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FORM 10-Q
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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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TIMKENSTEEL CORPORATION
(Exact name of registrant as specified in its charter)
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Ohio
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46-4024951
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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1835 Dueber Avenue SW, Canton, OH
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44706
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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o
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Accelerated filer
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ý
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Non-accelerated filer
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o
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(Do not check if smaller reporting company)
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Smaller reporting company
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o
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Emerging growth company
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o
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Class
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Outstanding at April 15, 2017
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Common Shares, without par value
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44,373,990
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PAGE
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 6.
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Three Months Ended
March 31, |
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2017
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2016
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(Dollars in millions, except per share data)
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Net sales
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$309.4
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$217.9
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Cost of products sold
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292.4
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212.5
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Gross Profit
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17.0
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5.4
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Selling, general and administrative expenses
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22.9
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22.1
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Impairment and restructuring charges
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—
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—
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Operating Loss
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(5.9
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)
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(16.7
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)
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Interest expense
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3.6
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2.0
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Other income, net
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(4.5
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)
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(2.6
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)
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Loss Before Income Taxes
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(5.0
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)
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(16.1
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)
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Provision (benefit) for income taxes
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0.3
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(6.4
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)
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Net Loss
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($5.3
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)
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($9.7
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)
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Per Share Data:
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Basic loss per share
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($0.12
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)
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($0.22
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)
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Diluted loss per share
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($0.12
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)
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($0.22
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)
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Dividends per share
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$—
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$—
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Three Months Ended
March 31, |
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2017
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2016
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(Dollars in millions)
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Net loss
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($5.3
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)
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($9.7
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)
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Other comprehensive (loss) income, net of tax:
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Foreign currency translation adjustments
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0.2
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(0.5
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)
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Pension and postretirement liability adjustments
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0.3
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1.0
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Other comprehensive (loss) income, net of tax
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0.5
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0.5
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Comprehensive Loss, net of tax
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($4.8
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)
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($9.2
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)
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March 31,
2017 |
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December 31,
2016 |
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(Dollars in millions)
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ASSETS
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Current Assets
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Cash and cash equivalents
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$20.6
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$25.6
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Accounts receivable, net of allowances (2017 - $2.7 million; 2016 - $2.1 million)
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147.9
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91.6
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Inventories, net
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190.9
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164.2
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Deferred charges and prepaid expenses
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3.1
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2.8
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Other current assets
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7.6
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6.2
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Total Current Assets
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370.1
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290.4
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Property, Plant and Equipment, Net
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727.3
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741.9
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Other Assets
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Pension assets
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8.4
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6.2
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Intangible assets, net
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23.6
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25.0
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Other non-current assets
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6.1
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6.4
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Total Other Assets
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38.1
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37.6
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Total Assets
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$1,135.5
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$1,069.9
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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Current Liabilities
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Accounts payable, trade
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$126.4
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$87.0
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Salaries, wages and benefits
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26.4
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20.3
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Accrued pension and postretirement costs
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3.0
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3.0
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Other current liabilities
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17.9
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20.4
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Total Current Liabilities
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173.7
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130.7
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Non-Current Liabilities
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Convertible notes, net
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67.3
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66.4
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Other long-term debt
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95.2
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70.2
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Accrued pension and postretirement costs
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193.2
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192.1
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Deferred income taxes
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0.3
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—
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Other non-current liabilities
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12.6
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13.1
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Total Non-Current Liabilities
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368.6
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341.8
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Shareholders’ Equity
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Preferred shares, without par value; authorized 10.0 million shares, none issued
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—
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—
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Common shares, without par value; authorized 200.0 million shares;
issued 2017 and 2016 - 45.7 million shares
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—
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—
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Additional paid-in capital
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841.4
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845.6
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Retained deficit
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(199.5
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)
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(193.9
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)
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Treasury shares - 2017 - 1.4 million; 2016 - 1.5 million
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(39.8
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)
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(44.9
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)
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Accumulated other comprehensive loss
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(8.9
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)
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(9.4
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)
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Total Shareholders’ Equity
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593.2
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597.4
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Total Liabilities and Shareholders’ Equity
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$1,135.5
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$1,069.9
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Three Months Ended
March 31, |
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2017
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2016
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(Dollars in millions)
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CASH PROVIDED (USED)
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Operating Activities
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Net loss
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($5.3
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)
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($9.7
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)
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Adjustments to reconcile net loss to net cash provided by operating activities:
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Depreciation and amortization
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18.9
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18.7
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Amortization of deferred financing and debt discount
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1.2
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0.2
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Loss on sale or disposal of assets
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—
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0.8
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Deferred income taxes
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0.3
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(8.7
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)
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Stock-based compensation expense
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1.6
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1.5
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Pension and postretirement expense
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0.8
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0.6
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Pension and postretirement contributions and payments
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(1.6
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)
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(1.9
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)
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Reimbursement from postretirement plan assets
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—
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13.3
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Changes in operating assets and liabilities:
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Accounts receivable, net
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(56.3
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)
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(14.1
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)
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Inventories, net
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(26.7
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)
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13.0
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Accounts payable, trade
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39.4
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6.6
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Other accrued expenses
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2.9
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(10.7
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)
|
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Deferred charges and prepaid expenses
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(0.3
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)
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7.0
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Other, net
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(1.2
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)
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3.5
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Net Cash (Used) Provided by Operating Activities
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(26.3
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)
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20.1
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Investing Activities
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Capital expenditures
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(2.7
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)
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(8.5
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)
|
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Proceeds from disposals of property, plant and equipment
|
—
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—
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Net Cash Used by Investing Activities
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(2.7
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)
|
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(8.5
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)
|
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|
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Financing Activities
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Proceeds from exercise of stock options
|
0.2
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—
|
|
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Shares surrendered for employee taxes on stock compensation
|
(1.2
|
)
|
|
—
|
|
