UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1998
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 1-873-2
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ARMCO INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-0200500
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Oxford Centre, 301 Grant Street, Pittsburgh, Pennsylvania 15219-1415
- ------------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 412/255-9800
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
Class A Preferred Stock, without par value New York Stock Exchange
Class B Preferred Stock, $1 par value each New York Stock Exchange
Common Stock, $.01 par value each/ New York Stock Exchange
Rights to Purchase Participating Preferred
Stock of Class A Preferred Stock New York Stock Exchange
9% Senior Notes, due 2007 New York Stock Exchange
8 7/8% Senior Notes, due 2008 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 (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by nonaffiliates of Armco
Inc. (assuming solely for purposes of this Form, that all members of
registrant's Board of Directors are "affiliates") was approximately
$698,241,346 as of February 26, 1999.
As of the close of business on February 26, 1999, there were 107,912,948
shares of Common Stock outstanding.
Documents incorporated by reference herein include:
Annual Report to Shareholders for the year ended December 31, 1998 --
Parts I, II, and IV of this report.
Proxy Statement for the 1999 Annual Meeting of Shareholders filed with
the Commission under Rule 14a-6 of the Securities Exchange Act of 1934 in
connection with the Company's 1999 Annual Meeting of Shareholders -- Part III
of this report.
PART I
ITEM 1. BUSINESS
General
Armco Inc. ("Armco" or the "Company") was incorporated as an Ohio
corporation in 1917 as a successor to a New Jersey corporation incorporated in
1899. Armco believes it is the largest domestic producer of stainless sheet
and strip and electrical steels, based on tons shipped. Armco's Sawhill
Tubular Division manufactures a wide range of steel pipe and tubing products
for use in the construction, industrial and plumbing fields. The Company also
owns Douglas Dynamics, L.L.C. ("Douglas Dynamics"), the largest North American
manufacturer of snowplows for four-wheel drive light trucks. Armco also
operates an industrial park on the Houston, Texas ship channel.
Armco's strategic objectives include enhancing and expanding its leading
domestic position as a producer of specialty flat-rolled steels via
incremental facility additions that add value through cost reductions or
productivity gains, or through joint venture/partnership arrangements where
value can be added without major capital outlay. In addition, Armco is
exploring possible acquisitions of "downstream," fabricating or parts-
producing businesses -- such as first and second operations like blanking,
stamping, tool and die manufacturing, welding, fabrication and forming
operations -- that will allow it to fully utilize its specialty steel
technical, manufacturing and customer service expertise. Armco also intends
to expand its snowplow business by adding new snowplow and ice control
products to reach new market segments as well as modestly expanding its
industrial park facility.
Business Segments
In 1998, Armco adopted Statement of Financial Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information. As a
result, Armco changed its segment presentation to reflect the operating
segments and performance measurements evaluated regularly by its chief
executive officer.
The Company operates in three business segments: Specialty Flat-Rolled
Steels, Tubular Products, and Other Businesses. Information on the amounts of
revenue, operating results and identifiable assets attributable to each of
Armco's business segments, set forth in Note 8 of the Notes to Consolidated
Financial Statements in Armco's Annual Report to Shareholders for the year
ended December 31, 1998, is incorporated by reference herein.
Additional information about Armco's business segments is set forth in
Management's Discussion and Analysis in Armco's Annual Report to Shareholders
for the year ended December 31, 1998, which is incorporated by reference
herein.
Specialty Flat-Rolled Steels Segment
Armco's Specialty Flat-Rolled Steels businesses produce and finish flat-
rolled stainless, electrical and galvanized carbon steels at manufacturing
operations located in Butler, Pennsylvania, and Coshocton, Dover, Mansfield
and Zanesville, Ohio. The Butler and Mansfield facilities produce both semi-
finished and finished specialty stainless and electrical steels in slab, hot
band and sheet and strip form. The Coshocton plant finishes stainless steel
in sheet and strip form and the Zanesville plant finishes stainless and
electrical sheet and strip. The Dover facility coats carbon steel products at
its
1
galvanizing facility. The segment also includes the results of European
trading companies that buy and sell steel and manufactured steel products.
