FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
--------------------------------------------------
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to______________________________
FOR QUARTER ENDED SEPTEMBER 30, 1997 COMMISSION FILE NUMBER 1-2394
WHX CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-3768097
(State of Incorporation) (I.R.S. Employer
Identification No.)
110 EAST 59TH STREET
NEW YORK, NEW YORK 10022
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 212-355-5200
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 / /
The number of shares of Common Stock issued and outstanding as of October 15,
1997 was 20,771,322 which includes redeemable common shares.
<PAGE>
WHX CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED SEPT. 30, NINE MONTHS ENDED SEPT. 30,
1997 1996 1997 1996
---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
NET SALES $144,612 $391,925 $386,717 $1,065,233
- ---------
OPERATING COSTS
Cost of goods sold 172,926 330,328 459,594 902,657
Depreciation 9,570 19,887 32,352 58,560
Selling and administration expense 16,664 18,308 50,566 53,489
Profit sharing - 1685 - 2,990
Special charge 88,910 - 88,910 -
--------- ------------- ----------- ---------------
288,070 370,208 631,422 1,017,696
-------- -------- ---------- ---------
OPERATING INCOME (LOSS) (143,458) 21,717 (244,705) 47,537
- -----------------------
Interest expense 7,594 6,507 21,025 19,740
Other income 10,457 9,529 14,625 22,641
--------- ---------- ---------- ----------
INCOME BEFORE TAXES (140,595) 24,739 (251,105) 50,438
- -------------------
Tax provision (benefit) (49,208) 7,422 (87,887) 15,132
---------- ---------- ---------- ----------
NET INCOME (LOSS) (91,387) 17,317 (163,218) 35,306
- -----------------
Dividend requirement for preferred stock 5,152 5,601 15,505 16,922
---------- ---------- ---------- ----------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK $ (96,539) $ 11,716 $(178,723) $ 18,384
- -------------------------------------------- ========== ======== ========== =========
Income (loss) per share of common stock:
Primary: $(4.49) $.45 $(7.84) $.69
======= ==== ======= ====
Fully Diluted: $(4.49) $.39 $(7.84) $.68
======= ==== ======= ====
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
WHX CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
---- ----
(Dollars and shares in thousands)
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 1,761 $ 35,020
Short term investments 552,307 447,562
Trade receivables - net 25,147 25,805
Inventories:
Finished and semi-finished products 143,392 126,678
Raw materials 133,213 80,147
Other materials and supplies 18,363 19,476
Excess of LIFO over current cost (10,899) (10,899)
------------ -----------
284,069 215,402
Other current assets 11,738 13,942
---------- -----------
Total current assets 875,022 737,731
Property, plant and equipment at cost, less
accumulated depreciation and amortization 739,800 755,412
Deferred income taxes 191,081 100,157
Intangible asset - pensions 77,180 -
Other non-current assets 121,134 125,479
----------- -----------
$2,004,217 $1,718,779
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade payables $ 102,100 $ 59,477
Short Term Borrowings 356,120 70,223
Deferred income taxes - current 32,806 30,649
Other current liabilities 113,308 83,090
Long-term debt due in one year 461 2,336
------------ ----------
Total current liabilities 604,795 245,775
Long-term debt 267,874 268,198
Pension liability 156,446 -
Other employee benefit liabilities 414,619 435,502
Other liabilities 48,835 49,096
------------ -----------
1,492,569 998,571
---------- ----------
Redeemable Common Stock - 395 shares
and 411 shares 5,502 5,771
----------- -----------
Stockholders' Equity:
Preferred Stock $.10 par value - 5,883 shares
and 6,137 shares 589 614
Common Stock - $.01 par value - 20,385
shares and 24,328 shares 204 245
Unrealized gain on securities
available for sale 17,436 -
Additional paid-in capital 609,803 658,123
Accumulated earnings (121,886) 56,837
----------- ------------
506,146 715,819
Less treasury stock - 157 shares - (1,382)
Total stockholders equity 506,146 714,437
$2,004,217 $1,718,779
========== ==========
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
WHX CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPT. 30,
1997 1996
---- ----
(Dollars in Thousands)
CASH FLOW FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ (163,218) $ 35,306
Non cash expenses:
Depreciation 32,599 58,808
Other postemployment benefits (1,390) 4,100
Income taxes (88,246) 7,300
Gain on sale of assets 835 (130)
Equity income in affiliated companies 1,191 (5,845)
Special charges, net of current portion 57,459 -
Other items not affecting cash 3,655 -
Decrease (increase) in working capital elements:
Trade receivables (2,842) (58,611)
Inventories (68,667) 15,109
Other current assets 2,204 7,976
Trade payables 42,623 (14,746)
Short term investments(trading) (54,878) (9,929)
Trade account borrowings 190,279 0
Other current liabilities 29,863 4,892
Other items - net (2,685) (866)
----------- -----------
Net cash (used in) provided from operating activities (21,218) 43,364
---------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Short term investments-available for sale (32,430) 7,920
Plant additions and improvements (19,323) (31,870)
Proceeds from asset sales 1,217 539
Dividends received from affiliated companies 2,500 2,500
Investment in/advances to joint ventures (5,450) (17,240)
---------- ---------
Net cash used in investing activities (53,486) (38,151)
--------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from warrants - 5,170
Proceeds from receivable securitization 3,500 (2,000)
Short term borrowings (repayments) 95,618 5,807
Long-term borrowings (repayments) (2,199) (4,822)
Repurchase of common stock (38,876) (18,303)
Preferred stock retirement (9,839) (10,147)
Preferred stock dividends (15,505) (16,926)
Letter of credit collateralization 8,999 (116)
Redemption of common stock (253) (441)
--------- ----------
Net cash (used in) provided from financing activities 41,445 (41,778)
-------- ---------
DECREASE IN CASH AND
CASH EQUIVALENTS (33,259) (36,565)
Cash and cash equivalents
at beginning of period 35,020 43,006
------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 1,761 $ 6,441
======= ========
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
WHX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
GENERAL
The consolidated balance sheet as of September 30, 1997, the
consolidated statement of income for the three and nine month periods
ended September 30, 1997 and 1996, and the consolidated statement of cash
flow for the nine month periods ended September 30, 1997 and 1996 have
been prepared by the Company without audit. In the opinion of management,
all adjustments necessary to present fairly the consolidated financial
position at September 30, 1997 and the results of operations and changes
in cash flow for the periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. This quarterly
report on Form 10-Q should be read in conjunction with the Company's
audited consolidated financial statements for the year ended December 31,
1996. The results of operations for the period ended September 30, 1997
are not necessarily indicative of the operating results for the full year.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
BUSINESS SEGMENT
The Company is primarily engaged in one line of business and has
one industry segment, which is the making, processing and fabricating of
steel and steel products. The Company's products include hot rolled and
cold rolled sheet, and coated products such as galvanized, prepainted and
tin mill sheet. The Company also manufactures a variety of fabricated
steel products including roll formed corrugated roofing, roof deck, form
deck, floor deck, bridge form and other products used primarily by the
construction, highway and agricultural markets. It also manufactures steel
framing components for wall, floor and roofing systems and other roll
formed expanded metal construction accessories.