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Credit agreement repayments
|
—
|
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(15.0
|
)
|
||
Credit agreement borrowings
|
25.0
|
|
|
—
|
|
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Issuance costs related to credit agreement
|
—
|
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(1.5
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)
|
||
Net Cash Provided (Used) by Financing Activities
|
24.0
|
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(16.5
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)
|
||
Effect of exchange rate changes on cash
|
—
|
|
|
—
|
|
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Decrease In Cash and Cash Equivalents
|
(5.0
|
)
|
|
(4.9
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)
|
||
Cash and cash equivalents at beginning of period
|
25.6
|
|
|
42.4
|
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||
Cash and Cash Equivalents at End of Period
|
|
$20.6
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$37.5
|
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Standard
|
|
Effective Date
|
|
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2015-11
|
Inventory: Simplifying the Measurement of Inventory (Topic 330)
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January 1, 2017
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2016-15
|
Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments (a Consensus of the Emerging Issues Task Force)
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January 1, 2017
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2016-16
|
Accounting for Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory (Topic 740)
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January 1, 2017
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2017-07
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Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Topic 715)
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January 1, 2018
|
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March 31,
2017 |
|
December 31,
2016 |
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Inventories, net:
|
|
|
|
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Manufacturing supplies
|
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$36.2
|
|
|
|
$37.9
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Raw materials
|
26.4
|
|
|
16.2
|
|
||
Work in process
|
88.6
|
|
|
58.6
|
|
||
Finished products
|
48.0
|
|
|
59.6
|
|
||
Subtotal
|
199.2
|
|
|
172.3
|
|
||
Allowance for surplus and obsolete inventory
|
(8.3
|
)
|
|
(8.1
|
)
|
||
Total Inventories, net
|
|
$190.9
|
|
|
|
$164.2
|
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Property, Plant and Equipment, net:
|
|
|
|
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Land
|
|
$13.4
|
|
|
|
$13.3
|
|
Buildings and improvements
|
421.5
|
|
|
420.6
|
|
||
Machinery and equipment
|
1,361.5
|
|
|
1,352.0
|
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Construction in progress
|
55.2
|
|
|
63.9
|
|
||
Subtotal
|
1,851.6
|
|
|
1,849.8
|
|
||
Less allowances for depreciation
|
(1,124.3
|
)
|
|
(1,107.9
|
)
|
||
Property, Plant and Equipment, net
|
|
$727.3
|
|
|
|
$741.9
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||||||||||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||||||||
Intangible Assets Subject to Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Customer relationships
|
|
$6.3
|
|
|
|
$3.8
|
|
|
|
$2.5
|
|
|
|
$6.3
|
|
|
|
$3.7
|
|
|
|
$2.6
|
|
Technology use
|
9.0
|
|
|
5.5
|
|
|
3.5
|
|
|
9.0
|
|
|
5.2
|
|
|
3.8
|
|
||||||
Capitalized software
|
59.3
|
|
|
41.7
|
|
|
17.6
|
|
|
58.9
|
|
|
40.3
|
|
|
18.6
|
|
||||||
Total Intangible Assets
|
|
$74.6
|
|
|
|
$51.0
|
|
|
|
$23.6
|
|
|
|
$74.2
|
|
|
|
$49.2
|
|
|
|
$25.0
|
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Principal
|
|
$86.3
|
|
|
|
$86.3
|
|
Less: Debt issuance costs, net of amortization
|
(2.0
|
)
|
|
(2.1
|
)
|
||
Less: Debt discount, net of amortization
|
(17.0
|
)
|
|
(17.8
|
)
|
||
Convertible notes, net
|
|
$67.3
|
|
|
|
$66.4
|
|
Contractual interest expense
|
|
$1.3
|
|
Amortization of debt issuance costs
|
0.1
|
|
|
Amortization of debt discount
|
0.8
|
|
|
Total
|
|
$2.2
|
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Variable-rate State of Ohio Water Development Revenue Refunding Bonds, maturing on November 1, 2025 (0.70% as of March 31, 2017)
|
|
$12.2
|
|
|
|
$12.2
|
|
Variable-rate State of Ohio Air Quality Development Revenue Refunding Bonds, maturing on November 1, 2025 (0.70% as of March 31, 2017)
|
9.5
|
|
|
9.5
|
|
||
Variable-rate State of Ohio Pollution Control Revenue Refunding Bonds, maturing on June 1, 2033 (0.70% as of March 31, 2017)
|
8.5
|
|
|
8.5
|
|
||
Amended Credit Agreement, due 2019 (LIBOR plus applicable spread)
|
65.0
|
|
|
40.0
|
|
||
Total Other Long-Term Debt
|
|
$95.2
|
|
|
|
$70.2
|
|
|
Foreign Currency Translation Adjustments
|
|
Pension and Postretirement Liability Adjustments
|
|
Total
|
||||||
Balance at December 31, 2016
|
|
($7.0
|
)
|
|
|
($2.4
|
)
|
|
|
($9.4
|
)
|
Other comprehensive (loss) income before reclassifications, before income tax
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|||
Amounts reclassified from accumulated other comprehensive loss, before income tax
|
—
|
|
|
0.3
|
|
|
0.3
|
|
|||
Income tax benefit
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net current period other comprehensive (loss) income, net of income taxes
|
0.2
|
|
|
0.3
|
|
|
0.5
|
|
|||
Balance at March 31, 2017
|
|
($6.8
|
)
|
|
|
($2.1
|
)
|
|
|
($8.9
|
)
|
|
Foreign Currency Translation Adjustments
|
|
Pension and Postretirement Liability Adjustments
|
|
Total
|
||||||
Balance at December 31, 2015
|
|
($5.0
|
)
|
|
|
($2.9
|
)
|
|
|
($7.9
|
)
|
Other comprehensive (loss) income before reclassifications, before income tax
|
(0.5
|
)
|
|
—
|
|
|
(0.5
|
)
|
|||
Amounts reclassified from accumulated other comprehensive loss, before income tax
|
—
|
|
|
0.5
|
|
|
0.5
|
|
|||
Income tax benefit
|
—
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|||
Net current period other comprehensive (loss) income, net of income taxes
|
(0.5
|
)
|
|
0.4
|
|
|
(0.1
|
)
|
|||
Balance at March 31, 2016
|
|
($5.5
|
)
|
|
|
($2.5
|
)
|
|
|
($8.0
|
)
|
|
Total
|
|
Additional Paid-in Capital
|
|
Retained Deficit
|
|
Treasury Shares
|
|
Accumulated Other Comprehensive Loss
|
||||||||||
Balance at December 31, 2016
|
|
$597.4
|
|
|
|
$845.6
|
|
|
|
($193.9
|
)
|
|
|
($44.9
|
)
|
|
|
($9.4
|
)
|
Net loss
|
(5.3
|
)
|
|
—
|
|
|
(5.3
|
)
|
|
—
|
|
|
—
|
|
|||||
Pension and postretirement adjustment, net of tax
|
0.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|||||
Foreign currency translation adjustments
|
0.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|||||
Stock-based compensation expense
|
1.6
|
|
|
1.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Stock option activity
|
0.2
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Issuance of treasury shares
|
—
|
|
|
(6.0
|
)
|
|
(0.3
|
)
|
|
6.3
|
|
|
—
|
|
|||||
Shares surrendered for taxes
|
(1.2
|
)
|
|
|
|
—
|
|
|
(1.2
|
)
|
|
—
|
|
||||||
Balance at March 31, 2017
|
|
$593.2
|
|
|
|
$841.4
|
|
|
|
($199.5
|
)
|
|
|
($39.8
|
)
|
|
|
($8.9
|
)
|
|
Three Months Ended
March 31, 2017 |
|
Three Months Ended
March 31, 2016 |
||||||||||||
Components of net periodic benefit cost:
|
Pension
|
|
Postretirement
|
|
Pension
|
|
Postretirement
|
||||||||
Service cost
|
|
$4.6
|
|
|
|
$0.4
|
|
|
|
$4.2
|
|
|
|
$0.4
|
|
Interest cost
|
12.2
|
|
|
2.1
|
|
|
13.1
|
|
|
2.3
|
|
||||
Expected return on plan assets
|
(17.5
|
)
|
|
(1.4
|
)
|
|
(17.8
|
)
|
|
(1.5
|
)
|
||||
Amortization of prior service cost
|
0.1
|
|
|
0.3
|
|
|
0.2
|
|
|
0.3
|
|
||||
Net Periodic Benefit Cost
|
|
($0.6
|
)
|
|
|
$1.4
|
|
|
|
($0.3
|
)
|
|
|
$1.5
|
|
|
Three Months Ended
March 31, |
||||||
|
2017
|
|
2016
|
||||
Numerator:
|
|
|
|
||||
Net loss for basic and diluted earnings per share
|
|
($5.3
|
)
|
|
|
($9.7
|
)
|
|
|
|
|
||||
Denominator:
|
|
|
|
||||
Weighted average shares outstanding, basic
|
44,300,396
|
|
|
44,206,837
|
|
||
Dilutive effect of stock-based awards
|
—
|
|
|
—
|
|
||
Weighted average shares outstanding, diluted
|
44,300,396
|
|
|
44,206,837
|
|
||
|
|
|
|
||||
Basic loss per share
|
|
($0.12
|
)
|
|
|
($0.22
|
)
|
Diluted loss per share
|
|
($0.12
|
)
|
|
|
($0.22
|
)
|
|
Three Months Ended
March 31, |
||||||
|
2017
|
|
2016
|
||||
Provision (benefit) for income taxes
|
|
$0.3
|
|
|
|
($6.4
|
)
|
Effective tax rate
|
(6.0
|
)%
|
|
39.8
|
%
|
|
Three Months Ended
March 31, |
|||||
|
2017
|
2016
|
||||
Beginning Balance, January 1
|
|
$0.6
|
|
|
$0.8
|
|
Expenses
|
—
|
|
—
|
|
||
Payments
|
—
|
|
(0.1
|
)
|
||
Ending Balance, March 31
|
|
$0.6
|
|
|
$0.7
|
|
|
Three Months Ended March 31,
|
|||||||||||||
|
2017
|
|
2016
|
|
Increase (Decrease)
|
|
% Change
|
|||||||
Net sales
|
|
$309.4
|
|
|
|
$217.9
|
|
|
|
$91.5
|
|
|
42.0%
|
|
Net sales, excluding surcharges
|
251.1
|
|
|
202.4
|
|
|
48.7
|
|
|
24.1%
|
|
|||
Gross profit
|
17.0
|
|
|
5.4
|
|
|
11.6
|
|
|
214.8%
|
|
|||
Gross margin
|
5.5
|
%
|
|
2.5
|
%
|
|
NM
|
|
|
300 bps
|
|
|||
Selling, general and administrative expenses
|
22.9
|
|
|
22.1
|
|
|
0.8
|
|
|
3.6%
|
|
|||
Net loss
|
(5.3
|
)
|
|
(9.7
|
)
|
|
(4.4
|
)
|
|
(45.4)%
|
|
|||
Average scrap index per ton (30 day lag)
|
312
|
|
|
177
|
|
|
135
|
|
|
76.3%
|
|
|||
Average selling price per ton, including surcharges
|
|
$1,105
|
|
|
|
$1,171
|
|
|
|
($66
|
)
|
|
(5.6)%
|
|
Shipments (in tons)
|
279,904
|
|
|
186,152
|
|
|
93,752
|
|
|
50.4%
|
|
|||
Melt utilization
|
71
|
%
|
|
47
|
%
|
|
NM
|
|
|
24
|
pp
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
||||||||||
|
2017
|
|
2016
|
|
$ Change
|
||||||
Cash interest paid
|
|
$0.5
|
|
|
|
$1.5
|
|
|
|
($1.0
|
)
|
Accrued interest
|
1.9
|
|
|
0.3
|
|
|
1.6
|
|
|||
Amortization of convertible notes discount and deferred financing
|
1.2
|
|
|
0.2
|
|
|
1.0
|
|
|||
Total Interest Expense
|
|
$3.6
|
|
|
|
$2.0
|
|
|
|
$1.6
|
|
|
Three Months Ended March 31,
|
|||||||||||||
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
|||||||
Provision (benefit) for income taxes
|
|
$0.3
|
|
|
|
($6.4
|
)
|
|
|
($6.7
|
)
|
|
(104.7)%
|
|
Effective tax rate
|
(6.0
|
)%
|
|
39.8
|
%
|
|
NM
|
|
|
(4580) bps
|
|
Current Assets
|
March 31,
2017 |
|
December 31,
2016 |
||||
Cash and cash equivalents
|
|
$20.6
|
|
|
|
$25.6
|
|
Accounts receivable, net
|
147.9
|
|
|
91.6
|
|
||
Inventories, net
|
190.9
|
|
|
164.2
|
|
||
Deferred charges and prepaid expenses
|
3.1
|
|
|
2.8
|
|
||
Other current assets
|
7.6
|
|
|
6.2
|
|
||
Total Current Assets
|
|
$370.1
|
|
|
|
$290.4
|
|
Property, Plant and Equipment
|
March 31,
2017 |
|
December 31,
2016 |
||||
Property, plant and equipment, net
|
|
$727.3
|
|
|
|
$741.9
|
|
Other Assets
|
March 31,
2017 |
|
December 31,
2016 |
||||
Pension assets
|
|
$8.4
|
|
|
|
$6.2
|
|
Intangible assets, net
|
23.6
|
|
|
25.0
|
|
||
Other non-current assets
|
6.1
|
|
|
6.4
|
|
||
Total Other Assets
|
|
$38.1
|
|
|
|
$37.6
|
|
Liabilities and Shareholders’ Equity
|
March 31,
2017 |
|
December 31,
2016 |
||||
Current liabilities
|
|
$173.7
|
|
|
|
$130.7
|
|
Convertible notes, net
|
67.3
|
|
|
66.4
|
|
||
Other long-term debt
|
95.2
|
|
|
70.2
|
|
||
Accrued pension and postretirement costs - long-term
|
193.2
|
|
|
192.1
|
|
||
Deferred income taxes
|
0.3
|
|
|
—
|
|
||
Other non-current liabilities
|
12.6
|
|
|
13.1
|
|
||
Total shareholders’ equity
|
593.2
|
|
|
597.4
|
|
||
Total Liabilities and Shareholders’ Equity
|
|
$1,135.5
|
|
|
|
$1,069.9
|
|
|
March 31, 2017
|
December 31, 2016
|
Cash and cash equivalents
|
$20.6
|
$25.6
|
|
|
|
Amended Credit Agreement:
|
|
|
Maximum availability
|
$252.9
|
$194.4
|
Amount borrowed
|
65.0
|
40.0
|
Letter of credit obligations
|
1.6
|
1.6
|
Availability not borrowed
|
186.3
|
152.8
|
Availability block
|
33.1
|
33.1
|
Net availability
|
$153.2
|
$119.7
|
|
|
|
Total liquidity
|
$173.8
|
$145.3
|
Cash Flows
|
Three Months Ended
March 31, |
||||||
|
2017
|
|
2016
|
||||
Net cash (used) provided by operating activities
|
|
($26.3
|
)
|
|
|
$20.1
|
|
Net cash used by investing activities
|
(2.7
|
)
|
|
(8.5
|
)
|
||
Net cash provided (used) by financing activities
|
24.0
|
|
|
(16.5
|
)
|
||
Decrease in Cash and Cash Equivalents
|
|
($5.0
|
)
|
|
|
($4.9
|
)
|
•
|
deterioration in world economic conditions, or in economic conditions in any of the geographic regions in which we conduct business, including additional adverse effects from global economic slowdown, terrorism or hostilities. This includes: political risks associated with the potential instability of governments and legal systems in countries in which we or our customers conduct business, and changes in currency valuations;
|
•
|
the effects of fluctuations in customer demand on sales, product mix and prices in the industries in which we operate. This includes: our ability to respond to rapid changes in customer demand; the effects of customer bankruptcies or liquidations; the impact of changes in industrial business cycles; and whether conditions of fair trade exist in the U.S. markets;
|
•
|
competitive factors, including changes in market penetration; increasing price competition by existing or new foreign and domestic competitors; the introduction of new products by existing and new competitors; and new technology that may impact the way our products are sold or distributed;
|
•
|
changes in operating costs, including the effect of changes in our manufacturing processes; changes in costs associated with varying levels of operations and manufacturing capacity; availability of raw materials and energy; our ability to mitigate the impact of fluctuations in raw materials and energy costs and the effectiveness of our surcharge mechanism; changes in the expected costs associated with product warranty claims; changes resulting from inventory management, cost reduction initiatives and different levels of customer demands; the effects of unplanned work stoppages; and changes in the cost of labor and benefits;
|
•
|
the success of our operating plans, announced programs, initiatives and capital investments (including the jumbo bloom vertical caster and advanced quench-and-temper facility); the ability to integrate acquired companies; the ability of acquired companies to achieve satisfactory operating results, including results being accretive to earnings; and our ability to maintain appropriate relations with unions that represent our associates in certain locations in order to avoid disruptions of business;
|
•
|
unanticipated litigation, claims or assessments, including claims or problems related to intellectual property, product liability or warranty, and environmental issues and taxes, among other matters;
|
•
|
the availability of financing and interest rates, which affect: our cost of funds and/or ability to raise capital; our pension obligations and investment performance; and/or customer demand and the ability of customers to obtain financing to purchase our products or equipment that contain our products; and the amount of any dividend declared by our Board of Directors on our common shares; and
|
•
|
those items identified under Risk Factors in our Annual Report on Form 10-K for the year ended
December 31, 2016
.
|
(a)
|
Disclosure Controls and Procedures
|
(b)
|
Changes in Internal Control Over Financial Reporting
|
Exhibit Number
|
|
Exhibit Description
|
10.1*
|
|
Form of Nonqualified Stock Option Agreement.
|
10.2*
|
|
Form of Time-Based Restricted Stock Unit Agreement (Cliff Vesting).
|
10.3*
|
|
Form of Time-Based Restricted Stock Unit Agreement (Ratable Vesting)
|
10.4*
|
|
Form of Performance-Based Restricted Stock Unit Agreement.
|
12.1*
|
|
Computation of Ratio of Earnings to Fixed Charges.
|
31.1*
|
|
Certification of the Chief Executive Officer pursuant to Rule 13a-14 of the Exchange Act, as adopted, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2*
|
|
Certification of the Chief Financial Officer pursuant to Rule 13a-14 of the Exchange Act, as adopted, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1**
|
|
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101.INS*
|
|
XBRL Instance Document
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
*
|
Filed herewith.
|
**
|
Furnished herewith.
|
|
|
TIMKENSTEEL CORPORATION
|
|
|
|
|
|
|
Date:
|
April 27, 2017
|
/s/ Christopher J. Holding
|
|
|
Christopher J. Holding
Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
Exhibit Number
|
|
Exhibit Description
|
10.1
|
|
Form of Nonqualified Stock Option Agreement.
|
10.2
|
|
Form of Time-Based Restricted Stock Unit Agreement (Cliff Vesting).
|
10.3
|
|
Form of Time-Based Restricted Stock Unit Agreement (Ratable Vesting).
|
10.4
|
|
Form of Performance-Based Restricted Stock Unit Agreement.
|
12.1
|
|
Computation of Ratio of Earnings to Fixed Charges.
|
31.1
|
|
Certification of the Chief Executive Officer pursuant to Rule 13a-14 of the Exchange Act, as adopted, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
|
Certification of the Chief Financial Officer pursuant to Rule 13a-14 of the Exchange Act, as adopted, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
|
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101.INS
|
|
XBRL Instance Document
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
(i)
|
engaging in any activity, as an employee, principal, agent, or consultant for another entity that competes with the Company in any actual, researched, or prospective product, service, system, or business activity for which Grantee has had any direct responsibility during the last two years of his or her employment with the Company or a Subsidiary, in any territory in which the Company or a Subsidiary manufactures, sells, markets, services, or installs such product, service, or system, or engages in such business activity;
|
(ii)
|
soliciting any employee of the Company or a Subsidiary to terminate his or her employment with the Company or a Subsidiary;
|
(iii)
|
the disclosure to anyone outside the Company or a Subsidiary, or the use in other than the Company or a Subsidiary’s business, without prior written authorization from the Company, of any confidential, proprietary or trade secret information or material relating to the business of the Company and its Subsidiaries, acquired by Grantee during his or her employment with the Company or its Subsidiaries or while acting as a director of or consultant for the Company or its Subsidiaries thereafter;
|
(iv)
|
the failure or refusal to disclose promptly and to assign to the Company upon request all right, title and interest in any invention or idea, patentable or not, made or conceived by Grantee during employment by the Company and any Subsidiary, relating in any manner to the actual or anticipated business, research or development work of the Company or any Subsidiary or the failure or refusal to do anything reasonably necessary to enable the Company or any Subsidiary to secure a patent where appropriate in the United States and in other countries;
|
(v)
|
activity that results in Termination for Cause. For the purposes of this subsection, “Termination for Cause” shall mean a termination: (A) due to Grantee’s willful and continuous gross neglect of his or her duties for which he or she is employed; or (B) due to an act of dishonesty on the part of Grantee constituting a felony resulting or intended to result, directly or indirectly, in his or her gain for personal enrichment at the expense of the Company or a Subsidiary; or
|
(vi)
|
any other conduct or act determined to be injurious, detrimental or prejudicial to any significant interest of the Company or any Subsidiary unless Grantee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company.
|
1.
|
Payment of RSUs
. The RSUs will become payable if the Restriction Period lapses and Grantee’s right to receive payment for the RSUs becomes nonforfeitable (“Vest,” “Vesting” or “Vested”) in accordance with Section 3 and Section 4 of this Agreement.
|
2.
|
RSUs Not Transferrable
. None of the RSUs nor any interest therein or in any Common Shares underlying such RSUs will be transferable prior to payment other than by will or the laws of descent and distribution.
|
3.
