As filed with the Securities and Exchange Commission on August 4,
1994.
Registration No. 33-53797
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
WEIRTON STEEL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware (State of other jurisdiction of incorporation or
organization)
3312 (Primary Standard Industrial Classification Code)
06-1075442
(I.R.S. Employer Identification No.)
400 Three Springs Drive
Weirton, West Virginia 26062-4989
(304) 797-2000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive office)
WILLIAM R. KIEFER, ESQ.
Vice President-Law and Secretary
Weirton Steel Corporation
400 Three Springs Drive
Weirton, West Virginia 26062-4989
(304) 797-2000
(Name, address, including zip code, and telephone number,
including area code, of agent for service).
Copy to:
Winthrop B. Conrad, Jr.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Approximate date of commencement of proposed sale to the public:
As soon as practicable following the effectiveness of this
Registration Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933 check the following box: [ ]
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
- ------------------------------------------------
Explanatory Note
This Registration Statement relates to an offering of shares of Common
Stock, $.01 par value, in the United States and Canada and internationally as
described herein. The Prospectus for the offering in the United States and
Canada and the Prospectus for the international offering will be identical
except for the front and back cover pages, the underwriting section, and a
section in the Prospectus for the international offering relating to tax
considerations. The Alternate Pages are marked
"Alternate International Front Cover Page", "Alternate International Back
Cover Page", "Alternate International Underwriting Section," and "Certain
U.S. Federal Tax Considerations for Non-U.S. Holders of Common Stock,
respectively, and are included immediately preceding Part II.
- ------------------------------------------------------
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
- -------------------------------------------------------
Subject to Completion
August 4, 1994
Prospectus
17,000,000 Shares
WEIRTON STEEL CORPORATION
logo
Common Stock
($.01 Par Value)
Of the 17,000,000 shares of Common Stock of Weirton Steel
Corporation ("Weirton" or the "Company") offered hereby,
15,000,000 shares are being offered by the Company and 2,000,000
shares are being offered by Mellon Bank, N.A. as trustee
(the "Selling Stockholder") of the trust created under the Weirton
Steel Corporation Retirement Plan (the "Pension Plan"). The Company
will not receive any proceeds from the sale of shares by the Selling
Stockholder. See "Selling Stockholder."
Of the shares being offered, 14,450,000 shares are being offered
in the United States and Canada (the "U.S. Offering") and
2,550,000 shares are being offered in a concurrent international
offering outside the United States and Canada (the "International
Offering" and, collectively with the U.S. Offering, the
"Offerings"), subject to transfers between the U.S. Underwriters
and the International Underwriters. The Price to Public and the
Underwriting Discount per share will be identical for the U.S.
Offering and the International Offering. The closing of the U.S.
Offering and the International Offering are conditioned upon each
other. See "Underwriting."
The Common Stock of the Company is traded on the New York Stock
Exchange (the "NYSE") under the symbol "WS." On August 2, 1994,
the last sale price of Weirton's Common Stock, as reported on the
NYSE Composite Tape, was $9.75 per share.
Prospective investors should consider carefully the matters
discussed under the caption "Risk Factors."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to Proceeds to
Public Discount Company Selling Stockholder
(1)
<S> <C> <C> <C> <C>
Per share $ $ $ $
Total(2) $ $ $ $
<FN>
(1) Before deduction of expenses payable by the Company
estimated to be $__________.
(2) The Selling Stockholder has granted to the U.S. Underwriters
and the International Underwriters 30-day options to
purchase up to an aggregate of 2,550,000 additional shares
of Common Stock, at the Price to Public, less the Underwriting
Discount, solely to cover over-allotments, if any. The
Company may satisfy the exercise of these options up to a
maximum of 300,000 shares. If the Underwriters exercise
such options in full, the total Price to Public,
Underwriting Discount and Proceeds to the Selling
Stockholder will be $________, $________ and $________,
respectively. If the Company satisfies the exercise of such
options with the maximum number of shares permitted, Proceeds
to Company and Proceeds to Selling Stockholder will be
$____ and $____, respectively. See "Underwriting."
</TABLE>
[TEXT]
The shares of Common Stock are offered subject to receipt and
acceptance by the Underwriters, to prior sale and to the
Underwriters' right to reject any order in whole or in part and
to withdraw, cancel or modify the offer without notice. It is
expected that delivery of the shares will be made at the office
of Salomon Brothers Inc, Seven World Trade Center, New York, New
York or through the facilities of The Depository Trust Company,
on or about August______ , 1994.
Salomon Brothers Inc
Lazard Freres & Co.
Lehman Brothers
PaineWebber Incorporated
The date of this Prospectus is August________, 1994.
- ------------------------------------------
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT LEVELS ABOVE
THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports, proxy
statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and
other information concerning the Company can be inspected and
copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at its regional offices, 500 West
Madison Street, Chicago, Illinois 60661 and Seven World Trade
Center, Thirteenth Floor, New York, New York 10048. Copies of
such materials can be obtained at prescribed rates by writing to
the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. Such materials also may be
inspected at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration
statement on Form S-3 (herein, together with all amendments and
exhibits thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration
Statement, does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto,
certain parts of which are omitted in accordance with the rules
and regulations of the Commission. For further information,
reference is hereby made to the Registration Statement and the
exhibits and schedules thereto.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission
by the Company (File No. 1-10244) are incorporated by reference
in this Prospectus:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
2. The Company's Amendment No. 1 on Form 10-K/A to the Company's
Annual Report on Form 10-K for the year ended December
31, 1993.
3. The Company's Amendment No. 2 on Form 10-K/A to the Company's
Annual Report on Form 10-K for the year ended December
31, 1993.
4. The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1994.
5. The Company's Current Report on Form 8-K dated April 19, 1994.
6. The Company's Current Report on Form 8-K dated July 11, 1994.
7. The Company's Current Report on Form 8-K dated July 19, 1994.
8. The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A filed May 4, 1989.
All documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the Offerings shall be
deemed to be incorporated by reference into this Prospectus and
to be a part of this Prospectus from the date of filing of such
documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference in this Prospectus shall
be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in
any other subsequently filed document which also is or is deemed
to be incorporated by reference in this Prospectus modifies or
supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to
each person, including any beneficial owner, to whom a copy of
this Prospectus has been delivered, on the written or oral
request of any such person, a copy of any or all of the documents
referred to above which have been or may be incorporated in this
Prospectus by reference, other than exhibits to such documents
unless such exhibits are specifically incorporated by reference
herein or in any incorporated document. Requests should be
directed to Weirton Steel Corporation, Secretary, 400 Three
Springs Drive, Weirton, West Virginia 26062-4989 (telephone:
304-797-2000).
The following are registered trademarks of the Company and
are printed in capital letters in this Prospectus: WEIRITE,
WEIRLITE, WEIRCHROME, WEIRKOTE PLUS, AND WEIRTEC.
- ---------------------------------------
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety
by the more detailed information and financial statements
(including the notes thereto) appearing elsewhere in this
Prospectus. Unless otherwise indicated, the information in this
Prospectus assumes that the U.S. and International Underwriters'
over-allotment options will not be exercised. See
"Underwriting."
Weirton Steel Corporation
The Company is a major integrated producer of flat rolled
carbon steel which has been in the steelmaking and finishing
business for more than 80 years. The Company focuses on higher
value-added products with demanding specifications, such as tin
mill products ("TMP") and coated sheet. TMP are sold primarily
to manufacturing and packaging companies for use as food,
beverage and general line cans and coated sheet is sold primarily
to the construction industry for use in a broad variety of
building products. For the year 1993, these value-added product
lines accounted for approximately 70% of the Company's revenues
and 63% of its shipments. The remainder of the Company's
revenues are derived from the sale of hot and cold rolled sheet,
which is used for machinery, construction products and other
durable goods. The Company believes that its percentage of
value-added products to total production is among the highest of
integrated steel producers in the United States and provides it
with a competitive advantage against both domestic producers and
foreign commodity imports.
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 (steel with fewer impurities),
rebuilding its multi-strand continuous caster and upgrading its
hot strip rolling mill to be one of the most modern in the world.
The Company's strategic objective is to be a leading domestic
producer of high value-added flat rolled carbon steel products.
With the completion of the capital improvement program, the
Company's strategy is to: (i) increase revenues and margins
through the development and marketing of higher value-added
products and services; (ii) achieve productivity improvements and
significant reductions in conversion costs through advanced
steelmaking and rolling technology and savings in manpower and
production processes; and (iii) reduce financial leverage and
restore the Company's equity base. See "Business--Business Strategy."
Incorporated in Delaware in November 1982, the Company
acquired the principal assets of National Steel Corporation's
("National" or "NSC") former Weirton Steel Division (the "Division") in
January 1984 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 and also
sold 1.8 million shares of Convertible Voting Preferred Stock, Series
A, (the "Series A Preferred Stock") to a new employee stock
ownership plan (the "1989 ESOP").
Substantially all the Company's employees participate in the 1984
and 1989 ESOPs (the "ESOPs"), which, after giving effect to the
above-mentioned and certain other transactions, but prior to the
proposed Offerings, owned approximately 51% of the combined
issued and outstanding common and preferred shares of the
Company. This, in turn, accounts for approximately 75% of the
voting power (as calculated in accordance with voting restrictions)
of the Company's stock.
- ------------------------------------------
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY CERTAIN
FACTORS RELATING TO THE COMPANY. SEE "RISK FACTORS."
- ------------------------------------------
The Offerings
Common Stock Offered
By the Company
U.S. Offering 12,750,000 shares
International Offering 2,250,000 shares
__________
Total 15,000,000 shares
By the Selling Stockholder
U.S. Offering 1,700,000 shares
International Offering 300,000 shares
_________
Total 2,000,000 shares
Common Stock Outstanding(1)
Before the Offerings 26,736,661 shares
After the Offerings 41,736,661 shares
Use of Proceeds. . . . . . . . All of the
net proceeds from the Offerings will be
used to reduce obligations of the Company,
including the
repurchase or redemption of
a portion of the Company's
outstanding senior indebtedness,
and the reduction of the unfunded
obligation under the
Pension Plan. The Company may also utilize proceeds to redeem
its Redeemable Preferred Stock, Series B.
See "Use of Proceeds."
NYSE Symbol. . . . . . . WS
(1) As of April 25, 1994; excludes 240,000 shares of Common
Stock reserved for issuance upon the exercise of currently
exercisable stock options.
- -------------------------------------------------------
<TABLE>
<CAPTION>
Summary Financial Data
(Dollars in millions, except per share and ton data)
Quarter
Ended March 31, Year Ended December 31,
1994 1993 1993 1992 1991 1990 1989
(Unaudited)
Income Statement Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales $325.2 $297.7 $1,201.1 $1,078.7 $1,036.3 $1,190.9 $1,329.4
Operating Costs:
Cost of sale 288.4 279.9 1,105.6 1,010.0 1,019.3 1,113.9 1,165.4
Selling, gen.
& administr.
expense 7.9 7.8 32.5 30.5 29.1 30.4 27.6
Depreciation 12.3 11.2 49.1 38.6 34.3 29.0 26.7
Special items - 17.3 17.3 - - - 27.0
(1) (2) ----- ----- ------- ------- ------- ------- ----
Income (loss)
from operations 16.6 (18.5) (3.4) (0.4) (46.4) 17.6 82.7
Net interest 12.3 12.4 50.2 37.9 29.7 15.0 9.8
expense (3)
ESOP contrib- 0.7 0.7 2.6 2.6 2.6 1.5 36.2
utions (4) ----- ----- ------- ------- ------ ------- ------
Income (loss)
bef.income taxes 3.6 (31.6) (56.2) (40.9) (78.7) 1.1 36.7
Income tax
(provision)
benefit (0.7) 6.0 13.3 4.8 4.0 (0.8) (8.1)
----- ----- ------- ------- ------ ------- ------
Income(loss)
bef.extraord-
inary item and
cumulative effect
of changes in
acctg.principles 2.9 (25.6) (42.9) (36.1) (74.7) 0.3 28.6
Extraordinary - (6.5) (6.5) - - - (12.6)
item (5)
Cumulative eff-
ect of changes in
acctg.principles - (179.8) (179.8) 4.3 - - -
(6) ----- ----- ------- ------ ------ ------ -----
Net income (loss) $2.9 (211.9) (229.2) (31.8) (74.7) $0.3 $16.0
Less:Preferred
stock dividend
requirement (0.8) (0.8) (3.1) (3.1) - - -
Net income (loss)
applicable to
common shares 2.1 (212.7) (232.3) (34.9) (74.7) 0.3 16.0
Per Common Share
Data:
Income(loss) per
common share
before extra-
ordinary item $0.07 (0.99) (1.74) (1.57) (3.49) 0.01 1.37
Income(loss) per
common share bef-
ore cumulative
effect of acctg.
changes 0.07 (1.24) (1.99) (1.57) (3.49) 0.01 0.77
Net income(loss)
common share(7) 0.07 (8.03) (8.78) (1.40) (3.49) 0.01 0.77
Cash dividends
paid - - - - - $0.64 $0.32
<CAPTION>
Balance Sheet Data (at end of period):
<S> <C> <C> <C> <C> <C> <C> <C>
Cash, equiva-
lents, and market
able securities $111.2 $ 74.4 $ 89.0 $ 61.2 $ 84.2 $ 56.2 $201.9
Working capital 281.4 263.6 262.2 237.7 273.5 264.6 373.3
Total assets 1221.9 1105.6 1240.7 1005.4 1038.0 965.2 946.4
Long-term debt,
incl. current
portion (8) 495.3 495.2 495.3 503.2 505.3 398.9 355.8
Redeemable stock
(8) 37.4 34.9 36.7 34.2 31.0 3.9 1.3
Stockholders'
equity(8) 0.7 18.6 (1.4) 231.3 257.3 316.5 328.1
<CAPTION>
Other Data (For the period, except where noted):
<S> <C> <C> <C> <C> <C> <C> <C>
Shipments in
thousands
of tons 656 608 2,431 2,102 1,939 2,206 2,499
Average sales
per ton
shipped $496 $490 $494 $513 $534 $540 $532
Average cost
of sales
per ton shipped $440 $460 $455 $480 $526 $505 $466
Gross margin
per ton
shipped $ 56 $ 30 $ 39 $ 33 $ 8 $ 35 $ 66
Operating
income per
ton shipped bef.
special items $ 25 $( 2) $ 6 $ - $(24) $ 8 $ 44
Active employees
(end
of period) 5909 6256 6026 6542 6979 7582 7898
Employee hours
per ton
of hot band
produced 1.83 1.97 1.95 2.07 2.38 2.45 2.43
Employee hours
per ton
shipped 4.85 5.37 5.31 6.53 7.55 7.48 6.77
Capacity
utilization 90% 89% 91% 83% 68% 79% 85%
Percentage of
raw steel con-
tinuously cast 100% 100% 100% 100% 97% 64% 67%
Yield (raw
steel to fin-
ished production) 79.4% 75.8% 77.9% 72.3% 72.3% 69.7% 72.0%
EBITDA (9) $36.4 $9.4 $81.9 $45.7 $(2.1) $60.5 102.9
Capital
expenditures 4.0 0.3 14.4 44.6 113.9 181.9 131.1
__________
<FN>
(1) The Company recognized a pretax restructuring charge of
$17.3 million in the first quarter of 1993 to account for certain
costs associated with an enhanced early retirement package, which
is part of the Company's ongoing cost reduction program.
(2) Effective January 1, 1989, employee profit sharing for each
fiscal year has been set at 35% of net income before profit
sharing, computed after deducting dividends on capital stock of
up to $13 million. See "Business--Employees." A provision for
profit sharing of $21.9 million was recognized for 1989.
A one-time special bonus of $5.1 million was paid to
employees in connection with a 1989 labor contract ratification.
(3) Net interest expense has been reduced by capitalized
interest of $0.8 million, $6.1 million, $12.8 million, $14.8
million and $4.4 million for the years 1993 through 1989,
respectively.
(4) Does not involve a net outflow of cash as these
contributions are returned to the Company in the form of payments
on loans outstanding from the Company to the ESOPs.
(5) Reflects certain costs incurred in connection with the early
extinguishment of debt.
(6) Effective January 1, 1992, the Company changed its method of
accounting for the depreciation of its steelmaking facilities
from a straight-line to a production-variable method. Effective
January 1, 1993, the Company adopted the provisions of 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."
The cumulative effect of the 1993 accounting changes
reflects the collective implementation of the following
accounting changes. The change in accounting under SFAS No. 106
required the Company to recognize a pretax charge of $303.9
million to account for the prior service cost of retiree health
care and life insurance benefits as well as an additional noncash
expense each quarter which began in the first quarter of 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 relates to the
adoption of SFAS No. 106, representing the cumulative effect of
the accounting change for income taxes in accordance with SFAS
No. 109.
(7) The unaudited net income(loss) per common share for the year ended
December 31, 1993 and the three month period ended March 31, 1994 would have
been $ and $ , respectively, after giving effect to the application
of the estimated net proceeds of the Offerings, as described under "Use
of Proceeds," assuming the issuance of Common Stock pursuant to the Offerings
had been effected at the beginning of the respective period. This pro forma
per common share data does not purport to represent what the Company's
net income (loss) per common share would have been if the foregoing had in
fact occurred on such dates.
(8) See "Capitalization" for information regarding certain
adjustments to give effect to the issuance of shares of Common
Stock offered hereby and the application of the net proceeds
therefrom.
(9) EBITDA represents the earnings of the Company before income
taxes, net interest expense, depreciation and amortization and
other noncash items reducing net income. This definition of
EBITDA is consistent with the one used in covenants in the
Company's outstanding indebtedness. EBITDA is not a measure of
financial performance under generally accepted accounting
principles ("GAAP"). Accordingly, it does not represent net income or
cash flows from operations as defined by GAAP and does not necessarily
indicate that cash flows will be sufficient to fund cash needs.
As a result, EBITDA should not be considered as an alternative to net
income as an indicator of operating performance or to cash flows as a
measure of liquidity.
</TABLE>
[TEXT]
- ---------------------------------------
RISK FACTORS
Prospective investors should consider carefully the
following risk factors affecting the Company and the domestic
steel industry before purchasing the shares of Common Stock offered hereby.
FACTORS RELATING TO THE COMPANY
Recent Losses.
The Company reported net losses of $229.2 million for 1993, $31.8 million
for 1992, and $74.7 million for 1991. The Company's results for 1993 were
significantly affected by the net after tax effect of required changes in
certain accounting principles, primarily related to retiree healthcare and
income taxes, which totaled $179.8 million, a
pretax restructuring charge of $17.3 million, and an after tax
extraordinary charge of $6.5 million. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations." Management attributes the losses in 1992 and 1991 to
production disruptions stemming from the Company's implementation
of a $550 million capital improvement program and to recessionary
conditions affecting the industry.
Recent Major Damage to Facility. On April 6, 1994, the
Company'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 Company's
tin plating operations. The Company began rebuilding and repair
operations immediately to restore the No. 9 Tandem as quickly as
practicable. At this time, the Company 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 Company is
increasing the cold rolling output of its remaining facilities.
The Company has also compensated for the reduction in cold
rolling capacity by increasing its sales of hot rolled products.
The Company also may 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 Company's
revenues and 37% of its shipments. The Company believes that, during
the remaining period of the No.9 Tandem outage, it will be able to
maintain monthly TMP production at approximately 54% of its 1993
monthly average of 66 thousand tons per month.
At this time, the Company cannot predict with certainty the
extent to which its short-term results of operations will be
affected adversely by the outage. The Company 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 $500,000 for property
damage and $5 million for business interruption. The
claims process has been commenced and advances have been collected from
the insurance carrier. As a result of the length of
time the Company anticipates to restore the No. 9 Tandem to full
operations and arrive at a final settlement with its insurance
carrier, recoveries under its business interrruption coverage
have not yet been determined. The Company does not expect that the
outage will affect its long-term prospects adversely.