NOTE 1 - COLLECTIVE BARGAINING AGREEMENT
The Company's labor agreement with the USWA expired on October 1,
1996. On August 1, 1997 the Company and the USWA announced that they had
reached a tentative agreement on the terms of a new collective bargaining
agreement. The tentative agreement was ratified on August 12, 1997 by
USWA-represented employees. The new collective bargaining agreement
provides for a defined benefit pension plan, a retirement enhancement
program, short-term bonuses and special assistance payments for employees
not immediately recalled to work and $1.50 in hourly wage increases over
its term of not less than five years. It also provides for the reduction
of 850 jobs, mandatory multicrafting as well as modification of certain
work practices.
NOTE 2 - SPECIAL CHARGE
The Company recorded a special charge of $88.9 million in the third
quarter of 1997. The special charge is related to certain benefits
included in its new collective bargaining agreement described in Note 1
above.
The special charges included enhanced retirement benefits to be
paid under the defined benefit pension program which totaled $66.7 million
and were recorded under the provisions of
<PAGE>
-2-
Statement of Financial Accounting Standard No.88, Employers' Accounting
For Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits, and various other charges which totaled $22.2
million. Of this special charge $12.4 million was paid in the third
quarter of 1997.
The Company also recorded an additional pension liability of $77.2
million under the provisions of Statement of Financial Accounting Standard
No. 87, Employers' Accounting for Pensions with an offsetting debit to an
intangible pension asset. The Company's unfunded accumulated pension
benefit obligation totaled $162.0 million as of September 30, 1997.
NOTE 3 - EARNINGS PER SHARE
The computation of primary earnings per share of common stock is
based upon the average shares of common stock and common stock equivalents
outstanding. Common stock equivalents represent the dilutive effect of
assuming the exercise of outstanding stock options. Outstanding stock
options granted to officers, directors and key employees totaled 2.3
million at September 30, 1997. The computation of fully diluted earnings
per share further assumes the sale of all redeemable common stock into the
public market and conversion of all convertible preferred stock, unless
their inclusion has an anti-dilutive effect. The inclusion of common stock
equivalents, sale of redeemable common stock and/or conversion of the
convertible preferred stock would have been anti-dilutive in the third
quarter of 1997 and for the nine-month period ended September 30, 1997.
The conversion of the convertible preferred stock would have been
anti-dilutive for the nine-month period of 1996.
The average shares used in the computations were as follows: (in thousands)
<TABLE>
<CAPTION>
Quarter Ended Sept. 30, Nine Months Ended Sept. 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary 21,513 25,887 22,792 26,710
Fully diluted 21,513 43,760 22,792 27,126
</TABLE>
REDEEMABLE COMMON STOCK
Certain present and former employees of the Company have the right
to sell their redeemable common stock to the Company at prices of $15 or
$20 per share depending on years of service, age and retirement date.
Holders can sell any or all of their redeemable common stock into the
public market, provided, however, that stock sales on any day cannot be
more than 20% of the number of shares publicly traded during the previous
day. As of September 30, 1997, redeemable common stock outstanding totaled
395,287 shares.
NOTE 4 - SHORT TERM INVESTMENTS
The Company recognizes gains and losses based on specific
identification of the securities which comprise the investment balance. At
September 30, 1997 unrealized holding gains on available-for-sale
securities in the amount of $17.4 million were reported as a separate
component of stockholder's equity. There were no available-for-sale
securities at September 30, 1996. Net unrealized holding gains or losses
on trading securities included in net income for the third quarter of 1997
and 1996 were a gain of $4.7 million and a loss of $2.9 million,
respectively.
NOTE 5 - SALES OF RECEIVABLES
In 1994 a special purpose wholly-owned subsidiary of
Wheeling-Pittsburgh Steel Corporation ("WPSC"), entered into an agreement
to sell (up to $75 million on a revolving basis) an undivided
<PAGE>
-3-
percentage ownership in a designated pool of accounts receivable generated
by WPSC, Wheeling Construction Products, Inc. and Pittsburgh-Canfield
Corporation. The agreement expires in August 1999. In July 1995 WPSC
amended such agreement to sell an additional $20 million on similar terms
and conditions. In October 1995 WPSC entered into an agreement to include
the receivables generated by Unimast in the pool of accounts receivable
sold. Accounts receivable at September 30, 1997 and 1996 exclude $48.5
million and $65 million, respectively, representing uncollected accounts
receivable sold with recourse limited to the extent of uncollectible
balances. Fees paid by the Company under this agreement range from 7.42%
to 8.5% of the outstanding amount of receivables sold. Based on the
Company's collection history, the Company believes that credit risk
associated with the above arrangement is immaterial.
NOTE 6 - REVOLVING CREDIT FACILITY
In December 1995 Wheeling-Pittsburgh Steel Corporation entered into
a Second Amended and Restated Revolving Credit Facility ("RCF") with
Citibank, N.A. as agent. The RCF, as amended, provides for borrowings for
general corporate purposes up to $150 million and a $35 million sub-limit
for Letters of Credit.
The RCF expires on May 3, 1999. Interest rates are based on the
Citibank prime rate plus 1.0% and/or a Eurodollar rate plus 2.25%, but the
margin over the prime rate and the Eurodollar rate can fluctuate based
upon performance. The letter of credit fee is 2.25% and is also
performance based.
Borrowings are secured primarily by 100% of the eligible inventory
of Wheeling-Pittsburgh Steel Corporation, Pittsburgh-Canfield Corporation,
Wheeling Construction Products, Inc. and Unimast, and the terms of the RCF
contain various restrictive covenants, limiting among other things
dividend payments or other distributions of assets, as defined in the RCF.
Certain financial covenants associated with leverage, net worth, capital
spending, cash flow and interest coverage must be maintained. Borrowings
outstanding against the RCF at September 30, 1997 totaled $97.0 million.
No letters of credit were outstanding under the RCF.
In August 1994 WPSC entered into a separate facility for letters of
credit up to $50 million. At September 30, 1997 letters of credit totaling
$16.9 million were outstanding under this facility. The letters of credit
are collateralized at 105% with U.S. Government securities owned by the
Company, and are subject to an administrative charge of .4% per annum on
the amount of outstanding letters of credit.
NOTE 7 - CONTINGENCIES
ENVIRONMENTAL MATTERS
The Company has been identified as a potentially responsible party
under the Comprehensive Environmental Response, Compensation and Liability
Act ("Superfund") or similar state statutes at seven waste disposal sites.
The Company is subject to joint and several liability imposed by Superfund
on potentially responsible parties. Due to the technical and regulatory
complexity of remedial activities and the difficulties attendant to
identifying potentially responsible parties and allocating or determining
liability among them, the Company is unable to reasonably estimate the
ultimate cost of compliance with Superfund laws. The Company believes,
based upon information currently available, that the Company's liability
for clean up and remediation costs in connection with one of these sites
will be between $3 million and $4 million. At four other sites the costs
are estimated to aggregate up to $700,000. The Company lacks sufficient
information regarding the remaining sites to form an estimate. Non-current
accrued environmental liabilities totaled $7.4 million at September 30,
1997 and $7.5 million at September 30, 1996. These liabilities were
determined by the Company, based on all available information, including
information provided by
<PAGE>
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third parties, and existing laws and regulations then in effect, and are
reviewed and adjusted quarterly as new information becomes available.
Based upon all available information, the Company does not anticipate that
assessment and remediation costs resulting from the Company being a
potentially responsible party will have a material adverse effect on the
financial condition or results of operations of the Company. However, as
further information becomes available, the Company will reassess such
evaluations.
