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, 2000
/ / 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, 2000 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 No
The number of shares of Common Stock issued and outstanding as of October 31,
2000 was 14,952,173 which includes redeemable common shares.
<PAGE>
WHX CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended September 30 Nine Months Ended September 30
-------------------------- ------------------------------
2000 1999* 2000 1999*
-------------------------- ------------------------------
(In thousands except per share)
<S> <C> <C> <C> <C>
Net Sales $ 446,995 $ 447,607 $ 1,373,078 $ 1,258,315
Operating Costs
Cost of goods sold 387,583 368,391 1,148,977 1,053,153
Depreciation and amortization 27,669 26,622 83,656 79,297
Selling, administrative and general expense 37,198 34,982 113,574 107,826
----------- ----------- ----------- -----------
452,450 429,995 1,346,207 1,240,276
----------- ----------- ----------- -----------
Operating Income/(loss) (5,455) 17,612 26,871 18,039
Interest expense on debt 23,397 22,349 67,597 65,328
Other income (expense) 5,898 21,191 (1,825) 33,965
----------- ----------- ----------- -----------
Income (Loss) Before Taxes and
Extraordinary Item (22,954) 16,454 (42,551) (13,324)
Tax provision (benefit) (1,839) 5,345 (50,998) (3,373)
----------- ----------- ----------- -----------
Income (Loss) Before Extraordinary Item (21,115) 11,109 8,447 (9,951)
Extraordinary income-net of tax -- -- -- 896
----------- ----------- ----------- -----------
Net Income (Loss) (21,115) 11,109 8,447 (9,055)
Dividend requirement for Preferred Stock 5,152 5,152 15,455 15,456
----------- ----------- ----------- -----------
Net Income (Loss) Applicable to Common Stock $ (26,267) $ 5,957 $ (7,008) $ (24,511)
=========== =========== =========== ===========
Basic income (loss) per share of
Common Stock
Income (loss) before extraordinary item $ (1.84) $ 0.38 $ (0.49) $ (1.55)
Extraordinary item - net of tax -- -- -- 0.06
----------- ----------- ----------- -----------
Net income (loss) per share $ (1.84) $ 0.38 $ (0.49) $ (1.49)
=========== =========== =========== ===========
Income (loss) per share of
Common Stock-assuming dilution
Income (loss) before extraordinary item $ (1.84) $ 0.34 $ (0.49) $ (1.55)
Extraordinary item - net of tax -- -- -- 0.06
----------- ----------- ----------- -----------
Net income (loss) per share -
assuming dilution $ (1.84) $ 0.34 $ (0.49) $ (1.49)
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements
* Reclassified
<PAGE>
WHX CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
-------------------------------------------------------------------------------------------------------------------
(Dollars and shares in Thousands)
ASSETS (Unaudited) *
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 10,577 $ 10,775
Short term investments 255,361 659,356
Trade receivables - net 151,947 141,091
Inventories:
Finished and semi-finished products 268,568 218,350
Raw materials 74,811 81,210
Other materials and supplies 20,247 28,033
Precious metals 109,488 117,639
LIFO reserve 3,596 (3,363)
----------- -----------
476,710 441,869
Other current assets 14,710 14,622
----------- -----------
Total current assets 909,305 1,267,713
Property, plant and equipment at cost, less
accumulated depreciation and amortization 820,621 816,501
Deferred income taxes 145,553 123,033
Prepaid pension 38,398 40,336
Intangibles, net of amortization 275,354 280,766
Other non-current assets 142,350 145,217
----------- -----------
$ 2,331,581 $ 2,673,566
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade payables $ 195,550 $ 171,229
Short-term borrowings 268,472 582,547
Deferred income taxes - current 67,056 67,793
Other current liabilities 141,827 133,158
Long-term debt due in one year 1,384 1,810
----------- -----------
Total current liabilities 674,289 956,537
Long-term debt 869,224 864,620
Other employee benefit liabilities 391,986 400,425
Other liabilities 31,034 71,181
----------- -----------
1,966,533 2,292,763
Redeemable Common Stock - 268 shares
and 282 shares 3,070 3,332
----------- -----------
Stockholders' Equity:
Preferred Stock $.10 par value -
5,883 shares 589 589
Common Stock - $.01 par value -
14,273 shares and 14,145 shares 144 141
Accumulated other
comprehensive income (loss) (8,797) 945
Additional paid-in capital 555,114 553,861
Accumulated (deficit) earnings (185,072) (178,065)
----------- -----------
Total stockholders' equity 361,978 377,471
----------- -----------
$ 2,331,581 $ 2,673,566
=========== ===========
</TABLE>
See notes to consolidated financial statements.
* Reclassified
<PAGE>
WHX CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
2000 1999
-------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 8,447 $ (9,055)
Non cash income and expenses:
Depreciation and amortization 83,656 79,297
Other post employment benefits (6,838) (4,824)
Income taxes - deferred (53,582) (8,859)
(Gain) loss on sale of assets (1,046) 2,695
Equity income in affiliated companies (2,442) (3,991)
Pension expense 1,936 4,554
Minority interest 1,454 866
Premium on early debt retirement (net of tax) -- (896)
Decrease (increase) in working capital elements,
Trade receivables (15,856) (54,898)
Trade receivables sold 5,000 3,225
Inventories (34,842) (16,796)
Other current assets 89 (12,985)
Trade payables 24,321 27,338
Other current liabilities 8,670 31,079
Short term investments - net 390,738 511,785
Trading account borrowings (374,333) (487,502)
Other items - net 5,827 (3,787)
--------- ---------
Net cash provided by operating activities 41,199 57,246
--------- ---------
Cash flows from investing activities:
Property additions and improvements (97,936) (62,000)
Investment in affiliates 131 (9,615)
Dividends from affiliates 4,649 5,594
Proceeds from sale of property 4,773 930
--------- ---------
Net cash (used) in investing activities (88,383) (65,091)
--------- ---------
Cash flows from financing activities:
Net borrowings (payments) on long-term debt 21,504 (27,964)
Minority interest dividends (1,733) 1,103)
Short term borrowings 42,933 70,552
Common stock purchased -- (27,606)
Letter of credit collateralization -- 8,229
Preferred stock dividends paid (15,455) (15,456)
Redemption of equity issues (263) (245)
--------- ---------
Net cash provided in financing activities 46,986 6,407
--------- ---------
Decrease in cash and
cash equivalents (198) (1,438)
Cash and cash equivalents
at beginning of period 10,775 16,004
--------- ---------
Cash and cash equivalents
at end of period $ 10,577 $ 14,566
========= =========
</TABLE>
See notes to consolidated financial statements
<PAGE>
WHX CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
General
The consolidated balance sheet as of September 30, 2000, the
consolidated statement of operations for the nine month periods ended
September 30, 2000 and 1999, and the consolidated statement of cash
flows for the nine month periods ended September 30, 2000 and 1999, have
been prepared by the Company and have not been audited. In the opinion
of management, all normal and recurring adjustments necessary to present
fairly the consolidated financial position at September 30, 2000 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, 1999. The results of operations for the period ended September 30,
2000 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.
Wheeling-Pittsburgh Corporation and six of its subsidiaries
filed a petition seeking reorganization under Chapter 11 of Title 11 of
the United States Bankruptcy Code on November 16, 2000. See Note 1.
Business Segments
WHX Corporation ("WHX") is a holding company that has been
structured to invest in and/or acquire a diverse group of businesses on
a decentralized basis. WHX's primary businesses currently are Handy &
Harman ("H&H"), a diversified manufacturing company whose strategic
business segments encompass, among others, specialty wire, tubing, and
fasteners, and precious metals plating and fabrication, and
Wheeling-Pittsburgh Corporation ("WPC"), a vertically integrated
manufacturer of value-added and flat rolled steel products. WPC is the
holding company for WHX's steel related businesses, including
Wheeling-Pittsburgh Steel Corporation ("WPSC" and together with WPC and
its other subsidiaries, the "WPC Group"). WHX's other businesses include
Unimast Incorporated ("Unimast"), a leading manufacturer of steel
framing and other products for commercial and residential construction
and WHX Entertainment Corp., a co-owner of a racetrack and video lottery
facility located in Wheeling, West Virginia. WHX, together with all of
its subsidiaries shall be referred to as the "Company" and WHX together
with all of its subsidiaries other than the WPC Group, shall be referred
to as the "WHX Non-Steel Group." See Segment Disclosures in Note 9.
<PAGE>
Note 1 - Subsequent Events
On October 4, 2000, the Company commenced and successfully
completed a solicitation of consents from holders of its 10-1/2% Senior
Notes due 2005 (the "Notes") to amend certain covenants and other
provisions of the indenture dated as of April 7, 1998 (the "Indenture")
governing the Notes. The supplemental indenture reflecting such
amendment (the "Supplemental Indenture") provides, among other things,
for amendments to certain covenants which restrict the Company's ability
to make restricted payments, incur additional indebtedness, make
permitted investments or utilize proceeds from asset sales. The
Supplemental Indenture prohibits the payment of dividends on the
Company's preferred stock until October 1, 2002, and thereafter only in
the event such payments satisfy certain conditions set forth in the
Indenture, as amended by the Supplemental Indenture. In addition, the
amendments remove as events of default under the Indenture those
relating to defaults under any mortgage, indenture or instrument by,
judgments against and bankruptcy, insolvency and related filings and
other events of WPC or any of its direct or indirect subsidiaries.