High Financial Leverage. Beginning in 1989, the Company
incurred substantially increased indebtedness to fund its capital
improvement program. At December 31, 1990, stockholders' equity
in the Company was $316.5 million, and its indebtedness of $398.9
million represented 55% of its capitalization. As a result of
the Company's net losses since that date (see "--Recent Losses"),
its indebtedness increased to
$495.3 million and its stockholders' equity was reduced to $0.7
million at March 31, 1994, causing its financial leverage to
increase significantly. At March 31, 1994, the Company's
indebtedness and redeemable stock comprised 93% and 7%,
respectively, of its capitalization. After giving effect to the
Offerings and a use of all net proceeds as described in "Use of
Proceeds" and shown under "Capitalization," the Company's
indebtedness and redeemable stock would have been reduced to
[__%] and [__%], respectively, of its capitalization at March 31,
1994, and the remaining ___% of its capitalization would have
represented stockholders' equity. The Company intends to reduce
its debt burden and increase its financial flexibility and has no
immediate plans to incur additional debt. From time to time,
however, the Company may be required to utilize outside financing
for working capital purposes. Such financing may involve the
incurrence of debt. The Company will be permitted to incur
additional debt only if, at the time, it is able to comply with
restrictions under applicable debt instruments. Based on the
tests under the indenture governing its 11 1/2% Senior Notes due
1998 (respectively, the "11 1/2% Indenture" and the "11 1/2%
Notes"), at March 31, 1994, the Company would not have been
permitted to incur additional debt, except for "Permitted
Indebtedness," as defined in the 11 1/2% Indenture. (As defined,
Permitted Indebtedness includes debt outstanding immediately
after the issuance of the 11 1/2% Notes, intercompany debt
subordinated to the 11 1/2% Notes, debt under currency, commodity
and interest swap agreements, debt not to exceed $100 million
(substantially all of which could be incurred if borrowing
sources were available) and renewals of all such permitted debt.)
In August 1993, the Company, through a subsidiary, instituted an
accounts receivable participation and letter of credit facility,
which it believes will be sufficient for its foreseeable working
capital needs. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and
Capital Resources."
Employee Ownership and Voting Power. Prior to the proposed
Offerings, the ESOPs own 51% of the Company's outstanding shares
and account for 75% of its total voting power (as calculated in
accordance with certain voting restrictions). Following the proposed
Offerings, the ESOPs are expected to own approximately 34% of the
Company's outstanding shares and account for approximately 53% of the
Company's total voting power. Employee voting power could increase by
approximately 3% if the five million shares of Common Stock reserved
for an employee purchase program over the next five years are acquired
by employees. The participants in the ESOPs, all of whom are present
or former employees of the Company, could, if they were to act
collectively in the voting of their shares, elect a majority of the
Company's directors. In addition, the Pension Plan holds approximately
22% of the Company's outstanding Common Stock, which represents 5% of
the Company's total voting power. The fiduciary under that plan has
the duty to vote the shares held in such plan in the best interest of plan
participants. The interest of ESOP and Pension Plan participants may
differ from those of public stockholders. To the extent that shares
of Common Stock are sold by the Selling Stockholder in the Offerings,
employees whose retirement benefits depend on the assets held in trust
under the Pension Plan will derive a benefit.
Reductions in Earnings from Profit Sharing. The earnings of the
Company available for the payment of dividends or which may be
available for use in its business will be reduced by amounts paid out
pursuant to the Company's profit sharing plan (the "Profit Plan").
The Profit Plan, which is effective through 1996 and covers
substantially all employees, generally requires that from 33-1/3% to
35% of the Company's net income for each year (adjusted to provide
allowance for certain dividends on preferred stock) be paid to
employees as profit sharing. However, profit sharing is only payable
to the extent that, at the time of determination, or as a result of a
determination, profit sharing payments will not reduce the Company's
net worth below 100.0 million. The Company has not recognized a
provision for profit sharing since 1989. Completion of the Offerings
will increase the Company's net worth and, accordingly, the likelihood
that, if the Company has net income in 1994, a certain amount of profit
sharing will become payable in 1995 with respect to the Company's
financial performance in 1994, and that future earnings may be
reduced through payments of profit sharing.
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 lower earnings
or losses.
Limitations on Raising Equity. The Company's Restated Certificate of
Incorporation (the "Restated Certificate") imposes restrictions
on the Company's ability to raise additional equity. The
authorization of shares of capital stock under the Restated
Certificate (beyond the 30.0 million shares of Common Stock and
7.5 million shares of preferred stock originally authorized in
1989) generally requires for approval a simple majority vote of
stockholders, if such shares are to be used only for bona fide
public offerings or in connection with certain employee benefit
plans. However, if shares are to be used for any other purpose,
their authorization must be approved by the vote of 80% of total
voting power (the "Super Majority Vote"). Limitations on the
future use of shares, if applicable, would deny the Company
access to private markets for its shares and could deprive the
Company of needed capital at times when the permitted types of
issuances are not feasible or have less favorable terms. The
increase in the Company's capitalization from 30.0 million to
50.0 million shares of Common Stock approved by stockholders
at a special meeting held on May 26, 1994 is subject to
such use restrictions.
In addition, the Restated Certificate provides that the
specific terms and conditions of each issuance of capital stock
by the Company, with limited exceptions, must be approved by the
vote of at least 90% of the Company's directors. The Company's
Board of Directors is required to be composed of 13 members and
will be increased to 14 members after the 1994 annual meeting of
stockholders. Regardless of the increase in the number of directors,
a dissent by more than one director could prevent the Company from issuing
capital stock, even though the authorization of shares for such
issuance was approved by a Super Majority Vote of the Company's
stockholders.
Lack of Dividends. The Company discontinued dividends on its Common
Stock after the fourth quarter of 1990. The Board of Directors
does not anticipate that the Company will resume payment of
dividends on Common Stock in the foreseeable future. The payment
of future dividends on the Common Stock, and any amount thereof,
will be determined by the Board of Directors in light of
financial factors and other restrictions affecting the Company.
The Company's ability to pay dividends on its stock is
limited by restrictions under an earnings related formula in the
11 1/2% Indenture. Under the applicable formula, the receipt of
proceeds from sales of equity securities increases the Company's
ability to pay dividends on stock.
Environmental Compliance Expenditures. The Company has made, and
expects to continue to make, expenditures to comply with environmental
laws and regulations. The Company believes that its facilities are in
material compliance with such provisions and does not believe that
future compliance with such provisions will have an adverse effect on
its results of operations or financial condition. Unlike most of its
domestic integrated competitors, the Company does not operate coke
making facilities, and , as such, will not be required to comply with
Clean Air Act Amendment standards applicable to those types of
facilities. Nevertheless, since environmental regulations are becoming
increasingly more stringent, the Company's environmental
capital expenditures and costs for compliance may increase in the
future. Furthermore, due to the possibility of unanticipated
regulatory developments, the amount and timing of future environmental
expenditures may vary from those currently anticipated. State
environmental authorities have recently issued a wastewater discharge
permit to the Company containing substantially more stringent effluent
standards. The Company believes it will not be able to ensure
consistent compliance with certain provisions contained in the permit
without significant treatment technology and/or process changes. The
Company cannot estimate the cost of installing such technology or
effecting such changes, but such costs could be material. See
"Business--Environmental Control."
The site at which the Company carries on its operations has been
in use for many years and, over such time, the Company and its
predecessors may have generated, stored and disposed of wastes which
may be classified as hazardous. The Company is indemnified by
National, the seller of the steelmaking business acquired by the
Company in 1984, against environmental liabilities arising from
activities prior to the acquisition. National's indemnification
obligation is not limited by the passage of time or, with certain
exceptions, in amount. As a result, the Company does not believe it
will incur any material liability for environmental conditions
existing prior to the acquisition, provided that the Company is able
to recover on environmental claims from National. The ability of the
Company to collect on claims for indemnification covering
environmental matters is subject to National's continued financial
viability, on the nature of future claims made by the Company, whether
the parties can settle certain differences in their respective
interpretations of indemnification rights and the outcome of any
necessary litigation between the Company and National regarding such
issues. The Company does not carry insurance of the type that
provides coverages similar to the indemnification rights provided
by National. See "Business--Environmental Control."
Customer Concentration. The TMP market served by the Company and
its competitors is characterized by a relatively small number of
customers. In 1993, one TMP customer accounted for approximately 11%
of the Company's revenues and its five largest TMP customers for
approximately 30% of such revenues. A loss of one or more major TMP
customers, unless replaced, could have a substantial adverse effect on
the Company's revenues. See "Business--Principal Products and Markets."
Dependence on Third Parties for Certain Raw Materials.
The Company's supply of iron ore pellets and coke for its blast furnaces
currently is provided by a small number of sources; however, the
Company has contracts for a majority of its pellets through 2004 and coke
through 1996. If such contracts were interrupted in performance at a time when
supplies were scarce, the Company might not be able to obtain
sufficient quantities of raw materials, or obtain quantities of such
materials at satisfactory prices which, in either case, could
adversely affect its production levels and margins. The Company does not
own, or have any interest in, extraction or production facilities for
these materials. See "Business--Raw Materials."
Antitakeover Features. Certain provisions of the Company's
Restated Certificate, the Delaware General Corporation Law, and the
current ownership structure of the Company, may have the effect of
preventing a change of control of the Company, including transactions
in which stockholders could receive premiums for their shares over
prevailing market prices. For example, under the Restated
Certificate, stockholders other than certain employee plans may not
exercise more than 5% of total voting power, and extraordinary
transactions, such as mergers, consolidations, sales of substantially
all assets, liquidation and transactions with significant
stockholders, require at least an 80% affirmative vote by
stockholders. The Company's Board of Directors is authroized by the
Restated Certificate to issue preferred stock in series with such
designations, rights, and preferences as may be determined by the
Board. Also, the Company's Board of Directors is classified into
three classes of directors serving staggered terms, and substantial
qualification requirements exist to serve as a director. These
provisions could delay the replacement of a majority of directors and
could have the effect of making changes in the Board of Directors more
difficult than in their absence. Finally, the Company originated from
an employee buyout and was formerly wholly-owned by its employees
through the 1984 ESOP. At present, a majority of the Company's
stockholder voting power is held by employees through the ESOPs.
Limitation on Utilization of Existing Tax Attributes.
Pursuant to Section 382 of the Internal Revenue Code of 1986, as
amended (the "Code"), certain ownership changes may substantially
limit or prohibit the utilization of certain existing tax attributes
(such as net operating losses) subject to the carryforward provisions
under the Code. As of December 31, 1993, the Company had available for
federal income tax purposes regular net operating loss carryforwards of
approximately $194.8 million, alternative minimum tax net operating
loss carryforwards of approximately $13.6 million, an alternative
minimum tax credit of approximately $4.7 million, and general business
tax credits of approximately $14.1 million.
Under a literal reading of the Code and regulations currently in
force, the Offerings (together with other relevant prior events) would
likely result in an ownership change under Section 382 that would impose
constraints on the Company's utilization of its existing tax attributes.
The Company has made a request to the Internal Revenue Service (the
"IRS") for a ruling that would enable it to conclude that the utilization
of its existing tax attributes will not be limited as a result of the
Offerings. There can be no assurance that the
IRS will rule favorably on the Company's request or when it will make
such determination. The Offerings are not conditioned upon the Company's
receipt of the ruling. If it is determined that as a result of the
Offerings, such an ownership change has occurred, the Company's
existing tax attributes would be subject to limitations as
determined under the Code. Based upon the Company's estimated value
prior to the Offerings, the annual limitation would be in the
approximate range of $13.0 million to $16.0 million, prior to any
adjustments for any built in gains or losses. In addition, the
amount of limitation not utilized in any taxable year can be carried
forward, thereby increasing the limitation applicable to the next
taxable year. See Note 9 to the "Notes to Financial Statements"
included herein for further information regarding the Company's existing
tax attributes.
Even if the Company is able to conclude that the utilization of
its existing tax attributes is not limited as a result of the Offerings,
it is possible that other future events could occur, which may be beyond
the Company's control, that would adversely affect its ability to fully
utilize such attributes.
Shares eligible for Future Sale. Future sales of Commmon Stock by
the Company or its stockholders could adversely affect the prevailing
market price of the Common Stock. The Company, its officers and directors
and U.S. Trust (as defined below) have entered
into lock-up agreements with the U.S. Underwriters and International
Underwriters whereby such parties have
agreed not to sell any Common Stock or securities convertible into or
exchangeable or exercisable for Common Stock for a period of 120 days
following the date of this Prospectus, without the written consent of the U.S.
Representatives and International Representatives. In addition, under
the 1984 ESOP, no distributions of Common Stock, except those required by law,
may be made to participants during any lock-up period agreed to by the
Company. After the end of the 120 day period, or earlier with the written
consent of the U.S. Representatives and International Representatives, the
Company estimates that approximately 7.8 million shares of Common Stock will
be eligible for sale by existing holders, subject where applicable, to Rule
144 promulgated under the Securities Act. Sales of substantial amounts of
Common Stock in the public market,or the perception that such sales may occur,
could have an adverse effect on the market prices for Common Stock.
See "Selling Stockholder" for a discussion of agreements between the
Company and U.S. Trust regarding additional restrictions
on the ability of the Pension Plan to sell shares of Common Stock.
Dilution to New Investors. The public offering price per share of
Common Stock will exceed the net tangible book value per share of Common
Stock. Accordingly, the purchasers of the Common Stock offered hereby will
experience immediate dilution of $8.82 per share. See "Dilution."
FACTORS RELATING TO THE DOMESTIC STEEL INDUSTRY
Cyclicality. The domestic steel industry is a cyclical business
characterized by intense competition. Within the industry, the first
half of the 1980's was marked by significant restructurings and
downsizing, unprecedented losses and bankruptcies. Factors such as
overcapacity, increased domestic and international competition,
including high levels of imported steel coupled with a strong dollar,
high labor costs, inefficient plants and reduced levels of steel
demand caused major disruptions to the industry. This was followed in
the late 1980's by increased demand, lower levels of steel imports, the
decline of the dollar, capacity reductions and increased efficiency
through modernization of plants. As a result, industry profits were
substantial in 1988. However, steel prices and demand began to decline
in the latter half of 1989, and a number of domestic producers
reported losses in 1990 and 1991. These losses continued for many
producers throughout 1992. However, with stronger demand in 1993, the
industry demonstrated improved performance. Although the recovery in
steel markets has continued into 1994, there can be no assurance as to
its duration or the extent of any future improvement in steel prices
or industry earnings.
Capacity Utilization and Price Sensitivity. According to the
American Iron and Steel Institute (the "AISI"), annual U.S. raw steel
production capacity has been reduced from approximately 151 million
tons in 1983 to approximately 110 million tons in 1993. The reduction
in domestic capacity generally has resulted in higher utilization
rates, although overcapacity remains a problem in certain product
lines and may become a problem in other product lines, particularly
coated steels. The average utilization of domestic industry capacity
was 64% from 1983 through 1986 compared to 82% from 1987 through 1992,
and 89% for the year 1993. For the first three months of 1994,
capacity utilization increased to 90%. The results of operations of
major domestic integrated steelmakers, including the Company, are
affected substantially by relatively small variations in selling
prices of products. Overcapacity relative to demand, particularly in
downcycles, has resulted in an extremely competitive environment which
limits the ability of producers to raise prices. Competitive
pressures in the industry could limit the ability of producers to
obtain price increases or could lead to declines in prices, both of
which may have a material adverse effect on the industry generally
and on the Company specifically.
Domestic Competition. Competition among domestic steelmakers is
intense with respect to price, service and quality. Domestic
integrated steel producers have lost market share to domestic
mini-mills in recent years as these mills have expanded their product
lines from commodity type items to include larger -size structural
products and flat rolled products. Mini-mills have enjoyed certain
cost advantages compared to integrated producers because of lower
costs in converting scrap to raw steel, lower employment and
environmental costs and the targeting of regional markets. In the
past few years, mini-mills also have substantially improved the
quality of their products through the use of new technology,
particularly thin cast steel, which has allowed them to retain overall
conversion cost advantages. In recent years, competitive pressures
among domestic producers, including mini-mills, have extended to
higher value-added products, putting further pressure on prices and
margins. In addition, certain domestic integrated steelmakers have
gone through reorganizations under Chapter 11 of the U.S. Bankruptcy
Code. Following their reorganizations, these companies generally have
reduced costs and become more effective competitors. In addition,
domestic steel producers have invested heavily in new plant and
equipment, which, combined with the implementation of manning and
other work rule changes, have enabled many domestic companies to
improve efficiency and increase productivity. Finally, demand for
certain of the industry's products continues to be under pressure from
products made with aluminum, plastics, cardboard, glass, wood,
concrete and ceramics, which may offer substitutes for steel in
certain applications.
Foreign Competition. Domestic producers face competition from
foreign producers over a broad range of products. Many foreign steel
producers are owned, controlled or subsidized by their governments,
making these producers subject to influence by political and economic
policy considerations as well as the prevailing market conditions.
Voluntary restraint arrangements ("VRAs") covering 17 steel exporting
nations and the European Community, which limited steel imports into
the United States market, expired on March 31, 1992. A replacement
structure to reduce subsidies and other unfair trade practices by
foreign producers has not emerged. In 1992, a number of domestic steel
producers filed extensive unfair trade cases covering imports of flat
rolled carbon steel products. These cases sought the imposition of
anti-dumping and countervailing duties on products alleged to have
caused injury to domestic producers. Initial determinations favorable
to U.S. producers were overturned in July 1993, and a number of these
cases are now being appealed. Steel imports as a percentage of
domestic consumption, excluding semi-finished products (primarily
(slabs), have been approximately 16% in each of the last three years,
below levels permitted under the former VRAs. Recent increases in the
importation of slabs in early 1994 appear to be related to scheduled
outages among domestic producers. Attractive world export prices,
favorable dollar exchange rates and improved international
competitiveness of the domestic steel industry have contributed to
these reduced import levels. The reversal of any one of these factors,
or the failure otherwise to control steel imports, may cause foreign
competition to increase.
Environmental Concerns. The facilities and operations of
domestic steelmakers are subject to a number of federal, state and
local laws, regulations and permits relating to environmental
protection. The costs for environmental compliance may serve to put
domestic steelmakers at a relative competitive disadvantage compared
to foreign producers not subject to similarly extensive regulation or
producers of competitive materials which may not be required to
undergo equivalent compliance costs.
- ----------------------------------------------
THE COMPANY
The Company is a major integrated producer of flat rolled
carbon steel which has been in the steelmaking and finishing
business for more than 80 years. The Company focuses on higher
value-added products with demanding specifications, such as TMP
and coated sheet. TMP are sold primarily to manufacturing and
packaging companies for use as food, beverage and general line
cans and coated sheet is sold primarily to the construction
industry for use in a broad variety of building products. For
the year 1993, these value-added product lines accounted for
approximately 70% of the Company's revenues and 58% of its
shipments. The remainder of the Company's revenues are derived
from the sale of hot and cold rolled sheet, which is used for
machinery, construction products and other durable goods.
The Company believes that its percentage of value-added products
to total production is among the highest of integrated steel
producers in the United States and provides it with a competitive
advantage against both domestic producers and foreign commodity
imports.
Although the Company has had significant losses for the last
three years, it has been consistently improving its operating performance
and the current economic recovery has created a strong demand
for its products. As a result, it had operating income of $14.6 million
and $16.5 million for the fourth quarter of 1993 and the first quarter of 1994
respectively, and net income of $3.8 million and $2.9 million for the
same respective quarters. Operating performance in the second quarter
of 1994 was adversely affected by the damage to the No. 9 Tandem. The No. 9
Tandem outage has resulted in lower shipments of TMP and higher operating
costs. As a result, the Company's operating profit of $2.9 million for the
second quarter compared unfavorably to recent performance. The Company
was required to recognize a new cost basis for certain insurance recoveries
related to the damage of the No. 9 Tandem which resulted in the
recognition of a pre-tax gain in second quarter in the amount of $32.5
million. The gain recognition resulted in the Company having net income in
the second quarter of 1994 of $18.6 million, bringing the net income to date
in 1994 to $21.5 million. Without the gain recognition, second quarter
results would have been reduced to a net loss of $7.7 million and to
a net loss to date of $4.9 million. Based upon current pricing for its
products and assuming a mix of products consistent with that shipped in
the first quarter of 1994, the Company believes its operating performance,
in the absence of the damage to the No. 9 Tandem, would have continued
to show an improving trend and exceeded that recognized in the first
quarter of 1994.
Capital Improvement Program
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 (steel with fewer impurities),
rebuilding its multi-strand continuous caster and upgrading its
hot strip rolling mill to be one of the most modern in the world.
Business Strategy
The Company's strategic objective is to be a leading
domestic producer of high value-added flat rolled carbon steel
products. With the completion of the capital improvement program, the
Company's strategy is to: (i) increase revenues and margins
through the development and marketing of higher value-added
products and services; (ii) achieve productivity improvements and
significant reductions in conversion costs through advanced
steelmaking and rolling technology and savings in manpower and
production processes; and (iii) reduce financial leverage and
restore the Company's equity base.
