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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
[x] AMENDMENT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31,
1998
or
[_] AMENDMENT TO TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the transition period from
___________ to ___________
Commission file number: 1-13696
AK STEEL HOLDING CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 31-1401455
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization
703 CURTIS STREET
MIDDLETOWN, OHIO 45043
(513) 425-5000
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(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
COMMON STOCK $.01 PAR VALUE NEW YORK STOCK EXCHANGE
10 3/4% SENIOR NOTES DUE 2004 NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
None
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 such
filing requirements for the past 90 days. Yes [x] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [x].
Aggregate market value of the registrant's voting stock held by non-affiliates
at January 22, 1999: $1,092,324,676
At January 22, 1999 there were 59,046,316 shares of the registrant's Common
Stock outstanding.
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NYFS07...:\55\38055\0019\1948\FRM2159P.15F
<PAGE>
INTRODUCTORY NOTE
This Amendment on Form 10-K/A amends and restates in their entirety
Items 10, 11, 12 and 13 of the Annual Report on Form 10-K of AK Steel Holding
Corporation (the "Company") for the fiscal year ended December 31, 1998 to
furnish information previously omitted therefrom pursuant to Paragraph G(3) of
the General Instructions to Form 10-K.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(A) DIRECTORS OF THE REGISTRANT
The following table sets forth the name, age and position with the Company
of each member of the Board of Directors as of February 22, 1999:
Director
Positions with Continuously
Name Age the Company Since
- ---- --- ----------- -----
Allen Born 65 Director 1995
John A. Georges 67 Director 1994
Dr. Bonnie G. Hill 57 Director 1994
Robert H. Jenkins 55 Director 1996
Lawrence A. Leser 63 Director 1995
Robert E. Northam 68 Director 1994
Cyrus Tang 69 Director 1994
Dr. James A. Thomson 54 Director 1996
Richard M. Wardrop, Jr. 53 Chairman of the Board; 1995
Chief Executive Officer
Mr. Born is Chairman of Born Investments, LLC. He is the former Chairman
of Alumax, Inc., having served in that position since November 1993. For more
than five years prior thereto he served as Chairman and Chief Operating Officer
of Amax Inc. Mr. Born also is a director of Cyprus-Amax Minerals Company, Inmet
Mining, the International Primary Aluminium Institute and the Aluminum
Association. He serves as a member of the Board of Trustees of the Robert W.
Woodruff Arts Center, Vice Chairman of the Kennedy Center's Corporate Fund Board
and the Board of Councilors of the Carter Center.
Mr. Georges is a former Senior Managing Director of Windward Capital
Partners LLP, a private investment partnership. He is the retired Chairman and
Chief Executive Officer of International Paper Company, having served in that
position from 1985 to March 1996. He also is a director of International Paper
Company, Ryder System Inc., Warner-Lambert Company and DCV Inc. Mr. Georges is a
member of the Business Council, the Trilateral Commission and the Board of the
University of Illinois Foundation.
Dr. Hill is Senior Vice President of Community Relations for the Los
Angeles Times. She continues as President and Chief Executive Officer of the
Times Mirror Foundation and as a Vice President of the Times Mirror Company,
having been elected to those positions in February 1997. From July 1992 until
January 1997, she was Dean of the McIntire School of Commerce at the University
of Virginia. She served as Secretary of the State and Consumer Services Agency
for the State of California from April 1991 to July 1992. She also is a director
of Niagara Mohawk Power Corporation, Hershey Foods Corporation and
Louisiana-Pacific Corporation.
Mr. Jenkins has served as Chairman of the Board of Sundstrand Corporation
since April 1997 and as President and Chief Executive Officer of that company
since September 1995. For more than five years prior thereto, Mr. Jenkins was
employed by Illinois Tool Works as its Executive Vice President and in other
senior management positions. Mr. Jenkins also is a director of Solutia, Inc.,
Cordant Technologies Inc., Pella Corporation and serves as a member of the
boards of trustees of the Manufacturers Alliance and the National Association of
Manufacturers.
2
<PAGE>
Mr. Leser is Chairman of the E.W. Scripps Company, having also served as
its Chief Executive Officer from July 1985 until May 1996. Mr. Leser also is a
director of Union Central Life Insurance Company, Student Loan Funding Resources
and a member of the Board of Trustees of Xavier University.
Mr. Northam retired as Executive Vice President and Chief Financial
Officer of J.C. Penney Company, Inc. in January 1996, having served in that
position since February 1982. He also served in the office of the chairman of
J.C. Penney Company, Inc. from June 1992 until his retirement.
