<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Armco Inc.
(Name of Registrant as Specified In Its Charter)
Armco Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
- --------
*Set forth the amount on which the filing is calculated and state how it was
determined.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
ARMCO INC.
One Oxford Centre
301 Grant Street
Pittsburgh, PA 15219-1415
------------------------------
Notice of Annual Meeting of Shareholders
April 22, 1994
------------------------------
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Armco
Inc. will be held at the Pittsburgh Green Tree Marriott, located at 101 Marriott
Drive, Pittsburgh, Pennsylvania on Friday, April 22, 1994, at 10:00 a.m., for
the following purposes:
1. To elect directors.
2. To consider and vote upon an amendment to the Regulations of Armco to
change the range of numbers of directors that may be fixed by the
Board of Directors to a minimum of eight and a maximum of thirteen.
3. If properly brought before the meeting, to vote on a shareholder
proposal for an amendment to the Regulations of Armco to limit post-
retirement benefits for directors.
4. To transact such other business as may properly come before the
meeting.
The close of business on February 28, 1994, was fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the meeting. The proxy statement, which follows, contains more detailed
information as to the actions proposed to be taken.
Your vote is important. Whether or not you plan to attend the
meeting, please complete and sign your proxy and promptly return it in the
enclosed envelope. If you attend the meeting, you may vote in person if you
wish, even though you have previously returned your proxy.
By Order of the Board of Directors
Gary R. Hildreth, Secretary
Pittsburgh, Pennsylvania
March 25, 1994
<PAGE>
ARMCO INC.
One Oxford Centre
301 Grant Street
Pittsburgh, PA 15219-1415
-------------------------
PROXY STATEMENT
Annual Meeting of Shareholders
April 22, 1994
-------------------------
SOLICITATION AND VOTING OF PROXIES
The enclosed proxy is being solicited by the Board of Directors of Armco
Inc., an Ohio corporation (hereinafter ''Armco'' or the ''Corporation''), with
its principal executive offices located at One Oxford Centre, 301 Grant Street,
Pittsburgh, Pennsylvania 15219-1415, for use at the annual meeting of
shareholders (the ''Meeting'') of the Corporation to be held on April 22, 1994.
This proxy statement and the accompanying proxy were first sent to shareholders
of the Corporation on or about March 25, 1994.
The close of business on February 28, 1994, has been fixed as the record
date for determining shareholders entitled to notice of and to vote at the
Meeting. On that date, the Corporation had outstanding and entitled to vote
104,103,174 shares of common stock, $.01 par value (the ''common stock''),
1,697,231 shares of Class A, $2.10 Cumulative Convertible Preferred Stock (the
''$2.10 preferred stock'') and 2,700,000 shares of Class A, $3.625 Cumulative
Convertible Preferred Stock (the "$3.625 preferred stock"). Holders of shares
of common stock, $2.10 preferred stock and $3.625 preferred stock are each
entitled to one vote for each share owned on all matters to come before the
Meeting.
Shares of common stock, $2.10 preferred stock and $3.625 preferred stock
represented by properly executed proxies will, unless such proxies have
previously been revoked, be voted at the Meeting in accordance with the
direction indicated on such proxies. Prior to its exercise, a proxy may be
revoked by a later proxy received by the Corporation or by giving notice to the
Corporation in writing or in open meeting.
With respect to the election of directors, shareholders may vote for the
election of the entire slate or may withhold their vote from the entire slate by
marking the proper box on the form of proxy, or may withhold their vote from any
one or more individual nominees by striking a line through the name of such
nominees in the form of proxy.
If no direction is given, an executed proxy will be voted FOR the election
of each of the nine persons named as nominees, FOR the amendment to the
Regulations of Armco (the "Regulations") to change the range of numbers of
directors that may be fixed by the Board of Directors to a minimum of eight and
a maximum of thirteen and AGAINST the shareholder proposal. If any nominee for
election as a director should be unable to serve, the proxy will be voted for a
nominee, if any, designated by the Board of Directors. Directors are elected by
a plurality of votes cast. Abstentions and broker non-votes will have the same
effect as a vote withheld in the case of the election of directors and will have
the same effect as a vote against the amendment to the Regulations relating to
the range of numbers of directors and the shareholder proposal.
<PAGE>
The Board of Directors does not anticipate that any matters other than
those set forth herein will be brought before the Meeting. If, however, other
matters are properly presented, the persons named in the proxy will have
discretion, to the extent provided by applicable law, to vote on such matters.
Under Ohio law, if any shareholder gives notice in writing to the
president, a vice president or the secretary of the Corporation, not less than
48 hours before the time fixed for holding the Meeting, that such shareholder
desires the voting for the election of directors to be cumulative, and if an
announcement of the giving of such notice is made upon the convening of the
Meeting by the chairman or secretary or by or on behalf of the shareholder
giving such notice, each shareholder shall have the right to cumulate his or her
voting power for the election of directors.
In the event of such an announcement, the persons named as proxies on the
enclosed proxy card will use their discretion in exercising such cumulative
voting power with respect to the shares represented thereby. Under the
cumulative voting method, each shareholder is entitled to the number of votes
equal to the number of shares held by such shareholder on the record date
multiplied by the number of directors to be elected, and all such votes may be
cast for a single nominee or distributed among the nominees as desired. The
Corporation intends that such persons named as proxies will (except as otherwise
provided by the shareholder submitting such proxy) have discretion to cumulate
votes for the election of directors so as to maximize the number of directors
elected from among the nominees proposed by the Board.
2
<PAGE>
ELECTION OF DIRECTORS
The Regulations currently fix the minimum number of directors at ten.
However, as discussed in "AMENDMENT TO THE REGULATIONS TO CHANGE THE RANGE OF
NUMBERS OF DIRECTORS," the Armco Board recommends that the Regulations be
amended to reduce the size of the Board of Directors. Subject to the adoption of
this proposed amendment, the Board of Directors has fixed the number of
directors at nine, and nine persons have been nominated to serve as directors of
the Corporation until the next Annual Meeting of Shareholders and until their
successors are elected and qualified. The accompanying proxy, accordingly,
cannot be voted for more than nine persons. These nominees are named in the
following table, which also sets forth information for each nominee respecting
age, principal occupation, business experience during the past five years and
certain other information.
In the event the proposed amendment to the Regulations is
not adopted, the Board of Directors will take action to elect one or more
additional directors to increase the number of directors to at least the minimum
of ten that would be required by the Regulations in such event.
Age 62; President and Chief Executive Officer of Alleghany
Corporation, a holding company. Prior to 1992, Mr. Burns was
President and Chief Operating Officer of Alleghany Corporation. A
Director of the Corporation since 1992; a member of the Audit Review
Committee and Compensation Committee. Also a Director of Alleghany
Corporation.
John J. Burns, Jr.
Age 58; Vice Chairman, Corning Incorporated, a broad-based
manufacturing and service company. Senior Vice President, Research &
Development Division, Corning Incorporated from 1985 - 1987. A
Director of the Corporation since 1989; a member of the Audit Review
Committee, Compensation Committee and Corporate Responsibility
Committee. Also a Director of Corning Incorporated.
David A. Duke
Age 64; Retired. Formerly Chairman of the Board and Chief Executive
Officer of Business International Corporation, a publishing,
consulting and advisory services firm; Deputy Chairman, Kissinger
Associates, Inc., an international affairs consulting firm. A
Director of the Corporation since 1975; a member of the Audit Review
Committee, Executive Committee and Nominating Committee.
John C. Haley
Age 68; Chairman of the Board, Kansas City Southern Industries Inc.,
a holding company providing transportation and financial services;
retired Chairman of the Board, and formerly Chief Executive Officer,
of Sprint Corporation, a supplier of telecommunications services and
products. A Director of the Corporation since 1972; a member of the
Compensation Committee, Executive Committee and Nominating
Committee. Also a Director of Duke Power Company, Hallmark Cards,
Inc., Kansas City Southern Industries Inc. and Sprint Corporation.
