def14a
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.___)
Filed by the Registrant x
Filed by a Party other than the Registrant o
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Soliciting Material Pursuant to §240.14a-12 |
RELIANCE STEEL & ALUMINUM CO.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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TABLE OF CONTENTS
RELIANCE
STEEL & ALUMINUM CO.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 16, 2007
To the Shareholders of
Reliance Steel & Aluminum Co.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the
shareholders of Reliance Steel & Aluminum Co.
(Reliance or Company) will be held on
Wednesday, May 16, 2007, at 10:00 a.m., California
time, at the City Club on Bunker Hill, 333 South Grand Avenue,
54th Floor, Wells Fargo Center, Los Angeles, California
90071, for the following purposes:
1. To elect four directors to serve for two years and until
their successors have been duly elected and qualified. The
nominees for election to the Board are Douglas M. Hayes,
Franklin R. Johnson, Richard J. Slater, and Leslie A. Waite.
2. To ratify Ernst & Young LLP as our independent
registered public accounting firm to perform the annual audit of
our 2007 financial statements.
3. To transact such other business as may properly come
before the Annual Meeting or adjournments thereof.
Only holders of shares of record on the books of Reliance at the
close of business on April 5, 2007 are entitled to notice
of, and to vote at, the Annual Meeting or any adjournments
thereof. You may continue to trade in our Common Stock during
the solicitation period.
We have enclosed a Proxy Statement and a proxy in card form with
this Notice. Next year we expect to be able to deliver the Proxy
Statement and proxy card electronically. All shareholders are
invited to attend the Annual Meeting. To make it easier, you may
vote on the Internet or by telephone. The instructions attached
to your proxy card describe how to use these convenient
services. Of course, if you prefer, you can vote by mail by
completing your proxy card and returning it in the enclosed
envelope to which no postage need be affixed if it is mailed in
the United States. Even if you give such proxy, you have the
right to vote in person if you attend the Annual Meeting.
By Order of the Board of Directors,
Yvette M. Schiotis
Secretary
Los Angeles, California
April 10, 2007
RELIANCE
STEEL & ALUMINUM CO.
350 South Grand
Avenue
Suite 5100
Los Angeles, California 90071
PROXY
STATEMENT
FOR ANNUAL MEETING OF
SHAREHOLDERS
To Be Held May 16, 2007
We are furnishing this statement because the Board of Directors
of Reliance Steel & Aluminum Co. is soliciting proxies
for use at the Annual Meeting of Reliance shareholders to be
held at the City Club on Bunker Hill, 333 South Grand Avenue,
54th Floor, Wells Fargo Center, Los Angeles, California
90071, on Wednesday, May 16, 2007 at 10:00 a.m.,
California time, or at any adjournments thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting.
INFORMATION
CONCERNING PROXY
The Board of Directors selected the persons named as
proxyholders to vote the shares of Common Stock represented by
the proxies at the Annual Meeting. Reliance will pay the cost to
solicit the proxies. The Board of Directors will solicit proxies
by mail, by telephone, and electronically via the Internet. In
addition, certain of our officers and agents may solicit proxies
by telephone, telegraph, and personal interview (the cost of
which will be nominal). We expect that banks, brokerage houses
and other custodians, nominees and fiduciaries will forward
soliciting material to beneficial owners and obtain
authorizations to execute proxies. We will reimburse the
out-of-pocket
expenses they incur to forward the proxy materials.
We intend to present at the Annual Meeting only the following
matters: (1) the election of four directors to serve for
the ensuing two years and until their successors are duly
elected and qualified and (2) the ratification of the Audit
Committees and the Boards selection of
Ernst & Young LLP as our independent registered public
accounting firm to perform the annual audit of our 2007
financial statements. Unless you instruct us otherwise on the
proxy, each proxy will be voted FOR the election of all
of the four nominees named herein as directors and FOR
the ratification of Ernst & Young LLP as our
independent registered public accounting firm for 2007. If other
matters properly come before the meeting, including but not
limited to, any matter for which we did not receive notice by
December 16, 2006, each proxy will be voted by the named
proxyholders in their discretion in a manner that they consider
to be in our best interests.
If you execute a proxy, the proxy may be revoked at any time
before it is voted (i) by filing with the Corporate
Secretary of Reliance either an instrument revoking the proxy or
a proxy bearing a later date, duly executed, or (ii) by
giving written notice to the Corporate Secretary of Reliance of
the death or incapacity of the shareholder who executed the
proxy. Any such notice should be sent or delivered to the above
address. In addition, the powers of a proxyholder are suspended
if the person executing the proxy is present at the Annual
Meeting and elects to vote in person.
We intend to mail this Proxy Statement and accompanying material
on or about April 10, 2007. An Annual Report with audited
financial statements for the fiscal year ended December 31,
2006 including a letter to the shareholders from the Chief
Executive Officer, the President and Chief Operating Officer and
the Executive Vice President and Chief Financial Officer is
included with this Proxy Statement. That report and letter are
not incorporated in, and are not a part of, this Proxy Statement
and do not constitute proxy-soliciting material.
INFORMATION
CONCERNING RELIANCES SECURITIES
Our only voting securities are shares of Common Stock, no par
value. As of January 31, 2007 we had a total of
75,849,932 shares issued and outstanding, all of which may
be voted at the Annual Meeting. Only holders of shares of record
on our books at the close of business on April 5, 2007 will
be entitled to vote at the Annual Meeting. Our total number of
shares outstanding has increased compared to 2005 because on
April 3, 2006 we acquired
1
Earle M. Jorgensen Company (EMJ) for
consideration consisting of both cash and shares of Reliance
Common Stock. As a result, approximately 9.0 million new
shares of Reliance Common Stock were issued to the stockholders
of EMJ in exchange for their shares of EMJ common stock. In
addition, the Board of Directors declared a 2 for 1 stock split
that was effective July 19, 2006. All share and per share
data, including prior period data, has been adjusted for this
stock split.
In the election of directors, you as a shareholder are entitled
to cumulate your votes for candidates whose names have been
placed in nomination prior to the voting, if you give notice at
the Annual Meeting before the voting of your intention to
cumulate votes. Cumulative voting entitles every shareholder who
is otherwise entitled to vote at an election of directors to
cumulate their votes, that is, to give any one candidate a
number of votes equal to the number of directors to be elected,
multiplied by the number of votes to which the
shareholders shares are normally entitled, or to
distribute those cumulated votes on the same principle among as
many candidates as a shareholder thinks fit. If any shareholder
gives notice of the intention to cumulate votes, all
shareholders may cumulate their votes for candidates. On all
matters other than the election of directors, each share has one
vote.
A plurality of the aggregate number of votes represented by the
shares present at the Annual Meeting in person or by proxy must
vote to elect directors. That means that the four individuals
receiving the largest number of votes cast will be elected as
directors, whether or not they receive a majority of the votes
cast. The affirmative vote of a majority of the votes cast is
required to ratify the engagement of the independent registered
public accounting firm.
ELECTION
OF DIRECTORS
Our Bylaws divide the Board of Directors into two classes, which
are to be as nearly equal in number as possible, and require one
class to be elected each year and to serve for a two-year term.
The terms of four of the incumbent directors expire as of the
date of the Annual Meeting. The Nominating and Governance
Committee and the Board of Directors have nominated the
following persons to be nominees for election at the Annual
Meeting as directors: Douglas M. Hayes, Franklin R. Johnson,
Richard J. Slater, and Leslie A. Waite. These nominees have
agreed to serve as directors. The term of office for each
director elected at the Annual Meeting will be two years, until
the second following Annual Meeting of Shareholders and until
their successors are duly elected and qualified.
Unless you otherwise instruct the proxyholders in the proxy,
your proxy will be voted FOR the above-named nominees. In
voting the proxies for election of directors, the proxyholders
have the right to cumulate the votes for directors covered by
the proxies (unless otherwise instructed) and may do so if they
think that is desirable.
The four nominees for the position of director expiring in 2009
were elected to their present term of office by vote of the
shareholders at the Annual Meeting of Shareholders held in May
2005, other than Richard J. Slater who was elected by the Board
of Directors to serve beginning January 2006 to fill a vacancy
on the Board. Although we do not expect that any nominee will
decline or be unable to serve as a director, if any nominee
declines or is unable to serve, the proxies will be voted, at
the Annual Meeting or any adjournment thereof, for such other
person as the Board of Directors may select or, if no other
person is so selected, as the proxyholders may, in their
discretion, select; provided that the proxyholders will not vote
for more than four nominees.
Certain information with respect to each nominee is set forth
in Management below. The Board of Directors
recommends that shareholders vote FOR the election of each
nominee as a director. Unless otherwise indicated on your proxy,
the proxyholders will vote your proxy FOR the election of all
named nominees.
2
MANAGEMENT
Directors
and Executive Officers
The following table sets forth certain information regarding our
directors and executive officers:
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Name
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Age
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Position with Reliance
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David H.
Hannah(1)
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55
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Chief Executive Officer; Director
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Gregg J.
Mollins(1)
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52
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President; Chief Operating
Officer; Director
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Karla R. Lewis
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41
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Executive Vice President; Chief
Financial Officer
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James P. MacBeth
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59
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Senior Vice President, Carbon
Steel Operations
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William K. Sales, Jr.
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49
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Senior Vice President, Non-Ferrous
Operations
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Joe D.
Crider(1)(4)(5)
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77
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Non-Executive Chairman of the
Board; Director
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Thomas W.
Gimbel(1)(5)
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55
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Director
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Douglas M.
Hayes(2)(3)(4)
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63
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Director
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Franklin R.
Johnson(2)(3)(5)
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70
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Director
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Mark V.
Kaminski(1)(3)(4)(5)
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51
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Director
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Richard J.
Slater(2)(4)(5)
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60
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Director
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Leslie A.
Waite(2)(3)(4)
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61
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Director
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Term of office as a director expiring in 2008. |
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Term of office as a director expiring in 2007. |
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Member of the Audit Committee. |
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Member of the Compensation and Stock Option Committee. |
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Member of the Nominating and Governance Committee. |
Nominees
for Directors to be Elected in 2007 With Terms Ending in
2009
Douglas M. Hayes became a director of Reliance in
September 1997. Mr. Hayes retired from Donaldson,
Lufkin & Jenrette Securities Corporation
(DLJ), where he was Managing Director of Investment
Banking from 1986 to May 1997, after which he established his
own investment firm, Hayes Capital Corporation, located in
Los Angeles, California. DLJ was an underwriter in our 1997
public equity offering and was also the underwriter in our
initial public offering in 1994. Mr. Hayes serves as a
member of our Audit Committee and our Compensation and Stock
Option Committee. Mr. Hayes served on our Nominating and
Governance Committee through February 2005. Mr. Hayes is
also a director of Circor International, Inc., a public company,
the securities of which are traded on the New York Stock
Exchange, and for which Mr. Hayes serves as chairman of the
nominating and governance committee and as a member of the audit
committee and the compensation committee. The Board of Directors
has determined that Mr. Hayes is an independent director,
and Mr. Hayes serves as our Lead Director for
non-management director meetings.
Franklin R. Johnson was appointed a director of Reliance
in February 2002. Mr. Johnson is a certified public
accountant, having been the managing partner of the
entertainment practice of Price Waterhouse until he retired in
June 1997. Mr. Johnson was the chief financial officer of
Rysher Entertainment, a producer and distributor of films and
television shows from June 1997 to June 1999 and, since July
1999, he has served as a business consultant, a litigation
consultant and an expert witness, none of which services has
been provided to Reliance. Mr. Johnson serves as a member
and the Chairman of our Audit Committee and as a member of our
Nominating and Governance Committee. Mr. Johnson also
serves as a director of Special Value Continuation Fund, a
registered investment fund for institutional investors organized
by Tennenbaum Capital Partners, for which Mr. Johnson is
chairman of its audit committee. The Board of Directors has
determined that Mr. Johnson is an independent director and
that he qualifies as the financial expert of the Audit Committee.
3
Richard J. Slater became a director of Reliance as of
January 1, 2006. Mr. Slater is chairman of ORBIS LLC,
an investment and corporate advisory firm, and chairman of
Bluebeam, a privately-held, early stage software development
company. From May 1980 until his retirement in October 2006,
Mr. Slater served in various executive positions with
Jacobs Engineering Group (NYSE-JEC), including Executive Vice
President of Worldwide Operations (1998 through 2002) and
advisor to the chairman and CEO (2003 through 2006). He is
currently a director of KBR, Inc. (NYSE-KBR), and a member of
its special independent, audit and compensation committees, and
he is a Trustee of the Board of Claremont Graduate University,
chairman of their business and finance committee, and member of
their audit and investment committees. The Board of Directors
has determined that Mr. Slater is an independent director.
Leslie A. Waite has been a director of Reliance since
1977. Mr. Waite is an investment advisor and, since April
2003, has been Managing Director and Senior Portfolio Manager of
Lombardia Capital Partners LLC (formerly Valenzuela Capital
Partners LLC). Prior to that, he had been the president and
chief portfolio manager of Waite & Associates since its
formation in 1977. Mr. Waite is a member of our Audit
Committee and serves as a member and Chairman of our
Compensation and Stock Option Committee. The Board of Directors
has determined that Mr. Waite is an independent director.
Directors
Whose Terms Continue Until 2008
Joe D. Crider became the Chairman of the Board of
Reliance in February 1997. Mr. Crider was the Chief
Executive Officer of Reliance from May 1994 until his retirement
in January 1999. Mr. Crider was President of Reliance until
November 1995. Before becoming the Chief Executive Officer,
Mr. Crider had been President and Chief Operating Officer
and a director since 1987 and had served in other capacities at
the Company since 1975. Mr. Crider serves as a member of
our Compensation and Stock Option Committee and as a member of
our Nominating and Governance Committee. The Board of Directors
has determined that Mr. Crider is an independent director.