Accordingly, the Chapter 11 Bankruptcy Filing is not an event of default
under the Note. In connection with the solicitation the Company made a
payment equal to 2% of the principal amount of the Notes ($20 in cash
for each $1,000 principal amount of Notes) to each holder of Notes whose
consent was received and accepted prior to the expiration date. Such
payments to bond holders aggregated $5,466,700.
On November 16, 2000, the WPC Group filed a voluntary
bankruptcy petition in the United States Bankruptcy Court for the
Northern District of Ohio (the "Bankruptcy Court") to reorganize their
business under Chapter 11 of the US Bankruptcy Code. Included in the
filing are WPC and its subsidiaries, (Wheeling-Pittsburgh Steel
Corporation, WP Steel Venture Corporation, Consumers Mining Company, WP
Coal Company, Wheeling Empire Company, Mingo Oxygen Company, Pittsburgh
Canfield Corporation, Monessen Southwestern Railway Company,
collectively the "Debtors"). The WPC Group took this action as a result
of the second steel import crises since 1998 which has caused a severe
deterioration of the U.S. steel industry. The deterioration has resulted
in severely reduced steel pricing. This decline, coupled with the
indebtedness incurred by the WPC Group in recovering from a 10-month
strike has resulted in the WPC Group suffering substantial losses and
the severe erosion of its financial position and liquidity. As a result,
the WPC Group has been forced to seek protection of the Federal
Bankruptcy laws. WPSC and the other members of the WPC Group are
continuing all normal business operations and will continue to provide
uninterrupted services to their customers. No plant closures are planned
as a result of the Chapter 11 filing and members of the WPC Group will
continue to honor the terms of their various labor agreements.
Subsequent to the commencement of the Chapter 11 filing, the
WPC Group sought and obtained several orders from the Bankruptcy Court
which were intended to stabilize their businesses and enable the WPC
Group to continue business operations as a debtor-in-possession.
<PAGE>
On November 17, 2000, members of the WPC Group entered in a
Debtor in Possession Credit Agreement to provide borrowings of up to
$290,000,000 to refinance certain obligations of the WPC Group, to
provide working capital for the WPC Group and for other general
corporate purpose. The Debtor in Possession Credit Agreement includes
(1) a $35.0 million term loan which will be fully drawn at closing and
(2) a Revolving Credit Facility of up to $255,000,000 to refinance
certain obligations of the WPC Group, to provide ongoing working capital
needs for the WPC Group and for other general corporate purposes. The
DIP Agreement includes a $25.0 million sublimit for letters of credit.
The DIP Credit Agreement expires November 16, 2002. Revolving credit
interest rates are based on the Citibank Base Rate plus 2.00% and/or
Eurodollar rate plus 3.00%. The margin over the prime rate and the
Eurodollar rate fluctuate based upon excess availability. The Term Loan
interest rates are 13.0% cash pay plus 3.0% deferred. Borrowings
outstanding under the DIP Credit Agreement at November 16, 2000 included
the $35 million term loan, $163.0 million in revolving credit borrowings
and letters of credit outstanding under the DIP Credit Agreement were
approximately $17.0 million. Borrowings under the Debtor in Possession
Credit Agreement were used to repay all obligations under the WPSC
Receivables Facility, amounting to approximately $105.0 million and to
repay all obligations under WPSC's Revolving Credit Facility amounting
to approximately $84.7 million. Upon repayment, the WPSC Revolving
Credit Facility was terminated and the Receivables Facility is in the
process of being terminated.
All the borrowings under the Debtor in Possession Credit
Agreement are entitled to a superpriority claim under Section 364(c) (1)
of the United States Bankruptcy Code and are collateralized by a lien on
all existing and after acquired assets, property and rights of the WPC
Group including but not limited to cash, inventory, accounts receivable,
general intangibles, equipment, intellectual property, equity
investments, owned real estate and leaseholds. In connection with the
Chapter 11 Filing, the Company has guaranteed $30.0 million of the term
loan portion of the Debtor in Possession Credit Agreement.
The Debtor in Possession Credit Agreement contains negative,
affirmative and financial covenants including a limitation on capital
expenditures through December 31, 2000 of $12.5 million, $42.5 million
in fiscal 2001 and $60.0 million in fiscal 2002 and require the WPC
Group to have $15.0 million of excess availability at all times.
The Company believes that this financing will enable the WPC
Group to pay for the post-petition delivery of goods and services,
continue operations and administration necessary to meet current and
future customer needs, and continue normal business operations during
the Chapter 11 Filing.
Since the Petition Date, management has been in the process of
stabilizing its business and evaluating its operations before beginning
the development of a reorganization plan. Until a reorganization plan is
confirmed by the Bankruptcy Court, payments of pre-petition liabilities,
including WPC's 9-1/4% Senior Notes, are limited to those approved by
the Bankruptcy Court. The Chapter 11 filing is an event of default under
WPC's 9-1/4% Senior Notes.
WPC's financial results are included in the WHX consolidated
results at September 30, 2000. However, generally accepted accounting
principles specifically require that any entity whose financial
statements were previously consolidated with those of its parent (as
WPC's are with WHX's) that files for protection under the U.S.
Bankruptcy Code, whether solvent or insolvent, must be prospectively
deconsolidated from the parent and presented on the cost method. The
cost method will require WHX to present the net assets of WPC at
November 17, 2000 as an investment and not recognize any income or loss
from WPC in the WHX results of operations during the reorganization
period. This investment of approximately $144.0 million as of September
30, 2000 will be subject to periodic reviews for recoverability. When
WPC emerges from the jurisdiction of the Bankruptcy Court, the
subsequent accounting will be determined based upon the applicable
circumstances and facts at such time, including the terms of any plan of
reorganization.
<PAGE>
Management has assessed WPC's liquidity position as a result of
the Chapter 11 Filing and believes that WPC can continue to fund its and
its subsidiaries operating activities and meet its debt and capital
requirements for the foreseeable future. However, the ability of WPC to
continue as a going concern is dependent upon its ability to generate
future profits and cash flow, whether through the confirmation of a plan
of reorganization or otherwise. The WPC condensed consolidated financial
information set forth below has been prepared on a going concern basis
which contemplates continuity of operations, realization of assets, and
liquidation of liabilities in the ordinary course of business. As a
result of the Chapter 11 Filing and related events, there is no
assurance that the carrying amounts of assets will be realized or that
liabilities will be liquidated or settled for the amounts recorded. In
addition, a plan of reorganization, or rejection thereof, could change
the amounts reported in the WPC financial statements and cause a
material decrease in the carrying amount of WHX's investment in WPC.
Following are the WHX condensed Pro Forma consolidated Statements of
Income and Balance Sheet data, assuming the deconsolidation of WPC:
<TABLE>
<CAPTION>
For the Nine-Month Period Ended For the Fiscal Year Ended
September 30, 2000 December 31, 1999
------------------ -----------------
(In thousands)
<S> <C> <C>
Net Sales $537,133 $683,525
Operating Income 43,317 57,304
Income before Provision for Income Taxes 5,268 33,488
Net Income $1,000 $20,090
(Loss) per Common Share after deducting preferred dividends of
$15,455 and $20,608, respectively
Basic & Diluted $(1.02) $(.03)
</TABLE>
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ -----------------
(In thousands)
<S> <C> <C>
Current Assets $564,996 $953,405
Property, Plant and Equipment 160,151 163,267
Investment in WPC 144,245 136,797
Other 344,969 335,075
---------- ----------
Total Assets $1,214,361 $1,588,544
---------- ----------
Current Liabilities $274,184 $631,059
Long-Term Debt 512,661 510,642
Other 65,538 69,372
Total Stockholders' Equity 361,978 377,471
---------- ----------
Total Liabilities and Stockholders' Equity $1,214,361 $1,588,544
---------- ----------
</TABLE>
<PAGE>
Following are the condensed consolidated Statements of Income and
Balance Sheet data for WPC:
<TABLE>
<CAPTION>
For the Nine-Month Period Ended For the Fiscal Year Ended
September 30, 2000 December 31, 1999
------------------ -----------------
(In thousands)
<S> <C> <C>
Net Sales $845,869 $1,081,657
Operating (Loss) (16,446) (17,595)
(Loss) before Benefit from Income Taxes (47,819) (55,208)
Net Income (Loss) $7,448 $(34,485)
</TABLE>
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ -----------------
(In thousands)
<S> <C> <C>
Current Assets $344,309 $314,308
Property, Plant and Equipment 660,470 653,234
Other 309,284 310,480
---------- ----------
Total Assets $1,314,063 $1,278,022
---------- ----------
Current Liabilities $400,105 $325,478
Long-Term Debt 356,563 353,978
Other 413,150 461,769
Total Stockholder's Equity 144,245 136,797
---------- ----------
Total Liabilities and Stockholder's Equity
$1,314,063 $1,278,022
---------- ----------
</TABLE>
<PAGE>
Note 2 - 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 diluted earnings per common share for the quarter ended September 30,
2000 and in the nine month periods of 1999 and 2000, the conversion of
preferred stock and redeemable common stock and exercise of options
would have had an anti-dilutive effect. A reconciliation of the income
and shares used in the computation follows:
Reconciliation of Income and Shares in EPS Calculation
(in thousands except per share amounts)
<TABLE>
<CAPTION>
For the Quarter Ended September 30, 2000 For the Nine Months Ended September 30, 2000
------------------------------------------------------------------------------------------------------------------------------------
Income Shares Per-Share Income Shares Per-share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
<S> <C> <C>
Income (loss) before extraordinary item $(21,115) $8,446
Less: Preferred stock dividends 5,152 15,455
-------- ------
Basic and diluted EPS
Income (loss) available to
common stockholders $(26,267) 14,304 $(1.84) $(7,008) 14,239 $(0.49)
========= ====== ======= ======== ====== ======
</TABLE>
<TABLE>
<CAPTION>
For the Quarter Ended September 30, 1999 For the Nine Months Ended September 30, 1999
-----------------------------------------------------------------------------------------------------------------------------------
Income Shares Per-Share Income Shares Per-share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before extraordinary item $11,109 $(9,951)
Less: Preferred stock dividends 5,152 15,456
------- ------
Basic EPS
Income available to
common stockholders 5,957 15,616 $0.38 (25,407) 16,437 $(1.55)
Effect of Dilutive Securities
Options 8
Convertible preferred stock 5,152 16,506
Redeemable common stock 284
Diluted EPS ------- ------ ------ --------- ------ -------
Income available to common
stockholders & assumed conversions $11,109 32,414 $0.34 $(25,407) 16,437 $(1.55)
======= ====== ====== ========= ====== =======
</TABLE>
Redeemable Common Stock
Certain present and former employees of the WPC Group 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, 2000 redeemable common stock
outstanding totaled 267,713 shares.