The Company, as well as other steel companies, is subject to
demanding environmental standards imposed by federal, state and local
environmental laws and regulations. For the nine months ended September
30, 1997 and years 1996 and 1995 aggregate capital expenditures for
environmental control projects totaled approximately $1.8 million, $6.8
million and $5.9 million, respectively. The Company is currently funding
its share of remediation costs. The Company believes that these
remediation costs are not significant and will not be significant in the
foreseeable future.
Based upon the Company's prior capital expenditures, anticipated
capital expenditures, consent agreements negotiated with federal and state
agencies and information available to the Company on pending judicial and
administrative proceedings, the Company does not expect its environmental
compliance costs, including the incurrence of any additional fines and
penalties, relating to the operation of its facilities, to have a material
adverse effect on its consolidated financial condition or results of
operations.
NOTE 8 - SUBSEQUENT EVENT
$350 MILLION SENIOR NOTE OFFERING
On November 4, 1997, the Company announced that Wheeling-Pittsburgh
Corporation, a wholly owned subsidiary, intends to privately place with
institutional investors approximately $350 million of Senior Notes. The
net proceeds will be used primarily to defease its outstanding 9 3/8%
Senior Notes and to reduce borrowings under its RCF.
<PAGE>
-5-
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION & RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
On August 12, 1997, the Company and the USWA entered into a new 5-year
collective bargaining agreement which settled a ten month strike. The strike
directly affected facilities accounting for approximately 80% of the Company's
steel shipments. The new labor agreement provides for the elimination of 850
hourly employees (approximately 20% of the Company's workforce), restructuring
of work rules and manning requirements and a reduction in the expense associated
with retiree healthcare costs. The improved work rules should allow the Company
to ship at pre-strike levels with 850 fewer hourly employees.
The Company is directing its selling efforts to attain pre-strike sales
and production levels. Market conditions for the products produced by the
Company have remained stable since the time of the Company's return to operation
after settlement of the strike. The orders booked by the Company to date have
been at prices comparable to those prevailing in the market. All of the
Company's production facilities have resumed operations as of September 30,
1997. Full primary steel operations are expected during the fourth quarter of
1997. The Company expects to be at full shipping levels, at competitive market
pricing, during the second quarter of 1998.
The Company believes that it has sufficient resources to fund the start-up
of its production facilities for re-entry to the marketplace. These resources,
which are in excess of $150 million, include the sale of coke produced and not
shipped during the strike, the sale of receivables under the receivables
securitization agreement and availability under the RCF.
THREE MONTHS ENDED SEPTEMBER 30, 1997
COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1996
As set forth below, the Company's third quarter results were impacted by
the strike which began on October 1, 1996 and continued to August 12, 1997. The
Company reported a $91.4 million net loss in the third quarter of 1997,
including a special charge totaling $88.9 million for benefits included in the
new collective bargaining agreement related to enhanced retirement benefits,
short-term bonuses and special assistance payments for those not returning to
work immediately.
Net sales for the third quarter of 1997 totaled $144.6 million on
shipments of .2 million tons of steel products. Net sales for the 1996 third
quarter totaled $391.9 million on shipments of .7 million tons of steel
products. The decrease in sales and tons shipped is primarily attributable to
the strike at eight plants located in Ohio, Pennsylvania and West Virginia. No
steel products were being produced or shipped at these facilities which
represent approximately 80% of the tons shipped by the Company on an annual
basis. Average sales prices per ton increased to $705 from $534 per ton in the
1996 third quarter. The increase in average price per ton is primarily
attributable to continued shipment of Wheeling Corrugating's higher value-added
product mix during the strike. Steel prices also increased 3.2%.
Cost of goods sold for the third quarter of 1997 totaled $172.9 million,
compared to $330.3 million for the 1996 third quarter. The decrease in costs of
goods sold reflects the effects of the strike on volume of steel products
shipped. Cost of goods sold per ton increased to $843 per ton from $450 per ton.
The increase in costs per ton shipped reflects higher fixed cost absorption due
to lower volumes shipped, increased purchases of steel for use by Wheeling
Corrugating and Pittsburgh-Canfield Corporation
<PAGE>
-6-
operations, and a higher-cost mix of products shipped. Raw steel production in
the third quarter of 1997 totaled .1 million tons, compared to .6 million tons
in the 1996 third quarter.
Depreciation decreased to $9.6 million in the third quarter of 1997 from
$19.9 million in the 1996 third quarter. The decrease is due to the effects of
the strike on production and the units of production depreciation method.
Selling, administration and general expense decreased to $16.7 million in
the third quarter of 1997 from $18.3 million in the 1996 third quarter. The
decrease is due to a reduced salaried workforce, lower property and liability
insurance premiums, and lower computer time sharing expense.
The third quarter of 1997 includes a special charge for benefits included
in the new collective bargaining agreement totaling $88.9 million described
above.
Interest expense for the third quarter of 1997 increased to $7.6 million
from $6.5 million in the 1996 third quarter. The increase is due to increased
short-term borrowings.
Other income increased to $10.5 million in the third quarter of 1997 from
$9.5 million in the 1996 third quarter. The increase reflects a higher return on
mark-to-market short-term investments partially offset by equity losses for
start-up of the Ohio Coatings Company joint venture.
The tax benefit of $49.2 million for the third quarter of 1997 and tax
provision of $7.4 million for the 1996 third quarter reflect estimated annual
effective tax rates of 35% and 30%, respectively. The 1996 rate is lower than
the statutory rate of 35% due to the effect of permanent tax differences on a
relatively low pre-tax income.
Net loss for the third quarter of 1997 totals $91.4 million, or $4.49 per
share of common stock. Excluding the special charge, the loss would have been
$33.6 millions or $1.80 per share of common stock. Net income for the third
quarter of 1996 totaled $17.3 million, or $.45 per share of common stock.
NINE MONTHS ENDED SEPTEMBER 30, 1997
COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1996
Net sales for the first nine months of 1997 totaled $386.7 million on
shipments of .5 million tons of steel products. Net sales for the same period of
the prior year totaled $1,065.2 million on shipments of 2.0 million tons. The
decrease in sales and tons shipped is primarily attributable to the work
stoppage at eight plants located in Ohio, Pennsylvania and West Virginia. No
steel products were being produced or shipped at these facilities which
represent approximately 80% of the tons shipped by the Company on an annual
basis. Average sales prices increased to $737 per ton from $529 per ton in the
1996 nine month period. The increase in average price per ton is primarily
attributable to a higher value-added product mix, steel prices also increased
2.9%
Cost of goods sold for the 1997 nine months totaled $459.6 million,
compared to $902.7 million for the 1996 nine month period. The decrease in cost
of goods sold reflects the effects of the strike on the volume of steel products
shipped. Cost of goods sold per ton increased to $876 per ton from $448 per ton.
The increase in cost per ton shipped reflects higher fixed cost absorption due
to lower volumes shipped, increased purchases of steel for use by Wheeling
Corrugating and Pittsburgh-Canfield operations, and a higher-cost mix of
products shipped. Raw steel production in the 1997 nine month period totaled .1
million tons, compared to 1.8 million tons in nine months of 1996.
Depreciation decreased to $32.4 million for nine months of 1997 from $58.6
million for nine months of 1996. The decrease in depreciation is due to the
effects of the strike on production and the units of production depreciation
method.
<PAGE>
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No profit sharing was earned in the first nine months of 1997 as a result
of the strike and its impact on pre-tax income. Profit sharing totaled $3.0
million in the corresponding 1996 nine month period.
Selling, administrative and general expense decreased to $50.6 million for
1997 nine months from $53.5 million in the 1996 nine month period due to a
reduced salaried workforce, lower property and liability insurance premiums, and
lower computer time sharing.
