Second Quarter 1994
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D C 20549
FORM 10-Q
[X] Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period ended June
30, 1994.
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
- ----------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(304)-797-2000
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[ ]
The number of shares of Common Stock ($.01 par value) of the
Registrant outstanding as of July 31, 1994 was 26,743,314.
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WEIRTON STEEL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME-Unaudited
(Dollars in thousands, except per share data)
<CAPTION>
Three Months Ended
June 30,
1994 1993
-------------------
<S> <C> <C>
NET SALES $335,488 $301,341
OPERATING COSTS:
Cost of sales 311,856 280,403
Selling, general, administrative 7,689 8,376
Depreciation 13,050 13,224
Restructuring charge 0 0
Total operating costs 332,595 302,003
-------- --------
INCOME (LOSS) FROM OPERATIONS 2,893 (662)
Unusual Item -- 32,543 -
Adjustment to carrying value
of damaged facility
OTHER INCOME(EXPENSE):
Interest expense (12,964) (13,280)
Interest income 1,189 549
Net other expense (11,775) (12,731)
-------- --------
Income (loss) before ESOP contr. 23,661 (13,393)
ESOP contribution 652 652
Income (loss) before income tax 23,009 (14,045)
Income tax benefit (provision) (4,372) 2,669
-------- --------
Income (loss) before extraord.item 18,637 (11,376)
Extraordinary item-loss on 0 0
early extinguishment of debt
-------- --------
Income (loss) before cumulative 18,637 (11,376)
effect of accounting changes
Cumulative effect on prior 0 0
years of accounting changes
-------- --------
Net Income (loss) $ 18,637 $(11,376)
Less: Preferred stock dividend 781 781
requirement -------- --------
Net Income (loss) applicable to $ 17,856 $(12,157)
common shares ======== ========
PER SHARE DATA:
Weighted average number of 28,515 26,578
common shares and equivalents
Income (loss) per common share $ 0.63 $ (0.46)
before cumulative effect on
prior years of acctg. changes
Cumulative effect of accounting - -
changes -------- --------
Net Income (loss) per common share $ 0.63 $ (0.46)
<CAPTION>
Six Months Ended
June 30,
1994 1993
-------------------
<S> <C> <C>
NET SALES $660,652 $599,059
OPERATING COSTS:
Cost of sales 600,301 560,276
Selling, general, administrative 15,595 16,160
Depreciation 25,334 24,398
Restructuring charge - 17,340
Total operating costs 641,230 618,174
-------- --------
Income (loss) from operations 19,422 (19,115)
Unusual Item-- 32,543 -
Adjustment to carrying value
of damaged facility
OTHER INCOME(EXPENSE):
Interest expense (26,047) (26,262)
Interest income 1,926 1,127
Net other expense (24,121) (25,135)
-------- --------
Income (loss) before ESOP contrib. 27,844 (44,250)
ESOP contribution 1,305 1,305
Income (loss) before income taxes 26,539 (45,555)
Income tax benefit (provision) (5,043) 8,656
-------- --------
Income (loss) before extraord.item 21,496 (36,899)
Extraordinary item-loss on - (6,549)
early extinguishment of debt
-------- --------
Income (loss) before cumulative 21,496 (43,448)
effect of accounting changes
Cumulative effect on prior - (179,803)
years of accounting changes
-------- --------
Net Income (loss) 21,496 (223,251)
Less: Preferred stock dividend 1,562 1,562
requirement -------- --------
Net income (loss) applicable to $ 19,934 (224,813)
common shares ======== ========
PER SHARE DATA:
Weighted average number of 28,469 26,529
common shares and equivalents
Loss per common share before $ 0.70 $ (1.44)
extraordinary item
Extraordinary item - (0.25)
Loss per common share before -------- --------
cumulative effect of acctg changes 0.70 (1.69)
Cumulative effect of acctg changes - (6.78)
----- --------
Net Income (loss) per common share $ 0.70 $ (8.47)
======== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
WEIRTON STEEL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS - Unaudited
(Dollars in thousands, except per share amount)
<CAPTION>
