-01-02 RYERSON TULL, INC. ANNUAL INCENTIVE PLAN 1. Purpose The purpose of the Ryerson Tull, Inc. Annual Incentive Plan (the "Plan") is to promote the interests of Ryerson Tull, Inc. (the "Company") and its stockholders by (i) attracting and retaining salaried employees of outstanding ability; (ii) strengthening the Company's capability to develop, maintain and direct a competent employee population; (iii) motivating salaried employees, by means of performance-related incentives, to achieve financial rewards; (iv) providing annual incentive compensation opportunities which are competitive with those of other major corporations; and (v) enabling salaried employees to participate in the growth and financial success of the Company. 2. Definitions "Affiliate" means any corporation or other entity which is not a Subsidiary but as to which the Company possesses a direct or indirect ownership interest and has power to exercise management control. "Award" means an amount for an Award Period determined to be payable to a Participant under the Plan. "Award Period" means such calendar quarters or calendar years as the Committee may establish from time to time with respect to any applicable salary grade designation, to any Corporate Unit or to a combination of these factors. "Award Schedule" means the schedule to be used for determining Awards as established by the Committee and set forth in the Addendum to the Plan applicable to the Corporate Unit covered thereby. "Code" means the Internal Revenue Code of 1986, as amended. "Committee" means the Compensation Committee of the Board of Directors of the Company. "Corporate Unit" means the Company, Ryerson Tull West, Ryerson Tull North, Ryerson Tull South, Ryerson Tull Coil Processing, Inland Industries de Mexico, S.A. de C.V., Ryerson Tull Canada, Customer Solutions Team, and any Affiliate, other Subsidiary or any division or group of the Company or any Subsidiary designated as a Corporate Unit from time to time by the Committee of the Company. "Employee" means an employee eligible to be designated as a Participant in the Plan. "Named Executive Officer" means a Participant who is one of the group of "covered employees" as defined in the regulations promulgated under Section 162(m) of the Code. "Participant" means an Employee who is designated by the Committee to be eligible to receive an Award under the Plan. "Performance-Based Exception" means the performance-based exception from the deductibility limitations as set forth in Section 162(m) of the Code. "Subsidiary" means any corporation in which the Company possesses directly or indirectly more than fifty percent (50%) of the total combined voting power of all classes of its stock. "Target Award" means the percentage of a Participant's base salary earnings or base annual salary for an Award Period as established by the Committee pursuant to paragraph 6 of the Plan and set forth in the Addendum to the Plan applicable to the Corporate Unit in which such Participant is employed. "Threshold" means the minimum financial performance (established by the Committee and set forth in the Addendum to the Plan applicable to such Corporate Unit) required by a Corporate Unit before an Award may be paid to a Participant employed in such Corporate Unit. 3. Administration The Plan shall be administered by the Committee. No member of the Committee shall be eligible to receive an Award while serving on the Committee. The Committee shall have the authority to interpret the Plan and to establish, amend and rescind rules and regulations for the administration of the Plan, and all such interpretations, rules and regulations shall be conclusive and binding on all persons. In addition, the Committee may delegate to one or more senior executive officers of the Company the right to administer the Plan as it pertains to employees who are not officers of the Company or of any other Corporate Unit. Subject to the provisions of paragraph 7 hereof, the Committee may impose such conditions on participation in and Awards under the Plan as it deems appropriate. 4. Eligibility Except as otherwise provided by the Committee and subject to paragraph 9 hereof, all full-time salaried employees of a Corporate Unit as of the first day and the last day of an Award Period are eligible to be designated as Participants in the Plan for such Award Period; provided, however, that, with respect to Award Periods that extend for at least one year, individuals who are full-time salaried employees of a Corporate Unit on August 1 of the first year of the Award Period and the last day of the Award Period shall also be eligible to be designated as Participants in the Plan for such Award Period. Notwithstanding the foregoing, the Committee may adopt criteria restricting the number of full-time salaried employees of a Corporate Unit eligible to be designated as Participants in the Plan for any Award Period, which criteria shall be set forth in the Addendum to the Plan applicable to such Corporate Unit. -2- 5. Designation of Participants The Committee shall determine and designate from time to time those Employees who shall be Participants. The designation of an Employee as a Participant in the Plan for any Award period shall not bestow upon such Employee any right to receive an Award for such Award Period or the right to be designated as a Participant for any subsequent Award Period. 6. Individual Award Opportunity For each Award Period, the Committee shall establish for each Participant a Target Award, expressed as a percentage of his or her base salary earnings or base annual salary for such Award Period, on the basis of his or her salary grade designation. 7. Determination of Awards Awards for each Award Period for Participants in each Corporate Unit shall be determined in accordance with the Award Schedule established by the Committee for such Corporate Unit. No Award shall be paid to any Participant in a Corporate Unit for any Award Period in which the performance of such Corporate Unit does not equal or exceed the Threshold applicable to such Corporate Unit. The Award for each Participant in a Corporate Unit shall be his or her Target Award multiplied by the Percent Attainment (determined in accordance with the applicable Award Schedule), subject to the following: (a) Subject to paragraph 3 and the provisions of this paragraph 7, the Committee may adjust such Award for individual performance on the basis of such quantitative and qualitative performance measures and evaluations as it deems appropriate. (b) The Committee may make such adjustments as it deems appropriate in the case of any Participant whose salary grade designation has changed during the applicable Award Period or who has been employed in more than one Corporate Unit during an Award Period. (c) Unless and until the Committee proposes for stockholder vote a change in the general performance measures set forth in this paragraph 7(c), the attainment of which may determine the degree of payout with respect to Awards under the Plan which are designed to qualify for the Performance-Based Exception, the performance measure(s) to be used for purposes of such Awards shall be chosen from among the following alternatives: return on operating assets, operating profit, return on equity, net income, stock price, revenue growth, expense management, inventory management, quality management, customer service performance, shareholder return, gross margin management and market share improvement. The Committee shall have the discretion to establish performance goals based upon the foregoing performance measures and to adjust such goals and the methodology used to measure the determination of the degree of attainment of such goals; provided, however, that Awards under the Plan that are intended to qualify for the Performance-Based Exception and that are issued to or held by any Named Executive Officer may not be adjusted in a manner that increases such Award. The Committee shall retain the discretion to adjust such Awards in a manner that does not increase such Awards. Furthermore, the Committee shall not make any adjustment to Awards under the Plan issued to or held by any Named Executive Officer that are intended to comply with the Performance-Based Exception if the result of such adjustment would be the -3- disqualification of such Award under the Performance-Based Exception. In the event that applicable laws change to permit the Committee greater discretion to amend or replace the foregoing performance measures applicable to Awards to Named Executive Officers without obtaining stockholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining such approval. In addition, in the event that the Committee determines that it is advisable to grant Awards under the Plan to Named Executive Officers that may not qualify for the Performance-Based Exception, the Committee may make such grants upon any performance measures it deems appropriate with the understanding that they may not satisfy the requirements of Section 162(m) of the Code. Notwithstanding any other provision of the Plan, in no event may a Participant be paid an Award in any calendar year in excess of $2,000,000. No segregation of any moneys or the creation of any trust or the making of any special deposit shall be required in connection with any awards made or to be made under the Plan. 8. Payment of Awards Awards shall be paid in cash as soon as practicable after the end of the Award Period for which the Award is made. If a Participant to whom an Award has been made dies prior to the payment of the Award, such Award shall be delivered to his or her legal representative or to such other person or persons as shall be determined by the Chairman, the President, the Chief Executive Officer or the Vice President-Human Resources of the Company. The Company or other applicable Corporate Unit shall have the right to deduct from all Awards payable under the Plan any taxes required by law to be withheld by the Company or other Corporate Unit with respect thereto; provided, however, that to the extent provided by the Committee, any payment under the Plan may be deferred and to the extent deferred, may be credited with an interest or earnings factor as determined by the Committee. 9. Termination of Employment Except in the case of death, disability, normal retirement (determined in accordance with the qualified retirement plans of the Corporation) or release (determined in accordance with the Inland Steel Industries Severance Pay Plan for Eligible Salaried Employees or any successor or substituted plan) or except as provided in paragraph 10, a Participant must be an employee as of the end of the Award Period in order to be eligible for an Award. 10. Change of Control In the event of a Change of Control of the Company (as hereinafter defined), the Plan shall remain in full force and effect for the remainder of any Award Period (or, if longer, the remainder of the calendar year) during which such Change of Control of the Company occurs, and each Participant shall receive an Award for such Award Periods (or any Award Periods occurring in such calendar year), at least equal to his or her Target Award pro rated to the date on which the Participant ceases to be an Employee if such date occurs prior to the last day of the applicable Award Period, regardless of whether or not Awards would otherwise have been payable under the Plan for such Award Periods and regardless of whether or not such Participant was an Employee at the end of any such Award Period. A "Change of Control of the Company" -4- shall be deemed to have occurred if there shall have been a change in the composition of the Board of Directors of the Company such that a majority of the Board of Directors shall have been members of the Board of Directors for less than 24 months, unless the election of each new director who was not a director at the beginning of the 24 month period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period. 11. Transferability Any payment to which a Participant may be entitled under the Plan shall be free from the control or interference of any creditor of such Participant and shall not be subject to attachment or susceptible of anticipation or alienation. The interest of a Participant shall not be transferable except by will or the laws of descent and distribution. 12. No Right to Participate; Employment Neither the adoption of the Plan nor any action of the Committee shall be deemed to give any Employee any right to be designated as a Participant under the Plan. Further, nothing contained in the Plan, nor any action by the Committee or any other person hereunder, shall be deemed to confer upon any Employee any right of continued employment with any Corporate Unit or to limit or diminish in any way the right of any Corporate Unit to terminate his or her employment at any time with or without cause. 