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Section 1: DEF 14A (DEF 14A)

ryi-def14a_20190424.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

(Rule 14a -101)

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.      )

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement  

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12

Ryerson Holding Corporation

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):  

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

(2)

Aggregate number of securities to which transaction applies:

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

(4)

Proposed maximum aggregate value of transaction:

 

(5)

Total fee paid:

Fee paid previously with preliminary materials:

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

Amount previously paid:

 

(2)

Form, Schedule or Registration Statement No.:

 

(3)

Filing Party:

 

(4)

Date Filed:

 


 

 

 

 

 

 

 

 

 

 

 

2019 PROXY STATEMENT

& NOTICE OF ANNUAL MEETING


227 W. Monroe St., 27th Floor
Chicago, Illinois 60606

NOTICE OF ANNUAL STOCKHOLDERS’ MEETING

Wednesday, April 24, 2019 2:00 p.m. Central Time

JW Marriott Houston Downtown

806 Main Street

Houston, Texas 77002

March 13, 2019

To our Stockholders:

You are cordially invited to the 2019 annual meeting of stockholders of Ryerson Holding Corporation scheduled to be held on Wednesday, April 24, 2019, at 2:00 p.m. Central Time at JW Marriott Houston Downtown, 806 Main Street, Houston, Texas 77002. At the meeting, we will consider:

 

The election of two directors;

 

The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019;

 

The approval of the Amended and Restated 2014 Omnibus Incentive Plan; and

 

Such other business as may properly come before the meeting.

Stockholders who owned shares of our stock at the close of business on March 1, 2019 can vote on these proposals.

Your vote is important regardless of the number of shares of stock you own. Whether you plan to attend or not, please review our proxy materials and request a proxy card to sign, date and return, or submit your voting instructions by telephone or through the Internet. Instructions for each type of voting are included in the Notice of Internet Availability of Proxy Materials that you received and in this proxy statement. If you plan to attend the meeting and prefer to vote at that time, you may do so. If you hold your shares through a broker, bank, or other institution, please be sure to follow the voting instructions that you receive from the holder. The holder will not be able to vote your shares on any of the proposals except the ratification of the appointment of Ernst & Young LLP unless you have provided voting instructions.

 

 

Mark S. Silver

Executive Vice President, General Counsel & Secretary

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON APRIL 24, 2019: THIS PROXY STATEMENT AND THE
ANNUAL REPORT ARE AVAILABLE AT http://www.proxyvote.com.

 

 


TABLE OF CONTENTS

 

RYERSON HOLDING CORPORATION

1

ANNUAL MEETING INFORMATION

2

Who May Vote?

2

Who May Attend the Meeting?

2

What Am I Voting On?

2

How Do I Vote?

2

Stockholders of Record

2

Stockholders of Record Vote

3

Stock Held in Street Name

3

What If I Do Not Provide Voting Instructions?

3

Can I Revoke or Change My Vote?

3

Who Are the Proxies and What Do They Do?

3

Is My Vote Confidential?

4

What Is the Quorum Requirement for the Annual Meeting?

4

How Are Abstentions, Withheld Votes and Broker Non-Votes Treated?

4

What Vote Is Required to Approve a Proposal?

4

Who Solicits Proxies and How Are They Paid?

4

How Do You Determine Whether I Get One or More Paper Copies of the Proxy Materials?

4

ITEMS YOU MAY VOTE ON

5

1. Election of Directors

5

2. Ratification of the Appointment of Independent Registered Public Accounting Firm

5

3. Approval of the Amended and Restated 2014 Omnibus Incentive Plan

6

4. Such Other Business as May Properly Come Before the Annual Meeting

13

BOARD OF DIRECTORS

14

Composition of Board of Directors

14

Term and Classes of Directors

14

Biographies

14

Director Independence

16

CORPORATE GOVERNANCE MATTERS

17

DIRECTOR COMPENSATION

17

MEETINGS OF THE BOARD AND BOARD COMMITTEES

18

EXECUTIVE COMMITTEE

19

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE

19

Qualifications for Directors

19

Governance Guidelines and Committee Charters

19

Code of Ethics

20

Communications with Directors

20

BOARD LEADERSHIP STRUCTURE

20

BOARD OVERSIGHT OF RISK

20

Committee Roles

20

Internal Audit

20

AUDIT COMMITTEE

21

Audit, Audit-related and Other Non-Audit Services

22

Pre-approval Policies

22

Other Policies

22

AUDIT COMMITTEE REPORT – FINANCIAL STATEMENTS RECOMMENDATION

23

COMPENSATION COMMITTEE

24

Committee Resources and Authority

25

Compensation Committee Interlocks and Insider Participation

25

COMPENSATION COMMITTEE REPORT

25

 

 

i

 


 

 

EXECUTIVE OFFICERS

26

Biographies

26

EXECUTIVE COMPENSATION

26

Compensation Discussion and Analysis

26

Overview

26

Executive Compensation Philosophy

27

Consideration of Results of Advisory Vote on Executive Compensation

27

Determination of Compensation

27

Mr. Lehner’s Employment Agreement

28

Use of Peer Groups for Compensation Matters

28

Components of Compensation

28

Relationship Among the Different Components of Compensation

29

Base Salary

29

Annual Bonus

30

Long-Term Incentive Program

31

Retirement Benefits

35

Perquisites and Other Benefits

35

Employment Agreements

35

Compensation Risk Management

36

Tax Considerations and Deductibility of Compensation

36

Executive Stock Ownership Guidelines

36

Prohibition on Speculative Stock Transactions

36

Recommendation

36

COMPENSATION TABLES

37

Summary Compensation Table

37

Pay Ratio

38

Grants of Plan-Based Awards

39

Narrative Relating to Summary Compensation Table and Grants of Plan-Based Awards

40

Outstanding Equity Awards at Fiscal Year-End

42

Option Exercises and Stock Vested

43

Pension Benefits

44

Qualified Pension Plan

44

Supplemental Pension Plan

45

Nonqualified Deferred Compensation

45

Potential Payments Upon Termination or Change in Control

46

STOCK OWNERSHIP

47

Directors and Executive Officers

47

Ownership of More Than 5% of Ryerson Stock

48

Section 16(a) Beneficial Ownership Reporting Compliance

48

RELATED PARTY TRANSACTIONS

48

Investor Rights Agreement

48

Policies and Procedures Regarding Transactions with Related Persons

49

OTHER INFORMATION

49

Stockholder Proposals and Director Nominations for the 2020 Annual Meeting

49

Stockholder Nominations for Directors

50

Ryerson’s Annual Report on Form 10-K

50

 

ii

 


RYERSON HOLDING CORPORATION

 

From its modest start in 1842, Ryerson has grown into an intelligent network of service centers with leading capabilities to serve customers industrial metal supply chain needs. Ryerson has survived the Great Chicago Fire, weathered economic downturns, and evolved with changing markets. Ryerson is passionate about profitably providing consistently great customer experiences.

 

Ryerson Holding Corporation (“Ryerson,” the “Company,” “we,” “us” or “our”) is furnishing this proxy statement to the holders of our common stock in connection with the solicitation of proxies on behalf of our board of directors (the “Board”) for use at our 2019 annual meeting of stockholders, which will be held on Wednesday, April 24, 2019, at JW Marriott Houston Downtown, 806 Main Street, Houston, Texas 77002.

Our common stock trades on the New York Stock Exchange (“NYSE”) under the ticker symbol ‘RYI’. The Company’s fiscal year ends on December 31 of each calendar year. Our corporate headquarters is located at 227 W. Monroe St., 27th Floor, Chicago, Illinois 60606, and our website address is www.ryerson.com. Please note that the information on our website is not, and shall not be deemed to be, a part of this proxy statement nor, by reference or otherwise (except to the extent we specifically incorporate it by reference), incorporated into any other filings we make with the Securities and Exchange Commission (“SEC”).

On August 13, 2014, we completed an initial public offering of 11 million shares of our common stock (the “IPO”). Prior to that time, all of our common stock was held by affiliates of Platinum Equity, LLC (together with such affiliates, “Platinum”), which still own approximately 56% of Ryerson’s common stock. For additional information regarding Platinum’s ownership, see below under “Ownership of More Than 5% of Ryerson Stock,” on page 48.

As the context requires, “Ryerson,” the “Company,” “we,” “us” or “our” may also include the direct and indirect subsidiaries of Ryerson Holding Corporation.

1

 


ANNUAL MEETING INFORMATION

This proxy statement contains information we must provide to you under the rules of the SEC and the NYSE in connection with the solicitation of proxies by our Board for the 2019 annual meeting of stockholders. It is designed to assist you in voting your shares of our stock. We will begin sending notice of the availability of these proxy materials on or about March 13, 2019.

Who May Vote?

You may vote if you were the holder of record of shares of our common stock at the close of business on March 1, 2019. You are entitled to one vote on each matter presented at the 2019 annual meeting of stockholders for each share of our stock you owned at that time. If you held stock at that time in “street name” through a broker, bank or other institution, you must either provide voting instructions to the holder or obtain a proxy, executed in your favor, from the holder to be able to vote those shares at the meeting.

Each share of Ryerson common stock is entitled to one vote. As of the close of business on March 1, 2019 (the record date for determining stockholders entitled to vote at the annual meeting), we had 37,444,005 shares of common stock outstanding and entitled to vote.

Who May Attend the Meeting?

You are entitled to attend our 2019 annual meeting if you were the holder of record of shares of our common stock at the close of business on March 1, 2019 or if you hold a valid proxy for the annual meeting. You should be prepared to present photo identification (a driver’s license or passport is preferred) for admittance. In addition, if you are a stockholder of record, your name is subject to verification against the list of stockholders of record on the record date prior to being admitted to the meeting. If you are not a stockholder of record but hold shares through a broker, bank or other nominee (i.e., in “street name”), you also may attend our 2019 annual meeting if you provide proof of beneficial ownership on the record date, such as your most recent account statement or similar evidence of ownership. If you do not provide photo identification or comply with the other procedures outlined above upon request, you may not be admitted to the meeting.

The annual meeting will occur at JW Marriott Houston Downtown, 806 Main Street, Houston, Texas 77002, and will begin promptly at 2:00 p.m. Central Time, and you should allow ample time for check-in procedures. No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted into the meeting or adjacent areas. All items may be subject to search.

What Am I Voting On?

You are voting on:

 

The election of two directors;

 

The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019;

 

The approval of the Amended and Restated 2014 Omnibus Incentive Plan; and

 

Such other business as may properly come before the meeting.

How Do I Vote?

If your shares of stock are registered directly in your name, you are considered a stockholder of record and you will receive your Notice of Internet Availability of Proxy Materials directly from us. Stockholders of record can vote in advance of our annual meeting by requesting a proxy card to sign, date and return or by submitting voting instructions by telephone or through the Internet. Please see the Notice of Internet Availability of Proxy Materials you received or this proxy statement for specific instructions on how to cast your vote by any of these methods. You may obtain directions to the location of our 2019 annual meeting by contacting us at Investor Relations, 227 W. Monroe St., 27th Floor, Chicago, Illinois 60606, email: investorinfo@ryerson.com, or telephone: 312-292-5130.

If you hold your shares of stock through a broker, bank or other institution, you are considered the beneficial owner of stock held in “street name” and you will receive your notice from your broker, bank or other institution.

Stockholders of Record

For stockholders of record, voting instructions submitted via mail, telephone or the Internet must be received by Broadridge, our independent tabulator, by 11:59 p.m. Central Time on April 23, 2019. Submitting your voting instructions prior to the annual meeting will not affect your right to vote in person should you decide to attend the meeting.

2

 


Stockholders of record can vote by:

 

Requesting and returning a completed proxy card by mail to our independent tabulator, Broadridge, by 11:59 p.m. Central Time on April 23, 2019;

 

Submitting voting instructions via the Internet or telephone by 11:59 p.m. Central Time on April 23, 2019; or

 

Completing a ballot and returning it to the inspector of election during the annual meeting.

Instructions and contact information for each of these voting options can be found in our Notice of Internet Availability of Proxy Materials.

The Internet and telephone voting procedures available to you are designed to authenticate stockholders’ identities, to allow stockholders to submit voting instructions and to confirm that stockholders’ voting instructions have been recorded properly. We have been advised that the Internet and telephone voting procedures are consistent with the requirements of applicable law. Stockholders voting via the Internet or telephone should understand that there may be costs associated with voting in this manner, such as usage charges from Internet access providers and telephone companies, which must be borne by the stockholder.

Stock Held in Street Name

If you hold your stock in street name, you can vote by submitting a voting instruction card to your broker, bank or other institution that sent your Notice of Internet Availability of Proxy Materials to you in accordance with their procedures. Please note that if you hold your stock in street name, the broker, bank or other institution that holds the stock will not be able to vote your shares on any proposal other than the ratification of the appointment of Ernst & Young LLP unless you have provided voting instructions. If you hold your stock in street name and wish to vote at the meeting, you must obtain a proxy, executed in your favor, from the holder of record of the stock as of the record date.

What If I Do Not Provide Voting Instructions?

If you submit a valid proxy card, or validly submit voting instructions via the telephone or Internet, but you do not indicate your vote, your shares of stock will be voted FOR:

 

The election of the two directors named herein;

 

The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019; and

 

The approval of the Amended and Restated 2014 Omnibus Incentive Plan.

You also give the proxies discretionary authority to vote on any other business that may properly be presented at the annual meeting.

Can I Revoke or Change My Vote?

If you are a stockholder of record, you may revoke or change your proxy and voting instructions at any time prior to the vote at the annual meeting. To do so:

 

Submit a new proxy card or voting instructions to the independent tabulator by mail, telephone or through the Internet by 11:59 p.m. Central Time on April 23, 2019; or

 

Attend the annual meeting and vote in person by ballot.

If you hold your stock in street name, you may revoke or change your proxy instructions prior to the vote at the annual meeting by submitting new voting instructions to your broker, bank or other institution in accordance with their procedures.

Who Are the Proxies and What Do They Do?

When you vote in advance of the annual meeting, you appoint Mr. Mark S. Silver, our Executive Vice President, General Counsel & Secretary, and Ms. Camilla R. Merrick, our Senior Counsel, as proxies, each with the power to appoint a substitute. You direct them to vote all of the shares of stock you held on the record date at the annual meeting and at any adjournment or postponement of that meeting. If you submit a valid proxy card or validly submit voting instructions via the telephone or Internet, and you do not subsequently revoke your proxy or vote, the individuals named on the card as your proxies will vote your shares of stock in accordance with your instructions. If you submit a valid proxy card or voting instructions but you do not indicate your vote, your shares of stock will be voted as described above under “What If I Do Not Provide Voting Instructions?” on page 3.

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Is My Vote Confidential?

We have a confidential voting policy. Stockholders’ votes will not be disclosed to us other than in limited situations. The independent tabulator will collect, tabulate and retain all proxies and will forward any comments written on the proxy cards or otherwise received by the independent tabulator to management. Our confidential voting policy will not apply in the event of a contested solicitation.

What Is the Quorum Requirement for the Annual Meeting?

A quorum is necessary to hold a valid meeting. A quorum will exist if stockholders holding a majority of the shares of stock issued and outstanding and entitled to vote at the meeting are present in person or represented by proxy.

How Are Abstentions, Withheld Votes and Broker Non-Votes Treated?

The election inspector will treat abstentions, withholds and “broker non-votes” as shares of stock that are present and entitled to vote for purposes of determining the presence of a quorum. A “broker non-vote” occurs when a broker holding stock for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner. Brokers will have discretionary voting power with respect to proposal two (the ratification of the appointment of Ernst & Young LLP), but not with respect to any other proposal. Abstentions and broker non-votes do not count as votes cast either for or against any of the proposals. A “withhold” vote with respect to any director nominee will have the effect of a vote against such nominee.

What Vote Is Required to Approve a Proposal?

Proposal One: A director nominee will be elected to the Board if the number of votes cast “for” the nominee’s election exceeds the number of votes “withheld” from or cast “against” the nominee’s election.

Proposal Two: The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019 will be approved if holders of a majority of the stock present in person at the meeting or represented by proxy vote in favor of the proposal.

Proposal Three: The Amended and Restated 2014 Omnibus Incentive Plan will be approved if holders of a majority of the stock present in person at the meeting or represented by proxy vote in favor of the proposal.

Who Solicits Proxies and How Are They Paid?