Paul H. Henson
3
<PAGE>
Age 69; Retired Chairman of the Board and former President of Ladish
Malting Co., a grain malting company. A Director of the Corporation
since 1983; a member of the Corporate Responsibility Committee and
Nominating Committee.
John H. Ladish
Age 49; President and Chief Executive Officer of PNC Bank,
N.A.-Pittsburgh and former President of PNC Bank, Ohio, N.A. Prior to
that Mr. Robbins was Executive Vice President of PNC Bank Corp. Also
a Director of Eastern Stainless Corporation.
Bruce E. Robbins
Age 66; Retired. Formerly Chairman of the Board and Chief Executive
Officer of The Mead Corporation, an integrated manufacturer of paper
and forest products and provider of electronic publishing services.
A Director of the Corporation since 1985; a member of the Audit
Review Committee, Compensation Committee and Executive Committee.
Also a Director of DPL Inc., National City Corporation and Perkin-
Elmer Corporation.
Burnell R. Roberts
Age 48; President and Chief Executive Officer of Copperweld
Corporation, a manufacturer of tubular products. Also a Director of
Aloe Holding Company.
John D. Turner
Age 55; President and Chief Executive Officer of the Corporation.
Chief Operating Officer of the Corporation since April 24, 1992,
formerly President and Chief Executive Officer of Cyclops
Industries, Inc., a producer of flat-rolled stainless and carbon
steels, tubular steel products and special alloys. A Director of the
Corporation since 1992; a member of the Corporate Responsibility
Committee. Also a Director of Alleghany Corporation.
James F. Will
Board of Directors and Committees of the Board
In 1993, the Board of Directors of the Corporation met 11 times. In
addition to the committees described below, the Board of Directors has appointed
an Executive Committee and a Corporate Responsibility Committee.
The Nominating Committee met once in 1993. This committee reviews the
qualifications of and recommends individuals for election as directors. It
advises on the optimum size and composition of the Board and reviews and defines
the responsibilities, duties and performance of the committees of the Board.
This committee also reviews and advises the Board on the Corporation's
organization and successors for key personnel. This committee will review
nominees suggested by shareholders in writing and sent to the attention of the
Secretary of the Corporation.
In accordance with the Regulations, which were approved by the
shareholders, shareholders intending to nominate director candidates for
election at any annual meeting of shareholders must deliver written notice
thereof to the Secretary of Armco not later than 90 days prior to the date one
year from the date of the immediately preceding annual meeting of shareholders.
Such notice timely given by a shareholder shall set forth certain information
concerning such shareholder and his or her nominee(s). The presiding officer at
such annual meeting may refuse to acknowledge any nomination not made in
accordance with the foregoing and any person not so nominated shall not
4
<PAGE>
be eligible for election as a director. Shareholders intending to nominate
director candidates for election at the 1995 annual meeting of shareholders
must deliver written notice, including specified information, to the Secretary
of the Corporation by January 22, 1995.
The Audit Review Committee met three times in 1993. This committee is
responsible for nominating the independent auditors, working with the
independent auditors and the internal auditing staff of the Corporation and
other corporate officials, reviewing the financial statements of the
Corporation, monitoring compliance with corporate policies relating to conflict
of interest, business ethics and antitrust and reporting on the results of the
audits to the Board, as well as submitting to the Board its recommendations
relating to the financial reporting, accounting practices and policies, and
financial accounting and operation controls.
The Compensation Committee reviews, determines and recommends to the
Board the principal compensation and benefit programs, including the
compensation of executive officers of the Corporation, reviews the Board's
delegation of fiduciary responsibility relating to certain benefit plans to the
Benefit Plans Administrative Committee and oversees grants under the
Corporation's stock option plans and awards under the Corporation's other
incentive plans. This committee met five times in 1993. See "EXECUTIVE
COMPENSATION -- Compensation Committee Report on Executive Compensation".
During 1993, no director attended less than 80% of the meetings of
the Board and committees on which he served.
Compensation of Directors
Each director, other than those who are employees of the Corporation
or its subsidiaries, is paid a retainer fee of $20,400 a year, plus travel and
other expenses incurred in connection with his work for the Corporation. For
each Board meeting attended, each such director receives $1,000. For each
committee meeting attended, each committee member receives $800 and the
committee chairperson receives $1,000. Directors who are employees of the
Corporation do not receive any additional compensation by reason of their
membership on, or attendance at meetings of the Board or committees thereof.
Deferred Compensation Plan For Directors
The Deferred Compensation Plan for Directors became effective October
1, 1981. Any director, who is not an employee of the Corporation or its
subsidiaries, may elect to defer payment of all or any portion of fees earned as
a director of the Corporation. Deferred amounts will be hypothetically credited
with interest at the 90-day Treasury Bill rate in effect on the first day of
each quarter or, at the director's election, will be hypothetically invested in
the common stock at the average of the highest and lowest price per share
reported on the New York Stock Exchange Composite Transactions Tape for the day
on which such amounts are credited to such director's account. A hypothetical
investment in the common stock will be credited as if dividends have been paid
whenever a dividend is paid on the common stock and shall be accounted for as an
additional investment in the common stock. Payment will be made in cash in
either a lump sum or in annual installments for a period not to exceed five
years with payment usually commencing after a director ceases to be a director
of the Corporation.
5
<PAGE>
Pension Plan for Outside Directors
The pension plan for outside directors became effective June 23, 1989.
Under this plan, directors who are not and have not been employees of the
Corporation or its subsidiaries, and who retire from the Board at age 65 or
above with five or more years of service, will receive an annual pension equal
to 100% of the annual retainer fee payable at retirement, for a period equal to
the years of service with the Board. There is a maximum benefit period of ten
years.
Insurance Coverage for Outside Directors
The Corporation provides up to $100,000 of group life insurance to any
director who is not an employee of the Corporation. The Corporation also
provides non-employee directors with $250,000 of accidental death and
dismemberment insurance. These insurance benefits terminate upon a director's
resignation or retirement from the Board. During 1993, the Corporation paid
premiums aggregating $22,092 for this coverage.
AMENDMENT TO THE REGULATIONS TO CHANGE THE RANGE OF
NUMBERS OF DIRECTORS
The current Regulations provide that the number of directors of the
Corporation shall be fixed by a resolution adopted by the Armco shareholders or
by the Armco Board, and, if fixed by the Armco Board, that the number of
directors shall be not more than sixteen and not less than ten. The Armco Board
recommends that the minimum number of directors required and the maximum number
of directors permitted if the number of directors is fixed by the Board be
reduced at this time to eight and thirteen, respectively. The text of Section 1
of Article II of the Regulations as amended to effect this change would be as
follows:
Section 1. Number. The number of directors of the company shall be as
fixed from time to time either (i) by a resolution adopted by the
affirmative vote of the holders of shares entitling them to exercise a
majority of the voting power of the company or (ii) without action by the
shareholders, by a resolution adopted by a vote of a majority of the board
of directors then in office which does not raise the number of directors to
more than thirteen or lower the number of directors to less than eight.
The board of directors or the shareholders may fill any director's office
that is created by an increase in the number of directors. No reduction in
the number of directors shall of itself have the effect of shortening the
term of an incumbent director.
The proposed amendment to the Regulations will permit a range of minimum
and maximum numbers of directors that reflects the current and foreseeable size
and nature of Armco's business. While the expectation is to maintain the number
of directors at nine, the amendment will allow the Armco Board to elect up to
four additional directors or, should a vacancy occur on the Board, to reduce the
number of directors to eight.
The adoption of the proposed amendment to Article II, Section 1, of the
Regulations requires the affirmative vote of the holders of the majority of the
outstanding shares of common stock, $2.10 preferred stock and $3.625 preferred
stock, voting together.
The Board of Directors recommends a vote FOR the proposal to adopt the
amendment to the Regulations relating to the range of numbers of directors that
may be fixed by the Board.
SHAREHOLDER PROPOSAL
The Corporation has been advised that a shareholder owning 311 shares of
$2.10 preferred stock intends to present the following proposal at the Meeting.
The name and address of this shareholder will be furnished by the Secretary of
the Corporation, either orally or in writing as requested, promptly upon receipt
of any oral or written request therefor.
