def14a
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.___)
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RELIANCE
STEEL & ALUMINUM CO.
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 20,
2009
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
To the
Shareholders of Reliance Steel & Aluminum Co.:
This Notice presents only an overview of the more complete proxy
materials that are available to you on the Internet, if you have
not received this by mail. We encourage you to access and review
all of the important information contained in the proxy
materials before voting. A Proxy Statement, an Annual Report to
Shareholders, an Annual Report on
Form 10-K
and a proxy form for voting are available online at
www.proxyvote.com by using the
12-digit
control number provided to you. If you have not received this by
mail and want to receive a paper or
e-mail copy
of these documents, you must request one. There is no charge for
the copy. Please request a copy (1) by internet at
www.proxyvote.com; (2) by telephone at
1-800-579-1639;
or (3) by email to sendmaterial@proxyvote.com, on or
before May 6, 2009 to facilitate timely delivery.
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 20, 2009, at 10:00 a.m., California
time, at The Omni Hotel, 251 South Olive Street, Los Angeles,
California 90012, 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 Thomas W. Gimbel, Douglas
M. Hayes, Franklin R. Johnson, and Leslie A. Waite. The Board
of Directors recommends that shareholders vote FOR the election
of each nominee as a director.
2. To ratify KPMG LLP as our independent registered public
accounting firm to perform the annual audit of our 2009
financial statements. The Board of Directors recommends that
shareholders vote FOR the ratification of KPMG LLP as our
independent registered public accounting firm.
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 1, 2009 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.
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 this Notice describe how to use
these convenient services. Even if you give your 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 3, 2009
TABLE OF CONTENTS
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 20,
2009
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 Omni Hotel, 251 South Olive Street, Los Angeles,
California 90012, on Wednesday, May 20, 2009 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 Mark V. Kaminski and Andrew G.
Sharkey, III, both independent directors, to be 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 KPMG LLP
as our independent registered public accounting firm to perform
the annual audit of our 2009 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 KPMG LLP as our
independent registered public accounting firm for 2009. If other
matters properly come before the meeting, including but not
limited to, any matter for which we did not receive notice by
December 10, 2008, 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 or submit a proxy via the Internet or
telephone, 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 make this Proxy Statement and accompanying material
available to each shareholder on the Internet beginning on or
about April 3, 2009. An Annual Report, including a letter
to the shareholders from the Chairman and Chief Executive
Officer, the President and Chief Operating Officer and the
Executive Vice President and Chief Financial Officer, and an
Annual Report on
Form 10-K
will also be available electronically. Some shareholders will
receive these materials by mail and other shareholders may
request copies of these materials at no cost. The Annual Reports
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 December 31, 2008, we had a total of
73,312,714 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 1, 2009 will
be entitled to vote at the Annual Meeting.
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 KPMG LLP as our 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 to serve for a two-year term. The
terms of four of the incumbent directors expire as of the date
of the Annual Meeting, but Richard J. Slater has determined not
to stand for re-election. That would result in three directors
being in the class with a term ending in 2011 and five directors
being in the class with a term ending in 2010. Thomas W. Gimbel
was elected in 2008 to serve a term ending in 2010, but offered
to stand for re-election in 2009 in order to make the two
classes of directors equal in number. 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: Thomas W. Gimbel, Douglas M. Hayes,
Franklin R. Johnson, 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.
Three of the nominees for the position of director expiring in
2011 were elected to their present term of office by vote of the
shareholders at the Annual Meeting of Shareholders held in May
2007 and the fourth nominee, Thomas W. Gimbel, was elected to
his present term of office by vote of the shareholders at the
Annual Meeting of Shareholders held in May 2008. After learning
of Mr. Slaters decision not to stand for re-election,
the Board of Directors, in February 2009, reduced the authorized
number of directors to eight effective as of the end of
Mr. Slaters term. 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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57
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Chairman and Chief Executive Officer; Director
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Gregg J.
Mollins(1)
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54
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President; Chief Operating Officer; Director
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Karla R. Lewis
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43
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Executive Vice President; Chief Financial Officer
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James D. Hoffman
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50
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Senior Vice President, Operations
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James P. MacBeth
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61
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Senior Vice President, Carbon Steel Operations
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William K. Sales, Jr.
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51
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Senior Vice President, Non-Ferrous Operations
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Thomas W.
Gimbel(1)(5)
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57
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Director
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Douglas M.
Hayes(2)(3)(4)
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65
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Director
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Franklin R.
Johnson(2)(3)(5)
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72
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Director
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Mark V.
Kaminski(1)(3)(4)(5)
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53
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Director
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Andrew G.
Sharkey, III(1)(4)(5)
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62
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Director
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Richard J.
Slater(2)
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62
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Director
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Leslie A.
Waite(2)(3)(4)
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63
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Director
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Term of office as a director expiring in 2010. |
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Term of office as a director expiring in 2009. |
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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 2009 With Terms Ending in
2011
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.
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. 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. Since July 1999,
he has served as a business consultant, a litigation consultant
and an expert witness, but he has not provided any of these
services to Reliance. Mr. Johnson
3
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.
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 2010
David H. Hannah was appointed a director of Reliance in
1992 and became the Chairman of the Board of Reliance in October
2007 and 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 in
various professional staff positions by Ernst &
Whinney (a predecessor to Ernst & Young LLP, which was
our independent registered public accounting firm through 2007).
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 is 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 our Compensation and Stock Option Committee
and our Audit Committee. Mr. Kaminski also serves as a
director and on the audit and compensation committees of Granite
Rock, a privately-held company. 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 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.
Andrew G. Sharkey, III was appointed a director of
Reliance in July 2007. Until his retirement in September 2008,
Mr. Sharkey served as president and chief executive officer
of the American Iron and Steel Institute since 1993, and from
1978 to 1993 Mr. Sharkey was president, executive vice
president and director of education for the Steel Service Center
Institute (currently the Metal Service Center Institute).
Mr. Sharkey serves as a member of our Nominating and
Governance Committee and our Compensation and Stock Option
Committee. Mr. Sharkey also serves as a director of General
Moly, Inc., a public company with securities listed on the NYSE
Alternext (formerly the American Stock Exchange). The Board of
Directors has determined that Mr. Sharkey is an independent
director.
Director
With Term Ending in 2009
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 serves on the
board of directors 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, including executive
vice president of worldwide operations (1998 through
2002) and advisor to the chairman and CEO (2003 through
2006). He is currently a
4
director of KBR, Inc., a member of its nomination and governance
committee and chairman of its health, safety and environmental
committee. He is also 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. Mr. Slater determined not to stand
for re-election in 2009.
Executive
Officers
In addition to Messrs. Hannah and Mollins, the following
are the named 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 was also appointed an Assistant
Secretary in 2007. 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 through
2007) in various professional staff positions.
James D. Hoffman became Senior Vice President, Operations
in October 2008. Prior to his appointment, he served as
executive vice president and chief operating officer of our
subsidiary, Earle M. Jorgensen Company, from April 2006 to
September 2008. Mr. Hoffman was appointed executive vice
president of Earle M. Jorgensen Company in January 2006, having
been a vice president of Earle M. Jorgensen Company from 1996.
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. (now Kaiser Aluminum Corporation), a producer of aluminum
products and a supplier of Reliance.
Significant
Officers
In addition, the following Reliance officers are expected to
make significant contributions to our operations:
Brenda Miyamoto, 36, became Vice President and Corporate
Controller in May 2007, having been promoted from Corporate
Controller, a position which she had held since January, 2004.
Prior to that time, Ms. Miyamoto served as Group Controller
from December 2001 to January 2004. For six years prior to
joining Reliance, Ms. Miyamoto, a certified public
accountant, was employed by Ernst & Young LLP (our
independent registered public accounting firm through
2007) in various professional staff and manager positions.
Donna Newton, 55, 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, 61, 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.
Colleen Wolf, 44, joined Reliance as Chief Information
Officer in July 2008. Prior to that time, Ms. Wolf served
as the vice president, North American business systems for
Starbucks from October 2007 to July 2008 and as the chief
information officer and senior vice president of New Century
Financial from April 2006 to September 2007. From 1996 to April
2006, Ms. Wolf was vice president, information technology,
supply chain and corporate finance for Mattel, Inc.
5
COMPENSATION
DISCUSSION AND ANALYSIS
The following discussion and analysis should be read together
with the information presented in the Summary Compensation Table
and other compensation tables and the footnotes to those tables
and related disclosures elsewhere in this proxy statement.
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 the Companys corporate officers, including the named
executive officers as defined in Rule 402(a)(3) under the
Securities Exchange Act of 1934, as amended. The executive
compensation program is a pay-for-performance program that is
designed to motivate corporate officers 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 corporate officers by
targeting compensation at a level competitive with other
companies in our industry or companies having size or complexity
comparable to our Company. The executive compensation program is
also structured to ensure that the Companys compensation
expense is aligned with the Companys earnings and return
on shareholders equity. To meet these objectives, the
program has both cash and equity elements and short-term,
long-term and retirement benefits. The named executive officers
generally receive a base salary, an annual cash incentive bonus,
grants of stock options 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
qualitative and quantitative criteria in determining the amount
of the total compensation package and the allocation between
cash and non-cash elements, historical compensation records of
the Company, and recommendations and evaluations by named
executive officers with respect to officers they supervise. With
the help of its consultant, ECG Advisors, LLC, the Compensation
Committee develops a peer group of comparable size and
complexity and reviews compensation information available for
officers of that peer group and also may review surveys that
cross industries and size of companies. The Compensation
Committee may also provide guidelines to our Chief Executive
Officer (CEO) for 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
providing quantitative data and qualitative evaluations
regarding both Company and individual performance. The
Compensation Committee reviews our Companys financial
statements, certain stock market data, and comparable
compensation information for executive officers of other public
companies, including companies that the Compensation Committee
has identified as the Companys peer group based on size in
terms of revenues
and/or stock
market capitalization structures, industry and complexity.
From time to time the Compensation Committee engages an
independent outside consulting firm to aid in the review and
evaluation of the total compensation package provided to named
executive officers. In 2008, the Compensation Committee engaged
ECG Advisors, LLC to provide an objective review of the
compensation paid to the named executive officers and to
identify competitive levels and elements of compensation paid to
similarly-situated executive officers at other public companies.
ECG was asked to consider the Companys executive
compensation structure and to recommend changes consistent with
what is considered market level or competitive total
compensation for executive officers of similar public companies.
ECG was not engaged to provide any other services to the
Company, except with respect to the review by the Nominating and
Governance Committee of director compensation, as described
below.
6
There are few public companies in the metals service center
industry that are of comparable size, complexity and performance
to Reliance. Accordingly, the Compensation Committee and ECG
together developed a peer group for purposes of comparison,
consisting of the following 15 Fortune 500-ranked public
companies, in the same or similar industries with annual
revenues ranging from $6 billion to $15 billion. The
peer group includes four metals companies, three diversified
wholesalers, two Southern California Fortune 500-ranked
companies that are in traditional businesses, five industrial
companies and one other Fortune 500-ranked company in a
somewhat-related business: AK Steel Holding Company; Allegheny
Technologies, Inc.; Avery Dennison Group; Commercial Metals
Company; Dover Corp.; Eaton Corporation; Genuine Parts; ITT
Corporation; Jacobs Engineering Group; Parker Hannifin Corp.;
Pitney Bowes, Inc.; Steel Dynamics, Inc.; Terex Corp.; W. W.