The third quarter loss includes a special charge for benefits included in
the new collective bargaining agreement totaling $88.9 million ($57.8 million
after tax), related to enhanced retirement benefits, bonuses for hourly and
salaried employees and special assistance payments for those not returning to
work immediately.
Interest expense for the nine months of 1997 totaled $21.0 million, an
increase of $1.3 million over 1996, due to increased short term borrowings and
lower amounts of capitalized interest.
Other income for the nine months of 1997 totaled $14.6 million, compared
to other income of $22.6 million for nine months of 1996. The decrease is due
primarily to equity losses for start-up of the Ohio Coatings Company joint
venture.
The 1997 tax benefit and 1996 tax provision for the nine month periods
reflect estimated annual effective tax rates of 35% and 30%, respectively. The
1996 rate is lower than the statutory rate of 35% due to the effect of permanent
tax differences on a relatively low pre-tax income.
Net loss for the 1997 nine months totaled $163.2 million, or $7.84 per
share of common stock. Excluding the special charge, the loss would be $105.4
million, or $5.31 per share of common stock. Net income for nine months 1996
totaled $35.3 million, or $.69 per share of common stock.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997 the Company had cash and short-term investments of
$554.1 million and short term borrowings of $356.1 million.
Net cash flow used in operating activities for the first nine months of
1997 totaled $21.2 million. Inventories, valued principally by the LIFO method
for financial reporting purposes, totaled $284.1 million at September 30, 1997,
an increase of 68.7 million from December 31, 1996. The increase in inventories
is due primarily to increases in furnace coke and equity iron ore pellets. Net
cash flow used in investing activities for the first nine months of 1997 totaled
$53.5 million, including capital expenditures of $19.3 million. It is
anticipated that necessary capital expenditures, including required
environmental expenditures in future years, will approximate depreciation
expense and will represent a material use of operating funds. The Company
anticipates funding its capital expenditures from cash on hand, investments and
funds generated from operations. Net cash flow provided from financial
activities totaled $41.4 million, including borrowings under the RCF of $97.0
million, offsetting funds used to repurchase common and preferred stock of $48.7
million, and funds used to pay preferred dividends of $15.5 million.
In August 1994 the Company entered into an agreement to sell, up to $75
million on a revolving basis, an undivided percentage ownership in a designated
pool of accounts receivable generated by WPSC and two of its affiliates,
Wheeling Construction Products, Inc. and Pittsburgh-Canfield Corporation. The
agreement expires in August 1999. In July 1995, WPSC amended such agreement to
sell an additional $20 million on similar terms and conditions. In October 1995,
WPSC entered into an agreement to include the receivables generated by Unimast
in the pool of accounts receivable sold. Account receivable at September 30,
1997, exclude $48.5 million representing accounts receivable sold with recourse
limited to the extent of uncollectible balances. Fees under this agreement range
from
<PAGE>
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7.42% to 8.50% of the outstanding amount of receivables sold. Based on the
Company's collection history, the Company believes that credit risk associated
with the above arrangement is immaterial.
On December 28, 1995, WPSC entered into a new RCF with Citibank, N.A. as
agent. The RCF, as amended, provides for borrowing for general corporate
purposes of up to $150 million, and a $35 million sub-limit for letters of
credit. The RCF expires May 3, 1999. Interest is calculated at a Citibank prime
rate plus 1.0% and or a Eurodollar rate plus 2.25%. Borrowings under the
Revolving Credit Facility are secured primarily by 100% of WPSC's eligible
inventory and requires that WPSC maintain a specified level of tangible net
worth. The RCF has certain financial covenants restricting indebtedness, liens
and distributions. As of September 30, 1997, borrowings in the amount of $97.0
million were outstanding under the RCF. No letters of credit were outstanding
under the RCF.
On November 4, 1997, the Company announced that Wheeling-Pittsburgh
Corporation, a wholly owned subsidiary, intends to privately place to
institutional investors approximately $350 million of Senior Notes. The net
proceeds will be used primarily to defease its outstanding 9 3/8% Senior Notes
and to reduce borrowings under the RCF.
In August 1994 WPSC entered into a separate facility for letters of credit
up to $50 million. At September 30, 1997, letters of credit totaling $16.9
million were issued under this facility. No amounts have been drawn down
pursuant to these letters of credit. The letters of credit are collateralized by
U.S. government securities owned by the Company and are subject to an
administrative charge of .4% per annum on the amount of outstanding letters of
credit. The collateral is recorded as other non-current assets.
As of September 30, 1997, the Company had repurchased on the open market
and retired 9.1 million shares of its Common Stock for an aggregate purchase
price of approximately $89.0 million, including 2.1 million shares of Common
Stock purchased in the third quarter of 1997 for approximately $23.2 million,
and 4.2 million shares of Common Stock and .3 million shares of Preferred Stock
for the nine month period for approximately $48.7 million. The Board of
Directors had previously authorized the Company to repurchase up to 10.1 million
shares of its outstanding Common Stock, and up to .3 million of its outstanding
Series A and up to .7 million of its Series B Convertible Preferred Stocks. The
Company may, from time to time, continue to purchase additional shares of Common
Stock and Preferred Stock.
Short-term liquidity is dependent, in large part, on cash on hand,
investments, general economic conditions and their effect on steel demand and
prices. Long-term liquidity is dependent upon the Company's ability to sustain
profitable operations and control costs during periods of low demand or pricing
in order to sustain positive cash flow. The Company satisfies its working
capital requirements through cash on hand, investments, borrowing availability
under the RCF and funds generated from operations. The Company believes that
such sources will provide the Company for the next twelve months with the funds
required to satisfy working capital and capital expenditure requirements.
External factors, such as worldwide steel production and demand and currency
exchange rates, could materially affect the Company's results of operations.
When used in the Management's Discussion and Analysis, the words
"anticipate", "estimate" and similar expressions are intended to identify
forward-looking statements. These statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
projected. Such risks and uncertainties include, but are not limited to, the
following: the risk of lost business and other uncertainties relating to the ten
month strike and the effects and length of the start-up period following the
labor settlement, and its impact on the Company's business and liquidity.
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The Company will adopt SFAS No. 128 in the fourth quarter of 1997.
Management believes that adoption of the new standard will not have a material
effect on previously reported EPS amounts for prior quarters of 1997 and 1996.
<PAGE>
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PART II OTHER INFORMATION
Item 6.(a) EXHIBITS
10.1 Agreement by and between the Company and P.J. Mooney
effective as of October 17, 1997.
27 Financial Data Schedule
6.(b) REPORT ON FORM 8-K
On September 30, 1997 the Company filed a report on Form 8-K.
The report included a press release by the Company that
disclosed an anticipated third quarter special charge of
approximately $90 million related to a retirement enhancement
program and various short-term bonus/unemployment payments
stipulated in the Company's new collective bargaining agreement
ratified on August 12, 1997.
<PAGE>
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SIGNATURES
Pursuant to the requirements 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.