6
<PAGE>
RESOLVED, that the text of Section 6 of Article II of the Regulations, be
amended to read as follows:
Section 6. Fees, Etc. Stock, insurance and other benefits paid to
outside directors shall be limited to the time served on the board. Upon
resignation or retirement all such payments and benefits shall cease.
Any benefits not paid and accrued to be paid after retirement may be paid
as agreed. No pension plan for outside directors will be provided by the
Corporation, provided, however, that the Corporation's Pension Plan for
outside directors (the "Plan") in effect as of April 22, 1994 shall
continue in effect and provide coverage in accordance with the Plan's
provisions for the Corporation's outside directors who are either active
or retired members of the Corporation's Board of Directors as of April
22, 1994.
In support of this proposal, the shareholder has submitted the following
statement:
"Purpose of this proposal related to the limiting benefits to outside
directors upon either retirement or resignation is simply stated. In my
view outside directors are well compensated during their tenures and thus
should not encumber the company once they leave the board. In retirement
or resignation they no longer contribute to the business of the company."
Statement of The Board of Directors in Opposition to The Proposal
-----------------------------------------------------------------
The Board believes that the proposal to amend the Regulations to limit
post-retirement benefits for directors is not in the best interests of the
Corporation's shareholders. While the Board generally believes that post-
retirement benefits for directors should be limited (for example, all insurance
benefits for directors terminate upon resignation or retirement from the Board),
it also believes it important to have the flexibility to tailor directors'
compensation to meet changing conditions. Such compensation may, under
appropriate circumstances, include post-retirement benefits.
The proposed amendment of the Regulations would prevent the Corporation
from offering directors any post-retirement benefits without soliciting
separately shareholder approval, even were the Board, in the exercise of its
good faith business judgment, to determine that offering such benefits is
necessary or appropriate to achieve the Corporation's goals of securing and
retaining over time the most qualified directors available. Accordingly, the
Board believes that the proposal, by fixing this limitation in the Regulations,
unnecessarily interferes with the Board's flexibility in determining
compensation for the Corporation's directors and thus does not serve the
interests of the Corporation's shareholders.
The adoption of this shareholder proposal requires the affirmative vote of
the holders of the majority of the outstanding shares of common stock, $2.10
preferred stock and $3.625 preferred stock, voting together.
The Board of Directors recommends a vote AGAINST the proposal to adopt the
amendment to the Regulations to limit post-retirement benefits for directors.
7
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
Set forth below is certain summary information with respect to the
compensation of Armco's chief executive officer, the four other most highly
compensated executive officers who were serving as executive officers at
December 31, 1993 and one former executive officer who would have been included
in the four most highly compensated executive officers (other than the chief
executive officer) had such officer been serving at December 31, 1993 (based on
amounts reported as salary and bonus for 1993) (the "Named Executives").
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------------- ---------------------------------------
Awards Payouts
-------------------------- ------------------------
Other Restricted Securities All Other
Name Annual Stock Underlying LTIP Compen-
and Principal Compen- Award(s) Options/ Payouts sation
Position Year Salary ($) Bonus ($) sation ($) (1) SARs (#) ($) ($)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R.L. Purdum 1993 591,667 60,000 0 0 80,000 0 39,821 (2)
Chairman & ----
CEO (3) 1992 550,000 0 0 352,500 0 0 37,063
----
1991 550,000 93,000 0 390,000 65,000 0 37,175
----
J. F. Will 1993 495,833 53,000 0 0 65,000 0 30,781 (2)
President ----
& COO (4) 1992 465,672 0 0 0 0 0 14,225
----
R. M. Visokey 1993 244,002 167,829 0 0 16,000 0 16,273 (2)
Executive V.P. ----
Steel 1992 76,668 3,640 0 66,250 0 0 3,100
Operations ----
(5)
G. R. Hildreth 1993 196,667 20,000 0 0 15,000 0 12,449 (2)
V.P., ----
General 1992 174,000 32,604 0 58,750 0 0 10,607
Counsel ----
& Secretary 1991 168,000 69,300 0 0 7,000 0 7,367
(6) ----
J. L. Bertsch 1993 175,008 17,500 0 0 11,000 0 10,055 (2)
V.P. and ----
Treasurer 1992 171,675 21,450 0 94,000 0 0 9,608
----
1991 151,670 56,000 0 33,000 12,000 0 8,482
----
R. A. Cushman 1993 161,910 79,755 0 0 0 0 102,675 (2)
V.P., Pres. - ----
AWGS (7) 1992 185,004 38,850 0 51,250 0 0 11,628
----
1991 163,260 30,087 0 18,000 10,000 0 10,120
----
- --------------------------------------------------------------------------------------------------------------
- ---------------------
</TABLE>
8
<PAGE>
(1) The value indicated is based on the closing price of the common stock on
the date of grant. The aggregate number and value (based on the closing
price of the common stock of $6.125 at December 31, 1993) of the restricted
shares held by the Named Executives at December 31, 1993 was: Mr. Purdum -
170,000, $1,041,250; Mr. Will - 0, $0; Mr. Visokey - 10,000, $61,250; Mr.
Hildreth -24,000, $147,000; and Mr. Bertsch - 27,500, $168,438.
(2) These amounts include:
(i) $11,792 for Mr. Purdum, $9,351 for Mr. Will, $8,554 for
Mr. Visokey, $9,783 for Mr. Hildreth, $8,750 for Mr. Bertsch and
$8,096 for Mr. Cushman of matching contributions under the Armco
Inc. Retirement and Savings Plan;
(ii) $17,791 for Mr. Purdum, $15,359 for Mr. Will, $5,193 for
Mr. Visokey and $0 for Messrs. Hildreth, Bertsch and Cushman
representing contributions allocated to the trust established
under the Armco Inc. Executive Supplemental Deferred Compensation
Plan in respect of matching contributions not paid to the Armco
Inc. Retirement and Savings Plan by reason of Internal Revenue
Service limitations; and
(iii) $10,238 for Mr. Purdum, $6,071 for Mr. Will, $2,526 for
Mr. Visokey, $2,666 for Mr. Hildreth, $1,305 for Mr. Bertsch and
$2,079 for Mr. Cushman for premiums for life insurance benefits
provided to them.
(3) Effective January 1, 1994, Mr. Purdum resigned as Chief Executive Officer.
Mr. Purdum will retire as an officer of the Corporation effective April 30,
1994. See "Compensation Committee Report on Executive Compensation" below
for a discussion of certain retirement arrangements.
(4) Effective January 1, 1994, Mr. Will was elected President and Chief
Executive Officer.
(5) Effective March 1, 1994, Mr. Visokey was elected Executive Vice President-
Steel Operations.
(6) Mr. Hildreth was elected General Counsel on February 1, 1993. Effective
September 1, 1993, Mr. Hildreth was elected Vice President, General Counsel
and Secretary.
(7) Effective November 12, 1993, Mr. Cushman resigned from the Corporation upon
its divestment of Armco Worldwide Grinding Systems ("AWGS"). The salary
shown for Mr. Cushman was paid to him between January 1, 1993 and November
12, 1993. The 1993 bonus shown represents payment for AWGS performance
prior to the divestment. "All Other Compensation" includes a $92,500
payment in lieu of a severance payment. In addition, vesting of Mr.
Cushman's outstanding restricted stock was accelerated.
Stock Option Plans
The Corporation has granted and has authority to make future grants of
stock options and stock appreciation rights ("SARs") to key employees, including
the Named Executives, under stock option plans previously approved by the
shareholders. The exercise price of all outstanding options is 100% of the fair
market value at the date of grant and SARs have been granted in tandem with all
such options through 1991. The exercise of SARs and the form of settlement
thereof (i.e., cash, shares of common stock or a combination thereof) are
subject to the consent of the Compensation Committee. Stock options were
granted to key management, including the Named Executives, during 1993.
9
<PAGE>
The following table sets forth information with respect to all stock
options granted by the Corporation to the Named Executives during 1993.
