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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994 Commission File Number 1-4368
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THE LTV CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-1070950
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
25 West Prospect Avenue
Cleveland, Ohio 44115
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (216) 622-5000
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Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, par value $0.50 New York Stock Exchange
Series A Warrants New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
--- ---
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes x No
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State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Approximately $1.58 Billion
(As of February 20, 1995)
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
102,759,312 shares of Common Stock
(As of February 20, 1995)
Documents Incorporated by Reference: Annual Report to shareholders for fiscal
year 1994 (Part II); Annual Proxy Statement for 1995 Annual Meeting (Part III)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ x ]
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PART I
ITEM 1. BUSINESS.
INTRODUCTION
The LTV Corporation ("LTV") was organized as a Delaware corporation in
November 1958 as a successor to a California corporation organized in 1953.
LTV's principal office is located at 25 West Prospect Avenue, Cleveland, Ohio
44115 and its telephone number is (216) 622-5000. LTV is engaged in the steel
and energy product industries through its subsidiaries, LTV Steel Company, Inc.
("LTV Steel"), LTV Steel Tubular Products Company, Continental Emsco Company
and Continental Emsco Company Limited. LTV and its subsidiaries are
collectively referred to herein as "LTV" or the "Company" unless the context
otherwise requires.
LTV is a fully integrated steel producer that manufactures coated
sheet and cold rolled and hot rolled sheet and strip, as well as tubular and
tin mill products. Based on 1994 shipments (as compiled by LTV based primarily
on publicly filed data), LTV believes it is the third largest steel producer,
the second largest producer of flat rolled steel and a leading supplier of
quality-critical, flat rolled steel to the automotive, appliance and electrical
equipment industries in the United States. LTV operates two integrated steel
mills (Cleveland Works and Indiana Harbor Works) and various finishing and
processing facilities, as well as tubular and tin mill operations. Sales of
steel mill products accounted for approximately 93% of LTV's 1994 sales.
Coated sheet and cold rolled and hot rolled sheet and strip are used
to make products such as automobile bodies, appliances and other consumer
durable goods, farm equipment, industrial machinery, office equipment, machine
parts and tubular products. Tin mill products are used by the container
industry in the manufacture of cans and closures. Tubular products are used
primarily in the electrical, automotive, construction and oil and gas
industries.
The balance of LTV's sales relates to its energy products group
(Continental Emsco Company and Continental Emsco Company Limited), whose assets
are under review for a possible divestiture or merger with another company.
See below. LTV believes its energy products group is one of the largest
suppliers in the United States and Canada of oilfield equipment and supplies to
the oil and natural gas industry (based primarily on publicly available
information, the number of distribution locations and data compiled by LTV).
It also manufactures oil and gas drilling and production equipment and
elastomeric products.
RECENT DEVELOPMENTS
In December 1994, the Company announced it had agreed to form an
international joint venture with Sumitomo Metal Industries, Ltd. ("Sumitomo")
and British Steel plc ("British Steel") to construct and operate a mini-mill in
the southeastern United States to produce commercial and higher quality hot
rolled steel. The mini-mill's light gauge hot rolled products will compete
with a portion of the cold rolled market. The joint venture, to be called
Trico Steel Company, LLC ("Trico Steel"), will be owned 50% by the Company and
25% each by Sumitomo and British Steel. The mini-mill will have an estimated
annual capacity of 2.2 million tons, and capital costs are expected to
aggregate approximately $450 million. Construction is scheduled to begin in
the second quarter of 1995, and Trico Steel expects to be fully operational by
1998. The steel produced by Trico Steel will be sold by a wholly-owned
subsidiary of the Company.
In January 1995, the Company announced that an investment banking firm
had been retained to develop strategic options with respect to the Company's
energy products business (Continental Emsco Company and Continental Emsco
Company Limited). Such options may include a possible sale or merger of the
business with another company.
REORGANIZATION
LTV has been operating as a reorganized company since June 28, 1993,
after having operated within Chapter 11 of the Bankruptcy Code since July 17,
1986. While in Chapter 11 proceedings, LTV substantially reduced its debts,
restructured significant obligations, rejected
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unfavorable contracts, sold its aerospace and defense businesses, substantially
restructured its operations and reduced expenses. The bulk of these
activities, particularly reducing debt, restructuring obligations and rejecting
unfavorable contracts, could only have been accomplished in the context of
Chapter 11. With the adoption of fresh start reporting upon emergence from
bankruptcy, LTV's assets and liabilities were adjusted to fair values and a new
reporting entity was created with no retained earnings.
INDUSTRY SEGMENTS
For information relating to the Company's revenues, operating profits
or losses and identifiable assets, attributable to each of the Company's
industry segments, see such information on page 50 of the Company's 1994 Annual
Report to Shareholders, which information is incorporated herein by reference.
STEEL OPERATIONS
STEEL MILL PRODUCTS
During the years 1994, 1993, and 1992, LTV's steel operations
accounted for 8.3%, 8.4% and 8.6%, respectively, of total domestic industry
shipments of steel mill products, based on American Iron and Steel Institute
("AISI") reports. The net tons of steel mill products shipped by LTV's steel
operations during these periods were: 1994--7,969,000, 1993--7,570,000 and
1992--7,171,000.
LTV's steel mill product mix is reflected in the following table which
shows the revenue dollars for the periods indicated:
<TABLE>
YEAR ENDED DECEMBER 31,
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(DOLLARS IN MILLIONS)
<CAPTION>
1994 1993 1992
---- ---- ----
REVENUE REVENUE REVENUE
------- ------- -------
<S> <C> <C> <C>
Hot and cold flat rolled products . . . . . . . $2,100 $1,892 $1,726
Galvanized products . . . . . . . 1,212 1,112 994
Tin mill products . . . . . . . 474 438 422
Tubular products . . . . . . . 293 253 244
Other steel products . . . . . . . 1 3 3
Nonsteel products . . . . . . . 153 170 176
------ ------ ------
Total . . . . . . . $4,233 $3,868 $3,565
====== ====== ======
</TABLE>
The increase in revenues in 1994 and 1993 from 1992 for hot and cold
flat rolled products was due to the continued growth of the U.S. economy,
stronger demand for steel products and the realization of steel price
increases. Revenue in 1993 and 1992 in tin mill products was adversely
affected by a temporary reduction in production due to modernization of LTV's
tin mill product finishing facilities in 1992 and early 1993. Shipments of
electrical conduit and mechanical tubing products increased in 1994 due to
strength in the construction and automotive markets while shipments of electric
weld pipe products remained depressed throughout the periods shown due to
continued weak demand.
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<TABLE>
STEEL PRODUCTION
The following table sets forth raw steel production and estimated
capability information for both LTV and the domestic steel industry during the
periods indicated:
<CAPTION>
YEAR ENDED DECEMBER 31,
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1994 1993 1992
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<S> <C> <C>
Capability (net tons in thousands)
LTV 8,300 9,780 9,800
Industry(a) 108,200 109,900 113,100
Percent of industry 7.7% 8.9% 8.7%
Production (net tons in thousands)
LTV(b) 8,250 7,920 8,290
Industry(a) 97,900 97,900 92,900
Percent of industry 8.4% 8.1% 8.9%
Production as a percentage of capability
LTV(b)(c) 99.4% 81.0% 84.6%
Industry(a) 90.5% 89.1% 82.2%
<FN>
(a) The information relating to the domestic steel industry is as reported
by or is derived from data reported by the AISI and is preliminary for
1994. A net ton is 2,000 pounds.
(b) Production in 1994 reflects scheduled production interruption caused
by a blast furnace reline at Indiana Harbor Works. Production in
1993 reflects scheduled production interruptions including the reline
of a blast furnace at Cleveland Works and modifications to one of
two Cleveland Works steelmaking shops as part of the Direct Hot
Charge Complex.
(c) The annual operating capabilities indicated above for 1993 and 1992
include steel production capability related to two electric furnaces and a
fourth blast furnace at the Cleveland Works. LTV removed these facilities
from its stated capability, effective at the beginning of 1994, which
reduced annual operating capability by 1.5 million tons. Accordingly, for
1994, LTV's raw steel production capability is 8.3 million tons. If these
facilities had been removed from stated capacity for prior periods, LTV's
production as a percentage of capability in those years would have been
considerably higher in such periods.
</TABLE>
LTV produces its steel requirements using the basic oxygen furnace process at
its Cleveland Works and Indiana Harbor Works. With the start up of a third
continuous caster in September 1993, LTV began continuously casting 100% of its
flat rolled steel production in November 1993. Because of the scheduled
production interruptions as described above and to fulfill strong customer
demand, LTV purchased approximately 514,000 tons and 437,000 tons of
semi-finished slabs from other foreign and domestic steel producers in 1994 and
1993, respectively.
Individual facilities are operated at rates that best serve LTV's overall need
at the time and can be significantly higher or lower than LTV's average
operating rate. LTV does not believe data regarding the utilization of
individual facilities are necessarily meaningful.
CUSTOMERS
The following table sets forth the percentage of shipments by tonnage
distributed among LTV's various markets for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
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1994 1993 1992
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<S> <C> <C> <C>
Automotive 26% 26% 27%
Steel service centers 28 30 26
Converters and processors 13 11 11
Electrical, agricultural and other machinery 9 9 9
Household appliances and office equipment 8 8 9
Containers and packaging 8 8 8
Construction 6 5 6
All other 2 3 4
--- --- ---
Total 100% 100% 100%
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</TABLE>
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Sales to LTV's largest unaffiliated customer, General Motors
Corporation, represented approximately 11%, 13% and 14%, respectively, of LTV's
steel-related sales in dollars during 1994, 1993 and 1992.
SALES AND MARKET DISTRIBUTION
Approximately 60% to 65% of LTV's steel products are sold under
contracts, most of which are negotiated on an annual basis. Almost all of
LTV's flat rolled steel sales to its larger customers in the automotive,
appliance, electrical equipment and food and beverage can markets are made
pursuant to such contracts. These contracts generally provide for set prices
for the products ordered during the period that the contract is in effect. As
a result, LTV may experience a delay in realizing price changes related to its
contract steel products business, but is less susceptible to short-term swings
in spot prices. The remainder of LTV's flat rolled product is sold in the spot
market at the then prevailing market prices for such product.
LTV sells its flat rolled products in the U.S. through five regional
sales offices. Tubular products and tin mill products are sold through
separate sales organizations divided into four regions.
Internationally, LTV has information and technical liaison offices for
flat rolled products in Mexico City and in Tokyo. The Tokyo office assists the
flat rolled and tubular products sales groups to service their respective
Japanese customers that have operations in the U.S. The Tokyo office has been
particularly effective in enabling LTV to become a qualified supplier to the
U.S.-based manufacturing operations of various Japanese companies.
COMPETITION
LTV competes directly with domestic and foreign flat rolled carbon
steel producers and indirectly with producers of plastics, aluminum and other
materials such as ceramics and wood which sometimes can be substituted for flat
rolled carbon steel in manufactured products. The primary factors which have
affected competition include price, quality, delivery performance and customer
service. LTV targets quality-critical, value added applications and believes
it is able to differentiate certain of its products from those of its
competitors on the basis of its product quality, technology, modern facilities
and customer product and technical support.
Foreign
Domestic steel producers have faced significant competition from
foreign producers. Foreign competition is intense and has adversely affected
product prices in the United States and tonnage sold by domestic producers.
The intensity of foreign competition is affected by, among other things,
worldwide steel demand, fluctuations in the value of the U.S. dollar against
foreign currencies, and steel imports may increase should such demand decline
or the value of the dollar rise in relation to foreign currencies. Many
foreign steel producers are owned, controlled or subsidized by their
governments. Decisions by these foreign producers with respect to production
and sales may be influenced to a greater degree by political and economic
policy considerations than by prevailing market conditions. Further, the U.S.
Congress recently passed legislation to implement the GATT Uruguay Round
agreement. The impact of such legislation, which weakens prior U.S. trade
laws, could also result in increased steel imports from foreign producers. For
a description of the final dumping and subsidy decisions relating to foreign
competition issued by the International Trade Commission ("ITC"), substantially
all of which are being appealed, see "Trade Cases" below.
Based on AISI reports and other data, LTV believes that effective
domestic production capability for flat rolled steel is not sufficient to meet
fully domestic steel demand, particularly during periods of strong economic
demand. As a result, a certain level of imports is required to meet domestic
demand. Based on AISI reports, during the three years 1994, 1993 and 1992,
imports of steel mill products totaled approximately 27.6 million (eleven
months), 19.5 million and 17.1 million net tons, respectively, or approximately
25% of total domestic steel consumption in 1994 (eleven months) and
approximately 19% in 1993 and 18% in 1992. Of this amount, 7.3 million net
tons (eleven months) or 26.6% of the imports in 1994 and 5.0 million net tons
in 1993 consisted of semi-finished product purchased by domestic steel
producers for further finishing and resale. The market for tubular products
was most affected by imports, where foreign products accounted for 39% of the
market in 1994 (eleven months), 35% in 1993 and 30% in 1992. Flat rolled
imports (including tin
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mill products) comprised 19% of the flat rolled market in 1994 (eleven months),
13% in 1993 and 16% in 1992.
Domestic
LTV competes with other domestic integrated producers. Domestic
integrated producers also compete with mini-mills which are relatively
efficient, low-cost producers that generally produce steel from scrap in
electric furnaces, have lower employment and environmental costs and generally
target regional markets. Because of their technology, mini-mills are highly
dependent upon scrap and susceptible to fluctuating scrap prices and their
participation in steel markets has traditionally been limited to structural,
plate, bar and rod products. However, recently developed thin slab casting
technologies have allowed one mini-mill producer to enter certain sectors of
the flat rolled market, which has traditionally been supplied by integrated
producers, and others have announced their intention to do the same. See
"Recent Developments" for information on LTV's participation in an
international joint venture with Sumitomo and British Steel to construct and
operate a mini-mill in the southeastern United States.
TRADE CASES
U.S.--Certain ITC Determinations
On June 30, 1992, certain members of the U.S. steel industry filed 84
cases against 21 foreign countries alleging that steel imports from these
countries were being dumped and/or subsidized in the United States' steel
market and causing or threatening to cause material injury to U.S. steel
producers. The products involved included cut-to-length plates, hot rolled
sheet, cold rolled sheet and corrosion resistant products. On July 27, 1993,
the International Trade Commission (the "ITC") made final determinations that
material injury had occurred in approximately 83% of the total import tonnage
in 1992 of corrosion resistant products, 36% of the total import tonnage in
1992 of cold rolled products and none of the hot rolled products. The finding
of no material injury in the hot rolled sector by the ITC was affirmed by the
Court of International Trade in January 1995. Cash deposits equal to estimated
antidumping and/or countervailing duty margins are being required from
importers to pay additional duties on those steel imports where there was a
final affirmative injury decision. Since the ITC decisions (substantially all
of which have been appealed to the U.S. Court of International Trade), imports
of hot and cold rolled product have increased significantly while corrosion
resistant imports have increased to a lesser extent. During 1994, 29% of the
Company's steel-related revenues were derived from the shipment of corrosion
resistant steel, 28% from the shipment of cold rolled steel and 21% from the
shipment of hot rolled steel. A successful challenge to the trade decisions
that were favorable from the perspective of the Company may contribute to an
increase in steel imports or adoption of pricing and marketing practices in
those products that are adverse to the Company.
Canada and Mexico
Canada and Mexico have filed unfair trade cases involving dumping
allegations against importing, among other products, hot and cold rolled steel
and corrosion resistant products from the U.S. and other countries. In Canada,
dumping was found to exist on cold rolled product and galvanized product
(excluding electro-galvanized). There were no duties imposed on hot rolled
product shipped to Canada because of a finding of no injury. In Mexico, cases
are also pending alleging that U.S. steel producers have dumped steel product
and the U.S. government has subsidized its steel industry. During 1994, LTV
exported less than 130,000 tons of such steel products into Canada and Mexico.
Accordingly, management believes that the effect of these actions will not be
material to LTV.
STEEL-RELATED EMPLOYEES AND LABOR MATTERS
As of December 31, 1994, LTV's steel operations had approximately
15,300 active employees. Approximately 11,600 active employees, primarily
hourly workers, are represented by unions. Of these employees, approximately
11,200 are represented by the United Steelworkers of America ("USWA").
Effective June 1, 1994, the Company and the USWA entered into a labor
agreement which provides for enhanced pension benefits, bonuses to be paid over
the term of the agreement and a future wage increase. The agreement also
provides for the establishment of a VEBA (Voluntary
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Employee Beneficiary Association) Trust to prefund certain health care and
other insurance benefits for active and retired hourly employees covered under
the agreement and for the continuation of a preexisting managed health care
program. The agreement expires on August 1, 1999; however, it provides for a
reopening of wage provisions on August 1, 1996, subject to binding arbitration.
ENERGY PRODUCTS OPERATIONS
Continental Emsco, all the operations of which are under review for a
possible divestiture or merger with another company, is engaged in the
manufacture and/or distribution of drilling and production equipment, the
distribution of tubular goods and oilfield supplies of other manufacturers to
all segments of the oil and natural gas industry, and the manufacture and sale
of elastomeric products for the oil and gas, construction and defense
industries. See "Recent Developments."
The Company believes Continental Emsco is one of the largest suppliers
in the United States and Canada of oilfield equipment and supplies to the oil
and natural gas industry (based primarily on publicly available information,
the number of distribution locations and data compiled by LTV). Continental
Emsco's products are used both in the drilling and production phases of
land-based and offshore oil and gas wells and in enhanced oil and gas well
recovery and servicing operations. Sales and distribution of the energy
products group's products are made throughout North America and overseas,
primarily to multi-national and national oil companies, large and small
independent oil companies, drilling contractors, well service and work-over
operators and the petroleum, refining and chemical industries. Elastomeric
products are sold primarily to the oil and gas and construction industries.
PRODUCTS AND SALES
Continental Emsco's sales were distributed among its major product
lines as follows for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1994 1993 1992
---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Oilfield supplies $141.6 47% $140.4 47% $116.2 44%
Drilling, production
and other equipment 86.3 29 89.7 31 97.9 38
Tubular products 71.3 24 66.8 22 48.4 18
---- --- ---- -- ---- --
Total $299.2 100% $296.9 100% $262.5 100%
====== === ====== === ====== ===
</TABLE>
Approximately 35%, 33% and 30% of the group's revenues in 1994, 1993
and 1992, respectively, resulted from sales to purchasers outside the U.S.
Activity in the international market (excluding Canada) represented
12% of sales in 1994, 14% of sales in 1993 and 16% in 1992. The anticipated
shift in focus to overseas markets for U.S. exporters has been restrained by a
shortage of hard currency for payment of imports and uncertainties relating to
opportunities in developing countries. Canadian sales activity represented 23%
of sales in 1994 compared with 19% of sales in 1993 and 14% of sales in 1992.
During the last several years, Continental Emsco has downsized
significantly and discontinued product lines that did not fit its long-term
strategic plan. This has allowed it to reduce costs, inventories and work
force levels as part of a plan to bring operations into line with the current
level of demand for its products.
The level of Continental Emsco's sales and shipments is largely
dependent upon the level of oil and gas drilling and production activity in the
regions it serves. At December 31, 1994, Continental Emsco had a backlog of
$14.3 million of drilling and production equipment and $16.1 million of
elastomeric and metal products. Its facilities continue to operate at
substantially less than capacity. However, the values of its properties have
previously been substantially written down to reflect these lower space
requirements and equipment utilization rates.
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INDUSTRY CONDITIONS AND COMPETITION
Continental Emsco is affected primarily by the level of oil and gas
drilling and production activities, particularly within North America which, in
turn, is affected by the price and supply of oil from the Middle East and other
oil producing regions. Continental Emsco will continue to be dependent upon
the drilling and production activities of the oil and gas industry which depend
upon, among other things, overall economic conditions, future demand for oil
and gas and the action of governments which control the production of much of
the world's oil and gas. In particular, the declines and instability of oil
prices that have occurred since 1982 have caused a substantial reduction in the
level of oil exploration and, as a result, a substantial decrease in demand for
various products produced by Continental Emsco. However, improvement in
natural gas prices over the last several years has been a positive factor in
North American drilling and production activity and, accordingly, has
positively affected demand for its products and services.
As a result of the overall downturn in the energy products industry
and the resulting overcapacity in the manufacturing of drilling and production
equipment, the markets in which Continental Emsco operates have become
characterized by intense price competition.
CYCLICALITY AND SEASONALITY
Historically, the oil and gas industry has been cyclical and also
subject to a seasonal downturn in the first quarter of each year because work
in the oilfields is inhibited by inclement weather, primarily in Canada. The
weekly count of U.S. and Canadian rotary drilling rigs running, an indicator of
oilfield activity, was 1,072 at the end of 1994. At the end of 1993 and 1992,
it was at 1,069 and 1,063, respectively.
EMPLOYEES AND LABOR MATTERS
As of December 31, 1994, Continental Emsco had approximately 1,200
employees. The hourly employees at the Houston and Garland, Texas facilities
are represented by either the International Association of Machinists and
Aerospace Workers or the International Brotherhood of Boiler Makers, Iron
Shipbuilders, Blacksmiths, Forgers and Helpers. In February 1993, a five-year
agreement was reached with these unions at the Houston facility. The agreement
at the Garland facility expires in March 1995.
OTHER ASPECTS OF LTV
RESEARCH AND DEVELOPMENT
LTV's research and development efforts focus on developing new
production processes to improve the quality and reduce the cost of LTV's
product lines, provide product and technical support to customers and create
new steel products.
LTV operates a research and development facility and customer
technical center in Cleveland to develop new steel products, improve existing
steel products and develop more efficient operating procedures to meet the
continually increasing demands of the automotive, appliance, electrical
equipment and container markets. The employees of LTV's research and
development facilities include chemists, metallurgists and engineers. In
addition, LTV offices in Tokyo and Mexico City provide technical support to
Company customers in those countries and their U.S. manufacturing operations.
LTV also operates a product application center in Detroit that works
closely with customers in identifying optimum steel and manufacturing methods,
evaluating steel product performance and solving customer manufacturing
problems.
Expenditures for research and development by the steel group totaled
$15.1 million in 1994, $15.0 million in 1993 and $15.1 million in 1992. These
expenditures do not include the efforts of sales and manufacturing employees in
working to meet customer technical demands.
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ENVIRONMENTAL MATTERS
LTV is subject to changing and increasingly stringent environmental
laws and regulations concerning air emissions, water discharges and waste
disposal.
The Company spent approximately $30 million in 1994 and approximately
$41 million in 1993 for compliance-related capital expenditures and expects to
spend an average of approximately $40 million annually in capital expenditures
for the next five-year period to meet environmental standards (including
requirements of the 1990 Clean Air Act Amendments).
Also, the Company spent approximately $21 million during 1994 and
approximately $29 million in 1993 for environmental clean-up and related
matters at operating and idled facilities and has a recorded liability of $105
million at December 31, 1994 and $121 million at December 31, 1993 for known
and identifiable environmental clean-up and related matters that are probable
to occur, principally over the next five-year period. It is anticipated that
other requirements for environmental matters, which could increase these costs,
may arise in the future.
Estimates for future capital expenditures and operating costs required
for environmental compliance are difficult to determine due to numerous
uncertainties, including the evolving nature of the regulations, the possible
imposition of more stringent requirements and the availability of new
technologies.
EPA AND STATE ENVIRONMENTAL SETTLEMENT AGREEMENTS
At the time of the Company's reorganization (in June 1993), the U.S.
Environmental Protection Agency ("EPA") and the Company entered into a
settlement agreement (the "Environmental Settlement Agreement") which resolved,
or provided a mechanism for resolving, the environmental claims which the EPA
had brought against the Company in its bankruptcy proceedings.
The Environmental Settlement Agreement resolved all environmental
clean-up and natural resource damage claims of the EPA relating to specified
sites designated by the EPA as Superfund Sites (other than a Company-owned
Superfund Site). In addition, the Agreement resolved certain pending claims
for civil penalties under several environmental statutes.
Claims under CERCLA, RCRA and TSCA relating to sites once owned by the
Company (but not owned at the time of confirmation of the Company's Joint Plan
of Reorganization ("Joint Plan")), which arise out of conduct of the Company
occurring prior to confirmation of the Joint Plan (or, in the case of sites
never owned by the Company, conduct of the Company occurring prepetition), were
given the status of unliquidated general unsecured claims in the bankruptcy
proceedings. No distribution was made by the Company at reorganization on
account of such claims. Instead, such claims, should they be liquidated in the
future pursuant to a settlement or judgment obtained through enforcement
activities of the United States pursued in the ordinary course, will be
satisfied by the payment of Common Stock in the same manner as other
general unsecured claims under the Joint Plan or, at LTV's option, an
equivalent amount of cash or a combination of stock and cash. As of February
27, 1995, no such EPA claims had been liquidated.
Environmental claims under CERCLA, RCRA and TSCA relating to property
owned by the Company upon confirmation of the Joint Plan ("Owned Sites") were
not affected by the reorganization of the Company or the Environmental
Settlement Agreement (except for certain response costs incurred
preconfirmation).
The Environmental Settlement Agreement also served as the basis for
settlement agreements covering the environmental claims of several states and
are similar in all material respects, although in the case of the states, the
agreements apply to claims arising under essentially all of the states'
environmental laws. Thus, claims in the Company's bankruptcy proceedings
arising with respect to Owned Sites were not affected by the Company's
reorganization (except for certain response costs incurred preconfirmation and
penalties assessed with respect to certain specified and prepetition
activities). Also, as with treatment of liabilities at sites which are not
Owned Sites under the Environmental Settlement Agreement, except for certain
specified sites for which claims were liquidated, the states received no
distributions in the bankruptcy proceedings on account of such liabilities at
the time of confirmation, but such claims are to be liquidated in the same
manner as other
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general unsecured claims, if, as and when states undertake enforcement
activities. As of February 27, 1995, no such state claims had been liquidated.
Except in the case of several states which agreed to a complete
discharge of claims against the Company, the state settlement agreements and
the Environmental Settlement Agreement do not cover environmental liabilities,
if any, of the aerospace, defense and military vehicle subsidiaries of the
Company, the assets of which were sold during the pendency of the bankruptcy
proceeding. The Company believes, however, that any such claims would be
subject to the provisions on claim dischargeability under the Bankruptcy Code
and the Joint Plan.
By addressing its environmental liabilities in the reorganization
process, the reorganized Company has had a significant amount of its
environmental liabilities liquidated and discharged as general unsecured claims
and has established a mechanism for having environmental claims (if any) for
prepetition or preconfirmation conduct that are identified and liquidated
subsequent to its emergence from bankruptcy proceedings treated as prepetition
general unsecured claims. Nevertheless, the Company is in a business that has
incurred and will continue to incur substantial expense as a result of
environmental laws and regulations with respect to its Owned Sites. The
Company does not believe, however, that these future costs will have a material
adverse effect on its financial position, liquidity and competitive position.
<TABLE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
executive officers of LTV.
<CAPTION>
NAME AGE* OFFICE
<S> <C> <C>
David H. Hoag 55 Chairman of the Board, President and Chief Executive Officer
David E. Althoff 53 Group Vice President--Energy
J. Peter Kelly 53 Group Vice President--Steel
Arthur W. Huge 49 Senior Vice President and Chief Financial Officer
Glenn J. Moran 47 Senior Vice President, General Counsel and Secretary
William C. Armbruster 48 Vice President and Controller
John C. Skurek 50 Vice President and Treasurer
<FN>
* As of December 31, 1994.
</TABLE>
OFFICERS
The only employee of LTV and its subsidiaries who is also a director
of LTV is Mr. Hoag, Chairman of the Board, President and Chief Executive
Officer of LTV.
All officers, except Mr. Armbruster, have been employed by LTV or its
subsidiaries for more than the last five years.
David H. Hoag became Chairman of the Board of LTV in June 1991 and
President and Chief Executive Officer of LTV in February 1991. He has been a
director of LTV since June 1986. He was Executive Vice President--Steel of LTV
from June 1986 until February 1991 and was Group Vice President of LTV from May
1983 to June 1986. He is the Chairman of the Board and Chief Executive Officer
and a director of LTV Steel Company, Inc. and, prior to February 1, 1991, was
President of LTV's steel group. He also is a director of The Lubrizol
Corporation (chemical manufacturing) and The Chubb Corporation (insurance). He
also serves as Chairman of Cleveland Tomorrow, a prominent Cleveland business
group, and as Chairman of the Board of Trustees of Allegheny College. He also
is a past Chairman of the Board of the American Iron and Steel Institute.
Mr. Althoff became a Group Vice President of LTV in July 1991. He was
named President and Chief Executive Officer and a director of Continental Emsco
Company in June 1991. He was Vice President and General Manager, Tin Mill
Products, for LTV Steel from February 1989 to June 1991. Prior thereto, he
served in general management positions in operations and marketing for LTV
Steel for more than five years.
- 9 -
<PAGE> 11
Mr. Kelly became a Group Vice President of LTV in February 1991. He
was named President and a director of LTV Steel in February 1991 and Chief
Operating Officer of LTV Steel in January 1993. Prior thereto, since September
1987, Mr. Kelly was Executive Vice President of LTV Steel.
Mr. Huge became Senior Vice President and Chief Financial Officer of
LTV in June 1993. Mr. Huge has also served as Vice President and Chief
Financial Officer of LTV Steel for more than the past five years.
Mr. Moran was elected Senior Vice President and General Counsel of LTV
in September 1992 and Secretary in July 1993. He also has served for the last
five years as Vice President and Group Counsel of LTV Steel.
Mr. Armbruster was elected Vice President and Controller of LTV in
June 1993. For the period June 1, 1992 through May 17, 1993, he was in private
practice as a financial consultant. Prior thereto, for more than five years,
he was a partner of Ernst & Young and its predecessors.
Mr. Skurek was elected Vice President and Treasurer of LTV in February
1993. Mr. Skurek has also served as Vice President and Treasurer of LTV Steel
since September 1992 and as Vice President--Public Affairs of LTV Steel from
July 1991 to September 1992. Prior thereto, he was the Assistant Treasurer of
LTV Steel for more than the past five years.
ITEM 2. PROPERTIES.
CORPORATE HEADQUARTERS
LTV has its corporate headquarters in 299,000 square feet of leased
office space in Cleveland, Ohio. The existing lease expires at the end of
1996; the lease agreement contains options, exercisable by LTV, to extend the
lease term through 2010.
STEEL PRODUCING FACILITIES
The Cleveland Works at Cleveland, Ohio produces a variety of flat
rolled products. Major facilities include blast furnaces, basic oxygen
furnaces, two continuous slab casters, vacuum degassing and ladle metallurgy
systems, hot strip mills, cold reducing mills, a continuous annealing line,
sheet finishing facilities and an electroplate line.
Capital spending at the Cleveland Works has included the installation
in 1991 of a vacuum degassing and ladle metallurgy facility (an advanced steel
refining facility for the production of ultra-low carbon steel designed for
demanding electrical and automotive applications) and the relining and
upgrading of blast furnaces as needed. LTV also upgraded the gauge tolerance
controls at one of its 84-inch hot strip mills and 84-inch tandem cold mill in
1990 and built a continuous anneal line which commenced operations in early
1992.
