<PAGE>1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
--------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------------- ------------------
Commission File No. 1-873-2
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ARMCO INC.
----------
(Exact name of registrant as specified in its charter)
Ohio 31-0200500
- ------------------------------------ --------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Oxford Centre, 301 Grant St., Pittsburgh, PA 15219-1415
-----------------------------------------------------------
(Address of principal executive offices, Zip Code)
(412) 255-9800
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to filing requirements for the past 90 days.
Yes X No
------- ------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes X No
------- ------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Shares of common stock outstanding at March 31, 1996: 106,676,883
<PAGE>2
ARMCO INC.
INDEX
Page
----
Part I. Financial Information
Condensed Statement of Consolidated Financial Position -
March 31, 1996 and December 31, 1995 2
Condensed Statement of Consolidated Operations and
Retained Deficit - Three Months Ended March 31,
1996 and 1995 3
Condensed Statement of Consolidated Cash Flows -
Three Months Ended March 31, 1996 and 1995 4
Notes to Condensed Consolidated Financial Statements 5-6
Management's Discussion and Analysis of the Condensed
Consolidated Financial Statements 7-10
Segment Report 11
Part II. Other Information
Item 1. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12-13
Signatures 14
Exhibit 11 Computation of Income (Loss) Per Common Share
-1-
<PAGE>3
<TABLE>
ARMCO INC.
CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION
(Unaudited)
<CAPTION>
(Dollars in millions) March 31, December 31,
1996 1995
------------ ------------
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 223.9 $ 136.8
Receivables, less allowance for doubtful accounts 180.1 169.4
Inventories (Note 2) 226.6 216.2
Net assets held for sale (Note 5) - 85.5
Other 6.5 5.9
- ------------------------------------------------------------------------------
Total current assets 637.1 613.8
Investments
Investment in AFSG 85.6 85.6
Other, less allowance for impairment 53.0 37.2
Property, plant and equipment 1,221.6 1,208.3
Accumulated depreciation (554.7) (539.8)
- ------------------------------------------------------------------------------
Property, plant and equipment - net 666.9 668.5
Deferred tax asset 325.8 326.1
Goodwill and other intangible assets 145.1 145.9
Other assets 15.3 19.5
- ------------------------------------------------------------------------------
Total assets $ 1,928.8 $ 1,896.6
- ------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Trade accounts and notes payable $ 173.3 $ 148.2
Employee-related obligations 140.1 172.4
Other liabilities 72.8 72.6
Current portion of long-term debt 29.3 25.8
- ------------------------------------------------------------------------------
Total current liabilities 415.5 419.0
Long-term debt, less current portion 358.4 361.6
Long-term employee benefit obligations 1,193.2 1,165.9
Other liabilities 186.3 180.5
Commitments and contingencies (Note 6)
Shareholders' deficit (Note 7)
Preferred stock - Class A 137.6 137.6
Preferred stock - Class B 48.3 48.3
Common stock 1.1 1.1
Additional paid-in capital 966.3 963.0
Retained deficit (1,376.1) (1,378.5)
Other (1.8) (1.9)
- ------------------------------------------------------------------------------
Total shareholders' deficit (224.6) (230.4)
- ------------------------------------------------------------------------------
Total liabilities and shareholders' deficit $ 1,928.8 $ 1,896.6
- ------------------------------------------------------------------------------
<FN>
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
-2-
<PAGE>4
<TABLE>
ARMCO INC.
CONDENSED STATEMENT OF CONSOLIDATED OPERATIONS
AND RETAINED DEFICIT
(Unaudited)
(Dollars and shares in millions,
except per share amounts)
<CAPTION>
Three Months Ended
March 31,
-------------------
1996 1995
-------- --------
<S> <C> <C>
Net sales $ 430.4 $ 368.4
Cost of products sold (Note 3) (392.9) (327.7)
Selling and administrative expenses (22.4) (24.2)
- ------------------------------------------------------------------------------
Operating profit 15.1 16.5
Interest income 3.0 3.7
Interest expense (9.2) (7.5)
Gain on sale of investment in AK Steel stock - 1.3
Sundry other - net (Note 4) (1.6) (12.9)
- ------------------------------------------------------------------------------
Income before income taxes 7.3 1.1
Provision for income taxes (0.4) (0.2)
- ------------------------------------------------------------------------------
Income from continuing operations 6.9 0.9
Discontinued operation -
Equity in income of National-Oilwell (Note 5) - 1.5
- ------------------------------------------------------------------------------
Net income 6.9 2.4
Retained deficit, beginning of period (1,378.5) (1,390.4)
Preferred stock dividends (4.5) (4.5)
- ------------------------------------------------------------------------------
Retained deficit, end of period $(1,376.1) $(1,392.5)
- ------------------------------------------------------------------------------
Weighted average number of common and common
equivalent shares outstanding - primary 106.4 105.6
Net income (loss) applicable to common stock $ 2.4 $ (2.1)
Earnings per common share - primary
Income (loss) from continuing operations $ 0.02 $ (0.03)
Discontinued operation -
Equity in income of National-Oilwell (Note 5) - 0.01
- ------------------------------------------------------------------------------
Net income (loss) $ 0.02 $ (0.02)
Earnings (loss) per common share - fully dilutive * *
Cash dividends per share
$2.10 Class A $ 0.525 $ 0.525
$3.625 Class A 0.906 0.906
$4.50 Class B 1.125 1.125
<FN>
* Antidilutive or dilution less than 3%
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
-3-
<PAGE>5
<TABLE>
ARMCO INC.
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
(Unaudited)
(Dollars in millions)
<CAPTION>
Three Months Ended
March 31,
-------------------
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6.9 $ 2.4
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and lease-right amortization 14.6 12.5
Undistributed earnings from discontinued operations - (1.5)
Net gain on sales of investments and facilities (1.4) (1.5)
Other (3.7) 3.8
Change in assets and liabilities:
Trade accounts and notes receivable (1.9) (10.1)
Inventory (10.4) (16.8)
Payables and accrued operating expenses 24.0 5.0
Employee benefit obligations 7.0 11.3
Other assets and liabilities - net (7.2) (4.1)
- ------------------------------------------------------------------------------
Net cash provided by operating activities 27.9 1.0
- ------------------------------------------------------------------------------
Cash flows from investing activities:
Net proceeds from the sale of businesses and assets 3.1 15.7
Proceeds from the sale and maturity of liquid
investments 0.2 24.7
Proceeds from the sale of investments 77.2 1.3
Purchase of investments (0.4) (1.0)
Contributions to investees (1.6) -
Capital expenditures (11.6) (33.1)
Net cash (used in) provided by businesses held
for sale (2.9) 6.0
Other 0.3 0.1
- ------------------------------------------------------------------------------
Net cash provided by investing activities 64.3 13.7
- ------------------------------------------------------------------------------
Cash flows from financing activities:
Dividends paid (4.5) (7.5)
Other (0.6) 1.4
- ------------------------------------------------------------------------------
Net cash used in financing activities (5.1) (6.1)
- ------------------------------------------------------------------------------
Net change in cash and cash equivalents 87.1 8.6
Cash and cash equivalents:
Beginning of period 136.8 202.8
- ------------------------------------------------------------------------------
End of period $223.9 $211.4
- ------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of capitalized interest) $ 5.5 $ 4.0
Income taxes - 0.1
Supplemental schedule of noncash investing and
financing activities:
Issuance of restricted stock 3.2 4.4
Debt incurred directly for property - 11.6
Note received in partial payment for asset sale 10.6 -
<FN>
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
-4-
<PAGE>6
ARMCO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in millions,
except per share amounts)
1. The condensed consolidated financial statements of Armco Inc. (Armco)
should be read in conjunction with the financial statements in Armco's Annual
Report to Shareholders for the year ended December 31, 1995. In the opinion
of Armco's management, the accompanying condensed consolidated financial
statements contain all adjustments, which were of a normal recurring nature,
necessary to present fairly, in all material respects, the financial position
as of March 31, 1996, and the results of operations and cash flows for the
three months ended March 31, 1996 and 1995. The results of operations for the
three months ended March 31, 1996 are not necessarily indicative of the
results to be expected for the year 1996.
2. Armco's inventories are valued at the lower of cost or market. Most of
Armco's domestic inventories are valued using the LIFO - Last In, First Out -
method. Other inventories are valued principally at average cost.
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Inventories on LIFO:
Finished and semi-finished $ 235.5 $ 226.8
Raw materials and supplies 27.4 24.8
Adjustment to state inventories at
LIFO value (57.4) (57.3)
-------- --------
Total 205.5 194.3
Inventories on average cost:
Finished and semi-finished 13.7 15.5
Raw materials and supplies 7.4 6.4
-------- --------
Total 21.1 21.9
-------- --------
Total inventories $ 226.6 $ 216.2
======== ========
</TABLE>
3. Cost of products sold for the first quarter of 1996 included income of
$4.2 related to the partial settlement of a business interruption insurance
claim for a third quarter 1995 unplanned outage. The outage resulted from the
failure of a generator on one stand of the hot mill at the Butler Operations,
which reduced efficiency during a six-week period, resulting in the use of
alternative and more costly product routings and lost sales.
4. Sundry other - net in Armco's Condensed Statement of Consolidated
Operations and Retained Deficit included expenses of $7.9 and $9.6 for the
three months ended March 31, 1996 and 1995, respectively, for interest on
employee benefit obligations related to facilities which have been divested.
The reduction in expense in 1996 is primarily due to lower interest rates.
In the three months ended March 31, 1996, Sundry other - net included a gain
of $6.3, which resulted from the recognition of gains previously deferred in
connection with asset sales at a 500-acre industrial park owned by Armco.
Armco had elected to defer gains resulting from individual asset sales at this
site because of the uncertainty concerning realization of the carrying value
of the remaining property. The gains were recognized following receipt, in
March 1996, of an independent appraiser's report indicating that the land,
buildings and dock facilities in the park had a market value significantly in
excess of Armco's historical cost carrying value. Armco is currently
discussing the sale of this property with a number of potential buyers.
-5-
<PAGE>7
5. At December 31, 1995, Armco had recorded $85.5 in Net assets held for sale
in the Condensed Statement of Consolidated Financial Position for its 50%
ownership interest in National-Oilwell, an oil field equipment and supply
joint venture. The sale of National-Oilwell was completed on January 16,
1996, with Armco receiving $77.0 in cash and receivables with a face value of
$13.0. The receivables were recorded in other investments at a discounted
value of $10.6. After recording $2.1 for recognition of deferred foreign
translation losses and miscellaneous expenses, no gain or loss was recorded on
the sale. The equity income of National-Oilwell recognized prior to the
fourth quarter of 1995 is reported in Discontinued operation on the Condensed
Statement of Consolidated Operations and Retained Deficit.
6. There are various claims pending involving Armco and its subsidiaries
regarding product liability, antitrust, patent, employee benefits,
environmental, reinsurance and insurance arrangements, and other matters
arising out of the conduct of Armco's business.
Like other manufacturers, Armco is subject to various environmental laws.
These laws necessitate expenditures to assure compliance at Armco's facilities
and to remediate sites where contamination has occurred. Compliance costs are
either expensed as they are incurred or, when appropriate, are recorded as
capital expenditures. Armco has accrued its estimate of remediation costs for
sites where it is probable that a liability has been incurred and the amount
can be reasonably estimated. The recorded amounts are currently believed by
management to be sufficient. However, such estimates could significantly
change in future periods to reflect new laws or regulations, advances in
technologies, additional sites requiring remediation, new remediation
requirements at existing sites, and Armco's share of liability at multi-party
sites.
There are various pending matters relating to litigation, arbitration and
regulatory affairs arising out of the operations of Armco's runoff insurance
companies, including matters related to Northwestern National Insurance
Company, a runoff company currently involved in, among other matters,
litigation with respect to certain reinsurance programs. Armco has recorded
an $85.6 investment in these companies.
Armco believes, based on current facts and circumstances, that its ultimate
liability for pending claims, contingent liabilities, environmental matters
and matters related to its runoff insurance companies identified to date will
not materially affect its consolidated financial condition or liquidity.
However, it is possible that due to fluctuations in Armco's results, future
developments with respect to such pending claims, contingent liabilities and
other matters could have a material effect on the results of its operations in
future interim or annual periods.
At March 31, 1996, Armco had recorded in its Condensed Statement of
Consolidated Financial Position, legal and environmental reserves of $86.5, of
which $13.9 was classified as current.
7. Under the terms of one of Armco's revolving credit facilities, which
expires on December 31, 1998, Armco is not permitted to pay cash dividends on
its common stock. The payment of dividends on preferred stock is prohibited
if Armco is in default under the credit agreement.
Under the terms of the indentures for Armco's 11.375% Senior Notes Due 1999
and 9.375% Senior Notes Due 2000, Armco cannot pay a dividend on its common
stock or repurchase its capital stock, unless it meets certain financial tests
described in the indentures. Armco does not expect to be able to meet all of
these tests in the near term.
At its April 26, 1996 meeting, the Board of Directors declared the regular
quarterly dividends payable on Armco's $2.10 Cumulative Convertible Preferred
Stock, Class A, $3.625 Cumulative Convertible Preferred Stock, Class A, and
$4.50 Cumulative Convertible Preferred Stock, Class B.
8. Information relating to Armco's industry segments can be found on page 11.
-6-
<PAGE>8
ARMCO INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share data)
GENERAL
- -------
Armco's consolidated results for the first three months of 1996 and 1995 were
as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1996 1995
-------- --------
<S> <C> <C>
Net sales $430.4 $368.4
Operating profit 15.1 16.5
Income from continuing operations 6.9 0.9
Discontinued operation -
National-Oilwell equity income -- 1.5
Net income 6.9 2.4
Net income (loss) per common share - primary 0.02 (0.02)
</TABLE>
Net sales in the three months ended March 31, 1996 were 17% higher than in the
same period last year, primarily due to higher sales of carbon, automotive
chrome stainless and specialty semi-finished steels in the Specialty Flat-
Rolled Steels segment.
First quarter 1996 operating profit included income of $4.2 related to the
partial settlement of a business interruption claim. Excluding this one-time
credit, the decrease in operating profit from last year was due to the effects
of planned equipment outages, high outside processing costs, continued
operating problems at the Mansfield Operations and sales of lower-priced
carbon steel products.
Income from continuing operations was $6.0 higher in 1996 than 1995. However,
included in the 1996 amount was the above-mentioned insurance settlement and a
$6.3 gain, which resulted from the recognition of gains previously deferred in
connection with asset sales at a 500-acre industrial park owned by Armco.
