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 March 31, 1998
--------------------------------------------------
/ / 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 March 31, 1998 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 May 8, 1998
was 18,769,922 which includes redeemable common shares.
<PAGE>
WHX CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
1998 1997
---- ----
(In thousands except per share)
<S> <C> <C>
NET SALES $ 304,078 $ 113,632
OPERATING COSTS
Cost of goods sold 269,657 141,152
Depreciation 20,504 11,337
Selling, administrative and general expense 18,276 16,318
--------- ---------
308,437 168,807
--------- ---------
OPERATING INCOME (LOSS) (4,359) (55,175)
Interest expense on debt 9,847 6,457
Other income (expense) 15,783 (1,019)
--------- ---------
INCOME (LOSS) BEFORE TAXES 1,577 (62,651)
Tax provision (benefit) 489 (21,927)
--------- ---------
NET INCOME (LOSS) 1,088 (40,724)
Dividend requirement for Preferred Stock 5,152 5,201
--------- ---------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK $ (4,064) $ (45,925)
Income (loss) per share of common stock:
Basic income(loss) per share of common stock $ (0.21) $ (1.92)
========= =========
Income (loss) per share of common stock $ (0.21) $ (1.92)
========= =========
-- assuming dilution
</TABLE>
See notes to consolidated financial statements.
<PAGE>
WHX CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
(Dollars and shares in thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ -- $ 1,002
Short term investments 833,896 581,550
Trade receivables - net 57,606 44,993
Inventories:
Finished and semi-finished products 200,943 178,450
Raw materials 79,370 103,735
Other materials and supplies 20,448 19,811
Excess of LIFO over current cost (17,239) (17,239)
----------- -----------
283,522 284,757
Other current assets 21,172 26,581
----------- -----------
Total current assets 1,196,196 938,883
Property, plant and equipment at cost, less
accumulated depreciation and amortization 726,137 738,660
Deferred income taxes 196,644 196,966
Intangible asset-pensions 76,714 76,714
Other non-current assets 125,205 119,180
----------- -----------
$ 2,320,896 $ 2,070,403
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade payables $ 139,996 $ 123,872
Short-term borrowings 598,994 366,418
Deferred income taxes - current 32,196 32,196
Other current liabilities 93,937 86,559
Long-term debt due in one year 619 466
----------- -----------
Total current liabilities 865,742 609,511
Long-term debt 354,554 350,453
Pension liability 172,767 166,652
Other employee benefit liabilities 429,026 427,124
Other liabilities 49,955 49,979
----------- -----------
1,872,044 1,603,719
----------- -----------
Redeemable Common Stock - 327 shares
and 360 shares 4,163 4,808
----------- -----------
Stockholders' Equity:
Preferred Stock - $.10 par value -
5,883 shares 589 589
Common Stock - $.01 par value - 18,415
shares and 19,074 shares 184 193
Accumulated other
comprehensive income 19,935 24,237
Additional paid-in capital 591,627 602,657
Accumulated earnings (deficit) (167,646) (163,582)
----------- -----------
444,689 464,094
Less treasury stock - 0 shares and 205 shares 0 (2,218)
----------- -----------
Total stockholders' equity 444,689 461,876
----------- -----------
$ 2,320,896 $ 2,070,403
=========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
WHX CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
1998 1997
---- ----
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,088 $ (40,724)
Non cash expenses:
Depreciation and amortization 20,756 11,420
Other postemployment benefits 2,150 --
Income taxes 322 (21,927)
Equity income in affiliated companies (974) (931)
Pension expense 5,556 --
Decrease (increase) in working capital elements net of effect of
acquisition:
Trade receivables (26,849) 10,784
Trade receivables sold 15,500 --
Inventories 2,105 (21,025)
Other current assets 5,463 (2,913)
Trade payables 16,124 5,203
Other current liabilities 7,221 14,980
Short term investments - trading (234,233) (158,433)
Trading account borrowings 267,432 199,921
Other items - net 887 (3,990)
--------- ---------
Net cash provided by (used in) operating activities 82,548 (7,635)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Short term investments-available for sale (22,418) (3,522)
Plant additions and improvements (7,478) (2,554)
Acquisition of Clinch-on Corporation (8,335) --