|
Vesting of RSUs
. Subject to the terms and conditions of Section 4 and Section 5 of this Agreement, the RSUs will Vest on the third anniversary of the Date of Grant if the Grantee shall have been in the continuous employ of the Company or a Subsidiary from the Date of Grant until the third anniversary of the Date of Grant. For purposes of this Agreement, the continuous employment of Grantee with the Company or a Subsidiary will not be deemed to have been interrupted, and Grantee shall not be deemed to have ceased to be an employee of the Company or a Subsidiary, by reason of the transfer of Grantee’s employment among the Company and its Subsidiaries.
|
4.
|
Alternative Vesting of RSUs
. Notwithstanding the provisions of Section 3 of this Agreement, and subject to the payment provisions of Section 6 hereof, the RSUs will Vest earlier than the time provided for in Section 3 under the following circumstances:
|
(a)
|
Death or Disability
: If Grantee should die or become permanently disabled while in the employ of the Company or a Subsidiary, then the RSUs will immediately Vest in full. If Grantee should die or become permanently disabled during the period that Grantee is deemed to be in the continuous employ of the Company or a Subsidiary pursuant to Section 4(b), 4(d) or 4(e), then the RSUs will immediately Vest in full, except that to the extent that Section 4(e) applies, the RSUs will immediately Vest only to the extent that the RSUs would have become Vested pursuant to Section 4(e). For purposes of this Agreement, “permanently disabled” means that Grantee has qualified for long-term disability benefits under a disability plan or program of the Company or a Subsidiary or, in the absence of a disability plan or program of the Company or a Subsidiary, under a government-sponsored disability program and is “disabled” within the meaning of Section 409A(a)(2)(C) of the Code.
|
(b)
|
Retirement
: If Grantee should retire with the Company’s consent, then Grantee shall Vest in the RSUs in accordance with the terms and conditions of Section 3 as if Grantee had remained in the continuous employ of the Company or a Subsidiary from the Date of Grant until the third anniversary of the Date of Grant as described in Section 3 or the occurrence of a circumstance referenced in Section 4(a) or Section 4(c), whichever occurs first. For purposes of this Agreement, “retire with the Company’s consent” means: (i) the retirement of Grantee prior to age 62 under a retirement plan of the Company or a Subsidiary, if the Board or the Committee determines that Grantee’s retirement is for the convenience of the Company or a Subsidiary; or (ii) the retirement of Grantee at or after age 62 under a retirement plan of the Company or a Subsidiary.
|
(c)
|
Change in Control
:
|
(i)
|
Upon a Change in Control occurring during the Restriction Period while Grantee is an employee of the Company or a Subsidiary, to the extent the RSUs have not been forfeited, the RSUs will immediately Vest in full (except to the extent that a Replacement Award is provided to Grantee for the RSUs). If Grantee is deemed to be in the continuous employ of the Company or a Subsidiary pursuant to Section 4(b), 4(d) or 4(e), upon a Change in Control during the Restriction Period, then the RSUs will immediately Vest in full, except that to the extent that Section 4(e) applies, the RSUs will Vest only to the extent that the RSUs would have become Vested pursuant to Section 4(e).
|
(ii)
|
For purposes of this Agreement, a “Replacement Award” means an award (A) of service-based restricted stock units, (B) that has a value at least equal to the value of the RSUs, (C) that relates to publicly traded equity securities of the Company or its successor in the Change in Control (or another entity that is affiliated with the Company or its successor following the Change in Control), (D) the tax consequences of which, under the Code, if Grantee is subject to U.S. federal income tax under the Code, are not less favorable to Grantee than the tax consequences of the RSUs, (E) that vests in full upon a termination of Grantee’s employment with Company or a Subsidiary or their successors in the Change in Control (or another entity that is affiliated with the Company or a Subsidiary or their successors following the Change in Control) (as applicable, the “Successor”) for Good Reason by Grantee or without Cause by such Successor, or upon the death of Grantee or Grantee becoming permanently disabled, within a period of two years after the Change in Control, and (F) the other terms and conditions of which are not less favorable to Grantee than the terms and conditions of the RSUs (including the provisions that would apply in the event of a subsequent Change in Control). A Replacement Award may be granted only to the extent it conforms to the requirements of Treasury Regulation 1.409A-3(i)(5)(iv)(B) or otherwise does not result in the RSUs or Replacement Award failing to comply with or be exempt from Section 409A of the Code. Without limiting the generality of the foregoing, the Replacement Award may take the form of a continuation of the RSUs if the requirements of the preceding sentence are satisfied. The determination of whether the conditions of this Section 4(c)(ii) are satisfied will be made by the Committee, as constituted immediately before the Change in Control, in its sole discretion.
|
(iii)
|
For purposes of Section 4(c)(ii), “Cause” will be defined not less favorably with respect to Grantee than: any intentional act of fraud, embezzlement or theft in connection with the Grantee’s duties with the Successor, any intentional wrongful disclosure of secret processes or confidential information of the Successor, or any intentional wrongful engagement in any competitive activity that would constitute a material breach of Grantee’s duty of loyalty to the Successor, and no act, or failure to act, on the part of Grantee shall be deemed “intentional” unless done or omitted to be done by Grantee not in good faith and without reasonable belief that Grantee’s action or omission was in or not opposed to the best interest of the Successor;
provided
, that for any Grantee who is party to an individual severance or employment agreement defining Cause, “Cause” will have the meaning set forth in such agreement. For purposes of Section 4(c)(ii), “Good Reason” will be defined to mean a material reduction in the nature or scope of the responsibilities, authorities or duties of Grantee attached to Grantee’s position held immediately prior to the Change in Control, a change of more than 60 miles in the location of Grantee’s principal office immediately prior to the Change in Control, or a material reduction in Grantee’s remuneration upon or after the Change in Control;
provided
, that no later than 90 days following an event constituting Good Reason Grantee gives notice to the Successor of the occurrence of such event and the Successor fails to cure the event within 30 days following the receipt of such notice.
|
(iv)
|
If a Replacement Award is provided, notwithstanding anything in this Agreement to the contrary, any outstanding RSUs which at the time of the Change in Control are not subject to a “substantial risk of forfeiture” (within the meaning of Section 409A of the Code) will be deemed to be Vested at the time of such Change in Control.
|
(d)
|
Divestiture
: If Grantee’s employment with the Company or a Subsidiary terminates as the result of a divestiture, then Grantee shall Vest in the RSUs in accordance with the terms and conditions of Section 3 as if Grantee had remained in the continuous employ of the Company or a Subsidiary from the Date of Grant until the third anniversary of the Date of Grant as described in Section 3 or the occurrence of a circumstance referenced in Section 4(a) or Section 4(c), whichever occurs first. For the purposes of this Agreement, the term “divestiture” shall mean a permanent disposition to a Person other than the Company or any Subsidiary of a plant or other facility or property at which Grantee performs a majority of Grantee’s services whether such disposition is effected by means of a sale of assets, a sale of Subsidiary stock or otherwise.
|
(e)
|
Layoff
: If (i) Grantee’s employment with the Company or a Subsidiary terminates as the result of a layoff and (ii) Grantee is entitled to receive severance pay pursuant to the terms of any severance pay plan of the Company in effect at the time of Grantee’s termination of employment that provides for severance pay calculated by multiplying Grantee’s base compensation by a specified severance period, then Grantee shall Vest in a number of RSUs equal to the product of (x) the number of RSUs in which Grantee would have Vested in accordance with the terms and conditions of Section 3 if Grantee had remained in the continuous employ of the Company or a Subsidiary from the Date of Grant until the third anniversary of the Date of Grant or the occurrence of a circumstance referenced in Section 4(a) or Section 4(c), whichever occurs first, multiplied by (y) a fraction (in no case greater than 1), the numerator of which is the number of whole months from the Date of Grant through the end of the specified severance period and the denominator of which is 36. For purposes of this Agreement, a “layoff” shall mean the involuntary termination by the Company or any Subsidiary of Grantee’s employment with the Company or any Subsidiary due to (A) a reduction in force leading to a permanent downsizing of the salaried workforce, (B) a permanent shutdown of the plant, department or subdivision in which Grantee works, or (C) an elimination of position.
|
5.
|
Forfeiture of RSUs
. Any RSUs that have not Vested pursuant to Section 3 or Section 4 by the third anniversary of the Date of Grant will be forfeited automatically and without further notice on such date (or earlier if, and on such date that, Grantee ceases to be an employee of the Company or a Subsidiary prior to the third anniversary of the Date of Grant for any reason other than as described in Section 4).
|
6.
|
Form and Time of Payment of RSUs
.
|
(a)
|
General
: Subject to Section 5 and Section 6(b), payment for Vested RSUs will be made
in cash or Common Shares (as determined by the Committee) within 10 days following the Vesting date specified in Section
3.
|
(b)
|
Other Payment Events
. Notwithstanding Section 6(a), to the extent that the RSUs are Vested on the dates set forth below, payment with respect to the RSUs will be made as follows:
|
(i)
|
Change in Control
. Upon a Change in Control, Grantee is entitled to receive payment for Vested RSUs in cash or Common Shares (as determined by the Committee) on the date of the Change in Control;
provided
,
however
, that if such Change in Control would not qualify as a permissible date of distribution under Section 409A(a)(2)(A) of the Code, and the regulations thereunder, and where Section 409A of the Code applies to such distribution, Grantee is entitled to receive the corresponding payment on the date that would have otherwise applied pursuant to Sections 6(a) or 6(b)(ii) as though such Change in Control had not occurred.
|
(ii)
|
Death or Disability
. On the date of Grantee’s death or the date Grantee becomes permanently disabled, Grantee is entitled to receive payment for Vested RSUs in cash or Common Shares (as determined by the Committee) on such date.
|
7.
|
Payment of Dividend Equivalents
. With respect to each of the RSUs covered by this Agreement, Grantee shall be credited on the records of the Company with dividend equivalents in an amount equal to the amount per Common Share of any cash dividends declared by the Board on the outstanding Common Shares during the period beginning on the Date of Grant and ending either on the date on which Grantee receives payment for the RSUs pursuant to Section 6 hereof or at the time when the RSUs are forfeited in accordance with Section 5 of this Agreement. These dividend equivalents will accumulate without interest and, subject to the terms and conditions of this Agreement, will be paid at the same time, to the same extent and in the same manner, in cash or Common Shares (as determined by the Committee) as the RSUs for which the dividend equivalents were credited.
|
8.
|
Detrimental Activity and Recapture
.
|
(a)
|
In the event that, as determined by the Committee, Grantee shall engage in Detrimental Activity during employment with the Company or a Subsidiary, the RSUs will be forfeited automatically and without further notice at the time of that determination notwithstanding any other provision of this Agreement. For purposes of this Agreement, “Detrimental Activity” shall mean:
|
(i)
|
engaging in any activity, as an employee, principal, agent, or consultant for another entity that competes with the Company in any actual, researched, or prospective product, service, system, or business activity for which Grantee has had any direct responsibility during the last two years of his or her employment with the Company or a Subsidiary, in any territory in which the Company or a Subsidiary manufactures, sells, markets, services, or installs such product, service, or system, or engages in such business activity;
|
(ii)
|
soliciting any employee of the Company or a Subsidiary to terminate his or her employment with the Company or a Subsidiary;
|
(iii)
|
the disclosure to anyone outside the Company or a Subsidiary, or the use in other than the Company or a Subsidiary’s business, without prior written authorization from the Company, of any confidential, proprietary or trade secret information or material relating to the business of the Company and its Subsidiaries, acquired by Grantee during his or her employment with the Company or its Subsidiaries or while acting as a director of or consultant for the Company or its Subsidiaries thereafter;
|
(iv)
|
the failure or refusal to disclose promptly and to assign to the Company upon request all right, title and interest in any invention or idea, patentable or not, made or conceived by Grantee during employment by the Company and any Subsidiary, relating in any manner to the actual or anticipated business, research or development work of the Company or any Subsidiary or the failure or refusal to do anything reasonably necessary to enable the Company or any Subsidiary to secure a patent where appropriate in the United States and in other countries;
|
(v)
|
activity that results in Termination for Cause. For the purposes of this subsection, “Termination for Cause” shall mean a termination: (A) due to Grantee’s willful and continuous gross neglect of his or her duties for which he or she is employed; or (B) due to an act of dishonesty on the part of Grantee constituting a felony resulting or intended to result, directly or indirectly, in his or her gain for personal enrichment at the expense of the Company or a Subsidiary; or
|
(vi)
|
any other conduct or act determined to be injurious, detrimental or prejudicial to any significant interest of the Company or any Subsidiary unless Grantee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company.
|
(b)
|
If a Restatement occurs and the Committee determines that Grantee is personally responsible for causing the Restatement as a result of Grantee’s personal misconduct or any fraudulent activity on the part of Grantee, then the Committee has discretion to, based on applicable facts and circumstances and subject to applicable law, cause the Company to recover all or any portion (but no more than 100%) of the RSUs earned or payable to Grantee for some or all of the years covered by the Restatement. The amount of any earned or payable RSUs recovered by the Company shall be limited to the amount by which such earned or payable RSUs exceeded the amount that would have been earned by or paid to Grantee had the Company’s financial statements for the applicable restated fiscal year or years been initially filed as restated, as reasonably determined by the Committee. The Committee shall also determine whether the Company shall effect any recovery under this Section 8(b) by: (i) seeking repayment from Grantee; (ii) reducing, except with respect to any non-qualified deferred compensation under Section 409A of the Code, the amount that would otherwise be payable to Grantee under any compensatory plan, program or arrangement maintained by the Company (subject to applicable law and the terms and conditions of such plan, program or arrangement); (iii) by withholding, except with respect to any non-qualified deferred compensation under Section 409A of the Code, payment of future increases in compensation (including the payment of any discretionary bonus amount) that would otherwise have been made to Grantee in accordance with the Company’s compensation practices; or (iv) by any combination of these alternatives. For purposes of this Agreement, “Restatement” means a restatement (made within 36 months of the publication of the financial statements that are required to be restated) of any part of the Company’s financial statements for any fiscal year or years after 2016 due to material noncompliance with any financial reporting requirement under the U.S. securities laws applicable to such fiscal year or years.
|
9.
|
Compliance with Law
. The Company shall make reasonable efforts to comply with all applicable federal and state securities laws;
provided
,
however
, notwithstanding any other provision of this Agreement, the Company shall not be obligated to issue any of the Common Shares covered by this Agreement if the issuance thereof would result in violation of any such law.
|
10.
|
Adjustments
. Subject to Section 13 of the Plan, the Committee shall make any adjustments in the number of RSUs or kind of shares of stock or other securities underlying the RSUs covered by this Agreement, or in any other terms of this award, that the Committee may determine to be equitably required to prevent any dilution or expansion of Grantee’s rights under this Agreement that otherwise would result from any (a) stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, (b) merger, consolidation, separation, reorganization or partial or complete liquidation involving the Company or (c) other transaction or event having an effect similar to any of those referred to in Section 10(a) or 10(b) hereof. Furthermore, in the event that any transaction or event described or referred to in the immediately preceding sentence shall occur, the Committee shall provide in substitution of any or all of Grantee’s rights under this Agreement such alternative consideration as the Committee may determine in good faith to be equitable under the circumstances.
|
11.
|
Withholding Taxes
.
