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, 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 March 31, 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 /X/ No
The number of shares of Common Stock issued and outstanding as of May 10, 2000
was 14,500,137 which includes redeemable common shares.
<PAGE>
WHX CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
2000 1999
(In thousands, except per share data)
<S> <C> <C>
Net Sales $ 453,771 $ 396,925
Operating Costs
Cost of goods sold 371,882 349,137
Depreciation and amortization 27,266 26,776
Selling, administrative and general expenses 39,760 36,126
--------- ---------
438,908 412,039
--------- ---------
Operating Income (Loss) 14,863 (15,114)
Interest expense on debt 22,446 21,335
Other (expense) (6,668) (17,276)
--------- ---------
(Loss) Before Taxes and Extraordinary Item (14,251) (53,725)
Tax provision (benefit) (7,552) (17,233)
--------- ---------
(Loss) Before Extraordinary Item (6,699) (36,492)
Extraordinary income net of tax -- 896
--------- ---------
Net (Loss) (6,699) (35,596)
Dividend requirement for Preferred Stock 5,152 5,152
--------- ---------
Net (Loss) Applicable to Common Stock $ (11,851) $ (40,748)
========= =========
Basic and Diluted income (loss) per share of
Common Stock
(Loss) before extraordinary item $ (.84) $ (2.45)
Extraordinary item - net of tax -- .05
--------- ---------
Net (loss) per share $ (.84) $ (2.40)
========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
WHX CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(Dollars and shares in thousands)
ASSETS (Unaudited) *
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 10,511 $ 10,775
Short term investments 681,446 659,356
Trade receivables - net 166,895 141,091
Inventories:
Finished and semi-finished products 221,354 218,350
Raw materials 89,152 81,210
Other materials and supplies 41,423 28,033
Precious metals 112,740 117,639
LIFO reserve 1,576 (3,363)
----------- -----------
466,245 441,869
Other current assets 17,594 14,622
----------- -----------
Total current assets 1,342,691 1,267,713
Property, plant and equipment at cost, less
accumulated depreciation and amortization 823,641 816,501
Deferred income taxes 135,644 123,033
Prepaid pension 39,123 40,336
Intangibles, net of amortization 278,893 280,766
Other non-current assets 141,618 145,217
----------- -----------
$ 2,761,610 $ 2,673,566
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade payables $ 202,211 $ 171,229
Short-term borrowings 632,847 582,547
Deferred income taxes - current 67,798 67,793
Other current liabilities 151,187 133,158
Long-term debt due in one year 1,810 1,810
----------- -----------
Total current liabilities 1,055,853 956,537
Long-term debt 868,460 864,620
Other employee benefit liabilities 399,597 400,425
Other liabilities 71,708 71,181
----------- -----------
2,395,618 2,292,763
----------- -----------
Redeemable Common Stock - 275 shares
and 298 shares 3,196 3,332
----------- -----------
Stockholders' Equity:
Preferred Stock $.10 par value -
5,883 shares 589 589
Common Stock - $.01 par value -
14,205 shares and 14,145 shares 142 141
Accumulated other
comprehensive income (loss) (2,334) 945
Additional paid-in capital 554,315 553,861
Accumulated (deficit) earnings (189,916) (178,065)
----------- -----------
Total stockholders' equity 362,796 377,471
----------- -----------
$ 2,761,610 $ 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>
Three Months Ended March 31,
2000 1999
- ----------------------------------------------------------------------------------------------------
(Dollars in thousands)
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ (6,699) $(35,596)
Non cash income and expenses:
Depreciation and amortization 27,266 26,776
Other post employment benefits (437) 1,220
Income taxes (8,503) (17,471)
(Gain) loss on sale of assets (1,844) 2,480
Equity income in affiliated companies (2,456) (1,828)
Pension expense 1,212 1,518
Minority interest 451 296
Premium on early debt retirement (net of tax) -- (896)
Decrease (increase) in working capital elements,
Trade receivables (25,804) (34,700)
Inventories (24,376) (1,433)
Other current assets (2,972) 282
Trade payables 30,982 30,845
Other current liabilities 18,034 23,797
Short term investments - net (22,090) 17,263
Trading account borrowings 39,615 48,102
