<PAGE>
1997
First Quarter
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-983
NATIONAL STEEL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 25-0687210
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4100 Edison Lakes Parkway, Mishawaka, IN 46545-3440
(Address of principal executive offices) (Zip Code)
219-273-7000
(Registrant's telephone number, including area code)
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- -----
As of April 30, 1997, there were 22,100,000 shares of Registrant's Class A
Common Stock, $.01 par value, and 21,188,240 shares of Registrant's Class B
Common Stock, $.01 par value, outstanding.
<PAGE>
NATIONAL STEEL CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
----
Statements of Consolidated Income -
Three Months Ended March 31, 1997 and 1996 3
Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996 4
Statements of Consolidated Cash Flows -
Three Months Ended March 31, 1997 and 1996 5
Statements of Changes in Consolidated
Stockholders' Equity and Redeemable
Preferred Stock-Series B -
Three Months Ended March 31, 1997 and
Year Ended December 31, 1996 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
Legal Proceedings 14
Exhibits and Reports on Form 8-K 15
2
<PAGE>
PART I. - FINANCIAL INFORMATION
NATIONAL STEEL CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(In Thousands of Dollars, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1997 1996
--------- ---------
<S> <C> <C>
Net Sales $757,618 $682,143
Cost of products sold 654,293 628,920
Selling, general and administrative 31,569 31,413
Depreciation, depletion and amortization 35,151 36,288
Equity income of affiliates (94) (2,287)
-------- --------
Income (Loss) from Operations 36,699 (12,191)
Financing Costs:
Interest and other financial income (1,715) (1,896)
Interest and other financial expense 9,889 10,667
-------- --------
8,174 8,771
-------- --------
Income (Loss) before Income Taxes 28,525 (20,962)
Income tax provision (credit) 2,639 (5,387)
-------- --------
Net Income (Loss) 25,886 (15,575)
Less preferred stock dividends 2,741 2,742
-------- --------
Net income (loss) applicable to Common Stock $ 23,145 $(18,317)
======== ========
Per Share Data Applicable to Common Stock:
Net Income (Loss) Applicable to Common Stock $ .53 $ (0.42)
======== ========
Weighted average shares outstanding (in thousands) 43,288 43,288
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
NATIONAL STEEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Except Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
Assets 1997 1996
---------- ------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 135,003 $ 109,041
Receivables - net 288,142 279,889
Inventories - net:
Finished and semi-finished products 301,660 295,952
Raw materials and supplies 110,089 140,009
---------- ----------
411,749 435,961
---------- ----------
Total current assets 834,894 824,891
Investments in affiliated companies 59,648 65,399
Property, plant and equipment 3,709,305 3,664,597
Less allowances for depreciation, depletion
and amortization 2,245,443 2,209,079
---------- ----------
1,463,862 1,455,518
Other assets 205,026 201,247
---------- ----------
Total Assets $2,563,430 $2,547,055
========== ==========
Liabilities, Redeemable Preferred Stock and
Stockholders' Equity
Current liabilities
Accounts payable $ 222,830 $ 234,892
Accrued liabilities 312,683 301,176
Current portion of long term obligations 38,538 37,731
---------- ----------
Total current liabilities 574,051 573,799
Long term obligations 314,714 323,550
Long term indebtedness to related parties 139,160 146,744
Other long term liabilities 857,285 847,512
Redeemable Preferred Stock - Series B 63,155 63,530
Stockholders' equity
Common Stock - par value $.01:
Class A - authorized 30,000,000 shares, issued
and outstanding 22,100,000 221 221
Class B - authorized 65,000,000 shares; issued
and outstanding 21,188,240 212 212
Preferred Stock - Series A 36,650 36,650
Additional paid-in-capital 465,359 465,359
Retained earnings 112,623 89,478
---------- ----------
Total stockholders' equity 615,065 591,920
---------- ----------
Total Liabilities, Redeemable Preferred Stock
and Stockholders' Equity $2,563,430 $2,547,055
========== ==========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
NATIONAL STEEL CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1997 1996
--------- ----------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income (loss) $ 25,886 $(15,575)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation, depletion and amortization 35,151 36,288