Grainger, Inc.; and Wesco International (together, the
2008 Peer Group). The 2008 Peer Group was selected
so that the Company would be approximately in the middle of the
group with respect to various financial metrics. The Company was
at the 49th percentile for annual revenues, the
40th percentile for net income and the 55th percentile
for return on equity when compared with the companies in the
2008 Peer Group. The peer group identified by the Compensation
Committee may change from year to year, depending on the
Companys growth, changes in the economy and other events
that might make any individual company more or less comparable
to Reliance.
The Compensation Committee also compared the performance of the
Companys stock price to the stock prices of the 2008 Peer
Group and of other companies in the metals and metals service
center industries, including AK Steel Holding Company; Allegheny
Technologies, Inc.; A.M. Castle & Co.; Century
Aluminum; Commercial Metals Company; Gibraltar Industries; Nucor
Corporation; Olympic Steel; and Worthington Industries, Inc., as
well as the Standard & Poors 500.
Policies
The executive compensation program of the Company was
established by the Board of Directors initially and is annually
reviewed by the Compensation Committee. The non-management
members of the Board must approve all changes in the policies,
programs or plans affecting executive compensation. 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;
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target executive compensation at a level to ensure our ability
to attract and retain superior executives; and
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align executive compensation with Company earnings.
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Historically, Reliance has enjoyed a team-oriented corporate
culture and has rewarded the entire team of executive and
corporate officers for their joint efforts that result in the
Companys performance. The Company believes that attracting
and maintaining a team of superior officers with complementary
skills and expertise has proven successful for the
Companys growth, both organically and through
acquisitions, and for maintaining the Companys profitable
financial performance, each of which generally enhances
shareholder value. To motivate executive officers to enhance
shareholder value, we maintain a pay-for-performance
compensation structure that rewards our executive officers
principally for the amount of return on beginning
shareholders equity and other factors of Company
performance, but also for individual performance, activities
that further the strategic vision and goals of the Company, and
the individuals level of responsibility and length of time
with the Company. The underlying principle that all of the
Companys senior management is required to adhere to is to
maintain the Companys reputation for honesty and
integrity, while providing excellent, responsive service to our
customers and maintaining excellent relationships with our
suppliers. Failure to adhere to this principle could result in a
reduction in compensation or termination of employment.
Our compensation structure for our named executive officers has
four main elements: base salary, cash incentive bonus, equity
incentive bonus (which may consist of either or both stock
options or restricted stock) and retirement or deferred
compensation benefits, which together provide short-term,
long-term and retirement benefits, and have both cash and equity
components. The allocation between cash and non-cash elements is
intended to provide short-term benefits (cash) and long-term
benefits (non-cash). The allocation between the base salary and
the cash incentive bonus is intended to place a significant
portion of the named executive officers
7
compensation at risk, based on the Companys performance.
If there is a return of 12% on beginning shareholders
equity (which the Compensation Committee considers to be an
average return), then the named executive officers would earn an
incentive bonus equal to 100% of the executive officers
base salary, which is the target amount, and an above-average
return would normally result in a higher percentage of the
officers base salary being paid as a cash bonus. If the
minimum return on beginning shareholders equity of 6% is
not met in any year, no bonus is paid. The long-term benefits
include both equity (to date through stock option grants) and
retirement benefits. The equity component is intended to more
closely align officers and shareholders interests,
and both of the long-term benefits are intended to encourage the
officers to remain with the Company and to seek to increase
shareholder value.
In February 2007 the Compensation Committee and the
non-management directors on the Board of Directors established
the requirement that the named executive officers maintain an
ownership position in our common stock at least equal to five
times base salary for our principal executive officer (our CEO),
four times base salary for our chief operating officer, three
times base salary for our principal financial officer (our CFO),
and two and a quarter times base salary for the other named
executive officers. All of the named executive officers, other
than James D. Hoffman who was appointed in October 2008, are in
compliance with the stock ownership requirements.
Mr. Hoffman has a period of five years in which to comply
with the requirement. The policy that all such officers must
maintain a shareholding position in the Company helps to align
the officers interests as much as possible with those of
our shareholders.
The Company has had a supplemental executive retirement plan
(SERP) since 1996, in which all named executive
officers other than James D. Hoffman participate. Through
December 31, 2008, the SERP benefit payable to each
participant was offset by the value that the participant was
expected to receive from the Companys contributions to the
participant accounts in the Companys 401(k) Plan and ESOP,
including earnings thereon from the date of contribution to
retirement, as well as amounts the participant was to receive
from social security. This resulted in the Company bearing the
risk of any fluctuations in the value of those investments.
Because of the significant decline in overall investment markets
in 2008, the Companys SERP expense increased
significantly. The SERP amounts shown in the tables in this
proxy statement reflect the impact of the decline in the value
of the investments in the retirement plans under the formula in
effect through December 31, 2008.
As of December 2008 the Company adopted a deferred compensation
plan to replace certain subsidiary deferred compensation plans
or supplemental executive retirement plans that were in
existence at the time that the Company acquired certain
subsidiaries. Adopting the new plan resulted in a cost savings
to the Company. None of the named executive officers participate
in the deferred compensation plan, other than Mr. Hoffman
who participated in the Earle M. Jorgensen Company
(EMJ) deferred compensation plan that was replaced.
The Company contribution made to the deferred compensation plan
for the benefit of Mr. Hoffman was based on the formula
applicable under the EMJ plan.
Procedures
The Compensation Committee is charged with assisting the Board
to fulfill its obligations with respect to the compensation
policies and does so by gathering both current and historical
information relevant to the performance of the Company as
compared to the identified peer group, compensation paid to
named executive officers of the Company and comparable officers
with the companies in the peer group identified by the
Compensation Committee, and from time to time surveys of other
public companies that the Compensation Committee determines to
be comparable or useful. The Compensation Committee further
requests that our CEO provide a summary of accomplishments and
disappointments for the year under review, goals and results for
the year under review and goals for the year ahead, a discussion
of any tactical and strategic risks, any revisions to the
strategic vision of the Company and a review or evaluation of
each of the corporate officers, including the named executive
officers, prepared by that persons immediate supervisor.
The Compensation Committee reviews and discusses these items
before it begins any analysis specifically related to the mix,
structure or amount of total compensation for the corporate
officers.
After reviewing that information and the data previously
gathered, the Compensation Committee makes recommendations for
the compensation to be paid to the CEO and other corporate
officers. The Compensation Committee then discusses these
recommendations with the CEO and presents these recommendations
to the non-
8
management members of the Board of Directors in executive
session. The cash portion of the compensation is generally
considered separately from the equity portion, although the
Compensation Committee does analyze the proposed total
compensation package before making any recommendations. The
independent, non-management directors of the Board make the
final determination of the compensation to be paid to the CEO
and the other corporate officers of the Company.
Elements
The compensation paid to each of the named executive officers is
structured in the same manner and contains the same basic
elements as for all of the corporate officers, that is, base
salary, an annual cash incentive bonus, long-term compensation
in the form of stock options and retirement benefits. All of the
named executive officers other than James D. Hoffman are also
eligible to receive benefits under our SERP, which provides
post-retirement benefits to the named executive officers, among
others. Effective as of December 1, 2008 the Company
adopted a deferred compensation plan. None of our named
executive officers received any Company contribution to this
deferred compensation plan for 2008, other than Mr. Hoffman
who received a contribution based on the formula established in
the Earle M. Jorgensen Company deferred compensation plan before
it was replaced by the Reliance plan. Our named executive
officers may participate in our 401(k) plan and health and
medical insurance 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. 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
named executive officers, are paid a car allowance of
$700 monthly.
Base
Salary
The base salary is what the name implies the
primary, or base, compensation for each of the named executive
officers, which is the minimum pay that an officer would receive
in any year. The base salaries of the named executive officers
are intended to be reasonably competitive with those of
comparable officers at companies in the identified peer group.
The Compensation Committee determined to benchmark the base
salaries of the named executive officers against the base
salaries of comparable officers at companies in the 2008 Peer
Group. The Compensation Committee found that the base salaries
of the named executive officers were somewhat below market, with
the base salary of the Chief Executive Officer being the lowest
in the 2008 Peer Group. A greater portion of the Companys
executive compensation is at risk because the Company has
established lower base salaries, but higher cash bonuses that
are tied to the return on beginning shareholders equity.
All of the corporate officers of the Company, including the
named executive officers, voluntarily froze their base salaries
for 2009 at the same level as 2008 in light of the current
economic crisis.
Incentive
Bonus
In February 2008 the Compensation Committee recommended and the
independent non-management directors on the Board of Directors
approved a Corporate Officers Bonus Plan (the Bonus
Plan) that is a non-equity incentive bonus plan available
to all corporate officers of Reliance, including the named
executive officers. The Bonus Plan was also approved by the
shareholders at the annual meeting in May 2008. The Bonus Plan
is primarily a quantitative calculation based on the annual
total return on beginning shareholders equity for the
named executive officers and simplifies the calculations made
under the Key-Man Incentive Plan that was in place prior to
2008. The Compensation Committee has adopted a sliding scale to
calculate the bonus for named executive officers, which provides
for a bonus to be paid to named executive officers if the annual
rate of return on beginning equity is 6% or more, with the
amount of bonus calculated as a corresponding percent of base
salary ranging from 14% to 300%. By way of example, the named
executive officers would receive no bonus if the rate of return
were below 6%, a bonus of 100% of base salary if the rate of
return were 12% (which is considered the target, based on the
Companys long-term average return on beginning
shareholders equity) and a maximum of 300% of base salary
if the rate of return were 25% or greater. Despite this
quantitative calculation, the independent, non-management
directors on the Board of Directors have final authority to
approve these bonuses. This Bonus Plan and the sliding scale
were approved by
9
the independent directors to establish the performance goals
applicable for 2009. This Bonus Plan is intended primarily to
reward the named executive officers for the Companys
performance. Under the Bonus Plan, the named executive officers
would be entitled to receive the following target bonus amount
if the Companys return on beginning shareholders
equity were 12% and up to the maximum bonus amounts if the
Company had a return on beginning shareholders equity in
excess of 25%.
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Target Bonus
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Maximum Bonus
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Officer Name/Title
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Amount
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Amount
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David H. Hannah
Chairman and Chief Executive Officer
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$
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700,000
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$
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2,100,000
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Gregg J. Mollins
President and Chief Operating Officer
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$
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520,000
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$
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1,560,000
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Karla R. Lewis
Executive Vice President, Chief Financial Officer and Assistant
Secretary
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$
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375,000
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$
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1,125,000
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James D. Hoffman
Senior Vice President, Operations
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$
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330,000
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$
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990,000
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James P. MacBeth
Senior Vice President, Carbon Steel Operations
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$
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320,000
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$
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960,000
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William K. Sales, Jr.