Other items - net 2,548 1,349
-------- --------
Net cash provided by operating activities 24,927 62,004
-------- --------
Cash flows from investing activities:
Short term investments-available for sale (4,630) --
Property additions and improvements (35,470) (18,526)
Investment in affiliates (1,369) 1,031
Dividends from affiliates 3,750 5,000
Proceeds from sale of property 4,612 8
-------- --------
Net cash used in investing activities (33,107) (12,487)
-------- --------
Cash flows from financing activities:
Net borrowings (payments) on long-term debt 3,840 (26,840)
Minority interest dividends (1,417) (357)
Short term borrowings (payments) 10,685 (20,002)
Common stock purchased -- (7,784)
Letter of credit collateralization -- 8,229
Preferred stock dividends paid (5,152) (5,152)
Redemption of equity issues -- (39)
-------- --------
Net cash provided (used) in financing activities 7,956 (51,945)
-------- --------
Effect of exchange rate changes on net cash (40) --
Decrease in cash and
cash equivalents (264) (2,428)
Cash and cash equivalents
at beginning of period 10,775 16,004
-------- --------
Cash and cash equivalents
at end of period $ 10,511 $ 13,576
======== ========
</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 March 31, 2000, the
consolidated statement of operations for the three month periods ended
March 31, 2000 and 1999, and the consolidated statement of cash flows
for the three month periods ended March 31, 2000 and 1999, have been
prepared by the Company without audit. In the opinion of management, all
normal and recurring adjustments necessary to present fairly the
consolidated financial position at March 31, 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 March 31, 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.
Business Segments
WHX Corporation and Subsidiary Companies ("the Company") is a
holding company that has been structured to acquire and operate a
diverse group of businesses on a decentralized basis, with a corporate
staff providing strategic direction and support. The Company's primary
business currently is Wheeling-Pittsburgh Corporation (WPC), a
vertically integrated manufacturer of value-added flat rolled steel
products. The Company's other principal businesses include Handy &
Harman (H&H), a diversified industrial manufacturing company whose
business units encompass (a) manufacturing and selling of metal wire,
cable and tubing products primarily stainless steel and specialty
alloys; (b) manufacturing and selling of precious metals products and
precision electroplated material and molded parts; and (c) manufacturing
and selling of other specialty products supplied to roofing,
construction, do-it-yourself, natural gas, electric and water
industries; and Unimast Incorporated (Unimast), a leading manufacturer
of steel framing and other products for commercial and residential
construction. See Segment disclosures in Note 6.
Note 1 - 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 in the first quarter of 2000 and
1999, 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:
<PAGE>
Reconciliation of Income and Shares in EPS Calculation
(in thousands except per share amounts)
<TABLE>
<CAPTION>
For the Quarter Ended March 31, 2000
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Net (Loss) $ (6,699)
Less: Preferred stock dividends 5,152
Basic and Diluted EPS
Income (loss) available to
common stockholders $(11,851) 14,167 $(.84)
========= ====== ======
</TABLE>
The assumed conversion of stock options, preferred stock and redeemable common
stock would have an antidilutive effect on earnings per share.
<TABLE>
<CAPTION>
For the Quarter Ended March 31, 1999
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
(Loss) before extraordinary item $ (36,492)
Less: Preferred stock dividends 5,152
Basic and Diluted EPS
Income (loss) available to ------------ ------- -------
common stockholders $ (41,644) 17,001 $(2.45)
============ ======= =======
</TABLE>
The assumed conversion of stock options, preferred stock and redeemable common
stock would have an antidilutive effect on earnings per share.
Outstanding stock options granted to officers, directors, key
employees and others totaled 5.5 million shares of Common Stock at
March 31, 2000.
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, 2000 redeemable common stock outstanding
totaled 274,571 shares.