<TABLE>
Option/SAR Grants in Last Fiscal Year
-------------------------------------
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term (1)
- -------------------------------------------------------------- ---------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in or Base Expiration
Name Granted (# )(2) Fiscal Year Price ($/sh) Date 5% ($) 10% ($)
---- --------------- ------------ ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
R. L. Purdum 80,000 14.6% $7.3750 2/26/03 $371,045 $940,283
J. F. Will 65,000 11.9% $7.3750 2/26/03 301,474 763,980
R. M. Visokey 16,000 2.9% $7.3750 2/26/03 74,209 188,057
G. R. Hildreth 15,000 2.7% $7.3750 2/26/03 69,571 176,303
J. L. Bertsch 11,000 2.0% $7.3750 2/26/03 51,019 129,289
R. A. Cushman 0 0 -- -- 0 0
- -------------------
</TABLE>
(1) The total increase in value of all common shares outstanding, based upon
the 10-year option term and 5% and 10% compound appreciation assumptions
above, would be $482,928,601 and $1,223,813,540, respectively. The Named
Executives would realize less than two-tenths of one percent of the total
shareholders' appreciation in value.
(2) All options were granted on February 26, 1993 and 25% of each award becomes
exercisable on the first anniversary and thereafter on each succeeding
anniversary of the date of the grant.
10
<PAGE>
The following table sets forth information with respect to the options
exercised by the Named Executives in 1993 and the unexercised options/SARs held
by the Named Executives at December 31, 1993.
<TABLE>
Aggregated Option/SAR Exercises in Last
Fiscal Year and Fiscal Year-End Option/SAR Values
-------------------------------------------------
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at Fiscal at Fiscal
Shares Year End (#) Year End ($) (2)
Acquired -------------- ----------------
on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) (1) Unexercisable Unexercisable
---- ------------ ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
R. L. Purdum -0- -0- 220,220/80,000 89,375/-0-
J. F. Will 187,123 323,723 62,347/65,000 179,949/-0-
R. M. Visokey -0- -0- -0-/16,000 -0-/-0-
G. R. Hildreth 7,000 19,250 21,200/15,000 1,313/-0-
J. L. Bertsch -0- -0- 35,300/11,000 16,500/-0-
R. A. Cushman 15,000 28,750 12,600/-0- -0-/-0-
- -----------------
</TABLE>
(1) Calculated by determining the difference between the exercise price(s) and
the average of the high and low price of the common stock as reported on
the New York Stock Exchange Composite Transactions Tape on the date(s) of
exercise.
(2) Calculated by determining the difference between the exercise price and the
closing price of the common stock as reported on the New York Stock
Exchange Composite Transactions Tape at December 31, 1993 ($6.125 per
share).
1993 Long-Term Incentive Plan
At the April 23, 1993 Annual Meeting, the shareholders approved the
adoption of the 1993 Long-Term Incentive Plan. The following table provides
information with respect to performance share awards granted in 1993 to the
Named Executives under the Corporation's 1993 Long-Term Incentive Plan. The
award recipient earns the right to receive a portion or all of such contingent
shares at the end of the performance period based on Armco's performance on
operating cash flow return on investment approved by the Board of Directors at
the beginning of the performance period and subject to change by the Board if it
deems appropriate. Such awards will be paid in shares of common stock. The
award recipient has no rights as a shareholder with respect to the contingent
shares awarded until such shares, if any, are issued and distributed at the end
of a performance period. If a participant's active employment ends during a
calendar year because of retirement, disability or death, the participant or his
or her beneficiary will receive a pro rated portion of the award, if any, from
the performance period that concludes at the end of such year, based on
performance over the entire year. Awards from performance periods that pay out
in future years are forfeited. If a participant's active employment ends for
any other reason prior to the completion of any performance period, awards for
such period will be forfeited.
11
<PAGE>
<TABLE>
Long-Term Incentive Plans -- Awards in Last Fiscal Year
-------------------------------------------------------
<CAPTION>
Performance
Number of or Other
Shares, Period
Units Until Matu- Estimated Future Payouts under
or Other ration or Non-Stock Price- Based Plans
-------------------------------------------
Name Rights (#) Payout Threshold ($) Target ($)(3) Maximum ($)
---- ---------- ------ ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
R. L. Purdum(2) 150,000 4 years 183,750 551,250 918,750
J. F. Will 130,000 4 years 159,250 477,750 796,250
R. M. Visokey 30,000 4 years 36,750 110,250 183,750
G. R. Hildreth 27,500 4 years 33,688 101,063 168,438
J. L. Bertsch 25,000 4 years 30,625 91,875 153,125
R. A. Cushman 0 N/A N/A N/A N/A
- ------------------------
</TABLE>
(1) Contingent shares were awarded at the beginning of a four-year performance
period. An Executive earns the right to receive 20% of his or her award
based upon achievement of the threshold level of operating cash flow return
on investment over the four-year period 1993 through 1996. An Executive
earns the right to receive further percentages, up to the Maximum of 100%,
based upon the amount by which the operating cash flow return on investment
for such period exceeds the threshold level. The estimated future payouts
are based on the closing price of the common stock as reported on the New
York Stock Exchange Composite Transactions Tape on December 31, 1993
($6.125 per share).
(2) See "Compensation Committee Report on Executive Compensation" below
regarding the adjustments to be made upon Mr. Purdum's retirement.
(3) The Target is the mid-point between the Threshold and Maximum.
Pension Plans
Under the Armco Inc. Noncontributory Pension Plan ("NCPP"), a pension is
payable upon retirement if an employee has reached age 65 and has at least five
years of service, or upon an earlier termination of service if various stated
conditions are satisfied. Depending upon the employee's average annual earnings
during the highest 60 consecutive months in the last 120 months of service, an
employee may qualify for a higher pension amount under either of two NCPP
pension formulas. Average annual earnings under the NCPP generally include
those amounts reported under "Annual Compensation" and "All Other Compensation"
in the Summary Compensation Table above, except that imputed income resulting
from group term life insurance premiums paid by the Corporation is included only
for years prior to 1991. No pension of $40,000 per year or more may exceed 70%
of the employee's average annual earnings or the maximum (the ''maximum
limitation'') permitted under Section 415 of the Internal Revenue Code.
Messrs. Purdum, Will, Hildreth, Bertsch and Cushman have 31, 12, 23, 29 and 28
years of continuous service, respectively, under such plans. Although Mr.
Visokey does not participate in the NCPP, he participates in the Armco Inc.
Minimum Pension Plan discussed below. Although Mr. Cushman is no longer
employed by the Corporation and will not accrue any additional years of
service for purposes of the NCPP, he continues to be eligible for a pension
under the NCPP.
12
<PAGE>
The following table shows the maximum annual pension benefits payable under
the NCPP as in effect for both corporate staff and employees of the Corporation
as of January 1, 1994, at age 65, before applying the maximum limitation. The
benefits shown are computed on the basis of salary and length of service and are
before deductions of Social Security payments.
<TABLE>
Pension Plan Table
------------------
<CAPTION>
Average Annual
Earnings During
Highest 5 Con- Years of Service
secutive Years ---------------------------------------------------------------------------------------------
in Last 10
Years of Service 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
- ---------------- ------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$200,000 $15,750 $ 31,500 $ 47,250 $ 63,000 $ 78,750 $ 94,500 $110,250 $126,000
300,000 23,625 47,250 70,875 94,500 118,125 141,750 165,375 189,000
400,000 31,500 63,000 94,500 126,000 157,500 189,000 220,500 252,000
500,000 39,375 78,750 118,125 157,500 196,875 236,250 275,625 315,000
600,000 47,250 94,500 141,750 189,000 236,250 283,500 330,750 378,000
700,000 55,125 110,250 165,375 220,500 275,625 330,750 385,875 441,000
800,000 63,000 126,000 189,000 252,000 315,000 378,000 441,000 504,000
</TABLE>
The Corporation has established the Armco Inc. Minimum Pension Plan
("MPP") for key executives, including the Named Executives, whose participation
has been approved by the Board of Directors to provide benefits for executives
who retire on or after age 55, with at least five years of service as an MPP
member and ten years of service with the Corporation; or prior to age 55, with
at least five years of service as an MPP member and thirty years of service with
the Corporation; or at age 65, with five years of service as an MPP member.
