FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D C 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
Commission File Number 1-10244
WEIRTON STEEL CORPORATION
- -------------------------
(Exact name of Registrant as specified in its charter)
Delaware 06-1075442
- -------- ----------
(State or other jurisdiction (IRS employer identification #)
of incorporation or organization)
400 Three Springs Drive, Weirton, West Virginia 26062
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(304)-797-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
Common Stock, par New York Stock Exchange
value $.01 per share
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by checkmark 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 checkmark 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]
As of March 15, 1994, the aggregate market value of the voting
stock held by nonaffiliates of the Registrant was $309,062,878.
(The foregoing calculation includes shares allocated under the
Registrant's 1984 and 1989 Employee Stock Ownership Plans to the
accounts of employees who are not otherwise affiliates and
unallocated shares under the Registrant's 1989 Employee Stock
Ownership plan subject to voting instructions of employees who are
not otherwise affiliates.)
The number of shares of Common Stock ($.01 par value) of the
Registrant outstanding as of March 15, 1994 was 26,639,894.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Certain portions of the Registrant's 1993 Annual Report to
Stockholders are incorporated by reference into Parts I and II of
this Annual Report on Form 10-K to the extent provided herein.
(2) Certain portions of the Registrant's definitive Proxy
Statement filed pursuant to Regulation 14A (filed within 120 days
after the end of the fiscal year covered hereby) in connection with
the 1994 Annual Meeting of Stockholders are incorporated by
reference into Part III of this Annual Report on Form 10-K to the
extent provided herein.
PART I
Item 1. Description of Business
BACKGROUND
Weirton Steel Corporation, together with its wholly owned
subsidiary Weirton Receivables, Inc., (the "Company") and its
predecessor companies have been in the business of making and
finishing steel products for more than eighty years at the
Company's facility located in Weirton, West Virginia. From
November 1929 to January 1984, the Company's business had been
operated as a division of National Steel Corporation ("National").
Incorporated in Delaware in November 1982, the Company acquired the
principal assets of National's former Weirton Steel Division ("the
Division") in January 1984.
PRINCIPAL PRODUCTS
The Company is a major integrated producer of flat rolled
carbon steels with principal product lines consisting of sheet
products and tin mill products ("TMP"). The Company offers a full
range of sheet products that include hot and cold rolled sheet
steel up to 48" wide and both hot-dipped and electrolytic
galvanized products. TMP includes tin plate, chrome coated, and
black plate. Historically, the Company's products have emphasized
the narrow to medium widths reflective of its rolling and finishing
equipment and covered a broad range of gauges, finishes and
performance specifications. The Company has developed significant
expertise in filling orders with demanding specifications. The
Company does not produce bars, wire or structural products.
The Company's sales as a percentage of its total revenues
for each year in the period 1989 through 1993 are shown in the
following table.
<TABLE>
<CAPTION>
(Percentage of revenues)
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Sheet products ...... 54% 48% 46% 53% 58%
Tin mill products ... 46 52 54 47 42
100% 100% 100% 100% 100%
<FN>
The above table includes secondary products, principally those not
meeting prime specifications. Semi-finished products have been
included in sheet products.
</TABLE>
[TEXT]
PRINCIPAL MARKETS
The following table shows the percentage of total net
tons of steel products shipped for each year in the period 1989
through 1993 by the Company to each of its principal markets.
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Service Centers and Sheet
and Strip Converters... 46% 41% 33% 45% 45%
Food and Beverage........ 37 41 44 42 40
Construction............. 9 8 7 8 9
Consumer Durables........ 4 6 8 4 5
Other ................... 4 4 8 1 1
100% 100% 100% 100% 100%
</TABLE>
[TEXT]
A substantial portion of the Company's revenues are
derived from long-time, steady customers, although the Company
actively seeks new customers and constantly seeks new markets for
its products. A substantial share of the Company's TMP and sheet
products are shipped to customers located in the eastern portion of
the United States. The Company's products are sold through
salaried Company representatives who operate from 12 district sales
offices. Sales orders taken in the field are subject to home
office approval.
Trade orders on hand for the Company's products at
December 31, 1993, 1992, and 1991 amounted to approximately 449
thousand tons, 308 thousand tons, and 307 thousand tons,
respectively. Substantially all orders on hand at any time are
expected to be filled within a twelve month period. Since the
Company produces steel in response to orders primarily of
established grades and specifications, resulting in short order
processing time and relatively rapid inventory turnover, it does
not believe that order backlog is a material aspect of its
business.
SHEET PRODUCTS. Hot rolled products are sold directly
from the hot strip mill as "hot bands," or are further processed
using hydrochloric acid to remove surface scale and are sold as
"hot rolled pickled." Hot rolled sheet is used for unexposed parts
in machinery, construction products and other durable goods. Most
of the Company's sales in hot rolled have been to pipe and tube
manufacturers and converters and, to a lesser extent, steel service
centers. In 1993, the Company sold 658 thousand tons of hot rolled
sheet, which accounted for 17.8% of its total revenues.
Cold rolled sheet, which requires further processing
consisting of additional rolling, annealing and tempering to
enhance ductility and surface characteristics, is used in the
construction, steel service center, commercial equipment and
container markets, primarily for exposed parts where appearance and
surface quality are important considerations. In 1993, the Company
sold 169 thousand tons of cold rolled sheet, which accounted for
6.6% of its total revenues.
Galvanized hot-dipped and electrolytic sheet, which is
coated primarily with zinc compounds to provide extended anti-
corrosive properties, is sold to the electrical, construction,
automotive, container, appliance and steel service center markets.
In 1993, the Company sold 642 thousand tons of galvanized products,
which accounted for 28.7% of total revenues. Generally, the
Company's more highly processed sheet products provide higher
profit margins.
The following table, based on AISI information, shows the
Company's historical share of the domestic Sheet Products market.
<TABLE>
Sheet Products
Historical Market Share
<CAPTION>
(In thousands of tons)
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Industry Shipments..... 41,616 38,099 35,590 39,652 39,581
Company shipments(a)... 1,536 1,206 1,082 1,285 1,480
Company market share... 3.7% 3.2% 3.0% 3.2% 3.7%
<FN>
(a) Includes secondaries.
</TABLE>
[TEXT]
While the Company's presence in the overall sheet market
is limited, the Company has concentrated on developing its
offerings of more highly processed products and production capacity
to provide the larger coils favored by most of its customers. The
Company's goals for development of its sheet business are focused
on increasing its percentage of coated products, such as
galvanized, while capitalizing on developing specialty markets such
as construction where the Company believes that its GALFAN product
has potential in roofing and framing applications. As part of its
sheet marketing strategy, the Company is also making efforts to
enhance high quality end use of its products marketed through steel
service centers, as well as developing the hot rolled market for
heavier gauge and higher carbon applications for all markets.
Tin Mill Products. The Company has enjoyed substantial
market share and a widely held reputation as a high quality
producer of TMP. TMP comprise a wide variety of light gauge coated
steels. Tin plate and black plate products are sold under the
Company name and under such trademarks as WEIRITE and WEIRLITE. In
addition to tin plate and black plate, the Company produces
electrolytic chromium coated steel under the trademark WEIRCHROME.
Based upon the Company's share of the domestic market for
TMP, which has remained relatively constant in recent years, the
Company believes it is one of the largest domestic producers of
TMP. In 1993, the Company accounted for approximately 22% of the
TMP market, a slight decrease from the 23% market share it held in
1992. TMP shipments on an industry-wide basis have remained
relatively steady over the same period even as plastic, aluminum,
composites and other materials competed for potential growth in
some applications. The TMP market is now primarily directed at
food, beverage, and general line cans. The majority of the
Company's TMP sales have been to can manufacturing and packaging
companies, a substantial amount of whose annual requirements are
established in advance. This market is characterized by a
relatively low number of manufacturers. During 1993, shipments to
ten major can manufacturers accounted for approximately 90% of the
Company's TMP sales and its five largest TMP customers accounted
for approximately 29.6% of total revenues. One customer, Crown
Cork & Seal Company, a major can manufacturer, accounted for
approximately 11% of total revenues. The balance of the TMP output
is sold to other can manufacturers, manufacturers of caps and
closures and specialty products ranging from film cartridges,
lighting fixtures and battery jackets to cookie sheets and curtain
rods. As a result of predictable sales patterns for TMP, the
Company is able to gauge in advance a significant portion of its
production requirements which allows the Company to operate its
production facilities more efficiently and adjust its marketing and
production efforts for other products.
The following table, based on AISI information, shows the
Company's historical share of the domestic TMP market.
<TABLE>
Tin Mill Products
Historical Market Share
<CAPTION>
(In thousands of tons)
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
TMP industry shipments(a) 4,123 3,927 4,040 4,032 4,116
Company shipments(a)..... 895 890 857 874 894
Company market share..... 22% 23% 21% 22% 22%
<FN>
(a) Includes secondaries.
</TABLE>
[TEXT]
Steelmaking and hot rolling improvements derived from the
Company's recent capital improvement program have allowed for the
production of sufficient quantities of "clean" steel to fill
anticipated TMP orders for the near term. Expansion of downstream
annealing and tempering capacity, however, would be necessary
before large TMP production increases could be effected. The
Company's facilities and expertise also allow it to produce the
lightest gauges of tin plate, enhancing the manufacturing
efficiencies of the Company's customers and promoting the use of
its steel in leading edge technology products such as thin-walled
containers.
The Company has been a leading innovator in the
development of can making technology through its WEIRTEC research
and development center. Although accounting for less than 5% of
the domestic beverage container market in recent years, largely due
to highly competitive prices for aluminum, the Company believes
that two piece thin-walled steel beverage containers have
significant potential for growth. This is primarily because of
improved production efficiencies for cans and increased industry
success in promoting the recycling of steel. The Company engages
in other end product research and development and provides support
services to its customers. The Company believes these services
have been of significant assistance, particularly to its TMP
customers, and promotes the consumption of the Company's products.
See "Research and Development."
A 1.1 million square foot Finished Products Warehouse
with storage and staging areas for TMP has been located near the
Company's mill to facilitate "just in time" production and delivery
to several of the Company's major customers who are located in
attached, or nearby, manufacturing facilities. As steel coils are
needed by customers' operations, they are moved from the adjoining
central storage areas and loaded directly on to their production
lines. This arrangement provides significant savings for the
Company and its customers.
PRODUCTION AND SHIPMENTS
In 1991, after three years of close to 100 million tons
of raw steel production per year, the domestic steel industry's raw
steel production fell to 87.3 million tons and shipments declined
to 78.9 million tons. However, starting with December 1991 and
continuing through 1993, the steel industry experienced a rebound
in both production and shipments. Steel production for 1993 was up
approximately 4.9% to 96.1 million tons compared to 1992, while
shipments increased by approximately 7.4% to 88.4 million tons.
Similarly, capacity utilization which had dropped to 74% in 1991
rebounded to 87.4% in 1993.
During 1991 and 1992 in particular, the Company's
production, and consequently its ability to sell steel products,
was constrained by facilities' outages stemming from the Company's
capital improvement program. See "Investment in Facilities" in
Item 7 hereof for a more complete discussion of the Company's
capital improvement program. Although these factors for the most
part concerned the Company's primary steelmaking and first stage
finishing facilities, downstream operations were also affected. In
many instances, with the cooperation of its customers, the Company
limited orders it would accept for finished products, rather than
take orders it could not fill.
The Company seeks to maximize the utilization of its
production capacity. Until the Company began implementing its
capital program in 1989, historically it had exceeded the industry
average in that regard. However, during 1990 and 1991, outages and
complications from several installations adversely affected the
Company's relative position in the industry at a time when the
industry itself was operating at near recessionary levels.
Facilities outages, both planned and unplanned, which plagued
operations during installation phases became less frequent
throughout the break-in period for new equipment and, in 1993, were
reduced to only one 2-day unscheduled outage due to flood water
damage.
In 1993, the Company produced 2.7 million tons of raw
steel and shipped 2.4 million tons of finished and semi-finished
steel products. The following table sets forth annual production
capability, utilization rates and shipment information for the
Company and the domestic steel industry (as reported by the
American Iron and Steel Institute ("AISI")) for the period 1989
through 1993.
<TABLE>
Production and Shipments
<CAPTION>
(In millions of tons)
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Company
Raw steel production... 2.7 2.5 2.3 2.7 2.9
Capability............. 3.0* 3.0* 3.4 3.4 3.4
Utilization............ 91% 83% 68% 79% 85%
Shipments ............. 2.4 2.1 1.9 2.2 2.5
Shipments as percentage
of industry total... 2.7% 2.6% 2.4% 2.6% 3.0%
Industry
Raw steel production... 96.1 91.6 87.9 98.9 97.9
Capability............. 109.9 113.1 117.6 116.7 115.9
Utilization............ 87% 81% 74% 84% 84%
Shipments ............. 88.4 82.3 78.9 84.7 84.1
<FN>
*Reflects the discontinuation of ingot teeming and reduction
operations.
</TABLE>
[TEXT]
STEELMAKING PROCESS
In primary steelmaking, iron ore pellets, iron ore, coke,
limestone and other raw materials are consumed in blast furnaces to
produce molten iron or "hot metal." The Company then converts the
hot metal into raw or liquid steel through its basic oxygen
furnaces where impurities are removed, recyclable scrap is added
and metallurgy for end use is determined on a batch by batch basis.
The Company's basic oxygen process shop ("BOP") is one of the
largest in North America, employing two vessels, each with a
steelmaking capacity of 360 tons per heat. Liquid steel from the
BOP is then formed into slabs through the process of continuous
casting. The Company operates a multi-strand continuous caster,
rebuilt in 1990, which allows the Company to cast 100% of its steel
requirements. The slabs are then reheated, reduced and finished by
extensive rolling, shaping, tempering and, in many cases, by the
application of plating or coating at the Company's downstream
operations. Finished products are normally shipped to customers in
the form of coils. The Company believes that its hot rolling mill,
with two walking beam reheat furnaces, reversing rougher and
millstand drive and control improvements, greatly enhances its
competitive capabilities. In addition, the Company has linked its
steelmaking and rolling equipment with computer-control systems and
is in the process of installing an integrated manufacturing control
system to coordinate production and sales activities.
RAW MATERIALS
The Company purchases iron ore pellets, iron ore, coal,
coke, limestone, scrap and other necessary raw materials in the
open market. Substantially all the Company's raw materials needs
are available through multiple sources where the primary concern is
price rather than availability of supply; however, the Company
continues to explore potential new sources of raw materials.
In October 1991, the Company entered into a contract with
a subsidiary of Cleveland-Cliffs Inc ("Cliffs") to purchase a
substantial part of the Company's standard and/or flux grade iron
ore pellet requirements for a twelve year period which began in
1992. The contract provides for a minimum tonnage of pellets to be
supplied based on the production capacity of the mining source
during the contract periods, and for additional tonnages of pellets
in specified circumstances. Purchase prices established under the
contract formulas may vary depending on whether the Company's
Redeemable Preferred Stock, Series B, acquired by Cliffs at the
time the supply agreement was entered into, has been redeemed. See
Note 10 to the Company's Financial Statements included as Item 8
hereof for a more complete discussion of the Series B Preferred.
The Company also has other contracts for iron ore pellets and iron
ore through 1994.
The Company and other steelmakers are installing
technology calculated to achieve some reduction in the consumption
of coke in blast furnace operations. However, if coke making
capacity available to the industry continues to decline, future
coke prices may be subject to significant escalation. Unlike many
of the other major integrated producers, the Company does not have
its own coke making facilities. From time to time, the Company has
considered rebuilding the former coke making facilities of the
Division; however, in view of the availability of metallurgical
coke, its price and the emergence of alternative non-coking
technologies for ironmaking, the Company does not believe an
investment to rebuild those facilities is justified at this time.
In July 1993, the Company entered into an agreement with USX
Corporation to purchase blast furnace coke. The agreement provides
for tonnages of 750,000 per calendar year in 1994 through 1996, or
the actual annual requirements of the Company if less than the
stated amount. The price is to be the prevailing market price for
blast furnace coke determined each October prior to the delivery
year.
In 1990, the Company's continuous caster was rebuilt and
placed back in service with enhanced capacity. Since that time,
the rebuilt caster has achieved production levels which enable it
to provide substantially all the Company's requirements for slabs.
The increased capacity of the caster allowed the Company to close
its ingot teeming and reduction operations in 1991. The Company's
requirements for slabs have from time to time exceeded its caster's
production ability and it has purchased and may continue to
purchase slabs from other sources in order to meet the demand for
its products and to maximize the overall production efficiency of
its entire operations. In general, the Company does not expect to
have undue difficulty in purchasing slabs as and when needed.
However, in times of high capability utilization, slabs of certain
required specifications may not be available from other producers.
The primary sources of energy used by the Company in its
steel manufacturing process are natural gas, oil, coal and
electricity. The Company generates a significant amount of
electricity and steam for processing operations from a mixture of
excess blast furnace gas and natural fuels. The Company
continually attempts to conserve and reduce the consumption of
energy in its steelmaking operations. A number of the Company's
facilities have alternate fuel burning capability.
In recent years, due to the increased availability and
sources of natural gas, the Company has entered into natural gas
purchase contracts with gas suppliers and transportation contracts
with transmission companies in an effort to reduce prices paid for
gas. A substantial increase in the Company's energy costs or a
shortage in the availability of its sources could have an adverse
effect on the Company.
Management believes that the Company's long term raw
materials contracts are at competitive terms over the course of a
business cycle.
COMPETITION AND OTHER INDUSTRY FACTORS
The domestic steel industry is a cyclical business with
intense competition among producers. Manufacturers of products
other than steel, including plastics, aluminum, cardboard, ceramics
and glass, have made substantial competitive inroads into
traditional steel markets. During recessionary periods, the
industry's high level of production capacity relative to demand
levels has resulted in a lack of ability to achieve satisfactory
selling prices across a broad range of products.
Integrated steelmakers also face increased competition
from mini-mills. Mini-mills are relatively efficient, low-cost
producers that generally produce steel from scrap in electric
furnaces, utilize new technologies, have lower employment costs and
target regional markets. Mini-mills historically have produced
lower profit margin bars, rods, wire and other commodity-type steel
products not produced by the Company. Recently developed thin cast
technology has allowed mini-mills to enter certain of the sheet
markets supplied by integrated producers, and certain mini-mills
have built, or are building, facilities to do so. One such
facility has been placed in operation and is competing in the hot
rolled, cold rolled and galvanized marketplace.
During the past decade, a number of domestic steelmakers
have gone through reorganization under Chapter 11 of the United
States Bankruptcy Code, including several of the Company's major
competitors. Reorganization under Chapter 11 generally has enabled
bankrupt companies to reduce costs, making them more efficient
competitors.
In response to increased competition, domestic steel
producers have invested heavily in new plant and equipment, which
has improved efficiency and increased productivity. Many of these
improvements are in active service and, together with the
achievement of other production efficiencies such as manning and
other work rule changes, have tended to lower competitors' costs.
The Company has responded to technological competitive pressures
through its capital improvement program and strategies for future
operating efficiencies.
Foreign competition also remains a major concern. The
VRAs covering 17 steel exporting nations and the European
Community, which limited steel imports into the United States
market, expired on March 31, 1992, and negotiations among
governments in 36 countries to achieve a global multilateral steel
agreement to reduce subsidies and other unfair trade practices by
foreign producers have not yet resulted in any agreement being
reached. The prospects of such an agreement being reached in the
near future are not good. During 1993, steel imports were
approximately 18% of total domestic steel consumption. Imports
represent a slightly smaller percentage of consumption of sheet
products and TMP, amounting to 13% and 11% of such consumption,
respectively, in 1993. As a result of anti-dumping cases brought
by domestic steelmakers, the Commerce Department, earlier in 1993,
imposed tariffs averaging approximately 36.5% on imported, flat-
rolled carbon steel from a number of countries. On July 27, 1993,
however, the U.S. International Trade Commission (the "ITC") found
that the domestic industry had sustained no injury from imports of
hot rolled sheet, and no injury from 9 of 12 importing countries on
cold rolled sheet. Several domestic producers have filed appeals
of the ITC rulings. The ITC did affirm that the domestic industry
had sustained injury from imports of coated sheet products, which
has since reduced imports of the same and consequently improved
domestic coated sheet pricing and volume.
The Company's primary competitors in sheet products
consist of substantially the entire steel industry. The Company's
primary TMP competitors in recent years have been USX Corporation,
LTV Corporation, Bethlehem Steel Corporation, National Steel
Corporation, Wheeling-Pittsburgh Steel Corporation and USS-POSCO
Industries.
The Company experiences strong competition in all its
principal markets with respect to price, service and quality. The
Company believes that it competes effectively in all these
categories by focusing its marketing efforts on high quality
products and strong customer relationships.
RESEARCH AND DEVELOPMENT
The Company engages in research and devlopment for the
improvement of existing products, the development of new products,
and the development of product applications. It also seeks more
efficient operating techniques. During 1993, 1992 and 1991,
respectively, the Company spent approximately $5.4 million, $4.7
million, and $5.3 million for Company sponsored research and
development activities. Expenditures for customer sponsored
research have not been material to the Company. The Company
operates WEIRTEC, its research and development center specializing
in the advancement of steel food and beverage packaging and steel
manufacturing processes. WEIRTEC maintains research and prototype
steel packaging manufacturing facilities and analytical laboratory
facilities located in Weirton. The facilities are engaged in
improving the Company's production and finishing processes for TMP
and sheet products. In recent years, WEIRTEC has played a central
role in the development of thin-wall, two piece beverage can
technology and other products seeking to capitalize on the
Company's production expertise, particularly in coated products.
See "Principal Products." The Company believes that the facilities
and the scientists, engineers and technicians at WEIRTEC enhance
the Company's technical excellence, product quality and customer
service.
The Company owns a number of patents that relate to a
wide variety of products and applications and steel manufacturing
processes, has pending a number of patent applications, and has
access to other technology through agreements with other companies.
The Company believes that none of its patents or licenses, which
expire from time to time, or any group of patents or licenses
relating to a particular product or process, is of material
importance in its overall business. The Company also owns a number
of registered trademarks for its products which, unlike patents and
licenses, do not expire when they are continued in use and are
properly protected.
ENVIRONMENTAL CONTROL
COMPLIANCE. The Company's business operations are
affected by extensive federal, state and local laws and regulations
governing discharges into the air and water, as well as the
handling and disposal of solid and hazardous wastes. The Company
is also subject to federal and state requirements governing the
remediation of environmental contamination associated with past
releases of hazardous substances. In recent years, environmental
control regulations have been marked by increasingly strict
compliance standards. Governmental authorities have the power to
enforce compliance with these requirements, and violators may be
subject to civil or criminal penalties, injunctions or both. Third
parties also may have the right to sue to enforce compliance.
Expenditures for environmental control facilities were
approximately $1 million in 1993, $1 million in 1992, and $2
million in 1991. For 1994, the Company has budgeted approximately
$3.3 million in capital expenditures toward environmental control
facilities. Given the nature of the steelmaking industry, it can
be expected that substantial additional capital expenditures will
be required from time to time to permit the Company to remain in
compliance with environmental regulations.
In the past, the Company has entered into consent
decrees with certain environmental authorities pursuant to which it
has paid various fines and penalties relating to violations, or
alleged violations, of laws and regulations in the environmental
control area. Those payments have not been material to the
Company's financial position or its cash flows. The Company
believes that, at the present time, it is in substantial compliance
with the various environmental control consent orders and
agreements applicable to it and does not anticipate any material
problems in taking required actions to remain in compliance with
such orders and agreements. The Company does not operate coke
making facilities and, accordingly, has not been affected by the
stringent Clean Air Act limitations imposed on those installations.
The Company's near-term focus for environmental
compliance centers on procedures to achieve ambient air quality and
water pollution control standards. In addition to improving its
monitoring and study programs, the Company anticipates taking
affirmative action to reduce sulfur dioxide and particulate
emissions primarily by changing operating policies and by improving
the quality of maintenance procedures. In an effort to improve its
water pollution discharge compliance performance, the Company
initiated in 1993 a full-time, round-the-clock environmental
control supervisory function and is seeking to create a mobile
maintenance group dedicated to high quality, environmentally safe
operation.
WASTE SITES AND PROCEEDINGS. Under the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as
amended ("CERCLA"), and similar state statutes, the Environmental
Protection Agency (the "EPA") and state regulators generally have
authority to impose joint and several liability on waste
generators, owners, operators and others with respect to superfund
sites as potentially responsible parties ("PRPs"), regardless of
fault or the legality of the original disposal activity. The
Company is entitled to indemnification from National for certain
environmental liabilities, including those relating to CERCLA and
similar statutes, as more fully described below. The Company
believes that National has registered a number of sites as required
by CERCLA, some of which had been used by the Division prior to its
sale to the Company, and two of which subsequently became the
property of the Company. The Company understands that National has
been involved, at the request of the EPA or state agencies, in
voluntary remedial activities with respect to some sites; National
has declined to participate with respect to some sites; National
has declined to participate with respect to others (because its
records do not indicate any involvement with those sites); and
National has not been notified with respect to other sites.
Insofar as any of those sites involve liabilities under CERCLA or
other environmental laws or regulations for prior Division
activities, the Company believes it is fully indemnified by
National.
In March 1988 and September 1989, respectively, the
Pennsylvania Department of Environmental Resources and/or the EPA
notified the Company that it was considered to be among a number of
PRPs for the dumping of wastes at the Municipal and Industrial
Disposal Company site near Elizabeth, Pennsylvania and at the Tex
Tin site near Texas City, Texas, and requested the Company's
voluntary participation in certain remedial actions. The Company's
records do not indicate any involvement with either site by the
Company. The Company believes that National would be responsible
for any remedial actions, if there had been prior involvement by
the Division. The Company has given all required notices to
National for the purpose of facilitating its response to this
matter.
During February 1991, the Company received notification
under CERCLA that it may incur or may have incurred a liability as
a PRP with respect to a drum site located near Avenue H in Weirton,
West Virginia. According to Company records, the drum site is on
property owned, but never used, by the Company. Following
consultation with appropriate agencies, the Company initiated a
voluntary remediation program at the site, which program has been
substantially completed. The Company has entered into negotiations
with the EPA to resolve all remaining issues raised by the
notification. The Company believes that National, under its
agreements with the Company, is responsible for any environmental
liabilities involving the site, including reimbursement for the
total cost of the remediation program. National has reimbursed the
Company for the $761,000 spent by the Company to date on the
remediation program at this site. The Company believes that any
future expenditures related to the remediation program will not
exceed $100,000.
In May 1992, the Company received notice from the
Pennsylvania Department of Environmental Resources that it was
considering a closure plan and post-closure plan for a solid waste
landfill facility in Hanover Township, Pennsylvania (the "Hanover
Site") operated by Starvaggi Industries Inc. From at least the
1960's through mid-1983, National and, after mid-1983, the Division
and the Company disposed of solid wastes at the facility. The
Company believes that certain of the solid wastes disposed of at
the facility by National were classified as hazardous wastes under
applicable law. The Company believes that while it disposed of
various materials which were residual to the steelmaking industry,
such materials were not classified as hazardous wastes under
applicable law. At this time, definitive closure plans and post-
closure care plans have not been adopted. National's liability to
the Company under the indemnification agreements for liabilities
which may result from the closure of this facility is limited to
$1.0 million. However, the Company does not believe that any costs
associated with these plans for which it would be responsible would
exceed that amount.
In October 1992, the Company entered into a consent order
with the West Virginia Division of Environmental Protection (the
"DEP") that provided for administrative fines and penalties to be
assessed against the Company for asserted spills of various
substances under provisions of the Federal Clean Water Act
administered by such agency. The consent order required the
payment of an administrative settlement in the amount of $99,000,
as well as the application of $40,000 to a "Best Management
Practices" ("BMP") plan to reduce or eliminate the frequency of
hazardous waste spills, which plan is being implemented. The
consent order also provides for stipulated penalties upon the
occurrence of future spills. The Company is seeking to improve its
operating practices to minimize the occurrence of spills.
In January 1993, the Company received a notification from
the DEP that four ground water monitoring wells situated at the
Division's former coke making facilities on Brown's Island in
Hancock County, West Virginia tested in excess of maximum
contaminant levels established by the EPA and DEP for certain
elements specified in the notice. The DEP requested the Company to
supply it with additional data regarding the site and stated that
it felt additional investigation, and possible remediation, would
be required. The Company and the DEP are discussing the
implementation of an enhanced ground water monitoring program for
the area. As required by the relevant indemnification agreements,
the Company has given notice to National of the DEP communication.
As described more fully below, the Company believes that National
will be responsible for any required remediation.
In December 1993, the Company was informed by the DEP
that the EPA was considering initiating a "multimedia" enforcement
action against the Company during 1994. Such a proceeding could
involve coordinated enforcement proceedings relating to water, air
and waste-related issues stemming from a number of federal statutes
and rules. The DEP has indicated that it prefers first to issue
new NPDES water discharge permits to the Company and then monitor
compliance by the Company before making any recommendation to the
EPA. The Company expects that such permits could be issued by
April 1994. However, no assurance can be given that a permit will
be issued or that improved compliance by the Company or any
recommendation by West Virginia environmental authorities to the
EPA not to initiate such a proceeding will result in avoiding
commencement of a multimedia enforcement action by the EPA. In
recent years, such actions have resulted in penalties and other
commitments being obtained from many of the Company's competitors.
INDEMNIFICATION. According to the agreements by which
the Company acquired the assets of the Division from National, the
parties determined to apportion their respective responsibilities
for environmental liability claims based on two dates, May 1, 1983
(the "Purchase Date"), and January 11, 1984 (the "Closing Date").
In general, the Company is entitled to indemnification from
National for liabilities, including governmental and third-party
claims, arising from violations prior to the Purchase Date, and
National is entitled to indemnification from the Company for such
items after the Purchase Date. In addition, the Company, subject
to the $1.0 million limitation applicable to the Hanover Site
described above, is entitled to reimbursement for clean-up costs
related to facilities, equipment or areas involved in the
management of solid or hazardous wastes of the Division ("Waste
Sites"), as long as the Waste Sites were not used by the Company
after the Closing Date. Third-party liability claims relating to
Waste Sites are likewise covered by the parties' respective
indemnification undertakings, in each case based on whether the
particular site was used by the Company after the Closing Date.
Until 1993, National had performed in accordance with its
responsibilities under the applicable agreements with the Company.
However, in July 1993, National indicated that it would not
reimburse the Company for approximately $210,000 expended by the
Company in cleaning out tar and other bottom sludge sediments from
a lagoon at National's former Brown's Island Coke Plant (acquired
by the Company on the Closing Date, but never operated). The
Company performed this remediation in 1990 to avoid the facility
becoming an unpermitted hazardous waste disposal site, but did not
submit a final invoice until February 1993. National has indicated
its belief that the Company was not entitled to reimbursement for
remediation at this site. The Company believes that National's
interpretation of the relevant agreements as applied to this site
is erroneous. As a result of these developments, the Company's
ability to obtain future reimbursement or indemnification relating
to environmental claims from National has become more dependent on
factors beyond the Company's control. These factors include, in
addition to National's continued financial viability, the nature of
future claims made by the Company, whether the parties can settle
their differences relating to indemnification rights and the
outcome of any necessary litigation.
Although it is possible that the Company's future results
of operations in particular quarterly or annual periods could be
materially affected by the future costs of environmental
compliance, the Company does not believe the future costs of
environmental compliance will have a material adverse effect on its
financial position or on its competitive position with respect to
other integrated domestic steelmakers that are subject to the same
environmental requirements.
EMPLOYEES
At December 31, 1993, the Company had 6,026 employees, of
whom 4,542 were engaged in the manufacture of steel products, 779
in support services, 71 in sales and marketing activities and 634
in management and administration. The number of employees at
December 31, 1993 represented an 8% reduction compared to the prior
year end. The Company continues to implement a program as part of
its business strategy designed to reduce its workforce primarily
through retirement programs and attrition. The Company's goal by
1997 is to reduce its workforce by another 15% from the 1993 year
end level.
The Company has new collective bargaining agreements with
the Independent Steelworkers Union, which represents 4,966
employees in bargaining units covering production and maintenance
workers, clerical workers, nurses, and the Independent Guard Union,
which represents 39 employees. The agreements run through
September 25, 1996. The Company believes that its compensation
structure places a heavier emphasis on profit sharing compared to
other major integrated steel producers. This tends to cause the
wage portion of the Company's employment costs to be relatively
higher during periods of profitability and relatively lower during
periods of low earnings or losses.
