<PAGE>
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ASARCO Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
ASARCO
RICHARD DE J. OSBORNE
CHAIRMAN OF THE BOARD
March 15, 1999
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders which
will be held in the Ricker Auditorium, 180 Maiden Lane, New York, New York on
Wednesday, April 28, 1999, at 2 P.M. We hope you can be with us.
At the meeting, you will be asked to elect directors and to approve the
selection of auditors.
The meeting also provides an opportunity to give you a current report on the
activities of the Company and its plans and prospects for the future.
It is important that your shares be represented at the meeting whether or not
you are able to attend in person. Therefore, you are asked to vote, sign, date
and mail the enclosed proxy. Please do so today.
Sincerely,
Richard de J. Osborne
Chairman and Chief Executive Officer
ASARCO INCORPORATED, 180 MAIDEN LANE, NEW YORK, N.Y. 10038 (212) 510-2000
<PAGE>
ASARCO
ASARCO INCORPORATED
180 MAIDEN LANE
NEW YORK, N.Y. 10038
_____________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 28, 1999
To the Stockholders:
The annual meeting of stockholders of ASARCO Incorporated will be held in the
Ricker Auditorium, 180 Maiden Lane, New York, New York on Wednesday, April 28,
1999, at 2 P.M. for the following purposes:
(1) To elect one director to serve until the 2001 annual meeting of
stockholders and four directors to serve until the 2002 annual meeting of
stockholders.
(2) To act upon a proposal to approve the selection by the Board of
Directors, upon recommendation of the Audit Committee, of
PricewaterhouseCoopers L.L.P. as independent auditors for the calendar
year 1999.
(3) To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on March 9, 1999 will be
entitled to vote at the annual meeting. Stockholders of record who attend the
annual meeting in person may withdraw proxies and vote in person if they wish.
By order of the Board of Directors,
R. Ferri
Secretary
New York, N.Y., March 15, 1999
---------------------------------------------------
YOUR VOTE IS VERY IMPORTANT
Please mark, sign, date and return your proxy.
---------------------------------------------------
<PAGE>
PROXY STATEMENT
This proxy statement is furnished as part of the solicitation by the Board of
Directors of ASARCO Incorporated, 180 Maiden Lane, New York, N.Y. 10038
("Asarco" or the "Company") of the proxies of all stockholders entitled to vote
at the annual meeting to be held on April 28, 1999 and at any adjournment
thereof. This proxy statement and the enclosed form of proxy are being mailed,
commencing on or about March 18, 1999, to stockholders of record on March 9,
1999. Any proxy in the enclosed form given pursuant to this solicitation and
received in time for the annual meeting will be voted with respect to all shares
represented by it and in accordance with the instructions, if any, given in such
proxy. If the Company receives a signed proxy with no voting instructions given,
such shares will be voted for the election of directors and for the proposals.
Any proxy may be revoked at any time prior to the exercise thereof by notice
from the stockholder, received in writing by the Secretary, or by written ballot
voted at the meeting.
At the close of business on March 9, 1999, the record date for the annual
meeting, the Company had outstanding and entitled to be voted 39,692,529 shares
of Common Stock, without par value. Each share of Common Stock outstanding at
the record date will be entitled to one vote. The presence in person or by proxy
of the holders of record of a majority of the shares entitled to vote at the
meeting shall constitute a quorum. Abstentions, votes withheld and broker non-
votes are counted for quorum purposes but are not counted either as votes cast
"For" or "Against". A plurality of the votes cast is required for the election
of directors. The affirmative vote of a majority of the votes cast at the
meeting by the holders of shares entitled to vote is required to approve
proposals other than the election of directors.
When a stockholder participates in the Dividend Reinvestment Plan applicable
to the Company's Common Stock, his proxy to vote shares of Common Stock will
include the number of shares held for him by The Bank of New York, the agent
under the plan. If the stockholder does not send any proxy, the shares held for
his account in the Dividend Reinvestment Plan will not be voted. Shares of
Common Stock owned under the Company's Savings Plans will be voted by the
trustee under the plans in accordance with the instructions contained in the
proxy submitted by the beneficial stockholder. Any shares held by the trustee as
to which it receives no voting instructions will be voted by the trustee in the
same proportion as the shares for which it has received voting instructions.
ELECTION OF DIRECTORS
At the recommendation of the Company's Organization and Compensation Committee
and pursuant to a resolution of the Board of Directors adopted on January 27,
1999, five nominees are proposed for election at the annual meeting. The
remaining seven directors will continue to serve in accordance with their
previous election. All of the nominees are currently directors. All current
directors were elected to their present term of office at a previous annual
meeting of stockholders.
The Company's Restated Certificate of Incorporation provides that the Board of
Directors shall be comprised of at least nine, but no more than fifteen,
directors divided into three classes as nearly equal in number as possible, each
class to be elected for a three-year term. The Board of Directors has currently
fixed the number of directors at fourteen. At its meeting held on January 27,
1999, the Board of Directors of the Company nominated Richard de J. Osborne for
election as a Class I director to serve until the 2001 annual meeting of
stockholders, and Kevin R. Morano, Michael T. Nelligan,
2
<PAGE>
Manuel T. Pacheco and James Wood as Class II directors to serve until the 2002
annual meeting. Messrs. Morano, Osborne and Pacheco are currently serving as
Class II directors with a term of office expiring in 1999, Mr. Wood is currently
serving as a Class III director with a term of office expiring in 2000, and Mr.
Nelligan is currently serving as a Class I director with a term of office
expiring in 2001. Willard C. Butcher and Martha T. Muse will retire at the
expiration of their term of office on April 28, 1999, and will not be standing
for re-election.
Proxies in the enclosed form will be voted, unless authority is withheld, for
the election of the five nominees named below. If any person should be
unavailable for election, proxies will be voted for another individual chosen by
the Board of Directors as a substitute for the unavailable nominee, unless the
Board of Directors adopts a resolution pursuant to the By-Laws reducing the
number of directors. Proxies will not be voted for a greater number of persons
than the five nominees named herein.
NOMINEES FOR ELECTION AS DIRECTORS
Class I
(to serve until the 2001 annual meeting of stockholders)
<TABLE>
<CAPTION>
DIRECTOR
FOR DIRECTOR AGE SINCE
------------ --- --------
<S> <C> <C> <C>
Richard de J. Osborne.......... Chairman of the Board and Chief Executive Officer 64 1976
of the Company since December 1985, also its
President from 1982 until January 1998;
non-executive Chairman of the Board and director of
Southern Peru Copper Corporation; director of
Schering-Plough Corporation, The BFGoodrich
Company, Birmingham Steel Corporation, NACCO
Industries, Inc. and The Tinker Foundation
Incorporated.
</TABLE>
Class II
(to serve until the 2002 annual meeting of stockholders)
<TABLE>
<CAPTION>
DIRECTOR
FOR DIRECTOR AGE SINCE
------------ --- --------
<S> <C> <C> <C>
Kevin R. Morano................ Executive Vice President and Chief Financial 45 1998
Officer of the Company since January 1998,
previously its Vice President, Finance and Chief
Financial Officer from 1993 until January 1998, and
general manager of the Company's Ray Complex from
1991 to 1993; Vice President and director of
Southern Peru Copper Corporation.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
FOR DIRECTOR AGE Since
------------ --- --------
<S> <C> <C> <C>
Michael T. Nelligan............ Chief Executive Officer of Don Ward Transport, Inc. 59 1984
(specialty trucking) since January 1987, its
Chairman since August 1995 and previously its
President. Mr. Nelligan was Chairman of the Board
of Ideal Basic Industries, Inc. (cement products)
from October 1985 until January 1986, its Chief
Executive Officer from July 1983 until January 1986
and its President from 1982 until January 1986.