The stainless and electrical steel industry is a relatively small but
distinct segment of the overall steel industry that represented approximately
2% of domestic steel tonnage but accounted for approximately 14% of domestic
steel revenues in 1998. These steels differ from basic carbon steel by their
metallurgical composition. Electrical steels have properties that make them
desirable in the generation and distribution of electricity. Stainless steels
are made with a high alloy content, which permits their use in environments
that demand exceptional hardness, toughness, strength and resistance to heat,
corrosion or abrasion, or combinations thereof. Unlike high-volume carbon
steel, stainless and electrical steels are generally produced in relatively
small quantities utilizing special processing techniques designed to meet more
exacting specifications and tolerances. Stainless and electrical steel
products sell at higher prices and generate higher average profit margins than
carbon steel products.
Stainless steel contains elements such as chromium, nickel and molybdenum
that give it the unique qualities of resistance to rust, corrosion and heat;
high strength; good wear characteristics; natural attractiveness; and ease of
maintenance. Stainless steel is used in the automotive and aerospace
industries, and in the manufacture of food handling, chemical processing,
pollution control, medical and health equipment and other products where its
combination of strength, durability and attractiveness is desirable.
Electrical steels are iron-silicon alloys which, through special production
techniques, possess unique magnetic properties that make them desirable for
use as energy efficient material in such applications as power transmission
and distribution transformers, electrical motors and generators.
Armco expects that long-term demand for stainless steel will continue to
grow due to increasing use in the manufacture of consumer durable goods and
industrial applications. Per capita stainless steel usage in many developed
countries significantly exceeds per capita usage in the United States and
Armco believes that this is an indication of the growth potential of demand
for stainless steel in the United States. In addition, the 1990 amendments to
the Clean Air Act have resulted in the increasing use of corrosion-resistant
materials in a number of applications for which stainless steel is well
suited, including industrial pollution control devices and motor vehicle
exhaust systems for use in the United States, where Armco now has the leading
market share. Another factor that Armco believes will affect demand
positively is the increasing issuance of new car bumper-to-bumper warranties
and the use of stainless steel in passenger restraint systems and other
functional components.
Armco produces flat-rolled stainless and electrical sheet and strip
products that are used in a diverse range of consumer durables and industrial
applications. During the last three years, approximately 77% of Armco's sales
of specialty flat-rolled steel has been finished stainless and electrical
steels, 10% has been specialty semi-finished and 10% has been galvanized
carbon steel. The remaining sales in this segment of Armco's business are
primarily related to the foreign subsidiaries that buy, warehouse, and sell
specialty steel products. Major markets served are industrial machinery and
electrical equipment, automotive, construction and service centers.
Armco is the leading producer of chrome stainless grades used primarily
in the domestic market for automotive exhaust components. Stainless steel,
which formerly was not used in parts of the exhaust system other than the
catalytic converter, is now used in the entire exhaust system, from manifold
to tailpipe, by many auto manufacturers. Armco has developed a number of
specialty grades for this application. Armco is also known for its "bright
anneal" finish utilized for automotive and appliance trim and chrome grades
used for cutlery, kitchen utensils, scissors and surgical instruments.
Specialty chrome nickel grades produced by Armco are used in household
cookware, restaurant, food processing and
2
medical equipment. Other Armco stainless products have various automotive,
agricultural, heating, air conditioning and various industrial uses.
Armco is the only United States manufacturer of a complete line of flat-
rolled electrical steel products. It is also the only domestic manufacturer
utilizing laser scribing technology. In this process, the surface of
electrical steel is etched with high-technology lasers that refine the
magnetic domains of the steels, resulting in superior electrical efficiency.
Major electrical product categories are: Regular Grain Oriented ("RGO"), used
in the cores of power and distribution transformers; Cold Rolled Non-Oriented
("CRNO"), used for electrical motors, generators and lighting ballasts; and
TRAN-COR[registered trademark]H, which is used in power transformers and is
the only high permeability electrical steel made domestically.
Additionally, Armco produces a full range of hot-dipped galvanized
products primarily for use in the heating, ventilation and air conditioning
("HVAC") market.
Armco's order backlog for its Specialty Flat-Rolled Steels segment was
$193.7 million at December 31, 1998, and $188.5 million at December 31, 1997.
While substantially all of the orders on hand at year-end 1998 are expected to
be shipped in 1999, such orders, as is customary in the industry, are subject
to modification, extension or cancellation.
Armco's specialty steelmaking operations are located in Pennsylvania and
Ohio. Armco's Butler, Pennsylvania facility, which is situated on 1,300 acres
with 3.2 million square feet of buildings, continuously casts 100% of its
steel. Melting takes place in three 175-ton electric arc furnaces that feed
the world's largest (175-ton) argon-oxygen decarburization unit and a 175-ton
vacuum degassing unit for refining molten metal that, in turn, feed two double
strand continuous casters. The melt capacity at Butler is approximately
950,000 cast tons. Butler operates a hot-strip mill, anneal and pickle units
and two fully-automated tandem cold-rolling mills. It also has various
intermediate and finishing operations for both stainless and electrical
steels.
