SCHN 2017 Proxy Statement
Compensation Discussion and Analysis (“Acquisition Items”); any charges to reduce the recorded value of any inventory to net realizable value (“NRV Charges”); and the discrete income tax impact of the foregoing adjustments as certified by the Audit Committee based on recommendation of the Company’s CFO (“Tax Impacts”). (2) The performance goal for the Safety management objective reflects relative improvements in the Total Case Incident Rate (“TCIR”), Lost Time Incident Rate (“LTIR”), and Days Away, Restricted or Transferred Rate (“DART”) safety metrics from their respective fiscal 2016 levels, except for safety metrics that fiscal 2016 achieved levels did not represent the best result during the prior five years, in which case the 0.25x payout target was set at the best achieved safety metric level within the five-year historical period, and with the 0.00x payout target set at the fiscal 2016 achieved levels. (3) Weighted average safety multiple weighted 80% AMR, and 20% SMB. (4) Adjusted operating cash flow for fiscal 2017 was defined as the Company’s net cash provided by operating activities for fiscal 2017 before significant non-recurring and extraordinary items and the cumulative effects of changes in accounting principles, adjusted to eliminate the cash impact of the following items: Environmental Expenses; Restructuring Charges; Acquisition Items; and Tax Impacts. (5) See “Fiscal 2017 APBP Results” below for a discussion of the strategic objectives metric. Fiscal 2017 APBP Results • Strong performance on both the financial and management objectives components driven in large part by the significant increase in Adjusted EPS year-over-year and the results in the strategic objectives metric. • The achievement of the strategic objectives metric reflected the long-term goals which the CEO has implemented to significantly improve the Company’s operating profit, increase productivity, optimize our platform, and efficiently use our capital. In fiscal 2017, the Company delivered its strongest earnings performance in the past six years driven by significantly higher volumes and operating margins, and the achievement of our multi- year cost savings and productivity improvement initiatives. In fiscal 2017, we delivered approximately $95 million in annual operating performance improvements from cost savings and productivity initiatives, compared to approximately $78 million and $28 million of benefits in fiscal 2016 and 2015, respectively. In addition, we further optimized our platform through our newly created CSS division which integrated our steel manufacturing and Oregon metals recycling operations into a single operating and reportable segment which delivered productivity improvements and initial synergies from the integration in fiscal 2017. The success of our strategic objectives are evidenced by the successful cost savings and productivity initiatives noted above and our enhanced organizational structure, including the establishment of key management and leadership positions for the newly merged division. Our focus on capital efficiency is demonstrated by improved profitability, and operating cash flow. These strategies reflect our overarching focus on delivering operating and financial performance which supports long- term shareholder value. • The overall multiple for performance during fiscal 2017 under the APBP was 2.35x. • Total cash annual incentive payment to the CEO for fiscal 2017 under the APBP was $3.9 million. This amount is included in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table.” AICP for Other NEOs. Our NEOs, other than the CEO, participate in the AICP. • Recognizes overall Company performance, divisional safety performance relevant to the applicable NEO, and contribution to the achievement of performance improvement initiatives. • Target bonuses based on a percentage of actual base salary paid during the fiscal year are established for the applicable NEO under the AICP. – Target bonus percentages remained unchanged for fiscal 2017 for Mr. Peach at 80% and Mr. Saba at 65%, and increased for Messrs. Heiskell (from 65% to 70%) and Henderson (from 75% to 80%). – Differences in target bonus percentages among the NEOs reflect their varying levels of responsibility, expertise, experiences, development within roles, and positions within the industry. For fiscal 2017, the Committee established a series of performance targets based on the Company’s Adjusted EPS, safety, cost savings, and operating cash flow, which utilized the same adjustments as in the fiscal 2017 APBP. In addition, consistent with the metrics used in the fiscal 2017 APBP, the Committee determined to use adjusted operating cash flow, cost savings, and workplace safety as the other operating metrics for the fiscal 2017 AICP to complement the financial AICP metric. Also consistent with the fiscal 2017 APBP, the non-income statement metrics under the fiscal 2017 AICP (i.e., safety performance, cost savings, and operating cash flow) were capped at 0.5x in the event adjusted earnings per share were negative. For additional discussion on the target levels set for each of the fiscal 2017 AICP performance goals, see the discussion of that goal under the fiscal 2017 APBP on page 44. Aligned with our strong performance, for fiscal 2017, the NEO’s achievement under the AICP was either 1.55x or 1.56x. Notice of Annual Meeting of Shareholders and 2017 Proxy Statement | 45
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