<PAGE>
1997
Second Quarter
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 1 0 - Q / A
(Amendment No. 1 to Form 10-Q originally filed August 13, 1997)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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)
(Registrant's telephone number, including area code): 219-273-7000
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
----- -----
The number of shares outstanding of the Registrant's Common Stock $.01 par
value, as of July 31, 1997, was 43,288,240 shares.
<PAGE>
NATIONAL STEEL CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
THIS AMENDMENT REFLECTS RESTATED FINANCIAL INFORMATION.
(SEE NOTE 2 TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AND MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS).
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C>
Statements of Consolidated Income -
Three Months Ended June 30, 1997 and 1996 3
Statements of Consolidated Income -
Six Months Ended June 30, 1997 and 1996 4
Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996 5
Statements of Consolidated Cash Flows -
Six Months Ended June 30, 1997 and 1996 6
Statements of Changes in Consolidated
Stockholders' Equity and Redeemable
Preferred Stock-Series B -
Six Months Ended June 30, 1997 and
Year Ended December 31, 1996 7
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 16
PART II. OTHER INFORMATION
Legal Proceedings 21
Submission of Matters to a Vote of Security Holders 22
Exhibits and Reports on Form 8-K 22
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATIONAL STEEL CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(In Thousands of Dollars, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended June 30,
1997 1996
(Restated) (Restated)
---------- ----------
<S> <C> <C>
Net Sales $824,869 $769,481
Cost of products sold 700,051 680,545
Selling, general and administrative 36,937 32,273
Depreciation and amortization 36,984 36,322
Equity income of affiliates (672) (1,376)
-------- --------
Income from Operations 51,569 21,717
Interest and other financial income (4,712) (1,797)
Interest and other financial expense 9,390 11,146
Net gain on disposal of non-core assets (25,385) --
-------- --------
(20,707) 9,349
-------- --------
Income Before Income Taxes and Extraordinary Item 72,276 12,368
Income tax provision (credit) 7,351 (5,549)
-------- --------
Income Before Extraordinary Item 64,925 17,917
Extraordinary item (net of applicable tax) (5,397) --
-------- --------
Net Income 59,528 17,917
Less preferred stock dividends 2,737 2,740
-------- --------
Net income applicable to Common Stock $ 56,791 $ 15,177
======== ========
Per Share Data Applicable to Common Stock:
Income Before Extraordinary Item $ 1.43 $ .35
Extraordinary item (.12) --
-------- --------
Net Income Applicable to Common Stock $ 1.31 $ .35
======== ========
Weighted average shares outstanding (in thousands) 43,288 43,288
======== ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
NATIONAL STEEL CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(In Thousands of Dollars, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
1997 1996
(Restated) (Restated)
---------- ----------
<S> <C> <C>
Net Sales $1,582,487 $1,451,624
Cost of products sold 1,353,255 1,309,547
Selling, general and administrative 69,381 62,386
Depreciation and amortization 72,135 72,610
Equity income of affiliates (766) (3,663)
---------- ----------
Income from Operations 88,482 10,744
Interest and other financial income (6,427) (3,693)
Interest and other financial expense 19,279 21,813
Net gain on disposal of non-core assets (25,385) --
---------- ----------
(12,533) 18,120
---------- ----------
Income (Loss) Before Income Taxes and Extraordinary Item 101,015 (7,376)
Income tax provision (credit) 9,425 (11,097)
---------- ----------
Income Before Extraordinary Item 91,590 3,721
Extraordinary item (net of applicable tax) (5,397) --
---------- ----------
Net Income 86,193 3,721
Less preferred stock dividends 5,478 5,482
---------- ----------
Net income (loss) applicable to Common Stock $ 80,715 $ (1,761)
========== ==========
Per Share Data Applicable to Common Stock:
Income (Loss) Before Extraordinary Item $ 1.98 $ (.04)
Extraordinary item (.12) --
---------- ----------
Net Income (Loss) Applicable to Common Stock $ 1.86 $ (.04)
========== ==========
Weighted average shares outstanding (in thousands) 43,288 43,288
========== ==========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
NATIONAL STEEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Except Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
Assets (Restated) (Restated)
---------- ----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 426,884 $ 109,041
Receivables - net 285,704 281,889
Inventories - net:
Finished and semi-finished products 275,716 299,333
Raw materials and supplies 106,594 141,234
----------- ----------
382,310 440,567
----------- ----------
Total current assets 1,094,898 831,497
Investments in affiliated companies 15,383 65,399
Property, plant and equipment 3,393,635 3,664,597
Less allowances for depreciation
and amortization 2,161,728 2,209,079
----------- ----------
1,231,907 1,455,518
Other assets 212,049 203,878
----------- ----------
Total Assets $ 2,554,237 $2,556,292
=========== ==========
Liabilities, Redeemable Preferred Stock
and Stockholders' Equity:
Current liabilities
Accounts payable $ 270,750 $ 234,892
Accrued liabilities 311,084 278,147
Current portion of long term obligations 33,586 37,731
----------- ----------
Total current liabilities 615,420 550,770
Long term obligations 321,341 323,550
Long term indebtedness to related parties -- 146,744
Other long term liabilities 829,419 827,136