Senior Vice President, Non-Ferrous Operations
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$
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330,000
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$
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990,000
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Named Executive Group
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$
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2,575,000
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$
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7,725,000
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Non-Executive Director Group
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$
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-0-
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$
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-0-
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Other Corporate Officer Employee Group
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$
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372,167
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$
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1,116,500
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(1)
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(1) |
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Estimate based on percentages of base salary and bonus
percentages applicable for 2008. The actual amount of the
bonuses for corporate officers other than the named executive
officers is within the discretion of the Compensation and Stock
Option Committee, subject to approval of the independent,
non-management directors. |
When benchmarking the incentive cash bonus against bonuses paid
to comparable officers at companies in the 2008 Peer Group, the
Compensation Committee found that the Companys annual
bonuses are highly competitive. When initially adopting the
sliding scale for 2006, the Compensation Committee determined
that, the Companys average return on beginning
shareholders equity since 1978 was 13.7%, with a median
return of 13.4%. For 2007, the average rate of return had
increased to 14.0% and the median had increased to 13.6%. For
2008, the average rate of return over the period from 1978 to
2008 had increased to 14.3% and the median had increased to
13.7%. The rates of return have, however, varied from a low of
1.6% to a high of 32.6% during that period. In only three years
in that period has the Company exceeded the 25% rate of return,
which the Compensation Committee has determined is required for
the named executive officers to achieve the maximum incentive
bonus equal to 300% of their respective base salaries. The rate
of return in 2006 exceeded 25%, the rate of return for 2007 was
23.4% and the rate of return for 2008 was 22.9%. Accordingly,
for 2008 all of the named executive officers received 269% of
their respective base salaries as an incentive bonus. The
calculation under this plan of the bonus for James D. Hoffman
was applied to his salary from October 1, 2008 (when he was
appointed as an executive officer) through December 31,
2008.
Until 2008, the Company awarded bonuses to its named executive
officers under its Key-Man Incentive Plan, which the Company had
maintained for division managers and corporate officers of
Reliance since 1965, with amendments from time to time. The
Key-Man Incentive Plan was primarily a quantitative calculation
based on the annual operating results of the Company, with the
point assignment being a qualitative element. To determine the
bonus amounts to be paid under the Key-Man Incentive Plan, the
Compensation Committee first calculated the bonus pool, which
was an amount equal to 20% of the amount by which the
Companys net income for the current year exceeded the
average risk-free rate of return on a one year Treasury bill
applied to the Companys net worth at the beginning of the
year. That amount was then divided by the total points that the
Compensation Committee had allocated to all participants under
the Plan to determine the value per point, which was then
multiplied by each
10
participants number of points assigned by the Compensation
Committee. Under the Key-Man Incentive Plan, the Compensation
Committee established maximum bonus amounts for each individual,
based on a percent of that persons base salary. The
maximum bonus amounts for the named executive officers were
determined based on a sliding scale with percentages of base
salary corresponding to certain rates of return on beginning
shareholders equity, so that the maximum bonus payable to
any named executive officer would equal the corresponding
percentage applicable for the Companys return on beginning
shareholders equity shown on the sliding scale. The target
bonus was 100% of the named executive officers base
salary. This target was attained if the Companys return on
beginning shareholders equity equaled 12%. No bonus was
payable unless the return on beginning equity was at least 6%,
for which the percent of base salary that would have been the
maximum bonus payable was 14%. The maximum bonus payable to each
executive officer if the Company achieved a return on beginning
shareholders equity equal to 25% or more was 300% of base
salary. In 2007 the Companys return on beginning
shareholders equity was approximately 23% and,
accordingly, the maximum incentive bonus amount payable to the
named executive officers under the Key-Man Incentive Plan was
269% of their respective base salaries. Under the Key-Man
Incentive Plan the corporate officers, including the named
executive officers, could elect to receive 25% of their bonus in
shares of restricted common stock. None of the officers made
such an election for the 2007 bonus.
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). The Stock Plan is intended to encourage
the named executive officers, among others, to remain with the
Company on a long-term basis and to reward individual
performance and levels of responsibility. The scope and
authority of the Compensation Committee is defined by the Stock
Plan. The Compensation Committee has complete authority to
interpret the Stock 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
or restricted stock should be granted, but the independent,
non-management members of the Board must confirm any issuance of
stock options or restricted stock. 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, but James D. Hoffman currently holds certain incentive
stock options that were granted to him by Earle M. Jorgensen
Company before Reliance acquired it and that were converted to
options to acquire Reliance common stock. We have, however,
granted non-qualified stock options. All awards to named
executive officers are approved by the independent, non-employee
directors of the Company. The Compensation Committee considers
the recommendations of our Chief Executive Officer with respect
to any grants or awards to the other named executive officers.
In making its recommendations to the Board, the Compensation
Committee considers the position of the named executive officer,
his or her importance to the Companys results, his or her
individual performance, 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 the
potential dilution and the related stock option expense as a
percentage of pre-tax income. For 2007, the Compensation
Committee determined that no more than 20% of the total options
granted in any particular approved grant should be granted to
the named executive officers.
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 on the date of grant. 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.
The Company did not grant any stock options in 2006 because of
certain material non-public information then held by the
Company. Accordingly, the Chief Executive Officer recommended to
the Compensation Committee that a larger number of stock options
be granted to the named executive officers in 2007. The
Compensation Committee agreed with this recommendation, but also
suggested that there be annual grants of stock options in the
future. In addition, in March 2007 the Compensation Committee
determined, because of the cyclicality of the Companys
11
business operations, to make the term of newly-granted stock
options seven years, instead of the five years that was
applicable to previously granted stock options, but the options
continue to become exercisable at the rate of 25% per year
commencing one year from the date of grant. When determining the
number of stock options to grant to the named executive officers
in 2008, the Compensation Committee found that the value of the
stock options granted to the Chief Executive Officer and the
Chief Operating Officer was below the value of equity grants to
the 2008 Peer Group and the value of the stock options granted
to the other named executive officers was above the value of
grants to the 2008 Peer Group. The Compensation Committee then
determined to adjust this differential by recommending that an
increased number of stock options be granted to the Chief
Executive Officer and the Chief Operating Officer in 2008.
Additionally, beginning in 2008, the Compensation Committee
determined that no more than 33% of the total options granted
should be granted to all of the corporate officers as a group,
including the named executive officers.
The Company does not plan to time nor has it timed its release
of material non-public information for the purpose of affecting
the value of any stock or stock options granted. In fact, the
Company has delayed the grant of options when in possession of
material non-public information. Historically, the Compensation
Committee has recommended grants of stock options for named
executive officers at such times as it believed appropriate to
ensure that each of the named executive officers has a
reasonable amount of unexercised stock options. In 2007 and for
future years, the Compensation Committee determined to make
annual grants under the Stock Plan after the Company has
reported its annual earnings and the market has had an
opportunity to react to the Companys release of its
financial results. The Company has not yet made any grants in
2009. Our Company maintains internal controls to prevent
backdating or repricing of stock options.
SERP
and Deferred Compensation Plan
In 1996, Reliance adopted a Supplemental Executive Retirement
Plan (SERP), which provides post-retirement benefits
to certain of our named executive officers (other than James D.
Hoffman) and other key employees, as the Compensation Committee,
in its discretion, has determined appropriate from time to time.
The SERP was amended in 1999 to provide for a pre-retirement
death benefit. Effective January 1, 2009, the SERP was
amended and restated. One of the Compensation Committees
and the Boards primary objectives was to shift the risk of
the performance of the individuals retirement plan
investments from the Company to the participants. Through
December 31, 2008, the SERP benefit payable to each
participant was offset by the value that the participant was
expected to receive from the Companys contributions to the
participant accounts in the Companys 401(k) Plan and ESOP,
including earnings thereon from the date of contribution to
retirement, as well as amounts the participant was to receive
from social security. This resulted in the Company bearing the
risk of any fluctuations in the value of those investments.
Because of the significant decline in overall investment markets
in 2008, the Companys SERP expense increased
significantly. The SERP amounts shown in the tables below
reflect the impact of the decline in the value of the
investments in the retirement plans under the formula in effect
through December 31, 2008. The 2009 amendment and
restatement eliminated the offsets to the SERP benefit and
reduced the benefit amount to 38% of the average of the
participants highest five years of the last ten years of
total cash compensation (from 50% less offsets for the value of
the Company contributions to the 401(k) and ESOP plans as well
as social security benefits). The amendment also froze the plan
to new participants, brought it into compliance with IRS
Rule 409A, and clarified certain provisions. The new
benefit formula was intended to provide participants with
approximately the same benefits that they would have received
under the calculation required by the SERP before the amendment,
but shifts certain risks from the Company to the participant.
Reliance also adopted a deferred compensation plan effective
December 1, 2008, to combine and replace certain deferred
compensation plans and supplemental executive retirement plans
that existed at companies at the time that we acquired them.
James D. Hoffman was previously a participant of one of these
subsidiary plans that was replaced, and he now participates in
the Reliance Deferred Compensation Plan.
The Compensation Committee considers the SERP benefits and any
benefits under the Reliance Deferred Compensation Plan in its
analysis of the total compensation to be paid to the named
executive officers. In benchmarking the values of the SERP
against the retirement benefits offered at companies in the 2008
Peer Group, the Compensation Committee found that the values are
competitive for the Chief Executive Officer and highly
competitive for the other five named executive officers.
12
Other
Benefits
Our 401(k) Plan allows all eligible employees, including the
named executive officers, who have been employed a minimum of
three months to defer a portion of their eligible compensation
and provides a matching contribution of up to 3% of eligible
compensation, subject to certain IRS limitations. All named
executive officers participate in this 401(k) Plan. 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, including the named
executive officers, are eligible to participate in the ESOP as
of the first 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 eligible
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 named executive
officers and
his/her
dependents, as we do for all eligible employees of Reliance, and
the Company provides a car allowance and parking for the named
executive officers. (The Company provides parking or public
transportation benefits for most of its corporate office
employees.) The Company also provides club memberships for our
named executive officers that are intended to be used for
business purposes. When benchmarking the perquisites provided to
the named executive officers compared with the 2008 Peer Group,
the Compensation Committee found that the perquisites were
significantly below market.
Analysis
When making decisions regarding the compensation of our named
executive officers, the Compensation Committee considers
information from a variety of sources. The Compensation
Committee obtains from our accounting department historical data
on the level of compensation paid to executive officers by the
Company in the past, both individually and in relation to one
another. The accounting department, with assistance from outside
experts, also prepares certain quantitative calculations
regarding the values of stock option grants and the retirement
benefits. Members of the Compensation Committee and its
consultant gather publicly available information on compensation
paid by members of the Companys identified peer group, as
well as information regarding the Companys performance and
results relative to these other companies and companies in the
metals service center industry, and may review from time to time
surveys of related compensation information. The composition of
the peer group is reviewed and, if necessary, revised annually
in an effort to assure comparability of information. The
information on other companies, including the 2008 Peer Group,
alone is not determinative. The Compensation Committee analyzes
both the individual elements and the total compensation packages
for each of the named executive officers. In addition to the
relative financial results of the Company compared to companies
in the peer group and companies in the metals service center
industry and salaries of comparable executive officers in each
of these groups, the Compensation Committee considers factors
such as the Companys stock performance as compared with
standard indices, such as the Standard & Poors
500. The Compensation Committee recognizes that, given the stock
holding requirements and the amounts of stock actually held, the
executive officers and the directors are directly impacted by
the Companys stock price and, accordingly, are closely
aligned with the Companys shareholders.