Armco had elected to defer gains resulting from individual asset sales at this
site because of the uncertainty concerning realization of the carrying value
of the remaining property. The gains were recognized following receipt, in
March 1996, of an independent appraiser's report indicating that the land,
buildings and dock facilities in the park had a market value significantly in
excess of Armco's historical cost carrying value. Armco is currently
discussing the sale of this property with a number of potential buyers.
At December 31, 1995, Armco had recorded $85.5 in Net assets held for sale for
its 50% ownership interest in National-Oilwell, an oil field equipment and
supply joint venture. The sale of National-Oilwell was completed on January
16, 1996, with Armco receiving $77.0 in cash and receivables with a face value
of $13.0. The receivables were recorded at a discounted value of $10.6.
After recording $2.1 for recognition of deferred foreign translation losses
and miscellaneous expenses, no gain or loss was recorded on the sale. The
equity income of National-Oilwell recognized prior to the fourth quarter of
1995 is reported in Discontinued operation.
Net income (loss) per common share reflects a deduction of $4.5 for the first
quarter of each year for preferred stock dividends declared.
-7-
<PAGE>9
BUSINESS SEGMENT RESULTS
- ------------------------
Specialty Flat-Rolled Steels
- ----------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1996 1995
-------- --------
<S> <C> <C>
Customer sales $372.1 $303.7
Operating profit 20.0 23.2
</TABLE>
During the first quarter of 1995, Armco's Mansfield Operations was idle
pending completion of its new thin-slab caster. The caster was completed, and
the plant resumed operations, in April 1995. First quarter 1996 customer
sales for the segment increased $68.4, primarily as a result of strong demand
for automotive chrome stainless, higher volumes of specialty semi-finished
products and sharply higher shipments of carbon steels from Mansfield.
Customer sales and shipments by major product line and total raw steel
production were as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------
1996 1995
--------------- ---------------
(tons in thousands) Sales Tons Sales Tons
------- ------ ------- ------
<S> <C> <C> <C> <C>
Automotive chrome $ 130.2 96 $ 106.6 82
Electrical 91.1 67 88.2 63
Specialty strip and sheet 65.7 24 68.1 27
Specialty semi-finished 31.6 21 20.9 15
Carbon 44.2 108 10.4 16
Other 9.3 -- 9.5 --
------- ----- ------- -----
Total $ 372.1 316 $ 303.7 203
Raw steel production 390 239
</TABLE>
Automotive chrome shipments were 17% higher in the first quarter of 1996 than
in the same period in 1995, as the Mansfield Operations began shipping
significant quantities of this product. Healthy production of North American
light vehicles and increased use of stainless in exhaust systems stimulated
demand.
Shipments of electrical steel products remained high as a result of generally
good market conditions and supplier contracts. Demand remained strong for
grain oriented electrical steel used in utility distribution transformers and
non-oriented electrical steel used in motors and generators. However, Armco's
ability to ship these products continues to be limited by finishing capacity
constraints.
The decline in specialty strip and sheet shipments was due to lower customer
demand related to inventory liquidations.
Specialty semi-finished shipments increased 6,000 tons in the first quarter of
1996, despite a weaker domestic market. Much of the increase was due to
export sales.
Carbon steel shipments in the first quarter of 1996 totaled 108,000 tons
compared to 16,000 tons in the first quarter of 1995. During the first
quarter of 1995, Mansfield was idle and selling only on-hand inventory, while
the Dover facility was selling some galvanized carbon steel produced from
steel purchased from outside sources.
Operating profit for the first quarter of 1996 included income of $4.2 related
to the partial settlement of a business interruption insurance claim for a
third quarter 1995 unplanned outage. The outage resulted from the failure of
a generator on one stand of the hot mill at the Butler Operations, which
reduced efficiency during a six-week period, resulting in the use of
alternative and more costly product routings and lost sales.
-8-
<PAGE>10
First quarter 1996 operating profit also included $16.5 of losses from the
Mansfield Operations, compared to losses totaling $24.0 while the plant was
idle in the same period last year. Mansfield, in addition to producing carbon
steels, helped meet customer demand for stainless steels by shipping a
significant percentage of Armco's automotive chrome in the first quarter of
this year. The products shipped by Mansfield were of high quality and fully
met customer requirements; however, operating costs, throughput and
productivity at the plant were not at acceptable levels. In addition to its
direct losses, Mansfield's operating problems were reflected in the results of
the other operations in the Specialty Flat-Rolled Steels segment due to the
increasing interdependence of the operating facilities.
First quarter 1996 operating profit was also lower due to several planned
equipment outages, necessary to upgrade Armco's finishing facilities as part
of the strategic facilities plan. The outages and the subsequent process of
restarting and returning these facilities to full capability contributed to
lower yields, particularly in electrical steel production. In addition, in
order to meet demand during this time, Armco used outside processors to finish
some of its stainless steels, resulting in increased costs.
Outlook: Armco is encouraged by the quality of products produced at
Mansfield, but continues to concentrate on improving the operations and
integrating its specialty steel producing capability with the other plants in
the segment. The results for the second and third quarters of 1996 will be
adversely affected by several more planned outages needed to complete the
strategic facilities plan. Extensive upgrades of the Mansfield cold mill and
an anneal and pickle line at the Zanesville Operations, both used to finish
automotive chrome stainless, are scheduled to begin in the second quarter and
should be completed early in the third quarter.
While Armco has experienced some softness in the specialty strip and sheet
market, overall demand for specialty flat-rolled products remains good.
However, the production of electrical steel will continue to be constrained,
through most of this year, with new finishing capacity not available until, at
least, the fourth quarter.
Armco expects the effects of continued weak pricing in carbon steel orders
currently in backlog to negatively affect second quarter results. However,
carbon markets appear to be strengthening and prices are expected to increase
in the third quarter.
Fabricated Products
- -------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1996 1995
-------- --------
<S> <C> <C>
Customer sales $ 58.3 $ 64.7
Operating profit 1.5 0.8
</TABLE>
Customer sales decreased by 10% from last year, with the decline attributable
to both Sawhill Tubular and Douglas Dynamics, LLC (Douglas Dynamics). The
first quarter of the year is the seasonal slow time for snowplow sales. The
higher sales realized in the first three months of 1995 were a result of sales
related to the year-end backlog carried over from the 1994 record-setting
sales year for Douglas Dynamics. Lower snowplow sales were partially offset
by higher parts sales, which were attributable to the greater snowfalls this
year. Lower customer sales for Sawhill resulted from lower prices and a
slight decline in volume.
In spite of lower sales, Douglas Dynamics was able to maintain the same
operating profit it recorded in the first three months of last year, while
Sawhill Tubular experienced increased profits. Douglas Dynamics reduced costs
by eliminating production outsourcing, while operating results at both
businesses were enhanced by cost containment measures begun last year.
Sawhill Tubular also benefited from lower hot band costs and quality
improvements.
-9-
<PAGE>11
Outlook: Douglas Dynamics anticipates somewhat lower snowplow sales over the
next twelve months compared to the last twelve months; however, Armco expects
the lower volume to be more than offset by normal annual price increases and
new product sales. Operating results for 1996 are expected to improve over
last year's levels.
Sawhill Tubular's sales are expected to remain level for the next 12 months,
though availability and pricing of hot bands will be a concern during the
remainder of the year. Sawhill Tubular is expected to remain profitable
throughout the year.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At March 31, 1996, Armco had $223.9 of cash and cash equivalents compared to
$136.8 at December 31, 1995. Cash and cash equivalents increased $87.1 during
the first three months of 1996, primarily due to cash inflows of $77.0 from
the sale of Armco's investment in National-Oilwell and $27.9 of cash generated
by operations. Partially offsetting these cash inflows were capital
expenditures of $11.6 and preferred stock dividends of $4.5.
In addition to the cash on hand, Armco has a receivables credit facility,
underwhich Armco Funding Corporation, a wholly owned subsidiary to which Armco
sells substantially all of its receivables, may borrow up to $120.0 secured by
those receivables. In addition, Armco can borrow up to $50.0 under a credit
facility secured by certain of its inventories. At March 31, 1996, $74.2 of
the receivables facility was used as support for letters of credit; while no
borrowings were outstanding under either facility.
Armco anticipates that its 1996 cash expenditures for capital projects will
total approximately $60.0 to $70.0. In addition, Armco has $29.3 of debt
commitments maturing through March 1997 and expects to make discretionary
pension payments of up to $65.0 during the remainder of 1996. The capital
expenditures, and debt and pension payments will be paid out of existing cash
balances and cash generated from operations and asset disposals.
On April 26, 1996, Armco's Board of Directors declared the regular quarterly
dividends of $.525 per share on the $2.10 Cumulative Convertible Preferred
Stock, Class A, and $.90625 per share on the $3.625 Cumulative Convertible
Preferred Stock, Class A, each payable June 28, 1996 to shareholders of record
on May 31, 1996. The Board of Directors also declared the regular quarterly
dividend of $1.125 per share on the $4.50 Cumulative Convertible Preferred
Stock, Class B, payable July 1, 1996, to shareholders of record on May 31,
1996. Payment of dividends on Armco's common stock is currently prohibited
under the terms of certain of Armco's debt instruments and under the terms of
its inventory credit facility.
-10-
<PAGE>12
<TABLE>
ARMCO INC.
SEGMENT REPORT
(Unaudited)
(Dollars in millions)
<CAPTION>
1996 1995
------ ----------------------------
1st 4th 3rd 2nd 1st
Qtr. Qtr. Qtr. Qtr. Qtr.
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Specialty Flat-Rolled Steels:
Customer sales $372.1 $326.3 $326.1 $320.9 $303.7
Operating profit 20.0 12.1 13.3 27.4 23.2
Fabricated Products:
Customer sales 58.3 70.5 78.0 69.7 64.7
Operating profit 1.5 5.1 10.7 5.4 0.8
Corporate general (6.4) (7.3) (7.2) (7.0) (7.5)
- ------------------------------------------------------------------------------
Total operating profit 15.1 9.9 16.8 25.8 16.5
Interest income 3.0 1.9 3.0 3.2 3.7
Interest expense (9.2) (8.2) (8.7) (8.5) (7.5)
Gain on sale of investment in AK
Steel stock - - - 25.9 1.3
Sundry other - net (1.6) (11.7) (12.3) (12.7) (12.9)
Provision for income taxes (0.4) (0.3) (0.9) (0.6) (0.2)
- ------------------------------------------------------------------------------
Income (loss) from continuing operations 6.9 (8.4) (2.1) 33.1 0.9
Discontinued operation -
Equity in income of National-Oilwell - - 2.0 2.8 1.5
- ------------------------------------------------------------------------------
Net income (loss) $ 6.9 $ (8.4) $ (0.1) $ 35.9 $ 2.4
==============================================================================
<FN>
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
-11-
<PAGE>13
Part II. Other Information
Item 1. Legal Proceedings
-----------------
There are various claims pending against Armco and its subsidiaries
involving product liability, patent, reinsurance and insurance arrangements,
environmental, antitrust, employee benefits and other matters arising out of
the conduct of the business of Armco as previously described in Armco's
Annual Report on Form 10-K for the year ended December 31, 1995 (the Form
10-K).
In the Cornerstones Litigation, as previously described in the Form 10-K, on
-----------------------
April 10, 1996, an amended summary judgment order was entered by the
District Court in the severed Kingsbridge action clarifying that summary
-----------
judgment had been granted in favor of Armco and against only the claims of
the Kingsbridge Municipal Utility District (Kingsbridge) and John
Kepplinger, individually. A motion for class certification is pending
before the court with respect to the claims of the remaining homeowners in
the Kingsbridge.
The total liability on the forgoing claim and those other claims described
under ITEM 3. LEGAL PROCEEDINGS in the Form 10-K is not determinable; but,
in the opinion of management, the ultimate liability resulting will not
materially affect the consolidated financial condition or liquidity of Armco
and its subsidiaries; however it is possible that due to fluctuations in
Armco's results, future developments with respect to changes in the ultimate
liability could have a material effect on future interim or annual results
of operations.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Annual Meeting of Shareholders was held on April 26, 1996, and all eight
nominees to the Board of Directors named in Armco's Proxy Statement were
elected. Approximately 86% of the outstanding common, $2.10 Cumulative
Convertible Preferred and $3.625 Cumulative Convertible Preferred shares
were voted. The vote on the election was as follows:
<TABLE>
<CAPTION>
Name For Withheld
- ---- --- --------
<S> <C> <C>
John J. Burns, Jr. 89,553,741 5,806,716
Paula H.J. Cholmondeley 93,199,898 2,160,559
David A. Duke 93,449,744 1,910,713
John C. Haley 93,364,074 1,996,383
Bruce E. Robbins 93,429,759 1,930,698
Burnell R. Roberts 93,376,789 1,983,668
John D. Turner 93,530,527 1,829,930
James F. Will 93,376,043 1,984,414
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
A. The following is an index of the exhibits included in the Form 10-Q:
Exhibit 3.1 Certificate of Amendment to Amended Articles of
Incorporation of Armco.
Exhibit 3.2 Amended Articles of Incorporation of Armco, as amended as
of April 4, 1996.
Exhibit 11 Computation of Income (Loss) Per Common Share
-12-
<PAGE>14
B. The following Reports on Form 8-K were filed by Armco since December
31, 1995.
<TABLE>
Report Date Description
------------ -----------
<S> <S>
January 16, 1996 Reporting that Armco sold its
partnership interest in National-
Oilwell, a joint venture engaged in
the oil and gas service business that
was equally owned by subsidiaries of
Armco and USX Corporation.
February 23, 1996 Reporting that Armco adopted a
Stockholder Rights Plan and declared a
dividend distribution of one preferred
stock purchase right for each
outstanding share of common stock of
Armco to stockholders of record at
the close of business on June 26,
1996.
</TABLE>
-13-
<PAGE>15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on behalf of the registrant by the following duly
authorized persons.
Armco Inc.
-----------------------------
(Registrant)
Date May 1, 1996 /s/ David G. Harmer
--------------- -----------------------------
David G. Harmer
Corporate Vice President and Chief
Financial Officer
Date May 1, 1996 /s/ Peter G. Leemputte
--------------- -----------------------------
Peter G. Leemputte
Corporate Vice President and Controller
-14-
<PAGE>
Exhibit 3.1
CERTIFICATE OF AMENDMENT
BY DIRECTORS
OF
ARMCO INC.
