SCHN 2017 Proxy Statement

Compensation Discussion and Analysis Performance Improvement Bonus Plan. Fiscal 2017 compensation also included the second half of the one-year Performance Improvement Bonus Plan (“PIBP”) established by the Committee in fiscal 2016. The CEO and the other NEOs participated in the PIBP along with all other AICP-eligible participants. The PIBP was focused on incentivizing execution of $30 million in new cost reduction and productivity improvement initiatives identified and announced in the second quarter of fiscal 2016 after the fiscal 2016 compensation plans had been approved. Payout under the PIBP was based on the achievement of the specific savings and productivity initiatives described below. The execution of these initiatives was considered to be critical to offset the impact from the significantly weakened market conditions in the first half of fiscal 2016 and to maximize improvement in financial performance in the second half of fiscal 2016 and the first half of fiscal 2017. • Specifically, $30 million of targeted new savings and productivity initiatives were identified and announced in the second quarter of fiscal 2016 which generated $14 million in benefits in fiscal 2016, with the balance delivered in fiscal 2017. These savings initiatives are derived from a combination of reduced SG&A, the consolidation of certain operating sites, increased efficiencies in procurement, and streamlining of administrative and supporting services. • The PIBP was designed to be complementary to the fiscal 2016 AICP and APBP to incentivize management to focus on the additional announced savings targets in order to achieve improvement in financial performance in alignment with shareholder interests. • The Committee determined that using adjusted operating income as the metric for the PIBP provides the best measure of the operating leverage to be achieved by successful implementation of these initiatives, is closely aligned with shareholder interests, and is complementary to, but not duplicative of, the metrics for the AICP and APBP. • The PIBP consisted of two measurement periods and applied the adjusted operating income metric independently to the six-month period ending August 31, 2016 (second half of fiscal 2016) and the six-month period ending February 28, 2017 (first half of fiscal 2017), reflecting the seasonality in the annual cycle. • For NEOs, the earned amounts for the second half of fiscal 2016 performance period, which amounts were disclosed in the Company’s fiscal 2016 proxy statement, were based on the achievement of the adjusted operating income metric applicable for such six-month period. However, the payout for the earned amount was subject to a service condition intended to ensure retention throughout the entire 12-month period ending February 28, 2017. As a result of this service condition, the PIBP provided for a single payout for NEOs following the end of the first half of fiscal 2017, subject to continued service through the payment date. • The PIBP also contained a “gateway” mechanism whereby an adjusted loss per share in a quarterly period, including applicable PIBP accruals, would result in participant earnings for that quarterly period being ineligible for any PIBP payout. • For the first half of fiscal 2017, the NEOs’ achievement under the PIBP was calculated at 1.0x. Because we experienced an adjusted loss per share in the first quarter of fiscal 2017, the NEOs’ earnings for that quarterly period were ineligible pursuant to the PIBP’s “gateway” mechanism. As a result, the overall PIBP payout for the NEOs for amounts earned in fiscal 2017 was equivalent to 0.5x and totaled less than $300,000 for all NEOs, including the CEO, combined. • The available PIBP pool was allocated among all eligible participants in proportion to their first half of fiscal 2017 APBP or AICP target bonuses, as applicable. As a result, payout for amounts earned in fiscal 2017 under the PIBP was equal to approximately 0.1x of the participant’s AICP/ APBP target. The following table shows the result of the first half of fiscal 2017 PIBP financial performance goal: First Half Fiscal 2017 PIBP Financial Performance Goal Financial Performance Goal Metric Weight 0.25x 0.50x 1.00x (and above) Results Payout Multiple Adjusted Operating Income (in millions) (1) 100% $5.0 $6.5 $8.8 $16.6 1.00 (1) Adjusted operating income is calculated based on the Company’s consolidated operating income for the six months ended February 28, 2017 before significant non-recurring and extraordinary items and the cumulative effects of changes in accounting principles, adjusted to eliminate the impact of the following items consistent with the calculation method for the fiscal 2017 AICP and APBP: Impairments; Environmental Accruals; Environmental Expenses; Restructuring Charges; and Acquisition Items. Notice of Annual Meeting of Shareholders and 2017 Proxy Statement | 47