Elected officers will receive an aggregate minimum pension of 45% or 50% of the
officer's average annual earnings, which include base salary, bonuses, the
Corporation's contributions to the Armco Inc. Retirement and Savings Plan
(corresponding generally to the amounts reported under "Annual Compensation" and
"All Other Compensation" in the Summary Compensation Table above) and, for years
prior to 1991, imputed income resulting from group term life insurance premiums
paid by the Corporation. For those who retire prior to age 62, this benefit is
payable at age 62. Such individuals may elect to receive payments at or after
age 55 in an actuarially reduced amount. This plan will pay directly any
difference between the amounts shown above and the maximum pension allowed by
law to be paid from a tax-qualified pension plan.
If 1993 employment were continued until mandatory retirement at age 65
at their 1993 rates of remuneration, Messrs. Purdum, Will, Visokey, Hildreth and
Bertsch would receive yearly pensions of $360,483, $260,361, $115,986, $111,377,
and $117,948, respectively, under such plans. Although he is no longer employed
by the Corporation, Mr. Cushman would receive a yearly pension of $83,067 based
upon his 28 years of service and applicable rates of compensation.
Severance Arrangements
Armco's severance policy, which is applicable to each of the Named
Executives, provides a minimum severance pay of twelve months' base salary, plus
additional months (up to a maximum of 24) of pay based on a combination of age
and service.
In addition, Armco has agreements with each of the Named Executives
providing for certain benefits upon actual or constructive termination of
employment, or termination of employment by reason of disability, death or an
employee's resignation under certain circumstances, generally following a
"change in control" of Armco, as defined in the agreements. Under these
agreements, Armco has reserved the right to terminate employment for "cause", as
13
<PAGE>
defined in the agreements, without the payment of such benefits. Generally,
upon the occurrence of an event which triggers these benefits, an employee would
be entitled to a lump sum payment based upon such employee's base salary, bonus
and other incentive compensation paid during the calendar year preceding the
termination, and continuation for two years of coverage under Armco's welfare
benefit plans, including life, health and other insurance benefits. The
agreements also provide, in the event of a change in control and termination of
employment, for (i) a cash payment in exchange for each employee's outstanding
stock options in an amount equal to the difference between the option price and
the higher of the per share market value of the common stock on the date of
termination and the average value of the consideration per share paid to Armco
shareholders in the transaction resulting in the change in control and (ii) the
lapse, immediately upon the change in control, of all restrictions applicable to
restricted share awards.
Insurance
Upon the occurrence of an extended illness or accident, key employees,
including the Named Executives, are provided payments equal to their then base
salary plus any applicable cash bonus for 12 months. Thereafter, the Corporation
will provide such individuals with long-term disability payments in an amount
equal to 60% of their base salary at the time such disability occurred. Such
payments will continue until age 65, at which time payments cease.
The Corporation provides all exempt salaried employees with group term life
insurance equal to 24 times an employee's monthly base salary except that, for
exempt salaried employees who were employed on or before December 31, 1989, this
insurance equals the greater of 30 times the employee's monthly base salary as
of December 31, 1989, or 24 times the employee's monthly base salary at the time
of death. At retirement, the coverage is reduced to 50% of the active amount
until age 65, and then reduced to 35% of the active amount. Certain key
employees, including Messrs. Purdum, Bertsch and Hildreth, could purchase
supplemental coverage equal to 18 times their monthly base salary as of January
1, 1987, at a cost equal to the amount of imputed income allocated to such
individual under the Internal Revenue Code. Unlike the amount of the group term
life insurance provided to all employees, there is no decrease in the amount of
coverage for such key employees after retirement. Participation in this
supplemental plan was frozen as of January 1, 1987. Messrs. Will and Visokey are
not eligible for this plan.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors (the "Committee") is
composed of independent directors (see "Compensation Committee Interlocks and
Insider Participation in Compensation Decisions"). The Committee is responsible
for reviewing, determining and recommending to the Board the annual salary,
short-and long-term incentive compensation, stock awards and other compensation
of the executive officers of the Corporation. This report describes the
policies and rationales of the Committee in establishing the principal
components of executive compensation in 1993.
The Committee's review and determination of executive compensation
generally includes consideration of the following factors: (a) industry, peer
group and national compensation surveys, (b) past and future performance
contributions of each executive officer to corporate performance, (c) the
overall performance of the Corporation, both separately and relative to similar
companies in the steel industry, (d) historical compensation levels and (e)
recommendations of independent compensation consultants with respect to
compensation competitiveness. Under the direction of the Committee, the
Corporation has developed a compensation strategy designed to compensate its
executives on a competitive basis relative to specific performance targets and
comparable to other companies in the steel industry, including companies that
are not included in the S&P Steel Index, the five-year cumulative total
shareholder return of which is graphically depicted under "Performance Graph"
below. Those companies, and the other companies surveyed by the Corporation for
their compensation policies, were selected for comparison on the basis of
industry similarities. The S&P Steel Index alone was not considered exclusively
for comparison because it does not broadly represent the specialty steels
industry. The compensation program is intended to (a) attract and retain key
executives critical to the long-term success of the Corporation, (b) facilitate
the Corporation's short- and long-term planning process, and, most importantly,
(c) reward executives for long-term strategic management and the enhancement of
shareholder value.
14
<PAGE>
Compensation for each of the Corporation's executive officers, including
the Named Executives, consists of a fixed base salary and variable components,
including both short- and long-term incentive compensation, as well as certain
compensation under corporate benefit plans available generally to corporate
officers. At the beginning of each year, an annual salary and performance
incentive plan for each of the Corporation's executive officers, other than the
Chief Executive Officer ("CEO"), is developed and prepared by the Corporation's
human resources staff under the direction of the CEO and submitted for
consideration by the Committee. The Committee reviews and fixes the CEO's
compensation based on criteria similar to those considered for all executives,
as well as an assessment of his past and future contributions in leading Armco
toward its objectives of becoming the leading, low-cost domestic producer of
specialty steels and achieving improved long-term financial and operating
results.
In evaluating the performance and setting the compensation of executive
officers in 1993, the Committee considered the factors described above. In
determining incentive compensation, it also took into account improvement in the
Corporation's historical market share in the specialty steel segment, Armco's
strategic market. The Committee also considered management's successful
completion of the divestment of several non-strategic assets during 1993, the
downsizing and consolidation of corporate staff functions in Pittsburgh,
Pennsylvania, the successful completion of a senior debt offering and
implementation of an aggressive strategy to control future health care costs for
active employees and retirees. Based on these factors and accomplishments, the
Committee believes that Armco's executive management made substantial and
objective progress toward achieving the Corporation's overall objectives
described above.
Base Salary. Armco's base salary is designed to recognize the sustained
-----------
and cumulative efforts toward achieving the Corporation's objectives that its
executives have demonstrated. The base salary is a remuneration for services
provided. The levels of base salary for 1993 were determined primarily by
competitive conditions and were fixed at levels which are below competitive
amounts paid to executives with comparable qualifications at a broad range of
industrial companies, as reported by Hay Management Consultants Salary Surveys.
In addition, the Committee considered specific steel industry compensation
survey data and fixed 1993 salaries at or about the median level for comparably
sized steel companies. Although the Named Executives changed in 1993, the
aggregate salaries for the top five executives in 1993, including the CEO,
increased only $.1 million to $1.7 million compared to the $1.6 million paid in
1992 to the top five executives. Of the Named Executives, Messrs. Purdum, Will,
Visokey and Hildreth received increases in base salary from the prior year in
recognition of their strong performance discussed below or increased
responsibilities associated with their new executive positions.