Carrying charges related to facility sales
and plant closings 3,679 5,596
Equity income of affiliates (94) (2,287)
Dividends from affiliates 6,808 4,375
Postretirement benefits 9,795 14,004
Deferred income taxes (5,400) (5,400)
Cash provided (used) by working capital items:
Receivables (8,253) 45,604
Inventories 24,212 (260)
Accounts Payable (12,062) (14,489)
Accrued Liabilities 11,434 (3,960)
Other (757) (2,878)
-------- --------
Net Cash Provided by Operating Activities 90,399 61,018
Cash Flows From Investing Activities
Purchases of plant and equipment (net) (42,975) (31,236)
-------- --------
Net Cash Used in Investing Activities (42,975) (31,236)
Cash Flows From Financing Activities
Debt Repayment (15,613) (14,981)
Payment of released Weirton benefit liabilities (2,806) (3,763)
Dividend payments on Preferred Stock-Series A (1,014) (1,015)
Dividend payments on Preferred Stock-Series B (210) -----
Payment of unreleased Weirton liabilities and
their release in lieu of cash dividends on
Preferred Stock-Series B (1,819) (2,031)
-------- --------
Net Cash Used in Financing Activities (21,462) (21,790)
-------- --------
Net Increase in Cash And Cash Equivalents 25,962 7,992
Cash and cash equivalents at the beginning of
the period 109,041 127,616
-------- --------
Cash and cash equivalents at the end of the
period $135,003 $135,608
======== ========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
NATIONAL STEEL CORPORATION AND SUBSIDIARIES
STATEMENTS OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY
AND REDEEMABLE PREFERRED STOCK - SERIES B
(In Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Common Common Preferred Additional Total Redeemable
Stock - Stock - Stock - Paid-In Retained Stockholders' Preferred Stock -
Class A Class B Series A Capital Earnings Equity Series B
------- ------- --------- ---------- --------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1996 $221 $212 $36,650 $465,359 $ 54,115 $556,557 $65,030
Net income 44,557 44,557
Amortization of excess of book value
over redemption value of Redeemable
Preferred Stock - Series B 1,500 1,500 (1,500)
Cumulative dividends on Preferred
Stock - Series A and B (12,459) (12,459)
Minimum pension liability 1,765 1,765
---- ---- ------- -------- -------- -------- -------
BALANCE AT DECEMBER 31, 1996 221 212 36,650 465,359 89,478 591,920 63,530
Net income 25,886 25,886
Amortization of excess of book value
over redemption value of Redeemable
Preferred Stock - Series B 375 375 (375)
Cumulative dividends on Preferred
Stock - Series A and B (3,116) (3,116)
---- ---- ------- -------- -------- -------- -------
BALANCE AT MARCH 31, 1997 $221 $212 $36,650 $465,359 $112,623 $615,065 $63,155
==== ==== ======= ======== ======== ======== =======
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
NATIONAL STEEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 (Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements of National Steel Corporation and its
majority owned subsidiaries (the "Company") presented herein are unaudited.
However, in the opinion of management, such statements include all adjustments
necessary for a fair presentation of the results for the periods indicated. All
such adjustments made were of a normal recurring nature. The financial results
presented for the three month period ended March 31, 1997 are not necessarily
indicative of results of operations for the full year. The Annual Report of the
Company on Form 10-K for the year ended December 31, 1996 (the "1996 Form 10-K")
contains additional information and should be read in conjunction with this
report.
NOTE 2 - SUBSEQUENT EVENTS
On April 1, 1997, the Company closed the sale of its 21.73% minority equity
interest in Iron Ore Company of Canada ("IOC") to North Limited, an Australian
mining and metals company ("North"). The Company received approximately $85
million from North in exchange for its interest in IOC and will report an after-
tax gain of approximately $25 million, or $0.58 per share, during the second
quarter of 1997. The Company will continue to purchase iron ore from IOC
pursuant to the terms of long-term supply agreements.
On April 18, 1997, the Company announced that it has reached an agreement in
principle to sell its coke oven battery servicing its Great Lakes Division and
other related assets, including coal inventories, to a subsidiary of DTE Energy
Company. As part of the arrangement, the Company has agreed to operate the
battery and will purchase the majority of the coke produced from the battery for
a twelve year period under a requirements contract.