The undersigned, James F. Will, Chairman of the Board, Chief Executive
Officer and President and Gary R. Hildreth, Secretary of Armco Inc., an Ohio
corporation (the "Corporation"), DO HEREBY CERTIFY for and on behalf of the
Corporation as follows:
A. The following resolution to amended the Corporation's articles was
adopted by the Board of Directors of the Corporation, pursuant to Section
1701.70(B) (3), at a meeting of such Board of Directors duly called and held
on February 23, 1996, at which a quorum was present, to reduce the authorized
number of shares of the Corporation's Class A Preferred Stock by the number
thereof theretofore redeemed or otherwise acquired by the Corporation, as
provided in the terms of such class, and correspondingly to reduce the stated
maximum number of shares authorized:
RESOLVED, that the Amended Articles of Incorporation of the Corporation,
as heretofore amended, be further amended as follows:
Subdivision C.1. of Section 2 of Article Fourth of the Amended Articles
of Incorporation, as heretofore amended, be further amended to reduce the
stated number of shares of the series of Class A Preferred Stock of the
Corporation designated as "$2.10 Cumulative Convertible Preferred Stock" to
1,697,256 to reflect the reduction provided by the terms of the Class A
Preferred Stock, of all series, upon redemption, purchase or conversion of
issued shares of such class, and to correct such number to correspond to the
reductions in the numbers of authorized shares of the Class A Preferred Stock
and stated maximum number of shares authorized effected by the Certificate of
Amendment of the Articles of Incorporation filed May 12, 1993.
Subdivision C.1. of Section 2 of Article Fourth of the Amended Articles
of Incorporation, as heretofore amended, be further amended to reduce the
stated number of shares of the series of Class A Preferred Stock of the
Corporation designated as "$2.10 Cumulative Convertible Preferred Stock" to
1,697,231, with corresponding reductions in the stated authorized number of
shares of Class A Preferred Stock of the Corporation to 6,697,231 and in the
stated maximum number of shares authorized to 161,697,231, in each case to
reflect the reduction provided by the terms of the Class A Preferred Stock
upon redemption, purchase or conversion of issued shares of such class.
B. The following resolution to amended the Corporation's articles was
adopted by the Board of Directors of the Corporation, pursuant to Section
1701.70(B) (3), at a meeting of such Board of Directors duly called and held
on February 23, 1996, at which a quorum was present, to increase by 100,000
shares the number of shares designated as shares of the Participating
Preferred Stock series of the Corporation's Class A Preferred Stock:
FURTHER RESOLVED, that Article Fourth, Section 2, Subdivision D.1. of the
Corporation's Amended Articles of Incorporation be amended and restated to
increase the number of authorized shares of the series from 650,000 to 750,000
and to read as follows:
"1. Creation of Series. There is hereby created a series of
------------------
Class A Preferred Stock, without par value, consisting of Seven
Hundred and Fifty Thousand (750,000) shares of the authorized and
unissued shares of Class A Preferred Stock, which series shall be
designated 'Participating Preferred Stock' (hereinafter called
'Participating Preferred Stock')."
C. The following resolution to amended the Corporation's articles was
adopted by the Board of Directors of the Corporation at a meeting of such
Board of Directors duly called and held on February 23, 1996, at which a
quorum was present to consolidate the previously existing Amended Articles of
Incorporation of the Corporation:
RESOLVED, that the Amended Articles of Incorporation, in the
form submitted to this meeting, are hereby adopted to consolidate the
previously existing Amended Articles of Incorporation and the
amendments thereto adopted by the Board of Directors on February 23,
1996, which shall thereafter supersede and take the place of the
previously existing Amended Articles of Incorporation.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and
do affirm the foregoing as true under the penalties of perjury this 28th day
of March, 1996.
/s/ James F. Will
-----------------------------------------
James F. Will
Chairman of the Board, Chief Executive
Officer and President
/s/ Gary R. Hildreth
-----------------------------------------
Gary R. Hildreth
Secretary
<PAGE>
Exhibit 3.2
ARMCO INC.
AMENDED ARTICLES OF INCORPORATION
First: The name of the Corporation is Armco Inc.
Second: The principal office of the Corporation is located at Middletown,
Butler County, Ohio.
Third: The purposes for which the Corporation is formed are: (a) to
manufacture, fabricate, mine, process, develop, produce, construct, install,
purchase or otherwise acquire, use, sell, exchange, transport, distribute,
refine, lease as lessor or as lessee, deal in and with, and render services
with respect to, any and all kinds of equipment, machinery, engines, tools,
fixtures, vehicles, aircraft, vessels, apparatus, minerals, metals, plastics,
composites, raw and other materials, natural resources and any other articles,
products, goods, wares, merchandise and other property of any kind whatsoever;
(b) to purchase or otherwise acquire, own, improve, develop, operate, manage,
use, sell, lease as lessor or as lessee, encumber and deal in and with, real
estate, buildings, structures, and interests therein; (c) to purchase or
otherwise acquire, own, hold, sell, pledge, exchange, guarantee, and deal in
and with personal property, shares of stock, bonds, notes, debentures,
warrants, mortgages, and securities and obligations of whatever nature; (d) to
carry on, or participate in either directly or indirectly, any kind of
industrial, commercial, financial, or mercantile enterprise in the United
States or elsewhere, and (e) to carry on any activity and transact any and all
business incidental to the foregoing.
Fourth: Section 1. The maximum number of shares which the Corporation is
authorized to have outstanding is one hundred sixty-one million, six hundred
ninety-seven thousand, two hundred thirty-one (161,697,231) shares, which
shall be classified and bear designations as follows: six million, six
hundred ninety-seven thousand two hundred thirty-one (6,697,231) shares,
without par value, shall be designated as Class A Preferred Stock, five
million (5,000,000) shares, having a par value of one dollar ($1.00) each,
shall be designated as Class B Preferred Stock, and one hundred fifty million
(150,000,000) shares having a par value of one cent ($.01) each, shall be
designated as Common Stock.
Section 2. The express terms and provisions of the shares of Class A
Preferred Stock are as follows:
Subdivision A. Issuance In Series and Limitations As To Variations
Between Series.
The Class A Preferred Stock may be issued from time to time in series.
Except as hereinafter provided, Class A Preferred Stock of all series shall
rank equally and be identical in all respects. All shares of any one series
shall be alike in every particular.
Subject to the limitations and restrictions set forth in this Article
Fourth, the Board of Directors is authorized and empowered at one time or from
time to time:
(1) To create one or more series of Class A Preferred Stock and to
authorize the issuance of Class A Preferred Stock in such series, and to fix
or alter, in respect of any particular series, the following express terms and
provisions of any authorized and unissued shares of Class A Preferred Stock
(whether or not such shares shall have been previously designated as shares of
a particular series):
(a) The designation of the series;
(b) The number of shares of the series, which number may at any time
or from time to time be increased or decreased by the Board of Directors,
notwithstanding that shares of the series may be outstanding at the time of
such increase or decrease, unless the Board of Directors shall have otherwise
provided in creating such series;
(c) The dividend rate;
(d) The dates at which dividends, if declared, shall be payable, and
the dates, if any, from which they shall be cumulative;
(e) The liquidation price;
(f) The redemption rights and price;
(g) The sinking fund requirements, if any;
(h) The conversion rights, if any, and
(i) The restrictions, if any, on the issuance of shares of any class
or series;
1
<PAGE>
(2) To adopt such amendment or amendments to the Amended Articles of
Incorporation as may be required or permitted by law to accomplish the
foregoing purposes.
Subdivision B. General Provisions Applicable To All Series.
The following general provisions shall apply to all Class A Preferred
Stock of the Corporation, irrespective of series.
1. Dividends. The holders of Class A Preferred Stock of each series
shall be entitled to receive, when and as declared by the Board of Directors,
dividends in cash at the annual rate fixed with respect to such series in
accordance with Subdivision A(1) of the Section 2. In case Class A Preferred
Stock of more than one series is outstanding, the Corporation, in making any
dividend payment upon the Class A Preferred Stock, shall (except in redeeming
shares of Class A Preferred Stock through the operation of any sinking fund
that may be established for the benefit of any series of Class A Preferred
Stock) make dividend payments ratably upon all outstanding shares of Class A
Preferred Stock of all series in proportion to the amount of dividends accrued
thereon and unpaid to the date of such dividend payment. Dividends in respect
of the shares of any series shall commence to accrue from the date on which
they shall have been declared to be payable and, in the case of cumulative
dividends, from the date as of which they accumulate pursuant to the terms and
provisions pertaining to the particular series. Accumulations of dividends
shall not bear interest.
2. Restrictions on Payment of Dividends upon Stock Junior to the Class A
Preferred Stock. So long as any Class A Preferred Stock shall be outstanding,
the Corporation shall not declare or pay any dividend or make any distribution
on, or purchase, or cause to be purchased, or redeem, any stock ranking
junior to the Class A Preferred Stock, nor shall any money be paid or set
aside or made available for a purchase fund or sinking fund for the purchase
or redemption of any shares of such junior stock unless
(i) accrued dividends for all past dividend periods on all
outstanding shares of Class A Preferred Stock of all series having cumulative
dividends shall have been paid and the dividend on all outstanding shares of
Class A Preferred Stock of all such series for the then current quarterly
dividend period shall have been paid or declared and provided for;
(ii) the Corporation shall have made all payments then due under the
requirements of all purchase funds and sinking funds (if any) for the Class A
Preferred Stock of all series for the then current fiscal year and shall have
set up suitable reserves for all payments not then due but then determined and
to become due during the current fiscal year, under the requirements of all
such purchase funds and sinking funds, and all defaults, if any, in complying
with any such purchase fund and sinking fund requirements in respect of
previous fiscal years shall have been made good; and
(iii) the net assets of the Corporation shall not thereby be reduced
below the aggregate preferential amounts to which the then outstanding shares
of Class A Preferred Stock would be entitled upon the involuntary liquidation,
dissolution or winding up of the Corporation.
3. Dissolution, Liquidation and Winding Up. Upon any dissolution,
liquidation or winding up of the Corporation, before any distribution or
payment is made to the holders of any class of stock ranking junior to the
Class A Preferred Stock, the holders of Class A Preferred Stock of each series
shall be entitled to be paid in cash the amount fixed in accordance with the
provisions of Subdivision A(1) of this Section 2 with respect to such series.
If the net assets of the Corporation shall be insufficient to permit the
payment to holders of all outstanding shares of Class A Preferred Stock of all
series of the full amounts to which they are respectively entitled, the entire
net assets of the Corporation shall be distributed ratably to the holders of
all outstanding shares of Preferred Stock of all series in proportion to the
amounts to which they are respectively entitled. After payment to holders of
Class A Preferred Stock of the full preferential amounts aforesaid, the
holders of Class A Preferred Stock as such shall have no right or claim to any
of the remaining assets of the Corporation, which remaining assets shall be
distributed among the holders of shares ranking junior to the Class A
Preferred Stock in accordance with their respective rights thereto. The sale,
lease or conveyance of all the property and assets of the Corporation to, or
the merger or consolidation of the Corporation into or with, any other
corporation shall not be deemed to be a liquidation, dissolution or winding up
of the Corporation for the purposes of this paragraph.
4. Redemption. At the option of, and to the extent fixed by, the Board
of Directors with respect to any series, the Corporation may redeem at any
time, or from time to time, any series of Class A Preferred Stock, or any part
of any series, at the redemption price fixed with respect to such series in
accordance with Subdivision A(1) of this Section 2; provided that, not less
than thirty days previous to the date fixed for any such redemption, a notice
of the time and place thereof shall be given to the holders of record of the
shares of Class A Preferred Stock so to be redeemed by mailing a copy of such
notice to such holders at their respective addresses as the same appear on the
books of the Corporation and, if the Board of Directors shall so determine, by
publication of notice in such manner as may be prescribed by resolution of the
Board of Directors. In case of redemption of less than all of the outstanding
Class A Preferred Stock of any one series, the redemption shall be made pro
rata or the shares to be redeemed shall be chosen by lot in such manner as may
be prescribed by resolution of the Board of Directors. At any time after
notice of redemption has been given in the manner herein prescribed, the
Corporation may deposit the amount of the aggregate redemption price with any
bank or trust company
2
<PAGE>
having capital and surplus of at least $5,000,000, named in such notice, in
trust for the holders of the shares so to be redeemed, payable on the date
fixed for redemption to the respective orders of such holders upon endorsement
of the Corporation or otherwise as may be required and surrender of the
certificates for such shares. Upon deposit of the aggregate redemption price,
as aforesaid, or, if no such deposit is made, upon said redemption date
(unless the Corporation shall default in making payment of the redemption
price as set forth in said notice) such holders shall cease to be stockholders
with respect to said shares and shall be entitled only to receive the
redemption price on or after the date fixed for redemption, without interest
thereon, upon endorsement, if required, and surrender of the certificates for
such shares; provided, however, that no such deposit in trust shall be deemed
to terminate, prior to the expiration of the redemption date, any conversion
or exchange rights to which any such holder may be entitled. Any funds so
deposited by the Corporation and unclaimed at the end of six years from the
date fixed for such redemption shall be repaid by such bank or trust company
to the Corporation upon its request, after which repayment the holders of such
shares so called for redemption shall look only to the Corporation for payment
of the redemption price thereof. Any funds so deposited which shall not be
required for such redemption because of the exercise subsequent to the date of
such deposit of any right of conversion or exchange, shall be returned to the
Corporation forthwith. Any interest accrued on any funds so deposited shall
belong to the Corporation and shall be paid to it from time to time.
If at any time the Corporation shall have failed to pay accrued dividends
in full on Class A Preferred Stock of any one or more series, thereafter and
until such dividends in full on Class A Preferred Stock of every series shall
have been paid or declared and set apart for payment, the Corporation shall
not redeem Class A Preferred Stock except as a whole or, directly or
indirectly, purchase any Class A Preferred Stock. Subject to the foregoing,
any Class A Preferred Stock may be purchased by the Corporation.
5. Action Requiring Approval of Class A Preferred Stock. The
Corporation shall not, without the affirmative vote of the holders of a
majority of the outstanding Class A Preferred Stock as a class, increase the
authorized number of shares of Class A Preferred Stock or create any class of
shares which rank equally with or prior to the Class A Preferred Stock.
6. Voting Rights. The holders of Preferred Stock shall be entitled at
all times to one vote for each share of Class A Preferred Stock held by them
respectively.
7. Preemptive Right. No holder of Class A Preferred Stock of any series
shall, as such holder, have any preemptive right in, or preemptive right to
subscribe to, any additional Class A Preferred Stock of any series or any
shares of any other class of stock, or any bonds, debentures or other
securities convertible into or exchangeable for shares of stock of any class
or series.