The Compensation Committee extensively analyzed the following
income statement, balance sheet, and stock market data of the
Company and the 2008 Peer Group:
Annual revenue
Net income
Operating margins
Return on equity
Number of full-time employees
Stock-market capitalization
One, three, five, and
10-year
stock market returns benchmarked against various stock
indices
Capitalization and debt ratios
Black Scholes factors
13
The Compensation Committee also considered the structure of
total compensation (base salary, cash bonus, long-term incentive
plans, and SERP and related long-term plans) as compared to the
2008 Peer Group. This discussion of the structure of various
executive compensation programs included the following:
Various elements of pay expressed as a percent of salary
Mix of direct pay
Value of annual stock grants
Long-term incentive plans
Non-qualified stock option plans of 2008 Peer Group companies
Rationale for restricted stock
Restricted stock and various performance standards
Retirement plans
Retirement plans of 2008 Peer Group companies
Based on its analysis of the above and benchmarking against the
2008 Peer Group, the Compensation Committee determined that,
although the Companys position with respect to each
element of compensation may vary, the total compensation for the
named executive officers is very competitive. The Compensation
Committee, together with its consultant, determined that the
Companys annual cash bonuses (other than that for the CEO
which ranked lower) and the SERP values rank quite high compared
with those of the 2008 Peer Group, but the salaries and
perquisites rank quite low. The Compensation Committee concluded
that the level of the incentive cash bonuses was reasonable
given the Companys record performance in 2008, achieving
record sales and earnings despite the economic recession, and
given the Companys completion of its largest acquisition
to date, based on transaction value. The value of the awards of
stock options range from below those of the 2008 Peer Group
(with respect to the CEO and the Chief Operating Officer) to
above those of the 2008 Peer Group (for the other named
executive officers). Our compensation structure emphasizes
annual cash incentive bonuses, which are performance based, and
retirement benefits, with lower base salaries, equity
compensation and perquisites, thereby more closely tying
executive compensation to Company performance, but also
retaining long-term benefits.
While mindful of the volatility of the Companys stock
price, the Compensation Committee recognized that the lowered
price was a result of the economic upheaval from the meltdown of
the financial markets and was not related to the Companys
performance or the performance of the executive officers. The
Compensation Committee commended the executive officers for
their outstanding efforts to manage working capital,
particularly by reducing inventory and expenses in the fourth
quarter of 2008 in response to reduced customer demand. The
significant increase in cash flow allowed the Company to reduce
its debt and deleverage its balance sheet to maintain its
investment grade credit rating. To the knowledge of the
Compensation Committee, Reliance is the only metals service
center company to have an investment grade credit rating. The
Compensation Committee, in collaboration with its consultant and
after completing its analysis, concluded that the Chief
Executive Officers cash compensation was below market but
that the total compensation was competitive, at approximately
the 62nd percentile of the 2008 Peer Group. The
Compensation Committee also found, based on the information
provided by its consultant, that the total compensation for
Reliances next five executive officers was competitive,
ranging from the 66th to the 76th percentile.
Individual Performance Factors. Individual
performance of each of the named executive officers principally
impacts any increase in base salary and the number of stock
options granted. Each of the named executive officers
contributed to the Companys results in a number of ways.
The Compensation Committee considered, among other things, the
following specific factors in addition to the more subjective
factors of management style, problem-solving capabilities,
supervisory responsibilities and the responsibilities of due
diligence related to proposed acquisitions and the integration
and subsequent performance of completed acquisitions of each of
the named executive officers:
CEO It is the CEOs responsibility to develop a
strategic vision for the Company and to ensure that the
corporate officers take actions to further the Companys
long-term corporate goals and objectives. Mr. Hannah has
been the principal factor in developing and implementing the
acquisition strategy of the Company and in maintaining a strong
balance sheet and adequate financing to allow the Company to
grow both organically and through acquisitions. In 2008 the
Company completed a strategic acquisition to expand the
geographical
14
presence of Service Steel Aerospace Corp. and a strategic asset
acquisition to establish a metals service center company in
Singapore. Most significantly, the Company completed our largest
to date acquisition (based on transaction value) of PNA Group
Holding Corporation (PNA), which included the
operating subsidiaries Delta Steel, Inc., Feralloy Corporation,
Infra-Metals Co., Metals Supply Company, Ltd., Precision
Flamecutting and Steel, Inc. and Sugar Steel Corporation. These
acquisitions expanded the Companys international presence,
as well as its presence in the U.S. Mr. Hannah also
directly supervises certain of our specialty subsidiaries.
President and COO Mr. Mollins, in addition to
supervising Mr. Hoffman, Mr. MacBeth and
Mr. Sales and the presidents of some of our larger
subsidiaries, was directly involved in the organic growth of the
Company and in planning the expansion of existing operations.
The presidents of the six PNA companies acquired in 2008 report
directly to Mr. Mollins, who spent considerable time
educating them on Reliances management strategy with
respect to gross profit margins and inventory turns in the
deteriorating environment in late 2008. Mr. Mollins also
oversees the capital expenditures of the Company; we spent a
record $151.9 million on capital expenditures in 2008. Both
Mr. Hannah and Mr. Mollins developed and implemented a
plan to respond quickly to falling prices and worsening economic
conditions by reducing expenses and increasing productivity.
EVP and CFO Mrs. Lewis supervises the Vice
President, Human Resources and the Vice President and Corporate
Controller, and serves on the committee overseeing the
restructuring of the Companys IT activities. Under
Mrs. Lewiss leadership, the Company managed its cash
flow so as to maintain a strong balance sheet allowing continued
access to capital markets, along with meeting all financial
reporting requirements and maintaining strong internal controls
throughout the Company. In addition, Mrs. Lewis spearheaded
the tender offers for approximately $725 million of
PNAs outstanding notes and the placement of a
$500 million term loan. The repayment of a significant
portion of the debt related to the PNA acquisition and adequate
liquidity allowed the Company to maintain an investment grade
credit rating.
Sr. VP, Operations Mr. Hoffman was appointed as
a named executive officer in October 2008 and for the remainder
of the year provided oversight for certain operating entities
and was instrumental in implementing a plan to respond quickly
to falling prices and worsening economic conditions by reducing
expenses and increasing productivity.
Sr. VP, Carbon Steel Operations Mr. MacBeth was
principally involved in maintaining and improving the
profitability, inventory turns and management of certain of our
carbon steel operations, and implementing the Companys
strategy for organic growth of these operations. The Company
expanded some of our existing facilities and updated our
processing equipment in certain key markets. Mr. MacBeth
was instrumental in implementing a plan to respond quickly to
falling prices and worsening economic conditions by reducing
expenses and increasing productivity
Sr. VP, Non-Ferrous Operations Mr. Sales was
involved in maintaining and improving the profitability,
inventory turns and management of certain of our non-ferrous
operations, implementing the Companys strategy for organic
growth for these operations and integrating certain
newly-acquired businesses into our existing operations.
Mr. Sales, in 2008, was involved in assisting in the
expansion of our Company into Singapore. In addition,
Mr. Sales was involved in the expansion of existing
facilities and updating of processing equipment at our
non-ferrous operations, and took an active role in supervising
certain of our Asian operations and implementing a more
substantial export compliance program. Mr. Sales is also on
the committee overseeing the Companys IT activities.
Mr. Sales was instrumental in implementing a plan to
respond quickly to falling prices and worsening economic
conditions by reducing expenses and increasing productivity
The performance of each of the named executive officers
contributed to the Companys strong cash flow and record
sales and net income.
15
Director
Compensation
In 2006, the Nominating and Governance Committee engaged ECG
Advisors, LLC as 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. An
updated review was performed in 2008 and it was determined that
the current director compensation levels were appropriate,
except that the retainer paid to the Lead Director was
increased. 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. Franklin R. Johnson and Andrew G. Sharkey, III are
the only directors who have not yet met this requirement. The
director compensation program was not further changed.
Certain
Federal Income Tax Consequences
The following summarizes certain Federal income tax consequences
relating to the Companys Stock Plans. 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 Plans 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 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
16
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 Corporate Officers Bonus
Plan is also designed to provide performance-based compensation,
with respect to 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 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 SERP has a change of control provision that was clarified by
the amendment and restatement of the plan as of January 1,
2009. Upon a change of control, the participants become 100%
vested in their benefits, which are calculated based on
compensation for the ten years prior to the change of control,
and the benefit due is paid out in accordance with the plan.
In December 2008, the Company adopted a deferred compensation
plan, but no executive officer received any benefits under this
plan in 2008, other than James D. Hoffman who received a Company
contribution under the plan calculated based on the formula
applicable to him under the Earle M. Jorgensen Company plan,
which was then replaced by the Reliance Deferred Compensation
Plan. The purpose of the deferred compensation plan is to allow
the Company to provide supplemental retirement benefits to
participants in the plan and to allow participants to defer
compensation to future years to meet their individual financial
needs. For Company contributions, participants vest based on
Years of Plan Participation at a rate of 20% per Plan Year.
Participants vest 100% upon reaching Retirement (age 65 and
ten years of service), Change in Control or Death, except that
participants in the plan who previously participated in a
subsidiary deferred compensation plan will be vested in
accordance with a separate vesting schedule that matches the
prior plan. Mr. Hoffman is 100% vested in the Company
contribution. Certain subsidiaries maintain deferred
compensation plans with change of control provisions, but, other
than Mr. Hoffmans prior participation in the EMJ
plan, the executive officers do not participate in these plans.
17
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 was a member of the Compensation Committee from
January 2007 to January 2009. Mr. Sharkey became a member
in July 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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Douglas M. Hayes
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Mark V. Kaminski
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Andrew G. Sharkey, III
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Richard J. Slater
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Leslie A. Waite, Chairman
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18
EXECUTIVE
COMPENSATION
The following table summarizes certain information concerning
the compensation that we paid for the years 2008, 2007 and 2006
to our Chairman and Chief Executive Officer, who was our only
principal executive officer during these years, our Executive
Vice President and Chief Financial Officer, who was our only
principal financial officer during these year, and each of the
other four most highly compensated executive officers who were
serving in that capacity at the end of 2008:
Summary
Compensation Tables
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Change in
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Pension Value
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and Nonqualified
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Non-Equity
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Deferred
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Name and Principal Position
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Year
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Salary ($)
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Bonus
($)(1)
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($)(2)
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($)(3)
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($)(4)
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($)(5)
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($)(6)
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($)
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David H. Hannah
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2008
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$
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700,000
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$
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1,883,000
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$
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$
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950,625
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$
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$
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2,369,595
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$
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20,529
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$
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5,923,749
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Chairman and Chief
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2007
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$
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636,000
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$
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1,710,840
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$
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$
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529,640
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$
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$
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497,547
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$
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20,136
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$
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3,394,163
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Executive Officer
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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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Gregg J. Mollins
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2008
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$
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520,000
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$
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1,398,800
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$
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$
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620,133
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$
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$
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1,198,902
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$
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20,529
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$
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3,758,364
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President and Chief
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2007
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$
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487,600
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$
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1,311,644
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$
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$
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415,495
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$
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$
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400,173
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$
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20,136
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$
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2,635,048
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Operating Officer
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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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2,546,633
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Karla R. Lewis
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2008
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$
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375,000
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$
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1,008,750
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$
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$
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578,712
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$
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$
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378,857
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$
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20,529
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$
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2,361,848
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Executive Vice
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2007
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$
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350,000
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$
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941,500
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$
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$
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415,495
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$
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$
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76,353
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$
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20,136
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$
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1,803,484
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President and Chief
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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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Financial Officer
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James D.