June 30, 1994 December 31, 1993
------------------ -----------------
ASSETS:
Current assets:
<S> <C> <C>
Cash and equivalents, $ 172,184 $ 89,002
includes restricted cash of
$1224 and $602, respectively
Notes and accounts receivable, 133,804 129,004
less allowances of $6,949
and $5,719, respectively
Inventories 172,550 242,659
Other current assets 54,192 29,589
------------ -----------
Total current assets 532,730 490,254
Property, plant, and 507,050 523,728
equipment, net
Deferred income taxes 112,231 117,273
Other assets and deferred 16,607 17,170
charges ------------ -----------
TOTAL ASSETS $1,259,907 $1,240,714
============ ===========
<CAPTION>
LIABILITIES, REDEEMABLE STOCK AND STOCKHOLDERS' EQUITY:
<S> <C> <C>
LIABILITIES:
Current liabilities 215,107 228,038
Long term debt 495,320 495,252
Postretirement benefits other 147,815 142,894
than pensions
Other long term liabilities 321,374 308,985
------------ ----------
TOTAL LIABILITIES 1,203,359 1,205,357
REDEEMABLE STOCK: 37,980 36,721
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 270 267
50,000,000 shares authorized;
27,116,797 and 26,719,752
shares issued, respectively
Additional paid-in capital 336,785 335,776
Retained earnings (316,601) (336,535)
Other stockholders' equity (1,886) (872)
------------ -----------
TOTAL STOCKHOLDERS' EQUITY 28,568 (1,364)
(DEFICIT) ------------ -----------
TOTAL LIABILITIES, REDEEMABLE $1,259,907 $1,240,714
STOCK AND STOCKHOLDERS' EQUITY ============
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
WEIRTON STEEL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - Unaudited
(Dollars in thousands)
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1994 1993
-----------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 95,406 $ 58,053
- -----------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
- -----------------------------------------
Expenditures for property, plant and (7,257) (3,313)
equipment
CASH FLOWS FROM FINANCING ACTIVITIES
- -----------------------------------------
Increase in term debt - 140,000
Reduction in term debt - (148,114)
Debt issuance fees - (3,611)
Dividends paid (1,562) (1,562)
Other, principally net book overdrafts (3,405) (313)
-------- --------
NET CASH USED BY FINANCING ACTIVITIES (4,967)
(13,600)
-------- --------
NET CHANGE IN CASH AND EQUIVALENTS 83,182 41,140
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 89,002 61,195
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD 172,184 102,335
-------- --------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid, net of interest capitalized $25,824 $21,974
Income taxes paid(refunded) - -
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
WEIRTON STEEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(In thousands of dollars, or in millions
of dollars where indicated)
Note 1
BASIS OF PRESENTATION
For the period ended June 30, 1994, the Consolidated
Financial Statements herein include the accounts of Weirton Steel
Corporation and its wholly-owned subsidiary, Weirton Receivables,
Inc. (on and after August 26, 1993). Prior to such date, 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 "Registrant."
The Consolidated Condensed Financial Statements presented
herein are unaudited. Certain information and footnote
disclosures normally prepared in accordance with generally accepted
accounting principles have been either condensed or omitted
pursuant to the rules and regulations of the Securities and
Exchange Commission. Although the Registrant believes that all
adjustments necessary for a fair presentation have been made,
interim periods are not necessarily indicative of the results of
operations for a full year. As such, these financial statements
should be read in conjunction with the financial statements and
notes thereto included or incorporated by reference in the
Registrant's 1993 Annual Report on Form 10-K.
Certain portions of the prior period's financial
statements have been reclassified where necessary to conform to the
presentation used in the current period.