Mr. Tang has served since 1971 as President and Chief Executive Officer of
Tang Industries, Inc., which, together with its affiliates, operates various
businesses, including steel distribution and processing, metal stamping and
fabrication, ferrous and non-ferrous metal scrap trading and processing,
aluminum die casting, extrusions and recycling, wood and steel office furniture
manufacturing and pharmaceuticals.
Dr. Thomson is the President and Chief Executive Officer of The Rand
Corporation, having served in that capacity since August 1989. He also serves as
a director of Texas Biotechnology Corporation and as a Trustee of the
International Institute for Strategic Studies in London and the Los Angeles
World Affairs Council and is a member of the Council on Foreign Relations in New
York.
Mr. Wardrop was elected Chairman of the Board of the Company effective
January 27, 1997. He has been Chief Executive Officer since May 16, 1995. Mr.
Wardrop also served as President of the Company from April 7, 1994 until March
20, 1997. From June 1992 to April 7, 1994, Mr. Wardrop served as Vice President,
Manufacturing of the Company's predecessor, Armco Steel Company, L.P.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established an Audit and Finance Committee, a
Compensation Committee, a Public Affairs Committee and a Nominating and
Governance Committee.
The Audit and Finance committee recommends to the Board of Directors the
firm of certified public accountants that will be appointed to serve as the
independent auditors of the Company's annual financial statements. The Audit and
Finance Committee also meets with representatives of that accounting firm and
the Company's internal audit staff to review the plan, scope and results of the
annual audit and the recommendations of the independent accountants regarding
the Company's internal accounting systems and controls. The current members of
the Audit and Finance Committee are Messrs. Georges (Chairperson), Born, Northam
and Tang.
The Compensation Committee makes recommendations to the Board of Directors
with regard to the Company's compensation and benefits policies and practices.
The Committee also reviews and makes recommendations to the Board of Directors
with respect to the compensation of the Company's principal executive officers
and administers the Company's Stock Incentive Plan. The current members of the
Compensation Committee are Messrs. Northam (Chairperson), Born and Leser and Dr.
Hill.
The Public Affairs Committee reviews and makes recommendations to the
Board of Directors regarding the Company's public affairs policies and
practices, including its policies with respect to environmental compliance,
employee safety and health and equal employment opportunities. The current
members of the Public Affairs Committee are Dr. Hill (Chairperson), Messrs.
Georges and Jenkins and Dr. Thomson.
The Nominating and Governance Committee reviews and makes recommendations
to the Board of Directors regarding the size, organization, membership
requirements, compensation and other practices and policies of the Board. The
current members of the Nominating and Governance Committee are Messrs. Leser
(Chairperson), Jenkins and Tang and Dr. Thomson.
3
<PAGE>
ATTENDANCE AT MEETINGS
During 1998, there were six regular meetings and three special telephonic
meetings of the Board of Directors, six meetings of each of the Audit and
Finance Committee, five meetings of the Compensation Committee and two meetings
of each of the Public Affairs Committee and the Nominating and Governance
Committee. Each director attended at least 75% of the meetings of the Board and
of each committee of which he or she was a member.
COMPENSATION OF DIRECTORS
During 1998, each director who is not an employee of the Company received
an annual fee of $33,000 for service on the Board of Directors. One-half of that
amount was paid in the form of shares of Common Stock of the Company valued at
market on the date of issuance and the balance was paid in cash (receipt of
which may have been deferred pursuant to a prior election) or, at the director's
option, in the form of additional shares of Common Stock. Each director who
chairs a committee of the Board of Directors received an additional annual fee
of $3,600 for such service. Non-employee directors also were paid a fee of
$1,500 for each Board meeting and each committee meeting they attended and were
reimbursed for their expenses incurred in attending those meetings. An employee
of the Company who serves as a director receives no additional compensation for
such service. Non-employee directors are required to retire from the Board at
age 70 but are entitled thereafter to an annual retainer equal to the annual
director's fee in effect at the time of such retirement, provided that they
remain available to the Chairman on a consulting basis. Upon first being elected
to the Board, each non-employee director also is granted options under the
Company's Stock Incentive Plan to purchase a total of 10,000 shares of the
Company's Common Stock at its then prevailing market price. The options vest on
the first anniversary of the date of grant and may be exercised at any time
thereafter until the tenth anniversary of the grant date.