Manuel T. Pacheco.............. President of the University of Missouri since 57 1997
August 1997; from 1991 to 1997, President of the
University of Arizona.
James Wood..................... Chairman of the Board of Directors of The Great 69 1989
Atlantic & Pacific Tea Company, Inc. (supermarket
chain); previously its Chairman and Chief Executive
Officer from 1980 to 1998, and its President from
1988 to 1993 and at other times since 1980; prior
to 1980, Chairman of the Board and Chief Executive
Officer of The Grand Union Company; director of
Schering-Plough Corporation.
</TABLE>
DIRECTORS WHOSE TERM OF OFFICE CONTINUES
Class I
(serving until the 2001 annual meeting of stockholders)
<TABLE>
<CAPTION>
DIRECTOR
DIRECTOR AGE Since
-------- --- ---------
<S> <C> <C> <C>
Vincent A. Calarco............. Chairman, President and Chief Executive Officer of 56 1997
Crompton & Knowles Corporation (specialty chemicals
and equipment) since 1986 and its President and
Chief Executive Officer since 1985.
Francis R. McAllister.......... President and Chief Operating Officer of the 56 1988
Company since January 1998, previously its
Executive Vice President in charge of copper
operations from April 1993 until January 1998, and
its Chief Financial Officer from April 1982 until
April 1993; director of Southern Peru Copper
Corporation and Cleveland-Cliffs, Inc.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
DIRECTOR AGE SINCE
-------- --- --------
<S> <C> <C> <C>
John D. Ong................... Chairman Emeritus of The BFGoodrich Company (diversified 65 1991
chemicals and aerospace) since July 1, 1997, formerly
Chairman and director of The BFGoodrich Company from
December 1996 to July 1997, and its Chairman and Chief
Executive Officer from July 1979 until December 1996,
and its President from 1975 to 1984; director of Cooper
Industries, Inc., Ameritech Corporation, The Geon
Company, TRW, Inc. and Marsh & McLennan Companies Inc.
</TABLE>
Class III
(serving until the 2000 annual meeting of stockholders)
<TABLE>
<CAPTION>
DIRECTOR
DIRECTOR AGE SINCE
-------- --- --------
<S> <C> <C> <C>
James C. Cotting.............. Director of USG Corporation and member of the Board of 65 1987
Governors of the Chicago Stock Exchange. Mr. Cotting was
Chairman of the Board of Navistar International
Corporation (truck and engine manufacturer) from April
1995 to March 1996. He was Chairman and Chief Executive
Officer of Navistar from 1987 through March 1995.
David C. Garfield............. Director of Schering-Plough Corporation. Mr. Garfield 71 1984
was consultant to Ingersoll-Rand Company (machinery
manufacturer) from June 1986 until June 1992. Mr.
Garfield was President of Ingersoll-Rand Company from
1981 through May 1986 and previously its Vice Chairman.
E. Gordon Gee................. President of Brown University since January 1998; 55 1989
President of The Ohio State University from September
1990 until December 1997; from 1985 until August 1990,
President of the University of Colorado; from 1981 to
1985, President of West Virginia University; director of
The Limited, Inc., Glimcher Realty Trust, Intimate
Brands Inc. and Allmerica Financial Corporation.
James W. Kinnear.............. Director of Corning Incorporated and PaineWebber Group 70 1990
Inc. and Saudi Arabian Oil Company; President and Chief
Executive Officer of Texaco Inc. (crude oil, natural gas
and petroleum products) from 1987 to April 1993;
previously its Vice Chairman of the Board from 1983 to
1987, Executive Vice President from 1978 to 1983, and a
director from July 1977 to May 1994.
</TABLE>
5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Set forth below is certain information with respect to those persons who are
known to the Company to have been, as of the dates indicated below, the
beneficial owners of more than five percent of the Company's Common Stock.
<TABLE>
<CAPTION>
SHARES OF
THE COMPANY'S
COMMON STOCK
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED CLASS
------------------------------------ ------------ ----------
<S> <C> <C>
Grupo Mexico, S.A. de C.V............................. 3,816,300 (a) 9.6%
Baja California 200
06760 Mexico City, Mexico
Merrill Lynch & Co., Inc. ("ML&Co.").................. 2,764,493 (b) 6.9%
(on behalf of Merrill Lynch Asset
Management Group ("AMG"))
World Financial Center, North Tower
250 Vesey Street
New York, NY 10381
Donald Smith & Co., Inc............................... 2,003,000 (c) 5.1%
East 80 Route 4
Paramus, New Jersey 07652
</TABLE>
____________
(a) Information is provided as of December 31, 1998, in reliance upon
information provided to the Company by Grupo Mexico, S.A. de C.V.
(b) Information is provided in reliance upon information included in Amendment
No. 4, dated February 14, 1999, to a Schedule 13G, filed with respect to
holdings by Merrill Lynch Asset Management, L.P. and Fund Asset Management,
L.P., each of which is an investment adviser registered under Section 203 of
the Investment Advisers Act of 1940, and acts as an investment adviser to
investment companies registered under Section 8 of the Investment Company
Act of 1940. The investment advisers are indirectly owned by ML&Co. through
AMG, one of its operating divisions. The investment advisers exercise
voting and investment powers over portfolio securities independently from
the other direct and indirect subsidiaries of ML&Co. ML&Co. disclaims
beneficial ownership of such shares.
(c) Information is provided in reliance upon information included in a Schedule
13G, dated February 4, 1999, filed by Donald Smith & Co., Inc.
6
<PAGE>
BENEFICIAL OWNERSHIP OF MANAGEMENT
The information set forth below as to the shares of Common Stock of the
Company beneficially owned by the nominees, directors, executive officers named
in the Summary Compensation Table below and by all nominees, directors and
officers as a group is stated as of December 31, 1998.
<TABLE>
<CAPTION>
ASARCO INCORPORATED
------------------------------------------------------------------------------------
SHARES OF THE
COMPANY'S ADDITIONAL
COMMON STOCK SHARES
BENEFICIALLY DEEMED PERCENT
OWNED(A) BENEFICIALLY OF
OWNED(B) TOTALS CLASS
---------------- ----------------- ---------------- --------------
<S> <C> <C> <C> <C>
Willard C. Butcher(c)..................... 1,800 __ 1,800 (d)
Vincent A. Calarco(c)..................... 400 __ 400 (d)
James C. Cotting(c)....................... 2,000 __ 2,000 (d)
David C. Garfield(c)(e)................... 18,100 __ 18,100 (d)
E. Gordon Gee(c).......................... 1,600 __ 1,600 (d)
James W. Kinnear(c)....................... 1,800 __ 1,800 (d)
Francis R. McAllister(f).................. 46,741 151,840 198,581 0.5%
Kevin R. Morano(f)........................ 26,209 93,200 119,409 (d)
Martha T. Muse(c)......................... 1,204 __ 1,204 (d)
Michael T. Nelligan(c).................... 2,015 __ 2,015 (d)
John D. Ong(c)............................ 1,400 __ 1,400 (d)
Richard de J. Osborne(f)(g)............... 151,952 399,450 551,402 1.4%
Manuel T. Pacheco(c)...................... 400 __ 400 (d)
James Wood(c)............................. 28,600 __ 28,600 (d)
Robert J. Muth(f)......................... 14,752 52,614 67,366 (d)
Augustus B. Kinsolving(f)................. 16,545 73,300 89,845 (d)
All nominees, directors and officers as
a group (24 individuals)(f).............. 363,235 939,554 1,302,789 3.3%
</TABLE>
__________
(a) Information with respect to beneficial ownership is based upon information
furnished by each nominee, director or officer. Except as noted below, all
nominees, directors and officers have sole voting and investment power over
the shares beneficially owned by them.