The proxy accompanying this proxy statement is solicited on behalf of our Board for use at the annual meeting and Ryerson pays the expenses of soliciting the proxies. In addition to this solicitation by mail, our directors, officers and other employees may contact you by personal interview, telephone, electronic mail, facsimile, Internet or otherwise to obtain your proxy. These persons will not receive any additional compensation for these activities. Brokerage houses and other custodians, nominees and fiduciaries will be requested to forward solicitation material to the beneficial owners of stock. We will reimburse these entities and our transfer agent for their reasonable out-of-pocket expenses in forwarding solicitation material. We have not retained the services of a proxy solicitor.

How Do You Determine Whether I Get One or More Paper Copies of the Proxy Materials?

To reduce the costs of printing and distributing proxy materials we are taking advantage of the SEC rule that allows companies to furnish their proxy materials over the Internet. As a result, we send many stockholders a notice regarding the Internet availability of the proxy materials instead of a paper copy of our proxy materials. This notice explains how you can access the proxy materials over the Internet, and also describes how to request to receive a paper copy of the proxy materials. If you have requested paper copies of the proxy materials, you may have received one copy of our proxy statement, annual report or Notice of Internet Availability of Proxy Materials for multiple stockholders in your household. This is because we and some brokers, banks and other record holders participate in the practice of “householding” proxy statements, annual reports and Notices of Internet Availability of Proxy Materials and deliver only one copy to stockholders at one address unless we or they receive other instructions from you.

If these materials were delivered to an address that you share with another stockholder, we will promptly deliver a separate copy if you make a written or verbal request to Ryerson Holding Corporation, Investor Relations, 227 W. Monroe St., 27th Floor, Chicago, Illinois 60606, email: investorinfo@ryerson.com, or telephone: 312-292-5130.

If you are receiving multiple copies and would like to receive only one copy for your household, you may make such request as follows:

 

If you are a stockholder of record, by contacting Broadridge Householding Department, 51 Mercedes Way, Edgewood, New York 11717 or call Broadridge toll free: 1-866-540-7095; and

 

If you are a beneficial owner of stock, by contacting your broker, bank or other holder of record.

The Company’s proxy materials are also available at ir.ryerson.com.

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ITEMS YOU MAY VOTE ON

1.Election of Directors

Our Board presently consists of seven directors, three of whom are independent under the NYSE Listed Company Manual and other NYSE rules and requirements (together, “NYSE rules”), and four of whom are affiliated with Platinum, which owns a majority of our outstanding common stock. Because Platinum owns more than 50% of the voting power of our common stock, we are considered to be a “controlled company” for purposes of the NYSE rules. As such, we are permitted, and have elected, to opt out of the NYSE rules that would otherwise require our Board to be comprised of a majority of independent directors.

The Board is divided into three separate classes, with one class being elected each year to serve a staggered three-year term. The terms of the Class II Directors expire at the 2019 annual meeting, and two directors will be elected at the annual meeting to serve as Class II Directors for a three-year term expiring at the 2022 annual meeting or until their successors are duly elected and qualified.

For the 2019 annual meeting, the Board has proposed the following director nominees for election: Stephen P. Larson and Philip E. Norment.

Detailed information on each director nominee and continuing director is provided below under “Biographies” on page 14. If you submit valid voting instructions, the proxies will vote your shares of stock for the election of each of the nominees, unless you indicate that you wish to vote against a nominee or withhold your vote on a nominee. If at the time of the annual meeting any of the nominees is unable or declines to serve, the persons named in the proxy will, at the direction of the Board, either vote for the substitute nominee or nominees that the Board recommends, or the Board may reduce the number of directors to be elected at the meeting. The Board has no reason to believe that any nominee will be unable or will decline to serve as a director if elected.  

Vote Required

Under our Bylaws, our directors are elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote in the election of directors. In an uncontested election, a director is elected if the votes cast “for” the director’s election exceed the votes “withheld” from or cast “against” the director’s election.

Recommendation of the Board

OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” the election of Stephen P. Larson and Philip E. Norment to serve as directors of the Company.

2.Ratification of the Appointment of Independent Registered Public Accounting Firm

Our Audit Committee has selected Ernst & Young LLP to serve as our independent registered public accounting firm for 2019. Ernst & Young LLP has served as the independent registered public accounting firm for the Company since 2006. Representatives of Ernst & Young LLP will be present at the annual meeting to answer questions. They will also have the opportunity to make a statement if they desire to do so.

The Audit Committee is responsible for recommending, for stockholder approval, our independent registered public accounting firm. Should stockholders fail to approve the ratification of the appointment of Ernst & Young LLP, the Audit Committee would undertake the task of reviewing the appointment. Nevertheless, given the difficulty and expense of changing independent accountants mid-way through the year, there is no assurance that a firm other than Ernst & Young LLP could be secured to deliver any or all of the Company’s independent auditing services required in 2019. The Audit Committee, however, would take the lack of stockholder approval into account when recommending an independent registered public accounting firm for 2020.

The following table sets out the various fees for services provided by Ernst & Young LLP for 2018 and 2017. The Audit Committee pre-approved all of these services. For additional information, see the description of the pre-approval policies and procedures of the Audit Committee under “Pre-approval Policies,” below on page 22.

5

 


Annual Fees for 2018 and 2017

 

 

 

Amounts

 

Description

 

2018

 

 

2017

 

Audit Fees(1)

 

$

5,000,460

 

 

$

4,486,080

 

Audit-related Fees(2)

 

$

1,995

 

 

$

1,995

 

Tax Fees(3)

 

$

299,315

 

 

$

354,905

 

Other Fees (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

5,301,770

 

 

$

4,842,980

 

 

(1)

Audit fees related to professional services rendered in conjunction with the audit of our annual financial statements, the audit of our internal control over financial reporting, the review of our quarterly financial statements, comfort letters, consents, and the audit of our statutory filings, and other services pertaining to SEC matters.

(2)

Audit-related fees related to professional services that are reasonably related to the performance of the audit or review of the Company’s financial statements, including compliance-related matters, which are not specifically classified as audit fees, including such fees related to subscription fees for the audit firm’s online research tool.

(3)

Tax fees related to professional services performed by the independent auditor’s tax personnel and not included in audit fees or audit related fees, such as services related to tax audits, tax compliance and tax consulting and planning services. Tax fees primarily related to tax consulting and planning services related to international corporate structuring and transfer pricing relative to service charges from our U.S. operations to our Canadian subsidiary.

(4)

For 2018 and 2017, there were no fees billed by Ernst & Young LLP for services provided other than those described in the three preceding footnotes.

Ernst & Young LLP’s full-time, permanent employees conducted a majority of the audit of the Company’s 2018 financial statements. Leased personnel were not employed with respect to the domestic audit engagement.

Vote Required

The approval of this proposal requires the affirmative vote of a majority of the votes cast in person or by proxy and entitled to vote thereon at the 2019 annual meeting, assuming that a quorum is present.

Recommendation of the Board

OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019.

3.Approval of the Amended and Restated 2014 Omnibus Incentive Plan

Overview of Proposal

Our 2014 Omnibus Incentive Plan, or 2014 Plan, was originally adopted by our Board on August 6, 2014.  On February 20, 2019, our Compensation Committee approved an amendment and restatement of the 2014 Omnibus Incentive Plan, which we refer to as the Amended and Restated 2014 Plan, subject to approval by our stockholders.  The 2014 Plan has been an important factor in attracting, retaining, motivating, and rewarding certain employees, officers, directors and consultants by closely aligning the interests of such individuals with those of our stockholders.  We are asking our stockholders to approve the Amended and Restated 2014 Plan at the 2019 annual meeting that would:

 

Increase the number of shares of common stock reserved for issuance from 1,695,000 to 3,495,000, subject to adjustment as provided in the plan and an equivalent increase to the number of shares of common stock available for grant pursuant to incentive stock options;

 

Extend the expiration date of the plan to February 20, 2029;

 

Remove certain performance and cash-based awards previously available for grant under the plan that were designed for compliance with the exception from deduction limit for performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), which was repealed by the Tax Cuts and Jobs Act, signed into law December 2017; and

6

 


 

Allow the Company to withhold shares to cover tax withholding obligations based on either the applicable minimum statutorily required withholding rates or other applicable withholding rates in the applicable award holder’s jurisdiction, including maximum applicable rates that may be utilized without creating adverse accounting treatment under Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor pronouncement thereto) and is permitted under applicable withholding rules.

We believe that increasing the share reserve under the 2014 Plan and extending the expiration date to facilitate continued use of the 2014 Plan will allow us to further the purpose of the plan and our compensation philosophy.  

If our stockholders approve this proposal, the amended and restated plan will become effective as of the date of stockholder approval. If our stockholders do not approve this proposal, the amendment and restatement of the 2014 Plan described in this proposal will not take effect and our 2014 plan will continue to be administered in its current form.  Further, if stockholders do not approve this proposal, our ability to attract, reward and retain valuable employees will be restricted as we would not have a sufficient number of shares of common stock to make future equity grants.

Rationale for Approving the Amended and Restated 2014 Plan

Our Board believes that approval of the Amended and Restated 2014 Plan is essential to our continued success.  The additional 1,800,000 shares of common stock our Compensation Committee has reserved for issuance under the Amended and Restated 2014 Plan represent approximately 4.8% of our outstanding shares of common stock on a fully diluted basis as of the record date, March 1, 2019.  Our Board believes that compensation of the type available for grant under the Amended and Restated 2014 Plan, a stock-based incentive plan, furthers our goal of creating long-term value for our stockholders by fostering an ownership culture that encourages a focus on long-term performance, retention, and stockholder value-creation, and exposes participants to economic diminishment if our share performance lags.

Alignment of the Amended and Restated 2014 Plan with the Interests of the Company and our Stockholders

Our Board believes that using long-term incentive compensation, including equity compensation, to retain and motivate our key employees is critical to the achievement of our long-term goals and it considered the following factors, among other things, when adopting the Amended and Restated 2014 Plan:

 

our belief that the Amended and Restated 2014 Plan will serve a critical role in attracting, retaining and motivating high caliber employees, officers, directors and other service providers essential to our success and in motivating these individuals to enhance our growth and profitability;

 

our belief that share ownership by employees provides performance incentives and fosters long-term commitment to our benefit and to the benefit of our stockholders; and

 

our belief that equity compensation, by its very nature, is performance-based compensation, and that the Amended and Restated 2014 Plan reflects our pay-for-performance philosophy and motivates our employees to enhance our growth and profitability.

Key Features of the Amended and Restated 2014 Plan

The Amended and Restated 2014 Plan and our related governance practices and policies include many features that are designed to protect stockholder interests.  A summary of these features follows, and a more detailed description of the features is included under the heading “Summary of the Amended and Restated 2014 Plan” below.  The summaries in this proposal do not provide a complete description of all the provisions of the Amended and Restated 2014 Plan and are qualified in their entirety by reference to the full text of the Amended and Restated 2014 Plan, which is attached to this proxy statement as Appendix A.

 

Fixed Reserve of Shares. The number of shares of common stock available for grant under the Amended and Restated 2014 Plan is fixed and will not automatically increase because of an “evergreen” feature, meaning stockholder approval is required to issue any additional shares, allowing our stockholders to have direct input on our equity compensation program.

 

No Repricing. The Amended and Restated 2014 Plan prohibits the repricing of awards without stockholder approval.

 

No Liberal Definition of “Change in Control.” The change in control definition contained in the Amended and Restated 2014 Plan is not a “liberal” definition that would be triggered on stockholder approval of a transaction.

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Limitation on Term of Stock Options and Stock Appreciation Rights.  The maximum term of a stock option or stock appreciation right under the Amended and Restated 2014 Plan is 10 years.

 

No Dividends or Dividend Equivalents on Unearned Awards.  If the Company were to pay cash dividends and share dividends, such dividends paid on shares of restricted stock will be withheld by the Company and will be subject to vesting and forfeiture to the same degree as the shares of restricted stock to which such dividends relate.

 

Clawback.  Awards granted under the Amended and Restated 2014 Plan will be subject to any Company’s clawback and/or recoupment policies in effect or as otherwise required by applicable law.

 

Limitation on Amendments.  Amendments to the Amended and Restated 2014 Plan must be approved by our stockholders if stockholder approval is required by applicable law or the applicable rules of the national securities exchange on which our shares are principally listed or if the amendment would diminish the prohibitions on repricing stock options or stock appreciation rights.

 

No Automatic Grants.  The Amended and Restated 2014 Plan does not provide for automatic grants to any participant.

 

No Tax Gross-Ups.  The Amended and Restated 2014 Plan does not provide for any tax gross-ups.

Key Data

The following table includes information regarding our outstanding awards and shares of common stock available for future awards under the 2014 Plan as of February 28, 2019:

 


2014 Plan

Total shares of common stock underlying outstanding stock options

Total unvested shares of restricted stock outstanding

Total unvested restricted stock units outstanding(1)

878,912

Shares of common stock available for future issuances

379,883

 

(1)

Includes performance- and time-vested restricted stock units.  Shares subject to restricted stock units are not are included in our outstanding common stock until vested. Performance-vested restricted stock units are assumed to vest at the maximum potential payout.

 

The Compensation Committee carefully monitors our annual burn rate and total dilution by granting only the number of stock-based awards that it believes is necessary to attract, reward and retain key employees, officers and other service providers.  Burn rate, or run rate, refers to how fast a company uses the supply of shares authorized for issuance under its stock incentive plan.  Over the last three years, we have maintained an average burn rate of 0.96% of common stock outstanding per year.  Dilution measures the degree to which our stockholders’ ownership has been diluted by stock-based compensation awarded under our stock plans.  The following table shows our burn rate and dilution percentages over the past three years:

Key Equity Metrics

 

2016

 

2017

 

2018

Burn Rate(1)

 

1.00%

 

0.90%

 

0.96%

Dilution(2)

 

1.46%

 

2.15%

 

2.37%

_______________________________________________________________________________

 

(1)

Burn rate is calculated by dividing the number of shares of common stock subject to equity awards granted during the fiscal year by the weighted average number of shares of common stock outstanding during the fiscal year.

 

(2)

Dilution is calculated by dividing the number of shares of common stock subject to equity awards outstanding at the end of the fiscal year by the number of shares of common stock outstanding at the end of the fiscal year.

Summary of the Amended and Restated 2014 Plan

The following is a summary of certain material features of the Amended and Restated 2014 Plan.

Purpose.  The purpose of the Amended and Restated 2014 Plan is to give us the ability to attract, retain, motivate and reward certain officers, employees, directors and consultants and to provide a means whereby officers, employees, directors and/or consultants can acquire and maintain ownership of our common stock or be paid incentive compensation measured by reference to the value of our common stock, thereby strengthening their commitment to our welfare and that of our affiliates and promoting an identity of interest

8

 


between our stockholders and these persons and encouraging such eligible persons to expend maximum effort in the creation of stockholder value.

The following summary is not a complete description of all provisions of the Amended and Restated 2014 Plan and is qualified in its entirety by reference to the Amended and Restated 2014 Plan, the final version of which is attached to this proxy statement as Appendix A.

Plan Administration.  The Amended and Restated 2014 Plan will be administered by our Compensation Committee.  Our Compensation Committee will have the authority, among other things, to select participants, grant awards, determine types of awards and terms and conditions of awards for participants, prescribe rules and regulations for the administration of the plan and make all decisions and determinations as deemed necessary or advisable for the administration of the Amended and Restated 2014 Plan.  Our Compensation Committee may delegate certain of its authority as it deems appropriate, pursuant to the terms of the Amended and Restated 2014 Plan and to the extent permitted by applicable law, to our officers or employees, although any award granted to any person who is not our employee or who is subject to Section 16 of the Exchange Act, must be expressly approved by the Compensation Committee.  Our Compensation Committee’s actions will be final, conclusive and binding.

Authorized Stock.  A total of 3,495,000 shares of common stock will be reserved and available for issuance under the Amended and Restated 2014 Plan, subject to adjustment in accordance with the terms of the Amended and Restated 2014 Plan.  The number of shares of common stock reserved and available for issuance under the Amended and Restated 2014 Plan is subject to adjustment, as described below.  The maximum number of shares of common stock that may be issued in respect of incentive stock options will be 3,495,000.  Common stock issued under the Amended and Restated 2014 Plan may consist of authorized but unissued stock or previously issued common stock.  Common stock underlying awards that are settled in cash, expire or are canceled, forfeited, or otherwise terminated without delivery to a participant will again be available for issuance under the Amended and Restated 2014 Plan.  Common stock withheld or surrendered in connection with the payment of an exercise price of an award or to satisfy tax withholding will again become available for issuance under the Amended and Restated 2014 Plan.

