Third 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
September 30, 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 October 31, 1995 was 42,024,073.
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WEIRTON STEEL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME-Unaudited
(Dollars in thousands, except per share data)
<CAPTION>
Three Months Ended
September 30,
1995 1994
-------------------
<S> <C> <C>
NET SALES $341,421 $295,867
OPERATING COSTS:
Cost of sales 304,825 266,105
Selling, general, administrative 8,553 7,782
Depreciation 14,221 12,000
Provision for profit sharing 3,590 5,747
Restructuring charge - -
Total operating costs 331,189 291,634
-------- --------
INCOME FROM OPERATIONS 10,232 4,233
UNUSUAL ITEM:
Adj. to carrying value of damaged facility 9,000 -
OTHER INCOME(EXPENSE):
Interest expense (10,890) (13,259)
Interest income 1,231 2,558
Net other income(expense) ( 9,659) (10,701)
-------- --------
Income (loss) before ESOP cont. 9,573 ( 6,468)
ESOP Contribution 653 653
Income (loss)before income taxes 8,920 ( 7,121)
Income tax provision (benefit) 1,739 (2,863)
-------- --------
Income (loss) before extraord.item 7,181 (4,258)
Extraordinary item-loss on - -
early extinguishment of debt
-------- --------
Net Income (loss) $ 7,181 $ (4,258)
Less: Preferred stock dividend - 776
requirement -------- --------
Net Income (loss) applicable to $ 7,181 $( 5,034)
common shares ======== ========
PER SHARE DATA:
Weighted average number of 43,746 33,260
common shares and equivalents
Net Income (loss) per common share $ 0.16 $ (0.15)
<CAPTION>
Nine Months Ended
September 30,
1995 1994
-------------------
<S> <C> <C>
NET SALES $1,015,155 $956,519
OPERATING COSTS:
Cost of sales 877,996 866,406
Selling, general, administrative 25,437 23,377
Depreciation 44,187 37,334
Provision for profit sharing 22,750 5,747
Insurance recoveries (41,502) -
--------- --------
Total operating costs 928,868 932,864
-------- --------
Income from operations 86,287 23,655
Unusual item--adjustment to
carrying value of damaged facility 9,000 32,543
Other income(expense):
Interest expense (31,829) (39,306)
Interest income 3,281 4,484
Net other income(expense) (28,548) (34,822)
-------- --------
Income before ESOP contribution 66,739 21,376
ESOP Contribution 1,958 1,958
Income before income taxes 64,781 19,418
Income tax provision 12,563 2,180
-------- --------
Income before extraordinary item 52,218 17,238
Extraordinary item-loss on 6,718 -
early extinguishment of debt
-------- --------
Net Income 45,500 17,238
Less: Preferred stock dividend - 2,339
requirement -------- --------
Net Income applicable to $ 45,500 $ 14,899
common shares ======= ========
PER SHARE DATA:
Weighted average number of 43,756 31,114
common shares and equivalents
Income (loss) per common share $ 1.19 $ 0.48
before extraordinary item
Extraordinary loss on early exting. of debt (0.15) -
Net income (loss) per -------- --------
common share $ 1.04 $ 0.48
======== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
WEIRTON STEEL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands, except per share amount)
<CAPTION>
September 30, 1995 December 31, 1994
------------------ -----------------
(Unaudited)
ASSETS:
Current assets:
<S> <C> <C>
Cash and equivalents, $ 111,938 $ 62,905
includes restricted cash of
$1,349 and $1,329, respectively
Receivables, 153,719 131,902
less allowances of $6,021
and $6,405, respectively
Inventories 264,714 270,518
Deferred income taxes 45,762 42,570
Other current assets 6,791 5,603
---------- -----------
Total current assets 582,924 513,498
Property, plant and 578,954 588,903
equipment, net
Intangible asset 17,213 17,213
Deferred income taxes 87,418 98,493
Other assets and deferred 15,781 12,813
charges ----------- ---------
TOTAL ASSETS $1,282,290 $1,230,920
========== ==========
LIABILITIES, REDEEMABLE STOCK AND STOCKHOLDERS' EQUITY:
<S> <C> <C>
Liabilities:
Current liabilities 228,301 257,039
Long term debt obligations 407,830 394,505
Long term pension obligation 78,167 68,093
Postretirement benefits other 322,243 316,185
than pensions
Other long term liabilities 35,907 31,429
--------- -----------
TOTAL LIABILITIES 1,072,448 1,067,251
REDEEMABLE STOCK 15,228 14,485
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 423 420
50,000,000 shares authorized;
42,289,755 and 42,027,405
shares issued, respectively