<PAGE>
Note 3 - Comprehensive Income
Comprehensive income for the three and nine month periods ended
September 30, 2000 and 1999 was as follows:
<TABLE>
<CAPTION>
(in thousands) Three Months Ended Nine Months Ended
September 30 September 30
------------ ------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings (loss) $(21,115) $11,109 $8,447 $(9,055)
Other comprehensive (loss):
Foreign currency translation
adjustments (538) (72) (1,125) (811)
Unrealized (losses) on securities:
Unrealized holding (losses) arising
during the period, net of tax (a) (1,045) (8,617) -
Less: Reclassification of gains to net
earnings (loss), net of tax (b) (5,389)
-------- ------- -------- ---------
Comprehensive income (loss) $(22,698) $11,037 $(1,295) $(15,255)
======== ======= ======== =========
</TABLE>
(a) Includes tax (benefit) of $564 for the three-month period ended September
30, 2000 and $4,640 for the nine-month period ended September 30, 2000.
(b) Includes tax expense of $2,901 for the nine-month period ended September 30,
1999.
Accumulated other comprehensive income balances as of September 30, 2000 and
December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Foreign currency Accumulated other
(in thousands) Unrealized gain translation comprehensive
(loss) on securities adjustments income (loss)
-------------------- ----------- -------------
<S> <C> <C> <C>
September 30, 2000
Balance on January 1, 2000 $ 1,450 $ ( 505) $ 945
Period change (8,617) (1,125) (9,742)
------- -------- -------
Balance on September 30, 2000 $(7,167) $(1,630) $(8,797)
======== ======== ========
December 31, 1999
Balance on January 1, 1999 $5,389 $ 83 $ 5,472
Period change (3,939) (588) (4,527)
------- -------- -------
Balance on December 31, 1999 $1,450 $ (505) $ 945
======== ======== =======
</TABLE>
<PAGE>
Note 4 - Inventory
The operating income for the quarter and the nine months ended
September 30, 2000 includes a benefit resulting from the liquidation of
LIFO inventory and the reversal of provisions recorded in the first two
quarters of 2000 for the cost associated with replenishing the
liquidated LIFO layers. The effect of the LIFO liquidation and the
related provision reversals increased operating income (reduced
operating loss) by $1.7 million and $0.7 million for the three months
and nine months ended September 30, 2000.
Note 5 - Short Term Investments
Net unrealized holding gains/losses on trading securities held
at period end and included in other income for the third quarter of 2000
and 1999 were a loss of $0.5 million and a gain $13.3 million,
respectively. Net unrealized holding gains/losses on trading securities
held at period end included in other income for the nine month periods
ended September 30, 2000 and 1999 were a loss of $18.2 million and a
gain of $23.0 million respectively.
Note 6 - Long Term Debt
The Company's long-term debt consists of the following debt instruments:
<TABLE>
<CAPTION>
September 30 December 31
------------ -----------
2000 1999
---- ----
(dollars in thousands) (dollars in thousands)
---------------------- ----------------------
<S> <C> <C>
WPC Group Senior Unsecured Notes due 2007, 9-1/4% $274,373 $274,175
WPC Group Term Loan Agreement due 2006, floating rate 75,000 75,000
WPC Group - Other 7,190 5,218
WHX Senior Unsecured Notes due 2005, 10-1/2% 281,490 281,490
Handy & Harman Senior Secured Credit Facility 200,471 201,064
Handy & Harman Industrial Revenue Bonds, due 2004 7,500 7,500
Unimast Revolving Credit Agreement, due 2003 15,000 16,900
Unimast Industrial Development Bond, due 2030 6,050 --
Unimast Other 2,150 3,273
-------- --------
Total Long-Term Debt $869,224 $864,620
======== ========
</TABLE>
On October 4, 2000, the Company effected an amendment to its Senior
Unsecured Notes. See Note 1.
Note 7 - WPC Sales of Receivables
On May 27, 1999, WPSC renegotiated its $100 million Receivables
Facility on similar terms and conditions to its previous facility. On
June 30, 2000 WPC amended the Receivables Facility to increase the
program limits from $100 million to $115 million and on September 22,
2000 lowered the program limits to $105 million. Accounts receivable at
September 30, 2000 and December 31, 1999 exclude $105.0 million and
$100.0 million respectively, representing uncollected accounts
receivable sold with recourse limited to the extent of uncollectible
balances. Fees paid by WPSC under the Receivables Facility range from
approximately 5.91% to 7.63% of the outstanding amount of receivables
sold. On November 17, 2000 all obligations under the Receivable Facility
were repaid. See Note 1.
<PAGE>
Note 8 - Contingencies
Legal & Environmental Matters
Legal Matters
WPC Group
On October 27, 1998, WPC filed a complaint in Belmont County,
Ohio against ten trading companies, two Japanese steel mills and three
Russian steel mills alleging that it had been irreparably harmed as a
result of sales of hot-rolled steel by the defendants at prices below
the cost of production. WPC asked the Court for injunctive relief to
prohibit such sales. On November 6, 1998, defendants removed the case
from Belmont County to the US District Court for the Southern District
of Ohio. WPC subsequently amended its complaint to allege violations of
the 1916 Antidumping Act by nine trading companies. The amended
complaint seeks treble damages and injunctive relief. The Court
dismissed WPC's state law causes of action, but allowed it to proceed
with its claims under the 1916 Antidumping Act. In early June 1999, the
U.S. District Court issued an order holding that injunctive relief is
not available as a remedy under the 1916 Antidumping Act. WPC has
appealed the Court's decision to the Sixth Circuit Court of Appeals. WPC
has reached out-of-court settlements with six of the nine steel trading
companies named in this lawsuit. The Sixth Circuit Court ruled against
WPC and the Company has elected not to seek a review by the U.S. Supreme
Court of the adverse ruling by the Sixth Circuit Court of Appeals.
Therefore, this case is effectively concluded.
Handy & Harman
On or about April 3, 2000 a civil action was commenced under
Title 3 of the United States Code ss.3729 et seq. (False Claims Act)
entitled United States of America, ex rel. Patricia Keehle v. Handy &
Harman, Inc. (sic) and Strandflex, a Division of Maryland Specialty
Wire, Inc. ("Strandflex") (Civil Action No. 5:99-CV-103). The
substantive allegations in the complaint relate to the alleged improper
testing and certification of certain wire rope manufactured at the
Strandflex plant during the period 1992-1999 and sold as MILSPEC wire.
The United States Attorney's office is also conducting a criminal
investigation relating to this matter and Strandflex is a target of the
criminal investigation under title 18 of the United States Code ss.287
(Submitting False Claims) with the focus of the investigation alleging
to be whether wire rope sold to government agencies, either directly or
indirectly, was misrepresented by Strandflex as meeting MILSPEC
specifications. On March 7, 2000, the Company was informed by the U.S.
Attorney that absent a negotiated settlement, the government will seek a
criminal indictment and civil damages against the Company based on 161
sales of wire rope by Strandflex during the period June, 1995 to July
1998. The Company has entered into discussion with the United States
Attorney to seek a negotiated settlement of all criminal and civil
claims. Those discussions are ongoing.
<PAGE>
Strandflex is cooperating in the investigation and has
produced various documents, including testing data, sales records and
internal Company correspondence. There are no known incidents of any
Strandflex wire failing and causing personal or property damages in any
application. The Company intends to vigorously defend the civil action
and any potential criminal action and believes that this matter will not
have a material adverse effect on the Company's financial condition or
results of operations. Annual sales of this product were $209,185 in
1999.