Redeemable Preferred Stock - Series B 62,780 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 222,835 142,120
----------- ----------
Total stockholders' equity 725,277 644,562
----------- ----------
Total Liabilities, Redeemable
Preferred Stock and Stockholders'
Equity $ 2,554,237 $2,556,292
=========== ==========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
NATIONAL STEEL CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
1997 1996
(Restated) (Restated)
---------- ----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 86,193 $ 3,721
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 72,135 72,610
Carrying charges related to facility
sales and plant closings 10,356 11,192
Net gain on disposal of non-core assets (25,385) --
Equity income (766) (3,663)
Dividends from affiliates 6,808 4,375
Postretirement benefits 7,988 11,794
Extraordinary item (net) 5,397 --
Deferred income taxes (10,800) (10,800)
Cash provided (used) by working capital items:
Receivables (1,816) 26,509
Inventories 48,257 (16,317)
Accounts payable 35,607 35,059
Accrued liabilities 30,619 (1,047)
Other 3,068 (24,922)
---------- ----------
Net Cash Provided by Operating Activities 267,661 108,511
---------- ----------
Cash Flows from Investing Activities:
Proceeds from the sale of non-core
assets 312,306 --
Purchases of plant and equipment (71,593) (46,934)
Other (362) --
---------- ----------
Net Cash Provided (Used) by
Investing Activities 240,351 (46,934)
---------- ----------
Cash Flows from Financing Activities:
Prepayment of related party debt (154,328) --
Costs associated with prepayment of
related party debt (4,500) --
Other debt repayment (18,664) (17,682)
Payment of released Weirton benefit
liabilities (6,684) (6,842)
Dividend payments on Preferred
Stock-Series A (1,998) (2,007)
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 (3,785) (4,015)
---------- ----------
Net Cash Used by Financing Activities (190,169) (30,546)
---------- ----------
Net Increase in Cash and Cash
Equivalents 317,843 31,031
Cash and Cash Equivalents, Beginning
of the Period 109,041 127,616
---------- ----------
Cash and Cash Equivalents, End of the
Period $ 426,884 $ 158,647
========== ==========
</TABLE>
See notes to consolidated financial statements.
6
<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 Retained Total Redeemable
Stock - Stock - Stock - Paid-In Earnings Stockholders' Preferred Stock -
Class A Class B Series A Capital (Deficit) Equity Series B
------- ------- --------- ---------- --------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995
as previously reported $221 $212 $36,650 $465,359 $ 54,115 $556,557 $65,030
Adjustments to correct prior period
accounting errors 43,778 43,778
---- ---- ------- -------- -------- -------- -------
BALANCE AT JANUARY 1, 1996 (Restated) 221 212 36,650 465,359 97,893 600,335 65,030
Net income (Restated) 53,924 53,924
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 (Restated) 1,262 1,262
---- ---- ------- -------- -------- -------- -------
BALANCE AT DECEMBER 31, 1996 (Restated) 221 212 36,650 465,359 142,120 644,562 63,530
Net income (Restated) 86,193 86,193
Amortization of excess of book value
over redemption value of Redeemable
Preferred Stock - Series B 750 750 (750)
Cumulative dividends on Preferred
Stock - Series A and B (6,228) (6,228)
---- ---- ------- -------- -------- -------- -------
BALANCE AT JUNE 30, 1997 (Restated) $221 $212 $36,650 $465,359 $222,835 $725,277 $62,780
==== ==== ======= ======== ======== ======== =======
</TABLE>
See notes to consolidated financial statements.
7
<PAGE>
NATIONAL STEEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 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, except for the items
discussed in Notes 2 and 3. The financial results presented for the three and
six month periods ended June 30, 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. The 1996 Form
10-K has been amended to reflect changes made in accordance with the restatement
discussed in Note 2.
Certain items in prior years have been reclassified to conform with the current
year presentation.
NOTE 2 - AUDIT COMMITTEE INQUIRY AND RESTATEMENT OF PRIOR PERIODS
The Audit Committee of the Company's Board of Directors in the third quarter of
1997 was informed of allegations about managed earnings, including excess
reserves and the accretion of such reserves to income over multiple periods, as
well as allegations about deficiencies in the system of internal controls. The
Audit Committee engaged legal counsel who, with the assistance of an accounting
firm, has inquired into these matters. The Company, based upon the inquiry, has
determined the need to restate its financial statements for certain prior
periods. In the Form 10-Q filed on November 14, 1997, the Company included the
effects of the restatement that increased previously reported retained earnings
at December 31, 1996 by $49.7 million and January 1, 1992 by $31.0 million. That
Form 10-Q also indicated that the Audit Committee inquiry was continuing.
Subsequent to that filing, as a result of further review initiated due to that
inquiry, and as part of its 1997 year-end closing process, the Company has
become aware of certain additional accounting errors which require restatement.
These additional adjustments affect the reported results for 1997 and 1996, and
result in reporting net earnings increases of $3.4 million in 1996, and $1.4
million, $5.3 million and $1.2 million in the first, second and third quarters
of 1997, respectively.
On December 15, 1997, the Board of Directors approved the termination of the
Company's Vice President-Finance in connection with the Audit Committee inquiry.