Additional paid-in capital 454,196 452,746
Retained earnings (258,210) (303,710)
Other stockholders' equity (1,795) (272)
--------- --------
TOTAL STOCKHOLDERS' EQUITY 194,614 149,184
--------- --------
TOTAL LIABILITIES, REDEEMABLE $1,282,290 $1,230,920
STOCK AND STOCKHOLDERS' EQUITY ========= =========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
WEIRTON STEEL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - Unaudited
(Dollars in thousands)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1995 1994
-----------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $73,209 $ 72,899
- -----------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
- -----------------------------------------
Expenditures for property, plant and (34,238) (52,497)
equipment
Less: insurance recoveries 9,000 -
NET CASH USED BY INVESTING ACTIVITIES (25,238) (52,497)
CASH FLOWS FROM FINANCING ACTIVITIES
- -----------------------------------------
Incurrance of long term indebtedness 125,000 -
Repurchase of long term indebtedness (112,000) -
Redemption of preferred stock, series B - (25,000)
Issuance of common stock - 116,063
Dividends paid - (2,339)
Other items,principally net book overdrafts (11,938) 11,331
-------- --------
NET CASH PROVIDED BY FINANCING 1,062 100,055
ACTIVITIES -------- --------
NET CHANGE IN CASH AND EQUIVALENTS 49,033 120,457
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 62,905 89,002
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $111,938 $209,459
======== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid, net of interest capitalized $27,906 $33,271
Income taxes paid 7,693 -
<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. Weirton Steel Corporation together with its
wholly-owned subsidiary, Weirton Receivables, Inc. 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 (the "SEC"). 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 incorporated by reference in the Registrant's 1994
Annual Report on Form 10-K.
Note 2
INVENTORIES
Inventories consisted of the following at September 30, 1995
and December 31, 1994:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
<S> <C> <C>
Raw materials $ 79,138 $ 100,319
Work-in-process 100,818 89,106
Finished goods 84,758 81,093
------- -------
$ 264,714 $ 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 43,746,193 and
33,259,782 for the three month periods ended September 30, 1995 and
1994, respectively, and 43,756,215 and 31,113,754 for the nine
month periods ended September 30, 1995 and 1994, respectively.
Note 4
INSURANCE CLAIMS
In March of 1991, the Registrant experienced an outage at its
hot strip mill as a result of an explosion of a reversing rougher
roller. The Registrant subsequently filed a claim seeking recovery
pursuant to its business interruption insurance coverage. Such
claim was settled in the second quarter of 1995 when the Registrant
received an insurance recovery in the net amount of $7.5
million.
On April 6, 1994, the Registrant's No. 9 Tandem Mill (the "No.
9 Tandem") sustained major damage from a fire which occurred while
the unit was undergoing maintenance. This cold rolling facility
typically supplied approximately 70% to 80% of the steel coils
further processed by the Registrant's tin plating operations. The
Registrant has since rebuilt the No. 9 Tandem which was returned to
full production in the first quarter of 1995. The Registrant
maintains insurance coverage for both property damage and business
interruption applicable to the No. 9 Tandem and had filed claims
with its carrier for recoveries under both types of coverage.
During the first six months of 1995, the Registrant's results of
operations were favorably affected by the recognition of $34
million related to recoveries under its business interruption
coverage, bringing the total amount recovered by the Registrant for
this claim to $54 million. The Registrant is required to recognize
a new cost basis for property damage insurance recoveries. These
recoveries which resulted in the recognition of an additional
pretax gain during the third quarter of 1995 of $9.0 million,
bringing the total amount recovered by the Registrant for this
claim to $53.7 million.
During the third quarter of 1995, the Registrant settled its
claims with respect to the No. 9 Tandem. The total amount of funds
recovered with respect to its claims was $110.5 million.