Short-Term Incentives. Short-term incentives are paid to recognize
---------------------
performance that is related to the achievement of key financial and operating
goals that have been established for a fiscal year. These short-term incentives
are set at or about the middle of the range of short-term incentive bonuses paid
to executives at the steel companies surveyed by Armco. Since short-term
incentives should generally reflect one year contributions, the size of the
payments may vary considerably from year to year, depending on performance. At
the beginning of each year, performance goals for the purposes of determining
annual incentive compensation are established. These goals are objective,
measurable and controllable by the respective executive. The executives are
paid an annual bonus based on achieving these annual goals. Reduced bonuses may
be paid to the executives, in the discretion of the Committee, if the executives
fail to achieve their financial goals, but attain certain non-financial
strategic objectives, whether or not identified at the beginning of the year.
For 1993, the Committee approved specific return on investment goals for
each operating unit based on its approved annual operating plan and a specific
net income goal for the Corporation's performance. The financial goals provided
65% of the executive's targeted incentive opportunity. In addition, the
Committee approved specific strategic and operating goals, including both
qualitative and quantitative measures, such as market share, productivity
initiatives, working capital and safety performance improvements. Achievement
of these goals provided the remaining 35% of the executive's targeted incentive
opportunity. The total of each executive's targeted incentive opportunity is
based upon a percentage of base salary, which percentage is based on the
comparative compensation data described above.
While the Corporation did not realize the threshold net income goal for
1993, the Committee reviewed the achievement of specific goals, including
divestment of non-strategic assets, consolidation and relocation of the
corporate headquarters, and the consummation of the senior debt offering by
Messrs. Purdum, Will, Hildreth and Bertsch, and recognized them accordingly with
a 10% incentive payment. Messrs. Visokey and Cushman achieved their return on
investment goals for Armco Advanced Materials Company and Worldwide Grinding
Systems, respectively, and received their targeted incentive payments.
15
<PAGE>
Long-Term Incentives. The Committee recognizes long-term incentive
--------------------
compensation as the key component of the total pay package linking executive pay
and corporate performance. At Armco, long-term incentive compensation is
intended to link the interests of its executives with the interests of Armco's
owners, its shareholders. Long-term incentive awards are targeted at or about
the middle of the range of long-term incentive compensation paid to executive
officers by the steel companies surveyed by Armco for their compensation
policies. In establishing its competitive position, Armco considers the
frequency and award size of the surveyed companies, as well as the prior grants
awarded to the Named Executives.
In 1993, the Committee approved the grant of stock options and performance
share awards to the Named Executives and other key managers in the Corporation.
With the assistance of an outside compensation consultant regarding typical
industry practices on percent-of-pay targets for long-term incentive awards, the
Committee approved the grant of contingent performance share awards detailed in
the table under "Executive Compensation -- 1993 Long-Term Incentive Plan",
above. Performance shares are designed to pay out when the executives have
provided the shareholders with an acceptable return on their investment over a
prolonged period of time. Contingent shares were awarded at the beginning of a
four-year period. An executive earns the right to receive 20% of his or her
award based on achievement of the threshold level of operating cash flow return
on investment over the four-year period 1993 through 1996. An executive earns
the right to receive further percentages, up to the maximum of 100%, based on
the amount by which the operating cash flow return on investment for such period
exceeds the threshold level.
No payments were made to the Named Executives in 1993 for performance share
awards in 1991 under the prior long-term incentive plan since the Corporation
failed to meet the three-year (1991-93) performance goals established for the
performance share awards.
Chief Executive Officer's 1993 Compensation. As set forth in the Summary
-------------------------------------------
Compensation Table, Mr. Purdum's 1993 total compensation was $691,488, a 26%
decrease from the $939,563 he earned in 1992. For 1993, Mr. Purdum earned
$591,667 in base salary, $60,000 in recognition of his leadership role in the
divestment of non-strategic assets and $39,821 in all other compensation.
In determining Mr. Purdum's 1993 compensation, the Committee considered the
various factors applied to compensation of all executive officers and discussed
above. After reviewing competitive salary information and his performance in
repositioning the Corporation in the specialty steels industry, the Committee
approved a 9% increase in base salary for Mr. Purdum effective March 1, 1993.
Mr. Purdum also had the opportunity to earn an annual incentive bonus targeted
at 55% of his annual base salary, which is the middle of the range of annual
incentives available to chief executive officers of the surveyed companies.
Although the Corporation did not achieve its net income objective, the Committee
recognized Mr. Purdum's leadership role in achieving several non-financial
goals, including the sale of non-strategic assets, refinancing of debt and
consolidation of the Corporate Headquarters in Pittsburgh, and awarded him
$60,000, approximately 10% of his annual base salary.
The Committee believes that increasing the variable component percentage of
the compensation paid to the CEO clearly links the financial interest of the CEO
to that of the Corporation's shareholders. It is for this reason that the
Committee elected in early 1993, prior to Mr. Purdum's decision to retire, to
tie Mr. Purdum's compensation to the longer-term goals of the Corporation and
its shareholders and awarded him 80,000 stock options and 150,000 contingent
performance shares under the 1993 Long-Term Incentive Plan. Like all executive
officers, the amounts of Mr. Purdum's option and performance share awards were
based on industry competitive levels.
The Committee acknowledges the potential impacts of the recent Internal
Revenue Code Section 162(m) change, which limits a publicly held corporation's
allowable deduction for a covered employee's applicable employee remuneration at
$1 million for a taxable year. Armco's short-term incentive plans are very
specific in the achievement of financial objectives. The Corporation continues
to refine non-financial objectives to insure they reflect measurable results.
The Corporation's base salary and short-term incentive opportunities are such
that the Named Executives are not likely to exceed the $1 million deduction
limit. In addition, Armco's 1993 Long-Term Incentive Plan is in compliance with
the performance-based compensation requirements of Section 162(m) with the
possible exception of the specific limitation by individuals with regard to the
number of stock option and/or stock appreciation rights.
At the December 3, 1993 meeting of the Board of Directors, Mr. Purdum and
the Board agreed that he would step down as Chief Executive Officer of the
Corporation effective January 1, 1994. In subsequent discussions, Mr.
16
<PAGE>
Purdum and the Board also agreed that he would continue as Chairman of the Board
through the Annual Shareholders meeting on April 22, 1994, at which time he
would not stand for reelection. Mr. Purdum has elected to retire from the
Corporation on April 30, 1994. In order to provide for an orderly transition of
executive responsibilities, as well as transition of external relationships, the
Board of Directors has entered into a consulting agreement with Mr. Purdum,
which will pay him $200,000 for the balance of 1994. The Board also approved the
waiver of restrictions on all his outstanding restricted stock shares. In
addition, the Board approved the vesting of his 1993 performance share award
contingent on the Corporation achieving the performance levels specified under
the plan, which will be determined at the conclusion of the performance cycle in
1996.
The foregoing report has been approved by all
members of the Committee.
Burnell R. Roberts, Chairman
John J. Burns, Jr.
Dr. David A. Duke
Paul H. Henson
Compensation Committee Interlocks and
Insider Participation in Compensation Decisions
The Compensation Committee consists of Burnell R. Roberts, Chairman,
John J. Burns, Jr., David A. Duke and Paul H. Henson, all of whom are
independent outside directors. Mr. Burns, President and Chief Executive Officer
of Alleghany Corporation, has been a director and a member of the Committee
since April 24, 1992. Mr. Will, President and Chief Executive Officer of the
Corporation, has been a director of Alleghany Corporation since June 16, 1992.
Performance Graphs
The following Performance Graph compares the five-year cumulative
total shareholder return (assuming reinvestment of dividends) of the common
stock, the S&P 500 Index and the S&P Steel Index.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF CUMULATIVE RETURN
AMONG ARMCO, S&P 500 INDEX AND S&P STEEL INDEX
<CAPTION>
Measurement period S&P 500 S&P STEEL
(Fiscal year Covered) ARMCO Index Index
- --------------------- -------- -------- --------
<S> <C> <C> <C>
Measurement PT -
12/31/88 $ 100 $ 100 $ 100
FYE 12/31/89 $ 110 $ 132 $ 97
FYE 12/31/90 $ 56 $ 128 $ 81
FYE 12/31/91 $ 58 $ 166 $ 100
FYE 12/31/92 $ 73 $ 179 $ 131
FYE 12/31/93 $ 67 $ 196 $ 172
</TABLE>
17
<PAGE>
MISCELLANEOUS
Information on the Auditors
On the recommendation of the Audit Review Committee, the Board of
Directors has appointed Deloitte & Touche to examine the financial statements of
the Corporation for the fiscal year ending December 31, 1994 and to perform
other appropriate accounting services.