Individual Limits.  The maximum number of shares of common stock that may be subject to awards granted to any non-employee director in any one calendar year may not exceed 20,000.

Types of Awards.  The types of awards that may be available under the Amended and Restated 2014 Plan are described below.  All of the awards described below will be subject to the terms and conditions determined by our Compensation Committee in its sole discretion, subject to certain limitations provided in the Amended and Restated 2014 Plan.  Each award granted under the Amended and Restated 2014 Plan will be evidenced by an award agreement, which will govern that award’s terms and conditions.

Non-qualified Stock Options.  A non-qualified stock option is an option that is not intended to meet the qualifications of an incentive stock option, as described below.  An award of a non-qualified stock option grants a participant the right to purchase a certain number of shares of our common stock during a specified term in the future, or upon the achievement of performance or other conditions, at an exercise price set by our Compensation Committee on the grant date.  The term of a non-qualified stock option will be set by our Compensation Committee but may not exceed 10 years from the grant date.  The exercise price may be paid using any of the following payment methods: (i) immediately available funds in U.S. dollars or by certified or bank cashier’s check, (ii) by delivery of stock having a value equal to the exercise price, (iii) a broker assisted cashless exercise, or (iv) by any other means approved by our Compensation Committee.  The Amended and Restated 2014 Plan also provides that participants terminated for “cause” (as such term is defined in the Amended and Restated 2014 Plan) will forfeit all of their non-qualified stock options, whether or not vested.  Participants terminated for any other reason will forfeit their unvested non-qualified stock options, retain their vested non-qualified stock options, and will have one year (in the case of a termination by reason of death or disability) or 90 days (in all other cases) following their termination date to exercise their vested non-qualified stock options, unless such non-qualified stock options expire sooner.  The Amended and Restated 2014 Plan authorizes our Compensation Committee to provide for different treatment of non-qualified stock options upon termination than that described above, as determined in its discretion.  

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Incentive Stock Options.  An incentive stock option is a stock option that meets the requirements of Section 422 of the Code.  Incentive stock options may be granted only to our employees or employees of certain of our subsidiaries and must have an exercise price of no less than 100% of the fair market value (or 110% with respect to a 10% stockholder) of a share of common stock on the grant date and a term of no more than 10 years (or 5 years with respect to a 10% stockholder).  The aggregate fair market value, determined at the time of grant, of our common stock subject to incentive stock options that are exercisable for the first time by a participant during any calendar year may not exceed $100,000.    The Amended and Restated 2014 Plan also provides that participants terminated for “cause” will forfeit all of their incentive stock options, whether or not vested.  Participants terminated for any other reason will forfeit their unvested incentive stock options, retain their vested incentive stock options, and will have one year (in the case of a termination by reason of death or disability) or 90 days (in all other cases) following their termination date to exercise their vested incentive stock options, unless such incentive stock option expires sooner.  The Amended and Restated 2014 Plan authorizes our Compensation Committee to provide for different treatment of incentive stock options upon termination than that described above, as determined in its discretion.

Stock Appreciation Rights.  A stock appreciation right entitles the participant to receive an amount equal to the difference between the fair market value of our common stock on the exercise date and the base price of the stock appreciation right that is set by our Compensation Committee on the grant date, multiplied by the number of shares of common stock subject to the stock appreciation right.  The term of a stock appreciation right will be set by our Compensation Committee but may not exceed 10 years from the grant date.  Payment to a participant upon the exercise of a stock appreciation right may be either in cash, stock or property as specified in the award agreement or as determined by our Compensation Committee.  The Amended and Restated 2014 Plan provides that participants terminated for “cause” will forfeit all of their stock appreciation rights, whether or not vested.  Participants terminated for any other reason will forfeit their unvested stock appreciation rights, retain their vested stock appreciation rights, and will have one year (in the case of a termination by reason of death or disability) or 90 days (in all other cases) following their termination date to exercise their vested stock appreciation rights, unless such appreciation rights expire sooner.  The Amended and Restated 2014 Plan authorizes our Compensation Committee to provide for different treatment of stock appreciation rights upon termination than that described above, as determined in its discretion.

Restricted Stock.  A restricted stock award is an award of restricted common stock that does not vest until a specified period of time has elapsed, and/or upon the achievement of performance or other conditions determined by our Compensation Committee, and which will be forfeited if the conditions to vesting are not met.  During the period that any restrictions apply, transfer of the restricted common stock is generally prohibited.  Unless otherwise specified in their award agreement, participants generally have all of the rights of a stockholder as to the restricted common stock, including the right to vote such common stock, provided, that any cash or stock dividends with respect to the restricted common stock will be withheld by us and will be subject to forfeiture to the same degree as the restricted common stock to which such dividends relate.  Except as otherwise provided by our Compensation Committee, in the event a participant is terminated for any reason, the vesting with respect to the participant’s restricted stock will cease, and as soon as practicable following the termination, we will repurchase all of such participant’s unvested restricted stock at a purchase price equal to the original purchase price paid for the restricted stock, or if the original purchase price is equal to $0, the unvested restricted stock will be forfeited by the participant to us for no consideration.

Restricted Stock Units.  A restricted stock unit is an unfunded and unsecured obligation to issue common stock (or an equivalent cash amount) to the participant in the future.  Restricted stock units become payable on terms and conditions determined by our Compensation Committee and will vest and be settled at such times in cash, common stock, or other specified property, as determined by our Compensation Committee.  Participants have no rights of a stockholder as to the restricted stock units, including no voting rights or rights to dividends, until the underlying common stock is issued or becomes payable to the participant.  Except as otherwise provided by our Compensation Committee, in the event a participant is terminated for any reason, the vesting with respect to the participant’s restricted stock units will cease, each of the participant’s outstanding unvested restricted stock units will be forfeited for no consideration as of the date of such termination, and any stock remaining undelivered with respect to the participant’s vested restricted stock units will be delivered on the delivery date specified in the applicable award agreement.

Other Stock-Based Compensation.  Under the Amended and Restated 2014 Plan, our Compensation Committee may grant other types of equity-based awards subject to such terms and conditions that our Compensation Committee may determine.  Such awards may include the grant of dividend equivalents, which generally entitle the participant to receive amounts equal to the dividends that are paid on the stock underlying the award.

Adjustments.  The aggregate number of shares of common stock reserved and available for issuance under the Amended and Restated 2014 Plan, the individual limitations, the number of shares of common stock covered by each outstanding award, and the price per share of common stock underlying each outstanding award will be equitably and proportionally adjusted or substituted, as determined by our Compensation Committee in its sole discretion, as to the number, price or kind of stock or other consideration subject to such awards in connection with stock dividends, extraordinary cash dividends, stock splits, reverse stock splits, recapitalizations, reorganizations, mergers, amalgamations, consolidations, combinations, exchanges, or other relevant changes in our capitalization affecting our common stock or our capital structure which occurs after the date of grant of any award, in connection with any extraordinary dividend declared and paid in respect of stock or in the event of any change in applicable law or circumstances that results

10

 


in or could result in, as determined by the Compensation Committee in its sole discretion, any substantial dilution or enlargement of the rights intended to be granted to, or available for, participants in the Amended and Restated 2014 Plan.

Corporate Events.  In the event of a merger, amalgamation, or consolidation involving us in which we are not the surviving corporation or in which we are the surviving corporation but the holders of our common stock receive securities of another corporation or other property or cash, a “change in control” (as defined in the Amended and Restated 2014 Plan), or a reorganization, or liquidation of us, our Compensation Committee may, in its discretion, provide for the assumption or substitution of outstanding awards, accelerate the vesting of outstanding awards, cash-out outstanding awards or replace outstanding awards with a cash incentive program that preserves the value of the awards so replaced.  

Transferability.  Unvested awards under the Amended and Restated 2014 Plan may not be sold, transferred, pledged, or assigned other than by will or by the applicable laws of descent and distribution, unless (for awards other than incentive stock options) otherwise provided in an award agreement or determined by our Compensation Committee.

Amendment.  Our Board or our Compensation Committee may amend the Amended and Restated 2014 Plan or outstanding awards at any time.  Our stockholders must approve any amendment if their approval is required pursuant to applicable law or the applicable rules of each national securities exchange on which our common stock is traded.  No amendment to the Amended and Restated 2014 Plan or outstanding awards which materially impairs the right of a participant is permitted unless the participant consents in writing.

Termination.  The Amended and Restated 2014 Plan will terminate on February 21, 2029.  In addition, our Board or our Compensation Committee may suspend or terminate the Amended and Restated 2014 Plan at any time.  Following any such suspension or termination, the Amended and Restated 2014 Plan will remain in effect to govern any then outstanding awards until such awards are forfeited, terminated or otherwise canceled or earned, exercised, settled or otherwise paid out, in accordance with their terms.

Clawback; Sub-Plans.  All awards under the Amended and Restated 2014 Plan will be subject to any incentive compensation clawback or recoupment policy currently in effect, or as may be adopted by our Board (or any committee or subcommittee thereof) and, in each case, as may be amended from time to time.  In addition, our Compensation Committee may adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Amended and Restated 2014 Plan by individuals who are non-U.S. nationals or are primarily employed or providing services outside the U.S., and may modify the terms of any awards granted to such participants in a manner deemed by our Compensation Committee to be necessary or appropriate in order that such awards conform with the laws of the country or countries where such participants are located.

No-Repricing of Awards.  No awards under the Amended and Restated 2014 Plan may be repriced without stockholder approval.  For purposes of the Amended and Restated 2014 Plan, “repricing” means any of the following (or any other action that has the same effect as any of the following): (i) changing the terms of the award to lower its exercise price or base price (other than on account of capital adjustments resulting from stock splits), (ii) any other action that is treated as a repricing under generally accepted accounting principles, and (iii) repurchasing for cash or canceling an award in exchange for another award at a time when its exercise price or base price is greater than the fair market value of the underlying stock.


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Certain U.S. Federal Income Tax Consequences

The following is a brief discussion of certain U.S. federal income tax consequences for awards granted under the Amended and Restated 2014 Plan. The Amended and Restated 2014 Plan is not subject to the requirements of the Employee Retirement Income Security Act of 1974, as amended, and it is not, nor is it intended to be, qualified under Section 401(a) of the Code. This discussion is based on current law, is not intended to constitute tax advice, and does not address all aspects of U.S. federal income taxation that may be relevant to a particular participant in light of his or her personal circumstances and does not describe foreign, state, or local tax consequences, which may be substantially different. Holders of awards under the Amended and Restated 2014 Plan are encouraged to consult with their own tax advisors.

Non-Qualified Stock Options and Stock Appreciation Rights. With respect to non-qualified stock options and stock appreciation rights, (i) no income is realized by a participant at the time the award is granted; (ii) generally, at exercise, ordinary income is realized by the participant in an amount equal to the difference between the exercise or base price paid for the shares and the fair market value of the shares on the date of exercise (or, in the case of a cash-settled stock appreciation right, the cash received), and the participant’s employer is generally entitled to a tax deduction in the same amount subject to applicable tax withholding requirements; and (iii) upon a subsequent sale of the stock received on exercise, appreciation (or depreciation) after the date of exercise is treated as either short-term or long-term capital gain (or loss) depending on how long the shares have been held, and no deduction will be allowed to such participant’s employer.

Incentive Stock Options. No income is realized by a participant upon the grant or exercise of an incentive stock option, however, such participant will generally be required to include the excess of the fair market value of the shares at exercise over the exercise price in his or her alternative minimum taxable income. If shares are issued to a participant pursuant to the exercise of an incentive stock option, and if no disqualifying disposition of such shares is made by such participant within two years after the date of grant or within one year after the transfer of such shares to such participant, then (i) upon sale of such shares, any amount realized in excess of the exercise price will be taxed to such participant as a long-term capital gain, and any loss sustained will be a long-term capital loss, and (ii) no deduction will be allowed to the participant’s employer for federal income tax purposes.

If shares acquired upon the exercise of an incentive stock option are disposed of prior to the expiration of either holding period described above, generally (i) the participant will realize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of such shares at exercise (or, if less, the amount realized on the disposition of such shares) over the exercise price paid for such shares and (ii) the participant’s employer will generally be entitled to deduct such amount for federal income tax purposes. Any further gain (or loss) realized by the participant will be taxed as short-term or long-term capital gain (or loss), as the case may be, and will not result in any deduction by the employer.

Subject to certain exceptions for disability or death, if an incentive stock option is exercised more than three months following termination of employment, the exercise of the stock option will generally be taxed as the exercise of a non-qualified stock option.

Other Stock-Based Awards. The tax effects related to other stock-based awards under the Amended and Restated 2014 Plan are dependent upon the structure of the particular award.

Withholding. At the time a participant is required to recognize ordinary compensation income resulting from an award, such income will be subject to federal (including, except as described below, Social Security and Medicare tax) and applicable state and local income tax and applicable tax withholding requirements. If such participant’s year-to-date compensation on the date of exercise exceeds the Social Security wage base limit for such year ($128,400 in 2019), such participant will not have to pay Social Security taxes on such amounts. The Company is required to report to the appropriate taxing authorities the ordinary income received by the participant, together with the amount of taxes withheld to the Internal Revenue Service and the appropriate state and local taxing authorities.

Section 162(m). In general, Section 162(m) of the Code generally denies a publicly held corporation a deduction for federal income tax purposes for compensation in excess of $1 million per year paid per person paid to certain “covered employees.” The Compensation Committee is authorized to grant awards that are not qualified under Section 162(m) of the Code; however, the Compensation Committee will continue to monitor the applicability of Section 162(m) of the Code on our ongoing compensation arrangements and intends to continue to compensate our employees in a manner consistent with the best interests of the Company and its stockholders.

Section 409A. Certain awards under the Amended and Restated 2014 Plan may be subject to Section 409A of the Code, which regulates “nonqualified deferred compensation” (as defined in Section 409A of the Code). If an award under the Amended and Restated 2014 Plan (or any other Company plan) that is subject to Section 409A of the Code is not administered in compliance with Section 409A of the Code, then all compensation under the Amended and Restated 2014 Plan that is considered “nonqualified deferred compensation” (and awards under any other Company plan that are required pursuant to Section 409A of the Code to be aggregated with the award under the Amended and Restated 2014 Plan) will be taxable to the participant as ordinary income in the year of the violation, or if later, the year in which the compensation subject to the award is no longer subject to a substantial risk of forfeiture. In addition, the participant will be subject to an additional tax equal to 20% of the compensation that is required to be included in income as a result of the violation, plus interest from the date that the compensation subject to the award was required to be included in taxable income.

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Certain Rules Applicable to “Insiders.” As a result of the rules under Section 16(b) of the Exchange Act, depending upon the particular exemption from the provisions of Section 16(b) utilized, “insiders” (as defined in Section 16(b)) may not receive the same tax treatment as set forth above with respect to the grant and/or exercise or settlement of awards. Generally, insiders will not be subject to taxation until the expiration of any period during which they are subject to the liability provisions of Section 16(b) with respect to any particular award. Insiders should check with their own tax advisors to ascertain the appropriate tax treatment for any particular award.

New Plan Benefits

Because awards to be granted in the future under the Amended and Restated 2014 Plan are at the discretion of the Compensation Committee, it is not possible to determine the benefits or the amounts that have been or will be received by eligible participants under the Amended and Restated 2014 Plan.

Securities Authorized for Issuance Under Equity Compensation Plans as of December 31, 2018

The following table sets forth, as of December 31, 2018, information concerning equity compensation plans under which our securities are authorized for issuance. The table does not reflect grants, awards, exercises, terminations or expirations since that date.

Plan Category

 

Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1)

Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (2)

Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in first column) (3)

 

 

(a)

(b)

(c)

Equity compensation plans approved by security holders

 

888,989

 

378,881

 

Equity compensation plans not approved by security holders

 

 

 

Total

 

888,989

 

378,881

 

_______________________________________________________________________________

(1)

Includes (i) 618,930 shares of our common stock subject to performance units, which vest depending on continued employment or service with the level of attainment of certain performance metrics, and (ii) 270,059 shares of our common stock subject to restricted stock units, which vest depending on continued employment or service.