Thomas W. Gimbel was appointed a director of Reliance in
January 1999. Mr. Gimbel has been retired since 2006 and
currently serves as Trustee of the Florence Neilan Trust,
Reliances largest shareholder. Between 1984 and 2006,
Mr. Gimbel was the President of Advanced Systems Group, an
independent computer consulting firm servicing database
requirements for diverse businesses of various sizes. From 1975
to 1984, Mr. Gimbel was employed by Dun &
Bradstreet. Mr. Gimbel serves as a member of our Nominating
and Governance Committee. The Board of Directors has determined
that Mr. Gimbel is an independent director.
David H. Hannah was appointed a director of Reliance in
1992 and became the Chief Executive Officer of Reliance in
January 1999. Mr. Hannah served as President of Reliance
from November 1995 to January 2002. Prior to that, he was
Executive Vice President and Chief Financial Officer from 1992
to 1995, Vice President and Chief Financial Officer from 1990 to
1992 and Vice President and Division Manager of the Los
Angeles Reliance Steel Company division of Reliance from 1989 to
1990. Mr. Hannah has served as an officer of the Company
since 1981. For eight years before joining Reliance in 1981,
Mr. Hannah, a certified public accountant, was employed by
Ernst & Whinney (a predecessor to Ernst &
Young LLP, our independent registered public accounting firm) in
various professional staff positions.
Mark V. Kaminski was appointed a director of Reliance in
November 2004. Mr. Kaminski was chief executive officer and
a director of Commonwealth Industries Inc. (now Aleris
International, Inc.) from 1991 to June 2004, when he retired.
Mr. Kaminski had served in other capacities with
Commonwealth Industries Inc. since 1987. Aleris has been a
supplier of metals to Reliance, but the purchases in any year do
not exceed five percent of either the gross revenues or the
total consolidated assets of Reliance or of Aleris.
Mr. Kaminski is also a director of the Matthew Kelly
Foundation, Cincinnati, Ohio, a non-profit organization.
Mr. Kaminski serves as a member and Chairman of our
Nominating and Governance Committee and as a member of the
Compensation and Stock Option Committee and the Audit Committee.
The Board of Directors has determined that Mr. Kaminski is
an independent director.
Gregg J. Mollins was appointed a director of Reliance in
September 1997 and became President of Reliance in January 2002.
Mr. Mollins has served as Chief Operating Officer since May
1994. Mr. Mollins was Executive Vice President from
November 1995 to January 2002, was Vice President and Chief
Operating Officer from 1994 to 1995
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and was Vice President from 1992 to 1994. Prior to that time he
had been with Reliance for six years as Division Manager of
the Santa Clara division. For ten years before joining
Reliance in 1986, Mr. Mollins was employed by certain of
our competitors in various sales and sales management positions.
Executive
Officers
In addition to Messrs. Hannah and Mollins, the following
are executive officers of Reliance:
Karla R. Lewis became Executive Vice President of
Reliance in January 2002 and continues as our Chief Financial
Officer. Mrs. Lewis had been Senior Vice President and
Chief Financial Officer of Reliance since February 2000.
Mrs. Lewis served as Vice President and Chief Financial
Officer of Reliance from 1999 to 2000 and was Vice President and
Controller from 1995 to 1999. Mrs. Lewis served as
Corporate Controller from 1992 to 1995. For four years prior to
joining Reliance, Mrs. Lewis, a certified public
accountant, was employed by Ernst & Young (our
independent registered public accounting firm) in various
professional staff positions.
James P. MacBeth became Senior Vice President, Carbon
Steel Operations in January 2002, having been promoted from Vice
President, Carbon Steel Operations, a position which he had held
since July 1998. Prior to that time, Mr. MacBeth served as
Division Manager of our Los Angeles Reliance Steel Company
division from September 1995 to June 1998. From December 1991 to
September 1995, Mr. MacBeth was Vice President and
Division Manager of Feralloy Reliance Company, L.P., a
joint venture owned 50% by Reliance. Prior to December 1991,
Mr. MacBeth held various sales and management positions
since joining Reliance in 1969.
William K. Sales, Jr. became Senior Vice President,
Non-Ferrous Operations in January 2002, having joined Reliance
as Vice President, Non-Ferrous Operations in September 1997.
From 1981 to 1997, Mr. Sales served in various sales and
management positions with Kaiser Aluminum & Chemical
Corp., a producer of aluminum products and a supplier of
Reliance.
Significant
Employees
In addition, the following Reliance officers are expected to
make significant contributions to our operations:
Donna Newton, 53, became Vice President, Human Resources
in January 2001. Ms. Newton joined Reliance as Director of
Employee Benefits and Human Resources in February 1999. Prior to
that time, she was director of sales and service for the Los
Angeles office of Aetna U.S. Healthcare and also held
various management positions at Aetna over a
20-year
period.
Kay Rustand, 59, joined Reliance as Vice President and
General Counsel in January 2001. Prior to that time,
Ms. Rustand was a partner at the law firm of
Arter & Hadden LLP (our former counsel) in Los Angeles,
California, for more than 10 years, specializing in
corporate and securities law. Following law school,
Ms. Rustand served as a law clerk for the Honorable Herbert
Y. C. Choy, of the U.S. Court of Appeals, 9th Circuit.
5
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
The Companys executive compensation program is
administered by the Compensation and Stock Option Committee of
the Board of Directors (the Compensation Committee),
which is composed entirely of independent, non-employee
directors and which makes recommendations to the non-management
directors on the Board of Directors regarding the compensation
of senior management. The executive compensation program is a
pay-for-performance
program that is designed to motivate executives to enhance
shareholder value with compensation plans that are tied to
Company performance as well as individual performance and to
ensure our ability to attract and retain superior executives by
targeting executive compensation at a level competitive with
other companies in our industry or having similar size or
performance metrics. To meet these objectives, the program has
both cash and equity elements and short term and long term
benefits. The executive officers receive a base salary, an
annual incentive bonus that may have both cash and stock
elements, periodic grants of stock options
and/or
restricted stock and certain retirement benefits, as well as
benefits common to all of our Companys employees. The
Compensation Committee evaluates, from time to time with the
help of an outside consultant, both the total compensation
package and the individual elements of the package on at least
an annual basis. The Compensation Committee considers both
objective and subjective criteria in determining the amount of
the total compensation package and the allocation between cash
and non-cash elements. The Compensation Committee considers
recommendations by management and also provides guidelines to
the executive officers for determining compensation of other
management personnel.
Compensation
Committee
The Compensation Committee is comprised solely of directors who
satisfy the independence requirements of the listing standards
for the New York Stock Exchange, come within the definition of
non-employee directors pursuant to
Rule 16b-3
under the Securities Exchange Act of 1934, as amended, and are
deemed to be outside directors for purposes of
Section 162(m) of the Internal Revenue Code of 1986, as
amended. Management assists the Compensation Committee in its
administration of the executive compensation program by
recommending salary levels and by providing data regarding both
Company and individual performance. The Compensation Committee
reviews our Companys financial statements, stock market
data and size in terms of revenues
and/or stock
market capitalization structures, as well as comparable
information for other public companies. Additionally, the
Compensation Committee from time to time engages an independent
outside consulting firm to aid in the review and evaluation of
the various elements of the total compensation package. In 2006,
the Compensation Committee engaged Mercer Human Resources
Consulting to provide an objective review of the compensation
paid to executive officers and to identify competitive levels of
compensation and appropriate elements. As part of its annual
review, the Compensation Committee considers compensation data
publicly available with respect to certain key competitors in
the metals service center and related industries, including
those shown in our peer group on our performance graph. In 2006
the Compensation Committee reviewed information for the
following companies: metal service centers
A.M. Castle & Co., Olympic Steel, Inc. and Ryerson
Inc.; metal processors Gilbraltar Industries, Inc., Steel
Technologies, Inc. and Worthington Industries, Inc.; and metal
producers AK Steel Holding Corporation, Allegheny Technologies
Incorporated, Century Aluminum Company, Commercial Metals
Company, Maverick Tube Corporation, Quanex Corporation and Steel
Dynamics, Inc. The Compensation Committee gives primary
consideration to companies in our peer group. There are few
metal service center companies that are publicly traded and are
of comparable size or performance. The Compensation Committee
from time to time also considers compensation information from
Fortune 1000 companies located in the Pacific Southwest
region.
Policies
The executive compensation program is a pay for performance
program that is designed to:
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motivate executives to enhance shareholder value with
compensation plans that are tied to Company performance; and
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target executive compensation at a level to ensure our ability
to attract and retain superior executives.
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6
We have not entered into any employment or similar agreements
with any named executive officer. Thus, the Compensation
Committee has determined that it is important to maintain a
level of compensation in the
mid-to-high
range of that paid by comparable companies in order to ensure
that we are able to employ and retain superior executive
officers. At the same time, it is important for us to be able to
ensure that our shareholders receive a rate of return at least
equal to what we have identified as a risk-free rate of return.
It is expected that total compensation will vary annually based
on Company and individual performance and individual
contributions to Reliance and its performance.
To motivate executive officers to enhance shareholder value, we
maintain a
pay-for-performance
compensation structure that rewards our executive officers for
individual performance, Company performance, level of
responsibility and length of time with the Company. This
structure includes both short-term and long-term benefits and
both cash and equity components and encourages the executive
officers to maintain a shareholding position in the Company to
align the executive officers interests as much as possible
with our shareholders. Other than any appreciation in the value
of our Common Stock available to executive officers through our
stock option and restricted stock plans and the SERP benefits
available to our executive officers upon retirement, we have no
deferred compensation plans for our executive officers.
Stock options
and/or
restricted stock may be granted from time to time as long-term
benefits to encourage the executive officers to continue in
their positions and to better align the executive officers
interests with those of the Companys shareholders. To
date, we have issued only non-qualified stock options under our
stock option and restricted stock plans and prior similar plans
with exercise prices at least equal to the closing market price
of our Common Stock at the date of grant because the Board of
Directors has determined that grants of such options are more
beneficial to the Company and its shareholders than grants of
incentive stock options or restricted stock. The Compensation
Committee has determined that short-term benefits, such as the
base salary and the incentive bonus should be payable primarily
in cash and that executive officers should be encouraged to use
all or a portion of the incentive bonus to exercise stock
options. Long-term benefits, on the other hand, are payable
primarily in non-cash compensation, such as the non-qualified
stock options, so that executive officers share the same risk as
shareholders of any change in the market value of our Common
Stock and also would have additional incentive to seek to
enhance shareholder value. In February 2007 the Compensation
Committee and the non-management directors on the Board of
Directors approved certain changes in policy and now require the
executive officers to maintain an ownership position in our
Common Stock at least equal to five times base salary for our
principal executive officer, three times base salary for our
principal financial officer, and from two and a quarter times to
four times base salary for the other executive officers. The
executive officers were given a five-year period in which to
reach these ownership levels, but all of the executive officers
are in compliance with the stock ownership requirements.
The Company does not plan to time nor has it timed its release
of material nonpublic information for the purpose of affecting
the value of executive compensation. In fact, the Company has
delayed granting options to a time when it is not in possession
of material nonpublic information. Historically, the
Compensation Committee has recommended grants of stock options
for executive officers at such times as it believed appropriate
to ensure that each of the executive officers has a reasonable
amount of unexercised stock options. Beginning in 2007, the
Company intends to grant stock options or restricted stock
annually after the market has had an opportunity to react to the
Companys release of its financial results for the prior
year. Our Company maintains internal controls to prevent
backdating or repricing of stock options.
The Compensation Committee has discretion to determine the
percent of increase in base salary, the percent of base salary
to be paid as a bonus and the allocation of compensation among
the various elements, based on the terms of the plans, the cost
to the Company, the performance of the Companys Common
Stock, the Companys performance and the individual
officers performance during the prior fiscal year. Among
other things, the Compensation Committee considers the
individuals contributions to the growth of the Company
(whether organic or by acquisition), the attainment of strategic
objectives (whether the objectives relate to the Companys
product, geographic or customer diversification, expense
control, increasing inventory turn rates, increasing gross
profit margins, increasing pre-tax income or other objectives
determined by the Compensation Committee or the Board of
Directors from time to time) and the management of Company
assets or personnel. During 2003, for example, when the metal
service center industry was experiencing low prices and low
demand across most, if not all, of its products
7
and regions because of the economic recession, the
Companys executive officers received no increase in their
base salary.
Elements
Compensation of executive officers is structured in the same
manner and contains the same basic elements as for all of senior
management, that is, base salary, an annual incentive bonus, and
long-term compensation in the form of stock options or
restricted stock. The executive officers are also eligible to
receive benefits under a Supplemental Executive Retirement Plan
(SERP), which provides post-retirement benefits to
the executive officers, among others. We provide our executive
officers an opportunity to participate in our 401(k) plan and
health and medical benefits, life and disability insurance, and
ESOP benefits on the same basis as these benefits are generally
available to all eligible employees. (Since our Company is
decentralized, we do not have master plans for each of these
benefits that apply to employees Company-wide. Certain of our
plans, such as the ESOP, are available only to employees of
Reliance Steel & Aluminum Co. and RSAC Management Corp.
Other plans are available only to employees of certain
subsidiaries and not corporate officers.) In lieu of either
providing a car or reimbursing certain personnel for auto
travel, certain members of senior management, including the
executive officers, are paid a car allowance monthly.
Base
Salary and Incentive Bonus
Generally, the Compensation Committee sets the compensation for
our executive officers in the
mid-to-high
range for comparable companies. The cash compensation consists
of a base salary and an annual performance-based incentive
bonus. The base salary is competitive and compensates the
executive officers for their level of responsibility, length of
time with the Company and performance of their duties. Over the
past five years, the incentive bonus under our Key-Man Incentive
Plan has ranged from 100% to 300% of the executive
officers base salary to compensate the executive officer
for the performance of the Company and the executive
officers individual contributions to the Companys
performance each fiscal year. The Compensation Committee applies
the same standards to our chief executive officer as to other
officers of our Company, based on the belief that compensation
should be directly tied to performance and based on both
short-term and long-term measurements. The incentive bonus may
be paid 100% in cash or 75% in cash and 25% in our Common Stock,
which is restricted for two years, depending on the annual
election of the corporate officers.