13. Nonexclusivity of the Plan This Plan is not intended to and shall not preclude the Board of Directors of the Company from adopting or continuing such additional compensation arrangements as it deems desirable for Participants under this Plan, including any thrift, savings, investment, stock purchase, stock option, profit sharing, pension, retirement, insurance or other incentive, compensation or benefit plan or program. -5- EX-10.2 4 dex102.txt 1999 INCENTIVE STOCK PLAN EXHIBIT 10.2 RYERSON TULL 1999 INCENTIVE STOCK PLAN (as amended through January 23, 2002) 1. Purpose. The purpose of the Ryerson Tull 1999 Incentive Stock Plan (the "Plan") is to attract and retain outstanding individuals as officers and key employees of Ryerson Tull, Inc. (the "Company") and its subsidiaries, and to furnish incentives to such individuals through rewards based upon the ownership and performance of the Common Stock (as defined in Section 3). To this end, the Committee hereinafter designated and, in certain circumstances, the Chairman of the Board of the Company (the "Chairman") or the President of the Company, may grant stock options, stock appreciation rights, restricted stock awards, and performance awards, or combinations thereof, to officers and other key employees of the Company and its subsidiaries, on the terms and subject to the conditions set forth in this Plan. As used in the Plan, the term "RT" shall mean, collectively, the Company and its affiliates, and the term "subsidiary" shall mean (a) any corporation of which the Company owns or controls, directly or indirectly, 50% or more of the outstanding shares of capital stock entitled to vote for the election of directors or (b) any partnership, joint venture, or other business entity in respect of which the Company, directly or indirectly, has comparable ownership or control. 2. Participants. Participants in the Plan shall consist of: (a) such officers and other key employees of the Company and its subsidiaries as the Committee in its sole discretion may select from time to time to receive stock options, stock appreciation rights, restricted stock awards or performance awards, either singly or in combination, as the Committee may determine in its sole discretion; and (b) if the Committee authorizes the Chairman or the President to make grants or awards of stock options, stock appreciation rights, restricted stock or performance awards, such employees of the Company and its subsidiaries who are not subject to section 16(a) of the Exchange Act as the Chairman or the President shall determine in his or her sole discretion after consultation with the Vice President-Human Resources of the Company. Any director of the Company or any of its subsidiaries who is not also an employee of the Company or any of its subsidiaries shall not be eligible to receive stock options, stock appreciation rights, restricted stock awards or performance awards under the Plan. Notwithstanding any other provision of the Plan, without the approval of the Company's stockholders, this Section 2 shall not be amended to materially change the class or classes of employees eligible to participate in the Plan. 3. Shares Reserved under the Plan. Subject to adjustment pursuant to the provisions of Section 11 of the Plan, the maximum number of shares of Common Stock, $1.00 par value per share, of the Company ("Common Stock") which may be issued pursuant to grants or awards made under the Plan shall not exceed the sum of (1) 1,000,000, and (2) the total number of shares available for issuance under the Inland 1992 Incentive Stock Plan and the Inland 1995 Incentive Stock Plan (collectively, the "Prior Plans") as of the effective date of the Plan. No more than 335,000 shares of Common Stock shall be issued pursuant to restricted stock awards and performance awards under the Plan. Notwithstanding any other provision of the Plan, without the approval of the Company's stockholders, this Section 3 shall not be amended to materially increase the number of shares reserved for issuance under the Plan. The following restrictions shall apply to all grants and awards under the Plan other than grants and awards which, by their terms, are not intended to comply with the "Performance-Based Exception" (defined below in this Section 3): (a) the maximum aggregate number of shares of Common Stock that may be granted or awarded under the Plan to any participant under the Plan during any three year period shall be 700,000; and (b) the maximum aggregate cash payout with respect to grants or awards under the Plan in any fiscal year of the Company to any Named Executive Officer (defined below in this Section 3) shall be $1,000,000. For purposes of the Plan, "Named Executive Officer" shall mean a participant who is one of the group of "covered employees" as defined in the regulations promulgated under section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code") or any successor statute, and "Performance-Based Exception" shall mean the performance-based exception from the deductibility limitations as set forth in Section 162(m) of the Code. Except to the extent otherwise determined by the Committee, any shares of Common Stock subject to grants or awards under the Plan that terminate by expiration, cancellation or otherwise without the issuance of such shares (including shares underlying a stock appreciation right exercised for stock, to the extent that such underlying shares are not issued), that are settled in cash (to the extent so settled), or, in the case of restricted stock awards, that terminate without vesting, shall become available for future grants and awards under the Plan. Shares of Common Stock to be issued pursuant to grants or awards under the Plan may be authorized and unissued shares of Common Stock, treasury Common Stock, or any combination thereof. 4. Administration of the Plan. The Plan shall be administered by the Compensation Committee (the "Committee") of the Board of Directors of the Company (the "Board"), which shall consist of two or more persons who constitute "non-employee directors" within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and "outside directors" within the meaning of Treas. Reg. (S) 1.162-27(e)(3). Subject to the provisions of the Plan, the 2 Committee shall have authority: (a) to determine which employees of the Company and its subsidiaries shall be eligible for participation in the Plan; (b) to select employees to receive grants under the Plan; (c) to determine the form of grant, whether as a stock option, stock appreciation right, restricted stock award, performance award or a combination thereof, the number of shares of Common Stock or units subject to the grant, the time and conditions of exercise or vesting, the fair market value of the Common Stock for purposes of the Plan, and all other terms and conditions of any grant and to amend such awards or accelerate the time of exercise or vesting thereof; and (d) to prescribe the form of agreement, certificate or other instrument evidencing the grant. Notwithstanding the foregoing, the Committee, subject to the terms and conditions of the Plan, may delegate to the Chairman or the President of the Company, if such individual is then serving as a member of the Board, the authority to act as a subcommittee of the Committee for purposes of making grants or awards of stock options, stock appreciation rights, restricted stock or performance awards, not to exceed such number of shares as the Committee shall designate annually, to such employees of the Company and its subsidiaries who are not subject to section 16(a) of the Exchange Act as the Chairman or the President shall determine in his or her sole discretion after consultation with the Vice President-Human Resources of the Company, and the Chairman or the President, as applicable, shall have the authority and duties of the Committee with respect to such grants. The Committee shall also have authority to interpret the Plan and to establish, amend and rescind rules and regulations for the administration of the Plan, and all such interpretations, rules and regulations shall be conclusive and binding on all persons. Notwithstanding any other provision of the Plan, without the approval of the Company's stockholders, in no event shall the Committee (1) reprice any stock options awarded under the Plan by lowering the option price of a previously granted stock option or by cancellation of outstanding stock options with subsequent replacement or regrant of stock options with lower option prices, (2) materially modify the terms of any restricted stock award under the Plan or any performance award under the Plan that consists of Common Stock, including the lapse or waiver of restrictions with respect to such awards, except (i) in the case of death, physical or mental incapacity, retirement on or after the normal retirement date provided for in and pursuant to any pension plan of the Company or any affiliate of the Company in effect at the time of such retirement, early retirement (with the consent of the Committee) provided for in and pursuant to any such pension plan, or a Change in Control (as defined in paragraph 12(b)), or (ii) to the extent the shares of Common Stock which are subject to such modified awards do not exceed, in the aggregate, 10 percent of the shares of Common Stock reserved for issuance under the Plan, or (3) make any form of grant under the Plan that is not provided for herein. 5. Effective Date of Plan. The Plan shall be effective upon approval by the stockholder(s) of the Company. 6. Stock Options. 3 (a) Grants. Subject to the terms of the Plan, options to purchase shares of Common Stock, including "incentive stock options" within the meaning of Section 422 of the Code, may be granted from time to time to such officers and other key employees of the Company and its subsidiaries as may be selected by the Committee. Each grant of an option under the Plan may designate whether the option is intended to be an incentive stock option or a "nonqualified" stock option. Any option not so designated shall be deemed to be a "nonqualified" stock option. (b) Terms of Options. An option shall be exercisable in whole or in such installments and at such times as may be determined by the Committee in its sole discretion, provided that no option shall be exercisable more than ten years after the date of grant. The per share option price shall not be less than the greater of par value or 100% of the fair market value of a share of Common Stock on the date the option is granted. Upon exercise, the option price may be paid in cash, in shares of Common Stock having a fair market value equal to the option price which have been owned by the Participant for at least 6 months prior thereto, or in a combination thereof. The Committee may also allow the cashless exercise of options by holders thereof, as permitted under regulations promulgated by the Board of Governors of the Federal Reserve System, subject to any applicable restrictions necessary to comply with rules adopted by the Security and Exchange Commission, and the exercise of options by holders thereof by any other means that the Committee determines to be consistent with the Plan's purpose and applicable law, including loans, with or without interest, made by the Company to the holder thereof. (c) Restrictions Relating to Incentive Stock Options. To the extent required by the Code, the aggregate fair market value (determined as of the time the option is granted) of the Common Stock with respect to which incentive stock options are exercisable for the first time by an employee during any calendar year (under the Plan or any other plan of the Company or any of its subsidiaries) shall not exceed $100,000. (d) Termination of Employment. If an optionee ceases to be employed by the Company or any of its affiliates by reason of (i) death, (ii) physical or mental incapacity, (iii) retirement on or after the normal retirement date provided for in and pursuant to any pension plan of the Company or any affiliate of the Company in effect at the time of such retirement, or (iv) early retirement (with the consent of the Committee) provided for in and pursuant to any such pension plan, any option held by such optionee may be exercised, with respect to all or any part of the Common Stock as to which such option was not theretofore exercised (whether or not such option was otherwise then exercisable), for such period from and after the date of such cessation of employment (not extending, however, beyond the date of expiration of such option) as the Committee may determine at the time of the grant or at any time thereafter. If an optionee ceases to be employed by the Company and any of its affiliates for any reason other than a reason set forth in the immediately preceding sentence, any option granted to such optionee may be exercised for a period ending on the 30th day following the date of such cessation of employment or the date of expiration of such option, whichever first occurs, but only with respect to that number of shares of Common Stock for which such option was exercisable immediately prior to 4 the date of cessation of employment, except as otherwise determined by the Committee at the time of grant or any time thereafter. (e) Additional Terms and Conditions. The agreement or instrument evidencing the grant of a stock option may contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Committee in its sole discretion. 