ELECTION OF DIRECTORS
Each of the Company's Directors is elected for a term expiring on the date
of the next Annual Meeting of the Company's stockholders and until his or her
successor is duly elected and has qualified.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and officers, and persons who
own beneficially more than ten percent of a registered class of the Company's
equity securities, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and
greater-than-ten-percent beneficial owners are required by Rule 16a3(e) under
the Exchange Act to furnish the Company with copies of all reports that they
file pursuant to Section 16(a).
To the Company's knowledge, based solely upon a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to the
Company's officers and directors were complied with, except that a report for
one transaction was filed late by Mr. Tang.
(B) EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the information with respect to executive officers of
the Company set forth in Part I of this Annual Report on Form 10-K immediately
following Item 4 - Submission of Matters to a Vote of Security Holders.
4
<PAGE>
Each officer of the Company holds office for a term of one year and until
his successor is duly elected and has qualified.
ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY OF CASH AND OTHER COMPENSATION
Annual compensation paid to executive officers of the Company consists of
salary and cash bonus awards under the Company's Annual Management Incentive
Plan. Long-term compensation consists of restricted stock awards and stock
options under the Company's Stock Incentive Plan and payouts in the form of cash
and restricted stock under the Company's Long-Term Performance Plan.
The following table sets forth the cash compensation, as well as certain
other compensation, paid or accrued by the Company for each of the past three
years to the Chief Executive Officer and each of the other four most highly
compensated executive officers of the Company (the "Named Executives") serving
as such at December 31, 1998.
5
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
AWARDS PAYOUTS
------ -------
SECURITIES ALL
RESTRICTED UNDERLYING OTHER
NAME AND STOCK STOCK LTIP COMPEN-
PRINCIPAL POSITION SALARY BONUS(3) AWARDS(4) OPTIONS PAYOUTS(5) SATION(6)
AT 12/31/1998 YEAR ($) ($) ($) (# OF SHARES) ($) ($)
- -------------------------- ------ --------- ----------- ----------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard M Wardrop, Jr. 1998 900,000 1,350,000 957,815 100,000 1,350,000 73,074
Chairman and Chief 1997 700,000 1,050,000 2,340,000 250,000 1,050,000 63,970
Executive Officer 1996 546,875 556,992 1,209,375 160,000 862,500 33,586
James L. Wareham(1) 1998 400,000 600,000 383,126 50,000 600,000 34,741
President 1997 333,333 500,000 449,219 60,000 500,000 37,618
1996 - - - - - -
Richard E. Newsted 1998 332,500 332,500 306,501 40,000 350,000 24,528
Executive Vice President, 1997 293,333 293,333 151,750 20,000 315,000 24.559
Commercial 1996 236,669 233,522 322,500 42,000 250,000 14,758
John G. Hritz 1998 296,667 296,667 191,563 25,000 310,000 21,873
Executive Vice President, 1997 246,667 246,667 151,750 20,000 270,000 20,635
General Counsel and 1996 153,726 151,682 201,563 24,000 200,000 8,198
Secretary
Thomas C. Graham Jr. (2) 1998 225,000 225,000 76,625 10,000 225,000 16,660
Vice President 1997 208,333 208,333 75,875 10,000 225,000 17,512
Research and Engineering 1996 104,167 197,345 217,188 25,000 104,672 5,564
</TABLE>
- ------------------
(1) Mr. Wareham joined the Company effective March 1, 1997 and was elected
President on March 20, 1997.
(2) Mr. Graham joined the Company on June 24, 1996.
(3) Amounts shown in this column represent bonuses earned under the Company's
Annual Management Incentive Plan.
(4) The dollar value of each restricted stock award indicated in this column
is based on the average price of the Company's Common Stock on the date of
the award. The amounts shown do not include the value of restricted stock
awards representing a portion of the payouts under the Company's Long-Term
Performance Plan. All awards shown in this column were granted pursuant to
the Company's Stock Incentive Plan. The aggregate number of shares of
restricted stock held by the Named Executives at December 31, 1998 and the
dollar value thereof (based on the closing price of the Company's Common
Stock on December 31, 1998) were as follows: for Mr. Wardrop-245,000,
$5,757,500; for Mr. Wareham-45,000, $1,057,500; for Mr. Newsted-45,000,
$1,057,500; for Mr. Hritz-29,500, $693,250; and for Mr. Graham-15,500,
$364,250. Dividends are paid on shares of restricted stock to the extent
declared and paid on the Company's Common Stock.
(5) The amounts shown in this column represent payouts under the Company's
Long-Term Performance plan for the performance period ended December 31,
1998. One half of the amount shown for each
- -----------------------------------------
Footnotes continue on following page.