8. Prohibitions Against Reissue or Resale. Class A Preferred Stock
which shall have been purchased or redeemed through the operation of any
purchase or sinking fund or applied to any purchase or sinking fund
installment shall not be applied to any subsequent purchase or sinking fund
installment. Class A Preferred Stock which shall have been purchased, redeemed
or otherwise acquired by the Corporation shall be deemed retired and shall not
be reissued or resold.
In case Class A Preferred Stock of any series shall be convertible into
or exchangeable for stock of any other series or class or other securities,
shares of Class A Preferred Stock of such series which shall have been so
converted or exchanged shall be deemed retired and shall not be reissued or
resold.
9. Rights Upon Default in Payment of Dividends. If the Corporation
shall have failed to pay, or declare and set apart for payment, when due,
dividends on all outstanding shares of Class A Preferred Stock in an amount
equal to six quarterly dividends upon such shares, the number of Directors of
the Corporation shall be increased by two at the first annual meeting of the
shareholders of the Corporation held thereafter, and at such meeting and at
each subsequent annual meeting until dividends payable for all past quarterly
dividend periods on all outstanding shares of Class A Preferred Stock shall
have been paid, or declared and set apart for payment, in full, the holders of
the shares of Class A Preferred Stock shall have the right, voting as a class,
to elect such two additional members of the Board of Directors to hold office
until the annual meeting of shareholders held next after their election and
the election and qualification of their successors or until such payment, or
such declaration and setting apart for payment, in full, whichever period is
shorter; provided, that during any period of time in which the holders of
shares of Class A Preferred Stock shall have the right to elect two Directors
of the Corporation as set forth in this paragraph 9, the voting right
conferred upon the holders of Class A Preferred Stock by paragraph 6,
Subdivision B of this Section 2 shall be suspended with respect to the
election of Directors, but shall otherwise continue in effect. Upon such
payment, or such declaration and setting apart for payment, in full, the terms
of the two additional Directors so elected shall forthwith terminate, and the
number of Directors of the Corporation shall be reduced by two and the right
of the holders of shares of Class A Preferred Stock to vote pursuant to this
paragraph 9 shall cease, subject to increase in the number of Directors as
aforesaid and to revesting of such voting right in the event of each and every
additional failure in the payment of dividends in an amount equal to six
quarterly dividends as aforesaid.
10. Stock Ranking Junior to Class A Preferred Stock. For the purpose of
this Section 2 and Article Fourth, whenever reference is made herein to stock
or shares "ranking junior to the Class A Preferred Stock" such reference shall
mean and include the Common Stock and any other authorized class of stock in
respect of which the rights of the holders as
3
<PAGE>
to the payment of dividends and as to distributions in the event of
dissolution, liquidation or winding up of the Corporation are subordinate to
the rights of the holders of the Class A Preferred Stock.
11. Amendments Materially Altering Provisions of Outstanding Class A
Preferred Stock. The Corporation shall not adopt, without the affirmative
vote of holders of two-thirds of the outstanding shares of Class A Preferred
Stock, as a class, any amendment to the Articles of Incorporation which
materially alters any existing provision of the outstanding Class A Preferred
Stock of the Corporation.
Subdivision C. Provisions Applicable To $2.10 Cumulative Convertible
Preferred Stock.
1. Creation of Series. There is hereby created a series of Class A
Preferred Stock without par value consisting of one million, six hundred
ninety-seven thousand two hundred thirty-one (1,697,231) shares of the
authorized and unissued shares of Class A Preferred Stock, which series shall
be designated "$2.10 Cumulative Convertible Preferred Stock" (hereinafter
called "$2.10 Preferred Stock").
2. Future Increase or Decrease. The number of shares of said series may
at any time or from time to time be increased or decreased by the Board of
Directors notwithstanding that shares of such series may be outstanding at
such time of increase or decrease.
3. Dividend Rate. The Dividend Rate of the $2.10 Preferred Stock shall
be $2.10 per share per annum and no more, payable in cash quarterly in equal
installments on the last day of each March, June, September and December,
commencing March 31, 1970 except that the dividend payable on March 31, 1970
shall be in an amount representing the cumulative dividend from the date of
the merger referred to in the next sentence. Such dividends shall be
cumulative, whether or not earned, from the effective date of the merger of
Advanced Composite Materials Corporation, a California corporation, into
HITCO, a California corporation, pursuant to an Agreement of Merger dated as
of September 29, 1969, (i) in the case of shares of $2.10 Preferred Stock
which became outstanding on the effective date of such merger in exchange for
shares of Series A Preferred Stock and Common Stock of HITCO then outstanding
pursuant to said Agreement of Merger and (ii) in the case of shares of $2.10
Preferred Stock issued after the effective date of such merger and on or
before the record date for the determination of holders of $2.10 Preferred
Stock entitled to receive the first dividend paid after the effective date of
such merger. In the case of all other shares of $2.10 Preferred Stock, such
dividends shall be cumulative, whether or not earned, from the quarterly
dividend payment date next preceding the date of issue of each such share;
provided that (i) if the date of issue is a quarterly dividend payment date or
a date between the record date for the determination of holders of $2.10
Preferred Stock entitled to receive a quarterly dividend and the payment date
for such quarterly dividend, such dividends shall be cumulative from such
quarterly dividend payment date, and (ii) if any shares of $2.10 Preferred
Stock are issued at a time when cumulative dividends are in arrears on
previously issued shares of $2.10 Preferred Stock, dividends on such newly
issued shares shall be cumulative and shall accrue in an amount equal to the
dividends accrued and unpaid on such previously issued shares of $2.10
Preferred Stock.
4. Dissolution, Liquidation and Winding Up. The amount which the
holders of the $2.10 Preferred Stock shall be entitled to be paid in the event
of any dissolution, liquidation or winding up of the Corporation shall be, if
such dissolution, liquidation or winding up shall be involuntary, Fifteen
Dollars ($15.00) per share plus an amount equal to all dividends thereon
accrued and unpaid computed to the date on which payment thereof is made
available, whether or not earned or declared, and, if such dissolution,
liquidation or winding up shall be voluntary, an amount equal to the
redemption price specified in paragraph 5 hereof.
5. Redemption. There shall be no right or power in the Corporation
prior to January 1, 1975 to redeem the whole or any part of the $2.10
Preferred Stock. Thereafter, the Corporation, at its option to be exercised by
the Board of Directors, may redeem at any time or from time to time, the whole
or any part of the $2.10 Preferred Stock. The redemption price of the $2.10
Preferred Stock shall be Forty Dollars ($40.00) per share, plus an amount
equal to all dividends thereon accrued and unpaid to the date fixed by the
Board of Directors as the redemption date. Notice of every redemption shall
state the redemption date, the redemption price and the place of payment
thereof, the then current conversion rate and the date the conversion right
terminates. The shares of $2.10 Preferred Stock shall not be entitled to the
benefit of any sinking fund to be applied to the purchase or redemption of the
$2.10 Preferred Stock.
6. Conversion Rights. (i) The shares of $2.10 Preferred Stock shall be
convertible at the option of the respective holders thereof at any time after
the date of issue into shares of Common Stock of the Corporation (as such
shares may be constituted on the Conversion Date as hereinafter defined) at
the rate of one and twenty-seven hundredths (1.27) of a share of Common Stock
for each share of $2.10 Preferred Stock, subject to adjustment as provided
herein; provided that, as to any shares of $2.10 Preferred Stock which shall
have been called for redemption, the conversion right shall terminate at the
close of business on the business day prior to the date fixed for redemption
unless default shall be made in the payment of the redemption price plus
accrued and unpaid dividends.
(ii) The holder of a share or shares of $2.10 Preferred Stock may
exercise the conversion rights as to any thereof by delivering to the
Corporation during regular business hours, at the office of any transfer agent
of the Corporation for the $2.10 Preferred Stock or at such other place as may
be designated by the Corporation, the certificate or certificates for the
shares to be converted, duly endorsed or assigned in blank or to the
Corporation (if required by it), accompanied by
4
<PAGE>
written notice stating that the holder elects to convert such shares and
stating the name or names (with address) in which the certificate or
certificates for Common Stock are to be issued. Conversion shall be deemed to
have been effected on the date when such certificate or certificates have been
so received by the Corporation or its transfer agent, and such date is
referred to herein as the "Conversion Date". As promptly as practicable
thereafter, the Corporation shall issue and deliver to or upon the written
order of such holder, a certificate or certificates for the number of full
shares of Common Stock to which he is entitled and a check, cash, scrip
certificate or other adjustment, at the election of the Corporation, in
respect of any fraction of a share as provided in subparagraph (iv) below. The
person in whose name the certificate or certificates for Common Stock are to
be issued shall be deemed to have become a holder of Common Stock of record on
the Conversion Date unless the transfer books of the Corporation are closed on
that date, in which event he shall be deemed to have become a holder of Common
Stock of record on the next succeeding date on which the transfer books are
open, but the conversion rate shall be that in effect on the Conversion Date.
(iii) No payment or adjustment shall be made for dividends accrued
but unpaid (even though the record date, but not the payment date, with
respect thereto shall have preceded the Conversion Date) on any shares of
$2.10 Preferred Stock converted (or for dividends on any shares of Common
Stock issuable on conversion), but until all dividends accrued and unpaid on
such $2.10 Preferred Stock up to the quarterly dividend payment date next
preceding the Conversion Date shall have been paid to the converting holder or
to his assigns, or declared and set apart for such payment, in full, no
dividend shall be paid or set apart for payment or declared on the Common
Stock or on any other class of stock of the Corporation ranking as to
dividends subordinate to the $2.10 Preferred Stock and no payment shall be
made with respect to any purchase or acquisition of, or to any sinking fund
with respect to, any class of stock of the Corporation ranking as to dividends
or distribution of assets on a parity with or subordinate to the $2.10
Preferred Stock.
(iv) The Corporation shall not be required to issue any fraction of a
share upon conversion of any share or shares of $2.10 Preferred Stock. If more
than one share of $2.10 Preferred Stock shall be surrendered for conversion at
one time by the same holder, the number of full shares of Common Stock
issuable upon conversion thereof shall be computed on the basis of the total
number of shares of $2.10 Preferred Stock so surrendered. If any fractional
interest in a share of Common Stock would be deliverable upon conversion, the
Corporation shall make an adjustment therefor in cash unless its Board of
Directors shall have determined to adjust fractional interests by issuance of
scrip certificates or in some other manner. Adjustment in cash shall be made
on the basis of the current market value of one share of Common Stock, which
shall be taken to be the last reported sale price of the Corporation's Common
Stock on the New York Stock Exchange on the last business day before the
Conversion Date, or, if there was no reported sale on that day, the mean
between the closing bid and asked quotations on that Exchange on that day or,
if the Common Stock was not then listed on that Exchange, the mean between the
lowest bid and the highest asked quotations in the over-the-counter market on
that day.
(v) The issuance of Common Stock on conversion of $2.10 Preferred
Stock shall be without charge to the converting holder of $2.10 Preferred
Stock for any fee, expense or tax in respect of the issuance thereof, but the
Corporation shall not be required to pay any fee, expense or tax which may be
payable in respect of any transfer involved in the issuance and delivery of
shares in any name other than that of the holder of record on the books of the
Corporation of the shares of $2.10 Preferred Stock converted, and the
Corporation shall not, in any such case, be required to issue or deliver any
certificate for shares of Common Stock unless and until the person requesting
the issuance thereof shall have paid to the Corporation the amount of such
fee, expense or tax or shall have established to the satisfaction of the
Corporation that such fee, expense or tax has been paid.
(vi) The conversion rate provided in subparagraph (i) shall be
subject to the following adjustments, which shall be made to the nearest one-
hundredth of a share of Common Stock or, if none, to the next lower one-
hundredth:
(A) if the Corporation shall pay to the holders of its Common Stock a
dividend in shares of Common Stock or in securities convertible into Common
Stock, the conversion rate in effect immediately prior to the record date
fixed for the determination of the holders of Common Stock entitled to such
dividend shall be proportionately increased, effective immediately following
such record date;
(B) if the Corporation shall split the outstanding shares of its
Common Stock into a greater number of shares or combine the outstanding shares
into a smaller number, the conversion rate in effect immediately prior to such
action shall be proportionately increased in the case of a split or decreased
in the case of a combination, effective immediately following such action;
(C) if the Corporation shall issue to the holders of its Common
Stock, as a class, rights or warrants to subscribe for or purchase shares of
its Common Stock at a price less than the Current Market Price (as defined
below in this subparagraph) of the Corporation's Common Stock at the record
date fixed for the determination of the holders of Common Stock entitled to
such rights or warrants, the conversion rate in effect immediately prior to
said record date shall be increased, effective immediately following such
record date, to an amount determined by multiplying such conversion rate by a
fraction the numerator of which is the number of shares of Common Stock of the
Corporation outstanding immediately prior to said record date plus the number
of additional shares of its Common Stock offered for subscription or purchase
and the denominator of which is said number of shares outstanding immediately
prior to said record date plus the number of shares of Common Stock of the
Corporation which the aggregate subscription or purchase price of the total
number of shares so offered would purchase at the
5
<PAGE>
Current Market Price of the Corporation's Common Stock at said record date; as
used in this subparagraph (vi)(C) the term "Current Market Price" at said
record date shall mean the average of the daily last reported sales prices per
share of the Corporation's Common Stock on the New York Stock Exchange during
the twenty (20) consecutive full business days commencing with the
thirtieth (30th) full business day before said record date, provided that if
there was no reported sale on any such day or days there shall be substituted
the mean between the closing bid and asked quotations on that Exchange on that
day, and provided further that if the Common Stock was not listed on that
Exchange on any such day or days there shall be substituted the mean between
the lowest bid and the highest asked quotations in the over-the-counter market
on that day;
(D) if the Corporation shall distribute to the holders of its Common
Stock any evidences of its indebtedness, or any rights or warrants to
subscribe for any security other than its Common Stock, or any other assets
(excluding dividends and distributions in cash to the extent permitted by
law), the conversion rate in effect immediately prior to the record date fixed
for the determination of the holders of Common Stock entitled to such
distribution shall be increased, immediately following such record date, to an
amount determined by multiplying such conversion rate by a fraction the
numerator of which is the Current Market Price per share (as defined in
subparagraph (vi) (C) above) of the Corporation's Common Stock at said record
date and the denominator of which is such Current Market Price per share less
the fair market value (as determined by the Board of Directors, whose
determination, in the absence of fraud, shall be conclusive) of the amount of
evidences of indebtedness, rights or warrants, or other assets (excluding cash
dividends and distributions as aforesaid) so distributed which is applicable
to one share of Common Stock. Notwithstanding the preceding sentence, if such
fair market value of the amount of evidences of indebtedness, rights or
warrants or such other assets in the case of a particular distribution is less
than One Dollar ($1.00), the increase in the conversion rate shall be
postponed and the amount of such fair market value shall be carried forward
and applied as provided herein below. Whenever the amounts of fair market
value so being carried forward plus any similar amount determined in
connection with a particular distribution aggregate One Dollar ($1.00) or
more, the conversion rate in effect immediately prior to the record date fixed
for the determination of holders of Common Stock entitled to such particular
distribution shall be increased, effective immediately following such record
date, by the aggregate of the increases in the conversion rate which were so
postponed plus the increase resulting from such particular distribution. If
the Corporation shall pay to the holders of its Common Stock a dividend in
shares of Common Stock or if it shall split or combine the outstanding shares
of its Common Stock, the amount of One Dollar ($1.00) referred to in this
subparagraph (vi)(D) (as theretofore increased or decreased) shall forthwith
be proportionately decreased in the case of a stock dividend or split or
increased in the case of a combination, so as appropriately to reflect the
same.
