Third 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
September 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 October 31, 1994 was 41,743,535.
<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
September 30,
1994 1993
-------------------
<S> <C> <C>
NET SALES $295,867 $300,727
OPERATING COSTS:
Cost of sales 266,105 277,529
Selling, general, administrative 7,782 8,461
Depreciation 12,000 13,641
Provision for profit sharing 5,747 -
Restructuring charge - -
Total operating costs 291,634 299,631
-------- --------
INCOME (LOSS) FROM OPERATIONS 4,233 1,096
OTHER INCOME(EXPENSE):
Interest expense (13,259) (13,351)
Interest income 2,558 826
Net other income(expense) (10,701) (12,525)
-------- --------
Income (loss) before ESOP cont. (6,468) (11,429)
ESOP Contribution 653 653
Income (loss)before income taxes (7,121) (12,082)
Income tax provision (benefit) (2,863) (2,296)
-------- --------
Income (loss) before extraord.item (4,258) (9,786)
Extraordinary item-loss on - -
early extinguishment of debt
-------- --------
Income (loss)before cumulative (4,258) (9,786)
effect of accounting changes
Cumulative effect on prior 0 0
years of accounting changes
-------- --------
Net Income (loss) $ (4,258) $ (9,786)
Less: Preferred stock dividend 776 781
requirement -------- --------
Net Income (loss) applicable to $ (5,034) $(10,567)
common shares ======== ========
PER SHARE DATA:
Weighted average number of 33,260 26,458
common shares and equivalents
Income (loss) per common share $ (0.15) $ (0.40)
before cumulative effect on
prior years of acctg. changes
Cumulative effect of accountin - -
changes -------- --------
Net Income (loss) per common share $ (0.15) $ (0.40)
<CAPTION>
Nine Months Ended
September 30,
1994 1993
-------------------
<S> <C> <C>
NET SALES $956,519 $899,786
OPERATING COSTS:
Cost of sales 866,406 837,805
Selling, general, administrative 23,377 24,621
Depreciation 37,334 38,039
Provision for profit sharing 5,747 -
Restructuring charge - 17,340
Total operating costs 932,864 917,805
-------- --------
Income (loss) from operations 23,655 (18,019)
Unusual item--adjustment to
carrying value of damaged facility 32,543 -
Other income(expense):
Interest expense (39,306) (39,613)
Interest income 4,484 1,953
Net other income(expense) (34,822) (37,660)
-------- --------
Income (loss)before ESOP contr. 21,376 (55,679)
ESOP Contribution 1,958 1,958
Income (loss)before income taxes 19,418 (57,637)
Income tax provision (benefit) 2,180 (10,952)
-------- --------
Income(loss)before extraord. item 17,238 (46,685)
Extraordinary item-loss on - (6,549)
early extinguishment of debt
-------- --------
Income (loss)before cumualtive 17,238 (53,234)
effect of accounting changes
Cumulative effect on prior - (179,803)
years of accounting changes
-------- --------
Net Income (loss) 17,238 (233,037)
Less: Preferred stock dividend 2,339 2,344
requirement -------- --------
Net Income (loss) applicable to $ 14,899 (235,381)
common shares ======== ========
PER SHARE DATA:
Weighted average number of 31,114 26,495
common shares and equivalents
Income (loss) per common share $ 0.48 $ (1.85)
before extraordinary item
Extraordinary item - (0.25)
Income(loss)per common share bef. -------- --------
cumulative effect of acctg changes 0.48 (2.10)
Cumulative effect of acctg changes - (6.78)
-------- --------
Net Income (loss) per common $ 0.48 $ (8.88)
share ======== ========
<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>
9/30/94 12/31/93
------------ ----------
ASSETS:
<S> <C> <C>
Cash, equivalents and deposits, $ 209,459 $ 89,002
includes restricted cash of
$1,120 and $602, respectively
Notes and Accounts Receivable, 127,537 129,004
less allowances of $7,384
and $5,719, respectively
Inventories 207,038 242,659
Insurance claims 11,658 1,201
Other Current Assets 29,187 28,388
---------- -----------
Total Current Assets 584,879 490,254
Property, Plant, and 538,891 523,728
Equipment, net
Intangible assets 91,289 91,289
Deferred Income Taxes 115,094 117,273
Other Assets and Deferred 15,255 18,170
Charges ----------- ---------
Total Assets $1,345,408 $1,240,714
========== ===========
LIABILITIES, REDEEMABLE STOCK AND STOCKHOLDERS' EQUITY:
<S> <C> <C>
Liabilities:
Current liabilities:
Pension liability - 20,394
Other 220,787 207,644
------- -------
Total current liabilities 220,787 228,038