Note 2 - 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 2000 comprehensive
loss of $9.0 million consists of a net loss of $6.7 million and other
comprehensive loss of $2.3 million, net of tax related to an unrealized
loss on available-for-sale securities and foreign exchange translation
adjustment. The comprehensive loss for the comparable period in 1999 of
$36.6 million consists of net loss of $35.6 million and other
comprehensive loss of $1.0 million, net of tax related to an unrealized
loss on available-for-sale securities and foreign exchange transaction
adjustment.
<PAGE>
Note 3 - Short Term Investments
Net unrealized holding losses on trading securities held at
period end and included in other income for the first quarter of 2000
and 1999 were a loss of $7.8 million and $24.5 million, respectively.
Note 4 - WPC Sales of Receivables
On May 27, 1999, WPC renegotiated its Receivables Facility to
sell up to $100 million on similar terms and conditions to its previous
facility. The agreement expires in May 2003. Effective June 23, 1999,
Unimast, a wholly-owned subsidiary of the Company, withdrew from
participation in the Receivables Facility, pursuant to terms of it's
Credit Facility established on November 24, 1998. Accounts receivable at
March 31, 2000 and December 31, 1999 exclude $100.0 million representing
uncollected accounts receivable sold with recourse limited to the extent
of uncollectible balances. Fees paid by the Company under the
Receivables Facility range from approximately 5.91% to 6.01% 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 5 - Contingencies
Environmental Matters
The Company 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. The Company is subject to joint and several liability
imposed by Superfund on potentially responsible parties. Due to the
technical and regulatory complexity of remedial activities and the
difficulties attendant to identifying potentially responsible parties
and allocating or determining liability among them, the Company is
unable to reasonably estimate the ultimate cost of compliance with
Superfund laws. The Company believes, based upon information currently
available, that the Company's liability for clean up and remediation
costs in connection with one of these sites, reclamation will be between
$2.5 and $3.0 million. At several other sites the Company estimates
costs of aggregate less than $1.0 million. 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 $9.5 million, $7.7 million
and $0.8 million for 1998, 1999 and the three months ended March 31,
2000, respectively. The Company anticipates spending approximately $18.6
million in the aggregate on major environmental compliance projects
through the year 2003, estimated to be spent as follows: $5.8 million in
2000, $5.7 million in 2001, $4.8 million in 2002 and $2.3 million in
2003. 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 $14.7
million at March 31, 2000. These accruals were initially determined by
the Company 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 the Company has adequately provided for
remediation costs that might be incurred or penalties that might be
imposed under present environmental laws and regulations.
<PAGE>
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.
Note 6 - 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 first quarters of 2000 and 1999.
First Quarter of 2000
<TABLE>
<CAPTION>
All Segment Consolidated
WPC H&H Unimast Other Total Adjustments Total
--- --- ------- ----- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Revenue from external
Customers $279,594 $120,858 $58,261 _ $458,713 ($4,942) $453,771
Intersegment revenues 4,942 _ _ _ 4,942 _ 4,942
Segment net income (loss) ($5,130) $ 2,215 $ 2,816 ($6,600) ($6,699) _ ($6,699)
</TABLE>
First Quarter of 1999
<TABLE>
<CAPTION>
All Segment Consolidated
WPC H&H Unimast Other Total Adjustments Total
--- --- ------- ----- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Revenue from
external customers $250,048 $109,540 $53,077 $ - $412,665 ($15,740) $ 396,925
Intersegment revenues 15,740 - - - 15,740 - 15,740
Segment net income (loss) ($20,267) $ 1,220 $2,791 ($19,340) ($35,596) - ($35,596)
</TABLE>
<PAGE>
PART I
Item 2. Management's Discussion and Analysis
Overview
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.
Results of Operations
Net sales for the first quarter of 2000 were $453.8 million as
compared to $396.9 million in the first quarter of 1999, an increase of
$56.9 million. Sales increased by $40.4 million at the Company's WPC
operation reflecting higher shipments, slightly higher prices and a
better mix of products in the first quarter 2000. Sales increased by
$11.4 million at H&H primarily from stronger sales to the automotive and
specialty tubing markets. Sales increased by $5.1 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 first quarter of 2000 increased to
$438.9 million from $412.0 million. Operating costs increased by $12.8
million at the Company's WPC operations. WPC's costs were aided in the
first quarter 2000 by $7.4 million, the result of a non-recurring
insurance recovery arising from a temper mill fire. Operating costs were
higher at both H&H and Unimast, reflecting the increase volume of
business in the first quarter 2000 compared to the first quarter 1999.