If the Company is required to withhold federal, state, local, employment, or foreign taxes, or, to the extent permitted under Section 409A of the Code, any other applicable taxes, in connection with Grantee’s right to receive Common Shares under this Agreement (regardless of whether Grantee is entitled to the delivery of any Common Shares at that time), and the amounts available to the Company for such withholding are insufficient, it shall be a condition to the receipt of any Common Shares or any other benefit provided for under this Agreement that Grantee make arrangements satisfactory to the Company for payment of the balance of the taxes. Grantee may satisfy such tax obligation by paying the Company cash via personal check. Alternatively, Grantee may elect that all or any part of such tax obligation be satisfied by the Company’s retention of a portion of the Common Shares provided for under this Agreement or by Grantee’s surrender of a portion of the Common Shares that he or she has owned for at least 6 months. In no event, however, shall the Company accept Common Shares for payment of taxes in excess of required tax withholding rates (unless such higher withholding amounts would not result in adverse accounting implications for the Company). If an election is made to satisfy Grantee’s tax obligation with the release or surrender of Common Shares, the Common Shares shall be credited in the following manner: (a) at the Market Value per Share on the date of delivery if the tax obligations arise due to the delivery of Common Shares under this Agreement; or (b) at the Market Value per Share on the date the tax obligation arises, if for a reason other than the delivery of Common Shares under this Agreement.
|
12.
|
Right to Terminate Employment
. No provision of this Agreement will limit in any way whatsoever any right that the Company or a Subsidiary may otherwise have to terminate the employment of Grantee at any time.
|
13.
|
Relation to Other Benefits
. Any economic or other benefit to Grantee under this Agreement or the Plan will not be taken into account in determining any benefits to which Grantee may be entitled under any profit‑sharing, retirement or other benefit or compensation plan maintained by the Company or a Subsidiary and will not affect the amount of any life insurance coverage available to any beneficiary under any life insurance plan covering employees of the Company or a Subsidiary.
|
14.
|
Amendments
. Any amendment to the Plan will be deemed to be an amendment to this Agreement to the extent that the amendment is applicable to this Agreement;
provided
,
however
, that no amendment will adversely affect the rights of Grantee with respect to the Common Shares or other securities covered by this Agreement without Grantee’s consent. Notwithstanding the foregoing, the limitation requiring the consent of Grantee to certain amendments will not apply to any amendment that is deemed necessary by the Company to ensure compliance with Section 409A of the Code.
|
15.
|
Severability
. In the event that one or more of the provisions of this Agreement is invalidated for any reason by a court of competent jurisdiction, any provision so invalidated will be deemed to be separable from the other provisions of this Agreement, and the remaining provisions of this Agreement will continue to be valid and fully enforceable.
|
16.
|
Governing Law
. This Agreement is made under, and shall be construed in accordance with, the internal substantive laws of the State of Ohio.
|
17.
|
Compliance with Section 409A of the Code.
To the extent applicable, it is intended that this Agreement and the Plan comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1)
of the Code
do not apply to Grantee. This Agreement and the Plan shall be administered in a manner consistent with this intent. Reference to Section 409A of the Code is to Section 409A of the Internal Revenue Code of 1986, as amended, and will also include any regulations or any other
formal
guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.
|
1.
|
Payment of RSUs
. The RSUs will become payable if the Restriction Period lapses and Grantee’s right to receive payment for the RSUs becomes nonforfeitable (“Vest,” “Vesting” or “Vested”) in accordance with Section 3 and Section 4 of this Agreement.
|
2.
|
RSUs Not Transferrable
. None of the RSUs nor any interest therein or in any Common Shares underlying such RSUs will be transferable prior to payment other than by will or the laws of descent and distribution.
|
3.
|
Vesting of RSUs
. Subject to the terms and conditions of Section 4 and Section 5 of this Agreement, the RSUs will Vest (a) to the extent of one-quarter (1/4) of the RSUs on the first anniversary of the Date of Grant if the Grantee shall have been in the continuous employ of the Company or a Subsidiary on such date and (b) to the extent of an additional one-quarter (1/4) of the RSUs on each of the second, third and fourth anniversaries of the Date of Grant so long as Grantee shall have been in the continuous employ of the Company or a Subsidiary on each such date. For purposes of this Agreement, the continuous employment of Grantee with the Company or a Subsidiary will not be deemed to have been interrupted, and Grantee shall not be deemed to have ceased to be an employee of the Company or a Subsidiary, by reason of the transfer of Grantee’s employment among the Company and its Subsidiaries.
|
4.
|
Alternative Vesting of RSUs
. Notwithstanding the provisions of Section 3 of this Agreement, and subject to the payment provisions of Section 6 hereof, the RSUs will Vest earlier than the times provided for in Section 3 under the following circumstances:
|
(a)
|
Death or Disability
: If Grantee should die or become permanently disabled while in the employ of the Company or a Subsidiary, then the RSUs will immediately Vest in full. If Grantee should die or become permanently disabled during the period that Grantee is deemed to be in the continuous employ of the Company or a Subsidiary pursuant to Section 4(b), 4(d) or 4(e), then the RSUs will immediately Vest in full, except that to the extent that Section 4(e) applies, the RSUs will immediately Vest only to the extent that the RSUs would have become Vested pursuant to Section 4(e). For purposes of this Agreement, “permanently disabled” means that Grantee has qualified for long-term disability benefits under a disability plan or program of the Company or, in the absence of a disability plan or program of the Company or a Subsidiary, under a government-sponsored disability program and is “disabled” within the meaning of Section 409A(a)(2)(C) of the Code.
|
(b)
|
Retirement
: If Grantee should retire with the Company’s consent, then Grantee shall Vest in the RSUs in accordance with the terms and conditions of Section 3 as if Grantee had remained in the continuous employ of the Company or a Subsidiary from the Date of Grant until the fourth anniversary of the Date of Grant or the occurrence of a circumstance referenced in Section 4(a) or Section 4(c), whichever occurs first. For purposes of this Agreement, “retire with the Company’s consent” means: (i) the retirement of Grantee prior to age 62 under a retirement plan of the Company or a Subsidiary, if the Board or the Committee determines that Grantee’s retirement is for the convenience of the Company or a Subsidiary; or (ii) the retirement of Grantee at or after age 62 under a retirement plan of the Company or a Subsidiary.
|
(c)
|
Change in Control
:
|
(i)
|
Upon a Change in Control occurring during the Restriction Period while Grantee is an employee of the Company or a Subsidiary, to the extent the RSUs have not been forfeited, the RSUs will immediately Vest in full (except to the extent that a Replacement Award is provided to Grantee for the RSUs). If Grantee is deemed to be in the continuous employ of the Company or a Subsidiary pursuant to Section 4(b), 4(d) or 4(e), upon a Change in Control during the Restriction Period, then the RSUs will immediately Vest in full, except that to the extent that Section 4(e) applies, the RSUs will Vest only to the extent that the RSUs would have become Vested pursuant to Section 4(e).
|
(ii)
|
For purposes of this Agreement, a “Replacement Award” means an award (A) of service-based restricted stock units, (B) that has a value at least equal to the value of the RSUs, (C) that relates to publicly traded equity securities of the Company or its successor in the Change in Control (or another entity that is affiliated with the Company or its successor following the Change in Control), (D) the tax consequences of which, under the Code, if Grantee is subject to U.S. federal income tax under the Code, are not less favorable to Grantee than the tax consequences of the RSUs, (E) that vests in full upon a termination of Grantee’s employment with Company or a Subsidiary or their successors in the Change in Control (or another entity that is affiliated with the Company or a Subsidiary or their successors following the Change in Control) (as applicable, the “Successor”) for Good Reason by Grantee or without Cause by such Successor, or upon the death of Grantee or Grantee becoming permanently disabled, within a period of two years after the Change in Control, and (F) the other terms and conditions of which are not less favorable to Grantee than the terms and conditions of the RSUs (including the provisions that would apply in the event of a subsequent Change in Control). A Replacement Award may be granted only to the extent it conforms to the requirements of Treasury Regulation 1.409A-3(i)(5)(iv)(B) or otherwise does not result in the RSUs or Replacement Award failing to comply with or be exempt from Section 409A of the Code. Without limiting the generality of the foregoing, the Replacement Award may take the form of a continuation of the RSUs if the requirements of the preceding sentence are satisfied. The determination of whether the conditions of this Section 4(c)(ii) are satisfied will be made by the Committee, as constituted immediately before the Change in Control, in its sole discretion.
|
(iii)
|
For purposes of Section 4(c)(ii), “Cause” will be defined not less favorably with respect to Grantee than: any intentional act of fraud, embezzlement or theft in connection with the Grantee’s duties with the Successor, any intentional wrongful disclosure of secret processes or confidential information of the Successor, or any intentional wrongful engagement in any competitive activity that would constitute a material breach of Grantee’s duty of loyalty to the Successor, and no act, or failure to act, on the part of Grantee shall be deemed “intentional” unless done or omitted to be done by Grantee not in good faith and without reasonable belief that Grantee’s action or omission was in or not opposed to the best interest of the Successor;
provided
, that for any Grantee who is party to an individual severance or employment agreement defining Cause, “Cause” will have the meaning set forth in such agreement. For purposes of Section 4(c)(ii), “Good Reason” will be defined to mean a material reduction in the nature or scope of the responsibilities, authorities or duties of Grantee attached to Grantee’s position held immediately prior to the Change in Control, a change of more than 60 miles in the location of Grantee’s principal office immediately prior to the Change in Control, or a material reduction in Grantee’s remuneration upon or after the Change in Control;
provided
, that no later than 90 days following an event constituting Good Reason Grantee gives notice to the Successor of the occurrence of such event and the Successor fails to cure the event within 30 days following the receipt of such notice.
|
(iv)
|
If a Replacement Award is provided, notwithstanding anything in this Agreement to the contrary, any outstanding RSUs which at the time of the Change in Control are not subject to a “substantial risk of forfeiture” (within the meaning of Section 409A of the Code) will be deemed to be Vested at the time of such Change in Control.
|
(d)
|
Divestiture
: If Grantee’s employment with the Company or a Subsidiary terminates as the result of a divestiture, then Grantee shall Vest in the RSUs in accordance with the terms and conditions of Section 3 as if Grantee had remained in the continuous employ of the Company or a Subsidiary from the Date of Grant until the fourth anniversary of the Date of Grant or the occurrence of a circumstance referenced in Section 4(a) or Section 4(c), whichever occurs first. For the purposes of this Agreement, the term “divestiture” shall mean a permanent disposition to a Person other than the Company or any Subsidiary of a plant or other facility or property at which Grantee performs a majority of Grantee’s services whether such disposition is effected by means of a sale of assets, a sale of Subsidiary stock or otherwise.
|
(e)
|
Layoff
: If (i) Grantee’s employment with the Company or a Subsidiary terminates as the result of a layoff and (ii) Grantee is entitled to receive severance pay pursuant to the terms of any severance pay plan of the Company in effect at the time of Grantee’s termination of employment that provides for severance pay calculated by multiplying Grantee’s base compensation by a specified severance period, then Grantee shall Vest in the RSUs in accordance with the terms and conditions of Section 3 as if Grantee had remained in the continuous employ of the Company or a Subsidiary from the Date of Grant until the end of the severance period or the occurrence of a circumstance referenced in Section 4(a) or Section 4(c), whichever occurs first. For purposes of this Agreement, a “layoff” shall mean the involuntary termination by the Company or any Subsidiary of Grantee’s employment with the Company or any Subsidiary due to (A) a reduction in force leading to a permanent downsizing of the salaried workforce, (B) a permanent shutdown of the plant, department or subdivision in which Grantee works, or (C) an elimination of position.
|
5.
|
Forfeiture of RSUs
. Any RSUs that have not Vested pursuant to Section 3 or Section 4 prior to the fourth anniversary of the Date of Grant will be forfeited automatically and without further notice on such date (or earlier if, and on such date that, Grantee ceases to be an employee of the Company or a Subsidiary prior to the fourth anniversary of the Date of Grant for any reason other than as described in Section 4).
|
6.
|
Form and Time of Payment of RSUs
.
|
(a)
|
General
: Subject to Section 5 and Section 6(b), payment for Vested RSUs will be made
in cash or Common Shares (as determined by the Committee) within 10 days following the applicable Vesting date specified in Section
3 for such Vested RSUs (to the extent payment for such Vested RSUs has not previously been made).