Note 2
INVENTORIES
Inventories consisted of the following at June 30, 1994 and
December 31, 1993:
June 30, December 31,
1994 1993
____________ ___________
Raw materials $ 42,223 $ 74,766
Work-in-process 61,153 74,109
Finished goods 69,174 93,784
___________ __________
$ 172,550 $ 242,659
Note 3
ESOP ACCOUNTING
The contributions of $0.7 million for the three months ended
June 30, 1994 and 1993 and $1.3 million for the six months ended
June 30, 1994 and 1993 represent a provision for contributions to
the 1989 Employee Stock Ownership Plan (the "1989 ESOP"), net of
any preferred stock dividends used to reduce debt service for the
1989 ESOP. The 1994 and 1993 contributions were required to be
increased because Convertible Voting Preferred Stock, Series A (the
"Series A Preferred") dividends normally payable quarterly were
omitted. The Series A preferred stock ranks equally with the
Registrant's common stock as to the payment of dividends.
Accordingly, unpaid dividends on the Series A preferred are not
cumulative.
Note 4
EARNINGS (LOSS) PER SHARE
The weighted average number of common and equivalent shares
used in the computations of earnings (loss) per share were
28,515,033 and 26,577,733 for the three months ended June 30, 1994
and 1993, and 28,468,635 and 26,528,628 for the six months ended
June 30, 1994 and 1993, respectively. The shares of Series A
Preferred were excluded from the 1993 calculations due to their
antidilutive effect.
Note 5
AUTHORIZED COMMON STOCK
On May 26, 1994, stockholders approved a proposal amending,
among other things, the Registrant's Restated Certificate of
Incorporation increasing the number of shares comprising its
authorized common stock, from 30.0 million shares to 50.0 million
shares. The amendment provides that 15.0 million shares of such
increase are to be issued only in one or more public offerings of
the Registrant's common stock and that up to 5.0 million shares of
such increase are to be issued only pursuant to employee benefit
plans. The Registrant has filed with the Securities and Exchange
Commission a registration statement providing for a public offering
of 15.0 million of the newly authorized common shares.
Note 6
RECENT MAJOR DAMAGE TO FACILITY
On April 6, 1994, the Registrant's No. 9 Tandem Mill (the "No.
9 Tandem") sustained major damage from a fire which occurred while
the unit was undergoing maintenance. This cold rolling facility
normally supplies approximately 70% to 80% of the coils required by
the Registrant's tin plating operations. The Registrant began
rebuilding and repair operations immediately to restore the No. 9
Tandem as quickly as practicable. At this time, the repair work to
repair No. 9 Tandem is proceeding on schedule; however, the
Registrant does not believe the unit can be returned to full
operations before the fourth quarter of 1994. While the No. 9
Tandem is out of service, the Registrant is increasing the cold
rolling output of its remaining facilities. The Registrant has
also compensated for the reduction in cold rolling capacity by
increasing its sales of hot rolled products. The Registrant may
also seek to have its hot bands cold rolled through tolling
arrangements with other producers and acquire cold rolled product
where available for further finishing. For the year 1993, TMP
accounted for approximately 46% of the Registrant's revenues and
37% of its shipments.
The Registrant maintains insurance for both property damage
and business interruption applicable to the No. 9 Tandem. The
policies providing these coverages are subject to deductibles of
$0.5 million for property damage and $5.0 million for business
interruption. The claims process has been commenced and advances
have been collected from the insurance carrier. Insurance
recoveries for property damage associated with events of this type
require the recognition of a new cost basis for the rebuilt
facility. As a result, the Registrant recognized a pretax gain of
$32.5 million in the second quarter of 1994. Since the length of
time required to restore the No. 9 Tandem to full operations and to
resolve the Company's claim has yet to be determined, the
Registrant is not, at this time, able to estimate the amount of
recovery under its business interruption coverage.
Note 7
ACCOUNTING CHANGES
Effective January 1, 1993, the Registrant adopted Statement
of Financial Accounting Standards ("SFAS") No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions", SFAS
No. 109, "Accounting for Income Taxes", and SFAS No. 112,
"Employers' Accounting for Postemployment Benefits". Previously,
postretirement and postemployment benefits were accounted for by
the Registrant on the cash basis and the Registrant followed the
provisions of Accounting Principles Board Opinion No. 11 in
accounting for income taxes. The cumulative effect of these
accounting changes was recognized during the first quarter of 1993,
as reflected in the Registrant's statement of income for the six
month period ended June 30, 1993.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis of the Registrant's financial
condition and results of operations should be read together with
the consolidated condensed financial statements and notes thereto.