6
<PAGE>
Named Executive was paid in cash (receipt of which may have been deferred
pursuant to a prior election by such Named Executive) and the balance in
the form of an award of shares of restricted stock valued on the basis of
the market price of the Company's Common Stock on the date of the approval
of the share issuance by the Compensation Committee. Those shares are in
addition to shares underlying restricted stock awards granted in 1998
pursuant to the Stock Incentive Plan but are subject to all of the terms
and conditions of that plan and vest with respect to 20% of the shares on
each of the first through fifth anniversaries of the award.
(6) The amounts shown in this column for 1998 were derived as follows: (i) for
Mr. Wardrop, $10,074 was attributed to him for imputed income arising out
of a Company-provided life insurance plan and $63,000 represents the
Company's matching contributions for his account to the Company's thrift
plan; (ii) for Mr. Wareham, $6,741 was attributed to him for imputed
income arising out of a Company-provided life insurance plan and $28,000
represents the Company's matching contribution for his account to the
Company's thrift plan; (iii) for Mr.Newsted, $1,253 was attributed to him
for income arising out of a Company-provided life insurance plan and
$23,275 represents the Company's matching contribution for his account to
the Company's thrift plan; (iv) for Mr. Hritz, $1,106 was attributed to
him for imputed income arising out of a Company-provided life insurance
plan and $20,767 represents the Company's matching contribution for his
account to the Company's thrift plan; and (v) for Mr. Graham, $814 was
attributed to him for imputed income arising out of a Company-provided
life insurance plan, $15,750 represents the Company's matching
contribution for his account to the Company's thrift plan and $96 was paid
to him pursuant to a Company-provided medical plan. All premiums for
Company-provided life insurance are paid by the Company; income is imputed
to an employee in an amount equal to the portion of the premium applicable
to coverage exceeding $50,000.
STOCK OPTIONS
Pursuant to its Stock Incentive Plan, the Company grants to its key
employees, including its executive officers, options to purchase shares of its
Common Stock. The plan does not provide for, and the Company does not grant,
stock appreciation rights. The following table sets forth information with
respect to stock options granted to the Named Executives in 1998:
STOCK OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
OPTIONS OPTIONS EXERCISE ANNUAL RATES OF STOCK
GRANTED GRANTED TO PRICE PER PRICE APPRECIATION FOR
(# OF EMPLOYEES SHARE(1) EXPIRATION OPTION TERM(2)
NAME SHARES) IN 1998 ($) DATE 5% ($) 10% ($)
- ---- ------- ------- --- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
R.M. Wardrop, Jr... 100,000 25.48 19.1563 5/21/08 1,204,729 3,053,021
J.L. Wareham....... 50,000 12.74 19.1563 5/21/08 602,365 1,526,510
R.E. Newsted....... 40,000 10.19 19.1563 5/21/08 481,892 1,221,208
J.G. Hritz......... 25,000 6.37 19.1563 5/21/08 301,182 763,255
T.C. Graham, Jr.... 10,000 2.55 19.1563 5/21/08 120,473 305,302
</TABLE>
- --------------------
Footnotes appear on following page
7
<PAGE>
Footnotes:
(1) All options provide for an exercise price equal to the fair market value
of the underlying shares as of the date of grant.
(2) The amounts shown in these columns represent the potential appreciation
in the value of the options over their stated term of ten years, based
upon assumed compounded rates of appreciation of 5% per year (equivalent
to 162.89%) and 10% per year (equivalent to 259.37%), respectively. Those
amounts are not intended as forecasts of future appreciation, which is
dependent upon the actual increase, if any, in the market price of the
shares underlying the options, and there is no assurance that the amounts
of appreciation shown in these columns will be realized.
The following table provides information as to options exercised by each
of the Named Executives in 1998 and the value of options held by them at year
end:
AGGREGATE OPTION EXERCISES IN 1998 AND
OPTION VALUES AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OF SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE DECEMBER 31, 1998 DECEMBER 31, 1998($)(1)
---------------------------- ----------------------------
NAME EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R.M. Wardrop, Jr........ 0 -- 510,002 319,998 4,110,226 1,211,660
J.L. Wareham............ 0 -- 20,000 90,000 107,500 424,375
R.E. Newsted............ 0 -- 154,668 67,332 1,175,927 270,453
J.G. Hritz.............. 0 -- 28,002 46,330 127,833 187,009
T.C. Graham, Jr......... 0 -- 20,002 24,998 41,672 84,578
</TABLE>
- ------------------
(1) Calculated on the basis of the difference between the option exercise
price and the closing price of the Company's Common Stock on the New York
Stock Exchange on December 31, 1998 ($23.50 per share).