No adjustment of the conversion rate provided in subparagraph (i) shall
be made by reason of the issuance of Common Stock for cash except as provided
in subparagraph (vi)(D) or by reason of the issuance of Common Stock for
property or services. Whenever the conversion rate is adjusted pursuant to
this subparagraph (vi) the Corporation shall promptly place on file at the
office of each of its transfer agents for the $2.10 Preferred Stock a
statement signed by the President or a Vice President of the Corporation and
by its Treasurer or an Assistant Treasurer showing in detail the facts
requiring such adjustment and the conversion rate after such adjustment, and
shall cause such transfer agents to mail copies of such statements to the
holders of record of the $2.10 Preferred Stock.
(vii) In case of any reclassification or change of the outstanding
shares of Common Stock of the Corporation (except a split or combination of
shares) or in case of any consolidation or merger to which the Corporation is
a party (except a merger in which the Corporation is the surviving corporation
and which does not result in any reclassification of or change in the
outstanding Common Stock of the Corporation except a split or combination of
shares) or in case of any sale or conveyance to another corporation of all or
substantially all of the property of the Corporation, effective provision
shall be made by the Corporation or the successor or purchasing corporation
(a) that the holder of each share of $2.10 Preferred Stock then outstanding
shall thereafter have the right to convert such share into the kind and amount
of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock of the Corporation into which
such share of $2.10 Preferred Stock might have been converted immediately
prior thereto, and (b) that there shall be subsequent adjustments of the
conversion rate which shall be equivalent, as nearly as practicable, to the
adjustments provided for in subparagraph (vi) above. The Provisions of this
subparagraph (vii) shall similarly apply to successive reclassification,
changes, consolidations, mergers, sales or conveyances.
(viii) Shares of Common Stock issued on conversion of shares of $2.10
Preferred Stock shall be issued as fully paid shares and shall be
nonassessable by the Corporation. The Corporation shall at times reserve and
keep available, free from preemptive rights, for the purpose of effecting the
conversion of $2.10 Preferred Stock, such number of its duly authorized shares
of Common Stock as shall be sufficient to effect the conversion of all
outstanding shares of $2.10 Preferred Stock.
7. No Consents to Increase or Decrease in Outstanding Shares. No
consent of the holders of outstanding shares of $2.10 Preferred Stock at any
time outstanding shall be required in order to permit the Board of Directors
to increase the number of authorized shares of $2.10 Preferred Stock or to
decrease such number to a number not below the number of shares then
outstanding.
6
<PAGE>
Subdivision D. Provisions Applicable to Participating Preferred Stock.
1. Creation of Series. There is hereby created a series of Class A
Preferred Stock, without par value, consisting of seven hundred fifty thousand
(750,000) shares of the authorized and unissued shares of Class A Preferred
Stock, which series shall be designated "Participating Preferred Stock"
(hereinafter called "Participating Preferred Stock").
2. Future Increase or Decrease. Subject to paragraph 7 of this
Subdivision D, the number of shares of said series may at any time or from
time to time be increased or decreased by the Board of Directors
notwithstanding that shares of such series may be outstanding at such time of
increase or decrease.
3. Dividend Rate. (A) The holders of shares of Participating Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the last day of each March, June, September and December in
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Participating
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $75 or (b) subject to the provision for adjustment
hereinafter set forth, 200 times the aggregate per share amount of all cash
dividends, and 200 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since
the immediately preceding Quarterly Dividend Payment Date, or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Participating Preferred Stock. In the event
the Corporation shall at any time after June 27, 1986 (the "Rights Declaration
Date") (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the amount to which holders of shares of Participating Preferred Stock
were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) On or after the first issuance of any share or fractional share
of Participating Preferred Stock, no dividend on Common Stock shall be
declared unless concurrently therewith a dividend or distribution is declared
on the Participating Preferred Stock as provided in paragraph (A) above; and
the declaration of any such dividend on the Common Stock shall be expressly
conditioned upon payment or declaration of and provision for a dividend on the
Participating Preferred Stock as above provided. In the event no dividend or
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $75 per share on the Participating
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Participating Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares of Participating
Preferred Stock, unless the date of issue of such shares is prior to the
record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is
a date after the record date for the determination of holders of shares of
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. The Board
of Directors may fix a record date for the determination of holders of shares
of Participating Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
4. Dissolution, Liquidation and Winding Up.
(A) In the event of any voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Corporation (hereinafter
referred to as a "Liquidation"), the holders of Participating Preferred Stock
shall receive at least $7,000 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the
date of such payment, provided that the holders of shares of Participating
Preferred Stock shall be entitled to receive at least an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
200 times the aggregate amount to be distributed per share to holders of
Common Stock (the "Participating Preferred Liquidation Preference").
(B) In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding Common Stock
(by reclassification or otherwise than by payment of a dividend in Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount which holders of Participating Preferred Stock were
entitled immediately prior to such event pursuant to the proviso set forth in
paragraph (A) above, shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
7
<PAGE>
5. Redemption. The shares of Participating Preferred Stock shall not be
redeemable.
6. Conversion Rights. The Participating Preferred Stock is not
convertible into Common Stock or any other security of the Corporation.
7. No Consents to Increase or Decrease in Outstanding Shares. No
consent of the holders of outstanding shares of Participating Preferred Stock
at any time outstanding shall be required in order to permit the Board of
Directors to increase the number of authorized shares of Participating
Preferred Stock or to decrease such number to a number not below the sum of
the number of shares of Participating Preferred Stock then outstanding and the
number of shares with respect to which there are outstanding rights to
purchase.
Subdivision E. Provisions Applicable to $3.625 Cumulative Convertible
Preferred Stock
1. Creation of Series. There is hereby created a series of Class A
Preferred Stock, without par value consisting of Two Million Seven Hundred
Thousand (2,700,000) shares of the authorized and unissued shares of Class A
Preferred Stock, which series shall be designated "3.625 Cumulative
Convertible Preferred Stock" (hereinafter called "$3.625 Preferred Stock").
2. Future Increase or Decrease. The number of shares of $3.625
Preferred Stock may at any time or from time to time be increased or decreased
by the Board of Directors notwithstanding that shares of $3.625 Preferred
Stock may be outstanding at such time of increase or decrease.
3. Dividend Rate. The dividend rate of the $3.625 Preferred Stock shall
be $3.625 per share per annum and no more, payable in cash quarterly in equal
installments on the last day of each March, June, September and December,
commencing December 31, 1992. Dividends shall be cumulative, whether or not
earned, and shall accrue on each share of $3.625 Preferred Stock from the date
of issue thereof, except that dividends on shares of $3.625 Preferred Stock
issued after the first date of issue of any shares of $3.625 Preferred Stock
shall be cumulative, whether or not earned, and shall accrue on each such
share from the quarterly dividend payment date next preceding the date of
issue of each such share; provided that (i) if the date of issue is a
quarterly dividend payment date or a date between the record date for the
determination of holders of $3.625 Preferred Stock entitled to receive a
quarterly dividend and the payment date for such quarterly dividend, such
dividends shall be cumulative from such quarterly dividend payment date, and
(ii) if any shares of $3.625 Preferred Stock are issued at a time when
cumulative dividends are in arrears on previously issued shares of $3.625
Preferred Stock, dividends on such newly issued shares shall be cumulative and
shall accrue in an amount equal to the dividends accrued and unpaid on such
previously issued shares of $3.625 Preferred Stock. Dividends payable on
$3.625 Preferred Stock for any period less than a full quarter shall be
computed on the basis of a 360-day year.
4. Dissolution, Liquidation and Winding Up. The amount which the
holders of $3.625 Preferred Stock shall be entitled to be paid in the event of
any dissolution, liquidation or winding up of the Corporation (whether
voluntary or involuntary) shall be Fifty Dollars ($50.00) per share plus an
amount equal to all dividends thereon accrued and unpaid computed to the date
on which payment thereof is made available.
5. Redemption. Shares of $3.625 Preferred Stock may not be redeemed
prior October 15, 1995. Thereafter, the Corporation, at its option to be
exercised by the Board of Directors, may redeem shares of $3.625 Preferred
Stock, as a whole or in part, at any time or from time to time, at the
following redemption prices, plus in each case, accrued and unpaid dividends
thereon to the date fixed by the Board of Directors for redemption.
If redeemed during the twelve-month period commencing October 15,
<TABLE>
<CAPTION>
Amount
Per Share
---------
<S> <C>
1995 . . . . . . . . . . . . . . . . . . $52.5375
1996 . . . . . . . . . . . . . . . . . . $52.1750
1997 . . . . . . . . . . . . . . . . . . $51.8125
1998 . . . . . . . . . . . . . . . . . . $51.4500
1999 . . . . . . . . . . . . . . . . . . $51.0875
2000 . . . . . . . . . . . . . . . . . . $50.7250
2001 . . . . . . . . . . . . . . . . . . $50.3625
2002 and thereafter . . . . . . . . . . $50.00
</TABLE>
provided, that no shares of $3.625 Preferred Stock may be redeemed prior to
October 15, 1997 if the last reported sale price of the Common Stock on the
New York Stock Exchange (or, if there was no reported sale, the mean between
the closing bid and asked quotations on that Exchange or, if the Common Stock
was not then listed on that Exchange, the highest asked quotations in the
over-the-counter market) per share shall not have equaled or exceeded 150% of
the current conversion price (as defined below) for at least 20 trading days
of the 30 consecutive trading days ending not more than five trading days
before the giving of the notice of redemption provided for herein. For
purposes of this subparagraph and paragraph 6 of this
8
<PAGE>
Subdivision E, the "conversion price" shall be an amount determined by
dividing $50 by the then current conversation rate provided for in such
paragraph 6.
Notice of every redemption shall state the redemption date; the number of
shares of $3.625 Preferred Stock to be redeemed and, if less than all the
shares held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; the redemption price; the place or places where
certificates for such shares are to be surrendered for payment of the
redemption price; the then current conversion rate; and the date the
conversion right terminates. The shares of $3.625 Preferred Stock shall not be
entitled to the benefit of any sinking fund to be applied to the purchase or
redemption of $3.625 Preferred Stock.
6. Conversion Rights.
(i) The shares of $3.625 Preferred Stock shall be convertible at the
option of the respective holders thereof at any time after the date of issue
into shares of Common Stock of the Corporation (as such shares may be
constituted on the Conversion Date as hereinafter defined) at the rate of 6.78
shares of Common Stock for each share of $3.625 Preferred Stock, subject to
adjustment as provided herein; provided that, as to any shares of $3.625
Preferred Stock which shall have been called for redemption, the conversion
right shall terminate at the close of business on the fifth day preceding the
date fixed for redemption unless default shall be made in the payment of the
redemption price plus accrued and unpaid dividends.
(ii) The holder of a share or shares of $3.625 Preferred Stock may
exercise the conversion rights as to any thereof by delivering to the
Corporation during regular business hours, at the office of any transfer agent
of the Corporation for the $3.625 Preferred Stock or at such other place as
may be designated by the Corporation, the certificate or certificates for the
shares to be converted, duly endorsed or assigned in blank or to the
Corporation (if required by it), accompanied by written notice stating that
the holder elects to convert such shares and stating the name or names (with
address) in which the certificate or certificates for Common Stock are to be
issued. Conversion shall be deemed to have been effected on the date when
such certificate or certificates have been so received by the Corporation or
its transfer agent, and such date is referred to herein as the "Conversion
Date." As promptly as practicable thereafter, the Corporation shall issue and
deliver to or upon the written order of such holder, a certificate or
certificates for the number of full shares of Common Stock to which he is
entitled and a check, cash, scrip certificate or other adjustment, at the
election of the Corporation, in respect of any fraction of a share as provided
in subparagraph (iv) below. The person in whose name the certificate or
certificates for Common Stock are to be issued shall be deemed to have become
a holder of Common Stock of record on the Conversion Date unless the transfer
books of the Corporation are closed on that date, in which event he shall be
deemed to have become a holder of Common Stock of record on the next
succeeding date on which the transfer books are open, but the conversion rate
shall be that in effect on the Conversion Date.
(iii) No payment or adjustment shall be made for dividends accrued
but unpaid (even though the record date, but not the payment date, with
respect thereto shall have preceded the Conversion Date) on any shares of
$3.625 Preferred Stock converted (or for dividends on any shares of Common
Stock issuable on conversion), but until all dividends accrued and unpaid on
such shares of $3.625 Preferred Stock up to the quarterly dividend payment
date next preceding the Conversion Date shall have been paid to the converting
holder or to his assigns, or declared and set apart for such payment, in full,
no dividend shall be paid or set apart for payment or declared on the Common
Stock or on any other class of stock of the Corporation ranking as to
dividends junior to the $3.625 Preferred Stock and no payments shall be made
with respect to any purchase or acquisition of, or to any sinking fund with
respect to, any class of stock of the Corporation ranking as to dividends or
distribution of assets on a parity with or junior to the $3.625 Preferred
Stock.