(2)

Not applicable because all outstanding awards reflected in column (a) will be issued upon the vesting of outstanding restricted stock units.

(3)

All of the shares of common stock that remained available for future issuance as of December 31, 2018, were available under the 2014 Plan.  Subject to certain express limits of the 2014 Plan, shares available for award purposes under the 2014 Plan generally may be used for any type of award authorized under that plan including options, stock appreciation rights, restricted stock, restricted stock units and other stock- based awards. The number of common shares reserved and available for delivery under the 2014 Plan is subject to adjustment, as described below.

Vote Required

The approval of this proposal requires the affirmative vote of a majority of the votes cast in person or by proxy and entitled to vote thereon at the 2019 annual meeting, assuming that a quorum is present.

Recommendation of the Board

OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” APPROVAL OF THE AMENDED AND RESTATED 2014 OMNIBUS INCENTIVE PLAN.

4.Such Other Business as May Properly Come before the Annual Meeting

We do not know of any other matters to be voted on at the meeting. If, however, other matters are properly presented for a vote at the meeting, the persons named as proxies will vote your properly submitted proxy according to their judgment on those matters.

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BOARD OF DIRECTORS

Composition of the Board of Directors

Our Amended and Restated Certificate of Incorporation and Bylaws provide that the authorized number of directors shall be fixed from time to time by a resolution of the majority of our Board. Our Board is currently comprised of the following seven members: Kirk K. Calhoun, Court D. Carruthers, Eva M. Kalawski, Jacob Kotzubei, Stephen P. Larson, Philip E. Norment and Mary Ann Sigler.

In connection with the IPO, the Company and Platinum entered into an amended and restated investor rights agreement (the “Investor Rights Agreement”) in August 2014 that provided, among other things, that for so long as Platinum collectively beneficially owns (i) at least 30% of the voting power of the outstanding capital stock of the Company, Platinum will have the right to nominate for election to the Board no fewer than that number of directors that would constitute a majority of the number of directors if there were no vacancies on the Board, (ii) at least 15% but less than 30% of the voting power of the outstanding capital stock of the Company, Platinum will have the right to nominate two directors and (iii) at least 5% but less than 15% of the voting power of the outstanding capital stock of the Company, Platinum will have the right to nominate one director. The agreement also provides that if the size of the Board is increased or decreased at any time, Platinum’s nomination rights will be proportionately increased or decreased, respectively, rounded up to the nearest whole number. Under the Investor Rights Agreement, Platinum has nominated Ms. Kalawski, Mr. Kotzubei, Mr. Norment and Ms. Sigler. Our Corporate Governance Guidelines provide that if an officer serving on our Board resigns or retires from his or her executive position with the Company or if a non-management director’s external job changes from the time such director was last elected, such individual shall offer his or her resignation from the Board at the same time; however, whether or not the individual shall continue to serve on the Board is a matter for determination on a case-by-case basis by the Board.

Term and Classes of Directors

Our Board is divided into three staggered classes of directors of the same or nearly the same number. At each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the directors of the same class whose terms are then expiring. The terms of the directors will expire upon election and qualification of successor directors at the annual meeting of stockholders to be held during the years 2019 for the Class II directors, 2020 for the Class III directors and 2021 for the Class I directors.

Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class shall consist of one-third of the directors. The following table sets forth information as of the date of this proxy statement regarding the nominees for directors and other directors who will serve as directors in the classes and for the terms specified below:

 

Name

 

Age

 

 

Independent

(Yes/No)

 

Director Since

 

Expiration of

Current Term

Nominees for Director

 

 

 

 

 

 

 

 

 

 

Class II

 

 

 

 

 

 

 

 

 

 

Stephen P. Larson

 

 

62

 

 

Yes

 

2014

 

2019*

Philip E. Norment

 

 

59

 

 

No

 

2014

 

2019*

Continuing Directors

 

 

 

 

 

 

 

 

 

 

   Class III

 

 

 

 

 

 

 

 

 

 

   Kirk K. Calhoun

 

 

74

 

 

Yes

 

2014

 

2020

Jacob Kotzubei

 

 

50

 

 

No

 

2010

 

2020

    Class I

 

 

 

 

 

 

 

 

 

 

   Court D. Carruthers

 

 

46

 

 

Yes

 

2015

 

2021

Eva M. Kalawski

 

 

63

 

 

No

 

2007

 

2021

Mary Ann Sigler

 

 

64

 

 

No

 

2010

 

2021

 

*

Current term expires at this annual meeting.

Biographies

Additional information regarding the nominees and continuing directors is set forth below and is based on information furnished to us by the nominees and directors:

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Nominees for Director

The Board has nominated Mr. Larson and Mr. Norment for election at the 2019 annual meeting, each to hold office until the annual meeting of stockholders in 2022 (subject to the election and qualification of their successors or the earlier of their death, resignation or removal). Each is currently a director.

Stephen P. Larson has been a director since October 2014. Mr. Larson completed a 35-year career with Caterpillar Inc. in 2014 after holding multiple positions in the areas of accounting, finance, marketing and logistics. Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. His senior leadership positions for Caterpillar included roles as Product Manager; Regional Manager for Canada and the Eastern United States; Vice President, Caterpillar Financial Services - Asia Pacific; Caterpillar Logistics President - Americas region; and from 2007 until his retirement, Vice President, Caterpillar Inc. and President and Chairman of Caterpillar Logistics Services, a wholly-owned subsidiary of Caterpillar Inc. From November 2015 to August 2016, Mr. Larson served as Interim Chief Executive Officer and was already a member of the board of directors of Neovia Logistics Services, LLC (formerly Caterpillar Logistics Services), a global industrial contract logistics company. Mr. Larson previously served for six years as a Commissioner on the board of the Metropolitan Airport Authority of Peoria, Illinois. He earned a Bachelor of Business Administration and a Master of Business Administration, both from Western Illinois University. Mr. Larson’s experience in accounting, finance and other areas for a large international manufacturer has led the Board to conclude that he has the background and skills necessary to serve as a director of the Company.

Philip E. Norment has been a director since April 2014. Mr. Norment is a Partner at Platinum. He is a member of Platinum’s Investment Committee, and the President, Portfolio Operations, responsible for evaluating acquisition opportunities and integrating new acquisitions into the portfolio. Prior to joining Platinum in 1997, Mr. Norment served in a variety of management positions at Pilot Software, Inc., achieving the position of Chief Operating Officer. Over the course of 12 years, he worked in the areas of global support, operations, consultative services and sales support. Mr. Norment currently serves as the chairman of the board of directors and on the audit committee of Key Energy Services, Inc (NYSE: KEG).  Mr. Norment earned a Bachelor’s degree in Economics and a Master of Business Administration from the University of Massachusetts Amherst. Mr. Norment’s experience in executive management oversight, private equity, and transactional matters has led the Board to conclude that he has the varied expertise necessary to serve as a director of the Company.

Continuing Directors

Messrs. Calhoun, Carruthers and Kotzubei, and Mses. Kalawski and Sigler will remain directors after the annual meeting.

Kirk K. Calhoun has been a director since August 2014. Mr. Calhoun joined the public accounting firm Ernst & Young LLP in 1965 and served as a partner of the firm from 1975 until his retirement in 2002. Mr. Calhoun has a B.S. in Accounting from the University of Southern California and is a Certified Public Accountant (non-practicing) in California. He currently serves on the board of directors and audit committees of NantHealth, Inc. and PLx Pharma, Inc., as well as on the board of directors of three private companies. Mr. Calhoun has previously served on the boards and audit committees of eight other public companies. Mr. Calhoun’s experience serving on public company audit committees and boards of directors and his past work as a partner with Ernst & Young LLP has led the Board to conclude that Mr. Calhoun has the requisite expertise to serve as a director of the Company and qualifies as a financial expert for audit committee purposes.

Jacob Kotzubei has been a director since January 2010. Mr. Kotzubei joined Platinum in 2002 and is a Partner at the firm. Mr. Kotzubei serves as a director of a number of Platinum’s portfolio companies. Prior to joining Platinum in 2002, Mr. Kotzubei was a Vice President of the Goldman Sachs Investment Banking Division – High Tech Group in New York City, and the head of the East Coast Semiconductor Group. Previously, he was an attorney at Sullivan & Cromwell LLP in New York City, specializing in mergers and acquisitions. Mr. Kotzubei received a Bachelor’s degree from Wesleyan University and holds a Juris Doctor from Columbia University School of Law. Mr. Kotzubei serves on the board of directors of KEMET Corp. (NYSE: KEM), and Key Energy Services, Inc. (NYSE: KEG). Mr. Kotzubei’s experience in executive management oversight, private equity, capital markets and transactional matters has led the Board of Directors to conclude that he has the varied expertise necessary to serve as a director of the Company.

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Court D. Carruthers has been a director since August 2015. Mr. Carruthers serves as President and CEO of TricorBraun, Inc. a global packaging solutions company, where he also is a director. He is the founder and principal of CKAL Advisory Partners, LLC. He previously served as Senior Vice President and Group President, Americas, of W.W. Grainger, Inc., a broad-line supplier of maintenance, repair and operating (MRO) products, from 2013 until July 2015. Prior to that time, he had served Grainger as President, Grainger U.S., from 2012 until 2013; President, Grainger International, from 2009 until 2012; and President, Acklands-Grainger, from 2006 until 2009. He was appointed a Senior Vice President of Grainger in 2007. Mr. Carruthers serves as a director of US Foods Holding Corp. He is a past director of a number of private and public companies including MonotaRO Co. Ltd., PSS Companies, Shoes For Crews LLC, Follett Corp., and Foundation Building Materials, LLC. Mr. Carruthers currently serves on the boards of the Montessori School of Lake Forest, Lake Forest Winter Club, and the Groton Community Center. He is a Chartered Professional Accountant (Canada, non-practicing), and holds a Bachelor’s of Commerce degree from the University of Alberta in Edmonton, Alberta, Canada, and a Master’s of Business Administration from Queens University in Kingston, Ontario, Canada. His substantial prior experience as a senior executive for a large international distribution company has led the Board to conclude that Mr. Carruthers has the background and skills necessary to serve as a director of the Company.

Eva M. Kalawski has been a director since July 2007. Ms. Kalawski joined Platinum in 1997, is a former Partner at Platinum and served as the firm’s General Counsel until July 2018.  She currently serves as Special Counsel and Assistant Secretary of Platinum, and serves or has served as an officer and/or director of many of the firm’s portfolio companies. Prior to joining Platinum in 1997, Ms. Kalawski was Vice President of Human Resources, General Counsel and Secretary for Pilot Software, Inc. Ms. Kalawski earned a Bachelor’s degree in Political Science and French from Mount Holyoke College, Massachusetts, and a Juris Doctor from Georgetown University Law Center, Washington, D.C. Ms. Kalawski’s expertise and experience managing the legal operations of many portfolio companies has led the Board to conclude that she has the background and skills necessary to serve as a director of the Company.

Mary Ann Sigler has been a director since January 2010. Ms. Sigler serves as Platinum’s Chief Financial Officer and Chief Compliance Officer. Ms. Sigler joined Platinum in 2004 and is responsible for overall accounting, tax and financial reporting as well as managing strategic planning projects for the firm. Prior to joining Platinum, Ms. Sigler was with Ernst & Young LLP for 25 years where she was a Partner. Ms. Sigler holds a Master’s Degree in Business Taxation from the University of Southern California and a Bachelor of Arts in Accounting from the California State University at Fullerton. Ms. Sigler is a Certified Public Accountant in California, as well as a member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants. She currently serves on the board of directors of Key Energy Services, Inc. (NYSE: KEG). Ms. Sigler’s experience in accounting and strategic planning matters has led the Board to conclude that she has the requisite qualifications to serve as a director of the Company and facilitate its continued growth.

Director Independence

As stated above, because Platinum owns more than 50% of the voting power of our common stock, we are considered to be a “controlled company” for purposes of the NYSE rules. As such, we are permitted, and have elected, to opt out of the NYSE rules that would otherwise require our Board to be comprised of a majority of independent directors and require our Compensation Committee and Nominating and Corporate Governance Committee to be comprised entirely of independent directors.

For a director to be considered independent under the NYSE rules, our Board must determine that he or she does not have any material relationship with the Company. To assist in making this determination, our Board adopted a policy on director independence based on the NYSE’s independence standards. A copy of the policy is available on the corporate governance page on our website, which can be found at ir.ryerson.com by clicking on “Governance.”

Under our policy on director independence, a director will be considered independent only if the Board has affirmatively determined that the director has no material relationship with the Company that would impair his or her independent judgment. In the process of making such determinations, the Board will consider the nature, extent and materiality of the director’s relationships with the Company. When assessing the materiality of a director’s relationship with the Company, the Board should consider the issue not only from the standpoint of the director, but also from that of persons or organizations with which the director has an affiliation. The Board will consider all relevant facts and circumstances in rendering its “independence” determinations. Material relationships can include commercial, banking, consulting, legal, accounting, charitable and familial relationships, among others. In addition, a director will not be deemed “independent” for purposes of service on the Board if such director:

 

1.

is, or has been within the last three years, an employee of the Company, or an immediate family member of such director is, or has been within the last three years, an executive officer of the Company;

 

2.

has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $120,000 in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service);

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3.

(A) is a current partner or employee of a firm that is the Company’s internal or external auditor; (B) has an immediate family member who is a current partner of such a firm; (C) has an immediate family member who is a current employee of such a firm and personally works on the Company’s audit; or (D) was, or has an immediate family member who was, within the last three years a partner or employee of such a firm and personally worked on the Company’s audit within that time;

 

4.

is, or an immediate family member of such director is, or has been within the last three years, employed as an executive officer of another company where any of the Company’s present executive officers at the same time serves or served on that company’s compensation committee; or

 

5.

is a current employee, or has an immediate family member who is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1,000,000, or 2% of such other company’s consolidated gross revenues.

For purposes of the Company’s policy on director independence, “immediate family member” means any of the person’s spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and brothers-and sisters-in-law and anyone (other than domestic employees) who shares the person’s home.

The Board has determined that of the nominees and continuing directors, only Messrs. Calhoun, Carruthers and Larson are, or during 2018 were, independent within the meaning of the NYSE rules or our policy on director independence.

As stated above, our Board of Directors unanimously recommends a vote “FOR” the election of the Board’s nominees identified above.

CORPORATE GOVERNANCE MATTERS

Our policies and practices reflect corporate governance standards that comply with the NYSE rules and the corporate governance requirements of the Sarbanes-Oxley Act, including:

 

Our Board adopted clear corporate governance policies, including standards for determining director independence;

 

Our Board committee charters clearly establish their respective roles and responsibilities;

 

Our non-management directors meet regularly in executive session without management present;

 

We have a code of ethics and business conduct that applies to all Ryerson directors, officers and associates;

 

Our chief executive officer, chief financial officer and other senior financial officers are subject to an additional code of ethics to promote (i) honest and ethical conduct; (ii) full, fair, accurate, timely and understandable disclosure in SEC filings; and (iii) compliance with applicable laws, rules and regulations;

 

Our internal audit function maintains critical oversight over the key areas of our business, compliance processes and controls, and reports regularly to the Audit Committee;

 

We have a compliance hotline service that permits employees to report violations of our code of ethics or other issues of significant concern on a confidential basis, via a toll-free telephone number or the Internet; and

 

Concerns related to the Company’s financial statements, accounting practices, or internal controls may be communicated in writing to the Company’s Audit Committee.

DIRECTOR COMPENSATION

In April 2015, our Board adopted a compensation program for our directors. Under the program, only independent directors are eligible to receive compensation for their service as Board members. The program provides for an annual cash retainer, additional annual cash retainers for committee chairs and fees for meeting attendance, as follows:

 

Annual retainer

 

$

130,000

 

Committee chair retainers

 

 

 

 

Audit Committee chair

 

$

15,000

 

Compensation Committee chair

 

$

10,000

 

Nominating and Corporate Governance Committee chair

 

$

10,000

 

Meeting Attendance Fees

 

 

 

 

Each Board meeting

 

$

2,000

 

Each committee meeting

 

$

1,500

 

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The following table presents information for compensation earned by them for their service as Board members during 2018.