SEC Enforcement Action
On June 25, 1998, the Securities and Exchange Commission
("SEC") instituted an administrative proceeding against the Company
alleging that it had violated certain SEC rules in connection with the
tender offer for Dynamics Corporation of America ("DCA") commenced on
March 31, 1997 through the Company's wholly-owned subsidiary, SB
Acquisition Corp. (the "Offer"). The Company previously disclosed that
the SEC intended to institute this proceeding. Specifically, the Order
Instituting Proceedings (the "Order") alleges that, in its initial form,
the Offer violated the "All Holders Rule," Rule 14d-10(a)(1) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), based
on the Company's inclusion of a "record holder condition" in the Offer.
No shareholder had tendered any shares at the time the condition was
removed. The Order further alleges that the Company violated Rules
14d-4(c) and 14d-6(d) under the Exchange Act upon expiration of the
Offer, by allegedly waiving material conditions to the Offer without
prior notice to shareholders and purchasing the approximately 10.6% of
DCA's outstanding shares tendered pursuant to the offer. The SEC does
not claim that the Offer was intended to or in fact defrauded any
investor.
The Order institutes proceedings to determine whether the SEC
should enter an order requiring the Company (a) to cease and desist from
committing or causing any future violation of the rules alleged to have
been violated and (b) to pay approximately $1.3 million in disgorgement
of profits. The Company has filed an answer denying any violations and
seeking dismissal of the proceeding. On October 6, 2000, the initial
decision of the Administrative Law Judge who heard the case dismissed
all charges against the Company, with the finding that the Company had
not violated the law. The Division of Enforcement has filed a petition
for the SEC to review the decision.
Summary
The Company is a party to various litigation matters including
general liability claims covered by insurance. In the opinion of
management, the ultimate outcome of such litigation matters and claims
is not expected to have a material adverse effect on the financial
condition or results of operations of the Company. However, it is
possible that the ultimate resolution of such litigation matters and
claims could have a material effect on quarterly or annual operating
results when they are resolved in future periods.
<PAGE>
Environmental Matters
WPC Group
WPC has been identified as a potentially responsible party
under the Comprehensive Environmental Response, Compensation and
Liability Act ("Superfund") and/or similar state statutes at several
waste sites. WPC 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, WPC is unable to reasonably
estimate the ultimate cost of compliance with Superfund laws. WPC
believes, based upon information currently available, that its liability
for clean up and remediation costs in connection with the Buckeye
Reclamation Landfill will be between $1.5 and $2.0 million. At WPC's
other sites the Company estimates costs of an aggregate less than $.5
million. WPC is currently funding its share of remediation costs.
WPC, 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, WPC has incurred capital expenditures for environmental
control projects aggregating $9.5 million, $7.7 million and $2.6 million
for 1998, 1999 and the nine months ended September 30, 2000,
respectively. WPC anticipates spending approximately $28.6 million in
the aggregate on major environmental compliance projects through the
year 2003, estimated to be spent as follows: $4.3 million in 2000, $10.9
million in 2001, $7.4 million in 2002 and $6.0 million in 2003. Due to
the possibility of unanticipated factual or regulatory developments, the
amount of future expenditures may vary substantially from such
estimates.
WPC's non-current accrued environmental liabilities totaled
$14.6 million at September 30, 2000. These accruals were initially
determined by WPC in January 1991, based on all then available
information. 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 WPC has adequately provided
for remediation costs that might be incurred or penalties that might be
imposed under present environmental laws and regulations.
The Company
Based upon information currently available, including the WPC
Group's and the WHX Non-Steel Group's prior capital expenditures,
anticipated capital expenditures, consent agreements negotiated with
Federal and state agencies and information available to the WPC Group
and the WHX Non-Steel Group 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 of the Company.
However, it is possible that litigation and environmental contingencies
could have a material effect on quarterly or annual operating results
when they are resolved in future periods. As further information comes
into the Company's possession, it will continue to reassess such
evaluations.
<PAGE>
Note 9 - Reported Segments
The Company's reportable operating segments consists of WPC,
H&H, Unimast and all other corporate entities, each providing their own
unique products and services. Each of these segments is independently
managed and requires different production technology and marketing and
distribution channels. The accounting policies of the segments are
consistent with those of the Company.
For the periods presented, intersegment sales and transfers
were conducted as if the sales or transfers were to third parties, that
is, at prevailing market prices. Income taxes are allocated to the
segments in accordance with the Company's tax sharing agreement, which
generally requires separate segment tax calculations. The benefit, if
any, of WPC NOL carryforwards are allocated to WPC.
The table below presents information about reported segments
and a reconciliation of total segment sales to total consolidated sales
for the third quarters of 2000 and 1999.
<PAGE>
Quarter ended September 30, 2000
<TABLE>
<CAPTION>
All Segment Consolidated
WPC H&H Unimast Other Total Adjustments Total
--- --- ------- ----- ------- ----------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue from external
Customers $272,530 $117,429 $59,440 $ - $449,399 $(2,404) $446,995
Intersegment revenues 2,404 - - - 2,404 -
Segment net income (loss) $(21,371) $ 3,170 $ 1,081 $ (3,995) $(21,115) - $(21,115)
Quarter ended September 30, 1999
All Segment Consolidated
WPC H&H Unimast Other Total Adjustments Total
--- --- ------- ----- ----- ----------- -----
(Dollars in thousands)
Revenue from
external customers $282,358 $116,365 $57,528 $ - $456,251 $(8,644) $447,607
Intersegment revenues 8,644 - - - 8,644 -
Segment net income (loss) $ (4,009) $ 3,404 $ 2,143 $9,571 $ 11,109 - $ 11,109
Nine months ended September 30, 2000
All Segment Consolidated
WPC H&H Unimast Other Total Adjustments Total
--- --- ------- ----- ----- ----------- -----
(Dollars in thousands)
Revenue from external
Customers $845,869 $360,871 $176,262 $ - $1,383,002 $(9,924) $1,373,078
Intersegment revenues 9,924 - - - 9,924 -
Segment net income (loss) $ 7,448 $ 9,054 $ 5,918 $(13,973) $ 8,447 - $ 8,447
Nine months ended September 30, 1999
All Segment Consolidated
WPC H&H Unimast Other Total Adjustments Total
--- --- ------- ----- ----- ----------- -----
(Dollars in thousands)
Revenue from
external customers $788,205 $344,818 $163,400 $ - $1,296,423 $(38,108) $1,258,315
Intersegment revenues 38,108 - - - 38,108 -
Segment net income (loss) $(29,726) $ 6,637 $ 8,039 $5,995 $ (9,055) - $ (9,055)
</TABLE>
<PAGE>
PART I
Item 2. Management's Discussion and Analysis
Overview
WHX Corporation ("WHX") is a holding company that has
been structured to invest in and/or acquire a diverse group of
businesses on a decentralized basis. WHX's primary businesses currently
are Handy & Harman ("H&H"), a diversified manufacturing company whose
strategic business segments encompass, among others, specialty wire,
tubing, and fasteners, and precious metals plating and fabrication, and
Wheeling-Pittsburgh Corporation ("WPC"), a vertically integrated
manufacturer of value-added and flat rolled steel products. WPC is the
holding company for WHX's steel related businesses, including
Wheeling-Pittsburgh Steel Corporation ("WPSC" and together with WPC and
its other subsidiaries, the "WPC Group"). WHX's other businesses include
Unimast Incorporated ("Unimast"), a leading manufacturer of steel
framing and other products for commercial and residential construction
and WHX Entertainment Corp., a co-owner of a racetrack and video lottery
facility located in Wheeling, West Virginia. WHX, together with all of
its subsidiaries shall be referred to as the "Company" and WHX together
with all of its subsidiaries other than the WPC Group, shall be referred
to as the "WHX Non-Steel Group."
The Company continues to pursue strategic alternatives to
maximize the value of its portfolio of businesses. Some of these
alternatives have included, and will continue to include selective
acquisitions, divestitures and sales of certain assets. The Company has
provided, and may from time to time in the future, provide information
to interested parties regarding portions of its businesses for such
purposes.
Risk Factors and Cautionary Statements
This Report includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended
(the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), including, in particular,
forward-looking statements under the headings Part 1. "Item 1. Financial
Statements" and "Item 2. Management's Discussion and Analysis." These
statements appear in a number of places in this Report and include
statements regarding the Company's intent, belief or current
expectations with respect to (i) its financing plans, (ii) trends
affecting its financial condition or results of operations, (iii) the
impact of competition, and (iv) the impact and affect of the Chapter 11
Filing by the WPC Group. The words "expect," "anticipate," "intend,"
"plan," "believe," "seek," "estimate," and similar expressions are
intended to identify such forward-looking statements; however, this
Report also contains other forward-looking statements in addition to
historical information.