The Company expects to receive proceeds of approximately $225 million from this
transaction, plus the value of the coal inventory. Although this transaction
will result in an after-tax loss of approximately $25 million, the impact on
future earnings is expected to be positive. The sale is subject to the parties
reaching a definitive agreement on all aspects of the transaction, as well as
customary regulatory review and approval of both companies' Boards of Directors.
Proceeds from the coke battery transaction will be used to repay the outstanding
related party indebtedness on the coke battery, which approximates $154 million,
plus prepayment and transaction costs which will be incurred in the payoff of
the debt and accrued interest.
The Company is evaluating the use of the remaining proceeds relating to these
transactions. Possible uses of the remaining proceeds may include additional
funding of employee benefit plans, additional debt reduction and funding of
strategic initiatives.
NOTE 3 - ENVIRONMENTAL AND LEGAL PROCEEDINGS
The Company's operations are subject to numerous laws and regulations relating
to the protection of human health and the environment. Because these
environmental laws and regulations are quite stringent and are generally
becoming more stringent, the Company has expended, and can be expected to expend
in the future, substantial amounts for compliance with these laws and
regulations. Due to the possibility of future
7
<PAGE>
changes in circumstances or regulatory requirements, the amount and timing of
future environmental expenditures could vary from those currently anticipated.
It is the Company's policy to expense or capitalize, as appropriate,
environmental expenditures that relate to current operating sites. Environmental
expenditures that relate to past operations and which do not contribute to
future or current revenue generation are expensed. With respect to costs for
environmental assessments or remediation activities, or penalties or fines that
may be imposed for noncompliance with such laws and regulations, such costs are
accrued when it is probable that liability for such costs will be incurred and
the amount of such costs can be reasonably estimated.
The Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), and similar state superfund statutes generally
impose joint and several liability on present and former owners and operators,
transporters and generators for remediation of contaminated properties,
regardless of fault. The Company and certain of its subsidiaries are involved as
potentially responsible parties ("PRPs") at a number of off-site CERCLA or state
superfund site proceedings. At some of these sites, any remediation costs
incurred by the Company would constitute liabilities for which Avatex
Corporation ("Avatex"), formerly FoxMeyer Health Corporation, is required to
indemnify the Company ("Avatex Environmental Liabilities"). In addition, at some
of these sites, the Company does not have sufficient information regarding the
nature and extent of the contamination, the wastes contributed by other PRPs, or
the required remediation activity to estimate its potential liability.
The Company has also recorded the reclamation and other costs to restore its
coal and iron ore mines at its shutdown locations to their original and natural
state, as required by various federal and state mining statutes.
Since the Company has been conducting steel manufacturing and related operations
at numerous locations for over sixty years, the Company potentially may be
required to remediate or reclaim any contamination that may be present at these
sites. The Company does not have sufficient information to estimate its
potential liability in connection with any potential future remediation at such
sites. Accordingly, the Company has not accrued for such potential liabilities.
As these matters progress or the Company becomes aware of additional matters,
the Company may be required to accrue charges in excess of those previously
accrued. The outcome of any of the matters described, to the extent they exceed
any applicable reserves, could have a material adverse effect on the Company's
results of operations and liquidity for the applicable period. The Company has
recorded an aggregate environmental liability of approximately $21.4 million and
$21.6 million at March 31, 1997 and December 31, 1996, respectively.
The Company is involved in various non-environmental legal proceedings, most of
which occur in the normal course of its business. The Company does not believe
that these proceedings will have a material adverse effect, either individually
or in the aggregate, on the Company's financial condition. However, with respect
to certain of the proceedings, if reserves prove to be inadequate and the
Company incurs a charge to earnings, such charge could have a material adverse
effect on the Company's results of operations and liquidity for the applicable
period.
NOTE 4 - CONTINGENCIES RELATED TO WEIRTON LIABILITIES
In 1984, the Company sold its Weirton Steel Division ("Weirton") to the
employees of the Weirton Steel Corporation. As a part of this sale, the Company
retained certain pension and other postretirement benefit liabilities of Weirton
(the "Retained Liabilities") as of the sale date.