(b) Consists of shares deemed beneficially owned under regulations of the
Securities and Exchange Commission because such shares may be acquired
within 60 days after December 31, 1998, through the exercise of options
granted under the Company's 1996 Stock Incentive Plan or the previous Stock
Incentive Plan or Stock Option Plan.
(c) See also the information below on Common Stock Equivalents.
(d) Less than 0.5%.
(e) Does not include 2,000 shares owned by Mr. Garfield's wife. Mr. Garfield
disclaims beneficial ownership of these shares.
(f) Includes restricted Common Stock awarded under the Company's 1996 Stock
Incentive Plan or previous Stock Incentive Plan to certain of the Company's
executive officers, and still subject to restrictions, as follows: 61,500
such shares to Mr. Osborne; 16,520 to Mr. McAllister; 13,840 to Mr. Morano;
8,800 to Mr. Muth; 7,600 to Mr. Kinsolving; and 129,920 to other executive
officers.
7
<PAGE>
Restrictions on such shares lapse in equal installments over five years
beginning on their respective grant dates.
(g) Includes 5,027 shares of Common Stock over which Mr. Osborne and his wife
share voting and investment power.
COMMON STOCK EQUIVALENTS
The following table sets forth the per share number of Common Stock
equivalents credited as of December 31, 1998 to the accounts of the Company's
non-employee directors under the Company's Deferred Fee Plan for Directors and
under its Directors' Deferred Payment Plan. Under both plans, payments are made
in cash following retirement based on the market value of the Common Stock at
that time. For additional information regarding these plans, see "Additional
Information" below.
<TABLE>
<CAPTION>
DEFERRED Deferred
FEE PAYMENT
PLAN(A) PLAN(B) TOTAL
----------------- ------------------ -------------------
<S> <C> <C> <C>
William C. Butcher................................... -- 3,390 3,390
Vincent A. Calarco................................... 1,351 1,279 2,630
James C. Cotting..................................... -- 3,439 3,439
David C. Garfield.................................... -- 4,003 4,003
E. Gordon Gee........................................ -- 2,180 2,180
James W. Kinnear..................................... 14,652 6,479 21,131
Martha T. Muse....................................... -- -- --
Michael T. Nelligan.................................. -- 4,903 4,903
John D. Ong.......................................... -- 5,187 5,187
Manuel T. Pacheco.................................... 1,474 1,390 2,864
James Wood........................................... 3,568 7,254 10,822
----------------- ------------------ -------------------
Total.............................................. 21,045 39,504 60,549
</TABLE>
_______
(a) Amounts shown reflect the number of share equivalents credited to the
Deferred Fee Plan plus share equivalents of dividends credited.
(b) Amounts shown reflect the number of share equivalents credited under the
Directors' Deferred Payment Plan plus share equivalents of dividends
credited.
8
<PAGE>
Information is set forth below as to the shares of Southern Peru Copper
Corporation common stock beneficially owned by the nominees, directors and
executive officers named in the Summary Compensation Table below and by all
nominees, directors and officers as a group. Southern Peru Copper Corporation is
a publicly-traded subsidiary of Asarco. This information is stated as of
December 31, 1998.
<TABLE>
<CAPTION>
SOUTHERN PERU COPPER
CORPORATION
----------------------------------------------
SHARES OF COMMON STOCK PERCENT
BENEFICIALLY OF
OWNED(A) CLASS
------------------------ --------------
<S> <C> <C>
Willard C. Butcher................................................... -- (b)
Vincent A. Calarco................................................... -- (b)
James C. Cotting..................................................... -- (b)
David C. Garfield.................................................... -- (b)
E. Gordon Gee........................................................ -- (b)
James W. Kinnear..................................................... -- (b)
Francis R. McAllister................................................ 3,075 (b)
Kevin R. Morano...................................................... 2,075 (b)
Martha T. Muse....................................................... 1,000 (b)
Michael T. Nelligan.................................................. 1,000 (b)
John D. Ong.......................................................... -- (b)
Richard de J. Osborne(c)............................................. 3,254 (b)
Manuel T. Pacheco.................................................... -- (b)
James Wood........................................................... -- (b)
Robert J. Muth....................................................... 1,800 (b)
Augustus B. Kinsolving(d)............................................ 1,071 (b)
All nominees, directors and officers as a group
(24 individuals).................................................... 18,713 (b)
</TABLE>
__________
(a) Information with respect to beneficial ownership is based upon information
furnished by each nominee, director or officer. Except as noted below, all
nominees, directors and officers have sole voting and investment power over
the shares beneficially owned by them.
(b) Less than 0.5%.
(c) Includes 2,357 shares of Common Stock over which Mr. Osborne and his wife
share voting and investment power.
(d) Does not include 100 shares owned by Mr. Kinsolving's son, as to which
beneficial ownership is disclaimed.
9
<PAGE>
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Organization and Compensation Committee of the Board of Directors has
furnished the following report on executive compensation.
The compensation of Asarco's executive officers other than those who are also
directors is reviewed and established annually by the Organization and
Compensation Committee of the Board of Directors. For officers who were also
directors in 1998 (Messrs. Osborne, McAllister and Morano) the Committee made
compensation recommendations to the Board absent those officers, which
established their compensation. The Board did not modify or reject in any
material way the Committee's recommendations for 1998 compensation. The
Committee met a total of seven times during 1998. Long-term incentive
compensation awards for 1998 to officers and other salaried employees were
approved by the Committee (and recommended to the Board with respect to Messrs.
Osborne and McAllister) at the Committee's January 1998 meeting.
The Company retains an independent compensation consulting organization to
advise and assist the Company and the Committee in connection with compensation
matters. During 1998 the consulting organization made recommendations to the
Committee on base salary, cash incentive compensation and long-term incentive
compensation matters for the Chief Executive Officer and each other Asarco
executive position. Such recommendations included target levels for base salary
and cash incentive compensation, long-term income targets, weighting of stock
option and restricted stock values, and appropriate stock option and restricted
stock valuation methods. The Committee carefully considered the recommendations
and acted within the scope of the recommendations in these areas.
Asarco's executive officer compensation is composed of base salary and
incentive compensation.
The Company's policy for base salary for executive officers is to establish
par compensation levels for each position based on competitive data and the
responsibilities and value of each executive position to the Company. The
Committee considers compensation information from other companies in the mining
and metals industry. It also considers compensation information from smaller,
larger and comparably sized companies in other industries. The Committee then
considers individual and corporate performance in establishing salary levels
within a competitive range.