|
(b)
|
Other Payment Events
. Notwithstanding Section 6(a), to the extent that the RSUs are Vested on the dates set forth below, payment with respect to the RSUs will be made as follows (to the extent payment for such Vested RSUs has not previously been made):
|
(i)
|
Change in Control
. Upon a Change in Control, Grantee is entitled to receive payment for Vested RSUs in cash or Common Shares (as determined by the Committee) on the date of the Change in Control;
provided
,
however
, that if such Change in Control would not qualify as a permissible date of distribution under Section 409A(a)(2)(A) of the Code, and the regulations thereunder, and where Section 409A of the Code applies to such distribution, Grantee is entitled to receive the corresponding payment on the date that would have otherwise applied pursuant to Sections 6(a) or 6(b)(ii) as though such Change in Control had not occurred.
|
(ii)
|
Death or Disability
. On the date of Grantee’s death or the date Grantee becomes permanently disabled, Grantee is entitled to receive payment for Vested RSUs in cash or Common Shares (as determined by the Committee) on such date.
|
7.
|
Payment of Dividend Equivalents
. With respect to each of the RSUs covered by this Agreement, Grantee shall be credited on the records of the Company with dividend equivalents in an amount equal to the amount per Common Share of any cash dividends declared by the Board on the outstanding Common Shares during the period beginning on the Date of Grant and ending either on the date on which Grantee receives payment for the RSUs pursuant to Section 6 hereof or at the time when the RSUs are forfeited in accordance with Section 5 of this Agreement. These dividend equivalents will accumulate without interest and, subject to the terms and conditions of this Agreement, will be paid at the same time, to the same extent and in the same manner, in cash or Common Shares (as determined by the Committee) as the RSUs for which the dividend equivalents were credited.
|
8.
|
Detrimental Activity and Recapture
.
|
(a)
|
In the event that, as determined by the Committee, Grantee shall engage in Detrimental Activity during employment with the Company or a Subsidiary, the RSUs will be forfeited automatically and without further notice at the time of that determination notwithstanding any other provision of this Agreement. For purposes of this Agreement, “Detrimental Activity” shall mean:
|
(i)
|
engaging in any activity, as an employee, principal, agent, or consultant for another entity that competes with the Company in any actual, researched, or prospective product, service, system, or business activity for which Grantee has had any direct responsibility during the last two years of his or her employment with the Company or a Subsidiary, in any territory in which the Company or a Subsidiary manufactures, sells, markets, services, or installs such product, service, or system, or engages in such business activity;
|
(ii)
|
soliciting any employee of the Company or a Subsidiary to terminate his or her employment with the Company or a Subsidiary;
|
(iii)
|
the disclosure to anyone outside the Company or a Subsidiary, or the use in other than the Company or a Subsidiary’s business, without prior written authorization from the Company, of any confidential, proprietary or trade secret information or material relating to the business of the Company and its Subsidiaries, acquired by Grantee during his or her employment with the Company or its Subsidiaries or while acting as a director of or consultant for the Company or its Subsidiaries thereafter;
|
(iv)
|
the failure or refusal to disclose promptly and to assign to the Company upon request all right, title and interest in any invention or idea, patentable or not, made or conceived by Grantee during employment by the Company and any Subsidiary, relating in any manner to the actual or anticipated business, research or development work of the Company or any Subsidiary or the failure or refusal to do anything reasonably necessary to enable the Company or any Subsidiary to secure a patent where appropriate in the United States and in other countries;
|
(v)
|
activity that results in Termination for Cause. For the purposes of this subsection, “Termination for Cause” shall mean a termination: (A) due to Grantee’s willful and continuous gross neglect of his or her duties for which he or she is employed; or (B) due to an act of dishonesty on the part of Grantee constituting a felony resulting or intended to result, directly or indirectly, in his or her gain for personal enrichment at the expense of the Company or a Subsidiary; or
|
(vi)
|
any other conduct or act determined to be injurious, detrimental or prejudicial to any significant interest of the Company or any Subsidiary unless Grantee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company.
|
(b)
|
If a Restatement occurs and the Committee determines that Grantee is personally responsible for causing the Restatement as a result of Grantee’s personal misconduct or any fraudulent activity on the part of Grantee, then the Committee has discretion to, based on applicable facts and circumstances and subject to applicable law, cause the Company to recover all or any portion (but no more than 100%) of the RSUs earned or payable to Grantee for some or all of the years covered by the Restatement. The amount of any earned or payable RSUs recovered by the Company shall be limited to the amount by which such earned or payable RSUs exceeded the amount that would have been earned by or paid to Grantee had the Company’s financial statements for the applicable restated fiscal year or years been initially filed as restated, as reasonably determined by the Committee. The Committee shall also determine whether the Company shall effect any recovery under this Section 8(b) by: (i) seeking repayment from Grantee; (ii) reducing, except with respect to any non-qualified deferred compensation under Section 409A of the Code, the amount that would otherwise be payable to Grantee under any compensatory plan, program or arrangement maintained by the Company (subject to applicable law and the terms and conditions of such plan, program or arrangement); (iii) by withholding, except with respect to any non-qualified deferred compensation under Section 409A of the Code, payment of future increases in compensation (including the payment of any discretionary bonus amount) that would otherwise have been made to Grantee in accordance with the Company’s compensation practices; or (iv) by any combination of these alternatives. For purposes of this Agreement, “Restatement” means a restatement (made within 36 months of the publication of the financial statements that are required to be restated) of any part of the Company’s financial statements for any fiscal year or years after 2016 due to material noncompliance with any financial reporting requirement under the U.S. securities laws applicable to such fiscal year or years.
|
9.
|
Compliance with Law
. The Company shall make reasonable efforts to comply with all applicable federal and state securities laws;
provided
,
however
, notwithstanding any other provision of this Agreement, the Company shall not be obligated to issue any of the Common Shares covered by this Agreement if the issuance thereof would result in violation of any such law.
|
10.
|
Adjustments
. Subject to Section 13 of the Plan, the Committee shall make any adjustments in the number of RSUs or kind of shares of stock or other securities underlying the RSUs covered by this Agreement, or in any other terms of this award, that the Committee may determine to be equitably required to prevent any dilution or expansion of Grantee’s rights under this Agreement that otherwise would result from any (a) stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, (b) merger, consolidation, separation, reorganization or partial or complete liquidation involving the Company or (c) other transaction or event having an effect similar to any of those referred to in Section 10(a) or 10(b) hereof. Furthermore, in the event that any transaction or event described or referred to in the immediately preceding sentence shall occur, the Committee shall provide in substitution of any or all of Grantee’s rights under this Agreement such alternative consideration as the Committee may determine in good faith to be equitable under the circumstances.
|
11.
|
Withholding Taxes
.
If the Company is required to withhold federal, state, local, employment, or foreign taxes, or, to the extent permitted under Section 409A of the Code, any other applicable taxes, in connection with Grantee’s right to receive Common Shares under this Agreement (regardless of whether Grantee is entitled to the delivery of any Common Shares at that time), and the amounts available to the Company for such withholding are insufficient, it shall be a condition to the receipt of any Common Shares or any other benefit provided for under this Agreement that Grantee make arrangements satisfactory to the Company for payment of the balance of the taxes. Grantee may satisfy such tax obligation by paying the Company cash via personal check. Alternatively, Grantee may elect that all or any part of such tax obligation be satisfied by the Company’s retention of a portion of the Common Shares provided for under this Agreement or by Grantee’s surrender of a portion of the Common Shares that he or she has owned for at least 6 months. In no event, however, shall the Company accept Common Shares for payment of taxes in excess of required tax withholding rates (unless such higher withholding amounts would not result in adverse accounting implications for the Company). If an election is made to satisfy Grantee’s tax obligation with the release or surrender of Common Shares, the Common Shares shall be credited in the following manner: (a) at the Market Value per Share on the date of delivery if the tax obligations arise due to the delivery of Common Shares under this Agreement; or (b) at the Market Value per Share on the date the tax obligation arises, if for a reason other than the delivery of Common Shares under this Agreement.
|
12.
|
Right to Terminate Employment
. No provision of this Agreement will limit in any way whatsoever any right that the Company or a Subsidiary may otherwise have to terminate the employment of Grantee at any time.
|
13.
|
Relation to Other Benefits
. Any economic or other benefit to Grantee under this Agreement or the Plan will not be taken into account in determining any benefits to which Grantee may be entitled under any profit‑sharing, retirement or other benefit or compensation plan maintained by the Company or a Subsidiary and will not affect the amount of any life insurance coverage available to any beneficiary under any life insurance plan covering employees of the Company or a Subsidiary.
|
14.
|
Amendments
. Any amendment to the Plan will be deemed to be an amendment to this Agreement to the extent that the amendment is applicable to this Agreement;
provided
,
however
, that no amendment will adversely affect the rights of Grantee with respect to the Common Shares or other securities covered by this Agreement without Grantee’s consent. Notwithstanding the foregoing, the limitation requiring the consent of Grantee to certain amendments will not apply to any amendment that is deemed necessary by the Company to ensure compliance with Section 409A of the Code.
|
15.
|
Severability
. In the event that one or more of the provisions of this Agreement is invalidated for any reason by a court of competent jurisdiction, any provision so invalidated will be deemed to be separable from the other provisions of this Agreement, and the remaining provisions of this Agreement will continue to be valid and fully enforceable.
|
16.
|
Governing Law
. This Agreement is made under, and shall be construed in accordance with, the internal substantive laws of the State of Ohio.
|
17.
|
Compliance with Section 409A of the Code.
To the extent applicable, it is intended that this Agreement and the Plan comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1)
of the Code
do not apply to Grantee. This Agreement and the Plan shall be administered in a manner consistent with this intent. Reference to Section 409A of the Code is to Section 409A of the Internal Revenue Code of 1986, as amended, and will also include any regulations or any other
formal
guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.
|
1.
|
Payment of PRSUs
. The PRSUs will become payable in accordance with the provisions of
Section 6
of this Agreement if the Restriction Period lapses and Grantee’s right to receive payment for the PRSUs becomes nonforfeitable (“
Vest
,” “
Vesting
” or “
Vested
”) in accordance with
Section 3
and
Section 4
of this Agreement.
|
2.
|
PRSUs Not Transferrable
. None of the PRSUs nor any interest therein or in any Common Shares underlying such PRSUs will be transferable prior to payment other than by will or the laws of descent and distribution.
|
3.
|
Vesting of PRSUs
.
|
(a)
|
Subject to the terms and conditions of
Section 4
and
Section 5
of this Agreement, the PRSUs will Vest on the basis of the relative achievement of the Management Objective or Management Objectives approved by the Committee on or before the Date of Grant (the “
Performance Metrics
”) for the period from
January 1, 2017 through December 31, 2018
(the “
Performance Period
”) as follows:
|
(i)
|
The applicable percentage of the PRSUs that shall be earned by Grantee for the Performance Period shall be determined by reference to the Performance Matrix for the Performance Period approved by the Committee on or before the Date of Grant (the “
Performance Matrix
”);
|
(ii)
|
In the event that the Company’s achievement with respect to one of the Performance Metrics is between the performance levels specified in the Performance Matrix, the applicable percentage of the PRSUs that shall be earned by Grantee for the Performance Period shall be determined by the Committee using straight-line interpolation; and
|
(iii)
|
The Vesting of the PRSUs pursuant to this
Section 3
or pursuant to Section 4 shall be contingent upon a determination of the Committee that the Performance Metrics, as described in this
Section 3
, have been satisfied.
|
(b)
|
If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, the manner in which it conducts business or other events or circumstances render the Performance Metrics specified in this
Section 3
to be unsuitable, the Committee may modify such Performance Metrics or any related minimum acceptable level of achievement, in whole or in part, as the Committee deems appropriate;
provided
,
however
, that no such action may result in the loss of the otherwise available exemption of the PRSUs under Section 162(m) of the Code.
|
(c)
|
All determinations involving the Performance Metrics set forth in this
Section 3
shall be calculated based on U.S. Generally Accepted Accounting Principles in effect at the time the Performance Metrics are established without regard to any change in accounting standards that may be required by the Financial Accounting Standards Board after the Performance Metrics are established.
|
(d)
|
Subject to
Section 3(a)
,
Section 3(b)
and
Section 3(c)
, the PRSUs earned with respect to the Performance Period will Vest if Grantee is in the continuous employ of the Company or a Subsidiary thereof from the Date of Grant through the last day of the Performance Period. For purposes of this Agreement, the continuous employment of Grantee with the Company or a Subsidiary thereof will not be deemed to have been interrupted, and Grantee shall not be deemed to have ceased to be an employee of the Company or a Subsidiary thereof, by reason of the transfer of Grantee’s employment among the Company and its Subsidiaries.
|
4.
|
Alternative Vesting of PRSUs
. Notwithstanding the provisions of
Section 3
of this Agreement, and subject to the payment provisions of
Section 6
hereof, Grantee shall Vest in some or all of the PRSUs under the following circumstances:
|
(a)
|
Death or Disability
: If Grantee should die or become permanently disabled while in the employ of the Company or a Subsidiary thereof, then Grantee shall Vest in a number of PRSUs equal to the product of (i) the number of PRSUs in which Grantee would have Vested in accordance with the terms and conditions of
Section 3
if Grantee had remained in the continuous employ of the Company or a Subsidiary thereof from the Date of Grant until the end of the Performance Period or the occurrence of a Change in Control to the extent a Replacement Award is not provided, whichever occurs first, multiplied by (ii) a fraction (in no case greater than 1) the numerator of which is the number of whole months from
January 1, 2017
through the date of such death or permanent disability and the denominator of which is 24. PRSUs that Vest in accordance with this
Section 4(a)
will be paid as provided for in
Section 6(a)
of this Agreement. For purposes of this Agreement, “permanently disabled” means that Grantee has qualified for long-term disability benefits under a disability plan or program of the Company or a Subsidiary thereof or, in the absence of a disability plan or program of the Company or a Subsidiary thereof, under a government-sponsored disability program and is “disabled” within the meaning of Section 409A(a)(2)(C) of the Code.