7. Stock Appreciation Rights. (a) Grants. Subject to the terms of the Plan, rights entitling the grantee to receive cash or shares of Common Stock having a fair market value equal to the appreciation in market value of a stated number of shares of such Common Stock from the date of the grant to the date of exercise, or, in the case of rights granted in tandem with or by reference to a stock option granted prior to the grant of such rights, from the date of grant of such related stock option to the date of exercise, may be granted from time to time to such officers and other key employees of the Company and its affiliates as may be selected by the Committee. (b) Terms of Grant. Such rights may be granted in tandem with or by reference to a related stock option, in which event the grantee may elect to exercise either the stock option or the right, but not both, as to the shares subject to the stock option and the right, or the right may be granted independently of a stock option. Rights granted in tandem with or by reference to a related stock option shall, except as provided at the time of grant, be exercisable to the extent, and only to the extent, that the related option is exercisable. Rights granted independently of a stock option shall be exercisable in whole or in such installments and at such times as may be determined by the Committee, provided that no right shall be exercisable more than ten years after the date of grant. Further, in the event that any employee to whom rights are granted independently of a stock option ceases to be an employee of the Company and its affiliates, such rights shall be exercisable only to the extent and upon the conditions that stock options are exercisable in accordance with the provisions of paragraph (d) of Section 6 of the Plan. The Committee may at the time of the grant or at any time thereafter impose such additional terms and conditions on the exercise of stock appreciation rights as it deems necessary or desirable for any reason, including for compliance with Section 16(a) or Section 16(b) of the Exchange Act and the rules and regulations thereunder. (c) Payment on Exercise. Upon exercise of a stock appreciation right, the holder shall be paid the excess of the then fair market value of the number of shares of Common Stock to which the right relates over the fair market value of such number of shares at the date of grant of the right or of the related stock option, as the case may be. Such excess shall be paid in cash or in shares of Common Stock having a fair market value equal to such excess, or in such combination thereof, as may be provided in the grant of such right (which may permit the holder to elect between cash and Common Stock or to elect a combination thereof), or, if no such provision is made in the grant, as the Committee shall determine upon exercise of the right, 5 provided, in any event, that the holder shall be paid cash in lieu of any fractional share of Common Stock to which such holder would otherwise be entitled. (d) Additional Terms and Conditions. The agreement or instrument evidencing the grant of stock appreciation rights may contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Committee in its sole discretion. 8. Restricted Stock Awards. Subject to the terms of the Plan, restricted stock awards consisting of shares of Common Stock may be made from time to time to such officers and other key employees of the Company and its affiliates as may be selected by the Committee, provided that any such employee (except an employee whose terms of employment include the granting of a restricted stock award) shall have been employed by the Company or any of its affiliates for at least six months. Such awards shall be contingent on the employee's continuing employment with the Company or its affiliates for a period to be specified in the award (which shall not be more than ten years from the date of award) and shall be subject to such additional terms and conditions as the Committee in its sole discretion deems appropriate, including, but not by way of limitation, requirements relating to satisfaction of performance measures and restrictions on the sale or other disposition of such shares during the restriction period. Except as otherwise determined by the Committee at the time of the award, the holder of a restricted stock award shall have the right to vote the restricted shares and to receive dividends thereon, unless and until such shares are forfeited. Notwithstanding the foregoing provisions of this Section 8, any restricted stock award which is not subject to satisfaction of performance measures shall be subject to the employee's continuing employment with the Company or its affiliates for a period of not less than three years from the date of grant and any restricted stock award which is subject to satisfaction of performance measures shall be subject to the employee's continuing employment with the Company or its affiliates for a period of not less than one year from the date of grant; provided, however, that this sentence shall not apply to the extent the restricted stock awards are approved by the Company's stockholders or to the extent the restricted stock awards made under the Plan which do not conform to the foregoing provisions of this sentence (when aggregated with any performance awards which do not conform to the provisions of the last sentence of paragraph 9(a)) do not exceed 10 percent of the shares of Common Stock reserved for issuance under the Plan. 9. Performance Awards (a) Awards. Performance awards consisting of (i) shares of Common Stock, (ii) monetary units or (iii) units which are expressed in terms of shares of Common Stock may be made from time to time to such officers and other key employees of the Company and its affiliates as may be selected by the Committee. Subject to the provisions of Section 12 below, such awards shall be contingent on the achievement over a period of not more than ten years of 6 such corporate, division, subsidiary, group or other measures and goals as shall be established by the Committee. Subject to the provisions of Sections 10 and 12 below, such measures and goals may be revised by the Committee at any time and/or from time to time during the performance period. Except as may otherwise be determined by the Committee at the time of the award or at any time thereafter, a performance award shall terminate if the grantee of the award does not remain continuously in the employ of the Company or its affiliates at all times during the applicable performance period. Notwithstanding the foregoing provisions of this paragraph 9(a) any performance award that consists of Common Stock shall be subject to the employee's continuing employment with the Company or its affiliates for a period of not less than one year from the date of grant; provided, however, that this sentence shall not apply to the extent the performance awards are approved by the Company's stockholders or to the extent the performance awards consisting of Common Stock made under the Plan which do not conform to the provisions of this sentence (when aggregated with any restricted stock awards which do not conform to the provisions of the last sentence of Section 8) do not exceed 10 percent of the shares of Common Stock reserved for issuance under the Plan. (b) Rights with Respect to Shares and Share Units. If a performance award consists of shares of Common Stock or units which are expressed in terms of shares of such Common Stock, amounts equal to dividends otherwise payable on a like number of shares may, if the award so provides, be converted into additional such shares (to the extent that shares are then available for issuance under the Plan) or credited as additional units and paid to the participant if and when, and to the extent that, payment is made pursuant to such award. (c) Payment. Payment of a performance award following the end of the performance period, if such award consists of monetary units or units expressed in terms of shares of Common Stock, may be made in cash, shares of Common Stock, or a combination thereof, as determined by the Committee. Any payment made in Common Stock shall be based on the fair market value of such stock on the payment date. 10. Performance Measures Applicable to Awards to Named Executive Officers Unless and until the Committee proposes for stockholder vote a change in the general performance measures set forth in this Section 10, the attainment of which may determine the degree of payout or vesting with respect to awards under the Plan which are designed to qualify for the Performance-Based Exception, the performance measure(s) to be used for purposes of such awards shall be chosen from among the following alternatives: safety (including, but not limited to, total injury frequency, lost workday rates or cases, medical treatment cases and fatalities); quality control (including, but not limited to, critical product characteristics and defects); cost control (including, but not limited to, cost as a percentage of sales); capital structure (including, but not limited to, debt and equity levels, debt-to-equity ratios, and debt-to total-capitalization ratios); inventory turnover; customer performance or satisfaction; revenue measures (including, but not limited to gross revenues and revenue growth); net income; 7 conformity to cash flow plans; return measures (including, but not limited to, return on investment assets or capital); operating profit to operating assets; share price measures (including, but not limited to, fair market value of shares, growth measures, and total shareholder return); working capital measures; operating earnings (before or after taxes); economic value added, cash value added; and cash flow return on investment. The Committee shall have the discretion to establish performance goals based upon the foregoing performance measures and to adjust such goals and the methodology used to measure the determination of the degree of attainment of such goals; provided, however, that awards under the Plan that are intended to qualify for the Performance-Based Exception and that are issued to or held by Named Executive Officers may not be adjusted in a manner that increases such award. The Committee shall retain the discretion to adjust such awards in a manner that does not increase such awards. Furthermore, the Committee shall not make any adjustment to awards under the Plan issued to or held by Named Executive Officers that are intended to comply with the Performance-Based Exception if the result of such adjustment would be the disqualification of such award under the Performance-Based Exception. In the event that applicable laws change to permit the Committee greater discretion to amend or replace the foregoing performance measures applicable to awards to Named Executive Officers without obtaining stockholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining such approval. In addition, in the event that the Committee determines that it is advisable to grant awards under the Plan to Named Executive Officers that may not qualify for the Performance-Based Exception, the Committee may make such grants upon any performance measures it deems appropriate with the understanding that they may not satisfy the requirements of Section 162(m) of the Code. 11. Adjustments for Changes in Capitalization, Etc. Subject to the provisions of Section 12 herein, in the event of any change in corporate capitalization, such as a stock split, reverse stock split, stock dividend, or a corporate transaction, such as a merger, consolidation, or separation, including a spin-off, or other distribution of stock or property of the Company or its affiliates (other than normal cash dividends), any reorganization (whether or not such reorganization comes within the definition of such term in Code Section 368) or any partial or complete liquidation of the Company or its affiliates, such adjustment shall be made in the number and class of shares which may be delivered under Section 3 (including the number of shares referred to in the last sentence of the first paragraph of Section 3 and in subparagraph (a) of the second paragraph of Section 3), and in the number and class of and/or price of shares subject to outstanding grants or awards under the Plan, as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights; provided, however, that the number of shares subject to any grants or awards under the Plan shall always be a whole number. 