(iv) The Corporation shall not be required to issue any fraction of a
share upon conversion of any share or shares of $3.625 Preferred Stock. If
more than one share of $3.625 Preferred Stock shall be surrendered for
conversion at one time by the same holder, the number of full shares of Common
Stock issuable upon conversion there of shall be computed on the basis of the
total number of shares of $3.625 Preferred Stock so surrendered. If any
fractional interest in a share of Common Stock would be deliverable upon
conversion, the Corporation shall make an adjustment therefor in cash unless
its Board of Directors shall have determined to adjust fractional interests by
issuance of scrip certificates or in some other manner. Adjustment in cash
shall be made on the basis of the current market value of one share of Common
Stock, which shall be taken to be the last reported sale price of the
Corporation's Common Stock on the New York Stock Exchange on the last business
day before the Conversion Date, or, if there was no reported sale on that day,
the mean between the closing bid and asked quotations on that Exchange on that
day or, if the Common Stock was not then listed on that Exchange, the mean
between the lowest bid and the highest asked quotations in the over-the-
counter market on that day.
(v) The issuance of Common Stock on conversion of $3.625 Preferred
Stock shall be without charge to the converting holder of $3.625 Preferred
Stock for any fee, expense or tax in respect of the issuance thereof, but the
Corporation shall not be required to pay any fee, expense or tax which may be
payable in respect of any transfer involved in the issuance and delivery of
shares in any name other than that of the holder of record on the books of the
Corporation of the shares of $3.625 Preferred Stock converted, and the
Corporation shall not, in any such case, be required to issue or deliver any
certificate for shares of Common Stock unless and until the person requesting
the issuance thereof shall have paid to the Corporation the amount of such
fee, expense or tax or shall have established to the satisfaction of the
Corporation that such fee, expense or tax has been paid.
9
<PAGE>
(vi) The conversion rate provided in subparagraph (i) shall be
subject to the following adjustments, which shall be made to the nearest one-
hundredth of a share of Common Stock or, if none, to the next lower one-
hundredth:
(A) if the Corporation shall pay to the holders of its Common Stock a
dividend in shares of Common Stock or in securities convertible into Common
Stock, the conversion rate in effect immediately prior to the record date
fixed for the determination of the holders of Common Stock entitled to such
dividend shall be proportionately increased, effective immediately following
such record date;
(B) if the Corporation shall split the outstanding shares of its
Common Stock into a greater number of shares or combine the outstanding shares
into a smaller number, the conversion rate in effect immediately prior to such
action shall be proportionately increased in the case of a split or decreased
in the case of a combination, effective immediately following such action;
(C) if the Corporation shall issue to the holders of its Common
Stock, as a class, rights or warrants to subscribe for or purchase shares of
its Common Stock at a price less than the Current Market Price (as defined
below in this subparagraph) of the Corporation's Common Stock at the record
date fixed for the determination of the holders of Common Stock entitled to
such rights or warrants, the conversion rate in effect immediately prior to
said record date shall be increased, effective immediately following such
record date, to an amount determined by multiplying such conversion rate by a
fraction the numerator of which is the number of shares of Common Stock of the
Corporation outstanding immediately prior to said record date plus the number
of additional shares of its Common Stock offered for subscription or purchase
and the denominator of which is said number of shares outstanding immediately
prior to said record date plus the number of shares of Common Stock of the
Corporation which the aggregate subscription or purchase price of the total
number of shares so offered would purchase at the Current Market Price of the
Corporation's Common Stock at said record; as used in this subparagraph
(vi)(C) the term "Current Market Price" of the Corporation's Common Stock at
said record date shall mean the average of the daily last reported sale prices
per share of the Corporation's Common Stock on the New York Stock Exchange
during the twenty (20) consecutive full business days commencing with the
thirtieth (30th) full business day before said record date, provided that if
there was no reported sale on any such day or days there shall be substituted
the mean between the closing bid and asked quotations on that Exchange on that
day, and provided further that if the Common Stock was not listed on that
Exchange on any such day or days there shall be substituted the mean between
the lowest bid and the highest asked quotations on the over-the-counter market
on that day;
(D) if the Corporation shall distribute to the holders of its Common
Stock any evidences of its indebtedness, or any rights or warrants to
subscribe for any security other than its Common Stock, or any other assets
(excluding dividends and distributions in cash to the extent permitted by
law), the conversion rate in effect immediately prior to the record date fixed
for the determination of the holders of Common Stock entitled to such
distribution shall be increased, immediately following such record date, to an
amount determined by multiplying such conversion rate by a fraction the
numerator of which is the Current Market Price per share (as defined in
subparagraph (vi)(C) above) of the Corporation's Common Stock at said record
date and the denominator of which is such Current Market Price per share less
the fair market value (as determined by the Board of Directors, whose
determination, in the absence of fraud, shall be conclusive) of the amount of
evidences of indebtedness, rights or warrants, or other assets (excluding cash
dividends and distributions as aforesaid) so distributed which is applicable
to one share of Common Stock.
No adjustment of the conversion rate shall be made unless the adjustment
would require a change of at least 1% in the conversion price, but any such
adjustment shall be carried forward and taken into account in a subsequent
adjustment, if any.
Whenever the conversion rate is adjusted pursuant to this subparagraph
(vi) the Corporation shall promptly place on file at the office of each of its
transfer agents for the $3.625 Preferred Stock a statement signed by the
President or a Vice President of the Corporation and by its Treasurer or an
Assistant Treasurer showing in detail the facts requiring such adjustment and
the conversion rate after such adjustment, and shall cause such transfer
agents to mail copies of such statements to the holders of record of $3.625
Preferred Stock.
(vii) The Corporation may make such reductions in the conversion
price, in addition to those required by subparagraph (vi) above, as it
considers to be advisable in order that any event treated for Federal income
tax purposes as a dividend of stock or stock rights shall not be taxable to
the recipients.
(viii) In case of any reclassification or change of the outstanding
shares of Common Stock of the Corporation (except a split or combination of
shares) or in case of any consolidation or merger to which the Corporation is
a party (except a merger in which the Corporation is the surviving corporation
and which does not result in any reclassification of or change in the
outstanding Common Stock of the Corporation except a split or combination of
shares) or in case of any sale or conveyance to another corporation of all or
substantially all of the property of the Corporation, effective provision
shall be made by the Corporation or the successor or purchasing corporation
(a) that the holder of each share of $3.625 Preferred Stock then outstanding
shall thereafter have the right to convert such share into the kind and amount
of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a
10
<PAGE>
holder of the number of shares of Common Stock of the Corporation into which
such share of $3.625 Preferred Stock might have been converted immediately
prior thereto, and (b) that there shall be subsequent adjustments of the
conversion rate which shall be equivalent, as nearly as practicable, to the
adjustments provided for in subparagraph (vi) above. The provisions of this
subparagraph (viii) shall similarly apply to successive reclassifications,
changes, consolidations, mergers, sales or conveyances.
(ix) Shares of Common Stock issued on conversion of shares of $3.625
Preferred Stock shall be issued as fully paid shares and shall be
nonassessable by the Corporation. The Corporation shall at all times reserve
and keep available, free from preemptive rights, for the purpose of effecting
the conversion of $3.625 Preferred Stock, such number of its duly authorized
shares of Common Stock as shall be sufficient to effect the conversion of all
outstanding shares of $3.625 Preferred Stock.
(x) Upon the exercise of the conversion rights of $3.625 Preferred
Stock, the stated capital of each share of Common Stock so issued shall be an
amount equal to the par value thereof.
7. No Consents to Increase or Decrease in Outstanding Shares. No
consent of the holders of outstanding shares of $3.625 Preferred Stock at any
time outstanding shall be required in order to permit the Board of Directors
to increase the number of authorized shares of $3.625 Preferred Stock or to
decrease such number to a number not below the number of shares then
outstanding.
8. Change of Control. If there occurs a "Change of Control" (as defined
below) with respect to the Corporation, each share of $3.625 Preferred Stock
may be converted, at the option of the holder thereof at any time from the
date of such Change of Control until the expiration of 45 days after the date
of a notice by the Corporation to all holders of the $3.625 Preferred Stock of
the occurrence of the Change of Control, into the number of shares of Common
Stock determined by dividing the redemption price then in effect (as set forth
in Section 5 of this Subdivision E) with respect to optional redemption by the
Corporation (or, if before October 15, 1995, at the price applicable on
October 15, 1995) by the greater of (a) the average of the daily last reported
sale prices per share of the Corporation's Common Stock on the New York Stock
Exchange for the last five trading days before the Change of Control, provided
that if there was no reported sale on any such day or days there shall be
substituted the mean between the closing bid and asked quotations on that
Exchange on that day, and provided further that if the Common Stock was not
listed on the Exchange on any such day or days there shall be substituted the
mean between the lowest bid and the highest asked quotations on the over-the-
counter market on that day, or (b) 66 2/3% of the last reported sale price of
the Common Stock on the New York Stock Exchange before the date of the
Prospectus (or if supplemented, the date of the applicable Prospectus
Supplement) relating to the $3.625 Preferred Stock. Upon a Change of Control,
the Corporation may elect to pay holders of the $3.625 Preferred Stock
exercising their conversion rights an amount equal to the applicable
redemption price plus any accrued and unpaid dividends. If the Change of
Control involves a consolidation, merger or sale of assets of the Corporation,
the holders of the $3.625 Preferred Stock exercising their conversion rights
will be entitled to receive the same consideration as received for the number
of shares of Common Stock into which their shares of $3.625 Preferred Stock
would have been converted pursuant to their special conversion rights.
A "Change in Control" of the Corporation will be deemed to have occurred
(a) if as a result of a transaction or series of related transactions pursuant
to a tender offer or otherwise, any person or entity (or group within the
meaning of Section 13d-3 of the Securities Exchange Act of 1934), (i) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 of the Securities
Exchange Act of 1934), directly or indirectly, of 50% or more of the
Corporation's outstanding voting securities or (ii) acquires 50% or more of
the Corporation's assets, or (b) if the Corporation consolidates with or
merges into or sells or transfers substantially all of its assets to another
person and, as a result thereof, the existing shareholders of the Corporation
immediately prior thereto hold less than 50% of the combined voting power of
the shares, interests, participations or other equivalents in the equity
interest of such other person.
Section 3. The express terms and provisions of the shares of Class B
Preferred Stock are as follows:
Subdivision A. Issuance in Series and Limitations As To Variations
Between Series.
The Class B Preferred Stock may be issued from time to time in series.
The Class A Preferred Stock and the Class B Preferred Stock shall rank
equally, whether or not dividend rates, dividend payment dates or redemption
or liquidation prices per share of any series of Class B Preferred Stock be
different from those of the Class A Preferred Stock, and the holders of
Class A Preferred Stock and Class B Preferred Stock shall be entitled to the
receipt of dividends and of amounts distributable upon liquidation,
dissolution or winding up, in proportion to their respective rates or
liquidation prices, without preference or priority one over the other.
Except as hereinafter provided, Class B Preferred Stock of all series
shall rank equally and be identical in all respects. All shares of any one
series shall be alike in every particular.
Subject to the limitations and restrictions set forth in this Article
Fourth, the Board of Directors is authorized and empowered at one time or from
time to time:
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<PAGE>
(1) To create one or more series of Class B Preferred Stock and to
authorize the issuance of Class B Preferred Stock in such series, and to fix
or alter, in respect of any particular series, the following express terms and
provisions of any authorized or unissued shares of Class B Preferred Stock
(whether or not such shares shall have been previously designated as shares of
a particular series):
(a) The designation of series;
(b) The number of shares of the series, which number may at any time
or from time to time be increased or decreased by the Board of Directors,
notwithstanding that shares of the series may be outstanding at the time of
such increase or decrease, unless the Board of Directors shall have otherwise
provided in creating such series;
(c) The dividend rate;
(d) The dates at which dividends, if declared, shall be payable, and
the dates, if any, from which they shall be cumulative;
(e) The liquidation price;
(f) The redemption rights and price;
(g) The sinking fund requirements, if any;
(h) The conversion rights, if any, and
(i) The restrictions, if any, on the issuance of shares of any class
or series;
(2) To adopt such amendment or amendments to the Amended Articles of
Incorporation as may be required or permitted by law to accomplish the
foregoing purposes.
Subdivision B. General Provisions Applicable To All Series.
The following general provisions shall apply to all Class B Preferred
Stock of the Corporation, irrespective of series.
1. Dividends. The holders of Class B Preferred Stock of each series
shall be entitled to receive, when and as declared by the Board of Directors,
dividends in cash at the annual rate fixed with respect to such series in
accordance with Subdivision A(1) of this Section 3. In case Class B Preferred
Stock of more than one series is outstanding, the Corporation, in making any
dividend payment upon the Class B Preferred Stock, shall (except in redeeming
shares of Class B Preferred Stock though the operation of any sinking fund
that may be established for the benefit of any series of Class B Preferred
Stock) make dividend payments ratably upon all outstanding shares of Class B
Preferred Stock of all series in proportion to the amount of dividends accrued
thereon and unpaid to the date of such dividend payment. Dividends in respect
of the shares of any series shall commence to accrue from the date on which
they shall have been declared to be payable and, in the case of cumulative
dividends, from the date as of which they accumulate pursuant to the terms and
provisions pertaining to the particular series. Accumulations of dividends
shall not bear interest.
2. Restrictions on Payment of Dividends Upon Stock Junior to the Class B
Preferred Stock. So long as any Class B Preferred Stock shall be outstanding,
the Corporation shall not declare or pay any dividend or make any distribution
on, or purchase, or cause to be purchased, or redeem, any stock ranking junior
to the Class B Preferred Stock, nor shall any money be paid or set aside or
made available for a purchase fund or sinking fund for the purchase or
redemption of any shares of such junior stock unless
(i) accrued dividends for all past dividend periods on all
outstanding shares of Class B Preferred Stock of all series having cumulative
dividends shall have been paid and dividends on all outstanding shares of
Class B Preferred Stock of all series for the then current quarterly dividend
period shall have been paid or declared and provided for;
(ii) the Corporation shall have made all payments then due under the
requirements of all purchase funds and sinking funds (if any) for the Class B
Preferred Stock of all series for the then current fiscal year and shall have
set up suitable reserves for all payments not then due but then determined and
to become due during the current fiscal year, under the requirements of all
such purchase funds and sinking funds, and all defaults, if any, in complying
with any such purchase fund and sinking fund requirements in respect of
previous fiscal years shall have been made good; and
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<PAGE>
(iii) the net assets of the Corporation shall not thereby be reduced
below the aggregate preferential amounts to which the then outstanding shares
of Class B Preferred Stock would be entitled upon the involuntary liquidation,
dissolution or winding up of the Corporation.
3. Dissolution, Liquidation and Winding Up. Upon any dissolution,
liquidation or winding up of the Corporation, before any distribution or
payment is made to the holders of any class of stock ranking junior to the
Class B Preferred Stock, the holders of Class B Preferred Stock of each series
shall be entitled to be paid in cash the amount fixed in accordance with the
provisions of Subdivision A(1) of this Section 3 with respect to such series.