LONG-TERM INCENTIVE AWARDS
The Company's Long-Term Performance Plan is designed to increase
management's focus on the Company's longer term performance relative to that of
a group of six other steel producers--Bethlehem Steel Corporation, Inland Steel
Company, LTV Steel Company, Inc., National Steel Corporation, Nucor Corporation
and the U.S. Steel Group of USX Corporation--and to further enhance the
Company's ability to retain the services of its key executives.
Long-term performance is measured on the basis of what the Company deems
to be a critical indicator of profitability in the steel industry--operating
profit per ton of steel shipped--which, for purposes of the plan, is assessed
both cumulatively and annually over a performance period of three years, with a
new performance period commencing annually. The current three-year performance
period ended December 31, 1998. In addition, upon inception of the plan, the
Board of Directors also provided for a one-time transitional two-year
performance period that ended December 31, 1996. Payouts in respect to completed
performance periods are shown in the Summary Compensation Table on page 6.
8
<PAGE>
Payouts under the plan are made shortly following the expiration of the
applicable performance period. No payout is made unless (i) the Company reports
net income for the last year of the performance period and (ii) the Company's
operating profit per ton ranks at least in the upper 50% of the competitor group
either on a cumulative basis over the entire performance period or during the
last year of the performance period. The payout to each participating executive
is determined by multiplying the executive's annual base salary as of the end of
the performance period by an award percentage. A target percentage for each
executive is established at or shortly following the beginning of the
performance period, subject to the approval of the Compensation Committee. The
actual award percentage may be higher or lower than the target percentage,
depending upon the Company's performance relative to that of the competitor
group during the performance period, and currently ranges from a threshold of
15% of the target percentage to a maximum of 200% of the target percentage. An
executive would be entitled to the maximum payout only if the Company's
performance ranks first among the competitor group both on a cumulative basis
over the entire performance period and during the last year thereof. No payment
is made to an executive who has voluntarily resigned or been discharged for
cause prior to the scheduled date of payout. Upon retirement, an executive is
entitled under the Plan to receive, in lieu of any amounts to which he or she
otherwise might have been entitled in respect of performance periods that
commenced prior to his or her retirement but are scheduled to expire subsequent
thereto, a payment equal to his or her payout for the performance period last
ended prior to the date of his retirement. Up to 50% of an executive's payout
may be made in the form of an award of shares of restricted stock, which vests
with respect to 20% of the shares on each of the first through fifth
anniversaries of the award date.
The following table sets forth information with respect to potential
payouts to the Named Executives pursuant to awards granted to them in 1998 under
the Company's Long-Term Performance Plan:
LONG-TERM PERFORMANCE PLAN AWARDS IN 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES, PERFORMANCE
UNITS OR PERIOD UNTIL ESTIMATED FUTURE PAYOUTS(2)
OTHER MATURATION OR THRESHOLD TARGET MAXIMUM
NAME RIGHTS(1) PAYOUT ($) ($) ($)
- ---- ----------- ---------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
R.M. Wardrop, Jr.................. 75 1/1/98-12/31/00 101,250 675,000 1,350,000
J. L. Wareham..................... 75 1/1/98-12/31/00 45,000 300,000 600,000
R.E. Newsted...................... 50 1/1/98-12/31/00 26,250 175,000 350,000
J.G. Hritz........................ 50 1/1/98-12/31/00 23,250 155,000 310,000
T.C. Graham, Jr................... 50 1/1/98-12/31/00 16,875 112,500 225,000
</TABLE>
- ---------------
(1) The number set forth in this column for a Named Executive is the target
percentage specified by the Compensation Committee.
(2) For purposes of estimating a Named Executive's future payout, the
applicable percentage has been multiplied against the Named Executive's
annual base salary as of December 31, 1998. A Named Executive's ultimate
payout will be determined by multiplying the applicable award percentage
against his or her actual base salary at December 31, 2000, which may not
be the same as that in effect at December 31, 1998.