WHX CORPORATION
/s/ J. R. SCHEESSELE
-----------------------------
J. R. Scheessele
President
Acting Chief Accounting Officer
November 12, 1997
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT effective as of the 17th day of October, 1997, by
and between WHEELING-PITTSBURGH STEEL CORPORATION ("WPSC"), a Delaware
corporation with a principal place of business at 1134 Market Street, Wheeling,
West Virginia, 26003, WHX CORPORATION ("WHX"), a Delaware corporation with a
principal place of business at 110 East 59th Street, New York, New York, 10022
and WHEELING-PITTSBURGH CORPORATION ("WPC"), a Delaware corporation with a
principal place of business at 1134 Market Street, Wheeling, West Virginia,
26003 (WPSC, WHX and WPC are collectively referred to as the "Company") and Paul
J. Mooney (the "Executive").
WHEREAS, the Company desires to employ the Executive as Executive Vice
President and Chief Financial Officer of each of WPSC, WHX and WPC and the
Executive desires to be employed by the Company upon the terms and conditions
set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties hereto do agree as follows:
1. EMPLOYMENT.
(a) The Company hereby employs the Executive, and the
Executive hereby accepts such employment, as Executive Vice President and Chief
Financial Officer of each of WPSC, WHX and WPC, with his principal office being
located in either Pittsburgh, Pennsylvania, Wheeling, West Virginia or in a
<PAGE>
geographic area around the Pittsburgh, Pennsylvania area no farther in distance
than Wheeling, West Virginia, upon the terms and subject to the conditions
contained herein. Immediately following the execution of this Agreement and at
all other appropriate times thereafter, WHX, WPC and WPSC shall take all action
to elect the Executive as Executive Vice President and Chief Financial Officer
of each of WPSC, WHX and WPC.
(b) Executive agrees that subsequent to an Initial Public
Offering (as hereinafter defined) of WPC or a "spin-off" of any portion of the
shares of Common Stock of WPC, Executive will resign as an officer of WHX or in
the case of an Initial Public Offering by WPSC or a "spin-off" of any portion of
the shares of Common Stock of WPSC, as an officer of WPC also.
(c) WPSC, WPC and WHX represent and warrant to Executive that this
Agreement has been duly and validly authorized and executed by and on behalf of
each of them in accordance with their respective Certificate of Incorporation
and By-Laws and that this Agreement constitutes the lawful and valid obligation
of WPSC, WPC and WHX enforceable against each of WPSC, WPC and WHX in accordance
with its terms.
2. DUTIES.
(a) The Executive shall perform all duties of the positions
referenced in paragraph 1 of this Agreement consistent with the powers and
duties of such offices set forth in WPSC's, WPC's or WHX's, as appropriate,
By-Laws, as well as any other
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<PAGE>
duties, commensurate with the Executive's positions that are assigned by the
Board of Directors of WPSC, WPC or WHX.
(b) Throughout his employment hereunder, Executive shall
devote his full time, attention, knowledge and skills during reasonable business
hours in furtherance of the business of the Company and will faithfully,
diligently and to the best of his ability perform the duties described above and
further the best interests of the Company. During his employment, the Executive
shall not engage, and shall not solicit any employees of the Company to engage,
in any commercial activities which are in any way in competition with the
activities of the Company, or which may in any way interfere with the
performance of his duties or responsibilities to the Company.
(c) The Executive shall at all times be subject to, observe
and carry out such rules, regulations, policies, directions and restrictions as
the Company, consistent with Executive's rights and duties under this Agreement,
may from time to time establish and those imposed by law.
3. EXECUTIVE COVENANTS. In order to induce the Company to
enter into this Employment Agreement, the Executive hereby agrees
as follows:
(a) Except when disclosure is in the interest of the Company
or is compelled by law, or disclosure is consented to or directed by the
Chairman or the Board of Directors of WPC, WHX or WPSC, the Executive shall keep
confidential and shall not divulge to any other person or entity, during the
term of the Executive's
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<PAGE>
employment or thereafter, any of the business secrets or other confidential
information regarding the Company or the Company's other subsidiaries which have
not otherwise become public knowledge.
(b) All papers, books and records of every kind and
description relating to the business and affairs of the Company, whether or not
prepared by the Executive, shall be the sole and exclusive property of the
Company, and the Executive shall surrender them to the Company at any time upon
request by the Chairman or the Board of WPC, WHX or WPSC.
(c) During the term of employment hereunder, and, if his
employment is terminated by the Company pursuant to Section 9 hereof, for a
period of one (1) year thereafter, the Executive shall not, without the prior
written consent of the Board of WHX (i) participate as a director, stockholder
or partner, or have any direct or indirect financial interest as creditor, in
any business which directly or indirectly competes, within the United States of
America, with the Company or the Company's other subsidiaries which exist as of
the date of the termination of this Agreement (the "Existing Subsidiaries");
provided, however, that nothing in this Agreement shall restrict the Executive
from holding up to two (2%) percent of the outstanding capital stock or other
securities of any publicly traded entity; (ii) solicit any customers of the
Company or its Existing Subsidiaries on behalf of himself, or any other person,
firm or company; or (iii) directly or indirectly, act in the capacity of an
executive
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<PAGE>
officer, employee or in any other capacity for any company or other entity which
competes with WPSC in the carbon steel manufacturing industry and which has at
least 5% of its annual dollar sales comprised of products which directly compete
with the Company's or its subsidiaries' products; provided, however, that
nothing in this paragraph 3(c) shall prevent the Executive from holding or
maintaining any positions or interests held by him subsequent hereto with the
consent of the Board of WHX (or the Board of WPC from and after the consummation
of the Initial Public Offering (as hereinafter defined) or a "spin-off" of any
portion of the shares of Common Stock of WPC or WPSC).
(d) The parties agree that the Executive's services are unique
and that any breach or threatened breach of the provisions of this Section 3
will cause irreparable injury to the Company and that money damages will not
provide an adequate remedy. Accordingly, the Company shall, in addition to other
remedies provided by law, be entitled to such equitable and injunctive relief as
may be necessary to enforce the provisions of this Section 3 against the
Executive or any other person or entity participating in such breach or
threatened breach. Nothing contained herein shall be construed as prohibiting
the Company from pursuing any other and additional remedies available to it, at
law or in equity, for such breach or threatened breach including any recovery of
damages from the Executive or termination of his employment as provided in
Paragraph 9(b).
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<PAGE>
4. BASE SALARY AND BONUSES. As full compensation for Executive's
services hereunder and in exchange for his promises contained herein, the
Company shall compensate the Executive in the following manner (subject to
Paragraph 4(c)):
(a) BASE SALARY. The Company shall compensate Executive at the
base salary rate of Two Hundred Thousand United States Dollars ($200,000 U.S.)
per annum, payable in equal installments on the same basis as other senior
salaried officers of the Company. Such annual salary may be increased in the
future by such amounts and at such times as the Board of WHX or the Compensation
Committee thereof (or the Board or Compensation Committee of WPC from and after
the consummation of the Initial Public Offering or a "spin-off" of any portion
of the shares of Common Stock of WPC or WPSC) shall deem appropriate in its sole
discretion.
(b) BONUSES.
(i) SIGNING BONUS: The Executive shall receive a
signing bonus of One Hundred Twenty Thousand United
States Dollars ($120,000 U.S.) payable in three
installments as follows: $50,000 on January 1, 1998;
$40,000 upon the first anniversary of the
effectiveness of this Agreement; and $30,000 upon the
second anniversary of the effectiveness of this
Agreement. (ii) ANNUAL BONUSES: Beginning with the
calendar year 1998 and in each year or portion
thereof
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<PAGE>
thereafter during the term of this Agreement, the
Board of WHX or the Compensation Committee of WHX (or
the Board or Compensation Committee of WPC from and
after the consummation of the Initial Public Offering
or a "spin-off" of any portion of the shares of
Common Stock of WPC or WPSC) shall grant the
Executive a bonus in accordance with the terms of
WPSC's Management Incentive Program.