During January 1998, legal counsel to the Audit Committee issued its report to
the Audit Committee and the Audit Committee approved the report and concluded
its inquiry. On January 21, 1998, the Board of Directors accepted the report and
approved the recommendations, except for the recommendation to revise the Audit
Committee Charter which will be considered at the next Board of Directors
meeting. The report found certain misapplications of generally accepted
accounting principles and accounting errors, including excess reserves, which
have been corrected by the restatements as discussed below. The report found
that the accretion of excess reserves to income during the first, second and
third quarters of 1997 as described below may have had, as the result of errors
in judgment and misapplications of generally accepted accounting principles, the
effect of management of earnings. However, these errors do not appear to have
involved the intentional misstatement of the Company's accounts. The report also
found weaknesses in internal controls and recommended various improvements in
the Company's system of internal controls, a comprehensive review of such
controls, a restructuring of its finance and accounting department, and
expansion of the role of the internal audit function, as well as corrective
measures to be taken related to the specific causes of the accounting errors.
The Company has begun to implement these recommendations.
The Securities and Exchange Commission (the "Commission") has authorized an
investigation pursuant to a formal order of investigation relating to the
matters described above. The Company has been cooperating with the Staff of the
Commission and intends to continue to do so.
8
<PAGE>
The following tables reflect the effects of the restatement on reported net
income (loss) and retained earnings (accumulated deficit) (in millions of
dollars):
<TABLE>
<CAPTION>
1997 Restatement:
- -----------------
1st Quarter 2nd Quarter 3rd Quarter Nine Months
<S> <C> <C> <C> <C>
Income Before Income Taxes and
- ------------------------------
Extraordinary Item:
- -------------------
As Originally Reported $ 28.5 $ 71.9 $ 93.9 $194.3
As Restated $ 28.7 $ 72.3 $ 93.7 $194.7
Income Before Extraordinary Item:
- ---------------------------------
As Originally Reported $ 25.9 $ 62.5 $ 77.3 $165.7
As Restated $ 26.7 $ 64.9 $ 78.6 $170.2
Net Income:
- -----------
As Originally Reported $ 25.9 $ 57.1 $ 77.3 $160.3
As Restated $ 26.7 $ 59.5 $ 78.6 $164.8
Earnings Per Share:
- -------------------
As Originally Reported $ .53 $ 1.26* $ 1.72 $ 3.52
As Restated $ .55 $ 1.31* $ 1.76 $ 3.62
</TABLE>
* Second quarter 1997 reported earnings per share before extraordinary items was
$1.38; the restated amount was $1.43. Six month reported earnings per share
before extraordinary items was $1.91; the restated amount was $1.98. Nine month
reported earnings per share before extraordinary items was $3.55; the restated
amount was $3.74.
- -----------------------------
The first quarter of 1997 was increased on a net pre-tax income basis by $.2
million. The reversal of the accretion of excess reserves reduced pre-tax income
by approximately $3.0 million (net of $.3 million of tax related accretion).
Revised timing of the recognition of an insurance recovery from the second to
the first quarter of 1997 increased pre-tax income by approximately $3.0
million. Other adjustments increased pre-tax income by approximately $.2
million. The tax provision decreased by $.6 million primarily as a result of a
revision in the state tax provision to appropriately reflect the benefit of net
operating loss carryforwards.
The second quarter of 1997 was increased on a net pre-tax income basis by $.3
million. The reversal of the accretion of excess reserves decreased pre-tax
income by approximately $3.6 million (net of $.3 million of tax related
accretion). The aforementioned revised timing of the recognition of an insurance
recovery decreased pre-tax income by approximately $3.0 million. The revised
timing of a write-off of the net book value of fixed assets to the period in
which they were disposed of or demolished in connection with a 1997 construction
project reduced pre-tax income by approximately $1.5 million. The revised timing
on the recognition of a gain on the 1997 sale of a coal mine property increased
pre-tax income by $3.0 million. Pretax income was also restated to reflect the
revision of a $5.2 million accrual of property taxes relating to the No. 5 coke
oven battery, which were assumed by the buyer as part of the sale of that coke
oven battery in the second quarter. Other adjustments increased pre-tax income
by approximately $.3 million. The adjustment to the income tax provision of
approximately $2.0 million related to a correction of the effective tax rate
used in calculating the previously reported income tax provision.
Pre-tax income in the third quarter of 1997 was reduced by $.2 million. This
reduction was due to the reversal of the impact of the accretion of an excess
reserve to income which reduced the restated income by $.6 million, offset by
other adjustments of $.4 million. The tax provision was reduced in the
restatement by approximately $1.4 million to appropriately reflect the benefit
of net operating loss carryforwards for state tax purposes.
9
<PAGE>
<TABLE>
<CAPTION>
1996 Restatement:
- -----------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
-------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Income (Loss) Before Income Taxes
and Accounting Change
- ---------------------------------
As Originally Reported $ (21.0) $ 5.0 $ 21.2 $ 23.6 $ 28.8
As Restated $ (19.8) $ 12.4 $ 12.1 $ 27.3 $ 32.0
Income (Loss) Before
Accounting Change:
- --------------------
As Originally Reported $ (15.6) $ 10.4 $ 24.3 $ 25.5 $ 44.6
As Restated $ (14.2) $ 17.9 $ 11.5 $ 27.6 $ 42.8
Net Income (Loss):
- ------------------
As Originally Reported $ (15.6) $ 10.4 $ 24.3 $ 25.5 $ 44.6
As Restated $ (14.2) $ 17.9 $ 22.6 $ 27.6 $ 53.9
Earnings (Loss) Per Share:
- --------------------------
As Originally Reported $ ( .42) $ .18 $ .50* $ .52 $ .78
As Restated $ ( .39) $ .35 $ .46* $ .57 $ .99
</TABLE>
- -------------------
* Third quarter 1996 reported earnings per share before cumulative effect of
accounting change was $.50, the restated amount was $.20; full year as reported
was $.78 and the restated amount was $.74.