Hoffman(7)
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2008
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$
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321,203
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$
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762,992
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$
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$
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215,852
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$
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$
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$
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48,996
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$
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1,349,043
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Senior Vice President, Operations
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James P. MacBeth
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2008
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$
|
320,000
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$
|
860,800
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$
|
|
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$
|
371,761
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$
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$
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1,314,652
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$
|
20,529
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$
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2,887,742
|
|
Senior Vice President,
|
|
|
2007
|
|
|
$
|
315,000
|
|
|
$
|
847,350
|
|
|
$
|
|
|
|
$
|
277,497
|
|
|
$
|
|
|
|
$
|
595,836
|
|
|
$
|
20,136
|
|
|
$
|
2,055,819
|
|
Carbon Steel Operations
|
|
|
2006
|
|
|
$
|
300,000
|
|
|
$
|
900,000
|
|
|
$
|
|
|
|
$
|
198,840
|
|
|
$
|
|
|
|
$
|
541,582
|
|
|
$
|
19,878
|
|
|
$
|
1,960,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William K. Sales, Jr.
|
|
|
2008
|
|
|
$
|
330,000
|
|
|
$
|
887,700
|
|
|
$
|
|
|
|
$
|
371,761
|
|
|
$
|
|
|
|
$
|
416,840
|
|
|
$
|
20,529
|
|
|
$
|
2,026,830
|
|
Senior Vice President,
|
|
|
2007
|
|
|
$
|
315,000
|
|
|
$
|
847,350
|
|
|
$
|
|
|
|
$
|
277,497
|
|
|
$
|
|
|
|
$
|
367,878
|
|
|
$
|
20,136
|
|
|
$
|
1,827,861
|
|
Non-Ferrous Operations
|
|
|
2006
|
|
|
$
|
300,000
|
|
|
$
|
900,000
|
|
|
$
|
|
|
|
$
|
198,840
|
|
|
$
|
|
|
|
$
|
326,916
|
|
|
$
|
19,878
|
|
|
$
|
1,745,634
|
|
|
|
|
(1) |
|
The amounts shown were paid under
our Key-Man Incentive Plan for 2007 and 2006 and under the
Corporate Officers Bonus Plan for 2008.
|
|
(2) |
|
No restricted stock was awarded to
any executive officer in 2008, 2007 or 2006.
|
|
(3) |
|
The amounts in this column do not
necessarily represent the value of the stock option awards, nor
are they a prediction of what the employee may realize. The
amounts in this column reflect the dollar amount of expense
recognized for financial statement reporting purposes for the
years ended December 31, 2008, 2007 and 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 portions of stock option awards made
during 2005, 2007 and 2008. No option awards were made during
2006 or 2004. Assumptions used in the calculation of these
amounts are included in Note 10 in the Companys Notes
to Consolidated Financial Statements for the years ended
December 31, 2008, 2007, and 2006, included in the
Companys Annual Report on Form
10-K for
each of the respective years.
|
|
(4) |
|
The Company has no non-equity
incentive compensation plan other than the Corporate Officers
Bonus Plan, which went into effect for 2008, and the Key-Man
Incentive Plan which is reported as a Bonus.
|
|
(5) |
|
The amounts represent the change in
the present 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, 2008.
The amounts in the table do not reflect the impact of the
amendment that became effective as of January 1, 2009 and
that we would expect would reduce these amounts.
|
|
(6) |
|
The amounts represent allocations
to the accounts of each of the named executive officers, with
the exception of Mr. Hoffman, of contributions made to our
ESOP of $5,229, the matching contributions to our 401(k)
retirement savings plan of $6,900 and an annual car allowance of
$8,400. Mr. Hoffmans All Other
Compensation amount is comprised of a company contribution
of $38,344 to the Reliance Deferred Compensation Plan based on
the formula applicable for the
|
19
|
|
|
|
|
subsidiary plan that he
participated in prior to becoming an executive officer as of
October 1, 2008, matching contribution to our 401(k)
retirement savings plan of $7,985, auto allowance of $2,100 and
other compensation of $567.
|
|
(7) |
|
James D. Hoffman was appointed an
executive officer as of October 1, 2008.
|
Grants of
Plan Based Awards
The Company has no non-equity or equity incentive plans for its
executive officers other than the Corporate Officers Bonus Plan
and the Amended and Restated Stock Option and Restricted Stock
Plan as disclosed on the Summary Compensation Table. The
following table sets forth plan-based awards granted to the
executive officers named above during 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
Estimated Future
|
|
|
Awards:
|
|
|
Awards:
|
|
|
Exercise or
|
|
|
Grant Date
|
|
|
|
|
|
|
Under Non-Equity Incentive
|
|
|
Payouts Under Equity
|
|
|
Number of
|
|
|
Number of
|
|
|
Base Price
|
|
|
Fair Value
|
|
|
|
|
|
|
Plan
Awards(1)
|
|
|
Incentive Plan Awards
|
|
|
Shares of
|
|
|
Securities
|
|
|
of Option
|
|
|
of Stock and
|
|
|
|
Grant
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Stock or
|
|
|
Underlying
|
|
|
Awards
|
|
|
Option
|
|
Name
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Units (#)
|
|
|
Options (#)
|
|
|
($/sh)
|
|
|
Awards ($)
|
|
|
David H. Hannah
|
|
|
|
|
|
|
98,000
|
|
|
|
700,000
|
|
|
|
2,100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
$
|
56.80
|
|
|
$
|
19.56
|
|
Gregg J. Mollins
|
|
|
|
|
|
|
72,800
|
|
|
|
520,000
|
|
|
|
1,560,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
$
|
56.80
|
|
|
$
|
19.56
|
|
Karla R. Lewis
|
|
|
|
|
|
|
52,500
|
|
|
|
375,000
|
|
|
|
1,125,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
$
|
56.80
|
|
|
$
|
19.56
|
|
James D. Hoffman
|
|
|
|
|
|
|
46,200
|
|
|
|
330,000
|
|
|
|
990,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
$
|
56.80
|
|
|
$
|
19.56
|
|
James P. MacBeth
|
|
|
|
|
|
|
44,800
|
|
|
|
320,000
|
|
|
|
960,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
$
|
56.80
|
|
|
$
|
19.56
|
|
William K. Sales, Jr.
|
|
|
|
|
|
|
46,200
|
|
|
|
330,000
|
|
|
|
990,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
$
|
56.80
|
|
|
$
|
19.56
|
|
|
|
|
(1) |
|
Reflects the threshold, target and maximum payout amounts of
non-equity incentive plan awards that were awarded for 2008 and
were paid out in 2009 under the Corporate Officers Bonus Plan.
The threshold, target and maximum payout amounts were determined
in accordance with the terms of the Corporate Officers Bonus
Plan, applying the maximum bonus amounts established by the
Compensation and Stock Option Committee. The award amount is a
percent of the named executive officers current year
salary, with the percent based upon the current year return on
beginning shareholders equity. In order to receive any
award, the return on beginning shareholders equity must be
at least 6%, which results in an award of 14% of the named
executive officers current year base salary. The target
amount is based on a return on beginning shareholders
equity of 12%, which is based on the Companys long-term
average return on beginning shareholders equity, and
results in an award of 100% of the named executive
officers base salary. The maximum amount is based on a
return on beginning equity of 25% or higher, which results in an
award of 300% of the named executive officers current year
salary. These columns do not reflect the actual amounts paid,
but only provide an example of how bonuses would be calculated
under the Corporate Officers Bonus Plan if the specified
levels of return on beginning shareholders equity were
achieved. |
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, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
Shares Acquired
|
|
|
Value Realized
|
|
|
Acquired on
|
|
|
Value Realized
|
|
Name
|
|
on Exercise (#)
|
|
|
on Exercise
($)(1)
|
|
|
Vesting (#)
|
|
|
on Vesting ($)
|
|
|
David H. Hannah
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
Gregg J. Mollins
|
|
|
62,500
|
|
|
$
|
2,490,149
|
|
|
|
|
|
|
$
|
|
|
Karla R. Lewis
|
|
|
80,000
|
|
|
$
|
3,349,602
|
|
|
|
|
|
|
$
|
|
|
James D.
Hoffman(2)
|
|
|
2,676
|
|
|
$
|
98,102
|
|
|
|
|
|
|
$
|
|
|
James P. MacBeth
|
|
|
50,000
|
|
|
$
|
2,465,003
|
|
|
|
|
|
|
$
|
|
|
William K. Sales, Jr.
|
|
|
50,000
|
|
|
$
|
2,700,966
|
|
|
|
|
|
|
$
|
|
|
|
|
|
(1) |
|
The amounts represent the difference between the exercise price
and fair market value at date of exercise of non-qualified stock
options. |
|
(2) |
|
Mr. Hoffman exercised and held 2,676 shares of
incentive stock options during 2008 before he was appointed an
executive officer. On the date of the exercise, the fair market
value of the shares exceeded the cost of the shares purchased by
$98,102. In accordance with incentive stock option grant
provisions, no taxable compensation resulted from this
transaction since the shares purchased were not sold or
transferred. |
20
Outstanding
Equity Awards at Fiscal Year-End
The following table sets forth outstanding equity awards held by
the executive officers named above at December 31, 2008,
all of which were granted under the Companys Amended and
Restated Stock Option and Restricted Stock Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Number
|
|
|
Market
|
|
|
Number of
|
|
|
Payout Value
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Securities
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
Value of
|
|
|
Unearned
|
|
|
of Unearned
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
or Units
|
|
|
Shares or
|
|
|
Shares, Units
|
|
|
Shares, Units
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Unexercised
|
|
|
|
|
|
|
|
|
of Stock
|
|
|
Units of
|
|
|
or Other
|
|
|
or Other
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unearned
|
|
|
Option
|
|
|
Option
|
|
|
That
|
|
|
Stock That
|
|
|
Rights That
|
|
|
Rights That
|
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Options
|
|
|
Exercise
|
|
|
Expiration
|
|
|
Have Not
|
|
|
Have Not
|
|
|
Have
|
|
|
Have Not
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable(1)
|
|
|
(#)
|
|
|
Price ($)
|
|
|
Date
|
|
|
Vested
|
|
|
Vested
|
|
|
Not Vested
|
|
|
Vested
|
|
|
David H. Hannah
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
|
|
|
$
|
24.58
|
|
|
|
10/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
|
|
|
37,500
|
|
|
|
|
|
|
$
|
44.86
|
|
|
|
3/2/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
$
|
56.80
|
|
|
|
2/26/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregg J. Mollins
|
|
|
37,500
|
|
|
|
37,500
|
|
|
|
|
|
|
$
|
24.58
|
|
|
|
10/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
|
$
|
44.86
|
|
|
|
3/2/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
$
|
56.80
|
|
|
|
2/26/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karla R. Lewis
|
|
|
62,500
|
|
|
|
37,500
|
|
|
|
|
|
|
$
|
24.58
|
|
|
|
10/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
30,000
|
|
|
|
|
|
|
$
|
44.86
|
|
|
|
3/2/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
|
$
|
56.80
|
|
|
|
2/26/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James D.