The agreements provide for the payment of bonuses in the
gross amount of $3,500 per employee, paid in installments, but do
not provide for wage increases. Through the end of the new
agreements, the Company's profit sharing plan, which covers
substantially all employees, provides for participants to share in
the Company's profits each year at a rate equal to 1/3 of the
Company's "adjusted net earnings" for that year as defined under
the plan, provided its net worth exceeds $100 million. If,
however, payment of the full profit sharing amount would reduce the
Company's net worth below $100 million, payments are reduced to an
amount necessary to maintain the $100 million threshold. If the
Company's net worth is in excess of $250 million, the profit
sharing rate increases to 35%. However, if payment of the full
profit sharing amount would reduce the Company's net worth below
$250 million, payments at this rate would be limited as necessary
to maintain the $250 million threshold and the remainder of the
payment would be made at the 1/3 rate. The agreements limit the
Company's exposure to increased costs of healthcare while providing
increased medical coverages through a mandatory managed healthcare
"point of service" program and a ceiling on the Company's cash
basis cost of healthcare for future retirees. Although no
assurances can be given, the Company anticipates a savings of
approximately $24 million over three years as a result of these
healthcare programs. The agreements also contain limitations on
the Company's ability to reduce its workforce by layoffs, with
exceptions for adverse financial, operational, and business
circumstances. In addition, the parties have agreed to certain
improvements in the Company's pension plan, which the Company
anticipates will increase costs on an annual basis by approximately
$7.5 million.
From January 1984 until June 1989, the Company was owned
in its entirety by its employees through an Employee Stock
Ownership Plan (the "1984 ESOP"). In June 1989, the 1984 ESOP
completed a public offering of 4.5 million shares of common stock
of the Company, which security is now listed and traded on the New
York Stock Exchange. In connection with the public offering of
common stock, the Company also sold 1.8 million shares of
Convertible Voting Preferred Stock, Series A (the "Series A
Preferred") to a new Employee Stock Ownership Plan which shares are
entitled to ten times the number of votes of the common stock into
which it is convertible.
Substantially all of the Company's employees participate
in the two ESOPs which, after giving effect to the above-mentioned
and certain other transactions, owned approximately 52% of the
combined issued and outstanding common and preferred shares of the
Company at December 31, 1993. This, in turn, accounts for
approximately 75% of the voting power of the Company's voting
stock.
Item 2. Properties and Facilities
The Company owns approximately 2,500 acres in the
Weirton, West Virginia, area which are devoted to the production
and finishing of steel products, research and development, storage,
support services and administration. The Company owns trackage and
railroad rolling stock for materials movement, water craft for
barge docking, power generation facilities and numerous items of
heavy industrial equipment. The Company has no material leases for
property. The Company's mill and related facilities are accessible
by water, rail and road transportation. The Company believes that
its facilities are suitable to its needs and are adequately
maintained.
The Company's operating facilities include four blast
furnaces; however, its current operating strategy employs a two
blast furnace configuration with an annual hot metal capacity of
approximately 2.5 million tons. One currently idled furnace is
being refurbished and will replace one operating furnace that is
nearing the end of its campaign which is estimated to be in 1995,
at which time the Company will undertake a major reline of that
furnace. Although the Company does not anticipate operating a
three blast furnace configuration in the near term, under this
operating scenario, its annual hot metal capacity could be
increased to 3.2 million tons. The Company's primary steelmaking
facilities also include a sinter plant, and a two vessel BOP with
an annual capacity of 3.0 million tons of raw steel based on a two
blast furnace operation. During December 1993, the Company began
the installation of a new vessel in its BOP furnace, replacing one
that had been in service for nearly 20 years. The new vessel was
placed in service in early February 1994. The Company's primary
steelmaking facilities also include a CAS-OB facility, two RH
degassers, a four strand continuous caster with an annual slab
production capacity of up to 3.0 million tons. The Company's
downstream operations include a hot strip mill with a design
capacity of 3.8 million tons, two continuous picklers, three tandem
cold reduction mills, three hot dip galvanize lines, one electro-
galvanize line, two tin platers, one chrome plater, one bi-metallic
chrome/tin plating line and various annealing, temper rolling,
shearing, cleaning and edge slitting lines, together with
packaging, storage and shipping and receiving facilities. See the
"Production and Shipments" section of Item 1 for additional
information regarding production capacity and utilization rates.
Item 3. Legal Proceedings
On August 7, 1992, an action entitled "Larry G. Godich,
et. al. v Herbert Elish, et. al." was commenced in the West
Virginia Circuit Court for Hancock County against ten current
members of the Company's Board of Directors, certain officers of
the Company, former Board members, the Company's outside counsel,
and the Company. The suit purports to be brought derivatively by
stockholders on behalf of the Company and seeks a recovery on its
behalf. The plaintiffs' complaint alleges that the defendants were
negligent or grossly negligent in the selection and supervision of
contractors engaged by the Company to design and construct reheat
furnaces for the hot mill project under the capital improvement
program, thereby breaching their respective fiduciary and other
duties to the Company and, as a result, that the Company incurred
substantial cost overruns in connection with the specific project.
The complaint seeks compensatory damages, jointly and severally,
against all defendants in the amount of $30 million. In November
1992, plaintiffs dismissed the claims against outside counsel. A
trial date for this suit has been scheduled for the second quarter
of 1994.
Following dismissal of claims against outside counsel,
plaintiffs made demands on the Board of Directors to initiate legal
proceedings for malpractice against outside counsel and a director
who is a member of that firm, a former director and the law firm of
which he is a member, and the Company's independent public
accountants. In July 1993, plaintiffs reinstituted suit against
outside counsel and also filed suit against an additional officer
of the Company. This suit is in the early stages of discovery.
Since both suits are on behalf of the Company, if the
plaintiffs prevail, the Company would receive the net benefit of
any recovery.
The Company is involved in other litigation relating to
claims arising out of its operations in the normal course of
business. Such claims are generally covered by insurance. It is
management's opinion that any liability resulting from existing
litigation would not have a material adverse effect on the
Company's business or financial position.
Item 4. Submission of Matters to a Vote of Security Holders
The Company scheduled a Special Meeting of Stockholders
for November 11, 1993 to approve a proposal to amend the Company's
Restated Certificate of Incorporation to increase its authorized
capital. On November 9, 1993, the Company's Board of Directors
canceled the meeting. Reference is made to Item 5 of the Company's
quarterly report on Form 10-Q dated November 15, 1993 for
additional information in response to this item.
PART II
Item 5. Market for the Registrant's Common Stock and Related
Security Holder Matters
As of March 15, 1994, there were 26,639,894 shares of
common stock, $.01 par value ("Common Stock"), outstanding held by
2,907 stockholders of record. The principal market for the Common
Stock is the New York Stock Exchange, on which that security has
been listed since June 1989. Prior to that date, all Common Stock
was held by the Company's 1984 ESOP and did not trade on any
exchange.
Dividends on the Company's Common Stock are paid when and
as declared by the Company's Board of Directors. Quarterly cash
dividends of $0.16 per share on Common Stock were last paid on
December 15, 1990. The payment of future dividends is subject to
the applicable provisions of Delaware corporate law governing the
Company and the discretion of the Company's Board of Directors,
which normally will take into consideration applicable provisions
of the Company's Certificate of Incorporation, as well as its
financial performance, and its capital requirements.
Under covenants of the indenture covering the Company's
11-1/2% Senior Notes, the Company's ability to pay dividends on its
Common Stock is limited as to the payment of aggregate dividends
after March 31, 1993, to the greater of (i) $5.0 million or (ii)
$5.0 million plus one-half of the Company's cumulative consolidated
net income since March 31, 1993, plus the net proceeds from future
issuances of certain capital stock less certain allowable payments.
As of December 31, 1993, pursuant to this covenant, the Company's
ability to pay dividends on its Common Stock was limited to $5.0
million.
As of March 15, 1994, 12,826,723 shares of Common Stock,
or 47.7% of the outstanding shares of Common Stock, were held by
one stockholder of record, United National Bank - North, as Trustee
of the 1984 ESOP. As of that date, the 1984 ESOP had approximately
7,735 participants who were active or former employees of the
Company. In addition, as of March 15, 1994 there were 1,779,681
shares of Series A Preferred Stock outstanding held by 240
stockholders of record. As of that date, United National Bank -
North, as Trustee of the Company's 1989 ESOP, was the record owner
of 1,774,164 shares of the Series A Preferred Stock, or over 99% of
the outstanding shares of Series A Preferred Stock, subject to the
terms and conditions of said Plan. As of that date, the 1989 ESOP
had approximately 7,829 participants who were active or former
employees of the Company. The Series A Preferred Stock is not
listed for trading on any exchange. The Series A Preferred Stock
has a preference of $5 per share over the Common Stock on
liquidation and is convertible into one share of Common Stock,
subject to adjustment. Each share of Series A Preferred Stock is
entitled to 10 times the number of votes as the Common Stock into
which it is convertible. Participants in the Company's two ESOPs
have full voting rights over all shares allocated to their
accounts. See "Employees" included in Item 1.
As of March 15, 1994, there were 500,000 shares of the
Company's Redeemable Preferred Stock, Series B outstanding, held by
one stockholder of record. The Series B Preferred Stock, which is
ordinarily non-voting, was issued in October 1991 to evidence a $25
million investment in the Company by Cliffs. See Note 10 to the
Financial Statements.
The following table sets forth, for the periods
indicated, the high and low sales prices of the Common Stock as
reported in the consolidated transaction reporting system.
<TABLE>
<CAPTION>
1992 1993 1994
Quarter High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C>
First 5-1/2 3 7-1/8 3-7/8 *11 6-1/4
Second 6-3/8 4-7/8 10 6-1/4
Third 6-1/4 4-1/8 9-1/8 5-3/8
Fourth 4-3/8 3-3/8 7-7/8 5-3/4
<FN>
*First Quarter 1994 through 3/15/94
</TABLE>
[TEXT]
Item 6. Selected Financial Data
The information required by this Item is incorporated
herein by reference to "Selected Financial and Statistical Data" on
page 48 of the Company's 1993 Annual Report to Stockholders. With
the exception of the information specifically incorporated by
reference, the 1993 Annual Report to Stockholders is not to be
deemed filed as part of this Report for purposes of this Item.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information required by this Item is incorporated
herein by reference to pages 19 to 24, inclusive, of the Company's
1993 Annual Report to Stockholders. With the exception of the
information specifically incorporated by reference, the 1993 Annual
Report to Stockholders is not to be deemed filed as part of this
Report for purposes of this Item.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data required
by this Item are incorporated herein by reference to pages 25 to
46, inclusive, of the Company's 1993 Annual Report to Stockholders
and are listed in "Item 14.--Exhibits, Financial Statement
Schedules and Reports on Form 10-K" hereof.
Item 9. Changes in or Disagreements with Accountants on
Accounting and Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors of the Company
The information required by this item with respect to
Directors of the Company is incorporated herein by reference to the
caption "Election of Directors" in the Company's definitive Proxy
Statement relating to its 1994 Annual Meeting of Stockholders.
With the exception of the information specifically incorporated by
reference, said definitive Proxy Statement is not to be deemed
filed as part of this report for purposes of this item.
Executive Officers of the Company
The executive officers of the Company as of March 15,
1994, were as follows:
Age at
March 15,
NAME 1994 OFFICE
Herbert Elish 60 President, Chairman
and Chief Executive
Officer
Craig T. Costello 46 Vice President -
Operations
William C. Brenneisen 52 Vice President - Human
Resources
James B. Bruhn 53 Vice President - Tin
Mill Products
Business
Thomas W. Evans 57 Vice President -
Materials Management
David M. Gould 55 Vice President -
Sales and Marketing
Sheet Products
William R. Kiefer 44 Vice President - Law
and Secretary
Dennis R. Mangino 50 Vice President -
Product Quality &
WEIRTEC
Narendra M. Pathipati 36 Treasurer
Richard K. Riederer 50 Vice President and
Chief Financial
Officer
Mac S. White, Jr. 61 Vice President -
Engineering
Unless otherwise indicated below, the executive officers
of the Company have held the positions described for at least the
last five years.
Herbert Elish has been Chairman of the Board of
Directors, President and Chief Executive Officer of the Company
since July 1987. He has been a director of the Company since 1983.
From April 1986 until July 1987, Mr. Elish was Senior Vice
President of Dreyfus Corp., a company engaged in financial
services. Previously, he served as a Senior Vice President of
International Paper Company, a producer of paper, paper packaging
and forest products.
William C. Brenneisen has served as the Company's Vice
President - Human Resources since February 1988. From September
1985 through February 1988, he was the Director of Industrial
Relations for the Company.
James B. Bruhn joined the Company as Vice President -
Sales and Marketing - Tin Mill Products in July 1987. He has been
a director of the Company since May 1990. He was appointed Vice-
President Tin Mill Products Business, with added responsibility for
tin finishing operations in November 1992. From May 1985 until
July 1987, he served as Vice President - Sales and Marketing for
Titanium Metals Corporation of America.
Craig T. Costello has been Vice President - Operations
since October 1993. Mr. Costello served as General Manager -
Operations since 1988 and prior to that was responsible for the
design, building, and operation of the Hot Mill Rebuild.
Thomas W. Evans has been Vice President - Materials
Management since February 1988. From April 1986 to February 1988,
he was Vice President - Purchasing and Traffic. From 1979 to April
1986, he was Vice President - Material Control for Sharon Steel
Corporation.
David M. Gould has served as the Company's Vice President
- - Sales and Marketing - Sheet Products since 1983. He was a
director of the Company from February 1989 to May 1990. Mr. Gould
has been employed by the Company and its predecessor for over 30
years.
William R. Kiefer has been the Company's Vice President -
Law and Secretary since May 1990. From March 1988 to May 1990 he
was Director - Legal Affairs and Secretary. From February 1985 to
March 1988, he was Corporate Attorney and Assistant Secretary for
the Company.
Dennis R. Mangino has served as a Vice President of the
Company at WEIRTEC since November 1989. From February 1986 to
October 1989, Mr. Mangino was employed by Enichem America where he
served as Director - Corporate Division and General Manager -
Electrical Materials Division.
Narendra M. Pathipati has served as Treasurer of the
Company since August 1991. From February 1990 to July 1991, he
served as Director of Financial Planning and Analysis for the
Company. Mr. Pathipati served as Treasurer for Century II, Inc.,
a multi-national capital goods manufacturer, from April 1988 to
January 1990. Previous to that, he was responsible for financial
planning at Harnischfeger Industries, Inc.
Richard K. Riederer has been Vice President and Chief
Financial Officer of the Company since January 1989. He has been
a director of the Company since October 1993. From March 1986 to
December 1988, he served as Vice President and Treasurer of
Harnischfeger Industries, Inc., a producer of manufacturing
equipment. Mr. Riederer is also a director of Portico Funds Inc.
Mac S. White, Jr. has been Vice President - Engineering
of the Company since May 1992. From April 1989 to April 1992, Mr.
White was Director of Engineering for the Company. Prior to that,
he was Director of Project Management for Italimpianti, Spa., a
steel mill equipment builder.
Item 11. Executive Compensation
The information required by this Item is incorporated
herein by reference to the caption "Executive Compensation" in the
Company's definitive Proxy Statement relating to its 1994 Annual
Meeting of Stockholders. With the exception of the information
specifically incorporated by reference, said definitive Proxy
Statement is not to be deemed to be filed as part of this report.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information required by this Item is incorporated
herein by reference to the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Company's definitive Proxy
Statement relating to its 1994 Annual Meeting of Stockholders.
With the exception of the information specifically incorporated by
reference, said definitive Proxy Statement is not to be deemed to
be filed as part of this report.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated
herein by reference to the caption "Certain Relationships and
Related Transactions" in the Company's definitive Proxy Statement
relating to its 1994 Annual Meeting of Stockholders. With the
exception of the information specifically incorporated by
reference, said definitive Proxy Statement is not to be deemed to
be filed as part of this report.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
1. The list of financial statements required to be filed by "Item
8--Financial Statements and Supplementary Data" of this Annual
Report on Form 10-K is as follows: Page
Financial Statements
a. Independent Public Accountants' Report *
b. Statements of Income for the years ended
December 31, 1993, 1992, and 1991. . . *
c. Balance Sheets as of December 31,
1993 and 1992 . . . . . . . . . *
d. Statements of Cash Flows for the years
ended December 31, 1993, 1992, and 1991 *
e. Notes to Financial Statements. . . . . *
Supplementary Financial Information *
* Incorporated in this Report by reference from pages 25 to 46,
inclusive, of the Company's 1993 Annual Report to Stockholders
referred to below.
2. The list of financial statement schedules required to be filed
by "Item 8--Financial Statements and Supplementary Data" of this
Annual Report on Form 10-K is as follows:
a. Independent Accountants' Report
on Financial Statement
Schedules . . . . . . . . . . . . . S-1
b. Schedules:
III - Condensed Financial Information
of Registrant S-2
V - Property, Plant and Equipment S-3
VI - Accumulated Depreciation of
Property, Plant and Equipment S-4
VIII - Valuation and Qualifying Accounts S-5
IX - Short-term Borrowings S-6
X - Supplementary Income Statement
Information S-7
3. Exhibits
The following listing of exhibits are included in this Report
or incorporated herein by reference.
Exhibit 3.1 Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit
3.1 to the Company's Registration Statement on
Form S-1 filed May 3, 1989, Commission File No.
33-28515).
Exhibit 3.2 By-laws of the Company (incorporated by
reference to Exhibit 3.3 to the Company's
Registration Statement on Form S-1 filed May 3,
1989, Commission File No. 33-28515).
Exhibit 3.3 Certificate of the Designation, Powers,
Preferences and Rights of the Convertible
Voting Preferred Stock, Series A (incorporated
by reference to Exhibit 3.2 to the Company's
Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 on Form
10-K filed March 28, 1990, Commission File No.
1-10244).
Exhibit 3.4 Certificate of Designation, Powers, Preferences
and Rights of the Redeemable Preferred Stock,
Series B (incorporated by
reference to Exhibit 4.1 to the Company's
Current Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 on Form
8-K filed October 9, 1991, Commission File No.
1-10244).
Exhibit 4.1 Indenture dated October 17, 1989 between the
Company and First Bank (N.A.) as Trustee,
pursuant to which the 10-7/8% Senior Notes due
October 15, 1999 Notes were issued
(incorporated by reference to Exhibit 4.1 to
the Company's Annual Report pursuant to Section
13 or 15(d) of the Securities Exchange Act of
1934 on Form 10-K filed March 28, 1990,
Commission File No. 1-10244).
Exhibit 4.2 Form of Notes (included as Exhibit A to Exhibit
4.1).
Exhibit 10.1 Pellet Sale Agreement dated June 25, 1991,
between USX Corporation and the Company
(incorporated by reference to Exhibit 10.2 to
the Company's Annual Report pursuant to Section
13 or 15(d) of the Securities Exchange Act of
1934 on Form 10-K filed March 27, 1992,
Commission File No. 1-10244).
Exhibit 10.2 1984 Employee Stock Ownership Plan, as amended
and restated (incorporated by reference to
Exhibit 10.3 to the Company's Annual Report
pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 on Form 10-K
filed March 28, 1990, Commission File No. 1-
10244).
Exhibit 10.3 1989 Employee Stock Ownership Plan
(incorporated by reference to Exhibit 10.4 to
the Company's Annual Report pursuant to Section
13 or 15(d) of the Securities Exchange Act of
1934 on Form 10-K filed March 28, 1990,
Commission File No. 1-10244).
Exhibit 10.4 1987 Stock Option Plan (incorporated by
reference to Exhibit 10.5 to the Company's
Registration Statement on Form S-1 filed May 3,
1989, Commission File No. 33-28515).
Exhibit 10.5 Employment Agreement between Herbert Elish and
the Company dated as of July 1, 1990
(incorporated by reference to Exhibit 10.6 to
the Company's Annual Report pursuant to
Section 13 or 15(d) of the Securities Exchange
Act of 1934 on Form 10-K, filed April 1, 1991,
Commission File No. 1-10244).
Exhibit 10.6 Employment Agreement between Warren E. Bartel
and the Company (incorporated by reference to
Exhibit 10.8 to the Company's Registration
Statement on Form S-1 filed May 3, 1989,
Commission File No. 33-28515).
Exhibit 10.7 Employment Agreement between James B. Bruhn and
the Company (incorporated by reference to
Exhibit 10.11 to the Company's Registration
Statement on Form S-1 filed May 3, 1989,
Commission File No. 33-28515).
Exhibit 10.8 Employment Agreement between Thomas W. Evans
and the Company dated April 21, 1987 (filed
herewith).
Exhibit 10.9 Employment Agreement between Richard K.
Riederer and the Company (incorporated by
reference to Exhibit 10.12 to the Company's
Registration Statement on Form S-1 filed May 3,
1989, Commission File No. 33-28515).
Exhibit 10.10 Stock Purchase and Contribution Agreement dated
September 27, 1991 among the registrant and
U.S. Trust Company of California, N.A., as
investment manager (incorporated by reference
to Exhibit 10.1 to the Company's Current
Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 on Form 8-K
filed October 9, 1991, Commission File No. 1-
10244).
Exhibit 10.11 Preferred Stock Purchase Agreement dated as of
September 30, 1991 between the registrant and
Cleveland-Cliffs Inc (incorporated by reference
to Exhibit 10.2 to the Company's Current Report
pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 on Form 8-K
filed October 9, 1991, Commission File No. 1-
10244).
Exhibit 10.12 Registration Rights Agreement dated October 2,
1991 between the registrant and Cleveland-
Cliffs Inc (incorporated by reference to
Exhibit 10.3 to the Company's Current Report
pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 on Form 8-K
filed October 9, 1991, Commission File No. 1-
10244).
Exhibit 10.13 Redacted Pellet Sale and Purchase Agreement
dated as of September 30, 1991 between the
Cleveland-Cliffs Iron Company and the Company
(incorporated by reference to Exhibit 10.18 to
the Company's Quarterly Report pursuant to
Section 13 or 15(d) of the Securities Exchange
Act of 1934 on Form 10-Q filed August 14, 1992,
Commission File No. 1-10244).
Exhibit 10.14 Deferred Compensation Plan for Directors
effective as of January 1, 1991, for all
directors who are not officers or other
employees of the Company (incorporated by
reference to Exhibit 10.19 of the Company's
Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 on form
10-K filed April 1, 1991, Commission File No.
1-10244).
Exhibit 10.15 Registration Rights Agreement dated September
30, 1991, between the Company and U.S.Trust
Company of California, N.A. (incorporated by
reference to Exhibit 1 to the Company's
Quarterly Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 on
Form 10-Q filed November 14, 1991, Commission
File No. 1-10244).
Exhibit 10.16 Amendment No. 1 dated September 30, 1992, to
the Registration Rights Agreement dated
September 30, 1991, among the Company and U.S.
Trust Company of California, N.A. (incorporated
by reference to Exhibit 10.34 of Amendment 2 to
the Company's Registration Statement on Form S-
2 filed February 9, 1993, Commission File No.
33-53476).
Exhibit 10.17 Stock Contribution Agreement dated September
30, 1992, between the Company and U.S. Trust
Company of California, N.A., as investment
manager (incorporated by reference to Exhibit
10.36 of Amendment 2 to the Company's
Registration Statement on Form S-2 filed
February 9, 1993, Commission File No. 33-
53476).
Exhibit 10.18 Coke Sale Agreement dated January 1, 1993 and
signed July 13, 1993 between the Registrant and
USX Corporation (incorporated by reference to
Exhibit 10.30 to the Company's quarterly report
pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 filed August
13, 1993, Commission File No. 1-10244).
Exhibit 10.19 Employment Agreement between Craig T. Costello
and the Company dated July 20, 1993
(filed herewith).
Exhibit 10.20 Employment Agreement between William R. Kiefer
and the Company dated July 21, 1993 (filed
herewith).
Exhibit 10.21 Employment Agreement between Dennis R. Mangino
and the Company dated July 26, 1993 (filed
herewith).
Exhibit 10.22 Employment Agreement between John H. Walker and
the Company dated July 21, 1993 (filed
herewith).
Exhibit 10.23 Employment Agreement between Narendra M.
Pathipati and the Company dated December 16,
1993 (filed herewith).
Exhibit 10.24 Employment Agreement between Mac S. White and
the Company dated July 28, 1993 (filed
herewith).
Exhibit 10.25 Amendment dated August 5, 1993 to the
Employment Agreement dated July 1, 1990 between
Herbert Elish and the Company (filed herewith).
Exhibit 10.26 Amendment dated July 19, 1993 to the Employment
Agreement dated June 8, 1987 between David M.
Gould and the Company (filed herewith).
Exhibit 10.27 Amendment dated July 21, 1993 to the Employment
Agreement dated June 8, 1987 between William C.
Brenneisen and the Company (filed herewith).
Exhibit 10.28 Amendment dated July 19, 1993 to the Employment
Agreement dated April 21, 1987 between Thomas
W. Evans and the Company (filed herewith).
Exhibit 13.1 1993 Annual Report to Stockholders of Weirton
Steel Corporation (filed herewith). Except for
those portions of the Annual Report
specifically incorporated by reference, such
report is furnished for the information of the
Securities and Exchange Commission and is not
to be deemed filed as part of this Annual
Report on Form 10-K.
Exhibit 22.1 Subsidiaries of the Registrant (filed
herewith).
Exhibit 24.1 Consent of Arthur Andersen & Co., independent
public accountants (filed herewith).
(b) The Registrant filed a report on Form 8-K in
reference to Item 5 thereof on November 23, 1993.
(c) The exhibits as listed under Item 14.(a)(3), are
filed herewith or incorporated herein by reference.
(d) The financial statement schedules listed under Item
14.(a)(2), are filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended, Weirton Steel
Corporation has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized, on the 28th day of
March, 1994.
WEIRTON STEEL CORPORATION
By /s/ Herbert Elish
Herbert Elish
Chairman, President and
Chief Executive Officer
/s/ Richard K. Riederer
Richard K. Riederer
Vice President and Chief
Financial Officer (Principal
Financial and Accounting
Officer)
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 Weirton Steel Corporation and in the
capacities indicated on the 28th day of March, 1994.
/s/ Herbert Elish /s/ F. James Rechin
Herbert Elish F. James Rechin
Chairman of the Board Director
/s/ Richard K. Riederer /s/Richard F. Schubert
Richard K. Riederer Richard F. Schubert
Director Director
/s/ James B. Bruhn
James B. Bruhn Phillip H. Smith
Director Director
/s/ Harvey L. Sperry
Robert J. D'Anniballe, Jr. Harvey L. Sperry
Director Director
Mark G. Glyptis Thomas R. Sturges
Director Director
/s/ Gordon C. Hurlbert /s/ David I.J. Wang
Gordon C. Hurlbert David I.J. Wang
Director Director
Phillip A. Karber
Director
Arthur Andersen & Co.
2100 One PPG Place
Pittsburgh, PA 15222
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of Weirton Steel Corporation:
We have audited in accordance with generally accepted
auditing standards, the consolidated financial statements included
in Weirton Steel Corporation's Annual Report to shareholders
incorporated by reference in this Form 10-K, and have issued our
report thereon dated January 24, 1994. Our audit was made for the
purpose of forming an opinion on those basic financial statements
taken as a whole. The schedules listed in the index in Item 14-
2(b) of the Form 10-K are the responsibility of the Company's
management and are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not a part of
the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the
basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a
whole.
/s/Arthur Andersen & Co.
ARTHUR ANDERSEN & CO.
Pittsburgh, Pennsylvania
January 24, 1994
S-1
<TABLE>
WEIRTON STEEL CORPORATION-UNCONSOLIDATED
SEC SCHEDULE III
CONDENSED FINANCIAL STATEMENTS
OF PARENT COMPANY
<CAPTION>
UNCONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
1993 1992 1991
-----------------------------
<S> <C> <C> <C>
NET SALES(1) $1,201,093 $1,078,691 $1,036,335
OPERATING COSTS:
Cost of Sales(1) 1,105,558 1,010,022 1,019,280
Discount on Sale of Finance 5,209 - -
Receivables to Subsidiary(2)
Selling, General, 31,535 30,470 29,148
Administrative
Depreciation 49,113 38,617 34,335
Restructuring Charge 17,340 - -
--------- --------- ---------
Total Operating Costs 1,208,755 1,079,109 1,082,763
--------- --------- ---------
LOSS FROM OPERATIONS (7,662) (418) (46,428)
OTHER INCOME(EXPENSE):
Interest Expense (52,634) (40,921) (32,833)
Interest Income 2,737 3,073 3,156
Dividends Received from 2,168 - -
Subsidiary(2)
--------- --------- ---------
Net Other Income(Expense) (47,729) (37,848) (29,677)
--------- --------- ---------
LOSS BEFORE ESOP CONTRIBUTION (55,391) (38,266) (76,105)
ESOP Contribution 2,610 2,610 2,610
--------- --------- ---------
LOSS BEFORE INCOME TAXES (58,001) (40,876) (78,715)
Income Tax Benefit 13,988 4,763 4,000
--------- --------- ---------
LOSS BEFORE EXTRAORDINARY ITEM (44,013) (36,113) (74,715)
Extraordinary item-loss on
early extinguishment of debt 6,549 - -
--------- --------- ---------
LOSS BEFORE CUMULATIVE EFFECT (50,562) (36,113) (74,715)
OF ACCOUNTING CHANGES
Cumulative effect on prior (179,803) 4,356 -
years of accounting changes
--------- --------- ---------
NET LOSS $(230,365) $(31,757) $(74,715)
========= ========= ========
(1) Excludes $575,455 of net
sales of finance receiva-
bles to subsidiary that
are eliminated in consol-
idation.
(2) Amounts eliminated in
consolidation.
NET LOSS $ (230,365) $ (31,757) $ (74,715)
Less: Preferred stock dividend 3,125 3,125 -
requirement --------- --------- ---------
NET LOSS APPLICABLE TO COMMON $ (233,490) $ (34,882) $ (74,715)
SHARES ========= ========= =========
PER SHARE DATA:
Weighted average number of 26,473 24,914 21,406
common shares & equivalents
Loss per common share before $(1.78) $(1.57) $(3.49)
extraordinary item
Extraordinary item (0.25) - -
--------- --------- ---------
Loss per common share before (2.03) (1.57) (3.49)
cumulative effect on prior
years of accounting changes
Cumulative effect of (6.79) 0.17 -
accounting changes --------- --------- ---------
NET LOSS PER COMMON SHARE $ (8.82) $ (1.40) $ (3.49)
======== ======== ========
</TABLE>
<TABLE>
WEIRTON STEEL CORPORATION-UNCONSOLIDATED
SEC SCHEDULE III
CONDENSED FINANCIAL STATEMENTS
OF PARENT COMPANY
<CAPTION>
UNCONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands, except per share amount)
1993 1992
------- -------
<S> <C> <C>
ASSETS:
Current Assets:
Cash, and equivalents, $ 76,805 $ 61,195
includes restricted cash of
$602 and $491, respectively
Receivables, less allowances 22,286 123,894
$5,719 and $5,545,
respectively(3)
Inventories:
Raw materials 74,766 78,017
Work-in-process 74,109 74,950
Finished goods 93,784 91,599
Deferred income taxes 25,732 -
Other current assets 4,142 8,182
--------- ---------
Total current assets 371,624 437,837
Property, plant, and 523,728 559,074
equipment, net
Investment in Weirton 116,913 -
Receivables, Inc.
Intangible assets 91,289 -
Deferred income taxes 117,990 -
Other assets and deferred 18,050 8,535
charges --------- ---------
Total Assets $1,239,594 $1,005,446
========= ==========
LIABILITIES, REDEEMABLE STOCK
AND STOCKHOLDERS' EQUITY:
Liabilities:
Current liabilities:
Current maturities of debt $ - $ 11,964
obligations
Payables 109,937 88,139
Employment costs 66,519 41,102
Pension liability 20,394 28,698
Other 31,189 27,163
-------- --------
Total current liabilities 228,038 200,134
Long term debt obligations 495,252 491,277
Long term pension obligation 142,894 32,231
Postretirement benefits other 308,985 -
than pensions
Other long term liabilities 30,188 16,334
--------- ---------
Total Liabilities 1,205,358 739,976
(3) Includes $5,367 of receiv-
ables from subsidiary that
are eliminated in consoli-
dation.