We have maintained a Key-Man Incentive Plan for our division
managers and corporate officers since 1965, with subsequent
amendments. An incentive bonus pool is calculated to equal 20%
of the amount by which our net income for that year exceeds the
rate of return on a one-year Treasury bill (as supplied by the
Federal Reserve Board) multiplied by our net worth at the
beginning of the year, as such may be adjusted by the
Compensation Committee from time to time. For instance, in 2006
the Compensation Committee adjusted our beginning net worth
because of the issuance of shares of our Common Stock in
connection with the acquisition of Earle M. Jorgensen Company
(EMJ). No awards are made unless our net income for
the year exceeds the average rate of return on a one-year
Treasury bill, which is considered as a risk-free rate of
return. That pool is then adjusted by additional calculations,
including the accrual of the calculated incentives. The
Compensation Committee establishes the maximum amounts payable
to individuals, resulting in only a portion of the bonus pool
being paid out as bonuses. Our corporate officers and certain
division managers are eligible to participate in the pool.
The Compensation Committee considers both objective and
subjective criteria to determine what portion of the bonus pool
available under the Key-Man Incentive Plan to allocate among
eligible personnel. The Compensation Committee reviews such
factors at least annually together with the individuals
respective contributions to the operational profitability of our
Company. Among the objective factors considered during 2006 was
the rate of return on the Companys beginning equity. The
maximum incentive bonus payable to division managers under the
Key-Man Incentive Plan is 40% of base salary. The maximum
incentive bonus for our corporate officers may vary but for 2006
it ranged from 50% to 300% of base salary. The maximum rate for
the executive officers was 300%.
8
Stock
Option and Restricted Stock Plan
We have adopted, and the shareholders have approved, the Amended
and Restated Stock Option and Restricted Stock Plan (the
Stock Plan). With respect to long-term incentives
that may be granted, the Compensation Committee has its scope
and authority defined for it by the Stock Plan that it
administers. The Compensation Committee has complete authority
to interpret the Plan and make all decisions with respect to how
it functions. The Compensation Committee recommends to whom and
in what number, and with what terms and conditions, options
should be granted but the Board must confirm the issuance of the
options. Under the Stock Plan, the Compensation Committee may
recommend to the Board of Directors the grant of incentive stock
options, non-qualified stock options or restricted stock. Thus
far, we have not issued any incentive stock options or
restricted stock under the Stock Plan. We have, however, granted
non-qualified stock options. All awards to executive officers
are approved by the independent, non-employee directors of the
Company. All other awards under the Stock Plan are approved by
the Board as a whole based on the Compensation Committees
recommendations as to whom and in what number and with what
terms and conditions options (or restricted stock) should be
granted. The Compensation Committee considers the
recommendations of senior management with respect to the awards.
In making its recommendations to the Board, the Compensation
Committee considers the position of the intended optionee, his
or her importance to our activities, the number of options
already granted to that individual and the option price or
prices at which those earlier granted options are exercisable,
the total number of options to be recommended for granting and
the relative number of such recommended option grants among the
various individuals then under consideration for option grants,
as well as related stock option expense as a percentage of
pre-tax income. The Compensation Committee has determined that
no more than 20% of the total options granted should be granted
to senior management.
The Company has historically granted non-qualified stock options
to its employees, although the Stock Plan allows the Company to
grant incentive stock options. With non-qualified stock options,
the employee, in this case the executive officer, pays the tax
due as a result of the exercise of the option at a price higher
than the exercise price, and the Company receives a
corresponding tax deduction. The Board of Directors has
determined that it is more beneficial to the Company and to its
shareholders to have the employees pay this tax and to have the
Company receive a corresponding tax deduction that may not be
available with incentive stock options. As part of our
acquisition of EMJ, the Company assumed EMJs incentive
stock option plan (EMJ Plan) pursuant to which
certain incentive stock options had been granted to key
employees of EMJ prior the acquisition. The outstanding EMJ
options were converted to options to acquire shares of Reliance
Common Stock.
Under the terms of the Companys Stock Plan the exercise
price of the stock option must be at least equal to the fair
market value of the underlying stock. The fair market value is
defined, for purposes of the Stock Plan as the value at least
equal to the closing price of Reliance Common Stock on the New
York Stock Exchange Composite Index on the business day
immediately prior to the grant date.
In March 2007 the Compensation Committee determined to extend
the term of stock option grants to seven years, instead of the
five years that it had previously been, but the vesting of
options continue to become exercisable at the rate of
25% per year commencing one year from the date of grant.
As the Company hires new executives or acquires new subsidiaries
the officers of the subsidiaries or the new executive officers
are informed that stock options may be available to them on a
similar basis as to the other officers, subject to the approval
of the Compensation Committee and the Board of Directors. There
has been no special grant of stock options for new officers or
new subsidiary officers.
SERP
In 1996, Reliance adopted a Supplemental Executive Retirement
Plan (SERP), which provides post-retirement benefits
to our executive officers and certain other key employees. Under
the SERP, benefit payments equal 50% of the average of the
participants highest five years of the last ten years of
total cash compensation, less benefits from other retirement
plans that we sponsor, including the 401(k) Plan and ESOP, and
social security benefits received. The SERP was amended in 1999
to provide for a pre-retirement death benefit.
9
Other
Benefits
Our 401(k) Plan allows all eligible employees, including
executive officers, who have been employed a minimum of three
months to defer a portion of their compensation and provides a
matching contribution of up to 3% of their base salaries,
subject to certain IRS limitations. All executive officers
participate in this 401(k) Plan, but certain of our subsidiaries
have other plans for which our executive officers are not
eligible and which our Compensation Committee does not
administer. We have maintained an Employee Stock Ownership Plan
(ESOP) since 1974, which was approved by the IRS as
a qualified plan. All non-union employees of Reliance
Steel & Aluminum Co. and RSAC Management Corp. (but not
other subsidiaries), including executive officers, are eligible
to participate in the ESOP as of January 1 after one and
one-half years of service. An employee who is eligible to
participate in the ESOP is fully vested in the shares of our
Common Stock allocated to
his/her ESOP
account. Allocation is based on the participants
compensation each year, including bonuses, as compared to the
total compensation of all participants, subject to the maximum
amounts established by the IRS. The Company also pays 100% of
the healthcare insurance premiums for the executive officers and
his/her
dependents, as we do for all eligible employees of Reliance
Steel & Aluminum Co. and RSAC Management Corp., and the
Company provides parking for all employees.
In addition to the compensation described above, each of the
executive officers is also entitled to membership in a country
club or other club to be used for purposes of entertaining
customers, suppliers or other persons with a business
relationship with the Company, and our chief executive officer
is provided membership in two clubs. On occasion these club
memberships may be used for personal use, but the executive
officers pay for all such personal use. We believe that the
total value of such memberships not used for business purposes
is less than $10,000 per year for each officer.
Director
Compensation
The Nominating and Governance Committee engaged an outside
consultant to assist it in reviewing director compensation and
recommended to the Board compensation levels that the Nominating
and Governance Committee believes to be commensurate with other
comparable public companies. Directors are paid an annual
retainer, payable quarterly, and fees for attending director or
committee meetings or for chairing the meetings or a committee
of the Board. Under the Amended and Restated Directors Stock
Option Plan, which has been approved by the shareholders,
non-employee directors are entitled to receive non-qualified
options to acquire our Common Stock in accordance with that
plan, including an automatic grant of 6,000 shares on the
date of each Annual Meeting of Shareholders with an exercise
price not less than the closing price of our Common Stock on the
New York Stock Exchange Composite Index on the grant date. In
February 2007, the Board of Directors adopted minimum
requirements for directors to own the Companys Common
Stock. Directors are required to own shares of the
Companys Common Stock having a market value equal to at
least five times the annual cash retainer received by directors,
and directors have five years in which to acquire and begin
maintaining that amount of the Companys Common Stock.
Certain
Federal Income Tax Consequences
The following summarizes certain Federal income tax consequences
relating to the Companys Stock Plan. The summary is based
upon the laws and regulations in effect as of the date of this
proxy statement and does not purport to be a complete statement
of the law in this area. Furthermore, the discussion does not
address the tax consequences of the receipt or exercise of
awards under foreign, state, or local tax laws, and such tax
laws may not correspond to the Federal income tax treatment
described below. The exact Federal income tax treatment of
transactions will vary depending upon the specific facts and
circumstances involved and the participants are advised to
consult their personal tax advisors with regard to all
consequences arising from the grant or exercise of awards and
disposition of any acquired shares.
Stock
Options
The grant of a stock option under the Stock Plan will create no
income tax consequences either to the Company or to the
recipient. An individual who is granted a non-qualified stock
option will generally recognize ordinary compensation income at
the time of exercise in an amount equal to the excess of the
fair market value of the common stock at such time over the
exercise price. We will generally be entitled to a deduction in
the same amount
10
as and in the year in which the participant recognizes ordinary
income. When the participant subsequently disposes of the shares
of common stock received with respect to such stock option, the
participant will recognize a capital gain or loss (long-term or
short-term, depending on the holding period) to the extent the
amount realized from the sale differs from the tax basis. (The
tax basis will equal the fair market value of the common stock
on the exercise date.)
In general, a participant will recognize no income or gain as a
result of the exercise of an incentive stock option, except that
the alternative minimum tax may apply. Except as described
below, a participant will recognize a long-term capital gain or
loss on the disposition of the common stock acquired pursuant to
the exercise of an incentive stock option, and we will not be
allowed a deduction. If the participant fails to hold the shares
of common stock acquired pursuant to an exercise of an incentive
stock option for at least two years from the grant date and one
year from the exercise date, then the participant will recognize
ordinary compensation income at the time of the disposition
equal to the lesser of the gain realized on the disposition and
the excess of the fair market value of the shares of common
stock on the exercise date over the exercise price. We will
generally be entitled to a deduction in the same amount and at
the same time as the participant recognizes ordinary income. Any
additional gain realized by the participant over the fair market
value at the time of exercise will be treated as a capital gain.
Restricted
Stock
Generally, a participant will not recognize income and we will
not be entitled to a deduction at the time an award of
restricted stock is made under the Stock Plan, unless the
participant makes the election described below. A participant
who has not made such an election will recognize ordinary income
at the time the restrictions on the stock lapse in an amount
equal to the fair market value of the restricted stock at that
time. We will generally be entitled to a corresponding deduction
in the same amount and at the same time as a participant
recognizes income. Any otherwise taxable disposition of the
restricted stock after the time the restrictions lapse will
result in a capital gain or loss to the extent the amount
realized from the sale differs from the tax basis. (The tax
basis would be the fair market value of the common stock on the
date the restrictions lapse.) Dividends paid in cash and
received by a participant who has not made a Section 83(b)
election prior to the time the restrictions lapse will
constitute ordinary income to the participant in the year paid,
and we will generally be entitled to a corresponding deduction
for such dividends. Any dividends paid in stock will be treated
as an award of additional restricted stock subject to the tax
treatment described in this section.
A participant may, within thirty (30) days after the date
of the award of restricted stock, make an election under
Section 83(b) of the Internal Revenue Code to recognize
ordinary income as of the date of the award in an amount equal
to the fair market value of such restricted stock on the date of
the award less the amount, if any, the participant paid for such
restricted stock. If the participant makes such an election,
then we will generally be entitled to a corresponding deduction
in the same amount and at the same time as the participant
recognizes income. If the participant makes the election, then
any cash dividends the participant receives with respect to the
restricted stock will be treated as dividend income to the
participant in the year of payment and will not be deductible by
us. The otherwise taxable disposition of the restricted stock
(other than by forfeiture) will result in a capital gain or
loss. If the participant who has made an election subsequently
forfeits the restricted stock, then the participant will not be
entitled to claim a credit for the tax previously paid. In
addition, we would then be required to include as ordinary
income the amount of any deduction we originally claimed with
respect to the shares.
Limits
on Deductibility of Compensation
Section 162(m) of the Internal Revenue Code limits the
deduction we can take for compensation paid to our Chief
Executive Officer and our four other highest paid officers
(determined as of the end of each year) to $1 million per
year per individual, subject to certain exemptions.
Performance-based compensation that meets the requirements of
Section 162(m) does not have to be included in determining
whether we have exceeded the $1 million limit. Our Stock
Plan is designed and administered so that awards granted to the
covered individuals meet the requirements of Section 162(m)
for performance-based compensation. Our Key-Man Incentive Plan
is also designed to provide performance-based compensation, with
respect to both cash and non-cash awards. To the extent
consistent with the Companys policies, we seek to preserve
the ability to deduct compensation paid to our executive
officers under these plans, but the Compensation Committee may
pay
11
compensation to one or more executive officers that is as a
whole or in part not deductible if the Compensation Committee
determines that it is in the best interests of the Company.
Change
of Control; Deferred Compensation
The Company has not entered into any change of control,
severance or deferred compensation agreements with any executive
officer. At the time that we acquired EMJ, EMJ had certain
existing change of control agreements and deferred compensation
plans. These plans do not affect any executive officer and are
not administered by the Compensation Committee.
Section 409A of the Internal Revenue Code generally
provides that arrangements involving the deferral of
compensation that do not comply in form and operation with
Section 409A or are not exempt from Section 409A are
subject to increased tax, penalties and interest. If a deferred
compensation arrangement does not comply with or is not exempt
from Section 409A, employees may be subject to accelerated
or additional tax, or interest or penalties, with respect to the
compensation. At the time of our acquisition of EMJ, the
existing deferred compensation plans were amended to comply with
Section 409A.
12
COMPENSATION
AND STOCK OPTION COMMITTEE REPORT
The Compensation and Stock Option Committee of the Board of
Directors (the Compensation Committee) is composed
entirely of independent, non-employee directors listed below.
