First Quarter 1995
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D C 20549
FORM 10-Q
[X] Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period ended
March 31, 1995.
Commission File Number 1-10244
WEIRTON STEEL CORPORATION
- -------------------------
(Exact name of Registrant as specified in its charter)
Delaware 06-1075442
- -------- ----------
(State or other jurisdiction (IRS employer identification #)
of incorporation or organization)
400 Three Springs Drive, Weirton, West Virginia 26062
- ----------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(304)-797-2000
Indicate by checkmark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes[X] No[ ]
The number of shares of Common Stock ($.01 par value) of the
Registrant outstanding as of April 30, 1995 was 42,018,485.
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WEIRTON STEEL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME-Unaudited
(Dollars in thousands, except per share data)
<CAPTION>
Three Months Ended
March 31,
1995 1994
-------------------
<S> <C> <C>
NET SALES $354,686 $325,164
OPERATING COSTS:
Cost of Sales 299,185 288,445
Selling, General, Administrative 8,206 7,906
Depreciation 15,135 12,284
Provision for profit sharing 16,072 -
Insurance recoveries (34,000) -
------- -------
Total Operating Costs 304,598 308,635
------- --------
INCOME FROM OPERATIONS 50,088 16,529
OTHER INCOME(EXPENSE):
Interest Expense (10,502) (13,083)
Interest Income 911 737
Net Other Income(Expense) ( 9,591) (12,346)
-------- --------
INCOME BEFORE ESOP CONTRIBUTION 40,497 4,183
ESOP Contribution 653 653
INCOME BEFORE INCOME TAXES 39,844 3,530
Income Tax provision 7,701 671
-------- --------
NET INCOME 32,143 2,859
======== =======
Less: Preferred stock dividend - 781
requirement -------- --------
NET INCOME APPLICABLE TO COMMON SHARES $ 32,143 $ 2,078
======== ========
PER SHARE DATA:
Weighted average number of 43,764 28,461
common shares and equivalents
Net Income per common share $ 0.73 $ 0.07
======= =======
<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, 1995 December 31, 1994
------------------ -----------------
ASSETS:
<S> <C> <C>
Cash and equivalents, $ 82,262 $ 62,905
includes restricted cash of
$1336 and $1329, respectively
Notes and Accounts Receivable, 149,610 131,902
less allowances of $6,754
and $6,405, respectively
Inventories 245,471 270,518
Deferred income taxes 45,762 42,570
Other Current Assets 12,359 5,603
------------ -----------
Total Current Assets 535,464 513,498
Property, Plant, and 578,907 588,903
Equipment, net
Intangible Assets 17,213 17,213
Deferred Income Taxes 90,174 98,493
Other Assets and Deferred 11,990 12,813
Charges ---------- ---------
Total Assets $1,233,748 $1,230,920
============ ===========
<CAPTION>
LIABILITIES, REDEEMABLE STOCK AND STOCKHOLDERS' EQUITY:
<S> <C> <C>
Liabilities:
Current Liabilities 214,227 257,039
Long term Debt obligations 394,533 394,505
Long term Pension Obligation 75,593 68,093
Postretirement Benefits Other 318,143 316,185
Than Pensions
Other Long-term Liabilities 34,832 31,429
------------ -----------
Total Liabilities 1,037,328 1,067,251
Redeemable Stock: 15,118 14,485
Stockholders' Equity:
Common Stock, $.01 par value; 423 420
50,000,000 shares authorized;
42,375,445 and 42,027,405
shares issued, respectively
Additional Paid-in Capital 454,099 452,746
Retained Earnings (271,568) (303,710)
Other Stockholders' Equity (1,652) (272)
------------ -----------
Total Stockholders' Equity 181,302 149,184
------------ -----------
Total Liabilities, Redeemable
Stock and Stockholders' Equity $1,233,748 $1,230,920
<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,
1995 1994
-----------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 24,310 $ 21,351
- -----------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
- -----------------------------------------
EXPENDITURES FOR PROPERTY, PLANT AND (7,141) (3,965)
EQUIPMENT
CASH FLOWS FROM FINANCING ACTIVITIES
- -----------------------------------------
DIVIDENDS PAID - (781)
OTHER, principally net book overdrafts 2,188 5,592