8 12. Effect of Change in Control. (a) Acceleration of Benefits. Subject to the following sentence and the terms of any agreement evidencing the terms of any award under the Plan, in the event of a "Change in Control" as defined in paragraph (b) of this Section 12, (i) the value of all outstanding stock options, stock appreciation rights and restricted stock awards (whether or not then fully exercisable or vested) shall be cashed out on the basis of the "Change in Control Price" (as defined in paragraph (c) of this Section 12) as of the date the Change in Control occurs, provided, however, that the Committee may provide for the immediate vesting instead of the cashing out of restricted stock awards in such circumstances as it deems appropriate; and (ii) all outstanding performance awards shall be cashed out in such manner and in such amount or amounts as determined by the Committee in its sole discretion. (b) Change in Control. For purposes of this Section 12, a Change in Control means the happening of any of the following: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than (w) RT, (x) a trustee or other fiduciary holding securities under an employee benefit plan of RT, (y) an underwriter temporarily holding securities pursuant to an offering of such securities, or (z) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of voting securities of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its affiliates) representing 20% or more of the combined voting power of the Company's then outstanding securities; (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clauses (i), (iii) or (iv) of this paragraph (b)) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute a majority thereof; (iii) there occurs a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary 9 holding securities under an employee benefit plan of RT, at least 60% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires more than 50% of the combined voting power of the Company's then outstanding securities; or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. A Change in Control shall also be deemed to occur with respect to any Participant for purposes of the Plan if there occurs: (1) a sale or disposition, directly or indirectly, other than to a person described in subclause (w), (x) or (z) of clause (i) next above, of securities of the Participant's employer, any direct or indirect parent company of the Participant's employer or any company that is a subsidiary of the Participant's employer and is also a significant subsidiary (as defined below) of the Company (the Participant's employer and such a parent or subsidiary being a "Related Company"), representing 50% or more of the combined voting power of the securities of such Related Company then outstanding; (2) a merger or consolidation of a Related Company with any other corporation, other than a merger or consolidation which would result in 50% or more of the combined voting power of the surviving company being beneficially owned by a majority owned direct or indirect subsidiary of the Company; or (3) the sale or disposition of all or substantially all the assets of a Related Company to a person other than a majority owned direct or indirect subsidiary of the Company. Notwithstanding the foregoing, no Change in Control shall be deemed to have occurred with respect to a Participant for purposes of the Plan if (I) such transaction includes or involves a sale to the public or a distribution to the stockholders of the Company of more than 50% of the voting securities of the Participant's employer or a direct or indirect parent of the Participant's employer, and (II) the Participant's employer or a direct or indirect parent of the Participant's employer agrees to become a successor to the Company under an individual agreement between the Company and the Participant or the Participant is covered by an agreement providing for benefits upon a change in control of his or her employer following an event described clauses (1), (2) or (3) next above. Notwithstanding any other provision of this Agreement, a merger or consolidation of the Company with and into Inland Steel Industries, Inc. ("ISI") (or any subsidiary of ISI) (regardless of whether or not the Company or ISI is the surviving entity) shall 10 not be considered a change in control of the Company for purposes of the Plan. For purposes of the Plan, the term "significant subsidiary" has the meaning given to such term under Rule 405 of the Security Act of 1933, as amended. (c) Change in Control Price. For purposes of this Section 12, Change in Control Price means: (i) with respect to a Change in Control by reason of a merger or consolidation of the Company described in paragraph (b)(iii) of this Section 12 in which the consideration per share of Common Stock to be paid for the acquisition of shares of Common Stock specified in the agreement of merger or consolidation is all in cash, the highest such consideration per share; (ii) with respect to a Change in Control by reason of an acquisition of securities described in paragraph (b)(i) of this Section 12, the highest price per share for any share of the Common Stock paid by any holder of any of the securities representing 40% or more of the combined voting power of the Company giving rise to the Change in Control; and (iii) with respect to a Change in Control by reason of a merger or consolidation of the Company (other than a merger or consolidation described in paragraph (b)(iii) of this Section or a change in the composition of the Board of Directors described in paragraph (b)(ii) of this Section 12, or stockholder approval of an agreement or plan described in paragraph (b)(iv) of this Section 12 the highest price per share of Common Stock reported on the Composite Transactions (or, if such shares are not traded on the New York Stock Exchange, such other principal market on which such shares are traded) during the sixty-day period ending on the date the Change in Control occurs, except that, in the case of incentive stock options and stock appreciation rights relating to incentive stock options, the holder may not receive an amount in excess of the maximum amount that will enable such option to continue to qualify as an incentive stock option. 13. Amendment and Termination of Plan. The Plan may be amended or terminated by the Board at any time and in any respect, provided that, without the approval of the Company's stockholders, no such amendment (other than pursuant to Section 11 of the Plan) shall be made for which stockholder approval is necessary to comply with any applicable tax or regulatory requirement, including for these purposes any approval requirement which is a prerequisite for exemptive relief under Section 16(b) of the Exchange Act, and provided that no such amendment or termination shall impair the rights of any participant, without his or her consent, in any award previously granted under the Plan, unless required by law. In the event of termination of the Plan, no further grants may be made under the Plan but termination shall not affect the rights of any participant under, or the authority of the Committee with respect to, any grants or awards made prior to termination. 11 Notwithstanding any other provision of the Plan, without the approval of the Company's stockholders, the Board shall not adopt any amendment to the Plan which makes changes to the Plan that are so material that the focus of the Plan is changed, including amending the Plan to provide for a form of grant not presently available under the Plan, as determined in the reasonable judgment of the Board. 12 14. Prior Plans. Upon the effectiveness of this Plan, no further grants shall be made under the Prior Plans. The discontinuance of the Prior Plans shall not affect the rights of any participant under, or the authority of the Committee (therein referred to) with respect to, any grants or awards made thereunder prior to such discontinuance. 15. Miscellaneous. (a) No Right to a Grant. Neither the adoption of the Plan nor any action of the Board or of the Committee shall be deemed to give any employee any right to be selected as a participant or to be granted a stock option, stock appreciation right, restricted stock award or performance award. (b) Rights as Stockholders. No person shall have any rights as a stockholder of the Company with respect to any shares covered by a stock option, stock appreciation right, or performance award until the date of the issuance of a stock certificate to such person pursuant to such stock option, right or award. (c) Employment. Nothing contained in this Plan shall be deemed to confer upon any employee any right of continued employment with the Company or any of its affiliates or to limit or diminish in any way the right of the Company or any such affiliate to terminate his or her employment at any time with or without cause. (d) Taxes. The Company shall be entitled to deduct from any payment under the Plan the amount of any tax required by law to be withheld with respect to such payment or may require any participant to pay such amount to the Company prior to and as a condition of making such payment. In addition, the Committee may, in its discretion and subject to such rules as it may adopt from time to time, permit a participant to elect to have the Company withhold from any payment under the Plan (or to have the Company accept from the participant), for tax withholding purposes, shares of Common Stock, valued at their fair market value, but in no event shall the fair market value of the number of shares so withheld (or accepted) exceed the amount necessary to meet the maximum Federal, state and local marginal tax rates then in effect that are applicable to the participant and to the particular transaction. (e) Nontransferability. Except as permitted by the Committee, no stock option, stock appreciation right, restricted stock award or performance award shall be transferable except by will or the laws of descent and distribution, and, during the holder's lifetime, stock options and stock appreciation rights shall be exercisable only by, and shares subject to restricted stock awards and payments pursuant to performance awards shall be delivered or made only to, such holder or such holder's duly appointed legal representative. 13 EX-10.6 5 dex106.txt SUPPLEMENTAL RETIREMENT PLAN EXHIBIT 10.6 RYERSON TULL SUPPLEMENTAL RETIREMENT PLAN FOR COVERED EMPLOYEES As Amended September 24, 1997 and January 1, 2002 ARTICLE 1 1.1 Purpose. ------- It is the intention of Ryerson Tull, Inc. (the "Company") to maintain appropriate levels of retirement benefits for individuals who are entitled to benefits under the Ryerson Tull Pension Plan, including any supplements thereto (collectively, the "Pension Plan"). Accordingly, the Company hereby establishes the Ryerson Tull Supplemental Retirement Plan for Covered Employees (the "Plan") to provide benefits to eligible persons in a manner so as to maintain the level of total retirement benefits which, but for the limitations on benefits required by Section 415 and 401(a)(17) of the Internal Revenue Code of 1986, as amended (the "Code"), would otherwise be payable to such persons under the Pension Plan. The Plan shall maintain such total retirement benefit levels by means of supplemental unfunded payments made by the Employers (as defined in Section 1.3) to the individuals eligible for such payments as more fully described in Articles 3 and 4. The Plan is intended to be an "excess benefit plan" described in Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"); provided, however, that, to the extent, if any, that the Plan provides benefits which cannot be provided by an excess benefit plan, the Plan shall constitute an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. 1.2 Effective Date. -------------- The Plan is effective as of April 30, 1996 (the "Effective Date"). 1.3 Employers. The Company and any of its affiliates which, with the --------- consent of the Company, adopt the Plan are referred to collectively herein as the "Employers" and individually as an "Employer". 1.4 Source of Benefit Payments; Funding Not Required. ------------------------------------------------- The amount of any benefit payable under the Plan to any Participant (as defined in Section 3.1) (or Beneficiary (as defined in Section 3.2)) shall be paid from the general revenues of the Employer that employed such Participant; provided, however, that if a Participant has been employed by more than one Employer, the portion of his Plan benefits payable by any such Employer shall be in proportion to the benefit he accrued under the Pension Plan for his period of service with the applicable Employer. An Employer's obligation under the Plan shall be reduced to the extent that any amounts due under the Plan are paid from one or more trusts, the assets of which are subject to the claims of general creditors of the Employers; provided, however, that nothing in the Plan shall require the Company or any Employer to establish any trust to provide benefits under the Plan. None of the individuals entitled to benefits under the Plan will have any claim on, or any beneficial ownership interest in, any assets of any Employer, and any rights of such individuals under the Plan will constitute unsecured contractual rights only. 1.5 Definitions. ----------- Unless the context clearly requires otherwise, any word, term or phrase used in the Plan will have the same meaning as is assigned to it under the terms of the Pension Plan. ARTICLE 2 2.1 Retirement Committee. -------------------- The Company hereby delegates authority to administer the Plan to the Pension Plan Retirement Committee (the "Committee") as established under the Pension Plan. Any action by the Committee shall be evidenced by a written document, certified by the Secretary of the Committee. References to the Company's authority, right, or power to act contained in any notice, disclosure, or communication which is made with a view toward effectuating the purposes of the Plan shall be construed to include such actions by the Committee on the Company's behalf and such actions by others to whom the Committee has delegated its authority. 