Any forward-looking statements made by the Company are
not guarantees of future performance and there are various important
factors that could cause actual results to differ materially from those
indicated in the forward-looking statements. This means that indicated
results may not be realized. Please see subsequent events: Bankruptcy
Filing of WPC Group. Factors which could cause the WHX Non-Steel Group's
actual results in future periods to differ materially include, but are
not limited to, the following:
<PAGE>
o The WHX Non-Steel Group has a significant amount of outstanding
indebtedness, and its ability to access capital markets in the future
may be limited;
o The WHX Non-Steel Group's senior management may be required to expend a
substantial amount of time and effort dealing with issues arising from
the WPC Group's Chapter 11 Filing, which could have a disruptive impact
on management's ability to focus on the operation of its businesses;
o The WHX Non-Steel Group may suffer an inability to attract and retain
qualified personnel;
o If the liabilities of the WPC Group exceed the value of its assets, the
equity value of the WPC Group could be eliminated and WHX could lose the
value of its investment in the WPC Group;
o The WHX Non-Steel Group's businesses operate in highly competitive
markets and are subject to significant competition from other
businesses; and
o A decline in the general economic and business conditions and industry
trends,
and the other factors detailed from time to time in our filings with the
Securities and Exchange Commission, including the Company's Annual Report on
Form 10-K for the year ended December 31, 1999 and Quarterly Reports on Form
10-Q for the quarters ended March 31, 2000 and June 30, 2000.
Factors which could cause the WPC Group's actual results in future
periods to differ materially include, but are not limited to, the following:
o The WPC Group may not generate or have enough cash on hand from
operations and from debtor-in-possession financing to fund its
operations until it is able to propose a plan of reorganization that
will be acceptable to creditors and other parties in interest and
confirmed by the Bankruptcy Court;
o The WPC Group's creditors or landlords may take action that prevents or
unduly delays confirmation of a plan of reorganization in connection
with the filing under Chapter 11;
o The WPC Group's suppliers may stop providing supplies or services to it
or provide such supplies or services only on "cash on delivery," "cash
on order" or other terms that could have an adverse impact on the WPC
Group's cash flow;
o The Bankruptcy Court may not confirm the WPC Group's plan of
reorganization;
<PAGE>
o The WPC Group may not be able to obtain sufficient additional financing
sources to meet its future obligations;
o The WPC Group's overall long-term operational reorganization and
financial restructuring plan may fail;
o The WPC Group's results of operations are sensitive to the steel prices
realized in the market, and the continuation of the low steel prices at
current levels would continue to have a material adverse effect on the
WPC Group's business;
o The WPC Group's business requires that it expend substantial capital to
maintain its productivity and facilities in order to remain competitive
and in compliance with environmental laws and regulations;
o The costs of complying with environmental standards continues to
increase and the WPC Group not only may be held liable for future clean
up costs, but also is at a disadvantage with foreign competitors who are
not held to similar strict regulation;
o The steel industry is very competitive, and the WPC Group faces
competition from both foreign and domestic producers who are able to
charge less than the WPC Group because of lower operating costs;
o The WPC Group may suffer an inability to attract and retain qualified
personnel; and
o A further decline in the general economic and business conditions and
industry trends affecting the steel industry.
By making these forward-looking statements, the Company does
not undertake to update them in any manner except as may be required by its
disclosure obligations in filings it makes with the Securities and Exchange
Commission under the Federal securities laws.
Subsequent Events: Bankruptcy Filing of the WPC Group
Subsequent to the end of the third quarter, on November
16, 2000 (the "Petition Date"), the WPC Group filed a voluntary petition
to reorganize their businesses under chapter 11 of the U.S. Code (the
"Bankruptcy Code"). The filing (the "Chapter 11 Filing") was made in the
United States Bankruptcy Court for the Northern District of Ohio (the
"Bankruptcy Court"). WPSC and the other members of the WPC Group are
continuing normal business operations and are anticipated to continue to
provide uninterrupted services to their customers. No plant closures are
planned as a result of the Chapter 11 Filing and members of the WPC
Group will continue to honor the terms of their various labor
agreements.
<PAGE>
Subsequent to the commencement of the Chapter 11 Filing,
the WPC Group sought and obtained several orders from the Bankruptcy
Court which were intended to stabilize their businesses and enable the
WPC Group to continue business operations as a debtor-in-possession.
The Bankruptcy Code provides that the WPC Group has an
exclusive period during which only it may propose and file and solicit
acceptances of a plan of reorganization. The exclusive period to propose
a plan for reorganization currently expires on March 17, 2001. If the
WPC Group fails to file a plan of reorganization during the exclusive
period (including any extensions granted thereunder) or, after such plan
has been filed, if the WPC Group fails to obtain acceptance of such plan
from the requisite impaired classes of creditors and equity security
holders during the exclusive solicitation period, any party in interest,
including a creditor, an equity security holder, a committee of
creditors or equity security holders, or an indenture trustee, may file
their own plan of reorganization for the WPC Group.
After a plan of reorganization has been filed with the
Bankruptcy Court, the plan, along with a disclosure statement approved
by the Bankruptcy Court, will be sent to impaired creditors and equity
security holders who are entitled to vote. Following the solicitation
period, the Bankruptcy Court will consider whether to confirm the plan.
In order to confirm a plan of reorganization, the Bankruptcy Court,
among other things, is required to find that (i) with respect to each
impaired class of creditors and equity security holders, each holder in
such class will, pursuant to the plan, receive at least as much as such
holder would receive in a liquidation, (ii) each impaired class of
creditors and equity security holders has accepted the plan by the
requisite vote (except as provided in the following sentence), and (iii)
confirmation of the plan is not likely to be followed by the liquidation
of the WPC Group or a need for its further financial reorganization or
any successors to it unless the plan proposes such liquidation or
reorganization. If any impaired class of creditors or equity security
holders does not accept a plan and assuming that all of the other
requirements of the Bankruptcy Code are met, the proponent of the plan
may invoke the "cram down" provisions of the Bankruptcy Code. Under
these provisions, the Bankruptcy Court may confirm a plan
notwithstanding the non-acceptance of the plan by an impaired class of
creditors or equity security holders if certain requirements of the
Bankruptcy Code are met. These requirements may, among other things,
necessitate payment in full for senior classes of creditors before
payment to a junior class can be made. A "cram down" as well as other
potential plans of reorganization could also result in holders of
capital stock receiving no value for their interests. Because of such
possibilities, the value of the WPC Group capital stock, including but
not limited to its common stock, is highly speculative.
Since the Petition Date, management has been in the process of
stabilizing its business and evaluating its operations before beginning
the development of a reorganization plan. Until a reorganization plan is
confirmed by the Bankruptcy Court, payments of prepetition liabilities,
including WPC's 9 1/4% Senior Notes, are limited to those approved by
the Bankruptcy Court. The Chapter 11 Filing is an event of default under
WPC's 9 1/4% Senior Notes.
<PAGE>
On November 17, 2000, members of the WPC Group entered in a
Debtor in Possession Credit Agreement to provide borrowings of up to
$290,000,000 to refinance certain obligations of the WPC Group, to
provide working capital for the WPC Group and for other general
corporate purpose. The Debtor in Possession Credit Agreement includes
(1) a $35.0 million term loan which will be fully drawn at closing and
(2) a Revolving Credit Facility of up to $255,000,000 to refinance
certain obligations of the WPC Group, to provide ongoing working capital
needs for the WPC Group and for other general corporate purposes. The
DIP Agreement includes a $25.0 million sublimit for letters of credit.
The DIP Credit Agreement expires November 16, 2002. Revolving credit
interest rates are based on the Citibank Base Rate plus 2.00% and/or
Eurodollar rate plus 3.00%. The margin over the prime rate and the
Eurodollar rate fluctuate based upon excess availability. The Term Loan
interest rates are 13.0% cash pay plus 3.0% deferred. Borrowings
outstanding under the DIP Credit Agreement at November 16, 2000 included
the $35 million term loan, $163.0 million in revolving credit borrowings
and letters of credit outstanding under the DIP Credit Agreement were
approximately $17.0 million. Borrowings under the Debtor in Possession
Credit Agreement were used to repay all obligations under the WPSC
Receivables Facility, amounting to approximately $105.0 million and to
repay all obligations under WPSC's Revolving Credit Facility amounting
to approximately $84.7 million. Upon repayment, the WPSC Revolving
Credit Facility was terminated and the Receivables Facility is in the
process of being terminated.
All the borrowings under the Debtor in Possession Credit
Agreement are entitled to a superpriority claim under Section 364(c) (1)
of the United States Bankruptcy Code and are collateralized by a lien on
all existing and after acquired assets, property and rights of the WPC
Group including but not limited to cash, inventory, accounts receivable,
general intangibles, equipment, intellectual property, equity
investments, owned real estate and leaseholds. In connection with the
Chapter 11 Filing, the Company has guaranteed $30.0 million of the term
loan portion of the Debtor in Possession Credit Agreement.
In the Chapter 11 Filing, the WPC Group may, with Bankruptcy
Court approval, sell assets and settle liabilities, including for
amounts other than those reflected in the financial statements. The
administrative and reorganization expense resulting from the Chapter 11
Filing will unfavorably affect results. Moreover, future results may be
adversely affected by other claims and factors resulting from the
Chapter 11 Filing.
Although the WPC Group represents a significant portion of the
Company's operations, it has incurred aggregate net losses over the past
five years in the amount of $223.0 million, compared to aggregate net
income in the Company's other groups in the amount of $127.7 million.
Results of Operations
Net sales for the third quarter of 2000 were $446.9 million as
compared to $447.6 million for the third quarter of 1999, a decrease of
$0.7 million. Sales decreased by $3.6 million at the WPC Group
operations reflecting a decrease of 10.6% in steel shipments, a decrease
of 0.7% in steel prices, all due to very high levels of steel imports.