Director Compensation Table

 

Name

 

Fees Earned or

Paid in Cash

 

 

Total

 

Kirk K. Calhoun(1)

 

$

165,500

 

 

$

165,500

 

Court D. Carruthers(2)

 

$

146,000

 

 

$

146,000

 

Stephen P. Larson(3)

 

$

147,500

 

 

$

147,500

 

Eva M. Kalawski

 

 

 

 

 

 

Jacob Kotzubei

 

 

 

 

 

 

Stephen P. Larson

 

 

 

 

 

 

Philip E. Norment

 

 

 

 

 

 

Mary Ann Sigler

 

 

 

 

 

 

 

(1)

Consists of the annual retainer ($130,000), Audit Committee chair retainer ($15,000) and meeting attendance fees ($20,500).

(2)

Consists of the annual retainer ($130,000) and meeting attendance fees ($16,000).

(3)

Consists of the annual retainer ($130,000) and meeting attendance fees ($17,500).

We reimburse each member of our Board for out-of-pocket expenses incurred by them in connection with attending meetings of the Board and its committees. Cash compensation and reimbursements are paid in arrears on a quarterly basis. There is currently no formal policy in place relating to the granting of equity awards to our directors.

MEETINGS OF THE BOARD AND BOARD COMMITTEES

During 2018, our Board met five times. In addition to the meeting of the full Board, directors also attended meetings of Board committees on which they served. All of the directors attended at least 75% of the meetings of the Board and the committees on which they served. While we do not have a formal policy requiring them to do so, we encourage our directors to attend our annual meeting of stockholders. Six of our seven directors attended our 2018 annual meeting of stockholders.

The standing committees of the Board (other than the Executive Committee), with the membership indicated as of February 28, 2019, are set forth in the table below. The Board has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee.

 

Director

 

Audit

Committee

 

Compensation

Committee

 

Nominating and

Corporate Governance

Committee

Kirk K. Calhoun*

 

X(C)

 

X

 

 

Court D. Carruthers*

 

X

 

 

 

 

Eva M. Kalawski

 

 

 

 

 

X

Jacob Kotzubei

 

 

 

X(C)

 

 

Stephen P. Larson*

 

X

 

 

 

 

Philip E. Norment

 

 

 

 

 

X

Mary Ann Sigler

 

 

 

X

 

X(C)

 

*

Independent director within the definition under the NYSE rules.

(C)

Committee Chair.

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EXECUTIVE COMMITTEE

In December 2014, the Board established an Executive Committee in accordance with our Bylaws. The Executive Committee has and may exercise all powers that the Board legally delegates to it. In addition, during the intervals between meetings of the Board, the Executive Committee has and may exercise all of the powers of the Board, other than such powers as are granted to the Audit Committee, the Compensation Committee or the Nominating and Corporate Governance Committee, in the management of the business and affairs of the Corporation, unless otherwise limited by a resolution of the Board, the Company’s Amended and Restated Certificate of Incorporation or Bylaws, or applicable law. The Executive Committee is convened when circumstances do not allow the time, or when it is otherwise not practicable, for the entire Board to meet. The Executive Committee consists of Messrs. Kotzubei, Larson and Norment. In 2018, the Executive Committee did not meet.

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE

Our Nominating and Corporate Governance Committee (the “Governance Committee”) considers and oversees all corporate governance issues as they arise and develops appropriate recommendations for the Board regarding those issues. It is also responsible for reviewing the requisite skills and characteristics of the members of the Board. In 2018, the Governance Committee met two times. The Governance Committee consists of Mr. Norment and Mses. Kalawski and Sigler, none of whom is independent under NYSE rules. Because Platinum owns more than 50% of the voting power of our common stock, we are considered to be a “controlled company” for the purposes of the NYSE rules. As such, we are permitted, and have elected, to opt out of the NYSE rules that would otherwise require our Governance Committee to be comprised entirely of independent directors.

Our Board has adopted a written charter for the Governance Committee, pursuant to which the Governance Committee has, among others, the following responsibilities:

 

Oversee and assist our Board in identifying, reviewing and recommending nominees for election as directors and for appointment to Board committees;

 

Review and evaluate the overall effectiveness and functioning of the management and the Board and the compliance of the Board with applicable legal requirements;

 

Review and evaluate the composition and performance of the other Board committees, and recommend any changes to the composition, size and functions of each committee;

 

Develop, review and recommend corporate governance guidelines; and

 

Generally advise our Board on corporate governance and related matters.

Qualifications for Directors

In selecting or recommending candidates to serve as directors, the Governance Committee takes into consideration the following criteria as approved by the Board, and as modified by the Board from time to time, and such other factors as it deems appropriate:

 

(i)

high personal and professional ethics, values and integrity;

 

(ii)

education, skill and experience that the Board deems relevant and useful, including whether such attributes or background would contribute to the diversity of the Board as a whole;

 

(iii)

ability and willingness to serve on any committees of the Board; and

 

(iv)

ability and willingness to commit adequate time to the proper functioning of the Board and its committees.

The Governance Committee will consider all candidates recommended by the Company’s stockholders in accordance with the procedures set forth in the Company’s annual proxy statement. The Governance Committee may also consider candidates proposed by management. For additional information, see “Stockholder Nominations for Directors,” below on page 50.

Governance Guidelines and Committee Charters

We maintain a corporate governance page on our website that includes our Corporate Governance Guidelines, Code of Ethics and Business Conduct and the charters for our Audit, Compensation and Nominating and Corporate Governance Committees. The corporate governance page can be found at ir.ryerson.com by clicking on “Governance.” Stockholders also may obtain copies of these materials by contacting us at Investor Relations, 227 W. Monroe St., 27th Floor, Chicago, Illinois 60606, email: investorinfo@ryerson.com, or telephone: 312-292-5130.

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Code of Ethics

Our Board has adopted a code of ethics (“Code of Ethics”) that contains the ethical principles by which our chief executive officer and chief financial officer, among others, are expected to conduct themselves when carrying out their duties and responsibilities. A copy of the Code of Ethics may be found at the end of our general code of ethics and business conduct, available on our corporate governance webpage located at ir.ryerson.com. We will provide a copy of our general code of ethics and business conduct, which includes the Code of Ethics, to any person, without charge, upon request, by writing to the Compliance Officer, Ryerson Holding Corporation, 227 W. Monroe St., 27th Floor, Chicago, Illinois 60606 (telephone number: 312-292-5000). We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of our Code of Ethics by posting such information on the corporate governance page on our website, which can be found at ir.ryerson.com by clicking on “Governance.”

Communications with Directors

An employee, officer or other interested party who has an interest in communicating with non-management members of the Board may do so by directing the communication to the General Counsel of the Company. Persons who desire to communicate with the non-management directors should send their correspondence addressed to the attention of the General Counsel, c/o Ryerson Holding Corporation, 227 W. Monroe St., 27th Floor, Chicago, Illinois 60606. The General Counsel will provide a summary of all appropriate communications to the addressed non-management directors.

BOARD LEADERSHIP STRUCTURE

Under our Bylaws, the Board may appoint one of the directors as Chairman of the Board. The Chairman of the Board may be a management or a non-management director and may or may not be the same individual as our CEO (if our CEO is a director), at the option of the Board. The Board believes it should be free to make this determination depending on what it believes is best for the Company in light of all the circumstances. The Company’s CEO is currently not a member of the Board and the Board currently does not have a Chairman of the Board. This leadership structure also allows our CEO to focus his time and energy on operating and managing the Company and leverages the experiences and perspectives of all of the Company’s directors.

Our non-management directors meet at regularly scheduled executive sessions without management present, usually in conjunction with regularly scheduled Board meetings. In addition, at least once each year the independent directors meet in executive session without any other persons present. One of our independent directors is chosen by the directors at each such session of non-management directors or independent directors to preside over the session.

BOARD OVERSIGHT OF RISK

Our Board as a whole has responsibility for overseeing our risk management. The Board exercises this oversight responsibility directly and through its committees. The Board and its committees are informed by reports from our management team and from our internal audit department that are designed to provide visibility to the Board about the identification and assessment of key risks and our risk mitigation strategies. The full Board oversees strategic and operational risks, and succession planning.

Committee Roles

Our Compensation Committee is responsible for evaluating risk arising from our compensation policies and practices. Our Audit Committee’s role includes assisting the Board in monitoring the Company’s compliance with legal and regulatory requirements as well as its ethical standards and policies. It also oversees our internal audit function. The committees provide reports to the full Board regarding these and other matters.

Internal Audit

Under its charter, the internal audit department is tasked to help the Company accomplish its objectives by bringing a systematic and disciplined approach to evaluate and improve the effectiveness of the Company’s risk management, control and governance processes. To promote independence of the department and ensure appropriate internal audit coverage, the internal audit director is responsible for leading the department and reports functionally to the Audit Committee, and administratively (i.e., day-to-day operations) to the chief financial officer. The internal audit services personnel have unrestricted access to all functions, records, property and personnel of the Company, and full and free access to the Audit Committee. The internal audit department is currently staffed entirely by a third-party auditing firm. The internal audit director provides reports to the Audit Committee at each regularly scheduled Audit Committee meeting.

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The scope of the departments internal auditing encompasses, but is not limited to, the examination and evaluation of the adequacy and effectiveness of the Companys governance, risk management and internal controls, as well as the quality of performance in carrying out assigned responsibilities to achieve the Companys stated goals and objectives. This includes, among other things:

 

partnering with other governance and monitoring groups to evaluate risk exposure relating to achievement of the Company’s strategic objectives;

 

monitoring and evaluating the effectiveness of the Company’s risk management processes;

 

performing consulting and advisory services related to governance, risk management and control as appropriate for the Company; and

 

reporting significant risk exposures and control issues, including fraud risks, governance issues and other matters needed or requested by the Audit Committee.

In addition, the internal audit department is responsible for conducting an annual risk assessment and developing a corresponding annual audit plan using a risk-based approach to monitor and report on the adequacy and effectiveness of the Company’s processes for controlling its activities and managing its risks.

AUDIT COMMITTEE

Our Audit Committee oversees a broad range of issues surrounding our accounting and financial reporting processes and audits of our financial statements. In 2018, the Audit Committee met four times. The Audit Committee consists of Messrs. Calhoun, Carruthers and Larson. Each of Messrs. Calhoun, Carruthers and Larson are “independent” as such term is defined in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and under the applicable NYSE rules. Each is “financially literate,” and Mr. Calhoun, the chair of the Audit Committee, is an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K.

Our Board has adopted a written charter for the Audit Committee, pursuant to which the Audit Committee has, among others, the following responsibilities:

 

Review and recommend to the Board the independent auditors to be selected to audit the financial statements;

 

Inquire as to the independence of the independent auditors and obtain from the independent auditors, on a periodic basis, a formal written statement delineating all relationships between the independent auditors and the Company; in addition, review the extent of non-audit services provided by the independent auditors in relation to the objectivity needed in the independent audit and recommend that the Board take appropriate action in response to the independent auditors’ written statement to satisfy the Board as to the independent auditors’ independence;

 

Pre-approve all services provided by the independent auditors to the Company;

 

Pre-approve appropriate funding for payment of (a) compensation to the Company’s independent auditors for preparing or issuing an audit report or performing other audit, review or attest services for the Company, (b) compensation to any advisors employed by the Committee and (c) ordinary administrative expenses necessary or appropriate to carry out its duties;

 

Ensure proper audit partner rotation;

 

Meet with the independent auditors and the financial management to review the scope of the audit proposed for the current year and the audit procedures to be utilized and at its conclusion review the audit with the Committee; upon completion of the audit and following each interim review of the Company’s financial statements, discuss with the independent auditors all matters required to be communicated to the Committee under generally accepted auditing standards, including the judgments of the independent auditors with respect to the quality, not just the acceptability, of the Company’s accounting principles and underlying estimates in the financial statements;

 

Review with the independent auditors, the internal auditor (if any) and the financial and accounting personnel, the adequacy of the accounting and financial controls and elicits any recommendations for improvement or particular areas where augmented controls are desirable;

 

Review the internal audit function of the Company including the independence and authority of its reporting obligations, the audit plans proposed for the coming year and the coordination of such plans with the work of the independent auditors;

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Receive before each meeting a summary of findings from completed internal audits and a progress report on the proposed internal audit plan with explanations for any deviations from the original plan;

 

Review the financial statements contained in the annual and quarterly reports with management and the independent auditors;

 

Review any year-to-year changes in accounting principles or practices;

 

Provide sufficient opportunity at each meeting for the internal and independent auditors to meet with the Committee without management present; among the items to be discussed in these meetings are the independent auditors’ evaluation of the financial, accounting and auditing personnel, and their cooperation during the audit;

 

Review with the independent auditors any problems or difficulties the auditors may have encountered, including any disagreements with management;

 

Review accounting and financial personnel and succession planning;

 

Oversee the cybersecurity program, including mitigation efforts related to cybersecurity risks;

 

Investigate any matter brought to its attention within the scope of its duties, with the power to retain professional advice (at the expense of the Company) for this purpose if, in its judgment, that is appropriate; and

 

Establish, as necessary, detailed pre-approval policies and procedures for engaging audit and non-audit services.

Audit, Audit-related and Other Non-Audit Services

Consistent with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation for and overseeing the work of Ernst & Young LLP, our independent registered public accounting firm. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by Ernst & Young LLP. For additional information regarding the services provided by Ernst & Young LLP and the fees for such services, see “Ratification of Appointment of Independent Registered Public Accounting Firm,” above on page 5.

Pre-approval Policies

The Audit Committee must pre-approve any audit or any permissible non-audit services to be provided by the independent registered public accounting firm. The Audit Committee has established pre-approval policies and procedures. Permissible non-audit services are services allowed under SEC regulations. The Audit Committee may pre-approve certain specific categories of permissible non-audit services up to an annual budgeted dollar limit. If any permissible non-audit services do not fall within a pre-approved category, or exceed the approved fees or budgeted amount, the services and the additional fees have to be pre-approved by the Audit Committee on a project-by-project basis. The Audit Committee may delegate to any member of the Committee the duty to pre-approve any payments of compensation to the independent registered public accounting firm, provided that the decisions of such member to grant pre-approvals shall be presented to the full Committee for ratification.

No required pre-approvals were waived or approved after the services commenced. Before approving the non-audit services described as “Tax Fees” under “Ratification of Appointment of Independent Registered Public Accounting Firm,” above on page 5, the Audit Committee reviewed whether the independent registered public accounting firm could provide those services and maintain its independence. The Audit Committee approved 100% of the audit-related and tax fees for 2018 and 2017.

Other Policies

The Audit Committee has adopted policies to ensure the independence of the Company’s independent registered public accounting firm, including policies on employment of audit firm employees and audit partner rotation.

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AUDIT COMMITTEE REPORT – FINANCIAL STATEMENTS RECOMMENDATION 1

Management is responsible for the preparation, presentation and integrity of Ryerson’s consolidated financial statements and the reporting process including Ryerson’s internal controls over financial reporting and their effectiveness. The independent registered public accounting firm of Ernst & Young LLP (“EY”) is responsible for performing an independent audit of Ryerson’s consolidated financial statements. The Audit Committee’s responsibility is to monitor and oversee these activities and processes. In this context, the Audit Committee reports as follows:

1. The Audit Committee has reviewed and discussed with management Ryerson’s audited consolidated financial statements as of and for the year ended December 31, 2018 and management has represented that the consolidated financial statements were prepared in accordance with generally accepted accounting principles;

2. The Audit Committee has discussed with EY the matters required to be discussed by Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 1301 (Communications with Audit Committees); and

3. The Audit Committee received the written disclosures and the letter from EY required by applicable requirements of the PCAOB regarding EY’s communications with the Audit Committee concerning independence, and has discussed with EY its independence.

Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, for filing with the Securities and Exchange Commission.

Respectfully submitted by the Audit Committee:

Kirk K. Calhoun, Chair

Court D. Carruthers

Stephen P. Larson

 

1 The information contained in this report shall not be deemed to be “soliciting material” or to be “filed” with the Commission, nor shall such information or report be incorporated by reference into any future filing by us under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate it by reference in such filing.

23

 


COMPENSATION COMMITTEE

Our Compensation Committee reviews and recommends policies relating to compensation and benefits of our officers and employees, including reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer and other named executive officers, evaluating the performance of those officers in light of those goals and objectives and setting compensation of those officers based on such evaluations. In 2018, the Compensation Committee met three times. The Compensation Committee consists of Messrs. Calhoun and Kotzubei and Ms. Sigler, of whom only Mr. Calhoun is independent under NYSE rules. Because Platinum owns more than 50% of the voting power of our common stock, we are considered to be a “controlled company” for the purposes of the NYSE rules. As such, we are permitted, and have elected, to opt out of the NYSE rules that would otherwise require our Compensation Committee to be comprised entirely of independent directors.