Long term debt obligation 495,354 495,252
Long term pension obligation 139,821 142,894
Postretirement benefits other 321,268 308,985
than pensions
Other long term liabilities 25,042 30,188
--------- -----------
Total Liabilities 1,201,772 1,205,357
Redeemable Stock: 14,037 36,721
Stockholders' Equity:
Common Stock, $.01 par value; 420 267
50,000,000 shares authorized;
42,116,797 and 26,419,705
shares issued, respectively
Additional Paid-in Capital 452,722 335,776
Retained Earnings (321,633) (336,535)
Other Stockholders' Equity (1,910) (872)
--------- --------
Total Stockholders' Equity 129,599 (1,364)
(Deficit) --------- --------
Total Liabilities, Redeemable $1,345,408 $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>
NINE MONTHS ENDED
SEPTEMBER 30,
1994 1993
-----------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $72,899 $ 53,768
- -----------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
- -----------------------------------------
EXPENDITURES FOR PROPERTY, PLANT AND (52,497) (6,731)
EQUIPMENT
CASH FLOWS FROM FINANCING ACTIVITIES
- -----------------------------------------
INCREASE IN TERM DEBT - 140,000
REDUCTION IN TERM DEBT - (148,114)
Redemption of Preferred Stock, Series B (25,000) -
DEBT ISSUANCE FEES - (4,408)
DIVIDENDS PAID (2,339) (2,344)
ISSUANCE OF COMMON STOCK 116,063 -
PURCHASES OF COMMON TREASURY STOCK - (1,456)
OTHER, principally net book overdrafts 11,331 5,465
-------- --------
NET CASH PROVIDED (USED) BY FINANCING 100,055 (10,857)
ACTIVITIES -------- --------
NET CHANGE IN CASH AND EQUIVALENTS 120,457 36,180
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 89,002 61,195
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD 209,459 $97,375
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
INTEREST PAID, NET OF INTEREST CAPITALIZED $33,271 $29,675
INCOME TAXES PAID (Refund) - -
<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 September 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 September 30, 1994 and
December 31, 1993:
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
____________ ___________
<S> <C> <C>
Raw materials $ 67,885 $ 74,766
Work-in-process 73,115 74,109
Finished goods 66,038 93,784
___________ __________
$ 207,038 $ 242,659
</TABLE>
Note 3
ESOP ACCOUNTING
The contributions of $0.7 million for the three months ended September
30, 1994 and 1993 and $2.0 million for the nine months ended September 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 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 33,259,782 and 26,458,060 for the
three months ended September 30, 1994 and 1993, and 31,113,754 and 26,495,394
for the nine months ended September 30, 1994 and 1993, respectively. The shares
of Series A Preferred were excluded from the 1993 calculations due to their
antidilutive effect.
Note 5
CAPITALIZATION
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, $.01 par value per
share, from 30.0 million shares to 50.0 million shares. The amendment provided
that 15.0 million shares of such increase was to be issued only in conjunction
with public offerings of the Registrant's common stock and that up to 5.0
million shares of such increase was to be issued only pursuant to employee
benefit plans. As discussed below, the Registrant issued 15.0 million shares
pursuant to a
public offering during the third quarter of 1994. In addition, the Registrant's
Board of Directors approved a new stock purchase plan for employees (the
"Plan"). The Registrant has filed with the Securities and Exchange Commission
(the "Commission") a registration statement covering 5.0 million shares it has
reserved for issuance to employees pursuant to the Plan. The Plan is subject to
approval by stockholders of the Registrant.
During the second quarter of 1994, the Registrant sold in a registered
public offering 15.0 million of its newly authorized shares of common stock and
a fiduciary under the Registrant's defined benefit pension plan (the "Pension
Plan") sold a total of 4.55 million shares of its holdings of the Registrant's
common stock. The net proceeds available to the Registrant from the offering,
after deduction for expenses payable by the Registrant, were approximately
$116.1 million. The Registrant did not receive any proceeds from the sale of
shares of its common stock by the Pension Plan.