|
(b)
|
Retirement
: If Grantee should retire with the Company’s consent, then Grantee shall Vest in a number of PRSUs equal to the product of (i) the number of PRSUs in which Grantee would have Vested in accordance with the terms and conditions of
Section 3
if Grantee had remained in the continuous employ of the Company or a Subsidiary thereof from the Date of Grant until the end of the Performance Period or the occurrence of a Change in Control to the extent a Replacement Award is not provided, whichever occurs first, multiplied by (ii) a fraction (in no case greater than 1) the numerator of which is the number of whole months from
January 1, 2017
through the date of such retirement and the denominator of which is 24. PRSUs that Vest in accordance with this
Section 4(b)
will be paid as provided for in
Section 6(a)
of this Agreement. For purposes of this Agreement, “retire with the Company’s consent” means: (i) the retirement of Grantee prior to age 62 under a retirement plan of the Company or a Subsidiary thereof, if the Board or the Committee determines that his retirement is for the convenience of the Company or a Subsidiary thereof; or (ii) the retirement of Grantee at or after age 62 under a retirement plan of the Company or a Subsidiary thereof.
|
(c)
|
Change in Control
:
|
(i)
|
Upon a Change in Control occurring during the Restriction Period while Grantee is an employee of the Company or a Subsidiary thereof or during the period that Grantee is deemed to be in the continuous employ of the Company or a Subsidiary thereof pursuant to
Section 4(a)
,
4(b)
,
4(d)
or
4(e)
, to the extent the PRSUs have not been forfeited, the PRSUs will Vest (except to the extent that a Replacement Award is provided to Grantee for the PRSUs) as follows: the Performance Period will terminate and the Committee as constituted immediately before the Change in Control will determine and certify the Vested PRSUs based on actual performance through the most recent date prior to the Change in Control for which achievement of the Performance Metrics can reasonably be determined;
provided
, that the number of PRSUs in which Grantee shall so Vest shall be equal to the product of (A) the number of PRSUs in which Grantee would have Vested based on actual performance in accordance with the terms and conditions of this Section 4(c)(i), multiplied by (B) a fraction (in no case greater than 1) the numerator of which is the number of whole months from January 1, 2017 through the date of such performance determination and the denominator of which is 24. PRSUs that Vest in accordance with this
Section 4(c)(i)
will be paid as provided for in
Section 6(b)
of this Agreement.
|
(ii)
|
For purposes of this Agreement, a “
Replacement Award
” means an award (A) of performance-based restricted stock units, (B) that has a value at least equal to the value of the PRSUs, (C) that relates to publicly traded equity securities of the Company or its successor in the Change in Control (or another entity that is affiliated with the Company or its successor following the Change in Control), (D) the tax consequences of which, under the Code, if Grantee is subject to U.S. federal income tax under the Code, are not less favorable to Grantee than the tax consequences of the PRSUs, (E) that vests upon a termination of Grantee’s employment with the Company or a Subsidiary thereof or their successors in the Change in Control (or another entity that is affiliated with the Company or a Subsidiary thereof or their successors following the Change in Control) (as applicable, the “
Successor
”) for Good Reason by Grantee or without Cause by such employer, or upon the death of Grantee or Grantee becoming permanently disabled, within a period of two years after the Change in Control based on actual performance through the date of the Change in Control; provided, that the number of PRSUs in which Grantee shall so vest shall be equal to the product of (X) the number of PRSUs in which Grantee would have vested based on actual performance in accordance with the terms and conditions of this Section 4(c)(ii)(E), multiplied by (Y) a fraction (in no case greater than 1) the numerator of which is the number of whole months from January 1, 2017 through the date of such termination, death or permanent disability and the denominator of which is 24, and (F) the other terms and conditions of which are not less favorable to Grantee than the terms and conditions of the PRSUs (including the provisions that would apply in the event of a subsequent Change in Control). A Replacement Award may be granted only to the extent it conforms to the requirements of Treasury Regulation 1.409A-3(i)(5)(iv)(B) or otherwise does not result in the PRSUs or Replacement Award failing to comply with or be exempt from Section 409A of the Code. Without limiting the generality of the foregoing, the Replacement Award may take the form of a continuation of the PRSUs if the requirements of the preceding sentence are satisfied. The determination of whether the conditions of this
Section 4(c)(ii)
are satisfied will be made by the Committee, as constituted immediately before the Change in Control, in its sole discretion.
|
(iii)
|
For purposes of
Section 4(c)(ii)
, “
Cause
” will be defined not less favorably with respect to Grantee than: any intentional act of fraud, embezzlement or theft in connection with the Grantee’s duties with the Successor, any intentional wrongful disclosure of secret processes or confidential information of the Successor, or any intentional wrongful engagement in any competitive activity that would constitute a material breach of Grantee’s duty of loyalty to the Successor, and no act, or failure to act, on the part of Grantee shall be deemed “intentional” unless done or omitted to be done by Grantee not in good faith and without reasonable belief that Grantee’s action or omission was in or not opposed to the best interest of the Successor;
provided
, that for any Grantee who is party to an individual severance or employment agreement defining Cause, “Cause” will have the meaning set forth in such agreement. For purposes of
Section 4(c)(ii)
, “
Good Reason
” will be defined to mean: a material reduction in the nature or scope of the responsibilities, authorities or duties of Grantee attached to Grantee’s position held immediately prior to the Change in Control, a change of more than 60 miles in the location of Grantee’s principal office immediately prior to the Change in Control, or a material reduction in Grantee’s remuneration upon or after the Change in Control;
provided
, that no later than 90 days following an event constituting Good Reason Grantee gives notice to the Successor of the occurrence of such event and the Successor fails to cure the event within 30 days following the receipt of such notice.
|
(iv)
|
If a Replacement Award is provided, notwithstanding anything in this Agreement to the contrary, any outstanding PRSUs which at the time of the Change in Control are not subject to a “substantial risk of forfeiture” (within the meaning of Section 409A of the Code) will be deemed to be Vested at the time of such Change in Control and will be paid as provided for in
Section 6(b)
of this Agreement.
|
(d)
|
Divestiture
: If Grantee’s employment with the Company or a Subsidiary thereof terminates as the result of a divestiture, then Grantee shall Vest in a number of PRSUs equal to the product of (i) the number of PRSUs in which Grantee would have Vested in accordance with the terms and conditions of
Section 3
if Grantee had remained in the continuous employ of the Company or a Subsidiary thereof from the Date of Grant until the end of the Performance Period or the occurrence of a Change in Control to the extent a Replacement Award is not provided, whichever occurs first, multiplied by (ii) a fraction (in no case greater than 1) the numerator of which is the number of whole months from
January 1, 2017
through the date of such termination and the denominator of which is 24. PRSUs that Vest in accordance with this
Section 4(d)
will be paid as provided for in
Section 6(a)
of this Agreement. For the purposes of this Agreement, the term “divestiture” shall mean a permanent disposition to a Person other than the Company or any Subsidiary thereof of a plant or other facility or property at which Grantee performs a majority of Grantee’s services whether such disposition is effected by means of a sale of assets, a sale of Subsidiary stock or otherwise.
|
(e)
|
Layoff
: If (i) Grantee’s employment with the Company or a Subsidiary thereof terminates as the result of a layoff and (ii) Grantee is entitled to receive severance pay pursuant to the terms of any severance pay plan of the Company in effect at the time of Grantee’s termination of employment that provides for severance pay calculated by multiplying Grantee’s base compensation by a specified severance period, then Grantee shall Vest in a number of PRSUs equal to the product of (x) the number of PRSUs in which Grantee would have Vested in accordance with the terms and conditions of
Section 3
if Grantee had remained in the continuous employ of the Company or a Subsidiary thereof from the Date of Grant until the end of the Performance Period or the occurrence of a Change in Control to the extent a Replacement Award is not provided, whichever occurs first, multiplied by (y) a fraction (in no case greater than 1) the numerator of which is the number of whole months from
January 1, 2017
through the end of the specified severance period and the denominator of which is 24. PRSUs that Vest in accordance with this
Section 4(e)
will be paid as provided for in
Section 6(a)
of this Agreement. For purposes of this Agreement, a “layoff” shall mean the involuntary termination by the Company or any Subsidiary thereof of Grantee’s employment with the Company or any Subsidiary thereof due to (A) a reduction in force leading to a permanent downsizing of the salaried workforce, (B) a permanent shutdown of the plant, department or subdivision in which Grantee works, or (C) an elimination of position.
|
5.
|
Forfeiture of PRSUs
. Any PRSUs that have not Vested pursuant to
Section 3
or
Section 4
at the end of the Performance Period will be forfeited automatically and without further notice after the end of the Performance Period (or earlier if, and on such date that, Grantee ceases to be an employee of the Company or a Subsidiary thereof prior to the end of the Performance Period for any reason other than as described in
Section 4
).
|
6.
|
Form and Time of Payment of PRSUs
.
|
(a)
|
General
. Subject to
Section 5
and
Section 6(b)
, payment for Vested PRSUs will be made in cash or Common Shares (as determined by the Committee) between January 1, 2019 and March 15, 2019.
|
(b)
|
Other Payment Event
. Notwithstanding
Section 6(a)
, to the extent that the PRSUs are Vested on the date of a Change in Control, Grantee will receive payment for Vested PRSUs in cash or Common Shares (as determined by the Committee) on the date of the Change in Control;
provided
,
however
, that if such Change in Control would not qualify as a permissible date of distribution under Section 409A(a)(2)(A) of the Code, and the regulations thereunder, and where Section 409A of the Code applies to such distribution, Grantee is entitled to receive the corresponding payment on the date that would have otherwise applied pursuant to
Section 6(a)
.
|
7.
|
No Dividend Equivalents
. No dividend equivalents will accrue, be credited or be paid or payable with respect to the PRSUs.
|
8.
|
Detrimental Activity and Recapture
.
|
(a)
|
Notwithstanding anything in this Agreement to the contrary, in the event that, as determined by the Committee, Grantee shall engage in Detrimental Activity during employment with the Company or a Subsidiary thereof, the PRSUs will be forfeited automatically and without further notice at the time of that determination notwithstanding any other provision of this Agreement. For purposes of this Agreement, “
Detrimental Activity
” shall mean:
|
(i)
|
engaging in any activity, as an employee, principal, agent, or consultant for another entity that competes with the Company in any actual, researched, or prospective product, service, system, or business activity for which Grantee has had any direct responsibility during the last two years of his or her employment with the Company or a Subsidiary thereof, in any territory in which the Company or a Subsidiary thereof manufactures, sells, markets, services, or installs such product, service, or system, or engages in such business activity;
|
(ii)
|
soliciting any employee of the Company or a Subsidiary thereof to terminate his or her employment with the Company or a Subsidiary thereof;
|
(iii)
|
the disclosure to anyone outside the Company or a Subsidiary thereof, or the use in other than the Company’s or one of its Subsidiary’s business, without prior written authorization from the Company, of any confidential, proprietary or trade secret information or material relating to the business of the Company and its Subsidiaries, acquired by Grantee during his or her employment with the Company or its Subsidiaries or while acting as a director of or consultant for the Company or its Subsidiaries thereafter;
|
(iv)
|
the failure or refusal to disclose promptly and to assign to the Company upon request all right, title and interest in any invention or idea, patentable or not, made or conceived by Grantee during employment by the Company and any Subsidiary thereof, relating in any manner to the actual or anticipated business, research or development work of the Company or any Subsidiary thereof or the failure or refusal to do anything reasonably necessary to enable the Company or any Subsidiary thereof to secure a patent where appropriate in the United States and in other countries;
|
(v)
|
activity that results in Termination for Cause. For the purposes of this subsection, “
Termination for Cause
” shall mean a termination: (A) due to Grantee’s willful and continuous gross neglect of his or her duties for which he or she is employed; or (B) due to an act of dishonesty on the part of Grantee constituting a felony resulting or intended to result, directly or indirectly, in his or her gain for personal enrichment at the expense of the Company or a Subsidiary thereof; or
|
(vi)
|
any other conduct or act determined to be injurious, detrimental or prejudicial to any significant interest of the Company or any Subsidiary thereof unless Grantee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company.
|
(b)
|
If a Restatement occurs and the Committee determines that Grantee is personally responsible for causing the Restatement as a result of Grantee’s personal misconduct or any fraudulent activity on the part of Grantee, then the Committee has discretion to, based on applicable facts and circumstances and subject to applicable law, cause the Company to recover all or any portion (but no more than 100%) of the PRSUs earned or payable to Grantee for some or all of the years covered by the Restatement. The amount of any earned or payable PRSUs recovered by the Company shall be limited to the amount by which such earned or payable PRSUs exceeded the amount that would have been earned by or paid to Grantee had the Company’s financial statements for the applicable restated fiscal year or years been initially filed as restated, as reasonably determined by the Committee. The Committee shall also determine whether the Company shall effect any recovery under this
Section 8(b)
by: (i) seeking repayment from Grantee; (ii) reducing, except with respect to any non-qualified deferred compensation under Section 409A of the Code, the amount that would otherwise be payable to Grantee under any compensatory plan, program or arrangement maintained by the Company (subject to applicable law and the terms and conditions of such plan, program or arrangement); (iii) by withholding, except with respect to any non-qualified deferred compensation under Section 409A of the Code, payment of future increases in compensation (including the payment of any discretionary bonus amount) that would otherwise have been made to Grantee in accordance with the Company’s compensation practices; or (iv) by any combination of these alternatives. For purposes of this Agreement, “
Restatement
” means a restatement (made within 24 months of the publication of the financial statements that are required to be restated) of any part of the Company’s financial statements for any fiscal year or years after 2016 due to material noncompliance with any financial reporting requirement under the U.S. securities laws applicable to such fiscal year or years. Notwithstanding anything in this Agreement to the contrary, Grantee acknowledges and agrees that this Agreement and the award described herein (and any settlement thereof) are subject to the terms and conditions of the Company’s clawback policy (if any) as may be in effect from time to time specifically to implement Section 10D of the Exchange Act and any applicable rules or regulations promulgated thereunder (including applicable rules and regulations of any national securities exchange on which the Common Shares may be traded) (the “
Compensation Recovery Policy
”), and that this
Section 8
shall be deemed superseded by and subject to the terms and conditions of the Compensation Recovery Policy from and after the effective date thereof.