Dividends from affiliates 5,000 2,500
--------- ---------
Net cash used in
investing activities (33,231) (3,576)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term borrowings (66) (1,987)
Short term borrowings (payments) (34,856) (1,263)
Preferred stock purchased -- (8,020)
Common stock purchased (10,050) (7,646)
Letter of credit collateralization 415 400
Preferred stock dividends paid (5,152) (5,201)
Redemption of common stock (610) (92)
--------- ---------
Net cash used in financing activities (50,319) (23,809)
--------- ---------
DECREASE IN CASH AND
CASH EQUIVALENTS (1,002) (35,020)
Cash and cash equivalents
at beginning of period 1,002 35,020
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ -- $ --
========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
WHX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
GENERAL
The consolidated balance sheet as of March 31, 1998, the
consolidated statement of operations and the consolidated statement of
cash flows for the three month periods ended March 31, 1998 and 1997,
have been prepared by the Company without audit. In the opinion of
management, all adjustments necessary to present fairly the consolidated
financial position at March 31, 1998 and the results of operations and
changes in cash flows 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, 1997. The results of operations for the period ended March 31, 1998
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 affected 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 has primarily been 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, steel framing
and related accessories and other products used primarily by the
construction, highway and agricultural markets.
NOTE 1 - HANDY & HARMAN ACQUISITION
On April 13, 1998, the Company completed the acquisition of
Handy & Harman and merged it with a wholly-owned subsidiary of the
Company, with Handy & Harman as the surviving entity. The transaction
has a total value of approximately $603.6 million, including the
assumption of approximately $185.7 million in debt. The Company financed
the transaction through cash on hand and a private placement of debt
securities of the Company.
<PAGE>
The following pro forma disclosure is presented as if the Handy
& Harman acquisition had occurred on January 1 of the respective
periods.
Quarter Ended March 31,
-----------------------
1998 1997
---- ----
(in thousands, except per share)
Revenue $424,410 $218,564
Net loss (1,819) (44,242)
Basic and diluted loss per share: (.37) (2.07)
NOTE 2 - 10 1/2% SENIOR NOTES
On March 31, 1998, the Company announced that it had entered
into a definitive purchase agreement for the sale of $350.0 million
principal amount of 10 1/2% Senior Notes due 2005 in a Rule 144A Private
Placement to qualified institutional buyers. The closing on the private
placement of 10 1/2% Senior Notes occurred April 7, 1998. The net
proceeds of $340.4 million from the offering were used to finance a
portion of the acquisition of Handy & Harman and related transaction
expenses. The 10 1/2% Senior Notes have not been registered under the
Securities Act of 1933, as amended, or applicable state securities laws.
The Company has filed a registration statement related to an exchange
offer for the Senior Notes under the Securities Act of 1933.
NOTE 3 - EARNINGS PER SHARE
In 1997 the Company adopted SFAS No. 128, Earnings per Share.
The computation of basic earnings per common share is based upon the
average shares of Common Stock outstanding. In the computation of
earnings per common share -- assuming dilution in the first quarter of
1998 and 1997, the conversion of preferred shares and redeemable common
stock and exercise of options and warrants would have had an
anti-dilutive effect. Previously reported first quarter 1997 EPS has
been restated. A reconciliation of the income and shares used in the
computation follows:
RECONCILIATION OF INCOME AND SHARES IN EPS CALCULATION
<TABLE>
<CAPTION>
For the Quarter Ended March 31, 1998
Income Shares Per-
(Numerator) (Denominator) Amount
(in thousands, except per-share amount)
<S> <C> <C> <C>
Net income $1,088
Less: Preferred stock dividends 5,152
BASIC AND DILUTED EPS
Income (loss) available to common stockholders $(4,064) 18,942 $(0.21)
======== ====== =======
</TABLE>
The assumed conversion of stock options, preferred stock and redeemable
common stock would have an anti-dilutive effect on earnings per share.