The finishing plant in Coshocton, Ohio, located on 650 acres, is housed
in a 600,000 square-foot plant and has three Sendzimer mills and two Z-high
mills for cold reduction, four anneal and pickle lines, bell annealing
furnaces, three bright anneal lines and other processing equipment, including
temper rolling, slitting and packaging facilities.
The Mansfield, Ohio plant consists of a 1.4 million square-foot facility,
including a melt shop with two electric arc furnaces (170-ton and 128-ton), a
135-ton argon-oxygen decarburization unit, a thin-slab continuous caster, a
six-stand hot strip mill, a five-stand tandem cold rolling mill and a pickle
line.
Armco's Zanesville, Ohio plant, with 508,000 square feet of buildings on
88 acres, is a finishing plant for some of the steel produced at Butler and
Mansfield and has a Sendzimer cold-rolling mill, anneal and pickle lines, high
temperature box anneal and other decarburization and coating units.
The Dover, Ohio plant consists of a 600,000 square foot facility
including a 48 inch galvanizing line, bell annealing furnaces and a temper
mill. The Dover plant has been the subject of sale negotiations over the past
year. However, no assurances can be given that a sale will be completed.
Tubular Products Segment
This business segment consists of Armco's Sawhill Tubular Division.
Sawhill Tubular manufactures a wide range of steel pipe and tubular products
for use in the non-residential construction,
3
industrial, plumbing and heating markets at plants in Sharon and Wheatland,
Pennsylvania and Warren, Ohio.
Armco's order backlog for its Tubular Products segment was $17.3 million
at December 31, 1998 and $23.0 million at December 31, 1997. The decrease in
1998 was due to lower volume and selling prices as a result of oversupply in
the market, including a high level of imported pipe. While substantially all
of the orders on hand at year-end 1998 are expected to be shipped in 1999,
such orders, as is customary in this industry, are subject to modification,
extension or cancellation. Armco has been, and continues to be, in
negotiations for the sale of Sawhill Tubular. However, no assurances can be
given that a sale will be completed.
Other Businesses
The businesses currently included in this segment are described below.
-- Douglas Dynamics, L.L.C. is the largest North American manufacturer
of snowplows for four-wheel drive light trucks. Douglas Dynamics, which has
manufacturing plants in Rockland, Maine, Milwaukee, Wisconsin and Johnson
City, Tennessee, sells its snowplows and ice control products under the brand
names Western and Fisher through independent distributors in the United States
and Canada. Douglas Dynamics' sales depend on the level of four-wheel drive
light truck sales and total snowfalls in major markets.
-- Greens Port Industrial Park consists of approximately 500 acres on
the Houston Ship Channel and leases land, buildings and rail car storage
facilities to third parties and operates a deep water loading dock on the
channel.
Employees
At December 31, 1998, Armco had approximately 5,700 employees. Most of
Armco's domestic production and maintenance employees are represented by
international, national or independent local unions, although some operations
are not unionized.
Armco has agreements with the United Steelworkers of America at its
Mansfield and Dover plants, which terminate September 1, 1999, and at its
Sharon plant, which terminates September 30, 1999.
Competition
The Company faces intense competition from domestic and foreign steel
producers, and also from producers of components and other products and
manufacturers of competing products other than steel, including aluminum,
plastics, composites and ceramics. Competition is based primarily on price,
with factors such as reliability of supply, service and quality also being
important in certain segments.
In addition to existing competition, AK Steel Corporation, an integrated
steel company has announced plans to enter the specialty steel market. AK
Steel is building a steel finishing facility in Rockport, Indiana that is
expected to be completed in mid-1999. When completed, this facility will
provide AK Steel with substantial stainless steel processing and finishing
capacity. Increases in the production capacity and efficiency of other
domestic producers, together with possible new entrants into the specialty
steel market, are expected to result in intensified competition that could
exert downward pressure on price and market share.
4
Armco's competitors in the domestic galvanized carbon steel market
include many of the large integrated and mini-mill flat rolled producers.