In late 1993, LTV completed construction of the Direct Hot Charge
Complex ("DHCC") which includes a second continuous slab caster for the
Cleveland Works. This facility links an existing steelmaking facility and a
recently modernized 80-inch hot strip mill with a new continuous caster and
ladle metallurgy station which allows slabs to be delivered directly from the
caster to the hot strip mill, reducing steel handling and reheating costs.
The Indiana Harbor Works at East Chicago, Indiana produces a variety
of flat rolled products. Major facilities include blast furnaces, basic oxygen
furnaces, a continuous slab caster, vacuum degassing and ladle reheating
systems, a hot strip mill, a cold reducing mill, sheet finishing facilities,
hot-dipped galvanizing lines and a tin mill.
Capital spending at the Indiana Harbor Works has included the
installation of a vacuum degassing and ladle reheating facility in 1988,
modernization of its hot strip mill gauge control and coil handling systems,
installation of a hydraulic gauge control system at its tandem cold mill, both
of which were completed during 1992, and the relining and upgrading of blast
furnaces as needed. LTV also completed an upgrade of its hot-dipped
galvanizing facilities, installing an inline temper mill and tension leveler as
well as a new, state-of-the-art, off-line inspection facility.
- 10 -
<PAGE> 12
LTV also operates a tin mill in Aliquippa, Pennsylvania. Recent
capital expenditures at LTV's tin mill facilities have included a hydrogen
batch anneal facility at the Aliquippa tin mill and upgrades at the Indiana
Harbor tin tandem mill for improved gauge and shape control, both of which were
completed during 1992. The two tin mills have an operating capacity
aggregating 840,000 tons. The two tin mills operated at a combined rate of 99%
of capacity during 1994.
LTV also operates finishing operations in Hennepin, Illinois. The
Hennepin facilities, which receive semi-finished products from the steel
producing facilities, include a cold reducing mill, a sheet finishing mill and
a hot-dipped galvanizing line. LTV also operates coke batteries in Chicago,
Illinois, Pittsburgh, Pennsylvania and Warren, Ohio.
Tubular products facilities in Ferndale, Michigan, Cleveland,
Youngstown and Elyria, Ohio, Counce, Tennessee, and Cedar Springs, Georgia
manufacture electric weld pipe and welded tubing (pressure tubing, mechanical
tubing, cold drawn tubing and electrical metallic conduit). A seamless pipe
mill in Campbell, Ohio is also being maintained in an indefinitely idled
status.
Joint Ventures
LTV also participates in several joint ventures, the largest of which
involve international partners.
In December 1994, the Company announced it had agreed to form an
international joint venture with Sumitomo and British Steel to construct and
operate a mini-mill in the southeastern United States to produce commercial and
higher quality hot rolled steel. The joint venture, Trico Steel, will be owned
50% by the Company and 25% each by Sumitomo and British Steel. Trico Steel
will have an estimated annual capacity of 2.2 million tons, and capital costs
are expected to aggregate approximately $450 million. Construction is
scheduled to begin in the second quarter of 1995, and Trico Steel expects to be
fully operational by 1998. The steel produced by the mini-mill will be sold by
a wholly-owned subsidiary of the Company.
LTV also owns joint venture interests in two electro-galvanizing
lines. The first, involving a joint venture owned 60% by a subsidiary of LTV
and 40% by a subsidiary of Sumitomo, was built at LTV's Cleveland Works. The
line produces one-sided and two-sided zinc-coated flat rolled steel products,
utilizing an electrolytic galvanizing process, and has an annual capacity of
approximately 420,000 tons of coated products. The second line, involving a
joint venture which is owned equally by subsidiaries of LTV and Sumitomo,
produces zinc, nickel/zinc and nickel/zinc/organic coated products and has an
annual capacity of approximately 360,000 tons of coated product. The second
line is located in Columbus, Ohio. Most of the cold rolled steel that is
coated at these facilities is produced by LTV, and LTV is responsible for all
sales and marketing of coated products processed by the joint ventures. The two
electro-galvanizing lines operated at a combined rate of 96% of capacity during
1994.
LTV is also a 33% owner of Processing Technology Inc. ("PTI"), a steel
processing and warehousing operation with two leased facilities in Perrysburg,
Ohio and Burns Harbor, Indiana. PTI is equipped to slit, edge trim and
cut-to-length steel coils.
Railroads
LTV owns all of the capital stock of the following six terminal
switching railroad companies: Aliquippa and Southern Railroad Company, serving
the Aliquippa tin mill; The Cuyahoga Valley Railway Company and The River
Terminal Railway Company, serving the Cleveland Works; The Mahoning Valley
Railway Company, serving the Youngstown electric weld pipe mill; The
Monongahela Connecting Railroad Company, serving the Pittsburgh coke plant; and
the Chicago Short Line Railway Company, serving the Indiana Harbor Works. All
are common carriers subject to regulation by the Interstate Commerce Commission
and are used primarily by LTV.
Suitability
LTV's steel related facilities are well maintained, considered
adequate for their intended purposes and being utilized for their intended
purposes.
- 11 -
<PAGE> 13
USWA Collateral Arrangement
LTV has granted liens on the plant, property and equipment at its
Cleveland West facilities and a royalty free license or sublicense with respect
to intellectual properties used in connection with the manufacture of products
at such facilities pursuant to a 1993 USWA labor agreement to secure payment of
(i) certain retiree health benefits to salaried and hourly employees and
retirees and (ii) certain employer contributions under a defined contribution
plan for hourly employees (collectively, the "Secured Obligations"). The
maximum amount recoverable to pay the Secured Obligations upon foreclosure of
the collateral is $250 million.
From time to time, either the USWA or LTV may request an appraisal of
the collateral securing the Secured Obligations. If such appraisal reveals
that the aggregate Coverage Value (as defined below) of such collateral is less
than $250 million, LTV must grant or cause to be granted additional collateral
with a Coverage Value at least equal to such deficit on plant, property and
equipment of LTV and its affiliates engaged in the steel business.
Alternatively, if an appraisal reveals that the aggregate Coverage Value of the
collateral is greater than $250 million, LTV may request the release of
collateral with a Coverage Value not to exceed such excess. For purposes of
plant, property and equipment, Coverage Value means 50% of the most recent
appraised value thereof (subject to certain adjustments) less two times any
obligation secured thereby to which the Secured Obligations have been
subordinated. The security interest granted may, subject to certain
conditions, be subordinated to certain subsequent security interests including,
among others, security interests created for LTV's benefit of working capital
lenders or in favor of LTV's restored pension plans.
RAW MATERIALS
Iron Ore
LTV owns interests in two iron ore mining operations. LTV's share of
production at these mines during 1994 was sufficient to meet 100% of its iron
ore requirements. LTV's share of reserves at these mines is sufficient to meet
its anticipated iron ore requirements beyond the year 2000.
LTV estimates that as of January 1, 1995, the total of its proven
crude ore reserves and of its proportionate share of such reserves of the
companies in which it has an ownership interest was such that, when mined and
beneficiated, there could be produced for use by LTV approximately 552,237,000
gross tons (a gross ton is equivalent to 2,240 pounds) of merchantable ore
averaging approximately 64% iron content. These ore reserves at the end of
1994, and 1994 activity, were as follows:
<TABLE>
<CAPTION>
PROVEN 1994
NET ANNUAL SHARE OF DELIVERIES
INTEREST IN IRON ORE 1994 TO STEEL
RESERVES(a) CONTENT ENTITLEMENT PRODUCTION PLANTS(b)
----------- ------- ----------- ---------- ---------
(GROSS TONS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Properties:
LTV Steel Mining Company 519,473 64% 7,900(c) 7,809 7,474
Empire Iron Mining Partnership(d) 32,764 64% 1,900 1,830 1,220
------ ----- ----- -----
Total Properties 552,237 9,800 9,639 8,694
======= ===== ===== =====
</TABLE>
(a) LTV's ownership interest in reserves is stated in gross tons of
concentrates or pellets.
(b) "1994 Deliveries to Steel Plants" does not include the sale of ore
products to third parties.
(c) LTV owns 100% of LTV Steel Mining Company located in Minnesota. The
entitlement is based on normal annual plant capacity and the
production level can be reduced at LTV's discretion.
(d) LTV holds a 25% interest in Empire Iron Mining Partnership which
operates an iron ore mine and pellet facility in Michigan. LTV can
reduce its annual ore purchase requirements. Minimum ore purchase
requirements in 1994 totaled 1,333,000 gross tons.
Ore reserves are expected to be exhausted prior to the expiration
dates of the various leases associated with LTV's mining properties. LTV is
committed to pay its share of the annual cost of these operations either
through cash advances or purchases of ore at market prices.
- 12 -
<PAGE> 14
During 1994, the average blast furnace charge consisted of
approximately 90% pellets and 10% sinter. During 1994, all of LTV's pellet and
sinter requirements came from affiliated sources.
Metallurgical Coal and Coke
All LTV's metallurgical coal requirements are purchased from
unaffiliated third parties under a number of short and intermediate term
contracts. LTV previously owned interests in a number of coal properties, all
of which have been closed, except for certain properties leased to third
parties. Metallurgical coal is used to make coke which is used in blast
furnaces to make iron in the raw steelmaking process.
LTV produced 79% of its coke requirements during 1994 and expects to
produce 82% of its anticipated requirements for 1995 at its owned coke
batteries located at Warren, Ohio, Chicago, Illinois and Pittsburgh,
Pennsylvania. LTV anticipates that these coke batteries, combined with
long-term coke supply contracts, will meet substantially all of its coke
requirements through the year 2000.
Other Raw Materials
LTV has a 53.5% interest in Presque Isle Corporation which operates a
limestone quarry located in Michigan. LTV's share of Presque Isle
Corporation's proven limestone reserves was approximately 139,900,000 gross
tons as of December 31, 1994. LTV owns a burnt lime processing plant at Grand
River, Ohio, which processes lime from Presque Isle and other sources into
burnt lime. In 1994, approximately 38% of the 376,000 net tons of high calcite
burnt lime consumed by LTV came from these sources.
Substantially all other raw materials are purchased in the open market
from domestic and foreign sources. Most of such raw materials, including
scrap, nickel, tin, zinc and ferroalloys, are expected to continue to be in
sufficient supply, although market prices have historically been subject to
wide fluctuations.
During the past two years, the Company has purchased a significant
amount of semi-finished slabs from other steel producers to supplement its own
production. The availability of such slabs, and the prices at which they can
be purchased, may vary, especially during periods of peak production in the
steel industry. See "Steel Production" above.
ENERGY PRODUCTS PROPERTIES
Continental Emsco, whose assets are under review for a possible
divestiture or merger with another company, occupies buildings and
manufacturing and distribution facilities that contain an aggregate floor space
of 1,177,000 square feet (not including oilfield supply stores and regional
sales offices), of which 238,000 square feet are owned and 939,000 square feet
are leased. Drilling equipment is manufactured in a leased plant located in
Houston, Texas, with 465,000 square feet of manufacturing space. A large
portion of this facility is not presently being utilized and the value of the
facility was previously adjusted to reflect its current utilization rate of
approximately 45% (based primarily on equipment utilization and square
footage). In addition, Continental Emsco manufactures production equipment in
plants in Oklahoma and Saskatchewan, Canada, both of which are owned, totaling
31,000 square feet of manufacturing space. Elastomeric and other products are
manufactured in eleven facilities located in Texas totaling 273,000 square
feet. The facilities of Continental Emsco are currently operating near their
adjusted capacity on a book value basis.
Continental Emsco's distribution facilities include a 52,000 square
foot facility in Houston, Texas, which is leased, a 20,000 square foot facility
in Alberta, Canada, which is owned, and a network of 93 oilfield supply stores,
80 of which are leased, and 14 sales offices, all of which are leased,
principally in the oilfield regions of the United States and Canada (each of
such stores ranging in size from 300 to 26,000 square feet).
Generally, Continental Emsco's facilities are well maintained,
considered adequate for their intended purposes and being utilized for their
intended purposes.
- 13 -
<PAGE> 15
<TABLE>
PROPERTY ADDITIONS AND CAPITAL EXPENDITURES
Capital expenditures and depreciation and amortization by business
operation for the periods indicated are as follows:
<CAPTION>
1994 1993 1992
----------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Capital Expenditures
Steel(1) . . . . . . . . . . . . . . . $233,936 $323,195 $311,015
Energy Products(2) . . . . . . . . . . 6,101 4,067 2,289
Corporate . . . . . . . . . . . . . . . -- -- 8
-------- -------- --------
Total . . . . . . . . . . . . . . . . . $240,037 $327,262 $313,312
======== ======== ========
Depreciation and Amortization
Steel . . . . . . . . . . . . . . . . . $241,764 $236,737 $207,819
Energy Products . . . . . . . . . . . . 3,430 3,550 4,798
Corporate . . . . . . . . . . . . . . . -- -- 827
-------- -------- --------
Total . . . . . . . . . . . . . . . . . $245,194 $240,287 $213,444
======== ======== ========
<FN>
____________________
(1) The steel group expenditures during 1994, 1993 and 1992 were mainly to
refurbish blast furnaces and for equipment and facilities, such as the
DHCC project, which are designed to reduce cost, increase production
efficiency and improve quality and for environmental control projects.
Spending for environmental control projects constructed during 1994,
1993 and 1992 was $30,187,000, $41,045,000 and $30,380,000,
respectively.
(2) The energy products operations expenditures during 1994, 1993 and 1992
were primarily for replacement of equipment and facilities capital
maintenance projects.
</TABLE>
ITEM 3. LEGAL PROCEEDINGS.
In addition to matters specifically discussed below, LTV is involved
in various legal proceedings occurring in the normal course of its business.
LTV cannot predict with certainty the outcome of any legal proceedings to which
it is subject. However, in the opinion of LTV's management, adequate provision
has been made for losses which are likely to result from these actions. To the
extent that such reserves prove to be inadequate, LTV would incur a charge to
earnings, which could have a material adverse effect on LTV's results of
operations for the applicable period. The outcome of these proceedings,
however, is not currently expected to have a material adverse effect on the
financial position of LTV.
Joint Plan
Remaining Proceedings Relating to Status of Claims. Aetna Casualty
and Surety Company ("Aetna") filed 10 appeals to the U.S. District Court for
the Southern District of New York ("District Court") from various orders of the
U.S. Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court"), including the order confirming the Joint Plan. The State of Minnesota
("Minnesota") filed an appeal to the same court. Both Aetna and Minnesota seek
priority for certain of their claims that were classified as general unsecured
claims under the Joint Plan, and, if they were to prevail on their appeals,
they would seek cash payments for various claims that (i) were disallowed by
the Bankruptcy Court or (ii) have received distributions of non-cash
consideration (including stock, warrants and contingent value rights) in
accordance with the Joint Plan. In January 1995, the District Court affirmed
the Bankruptcy Court's decision denying administrative or excise tax priority
to Aetna's claims based upon certain bonds totaling approximately $38 million
of its aggregate $45 million of claims. Aetna has appealed such decision to
the U.S. Court of Appeals for the Second Circuit. The remaining appeals have
been briefed and argued but not decided by the District Court. If Aetna or
Minnesota were to be successful on all of these appeals, they would seek
payments, in addition to what they have already received, in the following
amounts: (i) Aetna - approximately $27 million; and (ii) Minnesota -
approximately $6 million.
United States Trust Company of New York v. LTV Steel Company, Inc. On
February 16, 1993, United States Trust Company of New York ("U.S. Trust") filed
an appeal in the District Court seeking
- 14 -
<PAGE> 16
reversal of certain orders of the Bankruptcy Court and seeking recovery of
interest on certain bonds issued by Youngstown Sheet and Tube Company ("YS&T"),
a predecessor to LTV Steel. In the bankruptcy proceedings U.S. Trust had
sought a declaratory judgment that the holders of such YS&T bonds were entitled
to recover as part of their stipulated fully secured claim approximately $19.5
million in interest on unpaid installments of post-petition interest. The
Bankruptcy Court granted that portion of LTV Steel's dismissal motion which
challenged U.S. Trust's entitlement to interest on overdue installments of
post-petition interest. U.S. Trust appealed this decision to the U.S. District
Court for the Southern District of New York. On August 1, 1994, such District
Court affirmed the decision of the Bankruptcy Court that the Company was not
liable for the compound interest sought by U.S. Trust. U.S. Trust has appealed
the decision to the U.S. Court of Appeals for the Second Circuit. In January
1995, the Company and U.S. Trust agreed tentatively, subject to approval by
bondholders and the District Court, to settle the litigation for a $5.5 million
payment by LTV Steel.
Trade Cases
For information concerning trade cases covering flat rolled steel
products and other steel products, see "Business--Trade Cases."
Certain Environmental Matters Not Resolved by Environmental Settlement
Agreement or Corresponding State Environmental Agreements
Other legal and administrative actions have been taken or are being
threatened against LTV and its subsidiaries, as discussed below, by the EPA and
the States of Indiana, Ohio, Illinois and Minnesota or their state and local
environmental agencies for alleged violations of various federal, state and
local environmental laws and regulations. These matters which relate to Owned
Sites are not covered by the Environmental Settlement Agreement with the EPA
and the state settlement agreements described in "Item 1. Business --
Environmental Matters"; accordingly, any liabilities resulting from these
actions will be payable in full and not as general unsecured claims.
EPA -- Pittsburgh Coke Plant. In June 1991, the EPA filed an action
against LTV Steel alleging numerous violations of particulate and sulfur
dioxide emission standards at its Pittsburgh coke plant. In April 1994, LTV
Steel and the EPA entered into a settlement, pursuant to which LTV Steel later
paid $900,000 in civil penalties and built certain capital projects at the coke
plant.
EPA -- Chicago Coke Battery. Following its issuance of a Notice of
Violation ("NOV"), pursuant to Section 113(a)(1) of the Clean Air Act
concerning emissions from the combustion stack of the Chicago coke battery,
Region 5 of the EPA issued an NOV to LTV Steel for charging, pushing, door,
off-take piping and lid emissions at the battery. Rehabilitative work to
reduce combustion stack and pushing emissions at the battery will be completed
in early 1995. Work to reduce the other emissions at the battery is complete.
LTV Steel remains subject to maximum statutory civil penalties for past
violations of air quality standards of $25,000 per day per violation.
EPA -- Superfund Site. In July 1994, the EPA advised the Company that
it had selected a partial remedy to remediate conditions at a Superfund site
owned by the Company in Rochester Hills, Michigan. The remedy consists of
placing a cap over waste materials at the site at an estimated cost to the
Company of approximately $5 million. This amount has been fully reserved. The
EPA will undertake a second phase feasibility study to determine what, if any,
additional action needs to be taken with respect to ground water in the area.
The EPA has also demanded reimbursement from the Company of response and
oversight costs in the amount of $1.2 million. The Company is negotiating with
the EPA regarding both the action to be taken at the site and the reimbursement
of the agency's costs.
State of Indiana. In October 1990, the Indiana Department of
Environmental Management ("IDEM") filed a lawsuit against LTV Steel in the Lake
County, Indiana Circuit Court alleging that water discharges from the Indiana
Harbor Works have exceeded applicable standards at various times since 1986.
IDEM has asked the court to enjoin LTV Steel from future violations of certain
water quality statutes, permits and orders which IDEM alleges apply to water
discharges and to order LTV Steel to pay a civil penalty of $25,000 per day of
alleged past violations. IDEM has indicated publicly that it intends to seek
$34 million in penalties in addition to certain work to prevent future
discharges at the plant. LTV Steel believes it is in compliance with such
regulations and is contesting IDEM's allegations of past violations. The
parties are engaged in settlement discussions, and LTV Steel is seeking to
resolve the matter for a payment substantially less than $34 million.
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<PAGE> 17
IDEM has also issued NOV's to the Company relating to BOF precipitator
stack fugitive emissions from the BOF roof monitors at the Company's Indiana
Harbor Works. The Company is subject to a maximum statutory penalty of $25,000
per day for each violation.
State of Ohio. In July 1993, the Ohio EPA alleged that LTV Steel
violated the State of Ohio's air pollution control laws in connection with its
operation of two coke plants at its Cleveland facilities. In August 1994, the
Company and the Ohio EPA entered into a settlement agreement pursuant to which
the Company paid $225,000 as a civil penalty and $8,580 in costs. These plants
are no longer operating.
State of Illinois. After notifying the Illinois EPA (the "IEPA") of
the improper disposal of certain wastes, including hazardous wastes, at what
formerly was the ore yard at LTV Steel's Chicago plant, LTV Steel removed the
wastes and disposed of them as required by law. LTV Steel has completed the
clean up of tar at the site. However, the IEPA could order additional work to
be performed in other areas of the site; accordingly, final cost of the
clean-up has not been determined.
State of Minnesota. LTV Steel Mining Company and the State of
Minnesota ("Minnesota") have entered into a consent decree which settles
alleged violations by LTV Steel Mining Company of Minnesota's air quality
regulations at LTV's power plant in Schroeder, Minnesota. LTV Steel Mining
Company has taken the actions at the power plant required by the consent decree
and paid a civil penalty of $285,000.
U.S. Coast Guard -- Oil Spill. In June 1994, oil escaped from an
intake channel at LTV Steel's Indiana Harbor works into the Indiana Harbor.
Under the supervision of the U.S. Coast Guard, LTV Steel took emergency
response actions to contain and clean up the oil spill. LTV Steel expects the
U.S. Coast Guard will file claims against it for amounts aggregating less than
$150,000.
Aerospace-Related Litigation
Thomson Litigation. On August 3, 1992, the Company filed suit against
Thomson CSF, S.A. ("Thomson"), in the Bankruptcy Court alleging that Thomson
breached its promise to pay the Company $20 million in the event that Thomson
was unable to purchase the missiles division from the Company by July 31, 1992
for reasons relating directly or indirectly to Thomson's failure to obtain
certain U.S. government authorizations to purchase and operate such division.
Thomson has denied the allegations and countersued for damages of not less than
$250 million plus costs, expenses and attorneys fees, alleging that the Company
breached the contract of sale for the missiles division by failing to use
"reasonable efforts" to assist Thomson in obtaining the necessary government
approvals. Thomson also claims the Company breached express and implied
warranties under the purchase agreement by failing to disclose accurate
information regarding certain security requirements for missiles division
contracts and thereby fraudulently induced Thomson to enter into such
agreement. The counterclaims also seek an order declaring that Thomson is not
obligated to pay the Company the $20 million reverse break-up fee. In June
1993, the Bankruptcy Court granted the Company's motion for summary judgment as
to Thomson's claims of breach of express and implied warranties and fraud.
Thomson's claim that the Company breached the contract of sale is pending. In
connection with the Joint Plan, LTV has provided a guarantee to contribute to a
creditor trust up to $10 million from the proceeds received by the Company from
this litigation, and to make up any shortfall if the amount received is less
than $10 million, subject to certain offsets in LTV's favor in the event the
proceeds from the McDonnell Douglas litigation described below exceed $15
million.
McDonnell Douglas Litigation. On September 17, 1992, the Company
filed an action in the District Court for Dallas County, Texas against
McDonnell Douglas Corporation ("McDonnell Douglas") which seeks to collect
$26.3 million owed to the Company under a technology transfer agreement and
automatic riveting technology license agreement. On October 26, 1992, the
action was removed to the U.S. District Court for the Northern District of
Texas. On September 29, 1992, McDonnell Douglas filed an action in the U.S.
District Court for the Central District of California against the Company
alleging that the Company breached the two above- mentioned contracts as well
as an alleged oral contract to provide additional consideration in the event
that the value of the riveting technology subject to the license was determined
to be less than $41.3 million. The complaint seeks an unspecified amount of
damages for the alleged breaches as well as rescission of the contracts on the
grounds of fraud and unilateral mistake of fact and the return of $15 million
previously paid under the contracts. The parties have stipulated that this
action be transferred to the
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<PAGE> 18
U.S. District Court for the Northern District of Texas. Any proceeds which the
Company may receive from this litigation have been allocated under the Joint
Plan to creditors as security for obligations of LTV relating to the proceeds
in respect of the Thomson litigation and certain other obligations.
Inland Steel
In July 1991, Inland Steel Company ("Inland") filed an action against
LTV Steel and another domestic steel producer in the U.S. District Court for
the Northern District of Illinois, Eastern Division, alleging defendants
infringed two of Inland's steel-related patents. Inland seeks monetary damages
of up to approximately $600 million and an injunction against future
infringement. LTV Steel in its answer and counterclaim alleges the patents are
invalid and not infringed and seeks a declaratory judgment to such effect. In
May 1993, at a jury trial, LTV Steel was found to have infringed the patents.
The District Court proceeding on the validity of the patents has been stayed
informally pending the conclusion of proceedings in the U.S. Patent Office
described below, and the decision on infringement is not appealable until the
validity issue is tried. In July 1993, the U.S. Patent Office rejected the
claims of the two Inland patents upon a reexamination at the request of LTV
Steel and another domestic steel producer, in essence concluding that the
patents should not have been granted and are invalid. Inland filed a response
which sought to have the U.S. Patent Office reverse its decision; however, in
July 1994, the U.S. Patent Office affirmed its decision. Inland is entitled to
a hearing before the Patent Office Board of Appeals, and any decision by the
Board of Appeals would be subject to a federal judicial appeal.
Pension Related Litigation
On September 23, 1993, a number of former salaried employees of LTV
Steel's former Gadsden, Alabama facility filed a motion to reinstate a
complaint in the U.S. District Court for the Northern District of Alabama. In
November 1993, the District Court denied the motion to reinstate without
prejudice to plaintiffs' right to petition for reinstatement of the claims
asserted in the complaint to the extent such claims remain unadjudicated at the
end of related judicial proceedings pending in the Southern District of New
York. Various current or former officers, directors, employees and agents of
LTV and LTV Steel, who are entitled to indemnification rights for costs of
defense and judgment, if any, were named as defendants. Plaintiffs alleged,
among other things, that they are owed "shutdown" benefits as a result of the
sale of the Gadsden plant. Alleged liability is based on (i) ERISA, (ii) the
Racketeering Influenced and Corrupt Organizations Act ("RICO"), (iii) fraud and
(iv) conspiracy. LTV estimates the dollar amount of the plaintiffs' claims
relating to shutdown benefits to be approximately $4.3 million (without deduc
ting offsets for amounts previously paid). However, any damages found under
RICO are subject to trebling. A tentative settlement of the claims at less
than $1 million has been reached with the counsel of the plaintiffs in this
action.
Other Employee-Related Litigation
During 1994, individuals filed 54 separate asbestos-related lawsuits
in the U.S. District Court for the Northern District of Ohio against a past
affiliate of LTV and approximately 100 other companies. Each plaintiff claims
to have suffered bodily harm as a result of exposure to asbestos fibers while
sailing on ships owned by such affiliate of LTV and alleges unspecified damages
in excess of $50,000. In November 1994, the Company commenced a proceeding in
the Bankruptcy Court seeking, among other things, a judgment declaring all such
claims to be permanently barred as a result of the Company's bankruptcy
proceedings which were concluded in June 1993.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
- 17 -
<PAGE> 19
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
"Shareholders' Information" on the inside back cover, Financial Summary on
page 52 and Liquidity and Financial Resources on page 31 of the 1994 Annual
Report to Shareholders is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
"Financial Summary" on page 52 of the 1994 Annual Report to Shareholders is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
"Management's Discussion and Analysis" on pages 26 through 35 of the 1994
Annual Report to Shareholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The listing on page F-1 lists all financial statements which are filed as a
part of this Report and which are incorporated herein by reference.
"Quarterly Financial Information" on page 54 of the 1994 Annual Report to
Shareholders is incorporated herein by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information relating to the directors of LTV to be included in LTV's Annual
Proxy Statement for the 1995 Annual Meeting of Stockholders, which LTV plans to
file with the Commission in final form in early 1995, is incorporated herein by
reference. Information relating to the executive officers of LTV is included
in "Item 1. Business--Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION.
Information relating to management remuneration and transactions included
in LTV's Annual Proxy Statement for the 1995 Annual Meeting of Stockholders,
which LTV plans to file with the Commission in final form in early 1995, is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information relating to ownership of LTV stock by the directors and
officers of LTV and owners of more than 5% of any class of LTV stock to be
included in LTV's Annual Proxy Statement for the 1995 Annual Meeting of
Stockholders, which LTV plans to file with the Commission in final form in
early 1995, is incorporated herein by reference.
- 18 -
<PAGE> 20
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information relating to certain relationships and related transactions to
be included in LTV's Annual Proxy Statement for the 1995 Annual Meeting of
Stockholders, which LTV plans to file with the Commission in final form in
early 1995, is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
(a)(1) and (2) List of Consolidated Financial Statements and Financial
Statement Schedules.
Reference is made to the listing preceding the financial statements and
financial statement schedules attached hereto on page F-1 for a list of all
financial statements and financial statement schedules filed as exhibits and
part of this Report.
(a)(3) List of Exhibits.
Reference is made to the listing in (c) below for a list of all other
exhibits filed as part of this Report.
(b) Reports on Form 8-K.
None to report.
(c) Exhibits.
Certain of the exhibits to this Report are hereby incorporated by
reference, as specified below, to other documents filed with the Commission by
LTV. Exhibit designations below correspond to the numbers assigned to exhibit
classifications in Regulation S-K.
(d) Financial Statement Schedules.
The response to this portion of Item 14 is submitted as a separate section of
this Report on page F-1.
(2)-(1) - The LTV Second Modified Joint Plan of
Reorganization (incorporated herein by
reference to Exhibit (28)(a)-(3) to LTV's
Annual Report on Form 10-K for the Fiscal
Year ended December 31, 1992, filed with the
Commission (File No. 1-4368) on March 31,
1993)
(2)-(2) - Confirmation Order of the United States
Bankruptcy Court for the Southern District of
New York entered on May 27, 1993, confirming
the LTV Second Modified Joint Plan of
Reorganization (which includes, as Exhibit C
to the Confirmation Order, amendments to the
LTV Second Modified Joint Plan of
Reorganization) (incorporated herein by
reference to Exhibit 2(2) to LTV's Current
Report on Form 8-K, filed with the Commission
(File No. 1-4368) on June 7, 1993)
(3)-(1) - Restated Certificate of Incorporation of LTV
dated June 28, 1993 (incorporated herein by
reference to Exhibit 3.1 to LTV's
Registration Statement on Form S-1
[Registration No. 33-50217])
(3)-(2) - Certificate of Designations for Series B
Preferred Stock (incorporated herein by
reference to Exhibit 4 to SMI America, Inc.'s
13D Filing)
- 19 -
<PAGE> 21
(3)-(3) - Amended and Restated By-laws of LTV effective
June 28, 1993 (incorporated herein by
reference to Exhibit D to The LTV Second
Modified Disclosure Statement and Joint Plan
of Reorganization, which is Exhibit (28)(a)-
(3) to the Company's Annual Report on Form
10-K for the Fiscal Year ended December 31,
1992, filed with the Commission (File No.