On September 15, 1994, the Registrant used a portion of the net proceeds
from the offering to make a discretionary contribution of $20.0 million to the
Pension Plan. On September 30, 1994, the Registrant used $25.0 million of the
net proceeds from the offering to redeem all .5 million shares of its Redeemable
Preferred Stock, Series B, at its issue price. The Registrant had issued the
stock in October 1991 in connection with an iron ore pellet supply contract. In
connection with the redemption, the supply agreement was extended by two years
through 2005. The foregoing stock issuance, redemption and Pension Plan
contribution are reflected in the respective accounts on the Registrant's
condensed consolidated balance sheet as of September 30, 1994 with the remaining
portion of the net proceeds included in the Registrant's cash as of such date.
Subsequent to September 30, 1994, the Registrant used the remaining portion
of the net proceeds from the offering and approximately $32.3 million of its
available cash on hand to reduce the level of its outstanding senior
indebtedness, which consists of its 11-1/2% Senior Notes due 1998 and its
10-7/8% Senior Notes due 1999, which are pari passu in rank.
The following table sets forth the capitalization of the Registrant at
December 31, 1993, September 30, 1994, and September 30, 1994, as adjusted to
reflect the use of the remaining net proceeds from the offering described above
and available cash on hand.
<TABLE>
<CAPTION>
(In thousands of dollars) December 31, September 30, September 30,
1993 1994 1994
As adjusted
<S> <C> <C> <C>
Debt obligations:
11-1/2% Senior notes due 1998 $140,000 $140,000 $107,150
10-7/8% Senior notes due 1999 300,000 300,000 231,749
8-5/8% Pollution control Bonds 56,300 56,300 56,300
due 2014
Less:
Unamortized debt discount 1,048 946 946
------- ------- -------
Total debt obligations $495,252 $495,354 $394,253
Redeemable stock 36,721 14,037 14,037
Stockholders'Equity:
Common stock 267 420 420
Additional paid-in capital 335,776 452,722 452,722
Retained earnings (336,535) (321,633) (321,633)
Other stockholders' equity (872) (1,910) (1,910)
------- ------- -------
Total stockholders' equity (1,364) 129,599 129,599
------- ------- -------
Total capitalization $530,609 $638,990 $537,889
======= ======= =======
</TABLE>
The table above does not reflect the after tax effect of an extraordinary
charge of approximately $3.9 million that the Registrant will recognize in the
fourth quarter of 1994 related to premiums associated with the repurchases of
its senior indebtedness and the recognition of previously deferred issue
costs and debt discount associated with the amounts repurchased. In
addition, the table does not reflect the after tax effect of a reduction in
the Registrant's financing costs resulting from the reduction in its debt
obligations.
If theoffering of the Registrant's common stock had taken place on January 1,
1994, and the net proceeds therefrom along with $32.3 million of the
Registrant's available
cash on hand been used as previously described, the net loss for the three month
period ended September 30, 1994 would have been reduced to $1.7 million and net
income for the first nine months of 1994 would have been increased to $20.9
million. Accordingly, the respective net results per share applicable to common
stock would have been a net loss of $.04 per share, and net income of $.50 per
share.
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 supplied approximately 70% to
80% of the coils required by the Registrant's tin plating operations. The
Registrant has since rebuilt the No. 9 Tandem and began start-up operations in
October 1994 and normal ramp-up adjustments and scheduling toward returning the
No. 9 Tandem to full production are expected in the fourth quarter.
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 is underway and
advances have been collected from the insurance carrier. Insurance recoveries
for property damage associated with events of this type require the recogni-
tion 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. Based
on the length of time that was required to restore the No. 9 Tandem, 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 nine month
period ended September 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 September 30,
1994 and December 31, 1993, 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 SEPTEMBER 30, 1994 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 1993
In the third quarter of 1994 the Registrant recognized a net loss of $4.3
million, or $0.15 per share, compared to a net loss of $9.8 million, or $0.40
per share, for the same period in 1993.
Operating and net results for the third quarter continued to be 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 $4.2 million
in the third 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 operating income
of $1.1 million was recognized. Prior to the No. 9 Tandem outage in 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 periods preceding
the No. 9 Tandem outage, the Registrant believes its operating performance would
have continued to improve through the third quarter of 1994 in the absence of
the damage to the No. 9 Tandem.