|
9.
|
Compliance with Law
. The Company shall make reasonable efforts to comply with all applicable federal and state securities laws; provided, however, notwithstanding any other provision of this Agreement, the Company shall not be obligated to issue any of the Common Shares covered by this Agreement if the issuance thereof would result in violation of any such law.
|
10.
|
Adjustments
. Subject to
Section 13
of the Plan, the Committee shall make any adjustments in the number of PRSUs or kind of shares of stock or other securities underlying the PRSUs covered by this Agreement, or in any other terms of this award, that the Committee determines to be equitably required to prevent any dilution or enlargement of Grantee’s rights under this Agreement that otherwise would result from any (a) stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, (b) merger, consolidation, separation, reorganization or partial or complete liquidation involving the Company or (c) other transaction or event having an effect similar to any of those referred to in
Section 10(a)
or
10(b)
hereof. Furthermore, in the event that any transaction or event described or referred to in the immediately preceding sentence shall occur, or in the event of a Change in Control, the Committee shall provide in substitution of any or all of Grantee’s rights under this Agreement such alternative consideration (including cash) as the Committee determines in good faith to be equitable under the circumstances.
|
11.
|
Withholding Taxes
. If the Company is required to withhold federal, state, local, employment, or foreign taxes, or, to the extent permitted under Section 409A of the Code, any other applicable taxes, in connection with Grantee’s right to receive Common Shares under this Agreement (regardless of whether Grantee is entitled to the delivery of any Common Shares at that time), and the amounts available to the Company for such withholding are insufficient, it shall be a condition to the receipt of any Common Shares or any other benefit provided for under this Agreement that Grantee make arrangements satisfactory to the Company for payment of the balance of the taxes. Grantee may satisfy such tax obligation by paying the Company cash via personal check. Alternatively, Grantee may elect that all or any part of such tax obligation be satisfied by the Company’s retention of a portion of the Common Shares provided for under this Agreement or by Grantee’s surrender of a portion of the Common Shares that he or she has owned for at least 6 months. In no event, however, shall the Company accept Common Shares for payment of taxes in excess of required tax withholding rates (unless such higher withholding amounts would not result in adverse accounting implications for the Company). If an election is made to satisfy Grantee’s tax obligation with the release or surrender of Common Shares, the Common Shares shall be credited in the following manner: (a) at the Market Value per Share on the date of delivery if the tax obligations arise due to the delivery of Common Shares under this Agreement; or (b) at the Market Value per Share on the date the tax obligation arises, if for a reason other than the delivery of Common Shares under this Agreement.
|
12.
|
Right to Terminate Employment
. No provision of this Agreement will limit in any way whatsoever any right that the Company or a Subsidiary thereof may otherwise have to terminate the employment of Grantee at any time.
|
13.
|
Relation to Other Benefits
. Any economic or other benefit to Grantee under this Agreement or the Plan will not be taken into account in determining any benefits to which Grantee may be entitled under any profit‑sharing, retirement or other benefit or compensation plan maintained by the Company or a Subsidiary thereof and will not affect the amount of any life insurance coverage available to any beneficiary under any life insurance plan covering employees of the Company or a Subsidiary thereof.
|
14.
|
Amendments
. Any amendment to the Plan will be deemed to be an amendment to this Agreement to the extent that the amendment is applicable to this Agreement; provided, however, that (a) no amendment will adversely affect the rights of Grantee with respect to the Common Shares or other securities covered by this Agreement without Grantee’s consent and (b) Grantee’s consent shall not be required to an amendment that is deemed necessary by the Company to ensure compliance with Section 10D of the Exchange Act. Notwithstanding the foregoing, the limitation requiring the consent of Grantee to certain amendments will not apply to any amendment that is deemed necessary by the Company to ensure compliance with Section 409A of the Code.
|
15.
|
Severability
. In the event that one or more of the provisions of this Agreement is invalidated for any reason by a court of competent jurisdiction, any provision so invalidated will be deemed to be separable from the other provisions of this Agreement, and the remaining provisions of this Agreement will continue to be valid and fully enforceable.
|
16.
|
Governing Law
. This Agreement is made under, and shall be construed in accordance with, the internal substantive laws of the State of Ohio.
|
17.
|
Compliance with Section 409A of the Code.
To the extent applicable, it is intended that this Agreement and the Plan comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to Grantee. This Agreement and the Plan shall be administered in a manner consistent with this intent. Reference to Section 409A of the Code is to Section 409A of the Internal Revenue Code of 1986, as amended, and will also include any regulations or any other formal guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.
|
1.
|
Five-Year Vesting of Awards
.
|
(a)
|
Normal Vesting
: Subject to the terms and conditions of Sections 2 and 3 hereof, Grantee’s right to receive the Common Shares covered by this Agreement and any Deferred Cash Dividends accumulated with respect thereto shall become nonforfeitable on the fifth anniversary of the Date of Grant if Grantee has been in the continuous employ of the Company or a Subsidiary from the Date of Grant until the date of said fifth anniversary.
|
(b)
|
Vesting Upon Retirement with Consent
: In the event Grantee should retire with the Company’s consent prior to the fifth anniversary of the Date of Grant, then, subject to the payment provisions of Section 5 hereof, Grantee’s right to receive the Common Shares covered by this Agreement, along with any Deferred Cash Dividends accumulated with respect thereto, shall become nonforfeitable in accordance with the terms and conditions of Section 1(a) as if Grantee had remained in the continuous employ of the Company or a Subsidiary from the Date of Grant until the date of the fifth anniversary of the Date of Grant or the occurrence of an event referenced in Section 2, whichever occurs first.
|
2.
|
Alternative Vesting of Awards
.
|
(a)
|
Death or Disability
: Grantee’s right to receive the Common Shares covered by this Agreement and any Deferred Cash Dividends then accumulated with respect thereto shall immediately become nonforfeitable if Grantee should die or become permanently disabled while in the employ of the Company or any Subsidiary. If Grantee should die or become permanently disabled during the period that Grantee is deemed to be in the continuous employ of the Company or a Subsidiary pursuant to Section 1(b), 2(c) or 2(d), then the Common Shares covered by this Agreement and any Deferred Cash Dividends then accumulated with respect thereto will immediately become nonforfeitable, except that to the extent that Section 2(d) applies, the Common Shares covered by this Agreement and any Deferred Cash Dividends then accumulated with respect thereto will immediately become nonforfeitable only to the extent that the Common Shares covered by this Agreement and any Deferred Cash Dividends then accumulated with respect thereto would have become nonforfeitable during the severance period.
|
(b)
|
Change in Control
:
|
(i)
|
Upon a Change in Control occurring during the five-year period described in Section 1(a) above while Grantee is an employee of the Company or a Subsidiary, to the extent the Common Shares covered by this Agreement and any Deferred Cash Dividends accumulated with respect thereto have not been forfeited, the Common Shares covered by this Agreement and any Deferred Cash Dividends accumulated with respect thereto shall immediately become nonforfeitable (except to the extent that a Replacement Award is provided to Grantee for such Common Shares and Deferred Cash Dividends). If Grantee is deemed to be in the continuous employ of the Company or a Subsidiary pursuant to Section 1(b), 2(c) or 2(d), upon a Change in Control prior to the fifth anniversary of the Date of Grant, then the Common Shares covered by this Agreement and any Deferred Cash Dividends then accumulated with respect thereto will immediately become nonforfeitable, except that to the extent that Section 2(d) applies, the Common Shares covered by this Agreement and any Deferred Cash Dividends then accumulated with respect thereto will immediately become nonforfeitable only to the extent that the Common Shares covered by this Agreement and any Deferred Cash Dividends then accumulated with respect thereto would have become nonforfeitable during the severance period.
|
(ii)
|
For purposes of this Agreement, a “Replacement Award” means an award (A) of service-based deferred shares, (B) that has a value at least equal to the value of the Common Shares covered by this Agreement and any Deferred Cash Dividends accumulated with respect thereto, (C) that relates to publicly traded equity securities of the Company or its successor in the Change in Control (or another entity that is affiliated with the Company or its successor following the Change in Control), (D) the tax consequences of which, under the Code, if Grantee is subject to U.S. federal income tax under the Code, are not less favorable to Grantee than the tax consequences of the Common Shares covered by this Agreement and any Deferred Cash Dividends accumulated with respect thereto, (E) that vests in full upon a termination of Grantee’s employment with the Company or a Subsidiary or their successors in the Change in Control (or another entity that is affiliated with the Company or a Subsidiary or their successors following the Change in Control) (as applicable, the “Successor”) for Good Reason by Grantee or without Cause by such Successor, or upon the death of Grantee or Grantee becoming permanently disabled, within a period of two years after the Change in Control, and (F) the other terms and conditions of which are not less favorable to Grantee than the terms and conditions of the Common Shares covered by this Agreement and any Deferred Cash Dividends then accumulated with respect thereto (including the provisions that would apply in the event of a subsequent Change in Control). A Replacement Award may be granted only to the extent it conforms to the requirements of Treasury Regulation 1.409A-3(i)(5)(iv)(B) or otherwise does not result in the Common Shares covered by this Agreement and any Deferred Cash Dividends then accumulated with respect thereto, or Replacement Award, failing to comply with or be exempt from Section 409A of the Code. Without limiting the generality of the foregoing, the Replacement Award may take the form of a continuation of the Common Shares covered by this Agreement and any Deferred Cash Dividends then accumulated with respect thereto if the requirements of the preceding sentence are satisfied. The determination of whether the conditions of this Section 2(b)(ii) are satisfied will be made by the Committee, as constituted immediately before the Change in Control, in its sole discretion.
|
(iii)
|
For purposes of Section 2(b)(ii), “Cause” will be defined not less favorably with respect to Grantee than: any intentional act of fraud, embezzlement or theft in connection with the Grantee’s duties with the Successor, any intentional wrongful disclosure of secret processes or confidential information of the Successor, or any intentional wrongful engagement in any competitive activity that would constitute a material breach of Grantee’s duty of loyalty to the Successor, and no act, or failure to act, on the part of Grantee shall be deemed “intentional” unless done or omitted to be done by Grantee not in good faith and without reasonable belief that Grantee’s action or omission was in or not opposed to the best interest of the Successor;
provided
, that for any Grantee who is party to an individual severance or employment agreement defining Cause, “Cause” will have the meaning set forth in such agreement. For purposes of Section 2(b)(ii), “Good Reason” will be defined to mean a material reduction in the nature or scope of the responsibilities, authorities or duties of Grantee attached to Grantee’s position held immediately prior to the Change in Control, a change of more than 60 miles in the location of Grantee’s principal office immediately prior to the Change in Control, or a material reduction in Grantee’s remuneration upon or after the Change in Control;
provided
, that no later than 90 days following an event constituting Good Reason Grantee gives notice to the Successor of the occurrence of such event and the Successor fails to cure the event within 30 days following the receipt of such notice.
|
(iv)
|
If a Replacement Award is provided, notwithstanding anything in this Agreement to the contrary, any outstanding Common Shares covered by this Agreement and any Deferred Cash Dividends then accumulated with respect thereto which at the time of the Change in Control are not subject to a “substantial risk of forfeiture” (within the meaning of Section 409A of the Code) will be deemed to be nonforfeitable at the time of such Change in Control.
|
(c)
|
Divestiture
: If Grantee’s employment with the Company or a Subsidiary terminates as the result of a divestiture, then the Common Shares covered by this Agreement and any Deferred Cash Dividends then accumulated with respect thereto shall become nonforfeitable in accordance with the terms and conditions of Section 1(a) as if Grantee had remained in the continuous employ of the Company or a Subsidiary from the Date of Grant until the fifth anniversary of the Date of Grant or the occurrence of a circumstance referenced in Section 2(a) or 2(b), whichever occurs first.
|
(d)
|
Layoff
: If (i) Grantee’s employment with the Company or a Subsidiary terminates as the result of a layoff and (ii) Grantee is entitled to receive severance pay pursuant to the terms of any severance pay plan of the Company in effect at the time of Grantee’s termination of employment that provides for severance pay calculated by multiplying Grantee’s base compensation by a specified severance period, then Grantee’s right to receive the Common Shares covered by this Agreement and any Deferred Cash Dividends then accumulated with respect thereto shall become nonforfeitable in accordance with the terms and conditions of Section 1(a) as if Grantee had remained in the continuous employ of the Company or a Subsidiary from the Date of Grant until the end of the severance period or the occurrence of a circumstance referenced in Section 2(a) or 2(b), whichever occurs first. Notwithstanding the foregoing, in the event Grantee’s employment is terminated as a result of layoff after Grantee becomes eligible for retirement at or after age 62 under a retirement plan of the Company or a Subsidiary, then Section 1(b) shall govern.
|
3.
|
Forfeiture of Awards
. Grantee’s right to receive the Common Shares covered by this Agreement and any Deferred Cash Dividends accumulated with respect thereto shall be forfeited automatically and without further notice on the date that Grantee ceases to be an employee of the Company or a Subsidiary prior to the fifth anniversary of the Date of Grant for any reason other than as described in Sections 1 or 2 hereof. In the event that Grantee shall intentionally commit an act that the Committee determines to be materially adverse to the interests of the Company or a Subsidiary, Grantee’s right to receive the Common Shares covered by this Agreement and any Deferred Cash Dividends accumulated with respect thereto shall be forfeited at the time of that determination notwithstanding any other provision of this Agreement to the contrary.