1-4368) on March 31, 1993)
(10)-(1) - LTV Executive Benefit Plan as amended and
restated effective January 1, 1985
(incorporated herein by reference to Exhibit
(10)(c)-(2) to LTV's Report on Form 10-K for
the year ended December 31, 1985)
(10)-(2) - Amendment to LTV Executive Benefit Plan
adopted November 20, 1987 (incorporated
herein by reference to Exhibit (10)(c)-(3) to
LTV's Report on Form 10-K for the year ended
December 31, 1987)
(10)-(3) - LTV Excess Benefit Plan dated as of January
1, 1985 (incorporated herein by reference to
Exhibit (10)(c)-(5) to LTV's Report on Form
10-K for the year ended December 31, 1984)
(10)-(4) - LTV Key Employee Retention Plan adopted
February 5, 1988 (incorporated herein by
reference to Exhibit (10)(c)-(9) to LTV's
Report on Form 10-K for the year ended
December 31, 1987)
(10)-(5) - Employment Agreement dated February 1, 1991,
between LTV and David H. Hoag (incorporated
herein by reference to Exhibit (10)(c)-(9) to
LTV's Report on Form 10-K for the year ended
December 31, 1990)
(10)-(6) - Settlement Agreement dated as of June 28,
1993 between LTV, the PBGC, the Initial LTV
Group (as defined in the Settlement
Agreement) and LTV, as Administrator of the
Restored Plans (incorporated herein by
reference to Exhibit 10.10 to LTV's Report on
Form 10-Q for the quarter ended June 30,
1993)
(10)-(7) - Assignment, Pledge and Security Agreement
dated as of June 28, 1993 between LTV Steel
Company, Inc. and the PBGC (incorporated
herein by reference to Exhibit 10.11 to LTV's
Report on Form 10-Q for the quarter ended
June 30, 1993)
(10)-(8) - Securities Purchase Agreement dated as of May
26, 1993 by and among LTV, LTV Steel Company,
Inc. and SMI America, Inc. (incorporated
herein by reference to Exhibit 2 to SMI
America, Inc.'s 13D Filing)
(10)-(9) - Common Stock Registration Rights Agreement
dated as of June 28, 1993 by and between LTV
and SMI America, Inc. (incorporated herein
by reference to Exhibit 5 to SMI America,
Inc.'s 13D Filing)
(10)-(10) - Consultation and Management Participation
Agreement dated as of June 28, 1993 between
LTV and Sumitomo Metal Industries, Ltd.
(incorporated herein by reference to Exhibit
6 to SMI America, Inc.'s 13D Filing)
(10)-(11) - L-S Exchange Right and Security Agreement
dated as of June 28, 1993 by and among
LTV/EGL Holding Company, Sumikin EGL Corp.,
LTV, SMI America Inc., and Sumitomo Metal USA
Corporation (incorporated herein by reference
to Exhibit 7 to SMI America, Inc.'s 13D
Filing)
- 20 -
<PAGE> 22
(10)-(12) - Letter of Credit Agreement dated as of
October 12, 1994 among LTV Steel Company,
Inc., Continental Emsco Company, LTV Steel
Mining Company, LTV Steel Tubular Products
Company, LTV, various financial institutions
and BT Commercial Corporation (incorporated
herein by reference to Exhibit (10)-(12) to
LTV's Report on Form 10-Q for the quarter
ended September 30, 1994)
(10)-(13) - Subsidiary Guaranty dated as of October 12,
1994 by Georgia Tubing Corporation,
Youngstown Erie Corporation, Erie B
Corporation and Erie I Corporation for the
benefit of BT Commercial Corporation as agent
(incorporated herein by reference to Exhibit
(10)-(13) to LTV's Report on Form 10-Q for
the quarter ended September 30, 1994)
(10)-(14) - Collateral Account Agreement dated as of
October 12, 1994 among LTV Steel Company,
Inc., Continental Emsco Company, LTV Steel
Mining Company, LTV Steel Tubular Products,
LTV and BT Commercial Corporation as
collateral agent (incorporated herein by
reference to Exhibit (10)-(14) to LTV's
Report on Form 10-Q for the quarter ended
September 30, 1994)
(10)-(15) - Inventory Security Agreement dated as of June
28, 1993 and amended and restated as of
October 12, 1994 among LTV, LTV Steel
Company, Inc., LTV Steel Mining Company,
Continental Emsco Company, LTV Steel Tubular
Products Company and BT Commercial
Corporation as agent (incorporated herein by
reference to Exhibit (10)-(15) to LTV's
Report on Form 10-Q for the quarter ended
September 30, 1994)
(10)-(16) - Inventory Intercreditor Agreement dated as of
June 28, 1993 and amended and restated as of
October 12, 1994 among BT Commercial
Corporation as agent for the Lenders and SMI
America, Inc. as agent for the Noteholders
(incorporated herein by reference to Exhibit
(10)-(16) to LTV's Report on Form 10-Q for
the quarter ended September 30, 1994)
(10)-(17) - Intercreditor Collateral Account Agreement
dated as of October 12, 1994 by and among LTV
Steel Company, Inc., LTV and BT Commercial
Corporation (incorporated herein by reference
to Exhibit (10)-(17) to LTV's Report on Form
10-Q for the quarter ended September 30,
1994)
(10)-(18) - Pledge Agreement dated as of October 12, 1994
between LTV, LTV Steel Company, Inc.,
Continental Emsco Company, LTV Steel Tubular
Products Company, Georgia Tubing Corporation
and BT Commercial Corporation (incorporated
herein by reference to Exhibit (10)-(18) to
LTV's Report on Form 10-Q for the quarter
ended September 30, 1994)
(10)-(19) - Amended and Restated Subordination Agreement
dated as of June 28, 1993 and amended and
restated as of October 12, 1994 among the
PBGC, BT Commercial Corporation and Chemical
Bank (incorporated herein by reference to
Exhibit (10)-(19) to LTV's Report on Form
10-Q for the quarter ended September 30,
1994)
(10)-(20) - Amendments Nos. 1 and 2 to the Securities
Purchase Agreement dated as of May 26, 1993
among LTV, LTV Steel Company, Inc. and SMI
America, Inc. (incorporated herein by
reference to Exhibit (10)-(20) to LTV's
Report on Form 10-Q for the quarter ended
September 30, 1994)
- 21 -
<PAGE> 23
(10)-(21) - Amendments Nos. 1 through 4 to the Settlement
Agreement dated as of June 28, 1993 by and
among the PBGC, LTV, the Initial LTV Group
(as defined in the Settlement Agreement) and
LTV, as Administrator of the Restored Plans
(incorporated herein by reference to Exhibit
(10)-(21) to LTV's Report on Form 10-Q for
the quarter ended September 30, 1994)
(10)-(22) - Revolving Credit Agreement dated as of
October 12, 1994 among LTV Sales Finance
Company, the financial institutions parties
thereto as banks, the issuing banks, the
facility agent and collateral agent
(incorporated herein by reference to Exhibit
(10)-(22) to LTV's Report on Form 10-Q for
the quarter ended September 30, 1994)
(10)-(23) - Receivables Purchase and Sale Agreement dated
as of October 12, 1994 among LTV, LTV Steel
Company, Inc., Continental Emsco Company, LTV
Steel Tubular Products Company, Georgia
Tubing Corporation and LTV Sales Finance
Company (incorporated herein by reference to
Exhibit (10)-(23) to LTV's Report on Form
10-Q for the quarter ended September 30,
1994)
(10)-(24) - Accession Agreement dated as of October 12,
1994 among LTV Sales Finance Company, the
financial institutions listed on the
signature pages thereof, the issuing bank
named thereon, and Bankers Trust Company as
facility agent and collateral agent
(incorporated herein by reference to Exhibit
(10)-(24) to LTV's Report on Form 10- Q for
the quarter ended September 30, 1994)
(10)-(25) - Trust Termination Acknowledgment and
Agreement, dated October 12, 1994, between
LTV Sales Finance Company and Wilmington
Trust Company (incorporated herein by
reference to Exhibit (10)-(25) to LTV's
Report on Form 10-Q for the quarter ended
September 30, 1994)
(10)-(26) - Assignment and Transfer Agreement, dated as
of October 12, 1994, by and between LTV
Master Receivables Trust and LTV Sales
Finance Company (incorporated herein by
reference to Exhibit (10)-(26) to LTV's
Report on Form 10-Q for the quarter ended
September 30, 1994)
(10)-(27) - Collateral Trust Agreement dated as of May
25, 1993 among LTV, LTV Steel Company, Inc.,
United Steelworkers of America and Bank One
Ohio Trust Company, NA, as Collateral Trustee
(incorporated herein by reference to Exhibit
10.33 to LTV's Report on Form 10-Q for the
quarter ended June 30, 1993)
(10)-(28) - Open--2nd Mortgage, Security Agreement and
Fixture Filing dated as of June 28, 1993 by
LTV Steel Company, Inc. to Bank One Ohio
Trust Company, N.A. (incorporated herein by
reference to Exhibit 10.34 to LTV's Report on
Form 10-Q for the quarter ended June 30,
1993)
(10)-(29) - License Agreement dated as of June 28, 1993
between LTV Steel Company, Inc. and Bank One
Ohio Trust Company, N.A. (incorporated herein
by reference to Exhibit 10.35 to LTV's Report
on Form 10-Q for the quarter ended June 30,
1993)
(10)-(30) - Warrant Agreement dated as of June 28, 1993
between LTV and Society National Bank, as
Warrant Agent (incorporated herein by
reference to Exhibit 10.37 to LTV's Report on
Form 10-Q for the quarter ended June 30,
1993)
- 22 -
<PAGE> 24
(10)-(31) - Settlement Agreement and Stipulated Order on
behalf of the United States of America on
behalf of the United States Environmental
Protection Agency approved by the United
States Bankruptcy Court Southern District of
New York (the "Court") on April 15, 1993 and
supplemented by Exhibit 10.38 below
(incorporated herein by reference to Exhibit
10.38 to LTV's Report on Form 10-Q for the
quarter ended June 30, 1993)
(10)-(32) - Second Settlement Agreement and Stipulated
Order supplementing 10.36 above and approved
by the Court on May 19, 1993 (incorporated
herein by reference to Exhibit 10.39 to LTV's
Registration Statement on Form S-1
[Registration No. 33-50217])
(10)-(33) - Settlement Agreement and Stipulated Order on
behalf of the State of Minnesota approved by
the Court on May 19, 1993 (incorporated
herein by reference to Exhibit 10.39 to LTV's
Report on Form 10-Q for the quarter ended
June 30, 1993)
(10)-(34) - Settlement Agreement and Stipulated Order on
behalf of the State of Indiana on behalf of
the Indiana Department of Environmental
Management approved by the Court on May 24,
1993 (incorporated herein by reference to
Exhibit 10.40 to LTV's Report on Form 10-Q
for the quarter ended June 30, 1993)
(10)-(35) - Settlement Agreement and Stipulated Order on
behalf of the State of New York and approved
by the Court on May 24, 1993 (incorporated
herein by reference to Exhibit 10.42 to LTV's
Report on Form 10-Q for the quarter ended
June 30, 1993)
(10)-(36) - Settlement Agreement and Stipulated Order on
behalf of the State of Connecticut and
approved by the Court on May 19, 1993
(incorporated herein by reference to Exhibit
10.43 to LTV's Report on Form 10-Q for the
quarter ended June 30, 1993)
(10)-(37) - Settlement Agreement and Stipulated Order on
behalf of the Commonwealth of Pennsylvania
and approved by the Court on May 24, 1993
(incorporated herein by reference to Exhibit
10.44 to LTV's Report on Form 10-Q for the
quarter ended June 30, 1993)
(10)-(38) - Settlement Agreement and Stipulated Order on
behalf of the State of Ohio on behalf
of the Ohio Environmental Protection Agency
and approved by the Court on May 24, 1993
(incorporated herein by reference to Exhibit
10.45 to LTV's Report on Form 10-Q for the
quarter ended June 30, 1993)
(10)-(39) - Settlement Agreement and Stipulated Order on
behalf of the State of Georgia and approved
by the Court on May 24, 1993 (incorporated
herein by reference to Exhibit 10.46 to LTV's
Report on Form 10-Q for the quarter ended
June 30, 1993)
(10)-(40) - Closing Agreement Between LTV, its
subsidiaries and the Commissioner of Internal
Revenue as filed with the United States
Bankruptcy Court for the Southern District of
New York on May 14, 1993 (incorporated herein
by reference to Exhibit 10.47 to LTV's Report
on Form 10-Q for the quarter ended June 30,
1993)
(10)-(41) - The LTV Corporation Non-Employee Directors
Stock Option Plan adopted on October 22, 1993
(incorporated herein by reference to Exhibit
10.49 to Amendment No. 2 to LTV's
Registration Statement on Form S-1
[Registration No. 33-50217])
- 23 -
<PAGE> 25
(10)-(42) - Amendment to LTV Executive Benefit Plan
adopted October 22, 1993 (incorporated herein
by reference to Exhibit 10.50 to Amendment
No. 2 to LTV's Registration Statement on Form
S-1 [Registration No. 33-50217])
(10)-(43) - LTV Executive Benefit Trust Agreement
approved on October 22, 1993 (incorporated
herein by reference to Exhibit 10.51 to
Amendment No. 2 to LTV's Registration
Statement on Form S-1 [Registration No.
33-50217])
(10)-(44) - The LTV Corporation Supplemental Management
Retirement Plan adopted on October 22, 1993
(incorporated herein by reference to Exhibit
10.52 to Amendment No. 2 to LTV's
Registration Statement on Form S-1
[Registration No. 33-50217])
(10)-(45) - The LTV Corporation Supplemental Management
Retirement Trust Agreement approved on
October 22, 1993 (incorporated herein by
reference to Exhibit 10.53 to Amendment No. 2
to LTV's Registration Statement on Form S-1
[Registration No. 33-50217])
(10)-(46) - The LTV Corporation Management Incentive
Program as amended on January 28, 1994
(incorporated herein by reference to Exhibit
(10)-(53) to LTV's Report on Form 10-K for
the year ended December 31, 1993)
(10)-(47) - Amendment to The LTV Corporation Supplemental
Management Retirement Plan adopted on January
28, 1994 (incorporated herein by reference to
Exhibit (10)-(54) to LTV's Report on Form
10-K for the year ended December 31, 1993)
(10)-(48) - Amendment to LTV Executive Benefit Plan
adopted October 28, 1994 (incorporated herein
by reference to Exhibit (10)-(48) to LTV's
Report on Form 10-Q for the quarter ended
September 30, 1994)
(10)-(49) - Amendment to The LTV Corporation Management
Incentive Program adopted October 28, 1994
(incorporated herein by reference to Exhibit
(10)-(49) to LTV's Report on Form 10-Q for
the quarter ended September 30, 1994)
(10)-(50) - Amendment to The LTV Corporation Non-Employee
Directors Stock Option Plan adopted October
28, 1994 (incorporated herein by reference to
Exhibit (10)-(50) to LTV's Report on Form
10-Q for the quarter ended September 30, 1994)
(10)-(51) - Amendment to The LTV Corporation Supplemental
Management Retirement Plan adopted on October
28, 1994 (incorporated herein by reference to
Exhibit (10)-(51) to LTV's Report on Form
10-Q for the quarter ended September 30, 1994)
(10)-(52) - The LTV Corporation Non-Employee Directors'
Equity Compensation Plan (incorporated herein
by reference to Exhibit 4.3 to LTV's
Registration Statement on Form S-8
[Registration No. 33-56857])
(10)-(53) - The LTV Corporation Non-Employee Directors'
Deferred Compensation Plan (filed herewith)
(10)-(54) - The LTV Corporation Executive Deferred
Compensation Plan (filed herewith)
(10)-(55) - Amendment No. 5 to the Settlement Agreement
dated as of June 28, 1993 by and among the
PBGC, LTV, the Initial LTV Group and LTV, as
Administrator of the Restored Plans (filed
herewith)
- 24 -
<PAGE> 26
(10)-(56) - The Hourly Employee Stock Payment Alternative
Plan (incorporated herein by reference to
Exhibit 4.3 to LTV's Registration Statement
on Form S-8 [Registration No. 33-56861])
(11) - Statement re Computation of Per Share
Earnings (filed herewith)
(13) - Portions of the 1994 Annual Report to
Shareholders incorporated into this Report by
reference (filed herewith)
(21) - List of subsidiaries (filed herewith)
(23) - Consent of Ernst & Young LLP (filed herewith)
(27) - Financial Data Schedule (filed herewith)
- 25 -
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Cleveland, Ohio, as of the 24th day of February 1995.
THE LTV CORPORATION
By GLENN J. MORAN
------------------
(Glenn J. Moran)
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ DAVID H. HOAG Chairman of the Board, President February 24, 1995
- ----------------- Chief Executive Officer and Director
(David H. Hoag) (Principal Executive Officer)
/s/ ARTHUR W. HUGE Senior Vice President and Chief February 24, 1995
- ------------------ Financial Officer
(Arthur W. Huge) (Principal Financial Officer and
Principal Accounting Officer)
/s/ WILLIAM C. ARMBRUSTER Vice President and Controller February 24, 1995
- -------------------------
(William C. Armbruster)
/s/ EDGAR L. BALL Director February 24, 1995
- -----------------
(Edgar L. Ball)
/s/ DR. COLIN C. BLAYDON Director February 24, 1995
- ------------------------
(Dr. Colin C. Blaydon)
/s/ WILLIAM H. BRICKER Director February 24, 1995
- ----------------------
(William H. Bricker)
</TABLE>
- 26 -
<PAGE> 28
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ JOHN C. EVANS Director February 24, 1995
- -----------------
(John C. Evans)
/s/ JOHN E. JACOB Director February 24, 1995
- -----------------
(John E. Jacob)
/s/ EDWARD C. JOULLIAN, III Director February 24, 1995
- ---------------------------
(Edward C. Joullian, III)
/s/ M. THOMAS MOORE Director February 24, 1995
- -------------------
(M. Thomas Moore)
/s/ HAROLD A. POLING Director February 24, 1995
- --------------------
(Harold A. Poling)
/s/ VINCENT A. SARNI Director February 24, 1995
- --------------------
(Vincent A. Sarni)
/s/ SAMUEL K. SKINNER Director February 24, 1995
- ---------------------
(Samuel K. Skinner)
/s/ DR. PAUL G. STERN Director February 24, 1995
- --------------------
(Dr. Paul G. Stern)
/s/ STEPHEN B. TIMBERS Director February 24, 1995
- ----------------------
(Stephen B. Timbers)
/s/ FARAH M. WALTERS Director February 24, 1995
- --------------------
(Farah M. Walters)
</TABLE>
- 27 -
<PAGE> 1
THE LTV CORPORATION
FORM 10-K - ITEM 14(a)(1) and (2)
LIST OF CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
The following is a listing of the consolidated financial statements which are
incorporated herein by reference. The consolidated financial statements of LTV
and subsidiaries and Ernst & Young LLP's report thereon, included in the 1994
Annual Report to Shareholders, are incorporated herein by reference in Item 8.
With the exception of the pages listed in this index and the pages listed in
Items 5, 6, 7 and 8, the 1994 Annual Report to Shareholders is not deemed to be
filed as part of this Form 10-K.
<CAPTION>
Reference Page
-----------------
1994 Annual
Report to
Shareholders
Incorporated
by Reference
-----------------
<S> <C>
Report of independent auditors ............................................ 51
At December 31, 1994 and 1993:
Consolidated balance sheet .............................................. 38
For the year ended December 31, 1994, the six months ended December 31, 1993
and June 30, 1993, and the year ended December 31, 1992:
Consolidated statement of income ........................................ 36
Consolidated statement of cash flows .................................... 37
For the year ended December 31, 1994
and the six months ended December 31, 1993:
Consolidated statement of shareholders' equity .......................... 46
Notes to consolidated financial statements ................................ 40
</TABLE>
All schedules for which provision is made in the applicable regulation of the
Securities and Exchange Commission have been omitted as the schedules are not
required under the related instructions, are inapplicable, or the information
required thereby is set forth in the financial statements or the notes thereto.
F-1
<PAGE> 1
Exhibit (10)-(53)
THE LTV CORPORATION
NON-EMPLOYEE DIRECTORS'
DEFERRED COMPENSATION PLAN
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Purpose . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. DEFINITIONS AND CONSTRUCTION . . . . . . . . . . . . 1
Section 2.1. Definitions . . . . . . . . . . . . . . . . . . 1
ARTICLE III. PARTICIPATION AND DEFERRALS . . . . . . . . . . . . 3
Section 3.1. Eligibility and Participation . . . . . . . . . 3
Section 3.2. Amount of Deferral . . . . . . . . . . . . . . 3
Section 3.3. No Modification of Deferral Commitments . . . . 3
ARTICLE IV. DIRECTORS' ACCOUNTS . . . . . . . . . . . . . . . . . 3
Section 4.1. Establishment of Accounts . . . . . . . . . . . 3
Section 4.2. Crediting of Deferred Fees . . . . . . . . . . 4
Section 4.3. Determination of Accounts . . . . . . . . . . . 4
Section 4.4. Adjustments to Accounts . . . . . . . . . . . . 4
Section 4.5. Statement of Accounts . . . . . . . . . . . . . 4
Section 4.6. Vesting of Accounts . . . . . . . . . . . . . . 5
ARTICLE V. FINANCING OF BENEFITS . . . . . . . . . . . . . . . . 5
Section 5.1. Financing of Benefits . . . . . . . . . . . . . 5
Section 5.2. Security For Benefits . . . . . . . . . . . . . 5
Section 5.3. Hypothetical Investments . . . . . . . . . . . 5
ARTICLE VI. DISTRIBUTION OF BENEFITS . . . . . . . . . . . . . . 7
Section 6.1. Settlement Date . . . . . . . . . . . . . . . . 7
Section 6.2. Amount to be Distributed . . . . . . . . . . . 7
Section 6.3. In-Service Distribution . . . . . . . . . . . . 7
Section 6.4. Form of Distribution . . . . . . . . . . . . . 7
Section 6.5. Beneficiary Designation . . . . . . . . . . . . 8
Section 6.6. Facility of Payment . . . . . . . . . . . . . . 8
ARTICLE VII. ADMINISTRATION, AMENDMENT AND TERMINATION . . . . . 9
Section 7.1. Administration . . . . . . . . . . . . . . . . 9
Section 7.2. Amendment, Termination and Withdrawal . . . . . 9
Section 7.3. Successors . . . . . . . . . . . . . . . . . . 9
Section 7.4. Expenses . . . . . . . . . . . . . . . . . . . 10
ARTICLE VIII. APPROVAL BY STOCKHOLDERS . . . . . . . . . . . . . 10
Section 8.1. Approval of the Plan . . . . . . . . . . . . . 10
ARTICLE IX. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . 10
Section 9.1. No Continuing Right as Director. . . . . . . . 10
Section 9.2. Applicable Law . . . . . . . . . . . . . . . . 10
Section 9.3. Interests Not Transferable . . . . . . . . . . 10
Section 9.4. Severability . . . . . . . . . . . . . . . . . 10
Section 9.5. Withholding of Taxes . . . . . . . . . . . . . 11
i
<PAGE> 3
THE LTV CORPORATION NON-EMPLOYEE
DIRECTORS' DEFERRED COMPENSATION PLAN
The LTV Corporation Non-Employee Directors' Deferred
Compensation Plan is made and executed as of the ___ day of December, 1994 and
is effective as of January 1, 1995.
ARTICLE I. PURPOSE
Section 1.1. PURPOSE. The purpose of this Non-Employee
Directors' Deferred Compensation Plan ("Plan") is to provide the non-employee
Directors of the Corporation an opportunity to defer a portion of their
Directors' Fees.
ARTICLE II. DEFINITIONS AND CONSTRUCTION
Section 2.1. DEFINITIONS. Whenever the following terms are
used in this Plan they shall have the meanings specified below unless the
context clearly indicates to the contrary:
(a) "Account": The bookkeeping account maintained for
each Director showing his interest under the Plan.
(b) "Accounting Date": December 31 of each year and the
last day of any calendar quarter.
(c) "Accounting Period": The period beginning on the day
immediately following an Accounting Date and ending on the next
following Accounting Date.
(d) "Administrator": The Board.
(e) "Annual Retainer": The annual retainer earned by a
Director for services as a Director of the Corporation.
(f) "Beneficiary": The person or persons (natural or
otherwise), within the meaning of Section 6.5, who are entitled to
receive distribution of a Director's Account balance in the event of
such Director's death.
(g) "Board": The Board of Directors of the Corporation.
(h) "Common Stock": The Corporation's Common Stock, par
value $.50 per share.
<PAGE> 4
(i) "Corporation": The LTV Corporation or any successor
or successors thereto.
(j) "Deferral Commitment": An agreement by a Director to
have a specified percentage or dollar amount of his Fees deferred
under the Plan for a specified period in the future.
(k) "Deferral Period": Means the Plan Year for which a
Director has elected to defer a portion of his Fees.
(l) "Director": An individual duly elected or chosen as
a Director of the Corporation who is not also an employee of the
Corporation or its subsidiaries.
(m) "Fair Market Value": With respect to a share of Common
Stock on a given date, (i) the last reported closing price for a share
of Common Stock on the New York Stock Exchange (or any appropriate
over-the-counter market if the Common Stock is no longer listed on
such Exchange) for such date, or (ii) if there was no sale of Common
Stock so reported for such day, on the most recently preceding day on
which there was such a sale.
(n) "Fees": The Annual Retainer and Other Compensation.
(o) "Investment Fund": The meaning set forth in Section
5.3.
(p) "Other Compensation": The meeting and other fees
earned by a Director for services as a Director of the Corporation,
other than his Annual Retainer.
(q) "Participation Agreement": The Agreement submitted
by a Director to the Administrator with respect to a Deferral
Commitment.
(r) "Plan": The Plan set forth in this instrument as it
may, from time to time, be amended.
(s) "Plan Year": The 12-month period beginning January 1
through December 31.
(t) "Request": The meaning set forth in Section 5.3.
(u) "Rule 16b-3": Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (or any successor rule to the same
effect), as in effect from time to time.
(v) "Settlement Date": The date on which a Director
terminates as a Director. Settlement Date shall also include with
respect to any Deferral Period the date prior to termination as a
Director selected by a Director in a
2
<PAGE> 5
Participation Agreement for distribution of all or a portion of the
amounts deferred during such Deferral Period as provided in Section
6.3.
(w) "Trust": The meaning set forth in Section 5.2.
ARTICLE III. PARTICIPATION AND DEFERRALS
Section 3.1. ELIGIBILITY AND PARTICIPATION.
(a) PARTICIPATION. A Director may elect to participate
in the Plan with respect to any Plan Year by submitting a
Participation Agreement to the Administrator prior to the first day of
the Plan Year.
(b) INITIAL YEAR OF PARTICIPATION. In the event that an
individual first becomes a Director during a Plan Year and wishes to
elect a Deferral Commitment with respect to Fees earned by and payable
to the individual with respect to such Plan Year, a Participation
Agreement must be submitted to the Administrator no later than 30 days
following such individual's becoming a Director. Any Deferral
Commitment elected in such Participation Agreement shall be effective
only with regard to Fees earned following the submission of the
Participation Agreement to the Administrator. If a Director does not
submit a Participation Agreement within such period of time, such
Director will not be eligible to participate in the Plan until the
first day of the next Plan Year.
(c) TERMINATION OF PARTICIPATION. Participation in the
Plan shall continue as long as the Director is eligible to receive
benefits under the Plan.
Section 3.2. AMOUNT OF DEFERRAL. With respect to each Plan
Year, a Director may elect to defer a specified dollar amount or percentage of
any portion of his Fees. A Director may change the dollar amount or percentage
of his Fees to be deferred by filing a written notice thereof with the
Administrator. Any such change shall be effective as of the first day of the
Plan Year immediately succeeding the Plan Year in which such notice is filed
with the Administrator.
Section 3.3. NO MODIFICATION OF DEFERRAL COMMITMENTS. A
Deferral Commitment shall be irrevocable with respect to the Plan Year for
which it is made.
ARTICLE IV. DIRECTORS' ACCOUNTS
Section 4.1. ESTABLISHMENT OF ACCOUNTS. The Corporation,
through its accounting records, shall establish an Account for each Director.
In addition, the Corporation may
3
<PAGE> 6
establish one or more subaccounts of a Director's Account, if the Corporation
determines that such subaccounts are necessary or appropriate in administering
the Plan.
Section 4.2. CREDITING OF DEFERRED FEES. The portion of a
Director's Fees that are deferred pursuant to a Deferral Commitment shall be
credited to the Director's Account within thirty days following the date the
corresponding non-deferred portion of his Fees would have been paid to the
Director. Any withholding of taxes or other amounts with respect to any
deferred Fees which is required by state, federal or local law shall be
withheld from the Director's non-deferred Fees, or if none, then the Director's
Deferral Commitment shall be reduced by the amount of such withholding.
Section 4.3. DETERMINATION OF ACCOUNTS.
(a) DETERMINATION OF ACCOUNTS. The amount credited to
each Director's Account as of a particular date shall equal the deemed
balance of such Account as of such date. The balance in the Account
shall equal the amount credited pursuant to Section 4.2, and shall be
adjusted in the manner provided in Section 4.4.
(b) ACCOUNTING. The Corporation, through its accounting
records, shall maintain a separate and distinct record of the amount
in each Account as adjusted to reflect income, gains, losses and
distributions.
Section 4.4. ADJUSTMENTS TO ACCOUNTS.
(a) Each Director's Account shall be debited with the
amount of any distributions under the Plan to or on behalf of the
Director or, in the event of his death, his Beneficiary during the
Accounting Period ending on such Accounting Date.
(b) The Director's Account shall next be credited or
debited, as the case may be, with an income (loss) factor equal to an
amount determined by multiplying (i) the balance credited to the
Director's Account as of the immediately preceding Accounting Date (as
adjusted pursuant to Section 4.4(a) for the current Accounting Date)
by (ii) the rate of return for the Accounting Period ending on such
Accounting Date on deemed investments provided for in Section 5.3.
Section 4.5. STATEMENT OF ACCOUNTS. As soon as practicable
after the end of each Accounting Period, a statement shall be furnished to each
Director or, in the event of his death, to his Beneficiary showing the status
of his Account as of the end of the Accounting Period, any changes in his
Account since the end of the immediately preceding Accounting Period, and such
other information as the Administrator shall determine.
4
<PAGE> 7
Section 4.6. VESTING OF ACCOUNTS. Subject to Section 5.1,
each Director shall at all times have a nonforfeitable interest in his Account
balance.
ARTICLE V. FINANCING OF BENEFITS
Section 5.1. FINANCING OF BENEFITS. Benefits payable under
the Plan to a Director or, in the event of his death, to his Beneficiary shall
be paid by the Corporation from its general assets. The payment of benefits
under the Plan represents an unfunded, unsecured obligation of the Corporation.
Notwithstanding the fact that the Directors' Accounts may be adjusted by an
amount that is measured by reference to the performance of any deemed
investments as provided in Section 5.3, no person entitled to payment under the
Plan shall have any claim, right, security interest or other interest in any
fund, trust, account, insurance contract, or asset of the Corporation which may
be responsible for such payment.