Hoffman(2)
|
|
|
6,250
|
|
|
|
18,750
|
|
|
|
|
|
|
$
|
44.86
|
|
|
|
3/2/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
|
|
|
$
|
56.80
|
|
|
|
2/26/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,676
|
|
|
|
|
|
|
$
|
24.92
|
|
|
|
6/17/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James P. MacBeth
|
|
|
75,000
|
|
|
|
25,000
|
|
|
|
|
|
|
$
|
24.58
|
|
|
|
10/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,250
|
|
|
|
18,750
|
|
|
|
|
|
|
$
|
44.86
|
|
|
|
3/2/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
$
|
56.80
|
|
|
|
2/26/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William K. Sales, Jr.
|
|
|
75,000
|
|
|
|
25,000
|
|
|
|
|
|
|
$
|
24.58
|
|
|
|
10/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,250
|
|
|
|
18,750
|
|
|
|
|
|
|
$
|
44.86
|
|
|
|
3/2/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
$
|
56.80
|
|
|
|
2/26/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The table below shows the vesting schedule for all unexercisable
options. All options vest at the rate of 25% per year,
commencing one year from the date of the grant: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting Schedule For Unexercisable Options
|
|
Name
|
|
Grant Date
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
David H. Hannah
|
|
|
10/18/2005
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2007
|
|
|
|
12,500
|
|
|
|
12,500
|
|
|
|
12,500
|
|
|
|
|
|
|
|
|
2/26/2008
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregg J. Mollins
|
|
|
10/18/2005
|
|
|
|
37,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2007
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
2/26/2008
|
|
|
|
12,500
|
|
|
|
12,500
|
|
|
|
12,500
|
|
|
|
12,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karla R. Lewis
|
|
|
10/18/2005
|
|
|
|
37,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2007
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
2/26/2008
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James D. Hoffman
|
|
|
6/17/2005
|
|
|
|
2,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2007
|
|
|
|
6,250
|
|
|
|
6,250
|
|
|
|
6,250
|
|
|
|
|
|
|
|
|
2/26/2008
|
|
|
|
1,875
|
|
|
|
1,875
|
|
|
|
1,875
|
|
|
|
1,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James P. MacBeth
|
|
|
10/18/2005
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2007
|
|
|
|
6,250
|
|
|
|
6,250
|
|
|
|
6,250
|
|
|
|
|
|
|
|
|
2/26/2008
|
|
|
|
6,250
|
|
|
|
6,250
|
|
|
|
6,250
|
|
|
|
6,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William K. Sales, Jr.
|
|
|
10/18/2005
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2007
|
|
|
|
6,250
|
|
|
|
6,250
|
|
|
|
6,250
|
|
|
|
|
|
|
|
|
2/26/2008
|
|
|
|
6,250
|
|
|
|
6,250
|
|
|
|
6,250
|
|
|
|
6,250
|
|
21
|
|
|
(2) |
|
James D. Hoffman was appointed an executive officer as of
October 1, 2008. Prior to that time, as an officer of Earle
M. Jorgensen Company (EMJ), a subsidiary of
Reliance, Mr. Hoffman received stock options under an EMJ
stock option plan, which options at the time of Reliances
acquisition of EMJ were converted into options to acquire
Reliance common stock. Stock options with June 17, 2005
grant date were originally issued under the EMJ stock option
plan. All other stock options of Mr. Hoffman were granted
under the Reliance Stock Plan. |
Stock
Option Plans
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). The Board
of Directors authorized 6,000,000 shares of the
Companys common stock to be reserved for issuance upon
exercise of stock options granted under the 2004 Plan. On
May 17, 2006, as approved by the shareholders on that date,
the 2004 Plan was amended and restated to allow the Board to
extend the term of subsequently granted stock options to 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 5,974,125 shares
available for issuance and 3,191,375 options granted and
outstanding under the 2004 Plan as of December 31, 2008.
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. Options granted in 2007
and 2008 have terms of seven years. 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 also allows for restricted
shares of the Companys common stock to be issued, subject
to such restrictions as the Compensation and Stock Option
Committee may determine to be appropriate. The Stock Plan
expires by its terms as of December 31, 2013.
In February 2008, the Compensation and Stock Option Committee
recommended that the independent, non-management directors on
the Board approve, which they did, a total grant of options to
acquire 1,132,000 shares of the Companys common stock
with an exercise price of $56.80 per share and with a term of
seven years, becoming exercisable at the rate of 25% per year
beginning on the first anniversary of the grant. The named
executive officers received 240,000 of these stock options.
Mr. Hoffman was not a named executive officer at the time
of the grant, but was granted options to purchase 7,500 at an
exercise price of $56.80 with the same terms and conditions.
In connection with the acquisition of Earle M. Jorgensen Company
(EMJ), 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 was 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. There are
32,306 shares available for issuance and 85,647 options
granted and outstanding under the EMJ plan as of
December 31, 2008. James D. Hoffman, who became an
executive officer of Reliance as of October 1, 2008, holds
2,676 of these options.
22
Incentive
Plans
In February 2008 the Compensation and Stock Option Committee
recommended and the independent non-management directors on the
Board of Directors approved a Corporate Officers Bonus Plan that
is a non-equity incentive bonus plan available to all officers
of Reliance, including the named executive officers. The
Corporate Officers Bonus Plan is an annual cash incentive
payment based on the Companys performance. The amounts of
the bonuses for the named executive officers are the result of a
quantitative calculation based on the annual return on beginning
shareholders equity of the Company (net income for the
year, as reported, divided by the shareholders equity at
the beginning of the year. Net income and shareholders
equity may be adjusted due to certain non-recurring events as
determined by the Compensation and Stock Option Committee and
approved by the independent directors.). The Compensation and
Stock Option Committee has more discretion for corporate
officers other than the named executive officers to determine
annually, based on both qualitative and subjective criteria,
what maximum percent of base salary would be paid as a bonus.
For the named executive officers, the Compensation Committee has
adopted a sliding scale with percentages of base salary
corresponding to certain rates of return on beginning
shareholders equity of the Company. The scale provides for
a bonus to be paid to named executive officers if the rate of
return on beginning shareholders equity is 6% or more,
with the corresponding percent of salary ranging from 14% to
300%. A bonus of 100% of base salary is the target and would be
attained if the Companys rate of return on beginning
shareholders equity was 12%. A maximum of 300% of base
salary may be attained if the rate of return was 25% or greater.
Since 1965, we have maintained a Key-Man Incentive Plan for our
division managers and, until January 1, 2008, for our
corporate officers, with periodic amendments. Most recently, we
modified the Key-Man Incentive Plan in January 1999 to more
accurately reflect the financial and operational conditions of
Reliance and the metals service center 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 our
acquisition of EMJ. That pool is then adjusted by additional
calculations, including the accrual of the calculated
incentives. Our corporate officers, prior to 2008, were and
certain Reliance division managers are eligible to participate
in the pool. The incentive compensation bonus is payable 75% in
cash and 25% in our common stock, except that corporate officers
had the option of having this bonus paid 100% in cash. The
Company has reserved 157,698 shares of common stock for
issuance as restricted stock under the Key-Man Incentive Plan as
of December 31, 2008. Bonuses are generally paid and the
restricted stock issued in or about March of each year after the
Companys financial results for the prior year have been
announced. Officers and division/branch managers of the
subsidiaries are not currently eligible to participate under the
Key-Man Incentive Plan.
Our divisions and subsidiaries have separate incentive bonus
plans structured to allow them to participate in pretax income
if the income exceeds established goals to provide bonuses to
certain of the officers and managers, based upon the earnings of
the respective subsidiary or division. These bonus plans are
reviewed periodically by the executive officers of Reliance and
the subsidiary boards 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, 2008.
23
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 and Deferred Compensation
Plan
In 1996, Reliance adopted a Supplemental Executive Retirement
Plan (SERP), which provides post-retirement benefits
to the named executive officers, among others. Under the SERP as
adopted and in effect through December 31, 2008, benefit
payments equal 50% of the average of the participants
highest five years of the last ten years of total cash
compensation, offset by amounts received from the Company
contributions to and earnings on the participants 401(k)
Plan and the ESOP accounts, as well as amounts received through
social security. The SERP was amended in 1999 to provide for a
pre-retirement death benefit. At December 31, 2008,
separate SERPs and a deferred compensation plan existed
for certain 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.
Effective January 1, 2009, the SERP was amended and
restated principally to shift the risk of performance of the
individuals retirement plan investments from the Company
to the participant. Other objectives were to freeze the SERP to
new participants, to bring the documents into compliance with
IRS Rule 409A and to clarify certain provisions of the
SERP. The most significant change was to eliminate the offsets
to the participants benefit payments. Under the SERP as
amended, benefit payments will equal 38% of the average of the
participants highest five years of the last ten years of
total cash compensation, without any deduction. Prior to the
amendment, the benefit was calculated as 50% of the average of
the participants highest five years of the last ten years
of total cash compensation, subject to the offsets described
above. The new percentage should provide participants with
approximately the same benefits that they would have received
under the calculation required by the SERP before the amendment.
Other changes include paying the preretirement death benefit
over a period of ten years, making the change of control benefit
payable to all participants in a lump sum in the event of a
change of control, and a delay in payments for specified
employees as defined under Rule 409A. Reliance also
adopted a deferred compensation plan effective December 1,
2008, but no named executive officer received any contributions
under this plan for the 2008 year other than James D.
Hoffman, who is not a participant in the SERP and who received a
Company contribution based on his participation in a subsidiary
deferred compensation plan that was replaced by the Reliance
Deferred Compensation Plan.
Certain of our subsidiaries, including PNA and Earle M.
Jorgensen Company, had existing change of control agreements and
deferred compensation plans at the time of our acquisition.
Certain participants of these subsidiary plans entered into
agreements to release their rights under those plans and to
become participants in the Reliance Deferred Compensation Plan.
The Reliance deferred compensation plan is, administered by the
Compensation Committee, but the other plans are not.
24
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, 2008, is as follows:
Pension
Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
Years
|
|
|
|
|
|
Payments
|
|
|
|
|
|
Credited
|
|
|
Present Value of
|
|
|
During the
|
|
|
|
|
|
Service
|
|
|
Accumulated
|
|
|
Last Fiscal
|
|
Name
|
|
Plan Name
|
|
(#)
|
|
|
Benefit
($)(1)
|
|
|
Year ($)
|
|
|
David H. Hannah
|
|
Supplemental Executive Retirement Plan
|
|
|
28
|
|
|
$
|
3,891,738
|
|
|
$
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregg J. Mollins
|
|
Supplemental Executive Retirement Plan
|
|
|
22
|
|
|
$
|
2,158,686
|
|
|
$
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karla R. Lewis
|
|
Supplemental Executive Retirement Plan
|
|
|
17
|
|
|
$
|
378,857
|
|
|
$
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James P. MacBeth
|
|
Supplemental Executive Retirement Plan
|
|
|
27
|
|
|
$
|
3,118,863
|
|
|
$
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William K. Sales, Jr.
|
|
Supplemental Executive Retirement Plan
|
|
|
11
|
|
|
$
|
812,693
|
|
|
$
|
-0-
|
|
|
|
|
(1) |
|
The amounts shown are as of December 31, 2008 and do not
reflect any impact of the SERP amendment effective
January 1, 2009, which we expect would reduce these amounts. |
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. 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
$1,100,000 for 2008. 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 are not
eligible to participate under our ESOP.
25
Equity
Compensation Table
The following table provides information as of December 31,
2008 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
|
|
|
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Number of Securities
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
Remaining Available
|
|
Plan Category
|
|
and Rights
|
|
|
and Rights
|
|
|
for Future Issuance
|
|
|
Equity compensation plans approved by security holders
|
|
|
3,418,772
|
|
|
$
|
41.57
|
|
|
|
6,239,431
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,418,772
|
|
|
$
|
41.57
|
|
|
|
6,239,431
|
|
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.
In 2006, 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
or any meeting of the non-management directors held on a day
other than the day of a regular Board meeting 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 $15,000 annual retainer to the Lead Director who chairs
the non-management Board meetings, all of which fees are paid
quarterly. Mr. Hannah, who was elevated to the position of
Chairman in October 2007, does not receive an annual retainer or
other fees for his service as Chairman and as a director.