Net sales in the third quarter of 1994 decreased $4.8 million, or 1.6%, to
$295.9 million from $300.7 million in the third quarter of 1993. However, total
shipments in the third quarter of 1994 of 625.4 thousand tons represented an
increase of 4.6% over 1993's third quarter total shipments of 597.8 thousand
tons.
Demand for the Registrant's sheet products remained strong in the third
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 third quarter of 1994 compared to
the same quarter last year. Shipments of hot rolled products increased by
126.7 thousand tons, or 78%, with smaller volume increases for both cold roll
- -ed and galvanized products. These higher volumes resulted in total sheet
product shipments
increasing by 39.4% in the third quarter of 1994 compared to the same quarter in
1993 and resulted in increased revenues between the two periods of $51.1
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 third quarter of 1994 were favorably
affected by $10.2 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 No. 9 Tandem outage, as noted above, required a shift in production
which was reflected in the lower volume of shipments of Tin Mill Products
("TMP") in the third quarter of 1994 compared to the third quarter of 1993. TMP
shipments were 117.5 thousand tons, or 51.2%, lower in the 1994 third quarter
and resulted in a decline in TMP revenues of $72.4 million compared to the third
quarter of 1993.
Higher selling prices for TMP increased revenues by $1.7 million, while
changes in customer mix lowered revenues by $1.0 million in the third 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 contributed to a $31 per ton reduction in operating costs in the third
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 include the effect of a $32.5 million gain recognized in
the second quarter of 1994 from the No. 9 Tandem rebuild, which is discussed
below, but were unfavorably affected by the incremental costs caused by the
outage. Operating costs in the third quarter also include a provision for
employee profit sharing of $5.7 million, or $9.19 per ton.
<TABLE>
<CAPTION>
(Dollars in thousands, Third Quarter
except per ton data) 1994 1993
<S> <C> <C>
Operating Costs $279,634 $285,990
Shipments in tons 625,400 597,800
------- -------
Operating Cost per Ton $447 $478
</TABLE>
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 temporarily interrupted these efforts. Under
the Registrant's accelerated repair schedule, repairs to the No. 9 Tandem have
been completed. Start-up of the rebuilt facility took
in mid-October 1994, and normal ramp-up adjustments and scheduling toward
returning the No. 9 Tandem to
full production are expected in the fourth quarter. As a result, the
Registrant again expects to refocus its
attention on improving its finishing operations.
The Registrant's financing costs remained relatively high in the third
quarter of 1994 and comparable
to those experienced in the third quarter of 1993 due to a continued heavy
debt load. Recently, such debt has
been reduced as described under "Liquidity and Capital Resources."
The Registrant recognized a deferred income tax benefit of $4.1 million in
the third quarter offset by
a provision of $1.2 million to adjust its deferred tax asset valuation reserve.
NINE MONTHS ENDED SEPTEMBER 30, 1994 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1993
For the first nine months of 1994, the Registrant reported net income of
$17.2 million or $0.48 per share
compared to a loss before the effect of accounting changes for the first nine
months of 1993 of $53.2 million.
The 1993 period also included a pretax restructuring charge of $17.3 million.
The Registrant's net income for
the first nine months of 1994 included the $32.5 million pretax gain
associated with the No. 9 Tandem recognized
in the second quarter, as described below, as well as incrementally higher
operating costs caused by the related
outage. Without the gain, results for the first nine months of 1994 would
have been reduced as a result of the
outage to a net loss of $9.0 million or $0.31 per share.
The Registrant's operating profit of $23.7 million through the third 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 nine
months of 1993 when the Registrant
had an operating loss of $0.7 million, before the restructuring charge.
Net sales for the first nine months of 1994 were $956.5 million, an
increase of $56.7 million, or 6.3%,
from $899.8 million in the same 1993 period. Reflective of the strength of
demand for the Registrant's sheet
products, total shipments of 1,983.8 thousand tons showed an 8.4% increase over
the 1,829.7 thousand tons
shipped in the same period of 1993.
Demand for the Registrant's sheet products was strong in the first
nine months of 1994 and combined
with the second and third quarter production shift required by the No. 9
Tandem outage described above,
shipments of hot rolled products increased by 297.1 thousand tons, or 61%,
compared to the first nine months
of 1993. This volume increase, together with smaller volume increases for
both cold rolled and galvanized
products, contributed to an increase in revenues of $116.4 million compared
to the first nine months of 1993.