Section 5.2. SECURITY FOR BENEFITS. Notwithstanding the
provisions of Section 5.1, nothing in this Plan shall preclude the Corporation
from setting aside amounts in trust (the "Trust") pursuant to one or more trust
agreements between a trustee and the Corporation. However, no Director or
Beneficiary shall have any secured interest or claim in any assets or property
of the Corporation or the Trust and all funds contained in the Trust shall
remain subject to the claims of the Corporation's general creditors.
Section 5.3. HYPOTHETICAL INVESTMENTS. A Director's Account
will be deemed to be invested in one or more of the following investment funds
("Investment Funds"), which, except for (h) below, shall correspond to the
funds available from time to time under the Corporation's Capital Accumulation
Plan:
(a) The Fixed Income Fund
(b) The Balanced Fund
(c) The Equity Fund
(d) The Small Cap Fund
(e) The International Equity Fund
(f) The Blended Equity Fund
(g) The Common Stock Fund
(h) An obligation of the Corporation bearing interest at
prime rate adjusted on the first day of January,
April, July and October.
Each Director shall file an investment preference request
("Request") to be effective as of the beginning of the next Accounting Period
with respect to amounts previously and/or subsequently credited to his Account.
A Request will advise the Administrator as to the Director's preference with
respect to Investment Funds for all or some portion of the amounts credited to
a Director's Account in specified multiples of 10%.
5
<PAGE> 8
Notwithstanding the foregoing, if a Director chooses pursuant to a Request to
have any portion of the amounts subsequently credited to such Director's
Account deemed to be invested in the Common Stock Fund, such portion will be
deemed invested in the Investment Fund described in (h) above until six months
after the date such Request is first effective at which time such portion
(together with earnings accrued thereon) will automatically be deemed to be
invested in the Common Stock Fund. Any amounts in a Director's Account deemed
to be invested in the Common Stock Fund shall be deemed to be invested in the
number of shares of Common Stock equal to the amount obtained by dividing the
amount deemed to be invested in the Common Stock Fund pursuant to any Request
by the Fair Market Value of Common Stock on the first business day immediately
preceding the date such amount is deemed to be invested in the Common Stock
Fund.
A Request, unless modified as described below, shall apply to
all amounts credited to a Director's Account. A Request may be changed with
respect to the amounts credited to a Director's Account as of such date and
amounts subsequently credited to his Account only as of January 1, April 1,
July 1 and October 1 by giving the Administrator prior written notice. Any
such modified Request shall be effective as of the first day of the next
Accounting Period. Notwithstanding the foregoing,
(1) if a Director modifies his Request to have the deemed
investment of any portion of the amounts previously credited to such Director's
Account changed from any of the other Investment Funds to the Common Stock
Fund, such portion will be deemed to be invested in the Investment Fund
described in (h) above until six months after the date such modified Request is
first effective, at which time such portion (together with the earnings accrued
thereon) will automatically be deemed to be invested in the Common Stock Fund,
and
(2) if a Director modifies his Request to have the deemed
investment of any portion of the amounts previously credited to such Director's
Account changed from the Common Stock Fund to any of the other Investment
Funds, such portion will continue to be deemed to be invested in the Common
Stock Fund until six months after the date such modified Request is first
effective, at which time such portion (together with any dividends accrued or
paid thereon) will automatically be deemed to be invested in accordance with
such modified Request.
Earnings on any amounts deemed to have been invested in any
Investment Fund shall be deemed to have been reinvested in such fund.
6
<PAGE> 9
ARTICLE VI. DISTRIBUTION OF BENEFITS
Section 6.1. SETTLEMENT DATE. A Director or, in the event of
his death, his Beneficiary shall be entitled to distribution of the balance of
his Account, as provided in this Article VI, following his Settlement Date or
Dates.
Section 6.2. AMOUNT TO BE DISTRIBUTED. The amount to which a
Director or, in the event of his death, his Beneficiary is entitled in
accordance with the following provisions of this Article shall be based on the
Director's adjusted Account balance determined as of the Accounting Date
coincident with or next following his Settlement Date or Dates.
Section 6.3. IN-SERVICE DISTRIBUTION. A Director may
irrevocably elect to receive an in-service distribution of his deferred Fees
for any Plan Year on or commencing not earlier than the beginning of the third
Plan Year following the Plan Year in which such Fees otherwise would have been
payable. A Director's election of an in-service distribution shall be filed in
writing with the Administrator at the same time as is filed his election to
participate for the Plan Year as provided in Section 3.1. The Director may
elect to receive such Fees as an in-service distribution under one of the forms
as provided in Section 6.4. Any benefits paid to the Director as an in-service
distribution shall reduce the Director's Account.
Section 6.4. FORM OF DISTRIBUTION. As soon as practicable
after the end of the Accounting Period in which a Director's Settlement Date
occurs, but in no event later than thirty days following the end of such
Accounting Period, the Corporation shall distribute or cause to be distributed,
to the Director the balance of the Director's Account as determined under
Section 6.2, under one of the forms provided in this Section. Notwithstanding
the foregoing, if irrevocably elected by the Director, the distribution of all
or a portion of the Director's Account may be made or commence at the beginning
of the Plan Year next following his Settlement Date. In the event of a
Director's death, the balance of his Account shall be distributed to his
Beneficiary in a lump sum.
Distribution of a Director's Account with respect to any
Deferral Period shall be made in one of the following forms as elected by the
Director:
(a) by payment in cash in a single lump sum;
(b) by payment in cash in not greater than ten annual
installments; or
(c) a combination of (a) and (b) above. The Director
shall designate the percentage payable under each option.
7
<PAGE> 10
The Director's election of the form of distribution shall be made by written
notice filed with the Administrator at least one (1) year prior to the
Director's voluntary retirement as a Director. Any such election may be
changed by the Director at any time and from time to time without the consent
of any other person by filing a later signed written election with the
Administrator; provided that any election made less than one (1) year prior to
the Director's voluntary termination as a Director shall not be valid, and in
such case payment shall be made in accordance with the Director's prior
election.
The amount of each installment shall be equal to the quotient
obtained by dividing the Director's Account balance as of the date of such
installment payment by the number of installment payments remaining to be made
to or in respect of such Director at the time of calculation.
If a Director fails to make an election in a timely manner as
provided in this Section 6.4, distribution shall be made in cash in a lump sum.
Section 6.5. BENEFICIARY DESIGNATION. As used in the Plan
the term "Beneficiary" means:
(a) The last person designated as Beneficiary by the
Director in a written notice on a form prescribed by the
Administrator;
(b) If there is no designated Beneficiary or if the
person so designated shall not survive the Director, such
Director's spouse; or
(c) If no such designated Beneficiary and no such
spouse is living upon the death of a Director, or if all such
persons die prior to the full distribution of the Director's
Account balance, then the legal representative of the last
survivor of the Director and such persons, or, if the
Administrator shall not receive notice of the appointment of
any such legal representative within one year after such
death, the heirs-at-law of such survivor (in the proportions
in which they would inherit his intestate personal property)
shall be the Beneficiaries to whom the then remaining balance
of the Director's Account shall be distributed.
Any Beneficiary designation may be changed from time to time by like notice
similarly delivered. No notice given under this Section shall be effective
unless and until the Administrator actually receives such notice.
Section 6.6. FACILITY OF PAYMENT. Whenever and as often as
any Director or his Beneficiary entitled to payments hereunder shall be under a
legal disability or, in the sole
8
<PAGE> 11
judgment of the Administrator, shall otherwise be unable to apply such payments
to his own best interests and advantage, the Administrator in the exercise of
its discretion may direct all or any portion of such payments to be made in any
one or more of the following ways: (i) directly to him; (ii) to his legal
guardian or conservator; or (iii) to his spouse or to any other person, to be
expended for his benefit; and the decision of the Administrator, shall in each
case be final and binding upon all persons in interest.
ARTICLE VII. ADMINISTRATION, AMENDMENT AND TERMINATION
Section 7.1. ADMINISTRATION. The Plan shall be administered
by the Administrator. The Administrator shall have such powers as may be
necessary to discharge its duties hereunder. The Administrator may, from time
to time, employ agents and delegate to them such administrative duties as it
sees fit, and may from time to time consult with legal counsel who may be
counsel to the Corporation. The Administrator shall have no power to add to,
subtract from or modify any of the terms of the Plan, or to change or add to
any benefits provided under the Plan, or to waive or fail to apply any
requirements of eligibility for a benefit under the Plan. No member of the
Administrator shall act in respect of his own Account. All decisions and
determinations by the Administrator shall be final and binding on all parties.
All decisions of the Administrator shall be made by the vote of the majority,
including actions and writing taken without a meeting. All elections, notices
and directions under the Plan by a Director shall be made on such forms as the
Administrator shall prescribe.
Section 7.2. AMENDMENT, TERMINATION AND WITHDRAWAL. The Plan
may be amended from time to time or may be terminated at any time by the Board.
No amendment or termination of the Plan, however, may adversely affect the
amount or timing of payment of any person's benefits accrued under the Plan to
the date of amendment or termination without such person's written consent, and
no amendment of the Plan may cause Rule 16b-3 to become inapplicable to this
Plan without further approval by the stockholders of the Corporation.
Section 7.3. SUCCESSORS. The Corporation shall require any
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business and/or
assets of the Corporation expressly to assume and to agree to perform this Plan
in the same manner and to the same extent the Corporation would be required to
perform if no such succession had taken place. This Plan shall be binding upon
and inure to the benefit of the Corporation and any successor of or to the
Corporation, including without limitation any persons acquiring directly or
indirectly all or substantially all of the business and/or assets of the
Corporation whether by sale, merger, consolidation,
9
<PAGE> 12
reorganization or otherwise (and such successor shall thereafter be deemed the
"Corporation" for the purposes of this Plan), and the heirs, beneficiaries,
executors and administrators of each Director.
Section 7.4. EXPENSES. All expenses of the Plan shall be
paid by the Corporation from funds other than those deemed investments as
provided in Section 5.3, except that brokerage commissions and other
transaction fees and expenses relating to the investment of deemed assets and
investment fees attributable to commingled investment of such assets shall be
paid from or charged to such assets or earnings thereon.
ARTICLE VIII. APPROVAL BY STOCKHOLDERS
Section 8.1. APPROVAL OF THE PLAN. The Plan shall be
submitted for approval by the stockholders of the Corporation. If such
approval has not been obtained by June 1, 1995, this Plan shall be nullified
and all Deferral Commitments shall be rescinded, and each Director shall
receive in cash the full amount of such Director's Account balance without
interest.
ARTICLE IX. MISCELLANEOUS
Section 9.1. NO CONTINUING RIGHT AS DIRECTOR. Neither the
adoption or operation of this Plan, nor any document describing or referring to
this Plan, or any part thereof, shall confer upon any Director any right to
continue as a Director of the Corporation or any subsidiary of the Corporation.
Section 9.2. APPLICABLE LAW. All questions arising in
respect of the Plan, including those pertaining to its validity, interpretation
and administration, shall be governed, controlled and determined in accordance
with the applicable provisions of the laws of the State of Ohio.
Section 9.3. INTERESTS NOT TRANSFERABLE. No person shall
have any right to commute, encumber, pledge or dispose of any interest herein
or right to receive payments hereunder, nor shall such interests or payments be
subject to seizure, attachment or garnishment for the payments of any debts,
judgments, alimony or separate maintenance obligations or be transferable by
operation of law in the event of bankruptcy, insolvency or otherwise, all
payments and rights hereunder being expressly declared to be nonassignable and
nontransferable.
Section 9.4. SEVERABILITY. Each section, subsection and
lesser section of this Plan constitutes a separate and distinct undertaking,
covenant and/or provision hereof. Whenever possible, each provision of this
Plan shall be interpreted in such manner as to be effective and valid under
applicable law. In the event that any provision of this Plan shall finally be
10
<PAGE> 13
determined to be unlawful, such provision shall be deemed severed from this
Plan, but every other provision of this Plan shall remain in full force and
effect, and in substitution for any such provision held unlawful, there shall
be substituted a provision of similar import reflecting the original intention
of the parties hereto to the extent permissible under law.
Section 9.5. WITHHOLDING OF TAXES. The Corporation may
withhold or cause to be withheld from any amounts payable under this Plan all
federal, state, local and other taxes as shall be legally required.
IN WITNESS WHEREOF, The LTV Corporation has caused this
instrument to be executed in its name as of the date first above written.
THE LTV CORPORATION
By:______________________________
Its:_____________________________
Attest:
___________________________________
11
<PAGE> 1
EXHIBIT (10)-(54)
THE LTV CORPORATION EXECUTIVE
DEFERRED COMPENSATION PLAN
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
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<S> <C>
ARTICLE I. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. DEFINITIONS AND CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.2. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III. PARTICIPATION AND DEFERRALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.1. Eligibility and Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Initial Year of Participation . . . . . . . . . . . . . . . . . . . . . . . . 4
(d) Termination of Participation . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.2. Ineligible Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.3. Amount of Deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.4. Modification of Deferral Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV. PARTICIPANTS' ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.1. Establishment of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.2. Crediting of Deferred Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.3. Determination of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Determination of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.4. Adjustments to Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.5. Statement of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.6. Vesting of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE V. FINANCING OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5.1. Financing of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5.2. Security For Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5.3. Hypothetical Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VI. DISTRIBUTION OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6.1. Settlement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6.2. Amount to be Distributed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6.3. In-Service Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6.4. Form of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 6.5. Beneficiary Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6.6. Facility of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6.7. Hardship Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VII. ADMINISTRATION, AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7.1. Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7.2. Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7.3. Amendment, Termination and Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7.4. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7.5. Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7.6. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VIII. APPROVAL BY STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8.1. Approval of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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<TABLE>
<S> <C>
ARTICLE IX. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.1. No Guarantee of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.2. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.3. Interests Not Transferable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.4. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.5. Withholding of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.6. Top-Hat Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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<PAGE> 4
THE LTV CORPORATION EXECUTIVE
DEFERRED COMPENSATION PLAN
The LTV Corporation Executive Deferred Compensation Plan is made and
executed as of the ___ day of December, 1994 and is effective as of January 1,
1995.
ARTICLE I. PURPOSE
THE LTV CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN (the "Plan"), is
hereby established by The LTV Corporation to allow designated management and
highly compensated employees to defer a portion of their awards under the
Corporation's annual incentive program. It is intended that the Plan will aid
in attracting and retaining employees of exceptional ability by providing these
benefits. The terms and conditions of the Plan are set forth below.
ARTICLE II. DEFINITIONS AND CONSTRUCTION
Section 2.1. DEFINITIONS. Whenever the following terms are used in this
Plan they shall have the meanings specified below unless the context clearly
indicates to the contrary:
(a) "Account": The bookkeeping account maintained for each Participant
showing his interest under the Plan.
(b) "Accounting Date": December 31 of each year and the last day of any
calendar quarter.
(c) "Accounting Period": The period beginning on the day immediately
following an Accounting Date and ending on the next following Accounting
Date.
(d) "Administrator": With respect to any Participant who is not an
executive officer for purposes of the Corporation's proxy disclosure, a
committee consisting of one or more persons who shall be appointed by and
serve at the pleasure of the Board and, with respect to such executive
officers, the Committee.
(e) "Annual Incentive Program": The short-term performance award program
established under Article V of the Corporation's Management Incentive
Program.
(f) "Award": An Employee's Award for a Plan Year is equal to the sum of
(i) the annual cash award under the Annual Incentive Program and (ii) any
similar annual cash
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incentive bonus under any other equivalent Corporation-sponsored bonus program
(as determined by the Administrator), which, in either case, is earned with
respect to services performed by the Employee during such Plan Year, whether
or not such award is actually paid to the Employee during such Plan Year.
(g) "Beneficiary": The person or persons (natural or otherwise), within
the meaning of Section 6.5, who are entitled to receive distribution of the
Participant's Account balance in the event of the Participant's death.
(h) "Board": The Board of Directors of the Corporation.
(i) "Committee": The Compensation Committee of the Board.
(j) "Common Stock": The Corporation's Common Stock, par value $.50 per
share.
(k) "Corporation": The LTV Corporation or any successor or successors
thereto.
(l) "Deferral Commitment": An agreement by a Participant to have a
specified percentage or dollar amount of his Award deferred under the Plan.
(m) "Disability": The occurrence, while a Participant is an Employee, of
a physical or mental incapacity which entitles the Participant to benefits
under (i) any long-term disability plan sponsored by the Corporation, or (2)
the Social Security Act of the United States.
(n) "Effective Date": January 1, 1995.
(o) "Employee": Any employee of the Corporation who is, as determined by
the Committee, a member of a "select group of management or highly
compensated employees" of the Corporation, within the meaning of Sections
201, 301 and 401 of ERISA, and who is designated by the Committee as an
Employee eligible to participate in the Plan.
(p) "ERISA": The Employee Retirement Income Security Act of 1974, as
amended from time to time; any reference to a provision of ERISA shall also
include any successor provision thereto.
(q) "Fair Market Value": With respect to a share of Common Stock on a
given date, (i) the last reported closing price for a share of Common Stock on
the New York Stock Exchange (or an appropriate over-the-counter market if the
Common Stock is no longer listed on such Exchange) for such date, or (ii) if
there was no sale of Common Stock so
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reported for such date, on the most recently preceding day on which there was
such a sale.
(r) "Financial Hardship": An unforeseeable financial emergency of the
Participant, determined by the Administrator as provided in Section 6.7 on
the basis of information supplied by the Participant, arising from an
illness, Disability, casualty loss, sudden financial reversal or other such
unforeseeable occurrence, but not including foreseeable events such as the
purchase of a house or education expenses for children.
(s) "Insider Participant": Any Participant who is required to file
reports with the Securities and Exchange Commission pursuant to Section 16(a)
of the Securities Exchange Act of 1934, as amended from time to time, and any
rules promulgated thereunder.
(t) "Investment Fund": The meaning set forth in Section 5.3.
(u) "Participant": An Employee participating in the Plan in accordance
with the provisions of Section 3.1, or a former Employee retaining benefits
under the Plan that have not been fully paid.
(v) "Participation Agreement": The Agreement submitted by a Participant
to the Administrator with respect to one or more Deferral Commitments.
(w) "Plan": The Plan set forth in this instrument as it may, from time to
time, be amended.
(x) "Plan Year": The 12-month period beginning January 1 through December
31.
(y) "Request": The meaning set forth in Section 5.3.
(z) "Retirement": Termination of employment with the Corporation on or
after attainment of age 65.
(aa) "Rule 16b-3": Rule 16b-3 promulgated under the Securities Exchange
Act of 1934 (or any successor rule to the same effect), as in effect from
time to time.
(bb) "Settlement Date": The date on which a Participant terminates
employment with the Corporation. Leaves of absence granted by the
Corporation will not be considered as termination of employment during the
term of such leave. Settlement Date shall also include with respect to any
Deferral Commitment the date prior or subsequent to termination of employment
selected by a Participant in a Participation Agreement for distribution of
all or a portion of the amounts deferred during a Plan Year.
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(cc) "Trust": The meaning set forth in Section 5.2.
Section 2.2. CONSTRUCTION. The masculine gender, where appearing in the
Plan, shall be deemed to include the feminine gender, and the singular may
include the plural, unless the context clearly indicates to the contrary. The
words "hereof," "herein," "hereunder," and other similar compounds of the word
"here" shall mean and refer to the entire Plan, and not to any particular
provision or Section.
ARTICLE III. PARTICIPATION AND DEFERRALS
Section 3.1. ELIGIBILITY AND PARTICIPATION.
(a) ELIGIBILITY. Eligibility to participate in the Plan for any Deferral
Period is limited to those management and/or highly compensated Employees of
the Corporation who are designated, from time to time, by the Committee.
(b) PARTICIPATION. An Employee may, prior to the last business day of May
in any Plan Year, elect to participate in the Plan for such Plan Year and any
Plan Year thereafter by filing a Participation Agreement with the
Administrator.
(c) INITIAL YEAR OF PARTICIPATION. Notwithstanding Section 3.1(b), a
Participant who first becomes an eligible Employee during a Plan Year may,
within 30 days after he becomes an eligible Employee, elect to participate in
the Plan for such Plan Year and any Plan Year thereafter by filing a
Participation Agreement with the Administrator, and his Deferral Commitment
shall be effective only with regard to an Award earned following the filing
of the Participation Agreement with the Administrator.
(d) TERMINATION OF PARTICIPATION. Participation in the Plan shall
continue as long as the Participant is eligible to receive benefits under the
Plan.
Section 3.2. INELIGIBLE PARTICIPANT. Notwithstanding any other provisions
of this Plan to the contrary, if the Administrator determines that any
Participant may not qualify as a "management or highly compensated employee"
within the meaning of ERISA or regulations thereunder, the Administrator may
determine, in its sole discretion, that such Participant shall cease to be
eligible to participate in this Plan. Upon such determination, the Corporation
shall make an immediate lump sum payment to the Participant equal to the amount
credited to his Account. Upon such payment no benefit shall thereafter be
payable under this Plan either to the Participant or any Beneficiary of the
Participant, and all of the Participant's elections as to the time and manner
of payment of his Account shall be deemed to be cancelled.
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Section 3.3. AMOUNT OF DEFERRAL. With respect to each Plan Year, a
Participant may elect to defer a specified dollar amount or percentage of his
Award. A Participant may change the dollar amount or percentage of his Award
to be deferred by filing a written notice thereof with the Administrator. Any
such change shall be effective as of the first day of the Plan Year in which
such notice is filed with the Administrator if such notice is filed by the last
business day in May of such Plan Year, or if not so timely filed, then such
change shall be effective as of the first day of the next succeeding Plan Year.
Section 3.4. MODIFICATION OF DEFERRAL COMMITMENTS. A Deferral Commitment
shall be irrevocable with respect to the Plan Year for which it is made, except
that the Administrator may, in its sole discretion, permit a Participant to
terminate, prospectively, any Deferral Commitment for a Plan Year. If a
Participant terminates a Deferral Commitment during a Plan Year, such
Participant will not be permitted to enter into a new Deferral Commitment until
the following Plan Year.
ARTICLE IV. PARTICIPANTS' ACCOUNTS
Section 4.1. ESTABLISHMENT OF ACCOUNTS. The Corporation, through its
accounting records, shall establish an Account for each Participant. In
addition, the Corporation may establish one or more subaccounts of a
Participant's Account, if the Corporation determines that such subaccounts are
necessary or appropriate in administering the Plan.
Section 4.2. CREDITING OF DEFERRED AWARD. The portion of a Participant's
Award that is deferred pursuant to a Deferral Commitment shall be credited to
the Participant's Account within thirty days following the date the
corresponding non-deferred portion of his Award would have been paid to the
Participant. Any withholding of taxes or other amounts with respect to any
deferred Award which is required by state, federal or local law shall be
withheld from the Participant's non-deferred compensation.
Section 4.3. DETERMINATION OF ACCOUNTS.
(a) DETERMINATION OF ACCOUNTS. The amount credited to each Participant's
Account as of a particular date shall equal the deemed balance of such
Account as of such date. The balance in the Account shall equal the amount
credited pursuant to Section 4.2, and shall be adjusted in the manner
provided in Section 4.4.
(b) ACCOUNTING. The Corporation, through its accounting records, shall
maintain a separate and distinct record of the amount in each Account as
adjusted to reflect income, gains, losses and distributions.
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Section 4.4. ADJUSTMENTS TO ACCOUNTS.
(a) Each Participant's Account shall be debited with the amount of any
distributions under the Plan to or on behalf of the Participant or, in the
event of his death, his Beneficiary during the Accounting Period ending on
such Accounting Date.
(b) The Participant's Account shall next be credited or debited, as the
case may be, with an income (loss) factor equal to an amount determined by
multiplying (i) the balance credited to the Participant's Account as of the
immediately preceding Accounting Date (as adjusted pursuant to Section 4.4(a)
for the current Accounting Date) by (ii) the rate of return for the
Accounting Period ending on such Accounting Date on deemed investments
provided for in Section 5.3.
Section 4.5. STATEMENT OF ACCOUNTS. As soon as practicable after the end
of each Accounting Period, a statement shall be furnished to each Participant
or, in the event of his death, to his Beneficiary showing the status of his
Account as of the end of the Accounting Period, any changes in his Account
since the end of the immediately preceding Accounting Period, and such other
information as the Administrator shall determine.
Section 4.6. VESTING OF ACCOUNTS. Subject to Section 5.1, each Participant
shall at all times have a nonforfeitable interest in his Account balance.
ARTICLE V. FINANCING OF BENEFITS
Section 5.1. FINANCING OF BENEFITS. Benefits payable under the Plan to a
Participant or, in the event of his death, to his Beneficiary shall be paid by
the Corporation from its general assets. The payment of benefits under the
Plan represents an unfunded, unsecured obligation of the Corporation.
Notwithstanding the fact that the Participants' Accounts may be adjusted by an
amount that is measured by reference to the performance of any deemed
investments as provided in Section 5.3, no person entitled to payment under the
Plan shall have any claim, right, security interest or other interest in any
fund, trust, account, insurance contract, or asset of the Corporation which may
be responsible for such payment.
Section 5.2. SECURITY FOR BENEFITS. Notwithstanding the provisions of
Section 5.1, nothing in this Plan shall preclude the Corporation from setting
aside amounts in trust (the "Trust") pursuant to one or more trust agreements
between a trustee and the Corporation. However, no Participant or Beneficiary
shall have any secured interest or claim in any assets or property of the
Corporation or the Trust and all funds
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contained in the Trust shall remain subject to the claims of the Corporation's
general creditors.
Section 5.3. HYPOTHETICAL INVESTMENTS. A Participant's Account will be
deemed to be invested in one or more of the following investment funds
("Investment Funds"), which, except for (h) below, shall correspond to the
funds available from time to time under the Corporation's Capital Accumulation
Plan:
(a) The Fixed Income Fund;
(b) The Balanced Fund;
(c) The Equity Fund;
(d) The Small Cap Fund;
(e) The International Equity Fund;
(f) The Blended Equity Fund;
(g) The Common Stock Fund;
(h) An obligation of the Corporation bearing interest at prime rate
adjusted on the first day of January, April, July and October.
Each Participant shall file an investment preference request ("Request") to be
effective as of the beginning of the next Accounting Period with respect to
amounts previously and/or subsequently credited to his Account. A Request will
advise the Administrator as to the Participant's preference with respect to
Investment Funds for all or some portion of the amounts credited to a
Participant's Account in specified multiples of 10%. Notwithstanding the
foregoing, if an Insider Participant chooses pursuant to a Request to have any
portion of the amounts subsequently credited to such Participant's Account
deemed to be invested in the Common Stock Fund, such portion will be deemed
invested in the Investment Fund described in (h) above until six months after
the date such Request is first effective at which time such portion (together
with earnings accrued thereon) will automatically be deemed to be invested in
the Common Stock Fund. Any amounts in a Participant's Account deemed to be
invested in the Common Stock Fund shall be deemed to be invested in the number
of shares of Common Stock equal to the amount obtained by dividing the amount
deemed to be invested in the Common Stock Fund pursuant to any Request by the
Fair Market Value of Common Stock on the first business day immediately
preceding the date such amount is deemed to be invested in the Common Stock
Fund.
A Request, unless modified as described below, shall apply to all amounts
credited to a Participant's Account with respect to each subsequent Plan Year.
A Request may be changed with respect to the amounts credited to a
Participant's Account as of such date and amounts subsequently credited to his
Account only as of January 1, April 1, July 1 and October 1 by giving the
Administrator prior written notice. Any such modified Request shall be
effective as of the first day of the next Accounting Period. Notwithstanding
the foregoing,
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(1) if an Insider Participant modifies his Request to have the deemed
investment of any portion of the amounts previously credited to such
Insider Participant's Account changed from any of the other Investment
Funds to the Common Stock Fund, such portion will be deemed to be
invested in the Investment Fund described in (h) above until six
months after the date such modified Request is first effective, at
which time such portion (together with the earnings accrued thereon)
will automatically be deemed to be invested in the Common Stock Fund,
and
(2) if an Insider Participant modifies his Request to have the deemed
investment of any portion of the amounts previously credited to such
Insider Participant's Account changed from the Common Stock Fund to
any of the other Investment Funds, such portion will continue to be
deemed to be invested in the Common Stock Fund until six months after
the date such modified Request is first effective, at which time such
portion (together with any dividends accrued or paid thereon) will
automatically be deemed to be invested in accordance with such
modified Request.
Earnings on any amounts deemed to have been invested in any Investment Fund
shall be deemed to have been reinvested in such fund.
The provisions in this Section with respect to Insider Participants shall
apply to any Participant immediately upon the time such Participant becomes an
Insider Participant and shall continue until such time as such Participant is
no longer an Insider Participant.
ARTICLE VI. DISTRIBUTION OF BENEFITS
Section 6.1. SETTLEMENT DATE. A Participant or, in the event of his death,
his Beneficiary shall be entitled to distribution of the balance of his
Account, as provided in this Article VI, following his Settlement Date or
Dates.
Section 6.2. AMOUNT TO BE DISTRIBUTED. The amount to which a Participant
or, in the event of his death, his Beneficiary is entitled in accordance with
the following provisions of this Article shall be based on the Participant's
adjusted account balance determined as of the Accounting Date coincident with
or next following his Settlement Date or Dates.
Section 6.3. IN-SERVICE DISTRIBUTION. A Participant may irrevocably elect
to receive an in-service distribution of his deferred Award for any Plan Year
on or commencing not earlier
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than the beginning of the third Plan Year following the Plan Year in which such
Award otherwise would have been first payable. A Participant's election of an
in-service distribution shall be filed in writing with the Administrator at the
same time as is filed his election to participate for the Plan Year as provided
in Section 3.1. The Participant may elect to receive such Award as an
in-service distribution under one of the forms provided in Section 6.4. Any
benefits paid to the Participant as an in-service distribution shall reduce the
Participant's Account.
Section 6.4. FORM OF DISTRIBUTION. As soon as practicable after the end of
the Accounting Period in which a Participant's Settlement Date occurs, but in
no event later than thirty days following the end of such Accounting Period,
the Corporation shall distribute or cause to be distributed to the Participant
the balance of the Participant's Account as determined under Section 6.2, under
one of the forms provided in this Section. Notwithstanding the foregoing, if
irrevocably elected by the Participant, the distribution of all or a portion of
the Participant's Account may be made or commence on a date between the
Settlement Date and the date the Participant attains age sixty-five. In the
event of a Participant's death, the balance of his Account shall be distributed
to his Beneficiary in a lump sum.
Distribution of a Participant's Account with respect to any Plan Year shall
be made in one of the following forms as elected by the Participant:
(a) by payment in cash in a single lump sum;
(b) by payment in cash in not greater than ten annual installments; or
(c) a combination of (a) and (b) above. The Participant shall designate
the percentage payable under each option.
The Participant's election of the form of distribution shall be made by written
notice filed with the Administrator at least one (1) year prior to the
Participant's voluntary termination of employment with, or retirement from, the
Corporation. Any such election may be changed by the Participant at any time
and from time to time without the consent of any other person by filing a later
signed written election with the Administrator; provided that any election made
less than one (1) year prior to the Participant's voluntary termination of
employment or retirement shall not be valid, and in such case payment shall be
made in accordance with the Participant's prior election.