Since 1989, significant flat-rolled mini-mill capacity has been constructed
and these mini-mills now compete with integrated domestic steel producers in
most flat-rolled steel markets. Mini-mills generally rely on less capital-
intensive hot metal sources, have smaller, non-unionized workforces resulting
in lower employment costs per ton shipped and are relatively free of many of
the employee, environmental and other obligations that have traditionally
burdened non-mini-mill steel producers. There is significant flat-rolled and
galvanized capacity under construction or announced with various planned
commissioning dates in the next several years.
Competition is also presented by foreign producers. Some of these
foreign producers have lower labor costs and are subsidized by their
governments. Their decisions with regard to production and sales may be
influenced more by political and social considerations than prevailing market
forces. Many foreign steel producers continue to ship into the United States
market despite decreasing profit margins. Depending on a number of market
factors, including the strength of the dollar, import levels, and the
effectiveness of U.S. trade laws, pricing of the Company's products could be
adversely affected.
In recent years, record levels of imports have depressed pricing on
specialty steel products in the U.S. In June 1998, Armco and other domestic
producers of flat-rolled stainless sheet and strip products filed petitions
with the U.S. Department of Commerce and the International Trade Commission
charging eight foreign countries with violations of U.S. trade laws. On July
24, 1998, the U.S. International Trade Commission issued its preliminary
finding that there has been injury to domestic producers. On November 10,
1998, the U.S. Department of Commerce announced preliminary results in the
subsidy investigations, establishing countervailing duty rates for companies
in France, Italy and South Korea. On December 17, 1998, the U.S. Department
of Commerce announced a preliminary determination on antidumping margins for
companies in those countries, as well as in Germany, Japan, Mexico, Taiwan and
the United Kingdom. Final antidumping determinations are expected to be
announced in the second quarter of 1999. A finding that unfairly traded
imports have caused injury to domestic producers could result in tariffs that
may help slow the flood of imports.
In addition, with respect to electrical steels, in mid-1999 the U.S.
Department of Commerce and the U.S. International Trade Commission are
expected to review existing antidumping and countervailing duties involving
Italian and Japanese producers to determine whether these protections should
be extended for another five years. The failure to obtain or extend
meaningful tariff protections for any of the products Armco sells could
adversely affect prices and reduce profitability.
Raw Materials and Energy Sources
Raw materials represent a major component of production costs in the
steel industry. The principal raw materials used by Armco in the production
of steels are iron and carbon steel scrap, chrome and nickel and their
ferroalloys, stainless steel scrap, silicon, molybdenum and zinc. These
materials are purchased in the open market from various outside sources.
Since much of this purchased raw material is not covered by long-term
contracts, availability and price are subject to world market conditions.
Chrome, nickel and certain other materials in mined alloy form can be acquired
only from foreign sources, many of them located in developing countries that
may be subject to unstable political and economic conditions that might
disrupt supplies or affect the price of these materials. A significant
portion of Armco's chrome and nickel requirements, however, is obtained from
stainless steel scrap rather than mined alloys. While certain raw materials
have been in short supply from time to time, Armco currently is not
experiencing and does not anticipate any problems obtaining appropriate
materials in amounts sufficient to meet its production needs. Armco also uses
large amounts of
5
electricity and natural gas in the manufacture of its products. It is
expected that such energy sources will continue to be available in the
foreseeable future.
The Year 2000 Issue
A discussion of Year 2000 issues is incorporated herein by reference from
Management's Discussion and Analysis under the caption "The Year 2000 Issue"
of the Annual Report to Shareholders for the year ended December 31, 1998.
Environmental Matters
A discussion of environmental matters is incorporated herein by reference
from Management's Discussion and Analysis and Notes to Consolidated Financial
Statements under the captions "Environmental Matters," "Environmental
Liabilities" and "Litigation and Environmental Matters", respectively, of the
Annual Report to Shareholders for the year ended December 31, 1998.
Research and Development
Armco carries on a broad range of research and development activities
aimed at improving its existing products and manufacturing processes and
developing new products and processes. Armco's research and development
activities are carried out primarily at a central technology center located in
Middletown, Ohio. This center is engaged in applied materials research
related to iron and steel, non-ferrous materials and new materials. In
addition, the materials and metallurgy departments at each operating unit
develop and implement improvements to products and processes that are directly
connected with the activities of such operating unit. Armco spent $14.2
million, $15.3 million and $13.1 million, respectively, on research and
development in the years 1998, 1997 and 1996.
Discontinued Operations
Armco Financial Services Group ("AFSG")
Armco's investment in AFSG represents the net assets of its discontinued
insurance and finance leasing businesses, which have been largely liquidated.