- -------------------
Pre-tax loss in the first quarter decreased by $1.2 million as a result of the
restatement adjustments. The decrease was the result of an approximately $1.8
million adjustment to correct the accruals for certain employee incentive costs,
offset by other adjustments which decreased pre-tax income by approximately $.6
million.
Pre-tax income in the second quarter increased by $7.4 million as a result of
the restatement adjustments. The correction of a delay in recognition of reduced
pension and postretirement benefits increased pre-tax income by $8.7 million.
These reduced pension and postretirement expenses, which became known to the
Company when the January 1 actuarial valuation information was being completed
late in the second quarter, were previously recognized and reported in the third
quarter. These expenses were reduced from the original estimates as a result of
revised interest rate assumptions and as a result of the use of actual claim
information with respect to postretirement benefit obligation computations. In
addition, the second quarter included a reduction of pre-tax income of
approximately $1.0 million to amortize grant income over the useful lives of the
productive assets purchased with the grant rather than to recognize such grant
income as received. Other adjustments decreased pre-tax income by $.3 million.
Pre-tax income in the third quarter decreased by $9.1 million as a result of the
restatement adjustments. The decrease was caused by the aforementioned $8.7
million pension and postretirement benefit adjustment and other adjustments,
which decreased pre-tax income by $.4 million. In addition to the effect of the
above adjustments on net income, the restated net income in the third quarter
was increased by $11.1 million to reflect the change made in the measurement
date for the Company's pension and postretirement obligations from December 31st
to September 30th. This change is accounted for as a cumulative effect of an
accounting change. The $3.7 million increase in the tax provision related to the
correction of the effective tax rate used in calculating the previously reported
income tax provision. As a result of these adjustments, net income for the
quarter decreased by $1.7 million.
Fourth quarter pre-tax income increased by an aggregate of $3.7 million as a
result of the restatement adjustments. This resulted from reflecting the
reversal of a reserve for slow moving inventory of $3.5 million previously
recorded in the fourth quarter and reflecting a reduction of the allowance for
bad debts by $2.0 million from amounts previously reported. This increase in
pre-tax income was partially offset by an increase in postemployment benefits
obligations based on corrections to actuarial valuations, which
10
<PAGE>
decreased pre-tax income by approximately $2.4 million. Other adjustments
increased pre-tax income by approximately $.6 million. The tax provision in the
fourth quarter was increased in the restated financial statements by
approximately $1.6 million as a result of a correction of the effective tax rate
used in calculating the previously reported income tax provision.
<TABLE>
<CAPTION>
Effect on Other Years:
- ----------------------
1995 1994 1993 1992
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Income (Loss) Before Income
Taxes, Extraordinary Item And
Accounting Change
- ------------------------------
As Originally Reported $ 91.8 $ 151.8 $ (279.9) $ (74.5)
As Restated $ 90.0 $ 168.7 $ (281.1) $ (73.9)
Income (Loss) Before
Extraordinary Item And
Accounting Change
- ------------------------
As Originally Reported $ 105.4 $ 168.5 $ (242.4) $ (74.7)
As Restated $ 102.2 $ 185.2 $ (243.6) $ (74.0)
Net Income (Loss)
- -----------------
As Originally Reported $ 110.8 $ 168.5 $ (258.9) $ (48.4)
As Restated $ 107.5 $ 185.2 $ (260.1) $ (47.8)
Earnings (Loss) Per Share
- -------------------------
As Originally Reported $ 2.34* $ 4.33 $ (8.04)* $ (2.58)*
As Restated $ 2.26* $ 4.79 $ (8.07)* $ (2.56)*
</TABLE>
- --------------------
* Reported earnings per share for 1995 before extraordinary items was $2.21, the
restated amount was $2.13. Reported earnings (loss) per share for 1993 before
cumulative effect of accounting change was $(7.55); the restated amount was
$(7.58). Reported earnings (loss) per share for 1992 before extraordinary items
and cumulative effect of accounting change was $(3.61); the restated amount was
$(3.59).
- --------------------
The most significant of the restatement adjustments displayed in the table above
occurred in 1994 and 1995. Restated pre-tax income for 1994 increased by $16.9
million. Approximately $13.1 million of the increase in 1994 pre-tax income
related to adjustments to actuarially value certain of the Company's
postemployment and postretirement benefit liabilities related to workers
compensation and benefits for surviving spouses of certain former employees of
the Company or joint ventures in which the Company was involved. The remaining
adjustments relate to a reduction of the Company's Michigan Single Business Tax
accruals and other items, which increased pre-tax income by approximately $3.7
million and $.1 million, respectively, in 1994. The 1995 restated pre-tax income
includes an adjustment of approximately $3.8 million to amortize the recognition
of grant income over the useful lives of the productive assets purchased with
the grant, offset by other adjustments related primarily to postretirement and
postemployment benefits, which increased pre-tax income by $2.0 million. Grant
income had previously been recognized as income when received.