The Committee believes that the S&P Metals Miscellaneous Group, which includes
only four metals companies in addition to the Company, and the S&P 500 Index,
both used for comparing shareholder returns, do not necessarily represent the
Company's most direct competitors for executive talent. In making decisions
that affect executive compensation the Committee reviews three different
comparator groups proposed by its independent consultants: one group includes
13 process-oriented companies; another group is comprised of 50 companies
engaged in heavy industry; and a third group consists of approximately 175
companies having annual revenues of $1 billion to $6 billion (the "Comparator
Groups"). These groups represent companies whose operational and performance
characteristics are capable of comparison with those of the Company, allowing
for meaningful comparisons of executive compensation. The Comparator Groups
include three of the five companies in the S&P Metals Miscellaneous Group and
approximately 110 companies in the S&P 500 Index.
Base salaries for the Company's executive officers in 1998 were slightly above
the median of the Comparator Groups studied by the Committee and represented a
slightly greater percentage of total
10
<PAGE>
compensation, relative to the median for the Comparator Groups. Because the
cyclical nature of the Company's business can result in significant changes in
incentive compensation from year to year the Committee believes that
compensation levels are more stable and, accordingly, more competitive when base
salaries comprise a larger portion of total cash compensation. In general, the
Committee structures total compensation for each salaried position to be
approximately at the median of total compensation for comparable positions among
the Comparator Groups.
Although the Company's base salaries are set at levels intended to be
competitive with the Company's industry peers, the Committee also takes into
consideration the Company's performance relative to companies in the Comparator
Groups as part of its compensation review. In this regard, the Company's
success in meeting transactional, operational and financial objectives are all
taken into consideration. Because the relative importance of each objective may
change over time, the Committee does not set fixed Company performance targets
for purposes of setting base salaries. The Company's success or failure in
achieving certain objectives or financial results, however, will generally
affect executive salaries. Thus, in a downward part of the business cycle,
salary increases may be delayed or salaries even reduced; in strong financial
years, the Company may award larger increases.
In 1998, base salaries for Mr. McAllister and Mr. Morano were increased
effective February 1, 1998, by 16.7% and 9.4%, respectively, associated with the
promotion of Mr. McAllister to President and Mr. Morano to Executive Vice
President. The salary of one other officer was increased by 6.8% effective
April 1, 1998, in connection with a promotion. Base salaries for other
executive officers have not been increased since May 1997.
Incentive compensation consists of cash incentive compensation awarded
annually if justified, and long-term incentive compensation. Long-term
incentive compensation combines restricted stock and stock options and is
designed to link the interests of executive officers with those of stockholders
by providing each executive an incentive to manage the business as an owner with
an equity stake.
Annual cash incentive payments are determined under the Asarco Incentive
Compensation Plan and the Asarco Incentive Compensation Plan for Senior Officers
("Senior Officers' Plan"), which are administered by the Organization and
Compensation Committee. Approximately 75% of all active salaried employees of
the Company are eligible for annual cash incentive compensation payments under
the Incentive Compensation Plan. The sole purpose of the Senior Officers' Plan,
which covers only the five most highly compensated officers with respect to a
year in which compensation is awarded, is to assure current federal income tax
deductibility of incentive compensation earned by those five officers whose
compensation might otherwise not be deductible under the Internal Revenue Code.
Incentive awards to the five covered officers are determined pursuant to the
Senior Officers' Plan and the Incentive Compensation Plan, and to the extent
they exceed award levels under the Senior Officers' Plan, such awards may not be
deductible. The Asarco Compensation Deferral Plan permits officers and eligible
employees to defer all or a portion of awards made under the Incentive
Compensation Plan (and, if applicable, the Senior Officers' Plan), and to defer
that portion of salary that could have been deferred under the Savings Plan but
for limitations imposed by the Internal Revenue Code.
Under the Incentive Compensation Plan, a target level of annual incentive
compensation is established for each eligible employee based on the level of
responsibility attached to such employee's position with the Company. For
executive officers these targets are set slightly below
11
<PAGE>
competitive median levels to compensate for salary targets which are set
slightly above competitive median levels. The officers' levels of responsibility
are determined by the Committee after review of substantially equivalent
positions among the Comparator Groups. Awards to employees are increased or
decreased from a predetermined target level, based upon performance measured at
three levels: individual, operating unit or staff group and Company-wide.
Incentive compensation for the Company's executive officers, and particularly
for the Chief Executive Officer, is determined by individual and Company
performance levels. Company performance in 1998 was evaluated against objectives
previously established by the Board of Directors.
In November 1998 and January 1999 the Committee concluded that, although the
Company had made favorable progress in 1998 towards goals in areas including
reduction of copper operating costs and sale of non-core assets, no incentive
compensation should be awarded under the Incentive Compensation Plan or the
Senior Officers' Plan with respect to 1998 in view of the Company's net loss for
the year.
In meetings in April, June and September 1998, followed in each case by
discussion with the Board, the Committee developed a new formula-based incentive
compensation plan for the Company, which was approved by the Board in October
1998 effective for the year beginning January 1, 1999.
The revised Asarco Incentive Compensation Plan has been designed, among other
things, to reward management for achieving and exceeding annual Return on Equity
("ROE") targets approved by the Board. The ROE targets will be reviewed by the
Board each year and may be revised by the Board in response to changes in the
Company's strategy. If minimum or better ROE targets are achieved, incentive
compensation will be paid, subject to adjustments for overall corporate and for
unit or performance management group performance, and also for individual
performance.
In January 1998 the Committee approved awards of stock options and restricted
stock to the Company's officers other than Messrs. Osborne and McAllister, and
recommended to the Board awards to those officers. These awards were made
within long-term incentive income targets based upon analyses by the Company's
compensation consultant. The consultant supplements data from the Comparator
Groups with broad based survey data to develop target levels of "long-term gain
opportunity" for various levels of total compensation, with greater percentages
of long-term gain opportunity attaching to higher responsibility levels. The
Company's consultant surveys a broader group of companies than those in the
Comparator Groups so as to provide a more complete analysis of competitive long-
term incentive compensation award levels.
The Company normally makes long-term incentive awards on an annual basis and
has not established specific stock ownership objectives for its officers. In
1998, long-term incentive compensation awards to the Company's executive
officers were at the median of awards made by the companies included in the
Comparator Groups and the consultant's surveys. In making 1998 long-term
incentive awards the Committee also considered each officer's performance. The
Committee also considered outstanding options and shares of restricted stock
previously awarded to the executive officers. In the case of the Chief
Executive Officer the Committee also considered his performance and
responsibility in establishing the Company's strategic goals and directing all
elements of its performance.
In July 1998 the Committee approved an award of 118,075 stock options
exercisable at the then current market price of $21.75 per share to a broad
group of 1,217 of the Company's middle
12
<PAGE>
management and other employees. The options were granted during a period when
the Company was deferring any general salary increases in view of low copper
prices.
In meetings in October and November 1998 the Committee determined that it
would be in the best interests of the Company for Mr. Osborne to be entitled to
an office and certain executive-level services following his retirement. The
Committee recommended to the Board, and the Board approved, a one-year
consulting agreement under which Mr. Osborne will provide consulting services to
the Company for a daily consulting fee of $4,500 with an annual minimum of 23
consulting days of service. The Company agreed to nominate Mr. Osborne for re-
election in April 1999 as a Company director for a term ending April 2001.