Our Board has adopted a written charter for the Compensation Committee, pursuant to which the Compensation Committee has, among others, the following authority to fulfill its duties and responsibilities:

 

Review, revise and interpret the Company’s compensation philosophy, policies and objectives, including reviewing and approving any incentive compensation plans and equity-based plans of the Company; and the Compensation Committee shall report its determinations and any actions it takes with respect to the Company’s compensation philosophy, policies and objectives to the Board;

 

Review and approve annually the corporate goals and objectives applicable to the compensation of the Company’s CEO, evaluate at least annually the CEO’s performance in light of those goals and objectives, and determine and approve the CEO’s compensation level based on this evaluation; the Committee’s decisions regarding performance goals and objectives and the compensation of the CEO are reviewed and ratified by the Board; in determining the long-term incentive component of the CEO’s compensation, the Committee shall consider all relevant factors, including the Company’s performance and relative stockholder return, the value of similar awards to chief executive officers at comparable companies and the awards given to the CEO in past years;

 

Review and approve the compensation for executive officers, including the review and approval of the design and implementation of any incentive arrangements, equity compensation and supplemental retirement programs;

 

Review and approve grants and awards to officers and other participants under the Company’s compensation and participation plans, including the Company’s management incentive plans;

 

Review and make recommendations to the Board regarding the amount and types of compensation that should be paid to the Company’s outside directors, to ensure that such pay levels remain competitive;

 

Review and approve any employment, severance or termination arrangements to be made with any executive officer of the Company;

 

Review all equity compensation plans under the listing standards of the NYSE or such other national securities exchange or stock market on which the Company’s securities may be listed and approve such plans in the Committee’s sole discretion;

 

Annually assist management in drafting the Company’s Compensation Discussion and Analysis (“CD&A”) to be included in the Company’s public filings with the Securities and Exchange Commission by (i) articulating the discussion and analysis to be included in the CD&A, (ii) participating in or overseeing the drafting of the CD&A and (iii) reviewing the CD&A with management and determining whether to recommend to the Board that the CD&A be included in the Company’s annual report on Form 10-K or proxy statement, as applicable;

 

Prepare a report annually to be filed with the Company’s annual report on Form 10-K or proxy statement, as applicable, to state whether the Committee has reviewed and discussed the CD&A with management and, based on such review and discussions, whether the Committee has recommended to the Board that the CD&A be included in the Company’s annual report on Form 10-K or proxy statement, as applicable; and

 

Submit a report to the Board periodically, which shall include a review of any determinations, recommendations or issues that arise with respect to Company compensation philosophy, policies and objectives, executive compensation, management succession planning and any other matters that the Committee deems appropriate or is requested to be included by the Board.

In addition, the Compensation Committee reviews the results of the stockholder advisory votes on (i) executive compensation, and (ii) the frequency of the stockholder votes on executive compensation.

24

 


Committee Resources and Authority

Under the Compensation Committee’s charter, the Committee also has the resources and authority to:

 

Retain compensation consultants, independent counsel and other advisors;

 

Terminate any consulting firms and such other advisors;

 

Approve the consulting firms’ and other advisors’ fees and other retention terms; and

 

Determine the appropriate funding (at the expense of the Company) for (i) payment of compensation to any independent counsel and other advisers employed by the Committee and (ii) ordinary administrative expenses of the Committee.

In addition, the Committee may form and delegate its authority to subcommittees or to the Committee Chair when it deems appropriate and in the best interests of the Company, although it did not do so in 2018.

Compensation Committee Interlocks and Insider Participation

Mr. Kotzubei, Mr. Calhoun and Ms. Sigler served on our Compensation Committee during all of the last completed fiscal year. None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Board or our Compensation Committee. None of the members of the Compensation Committee is now an employee of the Company. Prior to the IPO, Ms. Sigler served as the Company’s Vice President. She resigned her position as an officer in August 2014 in connection with the IPO and has not served as an officer of the Company since that time.

COMPENSATION COMMITTEE REPORT1

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis section of this Proxy Statement, set forth below. Based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and be incorporated by reference into the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Respectfully submitted by the Compensation Committee:

Jacob Kotzubei, Chair

Kirk K. Calhoun

Mary Ann Sigler

 

1 The information contained in this report shall not be deemed to be “soliciting material” or to be “filed” with the Commission, nor shall such information or report be incorporated by reference into any future filing by us under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate it by reference in such filing.

25

 


EXECUTIVE OFFICERS

Biographies

Our executive officers are elected by the Board of Directors and hold office until a successor is chosen or qualified or until their earlier resignation or removal. The following lists our executive officers and gives a brief description of their business experience as of February 28, 2019:

Edward J. Lehner, 53, has been our President & Chief Executive Officer since June 2015. Previously, he had served as our Executive Vice President and Chief Financial Officer since August 2012. Prior to joining the Company, he served as chief financial officer and chief administrative officer for PSC Metals, Inc. from 2009 to 2012. PSC Metals is a North American ferrous and non-ferrous scrap processor. Mr. Lehner earned a bachelor’s degree in accounting from the University of Cincinnati.

Erich S. Schnaufer, 51, has been our Chief Financial Officer since January 2016. From August 2015 until that time, he had served as our Interim Chief Financial Officer & Chief Accounting Officer. Previously, he had served the Company as its Interim Chief Financial Officer, Controller & Chief Accounting Officer from June 2015 until August 2015, and as its Controller and Chief Accounting Officer from 2007 until June 2015. Mr. Schnaufer received a bachelor’s degree in accounting from the University of Illinois and an MBA from DePaul University.

Michael J. Burbach, 58, has been our President, North-West Region since October 2013. Prior to that time, he had served the Company as its President, Midwest Region since 2007. Mr. Burbach began his metals career as an inside sales representative at Vincent Metals in 1984 and has held procurement, sales and product management roles in the metals industry as well as roles in operations and senior management. Mr. Burbach received his Bachelor of Science degree from the University of Wisconsin-La Crosse.

Kevin D. Richardson, 57, has been our President, South-East Region since October 2007. Mr. Richardson started his metals career in 1985 and held a series of commercial and sales management roles before being named a Vice President of the Company in 2000. Mr. Richardson received a bachelor’s degree in business management and economics from North Carolina State University and an MBA from Case Western Reserve University.

John E. Orth, 52, has been our Executive Vice President-Operations since January 2019. Prior to that, Mr. Orth served as Senior Vice President – Operations of the Corporation since January 2018.  Prior to joining the Corporation, since December 2011, Mr. Orth had served in various capacities for Morgan Advanced Materials, a global-materials engineering company, including as Global Managing Director (Advanced Ceramics and Metals) from March 2016 to August 2017, and as a Vice President from February 2013 to March 2016.  Mr. Orth earned his bachelor’s degree in electrical engineering from Vanderbilt University, and his master’s degree in materials science and engineering and doctorate’s degree in  materials science and engineering from the University of Texas at Austin.

Mark S. Silver, 48, has served as our Executive Vice President, General Counsel & Secretary since February 2016. Previously, he had served as our Vice President, Managing Counsel & Secretary from December 2014 until February 2016 and as our Vice President & Managing Counsel from January 2013 until December 2014. Prior to his time at the Company, from 2006 until 2012, Mr. Silver served as Vice President and Assistant General Counsel of Sara Lee Corporation, a consumer goods company. Mr. Silver earned a Bachelor’s degree in political science from the University of Illinois and a Juris Doctor from Harvard University.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Overview

This section explains our executive compensation philosophy, objectives and design; our compensation-setting process; our executive compensation program components; and the decisions made in 2018 with respect to the compensation of each of our named executive officers. The Company’s named executive officers for 2018 are:

 

Edward J. Lehner, President & Chief Executive Officer (“CEO”);

 

Erich S. Schnaufer, Chief Financial Officer (“CFO”);

 

Michael J. Burbach, President, North-West Region;

 

Kevin D. Richardson, President, South-East Region; and

 

See Leong Fang, Executive Vice President-Operations and President, Asia.

26

 


Mr. Fang retired from his position as Executive Vice President-Operations and Chief Executive Officer, Asia of the Company, effective as of the close of business on December 31, 2018. As a result, Mr. Fang is no longer an executive officer.  However, he continues to be employed by the Company in a non-executive role.

Executive Compensation Philosophy

The Company’s compensation decisions are based on the goals of recruiting, retaining and motivating individuals who could help us meet and exceed our financial and operational goals, for the purpose of providing meaningful returns to our stockholders.

Objectives. Ryerson’s executive compensation program is designed to:

 

align the interests of executive management with stockholders;

 

provide market competitive compensation;

 

attract and retain talented executives;

 

differentiate rewards based on individual performance;

 

encourage long-term value creation; and

 

avoid incentivizing excessive risk-taking.

Principles. Ryerson seeks to promote a high-performance culture and create a compensation program that recognizes and rewards superior individual and Company performance. The following key principles are applied by the Board and our Compensation Committee when determining the compensation approach for the Company’s executives:

 

Accountability – Performance-based compensation is tied to corporate results, applicable business unit results and individual performance metrics. This ensures executives are held accountable through their compensation for the performance of the business and for achieving the Company performance objectives, thereby enhancing stockholder value.

 

Competitive Positioning – Ryerson seeks to provide competitive total compensation that includes significant upside and downside potential for executives, with actual pay determined based on performance. For compensation decisions made based on peer group data, target compensation will be based upon a range around the median of the defined peer group.

 

Market Compensation Elements – The compensation components reflect the competitive marketplace so that we can attract, motivate, reward and retain talented executives through business cycles.

 

Consideration of Results of Advisory Vote on Executive Compensation

 

In accordance with the advisory vote on the frequency of the stockholder advisory vote on executive compensation submitted to stockholders at the Company’s annual meeting of stockholders held in April 2018, the Company will hold a stockholder advisory vote on executive compensation every three years. The most recent executive compensation advisory vote was held at the Company’s 2018 annual meeting of stockholders. At that time, our stockholders approved, by more than 99% of the shares voted, the compensation of our named executive officers as disclosed in the proxy statement for that meeting. This level of support was a factor in the Compensation Committee’s continued application of the same principles when making compensation decisions for our named executive officers for 2019.

 

We expect that our next executive compensation advisory vote will be held at our annual meeting of stockholders in 2021.

Determination of Compensation

The Board established the Compensation Committee to oversee various compensation-related matters, including executive compensation. Since that time, the Compensation Committee has been responsible for executive compensation matters as further described above under “Compensation Committee,” beginning on page 24, and has the authority to make decisions regarding the named executive officers’ compensation. In determining the levels and mix of compensation, our Compensation Committee has not generally relied on formulaic guidelines but rather has sought to maintain a flexible compensation program that allowed it to adapt components and levels of compensation to motivate and reward individual executives within the context of our desire to maximize stockholder value. Subjective factors considered in compensation determinations included an executive’s tenure with the Company, skills and capabilities, contributions as a member of the executive management team, contributions to our overall performance, and whether the total compensation potential and structure were sufficient to ensure the retention of an executive when considering the compensation potential that may be available elsewhere.

27

 


Mr. Lehners Employment Agreement

On May 7, 2015, the Company entered into an employment agreement (“Mr. Lehner’s Employment Agreement”) with Mr. Lehner, pursuant to which he was appointed President & CEO of the Company, effective June 1, 2015. The terms of Mr. Lehner’s Employment Agreement were negotiated between Mr. Lehner and members of the Board and Mr. Lehner’s Employment Agreement was approved by the Board, in connection with his appointment. The Board determined it to be in the best interests of the Company to enter into the employment agreement with Mr. Lehner both as a means to induce Mr. Lehner to accept the CEO role and to insure that Mr. Lehner is bound by appropriate post-employment restrictive covenants which are described below under “Mr. Lehner’s 2015 Employment Agreement and Non-Competition Agreement,” on page 40.

Pursuant to the terms of the Mr. Lehner’s Employment Agreement, Mr. Lehner is entitled to an annual base salary and has a target annual bonus opportunity based on the achievement of targets established pursuant to the Company’s Annual Incentive Plan. The Compensation Committee has set Mr. Lehner’s base salary for 2018 at $875,500, and the target annual bonus opportunity to 125% of Mr. Lehner’s base salary.

Additional details regarding the terms of Mr. Lehner’s Employment Agreement are described below under “Narrative Relating to Summary Compensation Table and Grants of Plan-Based Awards,” on page 40.

Use of Peer Groups for Compensation Matters

Since 2016, Ryerson management, at the Compensation Committee’s request, has engaged Vivient Consulting LLC (“Vivient”), an executive compensation consultant, to assist in planning for the Company’s executive compensation program. As an outside advisor, Vivient assisted in evaluating executive compensation programs, providing general executive compensation consulting support including a review of Ryerson’s compensation philosophy and compensation for Ryerson’s named executive officers. Specifically, Vivient completed competitive market positioning reviews of Ryerson’s named executive officers, based upon an assessment of relevant total compensation comparative data obtained from surveys and publicly reported proxy statements. The comparative reviews assessed the named executive officers’ base salaries, target annual bonuses (as a percentage of salary), total cash compensation and total direct compensation against the compensation paid to comparable positions reported in the surveys and comparable executives of the companies listed below, as reported by those companies. The companies (the “Peer Group”) generally are competitors of Ryerson or conduct business in industries similar to Ryerson’s and, as a group, have annual sales comparable to Ryerson’s. Overall, Ryerson’s executive salaries and target annual cash compensations are below market median.

 

AK Steel Holding Corp

 

Kaman Corp

Aleris Corp

 

MRC Global Inc

Allegheny Technologies Inc

 

MSC Industrial Direct Co Inc

Applied Industrial Tech Inc

 

NCI Building Systems Inc

Carpenter Technology Corp

 

Olympic Steel Inc

Castle (A M) & Co

 

Reliance Steel & Aluminum Co

Century Aluminum Co

 

Schnitzer Steel Inds

Commercial Metals Co

 

Steel Dynamics Inc

Haynes International Inc

 

Timkensteel Corp

Kaiser Aluminum Corp

 

Worthington Industries Inc

 

Vivient presented its report on the competitiveness of the executive compensation program to the Compensation Committee in February 2018, and Vivient also presented a report on certain aspects of the executive compensation program to the Compensation Committee in July 2018.  The Compensation Committee and the Board considered the reports and Peer Group information in making some of its 2018 compensation decisions, as further described below.

 

Components of Compensation

The compensation provided to our named executive officers in 2018 consisted of the same elements generally available to our non-executive employees, including base salary, annual bonuses, the opportunity to participate in an equity-based long-term incentive program and retirement and other benefits, each of which is described in more detail below. Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not provide perquisites or other personal benefits to our executive officers, including the named executive officers, and do not have a formal perquisites policy, but may provide perquisites and other personal benefits in situations where we believe it is appropriate to assist an individual in the performance of his or her duties, to make our executive officers more efficient and effective, and for recruitment and retention purposes.

Our named executive officers may also receive compensation in connection with the termination of their employment in some circumstances, as further described below under “Narrative Relating to Summary Compensation Table and Grants of Plan-Based Awards,” on page 40, and under “Potential Payments Upon Termination or Change in Control,” on page 46.

28

 


Relationship Among the Different Components of Compensation

In order to ensure that named executive officers are held most accountable for our performance and changes in stockholder value, management and the committee generally allocate total compensation such that the portion of compensation attributable to fixed elements, such as salary and benefits, decreases with increasingly higher levels of responsibility, and the portion attributable to variable, performance-based elements increases with increasingly higher levels of responsibility. The value of the named executive officers’ 2018 base salaries, target annual bonus opportunities for 2018 and long-term incentive plan awards granted in 2018, as a percentage of those three components, are set forth below. Each component is discussed in more detail in the sections below.

 

Named Executive Officer

 

Base Salary*

 

 

Target Annual Bonus

 

 

Long-Term Incentive**

 

Edward J. Lehner

 

31.30%

 

 

39.13%

 

 

29.57%

 

Erich S. Schnaufer

 

47.32%

 

 

26.02%

 

 

26.66%

 

Michael J. Burbach

 

44.67%

 

 

33.50%

 

 

21.83%

 

Kevin D. Richardson

 

44.67%

 

 

33.50%

 

 

21.83%

 

See Leong Fang

 

51.60%

 

 

28.38%

 

 

20.02%

 

 

*The value of the base salaries is based on the named executive officers’ base salary rates as of December 31, 2018.