11
<PAGE>
Effect of Restatements on Retained Earnings (Accumulated Deficit)
- -----------------------------------------------------------------
As a result of the restatement, Retained Earnings (Accumulated Deficit) as of
January 1, 1992 increased by $31.0 million. A comparison of Retained Earnings
(Accumulated Deficit) as originally reported and as restated for each of the
last five years is as follows:
<TABLE>
<CAPTION>
As Reported As Restated Cumulative Change
----------- ----------- -----------------
<S> <C> <C> <C>
January 1, 1992 $ 136.7 $ 167.7 $ 31.0
December 31, 1992 70.8 102.4 31.6
December 31, 1993 (207.4) (177.0) 30.4
December 31, 1994 (44.0) 3.1 47.1
December 31, 1995 54.1 97.9 43.8
December 31, 1996 89.5 142.1 52.6
</TABLE>
Adjustments made to reserves at January 1, 1992 consist of the following:
- Franchise tax and state tax reserves $14.9
- General office reserve 7.0
- Reserves for shutdown properties 8.9
- Other reserves .2
-----
Total $31.0
=====
The adjustments made to reserves at January 1, 1992 included excess state tax
reserves related to franchise taxes of approximately $12.4 million and state
income taxes of approximately $2.5 million. The general office reserve was a
reserve established to record potential out-of-period items and was determined
to be unnecessary at, and subsequent to, December 31, 1991. The excess shutdown
reserves related to former operating or mining properties and joint ventures and
included retiree medical insurance and other benefit arrangements and property
costs.
Amendments to the 1996 Form 10-K and amendments to the other 1997 quarterly
reports on Form 10-Q have been filed reflecting the above restatements. This
report should be read in conjunction with those amended filings.
12
<PAGE>
NOTE 3 - NET GAIN ON DISPOSAL OF NON-CORE ASSETS
During the second quarter of 1997, the Company disposed of, or announced plans
to dispose of, certain non-core business assets that resulted in a net gain of
$25.3 million. These items, which are discussed in more detail below, are
recorded as a separate component of income on the Statement of Consolidated
Income.
On April 1, 1997, the Company completed the sale of its 21.73% minority equity
interest in the Iron Ore Company of Canada ("IOC") to North Limited, an
Australian mining and metals company ("North"). The Company received net
proceeds of $75.3 million from North in exchange for its interest in IOC and
reported a $37.0 million gain. The Company will continue to purchase iron ore
from IOC pursuant to the terms of long-term supply agreements.
On June 12, 1997, the Company completed the sale of a coke oven battery
servicing the Great Lakes Division and other related assets, including coal
inventories, to a subsidiary of DTE Energy Company. The Company received net
proceeds of $234.0 million in connection with the sale and recorded an $11.1
million loss. (The Company orginally recorded a loss of $16.3 million on the
sale, which was decreased in the restatement by $5.2 million as a result of the
incorrect accounting for property taxes related to the sold property. See Note 2
to the unaudited Consolidated Financial Statements.) The Company utilized a
portion of the proceeds to prepay $154.3 million of the related party coke oven
battery debt, which resulted in a net of tax extraordinary loss of $5.4 million.
As part of the arrangement, the Company has agreed to operate the battery under
an Operation and Maintenance Agreement executed with DTE and will purchase at
fair market value the majority of the coke produced from the battery for a
twelve-year period under a requirements contract.
The Company recorded a $3.6 million charge related to the decision to cease
operations of American Steel Corporation, a wholly-owned subsidiary which
pickled and slit steel. The Company also recorded a gain of $3.0 million related
to the sale of a coal mine property.
NOTE 4 - 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 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 other 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"). (See Note 5
below.) 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.
13
<PAGE>
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 $21.8 million and
$21.6 million at June 30, 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 5 - CONTINGENCIES AND 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.
In a series of transactions occurring after 1984, Avatex sold its interest in
the Company to NKK Corporation ("NKK") and the public. As part of those
transactions, Avatex agreed to indemnify the Company for the Retained
Liabilities and the Avatex Environmental Liabilities. In 1990, under the terms
of the Stock Purchase and Recapitalization Agreement between the Company and
Avatex (the "Recapitalization Agreement"), the Company received a payment of
$146.6 million and released Avatex from indemnification liability for $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 paid $10.0 million to the Company on account of its
liability with respect to a portion of the Avatex Environmental Liabilities.
Avatex remains liable to indemnify the Company for Avatex Environmental
Liabilities in excess of this amount.
Upon the occurrence of certain events detailed in the Recapitalization
Agreement, prior to or coincident with the Series B Preferred Stock final
redemption, the released Retained Liabilities will be recalculated by an
independent actuary. Any adjustment (the "true-up") to bring the balance of the
released Retained Liabilities to such recalculated amount will be dealt with in
the Series B Preferred Stock redemption proceeds or otherwise settled. Under the
Recapitalization Agreement, any "true-up" must take place no later than the year
2000, but may take place sooner if the parties agree to do so, or if the Series
B Redeemable Preferred Stock is redeemed in full. Based on current information,
it is expected that a "true-up" would result in a payment from the Company 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.