|
4.
|
Crediting of Deferred Cash Dividends
. With respect to each of the Common Shares covered by this Agreement, Grantee shall be credited on the records of the Company with Deferred Cash Dividends in an amount equal to the amount per share of any cash dividends declared by the Board on the outstanding Common Shares during the period beginning on the Date of Grant and ending on the date on which Grantee receives payment of the Common Shares covered by this Agreement pursuant to Section 5 hereof or at the time when the Common Shares covered by this Agreement are forfeited in accordance with Section 3 of this Agreement. The Deferred Cash Dividends shall accumulate without interest.
|
5.
|
Payment of Awards
.
|
(a)
|
General
: Subject to Section 3 and Section 5(b), payment for the Common Shares covered by this Agreement that are nonforfeitable and any Deferred Cash Dividends accumulated with respect thereto will be made within 10 days following the fifth anniversary of the Date of Grant.
|
(b)
|
Other Payment Events
: Notwithstanding Section 5(a), to the extent that the Common Shares covered by this Agreement are nonforfeitable on the dates set forth below, payment with respect to the Common Shares covered by this Agreement that have become nonforfeitable and any Deferred Cash Dividends accumulated with respect thereto will be made as follows:
|
(i)
|
Change in Control
. Upon a Change in Control, Grantee is entitled to receive payment for the Common Shares covered by this Agreement that are nonforfeitable and any Deferred Cash Dividends accumulated with respect thereto on the date of the Change in Control;
provided
,
however
, that if such Change in Control would not qualify as a permissible date of distribution under Section 409A(a)(2)(A) of the Code, and the regulations thereunder, and where Section 409A of the Code applies to such distribution, Grantee is entitled to receive the corresponding payment on the date that would have otherwise applied pursuant to Sections 5(a) or 5(b)(ii) as though such Change in Control had not occurred.
|
(ii)
|
Death or Disability
. On the date of Grantee’s death or the date Grantee becomes permanently disabled, Grantee is entitled to receive payment for the Common Shares covered by this Agreement that are nonforfeitable and any Deferred Cash Dividends accumulated with respect thereto on such date.
|
6.
|
Compliance with Law
. The Company shall make reasonable efforts to comply with all applicable federal and state securities laws;
provided
,
however
, notwithstanding any other provision of this Agreement, the Company shall not be obligated to issue any of the Common Shares covered by this Agreement or pay any Deferred Cash Dividends accumulated with respect thereto if the issuance or payment thereof would result in violation of any such law. To the extent that the Ohio Securities Act shall be applicable to this Agreement, the Company shall not be obligated to issue any of the Common Shares or other securities covered by this Agreement or pay any Deferred Cash Dividends accumulated with respect thereto unless such Common Shares and Deferred Cash Dividends are (a) exempt from registration thereunder, (b) the subject of a transaction that is exempt from compliance therewith, (c) registered by description or qualification thereunder or (d) the subject of a transaction that shall have been registered by description thereunder.
|
7.
|
Transferability
. Neither Grantee’s right to receive the Common Shares covered by this Agreement nor his right to receive any Deferred Cash Dividends shall be transferable by Grantee except by will or the laws of descent and distribution. Any purported transfer in violation of this Section 7 shall be null and void, and the purported transferee shall obtain no rights with respect to such Shares.
|
8.
|
Compliance with Section 409A of the Code
. To the extent applicable, it is intended that this Agreement and the Plan comply with the provisions of Section 409A of the Code. This Agreement and the Plan shall be administered in a manner consistent with this intent, and any provision that would cause the Agreement or the Plan to fail to satisfy Section 409A of the Code shall have no force and effect until amended to comply with Section 409A of the Code (which amendment may be retroactive to the extent permitted by Section 409A of the Code and may be made by the Company without the consent of Grantee).
|
9.
|
Adjustments
. Subject to Section 13 of the Plan, the Committee shall make any adjustments in the number or kind of shares of stock or other securities covered by this Agreement, or in any other terms of this award, that the Committee may determine to be equitably required to prevent any dilution or expansion of Grantee’s rights under this Agreement that otherwise would result from any (a) stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, (b) merger, consolidation, separation, reorganization or partial or complete liquidation involving the Company or (c) other transaction or event having an effect similar to any of those referred to in subsection (a) or (b) herein. Furthermore, in the event that any transaction or event described or referred to in the immediately preceding sentence shall occur, the Committee shall provide in substitution of any or all of Grantee’s rights under this Agreement such alternative consideration as the Committee may determine in good faith to be equitable under the circumstances.
|
10.
|
Withholding Taxes
. To the extent that the Company is required to withhold federal, state, local or foreign taxes in connection with any delivery of Common Shares to Grantee, and the amounts available to the Company for such withholding are insufficient, it shall be a condition to the receipt of such delivery that Grantee make arrangements satisfactory to the Company for payment of the balance of such taxes required to be withheld. Grantee may elect that all or any part of such withholding requirement be satisfied by retention by the Company of a portion of the Common Shares delivered to Grantee. If such election is made, the shares so retained shall be credited against such withholding requirement at the Market Value per Share on the date of such delivery.
|
11.
|
Detrimental Activity and Recapture
.
|
(a)
|
In the event that, as determined by the Committee, Grantee shall engage in Detrimental Activity during employment with the Company or a Subsidiary, the Common Shares covered by this Agreement and any Deferred Cash Dividends accumulated with respect thereto will be forfeited automatically and without further notice at the time of that determination notwithstanding any other provision of this Agreement. For purposes of this Agreement, “Detrimental Activity” shall mean:
|
(i)
|
engaging in any activity, as an employee, principal, agent, or consultant for another entity that competes with the Company in any actual, researched, or prospective product, service, system, or business activity for which Grantee has had any direct responsibility during the last two years of his or her employment with the Company or a Subsidiary, in any territory in which the Company or a Subsidiary manufactures, sells, markets, services, or installs such product, service, or system, or engages in such business activity;
|
(ii)
|
soliciting any employee of the Company or a Subsidiary to terminate his or her employment with the Company or a Subsidiary;
|
(iii)
|
the disclosure to anyone outside the Company or a Subsidiary, or the use in other than the Company or a Subsidiary’s business, without prior written authorization from the Company, of any confidential, proprietary or trade secret information or material relating to the business of the Company and its Subsidiaries, acquired by Grantee during his or her employment with the Company or its Subsidiaries or while acting as a director of or consultant for the Company or its Subsidiaries thereafter;
|
(iv)
|
the failure or refusal to disclose promptly and to assign to the Company upon request all right, title and interest in any invention or idea, patentable or not, made or conceived by Grantee during employment by the Company and any Subsidiary, relating in any manner to the actual or anticipated business, research or development work of the Company or any Subsidiary or the failure or refusal to do anything reasonably necessary to enable the Company or any Subsidiary to secure a patent where appropriate in the United States and in other countries;
|
(v)
|
activity that results in Termination for Cause. For the purposes of this subsection, “Termination for Cause” shall mean a termination: (A) due to Grantee’s willful and continuous gross neglect of his or her duties for which he or she is employed; or (B) due to an act of dishonesty on the part of Grantee constituting a felony resulting or intended to result, directly or indirectly, in his or her gain for personal enrichment at the expense of the Company or a Subsidiary; or
|
(vi)
|
any other conduct or act determined to be injurious, detrimental or prejudicial to any significant interest of the Company or any Subsidiary unless Grantee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company.
|
(b)
|
If a Restatement occurs and the Committee determines that Grantee is personally responsible for causing the Restatement as a result of Grantee’s personal misconduct or any fraudulent activity on the part of Grantee, then the Committee has discretion to, based on applicable facts and circumstances and subject to applicable law, cause the Company to recover all or any portion (but no more than 100%) of the Common Shares covered by this Agreement and any Deferred Cash Dividends accumulated with respect thereto earned or payable to Grantee for some or all of the years covered by the Restatement. The amount of any earned or payable Common Shares covered by this Agreement and any Deferred Cash Dividends accumulated with respect thereto recovered by the Company shall be limited to the amount by which such earned or payable Common Shares and Deferred Cash Dividends exceeded the amount that would have been earned by or paid to Grantee had the Company’s financial statements for the applicable restated fiscal year or years been initially filed as restated, as reasonably determined by the Committee. The Committee shall also determine whether the Company shall effect any recovery under this Section 11(b) by: (i) seeking repayment from Grantee; (ii) reducing, except with respect to any non-qualified deferred compensation under Section 409A of the Code, the amount that would otherwise be payable to Grantee under any compensatory plan, program or arrangement maintained by the Company (subject to applicable law and the terms and conditions of such plan, program or arrangement); (iii) by withholding, except with respect to any non-qualified deferred compensation under Section 409A of the Code, payment of future increases in compensation (including the payment of any discretionary bonus amount) that would otherwise have been made to Grantee in accordance with the Company’s compensation practices; or (iv) by any combination of these alternatives. For purposes of this Agreement, “Restatement” means a restatement (made within 36 months of the publication of the financial statements that are required to be restated) of any part of the Company’s financial statements for any fiscal year or years after 2016 due to material noncompliance with any financial reporting requirement under the U.S. securities laws applicable to such fiscal year or years.
|
12.
|
No Right to Future Awards or Employment
. This award is a voluntary, discretionary bonus being made on a one-time basis and it does not constitute a commitment to make any future awards. This award and any payments made hereunder will not be considered salary or other compensation for purposes of any severance pay or similar allowance, except as otherwise required by law. No provision of this Agreement shall limit in any way whatsoever any right that the Company or a Subsidiary may otherwise have to terminate Grantee’s employment at any time.
|
13.
|
Relation to Other Benefits
. Any economic or other benefit to Grantee under this Agreement or the Plan shall not be taken into account in determining any benefits to which Grantee may be entitled under any profit‑sharing, retirement or other benefit or compensation plan maintained by the Company or a Subsidiary and shall not affect the amount of any life insurance coverage available to any beneficiary under any life insurance plan covering employees of the Company or a Subsidiary.
|
14.
|
Processing of Information
. Information about Grantee and Grantee’s award of Common Shares and Deferred Cash Dividends may be collected, recorded and held, used and disclosed for any purpose related to the administration of the award. Grantee understands that such processing of this information may need to be carried out by the Company and its Subsidiaries and by third party administrators whether such persons are located within Grantee’s country or elsewhere, including the United States of America. Grantee consents to the processing of information relating to Grantee and Grantee’s receipt of the Common Shares and Deferred Cash Dividends in any one or more of the ways referred to above.
|
15.
|
Amendments
. Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto;
provided
,
however
, that subject to the provisions of Section 8 hereof no amendment shall adversely affect the rights of Grantee with respect to either the Common Shares or other securities covered by this Agreement or the Deferred Cash Dividends without Grantee’s consent.
|
16.
|
Severability
. If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid or unenforceable, the remainder of this Agreement and the application of such provision in any other person or circumstances shall not be affected, and the provisions so held to be invalid or unenforceable shall be reformed to the extent (and only to the extent) necessary to make it enforceable and valid.
|
17.
|
Governing Law
. This Agreement is made under, and shall be construed in accordance with, the internal substantive laws of the State of Ohio.
|
|
Three Months Ended March 31,
|
|
Year Ended December 31,
|
||||||||||||||||
|
2017
|
|
2016
|
2015 Adjusted
|
2014 Adjusted
|
2013
|
2012
|
||||||||||||
Income (loss) before income taxes
|
$
|
(5.0
|
)
|
|
$
|
(142.0
|
)
|
$
|
(71.7
|
)
|
$
|
68.7
|
|
$
|
127.6
|
|
$
|
234.3
|
|
Plus:
|
|
|
|
|
|
|
|
||||||||||||
Fixed charges
|
4.1
|
|
|
13.4
|
|
5.5
|
|
8.9
|
|
12.0
|
|
5.8
|
|
||||||
Amortization of capitalized interest
|
0.5
|
|
|
1.9
|
|
1.7
|
|
0.7
|
|
0.6
|
|
0.6
|
|
||||||
Less:
|
|
|
|
|
|
|
|
||||||||||||
Interest capitalized
|
0.2
|
|
|
0.7
|
|
1.0
|
|
6.9
|
|
10.8
|
|
4.5
|
|
||||||
Earnings (loss)
|
(0.6
|
)
|
|
(127.4
|
)
|
(65.5
|
)
|
71.4
|
|
129.4
|
|
236.2
|
|
||||||
Interest (A)
|
3.4
|
|
|
10.6
|
|
3.9
|
|
7.1
|
|
11.0
|
|
4.8
|
|
||||||
Amortization of deferred financing costs
|
0.4
|
|
|
1.5
|
|
0.5
|
|
0.9
|
|
0.1
|
|
0.2
|
|
||||||
Interest portion of rental expense
|
0.3
|
|
|
1.3
|
|
1.1
|
|
0.9
|
|
0.9
|
|
0.8
|
|
||||||
Fixed Charges
|
$
|
4.1
|
|
|
$
|
13.4
|
|
$
|
5.5
|
|
$
|
8.9
|
|
$
|
12.0
|
|
$
|
5.8
|
|
Ratio of Earnings to Fixed Charges
|
(B)
|
|
(B)
|
(B)
|
|
8.02
|
|
10.78
|
|
40.72
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of TimkenSteel Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant‘s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
April 27, 2017
|
/s/ Ward J. Timken, Jr.
|
|
|
Ward J. Timken, Jr.
Chairman, Chief Executive Officer and President
(Principal Executive Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of TimkenSteel Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant‘s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date:
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April 27, 2017
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/s/ Christopher J. Holding
|
|
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Christopher J. Holding
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
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Date:
|
April 27, 2017
|
/s/ Ward J. Timken, Jr.
|
|
|
Ward J. Timken, Jr.
Chairman, Chief Executive Officer and President
(Principal Executive Officer)
|
Date:
|
April 27, 2017
|
/s/ Christopher J. Holding
|
|
|
Christopher J. Holding
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|