Product and Service Expansion
The Company's strategy emphasizes the production and shipment
of higher value-added products, including expanding and
developing markets for those products. Higher value-added
products generally have allowed the Company to realize higher
margins. The Company's marketing initiatives are designed to
utilize the production advantages brought about by its capital
improvement program. As a result of the program, the Company has
more effectively met its customers' needs by producing coils with
increased weight per inch of width, meeting more exacting
tolerances for gauge and surface quality and achieving more
precise crown control. The Company estimates that these enhanced
production capabilities allow it to serve a potential sheet
market of approximately 35 million tons annually, or more than
three times the size of its previous potential market.
Productivity Improvements and Cost Reduction Initiatives
Yield Improvements and Manning Reductions. As a result of
its capital improvement program, the Company has achieved
significant operating efficiencies, including improving its
overall yields from liquid steel to finished production. Prior
to 1989, the Company's historic overall yields averaged 74.0%.
Combined with changes in product mix, the Company has increased
such yields to 79.4% in the first quarter of 1994. The Company
estimates that each full percentage point of improvement (based
on the Company's standard cost assumptions) would result in
operating cost reductions of approximately $4.7 million.
Yield improvements combined with manpower reductions have
significantly increased the Company's overall productivity. In
1989, the Company required approximately 2.5 employee hours to
produce a ton of hot band and approximately 7.3 employee hours
per ton of prime product shipped. For the first quarter of 1994,
productivity gains had reduced these figures to approximately 1.8
employee hours per ton of hot band and 5.3 employee hours per
ton of prime product shipped.
At December 31, 1989, following commencement of the capital
improvement program, the Company had approximately 7,900
employees. Manpower reductions, accomplished primarily through
attrition and retirement programs, reduced the Company's
workforce to approximately 6,000 at December 31, 1993,
representing a reduction of 24.0%.
Other Operating and Cost Improvements. Improved blast
furnace operating practices have allowed the Company to operate a
two furnace configuration and to raise average hot metal
production per furnace from 2,236 tons per day in 1989 (utilizing
three furnaces) to 3,242 tons per day in 1993 (utilizing two
furnaces).
The capital improvement program as well as other cost
containment measures have strengthened the Company's competitive
position in the domestic market place. In the period from 1990
through 1993, the Company reduced its operating costs by $50
per net ton of product shipped. The Company has several ongoing
programs to further reduce its operating costs.
Customer Service Improvements
The Company believes its sales efforts will be strengthened
by an improved customer service program. The Company continues
to simplify its management organization to provide increased
responsiveness to customer needs. The Company's total quality
management practices have been extended to cover service
functions as well as production. Relations with customers are
further enhanced by providing them access to the problem-solving
capabilities of the Company's research and development facility,
WEIRTEC.
Reducing Financial Leverage and Restoring the Company's Equity
Base
To further accomplish its strategic financial goals,
management is seeking to reduce the Company's high leverage and
financing costs and to rebuild stockholders' equity. The
Offerings of Common Stock, together with contemplated sales of
Common Stock to employees over the next five years, will assist
the Company in accomplishing that goal.
------------------------
The Company was incorporated in Delaware in November 1982 and
acquired the assets of the Division in January 1984. The Company
was wholly-owned by its employees through the 1984 ESOP until
June 1989 when the 1984 ESOP completed a public offering of the
Company's Common Stock. Since that time, the Common Stock has
been listed and traded on the NYSE. The Company's executive
offices are located at 400 Three Springs Drive, Weirton, WV 26062
- -4989, and its telephone number is (304) 797-2000.
- -----------------------------------------------------
USE OF PROCEEDS
The net proceeds to the Company from the Offerings are
estimated to be approximately $____ million, after deducting the
estimated expenses and underwriting discounts payable by the
Company in connection with the Offerings. The Company intends
to use the net proceeds from the Offerings to make a
discretionary contribution to the Pension Plan of at least
$20.0 million (the "Pension Plan Contribution"). In addition,
the Company will use the net proceeds from the Offerings to
(i) purchase or redeem (including premiums, if any, and accrued
interest) certain senior indebtedness, or (ii) in the event
that the Company does not reach an agreement with the holder of the
Company's Redeemable Preferred Stock, Series B (the "Series B Preferred
Stock") to modify certain provisions thereof, to purchase or redeem
the Series B Preferred Stock. The aggregate and specific amounts
of senior indebtedness to be reduced will be determined based upon
market and other conditions at the time of the consummation of the
Offerings and thereafter. Such reduction of senior indebtedness could
require the payment of a premium which would result in an extraordinary
after tax charge against the Company's results of operations in the period
in which such indebtedness is redeemed or repurchased. Such charge depends
upon the amount of premium paid, if any, and the aggregate and specific
amounts of the 11 1/2% Notes and the 10 7/8% Notes redeemed or repurchased.
Based upon current market conditions, estimates that such charge could
be $3.0 million; however, there can be no assurance that the actual
amount of this charge will not exceed this estimate. The Company's
senior indebtedness currently consists of 11 1/2% Notes due 1998, of
which $140 million principal amount is outstanding, and its 10 7/8%
Notes due 1999, of which $300 million principal amount is outstanding,
and which rank pari passu with the 11 1/2% Notes. Up to $50 million of the
11 1/2% Notes may be redeemed from the proceeds of sales of equity
securities at the Company's option until March 1, 1995 at 109.2% of
principal amount, plus accrued interest to the redemption date.
The Series B Preferred Stock is redeemable at any time at the Company's
option without premium for $50 per share (an aggregate of $25 million),
plus unpaid dividends. See "Description of Capital Stock."
The Company will not receive any proceeds from the sale of
the shares of Common Stock by the Selling Stockholder.
- -----------------------------------------
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock is listed on the NYSE under the
symbol "WS." The table below sets forth, for the periods
indicated, the high and low sales prices of the Company's Common
Stock, as reported on the NYSE Composite Tape.
High Low
<TABLE>
<CAPTION>
<S> <C> <C>
1992:
First Quarter ................... $5 1/2 $3
Second Quarter .................. 6 3/8 4 7/8
Third Quarter ................... 6 1/4 4 1/8
Fourth Quarter .................. 4 3/8 3 3/8
1993:
First Quarter ................... 7 1/8 3 7/8
Second Quarter .................. 10 6 1/4
Third Quarter ................... 9 1/8 5 3/8
Fourth Quarter .................. 7 7/8 5 3/4
1994:
First Quarter ................... 11 6 1/4
Second Quarter................... 10 7/8 8
Third Quarter (through Aug.2,1994) 9 3/4 7 1/2
</TABLE>
[TEXT]
Dividends on the Common Stock are paid when and as declared
by the Company's Board of Directors. Following the initial public
offering of the Common Stock in June 1989, the Company paid a
quarterly cash dividend of $0.16 per share of Common Stock. Such
dividends were discontinued after the fourth quarter of 1990.
The Company's Board of Directors does not anticipate a resumption
of dividends on the Common Stock for the foreseeable future as it
intends to retain any earnings to strengthen the Company's
capital base. The payment of dividends in the future will be
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 the
financial performance, capital requirements and financial
restrictions of the Company. The terms of the 11 1/2% Indenture
limit the Company's ability to pay dividends on its capital
stock, including Common Stock, based on a formula related to
earnings and proceeds of sales of certain equity securities.
- -----------------------------------------------
CAPITALIZATION
The following table sets forth the capitalization of the
Company at March 31, 1994, and as adjusted to reflect (i) the Offerings,
and (ii) an assumed application of all of the net proceeds of the Offerings,
to reduce indebtedness of the Company described in "Use of Proceeds," in
each case assuming no exercise of the Underwriters' over-allotment options.
The as adjusted column includes the effect of the Pension Plan
contribution and excludes the effect of any payment of a premium
above par value to reduce the Company's indebtedness and the resulting
extraordinary charge to results of operations. In addition, the as
adjusted column assumes no portion of the net proceeds is used to redeem
shares of Series B Preferred Stock.
<TABLE>
<CAPTION>
(Dollars in thousands)
March 31, 1994
Actual As Adjusted
------ ---------
<S> <C> <C>
Cash $111,199 $111,199
======= =======
CAPITALIZATION:
Current Maturities of Debt Obligations $ -0- $ -0-
Long term Debt Obligations 495,285 *
Redeemable Stock 37,372 37,372
Stockholders' Equity:
Common Stock 270
Additional Paid-in Capital 336,785
Retained Earnings (334,458) (334,458)*
Treasury Stock and Other (1,883) (1,883)
_______ _______
Total Stockholders' Equity 714
Total Capitalization $533,371 $
======= =======
<FN>
* The as adjusted amount of long term debt obligations will depend on the
amount of 11 1/2% Notes, if any, or 10 7/8% Notes, if any, reduced with the
net proceeds of the Offerings. The reduction of the 11 1/2% Notes and the
10 7/8% Notes could require the payment of a premium, resulting in an
extraordinary after tax charge to results of operations in the period in
which such indebtedness is retired. As a result, the as adjusted amount'
of long term debt obligations shown in the table would be increased by
the amount of such premium. The amount of any such premium and the
resulting charge depends upon the amount of the 11 1/2% Notes, if any,
or the 10 7/8% Notes, if any, so reduced and the effect of any such
premium and charge is not reflected in the table. See "Use of Proceeds."
</TABLE>
- -------------------------------------------------------------
DILUTION
The immediate per share equity interest dilution absorbed by
purchasers of the shares offered hereby is approximated by subtracting
the Company's pro forma tangible book value per common share, after
giving effect to the offering, from the assumed per
share public offering price.
<TABLE>
<CAPTION>
(In dollars per share)
<S> <C> <C>
Assumed public offering price $9.75
Tangible book value of common stock at
March 31, 1994 (3.75)
Pro forma increase in tangible book
value of common stock attributable
to the offerings 4.68
Pro forma tangible book value of common
stock after giving effect to the
offerings 0.93
----
Immediate dilution to purchasers based
upon proforma tangible book value $8.82
====
</TABLE>
- --------------------------------------------------------------
Selected Financial Data
<TABLE>
<CAPTION>
(Dollars in millions, except per share and ton data)
Quarter
Ended March 31, Year Ended December 31,
1994 1993 1993 1992 1991 1990 1989
(Unaudited)
Income Statement Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales $325.2 $297.7 $1,201.1 $1,078.7 $1,036.3 $1,190.9 $1,329.4
Operating Costs:
Cost of Sales 288.4 279.9 1,105.6 1,010.0 1,019.3 1,113.9 1,165.4
Selling,
general
& administrative
expense 7.9 7.8 32.5 30.5 29.1 30.4 27.6
Depreciation 12.3 11.2 49.1 38.6 34.3 29.0 26.7
Special items
(1) (2) - 17.3 17.3 - - - 27.0
----- ----- ------- ------- ------- ------- -----
Income (loss)
from
operations 16.6 (18.5) (3.4) (0.4) (46.4) 17.6 82.7
Net interest
exp.(3) 12.3 12.4 50.2 37.9 29.7 15.0 9.8
ESOP contrib-
utions(4) 0.7 0.7 2.6 2.6 2.6 1.5 36.2
----- ----- ------- ------- ------ ------- ------
Income (loss)
before
income taxes 3.6 (31.6) (56.2) (40.9) (78.7) 1.1 36.7
Income tax
(provision)
benefit (0.7) 6.0 13.3 4.8 4.0 (0.8) (8.1)
----- ----- ------- ------- ------ ------- ------
Income(loss)
before
extraordinary
item & cumula-
tive effect of
changes in acctg
principles 2.9 (25.6) (42.9) (36.1) (74.7) 0.3 28.6
Extraordinary
item (5) - (6.5) (6.5) - - - (12.6)
Cumulative eff-
ect of changes
in accounting
principles (6) - (179.8) (179.8) 4.3 - - -
----- ----- ------- ------ ------ ------ -----
Net income
(loss) $2.9 (211.9) (229.2) (31.8) (74.7) $0.3 $16.0
Less:Preferred
stock dividend
requirement (0.8) (0.8) (3.1) (3.1) - - -
Net income(loss)
applicable to
common shares 2.1 (212.7) (232.3) (34.9) (74.7) 0.3 16.0
Per Common
Share Data:
Income(loss)per 0.07 (0.99) (1.74) (1.57) (3.49) 0.01 1.37
common share bef-
ore extraord-
inary item
Income(loss) per 0.07 (1.24) (1.99) (1.57) (3.49) 0.01 0.77
common share bef-
ore cumulative
effect of
accntg. changes
Net income(loss)
per common
share(7) 0.07 (8.03) (8.78) (1.40) (3.49) 0.01 0.77
Cash dividends
paid - - - - - $0.64 $0.32
<CAPTION>
Balance Sheet Data (at end of period):
<S> <C> <C> <C> <C> <C> <C> <C>
Cash, Equivalents
and market.secur. 111.2 74.4 89.0 61.2 84.2 56.2 201.9
Working capital 281.4 263.6 262.2 237.7 273.5 264.6 373.3
Total Assets 1221.9 1105.6 1240.7 1005.4 1038.0 965.2 946.4
Long term debt,
incl.current(8) 495.3 495.2 495.3 503.2 505.3 398.9 355.8
Redeemable stk(8) 37.4 34.9 36.7 34.2 31.0 3.9 1.3
Stockholders'
Equity (8) 0.7 18.6 (1.4) 231.3 257.3 316.5 328.1
<CAPTION>
Other Data (for the period, except where noted):
<S> <C> <C> <C> <C> <C> <C> <C>
Shipments in
thousands of tons 656 608 2431 2102 1939 2206 2499
Average sales per
ton shipped $496 $490 $494 $513 $534 $540 $532
Average cost of
sales/ton shipped $440 $460 $455 $480 $526 $505 $466
Gross margin per
ton shipped $ 56 $ 30 $ 39 $ 33 $ 8 $ 35 $ 66
Operating income
per ton shipped $ 25 $ (2) $ 6 $ - $(24) $ 8 $ 44
before special
items
Active employees
end of period 5909 6256 6026 6542 6979 7582 7898
Employee hours
per ton hot band
produced 1.83 1.97 1.95 2.07 2.38 2.45 2.43
Employee hours
per ton shipped 4.85 5.37 5.31 6.53 7.55 7.48 6.77
Capacity Util-
ization 90% 89% 91% 83% 68% 79% 85%
Percentage of
raw steel con-
tinuously cast 100% 100% 100% 100% 97% 64% 67%
Yield(raw steel
to finish.prod) 79.4% 75.8% 77.9% 72.3% 72.3% 69.7% 72.0%
EBITDA (9) $36.4 $ 9.4 $81.9 $45.7 $(2.1) $60.5 $102.9
Capital Expend. 4.0 0.3 14.4 44.6 113.9 181.9 131.1
- -------------
<FN>
(1) The Company recognized a pretax restructuring charge of
$17.3 million in the first quarter of 1993 to account for certain
costs associated with an enhanced early retirement package, which
is part of the Company's ongoing cost reduction program.
(2) Effective January 1, 1989, employee profit sharing for each
fiscal year has been set at 35% of net income before profit
sharing, computed after deducting dividends on capital stock of
up to $13 million. See "Business--Employees." A provision for
profit sharing of $21.9 million was recognized in 1989.
A one-time special bonus of $5.1 million was paid to
employees in connection with a 1989 labor contract ratification.
(3) Net interest expense has been reduced by capitalized
interest of $0.8 million, $6.1 million, $12.8 million, $14.8
million and $4.4 million for the years 1993 through 1989,
respectively.
(4) Does not involve a net outflow of cash as these
contributions are returned to the Company in the form of payments
on loans outstanding from the Company to the ESOPs.
(5) Reflects certain costs incurred in connection with the early
extinguishment of debt.
(6) Effective January 1, 1992, the Company changed its method of
accounting for the depreciation of its steelmaking facilities
from a straight-line to a production-variable method. Effective
January 1, 1993, the Company adopted the provisions of 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".
The cumulative effect of the 1993 accounting changes
reflects the collective implementation of the following
accounting changes. The change in accounting under SFAS No. 106
required the Company to recognize a pretax charge of $303.9 million
to account for the prior service cost of retiree health care and
life insurance benefits as well as an additional non-cash expense
each quarter which began in the first quarter 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 relates to the adoption
of SFAS No. 106, representing the cumulative effect of the
accounting change for income taxes in accordance with SFAS No.
109.
(7) The unaudited net income (loss) per common share for the year ended
December 31, 1993 and the three month period ended March 31, 1994 would
have been $ and $ , respectively, after giving effect to the
application of the estimated net proceeds of the Offerings, as described
under "Use of Proceeds," assuming the issuance of Common Stock pursuant
to the Offerings had been effected at the beginning of the respective
period. This pro forma per common share data
does not purport to represent what the Company's net income (loss) per
common share would have been if the foregoing had in fact occurred on such
dates.
(8) See "Capitalization" for information regarding certain adjustments
to give effect to the issuance of shares of Common Stock offered hereby
and the application of the net proceeds therefrom.
(9) EBITDA represents the earnings of the Company before income taxes,
net interest expense, depreciation and amortization and other non cash
items reducing net income. This definition of EBITDA is consistent with
the one used in covenants in the Company's outstanding indebtedness.
EBITDA is not a measure of performance under GAAP. Accordingly, it does
not represent net income or cash flows from operations as defined by GAAP
and does not necessarily indicate that cash flows will be sufficient to
fund cash needs. As a result, EBITDA should not be considered as an
alternative to net income as an indicator of operating performance or
to cash flows as a measure of liquidity.
</TABLE>
[TEXT]
- ---------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company, as a major integrated producer of flat rolled
carbon steel, competes in a cyclical market where product demand
is generally influenced by several factors, including: the
strength of the economies of the U.S. and other major steel
consuming countries; restrictions on imports by foreign
producers; fluctuating exchange rates; and worldwide production
capacity. As the U.S. economy had emerged from the latest
recession, the domestic steel industry has experienced a
resurgence in product demand. As a result of this recent
economic recovery, the Company has experienced an increase in
demand for its sheet products that continued into the first
quarter of 1994. There can be no assurance that the demand for
the Company's products will remain stable or increase from
present levels.
Historically capital intensive, the domestic integrated
steel industry has for more than 20 years been rationalizing
older, less efficient production facilities in response to the
development of new steel producers and steel product substitutes.
More recently, competitive pressures have forced large steel
producers to implement more efficient production techniques and
focus on higher value-added products. The Company substantially
completed a capital improvement program in 1992, spending in
excess of $550 million, primarily to upgrade its steelmaking and
hot rolling facilities. As a result of its modernization
efforts, the Company has improved its product quality and mix,
broadened its customer base, and reduced its average cost per ton
of steel shipped. In periods of changing economic conditions,
the Company's refurbished operating facilities allow it to adjust
certain portions of its production to maximize the production
capabilities of its operating facilities.
Although the Company is generally influenced by the cyclical
nature of the industry and competitive pressures, its major
product lines and attributes of its particular operating
facilities differentiate the Company favorably in certain
respects from other producers. The Company is a domestic
industry leader in the production of TMP, accounting for
approximately a 22% share of the domestic TMP market. TMP
revenues represented 46% of the Company's total revenues in 1993.
The market for TMP is characterized by a relatively low number of
competitors and customers who make annual commitments at prices
which have been historically stable relative to pricing for other
steel products. This pricing stability is a result of the lower
volatility over the past decade of consumption of TMP in the U.S.
versus other steel products. The Company believes this is
primarily due to lower sensitivity of production levels by food
and beverage producers to the general business cycle than users
of other steel products, such as automobile and appliance
manufacturers, and the fact that imports have historically
represented a smaller percentage of the domestic TMP market. The
Company's financial performance compared to the industry in
general is therefore affected to a lesser degree during economic
recessions and recovery periods.
In contrast with TMP, selling prices for the Company's sheet
products are more sensitive to changes in demand due to the wide
variety of end use, broad customer base and the number of
producers. In periods of high demand, the Company is well
positioned to capitalize on higher profit margins on its sheet
products. In contrast with its TMP, which are typically
sold under one-year commitments, the majority of the Company's
sheet products are sold in the spot market or under quarter-to-
quarter pricing arrangements, which in the recent environment of
price increases on sheet products has allowed the Company to realize
higher margins on those products earlier than some of its
competitors. To the extent that selling prices may decline for
sheet products in the future, however, the Company is not as well
protected against declines in revenue on its sheet products as
certain of its competitors whose sheet product sales are largely
made pursuant to fixed price contracts.
The Company, as well as the industry, continues to be
challenged by increasing production costs for items such as raw
materials, energy, environmental compliance and labor, including
the cost of providing employee and retiree benefits. The major
raw materials and energy sources used by the Company in its
production process are iron ore pellets, iron ore, coal, coke,
zinc, chrome, limestone and scrap steel. Iron ore pellets and
coke are predominantly purchased pursuant to long-term
agreements, through which the Company has assured the extended
availability of a portion of its major raw material needs at
competitive prices. The other raw materials are generally
purchased in the open market from various sources and their
availability and price are subject to market conditions.