<TABLE>
<CAPTION>
For the Quarter Ended March 31, 1998
Income Shares Per-
(Numerator) (Denominator) Amount
(in thousands, except per-share amount)
<S> <C> <C> <C>
Net income (loss) $(40,724)
Less: Preferred stock dividends 5,201
BASIC AND DILUTED EPS
Income (loss) available to common stockholders $(45,925) 23,881 $(1.92)
========= ====== =======
</TABLE>
The assumed conversion of stock options, preferred stock and redeemable
common stock would have an anti-dilutive effect on earnings per share.
<PAGE>
Outstanding stock options granted to officers, directors and key
employees totaled 4.1 million shares of common stock at March 31, 1998.
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 March 31, 1998 redeemable common stock outstanding
totaled 326,729 shares.
NOTE 4 - COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130),
effective January 1, 1998. This Statement establishes standards for
reporting and display of comprehensive income and its components in the
financial statements. The Company's first quarter 1998 comprehensive
loss of $1.7 million consists of net income of $1.1 million and other
comprehensive loss of $2.8 million, net of tax related to an unrealized
loss on available-for-sale securities. The comprehensive loss for the
comparable period in 1997 of $40.3 million consists of net loss of $40.7
million and other comprehensive income of $.4 million, net of tax
related to an unrealized gain on available-for-sale securities.
NOTE 5 - SHORT TERM INVESTMENTS
Net unrealized holding losses on trading securities included
in net income for the first quarter of 1998 and 1997 were $7.4 million
and $4.3 million, respectively.
NOTE 6 - SALES OF RECEIVABLES
Accounts receivable at March 31, 1998 and 1997 exclude $84.5
million and $45.0 million, respectively, representing uncollected
accounts receivable sold with recourse limited to the extent of
uncollectible balances. Fees paid by the Company under such agreement
range from 6.25% to 8.5% of the outstanding amount of receivables sold.
Based on the Company's collection history, the Company believes that the
credit risk associated with the above arrangement is immaterial.
NOTE 7 - REVOLVING CREDIT FACILITY
On December 28, 1995, Wheeling-Pittsburgh Steel Corporation
("WPSC") 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. A commitment fee of .5% is charged on the unused
portion. The letter of credit fee is 2.25% and is also performance
based.
Borrowings are secured primarily by 100% of the eligible
inventory of WPSC, Pittsburgh-Canfield Corporation ("PCC"), Wheeling
Construction Products, Inc. ("WCPI") and Unimast, Inc. ("Unimast"), and
the terms of the RCF contain various restrictive covenants, limiting
among other things dividend payments or other distribution 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 March 31,
1998 totaled $56.1 million. Letters of credit outstanding under the RCF
were $10.0 million at March 31, 1998.
<PAGE>
In August 1994 WPSC entered into a separate facility for
letters of credit up to $50 million. At March 31, 1998 letters of credit
totaling $8.9 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 8 - 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 several waste
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 the Buckeye reclamation will be between $3.0 million and $4.0
million. At six other sites (MIDC Glassport, United Scrap Lead, Tex-Tin,
Breslube Penn, Four County Landfill and Beazor) the Company estimates
costs to aggregate up to $700,000. The Company is currently funding its
share of remediation costs.
The Company, as are other industrial manufacturers, is subject
to increasingly stringent standards relating to the protection of the
environment. In order to facilitate compliance with these environmental
standards, the Company has incurred capital expenditures for
environmental control projects aggregating $6.8 million, $12.4 million
and $3.0 million for 1996, 1997 and the first quarter of 1998,
respectively. The Company anticipates spending approximately $41.3
million in the aggregate on major environmental compliance projects
through the year 2000, estimated to be spent as follows: $13.4 million
in 1998, $15.9 million in 1999 and $12.0 million in 2000. Due to the
possibility of unanticipated factual or regulatory developments, the
amount of future expenditures may vary substantially from such
estimates.
Non-current accrued environmental liabilities totaled $10.6
million at December 31, 1997 and March 31, 1998. As new information
becomes available, including information provided by third parties, and
changing laws and regulation, the liabilities are reviewed and the
accruals adjusted quarterly. Management believes, based on its best
estimate, that the Company has adequately provided for remediation costs
that might be incurred or penalties that might be imposed under present
environmental laws and regulations.