2.2 Authority of Committee. ---------------------- The Committee shall have authority to control and manage the operation and administration of the Plan, including the authority and discretion to construe and interpret the Plan, decide all questions of eligibility for and the amount, manner and time of payment of Supplemental Retirement Benefits (as defined in Section 3.1) hereunder and such other rights and powers necessary or convenient to the carrying out of its functions hereunder. The authority and responsibilities of the Committee shall be coextensive with its authority and responsibilities under the Pension Plan. ARTICLE 3 3.1 Participation. ------------- Each employee or former employee of an Employer who, on or after the Effective Date, is entitled to an accrued benefit under the Pension Plan the amount of which is limited by reason of the application of the limitations imposed by Code Sections 415 or 401(a)(17), as amended from time to time, and the regulations and rulings thereunder or the terms of the Pension Plan implementing those limitations (the "Code Limitations") shall be a "Participant" in the Plan and shall be entitled to receive the benefits (the "Supplemental Retirement Benefits"), if -2- any, determined in accordance with Article 4 hereof. Any individual who had an accrued benefit under the Inland Steel Industries Supplemental Retirement Benefit Plan for Covered Employees and the Inland Steel Industries Special Retirement Benefit Plan for Covered Employees Plan (collectively, the "ISI Supplemental Plans") which was assumed by the Company effective as of the Effective Date shall also be a Participant in the Plan, subject to the terms and conditions thereof, regardless of whether such individual would otherwise be a Participant under the foregoing provisions of this Section 3.1. 3.2 Beneficiary. ----------- The spouse or other person entitled to a benefit under the Pension Plan upon the death of a Participant hereunder shall, upon the death of the Participant, be a "Beneficiary" under the Plan entitled to receive the Supplemental Retirement Benefit, if any, determined in accordance with Article 4 hereof. 3.3 Restricted Participation. ------------------------ Notwithstanding any other provision of the Plan to the contrary, if the Committee determines that participation by one or more Participants (or payment of benefits to any Beneficiary) shall cause the Plan as applied to any Employer to be subject to Part 2, 3 or 4 of Title I of ERISA, the entire interest of such Participant or Beneficiary under the Plan shall, in the discretion of the Committee, be immediately paid to such Participant or Beneficiary, as applicable, by the applicable Employer, or shall otherwise be segregated from the Plan, and such Participant(s) or Beneficiary(ies) shall cease to have any interest under the Plan. ARTICLE 4 4.1 Amount of Supplemental Retirement Benefit. ----------------------------------------- The amount of the Supplemental Retirement Benefit which a Participant or Beneficiary shall be entitled to receive and the Employers shall be obligated to pay under the Plan as of any date shall be equal to the greater of the amount determined under paragraph (a) or (b) below: (a) the excess, if any, of the amount described in subparagraph (i) of this Section 4.1 over the amount described in paragraph (ii) of this Section 4.1: (i) The amount of the benefit (expressed in the same form and commencing at the same time as that of the benefit that the Participant is actually receiving under the Pension Plan) that the Participant would have been entitled to receive as of that date under the Pension Plan, determined without regard to the Code Limitations. (ii) The amount of benefit which the Participant or Beneficiary actually receives under the Pension Plan as of that date (determined with regard to the Code Limitations applicable under the Pension Plan). -3- OR (b) The aggregate amount of the benefit accrued by the Participant or Beneficiary, as applicable, as of the Effective Date under the provisions of the ISI Supplemental Plans. It is the intent of this Section 4.1 that the Supplemental Retirement Benefit described above shall be determined at all times in a manner consistent with then current Code Limitations. Accordingly, the determinations made pursuant to this Section 4.1 shall be based upon adjustments employed in determining the amount of the benefit described above, and shall be subject to adjustments which reflect the Code Limitations with respect to the computation of benefits under the Pension Plan. No Supplemental Retirement Benefit shall be payable to any Participant or Beneficiary unless, at the time of the Participant's termination of employment with the Employers and their affiliates, the Participant has been credited with at least five Years of Vesting Service under the Pension Plan; provided, however, that, in the event of a Change in Control (as defined in Section 5.3), all benefits accrued under the Plan as of the date such Change in Control shall become fully and irrevocably vested and shall become distributable to Participants (and Beneficiaries) at such time and in such manner pursuant to the provisions of the Plan as in effect on the day immediately preceding the date of such Change in Control. 4.2 Payment of Supplemental Retirement Benefit. ------------------------------------------ (a) Except as otherwise provided herein, the Supplemental Retirement Benefit which a Participant or Beneficiary is eligible to receive shall be paid by the Employers at the same time, in the same form and subject to substantially the same conditions, as is the benefit paid to such Participant or Beneficiary under the Pension Plan. (b) To the extent provided by Section 4.4, the Employers may purchase an annuity with respect to any portion of a Participant's or Beneficiary's Supplemental Retirement Benefit in full satisfaction thereof. (c) The Employers may, in their sole discretion, distribute the Supplemental Retirement Benefit of any Participant described in Section 4.4(a) in a lump sum at the time of the Participant's retirement. (d) Notwithstanding any other provision of this Plan, a Participant who, as of the Effective Date, was a Participant in and had an accrued benefit under the ISI Supplemental Plans (or any Beneficiary of such a Participant) shall not be entitled to any portion of his Supplemental Retirement Benefit which is attributable to benefits accrued under the ISI Supplemental Plans unless such Participant (or Beneficiary, if applicable) agrees that his right to benefits supplemental to those of the Pension Plan is limited to his rights under this Plan and that he shall have no claim under or against the ISI Supplemental Plans or against Inland Steel Industries, Inc. or any of its affiliates for any benefits accrued under the ISI Supplemental Plans. (e) Notwithstanding any other provision of the Plan to the contrary, if a Participant's or Beneficiary's Supplemental Retirement Benefit is paid in a lump sum, such payment shall be in complete satisfaction of all amounts otherwise payable to such -4- Participant or Beneficiary under the Plan and neither the Participant nor Beneficiary shall have any further rights to benefits under the Plan (other than benefits based on additional accruals of benefits (other than increases described in Section 4.3) under the Pension Plan). Any optional form of benefit payable under the Plan, including a lump sum, shall be the actuarial equivalent of the benefit otherwise payable to the Participant or Beneficiary, determined by applying the appropriate interest rate and other actuarial assumptions then set forth in the Pension Plan. 4.3 Pension Plan Increase. --------------------- In the event the Pension Plan is amended to increase the benefit payable to participants or beneficiaries then receiving benefits under the Pension Plan, benefits payable under the Plan shall be adjusted or commenced accordingly for Participants or Beneficiaries; provided that no such adjustment shall be made if the Participant or Beneficiary received a single sum distribution under the Plan; and provided, further, that no such adjustment shall be made with respect to any portion of a Participant's or Beneficiary's Supplemental Retirement Benefit for which an annuity has been purchased pursuant to Section 4.4. 4.4 Purchase of Annuities. --------------------- The Employers shall not be obligated to purchase an annuity for any Participant or for any portion of a Participant's Supplemental Retirement Benefit, notwithstanding the purchase of an annuity with respect to any other Participant or any other portion of the Participant's Supplemental Retirement Benefit. The purchase of annuities under the Plan shall be governed by the following: (a) The purchase of annuities under this Section 4.4 shall be limited to Supplemental Retirement Benefits payable to Participants who meet all of the following requirements: (i) completion of at least five years of Vesting Service under the Pension Plan; (ii) annual compensation in excess of $150,000; and (iii) attainment of age 55. (b) Any annuity purchased with respect to any Participant's Supplemental Retirement Benefit shall be issued to and distributed to such Participant, who shall be the sole owner of such annuity and shall contain such terms not inconsistent with this Section 4.4 as the Committee shall determine in its sole discretion. (c) Annuity payments to a Participant under any annuity purchased pursuant to this Section 4.4 shall commence as of the date on which the Participant attains age 65 or the first day of the month thereafter; provided, however, that any such annuity may provide that, in the event of the Participant's death prior to attainment of age 65, benefits payable to any Beneficiary may commence as of any earlier date provided by the terms of the annuity. -5- (d) The monthly benefit amount to be provided by any annuity purchased pursuant to this Section 4.4 shall be such amount as the Committee, in its sole discretion, determines would provide, on an after-tax basis, an amount equal to the amount estimated to be the after-tax benefit to the Participant of monthly benefits payable by the Employers under Section 4.2, commencing at the Participant's age 65. Such determination shall be made by the Committee, in its sole discretion, based upon such rates and factors as the Committee, in its sole discretion, deems appropriate. No change in annuity benefits shall be required by reason of any subsequent change in such rates and factors; provided, however, that in determining the amount of any subsequent annuity purchased under this Section 4.4, the Committee may, in its sole discretion, take into account any change in such rates and factors and the benefits payable under any annuity previously purchased under this Section 4.4. Notwithstanding the foregoing, with the consent of the Participant, the Committee may substitute any form of fixed or variable annuity in lieu of the annuity otherwise provided by this paragraph (d), provided that such substitution does not result in a change in the cost of the annuity or the commencement date of the annuity payments. (e) The Company shall make a tax gross-up payment to any Participant for whom an annuity is purchased under this Section 4.4 in such amount as the Committee shall determine, in its sole discretion, would be necessary to make such Participant whole for federal, state and local income taxes attributable to the receipt of the annuity and the gross-up payment, based upon such tax rates as the Committee shall determine in its sole discretion. (f) To the extent that the Company has purchased an annuity under this Section 4.4 with respect to any portion of a Participant's Supplemental Retirement Benefit, such annuity and the tax gross-up payment under paragraph (e) above shall be in full satisfaction of all obligations of the Employers to the Participant or his Beneficiary attributable to such portion of the Participant's Supplemental Retirement Benefit. (g) A purchase of an annuity under this Section 4.4 shall have no effect on the monthly benefits payable to the Participant under Sections 4.1 and 4.3 prior to the Participant's attainment of age 65. In the event of the Participant's death prior to attainment of age 65, the benefit payable to any Beneficiary of the Participant shall be determined solely on the basis of the monthly benefits which would otherwise have been payable to the Participant under the Plan prior to attainment of age 65 and taking into account the amount payable to the Beneficiary under the Pension Plan. (h) If an annuity has not been purchased in accordance with the foregoing provisions of this Section 4.4 with respect to any portion of the Supplemental Retirement Benefit payable after attainment of age 65 to a Participant who meets all of the requirements of paragraph (a) above then, except for any portion payable in the form of a lump sum in accordance with Section 4.2, upon such Participant's termination of employment with the Employers and their affiliates, the Company may purchase an annuity for such portion in accordance with paragraphs (b) through (g) above. -6- ARTICLE 5 5.1 Amendment to Conform with Law. ----------------------------- The Company may make such changes in, additions to, and substitutions in the provisions of the Plan, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Plan to any present or future law relating to plans of this or a similar nature, and to the administrative regulations and rulings promulgated thereunder. 