In the first quarter of 1994, the Company entered into new
three-year labor agreements which it believes to be among the
most competitive in the industry. Among other things,
the Company expects the agreements to reduce the Company's exposure to
increased costs of providing healthcare to active employees and retirees
through a mandatory managed healthcare "Point of Service" program and a
cash basis cost ceiling on healthcare for future retirees. The
Company believes that these agreements place 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 low during periods of lower earnings
or losses.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Quarter Ended Year Ended December 31,
March 31, 1993 1992 1991
1994 1993
<S> <C> <C> <C> <C> <C>
Shipments: (1)
Tin mill products 197 226 895 890 857
Sheet products 459 382 1,536 1,212 1,082
---- ---- ----- ----- -----
Total shipments 656 608 2,431 2,102 1,939
Results per ton shipped:
Net Sales per Ton 496 490 $494 $513 $534
Cost of Sales per Ton (440) (460) (455) (480) (526)
---- ---- ------ ------ -----
Gross profit per ton 56 30 39 33 8
Operating profit per
ton (2) 25 (2) 6 - (24)
Profit margin percent-
ages:
Gross profit margin 11.3% 6.0% 8.0% 6.4% 1.6%
Operating profit mar-
gin(2) 5.0% (0.4%) 1.2% 0.0% (4.5)%
__________________
<FN>
(1) In thousands of tons.
(2) Before special items.
</TABLE>
[TEXT]
THREE MONTHS ENDED MARCH 31, 1994 COMPARED WITH THREE MONTHS
ENDED MARCH 31, 1993
In the first quarter of 1994, the Company showed continued
improvement in its operating results. The Company earned an
operating profit of $16.5 million for the quarter ended March 31,
1994, which marked the fifth consecutive quarter of improved
operating performance and compared to an operating loss of $1.1
million, exclusive of a $17.4 million restructuring charge, in
the same quarter of 1993.
The continued improvement in the Company's operating results
was attributable to improved performance of its primary
operations stemming from its capital improvement program and its
continuing cost reduction program combined with strong demand for
sheet products, particularly hot rolled, that has increased
steadily throughout the current period of economic recovery.
First quarter net sales in 1994 for TMP and sheet products
combined increased by 9.2% to $325.2 million compared to $297.7
million in 1993 on first quarter shipments that increased in 1994
by 7.9% (the net result of an increase in sheet products and a
decrease in TMP) to 656,100 tons from 608,100 tons in 1993.
The volume of sheet product shipments improved significantly
in the 1994 first quarter, increasing by 20.0% compared to 1993's
first quarter. This contributed $26.0 million in higher revenues
in the first quarter 1994 compared to the same quarter in 1993.
Average selling prices for sheet products in the first quarter of
1994 also improved from 1993's first quarter, adding $16.8
million to revenues, while improved product mix added $3.5
million. As a result of the foregoing, sheet product revenues
increased by a total of $46.3 million.
A planned first quarter product mix correction to improve
on-time delivery and unusually harsh winter weather conditions
lowered TMP shipment volume by 12.7% in the first quarter of 1994
compared to the first quarter of 1993. As a result of slightly
lower selling prices and lower volume, TMP revenues decreased
during the 1994 first quarter by approximately $19.0 million.
The gradual downward trend in average selling prices that
occurred throughout 1993, caused by changes in its customer and
product mix, showed some improvement in the first quarter of
1994. However, average prices remained at a level below that
realized in the first quarter of 1993. The shift in customer mix
resulted in a decrease in revenues of approximately $0.2 million
for the 1994 first quarter.
The Company continues to implement its strategic program to
reduce a broad range of production costs, lower spending and
improve yields. The program includes workforce reductions which
have approximated 8% from mid-1992 through year end 1993. The
Company's goal is to further reduce its workforce over the next
three years consistent with the limitations allowed by its collective
bargaining agreements.
The capital improvement program has lowered the
Company'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 improvement
program. The cost reduction and capital improvement programs
have more than offset higher energy, labor, and retiree
healthcare costs. As a result of the foregoing, together with
changes in customer and product mix, the Company's cost of sales
as a percent of sales improved to 88.7% in the first quarter of
1994, despite severe weather conditions experienced early in the
quarter that hampered operations, compared to 94.0% in the same
period in 1993. This resulted in an improvement of $21 per ton
in operating costs, exclusive of a restructuring charge
recognized in the first quarter of 1993.
<TABLE>
<CAPTION>
(Dollars in thousands, Quarter Ended March 31,
except per ton data) 1994 1993
<S> <C> <C>
Operating Costs $308,635 $316,171
Restructuring Charge - 17,340
------- -------
$308,635 $298,831
Shipments in tons 656,100 608,100
Operating Costs per Ton
before restructuring charge $470 $491
</TABLE>
[TEXT]
In its continuing efforts to improve profit margins and
operating efficiency, the Company has focused its attention on
improving the performance of its finishing operations,
specifically that of its tin mill. However, on April 6, 1994,
the Company experienced a fire which caused extensive damage to
the No.9 Tandem, a cold rolling facility which supplies steel
coils to its tin mill for further processing and which resulted
in an outage that is expected to last until the fourth quarter of
1994. See "Risk Factors--Factors Relating to the Company--
Recent Major Damage to Facility" for a more
complete discussion of the No. 9 Tandem outage.
Depreciation expense increased $1.1 million, or 10.0%, to
$12.3 million in the first quarter of 1994 from $11.2 million in
the first quarter of 1993, primarily due to the increase in
shipment and production levels.
The Company's financing costs remained relatively high in
the first quarter of 1994 and comparable to those experienced in
the first quarter of 1993 due to the costs associated with the
Company's refinancing and public sale of $140 million of 11 1/2%
Notes in the first quarter of 1993.
The Company recognized a deferred income tax provision of
$1.3 million in the first quarter offset by a benefit of $0.7
million to adjust its deferred tax asset valuation reserve.
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 1992. 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 1992. Lower average selling prices, combined with a slight
change in product mix, reduced revenues by $16.8 million compared
to 1992.
A record 1,536 thousand tons of sheet products were shipped
to trade customers in 1993, reflecting a dramatic increase of 324
thousand tons, or nearly 27%, compared to 1992. 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 TMP 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 in 1992 on
most TMP 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
per ton in direct production costs. 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 per ton less than they were in 1992.
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in thousands, 1993 1992
except per ton data) ------ ------
<S> <C> <C>
Cost of Sales $1,105,558 $1,010,022
Additional noncash (18,067) -
retiree healthcare chges --------- ---------
$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 in 1993 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 its blast
furnaces, continuous 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 liquid steel
through finished production improved in 1993 compared to
performance levels in 1992. Additional savings are anticipated
as the Company continues to implement its cost reduction
programs. See "Business--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 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. The effect of manpower reductions on the
Company's results of operations are more fully described in
"Business--Business Strategy--Productivity Improvements and
Cost Reduction Initiatives."
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 11 1/2%
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 TMP 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%.
The volume of sheet product shipments increased by 129,000
tons, or 12.0%, in 1992 compared to 1991 primarily on the strength
of demand for coated products and, in particular, galvanized
sheet products. Shipments of galvanized products increased 30.0%
from 1991 levels and, together with a 2.0% 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 in 1991 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 6.0% and 8.0% lower,
respectively, in 1992 than in 1991.
Revenues from the sale of the Company's TMP 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.
Selling prices that were off slightly from 1991 on prime TMP and
an 8% decline in shipments of WEIRCHROME were the principal
factors offsetting the increase in revenues on secondary
products.
Cost of sales in 1992 as a percentage of net sales was 93.6%
compared to 98.4% for 1991. The improvement over 1991 was
attributable primarily to an increase 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 operating 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 continuous 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 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 $4.8 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 $111.2 million at
March 31, 1994, was considerably higher than the $89.0 million on
hand at December 31, 1993 and the $61.2 million at December 31,
1992. This increase was attributable primarily to improved
operating results, exclusive of non cash charges. A lower level
of spending on capital items during the first quarter of 1994 and
the full year 1993, compared to 1992, also enhanced the Company's
cash position. Net financing activities over this same period
showed a net use of cash primarily resulting from the Company's
first quarter 1993 refinancing through the public offering of
$140 million of its 11 1/2% Notes, which occurred in the first
quarter of 1993.
The net proceeds from the 11 1/2% 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 maintenance covenants associated with those
instruments. Although the 11 1/2% Indenture does not contain
restrictive financial maintenance covenants, it does contain
other covenants 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.
The application of a portion of the 11 1/2 % Note offering
proceeds toward the repayment of all of its bank borrowings
resulted in the repayment of certain term loans, a revolving
credit facility and a 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. To implement the facility, the Company sold
substantially all of its accounts receivable, and will sell
additional receivables as they are generated, to the subsidiary.
The subsidiary is expected to finance its ongoing receivable
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 March 31, 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 Company's available
cash on hand at March 31, 1994 and the amount of cash it
anticipates will be provided from operating activities in the
near term, the Company has no immediate cash
requirements. As such, it does not expect the subsidiary to sell
participation interests to the banks in the near term. At March
31, 1994 and December 31, 1993, after reduction for amounts in
place under the letter of credit subfacility, the base amount
available for cash sales was approximately $80.4 million and
$64.6 million, respectively. During the period that began with
the facility's implementation through March 31, 1994, the base
amount available for cash sales ranged from $64.3 million to
$81.8 million. In addition, the Company does not have any scheduled
cash requirements related to its long term debt until 1998 when
its 11 1/2% Notes become due.
The Company has gross deferred tax assets which total $192.4
million and represent net operating loss carryforwards and other
tax credits and net deductible temporary differences, all of
which can be used to reduce the Company's cash requirements for
the payment of future Federal regular income tax. The Company
may be subject to cash requirements under Federal alternative
minimum tax.
The Company also expects its liquidity to improve as a
direct result of its capital improvement program and through the
implementation of its current business strategy. See "Business
- --Business Strategy."
The Company's capitalization includes three main elements:
long term debt obligations, redeemable stock and stockholders'
equity. The table below shows the changes in the Company's
capitalization from January 1, 1991 through March 31, 1994.
<TABLE>
<CAPTION>
March 31, % of Jan. 1, % of
1994 Total 1991 Total
(Dollars in millions) -------- ------ -------- ------
<S> <C> <C> <C> <C>
Long term debt obligations, $495.3 93% $398.9 55%
including current portion
Redeemable Stock 37.4 7 3.9 1
Stockholders' Equity 0.7 - 316.5 44
------- ------ ------- ------
$533.4 100% $719.3 100%
</TABLE>
[TEXT]
The significant decline in the Company's stockholders'
equity from January 1, 1991 through the first quarter of 1994
resulted from its net losses over this period of $332.9 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. See "--Results of Operations" and
"Risk Factors--Factors Relating to the Company--Recent Losses."
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
See "Business--Capital Improvement Program." This program, substantially
completed in 1992, included, among other things, enhancing the Company's
capacity tomake 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. As
a result of its modernization efforts, the Company has improved its product
quality and mix, enhanced its ability to broaden its customer base, and
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 be
approximately $40.0 million in 1994 (excluding any additional expenditures
associated with rebuilding the No.9 Tandem) primarily for its
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 facility.
The Company does not anticipate the recent damage to its No.9
Tandem will adversely affect its short term or long term liquidity.
See "Risk Factors-- Factors Relating to the Company--Recent
Major Damage to Facility."
- ------------------------------------------------------
BUSINESS
Introduction
The Company is a major integrated producer of flat rolled
carbon steel which has been in the steelmaking and finishing
business for more than 80 years. The Company focuses on higher
value-added products with demanding specifications, such as TMP
and coated sheet. TMP are sold primarily to manufacturing and
packaging companies for use as food, beverage and general line
cans and coated sheet is sold primarily to the construction
industry for use in a broad variety of building products. For
the year 1993, these value-added product lines accounted for
approximately 70.0% of the Company's revenues and 63.0% of its
shipments. The remainder of the Company's revenues are derived
from the sale of hot and cold rolled sheet, which is used for
machinery, construction products and other durable goods.
The Company believes that its percentage of value-added products
to total production is among the highest of integrated steel
producers in the United States and provides it with a competitive
advantage against both domestic producers and foreign commodity
imports.
The Company's strategic objective is to be a leading domestic
producer of high value-added flat rolled carbon steel products
concentrating on those products with demanding specifications and
precise tolerances. The Company believes that it is well
positioned to achieve this objective through its strategic
business program that builds on the achievements of its capital
improvement program completed in 1992.
Capital Improvement Program
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 (steel with fewer impurities),
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 raw steel production, versus 62.0% in
prior years (and an average of approximately 85.0% for the industry
as a whole), and to increase its yield from raw steel to finished
production from 72.0% in 1989 to 79.4% in the first quarter of 1994.
As a result of its modernization efforts, the Company has improved its
product quality and mix, broadened its customer base and reduced its average
cost per ton of steel shipped. The Company spent an additional $14
million on capital improvements in 1993 and anticipates spending
approximately $40.0 million in 1994 (excluding any additional
expenditures associated with rebuilding the No. 9 Tandem),
primarily for its finishing operations.
The following table shows the total amounts expended by the
Company (including those capitalized) under the capital
improvement program by area of operations:
<TABLE>
<CAPTION>
(Dollars in millions)
Project Total 1992 1991 1990 1989 1988
- ------- ---- ---- ---- ---- ---- ---
<S> <C> <C> <C> <C> <C> <C>
Primary Iron and Steelmaking $ 54 $ 7 $ 16 $ 11 $ 7 $ 13
Continuous Caster Rebuild 64 - 3 26 34 1
Hot Strip Mill 326 34 80 129 49 34
Finishing Operations and
Product Development 19 2 12 2 - 3
Environmental and Safety 42 1 1 7 10 23
General Operating Services
and Miscellaneous 71 6 13 19 18 15
---- ---- ---- ---- ---- ---
$576 $ 50 $125 $194 $118 $ 89
</TABLE>
[TEXT]
See "--Steelmaking Process" and
"--Properties and Facilities" for additional descriptions of
specific capital improvement program projects and improvements.
Business Strategy
The Company's strategic objective is to be a leading producer
of high value-added flat rolled carbon steel products. With the
completion of the capital improvement program, the Company's
strategy is to: (i) increase revenues and margins through the
development and marketing of higher value-added products and
services; (ii) achieve productivity improvements and significant
reductions in conversion costs through advanced steelmaking and
rolling technology and savings in manpower and production
processes; and (iii) reduce financial leverage and restore the
Company's equity base.
Product and Service Expansion
The Company's strategy emphasizes the production and shipment
of higher value-added products, including expanding and
developing markets for those products. For the year 1993, the
Company's product mix by prime tons of high value-added products
(TMP, galvanized and other coated sheet) was 63% compared to an
average (weighted by tons) of approximately 32% among the
Company's integrated competitors, and its mix of low and medium
value-added products (hot rolled and cold rolled) was 37%
compared to such competitors' average of approximately 68%. Higher
value-added products generally have allowed the Company to
realize higher margins.
The Company's marketing initiatives are designed to utilize
the production advantages brought about by its capital
improvement program. Prior to the program, the Company was
limited to supplying coils with a maximum weight of 650 pounds
per inch of width ("PIW"). The Company's enhanced casting and
hot rolling facilities can now produce 1,000 pound PIW coils, a
size preferred by many customers to promote their manufacturing
efficiency. The Company's computer controlled, state-of-the-art
hot rolling facilities also enable it to meet exacting tolerances
for gauge and precise crown control on its products. Prior
to the capital improvement program, the Company's limitations on
gauge ran from .072" to .200", without crown control. The
Company's hot rolling facilities can now deliver gauges as light
as .054" and as heavy as .750", which the Company believes to be
the widest range of gauges available within the industry. Crown
control as low as .001" can also now be consistently achieved. The
Company estimates that these enhanced production capabilities
allow it to serve a potential sheet market of approximately 35
million tons annually, or more than three times the size of its
previous potential market.
The Company constantly seeks to open up new markets for its
high quality products. Recently, the Company has begun to market
high carbon, high strength low alloy steels and heavy gauge coil
plate primarily for the pipe and tube and construction
businesses. The Company also has intensified marketing efforts
for its proprietary Galfan coated product, WEIRKOTE PLUS, in
construction and highway applications, such as roofing, framing,
doors and signage, where formability and paintability are
important considerations in addition to superior anti-corrosive
properties.
The Company has utilized the research and development
expertise of its well-known WEIRTEC facility to improve Weirton's
product lines and expand their markets. WEIRTEC has pioneered
new uses for Weirton's light gauge products in the technology of
thin-walled food and beverage containers and lids and provides
on-going efforts to the Company and its customers in developing
alternative uses for coated sheet products. WEIRTEC has played a
central role in reducing steel beverage can weights by almost 30%
in the past decade and is continuing its efforts to achieve
additional can weight reductions. These developments, together
with the Company's leading efforts in promoting can recycling and
consumer awareness, have helped to improve the competitive
position of steel food, general packaging and beverage cans.
However, to date, the Company's efforts to promote the use of
steel beverage cans have not resulted in increased demand for
steel cans, primarily due to lower raw material costs for
beverage cans made of aluminum.
Recently, the Company's marketing initiatives have extended
to conversion services, including programs involving the tolling
of stainless steel slabs of specialty steelmakers. The Company
believes that development of these services could provide
additional utilization of its enhanced hot rolling facilities.
Productivity Improvements and Cost Reduction Initiatives
Yield Improvements and Manning Reductions. As a result of
its capital improvement program, the Company has achieved
significant operating efficiencies, including improving its
overall yields from liquid steel to finished production. Prior
to 1989, the Company's historic overall yields averaged 74.0%.
Combined with changes in product mix, the Company has increased
such yields to approximately 79.4% in the first quarter of 1994.
The Company estimates that each full percentage point of
improvement (based on the Company's standard cost assumptions)
would result in operating cost reductions of approximately $4.7
million.
Yield improvements combined with manpower reductions have
significantly increased the Company's overall productivity. In
1989 the Company required approximately 2.5 employee hours to
produce a ton of hot band and approximately 7.3 employee hours
per ton of prime product shipped. For the first quarter of
1994, productivity gains had reduced these figures to
approximately 1.8 employee hours per ton of hot band produced
and 5.3 employee hours per ton of prime product shipped. The
Company believes these productivity figures are superior to the
domestic industry average for hot bands and for finished
products, given the Company's greater proportion of highly
processed products.
As part of its business strategy, the Company is continuing
to reduce its workforce over the next few years, primarily
through retirement programs and attrition. At the commencement
of its capital improvement program in 1989, the Company had
approximately 7,900 employees, and at year-end 1993 it had
approximately 6,000 employees, representing a reduction of 24.0%.
The Company's goal is to achieve additional workforce reductions
by 1997 of about 15.0% from the 1993 year-end level.
Other Operating and Cost Improvements. Improved blast
furnace operating practices have allowed the Company to operate a
two furnace configuration and to raise average hot metal
production per furnace from 2,236 tons per day in 1989 (utilizing
three furnaces) to 3,242 tons per day in 1993 (utilizing two
furnaces). This has permitted the Company to maintain its
required hot metal production while keeping a third furnace on
standby, instead of requiring a fourth standby furnace as the
Company had operated in prior years. At the same time, the
Company has lowered its conversion costs by reducing its blast
furnace coke consumption rates per ton of hot metal.
In 1993, the Company's renovated hot strip mill achieved
average per turn operating rates of almost 3,500 tons of enhanced
product in the first quarter of 1994 compared to rates
approximating 3,000 tons per turn prior to the capital
improvement program. Moreover, through improved production
scheduling, average operating delays for the hot mill have been
reduced by more than 20.0% from 1988 levels.
The capital improvement program, as well as other cost
containment measures, have strengthened the Company's competitive
position in the domestic market place. Among North American
steel producers, the Company believes its operating cost per ton
of hot band is below the industry average. Moreover, the Company
has reduced its cost of sales per net ton of product shipped from
$505 in 1990 (the first full year of a new labor contract) to
$455 in 1993. While changes in product mix and volume have
played a part in this achievement, the Company believes the
capital improvement program was the major contributor to the
improvement. These factors, together with improved pricing for
its products, have positioned the Company to further enhance its
operating results.
The Company is seeking additional savings primarily through
lower energy consumption and costs 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 further reduce its inventories.
The Company has initiated programs to contain inflationary
cost increases in healthcare benefits, and in some cases to
reduce costs while improving coverage, through new collective
bargaining agreements effective through 1996. The Company
believes its new labor agreements are among the most
competitively structured in the domestic industry.