Section 162(m) of the Internal Revenue Code eliminates the Company's Federal
income tax deductions for certain compensation in excess of $1 million paid in a
taxable year to each of the Company's five highest paid officers as reported in
the proxy statement, unless compensation programs meet certain requirements,
principally concerning the adoption of fixed targets. Accordingly, changes in
Asarco executive compensation programs for annual incentive compensation and for
stock option grants as a result of the provision were approved by Asarco
shareholders in 1996. While the Company considers that restricted stock
provides a form of long-term compensation the value of which is directly related
to Company stock performance, the Committee believes that it is not practical to
change the Company's restricted stock plan provisions to meet the requirements
of Section 162(m). The Committee intends, to the extent practicable, to
preserve deductibility under the Internal Revenue Code of compensation paid to
the Company's executive officers. Although compensation paid is generally
deductible, certain compensation paid to some executives may not be deductible.
Willard C. Butcher, Chairman
James W. Kinnear
Martha T. Muse
John D. Ong
James Wood
____________________
13
<PAGE>
EXECUTIVE COMPENSATION
Set forth below is certain information concerning the annual and long-term
compensation for services in all capacities to the Company for fiscal years
1998, 1997 and 1996 of the Company's Chief Executive Officer and the other four
most highly compensated executive officers of the Company:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------------------------- -------------------------------
SECURITIES
OTHER UNDERLYING
NAME AND ANNUAL RESTRICTED STOCK OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS(2) (SHARES) COMPENSATION(3)
- ------------------------------ ---- -------- -------- --------------- ----------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard de J. Osborne......... 1998 $885,000 $24,969 $528,710 73,950 $26,550
Chairman of the 1997 865,000 $957,000 25,588 577,500 67,500 25,950
Board and Chief 1996 811,672 485,000 28,850 539,750 50,000 24,350
Executive Officer
Francis R. McAllister......... 1998 518,750 --- 21,969 140,270 27,500 15,563
President and Chief 1997 441,668 335,300 22,588 159,500 25,500 13,250
Operating Officer 1996 419,008 172,600 25,850 142,875 19,000 12,570
Kevin R. Morano............... 1998 382,258 --- 24,969 116,532 22,500 11,468
Executive Vice President 1997 345,340 259,700 25,588 140,250 21,800 10,360
1996 324,672 141,800 28,150 114,300 15,200 9,740
Robert J. Muth................ 1998 300,000 --- 21,969 75,530 15,200 9,000
Vice President 1997 296,668 76,500 22,588 88,000 15,200 8,900
1996 286,672 74,300 24,825 76,200 10,400 8,600
Augustus B. Kinsolving........ 1998 299,004 --- 20,969 64,740 12,600 1,600
Vice President and 1997 295,004 132,500 22,588 77,000 12,600 1,600
General Counsel 1996 283,672 75,200 25,850 62,250 9,000 1,500
</TABLE>
__________
(1) Represents annual retainer, stock award and fees received for services as a
director of Southern Peru Copper Corporation.
(2) Dollar values of restricted stock awards are shown as of the date of grant.
The number and dollar value of shares of restricted stock holdings owned at
December 31, 1998, and still subject to restrictions are as follows: Mr.
Osborne, 61,500 shares/$930,188; Mr. McAllister, 16,520 shares/$249,865; Mr.
Morano,13,840 shares/$209,330; Mr. Muth, 8,800 shares/$133,100 and Mr.
Kinsolving, 7,600 shares/$114,950. Restrictions on such shares lapse in
equal installments over five years beginning with the grant dates which
occurred during the period from January 1994 through January 1998, except
upon a change of control, in which case all shares vest immediately. Cash
dividends paid on shares of restricted stock are not subject to
restrictions.
(3) Amounts shown reflect matching contributions made by the Company for the
named individuals under the Company's Savings Plan and Compensation Deferral
Plan (formerly the Supplemental Savings Plan). The Savings Plan is a
qualified defined contribution profit sharing plan available generally to
all United States salaried employees with one month of service with the
Company. Savings Plan contributions are immediately vested and may be
withdrawn subject to certain restrictions, penalties and suspension periods.
The Compensation Deferral Plan is a non-qualified deferred compensation plan
that allows eligible employees to defer that portion of their salary that
could have been deferred under the Savings Plan but for limitations imposed
by the Internal Revenue Code, and to defer all or part of their eligible
incentive compensation, as provided in the Plan. Salary deferrals are
eligible for a Company matching contribution under the Plan. Matching
contributions under both plans may not exceed 3% of the employee's salary.
Compensation deferred and amounts contributed by the Company may be
withdrawn subject to certain restrictions and penalties. Deferrals of
incentive compensation are not eligible for a Company matching contribution.
14
<PAGE>
OPTION GRANTS
Set forth below is further information on grants of stock options under the
Company's 1996 Stock Incentive Plan for the period January 1, 1998 to December
31, 1998. No stock appreciation rights ("SARs") were granted in 1998 or
outstanding as of December 31, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT
INDIVIDUAL GRANTS VALUE
--------------------------------------------------------------------------------------------------
NUMBER OF
SHARES
UNDERLYING % OF TOTAL OPTIONS EXERCISE GRANT DATE
OPTIONS GRANTED TO EMPLOYEES OR BASE EXPIRATION PRESENT
NAME GRANTED(1) IN FISCAL YEAR PRICE $/SH DATE VALUE(2)
---- -------------- ---------------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Richard de J. Osborne........... 73,950 15.1% $21.58 1/27/08 $359,323
Francis R. McAllister........... 27,500 5.6% $21.58 1/27/08 133,623
Kevin R. Morano................. 22,500 4.6% $21.58 1/27/08 109,328
Robert J. Muth.................. 15,200 3.1% $21.58 1/27/08 73,857
Augustus B. Kinsolving.......... 12,600 2.6% $21.58 1/27/08 61,223
</TABLE>
__________
(1) The options were awarded under the Company's stockholder-approved 1996 Stock
Incentive Plan. The option price per share equals the fair market value of
the Company's Common Stock on the date of grant. The options provide for
limited rights exercisable upon the occurrence of specified events that may
materially affect the value of the Company's Common Stock and are designated
as such by the Committee that administers the Plan, including a tender or
exchange offer for shares of the Company's Common Stock, the replacement of
a majority of the Board as a result of a proxy contest, a merger or
reorganization of the Company, or a liquidation or dissolution of the
Company. If an exercise event occurs, the holder is entitled to receive the
cash value of the options at the highest market value that the shares traded
over a period of sixty days preceding the event or, in the event of the
consummation of a tender offer, the tender offer price, in each case, less
the exercise price.
(2) Based on the Black-Scholes option pricing model, a widely recognized method
of valuing options. The following assumptions were used in determining the
value of the options using the model: expected volatility of 29.4% based on
actual monthly volatility for the preceding five years, risk-free rate of
return of 5.6% based on the yield of the five year U.S. treasury note as of
the grant date, annual dividend rate of $0.94 per share based on average
dividends paid per share over the preceding ten years, and exercise of the
option five years after the grant date. The actual value, if any, an
executive may realize will depend on the excess of the stock price over the
exercise price on the date the option is exercised, so that there is no
assurance the value realized by an executive will be at or near the value
estimated by the Black-Scholes model. The model is used for valuing market
traded options and is not directly applicable to valuing stock options
granted under the Company's Stock Incentive Plan which cannot be sold.
15
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Set forth below is information concerning stock option exercises by named
executive officers during 1998, including the aggregate value of gains on the
date of exercise, the number of shares covered by exercisable options and the
value of "in-the-money" options as of December 31, 1998. All outstanding options
were exercisable at December 31, 1998.