Higher selling prices for the Registrant's sheet products, hot
rolled in particular, resulted in an increase
in sheet product revenues of $42.8 million compared to the first nine
months of 1993. Changes in customer mix
added $15.0 million in higher revenues between the two periods.
The No. 9 Tandem outage resulted in lower shipments of TMP through
the first nine months of 1994
of 192.4 thousand tons compared to the first nine months of 1993. This
reduction in volume caused a $120.2
million decline in revenues between the two periods.
Generally higher TMP selling prices for the first nine months of
1994 compared to the same period last
year contributed $3.7 million in higher revenues offset by $0.9 million of
changes in customer mix between the
two periods.
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. There
was no similar event for the 1993 period.
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 $20
per ton reduction in operating costs in the first nine months of 1994
compared to the first nine months of last
year, the reduction also reflects the Company's improvement in operating
performance. Such lower operating
costs did not include the effect of a $32.5 million
gain recognized in the second quarter from the No. 9 Tandem
rebuild, which is discussed below, but were
unfavorably affected by the incremental costs caused by the outage.
Operating costs for the first nine months of 1994
also include a provision recognized in the third quarter of $5.7
million for employee profit sharing, or $2.90 per ton.
<TABLE>
<CAPTION>
Nine months ended
(Dollars in thousands, Sept.30, Sept.30,
except per ton data) 1994 1993
<S> <C> <C>
Operating Costs $895,530 $879,766
Restructuring charge - 17,340
------- -------
895,530 862,426
Shipments in tons 1,983,800 1,829,700
------- -------
Operating Cost per Ton $451 $471
before restructuring charge
</TABLE>
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 temporarily interrupted these efforts.
Under the Registrant's accelerated repair
schedule, repairs to the No. 9 Tandem have been completed. Start-up of the
rebuilt facility was in mid-October
1994, and normal ramp-up adjustments and scheduling
toward returning the No. 9 Tandem to full production
are expected in the fourth quarter. As a result,
the Registrant again expects to refocus its attention on improving
its finishing operations.
The Registrant's financing costs remained relatively high in the first nine
months of 1994 and comparable
to those experienced in the first nine months of 1993 due to a
continued heavy debt load. Recently, such debt
has been reduced as described under "Liquidity and Capital Resources."
The Registrant recognized a deferred income tax provision of
$6.0 million in the first nine months of
1994 offset by a benefit of $3.8 million to adjust
its deferred tax asset valuation reserve.
LIQUIDITY AND CAPITAL RESOURCES
The Registrant's cash and equivalents of $209.5 million at
September 30, 1994 was considerably higher
than the $89.0 million on hand at December 31, 1993, primarily from
remaining net proceeds from the sale of
15.0 million shares of its common stock in August 1994 and
the receipt of advances from the Registrant's
insurance carrier related to the No. 9 Tandem. Cash
provided from working capital items, principally through
a reduction in finished goods inventories, was offset by
higher payables and a reduction in current pension
liabilities, as noted below. Net investing activities
totaled $20.0 million, exclusive of the capital expenditures
associated with rebuilding the No. 9 Tandem.
A portion of the net proceeds from the sale of the common stock
were used to make a discretionary
contribution of $20.0 million to the Registrant's pension plan and
$25.0 million was used to redeem all .5 million
shares of its Redeemable Preferred Stock, Series B, at its issue price.
Subsequent to September 30, 1994, the Registrant used the
remaining portion of the net proceeds from
the offering and approximately $32.3 million of its other
available cash on hand to reduce the level of its
outstanding senior indebtedness, which consists of its 11-1/2%
Senior Notes due 1998 and its 10-7/8% Senior
Notes due 1999, which are pari passu in rank. These reductions
had a significant favorable effect on the
Registrant's capitalization.