If the net assets of the Corporation shall be insufficient to permit the
payment to holders of all outstanding shares of all series of Class B
Preferred Stock of the full amounts to which they are respectively entitled,
the entire net assets of the Corporation shall be distributed ratably to the
holders of all outstanding shares of Preferred Stock in proportion to the
amounts to which they are entitled. After payment to holders of Class B
Preferred Stock of the full preferential amounts aforesaid, the holders of
Class B Preferred Stock as such shall have no right or claim to any of the
remaining assets of the Corporation, which remaining assets shall be
distributed among the holders of shares ranking junior to the Class B
Preferred Stock in accordance with their respective rights thereto. The sale,
lease or conveyance of all the property and assets of the Corporation to, or
the merger or consolidation of the Corporation into or with, any other
corporation shall not be deemed to be a liquidation, dissolution or winding up
of the Corporation for the purposes of this paragraph.
4. Redemption. At the option of, and to the extent fixed by, the Board
of Directors with respect to any series, the Corporation may redeem at any
time, or from time to time, any series of Class B Preferred Stock, or any part
of any series, at the redemption price fixed with respect to such series in
accordance with Subdivision A(1) of this Section 3; provided that, not less
than thirty days previous to the date fixed for any such redemption, a notice
of the time and place thereof shall be given to the holders of record of the
shares of Class B Preferred Stock so to be redeemed by mailing a copy of such
notice to such holders at their respective addresses as the same appear on the
books of the Corporation and, if the Board of Directors shall so determine, by
publication of notice in such manner as may be prescribed by resolution of the
Board of Directors. In case of redemption of less than all of the outstanding
Class B Preferred Stock of any one series, the redemption shall be made pro
rata or the shares to be redeemed shall be chosen by lot in such manner as may
be prescribed by resolution of the Board of Directors. At any time after
notice of redemption has been given in the manner herein prescribed, the
Corporation may deposit the amount of the aggregate redemption price with any
bank or trust company having capital and surplus of at least $5,000,000, named
in such notice, in trust for the holders of the shares so to be redeemed,
payable on the date fixed for redemption to the respective orders of such
holders upon endorsement to the Corporation or otherwise as may be required
and surrender of the certificates for such shares. Upon deposit of the
aggregate redemption price, as aforesaid, or, if no such deposit is made, upon
said redemption date (unless the Corporation shall default in making payment
of the redemption price as set forth in said notice) such holders shall cease
to be stockholders with respect to said shares and shall be entitled only to
receive the redemption price on or after the date fixed for redemption,
without interest thereon, upon endorsement, if required, and surrender of the
certificates for such shares; provided, however, that no such deposit in trust
shall be deemed to terminate, prior to the expiration of the redemption date,
any conversion or exchange rights to which any such holder may be entitled.
Any funds so deposited by the Corporation and unclaimed at the end of six
years from the date fixed for such redemption shall be repaid by such bank or
trust company to the Corporation upon its request, after which repayment the
holders of such shares so called for redemption shall look only to the
Corporation for payment of the redemption price thereof. Any funds so
deposited which shall not be required for such redemption because of the
exercise subsequent to the date of such deposit of any right of conversion or
exchange, shall be returned to the Corporation forthwith. Any interest accrued
on any funds so deposited shall belong to the Corporation and shall be paid to
it from time to time.
If at any time the Corporation shall have failed to pay accrued
dividends in full on Class B Preferred Stock of any one or more series,
thereafter and until such dividends in full on Class B Preferred Stock of
every series shall have been paid or declared and set apart for payment, the
Corporation shall not redeem Class B Preferred Stock except as a whole or,
directly or indirectly, purchase any Class B Preferred Stock. Subject to the
foregoing, any Class B Preferred Stock may be purchased by the Corporation.
5. Preemptive Rights. No holder of Class B Preferred Stock of any
series shall, as such holder, have any preemptive right in, or preemptive
right to subscribe to, any additional Class B Preferred Stock of any series or
any shares of any other class of stock, or any bonds, debentures or other
securities convertible into or exchangeable for shares of stock of any class
or series.
6. Voting Rights.
(a) Except as set forth in this paragraph 6 and as required by the
General Corporation Law of Ohio, the holders of Class B Preferred Stock will
not be entitled to vote on any matter.
(b) If the Corporation shall have failed to pay, or declare and set
apart for payment, when due, dividends on all outstanding shares of Class B
Preferred Stock in an amount equal to six quarterly dividends upon such
shares, the number of Directors of the Corporation shall be increased by two
at the first annual meeting of the shareholders of the Corporation held
thereafter, and at such meeting and at each subsequent annual meeting until
dividends payable for all past quarterly dividend periods on all outstanding
shares of Class B Preferred Stock shall
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<PAGE>
have been paid, or declared and set apart for payment in full, the holders of
the shares of Class B Preferred Stock shall have the right, voting as a class,
to elect such two additional members of the Board of Directors to hold office
until the annual meeting of shareholders held next after their election and
the election and qualification of their successors or until such payment, or
such declaration and setting apart for payment in full, whichever period is
shorter. Upon such payment, or such declaration and setting apart for payment
in full, the terms of the two additional Directors so elected shall forthwith
terminate, and the number of Directors of the Corporation shall be reduced by
two and the right of the holders of shares of Class B Preferred Stock to vote
pursuant to this subparagraph 6(b) shall cease, subject to increase in the
number of Directors as aforesaid and to revesting of such voting right in the
event of each and every additional failure in the payment of dividends in an
amount equal to six quarterly dividends as aforesaid.
(c) The Corporation shall not adopt (i) without the affirmative vote
of holders of a majority of the outstanding shares of Class B Preferred Stock,
as a class, any amendment to the Amended Articles of Incorporation which
increases the authorized number of shares of Class B Preferred Stock or
creates any class of shares which ranks equally with or prior to the Class B
Preferred Stock and (ii) without the affirmative vote of holders of two-thirds
of the outstanding shares of Class B Preferred Stock, as a class, any
amendment to the Amended Articles of Incorporation which materially alters any
existing provision of any outstanding Class B Preferred Stock.
7. Stock Ranking Junior to Class B Preferred Stock. For the purpose of
this Section 3 and Article Fourth, whenever reference is made herein to stock
or shares "ranking junior to the Class B Preferred Stock" such reference shall
mean and include the Common Stock and any other authorized class of stock in
respect of which the rights of the holders as to the payment of dividends and
as to distributions in the event of dissolution, liquidation or winding up of
the Corporation are subordinate to the rights of the holders of the Class B
Preferred Stock.
Subdivision C. Provisions Applicable to $4.50 Cumulative Convertible
Preferred Stock
1. Creation of Series. There is hereby created a series of Class B
Preferred Stock, par value $1 per share, consisting of one million (1,000,000)
shares of the authorized and unissued shares of Class B Preferred Stock, which
series shall be designated "$4.50 Cumulative Convertible Preferred Stock"
(hereinafter called this "Series").
2. Future Increase or Decrease. The number of shares of this Series may
at any time or from time to time be increased or decreased by the Board of
Directors notwithstanding that shares of this Series may be outstanding at
such time of increase.
3. Dividend Rate. The Dividend Rate of this Series shall be $4.50 per
share per annum and no more, payable in cash quarterly in equal installments
on the first day of each January, April, July and October, commencing
October 1, 1983, except that the dividend payable on October 1, 1983, shall be
in an amount representing the cumulative dividend from the date of issue
thereof. Dividends shall be cumulative, whether or not earned, and shall
accrue on each share of this Series from the date of issue thereof, except
that dividends on shares of this Series issued after the first date of issue
of any shares of this Series shall be cumulative, whether or not earned, and
shall accrue on each such share from the quarterly dividend payment date next
preceding the date of issue of each such share; provided that (i) if the date
of issue is a quarterly dividend payment date or a date between the record
date for the determination of holders of this Series entitled to receive a
quarterly dividend and the payment date for such quarterly dividend, such
dividends shall be cumulative from such quarterly dividend payment date, and
(ii) if any shares of this Series are issued at a time when cumulative
dividends are in arrears on previously issued shares of this Series, dividends
on such newly issued shares shall be cumulative and shall accrue in an amount
equal to the dividends accrued and unpaid on such previously issued shares of
this Series. Dividends payable on this Series for any period less than a full
quarter shall be computed on the basis of a 360-day year.
4. Dissolution, Liquidation and Winding Up. The amount which the
holders of this Series shall be entitled to be paid in the event of any
dissolution, liquidation or winding up of the Corporation (voluntary or
involuntary) shall be Fifty Dollars ($50.00) per share plus an amount equal to
all dividends thereon accrued and unpaid computed to the date on which payment
thereof is made available.
5. Redemption. Shares of this Series may not be redeemed prior to
July 1, 1983. Thereafter, the Corporation, at its option to be exercised by
the Board of Directors, may redeem shares of this Series, as a whole or in
part, at any time or from time to time, at the following redemption prices,
plus in each case, accrued and unpaid dividends thereon to the date fixed by
the Board of Directors for redemption.
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<PAGE>
If redeemed during the twelve-month period commencing July 1,
<TABLE>
<CAPTION>
Amount
Per Share
---------
<S> <C>
1983 . . . . . . . . . . . . . . . . . $54.50
1984 . . . . . . . . . . . . . . . . $54.05
1985 . . . . . . . . . . . . . . . . $53.60
1986 . . . . . . . . . . . . . . . . $53.15
1987 . . . . . . . . . . . . . . . . $52.70
1988 . . . . . . . . . . . . . . . . $52.25
1989 . . . . . . . . . . . . . . . . $51.80
1990 . . . . . . . . . . . . . . . . $51.35
1991 . . . . . . . . . . . . . . . . $50.90
1992 . . . . . . . . . . . . . . . . $50.45
1993 and thereafter . . . . . . . . $50.00
</TABLE>
provided, that no shares of this Series may be redeemed prior to July 1, 1986
if the last reported sale price of the Common Stock on the New York Stock
Exchange (or, if there was no reported sale, the mean between the closing bid
and asked quotations on that Exchange or, if the Common Stock was not then
listed on that Exchange, the highest asked quotations in the over-the-counter
market) per share shall not have equaled or exceeded 150% of the conversion
price (as defined below) of this Series for at least 20 consecutive trading
days ending within 5 days prior to the giving of the notice of redemption
provided for herein. For purposes of this subparagraph, the "conversion price"
shall be an amount determined by dividing $50 by the then current conversion
rate provided for in Paragraph 6. Notice of every redemption shall state the
redemption date; the number of shares of this Series to be redeemed and, if
less than all the shares held by such holder are to be redeemed, the number of
such shares to be redeemed from such holder; the redemption price; the place
or places where certificates for such shares are to be surrendered for payment
of the redemption price; the then current conversion rate; and the date the
conversion right terminates. The shares of this Series shall not be entitled
to the benefit of any sinking fund to be applied to the purchase or redemption
of this Series. Shares of this Series redeemed by the Corporation will be
restored to the status of authorized but unissued shares of Class B Preferred
Stock without designation as to series, and may thereafter be issued.
6. Conversion Rights.
(i) The shares of this Series shall be convertible at the option of
the respective holders thereof at any time after the date of issue into shares
of Common Stock of the Corporation (as such shares may be constituted on the
Conversion Date as hereinafter defined) at the rate of 2.22 shares of Common
Stock for each share of this Series, subject to adjustment as provided herein;
provided that, as to any shares of this Series which shall have been called
for redemption, the conversion right shall terminate at the close of business
on the business day prior to the date fixed for redemption unless default
shall be made in the payment of the redemption price plus accrued and unpaid
dividends.
(ii) The holder of a share or shares of this Series may exercise the
conversion rights as to any thereof by delivering to the Corporation during
regular business hours, at the office of any transfer agent of the Corporation
for this Series or at such other place as may be designated by the
Corporation, the certificate or certificates for the shares to be converted,
duly endorsed or assigned in blank or to the Corporation (if required by it),
accompanied by written notice stating that the holder elects to convert such
shares and stating the name or names (with address) in which the certificate
or certificates for Common Stock are to be issued. Conversion shall be deemed
to have been effected on the date when such certificate or certificates have
been so received by the Corporation or its transfer agent, and such date is
referred to herein as the "Conversion Date." As promptly as practicable
thereafter, the Corporation shall issue and deliver to or upon the written
order of such holder, a certificate or certificates for the number of full
shares of Common Stock to which he is entitled and a check, cash, scrip
certificate or other adjustment, at the election of the Corporation, in
respect of any fraction of a share as provided in subparagraph (iv) below. The
person in whose name the certificate or certificates for Common Stock are to
be issued shall be deemed to have become a holder of Common Stock of record on
the Conversion Date unless the transfer books of the Corporation are closed on
that date, in which event he shall be deemed to have become a holder of Common
Stock of record on the next succeeding date on which the transfer books are
open, but the conversion rate shall be that in effect on the Conversion Date.
(iii) No payment or adjustment shall be made for dividends accrued
but unpaid (even though the record date, but not the payment date, with
respect thereto shall have preceded the Conversion Date) on any shares of this
Series converted (or for dividends on any shares of Common Stock issuable on
conversion), but until all dividends accrued and unpaid on such shares of this
Series up to the quarterly dividend payment date next preceding the Conversion
Date shall have been paid to the converting holder or to his assigns, or
declared and set apart for such payment, in full, no dividend shall be paid or
set apart for payment or declared on the Common Stock or on any other class of
stock of the Corporation ranking as to dividends junior to this Series and no
payment shall be made with respect to any purchase or acquisition of, or to
any sinking fund with respect to, any class of stock of the Corporation
ranking as to dividends or distribution of assets on a parity with or junior
to this Series.
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<PAGE>
(iv) The Corporation shall not be required to issue any fraction of a
share upon conversion of any share or shares of this Series. If more than one
share of this Series shall be surrendered for conversion at one time by the
same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the total number of
shares of this Series so surrendered. If any fractional interest in a share of
Common Stock would be deliverable upon conversion, the Corporation shall make
an adjustment therefor in cash unless its Board of Directors shall have
determined to adjust fractional interests by issuance of scrip certificates or
in some other manner. Adjustment in cash shall be made on the basis of the
current market value of one share of Common Stock, which shall be taken to be
the last reported sale price of the Corporation's Common Stock on the New York
Stock Exchange on the last business day before the Conversion Date, or, if
there was no reported sale on that day, the mean between the closing bid and
asked quotations on that Exchange on that day or, if the Common Stock was not
then listed on that Exchange, the mean between the lowest bid and the highest
asked quotations in the over-the-counter market on that day.