8
<PAGE>
In a series of transactions occurring after 1984, Avatex sold its interest in
the Company to NKK Corporation ("NKK") and the public. As a part of those
transactions, Avatex agreed to indemnify the Company for the Retained
Liabilities and certain environmental liabilities. In 1990, as a part of one of
these transactions, the Company received a payment of $146.6 million and
released Avatex from indemnification of $146.6 million of the Retained
Liabilities. In 1993, the Company released Avatex from an additional $67.8
million of pension liabilities in connection with an early redemption of 10,000
shares of the Series B Redeemable Preferred Stock owned by Avatex. In 1994,
Avatex deposited $10 million with the Company to cover indemnified environmental
liabilities.
As part of the indemnification agreements, Avatex and the Company have agreed
that a "true-up" of the pension and other postretirement liabilities will take
place no later than the year 2000. The "true-up" may take place sooner if the
parties agree to do so. Based on current information, it is expected that a
"true-up" would result in a payment to Avatex. Any adjustment resulting from
this "true-up" is expected to be made to the capital accounts of the Company
since such an adjustment results from finalization of amounts related to the
recapitalization arrangements.
Avatex has experienced operating difficulties and has recorded substantial asset
writedowns. In its latest filing with the Securities and Exchange Commission,
dated December 31, 1996, it reported a deficit in its consolidated stockholders'
equity of $83 million. Most of Avatex's operating subsidiaries have filed for
bankruptcy protection. Although Avatex, the parent company, has not been
included in the bankruptcy filing, the filing has caused the Company to have
increased concerns about Avatex's ability to honor its remaining indemnification
obligations to the Company. Should Avatex, the parent company, seek bankruptcy
protection, the Company's future cash outlays and on-going charges to operations
relating to the Retained Liabilities could be significantly increased.
Avatex is subject to the informational requirements of the Securities and
Exchange Act of 1934 and, in accordance therewith, files reports and other
information with the Securities and Exchange Commission.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Comparison of the Three Month Periods ended March 31, 1997 and 1996
Net Sales
- ---------
Net sales for the first quarter of 1997 totaled $757.6 million, an 11.1%
increase compared to net sales of $682.1 million during the corresponding 1996
period. This $75.5 million increase was attributable to an 85,000 ton increase
in volume, an improvement in selling prices and a favorable shift in product
mix. Steel shipments were a first quarter record 1,521,000 tons, a 5.9% increase
compared to the 1,436,000 tons shipped during the same 1996 period.
Cost of Products Sold
- ---------------------
The Company's cost of products sold of $654.3 million during the first quarter
of 1997 represents an increase of $25.4 million compared to the same period in
1996. This increase was primarily attributable to the higher level of shipments,
as well as a product mix shift towards higher-cost coated items. Cost of
products sold, as a percent of sales, declined from 92.2% during the first
quarter of 1996 to 86.4% during the corresponding 1997 period. This 5.8%
improvement is attributable to several nonrecurring items that occurred during
the first quarter of 1996, including a kiln outage and fire at the Company's
iron ore mining facility.
Raw steel production was 1,634,000 tons during the first quarter of 1997, which
represents a 1.9% decrease compared to the 1,666,000 tons produced during the
same 1996 period.
Equity Income of Affiliates
- ---------------------------
During the first quarter of 1997, equity income of affiliates of $.1 million
represents a decline of $2.2 million compared to the corresponding 1996 period.
This decline is primarily the result of lower income from Iron Ore Company of
Canada ("IOC") and Double G Coatings, L.P.
Income Taxes
- ------------
During the first quarter of 1997, the Company recorded alternative minimum and
state tax provisions of $6.7 million and $1.3 million, respectively, offset by a
deferred tax benefit of $5.4 million related to retiree postemployment benefits
("OPEB"). The Company's effective tax rate is lower than the federal statutory
rate primarily because of continued utilization of available operating loss
carryforwards. As such, the Company anticipates paying alternative minimum tax
at a rate of 20%.
As a result of the operating loss sustained during the first quarter of 1996,
the Company's tax provision was comprised solely of a deferred tax credit of
$5.4 million related to OPEB.
Subsequent Events
- -----------------
See Liquidity and Sources of Capital regarding the sale of the Company's
minority equity interest in IOC, as well as an agreement in principle to sell
the coke oven battery serving its Great Lakes Division.
Contingencies
- -------------
See Part 1 - Financial Information - Note 4, regarding contingencies related to
the Weirton Liabilities.