For the periods ended June 30, 1994, the consolidated financial
statements of Weirton Steel Corporation include the accounts of its
wholly-owned subsidiary Weirton Receivables, Inc. (on and after
August 26, 1993). Prior to such date, 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 "Registrant."
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1994 COMPARED WITH THREE MONTHS ENDED
JUNE 30, 1993
In the second quarter of 1994 the Registrant recognized net
income of $18.6 million, or $0.63 per share, compared to a net loss
of $11.4 million, or $0.46 per share, for the same period in 1993.
Operating and net results for the second quarter were
adversely affected by a fire that occurred on April 6, 1994 that
extensively damaged the Registrant's No. 9 Tandem. Nevertheless,
the operating profit of $2.9 million in the second quarter of 1994,
which reflected lower shipments of tin mill products and higher
operating costs caused by the No. 9 Tandem outage, exceeded the
operating performance for the same quarter last year when an
operating loss of $0.7 million was recognized. Prior to the second
quarter of 1994, the Registrant had achieved five consecutive
quarters of improved operating performance. Based upon current
pricing for its products and assuming a mix of products consistent
with that shipped in the first quarter of 1994, the Registrant
believes its operating performance, in the absence of the damage to
the No. 9 Tandem, would have continued to improve.
Under current accounting rules, certain property damage
insurance recoveries associated with events such as the damage to
the No. 9 Tandem result in the recognition of a new cost basis for
the rebuilt facility and the requirement to recognize a gain.
Based upon the nature of the recoveries associated with the damage
to the No. 9 Tandem, the Registrant recognized in the second
quarter of 1994 a pretax gain of $32.5 million. Without the gain
recognition, second quarter net results would have been reduced as
a result of the No. 9 Tandem outage to a net loss of $7.7 million.
Net sales in the second quarter of 1994 increased $34.1
million, or 11.3% to $335.5 million from $301.3 million in the
second quarter of 1993. Total shipments in the second quarter of
1994 of 702.0 thousand tons represented an increase of 12.5% over
1993's second quarter total shipments of 624.0 thousand tons.
Demand for the Registrant's sheet products remained strong in
the second quarter of 1994, especially for its hot rolled products.
Production scheduling designed to minimize the effect of the No. 9
Tandem outage placed emphasis on hot rolled production, which
contributed to the significant increase in volume of hot rolled
product shipped in the second quarter of 1994 compared to the same
quarter last year. Shipments of hot rolled products increased by
116.3 thousand tons, or 67%, with volume increases to a lesser
extent for both cold rolled and galvanized products. These higher
volumes resulted in total sheet product shipments increasing by
30.3% in the second quarter of 1994 compared to the same quarter in
1993 and resulted in an increase in revenues between the two
periods of $40.3 million.
Increased demand for the Registrant's sheet products resulted
in the realization of higher selling prices across the product line
in general, and hot rolled in particular. Revenues in the second
quarter of 1994 were favorably affected by $15.4 million as a
result of higher selling prices compared to the same quarter last
year. Changes in customer mix also favorably affected sheet
product revenues by $5.4 million between the two periods.
The outage of the No. 9 Tandem, as noted above, has caused a
shift in production which is reflected in the lower volume of
shipments of TMP in the second quarter of 1994 compared to the
second quarter of 1993. TMP shipments were 46.2 thousand tons, or
21.7%, lower in the 1994 second quarter and resulted in a decline
in TMP revenues of $29.3 million compared to the second quarter of
1993.
Higher selling prices for TMP increased revenues by $2.7
million while changes in customer mix lowered revenues by $0.4
million in the second quarter of 1994 compared to the same quarter
last year.