Selling, administrative and general expense for the first
quarter of 2000 increased $3.6 million to $39.7 million from $36.1
million in the comparable period in 1999. Selling, administrative and
general expense at the Company's WPC operations for the first quarter of
2000 increased $2.0 million to $18.1 million from $16.1 million in the
comparable period in 1999 due primarily to bonus payments to all
salaried employees in the first quarter of 2000. Selling, administrative
and general expense at H&H and Unimast were up slightly reflecting the
general increase in the level of operating activity.
Interest expense for the first quarter 2000 increased $1.1
million to $22.4 million from the comparable period in 1999. The
increase reflects the general rise in interest rates and slightly higher
revolver balances at the Company's WPC and Unimast operations.
Other (expense) was a $6.7 million loss in the first quarter
of 2000 as compared to $17.3 million loss in 1999's first quarter. The
change in other (expense) is due primarily to the difference between
realized and unrealized losses on short-term investments in fixed income
securities.
The 2000 first quarter tax provision reflects an estimated
annual effective tax rate of 53%, as compared to 28% annual effective
rate in 1999. The change in estimated annual effective tax rates is due
to changes in estimated annual pre-tax income and changes in permanent
tax adjustments.
Net loss for the 2000 first quarter totaled $6.7 million, or a
loss of $0.84 per share of common stock after deduction of preferred
dividends. The 1999 first quarter
<PAGE>
net loss was $35.6 million, or a loss of $2.40 per share of common
stock after deduction of preferred dividends.
Financial Position
Net cash flow provided by operating activities for the first
quarter of 2000 totaled $24.9 million. Short term trading investments
and related short-term borrowings are reported as cash flow from
operating activities and provided a net $17.5 million of funds in the
2000 first quarter. Working capital accounts (excluding cash, short-term
investments, short-term borrowings and current maturities of long term
debt) used $1.6 million of funds. Accounts receivable increased by $25.8
million, trade payables increased $30.9 million, and other current
liabilities increased $18.0 million. Inventories, valued principally by
the LIFO method for financial reporting purposes, totaled $466.2 million
at March 31, 2000, an increase of $24.3 million from December 31, 1999.
The increase in accounts receivable, inventory and accounts payable is
due to higher operating levels in the first quarter 2000 at all
operating subsidiaries.
In the first quarter period of 2000, $35.4 million was spent
on capital improvements including $0.8 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.
The Company's operating segments WPC, H&H and Unimast each
maintain separate and distinct credit facilities with various financial
institutions.
On May 27, 1999, WPC renegotiated its Receivables Facility to
sell up to $100 million on similar terms and conditions to its previous
facility. The Receivables Facility expires in May 2003. Effective June
23, 1999, Unimast, a wholly-owned subsidiary of the Company, withdrew
from participation in the Receivables Facility. Accounts receivable at
March 31, 2000 and December 31, 1999 exclude $100.0 million,
representing uncollected accounts receivable sold with recourse limited
to the extent of uncollectible balances. Fees paid by the Company under
such agreement range from approximately 5.91% to 6.01% of the
outstanding amounts of receivables sold. Based on the Company's
collection history, the Company believes that the credit risk associated
with the above arrangement is immaterial.
On April 30, 1999, WPC entered into a Third Amendment and
Restated Revolving Credit Facility ("WPC Revolving Credit Facility")
with Citibank, N.A. as agent. The WPC 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.
The WPC Revolving Credit Facility expires May 2, 2003. 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 WPC Revolving Credit
Facility at March 31, 2000 totaled $89.7 million. Letters of credit
outstanding under the WPC Revolving Credit Facility were $67 thousand
at March 31, 2000.