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 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
26
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, 2008 there were
233,000 shares available for issuance and 141,750 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.
Franklin R. Johnson and Andrew G. Sharkey, III are the only
directors who have not yet met this requirement.
Director
Summary Compensation Table
The following table sets forth certain information regarding
fees paid and expense for outstanding options under the
Directors Plan during 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
or Paid in
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
Deferred
|
|
|
All Other
|
|
|
|
|
Name
|
|
Cash
|
|
|
Awards
|
|
|
Awards(1)(2)
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Total
|
|
|
Joe D.
Crider(3)
|
|
$
|
55,500
|
|
|
$
|
|
|
|
$
|
58,168
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
71,124
|
|
|
$
|
184,792
|
|
Thomas W. Gimbel
|
|
$
|
96,250
|
|
|
$
|
|
|
|
$
|
151,541
|
|
|
$
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
247,791
|
|
Douglas M. Hayes
|
|
$
|
124,250
|
|
|
$
|
|
|
|
$
|
150,752
|
|
|
$
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
275,002
|
|
Franklin R. Johnson
|
|
$
|
131,250
|
|
|
$
|
|
|
|
$
|
150,752
|
|
|
$
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
282,002
|
|
Mark V. Kaminski
|
|
$
|
131,250
|
|
|
$
|
|
|
|
$
|
164,456
|
|
|
$
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
295,706
|
|
Andrew G. Sharkey, III
|
|
$
|
102,500
|
|
|
$
|
|
|
|
$
|
94,480
|
|
|
$
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
196,980
|
|
Richard J. Slater
|
|
$
|
95,000
|
|
|
$
|
|
|
|
$
|
150,752
|
|
|
$
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
245,752
|
|
Leslie A. Waite
|
|
$
|
127,500
|
|
|
$
|
|
|
|
$
|
150,752
|
|
|
$
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
278,252
|
|
|
|
|
(1) |
|
The amounts in this column reflect the dollar amount of expense
recognized for financial statement reporting purposes for the
year ended December 31, 2008, in accordance with
SFAS No. 123(R). This expense is related to portions
of stock option awards made in 2004, 2007 and 2008. Assumptions
used in the calculation of these amounts 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 years ended December 31, 2008, 2007 and 2006. |
27
|
|
|
(2) |
|
The table below shows the aggregate number of options
outstanding (both exercisable and unexercisable) and their
respective grant date fair values for each director at
December 31, 2008: |
|
|
|
|
|
|
|
|
|
|
|
Grant Date Per
|
|
|
Number of Options
|
|
Director
|
|
Share Fair Value
|
|
|
Outstanding
|
|
|
Thomas W. Gimbel
|
|
$
|
6.44
|
|
|
|
6,000
|
|
|
|
$
|
15.79
|
|
|
|
6,000
|
|
|
|
$
|
25.24
|
|
|
|
6,000
|
|
|
|
$
|
25.54
|
|
|
|
6,000
|
|
Douglas M. Hayes
|
|
$
|
6.44
|
|
|
|
6,000
|
|
|
|
$
|
15.79
|
|
|
|
6,000
|
|
|
|
$
|
25.24
|
|
|
|
6,000
|
|
|
|
$
|
25.54
|
|
|
|
6,000
|
|
Franklin R. Johnson
|
|
$
|
15.79
|
|
|
|
6,000
|
|
|
|
$
|
25.24
|
|
|
|
6,000
|
|
|
|
$
|
25.54
|
|
|
|
6,000
|
|
Mark V. Kaminski
|
|
$
|
4.39
|
|
|
|
3,750
|
|
|
|
$
|
6.44
|
|
|
|
6,000
|
|
|
|
$
|
15.79
|
|
|
|
6,000
|
|
|
|
$
|
25.24
|
|
|
|
6,000
|
|
|
|
$
|
25.54
|
|
|
|
6,000
|
|
Andrew G. Sharkey, III
|
|
$
|
25.54
|
|
|
|
6,000
|
|
Richard J. Slater
|
|
$
|
15.79
|
|
|
|
6,000
|
|
|
|
$
|
25.24
|
|
|
|
6,000
|
|
Leslie A. Waite
|
|
$
|
6.44
|
|
|
|
6,000
|
|
|
|
$
|
15.79
|
|
|
|
6,000
|
|
|
|
$
|
25.24
|
|
|
|
6,000
|
|
|
|
$
|
25.54
|
|
|
|
6,000
|
|
|
|
|
(3) |
|
Mr. Crider was the chief executive officer of the Company
prior to his retirement in January 1999 and was a director until
May 2008. Mr. Crider is a participant in the Companys
SERP and received payments during 2008 as his retirement
benefits under the SERP in addition to the directors fees. |
28
SECURITIES
OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of
January 31, 2009, 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,
|
|
|
9,076,116
|
(3)
|
|
|
12.38
|
%
|
Trustee of Florence A. Neilan Trust dated August 1, 2006
2670 Lorain Rd.
San Marino, CA 91108
|
|
|
|
|
|
|
|
|
Barclays Global Investors, NA
|
|
|
4,544,800
|
(4)
|
|
|
6.20
|
%
|
400 Howard Street
San Francisco, CA 94105
|
|
|
|
|
|
|
|
|
Royce & Associates, LLC
|
|
|
4,180,073
|
(5)
|
|
|
5.70
|
%
|
1414 Avenue of the Americas
New York, NY 10019
|
|
|
|
|
|
|
|
|
Lord, Abbett & Co. LLC
|
|
|
4,104,687
|
(6)
|
|
|
5.60
|
%
|
90 Hudson Street
Jersey City, NJ 07302
|
|
|
|
|
|
|
|
|
David H. Hannah
|
|
|
350,000
|
(7)
|
|
|
*
|
|
Douglas M. Hayes
|
|
|
37,195
|
(8)
|
|
|
*
|
|
2545 Roscomare Rd.
Los Angeles, CA 90077
|
|
|
|
|
|
|
|
|
Franklin R. Johnson
|
|
|
17,000
|
(9)
|
|
|
*
|
|
350 South Grand Avenue, Suite 4800
Los Angeles, CA 90071
|
|
|
|
|
|
|
|
|
Mark V. Kaminski
|
|
|
41,750
|
(10)
|
|
|
*
|
|
3521 Winterberry Circle
Louisville, KY 40207
|
|
|
|
|
|
|
|
|
Gregg J. Mollins
|
|
|
212,682
|
(11)
|
|
|
*
|
|
Andrew G. Sharkey, III
|
|
|
6,568
|
|
|
|
*
|
|
10106 Harewood Court
Great Falls, VA 22066
|
|
|
|
|
|
|
|
|
Richard J. Slater
|
|
|
12,500
|
(12)
|
|
|
*
|
|
1235 Hillcrest Avenue
Pasadena, CA 91106
|
|
|
|
|
|
|
|
|
Leslie A. Waite
|
|
|
136,812
|
(13)
|
|
|
*
|
|
55 South Lake Street, Suite 750
Pasadena, CA 91101
|
|
|
|
|
|
|
|
|
James D. Hoffman
|
|
|
23,632
|
(14)
|
|
|
*
|
|
Karla R. Lewis
|
|
|
172,436
|
(15)
|
|
|
*
|
|
James P. MacBeth
|
|
|
151,829
|
(16)
|
|
|
*
|
|
William K. Sales, Jr.
|
|
|
141,508
|
(17)
|
|
|
*
|
|
All directors and executive officers as a group (15 persons)
|
|
|
10,446,252
|
(18)
|
|
|
14.13
|
%
|
|
|
|
* |
|
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. |
29
|
|
|
(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 9,076,116 shares reported based
on most recent Form 4 filed by Mr. Gimbel,
(a) 8,396,180 shares are held by Thomas W. Gimbel as
Trustee of the Florence A. Neilan Trust dated August 1,
2006, (b) 640,736 shares are owned by Thomas W.
Gimbel, and (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 18,000 shares issuable upon the
exercise of options held by Mr. Gimbel with exercise prices
of $18.31 to $61.33 per share. |
|
(4) |
|
A Schedule 13G was filed in February 2009 on behalf of a
group that includes Barclays Global Investors, NA, which holds
sole voting power over 2,546,684 shares of Reliance common
stock and sole dispositive power over 3,047,111 shares. The
Schedule 13G was a group filing which also included
Barclays Global Fund Advisors, which holds sole voting
power over 857,527 shares and sole dispositive power over
1,217,631 shares; Barclays Global Investors, Ltd, which
holds sole voting power over 41,920 shares and sole
dispositive power over 112,392 shares; Barclays Global
Investors Japan Limited, which holds 110,044 with sole voting
and sole dispositive power; Barclays Global Investors Canada
Limited, which holds 49,414 shares with sole voting and
sole dispositive power; Barclays Global Investors Australia
Limited, which holds 8,208 shares with sole voting and sole
dispositive power; and Barclays Global Investors (Deutschland)
AG, which holds no shares of Reliance stock. The entities
identify themselves as banks or investment advisers or
non-U.S.
institutions. |
|
(5) |
|
Royce & Associates LLC filed an amended
Schedule 13-G
on January 30, 2009 in which it identifies itself as an
investment adviser, with sole voting and dispositive power over
the reported shares. |
|
(6) |
|
Lord, Abbett & Co. LLC filed a
Schedule 13-G
on February 13, 2009 in which it identifies itself as an
investment adviser having sole voting power over
3,738,187 shares and sole dispositive power over
4,104,687 shares. |
|
(7) |
|
Includes 100,000 shares issuable upon the exercise of
options held by Mr. Hannah, with exercise prices of $24.58
to $56.80 per share. All of the shares are owned jointly with
Mr. Hannahs wife. Excludes 27,171 shares with
respect to which Mr. Hannah has a vested right and shared
voting power pursuant to our Employee Stock Ownership Plan
(ESOP). |
|
(8) |
|
Includes 18,000 shares issuable upon the exercise of
options held by Mr. Hayes, with exercise prices of $18.31
to $61.33 per share. |
|
(9) |
|
Includes 12,000 shares issuable upon the exercise of
options held by Mr. Johnson, with exercise prices of $43.34
to $61.33 share. |
|
(10) |
|
Includes 21,750 shares issuable upon the exercise of
options held by Mr. Kaminski with exercise prices of $17.16
to $61.33 per share. |
|
(11) |
|
Includes 60,000 shares issuable upon the exercise of
options held by Mr. Mollins with exercise prices of $24.58
to $56.80 per share. All of the shares are owned jointly with
Mr. Mollins wife. Excludes 11,800 shares with
respect to which Mr. Mollins has a vested right and shared
voting power pursuant to our ESOP. |
|
(12) |
|
Includes 12,000 shares issuable upon the exercise of
options held by Mr. Slater, with exercise prices of $43.34
to $61.33 per share. |
|
(13) |
|
Includes 18,000 shares issuable upon the exercise of
options held by Mr. Waite, with exercise prices of $18.31
to $61.33 per share. |
|
(14) |
|
Includes 17,051 shares issuable upon the exercise of
options held by Mr. Hoffman, with exercise prices of $24.92
to $56.80 per share. |
|
(15) |
|
Includes 92,500 shares issuable upon the exercise of
options held by Mrs. Lewis, with exercise prices of $24.58
to $56.80 per share. Excludes 4,907 shares with respect to
which Mrs. Lewis has a vested right and shared voting power
pursuant to our ESOP. |
|
(16) |
|
Includes 93,750 shares issuable upon the exercise of
options held by Mr. MacBeth, with exercise prices of $24.58
to $56.80 per share. All of the shares are owned jointly with
Mr. MacBeths wife. Excludes |
30
|
|
|
|
|
10,818 shares with respect to which Mr. MacBeth has a
vested right and shared voting power pursuant to our ESOP. |
|
(17) |
|
Includes 93,750 shares issuable upon the exercise of
options held by Mr. Sales, with exercise prices of $24.58
to $56.80 per share. Excludes 1,884 shares with respect to
which Mr. Sales has a vested right and shared voting power
pursuant to our ESOP. |
|
(18) |
|
See notes 3 and 8 through 17, plus it includes
45,000 shares issuable upon the exercise of options held by
other executive officers, with exercise prices of $24.58 to
$56.80 per share. |
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
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
and annually reviews and approves managements succession
plan. The Board also reviews managements safety program
and record.