The amount of each installment shall be equal to the quotient obtained by
dividing the Participant's Account balance as of the date of such installment
payment by the number of installment
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payments remaining to be made to or in respect of such Participant at the time
of calculation.
If a Participant fails to make an election in a timely manner as provided in
this Section 6.4, distribution shall be made in cash in a lump sum.
Section 6.5. BENEFICIARY DESIGNATION. As used in the Plan the term
"Beneficiary" means:
(a) The last person designated as Beneficiary by the Participant in a
written notice on a form prescribed by the Administrator;
(b) If there is no designated Beneficiary or if the person so designated
shall not survive the Participant, such Participant's spouse; or
(c) If no such designated Beneficiary and no such spouse is living upon
the death of a Participant, or if all such persons die prior to the full
distribution of the Participant's Account balance, then the legal
representative of the last survivor of the Participant and such persons, or,
if the Administrator shall not receive notice of the appointment of any such
legal representative within one year after such death, the heirs-at-law of
such survivor (in the proportions in which they would inherit his intestate
personal property) shall be the Beneficiaries to whom the then remaining
balance of the Participant's Account shall be distributed.
Any Beneficiary designation may be changed from time to time by like notice
similarly delivered. No notice given under this Section shall be effective
unless and until the Administrator actually receives such notice.
Section 6.6. FACILITY OF PAYMENT. Whenever and as often as any Participant
or his Beneficiary entitled to payments hereunder shall be under a legal
disability or, in the sole judgment of the Administrator, shall otherwise be
unable to apply such payments to his own best interests and advantage, the
Administrator in the exercise of its discretion may direct all or any portion
of such payments to be made in any one or more of the following ways: (i)
directly to him; (ii) to his legal guardian or conservator; or (iii) to his
spouse or to any other person, to be expended for his benefit; and the decision
of the Administrator shall in each case be final and binding upon all persons
in interest.
Section 6.7. HARDSHIP DISTRIBUTIONS. Upon a finding by the Administrator
that a Participant has suffered a Financial Hardship, the Administrator may, in
its sole discretion, distribute, or direct the Trustee to distribute, to the
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Participant an amount which does not exceed the amount required to meet the
immediate financial needs created by the Financial Hardship and not reasonably
available from other sources of the Participant; provided, however, that in no
event shall any amount attributable to a Deferral Commitment be distributed
less than six months after the date of the applicable Participation Agreement.
No distributions pursuant to this Section 6.7 may be made in excess of the
value of the Participant's Account at the time of such distribution.
Notwithstanding the foregoing provisions of this Section 6.7, no distributions
pursuant to this Section 6.7 may be made to a Participant who is an Insider
Participant.
ARTICLE VII. ADMINISTRATION, AMENDMENT AND TERMINATION
Section 7.1. ADMINISTRATION. The Plan shall be administered by the
Administrator. The Administrator shall have such powers as may be necessary to
discharge its duties hereunder, including, but not by way of limitation, to
construe and interpret, resolve any ambiguities in, and determine the amount
and time of payment of any benefits under, the Plan. The Administrator may,
from time to time, employ agents and delegate to them such administrative
duties as it sees fit, and may from time to time consult with legal counsel who
may be counsel to the Corporation. The Administrator shall have no power to
add to, subtract from or modify any of the terms of the Plan, or to change or
add to any benefits provided under the Plan, or to waive or fail to apply any
requirements of eligibility for a benefit under the Plan. No member of the
Administrator shall act in respect of his own Account. All decisions and
determinations by the Administrator shall be final and binding on all parties.
All decisions of the Administrator shall be made by the vote of the majority,
including actions in writing taken without a meeting. All elections, notices
and directions under the Plan by a Participant shall be made on such forms as
the Administrator shall prescribe.
Section 7.2. PLAN ADMINISTRATOR. The Corporation shall be the
"administrator" under the Plan for purposes of ERISA.
Section 7.3. AMENDMENT, TERMINATION AND WITHDRAWAL. The Plan may be
amended from time to time or may be terminated at any time by the Board. No
amendment or termination of the Plan, however, may adversely affect the amount
or timing of payment of any person's benefits accrued under the Plan to the
date of amendment or termination without such person's written consent, and no
Amendment of the Plan may cause Rule 16b-3 to become inapplicable to this Plan
without further approval by the stockholders of the Corporation.
Section 7.4. SUCCESSORS. The Corporation shall require any successor
(whether direct or indirect, by purchase,
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<PAGE> 15
merger, consolidation, reorganization or otherwise) to all or substantially all
of the business and/or assets of the Corporation expressly to assume and to
agree to perform this Plan in the same manner and to the same extent the
Corporation would be required to perform if no such succession had taken place.
This Plan shall be binding upon and inure to the benefit of the Corporation and
any successor of or to the Corporation, including without limitation any
persons acquiring directly or indirectly all or substantially all of the
business and/or assets of the Corporation whether by sale, merger,
consolidation, reorganization or otherwise (and such successor shall thereafter
be deemed the "Corporation" for the purposes of this Plan), and the heirs,
beneficiaries, executors and administrators of each Participant.
Section 7.5. CLAIMS. The Administrator will provide to any Participant or
Beneficiary whose claim for benefits under the Plan has been fully or partially
denied a written notice setting forth (i) the specific reasons for such denial,
(ii) a designation of any additional material or information required and (iii)
an explanation of the Plan's claim review procedure. Such notice shall state
that the Participant or Beneficiary is entitled to request a review in writing,
by the Administrator, of the decision denying the claim. The claim will be
reviewed by the Administrator who may, but need not, grant the claimant a
hearing. On review, the claimant may have legal representation, examine
pertinent documents and submit issues and comments in writing. The decision on
review will be made within 120 days following the request, will be provided in
writing to the claimant and will be final and binding on all parties concerned.
Section 7.6. EXPENSES. All expenses of the Plan shall be paid by the
Corporation from funds other than those deemed invested in Investment Funds as
provided in Section 5.3, except that the Investment Funds shall bear and be
charged with actual or hypothetical expenses to the same extent that the
corresponding investment fund in which assets are deemed to be invested bear
and are charged with such expenses, as determined by the Administrator.
ARTICLE VIII. APPROVAL BY STOCKHOLDERS
Section 8.1. APPROVAL OF THE PLAN. The Plan shall be submitted for
approval by the stockholders of the Corporation. If such approval has not been
obtained by June 1, 1995, this Plan shall be nullified and all Deferral
Commitments shall be rescinded and each Participant shall receive in cash the
full amount of such Participant's Account balance without interest.
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<PAGE> 16
ARTICLE IX. MISCELLANEOUS
Section 9.1. NO GUARANTEE OF EMPLOYMENT. Nothing contained in the Plan
shall be construed as a contract of employment between the Corporation and any
Employee, or as a right of any Employee, to be continued in the employment of
the Corporation, or as a limitation of the right of the Corporation to
discharge any of its Employees, with or without cause.
Section 9.2. APPLICABLE LAW. All questions arising in respect of the Plan,
including those pertaining to its validity, interpretation and administration,
shall be governed, controlled and determined in accordance with the applicable
provisions of federal law and, to the extent not preempted by federal law, the
laws of the State of Ohio.
Section 9.3. INTERESTS NOT TRANSFERABLE. No person shall have any right to
commute, encumber, pledge or dispose of any interest herein or right to receive
payments hereunder, nor shall such interests or payments be subject to seizure,
attachment or garnishment for the payments of any debts, judgments, alimony or
separate maintenance obligations or be transferable by operation of law in the
event of bankruptcy, insolvency or otherwise, all payments and rights hereunder
being expressly declared to be nonassignable and nontransferable.
Section 9.4. SEVERABILITY. Each section, subsection and lesser section of
this Plan constitutes a separate and distinct undertaking, covenant and/or
provision hereof. Whenever possible, each provision of this Plan shall be
interpreted in such manner as to be effective and valid under applicable law.
In the event that any provision of this Plan shall finally be determined to be
unlawful, such provision shall be deemed severed from this Plan, but every
other provision of this Plan shall remain in full force and effect, and in
substitution for any such provision held unlawful, there shall be substituted a
provision of similar import reflecting the original intention of the parties
hereto to the extent permissible under law.
Section 9.5. WITHHOLDING OF TAXES. The Corporation may withhold or cause
to be withheld from any amounts payable under this Plan all federal, state,
local and other taxes as shall be legally required.
Section 9.6. TOP-HAT PLAN. The Plan is intended to be a plan which is
unfunded and maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
within the meaning of Sections 201, 301 and 401 of ERISA, and therefore to be
exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA.
Accordingly, notwithstanding any other provision of the Plan, the Plan will
terminate and no further benefits will accrue hereunder in the event it is
determined by a court of competent jurisdiction or by an opinion of counsel
based upon a change in
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<PAGE> 17
law that the Plan constitutes an employee pension benefit plan within the
meaning of Section 3(2) of ERISA, which is not so exempt. In addition and
notwithstanding any other provision of the Plan, in the absolute discretion of
the Committee, the amount credited to each Participant's Account under the Plan
as of the date of termination, which shall be an Accounting Date for purposes
of the Plan, will be paid immediately to such Participant in a single lump sum
cash payment.
IN WITNESS WHEREOF, The LTV Corporation has caused this instrument to be
executed in its name as of the date first above written.
THE LTV CORPORATION
By: __________________________
Its: _________________________
Attest:
______________________________
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14
<PAGE> 1
EXHIBIT (10)-(55)
FIFTH AMENDMENT TO PBGC-LTV SETTLEMENT AGREEMENT
------------------------------------------------
THIS FIFTH AMENDMENT TO THE PBGC-LTV SETTLEMENT AGREEMENT (this "Fifth
Amendment") is made and entered into as of November 23, 1994, by and among
PBGC, LTV, and each other member of the Initial LTV Group, and the
Administrator (terms used herein and not otherwise defined herein shall have
the meanings assigned to such terms in the Settlement Agreement referred to
below).
WHEREAS, on June 28, 1993, PBGC, LTV, and each other member of the Initial
LTV Group, and the Administrator (collectively, the "Parties" and individually,
a "Party") entered into the Settlement Agreement (the "Settlement Agreement");
and
WHEREAS, the parties desire to amend the Settlement Agreement as set forth
herein;
NOW, THEREFORE, in consideration of the foregoing and of other good and
valuable consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, and intending to be legally bound, the Parties hereby
agree as follows:
Section 1. AMENDMENT OF SETTLEMENT AGREEMENT Section 5.8(b) of the
Settlement Agreement is hereby amended, effective as of November 23, 1994, by
the addition of the phrase "the first paragraph of" before the phrase "Section
5.2(b)" in the seventh line thereof, so as to read in its entirety as follows:
"(b) LTV shall have the right to apply any amounts in the
Advance Contribution Credit Account toward the full or partial payment of
any Annual Fixed Contribution required under Section 5.4, any variable
annual contribution required under Section 5.5(a), or any contribution
required by the last sentence of the first paragraph of Section 5.2(b);
provided, however, that no amounts in the Advance Contribution Credit
Account may be applied to the Annual Fixed Contribution for 1994, including
all Fixed Periodic Contributions relating thereto, nor to the variable
annual contribution due March 31, 1994 relating to Available Cash Flow for
the portion of Fiscal Year 1993 following the last day of the calendar
month immediately preceding the Effective Date as set forth in the first
sentence of Section 5.5(a). Immediately upon the exercise of such right,
LTV shall (i) notify the PBGC of the application of amounts in the Advance
Contribution Credit Account, together with a summary, in reasonable detail,
of the amount of such application and the type, amount and date of the
contribution to which such application relates, and (ii) reduce the amount
in the Advance Contribution Credit Account by the amount so applied."
<PAGE> 2
Section 2. REFERENCE IN SETTLEMENT AGREEMENT. (a) Each reference in the
Settlement Agreement to "this Agreement", "hereunder", "herein", "hereof" or
words of similar import shall mean and be a reference to the Settlement
Agreement as amended by Section 1 hereof.
(b) Except as expressly amended hereby, the Settlement Agreement shall
remain unmodified.
IN WITNESS WHEREOF, the Parties hereto have caused this Fifth Amendment to
be duly executed by them or by their respective authorized officers, as
appropriate, as of the day and year first above written.
PENSION BENEFIT GUARANTY CORPORATION
By /s/ Ellen L. Hennessy
---------------------------------------------------
Name Ellen L. Hennessy
-------------------------------------------------
Title Deputy Executive Director & Chief Negotiator
------------------------------------------------
THE LTV CORPORATION, ON BEHALF OF ITSELF
AND THE INITIAL LTV GROUP LISTED ON THE
SIGNATURE PAGE OF THE SETTLEMENT
AGREEMENT AND AS ADMINISTRATOR OF AND
ON BEHALF OF THE RESTORED PLANS
By /s/ A. W. Huge
---------------------------------------------------
Name A. W. Huge
-------------------------------------------------
Title Sr. Vice President-Finance
------------------------------------------------
and Chief Financial Officer
LTV STEEL COMPANY, INC.
By /s/ A. W. Huge
---------------------------------------------------
Name A. W. Huge
-------------------------------------------------
Title Sr. Vice President-Finance
------------------------------------------------
and Chief Financial Officer
(DBP/BAG/4350)
<PAGE> 1
Page 1 of 2
Exhibit (11)-(1)
THE LTV CORPORATION
Calculation of Primary Earnings Per Share (EPS)
(Dollar amounts in millions except for EPS)
(Share data in thousands)
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, 1994 December 31, 1993
--------------------------------- ----------------------------
Shares Amount EPS Shares Amount EPS
------- ------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 127.1 $ 247.2
Preferred stock dividend requirements (2.3) (1.1)
------------ ---------
124.8 246.1
Share base:
Shares deemed issued pursuant to Joint Plan 60,838 60,846
Shares issued through public offerings 26,542 5,500
Shares issued upon exercise of Series A Warrants
and stock options 54 -
Common Stock issued (or obligated to issue)
on June 28, 1994:
Common Stock held for issuance 3,328 3,328
Series A Preferred Stock 3,328 3,328
LTV Steel ESOP 1,308 1,108
IRS Settlement Agreement 33 -
-------- --------
7,997 7,764
-------- --------
Common Stock equivalent shares resulting from
outstanding Series A Warrants, Stock Options
and Restricted Stock 349 -
Common Stock issuable upon conversion of
Series B Preferred Stock 2,926 2.3 2,926 1.1
-------- ----------- -------- --------
98,706 $ 127.1 77,036 $ 247.2
======== =========== ======== ========
PRIMARY EARNINGS PER SHARE $ 1.29 $ 3.21
======= =========
</TABLE>
<PAGE> 2
Page 2 of 2
Exhibit (11)-(1)
THE LTV CORPORATION
Calculation of Fully Diluted Earnings Per Share (EPS)
(Dollar amounts in millions except for EPS)
(Share data in thousands)
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, 1994 December 31, 1993
------------------------------- ------------------------------
Shares Amount EPS Shares Amount EPS
-------- -------- ------ -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 127.1 $ 247.2
Preferred stock dividend requirements (2.3) (1.1)
-------- --------
124.8 246.1
Share base:
Shares deemed issued pursuant to Joint Plan 60,838 60,846
Shares issued through public offerings 26,542 5,500
Shares issued upon exercise of Series A Warrants
and stock options 54 -
Common Stock issued (or obligated to issue) on
June 28, 1994:
Common Stock held for issuance 3,328 3,328
Series A Preferred Stock 3,328 3,328
LTV Steel ESOP 1,308 1,108
IRS Settlement Agreement 33 -
-------- --------
7,997 7,764
Common Stock equivalent shares resulting from
outstanding Series A Warrants, Stock Options
and Restricted Stock 352 -
Common Stock issuable upon conversion of
Series B Preferred Stock 2,926 2.3 2,926 1.1
Common Stock issuable upon conversion of
Senior Secured Convertible Notes 5,128 5.2 5,515 2.6
-------- --------- -------- --------
103,837 $ 132.3 82,551 $ 249.8
======== ========= ======== ========
FULLY DILUTED EARNINGS PER SHARE $ 1.27 $ 3.03
======= ========
</TABLE>
<PAGE> 1
MANAGEMENT'S DISCUSSION AND ANALYSIS 26
<TABLE>
On June 28, 1993, The LTV Corporation and substantially all of its subsidiaries
("LTV" or the "Company") consummated a Joint Plan of Reorganization ("Joint
Plan") and emerged from Chapter 11 of the Federal Bankruptcy Code as a steel
and energy products company. On June 30, 1993, the Company adopted "fresh
start" reporting and reflected the financial impact of the Joint Plan.
Accordingly, the results of operations, cash flows and financial condition of
the Company subsequent to the date of emergence are not necessarily comparable
with those prior to emergence, and comments on the major differences have been
provided.
<CAPTION>
RESULTS OF OPERATIONS 1994 1993 1992
(in millions)
<S> <C> <C> <C>
Sales:
Steel $ 4,233.3 $ 3,868.2 $ 3,564.9
Energy products 299.2 296.9 262.5
Sales between segments (3.3) (1.9) (1.5)
---------------- ---------------- ----------------
Net sales $ 4,529.2 $ 4,163.2 $ 3,825.9
================ ================ ================
Operating income (loss):
Steel $ 201.1 $ (68.2) $ (178.2)
Energy products (1.2) 5.9 (3.8)
Corporate (11.4) (9.5) (14.9)
Special credits -- 591.6 60.0
---------------- ---------------- ----------------
Operating income (loss) 188.5 519.8 (136.9)
Interest expense (15.3) (10.0) (4.3)
Interest and other income 26.1 9.5 36.9
---------------- ---------------- ----------------
Income (loss) from continuing operations before items below 199.3 519.3 (104.3)
Reorganization items -- 30.7 14.4
---------------- ---------------- ----------------
Income (loss) before income taxes and other items below 199.3 550.0 (89.9)
Income tax provision:
Taxes payable (refundable) (0.3) 4.1 5.2
Taxes not payable in cash 72.5 159.0 --
---------------- ---------------- ----------------
72.2 163.1 5.2
---------------- ---------------- ----------------
Income (loss) before discontinued operations
and extraordinary items 127.1 386.9 (95.1)
Discontinued operations -- -- 833.8
Extraordinary items -- 3,928.0 (140.0)
---------------- ---------------- ----------------
Net income $ 127.1 $ 4,314.9 $ 598.7
================ ================ ================
- --------------------------------------------------------------------------------------------------------------------------------
OPERATING DATA
Raw steel production (thousands of tons) 8,253 7,921 8,293
Steel shipments (thousands of tons) 7,969 7,570 7,171
Active employees (thousands):
Steel 15.3 15.7 16.4
Energy products 1.2 1.3 1.4
</TABLE>
<TABLE>
<CAPTION>
QUARTERLY OPERATING INCOME (LOSS)*
(in millions)
<S> <C> <C>
1994 4th $ 58.6
3rd $ 52.3
2nd $ 59.2
1st $ 18.4
1993 4th $ 8.3
3rd $ 0.9
2nd $(31.1)
1st $(49.9)
<FN>
*Before special credits of $591.6 million in 1993.
</TABLE>
<PAGE> 2
27
RESULTS OF OPERATIONS
1994 COMPARED WITH 1993
Steel Steel sales of $4.23 billion in 1994 increased by $365 million (9%)
from 1993, and steel shipments of 7.97 million tons increased by 399,000 tons
(5%) from 1993. The increases in sales and shipments in 1994 were across most
of the markets the Company serves.
<TABLE>
<CAPTION>
STEEL SALES (in millions) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
$4,233 $3,868 $3,565
Hot and Cold Flat Rolled 50% 49% 48%
Galvanized 29% 29% 28%
Tin Mill 11% 11% 12%
Tubular 7% 7% 7%
All Other 3% 4% 5%
</TABLE>
Flat rolled product sales were approximately 10% higher in 1994 over 1993,
reflecting a 5% increase in shipments and a 5% increase in average selling
prices. Included within the $3.79 billion of flat rolled product sales are
(i) galvanized product sales of $1.21 billion which were 9% higher in 1994,
reflecting increases in shipments and average selling prices, and (ii) tin
mill product sales of $474 million which were 8% higher in 1994, primarily
reflecting increases in shipments.
Tubular product sales of $293 million, consisting primarily of electrical
conduit, electric weld pipe and mechanical tubing, were 16% higher in 1994
than in 1993, reflecting increases in shipments and average selling prices.
Raw steel production increased by 332,000 tons to 8.25 million tons in 1994
compared with 1993, primarily as a result of the 1993 scheduled production
interruptions for a blast furnace reline and significant modifications
associated with the construction of the Direct Hot Charge Complex ("DHCC")
at the Cleveland Works. The 1994 production was impacted by a scheduled blast
furnace reline at the Indiana Harbor Works and the extremely cold weather
conditions experienced at the operating units in the first quarter. Steel
production in both years was supplemented with purchases of semifinished steel
to support the demand for the Company's products. The DHCC at the Cleveland
Works became fully operational in the second quarter of 1994.
The average operating rate at the Company's steelmaking facilities during 1994
was 99%, compared with 81% in 1993. The annual steel operating capability used
for calculating the operating rate during 1993 was 9.8 million tons. This rate
included production capability related to two electric furnaces and a fourth
blast furnace at the Cleveland Works. As part of the start-up of the DHCC, LTV
removed these facilities from its capability at the beginning of 1994, reducing
annual operating capability to 8.3 million tons. Had the capability
adjustment been made at the beginning of 1993, production as a percentage of
capability would have been 95% during 1993.
The operating income for the steel segment in 1994 was $201.1 million, an
improvement of $269.3 million from 1993 after excluding the effect of the 1993
special credits. The improvement in operating income was due to higher average
selling prices, increased shipments and lower costs. The 1994 results were
favorably impacted by operating performance improvements due to the Cleveland
Works' DHCC, lower postemployment expenses and gains related to various tax
settlements and divestitures. However, these benefits were partially offset by
additional costs related to higher purchased scrap prices, the 1994 labor
agreement with the United Steelworkers of America ("USWA") and the first
quarter's extremely cold weather conditions.
The special credits in 1993 included a $370.6 million gain related to an
antitrust settlement and a $221.0 million gain from the anticipated receipt of
assets held in trust and the collection of a note receivable related to the 1989
sale of the bar division.
<PAGE> 3
28
Energy Products Sales of $299 million for 1994 increased by $2 million
from 1993, primarily due to increased sales for major offshore production
projects and increased sales of general merchandise and tubular goods in
Canada. Offsetting these higher sales were lower international sales of
drilling equipment parts and lower domestic sales of production equipment parts.
The average number of drilling rigs operating in the United States, an
indicator of oilfield activity, increased slightly to 775 in 1994, compared
with 756 in 1993. The 1994 average number of rigs operating in Canada
increased to 261, compared with 182 in 1993.
<TABLE>
<CAPTION>
ENERGY PRODUCTS SALES (in millions)
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
$299 $297 $263
Oilfield Supplies 47% 47% 44%
Drilling, Production and
Other Equipment 29% 31% 38%
Tubular Products 24% 22% 18%
</TABLE>
The group reported an operating loss of $1.2 million in 1994 versus operating
income of $5.9 million in 1993. The reduction resulted from a higher
percentage of sales of lower-margin products, lower international sales of
drilling equipment parts and higher than expected costs incurred in con-
nection with the construction of cranes used on an offshore drilling project.
Corporate Corporate expenses in 1994 of $11.4 million were $1.9 million
more than in 1993, primarily due to higher state franchise taxes, partially
offset by lower administrative and personnel costs.
1993 COMPARED WITH 1992
Steel Steel sales of $3.87 billion in 1993 increased by $303 million
(9%) from 1992, and steel shipments of 7.57 million tons increased by 399,000
tons (6%) from 1992. The increases in sales and shipments in 1993 were
principally to steel service centers, one of the Company's major markets.
Flat rolled product sales were approximately 9% higher in 1993 over 1992,
reflecting a 6% increase in shipments and a 3% increase in average selling
prices. Included within the $3.44 billion of flat rolled product sales are (i)
galvanized product sales of $1.11 billion which were 12% higher in 1993,
reflecting an increase in shipments, and (ii) tin mill product sales of $438
million which were 4% higher in 1993, reflecting a 6% increase in shipments,
partially offset by a decrease in average selling prices.
Tubular product sales of $253 million were 4% higher in 1993 than in 1992,
reflecting an increase in average selling prices, partially offset by a
decrease in shipments.
Raw steel production decreased by 372,000 tons to 7.92 million tons in 1993
compared with 1992. The reduced production in 1993 resulted from scheduled
production interruptions for a major reline of a blast furnace and significant
modifications associated with the construction of the DHCC at the Cleveland
Works.
The average operating rate at the Company's steelmaking facilities during 1993
was 81%, compared with 85% in 1992. Had the capability adjustment previously
described been made at the beginning of 1992, production as a percentage of
capability would have been 95% in 1993 and 100% in 1992.
Excluding special credits, the operating loss for the steel segment in 1993 was
$68.2 million, an improvement of $110.0 million from 1992. The favorable
impact of higher shipments, improved cost performance and higher average
selling prices was partially offset by higher purchased material prices, higher
depreciation and the effects on operations from scheduled production
interruptions. Additionally, 1993 operating results included increased
post-reorganization employee benefits expense of approximately $20 million.
<PAGE> 4
29
The 1992 special credit was a $60.0 million gain due to the anticipated
receipt of assets held in trust related to the sale of the Warren, Ohio, steel
facility in 1988.
Energy Products Sales of $297 million for 1993 increased by $34 million
from 1992 due to higher United States and Canadian sales of tubular and general
merchandise, partially offset by lower international sales of drilling
equipment. The average number of drilling rigs operating in the United States
increased to 756 in 1993, compared with 717 in 1992. The 1993 average number
of rigs operating in Canada increased to 182, compared with 96 in 1992.
The group reported operating income in 1993 of $5.9 million which was $9.7
million better than in 1992. The improvement resulted from higher sales of
tubular and general merchandise and favorable dispositions of excess inventory,
partially offset by lower sales of drilling equipment. Also, 1992 included a
$2.9 million charge associated with a product that is no longer manufactured and
the shutdown of other unprofitable operations and supply stores.
Corporate Corporate expenses in 1993 of $9.5 million were $5.4 million
less than in 1992, primarily due to a reduction in corporate staff and other
cost-control programs.
OTHER INCOME AND EXPENSE ITEMS
1994, 1993 AND 1992
Interest Expense Interest expense of $15.3 million in 1994 increased
by $5.3 million from 1993. Interest expense in 1993 and 1992 was $10.0 million
and $4.3 million, respectively. The increase in interest expense in 1994 over
1993 primarily resulted from a $4.3 million reduction in the amount of interest
capitalized in 1994 versus 1993. The increase in interest expense in 1993 over
1992 resulted from the issuance of $173 million of debt as part of the Company's
reorganization.
Interest and Other Income Interest and other income in 1994 of $26.1
million was $16.6 million higher than in 1993. The 1994 earnings resulted
primarily from interest income on the Company's invested cash and marketable
securities. Interest and other income in 1993 resulted primarily from
post-reorganization interest income on the Company's invested cash. Interest
and other income in 1993 was $27.4 million lower than in 1992. The 1992 income
included a $38.1 million gain related to the collection of a note receivable
which had been fully reserved.
Reorganization Items Reorganization items of $30.7 million in 1993 consisted
of a $1.0 billion increase to allowed claims for pension plans in excess of
recorded amounts, a $1.14 billion gain on fair value adjustments to the
Company's assets and liabilities, $132.6 million of professional fees and
expenses, and $22.3 million of interest earned on accumulated excess cash. The
1992 reorganization items included professional fees and expenses of $36.7
million which were offset by interest earned on accumulated excess cash of
$51.1 million. Included within the 1993 professional fees and expenses are
legal fees, trustee fees, credit facility fees, and other administrative
expenses which were significantly higher than prior periods due to the
additional activity required to implement the Joint Plan. The reorganization
items related to the periods that the Company was operating under the
protection of Chapter 11; therefore, no reorganization items have occurred
after the first half of 1993.
Income Taxes The Company's income tax provision was $72.2 million in 1994,
compared with $163.1 million in 1993. The 1993 income tax provision consisted
of post-reorganization taxes of $160.9 million and pre-reorganization taxes of
$2.2 million. The Company's effective tax rate was 36.2% in 1994 and 39.4% for
the post-reorganization period in 1993. The 1994 effective tax rate reflects
the Company reaching a settlement on certain state income tax issues and
recording a benefit of $5.0 million. Included in the 1994 and 1993 income tax
provisions are $72.5 million and $159.0 million, respectively, of federal and
state income tax expense which did not result in cash payments and such amounts
were reflected as reductions to the Company's intangible asset. As benefits of
the Company's unrecognized pre-reorganization net deferred tax assets are
realized, the Company's actual income tax cash payments will be less than the
financial statement income tax expense amounts. Taxes payable in cash during
the past three years consist of state, federal (for a less than 80% owned
subsidiary) and foreign taxes.
<PAGE> 5
30
Discontinued Operations During 1992, all of the remaining operating
businesses of the aerospace and defense group were sold and their results were
reported as discontinued operations. The 1992 results included $96.8 million of
income from aerospace and defense operations and a $737.0 million gain on the
sale of the operations.
Extraordinary Items Upon reorganization, certain recorded claims and
liabilities totaling $5.75 billion were discharged for consideration of $1.55
billion in cash, $52 million in other assets and the issuance of new LTV Common
Stock and Series A Warrants. A nontaxable extraordinary gain of $3.93 billion
was recorded on this debt discharge because the consideration was less than the
recorded liabilities. Certain prepetition claims and liabilities, the most
significant of which was the Company's obligation for its restored pension
plans, were not discharged under the Chapter 11 proceedings.
During 1992, the Company recorded an extraordinary charge of $140 million to
recognize a liability related to the requirements of the Coal Industry Retiree
Health Benefit Act of 1992 ("Coal Retiree Act"). The Coal Retiree Act created
a new multiemployer benefit plan called the United Mine Workers of America
("UMWA") Combined Benefit Fund, which began providing medical and death
benefits in 1993 to qualifying UMWA beneficiaries.
REORGANIZATION The Company filed petitions for bankruptcy under
Chapter 11 of the Bankruptcy Code in July 1986 and, until June 28, 1993,
operated under the protection of the Bankruptcy Court. While in Chapter 11
proceedings the Company experienced financial flexibility including: (i)
significant reduction in pension payments, (ii) relief from paying certain
prepetition obligations and interest on substantially all of its debt, and
(iii) the earning of substantial interest income on cash balances. These
benefits were partially offset by higher professional fees and expenses.
Major financial differences in operating results and cash flows before and
after emergence from bankruptcy are:
+ The expense for all pension plans was $164 million in 1994 and $140 million
in 1993 or an increase of $24 million primarily caused by the restoration of
the Company's major defined benefit pension plans during 1993. Pension
expense is expected to approximate $175 million in 1995 which takes into
consideration the change in the discount rate used to determine the current
value of the pension obligation and the pension benefit enhancements under
the Company's 1994 USWA labor agreement, partially offset by the significant
1994 funding.