Representatives of Deloitte & Touche are expected to be present at the
Meeting and will be given the opportunity to make a statement if they desire to
do so and are expected to be available to respond to appropriate questions.
Stock Ownership
The following table sets forth information as to stock ownership of
directors and executive officers of Armco as of February 28, 1994.
<TABLE>
<CAPTION>
Shares of
Common Stock
Beneficially
Name Owned (1)(4)
- ---- -------------
<S> <C>
James L. Bertsch................................. 66,814
William B. Boyd.................................. 4,000 (1)
John J. Burns, Jr................................ 29,698 (2)(3)
Owen B. Butler................................... 1,000
David A. Duke.................................... 1,000
Robert A. Cushman................................ 7,500
John C. Haley.................................... 1,000
Paul H. Henson................................... 1,000
Gary R. Hildreth................................. 33,188
John H. Ladish................................... 159,000
Robert L. Purdum................................. 437,379
Burnell R. Roberts............................... 1,250
Robert M. Visokey................................ 14,000
James F. Will.................................... 276,624 (3)
All Directors and Executive Officers as a Group
(18 persons including those named above)...... 1,124,931
</TABLE>
(1) No director or executive officer beneficially owns more than 1% of the
total shares of common stock. The shares that are beneficially owned by all
directors and executive officers as a group constituted 1.08% of the total
shares of common stock outstanding. No director or executive officer owns
any shares of $2.10 preferred stock, $3.625 preferred stock or $4.50
Cumulative Convertible Preferred Stock, except Mr. Boyd, who owns 2,000
shares of $2.10 preferred stock and 2,000 shares of the $4.50 Cumulative
Convertible Preferred Stock. Except as noted below, each director or
executive officer has sole voting power and sole investment power with
respect to those shares listed as beneficially owned by such director or
executive officer.
(2) Mr. Burns disclaims beneficial ownership of 1,209 shares held by his wife
and 200 shares held by his wife as custodian for his daughter.
18
<PAGE>
(3) Mr. Burns and Mr. Will are directors, and Mr. Burns is President and Chief
Executive Officer, of Alleghany Corporation. As set forth below in this
Section, "Stock Ownership", Alleghany Corporation beneficially
owned 5,643,554 shares of common stock as of November 10, 1992. Mr. Burns
and Mr. Will disclaim beneficial ownership of such shares.
(4) For the executive officers and directors indicated, the shares shown as
beneficially owned include the number of shares such persons had the right
to acquire within 60 days after February 28, 1994, pursuant to employee
options granted by the Corporation: Mr. Purdum - 240,200 shares, Mr. Will -
78,624 shares, Mr. Bertsch - 38,050 shares, Mr. Hildreth - 24,950 shares,
Mr. Visokey -4,000 shares, Mr. Cushman - 7,500 shares and all directors and
executive officers as a group - 413,074 shares. The shares shown also
include any shares allocated as of such date to the person's accounts under
the Armco Inc. Retirement and Savings Plan. The numbers of shares
beneficially owned under this plan, in the aggregate, for the persons
indicated are as follows: Mr. Purdum - 27,099 shares, Mr. Will - no shares,
Mr. Bertsch - 264 shares, Mr. Hildreth - 238 shares, Mr. Visokey - no
shares, Mr. Cushman - no shares and all directors and executive officers as
a group - 33,329 shares. The numbers of restricted shares owned subject to
restrictions under Armco's long-term incentive plans for the persons
indicated are as follows: Mr. Purdum - 137,500 shares, Mr. Will - no
shares, Mr. Bertsch - 23,250 shares, Mr. Hildreth -16,000 shares,
Mr. Visokey - 10,000 shares, Mr. Cushman - no shares and all directors
and executive officers as a group - 228,250 shares. The executive
officers have no voting, dividend or any other rights with respect to
shares subject to options under stock option plans until the options are
exercised. Subject to the restrictions under Armco's long-term incentive
plans, the recipients have all rights of a shareholder with respect to
the restricted shares awarded thereunder, including the right to vote and
receive all dividends and other distributions paid or made with respect
thereto.
The following table lists the beneficial ownership of common stock and
$3.625 preferred stock with respect to all persons known by the Corporation to
be the "beneficial owners" (as defined in Securities and Exchange Commission
Rule 13d-3) of more than 5% of any such class. Except as indicated, the
information is as of December 31, 1993 and is based on reports filed with the
Securities and Exchange Commission. The percentage of the outstanding shares of
each class owned by each such person or entity is based on the outstanding
shares of such class as of December 31, 1993.
<TABLE>
<CAPTION>
Title of Name and Address Number of Shares % of Outstanding
Class of Beneficial Owner Beneficially Owned Shares of Class
- -------- ------------------- ------------------ ----------------
<S> <C> <C> <C>
Common Alleghany Corporation
Park Avenue Plaza
New York, NY 10055 5,643,554 (1) 5.5%
Common Dietche & Field
Advisers, Inc.
437 Madison Avenue
New York, NY 10022 5,564,950 (2) 5.4%
Common Norwest Corporation
Norwest Center
Sixth and Marquette
Minneapolis, MN 55479 15,175,549 (3) 14.4%
Common T. Rowe Price
Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202 5,513,502 (4) 5.3%
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Title of Name and Address Number of Shares % of Outstanding
Class of Beneficial Owner Beneficially Owned Shares of Class
- -------- ------------------- ------------------- ----------------
<S> <C> <C> <C>
$3.625 Putnam Investments, Inc.
Preferred One Post Office Square
Boston, MA 02109 380,250 (5) 14.1%
$3.625 Norwest Corporation
Preferred Norwest Center
Sixth and Marquette
Minneapolis, MN 55479 204,200 (3) 7.6%
$3.625 Neuberger & Berman
Preferred 605 Third Avenue
New York, NY 10158 167,200 (6) 6.69%
$3.625 Reliance Financial
Preferred Services Corporation
Park Avenue Plaza
55 East 52nd Street
New York, NY 10055 390,000 (7) 8.9%
</TABLE>
____________
(1) The reported beneficial ownership is as of November 10, 1992. The
beneficial owner reported that it had sole voting and investment power as
to 5,643,355 shares, shared voting power as to 199 shares, as to which
beneficial ownership is disclaimed, and shared investment power as to no
shares.
(2) The reported beneficial ownership is as of June 30, 1992. The beneficial
owner reported that it had sole voting power and no investment power as to
all of the shares beneficially owned.
(3) The reported beneficial ownership is indirectly through Norwest
Corporation's subsidiaries, Norwest Colorado, Inc. and Norwest Bank Denver,
N.A. (collectively with Norwest Corporation, "Norwest"). The shares of
common stock reported as beneficially owned include 18,600 shares issuable
upon conversion of shares of $2.10 preferred stock beneficially owned,
204,200 shares issuable upon conversion of shares of $3.625 preferred stock
beneficially owned and 800 shares issuable upon conversion of shares of the
$4.50 preferred stock shown as beneficially owned. Norwest reported that it
had sole voting power as to 13,047,709 shares (including 1,127,334 of the
shares issuable upon conversion of $2.10, $3.625 and $4.50 preferred
stock), shared voting power as to 88,574 shares (including 7,874 of the
shares issuable upon conversion of $2.10 preferred stock), sole investment
power as to 15,146,947 shares (including 1,403,272 of the shares issuable
upon conversion of $2.10 preferred stock and $3.625 preferred stock) and
shared investment power as to 6,026 shares (including 4,826 shares issuable
upon conversion of $2.10 preferred stock). Norwest reported that the shares
of $3.625 preferred stock reported as beneficially owned include 165,000
shares as to which the beneficial owner had sole voting power, 204,200 as
to which it had sole investment power and no shares as to which it had
shared voting or investment power. Norwest disclaims beneficial ownership
of all the shares of common stock and $3.625 preferred stock reported as
beneficially owned.