-------- --------
NET CASH PROVIDED (USED) BY FINANCING 2,188 4,811
ACTIVITIES -------- -------
NET CHANGE IN CASH AND EQUIVALENTS 19,357 22,197
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 62,905 89,002
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $ 82,262 $111,199
-------- --------
SUPPLEMENTAL CASH FLOW INFORMATION:
INTEREST PAID,NET OF INTEREST CAPITALIZED $ 2,480 $ 7,554
INCOME TAXES PAID 153 -
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
WEIRTON STEEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(In thousands of dollars, or in millions
of dollars where indicated)
Note 1
BASIS OF PRESENTATION
The Consolidated Condensed Financial Statements presented
herein are unaudited and Weirton Steel Corporation and/or Weirton
Steel Corporation together with its subsidiary are hereafter
referred to as the "Registrant." Certain information and footnote
disclosures normally prepared in accordance with generally accepted
accounting principles have been either condensed or omitted
pursuant to the rules and regulations of the Securities and
Exchange Commission. Although the Registrant believes that all
adjustments necessary for a fair presentation have been made,
interim periods are not necessarily indicative of the results of
operations for a full year. As such, these financial statements
should be read in conjunction with the financial statements and
notes thereto included or incorporated by reference in the
Registrant's 1994 Annual Report on Form 10-K.
Certain portions of the prior period's financial
statements have been reclassified where necessary to conform to the
presentation used in the current period.
Note 2
INVENTORIES
Inventories consisted of the following at March 31, 1995
and December 31, 1994:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
____________ ___________
<S> <C> <C>
Raw materials $ 66,982 $ 100,319
Work-in-process 84,556 89,106
Finished goods 93,933 81,093
___________ _________
$ 245,471 $ 270,518
</TABLE>
Note 3
EARNINGS PER SHARE
The weighted average number of common and equivalent shares
used in the computations of earnings per share were 43,764,379 and
28,460,993 for the three months ended March 31, 1995 and 1994,
respectively.
Note 4
MAJOR DAMAGE TO FACILITY
During the first quarter of 1995, the Registrant's results of
operations included the recognition of $34 million insurance
recoveries relating to a business interruption claim regarding the
fire which occurred at the No. 9 Tandem Mill in April 1994. With
the receipt of these proceeds, the total to date received under
business interruption is $54 million, after consideration of a $5
million deductible. The Registrant is currently pursuing the final
settlement of its claim under its property damage coverage.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis of the Registrant's financial
condition and results of operations should be read together with
the consolidated condensed financial statements and notes thereto.
For the periods ended March 31, 1995 and December 31, 1994, the
consolidated financial statements of Weirton Steel Corporation
include the accounts of its wholly-owned subsidiary Weirton
Receivables, Inc. Weirton Steel Corporation and/or Weirton Steel
Corporation together with its subsidiary are hereafter referred to
as the "Registrant."
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 COMPARED WITH THREE MONTHS ENDED
MARCH 31, 1994
In the first quarter of 1995, the Registrant recognized net
income of $32.1 million, or $0.73 per share, compared to net income
of $2.1 million, or $0.07 per share, for the same period in 1994.
Net sales in the first quarter of 1995 increased $29.5
million, or 9.1%, to $354.7 million from $325.2 million in the
first quarter of 1994. Total shipments in the first quarter of
1995 of 705 thousand tons represented an increase of 7.5% over
1994's first quarter total shipments of 656 thousand tons.
Demand for the Registrant's sheet products remained strong in
the first quarter of 1995, especially for its hot rolled products.