Mr. Slater became a member of the Compensation Committee in
January 2007.
The Compensation Committee has reviewed the Compensation
Discussion and Analysis and has discussed it with management.
Based on the 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,
to the extent appropriate, the Companys Annual Report on
Form 10-K.
This report is submitted on behalf of the members of the
Compensation Committee.
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Joe D. Crider
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Douglas M. Hayes
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Mark V. Kaminski
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Richard J. Slater
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Leslie A. Waite, Chairman
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13
EXECUTIVE
COMPENSATION
The following table summarizes certain information concerning
the compensation that we paid for the fiscal year 2006 to our
Chief Executive Officer, who was our only principal executive
officer during the year, our Executive Vice President and Chief
Financial Officer, who was our only principal financial officer
during the year, and each of the other three most highly
compensated executive officers who were serving in that capacity
at the end of 2006:
Summary
Compensation Tables
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Change in
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Pension
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Value and
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Nonqualified
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Non-Equity
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Deferred
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Incentive Plan
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Compensation
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All Other
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Name and
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Stock
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Option
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Compensation
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Earnings
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Compensation
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Total
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Principal Position
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Year
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Salary ($)
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Bonus
($)(1)
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Awards
($)(2)
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Awards
($)(3)
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($)(4)
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($)(5)
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($)(6)
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($)
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David H. Hannah
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2006
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$
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600,000
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$
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1,800,000
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$
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$
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364,673
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$
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$
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549,929
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$
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19,878
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$
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3,334,480
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Chief Executive Officer
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Gregg J. Mollins
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2006
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$
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460,000
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$
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1,380,000
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$
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$
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285,559
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$
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$
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401,196
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$
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19,878
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$
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2,526,755
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President and Chief Operating
Officer
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Karla R. Lewis
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2006
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$
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330,000
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$
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990,000
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$
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$
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285,559
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$
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$
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116,391
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$
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19,878
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$
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1,741,828
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Executive Vice President and Chief
Financial Officer
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James P. MacBeth
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2006
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$
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300,000
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$
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900,000
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$
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$
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198,840
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$
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$
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541,582
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$
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19,878
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$
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1,960,300
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Senior Vice President, Carbon Steel
Operations
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William K. Sales
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2006
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$
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300,000
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$
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900,000
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$
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$
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198,840
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$
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$
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326,916
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$
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19,878
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$
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1,745,634
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Senior Vice President, Non-Ferrous
Operations
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(1) |
|
The amounts shown were paid under our Key-Man Incentive Plan. |
|
(2) |
|
No restricted stock was awarded to any executive officer in 2006. |
|
(3) |
|
The amounts in this column reflect the dollar amount recognized
for financial statement reporting purposes for the fiscal year
ended December 31, 2006, in accordance with Statement of
Financial Accounting Standards (SFAS)
No. 123(R), Share Based Payment, of awards pursuant
to the Companys stock option plans. This expense is
related to stock option awards made in January 2002, October
2003, and October 2005. No option awards were made in 2006 or
2004. Assumptions used in the calculation of these amounts for
fiscal years ended December 31, 2004, 2005 and 2006 are
included in Note 10 in the Companys Notes to
Consolidated Financial Statements for the fiscal year ended
December 31, 2006, included in the Companys Annual
Report on
Form 10-K.
Assumptions used in the calculation of this amount for the
fiscal years ended December 31, 2002 and 2003, are included
in Note 8 in the Companys Notes to Consolidated
Financial Statements for the fiscal year ended December 31,
2003, included in the Companys Annual Report on
Form 10-K
for that year. |
|
(4) |
|
The Company has no non-equity incentive compensation plan other
than the Key-Man Incentive Plan which is reported as a Bonus. |
|
(5) |
|
The amounts represent the change in the value of the accumulated
benefits payable on retirement under our SERP, determined using
interest rate and mortality assumptions consistent with those
included in Note 11 of the Notes to Consolidated Financial
Statements in the Annual Report on
Form 10-K
filed by the Company for the year ended December 31, 2006. |
|
(6) |
|
The amounts represent allocations to the accounts of each of the
named executive officers of contributions made to our ESOP, the
matching contributions to our 401(k) retirement savings plan and
an annual car allowance of $8,400. |
14
Grants of
Plan Based Awards
The Company has no non-equity or equity incentive plans for its
executive officers other than the Key-Man Incentive Plan and the
Amended and Restated Stock Option and Restricted Stock Plan as
disclosed on the Summary Compensation Table. No options were
granted under the Stock Plan in 2006, and no executive officers
elected payment in Common Stock under the Key-Man Incentive
Plan. The following table sets forth plan-based awards granted
to the executive officers named above during 2006:
|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
Payouts Under
|
|
|
Awards:
|
|
|
Option Awards:
|
|
|
|
|
|
Grant Date
|
|
|
|
Under Non-Equity
|
|
|
Equity Incentive
|
|
|
Number of
|
|
|
Number of
|
|
|
Exercise or
|
|
|
Fair Value
|
|
|
|
Incentive Plan Awards
|
|
|
Plan Awards
|
|
|
Shares of
|
|
|
Securities
|
|
|
Base Price
|
|
|
of Stock
|
|
|
|
Grant
|
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|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Stock or
|
|
|
Underlying
|
|
|
of Option
|
|
|
and Option
|
|
Name
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Units (#)
|
|
|
Options (#)
|
|
|
Awards ($/sh)
|
|
|
Awards ($)
|
|
|
David H. Hannah
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregg J. Mollins
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karla R. Lewis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James P. MacBeth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William K. Sales
|
|
|
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|
|
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|
|
|
|
|
|
|
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|
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|
|
|
|
|
Option
Exercises and Stock Vested
The following table sets forth information for the executive
officers named above with regard to the aggregate stock options
exercised during the year ended December 31, 2006:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Acquired on
|
|
|
Value Realized
|
|
|
Shares Acquired
|
|
|
Value Realized
|
|
Name
|
|
Exercise (#)
|
|
|
on Exercise
($)(1)
|
|
|
on Vesting (#)
|
|
|
on Vesting ($)
|
|
|
David H. Hannah
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
Gregg J. Mollins
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
Karla R. Lewis
|
|
|
50,000
|
|
|
$
|
1,351,050
|
|
|
|
|
|
|
$
|
|
|
James P. MacBeth
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
William K. Sales, Jr.
|
|
|
20,000
|
|
|
$
|
229,100
|
|
|
|
|
|
|
$
|
|
|
|
|
|
(1) |
|
The amounts represent the difference between the exercise price
and fair market value at date of exercise of non-qualified stock
options. |
15
Outstanding
Equity Awards at Fiscal Year-End
The following table sets forth outstanding equity awards held by
the executive officers named above at December 31, 2006,
all of which were granted under the Companys Amended and
Restated Stock Option and Restricted Stock Plan:
|
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|
|
|
|
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|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
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|
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|
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|
|
|
|
|
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|
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|
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|
Equity
|
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|
|
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|
Incentive
|
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|
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|
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|
Equity
|
|
|
Plan Awards:
|
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|
|
|
|
|
Equity
|
|
|
|
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|
|
|
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|
|
|
|
Incentive
|
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|
Market
|
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|
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|
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|
Incentive
|
|
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|
|
|
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|
|
|
|
|
Plan Awards:
|
|
|
or Payout
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Number of
|
|
|
Value of
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
Unearned
|
|
|
Unearned
|
|
|
|
Securities
|
|
|
Securities
|
|
|
of Securities
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Shares or
|
|
|
Shares, Units
|
|
|
Shares,
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Units of
|
|
|
Units of
|
|
|
or Other
|
|
|
Units or
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
Stock That
|
|
|
Stock That
|
|
|
Rights That
|
|
|
Other Rights
|
|
|
|
Options
|
|
|
Options
|
|
|
Unearned
|
|
|
Exercise
|
|
|
Expiration
|
|
|
Have Not
|
|
|
Have Not
|
|
|
Have
|
|
|
That Have
|
|
Name
|
|
(#) Exercisable
|
|
|
(#) Unexercisable
|
|
|
Options (#)
|
|
|
Price ($)
|
|
|
Date
|
|
|
Vested
|
|
|
Vested
|
|
|
Not Vested
|
|
|
Not Vested
|
|
|
David H. Hannah
|
|
|
10,000
|
(1)
|
|
|
|
|
|
|
|
|
|
$
|
12.80
|
|
|
|
1/24/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
15,000
|
|
|
|
|
|
|
$
|
12.54
|
|
|
|
10/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
150,000
|
|
|
|
|
|
|
$
|
24.58
|
|
|
|
10/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregg J. Mollins
|
|
|
10,000
|
(1)
|
|
|
|
|
|
|
|
|
|
$
|
12.80
|
|
|
|
1/24/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
15,000
|
|
|
|
|
|
|
$
|
12.54
|
|
|
|
10/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,500
|
|
|
|
112,500
|
|
|
|
|
|
|
$
|
24.58
|
|
|
|
10/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karla R. Lewis
|
|
|
15,000
|
|
|
|
15,000
|
|
|
|
|
|
|
$
|
12.54
|
|
|
|
10/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,500
|
|
|
|
112,500
|
|
|
|
|
|
|
$
|
24.58
|
|
|
|
10/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James P. MacBeth
|
|
|
10,000
|
(1)
|
|
|
|
|
|
|
|
|
|
$
|
12.80
|
|
|
|
1/24/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,500
|
|
|
|
12,500
|
|
|
|
|
|
|
$
|
12.54
|
|
|
|
10/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
75,000
|
|
|
|
|
|
|
$
|
24.58
|
|
|
|
10/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William K. Sales
|
|
|
37,500
|
|
|
|
12,500
|
|
|
|
|
|
|
$
|
12.54
|
|
|
|
10/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
75,000
|
|
|
|
|
|
|
$
|
24.58
|
|
|
|
10/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
These stock options were exercised prior to the expiration date. |
Stock
Option Plans
In 1994, the Reliance Board of Directors adopted an Incentive
and Non-Qualified Stock Option Plan, which was approved by the
shareholders in May 1994. In May 2001, the shareholders approved
an amendment to the 1994 Plan to increase the number of
authorized shares under the 1994 Plan to allow options to be
granted for a maximum of 5,000,000 shares. As of
December 31, 2006, there were 745,300 options to acquire
shares of Common Stock outstanding under the 1994 Plan. The 1994
Plan provided for granting of stock options that may be either
Incentive Stock Options within the meaning of
Section 422A of the Internal Revenue Code of 1986 (the
Code) or Non-Qualified Stock Options
which do not satisfy the provisions of Section 422A of the
Code. Incentive Stock Options are required to be issued at an
option exercise price per share equal to at least the fair
market value of a share of Common Stock on the date of grant,
except that the exercise price of options granted to any
employee who owns (or, under pertinent Code provisions, is
deemed to own) more than 10% of the outstanding Common Stock
must equal at least 110% of fair market value on the date of
grant. Non-Qualified Stock Options must be issued at an option
exercise price equal to at least fair market value on the date
of grant. The Compensation and Stock Option Committee
established the terms and conditions for the exercise of stock
options, which are set forth in the agreement evidencing the
stock option. Stock options may be exercised with either cash or
shares of our Common Stock or other form of payment authorized
by the Compensation and Stock Option Committee. Stock options
expire five years from the date of the grant. The 1994 Plan
expired by its terms as of December 31, 2003, but the
outstanding options remain exercisable in accordance with their
terms.
In 2004, the Reliance Board of Directors adopted an Incentive
and Non-Qualified Stock Option Plan, which was approved by the
shareholders in May 2004 (the 2004 Plan).
6,000,000 shares of the Companys Common Stock were
reserved for issuance upon exercise of stock options granted
under the 2004 Plan. On May 17, 2006 the 2004 Plan was
amended and restated to allow the Board to extend the term of
subsequently granted stock options to
16
up to 10 years, to increase the number of shares available
for future grants of options or restricted stock from
6,000,000 shares to 10,000,000 shares, and to provide
for the grant of restricted shares of the Companys common
stock, in addition to or in lieu of stock options. (The 2004
Plan, as amended and restated, may be referred to as the
Stock Plan.) There are 8,129,000 shares
available for issuance with 1,871,000 options granted and
outstanding under the Stock Plan as of December 31, 2006.
The Stock Plan provides for granting of stock options that may
be either Incentive Stock Options within the meaning
of Section 422A of the Code or Non-Qualified Stock
Options which do not satisfy the provisions of
Section 422A of the Code. Incentive Stock Options are
required to be issued at an option exercise price per share
equal to at least the fair market value of a share of Common
Stock on the date of grant, except that the exercise price of
options granted to any employee who owns (or, under pertinent
Code provisions, is deemed to own) more than 10% of the
outstanding Common Stock must equal at least 110% of fair market
value on the date of grant. Non-Qualified Stock Options must be
issued at an option exercise price equal to at least fair market
value on the date of grant. The Compensation and Stock Option
Committee establishes the terms and conditions for the exercise
of stock options, which are set forth in the instrument
evidencing the stock option. Stock options may be exercised with
cash or such other form of payment as may be authorized by the
Compensation and Stock Option Committee. Stock options may not
be granted more than ten years from the date of the Stock Plan
and expire five years from the date of the grant for options
granted prior to December 31, 2006 and up to ten years for
options granted thereafter, as determined appropriate by the
Compensation and Stock Option Committee. All options granted and
outstanding become exercisable at a rate of 25% per year,
commencing one year after the date of grant until fully vested
and exercisable. The Stock Plan expires by its terms as of
December 31, 2013.
In March 2007 the Compensation Committee recommended to the
Board of Directors and independent directors on the Board
approved without revision the grant of non-qualified stock
options to acquire 1,026,500 shares of the Companys
Common Stock at an exercise price of $44.86 with a term of seven
years, but becoming exercisable at the rate of 25% per year
beginning on the first anniversary of the grant. The executive
officers received 180,000 of these stock options.