14
<PAGE>
Avatex has experienced operating difficulties and has recorded substantial asset
writedowns. In its latest filing with the Securities and Exchange Commission,
dated March 31, 1997, it reported a deficit in its consolidated stockholders'
equity of $113.5 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
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.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Pursuant to an Audit Committee inquiry, the Company has determined that certain
prior period financial statements must be restated. The financial statements for
the first three quarters of 1997, and each of the quarters of and the year ended
1996 have been restated to correct the accounting errors.
The effect of the restatement on items previously presented in the Management's
Discussion and Analysis of Financial Condition and Results of Operations is as
follows:
<TABLE>
<CAPTION>
Three months ended Three months ended
June 30, 1997 June 30, 1996
------------------------- -------------------------
As Reported As Restated As Reported As Restated
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 824,869 $ 824,869 $ 769,481 $ 769,481
Cost of products sold 695,230 700,051 687,754 680,545
Selling, general and administrative 35,462 36,937 32,429 32,273
Financing costs (net) 4,678 4,678 9,349 9,349
Net gain on disposal of non-core assets 17,175 25,385 -- --
Income tax provision (credit) 9,358 7,351 (5,388) (5,549)
Net income 57,078 59,528 10,391 17,917
% Net income increase 4.3% 72.4%
Six months ended Six months ended
June 30, 1997 June 30, 1996
------------------------- -------------------------
As Reported As Restated As Reported As Restated
----------- ----------- ----------- -----------
Net sales $1,582,487 $1,582,487 $1,451,624 $1,451,624
Cost of products sold 1,349,520 1,353,255 1,316,674 1,309,547
Selling, general and administrative 67,034 69,381 63,842 62,386
Financing costs (net) 12,852 12,852 18,120 18,120
Net gain on disposal of non-core assets 17,175 25,385 -- --
Income tax provision (credit) 11,997 9,425 (10,775) (11,097)
Net income (loss) 82,964 86,193 (5,184) 3,721
% Net income increase 3.9% 171.8%
</TABLE>
The following Management's Discussion and Analysis has been revised to reflect
the restated financial statements as discussed in Note 2 to the unaudited
Consolidated Financial Statements.
Results of Operations - Comparison of the Restated Three-Month Periods Ended
June 30, 1997 and 1996
Net Sales
Net sales for the second quarter of 1997 totaled a record $824.9 million, an
increase of $55.4 million, or 7.2%, compared to the corresponding period in
1996. This improvement is attributable to a 34,000 ton increase in shipments, as
well as improvements in both selling prices and product mix.
Steel shipments for the second quarter of 1997 were a record 1,605,000 tons, a
2.2% increase compared to the 1,571,000 tons shipped during the corresponding
1996 period.
Cost of Products Sold
The Company's cost of products sold of $700.1 million during the second quarter
of 1997 represented 84.9% of sales compared to 88.4% of sales for the same
period in 1996, resulting in a gross margin improvement of approximately $35.9
million. Increases in average selling price and product yields, as well as
impacts of cost reduction efforts, led to this increase in margin.
During the second quarter of 1997, the Company produced 1,634,000 net tons of
steel, a 3.1% decrease compared to the 1,687,000 net tons produced during the
corresponding 1996 period.
Selling, General and Administrative Expense
Selling, general and administrative expense of $36.9 million during the second
quarter of 1997 represents an increase of $4.7 million compared to the
corresponding 1996 period. This increase is largely the result of increased
costs associated with certain employee benefit plans.
Financing Costs
Net financing costs of $4.7 million represents a $4.6 million decrease compared
to the corresponding 1996 period. This improvement is partially attributable to
a $2.9 million increase in interest income on short term investments.
Additionally, lower interest expense resulted from lower average debt levels and
higher capitalized interest.
Net Gain on Disposal of Non-Core Assets
During the second quarter of 1997, the Company disposed of, or announced plans
to dispose of, certain non-core business assets that resulted in a net gain of
$25.3 million. These items, which are discussed in more detail below, are
recorded as a separate component of income on the Statement of Consolidated
Income.
16
<PAGE>
On April 1, 1997, the Company completed the sale of its 21.73% minority equity
interest in the Iron Ore Company of Canada ("IOC") to North Limited, an
Australian mining and metals company ("North"). The Company received net
proceeds of $75.3 million from North in exchange for its interest in IOC and
recorded a $37.0 million gain. The Company will continue to purchase iron ore
from IOC pursuant to the terms of long-term supply agreements.
On June 12, 1997, the Company completed the sale of a coke oven battery
servicing the Great Lakes Division and other related assets, including coal
inventories, to a subsidiary of DTE Energy Company. The Company received net
proceeds of $234.0 million in connection with the sale and recorded an $11.1
million loss. The Company utilized a portion of the proceeds to prepay $154.3
million of the related party coke battery debt, which resulted in a net of tax
extraordinary loss of $5.4 million. As part of the arrangement, the Company has
agreed to operate the battery under an Operation and Maintenance Agreement
executed with DTE and will purchase at fair market value the majority of the
coke produced from the battery for a twelve year period under a requirements
contract.