The insurance companies, including Northwestern National Insurance Company
(NNIC), have stopped writing new business and are being "run off." These
insurance companies have not written any new business for retention since 1986
except for an immaterial amount of guaranteed renewable accident and health
business. AFSG is accounted for as a discontinued operation under the
liquidation basis of accounting, whereby future cash inflows and outflows are
considered.
The discontinued insurance companies estimate that 60% of future claims
will be paid in the next five years and that substantially all of the claims
will be paid by the year 2017. The ultimate amount of the claims as well as
the timing of the claims payments are estimated based on the annual review of
loss reserves performed by independent and consulting actuaries. There have
been no charges recorded to income with respect to these companies since 1990.
There are various pending matters relating to litigation, arbitration and
regulatory affairs arising out of the runoff operations of the AFSG companies.
In March 1997, North Atlantic Insurance Company, a group of international
companies, previously affiliated with AFSG but sold in 1991, filed an
application for voluntary liquidation in the United Kingdom. As a result of
this voluntary liquidation
6
filing, certain claims have been asserted against NNIC by insureds of North
Atlantic. NNIC is defending these claims as well as pursuing related claims
against third parties and North Atlantic.
Armco management continues to believe, based on current facts and
circumstances and the opinions of outside counsel and advisors, that future
charges, if any, resulting from the liquidation of AFSG, including matters
related to the voluntary liquidation of North Atlantic, will not be material
to Armco's financial condition or liquidity. However, it is possible that,
due to fluctuations in Armco's operating results, future developments could
have a material effect on the results of one or more future interim or annual
periods.
ITEM 2. PROPERTIES
Armco owns and leases property primarily in the United States. This
property includes manufacturing facilities, offices and undeveloped property.
The locations of Armco's principal plants and materially important physical
properties are described in "ITEM 1. BUSINESS". Armco believes that all its
operating facilities are being adequately maintained and are in good operating
condition.
ITEM 3. LEGAL PROCEEDINGS
There are various claims pending against Armco and its subsidiaries
involving product liability, reinsurance and insurance arrangements,
environmental, antitrust, employee benefits and other matters arising out of
the conduct of the business of Armco.
Environmental Proceedings. Most environmental actions involving Armco
--------------------------
relate to alleged contamination at off-site treatment and disposal sites.
Other claims sometimes arise from contractual obligations for properties Armco
previously owned or leased and from regulatory actions. In most of these
cases, Armco is one of many companies who have been identified as potentially
responsible parties ("PRPs"). In a few instances, Armco is one of only a few
parties or is alleged to be solely liable. It is routinely asserted that
joint and several liability will be applied in such cases; thus, a single
party could be held liable for all costs related to a site. However, Armco's
experience has been that liability is apportioned on the basis of volume
and/or toxicity of materials sent to a site and Armco expects that any
ultimate liability would be apportioned among Armco and other financially
viable parties. Armco intends to assert all meritorious legal and equitable
defenses that are available to it with respect to environmental matters.
Based on Armco's analysis of the claims against it for contamination,
including the presence of other PRPs, Armco's experience in resolving similar
claims, and in some instances the type of contamination and expected
remediation costs, Armco does not believe that its liability, if any, for
these claims would materially impact its consolidated financial position or
liquidity. However, it is possible that due to fluctuations in Armco's
operating results, future developments with respect to such matters could have
a material effect on the results of operations in future interim or annual
periods.
On February 27, 1995, the Ohio Environmental Protection Agency ("OEPA")
issued a Notice of Violation ("NOV") to Armco's Zanesville Operations
alleging noncompliance with both a 1993 Order and various state regulations
regarding hazardous waste management. Armco continues to work with OEPA to
achieve final resolution of this matter. No proposed penalties were included
in the NOV and Armco cannot reasonably estimate potential penalties, if any,
based on current information.
On September 30, 1998, the United States Environmental Protection Agency
("USEPA") issued an order under Section 3013 of the Resource Conservation and
Recovery Act requiring environmental investigation at Armco's Mansfield
Operations. The cost of the investigation is not expected to have a material
effect on future, interim or annual results of operations. Armco has filed a
complaint against the
7
USEPA in the U.S. District Court for the Northern District of Ohio, Eastern
Division, which seeks injunctive relief and to set aside penalties during the
pendency of the legal proceeding. Armco's complaint challenges the legal
basis for the Order, the lack of support in the administrative record for such
an Order, and the lack of due process the Order provides to Armco in
responding to modifications and expansions USEPA could make to the scope of
work to be performed under the Order. The complaint was filed on October 30,
1998. On December 30, 1998, USEPA filed a motion to dismiss Armco's complaint
primarily on the basis that the Order was not final agency action and
therefore, that the court lacked subject matter jurisdiction. Armco is
preparing a response to this motion.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the security holders of
Armco during the fourth quarter of the year ended December 31, 1998.