In connection with the EMJ acquisition, the Company assumed the
EMJ incentive stock option plan (EMJ Plan) and
converted the outstanding EMJ options to options to acquire
287,886 shares of Reliance Common Stock on the same terms
and conditions as were applicable to such options under the EMJ
Plan, with adjusted exercise prices and numbers of shares to
reflect the difference in the value of the Reliance stock
compared with the EMJ stock. The exchange of the options was
accounted for similar to a modification in accordance with
SFAS 123(R). The value of the vested options assumed has
been included as part of the EMJ purchase price and the value of
the unvested options is being recognized to expense over the
remaining vesting periods of the respective options. Options
granted under the EMJ Plan have ten-year terms and vest at the
rate of 25% per year, commencing one year from the date of
grant. As of December 31, 2006, there were 22,097 options
available for issuance with 241,862 options granted and
outstanding under the EMJ Plan.
Incentive
Plan
We have maintained a Key-Man Incentive Plan for our division
managers and corporate officers since 1965, with subsequent
amendments. Most recently, we modified the Key-Man Incentive
Plan in January 1999 to more accurately reflect the conditions
of Reliance and the industry, and to allocate the incentive
bonus pool in accordance with the contributions of the eligible
personnel. The initial incentive bonus pool is calculated to
equal 20% of the amount by which our net income for that year
exceeds the rate of return on a one-year Treasury bill
multiplied by our net worth at the beginning of the year, as it
may be adjusted for certain significant events, such as the
issuance of our Common Stock in connection with the EMJ
acquisition. That pool is then adjusted by additional
calculations, including the accrual of the calculated
incentives. Our corporate officers and certain division managers
are eligible to participate in the pool and our division
managers are ranked according to certain criteria and awarded
points based on their rankings. Participating division managers
are ranked according to four criteria (size of the division,
measured in sales dollars; profitability of the division,
measured in pretax income dollars; pretax return on sales; and
pretax return on division assets) and are awarded points based
on their rankings. The incentive compensation bonus is payable
75% in cash and 25% in our Common Stock, except that corporate
officers have the option of having this bonus paid 100% in cash.
The Company has reserved 168,994 shares of Common Stock for
issuance as
17
restricted stock under this Plan as of December 31, 2006.
Bonuses are generally paid and the restricted stock issued in or
about March of each year after the Companys financial
results for the prior fiscal year have been announced. Officers
of the subsidiaries are not currently eligible to participate
under the Key-Man Incentive Plan.
We also maintain a bonus plan for division managers that allows
them to participate in pretax income from their respective
divisions if that income exceeds an amount equal to a 15% return
on division assets. This bonus plan has been in effect for many
years. In addition, most divisions have informal incentive
compensation arrangements for other employees, which are
proposed by division managers and approved from time to time by
executive officers of Reliance. Our subsidiaries, other than
RSAC Management Corp., have separate incentive bonus plans
structured in a similar manner to provide bonuses to certain of
the officers and managers of these subsidiaries, based upon the
earnings of the respective subsidiary. These subsidiary bonus
plans are also reviewed periodically by the executive officers
of Reliance and the subsidiary board of directors. Executive
officers who serve as officers of subsidiaries are not eligible
to participate in any subsidiarys bonus plan and receive
no other compensation from any subsidiary.
401(k)
Retirement Savings Plan
Various 401(k) and profit sharing plans are maintained by
Reliance and its subsidiaries. Effective in 1998, the Reliance
Steel & Aluminum Co. Master 401(k) Plan (the
Master Plan) was established, which combined several
of the various 401(k) and profit sharing plans of Reliance and
its subsidiaries into one plan. Salaried and certain hourly
employees of Reliance and its participating subsidiaries are
covered under the Master Plan. The Master Plan will continue to
allow each subsidiarys Board to determine independently
the annual matching percentage and maximum compensation limits
or annual profit sharing contribution. Eligibility occurs after
three months of service, and the Reliance contribution vests at
25% per year, commencing one year after the employee enters
the Master Plan. Other 401(k) and profit sharing plans and
defined benefit pension plans exist as certain subsidiaries have
not yet combined their plans into the Master Plan as of
December 31, 2006. One of these defined benefit pension
plans was terminated effective December 31, 2005 and
benefits were distributed in the 2006 first quarter.
Reliance also participates in various multi-employer pension
plans covering certain employees not covered under our benefit
plans pursuant to agreements between Reliance and collective
bargaining units who are members of such plans.
Supplemental
Executive Retirement Plan
In 1996, Reliance adopted a Supplemental Executive Retirement
Plan (SERP), which provides post-retirement benefits
to key officers of Reliance. Under the SERP, benefit payments
equal 50% of the average of the participants highest five
years of the last ten years of total cash compensation, less
benefits from other retirement plans that we sponsor, including
the 401(k) Plan and ESOP, and social security benefits. The SERP
was amended in 1999 to provide for a pre-retirement death
benefit. At December 31, 2006, separate SERPs existed
for three of the companies that we acquired, which continue to
provide post- retirement benefits to certain key employees of
each company who were eligible to participate in the plans at
the time we acquired the companies.
The estimated present value of accumulated benefits payable by
the SERP, net of amounts received under other retirement plans
that we sponsor, at the normal retirement age of 65 for each of
the executive officers named above, determined using interest
rate and mortality assumptions consistent with those included in
Note 11 in the Notes to Consolidated Financial Statements
included in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2006, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Payments
|
|
|
|
|
|
Years Credited
|
|
|
Present Value
|
|
|
During the
|
|
|
|
|
|
Service
|
|
|
of Accumulated
|
|
|
Last Fiscal
|
|
Name
|
|
Plan Name
|
|
(#)
|
|
|
Benefit ($)
|
|
|
Year ($)
|
|
|
David H. Hannah
|
|
Supplemental Executive Retirement
Plan
|
|
|
26
|
|
|
$
|
1,841,221
|
|
|
$
|
-0-
|
|
Gregg J. Mollins
|
|
Supplemental Executive Retirement
Plan
|
|
|
20
|
|
|
$
|
1,467,919
|
|
|
$
|
-0-
|
|
Karla R. Lewis
|
|
Supplemental Executive Retirement
Plan
|
|
|
15
|
|
|
$
|
227,865
|
|
|
$
|
-0-
|
|
James P. MacBeth
|
|
Supplemental Executive Retirement
Plan
|
|
|
25
|
|
|
$
|
1,559,150
|
|
|
$
|
-0-
|
|
William K. Sales, Jr.
|
|
Supplemental Executive Retirement
Plan
|
|
|
9
|
|
|
$
|
994,522
|
|
|
$
|
-0-
|
|
18
Employee
Stock Ownership Plan
In 1974, Reliance adopted an Employee Stock Ownership Plan
(ESOP) that was approved by the Internal Revenue
Service as a qualified plan and that allows eligible employees
to receive our Common Stock. All non-union employees, including
executive officers, are eligible to participate in the ESOP as
of January 1 after one and one-half years of service with
Reliance Steel & Aluminum Co. or RSAC Management Corp.
An employee who is eligible to participate is fully vested in
the shares of our Common Stock allocated to
his/her ESOP
account. Allocation is based on the participants
compensation each year, including bonuses, as compared to the
total compensation of all participants, subject to the maximum
amounts established by the Internal Revenue Service. Dividends
on the Common Stock are passed through and paid directly to the
participants. Each year, Reliance contributes to the ESOP an
amount determined by the Board of Directors, but no less than
that amount necessary to cover the obligations of the ESOP,
including any trustees fees. Our cash contribution was
$1,000,000 in 2006. The cash contribution is used to purchase
shares of our Common Stock on the open market. The shares are
retained by the ESOP until a participant retires or otherwise
terminates
his/her
employment with Reliance. Employees of the subsidiaries, except
for RSAC Management Corp., are not eligible to participate under
our ESOP.
Equity
Compensation Table
The following table provides information as of December 31,
2006 regarding shares outstanding and available for issuance
under our Incentive and Non-Qualified Stock Option Plan, our
Amended and Restated Stock Option and Restricted Stock Plan, our
Amended and Restated Director Stock Option Plan and the EMJ Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
to be Issued upon
|
|
|
Weighted Average
|
|
|
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Number of Securities
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
Remaining Available for
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
Future Issuance
|
|
|
Equity compensation plans approved
by security holders
|
|
|
3,007,412
|
|
|
$
|
21.54
|
|
|
|
8,486,847
|
|
Equity compensation plans not
approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,007,412
|
|
|
$
|
21.54
|
|
|
|
8,486,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTOR
COMPENSATION
Effective January 1, 2005 and during 2006, upon
recommendation of the Nominating and Governance Committee,
members of the Board of Directors who were not employees of the
Company received an annual retainer of $30,000, paid quarterly,
and a fee of $2,000 for each meeting attended. The Chair of the
Audit Committee received an additional fee of $8,000 each year,
paid quarterly, and the Chairs of the Compensation and Stock
Option Committee and the Nominating and Governance Committee
each received $4,000 per year, paid quarterly. All
directors are reimbursed for expenses incurred in connection
with Board or committee meetings.
The Nominating and Governance Committee engaged an outside
consultant to advise the Board on the amount of fees to be paid
to non-management directors. After reviewing the recommendation
of the consultant and the recommendation of the Nominating and
Governance Committee, the Board determined to increase the fees
paid to non-management directors effective January 1, 2007.
Each non-management director is currently paid an annual
retainer of $60,000, paid quarterly, and a fee of $2,500 for
attending each Board or Committee meeting in person and $1,250
for each meeting in which they participate by conference
telephone call. In addition, the Company pays the Audit
Committee Chair an annual retainer of $20,000, the Compensation
and Stock Option Committee Chair an annual retainer of $10,000,
the Nominating and Governance Committee Chair an annual retainer
of $10,000, and a $12,000 annual retainer to the Chairman of the
Board and an $8,000 annual retainer to the Lead Director who
chairs the non-management Board meetings, all of which fees are
paid quarterly.
In May 1998, the shareholders approved the Directors Stock
Option Plan for non-employee directors. There were
600,000 shares of our Common Stock reserved for issuance
under the Directors Plan initially. In February
19
1999, the Directors Plan was amended to authorize the Board of
Directors of Reliance to grant additional options to acquire our
Common Stock to non-employee directors. In May 2004 the
Directors Plan was amended to accelerate the vesting of a
non-employee directors unexpired stock options in the
event that such an individual retires from the Board of
Directors at or after the age of 75, so that any unexpired stock
options granted under the Directors Plan become immediately
vested and exercisable, and the director, if he or she so
desires, must exercise those options within ninety
(90) days after such retirement or the options shall expire
automatically. Options under the Directors Plan are
non-qualified stock options, with an exercise price equal to
fair market value at the date of grant. All options granted
prior to May 2005 expire five years from the date of grant. None
of the stock options becomes exercisable until one year after
the date of the grant, unless specifically approved by the Board
of Directors. In each of the following four years, 25% of the
options become exercisable on a cumulative basis.
In May 2005 the Directors Plan was further amended to provide
for automatic annual grants of options to acquire
6,000 shares of Common Stock to each non-employee director.
These options become 100% exercisable after one year. Once
exercisable, the options remain exercisable until that date
which is ten years after the date of grant. In addition, the
amendment increased the number of shares available for future
grants of options from the 374,000 shares reserved as of
May 2005 to 500,000 shares. As of December 31, 2006
there were 335,750 options available for issuance and 149,250
options granted and outstanding under the Directors Plan.
In February 2007, the Board of Directors adopted minimum
requirements for directors to own the Companys Common
Stock. Directors are required to own shares of the
Companys Common Stock having a market value equal to at
least five times the annual cash retainer received by directors,
and directors have five years in which to acquire and begin
maintaining that amount of the Companys Common Stock.
Director
Summary Compensation Table
The following table sets forth certain information regarding
fees paid and expense for outstanding options under the
Directors Plan during 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
Deferred
|
|
|
All Other
|
|
|
|
|
Name
|
|
Paid in Cash
|
|
|
Awards
|
|
|
Awards(1)
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Total
|
|
|
Joe D. Crider
|
|
$
|
53,600
|
|
|
$
|
|
|
|
$
|
97,271
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
71,124
|
(2)
|
|
$
|
221,995
|
|
Thomas W. Gimbel
|
|
$
|
48,800
|
|
|
$
|
|
|
|
$
|
97,695
|
|
|
$
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
146,495
|
|
Douglas M. Hayes
|
|
$
|
54,800
|
|
|
$
|
|
|
|
$
|
90,581
|
|
|
$
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
145,381
|
|
Franklin R. Johnson
|
|
$
|
62,800
|
|
|
$
|
|
|
|
$
|
84,803
|
|
|
$
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
147,603
|
|
Mark V. Kaminski
|
|
$
|
57,600
|
|
|
$
|
|
|
|
$
|
98,967
|
|
|
$
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
156,567
|
|
Richard J. Slater
|
|
$
|
47,600
|
|
|
$
|
|
|
|
$
|
54,332
|
|
|
$
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
101,932
|
|
Leslie A. Waite
|
|
$
|
58,800
|
|
|
$
|
|
|
|
$
|
90,581
|
|
|
$
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
149,381
|
|
|
|
|
(1) |
|
The amounts in this column reflect the dollar amount recognized
for financial statement reporting purposes for the fiscal year
ended December 31, 2006, in accordance with
SFAS No. 123(R). This expense is related to stock
option awards made in 2002, 2003, 2004, 2005 and 2006.