Redeemable Stock 36,721 34,202
Stockholders' Equity:
Common stock, $.01 par value; 267 264
30,000,000 shares authorized;
26,719,752, and 26,419,705
shares issued
Additional paid-in capital 335,776 334,834
Retained earnings (337,656) (104,168)
Other stockholders' equity (872) 338
--------- ---------
Total Stockholders' Equity (2,485) 231,268
(Deficit) --------- ---------
Total Liabilities, Redeemable $1,239,594 $1,005,446
Stock and Stockholders' Equity ========= =========
</TABLE>
<TABLE>
WEIRTON STEEL CORPORATION-UNCONSOLIDATED
SEC SCHEDULE III
CONDENSED FINANCIAL STATEMENTS
OF PARENT COMPANY
<CAPTION>
UNCONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
NET CASH PROVIDED BY $173,881 $ 13,322 $ 3,116
OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING
ACTIVITIES:
Expenditures for property, (13,324) (44,610) (113,881)
plant and equipment
Investment in Weirton (116,913) - -
Receivables, Inc. --------- --------- --------
Net cash used by investing (130,237) (44,610) (113,881)
activities
CASH FLOWS FROM FINANCING
ACTIVITIES:
Repayments of debt obligations (148,114) (2,171) (2,715)
Proceeds from issuance of debt 140,000 - 109,000
obligations
Debt issance fees (13,230) - -
Proceeds from issuance of - 8,250 15,000
common stock
Proceeds from issuance of - - 25,000
preferred stock
Other (6,690) 2,241 (7,529)
--------- -------- --------
Net cash (used) provided by (28,034) 8,320 138,576
financing activities
NET CHANGE IN CASH AND EQUIVALENTS 15,610 (22,968) 27,991
CASH AND EQUIVALENTS AT BEGINNING 61,195 84,163 56,172
OF PERIOD ------- ------- -------
CASH AND EQUIVALENTS AT END OF $76,805 $61,195 $84,163
PERIOD ======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid, net of interest 47,311 40,937 31,068
capitalized
Income taxes paid (refunded) 1,779 11,009 -
Dividends received from Weirton 2,166 - -
Receivables, Inc.
<FN>
S-2
</TABLE>
<TABLE>
SEC SCHEDULE V
WEIRTON STEEL CORPORATION and SUBSIDIARY
PROPERTY, PLANT, AND EQUIPMENT
For each of the three years ended December 31, 1993
(Dollars in thousands)
<CAPTION>
Description Balance Additions Retirements Balance
at beg. of Writeoffs at end
period of period
- ----------- ---------- --------- ----------- ---------
1993
<S> <C> <C> <C> <C>
Land $ 810 $ 0 $ 0 $ 810
Buildings 7,918 0 0 7,918
Machinery, 649,679 36,442 (258) 685,863
Equipment,Other
Construction in 84,982 (22,033) (558) 62,391
Progress ------- -------- ------- -------
Total $743,389 $14,409 $(816) $756,982
======= ====== ======= =======
1992
Land 808 3 1 810
Buildings 7,712 206 0 7,918
Machinery, 555,470 94,233 24 649,679
Equipment,Other
Construction in 134,788 (49,806) 0 84,982
Progress ------- -------- ------ -------
Total $698,778 $44,636 $25 $743,389
======= ====== ====== =======
1991
Land 815 1 8 808
Buildings 6,533 1,179 0 7,712
Machinery, 432,555 123,360 445 555,470
Equipment,Other
Construction in 145,164 (10,376) 0 134,788
Progress ------- -------- ------ -------
Total $585,067 $114,164 $453 $698,778
======= ======= ====== =======
<FN>
S-3
</TABLE>
<TABLE>
SEC SCHEDULE VI
WEIRTON STEEL CORPORATION and SUBSIDIARY
ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION OF
PROPERTY, PLANT, AND EQUIPMENT
For each of the three years ended December 31, 1993
(Dollars in thousands)
<CAPTION>
Description Balance Additions Retirements Balance
at beg. of charged at end
period to expense of period
- ----------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C>
1993
Buildings $ 2,844 $ 359 $ 0 $ 3,203
Machinery, 181,471 48,754 174 230,051
Equipment,Other ------- ------- -------- -------
Total $184,315 $49,113 $ 174 $233,254
======= ====== ======= =======
1992
Buildings 2,485 359 0 2,844
Machinery, 147,571 33,917 17 181,471
Equipment,Other ------- ------ ------ -------
Total $150,056 $34,276 (1) $17 $184,315
======= ====== ====== =======
1991
Buildings 2,075 410 0 2,485
Machinery, 113,815 33,925 171 147,571
Equipment,Other ------- ------- ------ -------
Total $115,890 $34,335 $171 $150,056
======= ======= ====== =======
<FN>
(1) Net of cumulative effect of accounting change which decreased
depreciation expense attributable to prior years by $4.4 million.
S-4
</TABLE>
<TABLE>
SEC SCHEDULE VIII
WEIRTON STEEL CORPORATION and SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
For each of the three years ended December 31, 1993
(Dollars in thousands)
<CAPTION>
Description Balance Deductions Balance
at beg. of Charged from at end
period to expense Reserves of period
- ----------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C>
1993
$5,545 $16,346 $16,172 $5,719
Allowance for
Doubtful accnts,
Discounts,Claims
and Allowances
Valuation allow-
ance for deferred
tax assets - 50,768 - 50,768
1992
Allowance for $8,339 $19,935 $22,729 $5,545
Doubtful accnts,
Discounts,Claims
and Allowances
1991
Allowance for $5,119 $27,478 $24,258 $8,339
Doubtful accnts,
Discounts,Claims
and Allowances
<FN>
S-5
</TABLE>
<TABLE>
SEC SCHEDULE IX
WEIRTON STEEL CORPORATION and SUBSIDIARY
SHORT-TERM BORROWINGS
For each of the Three Years Ended December 31, 1993
<CAPTION>
1993 1992 1991
Payable to Payable to Payable to
Banks Banks Banks
----------------------------------------
<S> <C> <C> <C>
Balance at end of (b) - - (b) -
period
Weighted Average - - -
interest rate
Maximum amount - $109,000 -
outstanding
during period
Average amount
outstanding
during period(a) - $ 42,000 -
Weighted average - 4.10% -
interest rate
during period(a)
<FN>
(a) Average borrowings are based on month-end balances. The
average interest rate is based on month-end balances and the
month-end interest rates.
(b) There were no short-term borrowings during 1991 or 1993.
S-6
</TABLE>
<TABLE>
SEC SCHEDULE X
WEIRTON STEEL CORPORATION and SUBSIDIARY
REPAIR AND MAINTENANCE CHARGED TO EXPENSE
For each of the three years ended December 31, 1993
(Dollars in thousands)
<CAPTION>
1993 1992 1991
-------- --------- --------
<S> <C> <C> <C>
Maintenance and $177,217 $160,190 $143,336
Repairs charged to
expense
<FN>
S-7
</TABLE>
EMPLOYMENT AGREEMENT
AGREEMENT made as of the date written below by and
between WEIRTON STEEL CORPORATION, a Delaware corporation, with its
principal executive offices located at Three Springs Drive,
Weirton, WV 26062 (hereinafter called the "Corporation") and the
individual employee whose name and address appear on the signature
page hereto (hereinafter called "Employee"),
WITNESSETH:
WHEREAS, the Corporation acknowledges and recognizes the
value of Employee's services, wishes to make him more secure in his
position and deems it necessary and desirable to provide benefits
in the event of Employee's involuntary termination, all as set
forth herein; and
WHEREAS, both Employee and the Corporation desire to
embody the terms and conditions of Employee's termination benefits
in a written agreement;
NOW, THEREFORE, the parties hereto agree as follows:
First: Term and Duties: The term of this Agreement
shall commence on the date hereof and shall continue until
terminated in accordance with Paragraph Second. During the term
hereof, Employee shall serve as a full-time, salaried employee of
the Corporation subject to the control of the Board of Directors
and the proper officers of the Corporation. Employee's position,
salary, and other benefits shall be as agreed upon from time to
time between Employee and the Corporation.
Second: Eligibility for Termination Benefits: If
Employee's employment with the Corporation is terminated without
cause and with out Employee's approval during the term of this
Agreement, Employee shall be entitled, subject to the terms and
conditions hereof, to receive severance benefits hereunder as
determined in accordance with Paragraph Third, provided Employee,
if requested remains in the employment of the Corporation for a
period not exceeding 60 days following receipt of a written notice
of such termination.
Third: Amount and Duration of Termination Benefits:
Upon Employee's actual termination of employment on any date in
accordance with Paragraph Second (the "Termination Date"): (i)
Employee shall continue to be compensated at a rate equal to
Employee's base salary (excluding vacation or special pay) in
effect at the Termination Date for a period of one year thereafter;
and (ii) the Corporation shall continue to provide coverage for
Employee and applicable dependents under all benefit plans of the
Corporation providing life insurance or health, disability,
hospitalization and major medical insurance at such levels as are
not less than those in effect at the Termination Date for a period
of one year thereafter. For all other purposes, Employee's
employment shall terminate on the Termination Date. Any income
earned by Employee after the Termination Date from employment, or
otherwise from a trade or business, shall reduce on a dollar-for-
dollar basis the compensation payable pursuant to clause (i) of
this Paragraph, regardless of whether such income is earned in
violation of Paragraph Fourth. Employee shall report all such
other income to the Corporation.
Fourth: Confidentiality and Non-Competition: Employee
shall not, during the term hereof or subsequent to the Termination
date, divulge, furnish or make accessible to anyone (otherwise than
as consented to by the Corporation) any knowledge or information,
techniques, plans, trade or business secrets or confidential
information relating to the business of the Corporation or with
respect to any other confidential or secret aspect of the business
of the Corporation, nor shall Employee make any use of the same for
his own purposes or for the benefit of anyone under any
circumstances; provided that, after the Termination Date, these
restrictions shall not apply to such knowledge, techniques, plans,
trade or business secrets or confidential information which is then
in or subsequently becomes part of, the public domain, except
because of disclosure by Employee without the Corporation's
consent.
Except with the consent of the Corporation and provided
the Corporation is making the payments required under Paragraph
Third (unless not required because of the set off provisions of
such paragraph), for a period of one year after the Termination
Date, Employee shall not engage in any business (whether as an
officer, director, owner, employee, partner or other direct or
indirect participant and except for and to the extent of any
business engaged in by Employee at the Termination Date and
consented to by the Corporation) competing with any portion of the
steel business in which the Corporation is actively engaged in the
United States as of the Termination Date. For such period,
Employee also shall not interfere with, disrupt or attempt to
disrupt the relationship, contractual or otherwise, between the
Corporation and any customer, supplier, lessor, lessee or employee
of the Corporation.
It is the desire of the parties that the provisions of
this Paragraph be enforced to the fullest extent permissible under
the laws and public policies in each jurisdiction in which
enforcement might be sought. Accordingly, if any particular
portion of this Paragraph be adjudicated as invalid or
unenforceable, this Paragraph shall be deemed amended to delete
therefrom such portion so adjudicated, such deletion to apply only
with respect to the operation of this Paragraph in the particular
jurisdiction so adjudicating. If there is a breach or threatened
breach of this Paragraph by Employee, the Corporation shall be
entitled to an injunction restraining Employee from such breach,
but nothing herein shall be construed as prohibiting the
Corporation from pursuing any other remedies for such breach or
threatened breach.
Fifth: Disability: If Employee is unable to render
full-time services to the Corporation of the character required to
perform the duties of his employment with the Corporation with
reasonable efficiency for a period of six consecutive months,
commencing after the date hereof, by reason of illness, disability
or incapacity and the Corporation terminates Employee's employment
thereafter, Employee shall not be entitled to any severance
benefits hereunder; provided, that this Paragraph shall not apply
in any case where Employee, upon such termination, would not
qualify under any program of long-term disability benefits provided
by the Corporation.
Sixth: Waiver of Breach: A waiver by the Corporation or
Employee if a breach of any provision of this Agreement by the
other party shall not operate or be construed as a waiver of any
subsequent breach by the other party.
Seventh: Entire Agreement: This Agreement contains the
entire understanding and agreement between the parties and cannot
be amended, modified or supplemented in any respect, except by an
agreement in writing signed by the party against whom enforcement
of any amendment, modification or supplement is sought.
Eighth: Successors and Assigns: This Agreement shall
inure to the benefit of and be binding upon the Corporation and its
successors and assigns including, without limitation, any
corporation or other entity which may acquire all or substantially
all of the capital stock, assets and/or business of the Corporation
or with or into which the Corporation may be consolidated or
merged, and Employee, his heirs, executors, administrators and
legal representatives.
Ninth: Governing Law: This Agreement shall be governed
by the laws of the State of West Virginia.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day written below.
WEIRTON STEEL CORPORATION
DATED: April 21, 1987 By: /s/Robert L. Loughhead
Robert L. Loughhead
Chairman, President
& CEO
EMPLOYEE
Name: /s/Thomas W. Evans
Thomas W. Evans
Address:
7732 Silverfox
Drive
Boardman, Ohio
44512
RETIREMENT BENEFIT AGREEMENT
The Weirton Steel Corporation and Thomas W. Evans,
hereinafter referred to as Employee, herewith enter into an
agreement which provides that if Employee remains actively employed
with the Weirton Steel Corporation for a total of ten (10) YEARS,
Employee will thereafter be credited with an additional seven (7)
years of service for pension benefit purposes. Actual service
worked and credited under the qualified pension plan will determine
eligibility and benefits to be paid from the assets of the plan.
Benefits, hereinafter referred to as excess benefits, payable as a
result of the additional seven years of service will be computed in
accordance with the provisions of the qualified plan then in
effect. It should be understood, however, that such excess
benefits, which will commence when benefits are payable under the
qualified plan, will be paid from assets outside the qualified
pension fund. Further, such excess benefits shall be paid on a
life annuity basis and no survivor option or survivor benefits will
apply.
Agreed to this date
/s/ Thomas W. Evans 3/20/86
Employee Date
/s/ R.L. Loughhead 3/26/86
For the Weirton Steel Corporation Date
/s/ Richard F. Schubert 6/25/87
Chairman-Compensation Committee Date
EMPLOYMENT AGREEMENT
AGREEMENT made as of the date written below by and between
WEIRTON STEEL CORPORATION, a Delaware corporation, with its
principal executive offices located at Three Springs Drive,
Weirton, West Virginia 26062 (hereinafter called the "Corporation")
and the individual employee whose name and address appear on the
signature page hereto (hereinafter called "Employee").
The parties hereto agree as follows:
First: Term and Duties: The term of this Agreement shall
commence on the date hereof and shall continue until terminated in
accordance with Paragraph Second. During the term hereof, Employee
shall serve as a full-time, salaried employee of the Corporation.
Employee's duties, title, salary and other benefits shall be as
agreed upon from time to time between Employee and the Corporation.
Second: Eligibility for Termination Benefits: (a) Subject
to paragraph (d) of Paragraph Third, if Employee's employment with
the Corporation is terminated by the Corporation without just
cause, Employee shall receive such benefits hereunder ("Termination
Benefits") as determined in accordance with Paragraph Third,
provided Employee, if requested, remains in the employment of the
Corporation for a period not exceeding 60 days following receipt of
a written notice of such termination. For purposes of this
Agreement, termination of Employee's employment by the Corporation
shall constitute a termination for "just cause" only if such
termination is for one of the following reasons: (i) conviction of
a felony punishable by a prison sentence of more than one year;
(ii) habitual use of drugs without a prescription or habitual,
excessive use of alcohol to the extent that any of such uses
materially interferes with Employee's performance of his duties; or
(iii) refusal or failure, after notice, by Employee to perform or
discharge duties and responsibilities appropriate to his position,
which refusal or failure amounts to an extended and gross neglect
of his duties to the Corporation. Except as otherwise specifically
set forth in this Agreement or as otherwise prohibited by law, all
rights of Employee, and all obligations of the Corporation under
this Agreement, shall cease and terminate on, and as of, the date
of termination of employment for just cause.
(b) The Corporation shall be deemed to have agreed to a
termination in accordance with paragraph (a) of this Paragraph
Second from and after the date (i) the Employee is assigned duties
or responsibilities significantly inconsistent with and less than
the Employee's position, duties, responsibilities or status with
the Corporation as in effect upon execution of this Agreement, (ii)
the Employee's base salary, excluding any bonus or other
compensation derived from any employee benefit plan, is ever
reduced below any level attained by the Employee, or (iii) the
Employee is required to reside other than in the Greater Pittsburgh
Area in order to perform his duties for the Corporation; provided,
that such action is taken without the Employee's consent, and
within 30 days after the occurrence of any such event the Employee
notifies the Corporation that he is so deeming the Corporation to
have elected to terminate his employment, whereupon the Corporation
shall be deemed to have terminated such employment as of the date
of any such action or the date of such notice at the option of the
Employee. If the date of termination is deemed to be a date
earlier than the date of such notice, and the Corporation, upon
receipt of such notice, promptly takes all actions hereunder
required in the event of such termination, no intervening delay in
taking such actions may be construed as a violation of this
Agreement.
Third: Amount and Duration of Termination Benefits:
(a) Upon the termination of Employee's employment on any date
in accordance with Paragraph Second (the "Termination Date"),
Employee shall be treated as being an inactive employee for 18
months following the Termination Date, and Employee shall receive
a total of 18 months base salary (excluding vacation or special
pay) in effect at the Termination Date as follows: (i) 12 months
base salary to be paid in one lump sum within 10 days following the
Termination Date; (ii) starting in the 13th month following the
Termination Date and ending in the 18th month following the
Termination Date, six months base salary to be paid in six monthly
installments. Any income earned by Employee from employment, or
otherwise from a trade or business, in the 13th through the 18th
month following the Termination Date (excluding any self-employment
income), shall reduce on a dollar-for-dollar basis the compensation
payable to Employee during such months pursuant to this paragraph.
Employee shall report all such other compensation to the
Corporation. Furthermore, for a period of 18 months following the
Termination Date, the Corporation shall (iii) continue to provide
coverage for Employee and applicable dependents under all benefit
plans of the Corporation providing life insurance or health,
disability, hospitalization and major medical insurance at such
levels as are not less than those in effect at the time of the
Termination Date; and (iv) to the extent allowable under applicable
law, cause Employee to continue to earn service credit for all
purposes under any pension or retirement plan maintained by the
Corporation in which Employee participated at the time of the
Termination Date; provided, however, that the coverage referred to
in clause (iii) shall be suspended during any period in which and
to the extent Employee is eligible for similar coverage under
another employer plan. After the completion of the 18th month
following the Termination Date, the Employee shall be placed on
"Inactive" status, and be considered "Laid Off With Intent To
Recall", during which period the Employee shall continue to accrue
pension service for a period of up to 24 months, provided that any
and all salary continuation or other monetary non-retirement
benefits available to Employee (e.g., Income Protection Plan
Benefits) as a result of being placed on Inactive status shall be
offset by any amounts previously paid hereunder. Notwithstanding
the above, the Corporation shall not be obligated as provided in
this Paragraph Third during any period when employee does not
comply with Paragraph Fourth. For all other purposes, Employee's
employment shall terminate on the Termination Date.
(b) Nothing in paragraph (a) of this Paragraph Third shall be
construed to require the Corporation to maintain any employee or
management benefit program solely for the purpose of covering or
providing benefits to Employee.
(c) The Corporation shall promptly reimburse Employee for the
reasonable legal fees and expenses incurred by Employee in
connection with enforcing any right of Employee pursuant to
paragraph (a) or (b) of Paragraph Second, or paragraph (a) of this
Paragraph Third; provided, however, that the Corporation will only
reimburse Employee for such legal fees and expenses if, in
connection with enforcing any right of Employee pursuant to this
Agreement, either (i) a judgment has been rendered in favor of
Employee by a duly authorized court of law, or (ii) the Corporation
and Employee have entered into a settlement agreement providing for
the payment to Employee of any or all amounts due hereunder.
(d) Notwithstanding any other provision of this Agreement, if
the Employee's employment with the Corporation is terminated for
any reason and (i) the Employee has attained 65 years of age, (ii)
for the 2-year period immediately prior to such termination the
Employee is employed in a bona fide executive or a high policy-
making position and (iii) the Employee is entitled to an immediate
nonforfeitable annual retirement benefit from a pension, profit-
sharing, savings, or deferred compensation plan, or any combination
of such plans, of the Corporation, which equals in the aggregate,
at least $44,000, the Employee will not be entitled to any
Termination Benefits hereunder.
Fourth: Confidentiality and Non-Competition: (a) Employee
shall not, during the term hereof or subsequent to the Termination
Date, divulge, furnish or make accessible to anyone (otherwise than
as consented to by the Corporation) any knowledge or information,
techniques, plans, trade or business secrets or confidential
information relating to the business of the Corporation or with
respect to any other confidential or secret aspect of the business
of the Corporation, nor shall Employee make any use of the same for
his own purposes or for the benefit of anyone under any
circumstances; provided that, after the Termination Date, these
restrictions shall not apply to such knowledge, techniques, plans,
trade or business secrets or confidential information which is then
in, or subsequently becomes part of, the public domain, except
because of disclosure by Employee without the Corporation's
consent.
(b) Except with the consent of the Corporation and provided
the Corporation has made the payment required under clause (i) of
paragraph (a) of Paragraph Third, for a period of one year after
the Termination Date, Employee shall not engage in any business
(whether as an officer, director, owner, employee, partner or other
direct or indirect participant and except for and to the extent of
any business engaged in by Employee at the Termination Date and
consented to by the Corporation) competing with any portion of the
steel business in which the Corporation is actively engaged in the
United States as of the Termination Date. For such period,
Employee also shall not interfere with, disrupt or attempt to
disrupt the relationship, contractual or otherwise, between the
Corporation and any customer, supplier, lessor, lessee or employee
of the Corporation.
(c) It is the desire of the parties that the provisions of
this Paragraph Fourth be enforced to the fullest extent permissible
under the laws and public policies in each jurisdiction in which
enforcement might be sought. Accordingly, if any particular
portion of this Paragraph Fourth be adjudicated as invalid or
unenforceable, this Paragraph Fourth shall be deemed amended to
delete therefrom such portion so adjudicated, such deletion to
apply only with respect to the operation of this Paragraph Fourth
in the particular jurisdiction so adjudicating. If there is a
breach or threatened breach of this Paragraph Fourth by Employee,
the Corporation shall be entitled to an injunction restraining
Employee from such breach, but nothing herein shall be construed as
prohibiting the Corporation from pursuing any other remedies for
such breach or threatened breach.
Fifth: Disability: If Employee is unable to render full-time
services to the Corporation of the character required to perform
the duties of his employment with the Corporation with reasonable
efficiency for a period of six consecutive months, commencing after
the date hereof, by reason of illness, disability or incapacity and
the Corporation terminates Employee's employment thereafter,
Employee shall not be entitled to any Termination Benefits
hereunder; provided, that this Paragraph Fifth shall not apply in
any case where Employee, upon such termination, would not qualify
under any program of long-term disability benefits provided by the
Corporation.
Sixth: Waiver of Breach: A waiver by the Corporation or
Employee of a breach of any provision of this Agreement by the
other party shall not operate or be construed as a waiver of any
subsequent breach by the other party.
Seventh: Entire Agreement: This Agreement contains the
entire understanding and agreement between the parties and cannot
be amended, modified or supplemented in any respect, except by an
agreement in writing signed by the party against whom enforcement
of any amendment, modification or supplement is sought.
Eighth: Successors and Assigns: This Agreement shall inure
to the benefit of and be binding upon the Corporation and its
successors and assigns including, without limitation, any
corporation or other entity which may acquire all or substantially
all of the capital stock, assets and/or business of the Corporation
or with or into which the Corporation may be consolidated or
merged, and Employee, his heirs, executors, administrators and
legal representatives.
Ninth: Governing Law: This Agreement shall be governed by
the laws of the State of West Virginia.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day written below.
WEIRTON STEEL CORPORATION
Dated: July 20, 1993 By: /s/Herbert Elish
Title: President & CEO
EMPLOYEE
Name: /s/Craig T. Costello
Craig T. Costello
EMPLOYMENT AGREEMENT
AGREEMENT made as of the date written below by and between
WEIRTON STEEL CORPORATION, a Delaware corporation, with its
principal executive offices located at Three Springs Drive,
Weirton, West Virginia 26062 (hereinafter called the
"Corporation") and the individual employee whose name and
address appear on the signature page hereto (hereinafter called
"Employee").
The parties hereto agree as follows:
First: Term and Duties: The term of this Agreement shall
commence on the date hereof and shall continue until terminated
in accordance with Paragraph Second. During the term hereof,
Employee shall serve as a full-time, salaried employee of the
Corporation. Employee's duties, title, salary and other
benefits shall be as agreed upon from time to time between
Employee and the Corporation.
Second: Eligibility for Termination Benefits: (a)
Subject to paragraph (d) of Paragraph Third, if Employee's
employment with the Corporation is terminated by the Corporation
without just cause, Employee shall receive such benefits
hereunder ("Termination Benefits") as determined in accordance
with Paragraph Third, provided Employee, if requested, remains
in the employment of the Corporation for a period not exceeding
60 days following receipt of a written notice of such
termination. For purposes of this Agreement, termination of
Employee's employment by the Corporation shall constitute a
termination for "just cause" only if such termination is for one
of the following reasons: (i) conviction of a felony punishable
by a prison sentence of more than one year; (ii) habitual use of
drugs without a prescription or habitual, excessive use of
alcohol to the extent that any of such uses materially
interferes with Employee's performance of his duties; or (iii)
refusal or failure, after notice, by Employee to perform or
discharge duties and responsibilities appropriate to his
position, which refusal or failure amounts to an extended and
gross neglect of his duties to the Corporation. Except as
otherwise specifically set forth in this Agreement or as
otherwise prohibited by law, all rights of Employee, and all
obligations of the Corporation under this Agreement, shall cease
and terminate on, and as of, the date of termination of
employment for just cause.
(b) The Corporation shall be deemed to have agreed to a
termination in accordance with paragraph (a) of this Paragraph
Second from and after the date (i) the Employee is assigned
duties or responsibilities significantly inconsistent with and
less than the Employee's position, duties, responsibilities or
status with the Corporation as in effect upon execution of this
Agreement, (ii) the Employee's base salary, excluding any bonus
or other compensation derived from any employee benefit plan, is
ever reduced below any level attained by the Employee, or (iii)
the Employee is required to reside other than in the Greater
Pittsburgh Area in order to perform his duties for the
Corporation; provided, that such action is taken without the
Employee's consent, and within 30 days after the occurrence of
any such event the Employee notifies the Corporation that he is
so deeming the Corporation to have elected to terminate his
employment, whereupon the Corporation shall be deemed to have
terminated such employment as of the date of any such action or
the date of such notice at the option of the Employee. If the
date of termination is deemed to be a date earlier than the date
of such notice, and the Corporation, upon receipt of such
notice, promptly takes all actions hereunder required in the
event of such termination, no intervening delay in taking such
actions may be construed as a violation of this Agreement.
Third: Amount and Duration of Termination Benefits:
(a) Upon the termination of Employee's employment on any
date in accordance with Paragraph Second (the "Termination
Date"), Employee shall be treated as being an inactive employee
for 18 months following the Termination Date, and Employee shall
receive a total of 18 months base salary (excluding vacation or
special pay) in effect at the Termination Date as follows: (i)
12 months base salary to be paid in one lump sum within 10 days
following the Termination Date; (ii) starting in the 13th month
following the Termination Date and ending in the 18th month
following the Termination Date, six months base salary to be
paid in six monthly installments. Any income earned by Employee
from employment, or otherwise from a trade or business, in the
13th through the 18th month following the Termination Date
(excluding any self-employment income), shall reduce on a
dollar-for-dollar basis the compensation payable to Employee
during such months pursuant to this paragraph. Employee shall
report all such other compensation to the Corporation.
Furthermore, for a period of 18 months following the Termination
Date, the Corporation shall (iii) continue to provide coverage
for Employee and applicable dependents under all benefit plans
of the Corporation providing life insurance or health,
disability, hospitalization and major medical insurance at such
levels as are not less than those in effect at the time of the
Termination Date; and (iv) to the extent allowable under
applicable law, cause Employee to continue to earn service
credit for all purposes under any pension or retirement plan
maintained by the Corporation in which Employee participated at
the time of the Termination Date; provided, however, that the
coverage referred to in clause (iii) shall be suspended during
any period in which and to the extent Employee is eligible for
similar coverage under another employer plan. Notwithstanding
the above, the Corporation shall not be obligated as provided in
this Paragraph Third during any period when employee does not
comply with Paragraph Fourth. For all other purposes,
Employee's employment shall terminate on the Termination Date.
(b) Nothing in paragraph (a) of this Paragraph Third shall
be construed to require the Corporation to maintain any employee
or management benefit program solely for the purpose of covering
or providing benefits to Employee.
(c) The Corporation shall promptly reimburse Employee for
the reasonable legal fees and expenses incurred by Employee in
connection with enforcing any right of Employee pursuant to
paragraph (a) or (b) of Paragraph Second, or paragraph (a) of
this Paragraph Third; provided, however, that the Corporation
will only reimburse Employee for such legal fees and expenses
if, in connection with enforcing any right of Employee pursuant
to this Agreement, either (i) a judgment has been rendered in
favor of Employee by a duly authorized court of law, or (ii) the
Corporation and Employee have entered into a settlement
agreement providing for the payment to Employee of any or all
amounts due hereunder.
(d) Notwithstanding any other provision of this Agreement,
if the Employee's employment with the Corporation is terminated
for any reason and (i) the Employee has attained 65 years of
age, (ii) for the 2-year period immediately prior to such
termination the Employee is employed in a bona fide executive or
a high policy-making position and (iii) the Employee is entitled
to an immediate nonforfeitable annual retirement benefit from a
pension, profit-sharing, savings, or deferred compensation plan,
or any combination of such plans, of the Corporation, which
equals in the aggregate, at least $44,000, the Employee will not
be entitled to any Termination Benefits hereunder.
Fourth: Confidentiality and Non-Competition: (a) Employee
shall not, during the term hereof or subsequent to the
Termination Date, divulge, furnish or make accessible to anyone
(otherwise than as consented to by the Corporation) any
knowledge or information, techniques, plans, trade or business
secrets or confidential information relating to the business of
the Corporation or with respect to any other confidential or
secret aspect of the business of the Corporation, nor shall
Employee make any use of the same for his own purposes or for
the benefit of anyone under any circumstances; provided that,
after the Termination Date, these restrictions shall not apply
to such knowledge, techniques, plans, trade or business secrets
or confidential information which is then in, or subsequently
becomes part of, the public domain, except because of disclosure
by Employee without the Corporation's consent.
(b) Except with the consent of the Corporation and provided
the Corporation has made the payment required under clause (i)
of paragraph (a) of Paragraph Third, for a period of one year
after the Termination Date, Employee shall not engage in any
business (whether as an officer, director, owner, employee,
partner or other direct or indirect participant and except for
and to the extent of any business engaged in by Employee at the
Termination Date and consented to by the Corporation) competing
with any portion of the steel business in which the Corporation
is actively engaged in the United States as of the Termination
Date. For such period, Employee also shall not interfere with,
disrupt or attempt to disrupt the relationship, contractual or
otherwise, between the Corporation and any customer, supplier,
lessor, lessee or employee of the Corporation.
(c) It is the desire of the parties that the provisions of
this Paragraph Fourth be enforced to the fullest extent
permissible under the laws and public policies in each
jurisdiction in which enforcement might be sought. Accordingly,
if any particular portion of this Paragraph Fourth be
adjudicated as invalid or unenforceable, this Paragraph Fourth
shall be deemed amended to delete therefrom such portion so
adjudicated, such deletion to apply only with respect to the
operation of this Paragraph Fourth in the particular
jurisdiction so adjudicating. If there is a breach or
threatened breach of this Paragraph Fourth by Employee, the
Corporation shall be entitled to an injunction restraining
Employee from such breach, but nothing herein shall be construed
as prohibiting the Corporation from pursuing any other remedies
for such breach or threatened breach.
Fifth: Disability: If Employee is unable to render
full-time services to the Corporation of the character required
to perform the duties of his employment with the Corporation
with reasonable efficiency for a period of six consecutive
months, commencing after the date hereof, by reason of illness,
disability or incapacity and the Corporation terminates
Employee's employment thereafter, Employee shall not be entitled
to any Termination Benefits hereunder; provided, that this
Paragraph Fifth shall not apply in any case where Employee[,
upon such termination,] would not qualify under any program of
long-term disability benefits provided by the Corporation.
Sixth: Waiver of Breach: A waiver by the Corporation or
Employee of a breach of any provision of this Agreement by the
other party shall not operate or be construed as a waiver of any
subsequent breach by the other party.
Seventh: Entire Agreement: This Agreement contains the
entire understanding and agreement between the parties and
cannot be amended, modified or supplemented in any respect,
except by an agreement in writing signed by the party against
whom enforcement of any amendment, modification or supplement is
sought.
Eighth: Successors and Assigns: This Agreement shall
inure to the benefit of and be binding upon the Corporation and
its successors and assigns including, without limitation, any
corporation or other entity which may acquire all or
substantially all of the capital stock, assets and/or business
of the Corporation or with or into which the Corporation may be
consolidated or merged, and Employee, his heirs, executors,
administrators and legal representatives.