(4) Disclosed to the Corporation as owned of record by a subsidiary, T. Rowe
Price Trust Company, Inc. (the "Trust Company"), as trustee of the trust
for some of the Corporation's benefit plans, including the Armco Inc.
Retirement and Savings Plan and the Armco Inc. Thrift Plan for Hourly
Employees, and the Trust Company's nominees. The Corporation believes that
for purposes of
20
<PAGE>
the reporting requirements of the Securities Exchange Act
of 1934, both T. Rowe Price Associates, Inc. and the Trust Company are
deemed to be beneficial owners of the reported securities; however, both T.
Rowe Price Associates, Inc. and the Trust Company expressly disclaim that
they are, in fact, the beneficial owners of such securities.
(5) The reported beneficial ownership is indirectly through Putnam Investments,
Inc.'s wholly owned investment advisors, Putnam Investment Management, Inc.
and The Putnam Advisory Company, Inc., and through The Putnam Fund for
Growth and Income (collectively with Putnam Investments, Inc., "Putnam").
Putnam reported that it had sole voting power as to no shares, shared
voting power as to 1,700 shares, sole dispositive power as to no shares and
shared dispositive power as to 380,250 shares. Putnam Investments, Inc. and
Marsh & McClennan Companies, Inc., of which Putnam Investments, Inc. is a
wholly owned subsidiary, each disclaim beneficial ownership of such shares
and state that neither of them has any power to vote or dispose of, or
direct the voting or disposition of, such shares.
(6) The beneficial owner reported that it had sole voting power as to 120,800
shares, shared investment power as to 167,200 shares and no shared voting
or sole investment power as to any shares.
(7) The beneficial owner reported that it had sole voting and investment power
as to all of the shares beneficially owned.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Corporation's directors and officers, and persons
who own beneficially more than ten percent of a registered class of the
Corporation's equity securities, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership in
common stock and other equity securities of the Corporation. Officers,
directors and greater-than ten-percent beneficial owners are required by Rule
16a-3(e) under the Exchange Act to furnish the Corporation with copies of all
reports that they file pursuant to Section 16(a).
To the Corporation's knowledge, based solely upon a review of the copies of
such reports furnished to the Corporation and written representations that no
other reports were required, during the fiscal year ended December 31, 1993, all
Section 16(a) filing requirements applicable to the Corporation's officers,
directors and greater-than-ten-percent beneficial owners were complied with,
except that one transaction report, relating to two transactions, was filed late
by James F. Will, President and Chief Executive Officer, one transaction report,
relating to one transaction, was filed late by Gary R. Hildreth, Vice President,
General Counsel and Secretary, and one transaction report, relating to one
transaction, was filed late by Robert A. Cushman, former Vice President
(President, Armco Worldwide Grinding Systems).
Shareholder Proposals
Any proposals of shareholders intended to be presented at the 1995 annual
meeting must be received by the Corporation by November 25, 1994, in order to be
considered for inclusion in the proxy statement and form of proxy for that
meeting. In addition, as set forth above under ''ELECTION OF DIRECTORS -- Board
of Directors and Committees of the Board", shareholders intending to nominate
director candidates for election at the 1995 annual meeting must deliver written
notice, including specified information, to the Secretary of Armco at its
address set forth on the first page of this proxy statement by January 22, 1995.
21
<PAGE>
Proxy Solicitation
The cost of soliciting proxies from the shareholders of the Corporation
will be borne by the Corporation. Proxies may be solicited by mail, personal
interviews, telephone and telegraph. It is anticipated that banks, brokerage
houses and other custodians, nominees or fiduciaries will be requested to
forward soliciting material to their principals and to obtain authorization for
the execution of proxies and will be reimbursed for their charges and expenses
incurred in connection therewith.
The Corporation has retained Georgeson & Company Inc., Wall Street Plaza,
New York, New York 10005, to assist in the solicitation of proxies by such
methods. Georgeson & Company Inc. will receive for such services a fee of
$12,000 plus out-of-pocket expenses and disbursements. Certain directors,
officers and regular employees of the Corporation may also solicit proxies by
such methods without additional remuneration therefor.
By Order of the Board of Directors
GARY R. HILDRETH, Secretary
March 25, 1994
22
<PAGE>
(Map & Directions)
23
<PAGE>
ARMCO INC.
Annual Shareholders' Meeting
Pittsburgh Green Tree Marriott
101 Marriott Drive
Pittsburgh, Pennsylvania 15205
April 22, 1994, at 10:00 a.m.
Are there any questions you would
like to have addressed at the
Annual Meeting or in the First
Quarter Report to Shareholders?
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
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24
<PAGE>
ARMCO INC.
The undersigned hereby appoints James F. Will, Paul H. Henson and Gary R.
Hildreth, and each or any of them, proxies, with full power of substitution, to
represent and to vote all shares of common stock and/or preferred stock of Armco
Inc. held of record by the undersigned on February 28, 1994, at the annual
meeting of shareholders to be held on April 22, 1994, and at any adjournment
thereof, notice of which meeting together with the related proxy statement has
been received. The proxies are directed to vote the shares the undersigned
would be entitled to vote if personally present upon the matters set forth.
IF NO CHOICE IS SPECIFIED THE SHARES REPRESENTED BY THIS PROXY SHALL BE VOTED
FOR THE ELECTION OF DIRECTORS, FOR APPROVAL OF THE AMENDMENT TO THE REGULATIONS
TO CHANGE THE RANGE OF NUMBERS OF DIRECTORS THAT MAY BE FIXED BY THE BOARD OF
DIRECTORS AND AGAINST THE SHAREHOLDER PROPOSAL. THIS PROXY DELEGATES
DISCRETIONARY AUTHORITY WITH RESPECT TO ANY OTHER MATTERS WHICH MAY COME BEFORE
THE MEETING.
PLEASE SIGN EXACTLY AS NAME APPEARS ON THE REVERSE, INDICATING OFFICIAL POSITION
OR REPRESENTATIVE CAPACITY (SUCH AS EXECUTOR, TRUSTEE, GUARDIAN, ETC.) WHERE
APPLICABLE. IF SHARES ARE HELD JOINTLY, ALL THE HOLDERS MUST SIGN THIS PROXY.
PLEASE COMPLETE, SIGN AND DATE THIS PROXY AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Signature ______________________________ Date _____________
Signature ______________________________ Date _____________
Please do not fold or mutilate this card.
(CONTINUED ON REVERSE SIDE)
Armco Inc.
One Oxford Centre
301 Grant Street
Pittsburgh, PA 15219-1415
PLEASE MARK ALL [X]
CHOICES LIKE THIS
(1) Election of directors: John J. Burns, Jr., David A. Duke, John C. Haley,
Paul H. Henson, John H. Ladish, Bruce E. Robbins, Burnell R. Roberts,
John D. Turner, James F. Will.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE
FOR All nominees listed WITHHOLD
(except as marked to the Authority to vote
contrary)
[_] [_]
The Board of Directors recommends a vote FOR Item 2:
- ----------------------------------------------------
(2) The amendment to the Regulations of Armco Inc. to change the range of
numbers of directors that may be fixed by the Board of Directors to a
minimum of eight and a maximum of thirteen.
FOR AGAINST ABSTAIN
--- ------- -------
[_] [_] [_]
The Board of Directors recommends a vote AGAINST Item 3.
- --------------------------------------------------------
(3) The shareholder proposal for an amendment to the Regulations of Armco Inc.
to limit post-retirement benefits for directors.
FOR AGAINST ABSTAIN
--- ------- -------
[_] [_] [_]
(4) For the transaction of such other business as may be properly brought
before the meeting.
- -----------------
ACCOUNT NUMBER
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
<PAGE>
GRAPHICS APPENDIX LIST
----------------------
EDGAR Version Typeset Version
- ------------- ---------------
3,4 Photos of the Nominees for Director appear above each
respective name on pages 3 and 4.
17 The Preformance Graph appears on page 17.
23 A map and directions showing the location of the
Pittsburgh Green Tree Marriott, site of the Annual
Meeting, appears on page 23