Customer Service and Information Management Improvements.
The Company believes its sales efforts will be strengthened by an
improved customer service program. The Company continues to
simplify its management organization to provide increased
responsiveness to customer needs. The Company's total quality
management practices have been extended to cover service
functions as well as production. New information systems have
assisted the Company in identifying order status so that
customers can be kept informed regarding production, shipment,
and delivery schedules. Finally, relations with customers are
being enhanced by providing them access to the problem solving
resources of the Company's WEIRTEC facility.
The Company has introduced a computer-controlled integrated
management information system, IMIS, which provides Company-wide
order and inventory related information. The Company
contemplates linking this system with logisitics and integrated
scheduling (L&IS), a state-of-the-art computer system, which it
expects to utilize by late 1995 or early 1996 for integrated
production scheduling throughout the mill.
Reducing Financial Leverage and Restoring the Company's Equity
Base
Since 1989, the Company's stockholders' equity has been
substantially eliminated by losses, restructuring and other
charges and the effects of changes in certain accounting
practices. See "Risk Factors--Factors Relating to the Company--Recent
Losses" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of
Operations." The Company's initial
financial strategy, in order to gain financial flexibility, was to replace
its variable interest rate debt and other instruments having
financial maintenance covenants with fixed rate obligations
having lesser restrictions. This was accomplished in 1993. See
Note 6 to the Consolidated Financial Statements. To further
accomplish its strategic financial goals, management is seeking
to reduce the Company's high leverage and financing costs and to
rebuild stockholders' equity. The Offerings of Common Stock,
together with contemplated sales of Common Stock to employees
over the next five years, will assist the Company in
accomplishing that goal. See "Capitalization."
Principal Products and Markets
The Company is a major integrated producer of flat rolled
carbon steels with principal product lines consisting of TMP and
sheet products. 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. Such ranges have been enhanced by
the Company's capital improvement program. See "--Capital Improvement
Program."
The Company's sales of TMP and sheet products as a
percentage of its total revenues and the comparative percentages
of tons shipped for each year in the period 1989 through 1993 are
shown in the following tables.
<TABLE>
<CAPTION>
(Percentage of revenues)
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Tin mill products ... 46% 52% 54% 47% 42%
Sheet products ... 54 48 46 53 58
100% 100% 100% 100% 100%
</TABLE>
<TABLE>
<CAPTION>
(Percentage of tons shipped)
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Tin mill products ... 37% 42% 44% 40% 36%
Sheet products ... 63 58 56 60 64
100% 100% 100% 100% 100%
<FN>
The above tables include "secondary" products, principally those
not meeting prime specifications. Semi-finished products have
been included in sheet products.
</TABLE>
[TEXT]
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>
Food and Beverage.... 37% 41% 44% 42% 40%
Service Centers...... 30 24 21 20 20
Pipe and Tube........ 12 11 9 10 10
Construction......... 9 8 7 8 9
Consumer Durables.... 4 6 8 4 5
Other ............... 8 10 11 16 16
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.
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 (also known as "tin
free" 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 22.0% of the
TMP market, a slight decrease from the 23.0% market share it held
in 1992. (For 1994, the Company expects that its share of the TMP
market will decline as a result of the outage affecting the No. 9
Tandem. See "Risk Factors--Factors Relating to the Company--Recent
Major Damage to Facility." TMP shipments
on an industry-wide basis have remained relatively steady over
the same period even as aluminum, plastic, 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.
The TMP market is characterized by a relatively low number of
manufacturers. During 1993, shipments to ten major can
manufacturers accounted for approximately 90.0% 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 11.0% 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>
<CAPTION>
Tin Mill Products
Historical Market Share
(In thousands of tons) 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
TMP industry shipments(1) 4,123 3,927 4,040 4,032 4,116
Company shipments(1)..... 895 890 857 874 894
Company market share..... 22% 23% 21% 22% 22%
<FN>
(1) Includes secondaries.
</TABLE>
[TEXT]
Steelmaking and hot rolling improvements derived from the
Company's 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 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
advanced steelmaking and rolling technology products such as
thin-walled containers.
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 a number of the Company's customers who are located
in adjoining or nearby manufacturing facilities. Steel coils,
when needed by customers' operations, 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.
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 of 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. The Company's sales of
cold rolled products in recent years have been constrained by
limitations in available cold rolling capacity not committed for
higher value-added products and by some customer migration to
higher surface quality hot rolled products.
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>
<CAPTION>
Sheet Products
Historical Market Share
(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(1)... 1,536 1,206 1,082 1,285 1,480
Company market share... 3.7% 3.2% 3.0% 3.2% 3.7%
<FN>
(1) Includes secondaries, but excludes hot metal produced for
sale.
</TABLE>
[TEXT]
While the Company does not consider its presence in the
overall sheet market to be significant, the Company has
concentrated on offering more highly processed products and
developed greater 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 products, while
capitalizing on developing specialty markets such as construction
where the Company believes that its enhanced galvanized product, Galfan,
has potential in a number of applications including roofing and
framing. As part of its sheet marketing strategy, the Company also is 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.
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 the
steel it produces. The slabs are then reheated, reduced and
finished by extensive rolling, shaping, tempering and, in many
cases, by the application of plating or coating. 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, represents a world-class facility that
greatly enhances the Company's 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.
The following chart shows the configuration of the Company's
major production facilities:
[ADD FLOWCHART that shows the processes from raw materials to
finished products produced by the Company]
Production and Shipments
The following table sets forth annual production capacity,
utilization rates and shipment information for the Company and
the domestic steel industry (as reported by the AISI) for the
periods shown below.
<TABLE>
<CAPTION>
Production and Shipments
1st
Qtr. Year ended December 31,
(In millions of tons) 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Company
Raw steel production.. 0.7 2.7 2.5 2.3 2.7 2.9
Capacity............... *.75 *3.0 *3.0 3.4 3.4 3.4
Utilization............ 90% 91% 83% 68% 79% 85%
Shipments ............. 0.7 2.4 2.1 1.9 2.2 2.5
Shipments as a percent
of industry total... 3.0% 2.7% 2.6% 2.4% 2.6% 3.0%
Industry
Raw steel production... 23.9 97.9 91.6 87.9 98.9 97.9
Capacity .............. 26.4 109.9 113.1 117.6 116.7 115.9
Utilization............ 90% 89% 81% 74% 84% 84%
Shipments ............. 22.7 89.0 82.3 78.9 84.7 84.1
<FN>
*Reduction from prior years reflects the discontinuation of ingot
teeming and reduction operations.
</TABLE>
[TEXT]
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 87.9 million tons and shipments declined
to 78.9 million tons. However, starting with December 1991 and
continuing through 1993, the steel industry experienced an
increase in both production and shipments. Steel production for
1993 was up approximately 6.5% to 97.9 million tons compared to
1992, while shipments increased by approximately 8.1% to 89.0
million tons. Similarly, capacity utilization which had dropped
to 74.0% in 1991 rebounded to 89.1% 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 "--Capital Improvement Program"
for a more complete discussion of the Company's capital
improvement program. Although these factors for the most part
affected the Company's primary steelmaking and first stage
finishing facilities, other 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 improvement 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 interrupted operations during installation
phases became less frequent throughout the break-in period for
new equipment and, in 1993, were reduced to only one two-day
unscheduled outage due to flood water damage.
Raw Materials
The Company purchases iron ore pellets, iron ore, coal,
coke, zinc, chrome, limestone, scrap and other necessary raw
material in the open market. Substantially all the Company's raw
material needs are available through multiple sources where the
primary concern is price and quality 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 Series B Preferred Stock, acquired by Cliffs at the
time the supply agreement was entered into, has been redeemed.
See "Description of Capital Stock" and Note 10 to the Company's
Financial Statements for a more complete discussion of the Series
B Preferred Stock. The Company also has other contracts for iron
ore pellets and iron ore through 1994.
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 its predecessor business; 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 each case
subject to upper and lower limitations on price. 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 declines, future coke prices may be subject to
significant increases.
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 capacity
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.
Research and Development
The Company engages in research and development for the
improvement of existing products, the development of new products
and product applications and the discovery of 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. 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.
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 aluminum, plastics, cardboard,
ceramics, wood, concrete 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. Two such facilities have been placed in
operation and are competing in the hot rolled, cold rolled and
galvanized marketplace. Escalating prices for scrap (the basic
raw material used in melting operations and on which mini-mills
are more dependent than integrated producers) have increased the
operating costs of mini-mills, particularly during the past year.
In response, some mini-mills have begun to develop scrap
substitution technologies.
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 operating and financing
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 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 Company believes 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 represented 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. The findings of the ITC regarding coated sheet products
have been followed by a reduction in 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.
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 has collective bargaining agreements effective
through September 25, 1996 with the Independent Steelworkers
Union (the "ISU"), which represents 4,966 employees in bargaining units
covering production and maintenance workers, clerical workers,
nurses, and with the Independent Guard Union, which represents 39
employees. 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 lower earnings or losses.
The Company's current labor agreements provide for the
payment of bonuses totalling $3,500 per employee, paid in
installments over the life of the contracts, but do not provide
for wage increases. During the term of the new agreements, the
Company's Profit Plan, which covers substantially all employees,
provides for participants to share in the Company's profits each
year at a rate equal to 33 1/3% of the Company's "adjusted net
earnings" for that year as defined under the plan, provided its
net worth exceeds $100 million. (Net worth, for purposes of the
Profit Plan, includes redeemable stocks.) 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 there can be no assurances that such savings can be
obtained, 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 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 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 NYSE. In connection with the public
offering of Common Stock, the Company also sold 1.8 million
shares of Series A Preferred Stock to the 1989 ESOP. Each share
of Series A Preferred Stock is 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, but prior to the proposed Offerings,
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 (as calculated in
accordance with applicable voting restrictions) of the Company's voting
stock.
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 $1.0 million in 1993, $1.0 million in 1992, and $2.0
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
substantial 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 round-the-clock
environmental control supervisory function and is seeking to
create a mobile maintenance group dedicated to
environmentally safe operation. See the discussion below
for recent developments involving the Company's waste discharge permit.
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.
The Company and its predecessors have been conducting steel
manufacturing and related operations at numerous locations, including
the Company's current plant site, for over eighty years. Although the
Company and its predecessors utilized operating practices that were
standard in the industry at the time, hazardous materials may have been
released on or under these sites. Consequently, thecompany potentially
may be required to remediate contamination at some of these sites.
None of these sites are the subject of pending or threatened proceding.
The Company does not have sufficient information to estimate its potential
liability in connection with any potential future remediation. However,
the Company believes that if any such remediation is required, it will occur
over an extended period of time. In addition, the Company believes that many
of these sites may also be subject to indemnities by National to the Company.
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. On June 30, 1994,
the Company received an invoice from the EPA seeking payment for
oversight and response costs incurred by the EPA, with regard to this
site in the approximate amount of $12,000. The Company believes that
this sum represents the final expenditure related to this remediation
program.
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" plan to reduce or eliminate the frequency of
spills at the tin mill, 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 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. Multimedia actions
involve coordinated enforcement proceedings related to water, air
and/or waste-related issues stemming from a number of federal
statutes and rules. The DEP further indicated that it informed
EPA that it preferred first to issue a new National Pollutant Discharge
Elimination System ("NPDES") water discharge
permit to the Company and then monitor compliance by the Company
before making any recommendation to the EPA concerning a federal
enforcement action. No assurance can be given that future
compliance by the Company under a new NPDES water discharge
permit 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.
The DEP issued a final NPDES permit to the Company on
June 30, 1994. The Company believes it will not be able to
ensure consistent compliance with certain provisions contained in
the NPDES permit without significant treatment technology
and/or process changes. The Company cannot estimate the cost of
installing such technology or effecting such changes, but such
costs could be material. In conjunction with the NPDES permit, the
DEP has issued an administrative compliance order which provides the
Company with interim effluent limitations for a three year period
which the Company believes it is able to meet. The Company is considering
whether it will pursue an administrative appeal and/or other appropriate
action to obtain relief from objectionable provisions contained in the
NPDES permit, although no assurance can be given that such
efforts by the Company will be successful.
Indemnification. According to the agreements by which the
Company acquired its assets 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 National's and the Company's
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. Thus, the
Company's ability to obtain future reimbursement or
indemnification relating to environmental claims from National
depends, in addition to National's continued financial viability,
on 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 between the
Company and National regarding such issues.
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. The prices obtainable for the
Company's products are generally governed by prevailing market conditions.
Accordingly, the Company, like its competitors, normally lacks the
ability to pass on to customers cost increases specifically resulting
from compliance with environmental regulations.
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 employed operating furnace is
nearing the end of its campaign which is estimated to be in late
1995 and at which time, the Company will undertake a major reline of
that furnace. The Company estimates that the cost of such reline
will be in the range of approximately $ million to $ million.
One currently idled furnace is being refurbished to serve as a replace-
ment. 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 shop, 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, and 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 (including the No. 9 Tandem),
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. The Company's
facilities include a 1.1 million square foot finished products
warehouse which stores and feeds coils to satellite customer
manufacturing operations. See "--Production and Shipments" for
additional information regarding production capacity and
utilization rates.
- -----------------------------------------------------------
MANAGEMENT
Executive officers and directors of the Company are as
follows:
Name Age Office
Herbert Elish 61 President, Chairman and
Chief Executive Officer;
Director
William C. Brenneisen 52 Vice President--Human
Resources
James B. Bruhn 53 Vice President--Tin Mill
Products Business;
Director
Craig T. Costello 46 Vice President--
Operations
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 and WEIRTEC
Narendra M. Pathipati 37 Treasurer
Richard K. Riederer 50 Vice President and Chief
Financial Officer;
Director
Mac S. White, Jr. 61 Vice President--
Engineering
Robert J. D'Anniballe, Jr. 37 Director
Mark G. Glyptis 43 Director
Gordon C. Hurlbert 70 Director
Phillip A. Karber 47 Director
F. James Rechin 70 Director
Richard F. Schubert 57 Director
Harvey L. Sperry 64 Director
Thomas R. Sturges 50 Director
David I.J. Wang 61 Director
Unless otherwise indicated, the executive officers and
directors of the Company have held the positions described below
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.
Mr. Elish also serves as a director of Hampshire Group, Limited.
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 has been the Company's Vice President--Tin
Mill Products Business since November 1992. From July 1987
through November 1992, he served as Vice President--Sales and
Marketing--Tin Mill Products. He has been a director of the
Company since May 1990.
Craig T. Costello was elected Vice-President--Operations in
October 1993. Mr. Costello, a 28-year employee with the Company,
served most recently as General Manager--Operations 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.
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.
Dennis R. Mangino has served as the Company's Vice
President--Product Quality and WEIRTEC since October 1989. From
February 1986 to October 1989, Mr. Mangino was employed by
Enichem America where he served as Director--Corporate
Development 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 & Analysis for the Company.
Mr. Pathipati served as Treasurer for Century II, Inc., a
multi-national capital goods company, from April 1988 to
January 1990. Prior 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. From
March 1986 to December 1988, he served as Vice President and
Treasurer of Harnischfeger Industries, Inc., a producer of
manufacturing equipment. Mr. Riederer was elected to the Board as
a director in October 1993. 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.
Robert J. D'Anniballe, Jr. has been a director of the
Company since 1990. Mr. D'Anniballe has been a partner in the law
firm of Alpert, D'Anniballe & Visnic since 1983 and General
Counsel to the ISU since 1985.
Mark G. Glyptis has been a director of the Company since 1991.
Mr. Glyptis has been President of the ISU, since August 1991 and was
employed by the Company in its Operations Services Department prior
to August 1991.
Gordon C. Hurlbert has been a director of the Company
since 1983. Mr. Hurlbert is President and Chief Executive Officer
of GCH Management Services, a business consulting firm, and
Chairman of the Board of Directors of CSC Industries, Inc. He is
a director of Carolina Power & Light Co., Urenco, Inc. and Kerr Group, Inc.
In November 1993, CSC Industries, Inc. filed for reorganiztion under
Chapter 11 of the U.S. Bankruptcy Code.
Phillip A. Karber has been a director of the Company since
1992. Mr. Karber is currently Corporate Vice President
and Director of the Center for Technology and Public Policy of
BDM International, Inc. He also serves on advisory boards at
Texas A&M and for the Center for Strategic and International
Studies.
F. James Rechin has been a director of the Company
since 1983. Mr. Rechin is President and Chief Executive Officer
of Searchlight Corporation, a consulting firm. He is a former
Executive Vice President and a former controlling stockholder of
Brittany Corporation, a manufacturing and holding company. He was
also formerly Group Vice President of TRW, Inc. a manufacturer of
jet engine parts.
Mr. Rechin is a major stockholder of Providence Group, Inc., a
holding company in the refrigeration supply business.
Richard F. Schubert has been a director of the Company
since 1983. Mr. Schubert is President and Chief Executive Officer
of The Points of Light Foundation. He is the Chairman of
Biorelease, Inc., a biotechnology firm, and the immediate past
President of American Red Cross. He is a director of National
Allowance of Business and Management Training Corp. and a former
Vice Chairman, President and a director of Bethlehem Steel
Corporation. He is past Chairman of AISI Committee on
International Trade and was formerly Under Secretary of Labor.
Harvey L. Sperry has been a director of the Company
since 1983. Mr. Sperry is a partner in the law firm of Willkie
Farr & Gallagher. He is a director of Kerr Group, Inc. and
Hampshire Group, Limited. Mr. Sperry, whose term of office
expires at the 1994 Annual Meeting, will not be a candidate for
re-election because he will not meet the qualifications for an
Independent Director, as defined below, since the law firm of
which he is a member performs legal services for the Company.
Thomas R. Sturges has been a director of the Company
since 1986. Mr. Sturges is Executive Vice President of The
Harding Group, Inc., a private investment and management firm. He
was Special Associate Director in the Corporate Finance
Department of Bear, Stearns & Co. Inc. from 1986 to
February 1990.
David I. J. Wang has been a director since 1992. Mr. Wang
was Executive Vice President--Timber Distribution & Specialty
Business from 1987 until his retirement in 1991 and was a member
of the International Paper Co. Board of Directors. He is director
of UGI Corp., Joy Technologies, Inc. and of several privately
held companies. He also serves on Advisory Boards of Georgia
Institute of Technology, the University of Texas and Hampton
University.
- ----------------------------------------------------
The Restated Certificate provides for a Board of Directors
of 14 members divided into three classes, designated as Class I,
Class II and Class III, respectively. Each class serves a
three-year term, and the terms are staggered so that the term of
one class expires at each year's annual meeting of stockholders.
At each annual meeting of stockholders, therefore, a different
class of directors is elected.
The Restated Certificate also provides for certain
qualifications among the Company's directors. Specifically, at
least three members of the Board of Directors (the "Union
Directors") must be designated by the Company's primary
recognized collective bargaining agent (the "Union"), currently
the ISU, provided the Union meets certain requirements. One of the
Union Directors must be the president of the Union and the other two
are designated by certification of the executive committee of the Union. The
Restated Certificate further provides that three members of the
Board of Directors must consist of the Chief Executive Officer of
the Company and two of the Company's employees designated by the
Chief Executive Officer. Seven
directors (the "Independent Directors") must not be, nor ever
have been, employees of the Company or its predecessor, or the
Union, and may not be affiliated with persons having certain
substantial business relationships with the Company. One
director is the "ESOP Director" who is required to be nominated
by the Board of Directors pursuant to a certification by a
nominating committee elected by the 1984 and 1989 ESOP
participants.
- ---------------------------------------------------
SELLING STOCKHOLDER
The Selling Stockholder is Mellon Bank, N.A., as trustee under
the trust established pursuant to the Pension Plan. The shares of
Common Stock held in such trust are managed by U.S. Trust Company of
California, N.A.("U.S. Trust) pursuant to an investment manager agreement. In
accordance with terms of the investment management agreement,
U.S. Trust is responsible for the management and disposition of the
shares of Common Stock of the Company held by the Pension Plan and is
a fiduciary of the Pension Plan. U.S. Trust, in exercising its
fiduciary duty, will direct the Selling Stockholder to sell the shares
of Common Stock offered hereby. At the date of this Prospectus, the Pension
Plan owned 5,870,968 shares of Common Stock, representing approximately
22% of the Company's outstanding shares. 2,000,000 shares of Common Stock
are to be sold by the Pension Plan pursuant to these Offerings,
and assuming that all such shares are sold, the Pension Plan will
own approximately 9% of the outstanding shares of Common Stock after the
Offerings. The remaining shares of Common Stock held by the
Pension Plan are entitled to registration rights which, pursuant
to an agreement with the Company, may not be exercised without
the Company's consent until at least ________ months following
the expiration of the 120 day lockup period.