AGREEMENTS WITH PRINCIPAL OFFICERS
The Company's executive officers and certain other key managers are
covered by agreements that provide for severance payments and certain other
benefits in the event (a "Triggering Event") of a diminution of the covered
employee's salary or responsibility or a termination of the employee's
employment other than for
9
<PAGE>
cause (as defined in the agreements). The agreements generally provide that upon
the occurrence of a Triggering Event, an elected officer (including each of the
Named Executives) would be entitled to (i) a lump sum severance payment equal to
the salary to which that officer would otherwise have been entitled for a period
(the "severance payment period") of 36 months (if the Triggering Event occurs
within 24 months following the occurrence of a Change in Control, as defined in
the agreements) or 24 months (in the case of a Triggering Event occurring other
than within 24 months after a Change in Control); (ii) a lump sum payment under
the Company's Annual Management Incentive Plan of a sum equal to the aggregate
annual bonuses to which the officer would have been entitled for the applicable
severance payment period based upon the bonus actually received by the employee
under that plan for the year preceding the Triggering Event; (iii) the immediate
vesting and lapse of all restrictions on shares that were the subject of
restricted stock awards to the employee under the Company's Stock Incentive
Plan; (iv) the right, for a period of three years following the Triggering
Event, to exercise any stock options that were outstanding at the date of the
Triggering Event; and (v) continuing coverage under the Company's benefit plans
(including life, health and other insurance benefits) for the duration of the
applicable severance payment period. For all key managers other than executive
officers, the applicable severance period is 18 months, whether or not the
Triggering Event is preceded by a Change in Control. The agreements with certain
senior executive officers (including the Named Executives) also provide that,
upon either (i) an involuntary termination of employment other than for cause
(whether or not preceded by a Change in Control) or (ii) a voluntary termination
of employment for good reason (as defined in the agreements) within 24 months
following a Change in Control, the officer would be entitled to a further lump
sum payment equal to (and in lieu of) all amounts to which that officer would
otherwise have been entitled under the Company's supplemental retirement plan
(described below under "Pension Plans"), such payment to be calculated as if he
had become fully vested under the plan and had retired at age 60 (or his then
actual age, if higher). If the Triggering Event is preceded by a Change in
Control and any portion of the required payments to an elected officer becomes
subject to the federal excise tax on so-called "parachute payments," the
agreement with that officer provides for "gross-up" so that the net amount
retained by the officer, after deduction of the excise tax and any applicable
taxes on the "gross-up" payment, is not reduced as a consequence of such excise
tax. The Company's agreements with its senior executive officers (including the
Named Executives) provide to each such officer the right, exercisable only
during a thirty-day period commencing (i) immediately after the occurrence of a
Change in Control in the case of the Chief Executive Officer, and (ii) 180 days
following the occurrence of a Change in Control in the case of all other senior
executive officers, to voluntarily terminate his or her employment and obtain
the same benefits as would be available following a Triggering Event.
PENSION PLANS
The Company's executive officers are eligible for retirement benefits
under several plans: (i) a qualified defined benefit plan (the "Defined Benefit
Plan") that covers salaried employees whose employment by the Company began on
or before December 31, 1991 and provides benefits based on the employee's final
average earnings, (ii) a qualified cash balance plan (the "Cash Balance Plan"
that covers salaried employees whose employment by the Company began on or after
January 1, 1992 and accumulates credits based on the employee's length of
service and compensation throughout the period of service, and (iii) a
supplemental retirement plan (the "Supplemental Plan") that provides a "make up"
of qualified plan benefits that may be denied to participants in the Defined
Benefit Plan or the cash Balance Plan because of limitations imposed by the
Internal Revenue Code of 1986, as amended, as well as supplemental benefits for
employees with a minimum of ten years of service, including at least five years
of service as a member of key management, subject to a limit on the total
benefits that may be paid to a covered participant equal to the lesser of (x)
75% of the participant's annual base salary during a defined period preceding
retirement or (y) 45% of the participant's average "covered compensation"
(consisting of base salary, bonuses under the Annual Management Incentive Plan
and payouts under the Long-Term Performance Plan) during that period.