+ The cash funding of the restored pension plans is based on a flexible
payment schedule. In accordance with the Company's settlement agreement with
the Pension Benefit Guaranty Corporation ("PBGC Settlement Agreement"),
LTV is required to make minimum annual fixed payments of $30 million to the
restored pension plans with respect to years 1994 through 1997, and $50
million in subsequent years. In addition, if available, the Company is
obligated each year to make variable payments to these plans based on the
previous year's available cash flow from operating activities after capital
spending (as defined in the PBGC Settlement Agreement). Under the PBGC
Settlement Agreement, the fixed and variable pension contributions due in
1995 total $183 million, $142 million of which was paid in September 1994,
with the remainder to be paid in 1995. The Company currently expects it
would need to make average annual payments of approximately $107 million in
order to fully fund this liability over the remaining 26-year term of the
PBGC Settlement Agreement.
+ Other postemployment benefit-related expense was $151 million in 1994 and
$215 million in 1993 or a decrease of $64 million. As part of fresh start
reporting, the Company recorded a reduction in the liability for
postemployment benefits of $514 million which was due to using current
experience information, revised assumptions including the health care cost
trend rate and the future rate of inflation, the recognition of actuarial
losses and prior service costs, and changes to the health care plans. While
the expense amount is now less than previously reported amounts, there is
not a significant change in cash payments as a result of these changes.
Other postemployment benefit-related expense is expected to approximate $165
million in 1995.
+ An intangible asset, reorganization value in excess of amounts allocable to
identifiable assets, was recognized as part of fresh start reporting. This
asset, which amounted to $27 million at December 31, 1994, is being
amortized over 20 years.
<PAGE> 6
31
+ Professional fees and other expenses, as well as interest earned on invested
excess cash balances associated with reorganization proceedings, ceased to
occur after reorganization.
+ Pre-reorganization net operating loss carryforwards and net deductible
temporary differences totaled $2.5 billion and $1.5 billion,
respectively, at December 31, 1994. In accordance with fresh start
reporting, the tax benefits associated with the utilization of these tax
attributes do not increase net income, but rather such benefits first
eliminate the Company's intangible asset and then increase shareholders'
equity. The Company's income tax cash payments will be significantly less
than the income tax expense amounts in the financial statements until these
tax attributes are fully utilized. Consequently, income before income
taxes represents an important indicator of the Company's performance. The
Company's ability to reduce its future income tax payments through the use
of net operating loss carryforwards could be significantly limited on an
annual basis if the Company were to undergo an "ownership change" within the
meaning of Section 382 of the Internal Revenue Code of 1986.
LIQUIDITY AND FINANCIAL
RESOURCES
The Company's sources of liquidity include cash and cash equivalents,
marketable securities, cash from operations, amounts available under credit
facilities and other external sources of funds. Management believes that these
sources are sufficient to fund the current requirements of working capital,
capital expenditures, pensions and postemployment health care.
From December 31, 1993, total cash, cash equivalents and marketable securities
increased by $287 million to $693 million at December 31, 1994. Cash and cash
equivalents totaled $335 million at year end. During 1994, cash provided by
operating activities, which included the remaining $171 million from the
settlement of an antitrust lawsuit, amounted to $716 million. Other major 1994
sources of cash consisted of $257 million from the Company's 1994 equity
offering and $184 million relating to dispositions of businesses and property.
Major uses of cash during 1994 included $642 million in funding to the restored
pension plans, the conversion of $358 million of cash equivalents to highly
liquid marketable securities to improve the return on those funds and $238
million in capital expenditures.
<TABLE>
1994 CASH FLOW
(in millions)
<S> <C>
Cash and cash equivalents at December 31, 1993........................................................ $ 406
----------
Cash flow from operations............................................................................. 716
Issuance of Common Stock.............................................................................. 257
Proceeds from dispositions of businesses and property................................................. 184
Pension funding to restored plans..................................................................... (642)
Net purchases of marketable securities................................................................ (358)
Capital expenditures, excluding capital leases........................................................ (238)
Other................................................................................................. 10
----------
Decrease in cash and cash equivalents................................................................. (71)
----------
Cash and cash equivalents at December 31, 1994........................................................ $ 335
==========
</TABLE>
Cash and cash equivalents increased to $406 million at December 31, 1993 from
$200 million at June 30, 1993. During this first post-reorganization period,
cash provided by operating activities, which included $200 million from the
settlement of an antitrust lawsuit, amounted to $432 million. Other major
sources of cash included $299 million from the Company's 1993 equity offering
and $123 million relating to prior sales of businesses. The major uses of cash
during this period included $512 million in contributions and cash restricted
for contributions to the restored pension plans and $129 million in capital
expenditures.
During the first six months of 1993, cash usage, excluding the effects of
reorganization-related items, was $136 million, principally due to capital
expenditures of $197 million. As part of the Company's reorganization
on June 28, 1993, Sumitomo Metal Industries, Ltd. made a cash investment and
loan totaling $200 million and the PBGC made a cash investment of $50 million.
The Company paid out $1.55 billion of cash, $52 million in other assets and
issued Common Stock and Series A Warrants to accomplish the reorganization.
<PAGE> 7
32
Cash and cash equivalents increased by $464 million from December 31, 1991 to
$1.63 billion at December 31, 1992. The increase in cash primarily resulted
from the proceeds of $546 million provided by the sales of the aerospace and
defense businesses, and by operating activities of $402 million which were
offset by cash used for property additions of $346 million and contributions to
a restored pension plan of $150 million.
In October 1994, the Company entered into two five-year credit facilities (the
"Receivables Facility" and the "Letter of Credit Facility") which will provide
the Company with up to $470 million for working capital requirements, including
letters of credit. The Receivables Facility permits borrowings of up to $320
million for working capital requirements and general corporate purposes, $100
million of which may be used to issue letters of credit. At December 31, 1994,
no borrowings were outstanding and letters of credit outstanding amounted to
$25.8 million under this facility. The Letter of Credit Facility is a
separate credit facility that provides for the issuance of up to $150 million
in letters of credit. At year end, letters of credit totaling $94.9 million
were outstanding under this facility.
The Company's long-term debt and credit facilities' agreements contain various
covenants which require the Company to maintain certain financial ratios and
amounts. These agreements as well as the PBGC Settlement Agreement place
certain restrictions on payments of dividends, capital expenditures,
investments in subsidiaries and borrowings. Under the terms of the most
restrictive covenant, $5.6 million of retained earnings are available for
Common Stock dividend payments at December 31, 1994. Substantially all of the
Company's receivables and inventories are pledged as collateral under certain
of these agreements. The Company does not believe that the restrictions
contained in these covenants will cause significant limitations on the Company's
financial flexibility.
COMPETITION
LTV competes directly with domestic and foreign integrated flat rolled carbon
steel producers and indirectly with producers of plastics, aluminum and other
materials such as ceramics and wood which sometimes can be substituted for
flat rolled carbon steel in manufacturing and construction. LTV also competes
with minimills which are relatively efficient, low-cost producers that
generally produce steel from scrap in electric furnaces. Their participation
in steel markets has traditionally been limited to structural, plate, bar and
rod products. Recently developed thin slab casting technologies have allowed
minimills to enter certain flat rolled markets which have traditionally been
supplied by integrated producers. Certain companies, including Trico Steel
Company, a 50% LTV-owned venture with Sumitomo Metal Industries, Ltd. and
British Steel plc, have begun construction of, announced plans for, or have
indicated that they are evaluating whether to construct additional minimills
to produce flat rolled products. The primary factors which affect competition
include price, quality, delivery and customer service. LTV targets
quality-critical, value-added applications and believes it is able to
differentiate some of its products from those of competitors on the basis of
its product quality, on-time delivery performance, and product and technical
support to customers.
Domestic steel producers have faced significant competition from foreign
producers. Foreign competition is intense and has adversely affected product
prices in the United States and tonnage sold by domestic producers. The
intensity of foreign competition is affected by fluctuations in the value of
the U.S. dollar against foreign currencies and demand within the domestic steel
market. Many foreign steel producers are owned, controlled or subsidized by
their governments. Decisions by these foreign producers with respect to
production and sales may be influenced to a greater degree by political and
economic policy considerations than by prevailing market conditions. Based on
American Iron and Steel Institute reports, imports of steel mill products
during the first 11 months of 1994 and 1993 totaled 27.6 million and 17.7
million net tons, respectively. This level of imports represented 25% and 19%
of total domestic steel consumption during the first 11 months of 1994 and 1993,
respectively. Imports of semifinished steel products accounted for 7.3 million
tons of the total in 1994, compared with 4.6 million tons in 1993. LTV along
with other U.S. steel producers are purchasers of semifinished steel products
which are further processed to support domestic demand.
<PAGE> 8
33
In 1992, the Company and certain domestic steel producers filed unfair trade
petitions against foreign producers of certain steel products. During 1993, the
International Trade Commission ("ITC") upheld final subsidy and dumping margins
on approximately 26% of the volume of all 1993 flat rolled carbon steel imports
under investigation. Appeals of the adverse ITC decisions have been filed in
the U.S. Court of International Trade or similar jurisdictional bodies, and
foreign producers have appealed certain of the findings against them. These
appeals are pending and decisions are expected during 1995. Steel imports of
flat rolled products during the first 11 months of 1994 totaled 13.0 million
tons, an increase of 5.6 million tons from the year-ago period. The outcome of
the trade cases, as well as the recently passed legislation implementing the
Uruguay Round agreements under the General Agreement on Tariffs and Trade, may
result in increased imports of steel products into the United States.
CAPITAL EXPENDITURES AND
REQUIREMENTS
The Company invested $240 million in capital expenditures during 1994. The
Company's major 1994 capital projects included the rehabilitation of the
Chicago coke facility and a blast furnace reline at the Indiana Harbor Works.
LTV's capital expenditures are directed toward market-driven requirements,
cost-reduction programs, new technology, replacement projects and environmental
requirements. The Company anticipates capital expenditures will approximate
$235 million during 1995.
<TABLE>
<CAPTION>
CONTINUING OPERATIONS-CAPITAL EXPENDITURES AND DEPRECIATION
(in millions)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
+ Capital Expenditures $240 $327 $313
+ Depreciation $245 $240 $213
</TABLE>
INVESTMENT IN
JOINT VENTURE
In December 1994, the Company announced that it is participating in a joint
venture with Sumitomo Metal Industries, Ltd. and British Steel plc to build and
operate a new flat rolled steel minimill company, known as Trico Steel Company.
LTV will have a 50% interest in the joint venture with the other partners
having interests of 25% each. Trico Steel Company will locate its new facility
in the growing steel market of the southeastern United States. Construction is
expected to begin during the second quarter of 1995, with operation scheduled to
begin in late 1996. The mill will have annual production capacity of 2.2
million tons. The construction cost of the project, a portion of which will be
financed by project debt, is expected to be $450 million. LTV anticipates its
investment in the joint venture will approximate $100 million during 1995.
PENSION AND POSTEMPLOYMENT
HEALTH CARE BENEFITS
The Company made contributions to its defined benefit pension plans totaling
$797 million in 1994 and $1.3 billion in 1993. The 1994 contribution included
amounts from the following: $257 million from the Company's 1994 equity
offering, $171 million from the final proceeds of a favorable antitrust
litigation settlement, $162 million from the proceeds of a revertible trust and
$150 million from the Company's 1993 equity offering. The Company's pension
plan assets were 63% of projected benefit obligations at December 31, 1994
versus 43% at December 31, 1993.
<PAGE> 9
34
<TABLE>
<CAPTION>
PENSION PLAN ASSETS AT END OF YEAR
(in millions)
<S> <C>
1994 $2,011
1993 $1,573
1992 $ 215
</TABLE>
Movements in the rate of interest on long-term high-quality corporate bonds
necessitated a change in the discount rate used to calculate the actuarial
present value of the benefit obligations for pensions and postemployment health
care benefits from a 7.0% discount rate used by the Company in 1993 to 9.0% at
December 31, 1994. The requirement to reset the discount rate consistent with
movements in market interest rates results in volatility of the discount rate
and consequently in the recorded amount of the Company's obligations. At
December 31, 1994, this adjustment of the discount rate decreased the benefit
obligation for pensions by $541 million and decreased the minimum pension
liability adjustment account. The increases in the discount rate and related
health care cost trend rate reduced the benefit obligation for postemployment
health care by $232 million at December 31, 1994. However, the application of
these higher rates does not require an adjustment to the related postemployment
health care liability on the Company's consolidated balance sheet. The changes
have no impact on near-term cash flows, and their impact on future operating
results is included in the previously disclosed 1995 estimated expense amounts.
As part of the 1994 USWA labor agreement, there were certain pension benefit
enhancements which increased the Company's benefit obligation for pensions by
approximately $176 million at December 31, 1994. In addition, under the
Company's 1994 USWA labor agreement, the Company will make contributions to
a Voluntary Employee Beneficiary Association ("VEBA") Trust to prefund
postemployment health care and other insurance benefits for retirees covered
under the agreement. Under the terms of the labor agreement, the Company is
required to contribute to the VEBA Trust a minimum of $5 million annually and,
under certain circumstances, additional amounts calculated as set forth in the
labor agreement. The initial required contribution is expected to be $19
million in 1995. The Company may also make additional discretionary
contributions to the VEBA Trust.
A 1993 agreement with the USWA provided that a portion of the requirements with
respect to certain postemployment benefits would be secured by a junior lien
($200 million at December 31, 1994 and increasing to $250 million on June 28,
1995) on collateral with an unencumbered fair market value of at least $500
million. The initial security was provided by the grant of a mortgage on
facilities having a carrying value of approximately $500 million.
LABOR MATTERS
Effective June 1, 1994, the USWA ratified a five-year and two-month labor
agreement with the Company. The terms of the labor agreement are consistent
with those negotiated with other major steel producers and thus LTV does not
believe that its competitive position with regard to such other competitors has
been materially affected by the ratification. The additional
nonpension-related costs of the labor agreement approximated $9 million in
1994 and such costs are anticipated to total $37 million in 1995. These
amounts exclude cost savings related to ongoing productivity improvements
under the new cooperative labor agreement which are difficult to quantify. The
agreement provided for, among other things, a ratification and other bonuses, a
$.50 per hour wage increase in August 1995, improved employment security, and
the previously discussed enhanced pension benefits and the establishment of the
VEBA Trust. The agreement provides for a reopening of wage provisions on
August 1, 1996, subject to binding arbitration.
<PAGE> 10
35
OTHER MATTERS
In January 1995, LTV announced that it is examining strategic alternatives for
its energy products segment, Continental Emsco Company. These alternatives
could include the possible sale or merger of the business with other entities.
LTV is working with an outside advisor to conclude the evaluation.
ENVIRONMENTAL LIABILITIES
AND RELATED COSTS
LTV is subject to changing and increasingly stringent environmental standards
and laws concerning air emissions, water discharges and waste disposal in the
normal course of conducting its business. Under the Joint Plan, the Company
entered into an environmental settlement agreement ("ESA") with the U.S.
Environmental Protection Agency ("EPA"), which resolved or provided the means
to resolve a significant portion of the Company's environmental-related
liabilities and also provided a basis for settlement agreements concerning the
environmental claims of several states. The ESA resolved certain prepetition
Superfund Site liabilities identified at the time of reorganization and settled
them for $33 million as general unsecured claims. Management believes that
future prepetition environmental claims, if any, which are not covered by the
ESA, will be subject to the dischargeability provisions of the Federal
Bankruptcy Code or to the provisions of the Joint Plan. General liabilities
from postpetition acts were not discharged or in any manner affected by the
reorganization. In addition, the Company retains responsibility for
environmental obligations for properties owned at confirmation of the Joint
Plan regardless of when the conduct which gives rise to the liability occurred.
By addressing certain environmental liabilities in the reorganization process,
the Company has had a significant amount of its environmental liabilities
liquidated and discharged and has established a mechanism to resolve certain
subsequently identified prepetition environmental claims (if any).
During 1994, the Company spent approximately $21 million for environmental
clean-up and related matters at operating and idled facilities, and at
December 31, 1994, has a recorded liability of $105 million for known and
identifiable environmental and related matters. The Company also spent
approximately $30 million in 1994 for environmental compliance-related capital
expenditures and expects it will be required to spend an average of
approximately $40 million annually in capital expenditures during the next
five years to meet environmental standards.
The Company has incurred and will continue to incur substantial capital
expenditures and operating and maintenance expenses in complying with
environmental standards and laws. In particular, the 1990 Clean Air Act
Amendments require progressively more stringent air emission quality standards.
Additionally, the EPA, in general, interprets the Resource Conservation and
Recovery Act of 1976, as amended ("RCRA"), as granting the EPA authority to
require companies to clean up plant sites where hazardous wastes have been used
(and are being or may be released into the environment) even if such sites are
not subject to the permitting requirements of RCRA. If the EPA were to
require the Company to clean up its facilities under RCRA, the costs to the
Company could be substantial. If any of the Company's facilities are unable
to meet required environmental standards, those operations could be
temporarily or permanently closed. Estimates for future costs required for
environmental compliance are difficult to determine due to numerous
uncertainties, including the evolving nature of the regulations, the possible
imposition of more stringent requirements and the availability of new
technologies. The effect of the outcome of these matters on the Company's
future results of operations and liquidity cannot be predicted because any such
effect depends on future results of operations and the amount and timing of the
resolution of such matters. While it is not possible to predict with certainty,
management believes that the ultimate resolution of such matters will not have
a material adverse effect on the consolidated financial position of the
Company.
<PAGE> 11
<TABLE>
CONSOLIDATED STATEMENT OF INCOME 36
(in millions, except per share data)
<CAPTION>
Year Ended Six Months Ended Year Ended
December 31, December 31,| June 30, December 31,
1994 1993 | 1993 1992
<S> <C> <C> | <C> <C>
NET SALES $ 4,529.2 $ 2,170.6 | $ 1,992.6 $ 3,825.9
---------- ---------- | ---------- ----------
Operating costs and expenses: |
Cost of products sold 3,907.8 1,945.8 | 1,867.0 3,614.3
Depreciation and amortization 245.2 125.9 | 114.4 213.4
Selling, general and administrative expenses 187.7 89.7 | 92.2 195.1
Special credits -- (400.6) | (191.0) (60.0)
---------- ---------- | ---------- ----------
Total 4,340.7 1,760.8 | 1,882.6 3,962.8
---------- ---------- | ---------- ----------
OPERATING INCOME (LOSS) 188.5 409.8 | 110.0 (136.9)
Interest expense (15.3) (8.3) | (1.7) (4.3)
Interest and other income 26.1 6.6 | 2.9 36.9
---------- ---------- | ---------- ----------
Income (loss) before reorganization items, |
income taxes, discontinued operations |
and extraordinary items 199.3 408.1 | 111.2 (104.3)
Reorganization items -- -- | 30.7 14.4
---------- ---------- | ---------- ----------
199.3 408.1 | 141.9 (89.9)
Income tax provision: |
Taxes payable (refundable) (0.3) 1.9 | 2.2 5.2
Taxes not payable in cash 72.5 159.0 | -- --
---------- ---------- | ---------- ----------
Total 72.2 160.9 | 2.2 5.2
---------- ---------- | ---------- ----------
Income (loss) before items below 127.1 247.2 | 139.7 (95.1)
Discontinued operations -- -- | -- 833.8
---------- ---------- | ---------- ----------
Income before extraordinary items 127.1 247.2 | 139.7 738.7
Extraordinary items -- -- | 3,928.0 (140.0)
---------- ---------- | ---------- ----------
NET INCOME $ 127.1 $ 247.2 | $ 4,067.7 $ 598.7
========== ========== | ========== ==========
|
EARNINGS PER SHARE |
Primary $ 1.29 $ 3.21 | * *
========== ========== |
Fully diluted $ 1.27 $ 3.03 | * *
========== ========== |
<FN>
* Per share amounts are not meaningful due to reorganization.
See notes to consolidated financial statements.
</TABLE>
<PAGE> 12
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS 37
(in millions)
<CAPTION>
Year Ended Six Months Ended Year Ended
December 31, December 31, June 30, December 31,
1994 1993 1993 1992
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Income before extraordinary items $ 127.1 $ 247.2 | $ 139.7 $ 738.7
Adjustments to reconcile income to net cash |
provided by (used in) operating activities: |
Special credits 171.0 (200.6) | (191.0) (60.0)
Gain on sale of aerospace and defense |
businesses ---- ---- | ---- (755.0)
Income tax provision not payable in cash 72.5 159.0 | ---- ----
Depreciation and amortization 245.2 125.9 | 114.4 241.3
Defined benefit pension expense 119.8 84.9 | 13.0 23.5
Postemployment benefit payments less |
than related expense 18.1 8.9 | 61.2 148.6
Employee benefit expense paid from |
VEBA Trust ---- ---- | 22.3 141.6
Changes in assets and liabilities (29.7) 0.3 | (19.3) (88.1)
Other (7.9) 6.3 | (1.5) 11.9
Cash used to discharge prepetition |
liabilities ---- ---- | (774.7) ----
--------- --------- | --------- -----------
Net cash provided by (used in) |
operating activities 716.1 431.9 | (635.9) 402.5
--------- --------- | --------- -----------
INVESTING ACTIVITIES |
Property additions, excluding capitalized |
lease assets (238.5) (128.7) | (196.9) (345.7)
Net purchases of marketable securities (357.5) ---- | ---- ----
Proceeds from dispositions of businesses |
and property 184.5 123.5 | 10.2 551.8
Other (10.3) (2.5) | (3.5) 9.4
--------- --------- | --------- -----------
Net cash provided by (used in) |
investing activities (421.8) (7.7) | (190.2) 215.5
--------- --------- | --------- -----------
FINANCING ACTIVITIES |
Issuance of Common Stock 257.2 298.5 | ---- ----
Issuance of notes payable ---- ---- | 7.1 ----
Pension funding to restored plans (642.2) (512.4) | (862.1) (150.0)
Receipt of escrowed funds 25.8 ---- | ---- ----
Principal payments on long-term debt (4.3) (3.3) | (0.7) (4.0)
Preferred dividends paid (2.3) (1.1) | ---- ----
Other 0.6 ---- | ---- ----
Other reorganization-related items ---- ---- | 250.0 ----
--------- --------- | --------- -----------
Net cash used in financing activities (365.2) (218.3) | (605.7) (154.0)
--------- --------- | --------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (70.9) 205.9 | (1,431.8) 464.0
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 406.3 200.4 | 1,632.2 1,168.2
--------- --------- | --------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 335.4 $ 406.3 | $ 200.4 $ 1,632.2
========= ========= | ========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE> 13
<TABLE>
CONSOLIDATED BALANCE SHEET 38
(in millions, except per share data)
<CAPTION>
December 31,
ASSETS 1994 1993
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 335.4 $ 406.3
Marketable securities 357.5 -----
---------- ---------
692.9 406.3
Receivables, less allowance for doubtful accounts
of $22.4 in 1994 and $21.4 in 1993 518.4 479.3
Inventories:
Products 573.5 565.9
Materials, purchased parts and supplies 247.2 265.3
---------- ---------
Total inventories 820.7 831.2
Prepaid expenses, deposits and other 35.8 566.3
---------- ---------
Total current assets 2,067.8 2,283.1
---------- ---------
INVESTMENTS AND OTHER NONCURRENT ASSETS 313.4 295.2
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements 72.7 73.4
Buildings 148.4 146.5
Machinery and equipment 3,178.4 3,026.9
Construction in progress 109.1 79.7
---------- ---------
3,508.6 3,326.5
Less allowance for depreciation (300.6) (109.7)
---------- ---------
Total property, plant and equipment 3,208.0 3,216.8
---------- ---------
$ 5,589.2 $ 5,795.1
=========== ===========
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
DECEMBER 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1994 1993
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 291.6 $ 260.8
Accrued employee compensation and benefits 401.2 899.1
Other accrued liabilities 186.8 240.5
----------- -----------
Total current liabilities 879.6 1,400.4
----------- -----------
NONCURRENT LIABILITIES
Long-term debt 190.3 186.3
Postemployment health care and other insurance benefits 1,646.1 1,601.9
Pension benefits 1,138.7 1,583.8
Other 451.7 482.9
----------- -----------
Total noncurrent liabilities 3,426.8 3,854.9
----------- -----------
SHAREHOLDERS' EQUITY
Convertible preferred stock--stated value $50.0 in 1994
and $100.0 in 1993 0.5 1.0
Common stock held for issuance -- 54.3
Common stock--par value $0.50 per share; authorized
150.0 shares; deemed issued and outstanding 106.0 shares
in 1994 and 83.8 shares in 1993 53.0 41.9
Additional paid-in capital 872.8 561.3
Retained earnings 366.7 246.1
Minimum pension liability adjustment (5.8) (364.8)
Other (4.4) --
----------- -----------
Total shareholders' equity 1,282.8 539.8
----------- -----------
$ 5,589.2 $ 5,795.1
=========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 40
December 31, 1994
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation Following approval of the Joint Plan of
Reorganization ("Joint Plan") by the creditors, shareholders and others, The
LTV Corporation ("LTV" or the "Company") emerged from bankruptcy on June 28,
1993 (the "Effective Date"). In accounting for its emergence, the Company
adopted "fresh start" reporting in which the Company's assets and liabilities
were adjusted to reflect their estimated fair values and the remaining
accumulated deficit was eliminated, resulting in a new reporting entity as of
June 30, 1993. Accordingly, the Company's consolidated financial statements
for periods prior to June 30, 1993 are not necessarily comparable to
consolidated financial statements presented subsequent to that date. A
vertical line has been placed on the consolidated financial statements to
distinguish between pre-reorganization and post-reorganization activity.
Certain prior year amounts have been reclassified to conform with the current
year presentation.
Principles of Consolidation The consolidated financial statements
include LTV and its majority-owned subsidiaries. Investments in joint ventures
and companies owned 20% to 50% are accounted for by the equity method. The
Company's interest in the cumulative undistributed earnings of its
unconsolidated affiliates was $11.6 million at December 31, 1994, all of which
was available for dividend or other distribution to the Company.
Marketable Securities The Company adopted the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," effective January 1, 1994.
Adoption of this standard did not materially impact the Company's con-
solidated financial statements.
The Company determines the appropriate classification of marketable
securities at the time of purchase and reevaluates such designation at each
balance sheet date. Marketable securities have been classified as
available-for-sale and are carried at fair value, with unrealized holding
gains and losses reported as a separate component of shareholders' equity.
The cost of debt securities is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization, interest income,
realized gains and losses and declines in value judged to be other than
temporary are included in interest and other income. The cost of securities
sold is based on specific identification.
Inventories Inventories were recorded at their estimated fair values
at June 30, 1993. Inventories are valued at the lower of cost or market, with
cost determined primarily by the "last-in, first-out" ("LIFO") method. The
amount by which inventory is reduced to state inventory at LIFO value is $21.8
million at December 31, 1994 and $3.0 million at December 31, 1993. The
current replacement value of inventories was $815.7 million and $805.1 million
at December 31, 1994 and 1993, respectively.
Property Costs and Depreciation and Amortization Property costs were
recorded at their estimated fair values at June 30, 1993. Property additions
after June 30, 1993 are recorded at cost. Depreciation is computed
principally using a modified straight-line method based upon estimated eco-
nomic lives of assets and the levels of production. The method provides for
depreciation within a range of 80% to 120% of the straight-line amount on
individual major production facilities with decreased depreciation at lower
and increased depreciation at higher operating levels. During each of the
previous three years, depreciation expense under this method has approximated
the computed straight-line amounts. In addition, a units-of-production method
is used for blast furnaces.
When properties are retired or sold, their carrying value and the related
allowance for depreciation are eliminated from the property and allowance for
depreciation accounts, respectively. Generally, for normal retirements, gains
or losses are credited or charged to allowance for depreciation accounts; for
abnormal retirements, gains or losses are included in income in the year of
disposal.
<TABLE>
MARKETABLE SECURITIES
The following is a summary of marketable securities at
December 31, 1994 (in millions):
<CAPTION>
UNREALIZED
HOLDING FAIR
COST LOSSES VALUE
<S> <C> <C> <C>
U.S. Government
obligations $ 158.9 $ (1.0) $ 157.9
Corporate obligations 189.7 (0.2) 189.5
Other 10.1 ---- 10.1
-------- -------- --------
$ 358.7 $ (1.2) $ 357.5
======== ======== ========
</TABLE>
The gross realized gains and losses on sales of marketable securities each
totaled approximately $0.1 million for the year ended December 31, 1994. Gross
unrealized holding gains at December 31, 1994 totaled under $0.1 million.
<PAGE> 16
41
<TABLE>
The cost and estimated fair value of marketable securities by contractual
maturity at December 31, 1994 are as follows (in millions):
<CAPTION>
COST FAIR VALUE
<S> <C> <C>
Due in one year or less $ 353.7 $ 352.6
Due after one year through two years 5.0 4.9
-------- --------
$ 358.7 $ 357.5
======== ========
</TABLE>
<TABLE>
OTHER ASSETS AND LIABILITIES
Current prepaid expenses, deposits and other assets included the following at
December 31 (in millions):
<CAPTION>
1994 1993
<S> <C> <C>
Cash and receivables restricted
to pension funding $ -- $ 481.0
Prepaid expenses and deposits 19.7 25.3
Other 16.1 60.0
-------- --------
$ 35.8 $ 566.3
======== ========
</TABLE>
<TABLE>
Current accrued employee compensation and benefits included the following at
December 31 (in millions):
<CAPTION>
1994 1993
<S> <C> <C>
Pension benefits $ 58.8 $ 543.3
Postemployment health care and other
insurance benefits 131.3 157.4
Compensated absences 52.6 52.9
Other 158.5 145.5
------- --------
$ 401.2 $ 899.1
======= ========
</TABLE>
<TABLE>
Current other accrued liabilities included the following at December 31
(in millions):
<CAPTION>
1994 1993
<S> <C> <C>
Accrued taxes other than income $ 79.6 $ 89.8
Accrued income taxes 13.6 14.4
Other 93.6 136.3
------- -------
$ 186.8 $ 240.5
======= =======
</TABLE>
<TABLE>
Noncurrent other liabilities included the following at December 31
(in millions):
<CAPTION>
1994 1993
<S> <C> <C>
Employee benefits $ 262.5 $ 268.3
Environmental and plant rationalization 121.9 138.1
Other 67.3 76.5
------- -------
$ 451.7 $ 482.9
======= =======
</TABLE>
<TABLE>
DEBT AND CREDIT FACILITIES
Long-term debt consisted of the following at December 31
(in millions):
<CAPTION>
1994 1993
<S> <C> <C>
Senior secured convertible notes due June 2003 $ 100.0 $ 100.0
Zero coupon notes due December 2020, less
unamortized discount of $640.9 in 1994 and
$647.5 in 1993, 8.5% effective rate to maturity 83.1 76.5
Note payable due in December 1995, bearing interest
at 5%, less unamortized discount of $0.1 in
1994 and $0.3 in 1993, 8.5% effective rate to
maturity 2.4 4.7
Capitalized lease obligations 8.8 9.0
-------- --------
194.3 190.2
Less current portion
(included in accounts payable) (4.0) (3.9)
-------- --------
$ 190.3 $ 186.3
======== ========
</TABLE>
Maturities of the Company's long-term debt are as follows: 1995--$4.0 million;
1996--$1.3 million; 1997--$0.7 million; 1998--$0.6 million; and 1999--$0.7
million.