Shipments of hot rolled products increased by 68.7 thousand tons,
or 33.5%, with smaller volume increases for both cold rolled and
galvanized products. These higher volumes resulted in total sheet
product shipments increasing by 15.3% in the first quarter of 1995
compared to the same quarter in 1994 and resulted in increased
revenues between the two periods of $22.8 million.
Increased demand for the Registrant's sheet products resulted
in the realization of higher selling prices across the product line
in general, and hot rolled and galvanized in particular. Revenues
in the first quarter of 1995 were favorably affected by $13.3
million as a result of higher selling prices compared to the same
quarter last year. Changes in customer mix also favorably affected
sheet product revenues by $2.1 million between the two periods.
TMP shipments were 180.2 thousand tons, or 8.7%, lower in the
1995 first quarter due to the Registrant's product mix resulting in
a decrease in TMP revenues of $12.3 million compared to the first
quarter of 1994.
Higher selling prices for TMP increased revenues by $4.0
million, while changes in customer mix lowered revenues by $0.4
million in the first quarter of 1995 compared to the same quarter
last year.
The Registrant continues to apply its strategic program to
reduce a broad range of production costs, lower spending and
improve yields. The program includes workforce reductions which
were approximately 18% from mid-1992 through year end 1994. The
Registrant's capital improvement program has lowered operating
costs by providing greater production yields and generally improved
performance at several operating units, including its blast
furnaces, continuous caster, hot mill and sheet mill operations.
Several of these units have achieved production records since
completion of the capital program. The cost reduction and capital
improvement programs have more than offset higher energy, labor,
and retiree healthcare costs. The result has been a steady
improvement in operating performance.
<TABLE>
<CAPTION>
(Dollars in thousands, First Quarter
except per ton data) 1995 1994
<S> <C> <C>
Operating Costs $304,598 $308,635
Add: Insurance recovery 34,000 -
Less: Profit sharing (16,072) -
------- -------
$322,526 $308,635
Shipments in tons 705,000 656,000
------- -------
Operating Cost per Ton $457 $470
</TABLE>
Primarily changes in product mix, coupled with improved
operating results offset by increased raw material and energy
costs, contributed to a $13 per ton reduction in operating costs in
the first quarter of 1995 compared to the same quarter last year.
In its continuing efforts to improve profit margins and
operating efficiency, the Registrant has focused its attention on
improving the performance of its finishing operations, specifically
that of its tin mill.
The Registrant's interest expense was $2.6 million, or 20%,
lower in the first quarter of 1995 compared to the same period last
year due to the reduction of long term debt accomplished in late
1994 by applying the proceeds from a public sale of common stock.
LIQUIDITY AND CAPITAL RESOURCES
The Registrant's cash and equivalents of $82.3 million at
March 31, 1995 was higher than the $62.9 million on hand at
December 31, 1994, primarily due to insurance recoveries received
upon settlement of the No. 9 Tandem Mill business interruption
claim. Net investing activities totalled $7.1 million.
The Registrant's capitalization includes three main elements:
long term debt obligations, redeemable stock, and stockholders'
equity. Such capitalization is shown below from January 1, 1994
through March 31, 1995:
<TABLE>
<CAPTION>
March 31, % of Jan.1, % of
(Dollars in millions) 1995 Total 1994 Total
________ _______ ____ _____
<S> <C> <C> <C> <C>
Long-term debt, $394.5 67% $495.3 93%
including current portion
Redeemable stock 15.1 2 36.7 7
Stockholders' equity 181.3 31 (1.4) -
________ _______ _____ ____
Total Capitalization $590.9 100% $530.6 100%
</TABLE>
The issuance of 15.0 million shares of the Registrant's common
stock in the third quarter of 1994, and the subsequent application
of the majority of the net proceeds thereof plus certain amounts of
cash on hand, has significantly improved the Registrant's financial
leverage and has provided greater financial flexibility.
Stockholders' equity has improved from profits generated during
this time period of $67.3 million in addition to the proceeds from
the public stock sale.