Ninth: Governing Law: This Agreement shall be governed by
the laws of the State of West Virginia.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day written below.
WEIRTON STEEL CORPORATION
Dated: July 21, 1993 By: /s/Herbert Elish
Title: President & CEO
EMPLOYEE
Name: /s/William R. Kiefer
William R. Kiefer
EMPLOYMENT AGREEMENT
AGREEMENT made as of the date written below by and between
WEIRTON STEEL CORPORATION, a Delaware corporation, with its
principal executive offices located at Three Springs Drive,
Weirton, West Virginia 26062 (hereinafter called the
"Corporation") and the individual employee whose name and
address appear on the signature page hereto (hereinafter called
"Employee").
The parties hereto agree as follows:
First: Term and Duties: The term of this Agreement shall
commence on the date hereof and shall continue until terminated
in accordance with Paragraph Second. During the term hereof,
Employee shall serve as a full-time, salaried employee of the
Corporation. Employee's duties, title, salary and other
benefits shall be as agreed upon from time to time between
Employee and the Corporation.
Second: Eligibility for Termination Benefits: (a)
Subject to paragraph (d) of Paragraph Third, if Employee's
employment with the Corporation is terminated by the Corporation
without just cause, Employee shall receive such benefits
hereunder ("Termination Benefits") as determined in accordance
with Paragraph Third, provided Employee, if requested, remains
in the employment of the Corporation for a period not exceeding
60 days following receipt of a written notice of such
termination. For purposes of this Agreement, termination of
Employee's employment by the Corporation shall constitute a
termination for "just cause" only if such termination is for one
of the following reasons: (i) conviction of a felony punishable
by a prison sentence of more than one year; (ii) habitual use of
drugs without a prescription or habitual, excessive use of
alcohol to the extent that any of such uses materially
interferes with Employee's performance of his duties; or (iii)
refusal or failure, after notice, by Employee to perform or
discharge duties and responsibilities appropriate to his
position, which refusal or failure amounts to an extended and
gross neglect of his duties to the Corporation. Except as
otherwise specifically set forth in this Agreement or as
otherwise prohibited by law, all rights of Employee, and all
obligations of the Corporation under this Agreement, shall cease
and terminate on, and as of, the date of termination of
employment for just cause.
(b) The Corporation shall be deemed to have agreed to a
termination in accordance with paragraph (a) of this Paragraph
Second from and after the date (i) the Employee is assigned
duties or responsibilities significantly inconsistent with and
less than the Employee's position, duties, responsibilities or
status with the Corporation as in effect upon execution of this
Agreement, (ii) the Employee's base salary, excluding any bonus
or other compensation derived from any employee benefit plan, is
ever reduced below any level attained by the Employee, or (iii)
the Employee is required to reside other than in the Greater
Pittsburgh Area in order to perform his duties for the
Corporation; provided, that such action is taken without the
Employee's consent, and within 30 days after the occurrence of
any such event the Employee notifies the Corporation that he is
so deeming the Corporation to have elected to terminate his
employment, whereupon the Corporation shall be deemed to have
terminated such employment as of the date of any such action or
the date of such notice at the option of the Employee. If the
date of termination is deemed to be a date earlier than the date
of such notice, and the Corporation, upon receipt of such
notice, promptly takes all actions hereunder required in the
event of such termination, no intervening delay in taking such
actions may be construed as a violation of this Agreement.
Third: Amount and Duration of Termination Benefits:
(a) Upon the termination of Employee's employment on any
date in accordance with Paragraph Second (the "Termination
Date"), Employee shall be treated as being an inactive employee
for 18 months following the Termination Date, and Employee shall
receive a total of 18 months base salary (excluding vacation or
special pay) in effect at the Termination Date as follows: (i)
12 months base salary to be paid in one lump sum within 10 days
following the Termination Date; (ii) starting in the 13th month
following the Termination Date and ending in the 18th month
following the Termination Date, six months base salary to be
paid in six monthly installments. Any income earned by Employee
from employment, or otherwise from a trade or business, in the
13th through the 18th month following the Termination Date
(excluding any self-employment income), shall reduce on a
dollar-for-dollar basis the compensation payable to Employee
during such months pursuant to this paragraph. Employee shall
report all such other compensation to the Corporation.
Furthermore, for a period of 18 months following the Termination
Date, the Corporation shall (iii) continue to provide coverage
for Employee and applicable dependents under all benefit plans
of the Corporation providing life insurance or health,
disability, hospitalization and major medical insurance at such
levels as are not less than those in effect at the time of the
Termination Date; and (iv) to the extent allowable under
applicable law, cause Employee to continue to earn service
credit for all purposes under any pension or retirement plan
maintained by the Corporation in which Employee participated at
the time of the Termination Date; provided, however, that the
coverage referred to in clause (iii) shall be suspended during
any period in which and to the extent Employee is eligible for
similar coverage under another employer plan. Notwithstanding
the above, the Corporation shall not be obligated as provided in
this Paragraph Third during any period when employee does not
comply with Paragraph Fourth. For all other purposes,
Employee's employment shall terminate on the Termination Date.
(b) Nothing in paragraph (a) of this Paragraph Third shall
be construed to require the Corporation to maintain any employee
or management benefit program solely for the purpose of covering
or providing benefits to Employee.
(c) The Corporation shall promptly reimburse Employee for
the reasonable legal fees and expenses incurred by Employee in
connection with enforcing any right of Employee pursuant to
paragraph (a) or (b) of Paragraph Second, or paragraph (a) of
this Paragraph Third; provided, however, that the Corporation
will only reimburse Employee for such legal fees and expenses
if, in connection with enforcing any right of Employee pursuant
to this Agreement, either (i) a judgment has been rendered in
favor of Employee by a duly authorized court of law, or (ii) the
Corporation and Employee have entered into a settlement
agreement providing for the payment to Employee of any or all
amounts due hereunder.
(d) Notwithstanding any other provision of this Agreement,
if the Employee's employment with the Corporation is terminated
for any reason and (i) the Employee has attained 65 years of
age, (ii) for the 2-year period immediately prior to such
termination the Employee is employed in a bona fide executive or
a high policy-making position and (iii) the Employee is entitled
to an immediate nonforfeitable annual retirement benefit from a
pension, profit-sharing, savings, or deferred compensation plan,
or any combination of such plans, of the Corporation, which
equals in the aggregate, at least $44,000, the Employee will not
be entitled to any Termination Benefits hereunder.
Fourth: Confidentiality and Non-Competition: (a) Employee
shall not, during the term hereof or subsequent to the
Termination Date, divulge, furnish or make accessible to anyone
(otherwise than as consented to by the Corporation) any
knowledge or information, techniques, plans, trade or business
secrets or confidential information relating to the business of
the Corporation or with respect to any other confidential or
secret aspect of the business of the Corporation, nor shall
Employee make any use of the same for his own purposes or for
the benefit of anyone under any circumstances; provided that,
after the Termination Date, these restrictions shall not apply
to such knowledge, techniques, plans, trade or business secrets
or confidential information which is then in, or subsequently
becomes part of, the public domain, except because of disclosure
by Employee without the Corporation's consent.
(b) Except with the consent of the Corporation and provided
the Corporation has made the payment required under clause (i)
of paragraph (a) of Paragraph Third, for a period of one year
after the Termination Date, Employee shall not engage in any
business (whether as an officer, director, owner, employee,
partner or other direct or indirect participant and except for
and to the extent of any business engaged in by Employee at the
Termination Date and consented to by the Corporation) competing
with any portion of the steel business in which the Corporation
is actively engaged in the United States as of the Termination
Date. For such period, Employee also shall not interfere with,
disrupt or attempt to disrupt the relationship, contractual or
otherwise, between the Corporation and any customer, supplier,
lessor, lessee or employee of the Corporation.
(c) It is the desire of the parties that the provisions of
this Paragraph Fourth be enforced to the fullest extent
permissible under the laws and public policies in each
jurisdiction in which enforcement might be sought. Accordingly,
if any particular portion of this Paragraph Fourth be
adjudicated as invalid or unenforceable, this Paragraph Fourth
shall be deemed amended to delete therefrom such portion so
adjudicated, such deletion to apply only with respect to the
operation of this Paragraph Fourth in the particular
jurisdiction so adjudicating. If there is a breach or
threatened breach of this Paragraph Fourth by Employee, the
Corporation shall be entitled to an injunction restraining
Employee from such breach, but nothing herein shall be construed
as prohibiting the Corporation from pursuing any other remedies
for such breach or threatened breach.
Fifth: Disability: If Employee is unable to render
full-time services to the Corporation of the character required
to perform the duties of his employment with the Corporation
with reasonable efficiency for a period of six consecutive
months, commencing after the date hereof, by reason of illness,
disability or incapacity and the Corporation terminates
Employee's employment thereafter, Employee shall not be entitled
to any Termination Benefits hereunder; provided, that this
Paragraph Fifth shall not apply in any case where Employee, upon
such termination, would not qualify under any program of
long-term disability benefits provided by the Corporation.
Sixth: Waiver of Breach: A waiver by the Corporation or
Employee of a breach of any provision of this Agreement by the
other party shall not operate or be construed as a waiver of any
subsequent breach by the other party.
Seventh: Entire Agreement: This Agreement contains the
entire understanding and agreement between the parties and
cannot be amended, modified or supplemented in any respect,
except by an agreement in writing signed by the party against
whom enforcement of any amendment, modification or supplement is
sought.
Eighth: Successors and Assigns: This Agreement shall
inure to the benefit of and be binding upon the Corporation and
its successors and assigns including, without limitation, any
corporation or other entity which may acquire all or
substantially all of the capital stock, assets and/or business
of the Corporation or with or into which the Corporation may be
consolidated or merged, and Employee, his heirs, executors,
administrators and legal representatives.
Ninth: Governing Law: This Agreement shall be governed by
the laws of the State of West Virginia.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day written below.
WEIRTON STEEL CORPORATION
Dated: July 26, 1993 By: /s/Herbert Elish
Title: President & CEO
EMPLOYEE
Name: /s/ Dennis R. Mangino
Dennis R. Mangino
EMPLOYMENT AGREEMENT
AGREEMENT made as of the date written below by and between
WEIRTON STEEL CORPORATION, a Delaware corporation, with its
principal executive offices located at Three Springs Drive,
Weirton, West Virginia 26062 (hereinafter called the "Corporation")
and the individual employee whose name and address appear on the
signature page hereto (hereinafter called "Employee").
The parties hereto agree as follows:
First: Term and Duties: The term of this Agreement shall
commence on the date hereof and shall continue until terminated in
accordance with Paragraph Second. During the term hereof, Employee
shall serve as a full-time, salaried employee of the Corporation.
Employee's duties, title, salary and other benefits shall be as
agreed upon from time to time between Employee and the Corporation.
Second: Eligibility for Termination Benefits: (a) Subject
to paragraph (d) of Paragraph Third, if Employee's employment with
the Corporation is terminated by the Corporation without just
cause, Employee shall receive such benefits hereunder ("Termination
Benefits") as determined in accordance with Paragraph Third,
provided Employee, if requested, remains in the employment of the
Corporation for a period not exceeding 60 days following receipt of
a written notice of such termination. For purposes of this
Agreement, termination of Employee's employment by the Corporation
shall constitute a termination for "just cause" only if such
termination is for one of the following reasons: (i) conviction of
a felony punishable by a prison sentence of more than one year;
(ii) habitual use of drugs without a prescription or habitual,
excessive use of alcohol to the extent that any of such uses
materially interferes with Employee's performance of his duties; or
(iii) refusal or failure, after notice, by Employee to perform or
discharge duties and responsibilities appropriate to his position,
which refusal or failure amounts to an extended and gross neglect
of his duties to the Corporation. Except as otherwise specifically
set forth in this Agreement or as otherwise prohibited by law, all
rights of Employee, and all obligations of the Corporation under
this Agreement, shall cease and terminate on, and as of, the date
of termination of employment for just cause.
(b) The Corporation shall be deemed to have agreed to a
termination in accordance with paragraph (a) of this Paragraph
Second from and after the date (i) the Employee is assigned duties
or responsibilities significantly inconsistent with and less than
the Employee's position, duties, responsibilities or status with
the Corporation as in effect upon execution of this Agreement, (ii)
the Employee's base salary, excluding any bonus or other
compensation derived from any employee benefit plan, is ever
reduced below any level attained by the Employee, or (iii) the
Employee is required to reside other than in the Greater Pittsburgh
Area in order to perform his duties for the Corporation; provided,
that such action is taken without the Employee's consent, and
within 30 days after the occurrence of any such event the Employee
notifies the Corporation that he is so deeming the Corporation to
have elected to terminate his employment, whereupon the Corporation
shall be deemed to have terminated such employment as of the date
of any such action or the date of such notice at the option of the
Employee. If the date of termination is deemed to be a date
earlier than the date of such notice, and the Corporation, upon
receipt of such notice, promptly takes all actions hereunder
required in the event of such termination, no intervening delay in
taking such actions may be construed as a violation of this
Agreement.
Third: Amount and Duration of Termination Benefits:
(a) Upon the termination of Employee's employment on any date
in accordance with Paragraph Second (the "Termination Date"),
Employee shall be treated as being an inactive employee for 18
months following the Termination Date, and Employee shall receive
a total of 18 months base salary (excluding vacation or special
pay) in effect at the Termination Date as follows: (i) 12 months
base salary to be paid in one lump sum within 10 days following the
Termination Date; (ii) starting in the 13th month following the
Termination Date and ending in the 18th month following the
Termination Date, six months base salary to be paid in six monthly
installments. Any income earned by Employee from employment, or
otherwise from a trade or business, in the 13th through the 18th
month following the Termination Date (excluding any self-employment
income), shall reduce on a dollar-for-dollar basis the compensation
payable to Employee during such months pursuant to this paragraph.
Employee shall report all such other compensation to the
Corporation. Furthermore, for a period of 18 months following the
Termination Date, the Corporation shall (iii) continue to provide
coverage for Employee and applicable dependents under all benefit
plans of the Corporation providing life insurance or health,
disability, hospitalization and major medical insurance at such
levels as are not less than those in effect at the time of the
Termination Date; and (iv) to the extent allowable under applicable
law, cause Employee to continue to earn service credit for all
purposes under any pension or retirement plan maintained by the
Corporation in which Employee participated at the time of the
Termination Date; provided, however, that the coverage referred to
in clause (iii) shall be suspended during any period in which and
to the extent Employee is eligible for similar coverage under
another employer plan. Notwithstanding the above, the Corporation
shall not be obligated as provided in this Paragraph Third during
any period when employee does not comply with Paragraph Fourth.
For all other purposes, Employee's employment shall terminate on
the Termination Date.
(b) Nothing in paragraph (a) of this Paragraph Third shall be
construed to require the Corporation to maintain any employee or
management benefit program solely for the purpose of covering or
providing benefits to Employee.
(c) The Corporation shall promptly reimburse Employee for the
reasonable legal fees and expenses incurred by Employee in
connection with enforcing any right of Employee pursuant to
paragraph (a) or (b) of Paragraph Second, or paragraph (a) of this
Paragraph Third; provided, however, that the Corporation will only
reimburse Employee for such legal fees and expenses if, in
connection with enforcing any right of Employee pursuant to this
Agreement, either (i) a judgment has been rendered in favor of
Employee by a duly authorized court of law, or (ii) the Corporation
and Employee have entered into a settlement agreement providing for
the payment to Employee of any or all amounts due hereunder.
(d) Notwithstanding any other provision of this Agreement, if
the Employee's employment with the Corporation is terminated for
any reason and (i) the Employee has attained 65 years of age, (ii)
for the 2-year period immediately prior to such termination the
Employee is employed in a bona fide executive or a high policy-
making position and (iii) the Employee is entitled to an immediate
nonforfeitable annual retirement benefit from a pension, profit-
sharing, savings, or deferred compensation plan, or any combination
of such plans, of the Corporation, which equals in the aggregate,
at least $44,000, the Employee will not be entitled to any
Termination Benefits hereunder.
Fourth: Confidentiality and Non-Competition: (a) Employee
shall not, during the term hereof or subsequent to the Termination
Date, divulge, furnish or make accessible to anyone (otherwise than
as consented to by the Corporation) any knowledge or information,
techniques, plans, trade or business secrets or confidential
information relating to the business of the Corporation or with
respect to any other confidential or secret aspect of the business
of the Corporation, nor shall Employee make any use of the same for
his own purposes or for the benefit of anyone under any
circumstances; provided that, after the Termination Date, these
restrictions shall not apply to such knowledge, techniques, plans,
trade or business secrets or confidential information which is then
in, or subsequently becomes part of, the public domain, except
because of disclosure by Employee without the Corporation's
consent.
(b) Except with the consent of the Corporation and provided
the Corporation has made the payment required under clause (i) of
paragraph (a) of Paragraph Third, for a period of one year after
the Termination Date, Employee shall not engage in any business
(whether as an officer, director, owner, employee, partner or other
direct or indirect participant and except for and to the extent of
any business engaged in by Employee at the Termination Date and
consented to by the Corporation) competing with any portion of the
steel business in which the Corporation is actively engaged in the
United States as of the Termination Date. For such period,
Employee also shall not interfere with, disrupt or attempt to
disrupt the relationship, contractual or otherwise, between the
Corporation and any customer, supplier, lessor, lessee or employee
of the Corporation.
(c) It is the desire of the parties that the provisions of
this Paragraph Fourth be enforced to the fullest extent permissible
under the laws and public policies in each jurisdiction in which
enforcement might be sought. Accordingly, if any particular
portion of this Paragraph Fourth be adjudicated as invalid or
unenforceable, this Paragraph Fourth shall be deemed amended to
delete therefrom such portion so adjudicated, such deletion to
apply only with respect to the operation of this Paragraph Fourth
in the particular jurisdiction so adjudicating. If there is a
breach or threatened breach of this Paragraph Fourth by Employee,
the Corporation shall be entitled to an injunction restraining
Employee from such breach, but nothing herein shall be construed as
prohibiting the Corporation from pursuing any other remedies for
such breach or threatened breach.
Fifth: Disability: If Employee is unable to render full-time
services to the Corporation of the character required to perform
the duties of his employment with the Corporation with reasonable
efficiency for a period of six consecutive months, commencing after
the date hereof, by reason of illness, disability or incapacity and
the Corporation terminates Employee's employment thereafter,
Employee shall not be entitled to any Termination Benefits
hereunder; provided, that this Paragraph Fifth shall not apply in
any case where Employee, upon such termination, would not qualify
under any program of long-term disability benefits provided by the
Corporation.
Sixth: Waiver of Breach: A waiver by the Corporation or
Employee of a breach of any provision of this Agreement by the
other party shall not operate or be construed as a waiver of any
subsequent breach by the other party.
Seventh: Entire Agreement: This Agreement contains the
entire understanding and agreement between the parties and cannot
be amended, modified or supplemented in any respect, except by an
agreement in writing signed by the party against whom enforcement
of any amendment, modification or supplement is sought.
Eighth: Successors and Assigns: This Agreement shall inure
to the benefit of and be binding upon the Corporation and its
successors and assigns including, without limitation, any
corporation or other entity which may acquire all or substantially
all of the capital stock, assets and/or business of the Corporation
or with or into which the Corporation may be consolidated or
merged, and Employee, his heirs, executors, administrators and
legal representatives.
Ninth: Governing Law: This Agreement shall be governed by
the laws of the State of West Virginia.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day written below.
WEIRTON STEEL CORPORATION
Dated: July 21, 1993 By: /s/Herbert Elish
Title: President & CEO
EMPLOYEE
Name: /s/ John H. Walker
John H. Walker
EMPLOYMENT AGREEMENT
AGREEMENT made as of the date written below by and between
WEIRTON STEEL CORPORATION, a Delaware corporation, with its
principal executive offices located at Three Springs Drive,
Weirton, West Virginia 26062 (hereinafter called the
"Corporation") and the individual employee whose name and
address appear on the signature page hereto (hereinafter called
"Employee").
The parties hereto agree as follows:
First: Term and Duties: The term of this Agreement shall
commence on the date hereof and shall continue until terminated
in accordance with Paragraph Second. During the term hereof,
Employee shall serve as a full-time, salaried employee of the
Corporation. Employee's duties, title, salary and other
benefits shall be as agreed upon from time to time between
Employee and the Corporation.
Second: Eligibility for Termination Benefits: (a)
Subject to paragraph (d) of Paragraph Third, if Employee's
employment with the Corporation is terminated by the Corporation
without just cause, Employee shall receive such benefits
hereunder ("Termination Benefits") as determined in accordance
with Paragraph Third, provided Employee, if requested, remains
in the employment of the Corporation for a period not exceeding
60 days following receipt of a written notice of such
termination. For purposes of this Agreement, termination of
Employee's employment by the Corporation shall constitute a
termination for "just cause" only if such termination is for one
of the following reasons: (i) conviction of a felony punishable
by a prison sentence of more than one year; (ii) habitual use of
drugs without a prescription or habitual, excessive use of
alcohol to the extent that any of such uses materially
interferes with Employee's performance of his duties; or (iii)
refusal or failure, after notice, by Employee to perform or
discharge duties and responsibilities appropriate to his
position, which refusal or failure amounts to an extended and
gross neglect of his duties to the Corporation. Except as
otherwise specifically set forth in this Agreement or as
otherwise prohibited by law, all rights of Employee, and all
obligations of the Corporation under this Agreement, shall cease
and terminate on, and as of, the date of termination of
employment for just cause.
(b) The Corporation shall be deemed to have agreed to a
termination in accordance with paragraph (a) of this Paragraph
Second from and after the date (i) the Employee is assigned
duties or responsibilities significantly inconsistent with and
less than the Employee's position, duties, responsibilities or
status with the Corporation as in effect upon execution of this
Agreement, (ii) the Employee's base salary, excluding any bonus
or other compensation derived from any employee benefit plan, is
ever reduced below any level attained by the Employee, or (iii)
the Employee is required to reside other than in the Greater
Pittsburgh Area in order to perform his duties for the
Corporation; provided, that such action is taken without the
Employee's consent, and within 30 days after the occurrence of
any such event the Employee notifies the Corporation that he is
so deeming the Corporation to have elected to terminate his
employment, whereupon the Corporation shall be deemed to have
terminated such employment as of the date of any such action or
the date of such notice at the option of the Employee. If the
date of termination is deemed to be a date earlier than the date
of such notice, and the Corporation, upon receipt of such
notice, promptly takes all actions hereunder required in the
event of such termination, no intervening delay in taking such
actions may be construed as a violation of this Agreement.
Third: Amount and Duration of Termination Benefits:
(a) Upon the termination of Employee's employment on any
date in accordance with Paragraph Second (the "Termination
Date"), Employee shall be treated as being an inactive employee
for 18 months following the Termination Date, and Employee shall
receive a total of 18 months base salary (excluding vacation or
special pay) in effect at the Termination Date as follows: (i)
12 months base salary to be paid in one lump sum within 10 days
following the Termination Date; (ii) starting in the 13th month
following the Termination Date and ending in the 18th month
following the Termination Date, six months base salary to be
paid in six monthly installments. Any income earned by Employee
from employment, or otherwise from a trade or business, in the
13th through the 18th month following the Termination Date
(excluding any self-employment income), shall reduce on a
dollar-for-dollar basis the compensation payable to Employee
during such months pursuant to this paragraph. Employee shall
report all such other compensation to the Corporation.
Furthermore, for a period of 18 months following the Termination
Date, the Corporation shall (iii) continue to provide coverage
for Employee and applicable dependents under all benefit plans
of the Corporation providing life insurance or health,
disability, hospitalization and major medical insurance at such
levels as are not less than those in effect at the time of the
Termination Date; and (iv) to the extent allowable under
applicable law, cause Employee to continue to earn service
credit for all purposes under any pension or retirement plan
maintained by the Corporation in which Employee participated at
the time of the Termination Date; provided, however, that the
coverage referred to in clause (iii) shall be suspended during
any period in which and to the extent Employee is eligible for
similar coverage under another employer plan. Notwithstanding
the above, the Corporation shall not be obligated as provided in
this Paragraph Third during any period when employee does not
comply with Paragraph Fourth. For all other purposes,
Employee's employment shall terminate on the Termination Date.
(b) Nothing in paragraph (a) of this Paragraph Third shall
be construed to require the Corporation to maintain any employee
or management benefit program solely for the purpose of covering
or providing benefits to Employee.
(c) The Corporation shall promptly reimburse Employee for
the reasonable legal fees and expenses incurred by Employee in
connection with enforcing any right of Employee pursuant to
paragraph (a) or (b) of Paragraph Second, or paragraph (a) of
this Paragraph Third; provided, however, that the Corporation
will only reimburse Employee for such legal fees and expenses
if, in connection with enforcing any right of Employee pursuant
to this Agreement, either (i) a judgment has been rendered in
favor of Employee by a duly authorized court of law, or (ii) the
Corporation and Employee have entered into a settlement
agreement providing for the payment to Employee of any or all
amounts due hereunder.
(d) Notwithstanding any other provision of this Agreement,
if the Employee's employment with the Corporation is terminated
for any reason and (i) the Employee has attained 65 years of
age, (ii) for the 2-year period immediately prior to such
termination the Employee is employed in a bona fide executive or
a high policy-making position and (iii) the Employee is entitled
to an immediate nonforfeitable annual retirement benefit from a
pension, profit-sharing, savings, or deferred compensation plan,
or any combination of such plans, of the Corporation, which
equals in the aggregate, at least $44,000, the Employee will not
be entitled to any Termination Benefits hereunder.
Fourth: Confidentiality and Non-Competition: (a) Employee
shall not, during the term hereof or subsequent to the
Termination Date, divulge, furnish or make accessible to anyone
(otherwise than as consented to by the Corporation) any
knowledge or information, techniques, plans, trade or business
secrets or confidential information relating to the business of
the Corporation or with respect to any other confidential or
secret aspect of the business of the Corporation, nor shall
Employee make any use of the same for his own purposes or for
the benefit of anyone under any circumstances; provided that,
after the Termination Date, these restrictions shall not apply
to such knowledge, techniques, plans, trade or business secrets
or confidential information which is then in, or subsequently
becomes part of, the public domain, except because of disclosure
by Employee without the Corporation's consent.
(b) Except with the consent of the Corporation and provided
the Corporation has made the payment required under clause (i)
of paragraph (a) of Paragraph Third, for a period of one year
after the Termination Date, Employee shall not engage in any
business (whether as an officer, director, owner, employee,
partner or other direct or indirect participant and except for
and to the extent of any business engaged in by Employee at the
Termination Date and consented to by the Corporation) competing
with any portion of the steel business in which the Corporation
is actively engaged in the United States as of the Termination
Date. For such period, Employee also shall not interfere with,
disrupt or attempt to disrupt the relationship, contractual or
otherwise, between the Corporation and any customer, supplier,
lessor, lessee or employee of the Corporation.
(c) It is the desire of the parties that the provisions of
this Paragraph Fourth be enforced to the fullest extent
permissible under the laws and public policies in each
jurisdiction in which enforcement might be sought. Accordingly,
if any particular portion of this Paragraph Fourth be
adjudicated as invalid or unenforceable, this Paragraph Fourth
shall be deemed amended to delete therefrom such portion so
adjudicated, such deletion to apply only with respect to the
operation of this Paragraph Fourth in the particular
jurisdiction so adjudicating. If there is a breach or
threatened breach of this Paragraph Fourth by Employee, the
Corporation shall be entitled to an injunction restraining
Employee from such breach, but nothing herein shall be construed
as prohibiting the Corporation from pursuing any other remedies
for such breach or threatened breach.
Fifth: Disability: If Employee is unable to render
full-time services to the Corporation of the character required
to perform the duties of his employment with the Corporation
with reasonable efficiency for a period of six consecutive
months, commencing after the date hereof, by reason of illness,
disability or incapacity and the Corporation terminates
Employee's employment thereafter, Employee shall not be entitled
to any Termination Benefits hereunder; provided, that this
Paragraph Fifth shall not apply in any case where Employee, upon
such termination, would not qualify under any program of
long-term disability benefits provided by the Corporation.
Sixth: Waiver of Breach: A waiver by the Corporation or
Employee of a breach of any provision of this Agreement by the
other party shall not operate or be construed as a waiver of any
subsequent breach by the other party.
Seventh: Entire Agreement: This Agreement contains the
entire understanding and agreement between the parties and
cannot be amended, modified or supplemented in any respect,
except by an agreement in writing signed by the party against
whom enforcement of any amendment, modification or supplement is
sought.
Eighth: Successors and Assigns: This Agreement shall
inure to the benefit of and be binding upon the Corporation and
its successors and assigns including, without limitation, any
corporation or other entity which may acquire all or
substantially all of the capital stock, assets and/or business
of the Corporation or with or into which the Corporation may be
consolidated or merged, and Employee, his heirs, executors,
administrators and legal representatives.
Ninth: Governing Law: This Agreement shall be governed by
the laws of the State of West Virginia.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day written below.
WEIRTON STEEL CORPORATION
Dated: December 16, 1993 By: /s/Herbert Elish
Title: President & CEO
EMPLOYEE
Name: /s/ Narendra M.
Pathipati
Narendra M. Pathipati
EMPLOYMENT AGREEMENT
AGREEMENT made as of the date written below by and between
WEIRTON STEEL CORPORATION, a Delaware corporation, with its
principal executive offices located at Three Springs Drive,
Weirton, West Virginia 26062 (hereinafter called the
"Corporation") and the individual employee whose name and
address appear on the signature page hereto (hereinafter called
"Employee").
The parties hereto agree as follows:
First: Term and Duties: The term of this Agreement shall
commence on the date hereof and shall continue until terminated
in accordance with Paragraph Second. During the term hereof,
Employee shall serve as a full-time, salaried employee of the
Corporation. Employee's duties, title, salary and other
benefits shall be as agreed upon from time to time between
Employee and the Corporation.
Second: Eligibility for Termination Benefits: (a)
Subject to paragraph (d) of Paragraph Third, if Employee's
employment with the Corporation is terminated by the Corporation
without just cause, Employee shall receive such benefits
hereunder ("Termination Benefits") as determined in accordance
with Paragraph Third, provided Employee, if requested, remains
in the employment of the Corporation for a period not exceeding
60 days following receipt of a written notice of such
termination. For purposes of this Agreement, termination of
Employee's employment by the Corporation shall constitute a
termination for "just cause" only if such termination is for one
of the following reasons: (i) conviction of a felony punishable
by a prison sentence of more than one year; (ii) habitual use of
drugs without a prescription or habitual, excessive use of
alcohol to the extent that any of such uses materially
interferes with Employee's performance of his duties; or (iii)
refusal or failure, after notice, by Employee to perform or
discharge duties and responsibilities appropriate to his
position, which refusal or failure amounts to an extended and
gross neglect of his duties to the Corporation. Except as
otherwise specifically set forth in this Agreement or as
otherwise prohibited by law, all rights of Employee, and all
obligations of the Corporation under this Agreement, shall cease
and terminate on, and as of, the date of termination of
employment for just cause.
(b) The Corporation shall be deemed to have agreed to a
termination in accordance with paragraph (a) of this Paragraph
Second from and after the date (i) the Employee is assigned
duties or responsibilities significantly inconsistent with and
less than the Employee's position, duties, responsibilities or
status with the Corporation as in effect upon execution of this
Agreement, (ii) the Employee's base salary, excluding any bonus
or other compensation derived from any employee benefit plan, is
ever reduced below any level attained by the Employee, or (iii)
the Employee is required to reside other than in the Greater
Pittsburgh Area in order to perform his duties for the
Corporation; provided, that such action is taken without the
Employee's consent, and within 30 days after the occurrence of
any such event the Employee notifies the Corporation that he is
so deeming the Corporation to have elected to terminate his
employment, whereupon the Corporation shall be deemed to have
terminated such employment as of the date of any such action or
the date of such notice at the option of the Employee. If the
date of termination is deemed to be a date earlier than the date
of such notice, and the Corporation, upon receipt of such
notice, promptly takes all actions hereunder required in the
event of such termination, no intervening delay in taking such
actions may be construed as a violation of this Agreement.
Third: Amount and Duration of Termination Benefits:
(a) Upon the termination of Employee's employment on any
date in accordance with Paragraph Second (the "Termination
Date"), Employee shall be treated as being an inactive employee
for 18 months following the Termination Date, and Employee shall
receive a total of 18 months base salary (excluding vacation or
special pay) in effect at the Termination Date as follows: (i)
12 months base salary to be paid in one lump sum within 10 days
following the Termination Date; (ii) starting in the 13th month
following the Termination Date and ending in the 18th month
following the Termination Date, six months base salary to be
paid in six monthly installments. Any income earned by Employee
from employment, or otherwise from a trade or business, in the
13th through the 18th month following the Termination Date
(excluding any self-employment income), shall reduce on a
dollar-for-dollar basis the compensation payable to Employee
during such months pursuant to this paragraph. Employee shall
report all such other compensation to the Corporation.