Based upon information currently available, including 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 and liability costs, including the incurrence
of additional fines and penalties, if any, relating to the operation of
its facilities, to have a material adverse effect on the financial
condition or results of operations of the Company. However, as further
information comes into the Company's possession, it will continue to
reassess such evaluations.
<PAGE>
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
On March 31, 1998, the Company announced that it had
entered into a definitive purchase agreement for the sale of $350.0 million
principal amount of 10 1/2% Senior Notes due 2005 in a Rule 144A Private
Placement to qualified institutional buyers. The closing on the private
placement of 10 1/2% Senior Notes occurred April 7, 1998. The net proceeds of
$340.4 million from the offering were used to finance a portion of the
acquisition of Handy & Harman and related transaction expenses. The 10 1/2%
Senior Notes have not been registered under the Securities Act of 1933, as
amended, or applicable state securities laws. The Company has filed a
registration statement related to an exchange offer for the Senior Notes under
the Securities Act of 1933.
On April 13, 1998 the Company completed the acquisition of Handy &
Harman ("H&H") and merged it with a wholly-owned subsidiary of the Company. The
transaction has a total value of approximately $603.6 million, including the
assumption of approximately $185.7 million in debt. The Company financed the
transaction through cash on hand and the private placement of $350 million of 10
1/2% Senior Notes of the Company.
In connection with the Acquisition, the waivers of certain lenders
to maintain the H&H Revolving Credit Facility (as defined) through June 30, 1998
were obtained. The Company intends to obtain the consent and/or waiver of the
lenders to the continuation of the H&H Revolving Credit Facility after June 30,
1998 or replace the H&H Revolving Credit Facility with a new credit facility on
substantially similar terms, although there can be no assurance that the Company
will be successful in obtaining a replacement credit facility on substantially
similar terms.
RESULTS OF OPERATIONS
Net sales for the first quarter of 1998 totaled $304.1 million on
shipments of steel products totaling 587,672 tons. Net sales for the first
quarter of 1997 totaled $113.6 million on shipments of 153,842 tons. The
increase in net sales and shipments of steel products primarily reflects the
effect of a strike by the United Steelworkers of America in the prior period.
During the strike, no products were being produced or shipped at eight
facilities which represented approximately 80% of the tons shipped by the
Company on an annual basis. The new labor agreement resulted in the elimination
of 850 jobs, directly affecting operating costs. The first quarter 1998 results
reflect the re-start of operations and the progression toward achieving
pre-strike production and shipping levels. Steel prices on the products shipped
decreased 2.7% from the comparable period in 1997.
First quarter 1998 operating costs increased to $308.4 million from
$168.8 million in 1997 first quarter. Operating cost per ton decreased to $525
per ton in the 1998 first quarter from $1,098 per ton in the 1997 first quarter.
The increase in operating costs reflects the effects of the strike on the volume
of steel products produced and shipped in the first quarter of 1997. The lower
operating costs per ton shipped reflects higher production levels and lower
fixed cost per ton during the first quarter of 1998, while completion of the
door rehabilitation program at the #8 coke battery adversely affected operating
costs. The Company produced 623,714 tons of raw steel in the 1998 first quarter,
setting a new production record at its Steubenville complex. There was no raw
steel produced in the 1997 first quarter.
Depreciation expense increased $9.2 million to $20.5 million in the
first quarter of 1998 from $11.3 million in the comparable period in 1997 due to
the effects of the strike on production in the first quarter of 1997 and the
higher levels of raw steel production and its effect on the units of production
depreciation method.
<PAGE>
Selling, administrative and general expense for the first quarter of
1998 increased $2.0 million to $18.3 million from $16.3 million in the
comparable period in 1997 due primarily to lower expenses incurred during the
strike.
Interest expense for the first quarter 1998 increased $3.4 million
to $9.8 million from the comparable period in 1997 due to higher levels of
long-term debt.
Other income (expense) increased $16.8 million to $15.8 million in
the first quarter of 1998, compared to a loss of $1.0 million in the 1997 first
quarter. The increase is due to realized gains on short-term investments,
partially offset by a lower return on mark-to-market short-term investments.