Sales increased by $1.0 million at H&H primarily from stronger sales to
the electronics and specialty tubing markets. Sales increased by $1.9
million at Unimast, reflecting continued demand in the non-residential
construction market, as well as its acquisition of Vinyl Corporation in
July 1999.
Operating costs for the third quarter of 2000 increased to
$452.5 million from $430.0 million. Operating costs increased by $16.8
million at the Company's WPC operations. The increase in WPC's operating
costs reflects a richer product mix, higher raw material and energy
costs, and the cost of making increased volumes of coke sold during the
third quarter of 2000. Operating costs were up $3.7 at Unimast,
reflecting higher volume of shipments as well as slightly higher raw
material costs in the third quarter of 2000.
Selling, administrative and general expense for the third
quarter of 2000 increased by $2.2 million to $37.2 million from $35.0
million in the comparable period in 1999. Selling, administrative and
general expense at the WPC Group operations for the third quarter of
2000 increased $1.4 million to $17.2 million from $15.8 million in the
comparable period in 1999 due to an increased marketing effort and
expansion of the fabricated products business. Selling, administrative
and general expenses at H&H were up $1.5 million due primarily to legal
discovery expenses in connection with protecting rights and earnings
under a joint venture agreement. The increases at the WPC Group and H&H
were offset by declines in selling, administrative and general expenses
at Unimast of $.4 million and at WHX Corporation of $.3 million in the
third quarter of 2000 compared to the third quarter of 1999.
<PAGE>
Interest expense for the third quarter of 2000 increased $1.0
million to $23.4 million from $22.4 million in the comparable period in
1999, reflecting the general rise in interest rates and higher revolver
balances at the WPC Group operations.
Other income for the third quarter of 2000 decreased $15.3
million to $5.9 million from $21.2 million income in the comparable
period in 1999. The decrease in other income is due primarily to the
difference between realized and unrealized gains on short-term
investments in fixed income securities and marketable equity securities
in the third quarter of 2000 compared to the third quarter of 1999.
The 2000 third quarter tax benefit reflects an estimated
annual effective rate of 30.5%. The increase in the 2000 effective tax
rate during the third quarter reflects changes in estimated annual
pretax income and in permanent tax differences.
Net loss for the 2000 third quarter totaled $21.1 million, or
a loss of $1.84 per share of common stock after deduction of preferred
dividends. The 1999 third quarter net income was $11.1 million, or $0.34
per share of common stock after deduction of preferred dividends.
Net sales for the first nine months of 2000 totaled $1,373.1
million as compared to $1,258.3 million in the first nine months of
1999. The increase is primarily attributable to the WPC Group steel
operations where net sales for the first nine months of 2000 totaled
$835.9 million on shipments of steel products totaling 1,769,005 tons.
Net sales for the first nine months of 1999 totaled $750.1 million on
shipments of steel products totaling 1,780,967 tons. Average sale prices
increased from $442 per ton shipped to $478 per ton shipped due to a
2.2% increase in steel prices, higher value-added mix of products sold,
and increased sales of coke during the nine months of 2000 as compared
to the nine month period of 1999.
H&H sales for the first nine months of 2000 totaled $360.9
million compared to $344.8 million for the first nine months of 1999.
The rise is due to increased sales of electroplated materials (aided by
the market price of palladium which is nearly double the 1999 price
level) serving the electronics and automotive markets and to increased
demand for H&H's specialty tubing products serving the semi-conductor
manufacturing, oil drilling and refrigeration appliance markets.
Unimast sales for the first nine months of 2000 totaled $176.3
million compared to $163.4 million for the first nine months of 1999.
The rise is due to continued demand in the commercial construction
market and the acquisition of Vinyl Corporation in July of 1999.
<PAGE>
Operating costs for the first nine months of 2000 increased to
$1,346.2 million from $1,240.3 million in the first nine months of 1999.
The increase is led by the WPC Group steel operations where operating
costs for the first nine months of 2000 increased to $852.4 million or
$487 per ton from $769.9 million or $454 per ton in the 1999 first nine
months. The increase in operating costs is due to the higher sales of
coke during the nine months of 2000 and higher raw material and energy
costs as compared to the same period of 1999. Included in the 1999 nine
months operating costs is $9.0 million of income reflecting a favorable
settlement with certain insurance carriers that releases and terminates
all rights, obligations and liabilities of the insurance companies with
respect to the subject insurance policies. In the first nine months of
2000, WPC produced 1,863,930 tons of raw steel as compared to production
of 1,810,633 tons of raw steel in the 1999 first nine months. Operating
costs were higher at both H&H and Unimast, reflecting the increase in
volume of business and higher raw material costs for the first nine
months of 2000 compared to the first nine months of 1999.
Depreciation and amortization expense increased $4.4 million
to $83.7 million in the first nine months of 2000 from $79.3 million in
the comparable period in 1999, principally due to WPC's higher level of
raw steel production in 2000 and its effect on the units of production
depreciation method.
Selling, administrative and general expense for the first nine
months of 2000 increased $5.7 million to $113.6 million from $107.8
million in the comparable period in 1999. The increase relates primarily
to increased selling, administrative and general expense at the WPC
Group operations. For the first nine months of 2000 WPC's selling,
administrative and general expense increased $4.3 million to $52.8
million from $48.5 million in the comparable period in 1999 due
primarily to an increased marketing effort in 2000 and expansion of the
fabricated products business during 2000. H&H's selling administrative
and general expense increased $2.5 million for the first nine months of
2000 related primarily to non-recurring costs for a bad debt related to
a bankrupt refiner of H&H's precious metal operations and legal
discovery costs in connection with protection rights and earnings under
a Joint Venture Agreement.
Interest expense for the first nine months of 2000 increased
$2.3 million to $67.6 million from $65.3 million in the comparable
period in 1999 reflecting the general rise in interest rates and higher
revolver balances at the WPC Group operations.
Other income decreased $35.8 million, creating $1.8 million of
other expense in the first nine months of 2000, compared to $34.0
million of other income in the 1999 first nine months. The change in the
other income (expense) in the first nine months of 2000 compared to the
first nine months of 1999 is due primarily to the difference in realized
and unrealized gains and losses on the Company's investment portfolio of
fixed income securities and marketable equity securities.
The 2000 nine month tax benefit reflects an estimated annual
effective rate of 30.5% and includes a non-cash benefit of approximately
$38.0 million relating to the reversal of prior year provisions for
taxes no longer required. The 1999 nine month tax benefit reflects an
estimated annual effective tax rate of 24.2%. The increase in the 2000
effective tax rate during the nine month reflects changes in estimated
annual pretax income and in permanent tax differences.
Net income in the first nine months of 2000 totaled $8.5
million, or $0.49 loss per share of common stock after deduction of
preferred stock dividends. Net income was favorably impacted by the
aforementioned income tax benefit of $38.0 million, or $2.66 per share.
Loss before extraordinary items in the first nine months of 1999 totaled
$10.0 million, or $1.55 loss per share of common stock after deduction
of preferred stock dividends. The extraordinary income of $1.4 million
($0.9 million net of tax) reflects the gain on early debt retirement of
$20.5 million of the 10 1/2% Senior Notes.
<PAGE>
Financial Position
The Company
Net cash flow provided by operating activities for the first
nine months of 2000 totaled $41.2 million. Short term trading
investments and related short-term borrowings are reported as cash flow
from operating activities and provided a net $16.4 million of funds in
the first nine months of 2000. Working capital accounts (excluding cash,
short-term investments, short-term borrowings and current maturities of
long term debt) used $4.0 million of funds. Accounts receivable
increased by $10.9 million, trade payables increased $24.3 million, and
other current liabilities increased $8.7 million. Inventories, valued
principally by the LIFO method for financial reporting purposes, totaled
$476.7 million at September 30, 2000, an increase of $34.8 million from
December 31, 1999.
In the first nine months of 2000, $97.9 million was spent on
capital improvements including $2.6 million on environmental control
projects. Continuous and substantial capital and maintenance
expenditures will be required at WPC 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. These capital expenditures will be
obligations of the WPC Group, not the Company. The Company will have no
obligation to make any advances to the WPC Group to cover such expenses.
To the extent the WPC Group does not have the funds required to make
such expenditures, there may be a material adverse effect on the
business and operations of the WPC Group.
The Company's operating segments H&H and Unimast and the WPC
Group each maintain separate and distinct credit facilities with various
financial institutions.
WPC Group
The 10-month strike, which began October 1, 1996 and ended
August 12, 1997, and the subsequent decrease in steel prices has
substantially weakened WPC's financial position. During the first nine
months of 2000, borrowings under the WPSC Revolving Credit Facility
totaled $132.0 million, leaving liquidity at September 30, 2000 of $10.4
million.
Net cash flow provided by WPC's operating activities for the
first nine months of 2000 totaled $2.6 million. Working capital accounts
(excluding cash, short-term borrowings and current maturities of long
term debt) used $10.7 million of funds. Accounts receivable increased by
$4.3 million, excluding a $5.0 million sale of trade receivables under
the Receivables Facility. Inventories, valued principally by the LIFO
method for financial reporting purposes, totaled $279.3 million at
September 30, 2000, an increase of $27.1 million from December 31, 1999
due to the seasonality of the fabricated and tin mill products divisions
and to facilitate a planned steelmaking facility outage. Trade payables
increased by $16.6 million, primarily as a result of increased
inventories.