In the second quarter, the Company recorded a $3.6 million charge related to the
decision to cease operations of American Steel Corporation, a wholly-owned
subsidiary which pickled and slit steel. The Company also recorded a gain of
$3.0 million related to the sale of a coal mine property.
Income Taxes
During the second quarter of 1997, the Company recorded current tax provisions
of $12.8 million, offset by a deferred tax benefit of $5.4 million related to
the periodic recognition of deferred tax benefits. The Company's effective tax
rate is lower than the combined federal and state statutory rates primarily due
to the continued utilization of available federal and state net operating loss
carryforwards and the recognition of the deferred tax benefit.
17
<PAGE>
Comparison of the Restated Six-Month Periods Ended June 30, 1997 and 1996
Net Sales
Net sales for the first half of 1997 totaled a record $1.58 billion, an increase
of $130.9 million, or 9.0%, compared to $1.45 billion during the first half of
1996. A 119,000 net ton increase in steel shipments, as well as improvements in
average selling price and product mix, were responsible for this increase.
Steel shipments for the first half of 1997 were a record 3,126,000 tons, a 4.0%
increase compared to the 3,007,000 tons shipped during the corresponding 1996
period.
Cost of Products Sold
The Company's cost of products sold of $1.35 billion for the first half of 1997
totaled 85.5% of sales compared to 90.2% of sales for the corresponding 1996
period, representing a margin improvement of approximately $87.2 million. This
increase in margin is primarily attributable to improvements in average selling
prices and product yields, as well as the impact of cost reduction efforts. In
addition, 1996 costs were adversely impacted by a kiln outage at the Company's
iron ore pelletizing facility, which increased costs by approximately $10
million.
Raw steel production declined to 3,268,000 tons, a 2.5% decrease from the
3,353,000 tons produced during the first half of 1996.
Selling, General and Administrative Expense
Selling, general and administrative expense of $69.4 million during the first
half of 1997 represents a $7.0 million increase compared to the corresponding
1996 period. This increase is primarily a result of increased costs associated
with certain employee benefit plans.
Financing Costs
Net financing costs of $12.9 million represents a $5.3 million decrease compared
to the corresponding 1996 period. This improvement is partially attributable to
a $2.7 million increase in interest income on short term investments.
Additionally, lower interest expense resulted from lower average debt levels and
higher capitalized interest.
Income Taxes
During the first half of 1997, the Company recorded current tax provisions of
$20.2 million, offset by a deferred tax benefit of $10.8 million related to the
periodic recognition of deferred tax benefits. The Company's effective tax rate
is lower than the combined federal and state statutory rates primarily due to
the continued utilization of available federal and state net operating loss
carryforwards and the recognition of the deferred tax benefit.
18
<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.
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 June 30, 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 $91.6 million. During the first six months of 1997, the
maximum availability under the Receivables Purchase Agreement, after reduction
for letters of credit outstanding, varied from $76.7 million to $111.1 million
and was $108.4 million as of June 30, 1997.
At June 30, 1997, total debt and redeemable preferred stock as a percentage of
total capitalization decreased to 36.5% as compared to 47.0% at December 31,
1996. Cash and cash equivalents totaled $426.9 million at June 30, 1997 compared
to $109.0 million at December 31, 1996.
Cash Flows from Operating Activities
For the six months ended June 30, 1997, cash provided from operating activities
totaled $267.7 million, which is primarily attributable to $86.2 million in net
income earned during this period, adjusted for the impact of working capital
items and non-cash items.
Cash Flows from Investing Activities
During the second quarter of 1997, the Company sold its coke oven battery at the
Great Lakes Division, as well as its minority investment in the Iron Ore Company
of Canada. The sale of these two non-core assets and a coal mine property
generated net proceeds of $312.3 million. The Company utilized $162.5 million of
these proceeds to prepay the related party debt associated with the coke oven
battery, including prepayment costs and accrued interest. The Company is
evaluating the use of the remaining proceeds.
Capital investments for the six months ended June 30, 1997 totaled $71.6
million. The 1997 spending is primarily related to the modernization and
upgrading of the Company's 72 inch continuous galvanizing line and the
construction of a new 48 inch wide coating line, both of which are located at
the Midwest Division. The Company plans to invest approximately $86.0 million
during the remainder of 1997 for capital expenditures, including the
aforementioned Midwest Division projects, scheduled repairs to the Great Lakes
Division "A" blast furnace, which is scheduled for the fourth quarter, and
improvements at its other facilities.
Cash Flows from Financing Activities
During the first six months of 1997, the Company utilized $190.2 million of cash
for financing activities, which includes the $154.3 million prepayment of
related party debt associated with the sale of the coke oven battery servicing
the Great Lakes Division and $4.5 million of costs associated with the
prepayment of the aforementioned debt. Other areas of cash utilization for
financing activities included scheduled payments of debt, as well as dividend
payments on the Company's preferred stock.
19
<PAGE>
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,
mining 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.
20
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Environmental Matters
Buck Mine Complex. With respect to the matter involving the Buck Mine Complex,
previously reported in the 1996 Form 10-K, by letter dated April 29, 1997, the
Michigan Department of Environmental Quality ("MDEQ") advised the Company and M.