(v) The issuance of Common Stock on conversion of this Series shall
be without charge to the converting holder of this Series for any fee, expense
or tax in respect of the issuance thereof, but the Corporation shall not be
required to pay any fee, expense or tax which may be payable in respect of any
transfer involved in the issuance and delivery of shares in any name other
than that of the holder of record on the books of the Corporation of the
shares of this Series converted, and the Corporation shall not, in any such
case, be required to issue or deliver any certificate for shares of Common
Stock unless and until the person requesting the issuance thereof shall have
paid to the Corporation the amount of such fee, expense or tax or shall have
established to the satisfaction of the Corporation that such fee, expense or
tax has been paid.
(vi) The conversion rate provided in subparagraph (i) shall be
subject to the following adjustments, which shall be made to the nearest one-
hundredth of a share of Common Stock or, if none, to the next lower one-
hundredth:
(A) if the Corporation shall pay to the holders of its Common Stock a
dividend in shares of Common Stock or in securities convertible into Common
Stock, the conversion rate in effect immediately prior to the record date
fixed for the determination of the holders of Common Stock entitled to such
dividend shall be proportionately increased, effective immediately following
such record date;
(B) if the Corporation shall split the outstanding shares of its
Common Stock into a greater number of shares or combine the outstanding shares
into a smaller number, the conversion rate in effect immediately prior to such
action shall be proportionately increased in the case of a split or decreased
in the case of a combination, effective immediately following such action;
(C) if the Corporation shall issue to the holders of its Common
Stock, as a class, rights or warrants to subscribe for or purchase shares of
its Common Stock at a price less than the Current Market Price (as defined
below in this subparagraph) of the Corporation's Common Stock at the record
date fixed for the determination of the holders of Common Stock entitled to
such rights or warrants, the conversion rate in effect immediately prior to
said record date shall be increased, effective immediately following such
record date, to an amount determined by multiplying such conversion rate by a
fraction the numerator of which is the number of shares of Common Stock of the
Corporation outstanding immediately prior to said record date plus the number
of additional shares of its Common Stock offered for subscription or purchase
and the denominator of which is said number of shares outstanding immediately
prior to said record date plus the number of shares of Common Stock of the
Corporation which the aggregate subscription or purchase price of the total
number of shares so offered would purchase at the Current Market Price of the
Corporation's Common Stock at said record date; as used in this subparagraph
(vi)(C) the term "Current Market Price" of the Corporation's Common Stock at
said record date shall mean the average of the daily last reported sale prices
per share of the Corporation's Common Stock on the New York Stock Exchange
during the twenty (20) consecutive full business days commencing with the
thirtieth (30th) full business day before said record date, provided that if
there was no reported sale on any such day or days there shall be substituted
the mean between the closing bid and asked quotations on that Exchange on that
day, and provided further that if the Common Stock was not listed on that
Exchange on any such day or days there shall be substituted the mean between
the lowest bid and the highest asked quotations on the over-the-counter market
on that day;
(D) if the Corporation shall distribute to the holders of its Common
Stock any evidences of its indebtedness, or any rights or warrants to
subscribe for any security other than its Common Stock, or any other assets
(excluding dividends and distributions in cash to the extent permitted by
law), the conversion rate in effect immediately prior to the record date fixed
for the determination of the holders of Common Stock entitled to such
distribution shall be increased, immediately following such record date, to an
amount determined by multiplying such conversion rate by a fraction the
numerator of which is the Current Market Price per share (as defined in
subparagraph (vi)(C) above) of the Corporation's Common Stock at said record
date and the denominator of which is such Current Market Price per share less
the fair market value (as determined by the Board of Directors, whose
determination, in the absence of fraud, shall be conclusive) of the amount of
evidences of indebtedness, rights or warrants, or other assets (excluding cash
dividends and distributions as aforesaid) so distributed which is applicable
to one share of Common Stock. Notwithstanding the preceding sentence, if such
fair market value of the amount of evidences of indebtedness, rights or
warrants or such other assets in the case of a particular
16
<PAGE>
distribution is less than One Dollar ($1.00), the increase in the conversion
rate shall be postponed and the amount of such fair market value shall be
carried forward and applied as provided herein below. Whenever the amounts of
fair market value so being carried forward plus any similar amount determined
in connection with a particular distribution aggregate One Dollar ($1.00) or
more, the conversion rate in effect immediately prior to the record date fixed
for the determination of holders of Common Stock entitled to such particular
distribution shall be increased, effective immediately following such record
date, by the aggregate of the increases in the conversion rate which were so
postponed plus the increase resulting from such particular distribution. If
the Corporation shall pay to the holders of its Common Stock a dividend in
shares of Common Stock or if it shall split or combine the outstanding shares
of its Common Stock, the amount of One Dollar ($1.00) referred to in this
subparagraph (vi)(D) (as theretofore increased or decreased) shall forthwith
be proportionately decreased in the case of a stock dividend or split or
increased in the case of a combination, so as appropriately to reflect the
same.
No adjustment of the conversion rate provided in subparagraph (i) shall
be made by reason of the issuance of Common Stock for cash except as provided
in subparagraph (vi)(D) or by reason of the issuance of Common Stock for
property or services. Whenever the conversion rate is adjusted pursuant to
this subparagraph (vi) the Corporation shall promptly place on file at the
office of each of its transfer agents for this Series a statement signed by
the President or a Vice President of the Corporation and by its Treasurer or
an Assistant Treasurer showing in detail the facts requiring such adjustment
and the conversion rate after such adjustment, and shall cause such transfer
agents to mail copies of such statements to the holders of record of this
Series.
(vii) The Corporation may make such reductions in the conversion
price, in addition to those required by subparagraph (vi) above, as it
considers to be advisable in order that any event treated for Federal income
tax purposes as a dividend of stock or stock rights shall not be taxable to
the recipients.
(viii) In case of any reclassification or change of the outstanding
shares of Common Stock of the Corporation (except a split or combination of
shares) or in case of any consolidation or merger to which the Corporation is
a party (except a merger in which the Corporation is the surviving corporation
and which does not result in any reclassification of or change in the
outstanding Common Stock of the Corporation except a split or combination of
shares) or in case of any sale or conveyance to another corporation of all or
substantially all of the property of the Corporation, effective provision
shall be made by the Corporation or the successor or purchasing corporation
(a) that the holder of each share of this Series then outstanding shall
thereafter have the right to convert such share into the kind and amount of
stock and other securities and property receivable upon such reclassification,
change, consolidation, merger, sale or conveyance by a holder of the number of
shares of Common Stock of the Corporation into which such share of this Series
might have been converted immediately prior thereto, and (b) that there shall
be subsequent adjustments of the conversion rate which shall be equivalent, as
nearly as practicable, to the adjustments provided for in subparagraph (vi)
above.
The provisions of this subparagraph (viii) shall similarly apply to
successive reclassifications, changes, consolidations, mergers, sales or
conveyances.
(ix) Shares of Common Stock issued on conversion of shares of this
Series shall be issued as fully paid shares and shall be nonassessable by the
Corporation. The Corporation shall at all times reserve and keep available,
free from preemptive rights, for the purpose of effecting the conversion of
this Series, such number of its duly authorized shares of Common Stock as
shall be sufficient to effect the conversion of all outstanding shares of this
Series. Shares of this Series converted into Common Stock will be restored to
the status of authorized but unissued shares of Class B Preferred Stock,
without designation as to series, and may thereafter be issued, but not as
shares of this Series.
7. No Consents to Increase or Decrease in Outstanding Shares. No
consent of the holders of outstanding shares of this Series at any time
outstanding shall be required in order to permit the Board of Directors to
increase the number of authorized shares of this Series or to decrease such
number to a number not below the number of shares then outstanding.
Section 4. The express terms and provisions of the shares of Common
Stock are as follows:
1. Dividends. Out of the assets of the Corporation available for
dividends remaining after full dividends on all shares ranking prior to the
Common Stock shall have been paid or declared and set apart for payment, then,
and not otherwise, and subject to any restrictions or limitations contained in
the express terms and provisions of any shares ranking prior to the Common
Stock, dividends may be declared and paid upon the Common Stock, but only when
and as determined by the Board of Directors.
2. Dissolution, Liquidation and Winding Up. Upon any dissolution,
liquidation or winding up of the Corporation, or any proceedings resulting in
any distribution of all its assets to its stockholders, after there shall have
been paid to or set apart for holders of all shares ranking prior to the
Common Stock the full preferential amounts to which they are respectively
entitled, the holders of Common Stock shall be entitled to receive pro rata
the remaining assets of the Corporation available for distribution to its
stockholders. The sale, lease or conveyance of all the property and assets of
the Corporation to, or the merger or consolidation of the Corporation into or
with, any other corporation shall not be deemed to be a liquidation,
dissolution or winding up of the Corporation for the purposes of this
paragraph.
17
<PAGE>
3. Voting Rights. The holders of Common Stock shall be entitled at all
times to one vote for each share of Common Stock held by them respectively.
4. Preemptive Rights. No holder of Common Stock shall, as such holder,
have any preemptive right in, or preemptive right to subscribe to, any shares
of Common Stock, or any shares of any other class of stock, or any bonds,
debentures or other securities convertible into or exchangeable for shares of
any class.
Section 5. For the purpose of this Article Fourth, whenever reference is
made to "Preferred Stock" or to stock or shares "ranking prior to the Common
Stock" such reference shall mean and include the Class A Preferred Stock, the
Class B Preferred Stock and any other authorized class of stock in respect of
which the rights of the holders as to the payment of dividends and as to
distributions in the event of dissolution, liquidation or winding up of the
Corporation will give preference over the Common Stock.
Fifth: Notwithstanding any provisions of the General Corporation Law of
Ohio now or hereafter in force requiring, for any purpose, the affirmative
vote or consent of the holders of shares entitling them to exercise two-
thirds, or any other proportion, of the voting power of the Corporation, or
the affirmative vote or consent of the holders of two-thirds, or any other
proportion, of the shares of any class or classes, such action may, to the
extent permitted by law and except as provided in paragraph 11 of
Subdivision B of Section 2 of Article Fourth hereof and as provided in
subparagraph 6 (c) (ii) of Subdivision B of Section 3 of Article Fourth
hereof, be authorized and taken by the affirmative vote or written consent of
the holders of shares entitling them to exercise a majority of the voting
power of the Corporation, or by the affirmative vote or consent of the holders
of a majority of the shares of such class or classes.
Sixth: To the extent not prohibited by law, the Board of Directors may
authorize the purchase by the Corporation of shares of any class issued by it.
Seventh: These Amended Articles of Incorporation supersede and take the
place of the heretofore existing Amended Articles of the Corporation.
18
<PAGE>
EXHIBIT 11
<TABLE>
ARMCO INC.
COMPUTATION OF INCOME (LOSS) PER COMMON SHARE
<CAPTION>
(Dollars and shares in millions,
except per share amounts) Three Months Ended
PRIMARY March 31,
- -----------------------------------------------------------------------------
1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
Income from continuing operations $ 6.9 $ 0.9
Preferred stock dividends (4.5) (4.5)
- -----------------------------------------------------------------------------
Income (loss) from continuing operations applicable
to common stock 2.4 (3.6)
Income from discontinued operation - 1.5
- -----------------------------------------------------------------------------
Net income (loss) applicable to common stock $ 2.4 $ (2.1)
- -----------------------------------------------------------------------------
Weighted average number of common shares 106.4 105.6
Weighted average number of common equivalent shares - -
- -----------------------------------------------------------------------------
Average common shares outstanding as adjusted 106.4 105.6
- -----------------------------------------------------------------------------
Income (loss) per share from continuing operations $ 0.02 $ (0.03)
Income per share from discontinued operation - 0.01
- -----------------------------------------------------------------------------
Net income (loss) per share $ 0.02 $ (0.02)
- -----------------------------------------------------------------------------
FULLY DILUTED*
Income from continuing operations $ 6.9 $ 0.9
Preferred stock dividends - (4.5)
- -----------------------------------------------------------------------------
Income (loss) from continuing operations applicable
to common stock 6.9 (3.6)
Income from discontinued operation - 1.5
- -----------------------------------------------------------------------------
Net income (loss) applicable to common stock $ 6.9 $ (2.1)
- -----------------------------------------------------------------------------
Weighted average number of common shares 106.4 105.6
Weighted average number of common equivalent shares - **
Weighted average number of preferred shares on an
"if converted" basis 22.7 **
- -----------------------------------------------------------------------------
Average common shares outstanding as adjusted 129.1 105.6
- -----------------------------------------------------------------------------
Income (loss) per share from continuing operations $ 0.05 $ (0.03)
Income per share from discontinued operation - 0.01
- -----------------------------------------------------------------------------
Net income (loss) per share $ 0.05 $ (0.02)
- -----------------------------------------------------------------------------
Shares of stock outstanding at March 31
Common 106.7 105.9
Preferred - $2.10 Class A 1.7 1.7
Preferred - $3.625 Class A 2.7 2.7
Preferred - $4.50 Class B 1.0 1.0
<FN>
* Calculation of fully diluted income per share is submitted in accordance
with Securities Exchange Act of 1934 Release No. 9083, although it is
contrary to paragraph 40 of APB Opinion No. 15 because it produces an
antidilutive result, or is not required by footnote 2 to paragraph 14 of
APB Opinion No. 15 because it results in dilution of less than 3%.
** Antidilutive
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE ARMCO INC. CONDENSED STATEMENT OF
CONSOLIDATED FINANCIAL POSITION AND CONDENSED STATEMENT
OF CONSOLIDATED OPERATIONS AND RETAINED DEFICIT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 223,900
<SECURITIES> 0
<RECEIVABLES> 180,100
<ALLOWANCES> 0
<INVENTORY> 226,600
<CURRENT-ASSETS> 637,100
<PP&E> 1,221,600
<DEPRECIATION> 554,700
<TOTAL-ASSETS> 1,928,800
<CURRENT-LIABILITIES> 415,500
<BONDS> 358,400
<COMMON> 1,100
0
185,900
<OTHER-SE> (411,600)
<TOTAL-LIABILITY-AND-EQUITY> 1,928,800
<SALES> 430,400
<TOTAL-REVENUES> 430,400
<CGS> 392,900
<TOTAL-COSTS> 392,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,200
<INCOME-PRETAX> 7,300
<INCOME-TAX> 400
<INCOME-CONTINUING> 6,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,900
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.05
</TABLE>