AGGREGATED OPTION EXERCISES IN 1998 AND
DECEMBER 31, 1998 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT YEAR END IN-THE MONEY
SHARES ACQUIRED VALUE EXERCISABLE/ OPTIONS AT
NAME ON EXERCISE REALIZED UNEXERCISABLE(1) YEAR END(2)
---- --------------- -------- ----------------------- ----------------
<S> <C> <C> <C> <C>
Richard de J. Osborne........... __ __ 399,450 __
Francis R. McAllister........... 9,000 $13,290 151,840 __
Kevin R. Morano................. __ __ 93,200 __
Robert J. Muth.................. __ __ 52,614 __
Augustus B. Kinsolving.......... 2,044 $ 6,457(3) 73,300 __
</TABLE>
__________
(1) The above officers held no unexercisable options at December 31, 1998.
(2) Based on the New York Stock Exchange--Composite Transactions price for the
Company's Common Stock of $15.125 on December 31, 1998.
(3) All after-tax net value realized was received in shares of Common Stock.
16
<PAGE>
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change in the
cumulative total return on the Company's Common Stock against the cumulative
total return on the S&P Composite 500 Stock Index and the S&P Metals
Miscellaneous Group Index for the five year period 1993 to 1998.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
ASARCO INCORPORATED, S&P 500 INDEX & S&P METALS MISC. GROUP INDEX
COMP OF FIVE YEAR
"Asarco" "S&P 500" "S&P Metal"
1993 100 100 100
1994 126.44 101.32 116.76
1995 145.19 139.40 129.16
1996 116.06 171.41 131.78
1997 107.58 228.59 88.58
1998 74.77 293.92 63.72
*TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
**ASSUMES $100 INVESTED ON 12/31/93 IN ASARCO COMMON STOCK, S&P 500 INDEX & S&P
METALS GROUP INDEX
The preceding chart analyzes the total return on Asarco's Common Stock
compared to the S&P 500 and the S&P Metals Miscellaneous Group over the five
year period commencing December 31, 1993. In the first year of this period,
through December 31, 1994, Asarco's stock had a positive return of 26.4%, the
S&P 500 returned 1.3% and the S&P Metal Miscellaneous Group returned 16.8%. In
1995, the return for Asarco's stock was a positive 14.8% compared to positive
returns of 37.6% for the S&P 500 and 10.6% for the S&P Metals Miscellaneous
Group. In 1996, Asarco's stock provided a negative return of 20.1% compared to
positive returns of 23.0% for the S&P 500 and 2.0% for the S&P Metals
Miscellaneous Group. In 1997, Asarco's return was a negative 7.3%, the S&P 500
returned a positive 33.4% and the S&P Metals Miscellaneous Group returned a
negative 32.8%. In 1998, Asarco's stock provided a negative return of 30.5%
compared to a positive return of 28.6% for the S&P 500 and a negative return of
28.1% for the S&P Metals Miscellaneous Group.
17
<PAGE>
RETIREMENT PLANS
The following table shows the estimated amount of annual retirement income
(calculated as a single life annuity benefit) payable to employees for life,
commencing at normal retirement at age 65 in 1999, under the Company's qualified
Retirement Benefit Plan for Salaried Employees ("Plan"), covering substantially
all salaried employees, a prior plan of the Company and a supplemental
retirement benefit plan (the "Supplemental Plan"). The Supplemental Plan is a
non-qualified supplemental retirement benefit plan under which any benefits not
payable from Plan assets by reason of the limitations imposed by the Internal
Revenue Code of 1986, as amended (the "Code") and the loss due to the deferrals
of salaries made under the Company's Deferred Income Benefit System and the
Compensation Deferral Plan are paid from the Company's general corporate funds.
The table assumes Social Security benefit levels as in effect on January 1,
1999.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
APPROXIMATE ANNUAL RETIREMENT BENEFITS
----------------------------------------------------------------------
FINAL
AVERAGE 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
COMPENSATION OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 300,000 64,525 86,033 107,541 129,049 150,557
400,000 87,025 116,033 145,041 174,049 203,057
500,000 109,525 146,033 182,541 219,049 255,557
600,000 132,025 176,033 220,041 264,049 308,057
700,000 154,525 206,033 257,541 309,049 360,557
800,000 177,025 236,033 295,041 354,049 413,057
900,000 199,525 266,033 332,541 399,049 465,557
1,000,000 222,025 296,033 370,041 444,049 518,057
1,100,000 244,525 326,033 407,541 489,049 570,557
1,200,000 267,025 356,033 445,041 534,049 623,057
1,300,000 289,525 386,033 482,541 579,049 675,557
1,400,000 312,025 416,033 520,041 624,049 728,057
1,500,000 334,525 446,033 557,541 669,049 780,557
1,600,000 357,025 476,033 595,041 714,049 833,057
1,700,000 379,525 506,033 632,541 759,049 885,557
1,800,000 402,025 536,033 670,041 804,049 938,057
1,900,000 424,525 566,033 707,541 849,049 990,557
2,000,000 447,025 596,033 745,041 894,049 1,043,057
</TABLE>
Benefits are calculated using a final average earnings formula (i.e., average
of the highest consecutive 60 months of the last 120 months of compensation
received "Final Average Compensation"), minus a Social Security offset.
As of January 31, 1999, the following officers had completed the number of
years of service indicated opposite their names: Richard de J. Osborne, 24
years; Francis R. McAllister, 32 years; Kevin R. Morano, 20 years; Robert J.
Muth, 30 years and Augustus B. Kinsolving, 24 years. Under the Plan and
Supplemental Plan, the amounts of covered compensation of such persons for
calendar year 1998 were Richard de J. Osborne, $1,842,000, Francis R.
McAllister, $854,050, Kevin R.
18
<PAGE>
Morano, $641,958, Robert J. Muth, $376,500 and Augustus B. Kinsolving, $431,504
and consisted of basic salary and cash incentive compensation payments in the
year received as shown in the Summary Compensation Table and in prior proxy
statements. Cash incentive compensation payments are generally received in the
year following that in which they are earned.
Messrs. Osborne, Muth and Kinsolving are eligible to receive additional
benefits, not included in the amounts shown in the table, under the Company's
supplemental plan for designated officers hired in mid-career (the "Mid-Career
Plan"). The Mid-Career Plan provides supplemental retirement benefits out of the
general funds of the Company for officers holding the rank of Vice President or
higher who are determined by the Organization and Compensation Committee to have
had prior business or professional experience valuable to the Company and
relevant to the positions for which they were employed by the Company, and who
at retirement or termination of employment with the consent of the Company will
have been with the Company as a Vice President or higher for 10 years or more.
The Mid-Career Plan provides for annual benefits equal to 55% of the Final
Average Compensation, which amount is reduced by any benefits payable by the
Company or any other employer under any other pension plan not attributable to
the employee's contributions, and by all Social Security benefits payable at the
time of retirement or early termination. All benefits under the Mid-Career Plan
are forfeited by a participant who prior to attaining age 65 terminates
employment with the Company without its consent, except in the case of a change
in control. Participants in the Supplemental Plan and the Mid-Career Plan
receive their benefits in a lump-sum payment at retirement (which payment may be
deferred) unless they elect, in accordance with the terms of the plan, to
receive an annuity benefit.