Executive Officers of Armco
The executive officers of Armco as of March 12, 1999, were as follows:
Years
Age as of Tenure in of
Service
Name March 12, 1999 Office Office(1) with Armco
- ---- --------------- ------ ----------- ---------
- -
James F. Will 60 Chairman, President and
Chief Executive Officer 1994(2) 7
Jerry W. Albright 62 Vice President and
Chief Financial Officer 1997 2
James L. Bertsch 55 Vice President and
Treasurer 1989 33
John B. Corey 55 Vice President - Diversified
Businesses and Business
Development. President,
Douglas Dynamics, L.L.C. 1994 20
John N. Davis 40 Vice President and
Controller 1996 7
Gary R. Hildreth 60 Vice President, General
Counsel and Secretary 1993 28
Gary L. McDaniel 52 Vice President -
Operations 1996 6
M. Dennis McGlone 49 Vice President -
Commercial 1996 7
Pat J. Meneely 47 Vice President - Information
and Organizational
Effectiveness 1995 4
DeWayne W. Tuthill 62 Vice President - Purchasing
and Materials Management 1998 1
9
<FN>
(1) All officers are elected annually by the Board of Directors and
hold office until their successors are elected and qualified. Each of the
officers named above has held responsible positions with Armco or its
subsidiaries during all of the past five years, with the exceptions of
Messrs. Albright, Meneely and Tuthill. Prior to joining Armco, Mr. Albright
was a consultant and small business owner. Prior to that he was Assistant to
the President of Armco Inc. and prior to that he was Vice President and Chief
Financial Officer of Cyclops Industries, Inc. Immediately prior to joining
Armco, Mr. Meneely worked as an executive consultant and held executive
positions with Sara Lee Hosiery and Wheeling-Pittsburgh Steel Corporation.
Mr. Tuthill previously served as Group Executive Vice President at Wheeling-
Pittsburgh Steel Corporation since October of 1995. Having been with
Wheeling-Pittsburgh since 1989, Mr. Tuthill also held the positions of
Executive Vice President of Operations and Vice President - Purchasing,
Traffic and Raw Materials.
(2) Effective February 1, 1996, Mr. Will was elected Chairman of the
Board in addition to the positions of President and Chief Executive Officer.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Armco's common stock is sold principally on the New York Stock Exchange.
At February 26, 1999, there were 19,782 common stock shareholders of record.
Other information required by this item is incorporated herein by reference
from pages 32 and 36 of the Annual Report to Shareholders for the year ended
December 31, 1998.
ITEM 6. SELECTED FINANCIAL DATA
(In millions, except per share amounts)(1)
1998 1997 1996 1995
1994
---- ---- ---- ---- --
- --
Net sales $1,706.5 $1,829.3 $1,724.0 $1,559.9
$1,437.6
Special charges - net (2) -- -- (8.8) --
(35.0)
Income from continuing operations 109.6 77.1 26.0 23.5
65.8
Income per common share
from continuing operations:
- Basic 0.85 0.55 0.08 0.05
0.46
- Diluted 0.81 0.55 0.08 0.05
0.46
Total assets 1,893.8 1,881.3 1,867.8 1,896.6
1,934.9
Long-term debt and lease obligations 250.7 306.9 344.3 361.6
363.8
Long-term employee benefit obligations 898.0 1,178.1 1,200.2 1,165.9
1,221.9
- -------------------------------
9
<FN>
(1) The information in this Item should be read in conjunction with
Armco's financial statements and the notes thereto, which are incorporated by
reference in Item 8.
(2) Special charges primarily relate to the sale and/or
rationalization of operating facilities.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain information required by this Item is incorporated herein by
reference from pages 16-21 under the caption Management's Discussion and
Analysis in the Annual Report to Shareholders for the year ended December 31,
1998.