Assumptions used in the calculation of these amounts for fiscal
years ended December 31, 2004, 2005 and 2006 are included
in Note 10 of the Companys Notes to Consolidated
Financial Statements included in the Companys Annual
Report on
Form 10-K
for the year ended December 31, 2006. Assumptions used in
the calculation of this amount for the fiscal years ended
December 31, 2002 and 2003, are included in Note 8 of
the Companys Notes to Consolidated Financial Statements
included in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2003. |
|
(2) |
|
Mr. Crider was the chief executive officer of the Company
prior to his retirement in January 1999. Mr. Crider is a
participant in the Companys SERP and received these
payments during 2006 as his retirement benefits under the SERP. |
20
SECURITIES
OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of
January 31, 2007, with respect to the beneficial ownership
of our Common Stock by (i) each person known to Reliance
who owns beneficially or of record more than five percent (5%)
of the Common Stock of Reliance, (ii) each director and
each executive officer named in the Summary Compensation Table
and (iii) all directors and executive officers as a group:
|
|
|
|
|
|
|
|
|
|
|
Amount and
|
|
|
|
|
|
|
Nature of
|
|
|
Percentage of
|
|
|
|
Beneficial
|
|
|
Outstanding
|
|
Name and Address of Beneficial
Owner(1)
|
|
Ownership(2)
|
|
|
Shares Owned
|
|
|
Thomas W. Gimbel,
|
|
|
9,092,366
|
(3)
|
|
|
11.99
|
%
|
Trustee of Florence A. Neilan
Trust dated August 1, 2006
|
|
|
|
|
|
|
|
|
2670 Lorain Rd.
|
|
|
|
|
|
|
|
|
San Marino, CA 91108
|
|
|
|
|
|
|
|
|
FMR Corp.
|
|
|
4,477,338
|
(4)
|
|
|
5.90
|
%
|
82 Devonshire Street
|
|
|
|
|
|
|
|
|
Boston, MA 02109
|
|
|
|
|
|
|
|
|
Joe D. Crider
|
|
|
213,500
|
(5)
|
|
|
*
|
|
400 A Mariposa
|
|
|
|
|
|
|
|
|
Sierra Madre, CA 91024
|
|
|
|
|
|
|
|
|
David H. Hannah
|
|
|
310,576
|
(6)
|
|
|
*
|
|
Douglas M. Hayes
|
|
|
29,750
|
(7)
|
|
|
*
|
|
2545 Roscomare Rd.
|
|
|
|
|
|
|
|
|
Los Angeles, CA 90077
|
|
|
|
|
|
|
|
|
Franklin R. Johnson
|
|
|
11,000
|
(8)
|
|
|
*
|
|
350 South Grand Avenue,
|
|
|
|
|
|
|
|
|
Suite 4800
|
|
|
|
|
|
|
|
|
Los Angeles, CA 90071
|
|
|
|
|
|
|
|
|
Mark V. Kaminski
|
|
|
19,560
|
(9)
|
|
|
*
|
|
3521 Winterberry Circle
|
|
|
|
|
|
|
|
|
Louisville, KY 40207
|
|
|
|
|
|
|
|
|
Gregg J. Mollins
|
|
|
203,142
|
(10)
|
|
|
*
|
|
Richard J. Slater
|
|
|
250
|
|
|
|
*
|
|
1235 Hillcrest Avenue
|
|
|
|
|
|
|
|
|
Pasadena, CA 91106
|
|
|
|
|
|
|
|
|
Leslie A. Waite
|
|
|
136,062
|
(11)
|
|
|
*
|
|
55 South Lake Street,
|
|
|
|
|
|
|
|
|
Suite 750
|
|
|
|
|
|
|
|
|
Pasadena, CA 91101
|
|
|
|
|
|
|
|
|
Karla R. Lewis
|
|
|
122,436
|
(12)
|
|
|
*
|
|
James P. MacBeth
|
|
|
120,659
|
(13)
|
|
|
*
|
|
William K. Sales, Jr.
|
|
|
86,258
|
(14)
|
|
|
*
|
|
All directors and executive
officers as a group (12 persons)
|
|
|
10,345,559
|
(15)
|
|
|
13.57
|
%
|
|
|
|
* |
|
Less than 1%. |
|
(1) |
|
Unless otherwise indicated, the address of each beneficial owner
is 350 South Grand Avenue, Suite 5100, Los Angeles,
California 90071. |
|
(2) |
|
Reliance has been advised that the named shareholders have the
sole power to vote and to dispose of the shares set forth after
their names, except as noted. |
|
(3) |
|
A Schedule 13D was filed in October 2006 on behalf of
Thomas W. Gimbel, Trustee of the Florence A. Neilan Trust dated
August 1, 2006. Of the 9,092,366 shares reported,
(a) 8,396,180 shares are held by Thomas W. Gimbel as
Trustee of the Florence A. Neilan Trust dated August 1,
2006, (b) 657,736 shares are owned by |
21
|
|
|
|
|
Thomas W. Gimbel, (c) 21,200 shares are held by Thomas
W. Gimbel as Trustee of trusts for the benefit of
Mr. Gimbels minor children. Mr. Gimbel disclaims
beneficial ownership of the shares held as Trustee of the
Florence A. Neilan Trust dated August 1, 2006 and the
21,200 shares held as Trustee of trusts for the benefit of
Mr. Gimbels minor children. The Florence A. Neilan
Trust is revocable by Florence A. Neilan, who retains shared
power to vote or dispose of the 8,396,180 shares held in
the Trust. Includes 17,250 shares issuable upon the
exercise of options held by Mr. Gimbel with exercise prices
of $15.62 to $18.31 per share. |
|
(4) |
|
A Schedule 13G was filed in February 2007 on behalf of FMR
Corp. stating that Fidelity Management & Research
Company (Fidelity), a wholly-owned subsidiary of FMR
Corp. and a registered investment adviser, acts as investment
adviser to various investment companies and has sole power to
dispose of 4,477,138 shares; that Strategic Advisers, Inc.,
a wholly-owned subsidiary of FMR Corp. and a registered
investment adviser beneficially owns 200 shares as a result
of acting as investment adviser to various individuals; and that
each of Edward C. Johnson 3d and FMR Corp., through its control
of Fidelity, also has sole power to dispose of the shares. |
|
(5) |
|
Includes 13,500 shares issuable upon the exercise of
options held by Mr. Crider with exercise prices of $15.41
to $18.31 per share. All shares are held by Mr. Crider
as a Co-Trustee of the Crider Family Trust with his wife. |
|
(6) |
|
Includes 80,000 shares issuable upon the exercise of
options held by Mr. Hannah, with exercise prices of $12.54
to $24.58 per share. All of the shares are owned jointly
with Mr. Hannahs wife. Excludes 29,002 shares
with respect to which Mr. Hannah has a vested right and
shared voting power pursuant to our Employee Stock Ownership
Plan (ESOP). |
|
(7) |
|
Includes 17,250 shares issuable upon the exercise of
options held by Mr. Hayes, with exercise prices of $8.56 to
$18.31 per share. |
|
(8) |
|
Includes 6,000 shares issuable upon the exercise of options
held by Mr. Johnson, with an exercise price of
$18.31 per share. |
|
(9) |
|
Includes 9,750 shares issuable upon the exercise of options
held by Mr. Kaminski with exercise prices of $17.16 to
$18.31 per share. |
|
(10) |
|
Includes 67,500 shares issuable upon the exercise of
options held by Mr. Mollins with exercise prices of $12.54
to $24.58 per share. All of the shares are owned jointly
with Mr. Mollins wife. Excludes 11,632 shares
with respect to which Mr. Mollins has a vested right and
shared voting power pursuant to our ESOP. |
|
(11) |
|
Includes 17,250 shares issuable upon the exercise of
options held by Mr. Waite, with exercise prices of $8.56 to
$18.31 per share. |
|
(12) |
|
Includes 52,500 shares issuable upon the exercise of
options held by Mrs. Lewis, with exercise prices of $12.54
to $24.58 per share. Excludes 4,738 shares with
respect to which Mrs. Lewis has a vested right and shared
voting power pursuant to our ESOP. |
|
(13) |
|
Includes 62,500 shares issuable upon the exercise of
options held by Mr. MacBeth, with exercise prices of $12.54
to $24.58 per share. Excludes 10,650 shares with
respect to which Mr. MacBeth has a vested right and shared
voting power pursuant to our ESOP. |
|
(14) |
|
Includes 62,500 shares issuable upon the exercise of
options held by Mr. Sales, with exercise prices of $12.54
to $24.58 per share. Excludes 1,716 shares with
respect to which Mr. Sales has a vested right and shared
voting power pursuant to our ESOP. |
|
(15) |
|
See notes 3 and 5 through 14. |
Code
of Ethics
Reliance has adopted a Code of Conduct, which includes a code of
ethics, that applies to all executive officers and senior
management, including the Chief Executive Officer and the
Executive Vice President and Chief Financial Officer. Reliance
has also adopted a Director Code of Conduct that applies to all
directors, whether management or non-management, independent or
not. These Codes of Conduct are posted on our website at
www.rsac.com or a copy will be provided to you at
no charge if you request one in writing to the attention of the
Secretary of the Company. We have also established a
confidential hotline to allow persons to report, without fear of
22
retaliation, any inappropriate acts or omissions relating to our
financial statements and accounting policies and practices.
Board of
Directors
Corporate
Governance
The Board of Directors has adopted Principles of Corporate
Governance (Principles) outlining the
responsibilities of the Board. These Principles are posted on
the Companys website at www.rsac.com or are
available in print to any shareholder who requests a copy from
our Corporate Secretary. The Boards primary role is to
represent the interests of the Companys shareholders in
strategic and material decisions of the Company. Among the most
important responsibilities are the determination of corporate
policies, the identification and nomination of qualified
independent directors, the selection and evaluation of the Chief
Executive Officer, the ongoing review of the senior management
team, planning for management succession and the review of
executive compensation. The Board also provides advice and
guidance to management on a broad range of strategic decisions.
The Board of Directors consists of nine directors. Seven of
the nine directors are independent. The Board is divided into
two classes, which are to be as nearly equal in number as
possible; one class is elected each year and serves for a
two-year term. The Board has determined that directors should
retire at the age of 75; provided that those directors serving
on the Board at the time the mandatory retirement age was
determined are not required to retire at that age. Joe D.
Crider, Leslie A. Waite and David H. Hannah are the only
directors who fall within this exception.
Board members are expected to attend each Board meeting and each
meeting of any committee on which such Board member serves and
are encouraged to attend the Companys Annual Meeting of
Shareholders. During 2006, the Board of Directors met nine
times. No person attended fewer than 75% of the aggregate of the
total number of Board meetings and the total number of committee
meetings held by the committees on which he served. All of the
directors attended the 2006 Annual Shareholders Meeting.
Shareholders or other interested parties may communicate with
members of the Board of Directors individually or with the Board
of Directors as a whole by sending a letter to the appropriate
director or the Board in care of the Corporate Secretary of
Reliance at the address shown above.
Committees
The Board of Directors has authorized three standing committees:
the Audit Committee, the Compensation and Stock Option
Committee, and the Nominating and Governance Committee. The
charters for each of these committees, as well as our Principles
of Corporate Governance are available on our website at
www.rsac.com, or are available in print to any
shareholder who requests a copy from our Corporate Secretary.
Each of these committees is composed of only independent
directors and regularly reports to the Board as a whole.
Nominations for the Board of Directors are made by the
Nominating and Governance Committee and considered by the Board
of Directors acting as a whole.
The Audit Committee assists the Board in fulfilling the
Boards oversight responsibilities over Reliances
financial reporting process and systems of internal controls,
monitoring the independence, qualifications and performance of
Reliances independent registered public accounting firm
and maintaining open communication between the Board and the
independent registered public accounting firm, the internal
auditors and financial management. The Audit Committee confers
formally with our independent registered public accounting firm,
as well as with members of our management, our internal auditors
and those employees performing internal accounting functions, to
inquire as to the manner in which the respective
responsibilities of these groups and individuals are being
discharged. The members of the Audit Committee are independent
directors as defined in the listing standards for the New York
Stock Exchange and as defined in the standards established by
the Securities and Exchange Commission. The Board of Directors
has determined that Mr. Johnson, the Chair of the Audit
Committee, is the Audit Committee financial expert. Each of the
other members of the Audit Committee, Messrs. Hayes,
Kaminski and Waite, are financially literate. Mr. Kaminski
became a member of the Audit Committee in January 2007. The
Audit Committee regularly reports to the Board of Directors. The
Audit Committee engages our independent registered public
accounting firm and approves our internal auditors, and the
Board of Directors as a
23
whole ratifies such actions. The Audit Committee reviews and
approves the scope of the audit conducted by the independent
registered public accounting firm of Reliance and pre-approves
all fees for audit and non-audit services provided by the
independent registered public accounting firm, reviews the
accounting principles being applied by Reliance in financial
reporting and the adequacy of internal controls and financial
accounting procedures. In 2006, the Audit Committee met six
times.
The Compensation and Stock Option Committee assists the Board in
determining the compensation of the Companys executive
officers and senior management, recommends to the Board annual
and long-term compensation for the Companys executive
officers and senior management and prepares an annual report on
its activities and determinations for inclusion in the
Companys proxy statement in accordance with applicable
rules and regulations. In addition to its annual review of the
compensation of officers of Reliance, the Compensation and Stock
Option Committee administers our stock option and restricted
stock plans and the Reliance Supplemental Executive Retirement
Plan. The Compensation and Stock Option Committee has the
authority to designate officers, directors or key employees
eligible to participate in the plans, to prescribe the terms of
any award of stock options or restricted stock, to interpret the
plans, and to make all other determinations for administering
the plans. The members of the Compensation and Stock Option
Committee are independent directors as defined in the listing
standards for the New York Stock Exchange. In 2006, the
Compensation and Stock Option Committee met four times.
The primary role of the Nominating and Governance Committee is
to represent the interests of our shareholders with respect to
the evaluation and composition of our Board of Directors and
each of its standing committees. The Nominating and Governance
Committee develops and implements policies and processes
regarding Board and corporate governance matters, assesses Board
membership needs, makes recommendations regarding potential
director candidates to the Board, administers the evaluation of
Board performance, and makes any recommendations to the full
Board as needed to carry out its purpose.