The Registrant's capitalization includes three main elements:
long term debt obligations, redeemable
stock, and stockholders' equity. Such capitalization as shown
below from January 1, 1991 through September
30, 1994, also reflects certain proforma adjustments that take into
account the use of the remaining net proceeds
from its offering of common stock and the utilization of
$32.3 million of available cash on hand to further reduce
its long term obligations:
<TABLE>
<CAPTION>
As adjusted
Sept.30, % of Sept.30, % of Jan.1, % of
(Dollars in millions) 1994 Total 1994 Total 1991 Total
________ _______ ________ _____ ____ _____
<C> <C> <C> <C> <C> <C> <C>
Long-term debt, $394.3 73% $ 495.4 78% $398.9 55%
including current portion
Redeemable stock 14.0 3 14.0 2 3.9 1
Stockholders' equity 129.6 24 129.6 20 316.5 44
________ _______ _______ ____ _____ ____
Total Capitalization $537.9 100% $ 639.0 100% $719.3 100%
</TABLE>
The significant decline in the Registrant's stockholders' equity from January
1, 1991 through September 30, 1994, resulted from its net
losses over this period $318.6 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 principals in 1993 primarily related to
retiree healthcare and income taxes that reduced stockholders'
equity by $179.8 million.
The issuance of 15.0 million shares of the Registrant's
common stock in the third quarter of 1994, and
the subsequent application of the net proceeds thereof, has
significantly improved the Registrant's financial
leverage and has provided it greater financial flexibility.
In comparison with June 30, 1994, the Registrant's
stockholders' equity was $18.6 million, or 3% of its
capitalization and long term debt obligations and redeemable
stock combined accounted for 97%. In connection with
the early extinguishment of certain portions of its long
term debt obligations, the Registrant expects to recognize
in the fourth quarter of 1994 an extraordinary charge
of approximately $3.9 million.
In August 1993, the Registrant 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 September 30,
1994, and 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 dates. Based upon the Registrant's
available cash on hand at September 30, 1994, and the
amount of cash it anticipates will be provided from
operating activities in the near term, the Registrant
expects to have no immediate cash requirements. As such,
it does not expect the subsidiary to sell
participation interests to the banks in the near term. At September 30,
1994, and December 31, 1993, after reductions
for amounts in place under the letter of credit subfacility, the base
amount available for cash sales was approximately
$79.4 million and $64.6 million, respectively. During the
period that began with the facility's implementation
through September 30, 1994, the base amount available for
cash sales ranged from $64.3 million to $85.0 million.
In addition, the Registrant does not have any scheduled
cash requirements related to its long term debt
obligations until 1998 when the remaining outstanding portion
of its 11-1/2% Senior Notes become due. On August 5, 1994,
the Registrant, the subsidiary and the participating
banks agreed to extend the receivables
participation agreement for an additional year through August 24, 1997.
The Registrant has gross deferred tax
assets which total $188.1 million at September 30, 1994, and
represent net operating loss carryforwards and
other tax credits and net deductible temporary differences, all of
which the Registrant believes can be used to
reduce the Registrant's cash requirements for the payment of future
Federal regular income tax. The
Registrant may be subject to cash requirements under Federal alternative
minimum tax.
INVESTMENT IN FACILITIES
Capital expenditures for the first three quarters
of 1994 totalled $20.0 million, excluding expenditures
related to the No. 9 Tandem rebuild. The Registrant does not expect
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
On August 9, 1994, the Hancock County West Virginia Circuit Court
approved the 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
None
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27. - Financial Data Schedule for nine months ended September
30, 1994.
(b) Reports on Form 8-K
The Registrant filed reports on Form 8-K on July 11, July 19, and
September 13, 1994, each 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/ Earl E. Davis
Earl E. Davis
Controller
(Principal Accounting Officer)
November 14, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Sep-30-1994
<CASH> 22,298
<SECURITIES> 187,161
<RECEIVABLES> 134,921
<ALLOWANCES> 7,384
<INVENTORY> 207,038
<CURRENT-ASSETS> 584,879
<PP&E> 808,123
<DEPRECIATION> 269,232
<TOTAL-ASSETS> 1,345,408
<CURRENT-LIABILITIES> 220,287
<BONDS> 495,354
<COMMON> 420
14,037
0
<OTHER-SE> 129,179
<TOTAL-LIABILITY-AND-EQUITY> 1,345,408
<SALES> 956,519
<TOTAL-REVENUES> 956,519
<CGS> 866,406
<TOTAL-COSTS> 932,864
<OTHER-EXPENSES> 1,958
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,306
<INCOME-PRETAX> 19,418
<INCOME-TAX> 2,180
<INCOME-CONTINUING> 17,238
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,238
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</TABLE>