<PAGE>
In the first nine months of 2000, $71.0 million was spent on
capital improvements including $2.6 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 capital
expenditures including required environmental expenditures in future
years will approximate depreciation expense and represent a material use
of operating funds.
On November 17, 2000, in connection with the Chapter 11 Filing
WPC, WPSC, WP Steel Venture Corporation, Consumers Mining Company, WP
Coal Company, Wheeling Empire Company, Mingo Oxygen Company, Pittsburgh
Canfield Company and Monessen Southwestern Railway Company, as
borrowers, the lenders party thereto and Citibank, N.A., as Initial
Issuing Bank and Citicorp USA, Inc., as Administrative Agent entered
into a Debtor in Possession Credit Agreement ("DIP Credit Agreement") to
provide (1) a $35.0 million term loan which will be fully drawn at
closing and (2) a Revolving Credit Facility of up to $255,000,000 to
refinance certain obligations of the WPC Group, to provide ongoing
working capital needs for the WPC Group and for other general corporate
purposes. The DIP Credit Agreement includes a $25.0 million sublimit for
letters of credit. The DIP Credit Agreement expires November 16, 2002.
Revolving credit interest rates are based on the Citibank Base Rate plus
2.00% and/or a Eurodollar rate plus 3.00%. The margin over the prime
rate and the Eurodollar rate fluctuate based upon excess availability.
Term Loan interest rates are 13.0% cash pay plus 3.0% deferred.
Borrowings outstanding under the DIP Credit Agreement at November 16,
2000 included the $35 million term loan, $163.0 million in revolving
credit borrowings and letters of credit outstanding under the DIP Credit
Agreement were approximately $17.0 million. The DIP Credit Agreement
Facility will be collateralized by substantially all assets of WPC and
WPSC.
All the borrowings under the Debtor in Possession Credit
Agreement are entitled to a superpriority claim under Section 364(c) (1)
of the United States Bankruptcy Code and are collateralized by a lien on
all existing and after acquired assets, property and rights of the WPC
Group including but not limited to cash, inventory, accounts receivable,
general intangibles, equipment, intellectual property, equity
investments, owned real estate and leaseholds. In connection with the
Chapter 11 Filing, the Company has guaranteed $30.0 million of the term
loan portion of the Debtor in Possession Credit Agreement.
The Debtor in Possession Credit Agreement contains negative,
affirmative and financial covenants including a limitation on capital
expenditures through December 31, 2000 of $12.5 million, $42.5 million
in fiscal 2001 and $60 million in fiscal 2002 and require the WPC Group
to have $15 million of excess availability at all times.
On May 27, 1999, WPSC renegotiated its $100 million
Receivables Facility agreement on similar terms and conditions to its
previous facility. On June 30, 2000 WPSC amended the Receivables
Facility to increase the program limits from $100 million to $115
million and on September 22, 2000 lowered the program limit to $105
million. Accounts receivable at September 30, 2000 and December 31, 1999
exclude $105.0 million and $100.0 million, respectively, representing
uncollected accounts receivable sold with recourse limited to the extent
of uncollectible balances. Fees paid by WPSC under such agreement range
from approximately 5.91% to 7.63% of the outstanding amounts of
receivables sold.
Borrowings under the DIP Credit Agreement in the amount of
$105.0 million were used to repay all outstanding obligations under the
Receivables Facility.
<PAGE>
On April 30, 1999, WPSC entered into a Third Amendment and
Restated Revolving Credit Facility ("WPSC Revolving Credit Facility")
with Citibank, N.A. as agent. The WPSC Revolving Credit Facility, as
amended, provides for borrowings for general corporate purposes up to
$150 million including a $25 million sub-limit for letters of credit.
Interest rates are based on the Citibank Prime Rate Plus $1.25% and/or a
Eurodollar rate plus 2.25%. The margin over the prime rate and the
Eurodollar rate can fluctuate based upon performance. Borrowings
outstanding against the WPSC Revolving Credit Facility at September 30,
2000 totaled $132.0 million. Letters of credit outstanding under the
WPSC Revolving Credit Facility were $2.8 million at September 30, 2000.
Borrowings under the DIP Credit Agreement in the amount of
$84.7 million were used to repay and satisfy all obligations under
WPSC's Revolving Credit Facility. Upon repayment, the WPSC Revolving
Credit Facility and all related documents were terminated.
WHX Non-Steel Group
WHX commenced and successfully completed on October 4, 2000 a
solicitation of consents from holders of its 10 1/2% Senior Notes due
2005 (the "Notes") to amend certain covenants and other provisions of
the indenture dated as of April 7, 1998 (the "Indenture") governing the
Notes. A copy of a supplemental indenture reflecting such amendment (the
"Supplemental Indenture") is attached as Exhibit 4.1 to this Form 10-Q.
The Supplemental Indenture provides, among other things, for amendments
to certain covenants which restrict the Company's ability to make
restricted payments, incur additional indebtedness, make permitted
investments or utilize proceeds from asset sales. The Supplemental
Indenture prohibits the payment of dividends on the Company's preferred
stock until October 1, 2002, and thereafter only in the event such
payments satisfy certain conditions set forth in the Indenture, as
amended by the Supplemental Indenture. In addition, the amendments also
remove as events of default under the Indenture those relating to
defaults under any mortgage, indenture or instrument by, judgments
against and bankruptcy, insolvency and related filings and other events
of WPC or any of its direct or indirect subsidiaries. Accordingly, the
Chapter 11 Filing is not an event of default under the Notes.
In connection with the Chapter 11 Filing WHX guaranteed $30.0
million of the $35.0 million term loan portion of the Debtor in
Possession Credit Agreement. In connection with the solicitation the
Company made a payment equal to 2% of the principal amount of the Notes
($20 in cash for each $1,000 principal amount of Notes) to each holder
of Notes whose consent was received and accepted prior to the expiration
date. Such payments to bond holders aggregated $5,466,700.
On June 1, 2000, Unimast entered into a loan agreement with
the Will-Kankakee Regional Development Authority to issue $6.1 million
of series 2000 Industrial Development Bonds ("Bonds"). The Bonds are
30-year variable rate bonds (set on a weekly basis) with the current
rate set at 4.0%. The Bonds were issued to finance the cost of capital
projects for Unimast, specifically a 150,000 square foot facility in
Joliet, Illinois and related equipment. The Bonds are tax-exempt for
federal income tax purposes and are secured by a direct pay letter of
credit issued by Citibank, N.A. The Chapter 11 Filing of the WPC Group
is not an event of default under the Bonds.
Borrowings outstanding against the H&H Revolving Credit
Facility at September 30, 2000 totaled $46.3 million. Letters of credit
outstanding under the H&H Revolving Credit Facility were $14.6 million
at September 30, 2000. Total funds available under the H&H Revolving
Credit Facility at September 30, 2000 were $39.2 million. The Chapter 11
Filing of the WPC Group is not an event of default under the H&H
Revolving Credit Facility.
<PAGE>
Borrowings outstanding against the Unimast Revolving Credit
Facility at September 30, 2000 totaled $27.0 million. Letters of credit
outstanding under the Unimast Revolving Credit Facility were $6.1
million at September 30, 2000. Total funds available under the Unimast
Revolving Credit Facility at September 30, 2000 were $10.5 million. The
Chapter 11 filing of the WPC Group is not an event of default under the
Unimast Resolving Credit Facility.
Liquidity
As of September 30, 2000, the Company had consolidated cash
and short-term investments, net of related investment borrowings, of
$144.7 million, attributable 100% to the WHX Non-Steel Group.
The Company is required to record income tax expense at
statutory rates. However, it is able to use its significant income tax
loss carry forwards to minimize its actual income tax payments.
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 WHX
Non-Steel Group's ability to sustain profitable operations and control
costs during periods of low demand or pricing in order to sustain
positive cash flow. The WHX Non-Steel Group satisfies its working
capital requirements through cash on hand, investments, the Unimast and
H&H Revolving Credit Facilities and funds generated from operations. The
WHX Non-Steel Group believes that such sources can provide the WHX
Non-Steel Group with the funds required to satisfy its working capital
and capital expenditure requirements. External factors, such as
production and demand and currency exchange rates, could materially
affect the WHX Non-Steel Group or its various subsidiaries, liquidity,
results of operations and financial condition.
The WPC Group will satisfy its working capital needs through
the DIP Credit Agreement and funds generated from operations. Management
has assessed WPC's liquidity position as a result of the Chapter 11
Filing and believes that WPC can continue to fund its and its
subsidiaries operating activities and meet its debt and capital
requirements for the foreseeable future. However, the ability of WPC to
continue as a going concern is dependent upon its ability to generate
future profits and cash flow, whether through the confirmation of a plan
of reorganization or otherwise.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS133). This
pronouncement requires all derivative instruments to be reported at fair
value on the balance sheet; depending on the nature of the derivative
instrument, changes in fair value will be recognized either in net
income or as an element of comprehensive income. SFAS 133 is effective
for fiscal years beginning after June 15, 2000. The Company has not
engaged in significant activity with respect to derivative instruments
or hedging activities in the past. Management of the Company has not yet
determined the impact, if any, of the adoption of SFAS 133 on the
Company's financial position or results of operations.