EMPLOYMENT AGREEMENTS
The Company has employment agreements which provide for severance payments in
certain events to Messrs. Osborne, McAllister, Morano, Muth and Kinsolving and
six other key executive officers. The employment agreements are for a term of
one year, renewable automatically on a year-to-year basis unless terminated by
the Company at least nine months prior to the anniversary date, except that they
continue in effect for not less than three years following occurrence of a
change in control of the Company. If, as a result of a change in control, the
executive's employment is terminated, his responsibilities are materially
reduced, or his salary, bonus or benefits are adversely affected, the executive
is entitled to receive from the Company as severance pay one lump-sum payment
equal to the total of three times such executive's annual base salary, average
incentive compensation payments received for the higher of the three or five
years immediately preceding the date of termination or the change in control,
and the annual cost to the Company of certain benefits such executive is
entitled to receive immediately preceding the date of termination. The executive
would also be entitled to continuation of health and other insurance benefits
for a period of three years following termination. Upon termination by the
Company after a change in control, under the agreements each executive is also
entitled to payment from the Company of the value of such executive's stock
options. The amount of the severance payment from the Company will also include
an amount necessary to reimburse each executive for any excise taxes imposed by
the Code in respect of such payments. In addition, the Supplemental Plan and the
Mid-Career Plan provide for lump-sum payment of accrued benefits upon a change
in control. The employment agreements also provide that following the occurrence
of a potential change in control of the Company each executive officer will
remain in the employ of the Company for 180 days. Under the agreements, change
in
19
<PAGE>
control as to an executive shall not be deemed to have occurred if the event
first giving rise to the change in control involves a publicly-announced
transaction or publicly-announced proposed transaction which at the time of the
announcement has not been previously approved by the Company's Board of
Directors and the executive is part of a purchasing group proposing the
transaction. Also, there is deemed to be no change in control as to an executive
if the executive is part of a purchasing group which consummates a change in
control transaction. No change in control shall occur under the agreements in a
merger or consolidation approved by the stockholders in which the voting
securities of the Company continue to represent 50% or more of the voting power
of the Company or surviving entity, or in a merger or consolidation in which no
person or entity acquires more than 50% of the voting securities of the Company.
In November 1998 the Company entered into a one-year consulting agreement with
Mr. Richard de J. Osborne to take effect upon his retirement as Chief Executive
Officer in April 1999. See "Committee Report on Executive Compensation" above
in this proxy statement.
CERTAIN TRANSACTIONS
During 1998, the Company paid an aggregate amount of approximately $0.6
million to Grupo Mexico, S.A. de C.V. ("Grupo Mexico") and a subsidiary company
for metal processing services and received an aggregate amount of approximately
$4.3 million from Grupo Mexico and a subsidiary for the sale of blister copper
and the sale of an anode furnace. Additionally, during 1998 the Company
purchased blister copper, originating from a subsidiary of Grupo Mexico, from an
unaffiliated third party for $87.5 million. Grupo Mexico beneficially owns
approximately 9.6% of the Company's Common Stock. In addition, during 1998 the
Company entered into financial, securities and commodities transactions,
primarily relating to the Company's copper price protection program and precious
metals transactions, with subsidiaries of Merrill Lynch & Co., Inc. ("Merrill
Lynch"), resulting in net payments to Merril Lynch of approximately $0.3
million. Merrill Lynch may be deemed to own beneficially approximately 6.9% of
the Company's Common Stock. Merrill Lynch disclaims ownership of these shares.
Management believes these transactions to be on terms as favorable as could be
obtained from unaffiliated parties.
ADDITIONAL INFORMATION
The functions of the Organization and Compensation Committee of the Board of
Directors (currently composed of Willard C. Butcher, Chairman, James W. Kinnear,
Martha T. Muse John D. Ong and James Wood) include making recommendations to the
Board with respect to nomination and tenure policy for directors and election of
and title changes for all corporate executive officers. The Committee considers
recommendations for nominees to the Board of Directors from all sources. Such
recommendations should be sent in writing to the Secretary of the Company. The
Company's By-Laws define notice procedures to be followed by stockholders
seeking to nominate directors for election. Under the By-laws, a stockholder
seeking to nominate a director for election by shareholders must give written
notice to the Secretary of the Company at least 90 days in advance of the
anniversary date of the immediately preceding annual meeting, or within 10 days
of the giving of notice of a special meeting. The notice must provide specific
biographical data with respect to each nominee, including such information as is
required to be included in the Company's proxy statement, and a representation
by the stockholder that he or she is a holder of record entitled to vote at the
meeting and that he or
20
<PAGE>
she intends to appear in person or by proxy to make the nomination. Nominations
by stockholders for election of directors at the Company's 2000 annual meeting
of stockholders must be received by January 31, 2000.
The Pension Advisory Committee of the Board of Directors (currently composed
of David C. Garfield, Chairman, Vincent A. Calarco, E. Gordon Gee, Martha T.
Muse, Michael T. Nelligan, and Manuel T. Pacheco) reviews pension fund and
savings plan matters affecting directors, officers and employees of the Company
and makes recommendations on such matters to the Board of Directors. The
Committee met two times during 1998.
The Board of Directors met nine times during 1998. All incumbent directors
attended at least 89% of the aggregate number of meetings of the Board of
Directors and of the Committees of the Board on which they served.
Directors who are not officers or employees of the Company were paid in 1998 a
basic fee of $26,000 plus $1,200 for attendance at each meeting of the Board or
of any Committee of the Board on which they served. Non-employee directors also
receive compensation under a stock award plan providing for the award of 200
shares of Asarco Common Stock per annum payable following each annual meeting to
non-employee directors who continue to serve or who are elected or reelected at
such meeting, or payable to non-employee directors who are first elected between
annual meetings or at a special meeting.
Directors may defer payment of fees payable for serving on the Board or a
Committee under the Deferred Fee Plan for Directors. Deferred compensation will
be credited to an Asarco Stock subaccount and /or to an investment subaccount.
The Asarco Stock subaccount is credited with a bookkeeping entry in shares of
Asarco Common Stock plus quarterly credits for shares of Common Stock that could
be purchased with dividends at fair market value. Transfers to or from the
Asarco Stock subaccount are not permitted, except that beginning one year prior
to retirement, a participant may transfer funds from the Asarco Stock subaccount
to an investment subaccount. The investment subaccount is credited with a deemed
investment return equivalent to the earnings, gains, losses, expenses and
changes in fair market value of one or more investment funds selected by the
participant from funds available under the Plan, as if the amounts deferred had
been so invested. The value of a participant's deferred compensation is payable,
at the participant's election, in cash in a lump sum, or in up to ten annual
installments commencing on January 15 of the year following the year of normal
retirement (or the 15th day of the 13th month following the date of any other
termination of service). The Plan permits early withdrawal or further deferral
of participant accounts, subject to certain financial hardship, prior notice or
penalty requirements. In the event of a participant's death, the value of the
participant's account is paid in a lump sum on the first January or July 15
following the participant's death unless the participant had elected to continue
the schedule for payment of benefits previously elected.
The Directors' Deferred Payment Plan provides that, in addition to the annual
cash retainer, the Company will credit to the deferred payment account of each
director who has less than ten years of Board service an annual amount equal to
75% of the annual cash retainer for up to ten years of service. For 1998, the
credit was $19,500. At least 50% of such amount will be credited to an Asarco
Stock subaccount and the balance may, at each director's election, be credited
to such account or to an investment subaccount, as under the Deferred Fee Plan.
Provisions regarding transfers, payment, early withdrawal and further deferral
are the same as under the Deferred Fee Plan. In the event of a
21
<PAGE>
change of control, the value of a participant's accounts under the Deferred Fee
Plan and the Deferred Payment Plan will be paid in a lump sum immediately.