The Selling Stockholder has granted over-allotment options
to the several Underwriters of up to 2,550,000 shares of Common
Stock. The Selling Stockholder and the Company have agreed
that the Company may supply shares to satisfy exercises of the
over-allotment options up to a maximum of 300,000 shares. If the
Underwriters exercise the over-allotment option, the Pension Plan
thereafter will hold approximately 3% of the Company's outstanding
shares, or approximately 4% if the Company supplies the maximum
number of shares it is permitted to satisfy such options.
Prohibited transactions under Title I of the Employee Retirement
Income Security Act of 1974 ("ERISA") and Section 4975 of the Code could
arise if, absent an available exemption, a person or entity which is a
"party in interest", as defined under ERISA, or a "disqualified person",
as defined under the Code, were to purchase any of the Common Stock being
offered by the Pension Plan. Any such potential purchaser should consult
with counsel in order to determine whether an exemption is available
with respect to any such purchase.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 50.0
million shares of Common Stock, par value $.01 per share, and 7.5
million shares of preferred stock, par value $.10 per share. Of
such shares of Common Stock, 15.0 million are restricted to sales
in bona fide public offerings and 5.0 million to use in
connection with employee plans, as defined in the Restated
Certificate.
Common Stock
As of April 25, 1994, there were 26,736,661 shares of Common
Stock outstanding, held of record by 2,721 persons, including the
1984 ESOP which held 12,826,723 shares on behalf of 9,622
participants.
Holders of Common Stock are entitled to one vote per share
on all matters submitted to a vote of the stockholders voting
together with Series A Preferred Stock as a single class. Shares
held of record by the 1984 and 1989 ESOPs are voted by the
respective trustee according to confidential written instructions
received by participants. There is no cumulative voting. The
Board of Directors is divided into three classes as described
under "Management," which could make it more difficult for
another person or entity to gain control of the Company's Board.
See "--Certain Voting Provisions."
Subject to any preferences of outstanding preferred stock,
holders of Common Stock are entitled to received ratably such
dividends as may be declared by the Board of Directors out of
funds legally available therefor, and in the event of
liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets
remaining after payment to all creditors and payments required to
be made in respect of any outstanding preferred stock. The rights
of holders of Common Stock may in effect be limited by the rights,
powers and preferences of holders of preferred stock. Such
limitations may occur, among other things, in respect of the voting
power, entitlement to dividends and entitlement to assets of preferred
stock relative to the Common Stock. See "--Preferred Stock" for a description
of the two series of preferred stock of the Company currently outstanding.
Holders of Common Stock have no preemptive rights and have
no rights to convert their shares of Common Stock into any other
securities. All outstanding shares of Common Stock are, and the
shares of Common Stock being offered by the Company and the
Pension Plan hereby will be, fully paid and nonassessable.
Approval of 90% of the Board of Directors is generally
required for any issuance of shares of Common Stock,
except for shares issued to the two ESOPs or pursuant to other
Company sponsored employee benefit plans approved in accordance
with the Restated Certificate.
Preferred Stock
The Board of Directors is authorized to issue preferred
stock in various series from time to time, with each series to
have such rights, powers, privileges, and limitations as the
Board may determine. Approval of 90% of the Board of Directors is
generally required for any issuance of shares of
preferred stock, except for shares issued to the two ESOPs or
pursuant to other Company sponsored employee benefit plans
approved in accordance with the Restated Certificate.
As of April 25, 1994, there were 1,780,282 shares of Series
A Preferred Stock outstanding, held of record by 238 persons,
including the 1989 ESOP which held 1,774,614 shares on behalf of
8,361 participants.
Holders of Series A Preferred Stock are entitled to ten
times the number of votes (currently ten votes per share) of the
Common Stock into which such Series A Preferred Stock is
convertible on all matters submitted to a vote of the
stockholders voting together with the Common Stock as a single
class. Each share of Series A Preferred Stock is convertible at
the option of the holder into one share of Common Stock subject,
in certain instances, to anti-dilution adjustments, including the
issuance of rights or warrants to purchase Common Stock, the
declaration of a dividend or other distribution in the form of
stock of the Company and the occurrence of a stock-split or a
reverse stock-split. The Series A Preferred Stock may only be
held by qualified holders, which term is limited to the 1989 ESOP
and employees. Transfers to non-qualified holders results in a
conversion into Common Stock. The Company has recently amended
the 1989 ESOP to provide that shares of Series A Preferred Stock
acquired by the Company from participants will be contributed
again to the 1989 ESOP.
The Series A Preferred Stock is entitled to receive
dividends, when and as declared by the Board of Directors, at the
same rate as payable on the number of shares of Common Stock into
which the Series A Preferred Stock is convertible. In the event
the Company is liquidated, the holders of Series A Preferred
Stock will be entitled to a liquidation preference, prior to any
payment on the Common Stock, of $5.00 per share plus any unpaid
dividends.
As of December 31, 1993, there were 500,000 shares of Series
B Preferred Stock outstanding held by one holder of record. The
Series B Preferred Stock is entitled to annual cumulative
preferential dividends of $6.25 per share and a liquidation
preference of $50 per share. The Company is required to redeem
all outstanding shares of Series B Preferred Stock by December
31, 2003 for a total of $25 million, plus any accrued and unpaid
dividends. Holders of Series B Preferred Stock do not generally
vote on stockholder matters. However, the Series B Preferred
Stock is entitled to a class vote on certain matters, including
combination transactions involving the Company and the issuance
of senior equity securities. The Series B Preferred Stock may be
redeemed by the Company optionally at any time at the mandatory
redemption price, plus accrued and unpaid dividends. Under certain
circumstances, the holders of the Series B Preferred Stock are entitled
to exchange their shares for securities being offered by the Company
in a public offering. In addition, the Company may be required to
repurchase shares of Series B Preferred Stock upon the occurrence of
events specified in the agreement pursuant to which such stock was
issued.
Subject to the limitations of applicable law and the provsions
of the Restated Certificate, the Company has the capacity to issue
additional shares of preferred stock. The issuance of preferred stock
could be utilized as a method of discouraging, delaying or preventing a
change in control of the Company. Under the circumstances where it
might be perceived that preferred stock could be issued for such
purposes, the existence of authorized but unissued shares of preferred
stock could have a depressive effect on the market for the Company's
Common Stock. The capacity to issue such stock, including the effects
of its voting power, together with other factors such as the Company's
classified Board of Directors could have the effect of discouraging
certain potential bidders from offering stockholders a premium for
their shares. See "Risk Factors--Factors Relating to the Company--
Antitakeover Features."
Certain Voting Provisions
The Restated Certificate provides that, with the exception
of certain types of employee benefit plans, no
stockholder, or group of stockholders acting in concert (a "Significant
Stockholder"), beneficially owns in excess of 5% of the total voting power of
the Company's voting stock (as measured in relation to the shares
entitled to vote in the election of directors) (the "Total Voting
Power") is entitled to vote any share of the Company's stock
which, when combined with all other shares of the Company's stock
beneficially owned by such Significant Stockholder, would exceed
5% of the Total Voting Power. Under these provisions, the ability of the
Pension Plan to vote its entire holdings of Common Stock has been limited.
The Restated Certificate also provides that certain
corporate transactions must be approved by the holders of shares
representing not less than 80% of the Total Voting Power of the
Company's capital stock not restricted from voting by the 5%
Significant Stockholder provision referred to above. Transactions
requiring an 80% vote include, inter alia, certain types of
mergers, the sale or transfer of substantially all of the
Company's assets, the liquidation or dissolution of the Company,
certain reclassifications of the Company's securities and certain
transactions involving the Company and a Significant Stockholder.
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is
Society National Bank of Cleveland, Ohio.
- --------------------------------------------------------------
UNDERWRITING
Subject to the terms and conditions set forth in the U.S.
Underwriting Agreement, the Company and the Selling Stockholder
have agreed to sell to each of the Underwriters named below (the
"U.S. Underwriters") for whom Salomon Brothers Inc, Lazard Freres
& Co., Lehman Brothers Inc. and PaineWebber Incorporated are
acting as representatives (the "U.S. Representatives"), and each
of the Underwriters has severally agreed to purchase from the
Company and the Selling Stockholder, the total number of shares
of Common Stock set forth opposite its name below:
U.S. Underwriters Number of Shares to be Purchased
Salomon Brothers Inc
Lazard Freres & Co.
Lehman Brothers Inc.
PaineWebber Incorporated
----------
Total 14,450,000
==========
In the U.S. Underwriting Agreement, the several U.S.
Underwriters have agreed, subject to the terms and conditions set
forth therein, to purchase all the shares of Common Stock set
forth in the table above, if any such shares are purchased. In
the event of a default by any U.S. Underwriter, the U.S.
Underwriting Agreement provides that, in certain circumstances,
purchase commitments of the nondefaulting U.S. Underwriters may
be increased or the U.S. Underwriting Agreement may be
terminated.
The Company and the Selling Stockholder have been advised by
the U.S. Representatives that the several U.S. Underwriters
propose initially to offer such shares to the public at the
public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a
concession not in excess of $ per share. The U.S.
Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to other dealers.
After this public offering, the public offering price and such
concessions may be changed.
The Selling Stockholder has granted to the U.S. Underwriters
an option exercisable during the 30-day period after the date of
this Prospectus to purchase up to 2,167,500 additional shares of
Common Stock at the same price per share as the initial
14,450,000 shares of Common Stock to be purchased by the U.S.
Underwriters. The U.S. Underwriters may exercise such option
only to cover over-allotments in the sale of the shares of Common
Stock that the U.S. Underwriters have agreed to purchase. To the
extent that the U.S. Underwriters exercise such option, each U.S.
Underwriter will have a firm commitment, subject to certain
conditions, to purchase the same proportion of the option shares
as the number of shares of Common Stock to be purchased and
offered by such U.S. Underwriter in the above table bears to the
total number of shares of Common Stock initially purchased by the
U.S. Underwriters. The U.S. Underwriting Agreement provides that
the Company, in its sole discretion, will be permitted to supply
up to 255,000 shares of Common Stock toward satisfaction of the
exercise of the option.
The Company and the Selling Stockholder have also entered
into an International Underwriting Agreement with the
International Underwriters named therein, for whom Salomon
Brothers International Limited, Lazard Brothers & Co., Limited,
Lehman Brothers International (Europe) and PaineWebber
International (U.K.) Ltd. are acting as representatives (the
"International Representatives"), providing for the concurrent
offer and sale of 2,550,000 shares of Common Stock outside of the
United States and Canada and providing the International
Underwriters an option, exercisable during the 30-day period
after the date of this Prospectus, to purchase up to 382,500
additional shares at the same price per share as the initial
2,550,000 shares of Common Stock to be purchased by the
International Underwriters. The International Underwriting
Agreement provides that the Company, in its sole discretion, will
be permitted to supply up to 45,000 shares of Common Stock toward
satisfaction of the exercise of the option.
The offering price and underwriting discounts for the U.S.
Offering and the International Offering will be identical. The
closing of the U.S. Offering is conditioned upon the closing of
the International Offering, and the closing of the International
Offering is conditioned upon the closing of the U.S. Offering.
Each U.S. Underwriter has severally agreed that, as part of
the U.S. Offering, (a) it is not purchasing any shares of Common
Stock for the account of anyone other than a United States or
Canadian Person and (b) it has not offered or sold, and will not
offer or sell, directly or indirectly, any shares of Common Stock
or distribute this Prospectus to any person outside the United
States or Canada or to anyone other than a United States or
Canadian Person. Each International Underwriter has severally
agreed that, as part of the International Offering, (a) it is not
purchasing any shares of Common Stock for the account of any
United States or Canadian Person and (b) it has not offered or
sold, and will not offer or sell, directly or indirectly, any
shares of Common Stock or distribute any Prospectus relating to
the International Offering to any person within the United States
or Canada or to any United States or Canadian Person. The
foregoing limitations do not apply to stabilization transactions
or to certain other transactions specified in the agreement
between the U.S. Underwriters and the International Underwriters.
"United States or Canadian Person" means any person who is a
national or resident of the United States or Canada, any
corporation, partnership or other entity created or organized in
or under the laws of the United States or Canada, or any
political subdivision thereof, any estate or trust the income of
which is subject to United States or Canadian federal income
taxation, regardless of the source of its income (other than a
foreign branch of any United States or Canadian Person), and
includes any United States or Canadian branch of a person other
than a United States or Canadian Person.
Each U.S. Underwriter that will offer or sell shares of
Common Stock in Canada as part of the distribution has severally
agreed that such offers and sales will be made only pursuant to
an exemption from the prospectus requirements in each
jurisdiction in Canada in which such offers and sales are made.
Pursuant to the agreement between the U.S. Underwriters and
the International Underwriters, sales may be made between the
U.S. Underwriters and the International Underwriters of such
number of shares of Common Stock as may be mutually be agreed.
The price of any shares of Common Stock so sold shall be the
initial public offering price, less an amount not greater than
the concession to securities dealers. To the extent that there
are sales between the U.S. Underwriters and the International
Underwriters, pursuant to the agreement between the U.S.
Underwriters and the International Underwriters, the number of
shares initially available for sale by the U.S. Underwriters or
by the International Underwriters may be more or less than the
amount indicated on the cover page of this Prospectus.
The Company, its officers and directors and U.S. Trust
have agreed not to sell, or otherwise dispose of, directly or indirectly, or
announce the offering of, any shares of Common Stock, or any
securities convertible into, or exchangeable for, shares of
Common Stock, except those offered in the Offerings or in
connection with certain employee benefit plans or labor
agreements, for a period of 120 days from the date hereof without
the prior consent of the U.S. Representatives and the
International Representatives.
The U.S. Underwriting Agreement and the International
Underwriting Agreement each provide that the Company will
indemnify the U.S. Underwriters and the International
Underwriters, respectively, against certain liabilities,
including liabilities under the Securities Act, or contribute to
payments the U.S. Underwriters and the International
Underwriters, as the case may be, may be required to make in
respect thereof.
- --------------------------------------------------
LEGAL MATTERS
Certain legal matters in connection with the securities
offered hereby will be passed upon for the Company by Willkie
Farr & Gallagher and for the Underwriters by Davis Polk &
Wardwell. Harvey L. Sperry, a member of the firm of Willkie
Farr & Gallagher, is a director of the Company. Mr. Sperry owns
23,947 shares of Common Stock of the Company.
EXPERTS
The financial statements and schedules of the Company
included in this Prospectus and elsewhere in the Registration
Statement have been audited by Arthur Andersen & Co., independent
public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority
of said firm as experts in accounting and auditing in giving said
reports.
- ----------------------------------------------------------------
INDEX TO FINANCIAL STATEMENTS
Page
Consolidated Condensed Statements of Income for the
three month period ended March 31, 1994 and
Condensed Statements of Income for the three month
period ended March 31, 1993 . . . . . . . . . . . . . . . . F-2
Consolidated Condensed Balance Sheets as of March 31,
1994 and December 31, 1993 . . . . . . . . . . . . . . . . . F-3
Consolidated Condensed Statements of Cash Flows for
the three month period ended March 31, 1994 and
Condensed Statements of Cash Flows for the three month
period ended March 31, 1993 . . . . . . . . . . . . . . . . F-4
Notes to Consolidated Condensed Financial Statements . . . . . . F-5
Report of Independent Public Accountants. . . . . . . . . . . . . F-7
Consolidated Statement of Income for the year ended December 31,
1993 and Statements of Income for the years ended December 31,
1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . . F-8
Consolidated Balance Sheet as of December 31, 1993 and Balance
Sheet as of December 31, 1992 . . . . . . . . . . . . . . . F-9
Consolidated Statement of Cash Flows for the year ended
December 31, 1993 and Statements of Cash Flows for
the years ended December 31, 1992 and 1991 . . . . . . . . . . F-10
Consolidated Statement of Changes in Stockholders' Equity for
the year ended December 31, 1993 and the Statements
of Changes in Stockholders' Equity for the years ended December
31, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . F-11
Notes to Financial Statements . . . . . . . . . . . . . . . . . . F-12
<TABLE>
WEIRTON STEEL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME-Unaudited
(Dollars in thousands, except per share data)
<CAPTION>
Three Months Ended
March 31,
1994 1993
------------------
<S> <C> <C>
Net Sales $325,164 $297,718
OPERATING COSTS:
Cost of Sales 288,445 279,873
Selling, General, Administrative 7,906 7,784
Expense
Depreciation 12,284 11,174
Restructuring Charge - 17,340
------- -------
Total operating costs 308,635 316,171
-------- -------
Income (loss)from operations 16,529 (18,453)
OTHER INCOME(EXPENSE):
Interest Expense (13,083) (12,982)
Interest Income 737 578
Net Other Expense (12,346) (12,404)
-------- --------
INCOME(LOSS) BEFORE ESOP 4,183 (30,857)
CONTRIBUTION
ESOP Contribution 653 653
INCOME(LOSS) BEFORE INCOME TAXES 3,530 (31,510)
Income Tax provision (benefit) (671) 5,987
------- ---------
INCOME(LOSS) BEFORE EXTRAORD- 2,859 (25,523)
INARY ITEM
Loss on Early Extinguishment - (6,549)
of debt -------- --------
INCOME(LOSS) BEFORE CUMULATIVE 2,859 (32,072)
EFFECT OF ACCOUNTING CHANGES
Cumulative Effect on Prior - (179,803)
Years of Accounting Changes
------- ---------
NET INCOME (LOSS) $ 2,859 $(211,875)
Less: Preferred stock dividend 781 781
requirement -------- --------
NET INCOME (LOSS) APPLICABLE TO $ 2,078 $(212,656)
COMMON SHARES ======== ========
PER SHARE DATA:
Weighted average number of 28,461 26,492
common shares and equivalents
Income(loss)per common share $ 0.07 $ (0.99)
before extraordinary item
Extraordinary item - (0.25)
Income (loss) per common share ------ ------
before cumulative effect of 0.07 (1.24)
accounting changes
Cumulative effect of accounting - (6.79)
changes -------- --------
NET INCOME (LOSS) PER COMMON SHARE $ 0.07 $ (8.03)
======= =======
<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>
March 31, 1994 December 31, 1993
-------------- -----------------
ASSETS:
Current Assets:
<S> <C> <C>
Cash and equivalents, $111,199 $ 89,002
includes restricted cash of
$612 and $602, respectively
Receivables, 139,083 129,004
less allowances of $6,833
and $5,719, respectively
Inventories 201,986 242,659
Other current assets 28,992 29,589
------------ -----------
Total current assets 481,260 490,254
Property, plant and 515,409 523,728
equipment, net
Intangible assets 91,289 91,289
Deferred income taxes 116,602 117,273
Other assets and deferred 17,321 18,170
charges ------------ -----------
TOTAL ASSETS $1,221,881 $1,240,714
============ ===========
Liabilities, Redeemable
Stock and Stockholders'
Equity:
LIABILITIES:
Current liabilities 199,908 228,038
Long term debt obligations 495,285 495,252
Long term pension obligation 145,103 142,894
Postretirement benefits other 313,018 308,985
than pensions
Other long-term liabilities 30,481 30,188
------------ -----------
Total Liabilities 1,183,795 1,205,357
REDEEMABLE STOCK 37,372 36,721
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value; 270 267
30,000,000 shares authorized;
27,019,723 and 26,719,752
shares issued, respectively
Additional paid-in capital 336,785 335,776
Retained earnings (334,458) (336,535)
Other stockholders' equity (1,883) (872)
---------- ---------
Total Stockholders' Equity 714 (1,364)
(Deficit) --------- ----------
Total Liabilities, Redeemable $1,221,881 $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>
THREE MONTHS ENDED
MARCH 31,
1994 1993
-----------------
<S> <C> <C>
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 21,351 $ 28,540
- --------------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
- --------------------
EXPENDITURES FOR PROPERTY
PLANT & EQUIPMENT (3,965) (347)
CASH FLOWS FROM
FINANCING ACTIVITIES:
- --------------------
INCREASE IN TERM DEBT - 140,000
REDUCTION IN TERM DEBT - (148,114)
DEBT ISSUANCE FEES - (4,411)
DIVIDENDS PAID (781) (781)
OTHER, principally net
book overdrafts 5,592 (1,708)
------ -------
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES 4,811 (15,014)
------ -------
NET CHANGE IN CASH
AND EQUIVALENTS 22,197 13,179
CASH AND EQUIVALENTS
AT BEGINNING OF PERIOD 89,002 61,195
-------- -------
CASH AND EQUIVALENTS
AT END OF PERIOD $111,199 $74,374
SUPPLEMENTAL CASH FLOW
INFORMATION:
Interest paid, net of
interest capitalized $ 7,554 $ 3,369
Income taxes paid - -
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
[TEXT]
WEIRTON STEEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(In thousands of dollars, or in millions
of dollars where indicated)
1. BASIS OF PRESENTATION
For the period ended March 31, 1994, the Consolidated Condensed
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 "Company."