The Board of Directors consists of nine directors, but on
termination of Richard Slaters term, the number of
directors will be reduced to eight. 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. 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 2008, the Board of Directors met twelve
times, including meetings held by conference telephone call. 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 during the
period for which he has served as a director. All of the
directors attended the Annual Shareholders Meeting held in May
2008. 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
31
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 the Board of Directors as a 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. The Audit
Committee oversees the Companys internal audit function
and approves the compensation of the Internal Audit Director. In
2008, the Audit Committee met five times.
The Compensation and Stock Option Committee assists the Board in
determining the compensation of the Companys corporate
officers, including the named executive officers, recommends to
the Board annual and long-term compensation for the
Companys corporate officers, including the named executive
officers, and prepares an annual report on its activities and
determinations for inclusion in the Companys proxy
statement in accordance with applicable rules and regulations.
The Compensation Committee is charged with assisting the Board
to fulfill its obligations with respect to the Companys
compensation policies and does so by gathering both current and
historical information relevant to compensation paid to
corporate officers, including the named executive officers, of
the Company and a peer group identified by the Compensation
Committee, with the advice of a consultant, and from time to
time other public companies that the Compensation Committee
determines to be comparable. After reviewing that information
and information regarding the Companys performance and the
performance of individual officers and obtaining and discussing
recommendations for compensation for corporate officers with our
CEO, the Compensation Committee develops its own recommendations
for the compensation to be paid to the CEO and other corporate
officers. The Compensation Committee then presents these
recommendations to the non-management members of the Board of
Directors in executive session. The independent, non-management
directors of the Board make the final determination of the
compensation to be paid to the CEO and other corporate officers.
In addition to its annual review of the compensation of
corporate officers of Reliance, the Compensation Committee
administers our stock option and restricted stock plans, the
Reliance Supplemental Executive Retirement Plan and the Reliance
Deferred Compensation Plan. The Compensation 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; provided that such determinations relating to
corporate officers are subject to the approval of the
independent, non-management directors of the Board. 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 2008, the Compensation and Stock Option
Committee met five times, but conferred by phone and email as
needed.
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
32
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 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 October 2007,
the Nominating and Governance Committee recommended that David
H. Hannah, the Companys Chief Executive Officer, succeed
Joe D. Crider as Chairman, and the independent, non-management
directors approved that promotion. In 2008, the Nominating and
Governance Committee met three 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.
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. 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 and the Company no longer retains
PricewaterhouseCoopers. The Board has determined that, in light
of the length of time that Mr. Johnson has been retired,
his prior relationship is 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
is 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 is an independent
director of KBR, Inc., which was a controlled affiliate of
Halliburton Co. 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
33
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.
NYSE
Reliance has provided our Annual Written Affirmation and Annual
CEO Certification to the New York Stock Exchange.
Compensation
Committee Interlocks and Insider Participation
The members of the Compensation and Stock Option Committee for
2008 were Douglas M. Hayes, Mark V. Kaminski, Andrew G.
Sharkey, III, Richard Slater and Leslie A. Waite, who
served as Chairman. Mr. Slater was a member of the
Compensation Committee from January 2007 to January 2009.
Mr. Sharkey became a member in July 2007. No member of the
Compensation and Stock Option Committee who served during 2008
was an officer or employee of Reliance, was formerly an officer
of Reliance or had any other relationship requiring disclosure.
34
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 2008, the Audit Committee, which is composed
entirely of independent, non-employee directors, met five times.
The Audit Committee reviewed its Charter and recommended no
changes in its Charter to the Board.
In fulfilling its responsibilities under the Charter, the Audit
Committee reviewed and discussed our audited financial
statements for 2008 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 year ended December 31, 2008 for filing with the
Securities and Exchange Commission. The Audit Committee also
evaluated and selected KPMG LLP as the Reliance independent
registered public accounting firm for 2009. This selection was
ratified by the Board of Directors.
|
|
|
|
|
|
|
Douglas M. Hayes
|
|
Franklin R. Johnson,
Chairman
|
|
Mark V. Kaminski
|
|
Leslie A. Waite
|
35
CERTAIN
TRANSACTIONS
In 2008, there were no related party transactions with any
director or executive officer of the Company or any other
related person, as defined in Rule 404 under
Regulation S-K
promulgated under the Securities Act of 1933, as amended, and
none is proposed. The Board of Directors has not adopted any
policies or procedures with respect to the review of any
proposed transactions other than to require that all material
facts be disclosed to the full Board of Directors and that all
disinterested persons will then review and consider what, if any
actions need to be taken.
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,
2008, all persons have complied with the requirements of
Section 16(a), except that we received the allocation of
the shares acquired by our Employee Stock Ownership Plan Trustee
after the deadline for filing the Forms 4 for the corporate
officers. Consequently the Forms 4 were filed after the
appropriate deadline.
36
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee and the Board of Directors selected, and our
shareholders approved, KPMG LLP to serve as the independent
registered public accounting firm for the Company to perform the
annual audit of our 2008 financial statements. Ernst &
Young LLP was our registered public accounting firm for the 2007
financial statements and continues to act as our tax advisor. We
paid our independent registered public accounting firms 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, and the
independent registered public accounting firms 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 years, such as
any filings related to acquisitions or our publicly traded debt
securities. This category also includes advice on accounting
matters that arose during, or as a result of, the audit or
review of interim financial statements and statutory audits
required by
non-U.S. jurisdictions.
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
acquisitions, and assistance with certain governmental tax
audits.
|
|
|
|
|
|
Audit Fees
|
2008
|
|
$
|
2,303,000
|
|
2007
|
|
$
|
2,823,000
|
*
|
Audit-Related Fees
|
2008
|
|
$
|
214,000
|
|
2007
|
|
$
|
51,000
|
*
|
Tax Fees
|
2008
|
|
$
|
35,000
|
|
2007
|
|
$
|
1,389,000
|
*
|
All Other Fees
|
2008
|
|
$
|
-0-
|
|
2007
|
|
$
|
-0-
|
|
|
|
|
* |
|
Fees for the 2007 services were paid to Ernst & Young
LLP, which was our independent registered public accounting firm
for 2007, as well as our tax advisor. E&Y is expected to
continue to provide tax and other services to Reliance as may be
requested by Reliance from time to time. |
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.
37
The Audit Committee selected KPMG LLP as the independent
registered public accountant for Reliance for the year ending
December 31, 2009. The Board of Directors ratified this
selection. At the Annual Meeting, the shareholders will be asked
to ratify and approve this selection. A representative of KPMG
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.
The Board of Directors recommends that shareholders vote FOR
the ratification of the selection of KPMG LLP as our independent
registered public accounting firm for 2009. Unless otherwise
indicated on your proxy, the proxyholders will vote FOR the
ratification of KPMG LLP as our independent registered public
accounting firm for 2008.
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 proxyholders identified on the proxy card.
38
SHAREHOLDER
PROPOSALS FOR 2010 ANNUAL MEETING
We must receive any shareholder proposals intended to be
presented at the 2010 Annual Meeting and included in our proxy
materials relating to such meeting not later than
December 10, 2009. If a shareholder proposal is not
received on or before February 20, 2010, it will be deemed
to be untimely. Such proposals must be addressed to the
Secretary of Reliance.
ANNUAL
REPORT
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 3, 2009
39
VOTE BY INTERNET www.proxyvote.com Use the Internet to transmit your voting instructions and for
electronic delivery of information up until 11:59 P.M. Eastern Time on May 19, 2009. Have your
proxy card in hand when you access the web site and follow the instructions to obtain your records
and to create an electronic voting instruction form. RELIANCE STEEL & ALUMINUM CO. ELECTRONIC
DELIVERY OF FUTURE PROXY MATERIALS 350 SOUTH GRAND AVENUE, 51ST FLOOR If you would like to reduce
the costs incurred by our company in mailing proxy LOS ANGELES, CA 90071 materials, you can consent
to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail
or the Internet. To sign up for electronic delivery, please follow the instructions above to vote
using the Internet and, when prompted, indicate that you agree to receive or access proxy materials
electronically in future years. VOTE BY PHONE 1-800-690-6903 Use any touch-tone telephone to
transmit your voting instructions up until 11:59 P.M. Eastern Time on May 19, 2009. Have your proxy
card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your
proxy card and return it in the postage-paid envelope we have provided or return it to Vote
Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Your mailed proxy must be received
by the close of business on May 19, 2009. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS
FOLLOWS: RESTA1 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND
DATED. DETACH AND RETURN THIS PORTION ONLY RELIANCE STEEL & ALUMINUM CO. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR ALL THE NOMINEES LISTED AND FOR PROPOSALS 2 AND 3. Vote On Directors For
All To withhold authority to vote for any individual For All Withhold All Except nominee(s), mark
For All Except and write the 1. Election of Directors number(s) of the nominee(s) on the line
below. NOMINEES: 01) Thomas W. Gimbel 0 0 0 02) Douglas M. Hayes 03) Franklin R. Johnson 04) Leslie
A. Waite Vote On Proposals For Against Abstain 2. To ratify KPMG LLP as the independent registered
public accounting firm to perform the annual audit of our 2009 financial 0 0 0 statements. 3. In
the proxyholders discretion on such other matters as may properly come before the meeting. 0 0 0
For address changes and/or comments, please check this box and 0 write them on the back where
indicated. Note: Please sign exactly as your name or names appear on this Proxy Card. When shares
are held jointly, each holder should sign. When signing as executor, administrator, attorney,
trustee or guardian, please give full title as such. If the signer is a corporation, please sign
full corporate name by duly authorized officer, giving full title as such. If signer Is a
partnership, please sign in partnership name by authorized person. Signature [PLEASE SIGN WITHIN
BOX] Date Signature (Joint Owners) Date |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice
and Proxy Statement, Annual Report and Form 10-K are available at www.proxyvote.com. RESTA2
RELIANCE STEEL & ALUMINUM CO. Proxy Solicited on Behalf of the Board of Directors of the Company
for the Annual Meeting of Shareholders on May 20, 2009 The undersigned hereby constitutes and
appoints Mark V. Kaminski and Andrew G. Sharkey III, 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 a.m., on Wednesday,
May 20, 2009, at The Omni Hotel, 251 South Olive Street, Los Angeles, California 90012 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 recommendations. The Board of Directors
recommends voting FOR all Nominees in item 1 and FOR items 2 and 3. The proxyholders cannot vote
the shares unless you sign and return this card. Address Changes/Comments: (If you noted any
Address Changes/Comments above, please mark corresponding box on the reverse side.) (Continued and
to be signed on the reverse side) |