5.2 Other Amendments and Termination. -------------------------------- The Company may amend or terminate the Plan at any time, without the consent of any Participant or Beneficiary; provided, however, that: (a) the provisions of Section 5.3 may not be amended after the date of a Change in Control without the written consent of a majority in both number and interest of the Participants in the Plan, other than those Participants who are both (i) not employed by the Company and its affiliates (collectively "RTI") as of the date of the Change in Control, and (ii) not receiving nor could have commenced receiving benefits under the Pension Plan as of the date of the Change in Control, both immediately prior to the Change in Control and at the date of such amendment; and (b) the Plan shall not be amended or terminated so as to reduce or cancel the benefits which have accrued to a Participant or Beneficiary prior to the later of the date of adoption of the amendment or termination or the effective date thereof, and in the event of such amendment or termination, any such accrued benefit hereunder shall not be reduced or cancelled. Notwithstanding the provisions of paragraph (b) next above, in the event the Pension Plan is terminated or curtailed with the result that pension payments to retired employees and survivor and contingent annuity payments to beneficiaries are discontinued or reduced the Supplemental Retirement Benefit then being paid or in the future payable pursuant to the Plan shall similarly be discontinued or reduced in the same ratio as payments under the Pension Plan are discontinued or reduced. 5.3 Manner and Form of Amendment or Termination. ------------------------------------------- Any amendment or termination of the Plan by the Company shall be made by action of the Board of Directors of the Company; provided, however, that (i) the Treasurer of the Company, and (ii) the Vice President-Human Resources of the Company (or such other person as designated by the Chairman of the Board of Directors of the Company) are jointly authorized, by written action signed by both individuals, to adopt and place in effect any amendments to the Plan and any related documents as they jointly deem necessary or advisable: (a) to maintain the Plan and any related documents in compliance with applicable law; (b) to relieve administrative burdens with respect to those documents; -7- (c) to conform the Plan to the provisions of any applicable collective bargaining agreement; or (d) to provide for other changes in the best interests of Participants and Beneficiaries. without the necessity for further action by the Board of Directors of the Company or subsequent ratification: provided, however, that any action or amendment that would have the effect of: (i) terminating the Plan; (ii) changing the structure of the Committee under which the Plan is administered; (iii) authorizing an Affiliate to adopt the Plan; (iv) materially changing the benefits under the Plan; or (v) materially increasing anticipated costs associated with the Plan by more than $15 million, except for changes to comply with applicable law; may not be made without approval or ratification by the Board of Directors of the Company. Notwithstanding the foregoing, either of the Board of Directors of the Company or the Chairman of the Company may from time to time authorize another officer or officers to adopt and place into effect (without the further need for Board authorization) amendments to the Plan and any related documents within the parameters set forth in subparagraphs (a) through (d) above and subject to the limitations in subparagraphs (i) through (v) above. If and to the extent the Board or the Chairman does so authorize other officer(s), that officer or those officers will have the powers described above in this Section 5.3. Certification of any amendment or termination of the Plan shall be furnished to the Committee by the Company. 5.4 Notice of Amendment or Termination. ---------------------------------- The Committee shall notify Participants or Beneficiaries who are affected by any amendment or termination of the Plan within a reasonable time thereof. 5.5 Change in Control. For purposes of this Section 5.5, a "Change ----------------- in Control" shall be deemed to have occurred if: (a) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than (i) the Company and its affiliates (collectively referred to herein as "RTI"), (ii) a trustee or other fiduciary holding securities under an employee benefit plan of RTI, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), -8- directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from RTI) representing 20% or more of the combined voting power of the Company's then outstanding securities; (b) during any period of two consecutive years individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in paragraphs (a), (c) or (d) of this Section 5.5, whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; (c) there occurs a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of RTI, at least 60% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires more than 50% of the combined voting power of the Company's then outstanding securities; or (d) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. A Change in Control shall also be deemed to occur with respect to any Participant or Beneficiary for purposes of the Plan if there occurs: (1) a sale or disposition, directly or indirectly, other than to a person described in clause (i), (ii) or (iii) of paragraph (a) next above, of securities of the Participant's employer, any direct or indirect parent company of the Participant's employer or any company that is a subsidiary of the Participant's employer and is also a significant subsidiary (as defined below) of the Company (the Participant's employer and such a parent or subsidiary being a "Related Company"), representing 50% or more of the combined voting power of the securities of such Related Company then outstanding; (2) a merger or consolidation of a Related Company with any other corporation, other than a merger or consolidation which would result in 50% or more of the combined voting power of the surviving company being beneficially owned by a majority owned direct or indirect subsidiary of the Company; or -9- (3) the sale or disposition of all or substantially all the assets of a Related Company to a person other than a majority owned direct or indirect subsidiary of the Company. Notwithstanding the foregoing, no Change in Control shall be deemed to have occurred with respect to a Participant for purposes of the Plan if (I) such transaction includes or involves a sale to the public or a distribution to the stockholders of the Company of more than 50% of the voting securities of the Participant's employer or a direct or indirect parent of the Participant's employer, and (II) the Participant's employer or a direct or indirect parent of the Participant's employer agrees to become a successor to the Company under an individual agreement between the Company and the Participant or the Participant is covered by an agreement providing for benefits upon a change in control of his or her employer following an event described clauses (1), (2) or (3) next above. For purposes of the Plan, the term "significant subsidiary" has the meaning given to such term under Rule 405 of the Securities Act of 1933, as amended. ARTICLE 6 6.1 No Right to Employment. ---------------------- Neither the creation of the Plan nor anything contained herein shall be construed as giving any Participant hereunder or other employees of the Employers any right to remain in the employ of the Employers or any affiliate thereof. 6.2 Successors and Assigns. ---------------------- All rights and obligations of this Plan shall inure to, and be binding upon the successors and assigns of the Company. 6.3 Inalienability. -------------- Except so far as may be contrary to the laws of any state having jurisdiction in the premises, a Participant or Beneficiary shall have no right to assign, transfer, hypothecate, encumber, commute or anticipate his interest in any payments under the Plan and such payments shall not in any way be subject to any claim against any Participant or Beneficiary. 6.4 Incompetency. ------------ If any Participant or Beneficiary is, in the opinion of the Committee, legally incapable of giving a valid receipt and discharge for any payment, the Committee may, at its option, direct that such payment or any part thereof be made to such person or persons who in the opinion of the Committee are caring for and supporting such Participant or Beneficiary, unless it has received due notice of claim from a duly appointed guardian or conservator of the estate of the Participant or Beneficiary. A payment so made will be a complete discharge of the obligations under this Plan to the extent of and as to that payment, and neither the Committee nor the Employers will have any obligation regarding the application of the payment. -10- 6.5 Controlling Law. --------------- To the extent not preempted by the laws of the United States of America, the laws of the State of Illinois shall be the controlling state law in all matters relating to the Plan. 6.6 Severability. ------------ If any provisions of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, but the Plan shall be construed and enforced as if the illegal and invalid provisions never had been included herein. 6.7 Limitations on Provisions. ------------------------- The provisions of the Plan and any Supplemental Retirement Benefits shall be limited as described herein. Any benefit payable under the Pension Plan shall be paid solely in accordance with the terms and provisions of the Pension Plan, as appropriate, and nothing in the Plan shall operate or be construed in any way to modify, amend, or affect the terms and provisions of the Pension Plan. 6.8 Gender and Number. ----------------- Whenever the context requires or permits, the gender and number of words shall be interchangeable. ARTICLE 7 7.1 Application for Benefits and Review Procedures. ---------------------------------------------- The Claims Procedure set forth in the Pension Plan shall apply to any claim for benefits under the Plan. The "Plan Administrator" for purposes of applying such Claims Procedure to this Plan shall be the Committee. -11- EX-10.7 6 dex107.txt NONQUALIFIED SAVINGS PLAN EXHIBIT 10.7 RYERSON TULL NONQUALIFIED SAVINGS PLAN ------------------------- (Effective January 1, 1998) (As Amended January 1, 2002) Ryerson Tull, Inc. hereby establishes this Ryerson Tull Nonqualified Savings Plan, effective as of January 1, 1998, in order to continue to enable employees of the Company and the other Employers to obtain the same level of benefits they would have been able to receive under the Ryerson Tull Savings Plan but for the limits imposed by Sections 401(a)(17) or 415 of the Internal Revenue Code of 1986, as amended, on the amounts that can be contributed to the Savings Plan. The Plan is intended to be an "excess benefit plan" described in Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended; provided, however, that, to the extent, if any, that the Plan provides benefits which cannot be provided by an excess benefit plan, the Plan shall constitute an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. ARTICLE I DEFINITIONS ----------- 1.01 "Account" means the record of a Participant's interest in the Plan ------- attributable to Company Contributions and Participant Contributions made on behalf of such Participant. 1.02 "Base Compensation" means Base Compensation as defined in the ----------------- Savings Plan. 1.03 "Beneficiary" means, with respect to a Participant, the ----------- Participant's Beneficiary under the Savings Plan. 1.04 "Board" means the Board of Directors of the Company. ---- 1.05 "Code" means the Internal Revenue Code of 1986, as from time to --- time amended. 1.06 "Company" means Ryerson Tull, Inc. ------ 1.07 "Distributable Event" means a Distributable Event as defined in ------------------ the Savings Plan. 1.08 "Effective Date" means January 1, 1998. ------------- 1.09 "Eligible Employee" means an employee of an Employer who is ---------------- eligible to participate in the Savings Plan and whose Base Compensation exceeds the limits set forth in Section 401(a)(17) of the Code or whose contributions under the Savings Plan are limited by Section 415 of the Code. 1.10 "Employer" means an Employer as defined in the Savings Plan. -------- 1.11 "Employer Contributions" means the contributions to the Plan by the ---------------------- Employers pursuant to Section 3.03. 1.12 "Enrollment Date" means the Effective Date and the first day of each --------------- month thereafter. 1.13 "ERISA" means the Employee Retirement Income Security Act of 1974, ----- as from time to time amended. 1.14 "Nonqualified Thrift Plan" means the Inland Steel Industries, Inc. ------------------------ Nonqualified Thrift Plan. 1.15 Participant" means each Eligible Employee who has met the ----------- requirements of Article II for participation in the Plan. 1.16 "Participant Contributions" means the contributions to the Plan by ------------------------- the Employers on behalf of a Participant pursuant to Section 3.01. 