In March 2000, the FASB issued Interpretation No. 44,
"Accounting for Certain Transactions Involving Stock Compensation - an
interpretation of APB Opinion No. 25", effective for all fiscal quarters
of all fiscal years beginning after July 1, 2000. The Company does not
expect the Interpretation to have a significant impact on the
consolidated results of operations or financial position and related
disclosure requirements.
<PAGE>
In December 1999, the Securities and Exchange Commission (SEC)
issued Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition
in Financial Statements", as amended by SAB 101A and SAB 101B, which
summarizes the SEC staff's interpretations of generally accepted
accounting principles related to revenue recognition and classification.
During the third quarter 2000, the EITF issued EITF Consensus No. 99-19,
"Reporting Revenue Gross as a Principal versus Net as an Agent", which
addresses whether certain cost items should be reported as a reduction
of revenue or as a component of cost of sales and EITF Consensus No.
00-10, "Accounting for Shipping and Handling Fees and Costs", which
addresses the classification of cost incurred for shipping goods to
customers. These new pronouncements are effective no later than the
fourth quarter of fiscal years beginning after December 15, 1999.
Management has not yet determined the impact, if any, of the operation
of these new pronouncements on the Company's financial position or
results of operations.
PART II Other Information
ITEM 1. LEGAL PROCEEDINGS
WPC Group
On October 27, 1998, WPC filed a complaint in Belmont County,
Ohio against ten trading companies, two Japanese mills and three Russian
mills alleging that it had been irreparably harmed as a result of sales
of hot-rolled steel by the defendants at prices below the cost of
production. WPC asked the Court for injunctive relief to prohibit such
sales. On November 6, 1998, defendants removed the case from Belmont
County to the US District Court for the Southern District of Ohio. WPC
subsequently amended its complaint to allege violations of the 1916
Antidumping Act by nine trading companies. The amended complaint seeks
treble damages and injunctive relief. The Court dismissed WPC's state
law causes of action, but allowed it to proceed with its claims under
the 1916 Antidumping Act. In early June 1999, the U.S. District Court
issued an order holding that injunctive relief is not available as a
remedy under the 1916 Antidumping Act. WPC has appealed the Court's
decision to the Sixth Circuit Court of Appeals. WPC has reached
out-of-court settlements with six of the nine steel trading companies
named in this lawsuit. The Sixth Circuit Court ruled against WPC and the
Company has elected not to seek a review by the U.S. Supreme Court of
the adverse ruling by the Sixth Circuit Court of Appeals. Therefore,
this case is effectively concluded.
The WPC Group filed a voluntary petition to reorganize their
businesses under Chapter 11 of the United States Bankruptcy Code with
the United States Bankruptcy Court for the Northern District of Ohio on
November 16, 2000.
<PAGE>
Handy & Harman
On or about April 3, 2000 a civil action was commenced under
Title 3 of the United States Code ss.3729 et seq. (False Claims Act)
entitled United States of America, ex rel. Patricia Keehle v. Handy &
Harman, Inc. (sic) and Strandflex, a Division of Maryland Specialty
Wire, Inc. ("Strandflex") (Civil Action No. 5:99-CV-103). The
substantive allegations in the complaint relate to the alleged improper
testing and certification of certain wire rope manufactured at the
Strandflex plant during the period 1992-1999 and sold as MILSPEC wire.
The United States Attorney's office is also conducting a criminal
investigation relating to this matter and Strandflex is a target of the
criminal investigation under title 18 of the United States Code ss.287
(Submitting False Claims) with the focus of the investigation appearing
to be whether wire rope sold to government agencies, either directly or
indirectly, was misrepresented by Strandflex as meeting MILSPEC
specifications. On March 7, 2000, the Company was informed by the U.S.
Attorney that absent a negotiated settlement, the government will seek a
criminal indictment and civil damages against the Company based on 161
sales of wire rope by Strandflex during the period June, 1995 to July
1998. The Company has entered into discussion with the United States
Attorney to seek a negotiated settlement of all criminal and civil
claims. Those discussions are ongoing. Strandflex is cooperating in the
investigation and has produced various documents, including testing
data, sales records and internal Company correspondence. There are no
known incidents of any Strandflex wire failing and causing personal or
property damages in any application. The Company intends to vigorously
defend the civil action and any potential criminal action and believes
that this matter will not have a material adverse effect on the
Company's financial condition or results of operations. Annual sales of
this product were $209,185 in 1999.
SEC Enforcement Action
On June 25, 1998, the Securities and Exchange Commission
("SEC") instituted an administrative proceeding against the Company
alleging that it had violated certain SEC rules in connection with the
tender offer for Dynamics Corporation of America ("DCA") commenced on
March 31, 1997 through the Company's wholly-owned subsidiary, SB
Acquisition Corp. (the "Offer"). The Company previously disclosed that
the SEC intended to institute this proceeding. Specifically, the Order
Instituting Proceedings (the "Order") alleges that, in its initial form,
the Offer violated the "All Holders Rule," Rule 14d-10(a)(1) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), based
on the Company's inclusion of a "record holder condition" in the Offer.
No shareholder had tendered any shares at the time the condition was
removed. The Order further alleges that the Company violated Rules
14d-4(c) and 14d-6(d) under the Exchange Act upon expiration of the
Offer, by allegedly waiving material conditions to the Offer without
prior notice to shareholders and purchasing the approximately 10.6% of
DCA's outstanding shares tendered pursuant to the offer. The SEC does
not claim that the Offer was intended to or in fact defrauded any
investor.
The Order institutes proceedings to determine whether the SEC
should enter an order requiring the Company (a) to cease and desist from
committing or causing any future violation of the rules alleged to have
been violated and (b) to pay approximately $1.3 million in disgorgement
of profits. The Company has filed an answer denying any violations and
seeking dismissal of the proceeding. On October 6, 2000, the initial
decision of the Administrative Law Judge who heard the case dismissed
all charges against the Company, with the finding that the Company had
not violated the law. The Division of Enforcement has filed a petition
for the SEC to review the decision.
<PAGE>
Summary
The Company is a party to various litigation matters including
general liability claims covered by insurance. In the opinion of
management, the ultimate outcome of such litigation matters and claims
is not expected to have a material adverse effect on the financial
condition or results of operations of the Company. However, it is
possible that the ultimate resolution of such litigation matters and
claims could have a material effect on quarterly or annual operating
results when they are resolved in future periods.
ITEM 2. CONSENT SOLICITATION 10-1/2% SENIOR NOTES DUE 2005
WHX commenced and successfully completed on October 4,
2000 a solicitation of consents from holders of its 10 1/2% Senior Notes
due 2005 (the "Notes") to amend certain covenants and other provisions
of the indenture dated as of April 7, 1998 (the "Indenture") governing
the Notes. A copy of a supplemental indenture reflecting such amendment
(the "Supplemental Indenture") is attached as Exhibit 4.1 to this Form
10-Q. The Supplemental Indenture provides, among other things, for
amendments to certain covenants which restrict the Company's ability to
make restricted payments, incur additional indebtedness, make permitted
investments or utilize proceeds from asset sales. The Supplemental
Indenture prohibits the payment of dividends on the Company's preferred
stock until October 1, 2002, and thereafter only in the event such
payments satisfy certain conditions set forth in the Indenture, as
amended by the Supplemental Indenture. In addition, the amendments also
remove as events of default under the Indenture those relating to
defaults under any mortgage, indenture or instrument by, judgments
against and bankruptcy, insolvency and related filings and other events
of WPC or any of its direct or indirect subsidiaries. Accordingly, the
Chapter 11 filing is not an event of default under the Notes.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
As a result of the filing by WPC Group on November 16, 2000 of
voluntary petitions for relief under Chapter 11 of Title 11 of the
Bankruptcy Code, a default occurred under WPC's 9 1/4% Senior Notes due
2007 currently outstanding in the aggregate principal amount of $275
million. As of the date of this report, WPC has not paid regularly
scheduled interest paymnts on such 9 1/4% Senior Notes in the total
amount of $12.7 million.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
On November 16, 2000, the Petition Date, the WPC Group
filed a voluntary petition to reorganize their businesses under
chapter 11 of the Bankruptcy Code. The Chapter 11 Filing was made in
the United States Bankruptcy Court for the Northern District of Ohio.
To try to ensure that the WPC Group has the capital necessary to
continue to operate its business as normal during the Chapter 11
Filing, members of the WPC Group entered into a DIP Credit Agreement
to provide borrowings of up to $290.0 million to refinance certain
obligations of the WPC Group, to provide working capital for the WPC
Group and for other general corporate purposes. See "Financial
Position," "Subsequent Events: Bankruptcy Filing of the WPC Group,"
and "Risk Factors and Cautionary Statements."
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Ex. 27 Financial Data Schedule
4.1 First Supplemental Indenture dated as of October
6, 2000 to Indenture dated as of April 7, 1998
for 10-1/2% Senior Notes due 2005.
(b) Form 8-K filed on September 18, 2000.
Form 8-K filed on September 26, 2000.
Form 8-K filed on September 27, 2000.
Form 8-K filed on September 29, 2000.
<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.
WHX CORPORATION
/s/ Arnold Nance
----------------------------------
Arnold Nance
Vice President-Finance
(Principal Accounting Officer)