(c) WITHHOLDINGS. The amounts set forth in subparagraphs (a)
and (b) above shall be subject to appropriate payroll withholding and any
similar deductions required by law.
(d) INITIAL PUBLIC OFFERING. Upon the consummation of an
underwritten initial public offering under the Securities Act of 1933, as
amended (an "Initial Public Offering," including for this purpose a "spin-off"
that creates publicly traded securities) by WPC or WPSC (or any successor or
assign of either entity) during the term of this Agreement, the Executive and
certain other senior executives of the Company selected by the Board of WHX
shall be granted options to purchase, if all of the options are exercised, 15%
of the Common Stock of the public company outstanding immediately following the
Initial Public Offering, at an exercise price equal to 85% of the Initial Public
Offering price (such options are herein referred to as the "Option Pool"). To
the extent allowable under the Internal Revenue Code of 1986, as amended, such
options shall be "incentive stock options." Executive shall receive not less
than
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<PAGE>
10% of the Option Pool, the specific percentage to be determined by the Board of
WHX in its sole discretion; PROVIDED, HOWEVER, that if the Underwriters of the
Initial Public Offering determine to "cut-back" the Option Pool, the Executive's
share of the Option Pool shall be reduced to no less than the largest amount
granted to any officer of the Company other than John R. Scheessele. From and
after the consummation of the Initial Public Offering or a "spin-off" of any
portion of the shares of Common Stock of WPC or WPSC, WHX shall be relieved of
all obligations under this Agreement, with no further action required by WHX to
terminate its obligations hereunder.
5. LONG-TERM INCENTIVE PLAN. The Executive shall be entitled to
participate, to the extent he is eligible under the terms and conditions
thereof, in any stock option plan, stock award plan, omnibus stock plan, or
similar incentive plan currently in existence or hereafter established by the
Company, in the manner and to the same extent as the Company's other senior
executive officers, such participation to include 40,000 options that are
reserved for the Chief Financial Officer under the 1991 WPC Incentive and
Nonqualified Stock Option Plan, which options will be granted upon the
effectiveness of this Agreement, in accordance with the provisions of the 1991
WPC Incentive and Nonqualified Stock Option Plan. Awards to the Executive under
any such plan shall be made as provided in such plans and at such times and in
such amounts as shall be determined in the sole discretion reasonably exercised
of the Board of WHX subject to
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<PAGE>
confirmation by the Board of WHX or the Compensation Committee of WHX (or the
Board or Compensation Committee of WPC from and after the consummation of the
Initial Public Offering or a "spin-off" of any portion of the shares of Common
Stock of WPC or WPSC). Except as provided above, the Executive shall not be
entitled to participate in the Incentive Plan or in any bonus incentive or
similar plan for salaried employees of the Company and Executive's right to
receive a bonus shall be exclusively determined by the provisions of Paragraph
4(b) hereof.
6. BENEFIT PLANS. During the term of his employment, the Executive
shall be entitled to participate in the Company's management employee benefits
and retirement plans, as they are in existence on the date of this Agreement, or
as they may be amended or added hereafter, to the same extent as the Company's
other senior executive officers. The Company shall be under no obligation solely
as a result of this Agreement to institute or continue the existence of any
employee benefit plan.
7. OTHER BENEFITS. The Executive shall be provided the following
additional benefits:
(a) LEASED AUTOMOBILE. A leased Buick, Oldsmobile, Mercury or
comparable automobile of United States manufacture for his business and personal
use. The Company shall keep such automobile adequately insured and will pay or
reimburse the Executive for the cost of maintenance, repair and gasoline for
such automobile.
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<PAGE>
(b) CLUB MEMBERSHIPS. Reimbursement of the Executive for the
cost of his and his immediate family's membership in one country club, including
reimbursement of a $10,000 voting transfer fee to be paid or payable by the
Executive, and his membership in one business club, and for his business-related
use for both clubs.
(c) LEGAL AND TAX ADVICE. In recognition of the Executive's
need to carefully consider the terms herein, the reimbursement of Executive for
reasonable legal and tax advice, sought by him relative to this Agreement, which
is incurred prior to his execution of this Agreement, up to a maximum of Five
Thousand United States Dollars ($5,000 U.S.).
(d) BUSINESS EXPENSE. Reimbursement of the Executive,
upon proper accounting, for reasonable expenses and disbursements
incurred by him in the course of the performance of his duties
hereunder.
(e) VACATION. The Executive shall be entitled to four (4)
weeks of vacation each year of this Agreement or such longer period as shall be
provided to senior executives of the Company, without reduction in salary.
(f) ANNUAL PHYSICAL. The Company shall pay the cost, or
reimburse Executive for any cost not covered by health insurance, of one
comprehensive physical examination during each year of this Agreement.
(g) RELOCATION COSTS. The Company shall pay reasonable
relocation costs incurred by the Executive, including
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<PAGE>
the assumption of obligations of the Executive under an existing lease for
housing not to exceed an aggregate of $25,000.
8. SUPPLEMENTAL PENSION. As additional compensation, the Company will
provide nonqualified deferred compensation to the Executive after termination of
his employment. The amount of the deferred compensation will be measured solely
by the cash surrender value, at the time payment of the deferred compensation is
due, of one or more life insurance contracts (as defined in Internal Revenue
Code Section 7702) on the life of the Executive, purchased by or on behalf of
the Company solely with the annual premiums described below. Such life insurance
contracts shall provide such insurance coverage and contract terms (consistent
with the premium limits described below), and shall be purchased from such one
or more insurance companies, as shall be acceptable to the Executive.
On the first business day of each calendar year (or the date of the
execution of this Agreement in the case of 1997) during the Executive's service
under this Agreement, the Company shall provide for the payment of total
premiums, under all such life insurance contracts in the aggregate, equal to the
sum of:
1. Twenty-Five Thousand Dollars ($25,000) annual lump sum (or a
pro-rated portion for 1997) provided by the Company without
reduction of the Executive's regular salary or performance
bonus otherwise payable under this Agreement during the
calendar year.
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<PAGE>
2. An additional annual amount equal to the amount, if any, by
which the Executive has elected to have his regular salary,
otherwise payable in cash during the calendar year, reduced
for this purpose.
3. An additional annual amount equal to the amount, if any, by
which the Executive has elected to have his performance bonus
(if any), otherwise payable in cash during the calendar year,
reduced for this purpose.
The Executive shall elect in writing, no later than the end of the
preceding calendar year, the specific amounts (or definite formula to determine
the specific amounts) of additional premiums to be paid for in each calendar
year by reduction of his regular salary or bonus payments. However, such
additional premium amounts shall be limited in the aggregate (or, at the
Executive's election, insurance coverage shall be augmented as necessary) so
that the additional premium amount applied to any insurance contract in any
calendar year is less than the amount that would cause such contract to be
classified as a modified endowment contract under Internal Revenue Code Section
7702A.
The Company or the Deferred Compensation Trust described hereinafter
(the "Deferred Compensation Trust" or "Trust") shall be the sole owner of all
such life insurance contracts, except that the Executive, at his election, shall
have the right to designate the beneficiary of death benefits under the
contracts.
In the event of the Executive's death while the life insurance
contracts are in force and owned by the Company or the
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<PAGE>
Deferred Compensation Trust, the insurance companies' payment of death benefits
thereunder to the Executive's designated beneficiary (the "Beneficiary") shall
totally discharge the Company's obligation under this Section 8, except that the
Company or the Trust shall pay to such Beneficiary any salary or bonus reduction
amounts elected by the Executive for the calendar year in which his death occurs
to the extent that such amounts have not been paid to insurance companies as
additional premiums during that calendar year.