1.17 "Permanent Incapacity" means Permanent Incapacity as defined in the -------------------- Savings Plan. 1.18 "Plan" means the Ryerson Tull Inc. Nonqualified Savings Plan, as ---- from time to time amended. 1.19 "Plan Administrator" means the Plan Administrator appointed under ------------------ the Savings Plan or any other individual as may be appointed by the Chairman of the Board, the President, the Vice President-Human Resources or the Treasurer of the Company to administer the Plan. To the extent consistent with the purposes of the Plan and the authority delegated to the Assistant Plan Administrator pursuant to Section 6.03(h), the term Plan Administrator shall include the Assistant Plan Administrator. 1.20 "Plan Year" means the calendar year. --------- 1.21 "Related Company" means a Related Company as defined in the --------------- Savings Plan. 1.22 "Retirement" means Retirement as defined in the Savings Plan. ---------- 1.23 "Savings Plan" means the Ryerson Tull Savings Plan, as from time to ------------ time amended. 1.24 "Valuation Date" means the last day of each month. -------------- 1.25 "Years of Vesting Service" means Years of Vesting Service as ------------------------ defined in the Savings Plan. -2- ARTICLE II PARTICIPATION ------------- 2.01 Eligibility. An Eligible Employee shall become a Participant on the ----------- Enrollment Date next following the filing with the Plan Administrator of an instrument in a form prescribed by the Plan Administrator evidencing his or her acceptance of the provisions of the Plan. Notwithstanding the foregoing, any person who is an Eligible Employee and who, immediately prior to becoming an Eligible Employee, was a participant in the Nonqualified Thrift Plan shall automatically become a Participant in the Plan as of the date on which he or she becomes an Eligible Employee. 2.02 Restricted Participation. Notwithstanding any other provision of the ------------------------ Plan to the contrary, if the Plan Administrator determines that participation by one or more Participants or Beneficiaries shall cause the Plan as applied to any Employer to be subject to Part 2, 3 or 4 of Title I of ERISA, the entire interest of such Participant or Beneficiary under the Plan shall, in the discretion of the Plan Administrator, be immediately paid to such Participant or Beneficiary, as applicable, by the applicable Employer or Employers, or shall otherwise be segregated from the Plan, and such Participant(s) or Beneficiary(ies) shall cease to have any interest under the Plan. ARTICLE III CONTRIBUTIONS ------------- 3.01 Participant Contributions. For any payroll period, each Participant ------------------------- who is an Eligible Employee for such payroll period may elect for his or her Employer to make contributions ("Participant Contributions") under the Plan ------------------------- equal to not less than one (1) percent (1%) and not more than ten percent (10%) - of the Participant's Base Compensation. Contributions made to the Plan on a Participant's behalf for any payroll period shall be treated as a salary reduction and shall reduce the amount of current cash compensation otherwise payable to such Participant for such payroll period. 3.02 Designation of Participant Contributions. Each Participant shall ---------------------------------------- designate the percentage of his or her Base Compensation to be deferred as a contribution under the Plan in the same instrument by which he or she evidences his or her acceptance of the provisions of the Plan pursuant to Article II. Thereafter (but not retroactively), a Participant may, on a form prescribed by the Plan Administrator, change the percentage of his or her Base Compensation to be deferred as a contribution under the Plan, subject to the limitations of this Article III. Notwithstanding the foregoing, in the case of any person who becomes a Participant and who immediately prior thereto was a participant in the Nonqualified Thrift Plan, any election made by such individual under the Nonqualified Thrift Plan that was effective immediately prior to the date on which he or she becomes a Participant shall be considered an election under the foregoing provisions of this Article III effective as of the date on which he or she becomes a Participant without any other action being required on the part of the individual. -3- 3.03 Employer Contributions. For each payroll period, each Employer shall ---------------------- make a contribution to the Plan ("Employer Contributions") in respect of each ---------------------- Participant who is employed by such Employer as of the last day of the payroll period in an amount equal to 100% of the amount of the Participant Contributions made on behalf of such Participant during such payroll period pursuant to Section 3.01 that do not exceed four percent (4%) of the Participant's Base Compensation for such payroll period. 3.04 Nature of Contributions. Any amounts contributed to the Plan pursuant ----------------------- to this Article III shall be retained by the Employers as general assets of the Employers, and contributions shall be reflected on the books of the Employers solely for the purpose of computing Participants' benefits from the Plan. ARTICLE IV ACCOUNTS -------- 4.01 Maintenance of Accounts. The Plan Administrator shall establish and ----------------------- maintain in the records of the Plan an Account for each Participant reflecting each Participant's interest in the Plan attributable to Participant Contributions and Employer Contributions made on his or her behalf, increased by earnings attributable thereto. 4.02 Valuation of Accounts. As of each Valuation Date, the Account of each --------------------- Participant shall be (a) credited with earnings for the period since the next preceding Valuation Date as set forth in Section 4.03, and (b) increased by Participant Contributions and Employer Contributions to the Plan with respect to such Participant relating to payroll periods since the next preceding Valuation Date. 4.03 Earnings. During a Plan Year, Participants' Accounts shall be credited -------- with earnings at a rate of interest earned by assets in the Stable Value Fixed Income Fund established under the Savings Plan for the relevant period. ARTICLE V DISTRIBUTION OF BENEFITS ------------------------ 5.01 Distribution Upon Termination of Employment. ------------------------------------------- (a) Upon termination of a Participant's employment with the Employers and Related Companies other than by reason of a Distributable Event and prior to (i the completion of 5 Years of Vesting Service, (ii) the date on which he or she has a fully vested and nonforfeitable interest in his or her account balance under the Savings Plan, or (iii) the date on which his or her benefits under the Plan would otherwise be fully vested and nonforfeitable, the Participant shall be entitled to distribution of his or her entire -4- vested Account balance, payable to the Participant in a single lump sum payment no later than 60 days after the first anniversary of the Participant's termination of employment. (b) Upon termination of a Participant's employment with the Employers and Related Companies by reason of a Distributable Event or after (i) the completion of 5 Years of Vesting Service, (ii) the date on which he or she has a fully vested and nonforfeitable interest in his or her account balance under the Savings Plan, or (iii) the date on which his or her benefits under the Plan would otherwise be fully vested and nonforfeitable, the Participant shall be entitled to distribution of his or her entire Account balance, payable to the Participant in a single lump sum payment no later than 60 days after the first anniversary of the Participant's termination of employment. (c) Upon termination of a Participant's employment with the Employers and Related Companies by reason of Permanent Incapacity or Retirement, and where the amount payable to the Participant is at least $10,000, the Participant shall be entitled to a distribution of his or her entire Account balance, payable to the Participant in either of the following ways, as irrevocably elected by the Participant in accordance with rules established by the Plan Administrator: (1) In a single lump sum payment representing the full amount distributable to the Participant, payable on a date elected by the Participant which is not later than the end of the calendar year in which the Participant attains age 75; or (2) In substantially equal installments, payable annually, over a period not extending beyond the end of the calendar year in which the Participant attains age 75. Each installment payment shall be equal to that amount determined by multiplying the then remaining balance in the Participant's Account as of the Valuation Date used for purposes of calculating the payment by a fraction having a numerator of one and a denominator equal to the number of installments remaining to be paid. 5.02 Distribution Upon Death. Upon the death of a Participant, the ----------------------- total value of the Participant's Account as of the Valuation Date preceding the date of death shall be distributed to the Participant's Beneficiary in a single lump sum payment as soon as practicable after satisfactory proof of death shall have been submitted to the Plan Administrator. 5.03 Hardship Distributions. Upon a showing of hardship by a ---------------------- Participant, such Participant shall be entitled to a distribution of such portion (or all) of his or her Account balance as shall be necessary to meet such hardship. This Section 5.03 shall be administered in a manner consistent with the hardship withdrawal provisions of the Savings Plan. The Plan Administrator's determination of a Participant's hardship hereunder shall be final. 5.04 Liability for Benefit Payments. The amount of any benefit payable ------------------------------ under the Plan shall be paid from the general revenues of the Employer that last employs the Participant. An Employer's obligation under the Plan shall be reduced to the extent that any amounts due under the Plan are paid from one or more trusts, the assets of which are subject to the claims of general -5- creditors of the Employer or any affiliate thereof; provided, however, that nothing in the Plan shall require the Company or any Employer to establish any trust to provide benefits under the Plan. ARTICLE VI PLAN ADMINISTRATION ------------------- 6.01 Administration of Plan. The Employers shall have the sole ---------------------- responsibility for making salary reductions and contributions hereunder as provided under Article III and the Company shall have the sole authority to amend or terminate, in whole or in part, this Plan at any time. The Plan Administrator shall have the sole responsibility for the administration of the Plan. The Employers do not guarantee to any Participant in any manner the effect under any tax law or Federal or state statute of the Participant's participation in this Plan. 6.02 Claims Procedure. The Plan Administrator shall make all determinations ---------------- as to the right of any person to a benefit under this Plan. Any denial by the Plan Administrator of a claim for benefits under the Plan by a Participant shall be stated in writing by the Plan Administrator and shall set forth the specific reasons for the denial. In addition, the Plan Administrator shall afford a reasonable opportunity to any Participant whose claim for benefits has been denied for a review of the decision denying the claim. 6.03 Powers and Duties of Plan Administrator. The Plan --------------------------------------- Administrator shall have such duties and powers as may be necessary to discharge its duties hereunder,including, but not by way of limitation, the following: (a) to conclusively construe and interpret the Plan, decide all of questions of eligibility and determine the amount, manner and time of payment any benefits hereunder; (b) to prescribe procedures to be followed by Participants in filing elections or revocations thereof; (c) to prepare and distribute, in such manner as the Plan Administrator determines to be appropriate, information explaining the Plan; (d) to receive from the Employers and from Participants such information as shall be necessary for the proper administration of the Plan; (e) to furnish the Employers, upon request, such reports with respect to the administration of the Plan as are reasonable and appropriate; (f) to receive, review and keep on file (as it deems convenient and proper) reports of benefit payments by the Employers and reports of disbursements for expenses directed by the Plan Administrator; -6- (g) to appoint individuals to assist in the administration of the Plan and any other agents it deems advisable, including legal counsel; and (h) to name as an Assistant Plan Administrator any individual or individuals and to delegate such authority and duties to such individual as the Plan Administrator in its discretion deems advisable. Each Assistant Plan Administrator, if any, named pursuant to this paragraph shall have such authority to act with respect to the administration of the Plan as the Plan Administrator may prescribe. The incumbency of any Assistant Plan Administrator may be terminated by action of the Plan Administrator at any time, with or without cause. Notwithstanding the foregoing, in the absence of a formal designation of any Assistant Plan Administrator by the Plan Administrator, no provision of this paragraph shall prevent the Plan Administrator from delegating authority to employees or other agents of the Employers in executing the duties of administering the Plan. The Plan Administrator shall have no power to add to, subtract from or modify any of the terms of the Plan, or to change or add to any benefits provided by the Plan, or to waive or fail to apply any requirements of eligibility for a benefit under the Plan. 6.04 Rules and Decisions. The Plan Administrator may adopt such rules as it ------------------- deems necessary, desirable or appropriate. All rules and decisions of the Plan Administrator shall be uniformly and consistently applied to all Participants in similar circumstances. When making a determination or calculation, the Plan Administrator shall be entitled to rely upon information furnished by a Participant, the Employers or the legal counsel of the Employers. 