Furthermore, for a period of 18 months following the Termination
Date, the Corporation shall (iii) continue to provide coverage
for Employee and applicable dependents under all benefit plans
of the Corporation providing life insurance or health,
disability, hospitalization and major medical insurance at such
levels as are not less than those in effect at the time of the
Termination Date; and (iv) to the extent allowable under
applicable law, cause Employee to continue to earn service
credit for all purposes under any pension or retirement plan
maintained by the Corporation in which Employee participated at
the time of the Termination Date; provided, however, that the
coverage referred to in clause (iii) shall be suspended during
any period in which and to the extent Employee is eligible for
similar coverage under another employer plan. After the
completion of the 18th month following the Termination Date, the
Employee shall be placed on "Inactive" status, and be considered
"Laid Off With Intent To Recall", during which period the
Employee shall continue to accrue pension service for a period
of up to 24 months, provided that any and all salary
continuation or other monetary non-retirement benefits available
to Employee (e.g., Income Protection Plan Benefits) as a result
of being placed on Inactive status shall be offset by any
amounts previously paid hereunder. Notwithstanding the above,
the Corporation shall not be obligated as provided in this
Paragraph Third during any period when employee does not comply
with Paragraph Fourth. For all other purposes, Employee's
employment shall terminate on the Termination Date.
(b) Nothing in paragraph (a) of this Paragraph Third shall
be construed to require the Corporation to maintain any employee
or management benefit program solely for the purpose of covering
or providing benefits to Employee.
(c) The Corporation shall promptly reimburse Employee for
the reasonable legal fees and expenses incurred by Employee in
connection with enforcing any right of Employee pursuant to
paragraph (a) or (b) of Paragraph Second, or paragraph (a) of
this Paragraph Third; provided, however, that the Corporation
will only reimburse Employee for such legal fees and expenses
if, in connection with enforcing any right of Employee pursuant
to this Agreement, either (i) a judgment has been rendered in
favor of Employee by a duly authorized court of law, or (ii) the
Corporation and Employee have entered into a settlement
agreement providing for the payment to Employee of any or all
amounts due hereunder.
(d) Notwithstanding any other provision of this Agreement,
if the Employee's employment with the Corporation is terminated
for any reason and (i) the Employee has attained 65 years of
age, (ii) for the 2-year period immediately prior to such
termination the Employee is employed in a bona fide executive or
a high policy-making position and (iii) the Employee is entitled
to an immediate nonforfeitable annual retirement benefit from a
pension, profit-sharing, savings, or deferred compensation plan,
or any combination of such plans, of the Corporation, which
equals in the aggregate, at least $44,000, the Employee will not
be entitled to any Termination Benefits hereunder.
Fourth: Confidentiality and Non-Competition: (a) Employee
shall not, during the term hereof or subsequent to the
Termination Date, divulge, furnish or make accessible to anyone
(otherwise than as consented to by the Corporation) any
knowledge or information, techniques, plans, trade or business
secrets or confidential information relating to the business of
the Corporation or with respect to any other confidential or
secret aspect of the business of the Corporation, nor shall
Employee make any use of the same for his own purposes or for
the benefit of anyone under any circumstances; provided that,
after the Termination Date, these restrictions shall not apply
to such knowledge, techniques, plans, trade or business secrets
or confidential information which is then in, or subsequently
becomes part of, the public domain, except because of disclosure
by Employee without the Corporation's consent.
(b) Except with the consent of the Corporation and provided
the Corporation has made the payment required under clause (i)
of paragraph (a) of Paragraph Third, for a period of one year
after the Termination Date, Employee shall not engage in any
business (whether as an officer, director, owner, employee,
partner or other direct or indirect participant and except for
and to the extent of any business engaged in by Employee at the
Termination Date and consented to by the Corporation) competing
with any portion of the steel business in which the Corporation
is actively engaged in the United States as of the Termination
Date. For such period, Employee also shall not interfere with,
disrupt or attempt to disrupt the relationship, contractual or
otherwise, between the Corporation and any customer, supplier,
lessor, lessee or employee of the Corporation.
(c) It is the desire of the parties that the provisions of
this Paragraph Fourth be enforced to the fullest extent
permissible under the laws and public policies in each
jurisdiction in which enforcement might be sought. Accordingly,
if any particular portion of this Paragraph Fourth be
adjudicated as invalid or unenforceable, this Paragraph Fourth
shall be deemed amended to delete therefrom such portion so
adjudicated, such deletion to apply only with respect to the
operation of this Paragraph Fourth in the particular
jurisdiction so adjudicating. If there is a breach or
threatened breach of this Paragraph Fourth by Employee, the
Corporation shall be entitled to an injunction restraining
Employee from such breach, but nothing herein shall be construed
as prohibiting the Corporation from pursuing any other remedies
for such breach or threatened breach.
Fifth: Disability: If Employee is unable to render
full-time services to the Corporation of the character required
to perform the duties of his employment with the Corporation
with reasonable efficiency for a period of six consecutive
months, commencing after the date hereof, by reason of illness,
disability or incapacity and the Corporation terminates
Employee's employment thereafter, Employee shall not be entitled
to any Termination Benefits hereunder; provided, that this
Paragraph Fifth shall not apply in any case where Employee, upon
such termination, would not qualify under any program of
long-term disability benefits provided by the Corporation.
Sixth: Waiver of Breach: A waiver by the Corporation or
Employee of a breach of any provision of this Agreement by the
other party shall not operate or be construed as a waiver of any
subsequent breach by the other party.
Seventh: Entire Agreement: This Agreement contains the
entire understanding and agreement between the parties and
cannot be amended, modified or supplemented in any respect,
except by an agreement in writing signed by the party against
whom enforcement of any amendment, modification or supplement is
sought.
Eighth: Successors and Assigns: This Agreement shall
inure to the benefit of and be binding upon the Corporation and
its successors and assigns including, without limitation, any
corporation or other entity which may acquire all or
substantially all of the capital stock, assets and/or business
of the Corporation or with or into which the Corporation may be
consolidated or merged, and Employee, his heirs, executors,
administrators and legal representatives.
Ninth: Governing Law: This Agreement shall be governed by
the laws of the State of West Virginia.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day written below.
WEIRTON STEEL CORPORATION
Dated: July 28, 1993 By: /s/Herbert Elish
Title: President & CEO
EMPLOYEE
Name: /s/ Mac S. White
Mac S. White
First Amendment to the Employment Agreement
(the "Agreement") dated as of July 1, 1990
between Weirton Steel Corporation (the "Company")
and Herbert Elish (the "Employee")
WHEREAS, the Company and the Employee entered into the
Agreement to evidence the terms and conditions of the engagement by
the Company of the Employee as Chief Executive Officer; and
WHEREAS, Section 14 of the Agreement states that it may
be changed only by a writing signed by the party against whom
enforcement is sought; and
WHEREAS, the Company and the Employee now wish to amend
the Agreement to (i) clarify the treatment of the whole life
insurance policy provided to the Employee pursuant to Section 3(c)
thereof, (ii) make certain changes to the provisions regarding
payments due the Employee if he is terminated without cause, and
(iii) provide that, in certain circumstances, the Company will
reimburse the Employee for incurred legal fees and expenses.
NOW, THEREFORE, the parties hereto agree to the following
amendments to the Agreement, effective as of the date specified
below:
1. Section 2(b)(3) of the Agreement shall be amended to
read in its entirety as follows:
(3) Without Cause. Without cause upon 90 days' prior
notice in writing. If the Company terminates the Employee's
employment pursuant to this Section 2(b)(3), he shall be entitled
to receive an amount equal to two times his Base Salary, payable in
a single lump sum no later than 30 days after such termination.
The Company shall be deemed to have agreed to a termination in
accordance with this subsection (3) from and after the date (x) the
Employee is assigned duties other than those of a chief executive
officer of a corporation comparable to the Company in size and
complexity, (y) the Employee is required to report other than to
the Board of Directors of the Company, or (z) the Employee is
required to reside other than in the Greater Pittsburgh Area in
order to perform his duties for the Company; provided, that any
such action is taken without the Employee's consent and, within 30
days after the occurrence of any such event, the Employee shall
notify the Company that he is electing to deem such action to have
terminated his employment in accordance with this subsection (3).
2. The second sentence of Section 2(c)(2) of the
Agreement shall be amended to read in its entirety as follows:
If the Employee terminates his employment pursuant to this
subsection (2), (x) he shall be entitled to receive an amount equal
to two times his Base Salary, payable no later than 30 days after
such termination and (y) the Annuities described in Section
3(e)(ii) shall immediately become fully vested.
3. The second sentence of Section 3(c) of the Agreement
shall be amended to read in its entirety as follows:
The life insurance coverage provided in accordance with this
subsection (c) shall contain a waiver of premium in the event of
the Employee's disability, and be continued in force for the
Employee's life following the date of termination, without regard
to the basis for such termination.
4. Section 14 of the Agreement shall be renumbered
Section 15 and an entirely new Section 14 shall be inserted in lieu
thereof to read in its entirety as follows:
14. Legal Fees and Expenses.
The Company shall promptly reimburse the Employee for the
reasonable legal fees and expenses incurred by the Employee in
connection with enforcing any right of the Employee pursuant to and
afforded by this Agreement; provided however, that the Company only
will reimburse the Employee for such legal fees and expenses, if in
connection with enforcing any right of the Employee pursuant to and
afforded by this Agreement, either (i) a judgment has been rendered
in favor of the Employee by a duly authorized court of law, or (ii)
the Company and the Employee have entered into a settlement
agreement providing for the payment to the Employee of any or all
amounts due hereunder.
IN WITNESS WHEREOF, the parties have executed this
amendment to the Agreement as of August 5, 1993.
WEIRTON STEEL CORPORATION
By:/s/ Herbert Elish
Herbert Elish
First Amendment to the Employment Agreement
(the "Agreement") dated as of June 8, 1987
between Weirton Steel Corporation (the "Corporation")
and David M. Gould (the "Employee")
WHEREAS, as inducement for Employee to continue in the employ
of the Corporation, the parties hereto agree to the following
amendment to the Agreement, effective as of the date specified
below:
1. Paragraphs Second and Third of the Agreement shall be
amended to read as follows:
Second: Eligibility for Termination Benefits: (a) Subject to
paragraph (d) of Paragraph Third, if Employee's employment with the
Corporation is terminated by the Corporation without just cause,
Employee shall receive such benefits hereunder ("Termination
benefits") as determined in accordance with Paragraph Third,
provided Employee, if requested, remains in the employment of the
Corporation for a period not exceeding 60 days following receipt of
a written notice of such termination. For purposes of this
Agreement, termination of Employee's employment by the Corporation
shall constitute a termination for "just cause" only if such
termination is for one of the following reasons: (i) conviction of
a felony punishable by a prison sentence of more than one year;
(ii) habitual use of drugs without a prescription or habitual,
excessive use of alcohol to the extent that any of such uses
materially interferes with Employee's performance of his duties; or
(iii) refusal or failure, after notice, by Employee to perform or
discharge duties and responsibilities appropriate to his position,
which refusal or failure amounts to an extended and gross neglect
of his duties to the Corporation. Except as otherwise specifically
set forth in this Agreement or as otherwise prohibited by law, all
rights of Employee, and all obligations of the Corporation under
this Agreement, shall cease and terminate on, and as of, the date
of termination of employment for just cause.
(b) The Corporation shall be deemed to have agreed to a
termination in accordance with paragraph (a) of this Paragraph
Second from and after the date (i) the Employee is assigned duties
or responsibilities significantly inconsistent with and less than
the Employee's position, duties, responsibilities or status with
the Corporation as in effect upon execution of this Agreement, (ii)
the Employee's base salary, excluding any bonus or other
compensation derived from any employee benefit plan, is ever
reduced below any level attained by the Employee, or (iii) the
Employee is required to reside other than in the Greater Pittsburgh
Area in order to perform his duties for the Corporation; provided,
that such action is taken without the Employee's consent, and
within 30 days after the occurrence of any such event the Employee
notifies the Corporation that he is so deeming the Corporation to
have elected to terminate his employment, whereupon the Corporation
shall be deemed to have terminated such employment as of the date
of any such action or the date of such notice at the option of the
Employee. If the date of termination is deemed to be a date
earlier than the date of such notice, and the Corporation, upon
receipt of such notice, promptly takes all actions hereunder
required in the event of such termination, no intervening delay in
taking such actions may be construed as a violation of this
Agreement.
Third: Amount and Duration of Termination Benefits: (a)
Upon the termination of Employee's employment on any date in
accordance with Paragraph Second (the "Termination Date"), Employee
shall receive a total of 18 months base salary (excluding vacation
or special pay) in effect at the Termination Date as follows: (i)
12 months base salary to be paid in one lump sum within 10 days
following the Termination Date; and (ii) starting in the 13th month
following the Termination Date and ending in the 18th month
following the Termination Date, six months base salary to be paid
in six monthly installments. Any income earned by Employee from
employment, or otherwise from a trade or business, in the 13th
through the 18th month following the Termination Date (excluding
any self-employment income), shall reduce on a dollar-for-dollar
basis the compensation payable to Employee during such months
pursuant to this paragraph. Employee shall report all such other
compensation to the Corporation. Furthermore, for a period of 18
months following the Termination Date, the Corporation shall (iii)
continue to provide coverage for Employee and applicable dependents
under all benefit plans of the Corporation providing life insurance
or health, disability, hospitalization and major medical insurance
at such levels as are not less than those in effect at the time of
the Termination Date; and (iv) to the extent allowable under
applicable law, cause Employee to continue to earn service credit
for all purposes under any pension or retirement plan maintained by
the Corporation in which Employee participated at the time of the
Termination Date; provided, however, that the coverage referred to
in clause (iii) shall be suspended during any period in which and
to the extent Employee is eligible for similar coverage under
another employer plan. Notwithstanding the above, the Corporation
shall not be obligated as provided in this Paragraph Third during
any period when employee does not comply with Paragraph Fourth.
For all other purposes, Employee's employment shall terminate on
the Termination Date.
(b) Nothing in paragraph (a) above shall be construed to
require the Corporation to maintain any employee or management
benefit program solely for the purpose of covering or providing
benefits to Employee.
(c) The Corporation shall promptly reimburse Employee for the
reasonable legal fees and expenses incurred by Employee in
connection with enforcing any right of Employee pursuant to
paragraph (a) or (b) of Paragraph Second, or paragraph (a) of this
Paragraph Third; provided, however, that the Corporation will only
reimburse Employee for such legal fees and expenses if, in
connection with enforcing any right of Employee pursuant to this
Agreement, either (i) a judgment has been rendered in favor of
Employee by a duly authorized court of law, or (ii) the Corporation
and Employee have entered into a settlement agreement providing for
the payment to Employee of any or all amounts due hereunder.
(d) Notwithstanding any other provision of this Agreement, if
the Employee's employment with the Corporation is terminated for
any reason and (i) the Employee has attained 65 years of age, (ii)
for the 2-year period immediately prior to such termination the
Employee is employed in a bona fide executive or a high policy-
making position and (iii) the Employee is entitled to an immediate
nonforfeitable annual retirement benefit from a pension, profit-
sharing, savings, or deferred compensation plan, or any combination
of such plans, of the Corporation, which equals in the aggregate,
at least $44,000, the Employee will not be entitled to any
Termination Benefits hereunder.
1. The first sentence of the second paragraph of Paragraph
Fourth of the Agreement shall be amended to read as follows:
Except with the consent of the Corporation and provided the
Corporation has made the payment required under clause (i) of
Paragraph Third, for a period of one year after the Termination
Date, Employee shall not engage in any business (whether as an
officer, director, owner, employee, partner or other direct or
indirect participant and except for and to the extent of any
business engaged in by Employee at the Termination Date and
consented to by the Corporation) competing with any portion of the
steel business in which the Corporation is actively engaged in the
United States as of the Termination Date.
IN WITNESS WHEREOF, the parties have executed this amendment
to the Agreement as of July 19, 1993.
WEIRTON STEEL CORPORATION
Dated: July 19, 1993 By:/s/ Herbert Elish
/s/ David M. Gould
David M. Gould
First Amendment to the Employment Agreement
(the "Agreement") dated as of June 8, 1987
between Weirton Steel Corporation (the "Corporation")
and William C. Brenneisen (the "Employee")
WHEREAS, as inducement for Employee to continue in the employ
of the Corporation, the parties hereto agree to the following
amendment to the Agreement, effective as of the date specified
below:
1. Paragraphs Second and Third of the Agreement shall be amended
to read as follows:
Second: Eligibility for Termination Benefits: (a) Subject to
paragraph (d) of Paragraph Third, if Employee's employment with the
Corporation is terminated by the Corporation without just cause,
Employee shall receive such benefits hereunder ("Termination
Benefits") as determined in accordance with Paragraph Third,
provided Employee, if requested, remains in the employment of the
Corporation for a period not exceeding 60 days following receipt of
a written notice of such termination. For purposes of this
Agreement, termination of Employee's employment by the Corporation
shall constitute a termination for "just cause" only if such
termination is for one of the following reasons: (i) conviction of
a felony punishable by a prison sentence of more than one year;
(ii) habitual use of drugs without a prescription or habitual,
excessive use of alcohol to the extent that any of such uses
materially interferes with Employee's performance of his duties; or
(iii) refusal or failure, after notice, by Employee to perform or
discharge duties and responsibilities appropriate to his position,
which refusal or failure amounts to an extended and gross neglect
of his duties to the Corporation. Except as otherwise specifically
set forth in this Agreement or as otherwise prohibited by law, all
rights of Employee, and all obligations of the Corporation under
this Agreement, shall cease and terminate on, and as of, the date
of termination of employment for just cause.
(b) The Corporation shall be deemed to have agreed to a
termination in accordance with paragraph (a) of this Paragraph
Second from and after the date (i) the Employee is assigned duties
or responsibilities significantly inconsistent with and less than
the Employee's position, duties, responsibilities or status with
the Corporation as in effect upon execution of this Agreement, (ii)
the Employee's base salary, excluding any bonus or other
compensation derived from any employee benefit plan, is ever
reduced below any level attained by the Employee, or (iii) the
Employee is required to reside other than in the Greater Pittsburgh
Area in order to perform his duties for the Corporation; provided,
that such action is taken without the Employee's consent, and
within 30 days after the occurrence of any such event the Employee
notifies the Corporation that he is so deeming the Corporation to
have elected to terminate his employment, whereupon the Corporation
shall be deemed to have terminated such employment as of the date
of any such action or the date of such notice at the option of the
Employee. If the date of termination is deemed to be a date
earlier than the date of such notice, and the Corporation, upon
receipt of such notice, promptly takes all actions hereunder
required in the event of such termination, no intervening delay in
taking such actions may be construed as a violation of this
Agreement.
Third: Amount and Duration of Termination Benefits: (a)
Upon the termination of Employee's employment on any date in
accordance with Paragraph Second (the "Termination Date"), Employee
shall receive a total of 18 months base salary (excluding vacation
or special pay) in effect at the Termination Date as follows: (i)
12 months base salary to be paid in one lump sum within 10 days
following the Termination Date; and (ii) starting in the 13th month
following the Termination Date and ending in the 18th month
following the Termination Date, six months base salary to be paid
in six monthly installments. Any income earned by Employee from
employment, or otherwise from a trade or business, in the 13th
through the 18th month following the Termination Date (excluding
any self-employment income), shall reduce on a dollar-for-dollar
basis the compensation payable to Employee during such months
pursuant to this paragraph. Employee shall report all such other
compensation to the Corporation. Furthermore, for a period of 18
months following the Termination Date, the Corporation shall (iii)
continue to provide coverage for Employee and applicable dependents
under all benefit plans of the Corporation providing life insurance
or health, disability, hospitalization and major medical insurance
at such levels as are not less than those in effect at the time of
the Termination Date; and (iv) to the extent allowable under
applicable law, cause Employee to continue to earn service credit
for all purposes under any pension or retirement plan maintained by
the Corporation in which Employee participated at the time of the
Termination Date; provided, however, that the coverage referred to
in clause (iii) shall be suspended during any period in which and
to the extent Employee is eligible for similar coverage under
another employer plan. Notwithstanding the above, the Corporation
shall not be obligated as provided in this Paragraph Third during
any period when employee does not comply with Paragraph Fourth.
For all other purposes, Employee's employment shall terminate on
the Termination Date.
(b) Nothing in paragraph (a) above shall be construed to
require the Corporation to maintain any employee or management
benefit program solely for the purpose of covering or providing
benefits to Employee.
(c) The Corporation shall promptly reimburse Employee for the
reasonable legal fees and expenses incurred by Employee in
connection with enforcing any right of Employee pursuant to
paragraph (a) or (b) of Paragraph Second, or paragraph (a) of this
Paragraph Third; provided, however, that the Corporation will only
reimburse Employee for such legal fees and expenses if, in
connection with enforcing any right of Employee pursuant to this
Agreement, either (i) a judgment has been rendered in favor of
Employee by a duly authorized court of law, or (ii) the Corporation
and Employee have entered into a settlement agreement providing for
the payment to Employee of any or all amounts due hereunder.
(d) Notwithstanding any other provision of this Agreement, if
the Employee's employment with the Corporation is terminated for
any reason and (i) the Employee has attained 65 years of age, (ii)
for the 2-year period immediately prior to such termination the
Employee is employed in a bona fide executive or a high policy-
making position and (iii) the Employee is entitled to an immediate
nonforfeitable annual retirement benefit from a pension, profit-
sharing, savings, or deferred compensation plan, or any combination
of such plans, of the Corporation, which equals in the aggregate,
at least $44,000, the Employee will not be entitled to any
Termination Benefits hereunder.
2. The first sentence of the second paragraph of Paragraph
Fourth of the Agreement shall be amended to read as follows:
Except with the consent of the Corporation and provided the
Corporation has made the payment required under clause (i) of
Paragraph Third, for a period of one year after the Termination
Date, Employee shall not engage in any business (whether as an
officer, director, owner, employee, partner or other direct or
indirect participant and except for and to the extent of any
business engaged in by Employee at the Termination Date and
consented to by the Corporation) competing with any portion of the
steel business in which the Corporation is actively engaged in the
United States as of the Termination Date.
IN WITNESS WHEREOF, the parties have executed this amendment
to the Agreement as of July 21, 1993.
WEIRTON STEEL CORPORATION
Dated: July 21, 1993. By:/s/ Herbert Elish
/s/ William C. Brenneisen
William C. Brenneisen
First Amendment to the Employment Agreement
(the "Agreement") dated as of April 21, 1987
between Weirton Steel Corporation (the "Corporation")
and Thomas W. Evans (the "Employee")
WHEREAS, as inducement for Employee to continue in the employ
of the Corporation, the parties hereto agree to the following
amendment to the Agreement, effective as of the date specified
below:
1. Paragraphs Second and Third of the Agreement shall be
amended to read as follows:
Second: Eligibility for Termination Benefits: (a) Subject to
paragraph (d) of Paragraph Third, if Employee's employment with the
Corporation is terminated by the Corporation without just cause,
Employee shall receive such benefits hereunder ("Termination
Benefits") as determined in accordance with Paragraph Third,
provided Employee, if requested, remains in the employment of the
Corporation for a period not exceeding 60 days following receipt of
a written notice of such termination. For purposes of this
Agreement, termination of Employee's employment by the Corporation
shall constitute a termination for "just cause" only if such
termination is for one of the following reasons: (i) conviction of
a felony punishable by a prison sentence of more than one year;
(ii) habitual use of drugs without a prescription or habitual,
excessive use of alcohol to the extent that any of such uses
materially interferes with Employee's performance of his duties; or
(iii) refusal or failure, after notice, by Employee to perform or
discharge duties and responsibilities appropriate to his position,
which refusal or failure amounts to an extended and gross neglect
of his duties to the Corporation. Except as otherwise specifically
set forth in this Agreement or as otherwise prohibited by law, all
rights of Employee, and all obligations of the Corporation under
this Agreement, shall cease and terminate on, and as of, the date
of termination of employment for just cause.
(b) The Corporation shall be deemed to have agreed to a
termination in accordance with paragraph (a) of this Paragraph
Second from and after the date (i) the Employee is assigned duties
or responsibilities significantly inconsistent with and less than
the Employee's position, duties, responsibilities or status with
the Corporation as in effect upon execution of this Agreement, (ii)
the Employee's base salary, excluding any bonus or other
compensation derived from any employee benefit plan, is ever
reduced below any level attained by the Employee, or (iii) the
Employee is required to reside other than in the Greater Pittsburgh
Area in order to perform his duties for the Corporation; provided,
that such action is taken without the Employee's consent, and
within 30 days after the occurrence of any such event the Employee
notifies the Corporation that he is so deeming the Corporation to
have elected to terminate his employment, whereupon the Corporation
shall be deemed to have terminated such employment as of the date
of any such action or the date of such notice at the option of the
Employee. If the date of termination is deemed to be a date
earlier than the date of such notice, and the Corporation, upon
receipt of such notice, promptly takes all actions hereunder
required in the event of such termination, no intervening delay in
taking such actions may be construed as a violation of this
Agreement.
Third: Amount and Duration of Termination Benefits: (a)
Upon the termination of Employee's employment on any date in
accordance with Paragraph Second (the "Termination Date"), Employee
shall receive a total of 18 months base salary (excluding vacation
or special pay) in effect at the Termination Date as follows: (i)
12 months base salary to be paid in one lump sum within 10 days
following the Termination Date; and (ii) starting in the 13th month
following the Termination Date and ending in the 18th month
following the Termination Date, six months base salary to be paid
in six monthly installments. Any income earned by Employee from
employment, or otherwise from a trade or business, in the 13th
through the 18th month following the Termination Date (excluding
any self-employment income), shall reduce on a dollar-for-dollar
basis the compensation payable to Employee during such months
pursuant to this paragraph. Employee shall report all such other
compensation to the Corporation. Furthermore, for a period of 18
months following the Termination Date, the Corporation shall (iii)
continue to provide coverage for Employee and applicable dependents
under all benefit plans of the Corporation providing life insurance
or health, disability, hospitalization and major medical insurance
at such levels as are not less than those in effect at the time of
the Termination Date; and (iv) to the extent allowable under
applicable law, cause Employee to continue to earn service credit
for all purposes under any pension or retirement plan maintained by
the Corporation in which Employee participated at the time of the
Termination Date; provided, however, that the coverage referred to
in clause (iii) shall be suspended during any period in which and
to the extent Employee is eligible for similar coverage under
another employer plan. Notwithstanding the above, the Corporation
shall not be obligated as provided in this Paragraph Third during
any period when employee does not comply with Paragraph Fourth.
For all other purposes, Employee's employment shall terminate on
the Termination Date.
(b) Nothing in paragraph (a) above shall be construed to
require the Corporation to maintain any employee or management
benefit program solely for the purpose of covering or providing
benefits to Employee.
(c) The Corporation shall promptly reimburse Employee for the
reasonable legal fees and expenses incurred by Employee in
connection with enforcing any right of Employee pursuant to
paragraph (a) or (b) of Paragraph Second, or paragraph (a) of this
Paragraph Third; provided, however, that the Corporation will only
reimburse Employee for such legal fees and expenses if, in
connection with enforcing any right of Employee pursuant to this
Agreement, either (i) a judgment has been rendered in favor of
Employee by a duly authorized court of law, or (ii) the Corporation
and Employee have entered into a settlement agreement providing for
the payment to Employee of any or all amounts due hereunder.
(d) Notwithstanding any other provision of this Agreement, if
the Employee's employment with the Corporation is terminated for
any reason and (i) the Employee has attained 65 years of age, (ii)
for the 2-year period immediately prior to such termination the
Employee is employed in a bona fide executive or a high policy-
making position and (iii) the Employee is entitled to an immediate
nonforfeitable annual retirement benefit from a pension, profit-
sharing, savings, or deferred compensation plan, or any combination
of such plans, of the Corporation, which equals in the aggregate,
at least $44,000, the Employee will not be entitled to any
Termination Benefits hereunder.
2. The first sentence of the second paragraph of Paragraph
Fourth of the Agreement shall be amended to read as follows:
Except with the consent of the Corporation and provided the
Corporation has made the payment required under clause (i) of
Paragraph Third, for a period of one year after the Termination
Date, Employee shall not engage in any business (whether as an
officer, director, owner, employee, partner or other direct or
indirect participant and except for and to the extent of any
business engaged in by Employee at the Termination Date and
consented to by the Corporation) competing with any portion of the
steel business in which the Corporation is actively engaged in the
United States as of the Termination Date.
IN WITNESS WHEREOF, the parties have executed this amendment
to the Agreement as of July 19, 1993.
WEIRTON STEEL CORPORATION
Dated: July 19, 1993 By: /s/Herbert Elish
/s/ Thomas W. Evans
Thomas W. Evans
WEIRTON STEEL CORPORATION
1993 ANNUAL REPORT
THE NEXT DECADE
Ten years after the buyout, employee-owners
consider the strides they've made and size up
their prospects in the tough, competitive years ahead.
The Corporation. Weirton Steel Corporation, a major integrated
steel producer, was formed in 1982 for the purpose of acquiring the
assets of Weirton Steel Division of National Steel Corporation. On
January 11, 1984, the Corporation completed the acquisition in a
transaction financed through an Employee Stock Ownership Plan. The
Corporation and its predecessors have operated as an integrated
steel producer, in the Weirton, West Virginia area since 1909. All
operating units are situated at the Weirton location with a raw
steel production capacity of approximately 3 million tons. The
Company produces flat rolled carbon steels in sheet and strip form.
These products are sold chiefly as hot rolled, cold rolled or
coated products, including hot dipped and electro-galvanized steels
and tin mill products. Food and beverage cans, general packaging,
pipe and tube, service centers, construction and shipping
containers are the major market sectors supplied by the Company.
Product development and manufacturing process research is
conducted at the Weirton Technology Center (WEIRTEC) in Weirton,
West Virginia.
Weirton's common stock is listed and trade on the New
York Stock Exchange under the symbol WS.
About the Cover.
The inside story. Six employee-owners--in various jobs across the
Company--size up the changes they've seen and the future they
envision for Weirton Steel. Special report, "The Next Decade",
page 5.
Contents
Financial and Operating Highlights 1
Letter From The Chairman 2
Special Report 5
Financial Index 18
Board of Directors and Officers 49
Stockholder Information 49
<TABLE>
<CAPTION>
FINANCIAL AND OPERATING HIGHLIGHTS
Dollars in thousands 1993 1992
- -------------------------------------------------------------------
<S> <C> <C>
Net Sales $1,201,093 $1,078,691
Operating Loss (3,376)* (418)
Contribution to Employee Stock
Ownership Plan 2,610 2,610
Cumulative effect of accounting
changes (179,803) 4,356
Extraordinary Item (6,549) -
Net Loss (229,242) (31,757)
Working Capital 262,216 237,703
Working Capital Ratio 2.1:1 2.2:1
Long-term Debt 495,252 491,277
Number of common shares
outstanding at year end 26,338,347 26,211,352
Number of preferred shares
outstanding at year end 2,282,237 2,295,601
Capital expenditures 14,409 44,635
Depreciation 49,113 38,617
Tons raw steel produced 2,722,000 2,490,200
Tons steel shipped 2,430,600 2,102,400
Number of employees at year end 6,026 6,542
- -------------------------------------------------------------------
<FN>
* Includes a restructuring charge of $17,340 and $18,067 of
additional non cash charges resulting from a change in
accounting method for retiree healthcare.
</TABLE>
[TEXT]
Letter from the Chairman
In the first decade of our existence, we, at Weirton
Steel, have created a company with the facilities, costs and
quality that can succeed in an increasingly difficult competitive
marketplace. Today, we can say that the fundamentals of our
business have never been better, and we enter our second decade
with great opportunities for success.
At the same time, however, we know that we must take
significant steps to improve Weirton Steel's financial position in
order to assure our future and take advantage of our opportunities.
We have come far in the last several years. Six years
ago, we concluded that we could not compete in the decade of the
1990s with our then existing operations: Our old, high cost
equipment could no longer meet the quality requirements of our
customers. An uncompetitive cost structure further threatened the
long-term future of the Company. And we had antiquated information
and scheduling systems that prevented us from providing superior
service for our customers.
In our business, success--and indeed survival--depends on
having low costs, excellent quality, and superior service for
customers. Thus, in 1988, it was clear that our future depended on
bold action to literally rebuild the operational foundations of the
Company.