The Registrant continues to apply its strategic program to
reduce a broad range of production costs, lower spending and
improve yields. The program includes workforce reductions which
were approximately 8% from mid-1992 through year end 1993. The
Registrant's goal is to further reduce its workforce over the next
three years consistent with the limitations allowed by its
collective bargaining agreements. The Registrant's capital
improvement program has lowered the Registrant's operating costs by
providing greater production yields and generally improved
performance at several operating units, including its blast
furnaces, continuous caster, hot mill and sheet mill operations.
Several of these units have achieved production records since
completion of the capital program. The cost reduction and capital
improvement programs have more than offset higher energy, labor,
and retiree healthcare costs. The result has been a steady
improvement in operating performance. While changes in product mix
and volume have contributed to a $10 reduction in operating costs
in the second quarter of 1994 compared to the same quarter last
year, the reduction also reflects the Company's improvement in
operating performance. Such lower operating costs did not benefit
from the effect of the gain recognized from the No. 9 Tandem
rebuild, and were unfavorably affected by the incremental costs
caused by the outage and other one time miscellaneous second
quarter adjustments.
(Dollars in thousands, Second Quarter
except per ton data) 1994 1993
Operating Costs $332,595 $302,003
Shipments in tons 702,300 623,800
------- -------
Operating Cost per Ton $474 $484
In its continuing efforts to improve profit margins and
operating efficiency, the Registrant has focused its attention on
improving the performance of its finishing operations, specifically
that of its tin mill. However, the damage to the No.9 Tandem has
temporarily interrupted these efforts. Under the Registrant's
accelerated repair schedule, nearly all structural repairs to the
No. 9 Tandem have been completed. Start-up of the rebuilt facility
is scheduled for mid-October 1994, and full production is expected
to resume during the fourth quarter.
The Registrant's financing costs remained relatively high in
the second quarter of 1994 and comparable to those experienced in
the second quarter of 1993 due to the costs associated with the
Registrant's public sale of $140 million of 11-1/2% Senior Notes in
the first quarter of 1993, the proceeds of which were used to
reduce certain indebtedness.
The Registrant recognized a deferred income tax provision of
$8.7 million in the second quarter offset by a benefit of $4.4
million to adjust its deferred tax asset valuation reserve.
SIX MONTHS ENDED JUNE 30, 1994 COMPARED WITH SIX MONTHS ENDED JUNE
30, 1993
For the first six months of 1994, the Registrant reported net
income of $21.5 million or $0.70 per share compared to a loss
before the effect of accounting changes for the first six months of
1993 of $43.4 million. The 1993 period also included a pretax
restructuring charge of $17.3 million. The Registrant's net income
for the first six months of 1994 included the $32.5 million pretax
gain associated with the No. 9 Tandem recognized in the second
quarter, as described above, as well as incrementally higher
operating costs caused by the related outage. Without the gain,
results for the first six months of 1994 would have been reduced as
a result of the outage to a net loss of $4.9 million.
The Registrant's operating profit of $19.4 million through the
second quarter of 1994 continued to demonstrate improved operating
performance. Notwithstanding the adverse effects of the No. 9
Tandem outage, the Registrant's 1994 operating results compared
favorably to the first six months of 1993 when the Registrant had
an operating loss of $1.8 million, before the restructuring charge.
Net sales for the first six months of 1994 were $660.7
million, an increase of $61.6 million, or 10.3%, from $599.1
million in the same 1993 period. Reflective of the strength of
demand for the Registrant's sheet products, total shipments of
1,358.0 thousand tons showed a 10.2% increase over the 1,232.0
thousand tons shipped in the same period of 1993.
Demand for the Registrant's sheet products was strong in the
first half of 1994 and combined with the second quarter production
shift driven by the No. 9 Tandem outage described above, shipments
of hot rolled products increased by 170.5 thousand tons, or 53%,
compared to the first half of 1993. This volume increase together
with smaller volume increases for both cold rolled and galvanized
products, contributed to an increase in revenues of $65.8 million
compared to the first half of 1993.
Higher selling prices for the Registrant's sheet products, hot
rolled in particular, resulted in an increase in sheet product
revenues of $32.3 million compared to the first half of 1993.
Changes in customer mix added $9.2 million in higher revenues
between the two periods.