The senior secured convertible notes bear interest at the rate of 8.5% if paid
in cash or 10.5% if paid in kind with additional convertible notes. The
holders of the convertible notes have the right to convert such notes, in whole
or in part, into shares of LTV Common Stock at a conversion price of $19.50 per
share (potentially 5,128,205 shares).
The zero coupon notes mature on December 31, 2020 and have an aggregate matured
face amount of $724 million. The notes are required to be prepaid within 120
days after the restored pension plans become fully funded. LTV has the option
to prepay the zero coupon notes at any time after December 31, 2000 at a price
based on their accreted value, which on December 31, 2000 would approximate
$137 million.
In October 1994, the Company entered into two five-year credit facilities (the
"Receivables Facility" and the "Letter of Credit Facility") which at December
31, 1994 provided the Company with $470 million of financing facilities at
prevailing market rates.
The Receivables Facility permits borrowings of up to $320 million for working
capital requirements and general corporate purposes, $100 million of which may
be used to issue letters of credit. At December 31, 1994, no borrowings were
outstanding and letters of credit outstanding amounted to $25.8 million under
this facility. The borrower under the Receivables Facility is LTV Sales Finance
Company, a structured finance special purpose subsidiary wholly owned by LTV,
which on a daily basis purchases and pledges essentially all of the
receivables generated by LTV. The creditors of LTV Sales Finance Company have a
claim on the assets of that company prior to those assets becoming available
to other creditors of LTV or its affiliates.
<PAGE> 17
42
The Letter of Credit Facility is a separate credit facility that provides for
the issuance of up to $150 million in letters of credit. At year end, letters
of credit totaling $94.9 million were outstanding under this facility.
The long-term debt and credit facilities' agreements contain various covenants
which require the Company to maintain certain financial ratios and amounts.
These agreements, as well as the settlement agreement with the Pension Benefit
Guaranty Corporation ("PBGC") regarding the restored pension plans ("PBGC
Settlement Agreement"), place certain restrictions on payments of dividends,
capital expenditures, investments in subsidiaries and borrowings. Under the
terms of the most restrictive covenant, $5.6 million of retained earnings are
available for Common Stock dividend payments at December 31, 1994. Substan-
tially all of the Company's receivables and inventories are pledged as
collateral under the convertible notes and credit facilities agreements.
Through the reorganization period, the Company followed the accounting practice
of accruing interest only on those debt issues which were believed to be
fully secured. Interest expense would have been $120 million and $241 million
greater for the six months ended June 30, 1993 and the year ended December 31,
1992, respectively, if interest had been accrued and recorded on all
outstanding debt. However, these greater amounts are not representative of
interest expense or accruals for periods subsequent to the reorganization of
the Company.
<TABLE>
The Company leases certain manufacturing facilities and equipment, office
space and computer equipment under cancelable and noncancelable leases which
expire at various dates. Minimum future lease obligations in effect at
December 31, 1994 are as follows (in millions):
<CAPTION>
CAPITALIZED LEASE OPERATING
OBLIGATIONS LEASES
<S> <C> <C>
1995 $ 2.6 $ 31.8
1996 1.9 32.2
1997 1.3 28.1
1998 1.2 27.5
1999 1.2 15.5
Later years 4.6 6.2
----- ------
Total payments 12.8 $141.3
Less amount representing interest (4.0) ======
-----
Present value of net minimum lease
payments 8.8
Less current portion (1.6)
-----
Net amount included in long-term debt $ 7.2
=====
</TABLE>
Rental expense on operating leases was $61.9 million, $31.4 million, $31.7
million and $63.2 million for the year ended December 31, 1994, the six months
ended December 31 and June 30, 1993 and the year ended December 31, 1992,
respectively.
<TABLE>
POSTEMPLOYMENT HEALTH CARE AND OTHER
INSURANCE BENEFITS
The Company provides health care and other insurance benefits, primarily
life, for substantially all active, inactive and retired employees. The health
care plans are contributory and contain other cost-sharing features such as
deductibles, lifetime maximums and copayment requirements. The components of
periodic expense and cash payments for postemployment benefits are as follows
(in millions):
<CAPTION>
YEAR ENDED SIX MONTHS ENDED YEAR ENDED
12/31/94 12/31/93 | 6/30/93 12/31/92
<S> <C> <C> | <C> <C>
Service cost - benefits |
earned during |
the period $ 19.3 $ 8.2 | $ 13.8 $ 27.3
Interest cost on |
accumulated benefit |
obligation 131.3 71.1 | 107.0 217.3
Net amortization and |
deferral - - | 14.8 38.0
------- ------ | ------- -------
Total expense $ 150.6 $ 79.3 | $ 135.6 $ 282.6
======= ====== | ======= =======
Total cash payments $ 132.5 $ 70.4 | $ 74.4 $ 150.6
======= ====== | ======= =======
</TABLE>
<TABLE>
The actuarial and recorded liabilities for postemployment benefits are as
follows at December 31 (in millions):
<CAPTION>
1994 1993
<S> <C> <C>
Accumulated benefit obligation:
Retirees $ 1,342.7 $ 1,520.1
Fully eligible active plan participants 121.6 139.1
Other active plan participants 250.1 293.3
--------- ---------
Total 1,714.4 1,952.5
Unrecognized net actuarial gains (losses) 63.0 (193.2)
Total liability included in the --------- ---------
consolidated balance sheet 1,777.4 1,759.3
Less current portion (131.3) (157.4)
--------- ---------
Noncurrent liability $ 1,646.1 $ 1,601.9
========= =========
</TABLE>
<PAGE> 18
43
During 1994, the Company paid the cost of these benefits as they were
incurred. However, as part of the 1994 United Steelworkers of America ("USWA")
labor agreement, the Company will make contributions to a Voluntary Employee
Beneficiary Association ("VEBA") Trust to prefund postemployment health care
and other insurance benefits for covered retirees in addition to paying the
cash costs for such benefits as they are incurred. Under the terms of the
labor agreement, the Company is required to contribute to the VEBA Trust a
minimum of $5 million annually and, under certain circumstances, additional
amounts calculated as set forth in the labor agreement. The initial required
contribution is expected to be $19 million in 1995.
The December 31, 1994 accumulated benefit obligation was determined under an
actuarial assumption using a health care cost trend rate of 8.9% in 1995,
gradually declining to 5.5% in the year 2001 and thereafter over the projected
payout period of the benefits. The effect on the present value of the
accumulated benefit obligation at December 31, 1994 of a 1% increase each year
in the health care cost trend rate used would result in an increase of $126
million in the accumulated benefit obligation and a $13 million increase in
the total 1994 service and interest components of expense. At December 31,
1993, the accumulated benefit obligation was determined under an actuarial
assumption using a health care cost trend rate of 9.7% in 1994, gradually
declining to 4.25% in the year 2001 and thereafter over the projected payout
period of the benefits.
The accumulated benefit obligations were determined using an assumed discount
rate of 9.0% at December 31, 1994 and 7.0% at December 31, 1993. The assumed
discount rate was adjusted at December 31, 1994 to recognize the increase in
interest rates relating to high-quality debt instruments. The assumed
discount rate increase and related increase in the health care cost trend rate
resulted in a net decrease in the accumulated benefit obligation of $232
million with the offsetting amount classified as an unrecognized net actuarial
gain. The adjustment of these rates will result in an increase in annual
expense of approximately $14 million. However, the changes will have no impact
on near-term cash flows.
Postemployment benefits were adjusted to their estimated fair values at
June 30, 1993. The adjustment resulted in a reduction of the liability of $514
million due to using more current experience information, the recognition of
prior service costs and actuarial losses and giving effect to changes in the
Company's health care plans.
PENSION BENEFITS
The Company has various pension plans covering substantially all of its
employees. Current benefits for most employees are provided through
defined contribution plans with benefits based on age and compensation levels.
Pension costs for the defined contribution plans are accrued and funded on a
current basis.
The Company also has defined benefit plans, most of which were affected
by numerous actions which occurred during the Chapter 11 proceedings. The
increase in post-reorganization pension costs is due to the restored pension
plans. Benefits under the majority of the defined benefit plans are for past
service only and are based on years of service and on average compensation for
certain years. The majority of these plans will be funded through the year
2020 in accordance with the PBGC Settlement Agreement.
<TABLE>
The components of pension cost are as follows (in millions):
<CAPTION>
YEAR ENDED SIX MONTHS ENDED YEAR ENDED
12/31/94 12/31/93 | 6/30/93 12/31/92
<S> <C> <C> | <C> <C>
Defined benefit plans: |
Service cost -- |
benefits earned |
during the period $ 3.6 $ 2.1 | $ 1.6 $ 3.3
Interest cost on |
projected benefit |
obligation 250.7 136.5 | 20.5 39.5
Actual return |
on plan assets (14.9) (64.5) | (15.7) (15.3)
Net amortization |
and deferral (119.6) 10.8 | 6.6 (4.0)
-------- -------- | ------- ---------
Net pension cost |
of defined |
benefit plans 119.8 84.9 | 13.0 23.5
Defined contribution |
plans 44.3 21.3 | 21.2 35.2
-------- -------- | ------- ---------
Total expense $ 164.1 $ 106.2 | 34.2 $ 58.7
======== ======== ======= =========
</TABLE>
Plan assets consist substantially of equity securities listed
on national exchanges, fixed income securities and cash
equivalents. The assumed long-term rate of return on plan
assets was 8.5% for 1994, 1993 and 1992.
<PAGE> 19
44
<TABLE>
The following table sets forth the funded status of the Company's defined
benefit pension plans (in millions):
<CAPTION>
AT DECEMBER 31, 1994 AT DECEMBER 31, 1993
PLANS WITH ASSETS PLANS WITH PLANS WITH ASSETS PLANS WITH
IN EXCESS OF OBLIGATIONS IN IN EXCESS OF OBLIGATIONS IN
OBLIGATIONS EXCESS OF ASSETS OBLIGATIONS EXCESS OF ASSETS
<S> <C> <C> <C> <C>
Actuarial present value:
Vested benefit obligation $ 189.4 $ 2,743.0 $ 211.7 $ 3,161.8
Nonvested benefit obligation 33.2 210.8 26.6 265.3
-------------- -------------- ------------- --------------
Accumulated benefit obligation $ 222.6 $ 2,953.8 $ 238.3 $ 3,427.1
============== ============== ============= ==============
Projected benefit obligation $ 230.3 $ 2,953.8 $ 253.5 $ 3,427.4
Plan assets at fair value 245.7 1,764.9 266.8 1,306.4
-------------- -------------- ------------- --------------
Plan assets in excess of (less than)
projected benefit obligation 15.4 (1,188.9) 13.3 (2,121.0)
Unrecognized initial net asset
existing at transition (1.1) -- (1.3) --
Unrecognized prior service cost 14.9 162.2 0.5 --
Unrecognized net actuarial (gains) losses (1.2) (49.2) 19.1 365.0
Adjustment required to recognize
minimum liability -- shareholders' equity -- (5.8) -- (364.8)
-- intangible asset -- (109.5) -- --
Prepaid (accrued) pension costs included ------------- -------------- ------------- --------------
in the consolidated balance sheet $ 28.0 $ (1,191.2) $ 31.6 $ (2,120.8)
============= ============== ============= ==============
</TABLE>
Accumulated benefit obligations and projected benefit obligations for defined
benefit pension plans were determined using an assumed discount rate of 9.0%
at December 31, 1994 and 7.0% at December 31, 1993. The assumed discount rate
was adjusted at December 31, 1994 to recognize the increase in interest rates
relating to high-quality debt instruments. The increased assumed discount rate
decreased the accumulated benefit obligation by $541 million and decreased
the shareholders' equity minimum pension liability adjustment account.
Pension benefit enhancements under the Company's 1994 USWA labor agreement
increased the accumulated benefit obligation by approximately $176 million at
December 31, 1994 and increased the intangible asset minimum pension
liability adjustment account. These changes, along with the 1994 funding, will
result in a 1995 pension expense of approximately $175 million.
TAXES
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," effective January 1, 1993.
Adoption of this standard did not materially impact the Company's consoli-
dated financial statements.
<TABLE>
The provision for income taxes is as follows (in millions):
<CAPTION>
YEAR ENDED SIX MONTHS ENDED YEAR ENDED
12/31/94 12/31/93 | 6/30/93 12/31/92
<S> <C> <C> | <C> <C>
Current: |
Federal $ 0.9 $ 0.5 | $ (0.2) $ 1.4
State (2.0) 1.8 | 1.6 3.4
Foreign 1.1 0.2 | 0.8 0.4
Deferred (0.3) (0.6) | -- --
Amount not payable |
in cash 72.5 159.0 | -- --
------------- -------------- | ----------- ----------
$ 72.2 $ 160.9 | $ 2.2 $ 5.2
============= ============== | =========== ==========
</TABLE>
<PAGE> 20
45
The Company reports federal income tax expense before consideration of
pre-reorganization net deferred tax assets, including net operating losses.
To the extent that LTV realizes the benefits (through reduced cash tax
payments) from pre-reorganization net deferred tax assets ($1.6 billion at
December 31, 1994), such benefit amounts first reduce the intangible asset
resulting from the reorganization value being in excess of amounts allocable to
identifiable assets; and when such intangible asset is eliminated, such tax
benefits will increase additional paid-in capital. The Company's actual
income tax cash payments are, and will continue to be, significantly less than
the total financial statement expense amounts as the benefits of
pre-reorganization net deferred tax assets are being realized. The intangible
asset amounted to $102.0 million at December 31, 1993 and was reduced to $26.9
million at December 31, 1994 due to realization of pre-reorganization tax
benefits of $72.5 million and amortization of $2.6 million.
<TABLE>
The income tax effects of the factors accounting for the differences
between federal income tax computed at the statutory rate and the recorded
provision are as follows (in millions):
<CAPTION>
YEAR ENDED SIX MONTHS ENDED YEAR ENDED
12/31/94 12/31/93 | 6/30/93 12/31/92
|
<S> <C> <C> | <C> <C>
Tax provision at |
statutory rates $ 69.8 $ 142.8 | $ 48.2 $ (30.6)
Increases (decreases) ---- ---- |
resulting from: |
Deductible |
reorganization- |
related items ---- ---- | (96.2) ----
Net operating loss |
for which no benefit |
was recognized ---- ---- | 44.6 24.4
Alternative |
minimum tax ---- ---- | (0.2) 1.4
Nondeductible |
Chapter 11 |
administrative |
expenses ---- ---- | 8.6 11.4
Percentage depletion |
deduction (6.4) (5.2) | (5.2) (8.2)
Trust reversion ---- ---- | ---- 3.0
State and foreign taxes 8.1 21.9 | 2.4 3.8
Other 0.7 1.4 | ---- ----
-------- -------- | -------- --------
Tax provision $ 72.2 $ 160.9 | $ 2.2 $ 5.2
======== ======== | ======== ========
</TABLE>
<TABLE>
Significant components of the Company's deferred tax assets and
liabilities are as follows at December 31 (in millions):
<CAPTION>
1994 1993
<S> <C> <C>
Deferred tax assets:
Postemployment health care liability $ 708.7 $ 703.4
Net operating loss carryforwards 900.0 650.0
Pension liability 421.6 850.8
Other employee benefits 164.6 154.9
Plant rationalization 71.4 65.2
Safe harbor tax leases 134.2 140.3
Other 99.5 35.4
--------- ---------
Subtotal 2,500.0 2,600.0
Deferred tax liabilities:
Tax over book depreciation (807.8) (758.6)
Inventory and other (92.2) (141.4)
--------- ---------
Subtotal (900.0) (900.0)
Valuation allowance (1,600.0) (1,700.0)
--------- ---------
Total deferred taxes - net $ 0.0 $ 0.0
========= =========
</TABLE>
For income tax reporting purposes, LTV has a net operating loss carryforward of
$2.5 billion for regular income taxes, $2.4 billion of which is not restricted
as to use and will expire in the years 2000 through 2008. The balance of the
regular income tax net operating loss carryforward expires in 1996 through 1998
and is restricted to offsetting future taxable income of the respective
companies which generated the losses. LTV has a federal alternative minimum tax
net operating loss carryforward of $1.4 billion which is unrestricted as to its
use and will expire in the years 2001 through 2008. The Company's ability to
reduce its future income tax payments through the use of its net operating loss
carryforwards could be significantly limited on an annual basis if the Company
were to undergo an "ownership change" within the meaning of Section 382 of
the Internal Revenue Code of 1986.
Alternative minimum taxes paid through 1994 of approximately $42 million are
available as a credit carryforward. The credit carryforward period is not
limited. Investment tax credit carryforwards were approximately $20 million at
December 31, 1994. These credits, which are recognized using the "flow through"
method, expire in 1995 through 2003.
<PAGE> 21
46
SHAREHOLDERS' EQUITY
The shareholders' equity activity for the period from June 30, 1993 through
December 31, 1994 is presented below (in millions). Information for periods
prior to reorganization is not presented due to the general lack of
comparability and because the revised capital structure of the Company consists
of entirely new issues of Common and Preferred Stock.
<TABLE>
<CAPTION>
COMMON COMMON STOCK MINIMUM
CONVERTIBLE STOCK ADDITIONAL PENSION
PREFERRED HELD FOR NUMBER PAID IN RETAINED LIABILITY RESTRICTED
STOCK ISSUANCE OF SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT STOCK
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1993 $ 1.0 $ 54.3 60.8 $ 30.4 $ 274.3
Net income $ 247.2
Shares issued through
public offering 23.0 11.5 287.0
Minimum pension
liability adjustment $(364.8)
Preferred dividends paid (1.1)
------- ------- ------- ------- ------- ------- -------
Balance, December 31, 1993 1.0 54.3 83.8 41.9 561.3 246.1 (364.8)
Net income 127.1
Shares issued:
Public offering 13.6 6.8 250.4
Stock plans and other 1.9 1.0 5.4 $ (3.2)
Conversion of stock (0.5) (54.3) 6.4 3.2 51.6
Unrealized losses
Minimum pension
liability adjustment 359.0
Preferred dividends paid 0.3 0.1 4.1 (6.5)
------- ------- ------- ------- ------- ------- ------- -------
Balance, December 31, 1994 $ 0.5 $ -- 106.0 $ 53.0 $ 872.8 $ 366.7 $ (5.8) $ (3.2)
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
TOTAL
MARKETABLE SHAREHOLDERS'
SECURITIES EQUITY
<S> <C> <C>
Balance, June 30, 1993 $ 360.0
Net income 247.2
Shares issued through
public offering 298.5
Minimum pension
liability adjustment (364.8)
Preferred dividends paid (1.1)
-------
Balance, December 31, 1993 539.8
Net income 127.1
Shares issued:
Public offering 257.2
Stock plans and other 3.2
Conversion of stock -
Unrealized losses $ (1.2) (1.2)
Minimum pension
liability adjustment 359.0
Preferred dividends paid (2.3)
------- -------
Balance, December 31, 1994 $ (1.2) $1,282.8
======= =======
</TABLE>
LTV has authorized for issuance 20 million shares of Preferred Stock with a
$1.00 par value. At December 31, 1994, the Company has 500,000 outstanding
shares of Series B Convertible Preferred Stock ("Series B Preferred Stock").
This issue has a stated liquidation preference value of $50 million, is senior
to all Common Stock and has voting rights approximating the Common Stock into
which it can be converted. Dividends on the Series B Preferred Stock are
payable quarterly in either cash or Common Stock, at the election of LTV, at the
rate of 4.5% per annum on the stated value. Holders of the Series B Preferred
Stock have the right to convert the stated value of their shares, in whole or in
part, into Common Stock at a conversion price of $17.09 per share (potentially
2,925,688 shares). LTV will have the right to redeem the Series B Preferred
Stock on and after June 28, 1996 at $52.3 million and declining to $50.0 million
at June 28, 2000.
On June 28, 1994, the Series A Convertible Preferred Stock, and accrued
dividends thereon, were mandatorily converted into 3.3 million shares of Common
Stock. The Common Stock held for issuance represented a $50.0 million cash
investment in LTV on June 28, 1993, which resulted in 3.3 million shares of
Common Stock being issued on June 28, 1994.
In conjunction with the Joint Plan and as a provision of the 1993 USWA labor
agreement, LTV became obligated to contribute 4.3 million shares of Common
Stock on June 28, 1993 and 1.5 million shares of Common Stock on June 28, 1994
to its nonleveraged Employee Stock Ownership Plan ("ESOP").
During 1994, LTV issued 13.6 million shares of Common Stock pursuant to a public
offering. The Company's net proceeds of $257.2 million from the offering were
contributed to the Company's pension plans. During 1993, LTV issued 23.0
million shares of Common Stock pursuant to a public offering. The net proceeds
from the offering were $298.5 million, of which $150.0 million was contributed
to the Company's pension plans.
Common Stock reserved for potential future issuance includes the following:
a. Conversion of the Series B Preferred Stock and the convertible notes as
previously discussed.
b. Per a settlement agreement ("Federal Tax Agreement") with the Internal
Revenue Service ("IRS"), payments in six equal annual installments of cash
or shares of Common Stock with an aggregate value of $6.5 million are
required to be made to the IRS. On June 28, 1994, the first of these
payments was satisfied with the issuance of 65,183 shares of Common Stock.
<PAGE> 22
47
c. Per an agreement with the U.S. Environmental Protection Agency
("EPA"), certain (if any) future environmental claims can be settled in
cash or Common Stock. Also, through June 28, 1997, if and when shares are
actually issued under this agreement, the ESOP is to receive additional
shares approximating 7.5% of such issued shares.
d. The Company's Joint Plan provided for the issuance of 8.5 million Series A
Warrants. Each Series A Warrant is exercisable for 0.5582 of a share
of Common Stock at $16.28 per each full share purchased. The Series A
Warrants are exercisable through June 28, 1998, and through December 31,
1994, 27,800 warrants have been exercised.
e. Under the 1994 USWA labor agreement, certain bonuses may be paid in cash
or Common Stock, and the Company has reserved 1.7 million shares for
such potential use.
<TABLE>
The Company has also reserved for future issuance 3.5 million shares of LTV
Common Stock under incentive programs authorizing the granting of stock options
and restricted stock awards to directors, officers and other key employees. The
stock incentive programs are designed to encourage a personal investment in LTV
Common Stock from participating individuals. The options to purchase Common
Stock are outstanding for terms of 10 years from date of grant and are granted
at prices not lower than market price at date of grant. Transactions related
to stock options under these programs are summarized as follows:
<CAPTION>
YEAR ENDED | SIX MONTHS ENDED
12/31/94 | 12/31/93
SHARES PRICE | SHARES PRICE
<S> <C> <C> | <C> <C>
Stock options: |
Options outstanding at |
beginning of period 934,000 $ 15.38 | - $ -
Granted 272,705 16.53-19.33 | 934,000 15.38
Exercised (22,066) 15.38 | - -
Canceled (37,000) 15.38 | - -
--------- ------------- | ------- -------
Options outstanding |
at end of period 1,147,639 $15.38-$19.33 | 934,000 $ 15.38
========= ============= | ======= =======
Options exercisable |
at end of period 297,896 $15.38-$16.53 | -
========= ============= | =======
</TABLE>
Also, under the programs described above, 191,430 restricted shares of the
Company's Common Stock were awarded during 1994 at market prices ranging from
$15.75 to $18.88. All of the 191,430 shares remained restricted at the end of
1994. The market value of restricted stock awarded has been recorded as
unearned compensation and is shown as a separate component of shareholders'
equity. Unearned compensation is being amortized to expense over the
five-year vesting period.
EARNINGS PER SHARE
Earnings per share data prior to emergence from Chapter 11 proceedings are not
presented due to the general lack of comparability and because the revised
capital structure of the Company consists of entirely new issues of Common and
Preferred Stock.
Primary earnings per share calculations for the year ended December 31, 1994
and the six months ended December 31,1993 are based on average common and com-
mon equivalent shares outstanding of 98.7 million and 77.0 million,
respectively. Common equivalent shares principally included Common Stock that
is issuable in exchange for the Series B Preferred Stock and for outstanding
Series A Warrants.
Fully diluted earnings per share calculations for the year ended December 31,
1994 and the six months ended December 31, 1993 are based on fully diluted
shares outstanding of 103.8 million and 82.6 million, respectively. Fully
diluted shares were determined by increasing the primary shares outstanding to
reflect the Common Stock issuable upon conversion of the convertible
notes.
COMMITMENTS AND CONTINGENCIES
The Company is the subject of various threatened or pending legal actions,
contingencies and commitments in the normal course of conducting its business.
The Company provides for costs relating to these matters when a loss is
probable and the amount is reasonably estimable. The effect of the outcome of
these matters on the Company's future results of operations and liquidity
cannot be predicted because any such effect depends on future results of oper-
ations and the amount and timing of the resolution of such matters. While it
is not possible to predict with certainty, management believes that the
ultimate resolution of such matters will not have a material adverse effect on
the consolidated financial position of the Company.
LTV is subject to changing and increasingly stringent environmental laws and
regulations concerning air emissions, water discharges and waste disposal in
the normal course of conducting its business. As part of LTV's reorganization
in 1993, an agreement ("Environmental Settlement Agreement" or "ESA") with the
EPA was reached. The ESA resolved or provided the means to resolve a
significant portion of the Company's environmental-related liabilities and
also provided a basis for settlement agreements concerning the envi-
ronmental claims of several states. The ESA settled certain Superfund Site
liabilities identified at the time of reorganization for $33 millon as
general unsecured claims. Management believes that future prepetition
environmental claims, if any, which are not covered by the ESA, will be subject
to the dischargeability provisions of the Federal Bankruptcy Code or to the
provisions of the Joint Plan. General liabilities from postpetition acts were
not discharged or in any manner affected by the reorganization. In addition,
the Company retains responsibility for environmental obligations for prop-
erties owned at confirmation of the Joint Plan regardless of when the conduct
which gives rise to the liability occurred.
<PAGE> 23
48
The Company has incurred and will continue to incur substantial capital
expenditures and operating and maintenance expenses in complying with
environmental standards and laws. In particular, the 1990 Clean Air Act
Amendments require progressively more stringent air emission quality stan-
dards. Additionally, the EPA, in general, interprets the Resource Conservation
and Recovery Act of 1976, as amended ("RCRA"), as granting the EPA authority
to require companies to clean up plant sites where hazardous wastes have been
used (and are being or may be released into the environment), even if such
sites are not subject to the permitting requirements of RCRA. If the EPA were
to require the Company to clean up its facilities under RCRA, the costs to the
Company could be substantial. If any of the Company's facilities are unable to
meet required environmental standards, those operations could be temporarily
or permanently closed.
The Company's policy is to accrue environmental remediation liabilities when it
is probable a liability exists and the costs can be reasonably estimated. The
Company's estimates of these costs are based on existing technology, current
enacted laws and regulations and site-specific undiscounted costs. The lia-
bilities are adjusted when the effect of new facts or changes in law or
technology is determinable. The Company's liability for environmental
remediation totaled $105 million and $121 million at December 31, 1994 and
1993, respectively. Other environmental expenditures that are principally
maintenance or preventive in nature are expensed when incurred.
A 1993 agreement with the USWA provided that a portion of the requirements with
respect to certain postemployment benefits would be secured by a junior lien
($200 million at December 31, 1994 and increasing to $250 million on June
28, 1995) on collateral with an unencumbered fair market value of at least $500
million. The initial security was provided by the grant of a mortgage on
facilities having a carrying value of approximately $500 million.
FINANCIAL INSTRUMENTS
Cash equivalents are investments in highly liquid, low-risk money market mutual
funds and commercial paper with maturities of three months or less and are
classified as held-to-maturity. The carrying amount of these assets approxi-
mates fair value. The Company carries marketable securities at fair value.
The carrying amount of the Company's long-term debt approximates fair value at
December 31, 1994 and 1993 due to the debt's origination in 1993 combined with
market interest rates.
LTV owns a preferred stock asset with a carrying value of $25 million related
to the sale of its aircraft division. The preferred stock is subject to
redemption at the option of LTV beginning September 1997 and is subject to
redemption at the option of the issuer beginning March 1998. The aggregate
redemption price and the liquidation preference of the preferred stock is $25
million, plus accrued and unpaid dividends. Dividends are payable quarterly
at an annual rate of 11.5% and are cumulative. The estimated discounted cash
flow value of the preferred stock asset approximates its carrying value at
December 31, 1994 and 1993.
The Company has entered into futures contracts to reduce its exposure to
fluctuations in costs caused by the price volatility of certain metal
commodities and natural gas supplies. The Company does not engage in
speculation and the results of these hedging transactions become part of the
cost of the commodity or supply being hedged. At December 31, 1994 and 1993,
the purchase value of these contracts totaled $12 million and $43 million,
respectively. The contracts extend for periods up to two years. At December 31,
1994 and 1993, the fair value of the contracts, which is based on quoted mar-
ket prices, approximated the carrying value of zero.
Outstanding letters of credit totaled $120.7 million and $139.3 million at
December 31, 1994 and 1993, respectively. The letters of credit guarantee
performance to third parties of various trade activities and tax benefit
transfer agreements. Fair value estimated on the basis of fees paid to obtain
the obligations is not material at December 31, 1994 and 1993.
LTV has guaranteed approximately $13 million per year through January 1999 for
a joint venture's operating lease rental obligation. The Company has
guaranteed $5 million of debt of a company whose facilities are leased by the
Company. The Company does not believe it is practicable to estimate the fair
value of the guarantees and does not believe exposure to loss is likely.
SPECIAL CREDITS
The Company recorded special credits of $400.6 million during the six months
ended December 31, 1993, $191.0 million during the six months ended June 30,
1993 and $60.0 million during the year ended December 31, 1992. The $400.6
million included $370.6 million which is a gain from a settlement related to an
antitrust judgment against the Bessemer and Lake Erie Railroad Company. The
other special credits related to a note receivable and revertible trusts which
were established in connection with the sale of the bar division in 1989 and
the Warren, Ohio, facility in 1988. Upon selling these steel facilities, the
Company placed assets in revertible trusts which would provide funds under
specific circumstances to pay for certain former employees' benefits. The
required specific circumstances did not occur and the trusts reverted to the
Company. Proceeds from these items were deposited into the restored pension
plans.
DISCONTINUED OPERATIONS
During 1992, all of the remaining operating businesses of the aerospace and
defense group were sold and their results were reported as discontinued
operations. The 1992 results included income from aerospace and defense
operations of $96.8 million (which included an income tax benefit of $2.9
million) and a gain on the sale of the operations of $737.0 million (which is
net of an income tax charge of $4.9 million). Net sales of the aerospace and
defense operating businesses through their respective dates of closing
were approximately $1.50 billion in 1992.