The Company will set aside assets in the Deferred Compensation Trust to
provide for the systematic funding, during the Executive's period of active
service, of the deferred compensation promised to the Executive under this
Agreement. Such Deferred Compensation Trust (which may also include assets set
aside to fund other similar deferred compensation obligations of the Company)
shall be irrevocable except in the event of the Company's subsequent bankruptcy
or insolvency, in which case the assets of the Trust shall be subject to the
claims of the Company's general creditors, including the Executive. The Company
intends, and the Executive acknowledges, that the Executive's rights under this
Agreement shall be solely those of a general creditor of the Company, and
nothing in this Agreement nor in any instruments creating the Deferred
Compensation Trust nor in any life insurance contract, shall be construed to
create any rights in the Executive superior to those of other general creditors
of the Company.
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<PAGE>
The Company intends that the Deferred Compensation Trust shall make all
payments due under this Agreement to the Executive or his Beneficiary, to the
extent the Trust is funded. The Executive acknowledges, on behalf of himself and
any Beneficiary claiming under him, that the Company is absolved of any
liability or responsibility for any payment due hereunder to the extent such
payment shall have been duly made to the Executive (or Beneficiary, as the case
may be) by the Deferred Compensation Trust.
The deferred compensation provided hereunder shall be paid to the
Executive in accordance with the life insurance contracts obtained pursuant to
the first paragraph of this Section 8.
9. DURATION AND TERMINATION.
(a) DURATION. The term of this Agreement shall commence on a
date mutually agreed upon by the Company and the Executive after the Executive
gives notice of termination of employment to his then-current employer, with
Executive using his best efforts to commence employment no later than November
1, 1997, and shall terminate on the third anniversary hereof and shall
automatically be extended for successive three-year terms unless earlier
terminated pursuant to the provisions hereof, provided that the Executive shall
have the right to terminate this Agreement at the end of the initial term or any
succeeding term on not less than six (6) months prior written notice to the
Company (in which event all rights and benefits of Executive
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<PAGE>
hereunder other than the supplemental pension benefit under Section 8 shall
cease upon such termination's effective date).
(b) TERMINATION AT ANY TIME BY COMPANY. This Agreement shall
be terminable by the Company at any time for any reason, including death or
Disability (as hereinafter defined) of the Executive, upon not less than 30
days' prior written notice to the Executive and all rights and benefits of the
Executive hereunder (other than those arising under Section 10 hereof) shall
cease, except that the Executive will have the right to receive from the Company
(i) a payment of Six Hundred Thousand Dollars ($600,000) (less an amount equal
to the portion of the Twenty-Five Thousand ($25,000) Dollar per annum payment
made pursuant to Section 8 for the calendar year in which termination of
employment occurred which represents the pro-rata portion of the payment for the
balance of such calendar year, I.E., if the last date of employment is July 1,
then Twelve Thousand and Five Hundred ($12,500) Dollars shall be deducted from
the Six Hundred Thousand ($600,000) Dollars payment obligation) within thirty
(30) days of delivery of the notice of termination or within sixty (60) days of
the date of death or Disability of the Executive (the "Termination Payment"),
(ii) all amounts accrued but unpaid hereunder up to and including the date of
termination including, without limitation, any pro rata portion of the
Executive's salary or bonus remaining unpaid as of the date of termination,
(iii) all of the supplemental pension benefits accrued under Section 8 and (iv)
the continuation of all medical
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<PAGE>
insurance provided to the Executive as contemplated by Section 6 hereof for a
period of one (1) year following the termination date. Notwithstanding the
foregoing, if the Company terminated this Agreement "for cause", then no
Termination Payment shall be made to the Executive and all rights, benefits and
obligations of the Executive under this Agreement, except the Executive's rights
under Sections 8, 9(b)(ii) and (iii) and 10 hereof, shall cease. "For cause"
shall mean: (i) the Executive's willful and material breach in respect of his
duties under this Agreement if such breach continues unremedied for thirty (30)
days after written notice thereof from the Board of WPC, WHX or WPSC to the
Executive specifying the acts constituting the breach and requesting that they
be remedied; or (ii) the Executive is convicted or pleads guilty to a felony,
during the employment period other than for conduct undertaken in good faith in
furtherance of the interests of the Company. "Disability" shall mean that due to
illness, accident or other physical or mental incapacity, the Board of WPC, WHX
or WPSC has in good faith determined that the Executive is unable to
substantially perform his usual and customary duties under this Agreement for
more than four (4) consecutive months or six (6) months in any calendar year.
During any period that the Executive fails to perform his duties hereunder as a
result of incapacity due to Disability prior to the Executive's termination, the
Executive shall continue to receive his full base salary, together with all
benefits provided in this Agreement.
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<PAGE>
(c) RIGHTS OF TERMINATION BY EXECUTIVE. The Executive shall
have the right, by written notice to the Company, to elect to terminate this
Agreement within sixty (60) days following a Change of Control (as defined
below), or if the Executive is (i) demoted, (ii) no longer holds the office of
the Executive Vice President or Chief Financial Officer of WPSC, (iii) no longer
holds the office of Executive Vice President or Chief Financial Officer of WPC
(except following an Initial Public Offering of WPSC or a "spin-off" of any
portion of the shares of Common Stock of WPSC), or (iv) no longer holds the
office of Executive Vice President or Chief Financial Officer of WHX (except
following an Initial Public Offering of WPC or WPSC or a "spin-off" of any
portion of the shares of Common Stock of WPC or WPSC). In the event that
Executive makes such election, the Executive shall be entitled to receive from
the Company the items set forth in Paragraph 9(b)(i) through 9(b)(iv) within
sixty (60) days of receipt by the Company of a written notice of Executive's
election.
(d) CHANGE IN CONTROL. For the purposes of this Agreement, a
"Change in Control" means (i) the, direct or indirect, sale, lease, exchange or
other transfer of all or substantially all (50% or more) of the assets of WPC,
WHX or WPSC to any individual, corporation, partnership, trust or other entity
or organization (a "Person") or group of Persons acting in concert as a
partnership or other group (a "Group of Persons") other than a Person (an
"Affiliate") controlling, controlled by
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<PAGE>
or under common control with, any of WPC, WHX or WPSC, as the case may be, (ii)
the merger, consolidation or other business combination of WPC, WHX or WPSC with
or into another corporation with the effect that the shareholders of WPC, WHX or
WPSC, as the case may be, immediately prior to the business combination hold 50%
or less of the combined voting power of the then outstanding securities of the
surviving Person of such merger ordinarily (and apart from rights accruing under
special circumstances) having the right to vote in the election of directors,
(iii) the replacement of a majority of the Board of WPC, WHX or WPSC, over any
period of two years or less, from the directors who constituted the Board of
WPC, WHX or WPSC, as the case may be, at the beginning of such period, and such
replacement(s) shall not have been approved by the Board of WPC, WHX or WPSC, as
the case may be, as constituted at the beginning of such period, (iv) a Person
or Group of Persons shall, as a result of a tender or exchange offer, open
market purchases, privately negotiated purchases or otherwise, have become the
beneficial owner (within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") of securities
of WHX, or of WPC or WPSC following an Initial Public Offering or "spin-off" by
such company, representing 50% or more of the combined voting power of the then
outstanding securities of WHX, WPC or WPSC, as the case may be, ordinarily (and
apart from rights accruing under special circumstances) having the right to vote
in the election of directors. Notwithstanding the
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foregoing, an Initial Public Offering or a "spin-off" that creates publicly
traded securities of any portion of the shares of Common Stock of WPC or WPSC
shall not constitute a Change in Control under this Agreement.