The 1998 first quarter tax provision reflects an estimated annual
effective tax rate of 31% compared to the 1997 first quarter effective tax rate
of 35%.
Net income for the 1998 first quarter totaled $1.1 million, or a
loss of $0.21 per share of common stock after deduction of preferred dividends.
The 1997 first quarter net loss totaled $40.7 million, or a loss of $1.92 per
share of common stock after deduction of preferred dividends.
<PAGE>
FINANCIAL POSITION
Net cash flow provided by operating activities for the first quarter
of 1998 totaled $82.5 million. Short term trading investments and related
short-term borrowings are reported as cash flow from operating activities and
provided a net $33.2 million of funds in the 1998 first quarter. Working capital
accounts (excluding cash, short term investments, short-term borrowings and
current maturities of long term debt) provided $19.6 million of funds. Accounts
receivable increased by $26.8 million (excluding a $15.5 million sale of trade
receivables under the Receivables Facility), trade payables increased $16.1
million and other current liabilities increased $7.2 million. Inventories,
valued principally by the LIFO method for financial reporting purposes, totaled
$283.5 million at March 31, 1998, a decrease of $1.2 million from December 31,
1997. The increase in accounts receivable is due to increased shipments.
In the first quarter of 1998, $7.5 million was spent on capital
improvements including $3.0 million on environmental control projects.
Continuous and substantial capital and maintenance expenditures will be required
to maintain and where necessary, upgrade operating facilities to remain
competitive, and to comply with environmental control requirements. It is
anticipated that necessary capital expenditures including required environmental
expenditures in future years will approximate depreciation expense and represent
a material use of operating funds.
On December 28, 1995, Wheeling-Pittsburgh Steel Corporation,
("WPSC") entered into a new Revolving Credit Facility ("the Revolving Credit
Facility") with Citibank, N.A. as agent. The Revolving Credit Facility, as
amended, provides for borrowing for general corporate purposes of up to $150
million. The Revolving Credit Facility 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
eligible inventory and requires that WPSC maintain a specified level of tangible
net worth. The Revolving Credit Facility has certain financial covenants
restricting indebtedness, liens and distributions. Borrowings under the
Revolving Credit Facility at March 31, 1998 totaled $56.1 million.
In August 1994, WPSC entered into a separate facility for letters of
credit up to $50 million. At March 31, 1998 letters of credit totaling $8.9
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.
In November 1997, Wheeling-Pittsburgh Corporation, a wholly owned
subsidiary of the Company, ("WPC") issued $275.0 million principal amount of 9
1/4% Senior Unsecured Notes to qualified institutional buyers pursuant to Rule
144A under the Securities Act of 1933. WPC filed a registration statement
related to an exchange offer for the 9 1/4% Senior Notes under the Securities
Act of 1933.
In November 1997 WPC also entered into a Term Loan Agreement with
DLJ Capital Funding, Inc., as syndication agent, pursuant to which WPC borrowed
$75 million. The Term Loan Agreement matures on November 15, 2006. Amounts
outstanding under the Term Loan Agreement bear interest at either (i) the
Alternate Base Rate (as defined therein) plus 2.25% or (ii) the LIBO Rate (as
defined therein) plus 3.25%, determined at the Company's option. WPC's
obligations under the Term Loan Agreement will be guaranteed by WPC's then
outstanding present and future operating subsidiaries.
The proceeds from the 9 1/4% Senior Notes and the Term Loan
Agreement were used to defease $266.2 million of 9d% Senior Secured Notes due
2003 and to pay down borrowings under the Revolving Credit Facility.
Under the terms of the new labor agreement, WPSC established a
Defined Benefit Pension Plan ("DB Plan") covering its hourly employees. As of
December 31, 1997, WPSC had an unfunded accumulated pension benefit obligation
for the DB Plan of approximately $167.3 million, of which approximately 75% must
be funded over the next five years. In accordance with ERISA regulations, the
Company would not have had to make significant contributions to fund the
obligations of the new plan in 1998, but would be required to fund $31.4 million
in the first quarter of 1999. However, as
<PAGE>
a result of the acquisition of Handy & Harman and its significantly overfunded
pension plans, this funding obligation may be significantly reduced or
eliminated and is not classified as a current liability.