10
<PAGE>
Accounting Pronouncements
- -------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share", which
is required to be adopted on December 31, 1997. At that time, the Company will
be required to change the current presentation of primary EPS to a presentation
of basic EPS, which excludes any dilutive effect of stock options. The statement
also requires presentation of diluted EPS, which is computed similarly to fully
diluted EPS under existing accounting rules.
Stock options are the Company's only dilutive securities and are not entered
into the determination of primary EPS as their dilutive effect is less than 3%.
As such, the presentation of basic EPS will be consistent with the current
primary EPS. The impact of SFAS 128 on the calculation of fully diluted EPS is
not expected to be material.
In October 1996, the American Institute of Certified Public Accountants issued
Statement of Position 96-1 ("SOP 96-1"), "Environmental Remediation
Liabilities". SOP-96-1 provides authoritative guidance on the recognition,
measurement, display and disclosures of environmental remediation liabilities.
It is the Company's belief that it is in compliance with the accounting and
reporting guidance described therein and its issuance did not have a material
impact on the Company.
11
<PAGE>
LIQUIDITY AND SOURCES OF CAPITAL
- --------------------------------
The Company's liquidity needs arise primarily from capital investments, working
capital requirements, pension funding requirements and principal and interest
payments on its indebtedness. The Company has satisfied these liquidity needs
with funds provided by long term borrowings and cash provided by operations.
Additional sources of liquidity consist of a Receivables Purchase Agreement (the
"Receivables Purchase Agreement") with commitments of up to $200.0 million and
an expiration date of May 2001 and both a $100.0 million and a $50.0 million
credit facility, which are secured by the Company's inventories (the "Inventory
Facilities") and expire in May 2000 and July 1998, respectively.
On April 1, 1997, the Company closed the sale of its 21.73% minority equity
interest in IOC to North. The Company received approximately $85 million from
North in exchange for its interest in IOC and will report an after-tax gain of
approximately $25 million during the second quarter of 1997.
On April 18, 1997, the Company announced that it has reached an agreement in
principle to sell its coke oven battery servicing its Great Lakes Division and
other related assets, including coal inventories, to a subsidiary of DTE Energy
Company. As part of the arrangement, the Company has agreed to operate the
battery and will purchase the majority of the coke produced from the battery for
a twelve year period under a requirements contract.
The Company expects to receive proceeds of $225 million from this transaction,
plus the value of the coal inventory. Although this transaction is expected to
result in an after-tax loss of approximately $25 million, the impact on future
earnings is expected to be positive. Proceeds will be used to repay the
outstanding related party indebtedness on the coke battery, which approximates
$154 million, plus prepayment and transaction costs which will be incurred in
the payoff of the debt and accrued interest.
The Company is evaluating the use of the remaining proceeds relating to these
transactions. Possible uses of the remaining proceeds may include additional
funding of employee benefit plans, additional debt reduction and funding of
strategic initiatives.
The Company is currently in compliance with all material covenants of, and
obligations under, the Receivables Purchase Agreement, the Inventory Facilities
and other debt instruments. On March 31, 1997, there were no cash borrowings
outstanding under the Receivables Purchase Agreement or the Inventory
Facilities, and outstanding letters of credit under the Receivables Purchase
Agreement totaled $91.7 million. During the first quarter of 1997, the maximum
availability under the Receivables Purchase Agreement, after reduction of
letters of credit outstanding, varied from $76.7 million to $111.1 million and
was $97.3 million as of March 31, 1997.
At March 31, 1997, total debt and redeemable preferred stock as a percentage of
total capitalization decreased to 47.5% as compared to 49.1% at December 31,
1996. Cash and cash equivalents totaled $135.0 million at March 31, 1997 as
compared to $109.0 million at December 31, 1996.
Cash Flows from Operating Activities
- ------------------------------------
For the quarter ended March 31, 1997, cash provided from operating activities
amounted to $90.4 million, which is primarily attributable to $25.9 million in
net income earned during the quarter, adjusted for the impact of working capital
items and non-cash charges for depreciation and postretirement benefits.
Cash Flows from Investing Activities
- ------------------------------------
Capital investments for the quarters ended March 31, 1997 and 1996 amounted to
$43.0 million and $31.2 million, respectively. The 1997 spending increase is
primarily due to the 72 inch continuous galvanizing line upgrade and the
construction of a new coating line, both at the Midwest Division. The Company
plans to invest approximately $114.0 million during the remainder of 1997 for
capital expenditures, including the
12
<PAGE>
aforementioned Midwest Division projects, scheduled repairs to the Great Lakes
Division "A" blast furnace and improvements at its other facilities.