The No. 9 Tandem outage in the second quarter of 1994 caused
lower shipments of TMP through the first six months of 1994 of 74.8
thousand tons compared to the first six months of 1993. This
reduction in volume caused a $47.6 million decline in revenues
between the two periods.
Generally higher TMP selling prices for the first six months
of 1994 compared to the same period last year contributed $2.0
million in higher revenues offset by $0.1 million of changes in
customer mix between the two periods.
The Registrant's continued application of its strategic
program has lowered its operating costs by providing greater
production yields and generally improved performance at several
operating units, including its blast furnaces, continuous caster,
hot mill and sheet mill operations. Several of these units have
achieved production records since completion of the capital
program. The cost reduction and capital improvement programs have
more than offset higher energy, labor, and retiree healthcare
costs. The result has been a steady improvement in operating
performance. While changes in product mix and volume have
contributed to a $16 reduction in operating costs in the first half
of 1994 compared to the first half of last year, the reduction also
reflects the Company's improvement in operating performance. Such
lower operating costs did not benefit from the effect of the gain
recognized from the No. 9 Tandem rebuild, and were unfavorably
affected by the incremental costs caused by the outage and other
one time miscellaneous second quarter adjustments.
Six months ended
(Dollars in thousands, June 30, June 30,
except per ton data) 1994 1993
Operating Costs $641,230 $618,174
Restructuring charge - 17,340
------- -------
641,230 600,834
Shipments in tons 1,358,400 1,232,000
------- -------
Operating Cost per Ton $472 $488
before restructuring charge
In its continuing efforts to improve profit margins and
operating efficiency, the Registrant has focused its attention on
improving the performance of its finishing operations, specifically
that of its tin mill. However, the damage to the No.9 Tandem has
temporarily interrupted these efforts. Under the Registrant's
accelerated repair schedule, nearly all structural repairs to the
No. 9 Tandem have been completed. Start-up of the rebuilt facility
is scheduled for mid-October 1994, and full production is expected
to resume during the fourth quarter.
The Registrant's financing costs remained relatively high in
the first half of 1994 and comparable to those experienced in the
first half of 1993 due to the costs associated with the
Registrant's refinancing and public sale of $140 million of 11-1/2%
Senior Notes in the first quarter of 1993, the proceeds of which
were used to reduce certain indebtedness.
The Registrant recognized a deferred income tax provision of
$10.1 million in the first half of 1994 offset by a benefit of $5.0
million to adjust its deferred tax asset valuation reserve.
LIQUIDITY AND CAPITAL RESOURCES
The Registrant's cash and equivalents of $172.2 million at
June 30, 1994 was considerably higher than the $89.0 million on
hand at December 31, 1993. This increase was attributable
primarily to improved operating results exclusive of noncash
charges, a reduction in inventories, and the receipt of advances
from the Registrant's insurance carrier related to the No. 9
Tandem. Net investing activities totalled $7.3 million, with an
estimated $40.6 million in capital expenditures set for 1994.
The Registrant's capitalization as shown below includes three
main elements: long-term debt obligations, redeemable stock, and
stockholders' equity from January 1, 1991 through June 30, 1994.
<TABLE>
<CAPTION>
June 30, % of Jan. 1, % of
(Dollars in millions) 1994 Total 1991 Total
________ _______ ________ _______
<S> <C> <C> <C> <C>
Long-term debt, $495.3 90% $ 398.9 55%
including current portion
Redeemable stock 38.0 7 3.9 1
Stockholders' equity 18.6 3 316.5 44
________ _______ ________ _______
Total Capitalization $551.9 100% $ 719.3 100%
</TABLE>
The significant decline in the Registrant's stockholders'
equity from January 1, 1991 through June 30, 1994 resulted from its
net losses over this period of $314.3 million (which include a
pretax restructuring charge of $17.3 million and an after tax
extraordinary charge of $6.5 million, both of which were recognized
in 1993) and the net after tax effect of required changes in
certain accounting principles primarily related to retiree
healthcare and income taxes that reduced stockholders' equity by
$175.4 million. The Registrant's financial flexibility is severely
restricted by its heavy debt load and lack of equity.