The Nominating and Governance Committee has not adopted a
specific policy regarding the consideration of director
candidates recommended by shareholders, but seeks candidates, by
any method the Committee determines to be appropriate, with
experience, knowledge and expertise to complement the other
directors on the Board. The priorities and emphasis on
particular experience, knowledge or expertise may change from
time to time depending on the Nominating and Governance
Committees assessment of the needs of the Board and the
Company. From time to time, the Nominating and Governance
Committee has engaged a search firm to assist with the
identification of potential candidates. The committee members
review and discuss resumes and other information regarding
proposed candidates and will interview selected candidates
before any nominee is presented to the Board for consideration.
The Nominating and Governance Committee has determined that
candidates should hold no more than two board seats with public
companies in addition to serving as a director of Reliance and
must qualify as an independent director as defined in the
listing standards for the New York Stock Exchange.
The members of the Nominating and Governance Committee are
independent directors as defined in the listing standards for
the New York Stock Exchange. The Nominating and Governance
Committee recommended, and the Board adopted, those Corporate
Governance Principles posted on our website. In 2006, the
Nominating and Governance Committee met two times, but conferred
by phone and email as needed.
Executive
Session
Non-management directors meet regularly in executive sessions
without management. Non-management directors are all
those who are not Company officers or employees and include
directors, if any, who are not independent by virtue
of the existence of a material relationship with the Company,
former status or family relationship or for any other reason.
Executive sessions are led by a Lead Director. An
executive session is held in conjunction with each regularly
scheduled quarterly Board meeting and other sessions may be
called by the Lead Director in his own discretion or at the
request of the Board. Mr. Hayes has been designated as the
Lead Director. Since the Board has determined that all of the
non-management directors are independent, these executive
sessions are also meetings of the independent directors.
24
Director
Independence
Other than Messrs. Hannah and Mollins, who are officers and
employees of the Company, the Board has determined that no
director has any material relationship with the Company nor is
any such director affiliated with any entity or person who has a
material relationship with the Company. Mr. Crider is a
former chief executive officer of the Company, but he has been
retired for more than five years. Mr. Johnson is a former
partner of Price Waterhouse, the predecessor to the
Companys former internal auditor, but he has been retired
for more than five years, which was before the Company retained
PricewaterhouseCoopers. The Board has determined that, in light
of the length of time that Messrs. Crider and Johnson have
been retired, their prior relationships are not material to the
determination of independence. Prior to his retirement,
Mr. Kaminski served as chief executive officer and a
director of Commonwealth Industries Inc. (now known as Aleris
International, Inc.), which has been a supplier of metals to
Reliance. Since Reliances purchases from Aleris
International, Inc. in any year do not exceed five percent of
either the gross revenues or the total consolidated assets of
Reliance or of Aleris, the Board has determined that this prior
relationship would not interfere with Mr. Kaminskis
ability to exercise his independent judgment. Mr. Slater
was an officer of Jacobs Engineering Group until his retirement
in October 2006 and has recently become an independent director
of KBR, Inc., which is a controlled affiliate of Halliburton
Co., but with respect to which an exchange offer is pending to
spin off KBR from Halliburton as an independent company.
Although Halliburton is a customer of Reliance or one or more of
its subsidiaries, purchases by Halliburton and KBR in any year
do not exceed five percent of either the gross revenues or the
total consolidated assets of Reliance or of Halliburton. The
Board has determined, therefore, that this relationship would
not interfere with Mr. Slaters ability to exercise
his independent judgment. Accordingly, the Board has determined
that all of the directors other than Messrs. Hannah and
Mollins qualify as independent directors under New York Stock
Exchange Rule 303A. In making this determination, the Board
reviewed and considered information provided by the directors
and the Company with regard to each directors business and
personal activities as they may relate to the Company and to the
Companys management.
Reliance has provided our Annual Written Affirmation and Annual
CEO Certification to the New York Stock Exchange.
25
AUDIT
COMMITTEE REPORT
The Audit Committee assists the Board of Directors in fulfilling
the Boards oversight responsibilities over our financial
reporting process and systems of internal controls, monitoring
the independence, qualifications and performance of our
independent registered public accounting firm and the
performance of our internal auditors, and maintaining open
communication between the Board and the independent registered
public accounting firm, the internal auditors, and financial
management. During 2006, the Audit Committee, which is composed
entirely of independent, non-employee directors, met four times.
The Audit Committee reviewed its Charter and recommended certain
changes in its Charter to the Board. A copy of the Audit
Committee Charter is attached to this proxy statement as
Appendix A and is posted on our website at
www.rsac.com.
In fulfilling its responsibilities under the Charter, the Audit
Committee reviewed and discussed our audited financial
statements for fiscal 2006 with management and the independent
registered public accounting firm. The Audit Committee has
discussed with the independent registered public accounting firm
the matters required to be discussed by Statement on Auditing
Standards No. 61, Communications with Audit
Committees, as amended. The Audit Committee also annually
receives the written disclosures and the letter from the
independent registered public accounting firm required by
Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, as
amended, and discusses with the independent registered public
accounting firm its independence from management and Reliance.
The Audit Committee has also considered the compatibility of
non-audit services rendered by our independent registered public
accounting firm with its independence. The Audit Committee
approved all fees paid to the independent registered public
accounting firm for audit and non-audit services.
In reliance on the reviews and discussions outlined above, the
Audit Committee recommended to the Board of Directors (and the
Board subsequently approved the recommendation) that the audited
financial statements be included in the Reliance Annual Report
on
Form 10-K
for the fiscal year ended December 31, 2006 for filing with
the Securities and Exchange Commission. The Audit Committee also
evaluated and recommended to the Board of Directors, subject to
ratification by the shareholders, that Ernst & Young
LLP be re-appointed as the Reliance independent registered
public accounting firm for fiscal year 2007.
Douglas M. HayesFranklin R. Johnson, ChairmanMark V.
KaminskiLeslie A. Waite
26
PERFORMANCE
GRAPHS
The following graph compares the performance of our Common Stock
with that of the S&P 500, the Russell 2000 and the peer
group that we selected for the five-year period from
December 31, 2001 through December 31, 2006. The
comparison of total return assumes that a fixed investment of
$100 was invested on December 31, 2001 in all common stock
and assumes the reinvestment of dividends. Since there is no
nationally-recognized industry index consisting of metals
service center companies to be used as a peer group index,
Reliance constructed its own peer group. As of December 31,
2005, the peer group consisted of Steel Technologies Inc.,
Olympic Steel Inc. and Gibraltar Industries, Inc. (formerly
known as Gibraltar Steel Corporation, all of which have
securities listed for trading on NASDAQ;
A.M. Castle & Co., which has securities listed for
trading on the American Stock Exchange; and Ryerson Inc. and
Worthington Industries, Inc., which have securities listed for
trading on the New York Stock Exchange as of December 31,
2006 and Earle M. Jorgensen Company (collectively, Old
Peer Group). This year we have removed Earle M. Jorgensen
Company from the peer group because it no longer has securities
listed for trading as a result of our acquisition of it during
2006 (Old Peer Group excluding Earle M. Jorgensen Company,
New Peer Group). The returns of each member of the
peer groups are weighted according to that members stock
market capitalization as of the period measured. The stock price
performance shown on the graph below is not necessarily
indicative of future price performance.
COMPARISON
OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG
RELIANCE STEEL & ALUMINUM CO., THE S&P 500
INDEX,
THE RUSSELL 2000 INDEX AND PEER GROUPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Total Return
|
|
|
12/01
|
|
12/02
|
|
12/03
|
|
12/04
|
|
12/05
|
|
12/06
|
Reliance Steel & Aluminum
Co.
|
|
|
100
|
|
|
|
80.11
|
|
|
|
129.20
|
|
|
|
152.69
|
|
|
|
241.47
|
|
|
|
313.00
|
|
Old Peer Group
|
|
|
100
|
|
|
|
104.15
|
|
|
|
137.55
|
|
|
|
181.12
|
|
|
|
200.55
|
|
|
|
208.48
|
|
New Peer Group
|
|
|
100
|
|
|
|
104.15
|
|
|
|
137.55
|
|
|
|
181.12
|
|
|
|
200.55
|
|
|
|
194.31
|
|
S&P 500
|
|
|
100
|
|
|
|
77.90
|
|
|
|
100.24
|
|
|
|
111.15
|
|
|
|
116.61
|
|
|
|
135.03
|
|
Russell 2000
|
|
|
100
|
|
|
|
79.52
|
|
|
|
117.09
|
|
|
|
138.55
|
|
|
|
144.86
|
|
|
|
171.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
* |
|
$100 Invested on December 31, 2001 in stock or
index including reinvestment of dividends. Fiscal
year ending December 31. |
27
CERTAIN
TRANSACTIONS
In addition to a provision authorizing the indemnification of
directors, our Restated Articles of Incorporation limit or
eliminate the personal liability of directors for monetary
damages to Reliance or its shareholders for the breach of
fiduciary duty as a director in accordance with California
corporate law. This provision does not limit or eliminate the
liability of a director for the following: (i) for acts or
omissions that involve intentional misconduct or a knowing and
culpable violation of law; (ii) for acts or omissions that
a director believes to be contrary to the best interests of the
corporation or its shareholders, or that involve the absence of
good faith on the part of the director; (iii) for any
transaction from which a director derived an improper personal
benefit; (iv) for acts or omissions that show a reckless
disregard of the directors duty to the corporation or its
shareholders in circumstances in which the director was aware,
or should have been aware, in the ordinary course of performing
a directors duties, of a risk of serious injury to the
corporation or its shareholders; (v) for acts or omissions
that constitute an unexcused pattern of inattention that amounts
to an abdication of the directors duty to the corporation
or its shareholders; (vi) for transactions between the
corporation and a director, or between corporations having
interrelated directors; and (vii) for improper
distributions and stock dividends, loans and guaranties. The
provisions of the Indemnification Agreements described below
will be available to directors in the event of claims made
against a director for certain types of liability which are not
eliminated in the Restated Articles of Incorporation.
Our Bylaws require Reliance to indemnify officers, directors,
employees and agents to the fullest extent permissible by
California Corporations Code Section 317 against expenses,
judgments, fines, settlements or other amounts actually and
reasonably incurred by that person as a result of being made or
threatened to be made a party to a proceeding. Reliance has
entered into indemnification agreements with all of its present
directors and all of its officers, to indemnify these persons
against certain liabilities. The form of these Indemnification
Agreements was approved by the Board of Directors and
shareholders of Reliance in March 1988, and the shareholders
also authorized the Board of Directors to enter into
Indemnification Agreements with all existing and future
directors at the time they are so elected and to determine, from
time to time, whether similar Indemnification Agreements should
be entered into with other individual officers who are not
directors. The Indemnification Agreements provide for
indemnification in cases where indemnification might not
otherwise be available in the absence of the Indemnification
Agreements under our Restated Articles of Incorporation.
Each Indemnification Agreement provides that Reliance will
indemnify the indemnitee and hold him or her harmless, to the
fullest extent permitted by law, from all amounts which he or
she pays or is obligated to pay as a result of claims against
him or her arising out of his or her service to Reliance,
including derivative claims by or in the right of Reliance.
Reliance has agreed to indemnify against the amounts of all
damages, judgments, sums paid in settlement (if approved by
Reliance, which approval will not be unreasonably withheld),
counsel fees, costs of proceedings or appeals, and fines and
penalties (other than fines and penalties for which
indemnification is not permitted by applicable law) within the
scope of the indemnification.
In addition, Reliance has purchased directors and officers
liability insurance for the benefit of its directors and
officers.
SECTION 16(A)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires that our officers and directors and any person
who directly or indirectly is the beneficial owner of more than
10% of our Common Stock must file reports of beneficial
ownership and any changes in such ownership. The three forms
used for reports are: the Form 3, which is an initial
statement of beneficial ownership of such securities; the
Form 4, which reports changes in beneficial ownership, and
the Form 5, which is an annual statement to report changes
that have not previously been reported. Each of these forms must
be filed at specified times.
Based solely on our review of such forms and written
representations made by certain of such reporting persons,
Reliance believes that during the year ended December 31,
2006, all persons have complied with the requirements of
Section 16(a).
28
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP has acted as our independent auditors
for more than sixty-five years. The Audit Committee and the
Board of Directors selected, and our shareholders approved,
Ernst & Young LLP to serve as the independent
registered public accounting firm for the Company to perform the
annual audit of our 2006 financial statements. We paid our
independent registered public accounting firm the amounts set
forth in the tables below for services provided in the last two
years. Audit fees are the aggregate fees for services of the
independent registered public accounting firm for audits of our
annual financial statements, the audit of managements
assessment of internal control over financial reporting and the
independent registered public accounting firms own audit
of our internal control over financial reporting, including
testing and compliance with Section 404 of the
Sarbanes-Oxley Act, and review of our quarterly financial
statements included in our
Forms 10-Q,
and services that are normally provided by the independent
registered public accounting firm in connection with statutory
and regulatory filings or engagements for those fiscal years,
such as our 2006 filings related to our acquisition of EMJ and
our debt offering. This category also includes advice on
accounting matters that arose during, or as a result of, the
audit or review of interim financial statements, statutory
audits required by
non-U.S. jurisdictions
and the preparation of an annual management letter
on internal control matters. Audit-related fees are those fees
for services provided by the independent registered public
accounting firm that are reasonably related to the performance
of the audit or review of our financial statements and not
included as audit fees. Our audit-related fees were paid for
accounting consultations, benefit plan audits, due diligence
reviews in connection with certain potential acquisition
targets, certain of which were completed, and reviews of our
various regulatory filings. We paid tax fees for tax advice,
planning and compliance, principally in connection with the
preparation of our tax returns, and assistance related to our
election of Section 338(h)(10) treatment for certain of our
acquisitions, due diligence reviews for certain of our 2006
acquisitions, and assistance with certain governmental tax
audits.
|
|
|
|
|
Audit Fees
|
2006
|
|
$
|
3,558,000
|
|
2005
|
|
$
|
1,923,000
|
|
|
Audit-Related Fees
|
2006
|
|
$
|
109,000
|
|
2005
|
|
$
|
125,000
|
|
|
Tax Fees
|
2006
|
|
$
|
1,235,000
|
|
2005
|
|
$
|
667,000
|
|
|
All Other Fees
|
2006
|
|
$
|
-0-
|
|
2005
|
|
$
|
-0-
|
|
The Audit Committee approved all of these fees in advance. The
Audit Committee has adopted a Pre-Approval Policy that requires
that the Audit Committee approve in advance the engagement
letter and all audit fees set forth in such letter for the
independent registered public accounting firm. In addition, the
Audit Committee will review proposed audit, audit-related, tax
and other services that management desires the independent
registered public accounting firm to perform to ensure that such
services and the proposed fees related to the services will not
impair the independent registered public accounting firms
independence and that such services and fees are consistent with
the rules established by the Securities and Exchange Commission.