**The value of the long-term incentive award (time-vesting restricted stock units (“RSUs”) and performance-vesting restricted stock units (“PSUs”)) is determined as the grant date fair value of the awards as described in footnote (2) to the Summary Compensation Table below on page 37.

Base Salary

The base salary payable to each named executive officer was intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities, as well as to recruit well-qualified executives. Salary is paid to ensure that we are able to attract and retain the talent necessary to lead our Company and to ensure that sufficient fixed income is provided even when variable compensation programs pay out below target (or not at all), intending to help mitigate incentive for executives to assume overly risky business strategies.

The named executive officers’ initial base salaries are generally determined in connection with the negotiation of their employment terms upon their hiring or promotion. The salary levels are then reviewed annually in connection with the Company’s salary review for all management employees. Each year, the Company’s Executive Vice President, General Counsel & Secretary recommends to the CEO a salary adjustment for each officer reporting to the CEO. This recommendation is based on a review of competitive market factors, Company budget considerations, retention considerations and the officer’s performance during the prior year, including his performance against his personal goals determined at the beginning of the prior year. After reviewing this recommendation, the CEO may make modifications based on his own assessment of individual performance and then prepares salary recommendations for the officers reporting to him. The CEO then makes his recommendations to the Compensation Committee for each officer (other than himself); the Executive Vice President, General Counsel & Secretary makes a recommendation directly to the Compensation Committee regarding the CEO’s salary, which recommendation is determined in the same manner as his recommendations to the CEO regarding the other officers’ salaries. The Compensation Committee members then review the salary recommendations and, after any adjustments, determine the officers’ base salaries on behalf of the Company. In determining base salaries for our named executive officers for any particular year, the Committee generally considers, among other factors, competitive market practice, individual performance for the prior year and the mix of fixed compensation to overall compensation.

2018 Base Salaries

With respect to our named executive officers’ base salaries in 2018, Mr. Silver, the Executive Vice President, General Counsel & Secretary, and manager of Corporate Human Resources, considered the Peer Group information in determining his salary adjustment recommendations. Mr. Silver also presented this information to Mr. Lehner in connection with his recommendations regarding the salaries of such named executive officers (other than with respect to Mr. Lehner’s compensation). In February 2018, the Compensation Committee, considered the recommendations, the Peer Group information and other factors, including market competitiveness, and it modified the salaries of the other named executive officers as follows, effective July 2018:

 

 

 

 

 

 

 

 

 

2018 Base Salary

Named Executive Officer

 

 

Previous Base Salary

 

 

 

Base Salary

 

 

Effective Date

Edward J. Lehner

 

 

$

850,000

 

 

 

$

875,500

 

 

7/2/2018

Erich S. Schnaufer

 

 

$

310,000

 

 

 

$

325,500

 

 

7/2/2018

Michael J. Burbach

 

 

$

405,000

 

 

 

$

417,000

 

 

7/2/2018

Kevin D. Richardson

 

 

$

405,000

 

 

 

$

417,000

 

 

7/2/2018

See Leong Fang

 

 

$

300,000

 

 

 

$

315,000

 

 

7/2/2018

 

29

 


Annual Bonus

The Company has historically maintained an annual incentive plan (“AIP”), pursuant to which its key managers (including our named executive officers) are eligible to receive performance-based cash bonuses tied to the Company’s achievement of specified financial performance targets for each year. Each year the Compensation Committee or the Board establishes objective financial performance criteria that must be met by the Company in order for bonuses to be paid (usually establishing threshold, target and maximum payout levels for each type of performance criterion), and other terms and conditions of awards under the AIP. It also approves any changes to the bonus targets for the named executive officers, which are expressed as a percentage of annual salary base rates in effect at November 30 of the applicable AIP plan year. No cash AIP bonuses are payable unless we achieve the performance thresholds set for the performance period. The Compensation Committee and our Board generally view the use of cash AIP bonuses as an effective means to compensate our named executive officers for achieving our annual financial goals. In general, a participant must be employed by the Company or its subsidiaries through the end of the AIP plan year in order to receive an AIP bonus payment, although some exceptions exist for circumstances such as retirement, death or position elimination. Additional information regarding AIP bonus payments in these circumstances is included below under “Potential Payments Upon Termination or Change in Control,” below on page 46.

The named executive officers’ target AIP bonus percentages are generally determined in connection with the negotiation of their employment terms upon their hiring or promotion. The target bonus percentages are then reviewed annually by the Company’s Executive Vice President, General Counsel & Secretary, who makes a recommendation to the CEO regarding any percentage adjustments for each officer reporting to the CEO. This recommendation is based on a review of competitive market factors and retention considerations. After reviewing this recommendation, the CEO may make modifications based on his own assessment, and then prepares recommendations for the officers reporting to him. The CEO then makes his recommendations to the Compensation Committee for each officer (other than himself); the Executive Vice President, General Counsel & Secretary makes a recommendation directly to the Compensation Committee regarding the CEO’s percentage, which recommendation is determined in the same manner as his recommendations to the CEO regarding the other officers’ bonus opportunities. The Compensation Committee members then review the target bonus percentage recommendations and, after any adjustments, determine each officer’s target bonus percentage on behalf of the Company. In determining target bonus percentage for our named executive officers for any particular year, the Committee generally considers the same factors it uses in determining base salary rate adjustments. The Compensation Committee may make the target bonus percentage change effective for the full year or make it effective on some date later in the plan year. If a participant’s target bonus percentage is changed effective during a plan year, then the effective target bonus percentage for the plan year is a weighted average of the two percentages, based on the time during the year that each of the two percentages was in effect unless determined otherwise by the Compensation Committee.

2018 Annual Incentive Plan

In 2018, the Company’s 2018 annual incentive plan (the “2018 AIP”) was approved by our Compensation Committee, and the target 2018 AIP bonuses for our named executive officers were expressed as a percentage of their annual base salary rates in effect on November 30, 2018.

With respect to the named executive officers’ target bonus percentages for 2018, Mr. Silver considered the Peer Group information in determining his target bonus percentage adjustment recommendations. Mr. Silver also presented this information to Mr. Lehner in connection with his recommendations regarding the target bonus percentages of such named executive officers (other than Mr. Lehner) and to the Compensation Committee with respect to his recommendations regarding the target bonus percentage for Mr. Lehner. In February 2018, the Compensation Committee considered the recommendations, the Peer Group information and other factors, including the factors it considered in making base salary rate adjustments, and it set the target bonus percentages of the other named executive officers as set forth in the below table, effective January 2018. The target AIP bonus levels were set to reflect the relative responsibility for our performance and to allocate appropriately the total cash opportunity between base salary and incentive-based compensation.

 

Named Executive Officer

 

2018 target bonus

percentage

 

Edward J. Lehner

 

125%

 

Erich S. Schnaufer

 

55%

 

Michael J. Burbach

 

75%

 

Kevin D. Richardson

 

75%

 

See Leong Fang

 

55%

 

 

For the 2018 AIP, it was determined that a combination of earnings before interest, taxes, depreciation, amortization, reorganization, and other adjustments (“EBITDAR”), and “economic value added” (“EVA”) should be used as the performance measures for determining the cash AIP bonus payable to our named executive officers. EBITDAR and EVA were chosen as the appropriate performance measures to motivate our key executives, including the named executive officers, to both maximize earnings and increase utilization of our working capital.

30

 


EBITDAR is calculated as our net income excluding interest and other expense on debt, provision for income taxes, depreciation, amortization, reorganization, net last-in first-out inventory expenses, asset impairment expenses, and other charges (as reported in the Companys annual audited financial statements included in the Companys Form 10-K and other SEC filings).

EVA is the amount by which EBITDAR exceeded a carrying cost of capital applied to certain of our assets (“Cost of Capital”). Cost of Capital is equal to our net operating assets (accounts receivable plus average cost inventory plus property, plant & equipment, plus prepaid expenses & other assets, minus accounts payable, minus salaries & wages payable, and minus other current liabilities) (as reported in the Company’s annual audited financial statements included in the Company’s Form 10-K and other SEC filings) multiplied by the “cost of capital rate” of 15%. In summary, EVA is calculated as EBITDAR minus the Cost of Capital.

A reconciliation of these non-GAAP financial measures to the most comparable GAAP measure is included in Appendix B to this proxy statement.

For Messrs. Lehner and Schnaufer 50% of their bonus opportunity for 2018 was based on Company (“corporate”) EBITDAR during 2018 and the remaining 50% was based on corporate EVA during 2018. For Messrs. Burbach and Richardson, 30% of their bonus opportunity for 2018 was split equally between corporate 2018 EBITDAR and EVA, and the remaining 70% was split equally between their respective assigned region’s 2018 EBITDAR and EVA. For Mr. Fang, 50% of his bonus opportunity for 2018 was split equally between corporate 2018 EBITDAR and EVA, and the remaining 50% was split equally between his assigned region’s 2018 EBITDAR and EVA.

Actual Payouts under the 2018 AIP

In 2018, the Company’s financial performance resulted in a payout under the 2018 AIP for corporate performance with respect to corporate 2018 EBITDAR and EVA. The Company’s financial performance also resulted in a payout under the 2018 AIP for Messrs. Burbach’s and Richardson’s respective assigned regions’ 2018 EBITDAR and EVA. Information on the achievement of each corporate target for 2018 AIP purposes is shown in the table below.

 

Performance

Criteria

(Corporate)

 

Threshold

(50% payout)

 

Target

(100% payout)

 

Maximum

(200% payout)

 

2018

Performance*

 

Payout

Percentage

Performance

2018 EBITDAR

 

$178.0M

 

$215.0M

 

$287.0M

 

$291M

 

200.0%

2018 EVA

 

$0.0M

 

$28.0M

 

$80.0M

 

$95M

 

200.0%

 

*

Performance results exclude the impact of Central Wire & Steel and Fanello Industries that were acquired in 2018.

The named executive officers’ bonus opportunities under the 2018 AIP are set forth in the table below.

 

Named Executive Officer

 

 

Base Salary (1)

 

 

Target 2018

AIP Bonus

(as a percentage

of Base Salary)

 

 

 

Target 2018

AIP Bonus

(dollar amount)

 

 

 

Actual 2018

AIP Award

Paid

 

Edward J. Lehner

 

 

$

875,500

 

 

 

125

%

 

 

$

1,094,375

 

 

 

$

2,188,750

 

Erich S. Schnaufer

 

 

$

325,500

 

 

 

55

%

 

 

$

179,025

 

 

 

$

358,050

 

Michael J. Burbach

 

 

$

417,000

 

 

 

75

%

 

 

$

312,750

 

 

 

$

617,646

 

Kevin D. Richardson

 

 

$

417,000

 

 

 

75

%

 

 

$

312,750

 

 

 

$

625,500

 

See Leong Fang

 

 

$

315,000

 

 

 

55

%

 

 

$

173,250

 

 

 

$

233,043

 

 

(1)

As of November 30, 2018.

Long-Term Incentive Program

Retention Bonus Plan

On July 23, 2014, the Board adopted a new retention plan called the Ryerson Holding Corporation Retention Bonus Plan (the “Retention Bonus Plan”), which is intended to incentivize certain of our employees to continue with the Company following the IPO. Our Board administers the Retention Bonus Plan and is authorized to, among other things, construe, interpret and implement the plan, to prescribe, amend and rescind rules and regulations relating to the plan and make any other determinations that it deems necessary or advisable for the administration of the plan. The Board may also delegate to certain members of the Board, our officers or employees, or other committees, the authority, subject to such terms as the Board determines appropriate, to perform such functions, including but not limited to administrative functions. Any action of the Board (or its authorized delegates) will be final, conclusive, and binding on all persons, including the Company and plan participants.

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Under the Retention Bonus Plan, participants were granted a number of units, which corresponds to their allocation of the total bonus pool that may be awarded under the plan. The total number of units that were made available for grant under the plan was 10,000,000 units, and the total amount of the bonus pool allocated among participants was $10,000,000. Each of our named executive officers participated in the Retention Bonus Plan and was granted the following number of units: Mr. Lehner, 1,574,803 units; Mr. Schnaufer, 393,700 units; Mr. Burbach, 1,338,583 units; Mr. Richardson, 1,338,583 units; and Mr. Fang, 1,181,102 units.

The named executive officers’ units vested 20% upon the effectiveness of the IPO and 20% on each of the next four anniversaries of the effectiveness of the IPO.

In August 2018, the remaining 20% of the units granted under the Retention Bonus Plan vested and was paid in cash as set forth in the table below, after the fourth anniversary of the IPO:

 

Named Executive Officer

 

 

Retention Bonus Plan – 2018 Payment

 

Edward J. Lehner

 

 

$

314,961

 

Erich S. Schnaufer

 

 

$

78,740

 

Michael J. Burbach

 

 

$

267,717

 

Kevin D. Richardson

 

 

$

267,717

 

See Leong Fang

 

 

$

236,220

 

 

Long-Term Incentive Plan (“LTIP”)

In March 2018, the Company granted equity awards to some of its employees, including its named executive officers. The Compensation Committee expects that the Company will grant equity awards to select employees on an annual basis under an LTIP, in order to serve several compensation objectives. First, the Compensation Committee believes that equity awards, in tandem with our executive stock ownership guidelines described below under “Executive Stock Ownership Guidelines,” on page 36, encourage ownership of our common stock by our executive officers, which aligns the interests of those officers with those of our stockholders. In addition, the vesting provisions applicable to the awards help retain executive officers and reward the achievement of long-term business objectives that benefit our stockholders. The Compensation Committee believes that performance metrics applicable to long-term incentive awards are particularly critical to encourage forward planning for our success. The Compensation Committee intends to continue to align the metrics for future long-term incentive compensation programs with the Company’s strategic goals as they evolve.

The equity awards are issued under the Omnibus Plan, which was approved by our stockholders prior to the IPO, and the amendment and restatement of which is the subject of Proposal 3 included elsewhere in this proxy statement. The Omnibus Plan permits the grant of various types of awards which allows the Compensation Committee to choose awards it believes will provide competitive long-term incentive compensation.

The Compensation Committee expects to approve annually the design of the LTIP for the upcoming year and to make LTIP equity awards to named executive officers on an annual basis. Management, including the President & CEO, the CFO and the Executive Vice President, General Counsel & Secretary, discuss and determine the initial LTIP program elements for recommendation to the Compensation Committee. This includes the type of equity award to be granted as well as the aggregate size of the awards for all selected employees. After considering management’s recommendation and other factors, the Compensation Committee then determines the design of the LTIP for the upcoming year, as well as the types and sizes of awards to the named executive officers.

In determining the type and aggregate size of all awards to be provided and the type and size of awards to the named executive officers, as well as the performance metrics that may apply, the Compensation Committee may consider factors including the strategic goals of the Company, trends in corporate governance, accounting impact, tax-deductibility, the Company’s aggregate budget for long-term incentive compensation, cash flow, the impact on the Company’s earnings per share and the number of shares of common stock that would be required to be allocated. The Compensation Committee may also consider some or all of the following: the officer’s original terms of hire, performance against annual performance goals, and considerations of fairness and comparability within the Company. The Compensation Committee also reviews and may adjust the target long-term incentive award at the time of promotions or other significant increases in executive responsibilities.

2018 LTIP  –  Type of Equity Granted and Performance Metrics

Ryerson management presented Peer Group data and other general survey data from Vivient regarding long-term incentive awards to the Compensation Committee. This data included information regarding award types, mix of awards and award vesting periods. After consideration of the information and management’s recommendations, in February 2018 the Board approved the 2018 LTIP and the named executive officers’ LTIP awards.

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Under the 2018 LTIP, our named executive officers received a combination of RSUs and PSUs. Each of our named executive officer’s 2018 LTIP award was allocated such that two-thirds of the total number of awards consisted of PSUs and one-third of the total number consisted of RSUs. More PSUs were granted than RSUs in order to place greater emphasis on successful financial performance.

The RSUs and PSUs awarded under the 2018 LTIP were granted in March 2018. All of the RSU and PSU awards were subject to award agreements and the terms of the Omnibus Plan.

Restricted Stock Units (“RSUs”)

A restricted stock unit is a right to receive a share of Ryerson common stock (or cash based on the value of a share of stock) on a specified vesting date in the future. The RSUs will vest on each of the first three anniversaries of the RSU grant date, provided that the recipient remains employed by the Company through the applicable vesting date.