6.05 Authorization of Benefit Payments. The Plan Administrator shall issue --------------------------------- directions to the Employers concerning all benefits which are to be paid from the Company's general assets pursuant to the provisions of the Plan. 6.06 Indemnification of Plan Administrator. The Plan Administrator shall be ------------------------------------- indemnified by the Employers against any and all liabilities arising by reason of any act or failure to act made in goodfaith pursuant to the provisions of the Plan, including expenses reasonably incurred in the defense of any claim relating thereto. ARTICLE VII MISCELLANEOUS ------------- 7.01 No Right to Employment, etc. Neither the creation of this Plan nor --------------------------- anything contained herein shall be construed as giving any Participant hereunder or other employees of the Employers or any Related Company any right to remain in the employ of the Employers or any Related Company. 7.02 Successors and Assigns. All rights and obligations of this Plan shall ---------------------- inure to, and be binding upon the successors and assigns of the Employers. -7- 7.03 Inalienability. Except so far as may be contrary to the laws of any -------------- state having jurisdiction in the premises, a Participant or Beneficiary shall have no right to assign, transfer, hypothecate, encumber, commute or anticipate his or her interest in any payments under this Plan and such payments shall not in any way be subject to any legal process to levy upon or attach the same for payment of any claim against any Participant or Beneficiary. 7.04 Incompetency. If any Participant or Beneficiary is, in the opinion of ------------ the Plan Administrator, legally incapable of giving a valid receipt and discharge for any payment, the Plan Administrator may, at its option, direct that such payment or any part thereof be made to such person or persons who in the opinion of the Plan Administrator are caring for and supporting such Participant or Beneficiary, unless it has received due notice of claim from a duly appointed guardian or conservator of the estate of the Participant or Beneficiary. A payment so made will be a complete discharge of the obligations under this Plan to the extent of and as to that payment, and neither the Plan Administrator nor the Employers will have any obligation regarding the application of payment. 7.05 Controlling Law. To the extent not preempted by the laws of the United --------------- States of America, the laws of the State of Illinois shall be the controlling state law in all matters relating to this Plan. 7.06 Severability. If any provisions of this Plan shall be held illegal or ----------- invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, but this Plan shall be construed and enforced as if the illegal and invalid provisions never had been included herein. 7.07 Limitations on Provisions. The provisions of this Plan and any ------------------------- benefits hereunder shall be limited as described herein. Any benefit payable under the Savings Plan shall be paid solely in accordance with the terms and provisions of the Savings Plan, as appropriate, and nothing in this Plan shall operate or be construed in any way to modify, amend, or affect the terms and provisions of the Savings Plan. 7.08 Gender and Number. Whenever the context requires or permits, the ----------------- gender and number of words shall be interchangeable. ARTICLE VIII AMENDMENT AND TERMINATION ------------------------- 8.01 Amendment to Conform with Law. The Plan may be amended to take effect ----------------------------- retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Plan to any present or future law relating to plans of this or a similar nature, and to the administrative regulations and rulings promulgated thereunder. 8.02 Other Amendments and Termination. The Plan may be amended at any time, -------------------------------- without the consent of any Participant or Beneficiary. Notwithstanding the foregoing, the Plan shall not be amended or terminated so as to reduce or cancel the benefits which have accrued to a -8- Participant or Beneficiary prior to the later of the date of adoption of the amendment or termination or the effective date thereof, and in the event of such amendment or termination, any such accrued benefit hereunder shall not be reduced or canceled. 8.03 Effect of Change in Control. --------------------------- (a) In the event of a Change in Control (as defined below), all benefits accrued as of the date of such Change in Control hereunder shall become fully (i.e., 100%) and irrevocably vested, and shall become distributable to Participants (and Beneficiaries) at such time and in such manner provided herein pursuant to the provisions of the Plan as in effect on the day immediately preceding the date of such Change in Control. The Plan Administrator shall, in its sole discretion, determine whether assets equal in value to the aggregate of all accrued benefits under the Plan as of the date of such Change in Control shall be deposited by the Employers with a bank trustee pursuant to one or more "rabbi trusts". (b) For purposes of this Section 8.03, a "Change in Control" means the happening of any of the following: ----------------- (1) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange -------- Act")), other than (w) the Company and its affiliates (collectively --- referred to herein as "RTI"), (x) a trustee or other fiduciary holding --- security under an employee benefit plan of RTI, (y) an underwriter temporarily holding security pursuant to an offering of such securities, or (z) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of security of the Company (not including in the securities beneficially owned by such person any security acquired directly from the Company or its affiliates) representing 20% or more of the combined voting power of the Company's then outstanding securities; (2) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clauses (1), (3) or (4) of this paragraph) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; (3) there occurs a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting security of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting -9- securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of RTI, at least 60% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires more than 50% of the combined voting power of the Company's then outstanding securities; or (4) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. A Change in Control shall also be deemed to occur with respect to any Participant for purposes of the Plan if there occurs: (I) a sale or disposition, directly or indirectly, other than to a person described in subclause (w), (x) or (z) of clause (b) (1) above, of securities of the Participant's employer, any direct or indirect parent company of the Participant's employer or any company that is a subsidiary of the Participant's employer and is also a significant subsidiary (as defined below) of the Company (the Participant's employer and such a parent or subsidiary being an "Affiliated Company"), representing 50% or more of the combined voting ------------------ power of the securities of such Affiliated Company then outstanding; (II) a merger or consolidation of an Affiliated Company with any other corporation, other than a merger or consolidation which would result in 50% or more of the combined voting power of the surviving company being beneficially owned by the Company or by majority owned direct or indirect subsidiary of the Company; or (III) the sale or disposition of all or substantially all the assets of an Affiliated Company to a person other than the Company or a majority owned direct or indirect subsidiary of the Company. (c) The provisions of this Section 8.03 may not be amended after the date of a Change in Control without the written consent of a majority in both number and interest of the Participants in this Plan, other than those Participants who are both (i) not employed by the Company or a subsidiary as of the date of the Change in Control, and (ii) not receiving nor could have commenced receiving benefits under the Plan as of the date of the Change in Control, both immediately prior to the Change in Control and at the date of such amendment. 8.04 Manner and Form of Amendment or Termination. Any amendment or ------------------------------------------- termination of this Plan shall be made by action of the Board; provided, -------- however, that the Vice President-Human Resources of the Company and the - ------- Treasurer of the Company (or such other -10- person as designated by the Chairman of the Board) are jointly authorized, by written action signed by both such individuals: (a) to adopt and place in effect such amendments to the Plan and any related documents as they jointly deem necessary or advisable; (b) to maintain the Plan and any related documents in compliance with applicable law; (c) to relieve administrative burdens with respect to those documents; or (d) to provide for other changes in the best interests of Plan Participants and Beneficiaries without the necessity for further action by the Board or subsequent ratification; provided, however, that any -------- ------- action or amendment that would have the effect of: (1) terminating the Plan; (2) materially changing the benefits under the Plan; or (3) increasing anticipated costs associated with the Plan by more than $5 million, except for changes to comply with applicable law; may not be made without approval or ratification by the Board. 8.05 Notice of Amendment or Termination. The Plan Administrator shall ---------------------------------- notify Participants or Beneficiaries who are affected by any amendment or termination of this Plan within a reasonable time thereof. -11- EX-21 7 dex21.txt LIST OF CERTAIN SUBSIDIARIES OF THE REGISTRANT 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), four of which are 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) Ryerson Tull International, Inc. (a Delaware corporation) Ryerson Tull Procurement Corporation (a Delaware corporation) Ryerson Tull Receivables LLC (a Delaware limited liability company) EX-23 8 dex23.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 33-59161, No. 33-62897 and No. 333-59009) and in the Registration Statements on Form S-8 (No. 33-59783, No. 33-48770, No. 33-22902, No. 33-1329, No. 33-32504, No. 333-06977, No. 333-06989, No. 333-78429 and No. 333-62382), of Ryerson Tull, Inc. of our report dated February 20, 2002 relating to the financial statements and financial statement schedule, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP - ------------------------------- PricewaterhouseCoopers LLP Chicago, Illinois March 19, 2002 EX-24 9 dex24.txt POWERS OF ATTORNEY 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 7th day of March, --- 2002. /s/ Jameson A. Baxter --------------------- Jameson A. Baxter 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 7th day of March, --- 2002. /s/ Richard G. Cline -------------------- Richard G. Cline 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 7th day of March, --- 2002. /s/ Gary L. Crittenden ---------------------- Gary L. Crittenden 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 7th day of March, --- 2002. /s/ James A. Henderson ---------------------- James A. Henderson 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 7th day of March, --- 2002. /s/ Gregory P. Josefowicz ------------------------- Gregory P. Josefowicz 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, 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 7th day of March, --- 2002. /s/ Neil S. Novich ------------------ Neil S. Novich 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 7th day of March, --- 2002. /s/ Jerry K. Pearlman --------------------- Jerry K. Pearlman 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 7th day of March, --- 2002. /s/ Ronald L. Thompson ---------------------- Ronald L. Thompson -----END PRIVACY-ENHANCED MESSAGE-----