In order to reduce its financial leverage and improve its
flexibility, the Registrant is seeking to implement various
financing strategies. These include, but are not limited to, the
sale of equity securities. In May 1994, the Registrant's
stockholders approved an increase in the Registrant's authorized
common stock by 20.0 million shares, 15.0 million of which are to
be used in public offerings and 5.0 million are to be sold to
employees. The Registrant has registered with the Securities and
Exchange Commission 15.0 million shares of common stock and 2.0
million shares of common stock held by its defined benefit pension
plan for sale through underwriters. The Registrant expects that
the sale of such securities will take place as soon as practicable
following the effectiveness of the registration statement. The
proceeds of such offering, if completed, will be used to reduce
long term liabilities and other obligations and to contribute to
the Registrant's pension plan. The Registrant will not receive the
proceeds from the sale of 2.0 million shares of common stock held
by its defined benefit plan.
On August 5, 1994, the Registrant, WRI and the participating
banks agreed to extend the 1993 receivables participation facility
for an additional year through August 24, 1997.
INVESTMENT IN FACILITIES
Capital expenditures for the first two quarters of 1994
totalled $7.3 million, with anticipated spending for the remainder
of the year estimated to approximate $34.0 million. These estimates
exclude any additional expenditures the Registrant considers
appropriate associated with the rebuilding of the No. 9 Tandem
Mill.
The Registrant does not anticipate the damage to the No. 9 Tandem
to adversely affect its short term or long term liquidity.
Spending included in the 1994 capital plan concentrates on the
Registrant's finishing operations.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A hearing is scheduled for August 9, 1994, in the Hancock
County Circuit Court of West Virginia, on the proposed settlement
reached June 29, 1994, between the plaintiffs and defendants in the
proceeding Godich, et al. v. Elish, et al. The details of such
settlement were filed as Exhibit 1 to Form 8-K on July 11, 1994.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 26, 1994, a special meeting of stockholders was
held to approve a proposal:
(1) amending the Registrant's Restated Certificate of
Incorporation to increase the number of shares comprising the
Registrant's authorized Common Stock, par value $.01 per share,
from 30.0 million shares to 50.0 million shares; (2) amending the
Registrant's Restated Certificate of Incorporation to add one
director (increasing from 13 to 14); create a new category of
director known as ESOP director; change qualification requirements
for independent directors; and impose age limits on directors; and
(3) amending the Registrant's By-laws to add the ESOP director to
the Nominating Committee of the Board of Directors.
Outstanding and entitled to vote on the above matters were
26,736,968 shares of Common Stock and 1,780,282 shares of Series A
Preferred, voting as a single class with each share of Series A
Preferred Stock entitled to ten votes and each share of Common
Stock entitled to one vote.
The number of votes cast for, against or withheld on the
Proposal were: 33,762,567, 4,962,776 and 14,145, respectively.
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 1. - Amendment to Exhibit 10.8 (Agreement between
the Registrant and Thomas W. Evans) filed
with the Registrant's Annual Report on Form 10-K March 30, 1994.
(b) Reports on Form 8-K
The Registrant filed a report on Form 8-K on July 11,
1994, containing information pursuant to Item 5
thereof.
The Registrant filed a report on Form 8-K on July 19,
1994, containing information pursuant to Item 5 thereof.
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
WEIRTON STEEL CORPORATION
Registrant
By /s/Richard K. Riederer
Richard K. Riederer
Vice President and Chief Financial Officer
August 9, 1994
Exhibit 1.
Amendment to Employment Agreement between the Registrant and Thomas
W. Evans filed as Exhibit 10.8 to the Registrant's Annual Report
for the year ended December 31, 1993 on Form 10-K filed March 30,
1994.
February 25, 1993
Mr. Thomas W. Evans
P.O. Box 2814
Weirton, WV 26062
Dear Tom:
This letter sets forth an amended agreement (the "Agreement")
between Weirton Steel Corporation ("Weirton") and you the
("Employee") pursuant to which Weirton will pay or provided the
Employee or, if applicable, the Employee's surviving spouse, a
supplemental pension and medical benefits in accordance with and
subject to the provisions hereof.