We embarked on a $550 million capital program to create
facilities that could produce world-class quality at competitive
costs. We revamped our continuous caster, and rebuilt our hot
strip mill to meet world-class cost and quality standards.
Our efforts to reduce costs have been unwavering. The
number of employees have been reduced by 20% since 1990, and our
production costs have fallen $60 a ton since that time, in spite of
increases in wages and sharp increases in the cost of benefits,
particularly health care. I am particularly proud that the large
majority of the employment reductions have been accomplished
through voluntary retirements, aided in substantial part by special
programs to increase retirement benefits.
We put in place Total Quality programs throughout the
operations, which are changing the way work is performed and
manufacturing processes are controlled. Teams of employees
throughout the mill are working to improve quality and reduce
costs--and are finding their own jobs enriched as a result.
Improvements in quality and reductions in costs in excess of $35
million in 1993 are directly attributable to these programs.
We completed a fully automated production recording
system, which now provides reliable, instantaneous information as
to the status of each customer order, giving us an important tool
to improve service. This successful systems project forms the
foundation for our ongoing Logistics and Information Systems
project, partially funded by the Department of Energy, and
partnered by West Virginia University and Westinghouse, which will
produce a fully integrated mill scheduling system that will set the
standard throughout the world. It will give us a competitive
advantage in serving customers, while optimizing mill efficiencies.
Key to all of our improvements has been the efforts of
all of our people, working together to continually improve the
Company.
In 1993, we began, in dramatic fashion, to reap the
benefits of our work. After three years of losses, during which we
suffered the effects of operational disruptions caused by the
rebuilding of our facilities and the impact of the recession of
1990-1992, we had a profit in the fourth quarter. This profit,
while due in part to increased volume of business resulting from
improvements in the economy, was most directly attributable to the
new efficiencies and lower costs now being realized.
The fourth quarter profit was achieved despite the fact
that the prices for our products remained below that of any year
since 1987. This result provides real promise for improving
profitability as the demand and prices for many of our products are
improving this year.
As we begin our second decade, the possibilities for
Weirton Steel are exciting. As we continue to reduce our costs and
improve our quality through ongoing programs, we will able to take
advantage of new opportunities in existing and emerging markets.
We should be able to deliver significantly greater value to our
shareholders.
The only clear roadblock that could keep us from
realizing our potential is our high level of financial leverage
compared to that of our competitors. To improve our profitability
and liquidity and to take advantage of new opportunities, various
strategies are being considered. These strategies include a public
offering of our common stock and reductions of long-term
obligations.
As we look back at 1993, it was clearly a year of
challenges--some that we met and some still to be answered. In
1994 we will work to assure that Weirton Steel fulfills its
potential for the benefit of all.
/s/Herbert Elish
Herbert Elish
Chairman, President and
Chief Executive Officer
March 2, 1994
THE NEXT DECADE
It's been ten years since the employees of Weirton Steel staked
their livelihoods on the courageous decision to buy their own
company.
A decade later, the visible changes are remarkable -- including a
$550 million transformation to leading-edge technology in ladle
metallurgy, casting, rolling, and finishing. The invisible changes
may be even more profound.
People who were seldom asked for their opinions are now
contributing ideas of enormous value in improving processes and
lowering costs. People who used to ignore each other's departments
or functions are now pooling their talents in Total Quality
Management teams and sending the improvements to the bottom line.
It's not always perfect or painless, and not everyone is a believer
- -- but more and more Weirton employee owners are investing their
brains as well as their hands and feet in the drive to be the
world's toughest competitor.
What are they working on? How do they size up Weirton's
competitive stance amid the rising world standards of tomorrow's
markets?
From six different vantage points, here's how some of Weirton's
insiders see the present and future of their common enterprise.
Steve Kile is a maintenance mechanic on the Blast Furnace
Mechanical crew. He's active on two Total Quality teams: TQM-Blast
Furnace Mechanical and TQM-Ironmaking Communications, which
publishes a lively newsletter designed and written by ten
volunteers at the blast furnaces, coke plant, river dock, and
sinter plant.
RECORD BREAKERS
When he was in the Navy in the early seventies, Steve Kile was
assigned to a submarine bristling with ballistic missiles. Twenty
years later, when employee involvement groups and Total Quality
groups started to come together at Weirton Steel, Steve had
occasion to remember those days.
"We were out for weeks at a time," he recalls. "We were on our own
and we had to solve our own problems. Here were 118 individuals
who had to count on each other as a matter of survival. We had a
good commander. Either the Navy was teaching them right, or he was
ahead of his time. When something went wrong, he didn't start
barking orders. He would turn to the man whose area was involved -
- - the person who knew most about it -- and he would say, 'Kile,
what do you think we should do?' That would start a discussion,
some suggestions, and five minutes later we'd be working on a
solution."
It would be a long time before Steve would find the same kind of
collaboration in civilian life. "When I started working here in
the mid-seventies, management managed and hourly people did what
they were told, whether it worked or not," he says. "In my first
year, I remember looking at one operation and asking the foreman --
How come you do it that way?" He said, 'Because we've been doing
it that way for 25 years, and we'll be doing it that way for 25
more.' But he was wrong. Now we're doing everything differently -
and better -- and when I have a question or an idea, the foreman
wants to hear it."
The rest of the story is written in results. After a remarkable
performance in 1992 -- 21 production records broken and $30 million
in cost savings -- Blast Furnace operations shattered the records
again this past October. They produced an average of 7100 tons a
day from two furnaces. "When I came here," Steve remembers, "we
couldn't get tonnage like that from four furnaces! And what we're
making now is a much better grade of iron."
Is there more where that came from? Steve thinks so. "The guys in
the blast furnace say, hey -- you bring anyone in here from any
blast furnace, any country, and we'll outdo them. But you don't
ever stand still because the world doesn't stand still. We have
all kinds of ideas, new TQM projects starting up, and we're going
to get better and better."
Renee Rosiak is a senior quality engineer in Strip Steel. A
metallurgical engineer, she came directly to Weirton after
graduation from the University of Pittsburgh in 1990 -- much to the
pride of her father, Frank, who has worked in Strip Steel for 16
years.
THE WINNING COMBINATION
When Renee Rosiak first came to Strip Steel, the mill operators
weren't sure what to make of this woman engineer, fresh out of
college. But they noticed she listened carefully. And then she
took on a problem for them.
Several times a week, coils coming out of batch anneal had to be
rejected for high hardness. Why? Not an easy question, since batch
annealing was done to any of 25 different cycles -- specific
combinations of time and temperature needed to achieve the desired
properties.
Working with the furnace operators, Renee collected data and
started a statistical analysis. They soon realized that two or
three of these cycles were causing most of the problems -- and that
these had been formulated back when the coils were made from ingot
steel. In converting to cast steel, they were processing larger
coils with different annealing requirements. Before long, they had
reduced the 25 cycles to 5 -- a much more efficient way of working
- -- and eliminated the troublesome combinations.
"We found that hardness could be better controlled through the
chemistry of the steel than by tinkering with the temperature and
soaking time," says Renee. "Since we made the change, we haven't
had a single reject faulted to the cycle."
Productivity soared, along with quality. The operators feel more
comfortable with Renee on the job.
"I look to them for help all the time," she says. "Theory is fine.
It helps. But the mill does not always operate according to the
textbook."
She thinks this is the winning combination in Weirton's future.
Advanced technology -- tempered by the wisdom of hard-won
experience -- can handle whatever new challenges arise.
"It's a team thing," Renee says. "We have smart, seasoned people,
and they're proud of the quality work they can do. But they're
also willing to listen to a new idea, and they're ready to
contribute the value of their own experience to make it work."
Dave Allen joined Weirton in 1989 as a senior process engineer and
is now manager of the Process Development group in WEIRTEC. He
holds Bachelors degrees in both mechanical and aerospace
engineering and a Masters in fluid mechanics from the University of
Michigan.
IDEAS IN ACTION
Dave Allen sees the future--or at least part of it. As a manager
in WEIRTEC, looking ahead is part of his job, and the future he
sees is exciting.
"I decided to come to Weirton because I felt that I could make a
difference to the future of the company," he says, "and it turns
out to be true. That's not a comment about my own ability, but a
comment about Weirton Steel and its people--managers and hourly
alike."
What's different about Weirton? "You can go into the plant with an
idea, and the operating people are willing to listen, and in many
cases, willing to try it. They take out time from making steel and
meeting schedules and somehow fit you in. Then, they find ways to
use the idea and even improve it. And they have first rate ideas
of their own." In that climate, promising ideas don't sit around
for months or years in forgotten memos and meeting notes. They get
put into action.
The key, says Dave, is teamwork. It's something he learned when he
first joined WEIRTEC, and his group has been practicing it ever
since. "Teamwork brings more of the available expertise and
experience together to complete the task," Dave points out, "and
teamwork makes us better positioned to select the right things to
work on in the first place."
As for the future, Dave sees Weirton forging ahead on several
fronts. The new hot mill, for example, is already world class, but
he thinks it can become the world leader, now and for many years to
come. New sensing technology could lead to unprecedented levels of
temperature uniformity in rolling--thus uniformity of metallurgical
properties in the finished product. His group is developing
methods to take waste from various processes and turn it into a
useful product for re-use or sale. They're also working on the
marking and sensing technology to identify and locate coils and
slabs in real time for the Logistics and Integrated Scheduling
program. And this year, the process group will work with
operations to install a full-scale pilot unit to test a new fluid
bearing technology. This would make it possible to support steel
sheet on an air cushion and move it without mechanical contact--a
boon to surface quality and productivity.
"We're a quality leader," Dave Allen says. "But looking ahead three
years and five years, customer tolerances will be tighter and
tighter. We hope to lead the trends, not follow them."
A 26-year veteran of Weirton Steel, John Ross is manager of Traffic
and Warehouse Distribution. Widely recognized as a traffic expert,
he has served as president of the Ohio Valley Traffic Club and is
now a board member of the West Virginia Port Authority.
THE RIGHT MOVES
In John Ross's world, everything moves. Raw materials are moving
at this moment toward Weirton from the Great Lakes. Weirton's
finished products -- over 200,000 tons in an average month--are en
route to customer locations in Ohio or Maryland, New Jersey,
Tennessee, or Arkansas. Mill products are on their way to the
Finished Products Warehouse. New orders advance through the plant,
nearing release to Traffic and to the customer. And the whole
system is moving in a big way toward the 21st Century.
"Our traffic and warehousing methods were acceptable for the 20th
century," says John, "but tomorrow's standards are going to be much
tougher -- more customer-responsive, more systems-oriented, more
integrated with our own electronic data networks and those of our
customers and carriers."
Already, customers are specifying not only size, gauge, chemistry,
quality, and day of delivery but also the time of day they expect
to hoist our coil off the flatbed and onto the production line,
where another coil is just finishing.
"Our truck is the first station of their production process, and
we'd better be there," says John. "We're part of our customer's
TQM, and our carrier is part of ours." So nothing stands still,
least of all John Ross and the many team projects his people are
part of.
Case in point: In the shipping yard, a vendor's truck driver is
surprised by an inspection team--people from Traffic, Plant
Security, and the Weirton Police Department. Is the truck properly
loaded? Is it well secured with a tarp and the right strength of
chain? Will everything stay in place, damage-free? To the police,
it's a public safety issue. To John Ross's people, it's safety
plus customer satisfaction. And to the driver? Usually, the
result is an immediate commendation for a job well done -- a letter
or certificate, maybe a baseball cap.
The Driver Recognition Program is one initiative among many. There
are partnership programs with carriers. There are six task force
projects launched through Weirton's Motor Carriers Safety
Conference. An employee involvement group racked up a 50%
productivity increase in inter-plant hauling. Others are working
to get better information, earlier, through electronics instead of
paperwork.
Put it all together, and John Ross is in Phase II of a four-phase
program to build the Materials Release System of the future.
"We're moving," he says, "and we're moving in the right direction."
Bill Murphy came to Weirton after serving seven years as an Air
Force pilot, including command duties on four continents. Beyond
his management degree from the Air Force Academy, he has achieved
top graduate honors from his pilot training class, pursued a
Masters in Systems Management from USC, and recently completed an
EMBA from the University of Pittsburgh.
LEAPFROG POTENTIAL
What Bill Murphy and his company-wide team are working on is
important not only to Weirton, but to the competitive stance of the
U.S. steel industry. So much so that the Department of Energy
provides major funding.
The project is called Logistics and Integrated Scheduling (L&IS).
It envisions nothing less than integrated plant-wide scheduling,
material management, and advanced technology material marking and
sensing systems. "We are already a world class producer," says
Bill. "L&IS is intended to make us a world class competitor."
Current scheduling and material movement processes are paper heavy,
time consuming operations which cannot easily adapt to changing
situations. Bill gives an example:
"Let's say a roll begins marking its product at 35 inches of width.
The operator on the scene may know exactly what to do--for example,
run something narrower until the rolls are changed. But with
conventional scheduling, this requires searching for inventory,
changing paperwork, getting the new material in place, and maybe
adjusting upstream feeding units' schedules to handle the
situation. Dozens of people in various sections have to be
notified, have to stop what they're doing and react, losing time
and production, raising costs, and putting on-time delivery in
jeopardy."
With L&IS in place, the whole network will react rapidly--and
intelligently. The L&IS team is programming the system with the
kind of expert knowledge that Weirton operators have gained through
experience. Throughout the plant, L&IS team members have
interviewed operators on how they make decisions, how their
functions work best, what sequences are most efficient, what
materials they need in what order, and how they respond to
problems. "The operators," says Bill, "are the experts, and they
are developing their own rules."
The results: rule-based computer programs which will be networked
through all stages of the manufacturing process. L&IS will build
on the two year old Integrated Manufacturing Information System.
IMIS applied electronic information systems to production recording
and order status, and it put computer hardware on the plant floor.
The L&IS team is now developing software from scratch, utilizing
state of the art application development tools and processes as
well as highly advanced computer hardware.
Bill concedes it is an ambitious goal--coordinating logistics and
intelligent scheduling for 45 operating units and 20,000+ pieces of
inventory. It's a three to four year project, fraught with
problems and obstacles, but the potential payback is enormous. As
Bill Murphy sums it up:
"L&IS has leapfrog potential."
Darlene McKinley is one of seven facilitators who go out into the
plant to help employee owners form problem solving groups. With
Weirton since 1965, she witnessed profound changes since the ESOP
and now sees employee involvement as the key to a promising future.
TEAMING UP
Darlene McKinley remembers what "employee involvement" meant in the
old days at Weirton Steel. In 1981, what was then Pittsburgh
headquarters instigated a program called QWL for Quality of Work
Life. From each department, union and management employees trained
in the QWL process. Typical issues investigated were a new water
cooler or a paint job for the locker rooms--but certainly nothing
that might "interfere" with operations.
"What a difference a decade makes!" Darlene laughs. "Now, Employee
Involvement training is open to everyone, and our teams have taken
on multi-million dollar improvements." Since 1985, some 3,500
hourly and salaried people have come through the department's
three-day course in teamwork and problem solving. Currently,
training is moving into the more powerful methods of TQM.
Results are already impressive. An inter-mill focus team resolved
problems in the transfer of mill products to the warehouse and
raised the average from four trips per turn to six trips per turn.
One team worked out a method for priority tagging of a customer's
rush orders and created a system that will win many friends among
customers in future years.
On the finishing floor of the Tin Mill, a team of cranemen and
supervisors reviewed a plan for preventing damage to finished
coils. They not only improved on the original plan, they shaved
close to $100,000 from the estimated cost. Now the cranemen are
benchmarking an aluminum plant--where the softer metal is more
easily damaged--in search of advanced product protection ideas.
Darlene thinks every one of her fellow-facilitators could relate
similar stories. Last time they counted, over $10 million had been
saved through team projects among hourly and salaried people in
various departments.
"This is our future," she says. "People arrive at a common
purpose, and then they start building on each other's ideas --
terrific ideas. It's a very powerful force."
"We in the mill want to be the world's best steel company. What we
need to get there may change every day. But we've shown we know
how to adapt. In ten years, we've handled more change than most
companies see in half a century. We've shown that we can take on
very large issues -- and win."
FINANCIAL CONTENTS
Management's Discussion and Analysis 19
Statements of Income 25
Balance Sheets 26
Statements of Cash Flows 27
Statements of Changes in Stockholders'
Equity 28
Notes to Financial Statements 30
Management Responsibility Statement 47
Report of Independent Public Accountants 47
Selected Financial and Statistical Data 48
Board of Directors and Officers 49
Stockholder Information 49
WEIRTON STEEL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
BACKGROUND
This discussion and analysis of the Company's financial
condition and results of operations should be read together with
the consolidated financial statements and notes thereto, which
begin on page 25.
The Company is a major integrated producer of flat rolled
carbon steels with major product lines consisting of tin mill and
sheet products. Tin mill products include tinplate, chrome coated,
and black plate. Sheet products include hot and cold rolled and
both hot-dipped and electrolytic galvanized steels.
RESULTS OF OPERATIONS
1993 COMPARED TO 1992:
Revenues in 1993 of $1,201 million for all products
combined were considerably higher than in 1992 and reached their
highest level over the last four years. Total revenues in 1993
increased by $122.4 million, or 11.3%, from a year ago. Higher
shipment levels, specifically for the Company's sheet products,
contributed $139.2 million in additional revenues in 1993.
However, combined average selling prices in the first half of 1993
followed a downward trend that began in 1991; and although the
effect of price increases announced earlier in 1993 on sheet
products began to enhance revenues in the third quarter of 1993,
combined average selling prices for the full year ended below the
average for a year ago. Lower average selling prices, combined
with a slight change in product mix, reduced revenues by $16.8
million compared to last year.
A record 1,536 million tons of sheet products were
shipped to trade customers in 1993, reflecting a dramatic increase
of 324 thousand tons, or nearly 27%, compared to a year ago. The
demand for the Company's hot rolled and coated products was
particularly strong in 1993. Shipments of hot rolled products
increased 56% from 1992 levels and, together with an 18% shipping
volume increase for coated products, primarily galvanized,
contributed $134.2 million in higher revenues. Average selling
prices for sheet products improved throughout the year, adding $6.0
million to revenues in 1993. The higher shipment volumes and
selling prices, combined with a slight change in product mix which
decreased revenues by $2.0 million, resulted in a net increase in
revenues on sheet products of $138.2 million for 1993 over
1992.
Revenues from the sale of tin mill products decreased by
$15.8 million in 1993 compared to 1992. Although slightly higher
volumes and a small change in product mix accounted for a $5.5
million increase, average selling prices that were lower than a
year ago on most tin mill products decreased revenues by $21.3
million.
Cost of sales in 1993 as a percentage of net sales was
92.0% compared to 93.6% for 1992 and reflected an improvement of
$25/ton in direct production costs over last year. Without giving
effect to additional non cash charges stemming from a change in
1993 in the Company's method of accounting for retiree healthcare,
direct production costs were $33/ton less than they were in 1992.
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992
---- ----
<S> <C> <C>
Cost of Sales $1,105,558 $1,010,022
Additional non cash (18,067) -
retiree healthcare charges
--------- ---------
$1,087,491 $1,010,022
Shipments in tons 2,430,600 2,102,400
--------- ---------
Cost of Sales per ton $ 447 $ 480
</TABLE>
[TEXT]
The improvement over the prior year was attributable
primarily to greater production yields and improved operating
performance. Several operating units throughout the Company's mill
achieved production records during 1993, including the blast
furnace, caster, hot mill and sheet mill operations. The Company's
continuous caster and hot strip mill, whose refurbishments were
completed in 1992, performed with minimal disruption, compared to
1992 when outages resulted in the loss of twelve operating days and
1991 when such outages totalled fifty-two operating days. An
unscheduled two-day outage of the tin mill in 1993 was the only
significant disruption to operations during the year. Operating
yields as measured from hot metal production through slab
production improved in 1993 compared to performance levels a year
ago. Additional savings are anticipated as the Company continues
to implement its cost reduction programs further discussed below
under "Business Strategy."
Depreciation expense increased $10.5 million to $49.1
million in 1993 from $38.6 million in 1992. This change reflected
an increase in the Company's depreciable asset base, as well as
higher production levels experienced in 1993. The Company's
accounting policy recognizes depreciation on production equipment
primarily as a function of both production volume and the age of
the equipment.
Interest expense increased $11.9 million to $52.8 million
in 1993 from $40.9 million in 1992, principally due to higher
interest rates on long-term debt and lower amounts of capitalized
interest. Capitalized interest declined to $0.8 million in 1993
from $6.1 million in 1992 following the substantial completion of
the Company's capital improvement program.
In the first quarter of 1993, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions"; SFAS No. 112, "Employers' Accounting for Postemployment
Benefits"; and SFAS No. 109, "Accounting for Income Taxes," all of
which had a material effect on the Company's earnings and net
worth.
The change in accounting under SFAS No. 106 required the
Company to recognize a pretax charge of $304 million to account for
the prior service cost of retiree healthcare and life insurance
benefits as well as an additional ongoing non cash expense which
amounted to $18.0 million in 1993. The Company also recorded a
pretax charge of $4.0 million related to the implementation of SFAS
No. 112 and a net income tax benefit of $128.2 million, of which
$115.5 million related to the adoption of SFAS No. 106,
representing the cumulative effect of the accounting change for
income taxes in accordance with SFAS No. 109.
In addition to the effect of the accounting changes, the
Company also recognized a pretax restructuring charge of $17.3
million to account for costs associated with an enhanced early
retirement package, which is part of the Company's ongoing cost
reduction program.
An extraordinary charge of $6.5 million on an after-tax
basis was also recognized by the Company in the first quarter of
1993 related to costs associated with the prepayment of bank and
institutional debt which was refinanced in conjunction with the
Company's first quarter sale of $140 million of its Senior Notes.
The income tax benefit recognized in 1993 reflected
principally the net realizable value of additional net operating
losses generated during 1993 and net deferred tax asset carrying
value adjustments related primarily to a change in the Federal
statutory rate. The income tax benefit in 1992 resulted from a
$2.9 million recovery of state income taxes paid in prior years and
$1.8 million of net recoverable Federal income tax adjustments.
1992 COMPARED TO 1991:
Shipment levels for tin mill and sheet products combined,
which increased during 1992 compared to 1991, generated $78.4
million in higher revenues. However, selling prices in 1992 that
generally continued their downward trend from 1991 caused net
revenues to decline by $35.7 million which combined with a slight
favorable change in product mix of $0.3 million, resulted in a net
increase in revenues in 1992 of $42.4 million, or 4.1%.
Revenues from the sale of the Company's tin mill products
increased $5.5 million in 1992 compared to 1991. This comparison
includes secondaries, products not meeting prime specifications,
which alone accounted for a $22.8 million increase on higher volume
alone. Selling prices that were off slightly from a year ago on
prime tin mill products and an 8% decline in shipments of
Weirchrome were the principal factors offsetting the increase in
revenues on secondary products.
The volume of Sheet Product shipments increased by
129,000 tons, or 12%, in 1992 compared to the prior year primarily
on the strength of demand for coated products and, in particular,
galvanized sheet products. Shipments of galvanized increased 30%
from 1991 levels and, together with a 2% shipping volume increase
for other sheet products, including secondaries, contributed $67.6
million in higher revenues. However, selling prices for sheet
products that were generally lower than a year ago offset $30.7
million of the volume increase achieved in 1992. In particular,
selling prices for cold rolled and galvanized sheet products on
average were approximately 6% and 8% lower, respectively, in 1992
than in 1991.
Cost of sales in 1992 as a percentage of net sales was
93.6% compared to 98.4% for 1991. The improvement over the prior
year was attributable primarily to an improvement in certain
production yields as operations with the newly refurbished
continuous caster and hot strip mill stabilized and outages were
reduced. A scheduled eleven-day hot strip mill outage in May 1992
and a one-day outage in August 1992 resulted in the loss of twelve
operating days in 1992, compared to outages which totaled fifty-two
days in 1991. Operating yields as measured from hot metal
production through slab production improved in 1992 compared to
performance levels in 1991. The start-up of the Company's rebuilt
and enhanced multi-strand caster in the last quarter of 1990
allowed for operations in the Company's blooming mill to be
suspended in the first quarter of 1991, making the Company a 100%
continuous cast producer.
Depreciation expense increased $4.3 million to $38.6
million in 1992 from $34.3 million in 1991. This change reflected
an increase in the Company's depreciable asset base, although the
increase was partially offset by the adoption of an accounting
change effective January 1, 1992. The depreciation method of
accounting for the Company's steelmaking facilities was changed
from the straight-line method to a production-variable method. The
new method adjusts straight-line depreciation to reflect actual
production levels and resulted in a decrease in depreciation
expense of $4.7 million for 1992. The cumulative effect on prior
years, which was required to be recognized in the first fiscal
quarter affected by the accounting change, reduced the net loss for
1992 by $4.4 million.
Interest expense increased $8.1 million to $40.9 million
in 1992 from $32.8 million in 1991, principally due to lower
amounts of capitalized interest. Capitalized interest declined to
$6.1 million in 1992 from $12.8 million in 1991 following the
substantial completion of the Company's recent capital improvement
program. In addition, certain borrowings that were incurred
primarily during the second quarter of 1991 under the Company's
prior credit facilities and used to finance a portion of the
capital improvement program remained outstanding throughout 1992.
The income tax benefit of $4.4 million recognized in 1992
resulted from a $2.9 million recovery of state income taxes paid in
prior years and $1.8 million of net recoverable Federal income tax
adjustments. The $4.0 million income tax benefit in 1991 was
derived from a recovery of Federal income taxes paid prior to 1991
through utilization of alternative minimum tax net operating loss
carrybacks.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's cash and equivalents of $89.0 million at
December 31, 1993 were significantly higher than the $61.2 million
on hand at December 31, 1992. This increase was attributable
primarily to improved operating results, exclusive of non cash
charges, and lower inventories. A lower level of spending on
capital items during 1993 compared to 1992, discussed below under
"Investment in Facilities," also enhanced the Company's cash
position at year end. Net financing activities primarily resulting
from the Company's first quarter 1993 refinancing through the
public offering of $140 million of its Senior Notes resulted in the
net use of cash amounting to $11.6 million. The net proceeds from
the Senior Notes offering of approximately $135.6 million together
with available cash were applied toward the repayment of the
Company's bank borrowings and its 11.45% Senior Notes due 1998 and
the repurchase of the 9.00% Senior ESOP Notes due 1999, thereby
removing the restrictive financial covenants associated with those
financing sources.
The Company's capitalization as shown below includes
three main elements: long-term debt obligations, redeemable stock
and stockholders' equity.
<TABLE>
<CAPTION>
Dec. 31, % of Dec. 31, % of
(Dollars in 1993 Total 1992 Total
millions)
<S> <C> <C> <C> <C>
Long-term debt, $495.3 93% $ 491.3 65%
including current
portion
Redeemable stock 36.7 7 34.2 4
Stockholders' equity ( 1.4) (-) 231.3 31
________ ______ ________ ______
Total Capitalization $530.6 100% $ 756.8 100%
</TABLE>
[TEXT]
The significant reduction in the Company's stockholders'
equity during 1993 resulted, in part, from adverse operating
results which included a first quarter restructuring charge of
$17.3 million along with $18.0 million of ongoing cost increases
stemming from accounting changes for retiree healthcare. Greater
financing costs to carry the Company's debt burden and a first
quarter extraordinary charge also adversely affected stockholders'
equity. The major contributor, however, to the reduction in
stockholders' equity in 1993 was the recognition of a net charge of
$179.8 million in the first quarter representing the cumulative
effect of the changes in accounting methods described under
"Results of Operations."
In order to reduce its financial leverage and improve its
flexibility, the Company is considering various financing
strategies. These strategies include, but are not limited to, a
public offering of its common stock, and reductions in its long-
term obligations. However, the Company does not currently have
sufficient unissued or unreserved shares to permit a substantial
underwritten public offering of its common stock, and increases in
the Company's authorized capital are subject to approval by the
Company's stockholders. During the fourth quarter of 1993, the
Company cancelled a Special Meeting of Stockholders that had been
called to approve additional authorized capital. Management
continues to believe that a public offering of common stock by the
Company remains a necessary element in the strategy to improve the
Company's capitalization. However, no assurance can be given that
future issuances of the Company's equity securities can be
completed on favorable terms or in a sufficient amount to provide
the adequate capital necessary to operate successfully under
recessionary economic conditions.
In connection with the $140 million Senior Note offering,
the Company applied a portion of the offering proceeds toward the
repayment of all its bank borrowings, which included term loans and
a revolving credit facility and letter of credit subfacility. To
provide a replacement facility for future working capital needs and
letters of credit, in August 1993, the Company initiated, through
a new subsidiary, Weirton Receivables, Inc., a receivables
participation agreement with a group of five banks. The facility
provides for a total commitment by the banks of up to $85 million,
including a letter of credit subfacility of up to $25 million. As
of December 31, 1993, while no funded participation interests had
been sold under the facility, $3.1 million in letters of credit
under the subfacility were in place at such date. Based upon the
Company's available cash on hand and its anticipated cash
requirements, it does not expect the subsidiary to sell
participation interests to the banks in the near term. At December
31, 1993, after reduction for amounts in place under the letter of
credit subfacility, the base amount available for cash sales was
approximately $64.6 million. During the period that began with the
facility's implementation through December 31, 1993, the base
amount available for cash sales ranged from $64.3 million to $81.8
million.
On a more long-term basis, the Company expects liquidity
to improve as a direct result of its recent capital improvement
program summarized under "Investment in Facilities" and a program
implemented in 1992 discussed under "Business Strategy."
INVESTMENT IN FACILITIES:
In order to modernize operations, the Company embarked in
1988 on an extensive capital improvement program, spending in
excess of $550 million, primarily to upgrade its steelmaking and
hot rolling facilities. This program, substantially completed in
1992, included, among other things, enhancing the Company's
capacity to make clean steel, rebuilding its multi-strand
continuous caster and upgrading its hot strip rolling mill to be
one of the most modern hot mills in the world. These improvements
have enabled the Company to continuously cast 100% of its steel
requirements versus 62% in prior years and an average of
approximately 85% for the industry as a whole and have increased
the Company's yield from raw steel to finished production. The
Company anticipates achieving an overall yield of approximately 80%
compared to 74% historically. The Company believes this measure
of productivity, which is based on achieving the design
efficiencies of the various capital improvement projects, will
compare favorably with its competitors, considering the larger
proportion of highly processed products comprising the Company's
product lines. As a result of its modernization efforts, the
Company has improved its product quality and mix, has enhanced its
ability to broaden its customer base, and has reduced its average
cost per ton of steel shipped.
Following the completion of the capital improvement
program, capital spending was reduced to $14.4 million in 1993.
The Company anticipates its spending for capital improvements in
1994 will approximate $35 million, primarily directed toward
finishing operations. At present, cash provided from operating
activities, together with cash on hand, is expected to be
sufficient to fund this capital budget and meet any near term
working capital requirements. To the extent that near term
operating activities do not generate an adequate amount of cash,
the Company expects that any cash shortfall would be financed from
its receivables participation agreement, or otherwise, as part of
the alternative financial strategies discussed under "Liquidity and
Capital Resources."
BUSINESS STRATEGY:
Since 1992, the Company has been implementing a program
entitled "Assuring Weirton's Future," which embodies the Company's
current business strategy. The major elements of this broad
program include: (i) achieving comprehensive, facility-wide and
unit-based productivity improvements derived from leading edge
technology; (ii) increasing revenues and margins by emphasizing
current and new marketing directions, especially for higher value-
added products; and (iii) attaining significant reductions in
conversion costs, primarily through manpower reductions, but also
in the production process. An enhanced early retirement program is
one element of the cost reduction phase of this comprehensive
program.
Productivity Improvements
The Company expects to continue to obtain significant
operating efficiencies from its capital program. Assuming that
performance according to design specifications is achieved in
sustained operations, the Company expects to improve its overall
yields from raw steel to finished production to approximately the
80% level. The Company's goal is to obtain additional yield
improvements from its downstream finishing operations, with
particular emphasis on its tin mill. This includes lowering the
reject and rework rate on products by identifying and curing the
major causes of rejects and, among other things, by reducing
coating metal consumption rates. The Company has also introduced
a computer-controlled integrated management information system,
which it contemplates ultimately will be utilized for integrated
production scheduling throughout the mill.
Product Expansion
The Company's long term strategy attempts to emphasize
and capitalize on the production and shipment of higher value added
products, including expanding and developing markets for those
products. The Company's strategy includes marketing initiatives
designed to benefit from the production advantages brought about by
its capital program. Thus, the Company is now able to supply
customers with larger, heavier coils to promote their manufacturing
efficiencies and to meet exacting tolerances for gauge and other
crucial specifications. The Company also aims to increase customer
satisfaction by improving on-time delivery throughout the Company's
product lines, with the object of achieving performance superior to
that of its competitors. The Company seeks to utilize its research
and development expertise to improve Weirton's product lines and
expand their markets, including usage of its TMP light gauge
products in the technology of thin-walled food and beverage
containers and alternative uses for its coated sheet products.