A. Hanna Company ("Hanna") that it had selected a remedy for the acid mine
drainage, and offered the Company and Hanna the opportunity to perform the work
to implement the remedy. This letter was also sent to other potentially
responsible parties ("PRPs"). Informally, the MDEQ has advised that it believes
that the cost of the remedy, including past costs, as well as future operating
and maintenance costs, but excluding natural resource damages, will be
approximately $750,000. None of the other PRPs have responded to the MDEQ
letter. The Company has advised the MDEQ that it is interested in pursuing a
"cash-out" settlement of this matter on behalf of itself and Hanna.
Great Lakes Division - Opacity Notice of Violation. With respect to the matter
involving alleged violations of specified opacity regulations at the Company's
Great Lakes Division's A blast furnace and basic oxygen furnace shop, previously
reported in the 1996 Form 10-K, the alleged violations set forth in the Notice
of Violation were incorporated by reference into a Consent Order with Wayne
County dated December 15, 1996. While the U.S. Environmental Protection Agency
was not a signatory to this Consent Order, it has indicated that it will accept
this settlement as a resolution of the matters covered by the Notice of
Violation.
Granite City Division - Illinois Environmental Protection Agency Notice of
Violation - Beaching of Iron. On or about April 24, 1997, the Company's Granite
City Division received a Notice of Violation ("NOV") from the Illinois
Environmental Protection Agency ("IEPA") in which it was alleged that the
Company had poured molten iron into a "beaching" pit at least 34 times in 1996,
allegedly in violation of various state air pollution requirements related to
particulate matter emissions and permitting. The Company has responded to the
NOV by agreeing to minimize the beaching of iron and requesting a modification
to its blast furnace operating permits that would recognize beaching as a
malfunction under certain circumstances. The IEPA is expected to reply to the
Company's proposal within the next 30 days.
21
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders was held on April 21, 1997. In connection
with the meeting, proxies were solicited pursuant to the Securities Exchange Act
of 1934. The following are the voting results on proposals considered and voted
upon at the meeting, all of which were described in the Company's Proxy
Statement dated March 20, 1997.
1. All nominees for director listed in the Proxy Statement were elected.
<TABLE>
<CAPTION>
Name Votes For Votes Withheld
-------------------- -------------- ---------------
<S> <C> <C>
Osamu Sawaragi 61,662,929 99,272
Charles A. Bowsher 61,477,876 284,325
Frank J. Lucchino 61,666,048 96,153
Bruce K. MacLaury 61,668,568 93,633
Yoshiharu Onuma 61,650,866 111,335
Keiichiro Sakata 61,648,511 113,690
Kenichiro Sekino 61,665,596 96,605
Mineo Shimura 61,647,651 114,550
</TABLE>
2. The proposal to ratify the selection of Ernst & Young LLP as the Company's
outside auditors for 1997 passed. (For 61,731,467, abstained 11,593, against
19,141)
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 June 12, 1997, under Item 5,
Other Events.
22
<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/ John A. Maczuzak
------------------------
John A. Maczuzak
President and Chief Operating Officer
BY /s/ Michael D. Gibbons
------------------------
Michael D. Gibbons
Acting Chief Financial Officer
Date: January 28, 1998
23
<PAGE>
NATIONAL STEEL CORPORATION
QUARTERLY REPORT ON FORM 10-Q/A
EXHIBIT INDEX
For the quarterly period ended June 30, 1997
2-A *Stock Purchase Agreement dated as of January 31, 1997 among North
Limited, National Steel Corporation, NS Holdings Corporation, Bethlehem
Steel Corporation and Bethlehem Steel International Corporation
10-A *Amendment Number One to The National Steel Corporation 1993 Non-Employee
Directors' Stock Option Plan.
10-B *Form of Stock Option Cancellation and Stock Appreciation Right Grant
Agreement under the National Steel Corporation 1993 Long Term Incentive
Plan.
10-C *Form of Stock Option Cancellation and Stock Appreciation Right Grant
Agreement under the National Steel Corporation 1993 Non-Employee
Directors' Stock Option Plan.
27-A Financial Data Schedule
*Previously filed with the Third Quarter Report on Form 10-Q originally filed on
August 13, 1997.
<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> JUN-30-1997
<CASH> 426,884
<SECURITIES> 0
<RECEIVABLES> 310,126
<ALLOWANCES> 24,422
<INVENTORY> 382,310
<CURRENT-ASSETS> 1,094,898
<PP&E> 3,393,635
<DEPRECIATION> 2,161,728
<TOTAL-ASSETS> 2,554,237
<CURRENT-LIABILITIES> 615,420
<BONDS> 321,341
62,780
36,650
<COMMON> 433
<OTHER-SE> 688,194
<TOTAL-LIABILITY-AND-EQUITY> 2,554,237
<SALES> 824,869
<TOTAL-REVENUES> 824,869
<CGS> 700,051
<TOTAL-COSTS> 700,051
<OTHER-EXPENSES> 43,318
<LOSS-PROVISION> 4,546
<INTEREST-EXPENSE> 4,678
<INCOME-PRETAX> 72,276
<INCOME-TAX> 7,351
<INCOME-CONTINUING> 64,925
<DISCONTINUED> 0
<EXTRAORDINARY> 5,397
<CHANGES> 0
<NET-INCOME> 59,528
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.31
</TABLE>