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 Company 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 in the Company'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.
2. INVENTORIES
Inventories consisted of the following at March 31, 1994 and
December 31, 1993:
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
____________ ___________
<S> <C> <C>
Raw Materials $ 44,466 $74,766
Work in process 56,409 74,109
Finished Goods 101,111 93,784
------- -------
$201,986 $242,659
</TABLE>
[TEXT]
3. ESOP ACCOUNTING
The contributions of $0.7 million for the three months ended
March 31, 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 1993 and 1992 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
ranks equally with the Company's common stock as to the payment
of dividends. Accordingly, unpaid dividends on the Series A
Preferred are not cumulative.
4. EARNINGS (LOSS) PER SHARE
The weighted average number of common and equivalent shares
used in the computations of earnings (loss) per share were
28,460,993 and 26,491,572 for the three months ended March 31,
1994 and 1993, respectively. The shares of Series A
Preferred were excluded from the 1993 calculation due to
their antidilutive effect.
5. ACCOUNTING CHANGES
Effective January 1, 1993, the Company 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 Company on the cash basis and the Company 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 Company's statement of income for the
three month period ended March 31, 1993.
6. SUBSEQUENT EVENT
On April 6, 1994, the Company experienced a fire which
caused extensive damage to its No. 9 Tandem, a cold rolling
facility which supplies steel coils to its tin mill for further
processing. The Company does not believe this unit can be
restored to operation prior to the fourth quarter of 1994. The
Company is adjusting its production on other units and seeking
alternate sourcing for certain products in an attempt to minimize
the effect of the No. 9 Tandem outage. The outage has caused a
need for reduced manpower which has resulted in temporary force
reductions at the Company's cold rolling and tin mill operations.
The Company intends to review the situation on a weekly basis and
make adjustments to its production and manpower situation
accordingly. Efforts to repair the No.9 Tandem and to assess the
financial effects of the outage are underway. The Company
maintains insurance coverage for both property damage and
business interruption. As a result of the length of time
anticipated to restore the No.9 Tandem mill to full operations, total
anticipated recoveries and unrecoverable costs have not yet been
determined.
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
their operations and their 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.
Arthur Andersen & Co.
Pittsburgh, Pennsylvania
January 24, 1994 (except
with respect to the matters
discussed in Note 17, as to
which the date is April 6,
1994)
<TABLE>
WEIRTON STEEL CORPORATION
STATEMENTS OF INCOME
(Dollars in thousands,
except per share data)
<CAPTION>
Year ended December 31,
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 32,458 30,470 29,148
Expense
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 BEFORE EXTRAORDINARY ITEM (42,890) (36,113) (74,715)
Loss on Early Extinguishment of 6,549 - -
Debt
LOSS BEFORE CUMULATIVE EFFECT OF (49,439) (36,113) (74,715)
ACCOUNTING CHANGES
Cumulative Effect on Prior Years of (179,803) 4,356 -
Accounting Changes
NET LOSS $(229,242) $(31,757) $(74,715)
======= ====== ======
Less: Preferred Stock Dividend 3,125 3,125 -
Requirement
NET LOSS APPLICABLE TO $(232,367) $(34,882) $(74,715)
COMMON SHARES ====== ======= ======
PER SHARE DATA:
Weighted Average Number of Common 26,473 24,914 21,406
Shares and Equivalents
Loss per Common Share Before $(1.74) $(1.57) $(3.49)
Extraordinary Item
Extraordinary Item (0.25) - -
Loss per Common Share Before (1.99) (1.57) (3.49)
Cumulative Effect on Prior Years
of Accounting Changes
Cumulative Effect of Accounting (6.79) 0.17 -
Changes
NET LOSS PER COMMON SHARE $ (8.78) $(1.40) $(3.49)
======= ====== =====
PRO FORMA PER SHARE DATA:
Net Loss applicable to common shares (39,238) (68,231)
assuming change in method of
depreciation is applied
retroactively
Net loss per common share (1.57) (3.19)
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
WEIRTON STEEL CORPORATION
BALANCE SHEETS
(Dollars in thousands, except
per share data)
<CAPTION>
December 31,
1993 1992
(Consolidated)
ASSETS:
Current Assets:
<S> <C> <C>
Cash and equivalents, includes $ 89,002 $ 61,195
restricted cash of $602 and $491,
respectively
Receivables, less 129,004 123,894
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, net 523,728 559,074
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 obligations $ - $ 11,964
Payables 109,937 88,139
Employment costs 66,519 41,102
Pension liability 20,394 28,698
Taxes other than income taxes 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 than pension 308,985 -
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; 26,084 26,090
1,800,000 shares authorized; 1,797,231
and 1,798,503 shares issued; 1,779,468 and
1,794,104 subject to put
Less:Preferred Treasury Stock Series A, (130) (25)
at cost, 17,763 and 4,399 shares
Deferred ESOP compensation (13,812) (16,422)
Preferred stock, Series B, $0.10 par value; 24,579 24,559
675,000 shares authorized; 500,000 shares
issued
TOTAL REDEEMABLE STOCK 36,721 34,202
STOCKHOLDERS' EQUITY:
Preferred stock, Series A, $0.10 par value; 16 10
2,769 and 1,497 shares issued; not
subject to put
Common stock, $0.01 par value; 30,000,000 267 264
shares authorized; 26,719,752 and
26,419,705 shares issued
Additional paid-in capital 335,776 334,834
Common shares issuable, 397,049 and 365,421 1,327 1,153
shares
Retained earnings (336,535) (104,168)
Less:Common treasury stock, at cost, (2,215) (825)
381,405 and 208,353 shares
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (1,364) 231,268
TOTAL LIABILITIES, REDEEMABLE STOCK AND $1,240,714 $1,005,446
STOCKHOLDERS' EQUITY ========= =========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
WEIRTON STEEL CORPORATION
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
Year Ended December 31,
1993 1992 1991
CASH FLOWS FROM OPERATING ACTIVITIES: (Consolidated)
<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 2,610 2,610 2,610
ESOP and repayment of note
Depreciation 49,113 38,617 34,335
Amortization of debt discount 125 113 101
Amortization of deferred - 50 410
compensation
Amortization of other 1,840 1,056 1,513
noncurrent assets
Deferred Income Taxes (13,272) - -
Restructuring charge 17,340 - -
Cumulative effect of 179,803 (4,356) -
accounting changes
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 obligations 19,374 6,272 8,017
Other (8,963) 1,944 4,268
NET CASH PROVIDED 69,455 13,322 3,116
BY OPERATING ACTIVITIES
CASH FLOWS 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 FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt obligations (148,114) (2,171) (2,715)
Proceeds from issuance debt obligations 140,000 - 109,000
Debt issuance fees (13,520) - -
Proceeds from issuance of common stock - 8,250 15,000
Proceeds from 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 (28,324) 8,320 138,756
FINANCING ACTIVITIES
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 interest $47,311 $40,937 $31,068
capitalized
Income tax refunds 1,779 11,009 -
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
WEIRTON STEEL CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
(Dollars in thousands, Additional Common Retained
except per share data) Common Stock Paid-in Shares Issuable Earnings
Shares Amount Capital Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Stockholders'Equity
December 31, 1990 19,949,118 199 308,958 271,641 1,638 6,210
Net loss - - - - - (74,715)
Issuance of common 3,870,968 39 14,961 - - -
stock
Purchase oftreasury - - - - - -
stock
Conversion of pre-
ferred stock - - - - - -
Reclassification of
Pref.Series A not - - - - - -
subject to put
Employee stock pur-
chase plan
Shares issued 271,641 3 1,635 (271,641) (1,638) -
Shares issuable - - - 352,542 1,132 -
Dividends payable
(1.56 per pref. - - - - - (781)
share Series B)
Amortization of
deferred comp. - - - - - -
Stockholders'Equity -------------------------------------------------------
December 31, 1991 24,091,727 241 325,554 352,542 1,132 (69,286)
Net loss - - - - - (31,757)
Issuance of common 2,000,000 20 8,230 - - -
stock
Purchase oftreasury
stock - - - - - -
Conversion of pre-
ferred stock - - - - - -
Reclassification of
Pref.Series A not - - - - - -
subject to put
Employee stock
purchase plan
Shares issued 327,978 3 1,050 (327,978)(1,053) -
Shares issuable - - - 340,857 1,074 -
Dividends payable
(6.25 per pref.share - - - - - (3,125)
Series B
Amortization of
deferred compens. - - - - - -
Stockholders' Equity ------------------------------------------------
December 31, 1992 26,419,705 264 334,834 365,421 1,153 (104,168)
Net loss - - - - - (229,242)
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 (300,047) (945) -
Shares issuable - - - 331,675 1,119 -
Dividends payable
(6.25 per preferred - - - - - (3,125)
share Series B)
Consolidated Stock- -----------------------------------------------
holders' Equity
December 31, 1993 26,719,752 $267 $335,776 397,049 $1,327 (336,535)
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
(Dollars in thousands except per share data)
Common Deferred Preferred Ser. Stockholders
Treasury stock Compensation A not subject Equity
to put
Shares Amount Shares Amount
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stockholders'
Equity at
12/31/90 369 (4) (460) - - $316,541
Net loss - - - - - (74,715)
Issuance of
common stock - - - - - 15,000
Purchase of
treasury stk 78,363 (256) - - - (256)
Conversion of
preferred stk (174) 1 - - - 1
eclassifica-
tion of Pref.
Series A not
subject to put - - - 625 6 6
Employee stock
purch. plan:
Shares issued - - - - - -
Shares issuable - - - - - 1,132
Dividends pay. - - - - - (781)
Amortiz. of
deferred comp. - - 410 - - 410
- ------------------------------------------------------------------------------
Stockholders'
Equity at
12/31/91 78,558 (259) (50) 625 6 257,338
Net loss - - - - - (31,757)
Issuance of
common stock - - - - - 8,250
Purchase of
treasury stk 130,056 (568) - - - (568)
Conversion of
preferred stk (261) 2 - - - 2
Reclassifica-
tion of Pref.
Series A not
subject to put - - - 872 4 4
Employee stock
purch. plan:
Shares issued - - - - - -
Shares issuable - - - - - 1,074
Dividends pay. - - - - - (3,125)
Amortiz. of
deferred comp. - - 50 - - 50
- ------------------------------------------------------------------------------
Stockholders' 208,353 (825) - 1,497 10 231,268
Equity at
12/31/92
Net loss - - - - - (229,242)
Purchase of
treasury stk 181,200 (1455) - - - (1,455)
Conversion of
preferred stk (8,148) 65 - - - 65
Reclassifica-
tion of Pref.
Series A not
subject to put - - - 1,272 6 6
Employee stock
purch. plan:
Shares issued - - - - - -
Shares issuable - - - - - 1,119
Dividends pay. - - - - - (3,125)
- ------------------------------------------------------------------------------
Consolidated
Stockholders'
Equity at
12/31/93 381,405 (2,215) - 2,769 16 $(1,364)
==============================================================================
</TABLE>
[TEXT]
NOTES TO FINANCIAL STATEMENTS
(In thousands of dollars, except per 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 statements of
cash flows, the Company considers all highly liquid investments
purchased with an original 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
756,982 743,389
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
<TABLE>
<caption
Debt Obligations
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
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 levels 2% 5% 5%
<FN>
for three years ann. ann.
and 4%
thereafter
</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, and grade 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 postemployment benefits.
For purposes of actuarially measuring the Company's
postemployment obligation as of January 1, 1993, an interest rate
of 8.5% 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,
Deferred tax assets: 1993 1993
<S> <C> <C>
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, and the Company's expectations regarding its
ability to generate taxable earnings over the long term,
the Company believes that it is more
likely than not that future taxable income will be sufficient to
fully offset these future deductions. The Company believes its
potential to generate sustained taxable earnings over the long term
and its ability to further utilize existing net operating loss
carryforwards and tax credits is supported 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. Under its capital improvement
program, which was substantially completed in 1992, the Company spent
in excess of $550 million to upgrade its steelmaking and hot rolling
facilities. As a result of the program, the Company's enhanced production
capabilities have allowed it to achieve significant operating efficiencies,
including improving its overall yields from liquid steel to finished
production and expanding its potential sheet market to more than three
times the size of its previous potential market. Manpower reductions
and improved operating practices have also increased the Company's
productivity; and in the first quarter of 1994, it entered into new
collective bargaining agreements, which, among other things, limit
the Company's exposure to increased costs of providing health care
to its work force while providing increased medical coverages.
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.
The Company believes its ability to utilize its deferred tax
attributes in the near term will be favorably affected by its
capital improvement program and business strategy. In addition,
certain tax planning strategies that include but are not limited to
changes in methods of depreciation for tax purposes, adjustments
to employee benefit plan funding strategies, and potential sale leaseback
arrangements, could be employed to avoid expiration of the attributes.
Notwithstanding the Company's expectations, it has conservatively 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
Deferred income taxes:
<S> <C>
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 2,326 - - 2,326
change in Federal
statutory rate to 35%
and other adjustments
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
===== =====
Sources of deferred income taxes:
1992 1991
------ ------
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 .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 or results of its operations.
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 was
determined based upon an independent appraisal done as of
December 31, 1993. The market value of the Series B Preferred
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 $18,958 and $15,006, respectively,
from customers who had been acquired in leveraged transactions.
Note 17
Subsequent Events
In March 1994, the Company entered into 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
new agreements, which run through September 25, 1996, 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 managed healthcare "point of
service" program and a ceiling on the Company's cash basis cost
of healthcare for future retirees. 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.
On April 6, 1994, the Company experienced a fire which
caused extensive damage to its No. 9 Tandem Mill, a cold rolling
facility which supplies steel coils to its tin mill for further
processing. The Company does not believe this unit can be
restored to operation prior to the fourth quarter of 1994. The
Company is adjusting its production on other units and seeking
alternate sourcing for certain products in an attempt to minimize
the effect of the tandem mill outage. The outage has caused a
need for reduced manpower which has resulted in temporary force
reductions at the Company's cold rolling and tin mill operations.
The Company intends to review the situation on a weekly basis and
make adjustments to its production and manpower situation
accordingly. Efforts to repair the tandem mill and to assess the
financial effects of the outage are underway. The Company
maintains insurance coverage for both property damage and
business interruption. As a result of the length of time
anticipated to restore the tandem mill to full operation, total
anticipated recoveries and unrecoverable costs have not yet been
determined.
- -----------------------------------------------------------
PROSPECTUS BACK COVER PAGE
No person is authorized to give any information or to make any
representation not contained in this Prospectus and if given or
made, such information or representation must not be relied upon
as having seen authorized by the Company or any Underwriter.
This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities other than the
registered securities to which it relates, or an offer to or
solicitation of any person in any jurisdiction where such an
offer or solicitation would be unlawful. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information
contained herein is correct as of any time subsequent to the date
hereof.
TABLE OF CONTENTS
Page
Available Information 2
Incorporation of Certain Documents by Reference 2
Prospectus Summary 4
Risk Factors 9
The Company 15
Use of Proceeds 17
Price Range of Common Stock and Dividend Policy 18
Capitalization 19
Dilution 19
Selected Financial Data 20
Management's Discussion and Analysis of
Financial Condition and Results of Operations 23
Business 31
Management 47
Selling Stockholder 49
Description of Capital Stock 50
Underwriting 53
Legal Matters 55
Experts 55
Index to Financial Statements F-1
17,000,000 Shares
WEIRTON STEEL CORPORATION
Common Stock
(Par Value $.01)
PROSPECTUS
SALOMON BROTHERS INC
LAZARD FRERES & CO.
LEHMAN BROTHERS
PAINEWEBBER INCORPORATED
, 1994
- -----------------------------------------------
[ALTERNATE INTERNATIONAL FRONT COVER PAGE]
Information contained herein is subject to completion or
amendment. A registration statement relating to these securities
has been filed with the Securities and Exchange Commission.
These securities may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any
sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
Subject to Completion
August 4, 1994
Prospectus
17,000,000 Shares
WEIRTON STEEL CORPORATION
logo
Common Stock
($.01 Par Value)
Of the 17,000,000 shares of Common Stock of Weirton Steel
Corporation ("Weirton" or the "Company") offered hereby,
15,000,000 shares are being offered by the Company and 2,000,000
shares are being offered by Mellon Bank, N.A., as trustee
(the "Selling Stockholder") of the trust created under the Weirton
Steel Corporation Retirement Plan (the "Pension Plan").
The Company will not receive any proceeds from the sale of shares
by the Pension Plan. See "Selling Stockholder."
Of the shares being offered, 2,550,000 shares are being offered
outside of the United States and Canada (the "International
Offering") and 14,450,000 shares are being offered in a
concurrent offering in the United States and Canada (the "U.S.
Offering" and, collectively with the International Offering, the
"Offerings"), subject to transfers between the International
Underwriters and the U.S. Underwriters. The Price to Public and
the Underwriting Discount per share will be identical for the
International Offering and the U.S. Offering. The closing of the
International Offering and the U.S. Offering are conditioned upon
each other. See "Underwriting."
The Common Stock of the Company is traded on the New York Stock
Exchange (the "NYSE") under the symbol "WS." On August 2, 1994,
the last sale price of Weirton's Common Stock, as reported on the
NYSE Composite Tape, was $9.75 per share.
Prospective investors should consider carefully the matters
discussed under the caption "Risk Factors."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Price to Underwriting Proceeds to Proceeds to
Public Discount Company(1) Selling Stockholder
Per share $ $ $ $
Total(2) $ $ $ $
(1) Before deduction of expenses payable by the Company estimated to be $ .
(2) The Selling Stockholder has granted to the International Underwriters
and the U.S. Underwriters 30-day options to purchase up to an aggregate
of 2,550,000 additional shares of Common Stock at the Price to Public, less
the underwriting discount, solely to cover over-allotments, if any. The
Company may satisfy the exercise of these options up to a maximum of
300,000 shares. If the Underwriters exercise such options in full, the total
Price to Public, Underwriting Discount and Proceeds to Selling Stockholder
will be $ , $ and $ , respectively. If the Company satisfies the
exercise of such options with the maximum number of shares permitted, Proceeds
to Company and Proceeds to Selling Stockholder will be $ and $ , resp-
ectively. See "Underwriting."
The shares of Common Stock are offered subject to receipt and
acceptance by the Underwriters, to prior sale and to the
Underwriters' right to reject any order in whole or in part and
to withdraw, cancel or modify the offer without notice. It is
expected that delivery of the shares will be made at the office
of Salomon Brothers Inc, Seven World Trade Center, New York, New
York or through the facilities of The Depository Trust Company,
on or about August______ , 1994.
Salomon Brothers International Limited
Lazard Brothers & Co., Limited
Lehman Brothers
PaineWebber International
The date of this Prospectus is August_______, 1994.
- -----------------------------------------------------
[ALTERNATE INTERNATIONAL PROSPECTUS BACK COVER PAGE]
PROSPECTUS BACK COVER PAGE
No person is authorized to give any information or to make any
representation not contained in this Prospectus and if given or
made, such information or representation must not be relied upon
as having seen authorized by the Company or any Underwriter.
This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities other than the
registered securities to which it relates, or an offer to or
solicitation of any person in any jurisdiction where such an
offer or solicitation would be unlawful. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information
contained herein is correct as of any time subsequent to the date
hereof.
TABLE OF CONTENTS
Page
Available Information 2
Incorporation of Certain Documents by Reference 2
Prospectus Summary 4
Risk Factors 9
The Company 15
Use of Proceeds 17
Price Range of Common Stock and Dividend Policy 18
Capitalization 19
Dilution 19
Selected Financial Data 20
Management's Discussion and Analysis of
Financial Condition and Results of Operations 23
Business 31
Management 47
Selling Stockholder 49
Description of Capital Stock 50
Underwriting 53
Certain Federal Tax Considerations for
Non-U.S. Holders of Common Stock 55
Legal Matters 56
Experts 56
Index to Financial Statements F-1
17,000,000 Shares
WEIRTON STEEL CORPORATION
Common Stock
(Par Value $.01)
PROSPECTUS
SALOMON BROTHERS INTERNATIONAL LIMITED
LAZARD BROTHERS & CO., LIMITED
LEHMAN BROTHERS
PAINEWEBBER INTERNATIONAL
, 1994
- -----------------------------------------------
[Alternate International Underwriting Section]
UNDERWRITING
Subject to the terms and conditions set forth in the
International Underwriting Agreement, the Company and the Selling
Stockholder have agreed to sell to each of the Underwriters named
below (the "International Underwriters") for whom Salomon
Brothers International Limited, Lazard Brothers & Co., Limited,
Lehman Brothers International (Europe) and PaineWebber
International (U.K.) Ltd. are acting as representatives (the
"International Representatives"), and each of the Underwriters
has severally agreed to purchase from the Company and the Selling
Stockholder, the total number of shares of Common Stock set forth
opposite its name below:
International Number of Shares
Underwriters To be Purchased
Salomon Brothers International
Limited
Lazard Brothers & Co., Limited
Lehman Brothers International
(Europe)
PaineWebber International (U.K.)