Cost Reductions
The Company is seeking additional savings primarily from
lower energy costs, spending levels and supply costs, including
more efficient repair and maintenance procedures, combined with
improved yields and productivity. Specific efforts have been
initiated to evaluate alternative energy supplies, improve
individual unit yields and reduce spending on consumables. Based
on more efficient production techniques and improved performance
from operating units, the Company also believes that there are
substantial opportunities to reduce finished goods inventories.
The Company's goal is to achieve the balance of cost reductions
from manpower reductions amounting to approximately 25% of its 1992
workforce by 1996. The reductions are expected to be achieved
principally by retirement programs accompanied by job combinations
and eliminations, which matters have been addressed in collectively
bargained labor contracts covering the Company's represented
workforce.
Business Outlook
The Company anticipates market conditions for its
products to remain relatively strong into 1994 and expects a
continued improvement in its operating results. In January 1994,
the Independent Steelworkers Union and the Company reached a
tentative agreement on a three-year labor pact. Although subject
to Union ratification, completion of the labor agreement should
allow the Company to focus on achieving the cost reductions and
productivity gains expected from the "Assuring Weirton's Future"
program.
<TABLE>
WEIRTON STEEL CORPORATION
STATEMENTS OF INCOME
(In thousands, except per share data)
<CAPTION>
1993 1992 1991
------- -------- --------
(Consolidated)
<S> <C> <C> <C>
NET SALES $1,201,093 $1,078,691 $1,036,335
OPERATING COSTS:
Cost of Sales 1,105,558 1,010,022 1,019,280
Selling, General, and
Administrative expense 32,458 30,470 29,148
Depreciation 49,113 38,617 34,335
Restructuring Charge 17,340 - -
--------- --------- ---------
Total Operating Costs $1,204,469 $1,079,109 $1,082,763
--------- --------- ---------
LOSS FROM OPERATIONS (3,376) (418) (46,428)
OTHER INCOME (EXPENSE):
Interest Expense (52,802) (40,921) (32,833)
Interest Income 2,626 3,073 3,156
--------- --------- ---------
Net Other Expense (50,176) (37,848) (29,677)
LOSS BEFORE ESOP --------- --------- ---------
CONTRIBUTION (53,552) (38,266) (76,105)
ESOP Contribution 2,610 2,610 2,610
--------- --------- ---------
LOSS BEFORE INCOME TAXES (56,162) (40,876) (78,715)
Income Tax Benefit (13,272) (4,763) (4,000)
--------- --------- ---------
LOSS BEF. EXTRAORDINARY
ITEM (42,890) (36,113) (74,715)
Loss on early
extinguishment of
debt 6,549 - -
LOSS BEFORE CUMULATIVE --------- --------- ---------
EFFECT OF ACCOUNTING
CHANGES (49,439) (36,113) (74,715)
Cumulative effect on
prior yrs of accounting
changes (179,803) 4,356 -
--------- --------- ---------
NET LOSS $ (229,242) $ (31,757) $ (74,715)
Less: Preferred stock
dividend requirement 3,125 3,125 -
NET LOSS APPLICABLE TO --------- --------- ---------
COMMON SHARES $ (232,367) $ (34,882) $ (74,715)
========= ========= =========
PER SHARE DATA:
Weighted average number
common shares 26,473 24,914 21,406
Loss per common share
before extraordinary (1.74) (1.57) (3.49)
item
Extraordinary Item (0.25) - -
Loss per common share
before cumulative
effect on prior (1.99) (1.57) (3.49)
yrs of acctg changes
Cumulative effect of
accounting changes (6.79) 0.17 -
--------- --------- ---------
NET LOSS /COMMON SHARE $ (8.78) $ (1.40) $ (3.49)
======== ======== =======
PRO FORMA PER SHARE DATA
Net loss applicable to
common shares assuming
accounting change is
applied retroactively $(39,238) $(68,231)
Net loss per common $ (1.57) $ (3.19)
share
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
WEIRTON STEEL CORPORATION
BALANCE SHEETS
(In thousands of dollars, except share data)
<CAPTION>
December 31, December 31,
1993 1992
----------- -----------
(Consolidated)
<S> <C> <C>
ASSETS:
CURRENT ASSETS:
CASH AND EQUIVALENTS, includes $ 89,002 $ 61,195
restricted cash of $602 and
$491, respectively
NOTES AND ACCOUNTS RECEIVABLE, 129,004 123,894
less allowances of $5,719 and
$5,545, respectively
INVENTORIES 242,659 244,566
DEFERRED INCOME TAXES 25,732 -
OTHER CURRENT ASSETS 3,857 8,182
---------- ----------
TOTAL CURRENT ASSETS 490,254 437,837
PROPERTY, PLANT AND EQUIPMENT, 523,728 559,074
net
INTANGIBLE ASSETS 91,289 -
DEFERRED INCOME TAXES 117,273 -
OTHER ASSETS AND DEFERRED CHARGES 18,170 8,535
---------- ----------
TOTAL ASSETS $1,240,714 $1,005,446
========== =========
LIABILITIES:
CURRENT LIABILITIES:
Current maturities of debt - 11,964
obligations
PAYABLES 109,937 88,139
Employment costs 66,519 41,102
Pension liability 20,394 28,698
Taxes other than income 17,433 17,784
Income Taxes - 3,068
Other 13,755 9,379
---------- ----------
Total Current Liabilities 228,038 200,134
LONG-TERM DEBT OBLIGATIONS 495,252 491,277
LONG-TERM PENSION OBLIGATION 142,894 32,231
POSTRETIREMENT BENEFITS OTHER 308,985 -
THAN PENSIONS
OTHER LONG-TERM LIABILITIES 30,188 16,334
---------- ----------
TOTAL LIABILITIES 1,205,357 739,976
---------- ----------
REDEEMABLE STOCK:
PREFERRED STOCK, 7,500,000 shares
authorized:
PREFERRED STOCK, Series A, $0.10
par value; 1,800,000 shares
authorized; 1,797,231
and 1,798,503 shares issued;
1,779,468 and 1,794,104 subject
to put 26,084 26,090
Less-Preferred Treasury Stock A,
at cost, 17,763 and 4,399 shares (130) (25)
DEFERRED ESOP COMPENSATION (13,812) (16,422)
PREFERRED STOCK, Series B, $0.10
par value; 675,000 shares
authorized, 500,000 shares 24,579 24,559
issued ---------- ----------
TOTAL REDEEMABLE STOCK 36,721 34,202
---------- ----------
STOCKHOLDERS' EQUITY:
PREFERRED STOCK, Series A, $0.10
par value; 2,769 and 1,497
shares issued,not subject to put 16 10
COMMON STOCK, $0.01 PAR VALUE;
30,000,000 shares authorized;
26,719,752 and 26,419,705 shares
issued 267 264
ADDITIONAL PAID-IN CAPITAL 335,776 334,834
COMMON SHARES ISSUABLE,
397,049and 365,421 1,327 1,153
RETAINED EARNINGS (336,535) (104,168)
Less-
Common Treasury Stock, at cost,
381,405 and 208,353 shares (2,215) (825)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY (1,364) 231,268
---------- ----------
TOTAL LIABILITIES,REDEEMABLE STOCK
AND STOCKHOLDERS' EQUITY $1,240,714 $1,005,446
=========== ==========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
WEIRTON STEEL CORPORATION
STATEMENTS OF CASH FLOWS
(In thousands of dollars)
<CAPTION>
Year Ended December 31,
1993 1992 1991
---- ---- ----
(Consolidated)
CASH FLOW FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
NET LOSS $(229,242)$(31,757) $(74,715)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Provision for contribution to
ESOP and repayment of note 2,610 2,610 2,610
Depreciation 49,113 38,617 34,335
Amortization of Debt Discount 125 113 101
Amortization of Deferred
Compensation - 50 410
Amortization of other non-
current assets 1,840 1,056 1,513
Deferred income taxes (13,272) - -
Restructuring charge 17,340 - -
Cumulative effect of
accounting changes 179,803 (4,356) -
Loss from early extinguishment
of debt 6,549 - -
Cash provided (used) by
working capital items:
Receivables (5,110) 769 (7,466)
Inventories 1,907 11,940 47,152
Other current assets 4,325 6,219 (5,714)
Payables 24,986 (9,248) (17,582)
Other current liabilities 18,070 (10,907) 10,187
Long-term pension obligation 19,374 6,272 8,017
Other (8,963) 1,944 4,268
-------- -------- --------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 69,455 13,322 3,116
CASH FLOW FROM INVESTING
ACTIVITIES:
EXPENDITURES FOR PROPERTY, (13,324) (44,610) (113,881)
PLANT AND EQUIPMENT -------- -------- --------
NET CASH USED BY INVESTING (13,324) (44,610) (113,881)
ACTIVITIES
CASH FLOW FROM FINANCING
ACTIVITIES:
REPAYMENTS OF DEBT OBLIGATIONS (148,114) (2,171) (2,715)
PROCEEDS FROM ISSUANCE OF DEBT 140,000 - 109,000
OBLIGATIONS
DEBT ISSUANCE FEES (13,520) - -
ISSUANCE OF COMMON STOCK - 8,250 15,000
ISSUANCE OF PREFERRED STOCK - - 25,000
DIVIDENDS PAID (3,125) (3,125) -
COMMON SHARES ISSUABLE 1,119 1,074 1,132
PURCHASE OF COMMON
TREASURY STOCK (1,455) (568) (255)
OTHER, PRINCIPALLY NET BOOK
OVERDRAFTS (3,229) 4,860 (8,406)
-------- -------- --------
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES (28,324) 8,320 138,756
NET CHANGE IN CASH AND -------- -------- --------
EQUIVALENTS 27,807 (22,968) 27,991
CASH AND EQUIVALENTS AT 61,195 84,163 56,172
BEGINNING OF PERIOD -------- -------- --------
CASH AND EQUIVALENTS AT $ 89,002 $61,195 $84,163
END OF PERIOD ======== ======== ========
SUPPLEMENTAL CASH FLOW
INFORMATION:
INTEREST PAID, NET OF $ 47,311 $40,937 $31,068
INTEREST CAPITALIZED
INCOME TAX REFUNDS 1,779 11,009 -
(REFUNDED)
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
WEIRTON STEEL CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars in thousands, except share data)
<CAPTION>
COMMON STOCK ADDITIONAL
SHARES AMOUNT PAID IN CAPITAL
------ ------- ---------------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Stockholders' Equity at December 31, 1990 19,949,118 $199 $308,958
Net loss - - -
Issuance of common stock 3,870,968 39 14,961
Purchase of treasury stock - - -
Conversion of preferred stock - - -
Reclassification of preferred Series A - - -
not subject to put
Employee stock purchase plan:
Shares issued 271,641 3 1,635
Shares issuable - - -
Dividends payable ($1.56 per - - -
preferred share, Series B)
Amortization of deferred compensation - - -
- --------------------------------------------------------------------------------
Stockholders' Equity at December 31, 1991 24,091,727 241 325,554
Net loss - - -
Issuance of common stock 2,000,000 20 8,230
Purchase of treasury stock - - -
Conversion of preferred stock - - -
Reclassification of preferred Series A - - -
not subject to put
Employee stock purchase plan:
Shares issued 327,978 3 1,050
Shares issuable - - -
Dividends payable ($6.25 per - - -
preferred share, Series B)
Amortization of deferred compensation - - -
- --------------------------------------------------------------------------------
Stockholders' Equity at December 31, 1992 26,419,705 264 334,834
Net loss - - -
Purchase of treasury stock - - -
Conversion of preferred stock - - -
Reclassification of preferred Series A - - -
not subject to put
Employee stock purchase plan:
Shares issued 300,047 3 942
Shares issuable - - -
Dividends payable ($6.25 per - - -
preferred share, Series B)
- --------------------------------------------------------------------------------
Stockholders' Equity at December 31, 1993 26,719,752 $267 $335,776
==============================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
WEIRTON STEEL CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY CONTINUED
(Dollars in thousands, except share data)
<CAPTION>
Common Shares Retained Common Deferred Preferred Stock---
Issuable Earnings Treasury Stock Compens- Series A not holdrs
Shares Amount ation subject to put Equity
- ------- ------- ---------- Shares Amount Shares Amount
------ ------- ------ ------- --------
- -------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
271,641 $1,638 $6,210 369 $(4) $(460) - - 316,541
- - (74,715) - - - - - (74,715)
- - - - - - - - 15,000
- - - 78,363 (256) - - - (256)
- - - (174) 1 - - - 1
- - - - - - 625 $6 6
(271641) (1,638) - - - - - - -
352,542 1,132 - - - - - - 1,132
- - (781) - - - - - (781)
- - - - - 410 - - 410
- -------------------------------------------------------------------------------
352,542 1,132 (69,286) 78,558 (259) (50) 625 6 257,338
- - (31,757) - - - - - (31,757)
- - - - - - - - 8,250
- - - 130,056 (568) - - - (568)
- - - (261) 2 - - - 2
- - - - - - 872 4 4
(327978) (1,053) - - - - - - -
340,857 1,074 - - - - - - 1,074
- - (3,125) - - - - - (3,125)
- - - - - 50 - - 50
- --------------------------------------------------------------------------------
365,421 1,153 (104,168) 208,353 (825) - 1,497 10 231,268
- - (229,242) - - - - - (229,242)
- - - 181,200 (1,455) - - - (1,455)
- - - (8,148) 65 - - - 65
- - - - - - 1,272 6 6
(300,047) (945) - - - - - - -
331,675 1,119 - - - - - - 1,119
- - (3,125) - - - - - (3,125)
- --------------------------------------------------------------------------------
397,049 $1,327 (336,535) 381,405 (2,215) - 2,769 $16 $(1,364)
================================================================================
</TABLE>
[TEXT]
NOTES TO FINANCIAL STATEMENTS
(In thousands of dollars, except share amounts, or in millions of
dollars where indicated)
Note 1
BASIS OF PRESENTATION
For the periods ended and as of December 31, 1993, the
financial statements herein include the accounts of Weirton Steel
Corporation and its wholly-owned subsidiary, Weirton Receivables,
Inc. Prior to August 26, 1993, the financial statements include
only the accounts of Weirton Steel Corporation. Weirton Steel
Corporation and/or Weirton Steel Corporation together with its
subsidiary are hereafter referred to as the "Company."
Certain portions of the prior periods' financial statements
have been reclassified where necessary to conform to the
presentation used in the current period.
Note 2
ORGANIZATION AND BACKGROUND
The Company and its predecessor companies have been in the
business of making and the finishing of steel products for more
than eighty years. From November 1929 to January 1984, the
Company's business had been operated as a division of National
Steel Corporation ("NSC"). Incorporated in Delaware in November
1982, the Company acquired the principal assets of NSC's former
Weirton Steel Division in January 1984. In connection with the
asset purchase, NSC retained liability for claims and litigation
arising out of the operation of its former Weirton Steel Division
based on occurrences prior to May 1, 1983, principally related to
pension benefits for active employees based upon service prior to
the sale and pension benefits, life insurance and health care for
retired employees.
From January 1984 until June 1989, the Company was owned in
its entirety by its employees through an Employee Stock Ownership
Plan (the "1984 ESOP"). In June 1989, the 1984 ESOP completed a
public offering of 4.5 million shares of common stock of the
Company, which security is now listed and traded on the New York
Stock Exchange.
In connection with the public offering of common stock, in
June 1989, the Company also sold 1.8 million shares of Convertible
Voting Preferred Stock, Series A (the "Series A Preferred") to a
new Employee Stock Ownership Plan (the "1989 ESOP"). Each share of
Series A Preferred is convertible at any time into one share of
common stock, subject to adjustment, and is entitled to ten times
the number of votes of the common stock into which it is
convertible.
In October 1991, in connection with an iron ore pellet supply
agreement, the Company issued .5 million shares of Redeemable
Preferred Stock, Series B (the "Series B Preferred") to
Cleveland-Cliffs Inc for a purchase price equal to the aggregate
redemption amount of $25 million. Holders of the Series B
Preferred do not generally vote on stockholder matters.
In September 1991, the Company issued to its defined benefit
pension plan (the "Pension Plan") 3,870,968 shares of its common
stock (the "1991 Pension Plan Shares") having an aggregate fair
value of $15.0 million. In September 1992, the Company issued 2.0
million shares of its common stock (the "1992 Pension Plan Shares")
having an aggregate fair value of $8.25 million to the Pension Plan
in a substantially similar transaction.
Substantially all of the Company's employees participate in
the two ESOPs which, after giving effect to the above-mentioned
transactions, own approximately 52% of the combined issued and
outstanding common and preferred shares of the Company at December
31, 1993. This, in turn, accounts for approximately 75% of the
voting power of the Company's voting stock.
Note 3
SIGNIFICANT ACCOUNTING POLICIES
Cash
The liability representing outstanding checks written on a
zero-balance general disbursement bank account that is funded as
the checks clear the bank are included in accounts payable for
financial statement presentation. Such amounts were $5,092, $8,281
and $3,410 at December 31, 1993, 1992 and 1991, respectively.
Cash Equivalents
Cash equivalents, which consist primarily of certificates of
deposit, commercial paper and time deposits, are stated at cost,
which approximates fair value. For purposes of the statement of
cash flows, the Company considers all highly liquid investments
purchased with a maturity of 90 days or less to be cash
equivalents.
Inventories
Inventories are stated at the lower of first-in, first-out
(FIFO) cost or market. Inventory costs include materials, labor and
manufacturing overhead.
Property, Plant and Equipment
Property, plant and equipment is valued at cost. Major
additions are capitalized, while the cost of maintenance and
repairs which did not improve or extend the lives of the respective
assets is charged to expense in the year incurred. Interest costs
applicable to facilities under construction are capitalized. Gains
or losses on property dispositions are credited or charged to
income.
The Company changed its method of accounting for depreciation
of its steelmaking facilities effective January 1, 1992, from the
straight-line method to a production-variable method which adjusts
straight-line depreciation to reflect actual production levels.
The Company believes the production-variable method of depreciation
is preferable to the method previously used because it recognizes
that depreciation of steelmaking facilities is related
substantially to both physical wear and the passage of time.
Moreover, this method of depreciating steelmaking facilities is an
accepted industry practice which, accordingly, allows for a
meaningful comparison of the Company's operations to that of its
competitors. The cost of relining blast furnaces is amortized over
the estimated life of the lining based upon production.
Postretirement Benefits Other Than Pensions
Effective January 1, 1993, the Company changed its method of
accounting for the costs of postretirement benefits other than
pensions from the cash method to an accrual method pursuant to the
provisions of Statement of Financial Accounting Standards ("SFAS")
No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions."
Postemployment Benefits
Effective January 1, 1993, the Company adopted the provisions
of SFAS No. 112, "Employers' Accounting for Postemployment
Benefits." Under the Company's previous method of accounting,
certain employee benefits covered by this new standard were
accounted for on the cash method, while certain other benefits were
accounted for on an accrual method. Effective with the adoption of
the new standard, the value of all such benefits is actuarially
determined and recognized on an accrual method.
ESOP Accounting
The Company recognizes ESOP expense based upon required
contributions to the plan. The resulting compensation expense
approximates the cost of shares allocated for the period. Shares
allocable to participants for a given year are determined based on
the ratio of the current year's debt service payment to total
estimated debt service. Shares to be allocated to individual
participants are based on the participants' relative compensation.
Research and Development
Research and development costs related to improvement of
existing products, development of new products and the development
of more efficient operating techniques are charged to expense as
incurred and totaled $5,430, $4,686 and $5,305 in 1993, 1992 and
1991, respectively.
Income Taxes
Effective January 1, 1993, the Company changed its method of
accounting for income taxes for financial reporting by adopting the
provisions of SFAS No. 109, "Accounting for Income Taxes." The
Company had previously accounted for income taxes pursuant to the
provisions of Accounting Principles Board Opinion ("APBO") No. 11,
"Accounting for Income Taxes." Under the new method, deferred
income tax assets and liabilities are recognized to reflect the
future income tax consequences of carryforwards and differences
between the tax bases and financial accounting bases of assets and
liabilities.
Note 4
INVENTORIES
Inventories consisted of the following at December 31, 1993
and 1992:
<TABLE>
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Raw materials $74,766 $78,017
Work-in-process 74,109 74,950
Finished goods 93,784 91,599
242,659 244,566
======= =======
</TABLE>
[TEXT]
Note 5
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at
December 31, 1993 and 1992:
<TABLE>
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Land $ 810 $ 810
Buildings 7,918 7,918
Machinery,equipment and other 685,863 649,679
Construction-in-progress 62,391 84,982
756,983 743,389
Less: Allowances for
depreciation (233,254) (184,315)
------- -------
$523,728 $559,074
======= =======
</TABLE>
[TEXT]
Capitalized interest costs applicable to facilities under
construction for the years ended December 31, 1993, 1992 and 1991
amounted to $0.8 million, $6.1 million and $12.8 million,
respectively.
The change in accounting method for depreciation of
steelmaking facilities resulted in a decrease in depreciation
expense of $4.7 million in 1992, with a cumulative effect on the
years prior to the change which decreased the net loss in 1992 by
$4.4 million.
Note 6
FINANCING ARRANGEMENTS
Debt Obligations
<TABLE>
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Revolving Credit due 6/30/93 $ - $ 59,000
Term Loans due 6/30/93 - 50,000
11-1/2% Senior Notes due 3/1/98 140,000 -
11.45% Senior Notes due 10/15/98 - 25,000
9.00% Senior ESOP Notes - 14,114
due 6/30/99
10-7/8% Senior Notes due 10/15/99 300,000 300,000
8-5/8% Pollution Control Bonds 56,300 56,300
due 11/1/2014 ------- -------
496,300 504,414
Less: Unamortized debt discount 1,048 1,173
------- -------
Less: Current maturities - 11,964
of debt obligations ------- -------
Long-term debt obligations $495,252 $491,277
======= =======
</TABLE>
[TEXT]
On October 17, 1989, the Company completed a public offering
of its senior notes in the principal amount of $300 million. These
unsecured senior notes bear interest at 10-7/8%, mature October 15,
1999, are senior to all the Company's subordinated obligations and
equal to the Company's other senior indebtedness. The indenture
governing these senior notes provides for an option, in the event
certain "qualifying downgrades" occur in the rating of the senior
notes following the occurrence of certain designated events related
to changes in control of the Company, whereby noteholders will have
the option to cause the Company to repurchase the senior notes at
100% of principal plus accrued interest.
On November 1, 1989, the Company refinanced two previous
pollution control bond issues having an aggregate principal amount
of $56.3 million. The 1989 pollution control bonds bear interest
at 8-5/8%, mature November 1, 2014, and are subject to an option
similar to that governing the 10-7/8% senior notes.
On March 4, 1993, the Company completed a public offering of
$140 million of its senior notes. These unsecured senior notes
bear interest at 11-1/2% per annum, mature March 1, 1998, are
senior to all subordinated obligations of the Company and equal to
the Company's other senior indebtedness. The senior notes are not
redeemable prior to maturity, except that prior to March 1, 1995,
the Company has the option to redeem up to $50 million in principal
amount at a redemption price of 109.2% with the proceeds from the
issuances of certain capital stock. The indenture governing the
senior notes does not contain restrictive financial maintenance
covenants, but does contain other covenants similar to those
normally associated with this type of financing that limit, among
other things, the incurrence of additional indebtedness, the
declaration and payment of dividends and distributions on the
Company's capital stock, as well as mergers, consolidations, liens,
and sales of certain assets. Under covenants affecting the
Company's ability to pay dividends on its common stock, the Company
is limited as to the payment of aggregate dividends after March 31,
1993, to the greater of (i) $5.0 million or (ii) $5.0 million plus
one-half of the Company's cumulative consolidated net income since
March 31, 1993, plus the net proceeds from future issuances of
certain capital stock less certain allowable payments. As of
December 31, 1993, pursuant to this covenant, the Company's ability
to pay dividends on its common stock was limited to $5.0 million.
Upon the occurrence of a change in control, as defined under the
indenture, holders of the senior notes will have the option to
cause the Company to repurchase their senior notes at 101% of the
principal amount, plus accrued interest to the date of repurchase.
The net proceeds of approximately $135.6 million resulting
from the senior notes offering, together with available cash, were
applied toward the repayment of borrowings under the Company's
former credit agreement, term loans, and 11.45% Senior Notes due
1998 and the repurchase of the 9.00% Senior ESOP Notes due 1999,
thereby relieving the Company from certain restrictive financial
covenants associated with those financing sources.
The Company incurred certain costs in the first quarter of
1993 in connection with the prepayment of the bank and
institutional debt which approximated $6.5 million on an after-tax
basis. This amount is recognized as an extraordinary item in the
Company's Consolidated Statement of Income.
As a result of this refinancing, the Company does not have any
scheduled principal payments until 1998 when the $140 million
principal amount of the 11-1/2% senior notes becomes due.
Credit Facilities
The Company entered into an agreement dated as of June 1,
1990, with six banks (the "Credit Agreement") that provided a $100
million unsecured revolving credit facility. The agreement included
a $20 million letter of credit subfacility. Interest options
included prime rate, Eurodollar, CD or money market loan rates.
On September 27, 1990, and November 20, 1990, the Company
entered into agreements for term loans (the" Term Loans") with two
banks. Each agreement had provided the Company with $25 million on
an unsecured, floating rate term basis.
The Credit Agreement and Term Loans contained certain similar
restrictive financial covenants. At December 31, 1992, $109
million was borrowed and $18.6 million in letters of credit were in
place under these facilities. Effective December 29, 1992, the
Company and its bank lenders agreed to amend the credit facilities
in a number of respects. In connection with the amendments, the
Company's borrowing capacity under the revolving bank credit
facility was limited to amounts already outstanding; the bank term
loans were shortened in maturity from September 30, 1993 to June
30, 1993; outstanding loans that bore interest on a LIBOR basis
were shifted to a "prime plus" basis; and the effective interest
rates on such loans generally were increased. The Company also
agreed to apply the proceeds from its offering of senior notes,
described above, toward payment of all bank debt. Substantially
similar amendments were made to financial covenants under the
Company's remaining institutional debt represented by its 11.45%
Senior Notes due 1998 and 9.00% Senior ESOP Notes due 1999.
RECEIVABLES PARTICIPATION AGREEMENT
On August 26, 1993, the Company initiated, through a new
subsidiary, a receivables participation agreement with a group of
five banks. The facility provides for a total commitment by the
banks of up to $85 million, including a letter of credit
subfacility of up to $25 million. To implement the facility, the
Company sold substantially all of its accounts receivable, and will
sell additional receivables as they are generated, to its wholly-
owned subsidiary known as "Weirton Receivables, Inc." The
subsidiary is expected to finance its ongoing receivables purchases
from a combination of cash collections on receivables already in
the pool, short term intercompany obligations, issuances of
redeemable stock, and cash proceeds derived from selling interests
in the receivables to the participating banks from time to time.
As of December 31, 1993, while no funded participation interests
had been sold under the facility, $3.1 million in letters of credit
under the subfacility were in place at such date. The amount of
participation interests committed to be purchased by the banks will
fluctuate depending upon the amounts and nature of future
receivables generated by the Company which are sold into the
program and certain financial tests applicable to them. With
respect to the receivables comprising the pool at December 31,
1993, and the financial tests applicable to such, and after
reduction for amounts in place under the letter of credit
subfacility, the base amount available for cash sales was
approximately $64.6 million. During the period beginning August
26, 1993 through December 31, 1993, the base amount available for
cash sales ranged from $64.3 million to $81.8 million.
Funded purchases of participation interests by the banks under
the facility are generally available on a revolving basis for three
years, subject to extension as agreed to by the banks. Weirton
Steel Corporation will continue to act as servicer of the assets
sold into the program and will continue to make billings and
collections in the ordinary course of business according to its
established credit practices. Except for warranties given by
Weirton Steel Corporation concerning the eligibility of receivables
sold to Weirton Receivables, Inc. under the program, the
transactions under the facility are generally nonrecourse. Weirton
Receivables, Inc.'s commitments to the banks, which do not include
warranties as to collectibility of the receivables, but do include
those typical of sellers of similar property, are secured by its
interest in the receivables and related security. Weirton
Receivables, Inc. is subject to certain restrictions regarding its
indebtedness, liens, asset sales not contemplated by the facility,
guarantees, investments, other transactions with its affiliates,
including Weirton Steel Corporation, and the maintenance of a
minimum net worth of not less than the greater of $5.0 million or
10% of the outstanding receivables. At December 31, 1993, Weirton
Receivables, Inc. had a net worth of $116.5 million and outstanding
receivables of $112.3 million. The banks and other creditors of
Weirton Receivables, Inc. have priority claim on all assets of
Weirton Receivables, Inc. prior to those assets becoming available
to any of Weirton Steel Corporation's creditors.
Leases
The Company also uses certain lease arrangements to supplement
its financing activities.
Rental expense under operating leases was $7,346, $6,419 and
$6,486 for the years 1993, 1992 and 1991, respectively. The
minimum future lease payments under noncancelable operating leases
are $6,427, $2,893, $1,932, $1,660 and $1,092 for 1994 through 1998
and $82 after 1998.
Note 7
EMPLOYEE RETIREMENT BENEFITS
Pensions
The Company's Pension Plan covers substantially all of its
employees. The Pension Plan provides benefits that are based
generally upon years of service and compensation during the final
years of employment.
The Company's funding policy is influenced by its general cash
requirements but, at a minimum, complies with the funding
requirements of Federal laws and regulations. During the calendar
years of 1993, 1992 and 1991, the Company contributed $25,648,
$28,790 and $26,488, respectively, to the Pension Plan. In 1992
and 1991, a portion of the Company's contributions was made in the
form of the Company's common stock.
In September 1992, the Company issued to the Pension Plan the
1992 Pension Plan Shares having an aggregate fair value of $8.25
million. Under the governing agreement with the independent
fiduciary of the Pension Plan, the Pension Plan obtained the right,
which was not transferable with the stock, to require the Company
to reimburse the Pension Plan for certain realized losses it may
incur upon disposition of the shares below their issuance value of
$4.125 per share. Under the terms of the agreement, the Pension
Plan's right to reimbursement following disposition of the shares
arose only in the event the trading price of the common stock fell
below 80% of the per share issuance value and expired after the
trading price equalled or exceeded $8.00 per share for 60
consecutive trading days. In September 1991, the Company issued
the 1991 Pension Plan Shares having an aggregate fair value of $15
million in a substantially similar transaction at an issuance value
of $3.875 per share. The Company's reimbursement obligations with
respect to the 1991 and 1992 Pension Plan Shares were secured by
letters of credit totalling $15.5 million. During the second and
third quarters of 1993, the trading price of the Company's common
stock equalled or exceeded $8.00 per share for 60 consecutive
trading days. As a result, the fiduciary's right to require the
Company to reimburse the Pension Plan expired.
The Pension Plan's assets are held in trust, the investments
of which consist primarily of common stocks, including the above-
mentioned 5.9 million common shares of the Company with market
values of $37.4 million and $22.0 million at December 31, 1993 and
1992, respectively, fixed income securities, and short term
investments.
Following are the components of the Company's net pension cost
recognized in 1993, 1992 and 1991:
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Service cost $10,192 $11,645 $13,592
Interest cost on projected
benefit obligation 41,714 34,135 32,107
Actual return on plan assets (30,300) (11,036) (50,698)
Net amortization and deferral 15,112 ( 8,592) 39,846
$36,718 $26,152 $34,847
====== ====== ======
</TABLE>
[TEXT]
The following table reconciles the funded status of the
Company's plan to the accrued pension obligation recognized in the
balance sheets at December 31, 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Actuarial present value of accumulated
benefit obligation:
Vested $461,449 $273,494
Nonvested 40,324 49,798
501,773 323,292
Effect of projected compen-
sation increases 81,516 113,645
Actuarial present value of projected
benefit obligation 583,289 436,937
Plan assets at fair value 338,485 304,076
Projected benefit obligation in
excess of plan assets 244,804 132,861
Items not yet recognized in
the balance sheet:
Actuarial gains (losses) (51,433) 26,704
Remaining net obligation
at transition (67,912) (75,302)
Prior Service cost (53,460) (23,334)
Additional minimum liability 91,289 -
Accrued Pension Obligation $163,288 $60,929
====== ======
</TABLE>
[TEXT]
The accrued pension obligation is classified in the balance
sheets at December 31, 1993 and 1992 as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Pension liability, a component
of current liabilities $20,394 $28,698
Long term pension obligation 142,894 32,231
$163,288 $60,929
====== ======
</TABLE>
[TEXT]
The Company's projected, accumulated and vested pension
obligations and expense have been actuarially measured through the
use of certain significant assumptions in accordance with SFAS No.