10. INDEMNIFICATION. The Company shall defend and hold the Executive
harmless to the fullest extent permitted by applicable law and the Company's
By-Laws and Certificate of Incorporation in connection with any claim, action,
suit, investigation or proceeding arising out of or relating to performance by
the Executive of services for, or action of the Executive as, or arising by
reason of the fact that the Executive is or was, a Director, officer, employee
or agent of the Company or any parent, subsidiary or affiliate of the Company,
or of any other person or enterprise at the Company's request. Expenses incurred
by the Executive in defending a claim, action, suit or investigation or
proceeding shall be paid by the Company in advance of the final disposition
thereof upon the receipt by the Company of any undertaking by or on behalf of
the Executive to repay such amount if it shall ultimately be determined that he
is not entitled to be indemnified hereunder. The foregoing rights are not
exclusive and do not limit any rights accruing to the Executive under any other
agreement or contract or under applicable law.
11. SUCCESSORS AND ASSIGNS. The rights and obligations of the Company
hereunder shall run in favor and be obligations of the Company, its successors
and assigns. The rights of the
-19-
<PAGE>
Executive hereunder shall inure to the benefit of the Executive's legal
representatives, executors, heirs and beneficiaries. Termination of Executive's
employment shall not operate to relieve him of any remaining obligations under
Section 3 hereof. The Company shall require any successor or assign (whether
direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of property or stock, liquidation or otherwise) to all or a
significant portion of the assets of the Company, by agreement in form and
substance satisfactory to the Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no such succession had taken place.
Regardless of whether such agreement is executed by a successor, this Agreement
shall be binding upon any successor and assign in accordance with the operation
of law and such successor and assign shall be deemed the "Company" for purposes
of this Agreement.
12. ARBITRATION OF ALL DISPUTES.
(a) Any controversy or claim arising out of or relating to
this Agreement or the breach thereof (including the arbitrability of any
controversy or claim), shall be settled by arbitration in the City of
Pittsburgh, Commonwealth of Pennsylvania, by three arbitrators, one of whom
shall be appointed by the Company, one by the Executive and the third of whom
shall be appointed by the first two arbitrators. If the first two arbitrators
cannot agree on the appointment of a third arbitrator, then the third arbitrator
shall be appointed by the
-20-
<PAGE>
American Arbitration Association. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section 12. The cost of any arbitration proceeding hereunder shall be borne
equally by the Company and the Executive. The award of the arbitrators shall be
binding upon the parties. Judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction thereof.
(b) In the event that it shall be necessary or desirable for
the Executive to retain legal counsel and/or incur other costs and expenses in
connection with the enforcement of any or all of his rights under this
Agreement, and provided that the Executive substantially prevails in the
enforcement of such rights, the Company shall pay (or the Executive shall be
entitled to recover from the Company, as the case may be) the Executive's
reasonable attorneys' fees and costs and expenses in connection with the
enforcement of his rights, including the enforcement of any arbitration award,
up to $50,000 in the aggregate.
13. NOTICES. All notices, requests, demands and other communications
hereunder must be in writing and shall be deemed to have been duly given upon
receipt if delivered by hand, sent by telecopier or courier, and three (3) days
after such communication is mailed within the continental United States by first
class certified mail, return receipt requested, postage prepaid, to the other
party, in each case addressed as follows:
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<PAGE>
(a) if to WHX, WPC or WPSC, as the case may be:
WHX Corporation
110 East 59th Street
New York, New York 10022
Attn: Stewart E. Tabin, Assistant Treasurer
Wheeling-Pittsburgh Corporation
1134 Market Street
Wheeling, West Virginia 26003
Attn: Corporate Secretary
Wheeling-Pittsburgh Steel Corporation
1134 Market Street
Wheeling, West Virginia 26003
Attn: Corporate Secretary
With a copy (which shall not constitute notice) to:
Steven Wolosky, Esquire
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
(b) if to the Executive:
Paul J. Mooney
323 Parkway Drive
Pittsburgh, Pennsylvania 15228
with a copy (which shall not constitute notice) to:
Dennis R. Bonessa, Esquire
Reed Smith Shaw & McClay
435 6th Avenue
Pittsburgh, PA 15219
Addresses may be changed by written notice sent to the other party at the last
recorded address of that party.
14. SEVERABILITY. If any provision of this Agreement shall be adjudged
by any court of competent jurisdiction to be invalid or unenforceable for any
reason, such judgment shall not affect, impair or invalidate the remainder of
this Agreement.
-22-
<PAGE>
15. PRIOR UNDERSTANDING. This Agreement embodies the entire
understanding of the parties hereto, and supersedes all other oral or written
agreements or understandings between them regarding the subject matter hereof.
No change, alteration or modification hereof may be made except in a writing,
signed by all parties hereto. The headings in this Agreement are for convenience
and reference only and shall not be construed as part of this Agreement or to
limit or otherwise affect the meaning hereof.
16. EXECUTION IN COUNTERPARTS. This Agreement may be executed by the
parties hereto in counterparts, each of which shall be deemed to be original,
but all such counterparts shall constitute one and the same instrument, and all
signatures need not appear on any one counterpart.
17. CHOICE OF LAWS. Subject to the provisions of Paragraph 12 and
without regard to the effect of principles of conflicts of laws thereof,
jurisdiction over disputes with regard to this Agreement shall be exclusively in
the courts of the Commonwealth of Pennsylvania, and this Agreement shall be
construed in accordance with and governed by the laws of the Commonwealth of
Pennsylvania.
18. THIRD PARTY BENEFICIARY. The provisions of this Agreement as to the
Company shall also be binding upon and inure to the benefit of WPSC.
-23-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
WHEELING-PITTSBURGH STEEL CORPORATION
By: /s/ John R. Scheessele
----------------------
Name: John R. Scheessele
Title: President and Chief
Executive Officer
WHX CORPORATION
By: /s/ John R. Scheessele
----------------------
Name: John R. Scheessele
Title: President and Chief
Executive Officer
WHEELING-PITTSBURGH CORPORATION
By: /s/ John R. Scheessele
----------------------
Name: John R. Scheessele
Title: President and Chief
Executive Officer
/s/ Paul J. Mooney
---------------------------------
Paul J. Mooney
-24-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the WHX
Corporation Consolidated Financial Statements as of September 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,761
<SECURITIES> 552,307
<RECEIVABLES> 25,147
<ALLOWANCES> 1,405
<INVENTORY> 284,069
<CURRENT-ASSETS> 875,022
<PP&E> 1,113,675
<DEPRECIATION> 373,875
<TOTAL-ASSETS> 2,004,217
<CURRENT-LIABILITIES> 604,795
<BONDS> 267,874
<COMMON> 204
0
589
<OTHER-SE> 609,803
<TOTAL-LIABILITY-AND-EQUITY> 2,004,217
<SALES> 144,612
<TOTAL-REVENUES> 144,612
<CGS> 172,926
<TOTAL-COSTS> 288,070
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,594
<INCOME-PRETAX> (140,595)
<INCOME-TAX> (49,208)
<INCOME-CONTINUING> (91,387)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (91,387)
<EPS-PRIMARY> (4.47)
<EPS-DILUTED> (4.47)
</TABLE>