Ltd.
----------
Total 2,550,000
==========
In the International Underwriting Agreement, the several
International Underwriters have agreed, subject to the terms and
conditions set forth therein, to purchase all the shares of
Common Stock set forth in the table above, if any such shares are
purchased. In the event of a default by any International
Underwriter, the International Underwriting Agreement provides
that, in certain circumstances, purchase commitments of the
nondefaulting International Underwriters may be increased or the
International Underwriting Agreement may be terminated.
The Company and the Selling Stockholder have been advised by
the International Representatives that the several International
Underwriters propose initially to offer such shares to the public
at the public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a
concession not in excess of $ per share. The International
Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to other dealers.
After this public offering, the public offering price and such
concessions may be changed.
The Selling Stockholder has granted to the International
Underwriters an option exercisable during the 30-day period after
the date of this Prospectus to purchase up to 382,500 additional
shares of Common Stock at the same price per share as the initial
2,550,000 shares of Common Stock to be purchased by the
International Underwriters. The International Underwriters may
exercise such option only to cover over-allotments in the sale of
the shares of Common Stock that the International Underwriters
have agreed to purchase. To the extent that the International
Underwriters exercise such option, each International Underwriter
will have a firm commitment, subject to certain conditions, to
purchase the same proportion of the option shares as the number
of shares of Common Stock to be purchased and offered by such
International Underwriter in the above table bears to the total
number of shares of Common Stock initially purchased by the
International Underwriters. The International Underwriting
Agreement provides that the Company, in its sole discretion, will
be permitted to supply up to 45,000 shares of Common Stock toward
satisfaction of the exercise of the option.
The Company and the Selling Stockholder have also entered into
a U.S. Underwriting Agreement with the U.S. Underwriters named
therein,, for whom Salomon Brothers Inc, Lazard Freres & Co.,
Lehman Brothers Inc., and PaineWebber Incorporated are acting as
representatives (the "U.S. Representatives"), providing for the
concurrent offer and sale of 14,450,000 shares of Common Stock in
the United States and Canada and providing the U.S. Underwriters
an option, exercisable during the 30-day period after the date of
this Prospectus, to purchase up to 2,167,500 additional shares at the
same price per share as the initial 14,450,000 shares of Common
Stock to be purchased by the U.S. Underwriters. The U.S.
Underwriting Agreement provides that the Company, in its sole
discretion, will be permitted to supply up to 255,000 shares of
Common Stock toward satisfaction of the exercise of the option.
The offering price and underwriting discounts for the U.S.
Offering and the International Offering will be identical. The
closing of the International Offering is conditioned upon the
closing of the U.S. Offering, and the closing of the U.S.
Offering is conditioned upon the closing of the International
Offering.
Each International Underwriter has severally agreed that, as
part of the International Offering, (a) it is not purchasing any
shares of Common Stock for the account of any United States or
Canadian Person and (b) it has not offered or sold, and will not
offer or sell, directly or indirectly, any shares of Common Stock
or distribute this Prospectus to any person within the United
States or Canada or to any United States or Canadian Person.
Each U.S. Underwriter has severally agreed that, as part of the
U.S. Offering, (a) it is not purchasing any shares of Common
Stock for the account of anyone other than a United States or
Canadian Person, and (b) it has not offered or sold, and will not
offer or sell, directly or indirectly, any shares of Common Stock
or distribute any Prospectus related to the U.S. Offering to any
person outside the United States or Canada or to anyone other
than a United States or Canadian Person. The foregoing
limitations do not apply to stabilization transactions or to
certain other transactions specified in the Agreement Between
U.S. Underwriters and International Underwriters. "United States
or Canadian Person" means any person who is a national or
resident of the United States or Canada, any corporation,
partnership or other entity created or organized under the laws
of the United States or Canada, or of any political subdivision
thereof, any estate or trust the income of which is subject to
United States or Canadian federal income taxation, regardless of
the source of its income (other than a foreign branch of any
United States or Canadian Person), and includes any United States
or Canadian branch of a person other than a United States or
Canadian Person.
Each International Underwriter has severally represented and
agreed that: (a) it has not offered or sold and will not offer
or sell in the United Kingdom by means of any document any shares
of Common Stock other than to persons whose ordinary business it
is to buy or sell shares or debentures (whether as principal or
agent) or in circumstances which do not constitute an offer to
the public within the meaning of the Companies Act 1985; (b) it
has complied and will comply with all applicable provisions of
the Financial Services Act 1986 with respect to anything done by
it in relation to the shares of Common Stock in, from or
otherwise involving the United Kingdom; and (c) it has only
issued or passed on and will only issue or pass on to any person
in the United Kingdom any document received by it in connection
with the issue of the shares of Common Stock if that person is of
a kind described in Article 9(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1988 (as
amended by Article 6(c) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1992) or is a
person to whom the document may otherwise lawfully be issued or
passed on.
Pursuant to the agreement between the International
Underwriters and the U.S. Underwriters, sales may be made between
the International Underwriters and the U.S. Underwriters of such
number of shares of Common Stock as may be mutually be agreed.
The price of any shares of Common Stock so sold shall be the
initial public offering price, less an amount not greater than
the concession to securities dealers. To the extent that there
are sales between the International Underwriters and the U.S.
Underwriters, pursuant to the agreement between the International
Underwriters and the U.S. Underwriters, the number of shares
initially available for sale by the International Underwriters or
by the U.S. Underwriters may be more or less than the amount
indicated on the cover page of this Prospectus.
The Company, its officers and directors and U.S. Trust
have agreed not to sell, or otherwise dispose of, directly or indirectly, or
announce the offering of, any shares of Common Stock, or any
securities convertible into, or exchangeable for, shares of
Common Stock, except those offered in the Offerings or in
connection with certain employee benefit plans or labor
agreements, for a period of 120 days from the date hereof without
the prior consent of the International Representatives and the
U.S. Representatives.
The International Underwriting Agreement and the U.S.
Underwriting Agreement each provide that the Company will
indemnify the International Underwriters and the U.S.
Underwriters, respectively, against certain liabilities,
including liabilities under the Securities Act, or contribute to
payments the International Underwriters and the U.S.
Underwriters, as the case may be, may be required to make in
respect thereof.
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CERTAIN U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S.
HOLDERS OF COMMON STOCK
The following is a general discussion of Certain U.S. federal
income tax and estate tax consequences of the ownership and disposition
of Common Stock by a "Non-U.S. Holder." A "Non-U.S. Holder" is a person
or entity that, for U.S. federal income tax purposes, is a non-resident
alien individual, a foreign corporation, a foreign partnership, or a
non-resident fiduciary of a foreign estate or trust. In the case of
a member of a foreign partnership, however (and in some circumstances
the beneficiary of a foreign estate or trust), the actual tax imposed
may depend on the status (including in some cases the ability to claim
a tax treaty) of the member or beneficiary. Any U.S. tax withheld
may be credited against the actual tax imposed and, to the extent it exceeds
such tax, may be refunded upon application.
This discussion is based on the Code and administrative interpretations
as of the date hereof, all of which may be changed either retroactively or
prospectively. This discussion does not address all aspects of
U.S. federal income and estate taxation that may be relevant to Non-U.S.
Holders in light of their particular circumstances and does not address
any tax consequences arising under the laws of any state, local or
foreign taxing jurisdiction.
Prospective holders should consult their tax advisors with respect
to the particular tax consequences to them of holding and disposing of
Common Stock.
DIVIDENDS
Subject to the discussion below, dividends paid to a Non-U.S.
Holder of Common Stock generally will be subject to withholding tax
at a 30% rate or such lower rate as may be specified by an applicable
income tax treaty. For purposes of determining whether tax is to be
withheld at a 30% rate or at a reduced rate as specified by an income
tax treaty, the Company ordinarily will presume that dividends paid to
an address in a foreign country are paid to a resident of such country
absent knowledge that such presumption is not warranted. However,
under proposed U.S. Treasury regulations which have not yet been put
into effect, to claim the benefits of a tax treaty, a Non-U.S. Holder
of Common Stock would be required to file certain forms accompanied
by a statement from a competent authority of the treaty country.
Dividends paid to a Non-U.S. Holder at an address within the
United States may be subject to backup withholding at a rate of 31%
if the Non-U.S. Holder fails to establish that it is entitled to an
exemption or to provide a correct taxpayer identification number
and other information to the payor.
Upon the filing of an IRS Form 4224 with the
payor, there will be no withholding tax on dividends that are
effectively connected with the Non-U.S. Holder's conduct of a trade
or business within the United States. Instead, the effectively
connected dividends will be subject to regular U.S. income tax
in the same manner as if the Non-U.S. Holder were a U.S. resident.
A non-U.S. corporation receiving effectively connected dividends also
may be subject to an additional "branch profits tax" which is imposed,
under certain circumstances, at a rate of 30% (or such lower rate as
may be specifided by an applicable treaty) of the earnings withdrawn
from such business.
In general, the Company must report to the U.S. Internal Revenue
Service the amount of dividends paid, the name and address of the
recipient, and the amount, if any, of tax withheld. A similar
report is sent to the holder. Pursuant to tax treaties or other
agreements, the U.S. Internal Revenue Service may make its reports
available to tax authorities in the recipient's country of residence.
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to U.S. federal
income tax with respect to gain realized on a sale or other disposition
of Common Stock unless (i) the gain is effectively connected with a
trade or business of such holder in the United States or (ii) the
holder owns more than five percent of the Common Stock and the Company
is or has been a "U.S. real property
holding corporation" within the meaning of Section 897(c)(2) of the
Code at any time within the shorter of the five-year period
preceding such dispostion or such holder's holding period.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING ON
DISPOSITION OF COMMON STOCK
Under current U.S. federal income tax law, information
reporting and backup withholding imposed at a rate of 31% will apply
to proceeds of a disposition of Common Stock paid to or through a U.S.
office of a broker unless the disposing holder certifies its non-U.S.
status or otherwise establishes an exemption. Generally, the U.S.
information reporting and backup withholding will not apply to a
payment of dispostion proceeds if the payment is made outside
the United States through a non-U.S. office of a non-U.S. broker.
However, U.S. information reporting requirements (but not backup
withholding) will apply to a payment of disposition proceeds outside the
United States if (A) the payment is made through an office outside the
United States of a broker that is either (i) a U.S. person, (ii) a
foreign person which derives 50% or more of its gross income for
certain periods from the conduct of a trade or business in the
United States of (iii) a "controlled foreign corporation" for
U.S. federal income tax purposes and (B) the broker fails to maintain
documentary evidence that the holder is a Non-U.S. Holder and that
certain conditions are met, or that the holder otherwise is entitled
to an exemption.
Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be reduced
by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained, provided that the
required information is furnished to the U.S. Internal Revenue
Service.
FEDERAL ESTATE TAX
An individual Non-U.S. Holder who is treated as the owner of
or has made certain lifetime transfers of an interest in the
Common Stock will be required to include the value thereof in his
gross estate for U.S. federal estate tax purposes, and may be
subject to U.S. federal estate tax unless an applicable estate
tax treaty provides otherwise.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other
than underwriting discounts and commissions, to be paid in
connection with the sale of the Shares being registered, all of
which will be paid by the registrant. All amounts are estimates
except the registration fee and the NASD filing fee (which have
been rounded to the nearest dollar).
Registration Fee $58,888.34
NASD Filing Fee 17,577.50
Blue Sky Fees and Expenses 20,000.00
Listing Fees *
Accounting Fees and Expenses *
Legal Fees and Expenses *
Transfer Agent and Registrar Fees *
Printing *
Miscellaneous *
Total $ *
* To be supplied by amendment.
Item 15. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of Delaware
provides that a corporation may indemnify directors and officers
against liabilities and expenses they may incur in such
capacities provided certain standards are met, including good
faith and the belief that the particular action is in or not
opposed to the best interests of the corporation. Article IX of
the registrant's By-laws provides as follows:
Section 1. Each current or former director, officer,
employee or agent of the Corporation, or any person who may have
served at its request as a director or officer of another
corporation in which it owns stock or of which it is a creditor
(or in a comparable position in another form of entity in which
the Corporation owns an equity interest or with which it is a
joint venturer or of which it is a creditor), and such person's
heirs, executors, and administrators (each, an "Indemnitee"),
shall be indemnified by the Corporation against all expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in
connection with any action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action
by or in the right of the Corporation), to which he or she may be
made a party by reason of any alleged acts or omissions in such
capacity if such person acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal
action or proceeding, such person had no reasonable cause to
believe his or her conduct was unlawful.
Section 2. Each Indemnitee shall be indemnified by the
Corporation against all expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection with
any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by
reason of any alleged acts or omissions in such capacity if he or
she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the
Corporation, and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person
shall have been finally adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the
State of Delaware or the court in which such action or suit was
brought shall determine upon application that despite the
adjudication of liability but in view of all of the circumstances
of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 3. Expenses incurred by an Indemnitee in defending
any civil or criminal action may be paid by the Corporation in
advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such
Indemnitee to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by
the Corporation.
Section 4. The foregoing rights of indemnification and
advancement of expenses shall be in addition to and not exclusive
of any and all other rights to which such Indemnitee might be
entitled as a matter of law.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit 1.1 Form of U.S. Underwriting Agreement.
Exhibit 1.2 Form of International Underwriting Agreement.
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 4.3 Indenture dated March 1, 1993 between the Company
and Bankers Trust Company as Trustee, pursuant to
which the 11 1-2% Senior Notes due March 1, 1998
were issued (incorporated by reference to Exhibit
4.1 to the Company's Registration Statement on
Form S-2 filed February 25, 1993, Commission File
No. 33-53476.
Exhibit 4.4 Form of Notes (incorporated by reference to pages
1 through 7 of the preamble to Exhibit 4.3.)
Exhibit 5.1 Opinion of Willkie Farr & Gallagher.*
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 (incorporated
by reference to Exhibit 10.8 of the Company's
Annual Report on Form 10-K filed March 30, 1994).
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 Company
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
(incorporated by reference to Exhibit 10.19 of the
Company's annual report on Form 10-K filed March
30, 1994).
Exhibit 10.20 Employment Agreement between William R. Kiefer
and the Company dated July 21, 1993 (incorporated
by reference to Exhibit 10.20 of the Company's
annual report on Form 10-K filed March 30, 1994).
Exhibit 10.21 Employment Agreement between Dennis R. Mangino
and the Company dated July 26, 1993 (incorporated
by reference to Exhibit 10.21 of the Company's
annual report on Form 10-K filed March 30, 1994).
Exhibit 10.22 Employment Agreement between John H. Walker and
the Company dated July 21, 1993 (incorporated by
reference to Exhibit 10.22 of the Company's annual
report on Form 10-K filed March 30, 1994).
Exhibit 10.23 Employment Agreement between Narendra M.
Pathipati and the Company dated December 16,
1993 (incorporated by reference to Exhibit 10.23
of the Company's annual report on Form 10-K filed
March 30, 1994).
Exhibit 10.24 Employment Agreement between Mac S. White and
the Company dated July 28, 1993 (incorporated by
reference to Exhibit 10.24 of the Company's annual
report on Form 10-K filed March 30, 1994).
Exhibit 10.25 Amendment dated August 5, 1993 to the
Employment Agreement dated July 1, 1990 between
Herbert Elish and the Company (incorporated by
reference to Exhibit 10.25 of the Company's annual
report on Form 10-K filed March 30, 1994).
Exhibit 10.26 Amendment dated July 19, 1993 to the Employment
Agreement dated June 8, 1987 between David M.
Gould and the Company (incorporated by reference
to Exhibit 10.26 of the Company's annual report on
Form 10-K filed March 30, 1994).
Exhibit 10.27 Amendment dated July 21, 1993 to the Employment
Agreement dated June 8, 1987 between William C.
Brenneisen and the Company (incorporated by
reference to Exhibit 10.27 of the Company's annual
report on Form 10-K filed March 30, 1994).
Exhibit 10.28 Amendment dated July 19, 1993 to the Employment
Agreement dated April 21, 1987 between Thomas
W. Evans and the Company (incorporated by
reference to Exhibit 10.28 of the Company's annual
report on Form 10-K filed March 30, 1994).
Exhibit 13.1 1993 Annual Report to Stockholders of Weirton
Steel Corporation (incorporated by reference to
Exhibit 13.1 of the Company's annual report on
Form 10-K filed March 30, 1994).
Exhibit 22.1 Subsidiaries of the Company (incorporated by
reference to Exhibit 22.1 of the Company's annual
report on Form 10-K filed March 30, 1994).
Exhibit 24.1 Consent of Willkie Farr & Gallagher (included in
the opinion filed as Exhibit 5.1).
Exhibit 24.2 Consent of Arthur Andersen & Co., independent
public accountants.
Exhibit 25.2 Certified Resolution of the Company's Board of
Directors Authorizing Power of
Attorney (filed herewith)
* To be filed by amendment.
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Item 17. Undertakings
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) of section 15(d)
of the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(i) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared
effective.
(2) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
- ----------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
S-3 and has duly caused this amendment to its registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized in
the City of Weirton, West Virginia on August 4, 1994.
WEIRTON STEEL CORPORATION
/s/ Herbert Elish
Herbert Elish
Chairman of the Board
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this amendment has been signed by the following
persons on the dates indicated.
___________* *By: /s/Richard K. Riederer
James B. Bruhn Attorney-in-Fact,
Director pursuant to powers of
August 4, 1994 attorney filed as part
___________ of the registration
Robert J. D'Anniballe, Jr. statement
Director
___________
Mark G. Glyptis
Director
___________*
Gordon C. Hurlbert
Director
August 4, 1994
___________*
Phillip A. Karber
Director
August 4, 1994
___________*
F. James Rechin
Director
August 4, 1994
___________*
Richard F. Schubert
Director
August 4, 1994
___________*
Harvey L. Sperry
Director
August 4, 1994
___________*
Thomas R. Sturges
Director
August 4, 1994
___________*
David I. J. Wang
Director
August 4, 1994
___________*
Herbert Elish
Chairman and Chief Executive Officer
and Director
August 4, 1994
/s/Richard K. Riederer
Richard K. Riederer
Director; Vice President and
Chief Financial Officer (Principal
Accounting Officer)
August 4, 1994
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Exhibit 24.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our
reports dated January 24, 1994 included (or incorporated by
reference) in Weirton Steel Corporation's Form 10-K for the year
ended December 31, 1993 and to all references to our Firm
included in this registration statement.
ARTHUR ANDERSEN & CO.
Pittsburgh, Pennsylvania
August 4, 1994
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Exhibit 25.2
CERTIFICATE OF SECRETARY OF WEIRTON STEEL CORPORATION
I, William R. Kiefer, Secretary of Weirton Steel Corporation, hereby
certify that the foregoing is a true copy of a resolution as passed by
the Company's Board of Directors at a meeting held on May 9, 1994,
and that the said resolution has not been amended, altered or modified
since that date.
RESOLVED, that the Chairman, President and Chief Executive Officer, the
Vice President and Chief Financial Officer and the Vice-President --Law,
and any other proper officer of the Corporation acting at the direction
of any of the foregoing officers be, and each of them hereby is,
authorized to execute and file on behalf of the Corporation any
amendment to the Registration Statement and any request, report
of application or amendment thereto with the SEC that may be
required from time to time under the 1933 Act of Securities Exchange
Act of 1934 (the "1934 Act"), and the rules and regulations promulgated
thereunder, or as may be deemed appropriate by the officer executing
the same, and the execution and filing of any such amendment to the
Registration Statement or request, report or application or amendment
thereto by the proper officers of the Corporation shall be deemed to
establish conclusively their authority therefor from the Corporation
and the approval and ratification by the Corporation of the documents
so executed.
/s/ William R. Kiefer
William R. Kiefer
Secretary
July 18, 1994