RSUs granted to our named executive officers accrue dividend equivalents in the event the Company declares a cash dividend on its common stock, but the holders of the RSUs have no other rights as stockholders with respect to the RSUs (e.g., no voting rights). Holders of the RSUs may not sell, assign or otherwise transfer the RSUs, and any unvested RSUs are forfeited if the holder’s employment is terminated for any reason.

Performance Units (“PSUs”)

A performance unit is a right to receive a share of Ryerson common stock (or cash based on the value of a share of stock) on a specified vesting date in the future, subject to the level of achievement of predetermined organizational performance goals over a specified period of time. The PSUs awarded under the 2018 LTIP will vest, if at all, on the later to occur of (x) the third anniversary of the PSU grant date, and (y) the date the Compensation Committee certifies the applicable performance objectives. Vesting of the PSUs is subject to the recipient remaining employed by the Company through the vesting date, and the portion of the PSUs that vest will depend on the level of the Company’s performance over the three-year period from 2018 through 2020 (the “PSU Performance Period”) against certain performance objectives. The actual number of shares of Ryerson common stock (or cash based on the value of such number of shares) received with respect to a PSU award might not equal the targeted number of shares, depending on the Company’s performance. The three-year performance period was chosen to emphasize the importance of achieving longer-term goals in creating value for stockholders, and to diminish the effect of short-term macroeconomic volatility on achievement of longer-term objectives of the 2018 LTIP.

PSUs granted to our named executive officers under the 2018 LTIP do not provide the holder with any rights as stockholders with respect to the PSUs (e.g., no voting rights) and do not accrue any dividend equivalent rights. Holders of the PSUs may not sell, assign or otherwise transfer the PSUs, and any unvested PSUs are forfeited if the holder’s employment is terminated for any reason.

PSU Performance Objectives

Payment under the PSUs granted to our named executive officers under the 2018 LTIP is subject to the achievement of two PSU performance objectives – (i) a “Cumulative Adjusted EBITDA” performance objective, and (ii) a “Cumulative Managerial Controllable Free Cash Flow” performance objective.

For these purposes, “Cumulative Adjusted EBITDA” means the sum of Adjusted EBITDA and net last-in first-out inventory expense (as reported in the Company’s SEC filings for the applicable period) over the entire PSU Performance Period.

In addition, for these purposes, “Cumulative Managerial Controllable Free Cash Flow” means the sum of Adjusted EBITDA, net last-in first-out inventory expense (as reported in the Company’s SEC filings for the applicable period), plus or minus changes in the Consolidated Statements of Cash Flows for inventory, accounts receivable, accounts payable, capital expenditures, and proceeds from asset sales, for the PSU Performance Period (as reported in the Company’s Forms 10-K) combined.

A reconciliation of these non-GAAP financial measures to the most comparable GAAP measure is included in Appendix B to this proxy statement.

PSU grants made prior to 2018 are subject to the achievement of a “Relative Free Cash Flow Yield” objective in addition to Cumulative Managerial Controllable Free Cash Flow.  For these purposes, Relative Free Cash Flow Yield determination begins by calculating the Company’s “Free Cash Flow Yield,” which is defined as (A) divided by (B), where (A) is cash flow from operating activities, less capital expenditures, plus proceeds from the sale of assets (“Free Cash Flow”) for a fiscal year during the performance period (all as reported on the Company’s Form 10-K), and (B) is stock market capitalization for the last day of such fiscal year. The same calculation for each comparative fiscal year during the performance period is performed for a group of the Company’s publicly traded direct competitors (the “LTIP Competitors Group”) by summing the LTIP Competitors Group’s Free Cash Flows and dividing by their aggregate equity market capitalizations on the last day of such fiscal year to compute a LTIP Competitors Group equity market capitalization weighted Free Cash Flow Yield. Relative Free Cash Flow Yield is determined by comparing the Company’s Free Cash Flow Yield metric against the LTIP Competitors Group’s for each fiscal year during the applicable performance period. A positive Relative Free Cash Flow Yield exists for a fiscal year if the Company’s Free Cash Flow Yield for that year is greater than that of the LTIP Competitors Group for the same year.  

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The Compensation Committee selected Cumulative Adjusted EBITDA as a new performance metric in place of Relative Free Cash Flow Yield to better reflect the Company performance relative to our business plan.

Determining PSUs Earned and Award Range

The actual number of PSUs granted to our named executive officers under the 2018 LTIP, if any, that are earned will be based on the Company’s achievement of the two performance objectives, Cumulative Adjusted EBITDA and Cumulative Managerial Controllable Free Cash Flow measured in total during the PSU Performance Period against established targets for each objective, each as set forth below.  The performance objectives are weighted 50% each such that half of the PSUs granted vest based on achievement of the Cumulative Adjusted EBITDA metric and half based on achievement of the Cumulative Managerial Controllable Free Cash Flow metric.  The performance objectives provide that vesting of its respective 50% of the total PSUs award is subject to the Company achieving an amount equal to or greater than a specified threshold dollar amount for such performance objective for the Performance Period. If the threshold of a performance objective is achieved but not exceeded, half of the PSUs relating to that performance objective will vest. If the target for a performance objective is achieved or exceeded, 100% of the PSUs relating to that performance objective will vest.  If an amount in between the threshold and target dollar amount for a performance objective is achieved, the vesting percentage will be interpolated on a straight-line basis.  If performance for either objective is below the applicable threshold, none of the corresponding PSUs will be earned.

Performance

Criteria

 

Threshold

(50% Vesting)(1)(2)

 

Target

(100% Vesting)(1)

 

Cumulative Adjusted EBITDA (50%)

 

$550.0M

 

$700.0M

 

Cumulative Managerial Controllable Free Cash Flow (50%)

 

$450.0M

 

$650.0M

 

 

(1)

Performance between the above referenced threshold and target levels will be interpolated on a straight-line basis.

 

 

(2)

None of the corresponding PSUs vest if performance for the applicable target is below threshold.

 

The level of difficulty of attaining the Cumulative Adjusted EBITDA and Cumulative Managerial Controllable Free Cash Flow performance objectives is moderate, based on projected results over the performance period. When granted, the company expects that performance results will be in the range between threshold and target levels.

Named Executive Officer 2018 LTIP Awards

In March 2018, after review of management’s recommendations regarding the type and size of 2018 LTIP awards to the named executive officers, the Board awarded the named executive officers the following 2018 LTIP awards, which were granted in March 2018.

 

Named Executive Officer

 

PSUs

(units)

 

 

RSUs

(units)*

 

Edward J. Lehner

 

 

68,005

 

 

 

33,495

 

Erich S. Schnaufer

 

 

15,075

 

 

 

7,425

 

Michael J. Burbach

 

 

16,750

 

 

 

8,250

 

Kevin D. Richardson

 

 

16,750

 

 

 

8,250

 

See Leong Fang

 

 

10,050

 

 

 

4,950

 

 

*

One-third of such RSUs will vest on each of the first three anniversaries of the RSU grant date.

The Board approved 2018 LTIP awards to the named executive officers after considering Peer Group data, the officers’ positions and shares available for allocation under the Omnibus Plan.

Additional information regarding the 2018 LTIP equity awards granted to our named executive officers, including the threshold and target award amounts for the PSUs granted to each of our named executive officers, is included in the table below under “Grants of Plan-Based Awards,” on page 39.


34

 


Retirement Benefits

Defined Contribution Plans

Our tax-qualified employee savings and retirement plan (the “401(k) Plan”) covers certain full- and part-time employees, including our named executive officers. Under the 401(k) Plan, employees may elect to reduce their current compensation up to the statutorily prescribed annual limits and have the amount of such reduction contributed to the 401(k) Plan. Our Board believes that the 401(k) Plan provides an important and highly valued means for employees to save for retirement.

Our Board reviewed the basic employee matching contribution policy under the 401(k) Plan in 2013 and concluded that it was competitive as compared to that of other employers. With respect to the 401(k) Plan, in 2018, we matched 100% of the first 4% of each employee’s contributed base salary and 50% of the contributions from 4% to 6% of the employee’s contributed base salary. All of our named executive officers participated in the 401(k) Plan on the same basis as our other employees in 2018.

We also maintain a nonqualified savings plan, which is an unfunded, nonqualified plan that allows highly compensated employees who make the maximum annual contributions allowed by applicable law to the 401(k) Plan to make additional deferrals in excess of the statutory limits. Under this plan, participants may contribute from 1% to 10% of their base salary. Just as we do for the 401(k) Plan, under this plan we match 100% of the first 4% of each participant’s contributed base salary contributed and 50% of the contributions from 4% to 6% of the participant’s contributed base salary. Our Board believes that our nonqualified savings plan provides an enhanced opportunity for our eligible employees, including our named executive officers, to plan for and meet their retirement savings needs. In 2018, none of our named executive officers contributed to the nonqualified savings plan and we did not make any contributions to it on behalf of any of them. As of December 31, 2018, Messrs. Burbach and Richardson each had an aggregate account balance under the nonqualified savings plan, equal to $11,377 and $37,031, respectively. For additional information, see “Nonqualified Deferred Compensation,” below on page 45.

Pension Plans

We currently sponsor the Ryerson Pension Plan, a qualified defined benefit pension plan. Of our named executive officers, only Messrs. Burbach and Richardson were eligible to participate in the Ryerson Pension Plan. Mr. Burbach was eligible to participate in the Ryerson Pension Plan under the Ryerson Pension Plan Supplement for Former Participants in the Integris Metals, Inc. Pension Plan, which was frozen as of December 31, 2005, and Mr. Richardson was eligible to participate in the Ryerson Pension Plan under the Ryerson Pension Plan Supplement for Salaried Employees of Ryerson Inc. and Certain Subsidiaries, which was frozen as of December 31, 1997.

We also sponsor the Integris Metals, Inc. Excess Retirement Benefit Plan, a nonqualified supplemental pension plan, in which only Mr. Burbach participated. This plan was frozen as of December 31, 2005.

Mr. Burbach’s combined frozen pension benefit from these pension plans is approximately $74,949 annually upon his retirement upon reaching retirement age under the plans, which is 62 years. Mr. Richardson’s combined frozen pension benefit from these pension plans is approximately $13,227 annually upon his retirement; due to the length of his service at the Company, Mr. Richardson could retire at any time and receive this benefit. These plans are described in further detail below under “Pension Benefits,” on page 44.

Perquisites and Other Benefits

All of our named executive officers were eligible for coverage under our health insurance programs, as well as group life insurance, short-term disability and long-term disability benefits, on the same terms as our other employees.

Employment Agreements

Our Compensation Committee believes that employment agreements with our named executive officers are valuable tools to both enhance our efforts to retain these executives and protect our competitive and confidential information. We are party to agreements with each of our named executive officers that govern their employment with the Company. Mr. Lehner’s Employment Agreement and the other named executive officers’ employment agreements are described in more detail under “Narrative Relating to Summary Compensation Table and Grants of Plan-Based Awards,” below on page 40. Mr. Lehner’s Employment Agreement is also further described under “Mr. Lehner’s Employment Agreement,” above on page 28. The estimates of the value of the benefits potentially payable under these agreements (if any) upon a termination of employment or change of control are included under “Potential Payments Upon Termination or Change in Control,” below on page 46.

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Compensation Risk Management

The Company’s management conducts a risk-assessment annually related to the Company’s compensation programs and presents to the Compensation Committee its assessment of the related risks.   The Company’s assessment included a review and assessment of risks related to Company’s AIP and LTIP discussed in this proxy statement as well as sales incentive plans applicable to the Company’s sales employees. We have reviewed our compensation policies and practices and have determined that those policies and practices are not reasonably likely to have a material adverse effect on the Company.

Tax Considerations and Deductibility of Compensation

In general, Section 162(m) of the Code generally denies a publicly held corporation a deduction for federal income purposes for compensation in excess of $1 million per year paid to certain “covered employees.” The Compensation Committee may, from time to time, design programs that are intended to further our success, including by enabling us to continue to attract, retain, reward and motivate highly-qualified executives that may not be deductible as a result of the limitations on deductibility under Section 162(m).

Executive Stock Ownership Guidelines

In June 2015, the Board established stock ownership guidelines for executive officers, including all named executive officers. The guidelines are intended to increase the stake these officers hold in the Company and to more closely align their interests with those of our stockholders. The guidelines provide that officers meet the following stock ownership requirements:

 

The President & CEO should acquire and maintain stock ownership equal in value to five times his base salary;

 

The CFO should acquire and maintain stock ownership equal in value to three times his base salary;

 

Each Regional President should acquire and maintain stock ownership equal in value to three times his base salary; and

 

Other executive officers should acquire and maintain stock ownership equal in value to one time his base salary.

Executive officers have five years to achieve the above ownership requirements from the date the ownership guidelines were adopted. Newly hired and promoted executive officers will have five years from the date they are appointed to achieve their ownership requirements. Shares purchased by the executive officer and vested RSUs and PSUs are included in the calculation of stock ownership levels.

Based on the closing price per share of our common stock on the NYSE on December 31, 2018, of $6.34 per share, the last trading day of fiscal year 2018, as of that date our continuing named executive officers held the following percentages of their base salaries at that date: Mr. Lehner, 158%; Mr. Schnaufer, 67%; Mr. Burbach, 123%; Mr. Richardson, 143%; and Mr. Fang, 51%.

Prohibition on Speculative Stock Transactions

The Company considers it improper and inappropriate for our officers and directors to engage in speculative transactions in Ryerson securities. Therefore, our insider trading policy prohibits such persons from engaging in short sales of our securities and certain other inherently speculative transactions in our securities.

Recommendation

As set forth in the “Compensation Committee Report” above on page 25, the committee has reviewed this Compensation Discussion and Analysis and recommended its inclusion in this proxy statement.

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COMPENSATION TABLES

The following table presents compensation information for Mr. Lehner, our President & CEO; Mr. Schnaufer, our CFO; and Messrs. Burbach, Richardson and Fang, our three next most highly compensated executive officers serving on December 31, 2018. It presents compensation information for Messrs. Lehner, Schnaufer, Burbach, Richardson and Fang for the last three years.

Summary Compensation Table

For Fiscal Year Ended December 31, 2018

 

Name and Principal

Position

(a)

 

Year

(b)

 

Salary

($)

(c)

 

 

Bonus

($)

(d)

 

 

Stock

($)(1)

(e)

 

 

Non-Equity

Incentive Plan

Compensation

($)(2)

(g)

 

 

Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

($)(3)

(h)

 

 

All Other

Compensation

($)(4)

(i)

 

 

Total

($)

(j)

 

Edward J.

Lehner

 

2018

 

 

862,750

 

 

 

 

 

 

827,225

 

 

 

2,503,711

 

 

 

 

 

 

16,425

 

 

 

4,210,111

 

President &

 

2017

 

 

835,000

 

 

 

707,759

 

 

 

1,197,000

 

 

 

314,961

 

 

 

 

 

 

16,123

 

 

 

3,070,843

 

CEO

 

2016

 

 

697,500

 

 

 

840,664

 

 

 

583,800

 

 

 

314,961

 

 

 

 

 

 

168,348

 

 

 

2,605,273

 

Erich S.

 

2018

 

 

317,750

 

 

 

 

 

 

183,375

 

 

 

436,790

 

 

 

 

 

 

14,976

 

 

 

952,891

 

Schnaufer,

 

2017

 

 

302,500

 

 

 

123,451

 

 

 

315,000

 

 

 

78,740

 

 

 

 

 

 

14,609

 

 

 

834,300

 

CFO

 

2016

 

 

292,981

 

 

 

159,970

 

 

 

139,000

 

 

 

78,740

 

 

 

 

 

 

13,944

 

 

 

684,635

 

Michael J.

Burbach,

 

2018

 

 

411,000

 

 

 

 

 

 

203,750

 

 

 

885,363

 

 

 

 

 

 

16,728

 

 

 

1,516,841

 

President, North-

 

2017

 

 

397,500

 

 

 

182,296

 

 

 

315,000

 

 

 

267,717

 

 

 

108,002

 

 

 

16,321

 

 

 

1,286,836

 

West Region

 

2016

 

 

382,500

 

 

 

424,218

 

 

 

139,000

 

 

 

267,717

 

 

 

65,408

 

 

 

15,952

 

 

 

1,294,795

 

Kevin D.

Richardson,