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ESTIMATED ANNUAL PENSION BENEFITS
Each of the Named Executives (other than Mr. Hritz), and all but four of
the Company's other executive officers, commenced employment subsequent to
January 1, 1992. Officers employed subsequent to that date are covered under the
Cash Balance Plan and the Supplemental Plan. The following table sets forth the
estimated combined annual retirement benefits (calculated on a straight line
annuity basis) that may become payable to a covered participant in the higher
compensation classifications, including the Named Executives, under the Cash
Balance Plan and the Supplemental Plan, assuming satisfaction of the requisite
service requirements at the time of retirement:
ESTIMATED MAXIMUM BENEFIT ESTIMATED MAXIMUM BENEFIT
BASED ON BASED ON
AVERAGE BASE SALARY AVERAGE COVERED COMPENSATION
------------------- ----------------------------
AVERAGE AVERAGE
BASE ESTIMATED COVERED ESTIMATED
SALARY($) BENEFIT ($) COMPENSATION($) BENEFIT($)
--------- ----------- --------------- ----------
200,000 150,000 600,000 270,000
300,000 225,000 800,000 360,000
400,000 300,000 1,000,000 450,000
500,000 375,000 1,200,000 540,000
600,000 450,000 1,400,000 630,000
700,000 525,000 1,600,000 720,000
800,000 600,000 1,800,000 810,000
900,000 675,000 2,000,000 900,000
1,000,000 750,000 2,200,000 990,000
It is anticipated that, so long as annual bonuses under the Management Incentive
Plan and payouts under the Long-Term Performance Plan continue to represent the
principal contributants to the covered compensation of the Company's executive
officers, benefits to those officers, including those of the Named Executives
covered under the Cash Balance Plan, will be limited to 75% of the highest
annual base salary during the period of his or her employment. The following
table sets forth, as of December 31, 1998, the number of years of creditable
service and the applicable covered compensation and base salary for pension
benefit calculation purposes for each of the Named Executives covered under the
Cash Balance Plan:
YEARS OF COVERED BASE
SERVICE COMPENSATION($) SALARY($)
------- --------------- ---------
R.M. Wardrop Jr............... 6.5 2,788,789 900,000
J.L. Wareham.................. 1.8 1,600,000 400,000
R.E. Newsted.................. 4.3 878,952 350,000
T.C. Graham, Jr............... 2.5 684,576 225,000
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Five of the Company's executive officers (including Mr. Hritz) commenced
employment with the Company prior to January 1, 1992. Those officers are covered
under the Defined Benefit Plan and the Supplemental Plan. The following table
sets forth, as of December 31, 1998, the estimated combined annual retirement
benefits (calculated on a straight line annuity basis and before a required
deduction of a portion of applicable Social Security benefits) that may become
payable to a covered participant in the higher compensation classifications
under the Defined Benefit Plan and the Supplemental Plan:
AVERAGE YEARS OF SERVICE
COVERED ------------------------------------------
COMPENSATION 15 20 30 40
------------ -------- -------- -------- --------
$ 400,000 $180,000 $180,000 $189,000 $252,000
$ 500,000 $225,000 $225,000 $236,250 $315,000
$ 600,000 $270,000 $270,000 $283,500 $378,000
$ 700,000 $315,000 $315,000 $330,750 $441,000
$ 800,000 $360,000 $360,000 $378,000 $504,000
$ 900,000 $405,000 $405,000 $425,250 $567,000
$1,000,000 $450,000 $450,000 $472,500 $630,000
$1,100,000 $495,000 $495,000 $519,750 $693,000
$1,200,000 $540,000 $540,000 $567,000 $756,000
To the extent that a participant's covered compensation substantially exceeds
his base salary, annual benefits will be limited to 75% of his highest annual
base salary during the period of his employment and, therefore, will be less
than the amounts shown in the foregoing table.
Under the Defined Benefit Plan, a participant's average pensionable
earnings are determined on the basis of the highest amounts paid to that
participant in any 60 consecutive months of service during his or her last 120
consecutive months of service. Mr. Hritz has 9.3 years of credited service under
the Defined Benefit Plan. If his employment were to continue until retirement at
age 65 at his 1998 rate of remuneration, he would be entitled to receive an
annual pension of $232,500.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are not employees of the Company
and do not participate in any of the Company's management compensation programs.
No member of the Committee is an executive officer of a company of which any
executive officer of the Company serves as a director.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth as of February 22, 1999 information with
respect to the beneficial ownership of the Company's Common Stock by (i) each
officer of the Company named in the Summary Compensation Table, (ii) each
current director and (iii) all directors and executive officers of the Company
as a group.
SHARES PERCENTAGE OF
OWNED OUTSTANDING
BENEFICIALLY(1) SHARES
--------------- ------
Allen Born.......................... 15,562 *
John A. Georges..................... 16,624 *
Thomas C. Graham, Jr................ 51,466 *
Dr. Bonnie G. Hill.................. 4,559 *
John G. Hritz....................... 97,958 *
Robert H. Jenkins................... 13,029 *
Lawrence A. Leser................... 12,681 *
Richard E. Newsted.................. 235,440 *
Robert E. Northam................... 13,309 *
Cyrus Tang.......................... 56,624 *
Dr. James A. Thomson................ 12,079 *
Richard M. Wardrop, Jr.............. 891,415 1.5%
James L. Wareham.................... 110,668 *
All directors and executives
officers as a group (21 persons)... 1,940,671 3.3%
-------------
*Less than 1%
(1) Includes shares subject to stock options exercisable within 60 days.