Cash Flows from Financing Activities
- ------------------------------------
During the first quarter of 1997, the Company utilized $21.5 million of cash for
financing activities which included scheduled payments of debt, as well as
dividend payments on the Company's preferred stock.
OTHER
- -----
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
- --------------------------------------------------------------------------------
Statements made by the Company in reports, such as this Form 10-Q, in press
releases and in statements made by employees in oral discussions, that are not
historical facts constitute "forward looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995.
Forward looking statements, by their nature, involve risk and uncertainty. A
variety of factors could cause business conditions and the Company's actual
results and experience to differ materially from those expected by the Company
or expressed in the Company's forward looking statements. These factors include,
but are not limited to, the following: (1) changes in market prices and market
demand for the Company's products; (2) changes in the costs or availability of
the raw materials and other supplies used by the Company in the manufacture of
its products; (3) equipment failures or outages at the Company's steelmaking and
processing facilities; (4) losses of customers; (5) changes in the levels of the
Company's operating costs and expenses; (6) collective bargaining agreement
negotiations, strikes, labor stoppages or other labor difficulties; (7) actions
by the Company's competitors, including domestic integrated steel producers,
foreign competitors, mini-mills and manufacturers of steel substitutes, such as
plastics, aluminum, ceramics, glass, wood and concrete; (8) changes in industry
capacity; (9) changes in economic conditions in the United States and other
major international economies, including rates of economic growth and inflation;
(10) worldwide changes in trade, monetary or fiscal policies; (11) changes in
the legal and regulatory requirements applicable to the Company; and (12) the
effects of extreme weather conditions.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Environmental Matters
Great Lakes Division - Wayne Country Air Pollution Control Department. With
respect to the matter involving alleged exceedances of emission and work
practice standards at the Company's Great Lakes Division, previously reported in
the 1996 Form 10-K, the Wayne Country Air Pollution Control Department has
issued nine new notices of violation during the first quarter of 1997. These
notices of violation relate to alleged exceedances of particulate emissions
standards and equipment operating and maintenance requirements. There has been
no demand for penalties or sanctions, and the Company has addressed all of the
issues raised with respect to these new notices of violation.
Granite City - Alleged Air Violations. With respect to the matter involving
alleged violations of various air emission requirements at the Granite City
Division's basic oxygen furnace shop, coke oven batteries and by-products plant,
previously reported in the 1996 Form 10-K, the U.S. Department of Justice
notified the Company on May 5, 1997 that it would recommend a settlement of this
matter prior to filing suit for a civil penalty of $3.1 million and appropriate
injunctive relief. The Company intends to meet with the Department of Justice to
discuss its settlement demand.
14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) See attached Exhibit Index
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated February 23, 1997 reporting on
Item 5, Other Events.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL STEEL CORPORATION
BY /s/ Carl M. Apel
-------------------------------------------------------
Carl M. Apel, Vice President - Finance
Principal Financial Officer and Duly Authorized Officer
Date: May 13, 1997
16
<PAGE>
NATIONAL STEEL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
EXHIBIT INDEX
For the quarterly period ended March 31, 1997
27-A Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 135,003
<SECURITIES> 0
<RECEIVABLES> 310,018
<ALLOWANCES> 21,876
<INVENTORY> 411,749
<CURRENT-ASSETS> 834,894
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<CURRENT-LIABILITIES> 574,051
<BONDS> 453,874
<COMMON> 433
63,155
36,650
<OTHER-SE> 577,982
<TOTAL-LIABILITY-AND-EQUITY> 2,563,430
<SALES> 757,618
<TOTAL-REVENUES> 757,618
<CGS> 654,293
<TOTAL-COSTS> 654,293
<OTHER-EXPENSES> 64,911
<LOSS-PROVISION> 556
<INTEREST-EXPENSE> 9,889
<INCOME-PRETAX> 28,525
<INCOME-TAX> 2,639
<INCOME-CONTINUING> 25,886
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<EXTRAORDINARY> 0
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<NET-INCOME> 25,886
<EPS-PRIMARY> 0.53
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</TABLE>