<PAGE> 24
49
EXTRAORDINARY CHARGE
During 1992, the Company recorded an extraordinary charge of $140 million to
recognize a liability related to the requirements of the Coal Industry Retiree
Health Benefit Act of 1992 ("Coal Retiree Act"). No tax benefit was recog-
nizable on this extraordinary charge. The Coal Retiree Act created a new
multiemployer benefit plan called the United Mine Workers of America ("UMWA")
Combined Benefit Fund, which began providing medical and death benefits in
1993 to qualifying UMWA beneficiaries.
<TABLE>
OTHER FINANCIAL DATA
Items charged to expense include the following (in millions):
<CAPTION>
YEAR ENDED SIX MONTHS ENDED YEAR ENDED
12/31/94 12/31/93 | 6/30/93 12/31/92
<S> <C> <C> | <C> <C>
Research and |
development $ 15.2 $ 7.6 | $ 7.5 $ 15.4
Maintenance and repairs 491.2 238.2 | 238.4 473.9
Taxes, other than payroll |
and income taxes 36.8 21.0 | 20.4 37.9
</TABLE>
Interest and other income includes a gain of $38.1 million in 1992 related to
the collection of a note receivable which had been fully reserved.
<TABLE>
Supplemental cash flow information is presented as follows (in millions):
<CAPTION>
YEAR ENDED SIX MONTHS ENDED YEAR ENDED
12/31/94 12/31/93 | 6/30/93 12/31/92
<S> <C> <C> | <C> <C>
Changes in assets |
and liabilities: |
Receivables $ (38.4) $ (63.2) | $ (8.8) $ (39.5)
Inventories 10.5 52.6 | 24.3 (30.5)
Other assets 0.4 17.1 | 1.2 7.5
Accounts payable 30.7 31.4 | 16.0 (2.4)
Other liabilities (32.9) (37.6) | (52.0) (23.2)
-------- -------- | ------- --------
Total $ (29.7) $ 0.3 | $ (19.3) $ (88.1)
======== ======== | ======= ========
Interest payments $ 18.0 $ 5.6 | $ 1.8 $ 3.9
Income tax payments 0.7 1.0 | 5.4 3.5
Capitalized interest 7.7 4.6 | 7.4 13.9
Capitalized lease |
obligations incurred 1.5 0.8 | 0.9 2.4
Marketable securities: |
Purchases 1,719.0 - | - -
Unrealized loss 1.2 - | - -
Sales and maturities 1,360.3 - | - -
</TABLE>
COMPANY REORGANIZATION
The Company's emergence from Chapter 11 proceedings was accomplished through a
series of mutually dependent transactions and agreements. The Joint Plan
provided for, among other things, recoveries for certain creditors which
included cash, shares of newly issued LTV Common Stock, Series A Warrants and a
variety of other assets. Special agreements were negotiated in order to
satisfy certain claims, including, among others, the PBGC Settlement Agreement
regarding the amount and the timing of funding of LTV's restored pension plans,
the Environmental Settlement Agreement and the Federal Tax Agreement.
Claims and liabilities totaling $5.75 billion on the Effective Date were
discharged for consideration of $1.55 billion in cash, $52 million in other
assets, and the issuance of LTV Common Stock and Series A Warrants. A
nontaxable extraordinary gain of $3.93 billion was recorded on this debt dis-
charge because the consideration was less than the recorded liabilities.
Certain prepetition claims and liabilities, the most significant of which was
the Company's obligation for the restored pension plans, were not discharged as
part of the Joint Plan and were reclassified to their respective consolidated
balance sheet accounts.
Reorganization items recognized on the consolidated statement of income of
$30.7 million in the six months ended June 30, 1993 consist of a $1.0 billion
increase to allowed claims for pension plans in excess of recorded amounts, a
$1.14 billion net gain on fair value adjustments to the Company's assets and
liabilities, $132.6 million of professional fees and expenses and $22.3
million of interest earned on accumulated cash. The 1992 reorganization items
include professional fees and expenses of $36.7 million, which are offset
by interest earned on accumulated cash of $51.1 million. The reorganization
items relate only to the period that the Company was operating under the
protection of Cbapter 11.
LTV's financial advisors assisted the Company and the Bankruptcy Court in
determining the reorganization value and the resulting beginning equity value.
In determining the overall reorganization value, the trading value of compara-
ble U.S. integrated steel companies (adjusted for long-term obligations) was
the major factor utilized. This method was used due to the highly cyclical
nature of the steel industry and was viewed as providing a more accurate
estimate than would have been provided through the use of a discounted cash
flow analysis or other methodologies. Adjustments to reflect the fair value of
individual assets and liabilities were based on independent reviews and
valuations, discounted cash flows, actuarial valuations and other studies.
The portion of reorganization value not attributable to specific tangible or
identified intangible assets has been reflected as an intangible asset which
totaled $26.9 million at December 31, 1994. The intangible asset is being
reduced by the realization of pre-reorganization tax benefits and is
amortized on the straight-line basis over 20 years.
<PAGE> 25
50
BUSINESS SEGMENTS
The steel segment includes the production and sale of a diversified line of
carbon steel products consisting of hot rolled and cold rolled sheet,
galvanized, tin mill and other flat rolled coated products; tubular products;
and the mining of iron ore. The energy products segment includes the
manufacture and sale of oil and gas drilling and production equipment, and the
sale of tubular products, oilfield supplies and industrial supplies. Corporate
includes general and administrative expenses which are not allocated to the
other business segments.
Operating income (loss) represents total sales less cost of products sold and
operating expenses. Cost of products sold from the steel segment has been
reduced by the equity in earnings of raw material and other affiliates of
approximately $14.7 million, $1.7 million, $9.5 million and $12.9 million for
the year ended December 31, 1994, the six months ended December 31 and June 30,
1993 and the year ended December 31, 1992, respectively. In determining
operating income (loss) by business segment, none of the following have been
added or deducted: interest expense, income taxes, reorganization items and
nonoperating interest and other income.
The Company's sales to the automotive market have approximated 30% of the
steel segment's sales over each of the last three years. The steel segment
also sells to the steel service center and converter markets which, in turn,
sell to the automotive and other industries. Management does not believe
significant credit risk exists at December 31, 1994.
Sales for the year ended December 31, 1994, the six months ended December 31
and June 30, 1993 and the year ended December 31, 1992 to the Company's largest
customer, General Motors Corporation, represented approximately 10%, 10%,
14% and 13%, respectively, of consolidated sales.
Included in identifiable assets of the steel segment are investments in and
advances to unconsolidated raw material joint ventures of $44.0 million, $44.8
million and $43.9 million at December 31, 1994, 1993 and 1992, respectively.
<TABLE>
Segment information is outlined in the following summary (in millions):
<CAPTION>
NET SALES OPERATING INCOME (LOSS)
YEAR ENDED SIX MONTHS ENDED YEAR ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
12/31/94 12/31/93 | 6/30/93 12/31/92 12/31/94 12/31/93 | 6/30/93 12/31/92
<S> <C> <C> | <C> <C> <C> <C> | <C> <C>
Steel $4,233.3 $2,010.5 | $1,857.7 $3,564.9 $ 201.1 $ 408.6(a)| $ 114.8(b) $(118.2)(c)
Energy products 299.2 161.3 | 135.6 262.5 (1.2) 4.0 | 1.9 (3.8)
Corporate - - | - - (11.4) (2.8) | (6.7) (14.9)
Intersegment | |
(at market) (3.3) (1.2) | (0.7) (1.5) - - | - -
-------- -------- | -------- -------- ------- ------- | ------- --------
$4,529.2 $2,170.6 | $1,992.6 $3,825.9 $ 188.5 $ 409.8 | $ 110.0 $ (136.9)
======== ======== ======== ======== ======= ======= ======= ========
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
IDENTIFIABLE ASSETS CAPITAL EXPENDITURES DEPRECIATION AND AMORTIZATION
YEAR ENDED SIX MONTHS ENDED YEAR ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
12/31/94 12/31/93 | 12/31/92 12/31/94 12/31/93 6/30/93 12/31/92 12/31/94 12/31/93 | 6/30/93 12/31/92
<S> <C> <C> | <C> <C> <C> | <C> <C> <C> <C> | <C> <C>
| | |
Steel $4,686.9 $5,170.0 | $4,320.4 $ 233.9 $ 127.3 | $ 195.9 $ 311.0 $ 241.8 $ 124.3 | $ 112.4 $ 207.8
Energy products 152.9 149.2 | 135.4 6.1 2.2 | 1.9 2.3 3.4 1.6 | 2.0 4.8
Corporate 749.4 475.9 | 1,767.3 - - | - - - - | - 0.8
-------- -------- | -------- ------- ------- | ------- ------- ------- ------- | ------- -------
Total continuing | | |
operations 5,589.2 5,795.1 | 6,223.1 240.0 129.5 | 197.8 313.3 245.2 125.9 | 114.4 213.4
Discontinued | | |
operations(d) - - | - - - | - 34.8 - - | - 27.9
-------- -------- | -------- ------- ------- | ------- ------- ------- ------- | ------- -------
$5,589.2 $5,795.1 | $6,223.1 $ 240.0 $ 129.5 | $ 197.8 $ 348.1 $ 245.2 $ 125.9 | $ 114.4 $ 241.3
======== ======== | ======== ======= ======= | ======= ======= ======= ======= | ======= =======
<FN>
a Included special credits of $370.6 million related to an antitrust settlement and $30.0 million from the collection of a note
receivable.
b Included a special credit of $191.0 million from the anticipated receipt of assets held in trust.
c Included a special credit of $60.0 million from the anticipated receipt of assets held in trust.
d In 1992, the Company completed the sale of the aerospace and defense businesses. Depreciation and amortization for the former
aerospace and defense business segment are included in discontinued operations.
</TABLE>
<PAGE> 26
MANAGEMENT AND AUDITORS' REPORTS 51
REPORT OF MANAGEMENT
The management of The LTV Corporation is responsible for the preparation of the
accompanying consolidated financial statements in conformity with generally
accepted accounting principles appropriate in the circumstances. Management
is also responsible for the determination of estimates and judgments used in
the financial statements, and the preparation of other financial information
included in this annual report to shareholders. The financial statements
have been audited by Ernst & Young LLP, independent auditors.
The management of the Company is responsible for and maintains an accounting
system and related internal controls that it believes are sufficient to provide
reasonable assurance that assets are safeguarded against unauthorized
acquisition, use or disposition, that transactions are executed and recorded in
accordance with management's authorization and that the financial records are
reliable for preparing financial statements. The concept of reasonable
assurance is based on the recognition that the cost of a system of internal
control must be related to the benefits derived and that the balancing of those
factors requires estimates and judgments. The system is tested and evaluated
regularly by the Company's internal auditors as well as by the independent
auditors in connection with their annual audit. Management responds to all
significant recommendations of the internal and independent auditors
and makes changes to the systems when appropriate.
The Board of Directors has an Audit Committee of Directors who are not members
of management. The Committee meets with management, the internal auditors and
the independent auditors in connection with its review of matters relating to
the Company's annual financial statements; the Company's internal audit
program; the Company's system of internal accounting controls; and the services
of the independent auditors. The Committee also periodically meets with inter-
nal auditors as well as the independent auditors, without management present,
to discuss appropriate matters. In addition, the internal auditors and the
independent auditors have full and free access to meet with the Committee,
with or without management representatives present, to discuss the results of
their audits, the adequacy of internal accounting controls and the quality of
financial reporting.
David H. Hoag
David H. Hoag
Chairman of the Board,
President and Chief Executive Officer
Arthur W. Huge
Arthur W. Huge
Senior Vice President and Chief Financial Officer
William C. Armbruster
William C. Armbruster
Vice President and Controller
January 26, 1995
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
The LTV Corporation
We have audited the accompanying consolidated balance sheet of The LTV
Corporation ("the Company") as of December 31, 1994 and 1993 and the related
consolidated statements of income and cash flows for the year ended December
31, 1994, the six months ended December 31, 1993, the six months ended June 30,
1993 and the year ended December 31, 1992. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
As more fully described in the Summary of Significant Accounting Policies and
Company Reorganization notes to consolidated financial statements, effective
June 28, 1993, the Company emerged from bankruptcy. In accordance with an
American Institute of Certified Public Accountants' Statement of Position, the
Company has adopted "fresh start" reporting whereby its assets, liabilities and
new capital structure have been adjusted to reflect estimated fair values
as of June 30, 1993. As a result, the consolidated financial statements for
periods subsequent to June 30, 1993, reflect this basis of reporting and are
not necessarily comparable to the Company's pre-reorganization consolidated
financial statements.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
LTV Corporation at December 31, 1994 and 1993 and the consolidated results of
their operations and their cash flows for the year ended December 31, 1994, the
six months ended December 31,1993 and June 30, 1993 and for the year ended
December 31, 1992, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Ernst & Young LLP
Cleveland, Ohio
January 26, 1995
<PAGE> 27
<TABLE>
<CAPTION>
52
FINANCIAL SUMMARY
(dollars in millions, except per share data)
1994 1993 1992 1991
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS FOR THE YEAR
Sales:
Steel $4,233.3 $3,868.2 $3,564.9 $3,392.5
Energy products 299.2 296.9 262.5 309.9
Sales between segments (3.3) (1.9) (1.5) (0.7)
-------- -------- -------- --------
Total $4,529.2 $4,163.2 $3,825.9 $3,701.7
======== ======== ======== ========
Operating income (loss):
Steel $ 201.1 $ (68.2) $ (178.2) $ (208.7)
Energy products (1.2) 5.9 (3.8) (15.5)
Corporate (11.4) (9.5) (14.9) (13.3)
Special credits (charges) - 591.6 60.0 -
-------- -------- -------- --------
Operating income (loss) 188.5 519.8 (136.9) (237.5)
Interest expense 15.3 10.0 4.3 4.3
Interest and other income 26.1 9.5 36.9 59.9
Income tax provision 72.2 163.1 5.2 (124.0)
-------- -------- -------- --------
Income (loss) from
continuing operations $ 127.1 $ 356.2 $ (109.5) $ (57.9)
======== ======== ======== ========
Net income (loss) $ 127.1 $4,314.9 $ 598.7 $ 74.1
======== ======== ======== ========
Earnings per share
(fully diluted) $ 1.27 NM NM NM
Cash dividends per
common share - - - -
FINANCIAL POSITION AT YEAR END
Working capital $1,188.2 $ 882.7 $2,048.4 $1,975.2
Total assets 5,589.2 5,795.1 6,223.1 6,685.2
Property, net 3,208.0 3,216.8 2,953.2 3,121.0
Long-term debt 190.3 186.3 7.7 9.0
Other noncurrent obligations 3,236.5 3,668.6 9,487.0 10,307.8
Shareholders' equity (deficit) 1,282.8 539.8 (4,129.3) (4,731.6)
OTHER FINANCIAL INFORMATION
Property additions:
Steel $ 233.9 $ 323.2 $ 311.0 $ 333.5
Energy products 6.1 4.1 2.3 4.0
Depreciation 245.2 240.3 213.4 182.5
OTHER OPERATING DATA
Steel-Raw steel production
(millions of tons) 8.3 7.9 8.3 7.7
-Continuous cast 100% 86% 77% 80%
-Shipment
(millions of tons) 8.0 7.6 7.2 6.6
-Operating rate 99% 81% 85% 78%
Employees:
Steel 15,300 15,700 16,400 17,200
Energy products 1,200 1,300 1,400 1,500
<FN>
Note Refer to "Company Reorganization" note to the consolidated financial statements for a discussion of the Company's emergence
from Chapter 11 proceedings. The fully diluted earnings per share for the six months ended December 31, 1993 totaled $3.03.
Earnings per share data prior to the Company's mid-1993 emergence from Chapter 11 proceedings are not presented due to the
general lack of comparability and because the revised capital structure of the Company consists of entirely new issues of
Common and Preferred Stock. Reorganization items have been excluded from income statement information in the summary above
other than the net income line as this presentation is more meaningful with respect to an understanding of the
post-reorganization operating results, since no reorganization items have occurred after June 1993.
NM Not meaningful.
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
53
1990 1989 1988 1987 1986 1985 1984
<S> <C> <C> <C> <C> <C> <C>
$3,860.4 $4,086.0 $ 4,874.4 $4,805.9 $ 4,469.0 $ 5,375.4 $ 4,521.5
318.4 268.3 291.1 258.0 286.9 591.7 647.0
(0.7) (0.1) (3.0) (2.4) (4.3) (22.7) (70.9)
-------- -------- --------- -------- --------- --------- ---------
$4,178.1 $4,354.2 $ 5,162.5 $5,061.5 $ 4,751.6 $ 5,944.4 $ 5,097.6
======== ======== ========= ======== ========= ========= =========
$ 55.7 $ 310.3 $ 423.2 $ 374.8 $ 95.8 $ (227.0) $ (217.4)
8.1 4.7 5.5 6.1 (36.4) (25.6) (73.1)
(14.7) (9.1) (15.4) (5.1) (7.4) (13.4) (10.1)
- - (1,275.2) - (3,095.0) (380.0) -
-------- -------- --------- -------- --------- --------- ---------
49.1 305.9 (861.9) 375.8 (3,043.0) (646.0) (300.6)
6.8 6.5 7.5 28.2 203.0 318.9 250.6
52.3 46.8 25.5 0.6 9.3 31.3 20.8
17.4 21.8 23.0 15.1 7.7 1.8 (27.4)
-------- -------- --------- -------- --------- --------- ---------
$ 77.2 $ 324.4 $ (866.9) $ 333.1 $(3,244.4) $ (935.4) $ (503.0)
======== ======== ========= ======== ========= ========= =========
$ 70.9 $ 264.9 $(3,153.6) $ 502.6 $(3,268.3) $ (723.9) $ (378.2)
======== ======== ========= ======== ========= ========= =========
NM NM NM NM NM NM NM
- - - - - - $ 0.19
$1,922.1 $1,860.2 $ 1,794.8 $1,616.7 $ 1,763.9 $ 185.3 $ 576.5
6,511.2 6,336.2 6,163.0 5,706.1 5,498.7 6,306.7 6,926.0
3,051.2 2,894.9 2,640.5 2,693.3 2,621.6 3,222.6 3,502.3
12.6 16.8 18.5 25.2 108.2 2,142.4 2,226.9
10,191.6 10,009.4 10,097.6 6,537.6 7,023.7 1,171.3 1,121.7
(4,845.3) (4,919.8) (5,183.4) (2,041.5) (2,575.6) 652.2 1,366.2
$ 336.5 $ 355.5 $ 351.8 $ 286.6 $ 102.1 $ 112.1 $ 140.9
7.4 2.4 2.9 2.1 5.0 7.4 7.9
187.7 185.7 204.6 219.3 213.5 226.9 177.9
8.2 8.4 10.5 11.5 11.1 13.1 10.0
76% 74% 60% 54% 54% 45% 34%
7.3 7.6 9.0 9.7 9.2 10.7 8.3
84% 86% 91% 91% 61% 62% 54%
16,800 17,800 18,400 26,700 26,800 33,600 39,000
1,600 1,500 1,500 1,600 1,400 3,000 3,200
</TABLE>
<PAGE> 29
<TABLE>
QUARTERLY FINANCIAL INFORMATION (UNAUDITED) 54
The following table presents quarterly financial information (in
millions, except per share data):
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
<S> <C> <C> <C> <C>
Net sales
1994 $1,064.9 $1,128.4 $1,130.5 $1,205.4
1993 $ 988.8 $1,003.8 $1,053.2 $1,117.4
Operating income (loss)
1994 $ 18.4 $ 59.2 $ 52.3 $ 58.6
1993 $ (49.9) $ 159.9(a) $ 0.9 $ 408.9(b)
Income (loss) before extraordinary items
1994 $ 15.3 $ 37.5 $ 34.1 $ 40.2
1993 $ (47.7) $ 187.4 $ 0.4 $ 246.8
Net income (loss)
1994 $ 15.3 $ 37.5 $ 34.1 $ 40.2
1993 $ (47.7) $4,115.4(c) $ 0.4 $ 246.8
Earnings per share
Primary-1994 $ 0.16 $ 0.40 $ 0.35 $ 0.37
Fully diluted-1994 $ 0.16 $ 0.39 $ 0.35 $ 0.36
Primary-1993(d) $ 0.00 $ 2.99
Fully diluted-1993(d) $ 0.00 $ 2.82
<FN>
a Included a special credit of $191.0 million from the anticipated receipt of
assets held in trust.
b Included special credits of $370.6 million related to an antitrust settlement
and $30.0 million from the collection of a note receivable.
c Included an extraordinary gain of $3.93 billion on the discharge of
prepetition claims and liabilities.
d Earnings per share data prior to the Company's reorganization are not
meaningful.
</TABLE>
<PAGE> 30
SHAREHOLDERS' INFORMATION
ANNUAL MEETING The LTV Corporation's 1995 annual
meeting will be held on Friday, April 28, 1995, at 10:00 a.m.
(Cleveland time) in the Gold Room (third floor) of the Stouffer
Renaissance Cleveland Hotel, 24 Public Square, Cleveland, Ohio.
10-K REPORT AVAILABLE A copy of LTV's 1994 Annual
Report on Form 10-K filed with the Securities and Exchange
Commission is available without charge upon request.
Address requests to: Secretary, The LTV Corporation, P.O. Box 6778,
Cleveland, OH 44101.
SHAREHOLDER COMMUNICATIONS Information is mailed
to registered shareholders from time to time to keep them
informed of the Company's activities and financial status. All
such information is available to any person interested in LTV.
Address requests to: Investor Relations, The LTV Corporation,
P.O. Box 6778, Cleveland, OH 44101.
COMPANY CONTACTS The following individuals may be
contacted in writing at The LTV Corporation, P.O. Box 6778,
Cleveland, OH 44101.
Media Contact
Mark R. Tomasch, Senior Director, Corporate Affairs
Financial Community Contact
Eric W. Evans, Senior Director, Investor Relations
QUARTERLY REPORTING LTV typically releases
earnings announcements on the last Friday of the month
immediately following each quarter end. The Company does not
publish quarterly reports due to the expense and lack of
timeliness of traditional quarterly reports. Instead, LTV's
quarterly earnings releases contain all of the financial
information typically found in quarterly reports.
LTV issues all of its corporate news releases through PR
Newswire (PRN), which can be accessed by CompuServe and America
On-Line subscribers. PRN is available through CompuServe in
the Executive News Service. To access LTV news releases, type
GO ENS, select Company News by Ticker, and enter "LTV" as the
stock ticker symbol. PRN is available through America
On-Line in the Business News Section of the News and Finance
Department. Use the News Search function to search for the
full text of LTV news releases.
PRN releases are also available on the Internet through
Quote.com and Delphi, among others. Several other databases
carry PRN releases, including Lexis/Nexis, Dialog, Dow Jones
News/Retrieval and Bloomberg.
In addition, it is possible to obtain faxed copies of recent
LTV corporate news releases by calling Company News on Call
at 1-800-758-5804. This electronic, menu-driven system will
request a six-digit code (516787) and allow you to request
specific LTV releases to be sent to your fax machine. LTV also
maintains a supplemental mailing list for those shareholders
wishing to receive copies of the Company's quarterly earnings
releases.
COMMON STOCK AND SERIES A WARRANT INFORMATION
LTV's Common Stock and Series A Warrants are listed on the New
York Stock Exchange ("NYSE") under the stock symbols: LTV and
LTVWS. The approximate number of holders of record of LTV's
Common Stock and Series A Warrants as of December 31, 1994, was
30,020 and 26,393, respectively.
In connection with the issuance of shares of Common Stock pur-
suant to the Company's reorganization plan, trading of Common
Stock commenced on the NYSE on a "when-issued" basis on June
29, 1993, and on a "regular-way" basis on July 30, 1993. Although
common stock of the Company was publicly traded prior to June 29,
1993, such old common stock (CUSIP 502210107) was canceled as a
part of LTV's reorganization. Old common stock certificates are
exchangeable for LTV Series A Warrants on the basis of 100 shares
of old common stock for approximately 1.16 Series A Warrants.
A holder of Series A Warrants is entitled to purchase 0.5582 shares
of LTV Common Stock for each Series A Warrant held at an exer-
cise price of $16.28 per each full share of LTV Common Stock pur-
chased. The Series A Warrants expire on June 28,1998.
COMMON STOCK AND SERIES A WARRANT TRADING INFORMATION
The following table sets forth the high, low and closing prices and
trading volume of LTV Common Stock and Series A Warrants as
reported on the NYSE Composite Tape for the quarterly periods
during which the securities have been outstanding.
<TABLE>
<CAPTION>
COMMON STOCK VOLUME
1993 HIGH LOW CLOSE (IN THOUSANDS)
<S> <C> <C> <C> <C>
3rd Quarter $12.75 $10.00 $10.75 11,767
4th Quarter 16.25 10.50 16.13 30,063
1994
1st Quarter $18.25 $14.38 $15.00 25,551
2nd Quarter 17.63 14.00 15.38 15,778
3rd Quarter 21.25 15.38 20.63 38,454
4th Quarter 21.00 15.38 16.50 36,528
</TABLE>
<TABLE>
<CAPTION>
SERIES A WARRANTS VOLUME
1993 HIGH LOW CLOSE (IN THOUSANDS)
<S> <C> <C> <C> <C>
3rd Quarter $4.13 $3.13 $3.75 938
4th Quarter 4.25 3.00 4.13 1,961
1994
1st Quarter $6.25 $3.50 $4.00 2,181
2nd Quarter 4.75 3.50 3.63 952
3rd Quarter 5.75 3.63 5.38 1,708
4th Quarter 5.63 3.50 3.75 1,029
</TABLE>
TRANSFER AGENT
Mail
Society National Bank, P.O. Box 6477,
Cleveland, OH 44101-1477
Hand Deliver
Society National Bank, Shareholder Services,
2073 East 9th Street, 4th Floor, Cleveland, OH 44115
DUPLICATE MAILINGS Shareholders occasionally receive dupli-
cate mailings, usually because the shareholder owns more than one
class of security or because shares are held in slightly different
names. Duplicate mailings may also result when other members of
a household own stock in their own names. The Company is
required by law to mail to each name on the shareholder list unless
the shareholder requests that duplicate mailings be eliminated. To
eliminate duplicate mailings, forward mailing labels indicating which
name to retain on the mailing list and which name(s) to delete. A
request for deletion of name from the mailing list will not affect
proxy mailings. Send requests to the Secretary of the Company.
<PAGE> 1
EXHIBIT (21)
<TABLE>
LIST OF SUBSIDIARIES
--------------------
<CAPTION>
Name of Company Percentage Owned
- --------------- ----------------
<S> <C>
THE LTV CORPORATION Parent
Continental Emsco Company 100%
Conemsco Limited 100%
Continental Emsco Company C.A. 100%
Continental Emsco Company de Mexico, S.A. de C.V. 100%
Continental Emsco Company Limited 100%
Elastomeric Actuators, Inc. 60%
Oil States Offshore Marine, Inc. 100%
Oil States Rubber Co. 100%
Oil States Rubber Co. (U.K.) Limited 99%
(1% owned by The LTV Corporation)
Continental Supply Company 100%
Georgia Tubing Corporation 100%
Vought Arabia 49%
Investment Bankers, Inc. 100%
Inmobiliaria Nueva Icacos, S.A. de C.V. 100%
(Intentionally left dormant)
Jones & Laughlin Steel Incorporated 100%
Kinglsey International Insurance Ltd. 100%
LTV Corporation, The (Wyoming) 100%
LTV/EGL Holding Company 100%
L-S Electro-Galvanizing Company 60%
LTV Electro-Galvanizing, Inc. 100%
LTV Holdings, Inc. 100%
Reomar, Inc. 100%
Chateaugay Corporation 100%
Republic Buildings Corporation 100%
LTV International N.V. 100%
LTV Properties, Inc. 100%
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
Name of Company Percentage Owned
- --------------- ----------------
<S> <C>
THE LTV CORPORATION (Continued) Parent
LTV Sales Finance Company 100%
LTV Steel Company, Inc. 100%
Aliquippa and Southern Railroad Company 100%
Black River Lime Company 37.5%
25.0% owned by Jalcite I, Inc.
12.5% owned by Jalcite II, Inc.
Chicago Short Line Railway Company 100%
Crystalane, Inc. 100%
Crystalee Coal Company 100%
Cuyahoga Valley Railway Company, The 100%
Mahoning Valley Railway Company, The 100%
Dearborn Leasing Company 100%
LS-II Electro-Galvanizing Company 50%
Erie B Corporation 100%
Erie I Corporation 100%
International Steel Alliance, Inc. 100%
J&L Empire, Inc. 100%
Empire Iron Mining Partnership 25%
Jalcite I, Inc. 100%
Jalcite II, Inc. 100%
Jalore Mining Company, Ltd. 100%
L.A.S. Resources, Inc. 53%
LTV Steel Mining Company 100%
45% owned by Erie B Corporation
10% owned by Erie I Corporation
45% owned by Youngstown Erie Corporation
Lorain Pellet Terminal Company 100%
Monongahela Connecting Railroad Company, The 100%
Nemacolin Mines Corporation 100%
Northern Land Company 50%
Olga Coal Company 53%
Presque Isle Corporation 53.5%
Processing Technology, Inc. 33.3%
Prospect Corporation, The 100%
Republic-Reserve, Inc. 100%
Republic Technology Corporation 100%
Reserve Mining Company 50%
River Terminal Railway Company, The 100%
Youngstown Erie Corporation 100%
YST Erie Corporation 100%
LTV Steel Tubular Products Company 100%
RepSteel Overseas Finance N.V. 100%
</TABLE>
<PAGE> 1
Ex. (23)
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-52543, Form S-8 No. 33-52545, Form S-8 No. 33-54229, Form S-8
No. 33-56857 and Form S-8 No. 33-56861) pertaining to the Non-Employee
Directors Stock Option Plan, Management Incentive Program, LTV Steel Group
Employee Stock Ownership Plan, Non-Employee Directors' Equity Compensation Plan
and The Hourly Employee Stock Payment Alternative Plan, respectively, of The
LTV Corporation of our report dated January 26, 1995, with respect to the
consolidated financial statements of The LTV Corporation incorporated by
reference in the Annual Report (Form 10-K) for the year ended December 31,
1994.
ERNST & YOUNG LLP
Cleveland, Ohio
February 24, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 335
<SECURITIES> 358
<RECEIVABLES> 541
<ALLOWANCES> 22
<INVENTORY> 821
<CURRENT-ASSETS> 2,068
<PP&E> 3,509
<DEPRECIATION> 301
<TOTAL-ASSETS> 5,589
<CURRENT-LIABILITIES> 880
<BONDS> 0
<COMMON> 53
0
1
<OTHER-SE> 1,229
<TOTAL-LIABILITY-AND-EQUITY> 5,589
<SALES> 4,529
<TOTAL-REVENUES> 4,529
<CGS> 3,908
<TOTAL-COSTS> 4,341
<OTHER-EXPENSES> (26)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15
<INCOME-PRETAX> 199
<INCOME-TAX> 72
<INCOME-CONTINUING> 127
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 127
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.27
</TABLE>