As of March 31, 1998, the Company had repurchased on the open market
and retired 11.3 million shares of its Common Stock and .6 million shares of
Preferred Stock since the repurchase program was initiated in October 1994 for
an aggregate purchase price of approximately $140.6 million. In the 1998 first
quarter the Company repurchased 795,607 shares of Common Stock for $10.1
million. The Company may, from time to time, continue to purchase additional
shares of Common Stock and Preferred Stock.
LIQUIDITY
As of March 31, 1998, the Company had cash and short-term
investments, net of related investment borrowings of $234.9 million.
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, the Receivables
Facility, borrowing availability under the Revolving Credit Facility and funds
generated from operations. The Company believes that such sources, together with
borrowings under Handy & Harman's revolving credit facility, 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. During the 1998 first
quarter, the Company had minimal activity with respect to futures contracts, and
the impact of such activity was not material on the Company's financial
condition or results of operations.
The Company began a Year 2000 compliance project in July 1995. This
project encompasses business systems, mainframe processor systems, plant
operating systems, end-user computing systems, wide-area and voice networks, and
building and plant environmental systems. Included in the project plan is a
review and Year 2000 compliance assurance program with customers, suppliers, and
other constituents. System inventories through out the Company are being
reviewed and work is in progress to ensure that such systems are Year 2000
compliant. Management believes, based on a current review and the ongoing
effort, that all relevant computer systems will be Year 2000 compliant by the
second quarter of 1999. Management believes that the cost of this project will
not be material to the Company's financial condition or results of operation
NEW ACCOUNTING STANDARD
In March 1998, the American Institute of Certified Public
Accountants issued Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1
addresses costs incurred in connection with the implementation of internal-use
software, and specifies the circumstances under which such costs should be
capitalized or expensed. The Company will be required to adopt SOP 98-1 in the
first quarter of 1999. At this time, management has not determined the impact of
adoption of SOP 98-1 on the Company's results of operations or financial
position.
*******
When used in the Management's Discussion and Analysis, the words
"anticipate", "estimate" and similar expressions are intended to identify
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act, which are intended to be covered by the
safe harbors created thereby. Investors are cautioned that all forward-looking
statements involve risks and uncertainty, including without limitation, the
ability of the Company to develop market and sell its products, the effects of
competition and pricing, the impact of the acquisition of Handy &
<PAGE>
Harman and Company and industry shipment levels. Although the Company believes
that the assumptions underlying the forward-looking statements are reasonable,
any of the assumptions could be inaccurate, and therefore, there can be no
assurance that the forward-looking statements included herein will prove to be
accurate.
<PAGE>
PART II OTHER INFORMATION
Item 6.(a) EXHIBITS
27 Financial Data Schedule
6.(b) REPORT ON FORM 8-K
None
<PAGE>
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.
<PAGE>
WHX CORPORATION
/s/ Arnold Nance
-----------------------------------
Arnold Nance
Vice President-Finance
(Principal Accounting Officer)
May 15, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the WHX
Corporation Consolidated Financial Statements as of March 31, 1998 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-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 0
<SECURITIES> 833,896
<RECEIVABLES> 57,606
<ALLOWANCES> 1,269
<INVENTORY> 283,522
<CURRENT-ASSETS> 1,196,196
<PP&E> 1,126,224
<DEPRECIATION> 400,087
<TOTAL-ASSETS> 2,320,896
<CURRENT-LIABILITIES> 865,742
<BONDS> 354,554
<COMMON> 184
0
589
<OTHER-SE> 611,562
<TOTAL-LIABILITY-AND-EQUITY> 2,320,896
<SALES> 304,078
<TOTAL-REVENUES> 304,078
<CGS> 269,657
<TOTAL-COSTS> 308,437
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,847
<INCOME-PRETAX> 1,577
<INCOME-TAX> 489
<INCOME-CONTINUING> 1,088
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,088
<EPS-PRIMARY> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