Borrowings outstanding against the H&H Revolving Credit
Facility at March 31, 2000 totaled $46.9 million. Letters of credit
outstanding under the H&H Revolving Credit Facility were $14.6 million
at March 31, 2000.
<PAGE>
Borrowings outstanding against the Unimast Revolving Credit
Facility at March 31, 2000 totaled $23.0 million. There are no letters
of credit outstanding at March 31, 2000.
Liquidity
As of March 31, 2000, the Company had cash and short-term
investments, net of related investment borrowings, of $156.8 million.
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 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 Facilities and funds generated from
operations. The Company believes that such sources will provide the
Company for the next twelve months with the funds required to satisfy
working capital and capital expenditure requirements. External factors,
such as worldwide steel production and demand and currency exchange
rates, could materially affect the Company's results of operations and
financial condition.
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.
*******
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 H&H and the Company and
industry shipment levels and the effect of Year 2000 on the Company, its
customers and suppliers. 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 1. LEGAL PROCEEDINGS
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.
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. Although there can be no assurance
that an adverse decision will not be rendered, the Company intends to
vigorously defend against the SEC's charges.
On or about April 3, 2000 a civil action was commenced under
Title 31 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 wire rope. 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, Strandflex was informed by the U.S.
Attorney that absent a negotiated settlement, the United States will
seek
<PAGE>
a criminal indictment and civil damages against Strandflex based on 161
sales of wire rope by Strandflex during the period June, 1995 to July
1998. Strandflex has entered into discussions 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
Strandflex 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.
The Company is a party to various litigation matters including
general liability claims covered by insurance. In the opinion of
management, such claims are not expected to have a material adverse
effect on the financial condition or results of operations of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The 2000 annual meeting of stockholders was held on March 15,
2000.
(b) All of the Company's nominees, as set forth below, were elected.
There was no solicitation in opposition to the Company's
nominees. The other members of the Company's Board of Directors
are Ronald LaBow, Neil D. Arnold, Paul W. Bucha, Marvin L.
Olshan, Raymond S. Troubh and Robert A. Davidow.
(c ) Matters voted on at the meeting and the number of votes cast.
<TABLE>
<CAPTION>
Votes Against Broker
(1) Directors Voted For or Withheld Abstentions Non-Votes
--------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
William Goldsmith 11,639,513 578,059 ___ ___
Robert D. LeBlanc 11,662,968 554,603 ___ ___
(2) Amendment to 1991 10,156,418 1,717,631 343,522 ___
Incentive and Non-
Qualified Stock Option
Plan to increase shares
reserved for issuance
from 3,500,000 to
3,750,000
(3) Ratification of Price 11,960,004 117,908 139,660
Waterhouse LLP as the
Company's Independent
Public Accountants for
the fiscal year ending
December 31, 2000
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Ex. 27 Financial Data Schedule
(b) Current Report on Form 8-K filed February 23, 2000 relating to
mailing of the Company's Annual Report to stockholders.
<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)
May 15, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the WHX
Corporation Consolidated Financial Statements as of March 31, 2000 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-31-2000
<PERIOD-START> JAN-1-2000
<PERIOD-END> MAR-31-2000
<CASH> 10,511
<SECURITIES> 681,446
<RECEIVABLES> 168,986
<ALLOWANCES> 2,091
<INVENTORY> 466,245
<CURRENT-ASSETS> 1,342,691
<PP&E> 1,393,903
<DEPRECIATION> 570,262
<TOTAL-ASSETS> 2,761,610
<CURRENT-LIABILITIES> 1,055,853
<BONDS> 868,460
<COMMON> 142
0
589
<OTHER-SE> 362,065
<TOTAL-LIABILITY-AND-EQUITY> 2,761,610
<SALES> 453,771
<TOTAL-REVENUES> 453,771
<CGS> 371,882
<TOTAL-COSTS> 438,908
<OTHER-EXPENSES> 6,668
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,446
<INCOME-PRETAX> (14,251)
<INCOME-TAX> (7,552)
<INCOME-CONTINUING> (6,699)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,699)
<EPS-BASIC> (.84)
<EPS-DILUTED> (.84)
</TABLE>