The Registrant has in place, through a subsidiary, Weirton
Receivables, Inc., a receivables participation agreement that
provides for a total commitment by the participating banks of up to
$85 million, including a letter of credit subfacility of up to $25
million. As of March 31, 1995, and December 31, 1994, while no
funded participation interests had been sold under the facility,
$3.1 million in letters of credit under the subfacility were in
place at such dates. Based upon the Registrant's available cash on
hand at March 31, 1995, and the amount of cash it anticipates will
be provided from operating activities in the near term, the
Registrant does not expect to utilize its short term facility. As
such, it does not expect the subsidiary to sell participation
interests to the banks in the near term. At March 31, 1995, and
December 31, 1994, after reductions for amounts in place under the
letter of credit subfacility, the base amount available for cash
sales was approximately $81.9 million and $81.7 million,
respectively. The Registrant does not have any scheduled cash
requirements related to its long term debt obligations until 1998
when the remaining outstanding portion of its 11-1/2% Senior Notes
become due. The receivables participation agreement expires August
24, 1997.
The Registrant has net deferred tax assets which total $135.9
million at March 31, 1995, and represent the carrying value of net
operating loss carryforwards and other tax credits and net
deductible temporary differences, all of which is available to
reduce the Registrant's cash requirements for the payment of future
Federal regular income tax. The Registrant anticipates it will be
subject to cash requirements under Federal alternative minimum tax
during the balance of 1995. At March 31, 1995, the Registrant has
recognized a current income tax payable of $7 million related to
this requirement.
INVESTMENT IN FACILITIES
Capital expenditures for the first quarter of 1995 totalled
$7.1 million. The Registrant expects capital spending for 1995 to
approximate $68.5 million, which includes an estimated $10 million
for materials for a major blast furnace reline set for early 1996.
The Registrant expects to fund these improvements from cash on hand
and cash generated from operations.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 16, 1995, the Registrant filed a claim in the United
States District Court for the Northern District of West Virginia
against the Independent Steelworkers Union (the "ISU"), which
represents the hourly and salary clerical workforce, under Section
301 of the Labor-Management Relations Act of 1947 following a work
stoppage that occurred in the Registrant's Tin Mill in February
1995. The ISU labor agreement provides, in relevant part, for a
grievance and binding arbitration procedure and prohibits work
stoppages or interruptions of work during its term. The ISU filed
its answer and counterclaim against the Registrant on April 5,
1995. The Registrant filed a motion to dismiss the counterclaim on
April 27, 1995. The parties are presently engaged in the discovery
process.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27. - Financial Data Schedule for three months
ended March 31, 1995.
(b) Reports on Form 8-K
The Registrant filed a report on Form 8-K on January 30,
1995 containing information pursuant to Item 5 thereof.
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
WEIRTON STEEL CORPORATION
Registrant
By /s/ Earl E. Davis
Earl E. Davis
Controller
(Principal Accounting Officer)
May 15, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-END> Mar-31-1995
<CASH> 10,853
<SECURITIES> 71,409
<RECEIVABLES> 156,364
<ALLOWANCES> 6,754
<INVENTORY> 245,471
<CURRENT-ASSETS> 535,464
<PP&E> 872,229
<DEPRECIATION> 293,322
<TOTAL-ASSETS> 1,233,748
<CURRENT-LIABILITIES> 214,227
<BONDS> 394,533
<COMMON> 423
15,118
0
<OTHER-SE> 180,879
<TOTAL-LIABILITY-AND-EQUITY> 1,233,748
<SALES> 354,686
<TOTAL-REVENUES> 354,686
<CGS> 299,185
<TOTAL-COSTS> 304,598
<OTHER-EXPENSES> 653
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,502
<INCOME-PRETAX> 39,844
<INCOME-TAX> 7,701
<INCOME-CONTINUING> 32,143
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,143
<EPS-PRIMARY> .73
<EPS-DILUTED> .73
</TABLE>