Other
Certain statements made or incorporated by reference in this Form 10-K,
or made in press releases or in oral presentations made by Company employees,
reflect management's estimates and beliefs and are intended to be, and are
hereby identified as, "forward-looking statements" for purposes of the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
These include statements in the paragraphs entitled Outlook for 1999, Armco
Financial Services Group (AFSG), Liquidity And Capital Resources,
Environmental Matters, The Year 2000 Issue and New Accounting Standard in the
section entitled Management's Discussion and Analysis and in the Letter to
Shareholders contained in the Annual Report to Shareholders and in Note 1.
Summary of Significant Accounting Policies, relating to Concentration of
Credit Risk and New Accounting Standard; Note 9. Litigation and Environmental
Matters; and Note 10. Discontinued Operations, relating to AFSG in the Notes
to Consolidated Financial Statement in the Annual Report to Shareholders
incorporated herein by reference.
Armco cautions readers that such forward-looking statements involve risks
and uncertainties that could cause actual results to differ materially from
those currently expected by management. In addition to those noted in the
statements themselves, these factors include, but are not limited to, the
following: risks of a downturn in the general economy or in the highly
cyclical steel industry; volatility in financial markets, which may affect
invested pension plan assets and the calculation of benefit plan liabilities
and expenses; changes in demand for Armco's products; unplanned plant outages,
equipment failures or labor difficulties; actions by Armco's foreign and
domestic competitors;; unexpected outcomes of major litigation and
contingencies; changes in U.S. trade policy and actions respecting imports;
disruptions in the supply of raw materials; actions by reinsurance companies
with which AFSG does business, or foreign or domestic insurance regulators;
and changes in application or scope of environmental regulations applicable to
Armco.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated herein by reference
from pages 22-35 of the Annual Report to Shareholders for the year ended
December 31, 1998.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
10
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item as to executive officers of Armco
is contained in Part I of this report under "Executive Officers of Armco" and
is incorporated herein by reference. The information required as to directors
is incorporated herein by reference from the information set forth under the
caption "ELECTION OF DIRECTORS" in the registrant's Proxy Statement for the
1999 Annual Meeting of Shareholders filed with the Securities and Exchange
Commission pursuant to Rule 14a-6 of the Securities Exchange Act of 1934, as
amended (the "Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference
from the information set forth in the Proxy Statement under the caption
"EXECUTIVE COMPENSATION".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The security ownership in Armco stock of directors, certain executive
officers and directors and executive officers as a group and of persons known
by Armco to be the beneficial owners of more than five percent of any class of
Armco's voting securities is incorporated herein by reference from the
information set forth in the Proxy Statement under the caption "MISCELLANEOUS
- -- Stock Ownership".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
I. Documents Filed as a Part of this Report
A. Financial Statements and Financial Statement Schedules Page
----
1. Consolidated Statements of Income and Comprehensive Income
for the Years Ended December 31, 1998, 1997 and 1996 *
2. Consolidated Balance Sheets as of December 31, 1998 and 1997 *
3. Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996 *
4. Notes to Consolidated Financial Statements *
11
5. Independent Auditors' Report *
6. Responsibility for Financial Reporting *
- ----------------
* Incorporated in this Annual Report on Form 10-K by reference to pages 22-35
of the Annual Report to Shareholders for the year ended December 31, 1998.
Financial Statements and Financial Statement Schedules Omitted
The financial statements and financial statement schedules for Armco Inc.
and subsidiaries, other than those listed above, are omitted because of the
absence of conditions under which they are required, or because the
information is set forth in the Notes to Consolidated Financial Statements.
B. Exhibits
The following is an index of the exhibits included in the Annual Report
on Form 10-K.
3(a). Articles of Incorporation of Armco Inc., as amended as of April 4,
1996 (1)
3(b). Regulations of Armco Inc. (2)
4. Armco hereby agrees to furnish to the Securities and Exchange
Commission, upon its request, a copy of each instrument defining the rights of
holders of long-term debt of Armco and its subsidiaries, omitted pursuant to
Item 601(b)(4)(iii) of Regulation S-K.
10(a). Deferred Compensation Plan for Directors*
10(b). 1993 Long-Term Incentive Plan of Armco Inc. (3)*
10(c). Amended Severance Benefit Agreement (4)*
10(d). 1988 Restricted Stock Plan (5)*
10(e). Executive Supplemental Deferred Compensation Plan Trust (6)*
10(f). Executive Supplemental Deferred Compensation Plan (7)*
10(g). Pension Plan for Outside Directors (8)*
10(h). Key Management Severance Policy (9)*
10(i). Minimum Pension Plan (10)*
10(j). Stainless Steel Toll Rolling Services Agreement (11)
10(k). Rights Agreement dated as of February 23, 1996 between Armco Inc. and
Fifth Third Bank (12)
12
13. Annual Report to Shareholders for the year ended December 31, 1997.
(Filed for information only, except for those portions that are specifically
incorporated in this Form 10-K Annual Report for the year ended December 31,
1997.)