1. Upon the Employee's separation from service with Weirton
for any reason, Weirton agrees to pay the Employee or, in the event
such separation occurs by reason of the Employee's death, the
Employee's surviving spouse, a supplemental pension determined
under Section 3 or 4 below, whichever is applicable; provided,
however, that if such separation of service occurs prior to the
Employee's completion of ten years of Service (as defined in the
Weirton Steel Corporation Retirement Plan (the "Retirement Plan")
by reason of voluntary resignation or discharge for cause, the
Employee will not be entitled to a supplemental pension under this
Agreement. Notwithstanding the foregoing, if such separation
occurs prior to the Employee's completion of ten years of Service
involuntarily other than for cause or by reason of death, the
Employee or his surviving spouse shall be entitled to a
supplemental pension hereunder.
2. For purposes of determining eligibility for medical and
life insurance in retirement and calculating the amount of the
supplemental pension payable under the Agreement:
(A) Service and Benefit Service shall be determined in
accordance with the Plan.
(B) Increased Service and Increased Benefit Service
shall be determined as follows:
(i) Upon the Employee's separation from service for
any reason after completion of ten years of service, his Increased
Service will be 17 years plus his Service in excess of ten years
and his Increased Benefit Service will be 17 years plus his Benefit
Service in excess of ten years.
(ii) Upon the Employee's involuntary separation
from service involuntarily other than for cause or by reason of
death prior to completion of ten years of Service, his Increased
Service and Increased Benefit Service will both be 17 years.
3. Upon the Employee's separation from service other than by
reason of death, the amount of the supplemental pension payable to
him will be the excess of:
(a) his aggregate regular pension calculated under the
terms of the Retirement Plan, based on his Increased Service and
his Increased Benefit Service as of his separation from service,
over
(b) his aggregate regular pension calculated under the
terms of the Retirement Plan, based on his Service and Benefit
Service as of his separation from service.
4. Upon the Employee's separation f rom service by reason of
death, the amount of the supplemental pension payable to his
surviving spouse will be the excess of:
(a) the aggregate surviving spouse's benefit, if
eligible thereof, or pre-retirement survivor annuity, if
applicable, under the terms of the Retirement Plan, based on his
Increased Service and Increased Benefit Service as of his death,
over
(b) the aggregate surviving spouse's benefit, if
eligible therefore, or pre-retirement survivor annuity, if
applicable, calculated under the terms of the Retirement Plan,
based on his Service and Benefit Service as of his death.
5. The supplemental pension hereunder payable to the Employee
or his surviving spouse shall commence on the same day his regular
pension or spouse's benefit under the Retirement Plan commences and
shall be payable in monthly installments in the same form of
payment as his regular pension or spouse's benefit is being paid
under the Retirement Plan. The supplemental pension payable
hereunder shall be subject to the sam adjustments as apply to the
regular pension or spouse's benefit, whichever is applicable, under
the Retirement Plan.
6. If the Employee is separated from service for any reason
after completion of ten years of Service or is separated from
service involuntarily other than for cause or by reason of death
prior to completion of ten years of Service, he (or his surviving
spouse) will be eligible for the life and medical insurance
coverage provided by Weirton at retirement.
7. The benefits under this Agreement shall not be funded and
shall be paid from the general assets of Weirton.
8. This Agreement shall supersede and replace the Retirement
Benefit Agreement between Weirton and the Employee dated March 20,
1986 in its entirety and such Retirement Benefit Agreement shall
have no further effect.
If the foregoing provisions reflect your understanding of the
agreement between you and Weirton, kindly sign and return the
duplicate copy of this letter provided, whereupon it will become a
binding contract between Weirton and you.
Very truly yours,
Weirton Steel Corporation
By: /s/ Herbert Elish
Chairman, President, and
Chief Executive Officer
Agreed to and Accepted as of
the date first above written.
/s/ Thomas W. Evans
Thomas W. Evans