Each quarter the Chief Financial Officer of the Company reports
to the Audit Committee what services have been performed and
what fees incurred. The Audit Committee has delegated to the
Chairman of the Audit Committee the authority to add to, amend
or modify the list of services to be provided or the amount of
fees to be paid; provided that the Chairman will report any
action taken to the Audit Committee at its next scheduled
meeting and provided further that the fees involved are
reasonably expected to be less than $100,000.
29
A representative of Ernst & Young LLP will be present
at the Annual Meeting, will have an opportunity to make a
statement if he or she desires to do so, and will be available
to respond to appropriate questions. At the Annual Meeting, the
shareholders will be asked to ratify and approve this selection.
The Board of Directors recommends that shareholders
vote FOR the ratification of the selection of
Ernst & Young LLP as our independent registered public
accounting firm for 2007. Unless otherwise indicated on your
proxy, the proxyholders will vote FOR the ratification of
Ernst & Young LLP as our independent registered public
accounting firm for 2007.
OTHER
MATTERS
While management has no reason to believe that any other
business will be presented at the Annual Meeting, if any other
matters should properly come before the Annual Meeting, the
proxies will be voted as to such matters in accordance with the
best judgment of the proxy holders.
30
SHAREHOLDER
PROPOSALS FOR 2008 ANNUAL MEETING
We must receive any shareholder proposals intended to be
presented at the 2008 Annual Meeting and included in our proxy
materials relating to such meeting not later than
December 10, 2007. Such proposals must be addressed to the
Secretary of Reliance.
Reliance will furnish without charge to any shareholder, upon
written request directed to the Secretary of Reliance at its
address appearing at the top of the first page of this Proxy
Statement, a copy of its most recent Annual Report on
Form 10-K
filed with the Securities and Exchange Commission.
By Order of the Board of Directors,
Yvette M. Schiotis
Secretary
Los Angeles, California
April 10, 2007
31
APPENDIX A
RELIANCE
STEEL & ALUMINUM CO.
AUDIT
COMMITTEE CHARTER
Organization
The Audit Committee (the Committee) of the Board of
Directors of Reliance Steel & Aluminum Co.
(Reliance) shall be composed of three or more
members of the Board of Directors (the Board), each
of whom is financially literate and at least one of whom has
accounting or related financial management experience that will
qualify him or her as a financial expert as defined by the New
York Stock Exchange (NYSE) and the Securities and
Exchange Commission (SEC). All members of the
Committee shall be free of any relationship that may interfere
with their exercise of independent judgment and shall meet the
requirements for independence and for committee membership
established by the NYSE and the SEC. The members of the
Committee shall be appointed by the Board and shall serve at the
pleasure of the Board and for such term or terms as the Board
may determine. The Board shall designate one member of the
Committee as its chairperson.
Purpose
The primary purpose of the Committee is to assist the Board in
fulfilling the Boards oversight responsibilities over
Reliances financial reporting process and systems of
internal controls, monitoring the independence, qualifications
and performance of Reliances independent registered public
accountant, pre-approving all fees paid to the independent
registered public accountant and maintaining open communication
between the Board and the independent registered public
accountant, the internal auditors and financial management.
Without limiting the foregoing, the Committee shall also assist
the Board in fulfilling its oversight responsibilities of
(1) the integrity of Reliances financial statements,
(2) Reliances compliance with legal and regulatory
requirements insofar as they pertain to the audit function and
the integrity of Reliances financial statements, and
(3) the performance of Reliances internal audit
function.
Responsibilities
Review
Procedures
1. Annually review the Charter and the Committees
adherence to it.
2. Annually review with Reliances counsel legal
matters that could have a significant impact on the financial
statements.
3. Review with financial management and the independent
registered public accountant Reliances annual and
quarterly financial statements prior to filing or distribution,
as well as any earnings press releases, and review with
management any earnings guidance.
4. Review and discuss with management and the independent
registered public accountant (a) Reliances accounting
policies and principles, (b) any significant changes to
Reliances accounting policies and principles, and
(c) any items required to be communicated by the
independent registered public accountant in accordance with the
American Institute of Certified Public Accountants Statement on
Auditing Standards No. 61 (AICPA SAS 61).
5. Discuss with management, the internal auditors and the
independent registered public accountant any significant
financial risks and the policies or actions required to minimize
such risks.
6. Annually review related party transactions for potential
conflicts of interest.
7. Review financial and accounting personnel succession
planning.
Independent
Registered Public Accountant
1. Annually appoint, retain and oversee the work of the
independent registered public accountant after evaluating
independence, performance and cost effectiveness. The Committee
must approve any discharge of the
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independent registered public accountant. The Committee shall
resolve any disagreements between management and the independent
registered public accountant regarding financial reporting
matters. The independent registered public accountant is
ultimately accountable to the Committee and the Board and must
report to the Committee.
2. Annually obtain and review a written report from
independent registered public accountant disclosing (a) the
auditors internal quality-control procedures, (b) any
material issues raised by the most recent internal
quality-control review or peer review of the independent
registered public accountant, (c) any review of the
independent registered public accountant or any material issues
raised by any inquiry or investigation of the independent
registered public accountant by governmental or professional
authorities, within the preceding five years, respecting one or
more independent audits carried out by the auditor, including,
but not limited to, the Public Company Accounting Oversight
Board (PCAOB) (d) any steps taken to deal with
any such issues, (e) the independent registered public
accountants registration with PCAOB and (f) all
relationships between the independent registered public
accountant and Reliance, with particular focus on the potential
impact which such relationships may have on the auditors
independence and objectivity. Review any non-audit services
provided by the independent registered public accountant to
Reliance and determine the compatibility of such services with
the independent registered public accountants independence
and objectivity.
3. Pre-approve all audit and non-audit engagement terms and
fees and other amounts to be paid to the independent registered
public accountant (other than amounts to be paid for non-audit
services which fall within the de minimus exception of the
Sarbanes Oxley Act of 2002).
4. Review the experience and qualifications of the senior
members of the independent registered public accountant and
their quality control procedures.
5. Review with the independent registered public accountant
(a) the scope and procedures of the audit, (b) the
results of the audit in accordance with AICPA SAS 61, as
amended, (c) the auditors findings and
recommendations, (d) the opinions to be issued in respect
to Reliances financial statements and internal control
over financial reporting prior to any filings or other
distribution and (e) the quality and acceptability of
Reliances accounting principles, including any audit
problems or difficulties and managements response.
6. Review with the independent registered public
accountant, Reliances internal auditors and financial
management, the integrity, adequacy and effectiveness of the
accounting and other financial controls of Reliance.
7. Provide an opportunity for direct communication between
the Board and the internal auditors and independent registered
public accountant, including the opportunity to meet with the
Committee without members of management present.
8. Review with management and the independent registered
public accountant the financial information, including
managements discussion and analysis, to determine that the
independent registered public accountant is satisfied with the
disclosure and content of the financial information.
9. Establish policies regarding Reliances hiring of
employees or former employees of the independent registered
public accountant.
Internal
Audit Department
1. Review with Reliances internal auditors the
independence and authority of their reporting obligations and
proposed audit plans and their coordination with the independent
registered public accountant, as well as any significant
findings or reports prepared by the internal auditors and
managements response and
follow-up.
The internal auditors shall be responsible to senior management,
but shall report to the Board through the Committee.
2. Review the experience and qualifications of the senior
members of the internal auditors.
3. Review the performance of Reliance internal auditors.
The Committee must approve managements appointment,
termination or replacement of the internal auditors.
4. Review and discuss with management and the independent
registered public accountant the adequacy of Reliances
internal controls and internal auditing procedures.
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Other
Responsibilities
1. Establish procedures for the receipt, retention and
treatment of complaints received regarding accounting, internal
accounting controls or auditing matters and the confidential,
anonymous submission by employees of concerns regarding
questionable accounting or auditing matters. Consider, and, if
appropriate, investigate any matter brought to the attention of
the Committee within the scope of its duties. The Committee
shall have direct access to the independent registered public
accountant and Reliance personnel and may retain, at
Reliances expense, special legal, accounting or other
consultants or experts.
2. Annually prepare a report to shareholders as required by
the Securities and Exchange Commission.
3. Annually perform an evaluation of the Committee and
assess the effectiveness of managements
tone-at-the-top.
4. Engage independent counsel and other advisers as the
Committee determines necessary to carry out its duties.
While the Committee has the responsibilities and powers set
forth in this Charter, the Committee is not responsible for
planning or conducting audits or determining that Reliance
financial statements are complete and accurate and prepared in
accordance with generally accepted accounting principles. Those
duties are the responsibility of management and the independent
registered public accountant. Nor is it the duty of the
Committee to conduct investigations or to assure compliance with
Reliances Code of Conduct or other policies.
Compensation
and Independence
Other than in their capacity as Board members or Board committee
members, the members of the Committee shall not accept any
consulting, advisory or other compensatory fee from Reliance and
they shall not be an affiliated person of Reliance or its
subsidiaries.
Meetings
The Committee shall meet at least four times each year and at
such other times as it may deem appropriate to carry out its
responsibilities and may, in its sole discretion, form and
delegate authority to subcommittees (comprised only of Audit
Committee members) in furtherance of such responsibilities. The
Committee shall maintain minutes of its meetings and shall
report its activities to the Board on a regular basis.
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Electronic Voting Instructions
You can vote by Internet or telephone!
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may
choose one of the two voting methods outlined
below to vote your proxy.
VALIDATION DETAILS
ARE LOCATED BELOW IN THE TITLE BAR.
Proxies submitted by the Internet or telephone
must be received by 1:00 a.m., Central Time, on
May 16, 2007.
Vote by Internet
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Log on to the
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www.investorvote.com |
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Follow the steps outlined on the secured website. |
Vote by telephone
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Call toll free 1-800-652-VOTE
(8683) within the United States, Canada
& Puerto Rico any time on a touch tone
telephone. There is NO CHARGE to you
for the call. |
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Follow the instructions
provided by the recorded message. |
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Using a black ink pen, mark your votes with an X as shown in
this example. Please do not write outside the designated areas.
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x |
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Annual Meeting Proxy Card |
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123456 |
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C0123456789 |
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6 IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. 6
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Proposals The Board of Directors recommends a vote FOR all the nominees listed and FOR Proposals 2 and 3. |
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1. Election of Directors: |
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Withhold |
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01 Douglas M. Hayes
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02 Franklin R. Johnson
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03 Richard J. Slater
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04 Leslie A. Waite
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2.
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Ratify Ernst & Young LLP as the independent registered
public accounting firm to perform the annual audit of our
2007 financial statements.
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In their discretion on such other matters as may properly
come before the meeting.
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Change of Address Please print new address below.
Comments Please print your comments below.
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Authorized Signatures This section must be completed for your vote to be counted. Date and Sign Below |
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as
attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give
full title.
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Date (mm/dd/yyyy) Please print date below.
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Signature 1 Please keep signature within the box.
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Signature 2 Please keep signature within the box. |
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6 IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. 6
Proxy Reliance Steel & Aluminum Co.
Proxy Solicited on Behalf of the Board of Directors of
the Company for Annual Meeting of Shareholders on May 16, 2007
The undersigned hereby constitutes and appoints, and/or instructs Union Bank of California
N.A., as trustee of the Employee Stock Ownership Plan, to appoint, and/or instructs Fidelity
Management Trust Company, as trustee of the Reliance Steel & Aluminum Co. Master 401(k) Plan and
the Precision Steel Retirement and Savings Plan, to appoint Thomas W. Gimbel and Mark V. Kaminski,
and each of them, his true and lawful agents and proxies with full power of substitution in each,
to represent the undersigned at the Annual Meeting of Shareholders of RELIANCE STEEL & ALUMINUM CO.
to be held at 10:00 am on Wednesday, May 16, 2007, at the City Club on Bunker Hill, 333 South Grand
Avenue, 54th Floor, Wells Fargo Center, Los Angeles, California 90071 and at any adjournments
thereof, on all matters coming before said meeting.
You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but
you need not mark any boxes if you wish to vote in accordance with the Board of Directors
recommendation. The Board of Directors recommends voting FOR all Nominees in item 1 and FOR items
2 and 3. The Proxy Committee cannot vote your shares unless you sign and return this card.
Additionally, you may choose to receive future Annual Meeting materials (annual report, proxy
statement and proxy card) on-line. By choosing to receive materials on-line, you help support
Reliance Steel & Aluminum Co. in its efforts to control printing and postage costs.
If you choose the option of electronic delivery and voting on-line, you will receive an e-mail
before all future annual or special meetings of shareholders, notifying you of the website
containing the Proxy Statement and other materials to be carefully reviewed before casting your
vote. To enroll to receive future proxy materials on-line if you are a plan participant, please go
to www.econsent.com/RS and if you are a registered holder, please go to
www.computershare.com/us/ecomms.