PROPOSAL TO APPROVE THE SELECTION OF AUDITORS
Upon recommendation of its Audit Committee, the Board of Directors has
selected PricewaterhouseCoopers L.L.P. to serve as independent auditors for the
Company for the calendar year 1999, subject to approval of the stockholders. The
Board of Directors recommends that the stockholders approve the selection of
PricewaterhouseCoopers L.L.P. at the annual meeting. PricewaterhouseCoopers
L.L.P. and its predecessors have served as the Company's auditors continuously
since 1935. PricewaterhouseCoopers L.L.P. have advised the Company that neither
the firm nor any of its members has any direct or material indirect financial
interest in the Company or its subsidiaries.
The Audit Committee currently consists of Messrs. Michael T. Nelligan,
Chairman, Vincent A. Calarco, James C. Cotting, David C. Garfield, James W.
Kinnear and Manuel T. Pacheco. Three meetings were held in 1998. The functions
of the Committee include recommending the engagement of independent auditors,
reviewing the fees, scope and timing of their audit and their other services,
and reviewing the audit plan and results of the audit. The Committee also
reviews the Company's policies and procedures on internal auditing, accounting
and financial controls. The implementation and maintenance of internal controls
are understood to be primarily the responsibility of management.
A representative of PricewaterhouseCoopers L.L.P. will be present at the
stockholders' meeting. The representative will have an opportunity to make a
statement and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the Company's 2000
annual meeting of stockholders must be received by the Company at its principal
executive offices (180 Maiden Lane, New York, N.Y. 10038) by November 19, 1999,
in order to be considered for inclusion in the Company's proxy statement and
form of proxy.
OTHER INFORMATION
The Company is not aware of any other matters to be considered at the meeting.
If any other matters properly come before the meeting, the persons named in the
enclosed form of proxy will vote said proxy in accordance with their judgment on
such matters.
A transcript of the proceedings of the 1999 annual meeting of stockholders
will be available after June 1, 1999 to any stockholder upon request to the
Secretary, specifying a proper purpose for the request, and upon payment of
$10.00 to cover the cost of postage and reproduction.
Asarco has adopted a confidential voting policy regarding shareholder votes at
Company shareholder meetings. Under the policy, shareholders' votes are kept
confidential by an independent inspector of election, who may be the transfer
agent, except as may be necessary to meet applicable
22
<PAGE>
legal requirements or to respond to written comments on proxy cards. Each proxy
solicited by the Board which identifies the vote of a specific shareholder will
be treated in accordance with this policy if the shareholder elects on the proxy
to have such vote kept confidential. In the event of a contested solicitation,
if the Company and the opposing party can agree in writing on mutually
acceptable confidentiality procedures which would apply to each party's
solicitation, the Company agrees to be bound by the confidentiality procedures
set forth in such agreement. If the parties do not agree on mutually acceptable
confidentiality procedures, the Company's policy on confidential voting shall
not apply to the solicitation.
The Asarco confidential voting policy shall not operate to impair free and
voluntary communication between Asarco and its shareholders, including voluntary
disclosure by shareholders of the nature of their votes.
Under the laws of New Jersey, where the Company is incorporated, no business
other than procedural matters may be raised at the annual meeting unless proper
notice to the stockholders has been given. We do not expect any business to
come up for stockholder vote at the meeting other than the items described in
this booklet. If other business is properly raised, your proxy card authorizes
the people named as proxies to vote as they think best.
The cost of soliciting proxies in the accompanying form will be borne by the
Company. Morrow & Co., Inc. and Georgeson & Company Inc. have been employed to
solicit proxies by mail, telephone or personal solicitation for fees to be paid
by the Company of $10,000 each, plus reasonable out-of-pocket expenses. A number
of regular employees of the Company, without additional compensation, may
solicit proxies personally or by mail or telephone.
ASARCO Incorporated
R. Ferri, Secretary
New York, N.Y., March 15, 1999
23
<PAGE>
ASARCO INCORPORATED
P R O X Y
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD APRIL 28, 1999
The undersigned hereby appoints RICHARD de J. OSBORNE, FRANCIS R.
McALLISTER and KEVIN R. MORANO, and each of them, with power of substitution,
the proxies of the undersigned to vote all the shares the undersigned may be
entitled to vote at the annual meeting of stockholders of ASARCO Incorporated,
to be held in the Ricker Auditorium, 180 Maiden Lane, New York, New York at 2
P.M., on Wednesday, April 28, 1999, and at any adjournments thereof upon all
matters specified in the notice of said meeting as set forth on the reverse
hereof, and upon such other business as may lawfully come before the meeting.
Classified Board Election: For the nominees listed on the reverse hereof,
or such other person or persons, if any, as may be chosen to replace unavailable
nominees.
The shares represented by this proxy will be voted as directed by the
stockholder. If a signed proxy is returned to the Company with no voting
instruction given, such shares will be voted FOR all nominees for election as
directors and FOR proposal No. 2. If you do not wish your shares voted FOR a
particular nominee, mark the Exception box and enter the name(s) of the
exception(s) in the space provided.
PLEASE VOTE ON ALL PROPOSALS, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued on the other side.)
ASARCO INCORPORATED
P.O. Box 11467
New York, N.Y. 10203-0467
<PAGE>
- ----------
- ----------
DIRECTORS RECOMMEND A VOTE "FOR"
<TABLE>
<S> <C> <C> <C>
1. Classified board election: FOR all nominees [_] WITHHOLD AUTHORITY to vote [_] *EXCEPTIONS [_]
listed below for all nominees listed below
</TABLE>
Class I Director Nominee: Richard de J. Osborne
Class II Director Nominees: Kevin R. Morano, Michael T. Nelligan, Manuel T.
Pacheco and James Wood
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR A PARTICULAR NOMINEE, MARK THE
"EXCEPTIONS" BOX AND ENTER THE NAME(S) OF THE EXCEPTIONS(S) BELOW.)
*Exception(s):..................................................................
DIRECTORS RECOMMEND A VOTE "FOR"
2. Selection of PricewaterhouseCoopers L.L.P. as independent auditors for 1999.
FOR [_] AGAINST [_] ABSTAIN [_]
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
ADDRESS CHANGE/COMMENTS
If you have noted either an Address Change or made Comments on the reverse side
of this card, mark here. [_]
Mark here to elect to have
your vote kept confidential. [_]
Please sign exactly as name or names appear on this proxy. If stock is held
jointly, each holder should sign. If signing as attorney, trustee, executor,
administrator, custodian, guardian or corporate officer, please give full title.
DATED:___________________________________, 1999
SIGNED:________________________________________
_________________________________________
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. [X]
<PAGE>
ASARCO Incorporated
180 Maiden Lane
New York, New York 10038
BECAUSE OF DELAYS IN MAIL
PLEASE SIGN AND RETURN THE
ENCLOSED PROXY EVEN IF YOU
RETURNED THE ORIGINAL
April 12, 1999
To the Stockholders of
ASARCO Incorporated
A REMINDER
We have previously sent to you proxy soliciting material relating to the
annual meeting of stockholders to be held on April 28, 1999.
According to our latest records, we have not as yet received your Proxy.
The time before the meeting is short and many of our shares are held in small
amounts. Your signed Proxy will be helpful, whether your holding is large or
small, and will aid us in avoiding further expense and delay.
A Proxy and return envelope are enclosed for your use.
Thank you for your cooperation.
Very truly yours,
R. Ferri
Secretary
PLEASE ACT PROMPTLY