87, "Employers' Accounting for Pensions." The table below depicts
the assumptions used to measure the Company's pension obligations
and expense.
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Weighted average interest rate used 7.5% 8.75% 9.25%
to discount the projected, accumulated
and vested benefit obligations to
present value
Expected rate of return on plan 8.75% 9.25% 9.25%
assets
Assumed increase in compensation 2% 5% 5%
levels
<FN>
for 3 yrs. annual annual
and 4% there
after
</TABLE>
[TEXT]
The assumed weighted average interest rate used to discount
the pension obligations to present value is based upon the rates of
return on high-quality fixed-income investments currently available
matched against expected benefit cash flows, thereby reflecting a
rate at which the obligations could be effectively settled.
The significant increase in the Company's pension obligations
as of December 31, 1993, compared to the prior year end reflects,
in part, the recent trend of declining rates of return on long term
investments. The accumulated pension benefit obligation as of
December 31, 1993 exceeds assets available for plan benefits and
unfunded accrued obligations by $91.3 million resulting in the
Company recognizing an additional minimum liability and an
intangible asset of an equal amount.
Benefits Other Than Pensions
Substantially all of the Company's retirees are covered under
medical and life insurance plans. Retirees who have not yet
reached age 65 are entitled to medical benefits that provide for
first-dollar coverage on certain hospital and surgical services,
major medical coverage that contains retiree-paid deductibles and
co-insurance requirements, and a prescription drug program under
which a majority of the cost is paid by the Company. Retirees who
have reached age 65 are covered by the same plan, except they are
not eligible for the prescription drug program and the payment of
plan benefits is coordinated with Medicare on a nonduplication
basis.
Coverage under the medical plan is extended to spouses and
unmarried children with certain age restrictions. Eligibility for
benefits continues beyond the death of the retiree or active
employee eligible to retire.
Life insurance benefits provided to retirees are generally
based upon annual basic pay at retirement for salaried employees
and specific amounts for hourly employees.
The Company does not prefund retiree medical and life
insurance benefits and does not anticipate doing so in the future.
The amount of cash used by the Company to pay for these benefits
was $9.9 million and $6.2 million for 1992 and 1991, respectively.
Through December 31, 1992, these amounts were charged to operations
on the cash basis in accordance with the Company's accounting
policy in effect up to that date.
Effective January 1, 1993, the Company adopted the provisions
of SFAS No. 106. This new accounting method requires the accrual
of the estimated cost of retirees' medical and other benefits over
the period during which employees render the service that qualifies
them for such benefits. The provisions of the new standard allow
for the "transition obligation," representing benefits earned in
prior periods by both retirees and current employees, to be
recognized in the period in which the new standard is adopted or
amortized prospectively over a period of up to 20 years. The
Company elected to recognize immediately its transition obligation
which at January 1, 1993 was actuarially determined to be $303.9
million.
The amount of net periodic expense for postretirement health
care and life insurance benefits recognized in 1993 is comprised of
the following:
<TABLE>
<S> <C>
Service cost-benefits earned during period $11,833
Interest cost on accumulated postretirement
benefit obligation 18,548
-----
Net periodic expense $30,381
======
</TABLE>
[TEXT]
The net periodic expense in 1993 for retiree medical and life
insurance benefits actuarially determined in accordance with SFAS
No. 106 exceeded the $12.4 million cash outlay for providing such
benefits by approximately $18.0 million.
The following table sets forth the components of the
accumulated postretirement benefit transition obligation and the
reconciliation of amounts recognized in the Company's balance sheet
as of December 31, 1993:
<TABLE>
<CAPTION>
January 1, December 31,
1993 1993
<S> <C> <C>
Accumulated postretirement benefit
obligation attributable to:
Retirees and beneficiaries $135,278 $131,494
Active employees fully eligible for
benefits 69,975 75,142
Other active participants 98,665 118,671
Total accumulated postretirement benefit ------- -------
obligation 303,918 325,307
Actuarial loss not yet recognized - (3,322)
------- -------
Accrued postretirement benefit $303,918 $321,985
======= =======
</TABLE>
[TEXT]
The accrued postretirement benefit obligation as of December
31, 1993 is recognized in the Company's consolidated balance sheet
as follows:
<TABLE>
<S> <C>
Accrued postretirement benefits, a component $ 13,000
of accrued employment costs
Postretirement benefits other than pensions 308,985
-------
$321,985
=======
</TABLE>
[TEXT]
The accumulated postretirement benefit transition obligation
recognized as of January 1, 1993 was actuarially determined using
a method that applied specific interest rates to future cash flows
when discounting the obligation to its present value. For purposes
of measuring the transition obligation, the interest rates
associated with future cash flows began at 6% and graded up to 8.5%
for years after 1996. The medical cost trend rate for retirees who
had not yet reached age 65 were 11.0% (16.2% for major medical) in
1993, grading down to an ultimate rate of 5.5% in 2003. Rates for
retirees 65 and older began at 9.0% in 1993 and graded down to an
ultimate rate of 5.5% in 2003. For purposes of measuring life
insurance benefits as of January 1, 1993, increases in compensation
levels were assumed to be 5.0%. The recent decline in long-term
interest rates, as described above affecting the measurement of the
Company's pension obligations, also affects the measurement of the
Company's accumulated obligation for retiree health care and life
insurance benefits, albeit to a lesser degree. The interest rate
associated with future cash flows and used to discount the
accumulated postretirement benefit obligation to present value as
of December 31, 1993 was also adjusted downward to 7.5%. The
medical cost trend rates for retirees who have not yet reached age
65 is 10% (14.4% for major medical) in 1994 grading down to an
ultimate rate of 4.5% in 2003. Rates for retirees 65 and older
begin at 8.5% in 1994, grading down to an ultimate rate of 4.5% in
2003. For purposes of measuring life insurance benefits, increases
in compensation levels were assumed to be 2% for the next three
years and 4% thereafter. A one percentage point increase in the
assumed health care trend rates for each future year would have
increased the aggregate of the service and interest cost components
of the 1993 net periodic expense by $4.8 million and would have
increased the accumulated postretirement benefit obligation as of
December 31, 1993 by $40.5 million.
Other
As part of the Company's organization, NSC agreed to retain
liability for pension service and the cost of life and health
insurance for employees of the Company's predecessor business who
retired through May 1, 1983. NSC also retained the liability for
pension service through May 1, 1983 for employees of the
predecessor business who became active employees of the Company.
RESTRUCTURING CHARGE
In the first quarter of 1993, the Company recognized a pretax
restructuring charge of $17.3 million to account for the costs
associated with implementing an enhanced retirement package. The
early retirement package is part of the Company's ongoing cost
reduction program.
Note 8
POSTEMPLOYMENT BENEFITS
Effective January 1, 1993, the Company adopted the provisions
of SFAS No. 112. This new standard requires the Company to
recognize on its balance sheet the present value of its obligation
to provide certain benefits to former or inactive employees who are
not yet eligible for retirement. Liabilities associated with (i)
workers' compensation, (ii) severance programs which include
medical coverage continuation and (iii) sickness and accident
protection, which includes medical and life insurance benefits, are
the major items comprising the Company's obligation for post-
employment benefits.
For purposes of actuarially measuring the Company's
postemployment obligation as of January 1, 1993, an interest rate
of 8-1/2% was used to discount the obligation to its present value.
Consistent with the basis that was used to measure the Company's
accumulated obligations for pensions and retiree health care and
life insurance benefits, the interest rate used to discount the
accumulated postemployment obligation to present value as of
December 31, 1993 was adjusted downward to 7.5%. Other actuarial
assumptions and demographic data used to value this obligation as
of December 31, 1993 and at transition were consistent with those
used to value pension or other postretirement benefits as the case
may be.
Upon determination as of January 1, 1993 of the accumulated
postemployment transition obligation, and after considering amounts
already accrued, the Company was required to recognize a cumulative
accounting charge of $4.0 million to fully recognize its
postemployment obligation as of January 1, 1993.
Note 9
INCOME TAXES
Effective January 1, 1993, the Company adopted the provisions
of SFAS No. 109. The Company previously accounted for income
taxes pursuant to the provisions of APBO No. 11. Under this new
method, deferred income tax assets and liabilities are recognized
which reflect the future tax consequences of net operating loss and
tax credit carryforwards and differences between the tax and
financial reporting bases of assets and liabilities. As a result
of implementing the change in accounting principle, a net deferred
tax asset of $11.9 million was recognized relating to net operating
loss carryforwards and other tax attributes existing as of January
1, 1993. In addition, the effect of the new income tax method as
applied to the Company's adoption of SFAS Nos. 106 and 112 as of
January 1, 1993 was the recognition of additional deferred tax
assets of $115.5 million and $.8 million, respectively. The
combined effect of these items resulted in the recognition of a
$128.2 million net deferred tax asset and a net income tax benefit
of an equal amount. The components of the Company's deferred
income tax assets and liabilities arising under SFAS No. 109 are as
follows:
<TABLE>
<CAPTION>
January 1, December 31,
1993 1993
<S> <C> <C>
Deferred tax assets:
Net operating loss and tax credit $76,150 $94,988
carryforwards
Deductible temporary differences:
Inventories 15,388 13,696
Property, plant, and equipment 11,140 11,619
Pensions and other long-term 20,209 36,499
liabilities
Postretirement benefits other 115,520 125,732
other than pensions
Other deductible temporary 10,260 9,331
differences
Valuation allowance (38,835) (50,768)
-------- --------
209,832 241,097
Deferred tax liabilities:
Accumulated depreciation (81,635) (98,092)
Net deferred tax asset $128,197 $143,005
======= =======
</TABLE>
[TEXT]
As of December 31, 1993, the Company had available, for
federal and state income tax purposes, regular net operating loss
carryforwards of approximately $194.8 million expiring in 2006
through 2008; alternative minimum tax net operating loss
carryforwards of approximately $13.6 million, which expire in 2007;
an alternative minimum tax credit of approximately $4.7 million;
and general business tax credits of approximately $14.1 million.
As of January 1, 1993, deferred tax liabilities associated
with existing taxable temporary differences exceeded deferred tax
assets from future deductible temporary differences, excluding
those attributable to SFAS No. 106, by approximately $24.6 million.
The recognition by the Company as of January 1, 1993 of the entire
transition obligation related to adopting the provisions of SFAS
No. 106 resulted in the recognition of a $115.5 million deferred
tax asset. Future operating costs under SFAS No. 106 are expected
to exceed deductible amounts for income tax purposes for many
years. In addition, under current Federal tax regulations, should
the Company incur tax losses in future periods, such losses may be
carried forward to offset taxable income for a period of up to 15
years. Based upon the length of the period during which the SFAS
No. 106-generated deferred tax asset can be utilized, the Company
believes that it is more likely than not that future taxable income
will be sufficient to fully offset these future deductions. The
length of time associated with the carryforward period available to
utilize existing net operating losses and certain tax credits is
more definite. A significant portion of the Company's net
operating losses is attributable to the realization of differences
between tax and financial reporting bases of the Company's fixed
assets. In the aggregate, such differences, including
depreciation, are expected to reverse within the allowable
carryforward periods. In addition, the Company believes it will be
able to further utilize existing net operating loss carryforwards
and tax credits, primarily through the future productivity benefits
of its recent capital improvement program and current business
strategy which calls for certain cost reductions and other
opportunities, or through certain tax planning strategies available
to the Company. Notwithstanding the Company's expectations, it has
provided a valuation allowance to reduce the carrying value of its
recognized deferred tax assets.
As of January 1, 1993, a valuation reserve of $38.8 million
was recognized as a component of its cumulative accounting
adjustment which provided for a reduction in the carrying value of
the Company's gross deferred tax assets of approximately 15%, a
reduction in the carrying value of its net deferred tax assets of
approximately 25%, and a reduction equal to approximately 50% of
the carrying value associated with the Company's net operating loss
carryforwards and tax credits. During 1993, the Company generated
additional net operating losses and throughout the year recognized
adjustments to its valuation reserve that would result in net
carrying values for the components of its deferred taxes on a basis
consistent with valuation adjustments established as of January 1,
1993.
The elements of the Company's deferred income tax benefit
associated with its loss before extraordinary items and cumulative
effect of accounting changes along with the allocation of deferred
taxes to other income statement items are as follows:
<TABLE>
<CAPTION>
1993
<S> <C>
Deferred income taxes:
Federal $21,421
State 2,248
Provision for valuation allowance (10,397)
Deferred income tax benefit 13,272
Other components of the Company's
total deferred income tax benefit are allocated
to the consolidated statement of income
as follows:
Deferred income tax benefit allocated to 1,536
extraordinary item
Deferred income tax benefit allocated to 128,197
cumulative effect on prior years
of accounting changes
Total deferred income tax benefit $143,005
=======
</TABLE>
[TEXT]
During August 1993, the statutory rate applicable to Federal
income taxes increased to 35% from 34% retroactive to January 1,
1993, thereby increasing the realizable value of the Company's
unutilized deferred tax assets. Net carrying values were adjusted
accordingly in the fourth quarter of 1993 along with the
recognition of certain other charges applicable to prior years' tax
attributes and unfavorable post-filing adjustments. As such, the
total income tax benefit recognized by the Company in 1993
reconciles to that computed under the Federal statutory corporate
rate as follows:
<TABLE>
<CAPTION>
Cumulative
Extra- effect of
Loss before ordinary accounting
income taxes item changes Total
<S> <C> <C> <C> <C>
Federal income tax $19,095 $ 2,748 $149,450 $171,293
benefit computed at
statutory rate of 34%
State income taxes 2,248 324 17,582 20,154
net of Federal income
tax effect
Effect of retroactive
change in Federal
statutory rate to 35%
attributable to:
Loss before income 561 - - 561
taxes
Extraordinary item 81 - - 81
Originating net 2,392 - - 2,392
temporary differences
Net operating losses 1,453 - - 1,453
and other tax attr-
ibutes existing at
January 1, 1993
Adjustments to prior (2,161) - - (2,161)
year's tax attributes
Provision for (10,397) (1,536) (38,835) (50,768)
valuation allowance ------- ------- ------- -------
$13,272 $ 1,536 $128,197 $143,005
====== ====== ======== =======
</TABLE>
[TEXT]
As noted above, prior to January 1, 1993, the Company
accounted for income taxes in accordance with APBO No. 11. The
disclosures regarding the Company's income taxes for periods prior
to January 1, 1993 are as follows.
<TABLE>
<CAPTION>
Income tax benefit: 1992 1991
------ ------
<S> <C> <C>
Federal $ 1,779 $ 4,000
State 2,984 -
------- -------
Total income tax benefit $ 4,763 $ 4,000
===== =====
</TABLE>
<TABLE>
<CAPTION>
Sources of deferred income taxes:
1992 1991
------ ------
<S> <C> <C>
Depreciation $ 18,964 $ 16,772
Inventories (508) (2,380)
Pension (536) (2,467)
Effect of net operating losses on
deferred taxes (20,174) (8,121)
Vacation reserve - (1,741)
Other 2,254 (2,063)
------- -------
Total deferred income taxes - -
======= =======
</TABLE>
[TEXT]
The income tax benefit differs from that computed under the
applicable Federal statutory corporate rate as follows:
<TABLE>
<CAPTION>
1992 1991
------ ------
<S> <C> <C>
Income tax benefit based on Federal
statutory rate of 34% $ 13,898 $ 26,763
State income taxes, net of Federal
income tax effect 2,984 -
Limitation of utilization of net
operating loss carrybacks (12,119) (22,763)
------- -------
Total income tax benefit $ 4,763 $ 4,000
======= =======
</TABLE>
[TEXT]
Note 10
REDEEMABLE STOCKS
In June 1989, the Company sold 1.8 million shares of the
Series A Preferred to the 1989 ESOP, which financed the purchase by
issuing to the Company a $26.1 million promissory note, payable
ratably over a ten-year period. Each share of Series A Preferred
is convertible at any time into one share of common stock, subject
to adjustment, is entitled to ten times the number of votes of the
common stock into which it is convertible, and has a preference on
liquidation over common stock of $5 per share. The Series A
Preferred has no preference over common stock as to dividends. The
Series A Preferred is not intended to be readily tradable on an
established market. Accordingly, shares of Series A Preferred
distributed to 1989 ESOP participants following termination of
service will be subject to a right, exercisable for limited periods
prescribed by law, to cause the Company to repurchase the shares at
fair value. The Company also has a right of first refusal upon
proposed transfers of distributed shares of Series A Preferred
which it has agreed, to the extent it is permitted, to exercise and
to contribute or sell reacquired shares to the 1989 ESOP. If not
repurchased by the Company or reacquired by the 1989 ESOP, shares
of Series A Preferred automatically convert into common stock upon
transfer by a distributee.
In October 1991, the Company issued 0.5 million shares of the
Series B Preferred to Cleveland-Cliffs Inc for a purchase price
equal to the aggregate redemption amount of $25 million. The
Series B Preferred is entitled to annual dividends of $6.25 per
share, subject to increase to $7.50 per share if the Company's
authorized common stock is not increased by approximately 4.3
million shares by May 31, 1994, is redeemable by the Company at any
time, has a liquidation preference over common stock and is subject
to mandatory redemption on December 31, 2003, in each case at $50
per share. The Company is obliged to repurchase shares of Series
B Preferred Stock at the option of the holders under specified
conditions; the holders of Series B Preferred are entitled to
exchange their stock in the event of future equity offerings by the
Company; and the Company has a right to consent to certain proposed
future private dispositions of shares of Series B Preferred, and a
right of first refusal over dispositions proposed to be made at
less than $47.50 per share. In connection with this transaction,
the Company entered into a supply agreement with a subsidiary of
Cleveland-Cliffs to furnish the Company with the major part of its
iron ore pellets for a twelve-year period which began in 1992.
Note 11
STOCK PLANS
The Company has a stock option plan (the "1987 Stock Option
Plan"), which provides for 750,000 shares of the Company's common
stock to be available for the granting of options. No stock
options were granted in 1993, 1992 or 1991. The options
outstanding for each period presented had been previously granted
under employment contracts with certain executive officers at an
exercise price of $8.33 per share. The excess of the option's fair
value at the date of grant over the proceeds to be received upon
exercise is being amortized over the terms of the employment
contracts.
There were 510,000 shares available for future grant at
December 31, 1993.
Activity under the 1987 Stock Option Plan is summarized below:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Options outstanding at beginning
of period 240,000 240,000 240,000
Granted - - -
Exercised - - -
Outstanding at end of period 240,000 240,000 240,000
Exercisable at end of period 240,000 230,000 119,998
Available for future grant 510,000 510,000 510,000
</TABLE>
[TEXT]
In October 1989, the Company registered 1.5 million shares of
common stock to be offered over a five-year period to eligible
employees through payroll deductions under its 1989 Employee Stock
Purchase Plan.
During 1991, the Company adopted a deferred compensation plan
to permit members of its Board of Directors to receive shares of
common stock in lieu of cash payments for total compensation or a
portion thereof for services they provided.
Both the Employee Stock Purchase Plan and the Directors'
Deferred Compensation Plan provide for respective participants to
purchase the Company's common stock at 90% of the lesser of the
stock's trading price at the beginning or the end of each year. At
December 31, 1993, 299,971 shares valued at approximately $1.0
million were issuable in accordance with the Employee Stock
Purchase Plan. These shares were issued during January 1994. At
December 31, 1993, 97,078 shares valued at $0.3 million were
issuable to the Directors who selected deferred compensation.
Note 12
ESOP FINANCING
The purchase by the 1989 ESOP of the Series A Preferred was
financed through the issuance of a $26.1 million promissory note to
the Company payable ratably over a ten-year period. The Company's
contribution to the 1989 ESOP for the principal and interest
components of debt service was immediately returned. As such, the
respective interest income and expense on the ESOP notes were
entirely offset within the Company's net financing costs.
Effective November 1, 1990, the 1989 ESOP entered into a
refinancing, which was guaranteed by the Company, under which $19
million of 9.0% ESOP notes were sold to certain institutional
investors. Following this refinancing, the net interest expense
component of the Company's ESOP contribution in the amounts of $653
and $708 for 1992 and 1991, respectively, was included in interest
expense.
In connection with the Company's public offering of $140
million of its senior notes in March 1993, the Company repurchased
the balance of the outstanding 9.0% senior ESOP notes which had
been reduced to the principal amount of $14.1 million. Following
this repurchase, the Company was reestablished as the sole lender
to the 1989 ESOP, and as such, the ESOP note interest income and
expense are offset within the Company's net financing costs.
Note 13
EARNINGS PER SHARE
The weighted average number of common and common equivalent
shares used in the calculation of the loss per share was
26,472,907, 24,914,026 and 21,405,729 for the years 1993, 1992 and
1991, respectively. The shares of Series A Preferred were excluded
from each year's calculation due to their antidilutive effect. The
assumed exercise of stock options would not result in significant
dilution in any such periods.
Note 14
COMMITMENTS AND CONTINGENCIES
The Company, in the ordinary course of business, is the
subject of, or party to, various pending or threatened legal and
environmental actions. The Company believes that any ultimate
liability resulting from these actions will not have a material
adverse effect on its financial position.
In October 1991, the Company entered into a twelve-year iron
ore pellet supply agreement with a subsidiary of Cleveland-Cliffs
Inc to provide the majority of tonnage needed beginning in 1992.
In July 1993, the Company entered into an agreement with USX
Corporation to purchase blast furnace coke during the remainder of
1993 through December 1996. The agreement provides for tonnages of
750,000 per calendar year in 1994 through 1996, or the actual
annual requirements of the Company if less than the stated amount.
The price is to be the prevailing market price for blast furnace
coke determined each October prior to the delivery year.
On August 7, 1992, an action entitled Larry G. Godich, et. al.
v Herbert Elish, et. al. was commenced in the West Virginia Circuit
Court for Hancock County against ten current members of the
Company's Board of Directors, certain officers of the Company,
former Board members, the Company's outside counsel, and the
Company. The suit purports to be brought derivatively by
stockholders on behalf of the Company and seeks a recovery on its
behalf. The plaintiffs' complaint alleges that the defendants were
negligent or grossly negligent in the selection and supervision of
contractors engaged by the Company to design and construct reheat
furnaces for the hot mill project under the capital improvement
program, thereby breaching their respective fiduciary and other
duties to the Company and, as a result, that the Company incurred
substantial cost overruns in connection with the specific project.
The complaint seeks compensatory damages, jointly and severally,
against all defendants in the amount of $30 million. The suit has
been scheduled for trial in the second quarter of 1994. Since the
suit is on behalf of the Company, if the plaintiffs prevail, the
Company would receive the net benefit of any recovery.
Note 15
LINE OF BUSINESS INFORMATION
The Company operates a single line of business, the making and
finishing of steel products including carbon sheet and tin
products. During 1993, 1992 and 1991, one customer accounted for
11%, 12% and 13% of net sales, respectively.
Note 16
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS AND
SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments for which it
is practicable to estimate that value:
Cash and short term investments
The carrying amount approximates fair value because of the
short maturity of those investments.
Redeemable preferred stock
The market value of the Series A Preferred Stock was
determined based upon an independent appraisal done as of December
31, 1993. The market value of the Series B Preferred Stock was
estimated based upon quoted market prices for the same or similar
issues.
Long-Term Debt
The fair values of the Company's long-term debt obligations
are estimated based upon quoted market prices.
The estimated fair values of the Company's financial instruments
are as follows at December 31, 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Cash and short-term $89,002 $89,002 $61,195 $61,195
investments
Redeemable preferred 50,533 36,122 50,624 31,266
stock, Series A and B
Long-term debt 496,300 516,378 504,414 458,824
</TABLE>
[TEXT]
Significant Group Concentrations of Credit Risk
As of December 31, 1993 and 1992, the Company had trade
receivables outstanding of $18,679 and $15,006, respectively, from
customers who had been acquired in leveraged transactions.
MANAGEMENT RESPONSIBILITY STATEMENT
The accompanying consolidated financial statements of the
Company are the responsibility of its management and have been
prepared in conformity with generally accepted accounting
principles.
The Company has a system of internal controls, including
a Code of Ethics, designed to provide reasonable assurance that
assets are safeguarded, financial statements are reliable, and a
high standard of business conduct is maintained. Management
monitors the system for compliance and internal auditors
independently measure its effectiveness.
The Company's independent auditors, Arthur Andersen &
Co., audit its financial statements in accordance with generally
accepted auditing standards. The report of the independent
auditors is included in this report.
The Board of Directors pursues its oversight role for the
financial statements through its Audit Committee. The Audit
Committee continued its practice of meeting quarterly to review the
financial affairs of the Company and to interface with the internal
audit staff and independent auditors. Both the independent
auditors and the internal auditors have full and free access to the
Audit Committee.
Management believes that the existing system of internal
controls, the independent audit, and the Audit Committee provide
reasonable assurance that the Company's financial accounting system
adequately maintains accountability for assets, assures the
integrity of financial statements, and maintains its commitment to
a high standard of business conduct.
/s/ Herbert Elish
Herbert Elish
Chairman, President & Chief Executive Officer
/s/ R. K. Riederer
R.K. Riederer
Vice-President & Chief Financial Officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Weirton Steel Corporation:
We have audited the accompanying consolidated balance
sheets of Weirton Steel Corporation (a Delaware corporation) and
subsidiary as of December 31, 1993 and 1992, and the related
consolidated statements of income, changes in stockholders' equity
and cash flows for each of the three years in the period ended
December 31, 1993. 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.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Weirton Steel Corporation and subsidiary as
of December 31, 1993 and 1992, and the consolidated results of its
operations and its cash flows for each of the three years in the
period ended December 31, 1993, in conformity with generally
accepted accounting principles.
As discussed in Notes 7, 8 and 9 to the consolidated
financial statements, effective January 1, 1993, the Company
changed its method of accounting for postretirement benefits other
than pensions, postemployment benefits and income taxes.
/s/ Arthur Andersen & Co.
Arthur Andersen & Co.
Pittsburgh, Pennsylvania
January 24, 1994
<TABLE>
SELECTED FINANCIAL AND STATISTICAL DATA
<CAPTION>
Dollars in millions, except per share data
1993 1992 1991 1990 1989
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $1,201 $1,079 $1,036 $1,191 $1,329
Operating expenses 1,204 1,079 1,083 1,173 1,247
Depreciation 49 39 34 29 27
Taxes on income (13.3) (4.8) (4) 0.8 8
Profit sharing - - - - 22
Contribution to ES 3 3 3 2 36
Net income (loss) (229.2) (31.8) (74.7) 0.3 16
Net income (loss) per share (8.78) (1.40) (3.49) 0.01 0.77
Total assets 1,241 1,005 1,038 965 946
Additions to property, plan 14 45 114 182 131
Long-term debt 495 491 503 397 355
Redeemable preferred stock, 37 34 31 4 1
Working capital 262 238 273 265 373
Cash dividends declared/share - - - 0.64 0.32
Number of common shares outs.
at year-end, in thous. 26,338 26,211 24,013 19,949 19,949
Number of preferred shares
o/s at year-end, in thous. 2,282 2,296 2,298 1,799 1,800
Stockholders' equity per (.05) 8.82 10.72 15.87 16.44
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
SELECTED QUARTERLY FINANCIAL DATA
<CAPTION>
(Unaudited)
Quarterly periods in 1993 Quarterly periods in 1992
-------------------------------------------------------
4th 3rd 2nd 1st 4th 3rd 2nd 1st
(Dollars in millions, except per share data)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $301 $301 $301 $298 $279 $264 $267 $269
Gross profit 33 23 21 18 23 12 17 17
Operating profit 15 1 (1) (18) 6 (6) (1) -
(loss)
Net profit (loss) 4 (10) (11) (212) (3) (14) (10) (5)
Net profit (loss)
per share:
On common stock prior
to accntg changes 0.11 (.40) (.46) (1.24) (.16) (.59) (.43) (.37)
Cumulative effect
accntg changes - - - (6.79) - - - .18
----- ----- ----- ----- ----- ----- ----- ---
Net profit(loss) 0.11 (.40) (.46) (8.03) (.16) (.59) (.43) (.19)
per share common
- ------------------------------------------------------------------------------
</TABLE>
[TEXT]
WEIRTON STEEL CORPORATION
BOARD OF DIRECTORS
James B. Bruhn Harvey L. Sperry+
Vice-President Tin Mill Products Business Partner,
Weirton Steel Corporation Willkie, Farr &
Weirton, West Virginia Gallagher
New York, New York
Robert J. D'Anniballe, Jr.*
Partner, Thomas R. Sturges*
Alpert, D'Anniballe & Visnic Executive Vice-
Weirton, West Virginia President, The
Harding Group
Greenwich, CT
Herbert Elish*+
Chairman, President, and Chief David I.J. Wang*
Executive Officer Former Executive
Ex Officio Member of Committees Vice-President
Weirton Steel Corporation International Paper
Weirton, West Virginia Company
Naples, Florida
Mark G. Glyptis*
President, Independent Steelworkers Union
Weirton, West Virginia
Gordon C. Hurlbert+
President and CEO
GCH Management Services, Inc.
Pittsburgh, Pennsylvania
Phillip A. Karber*
Corporate Vice-President and Director
Center for Technology and Public Policy Research
BDM International, Inc.
McLean, Virginia
F. James Rechin+
CEO
Searchlight Corporation
Waite Hill, Ohio
Richard K. Riederer
Vice-President and Chief Financial Officer
Weirton Steel Corporation
Weirton, West Virginia
Richard F. Schubert+
President and CEO
The Points of Light Foundation
Washington, D.C.
Phillip H. Smith
President
Smith, Yuill & Co., Inc. *Member of Audit Committee
Pittsburgh, Pennsylvania +Member of Compensation
Committee
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of Weirton Steel Corporation as of March 15,
1994 were as follows:
Herbert Elish,
President, Chairman, and
Chief Executive Officer
Craig T. Costello,
Vice President
Operations
William C. Brenneisen
Vice President
Human Resources
James B. Bruhn
Vice President
Tin Mill Products Business
Thomas W. Evans
Vice President
Materials Management
David M. Gould
Vice President
Sales and Marketing, Sheet Products
William R. Kiefer
Vice President
Law and Secretary
Dennis R. Mangino
Vice President
Product Quality and WEIRTEC
Narendra M. Pathipati
Treasurer
Richard K. Riederer
Vice President
and Chief Financial Officer
Mac S. White, Jr.
Vice President
Engineering
ESOP INFORMATION
Inquiries about Employee Stock Ownership Plan accounts should be
directed to Weirton Steel Corporation ESOP Administrator, at the
Executive Offices.
STOCKHOLDER INFORMATION
Additional copies of this Annual Report or Form 10-K and 10-Q
reports to the Securities and Exchange Commission and copies of the
Corporation's quarterly reports can be obtained by writing to:
Investor Relations
Weirton Steel Corporation
400 Three Springs Drive
Weirton, West Virginia 26062-4989
Phone (304) 797-2728
NOTICE OF ANNUAL MEETING
A notice of the annual meeting and proxy statement and a proxy
voting card as well as a copy of the current Annual Report will be
mailed to each stockholder prior to the meeting.
EXECUTIVE OFFICES
Weirton Steel Corporation
400 Three Springs Drive
Weirton, West Virginia 26062-4989
STOCK TRANSFER
The stock transfer agent and registrar is Society National Bank of
Cleveland, Ohio. Stockholders wishing to transfer stock to someone
else or to change the name on a stock certificate should contact
the Shareholder Communications Department, Society National Bank,
2073 E.9th Street, P.O. Box 6477, Cleveland, Ohio 44101-1477,
Telephone (216)737-5745 for assistance. Changes of address or
questions regarding stockholder accounts should also be directed to
the Shareholder Communications Department.
INDEPENDENT ACCOUNTANTS
Weirton's independent accountants are Arthur Andersen & Co., 2100
One PPG Place, Pittsburgh, Pennsylvania 15222.
Exhibit 22.1
Subsidiaries of the Registrant
Subsidiary: Weirton Receivables, Inc.
Percentage owned by Registrant: 100%
State of incorporation: Delaware
Exhibit 24.1
Arthur Andersen & Co.
2100 One PPG Place
Pittsburgh, PA 15222
Consent of Independent Public Accountants
As independent Public Accountants, we hereby consent to the incorporation
of our reports, included or incorporated by reference in this Form 10-K,
into the Company's previously filed Registration Statement on Form S-8,
Registration No. 33-31429, relating to the Company's 1989 Employee Stock
Purchase Plan.
/s/Arthur Andersen & Co.
Arthur Andersen & Co.
Pittsburgh, Pennsylvania
March 28, 1994