21. List of subsidiaries of Armco Inc.
23. Independent Auditors' Consent
27. Financial Data Schedule
99. Description of Armco Capital Stock
The annual reports (Form 11-K) for the year ended December 31, 1998
for the Armco Inc. Retirement and Savings Plan and the Armco Inc. Thrift Plan
for Hourly Employees will be filed by amendment as exhibits hereto, as
permitted under Rule 15d-21.
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to the Annual Report on Form 10-K pursuant to Item 14(c)
of Form 10-K.
- ----------------------
(1) Incorporated by reference from Exhibit 3.1 to Armco's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1993.
(2) Incorporated by reference from Exhibit 3.2 to Armco's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1994.
(3) Incorporated by reference from Exhibit 10 to Armco's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1993.
(4) Incorporated by reference from Exhibit 10(i) to Armco's Annual Report
on Form 10-K for the year ended December 31, 1997.
(5) Incorporated by reference from Exhibit 10(i) to Armco's Annual Report
on Form 10-K for the year ended December 31, 1988 (SEC File No. 001-00873).
(6) Incorporated by reference from Exhibit 10(b) to Armco's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1988 (SEC File No. 001-
00873).
(7) Incorporated by reference from Exhibit 10(c) to Armco's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1988 (SEC File No. 001-
00873).
(8) Incorporated by reference from Exhibit 10(p) to Armco's Annual Report
on Form 10-K for the year ended December 31, 1989 (SEC File No. 001-00873).
(9) Incorporated by reference from Exhibit 10(p) to Armco's Annual Report
on Form 10-K for the year ended December 31, 1990.
13
(10) Incorporated by reference from Exhibit 10(r) to Armco's Annual Report
on Form 10-K for the year ended December 31, 1991.
(11) Incorporated by reference from Exhibit 10(s) to Armco's Annual Report
on Form 10-K for the year ended December 31, 1993.
(12) Incorporated by reference from Exhibit 10(p) to Armco's Form 10-K for
the year ended December 31, 1995.
- ----------------------
II. Reports on Form 8-K
The following Report on Form 8-K as filed by Armco during the quarter
ended December 31, 1998.
Report Date Description
- ----------- -----------
December 7, 1998 On December 7, 1998, Armco Inc. (the "Company")
announced plans to issue $75 million of Senior Notes
maturing in 2008, in a private placement pursuant to
Rule 144A under the Securities Act of 1933, as amended.
The Company stated that it intends to use the net
proceeds of the offering to redeem or repurchase
certain outstanding debt securities.
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized as of March 12,
1999.
ARMCO INC.
By JAMES F. WILL
----------------------------------
James F. Will
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated as of March 12, 1999.
By JAMES F. WILL By JOHN C. HALEY
- -------------------------------------- -------------------------------
James F. Will John C. Haley
Chairman of the Board, President, Director
Chief Executive Officer
and Director
By JERRY W. ALBRIGHT By CHARLES J. HORA, JR.
- -------------------------------------- ------------------------------
Jerry W. Albright Charles J. Hora, Jr.
Vice President and Director
Chief Financial Officer
By JOHN N. DAVIS By BRUCE E. ROBBINS
- ------------------------------------- ------------------------------
John N. Davis Bruce E. Robbins
Vice President and Controller Director
By DAN R. CARMICHAEL By JAN H. SUWINSKI
- ------------------------------------- ------------------------------
Dan R. Carmichael Jan H. Suwinski
Director Director
By PAULA H.J. CHOLMONDELEY By JOHN D. TURNER
- -------------------------------------- ------------------------------
Paula H.J. Cholmondeley John D. Turner
Director Director
By DOROTHEA C. GILLIAM
- --------------------------------------
Dorothea C. Gilliam
Director
15
EXHIBIT INDEX
The following is an index of the exhibits included in the Annual Report
on Form 10-K.
13. Annual Report to Shareholders for the year ended December 31, 1998.
(Filed for information only, except for those portions that are specifically
incorporated in this Form 10-K Annual Report for the year ended December 31,
1998.)
21. List of subsidiaries of Armco Inc.
23. Independent Auditors' Consents
27. Financial Data Schedule
99. Description of Armco Capital Stock
- ------------------------