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OTHER BENEFICIAL OWNERS
The following table sets forth information with respect to each person
known by the Company to own beneficially more than five percent of the
outstanding Common Stock of the Company as of December 31, 1998:
PERCENTAGE
SHARES OF
NAME AND ADDRESS OWNED OUTSTANDING
OF BENEFICIAL OWNER BENEFICIALLY SHARES
------------------- ------------ ------
Franklin Resources, Inc. (1)........ 3,116,900 5.3%
777 Mariners Island Boulevard
San Mateo, California 94404
Kawasaki Steel Corporation.......... 8,510,638 14.4%
Hibiya, Kokusai Building
2-3 Uchisaiwaicho, 2-Chome
Chiyoda-Ku, Tokyo 100 Japan
Neuberger & Berman, LLC (2)......... 6,989,474 11.8%
605 Third Avenue
New York, New York 10158
The Prudential Insurance Company
of America (3).................... 4,494,200 7.6%
751 Broad Street
Newark, New Jersey 07102
Sasco Capital, Inc. (4)............. 3,686,772 6.2%
10 Sasco Hill Road
Fairfield, Connecticut 06430
Vanguard/Windsor Fund, Inc. (5)..... 6,199,352 10.5%
100 Vanguard Boulevard
Malvern, Pennsylvania 19355
Wellington Management Company (6)... 6,207,144 10.5%
75 State Street
Boston, Massachusetts 02109
-------------
(1) Based on information contained in a statement on Schedule 13G,
dated January 22, 1999, Franklin Resources, Inc. is a holding
company for subsidiaries that include investment advisers
registered under the Investment Advisers Act of 1940 having
sole voting and dispositive power with respect to an aggregate
of 3,116,900 shares held by or for the account of various
clients for whom they furnish advisory services.
(2) Based on information set forth in a statement on Schedule 13G,
dated February 5, 1999, Neuberger & Berman, LLC, a
broker-dealer registered under the Securities Exchange Act of
1934 and an investment adviser registered under the Investment
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Advisers Act of 1940, has shared dispositive power with
respect to an aggregate of 6,989,474 shares held by or for the
account of various clients for whom it serves as an investment
adviser, with sole voting power with respect to 3,668,174 of
those shares and shared voting power with respect to 3,321,300
of those shares.
(3) Based on information set forth in a statement on Schedule 13G,
dated February 1, 1999, The Prudential Insurance Company of
America, a mutual insurance company, in its capacity as an
investment adviser registered under the Investment Advisers
Act of 1940, had sole voting and dispositive power with
respect to an aggregate of 69,800 shares and shared voting and
dispositive power with respect to an aggregate of 4,424,400
shares, all of which were held by or for the benefit of
various investment advisory clients.
(4) Based on information set forth in a statement on Schedule 13G,
dated February 8, 1999, Sasco Capital, Inc., an investment
adviser registered under the Investment Advisers Act of 1940,
has sole dispositive power with respect to an aggregate of
3,686,772 shares held by or for the account of various clients
for whom it serves as an investment adviser, with sole voting
power with respect to 2,268,606 of those shares.
(5) Based on information set forth in a statement on Schedule 13G,
dated February 11, 1999, Vanguard Windsor Funds-Windsor Fund,
an investment company registered under the Investment Company
Act of 1940, has sole voting power and shared power with
respect to an aggregate of 6,199,352 shares.
(6) Based on information set forth in a statement on Schedule 13G,
dated December 31, 1998, Wellington Management Company, an
investment adviser registered under the Investment Advisers
Act of 1940, has shared dispositive power with respect to an
aggregate of 6,207,144 shares owned by various clients,
including Vanguard Windsor Fund, for whom it serves as an
investment adviser, with shared voting power with respect to
7,792 of those shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In the ordinary course of business, the Company sells finished steel to,
and purchases steel scrap from, an affiliate of Tang Industries, Inc., of which
Mr. Tang, a director of the Company, is President and Chief Executive Officer.
During 1998, those sales and purchases, which were made on arms' length terms,
aggregated $6.5 million and $2.3 million, respectively.
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this Amendment
to its Annual Report on Form 10-K to be signed on its behalf by the undersigned,
thereunto duly authorized.
AK STEEL HOLDING CORPORATION
By: /s/ John G. Hritz
-------------------------------------------
John G. Hritz,
Executive Vice President, General Counsel
and Secretary
Dated: February 25, 1999
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