Note 5
FINANCING ARRANGEMENTS
DEBT OBLIGATIONS:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
<S> <C> <C>
11 1/2 % Senior notes due 1998 $ 77,150 $107,150
10 7/8 % Senior notes due 1999 149,749 231,749
10 3/4 % Senior notes due 2005 125,000 -
8 5/8 % Pollution control bonds 56,300 56,300
due 2014
Unamortized debt discount (369) (694)
------- --------
Total debt obligations $407,830 $394,505
</TABLE>
In conjunction with a June 12, 1995 sale of 10 3/4 % senior
notes, the Registrant entered into a Registration Rights Agreement
under which the Registrant agreed (i) to file with the SEC within
45 days from the issue date, and to use its reasonable best efforts
to cause to become effective within 135 days of the issue date of
the 10 3/4 % senior notes, a registration statement relating to an
offer to exchange the previously issued 10 3/4 % senior notes for
notes which will be identical in all material respects except the
exchange notes will not contain terms with respect to transfer
restrictions, and (ii) upon the registration statement being
declared effective by the SEC, to offer the exchange notes in
exchange for the 10 3/4 % senior notes. On October 12, 1995, the
Registrant satisfied its obligation with respect to the
Registration Rights Agreement.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis of the Registrant's financial
condition and results of operations should be read together with
the consolidated condensed financial statements and notes thereto.
For the periods ended September 30, 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
BACKGROUND
On April 6, 1994, the Registrant's No. 9 Tandem Mill (the "No.
9 Tandem") sustained major damage from a fire which occurred while
the unit was undergoing maintenance. This cold rolling facility
typically supplied approximately 70% to 80% of the steel coils
further processed by the Registrant's tin plating operations. The
Registrant has since rebuilt the No. 9 Tandem and returned it to
full production in the first quarter of 1995. The Registrant
maintains insurance coverage for property damage to its operating
facilities and for losses caused by business interruption. The
Registrant had filed claims with its insurance carrier for
recoveries under both types of coverage with respect to the damage
at the No. 9 Tandem. During the first six months of 1995, the
Registrant's results of operations were favorably affected by the
recognition of $34 million related to recoveries under its business
interruption coverage, bringing the total amount recovered by the
Registrant for this claim to $54 million. The Registrant is
required to recognize a new cost basis for assets recovered with
the proceeds from property damage insurance. Property damage
insurance recoveries with respect to the damage at the No. 9 Tandem
resulted in the recognition of an additional pretax gain during the
third quarter of 1995 of $9.0 million, bringing the total amount
recovered by the Registrant for this claim to $53.7 million.
During the third quarter of 1995, the Registrant settled its
claims with respect to the No. 9 Tandem The total mount of funds
recovered with respect to its claims was $110.5 million.
While the No. 9 Tandem was out of service during 1994, the
Registrant was able to utilize the flexibility of its remaining
facilities to shift its production to a greater proportion of sheet
products. This enabled the Registrant to meet the strong demand at
that time for its sheet products, principally hot rolled and
galvanized products. The demand for these products remained strong
into the first quarter of 1995. Beginning in the first quarter of
1995, coincident with the return to full production of the No. 9
Tandem, demand for sheet products began to diminish. Since that
time, selling prices for sheet products have generally experienced
a significant downward trend. In addition, severe weather
conditions during the produce growing months in mid-1995,
significantly affected the food canning industry and placed
downward pressure on Tin Mill Product ("TMP") shipment levels.
THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH THREE MONTHS
ENDED SEPTEMBER 30, 1994
In the third quarter of 1995, the Registrant had net income of
$7.2 million, or $0.16 per share, compared to net loss of $4.3
million, or $0.15 per share, for the same period in 1994. The net
results for the third quarter of 1995 were favorably affected by a
$9.0 million pretax adjustment for the recognition of additional
basis in the No. 9 Tandem, as a result of a property damage
insurance recovery.
The net results for the third quarter of 1995, exclusive of
the above mentioned special adjustment, would have been $2.0
million of $.05 per share. This compares to a net loss of $.8
million, after adjustment for profit sharing accruals applicable
for the third quarter of 1994, or $.02 per share in the third
quarter of 1994.
<TABLE>
<CAPTION>
(In thousands of dollars) Third Third
Quarter Quarter
1995 1994
<S> <C> <C>
Net income (loss) as reported $ 7,181 $ (4,258)
After tax effect of property (7,245) -
insurance recoveries
Effect of adjustments on the 2,079 3,469
provision for profit sharing
------- -------
Net income (loss), exclusive of $ 2,015 $ (789)
special items
Net income (loss) per common
share, exclusive of special item $ 0.05 $ (0.02)
</TABLE>
The comparison of the adjusted net results reflects the
adverse effect on the Registrant's operations in the third quarter
of 1994 caused by the fire that damaged the No. 9 Tandem. Prior to
the third quarter of 1994, the Registrant had achieved five
consecutive quarter os improved operating performance and based
upon pricing levels the Registrant was realizing on its products at
that time, the Registrant believes that in absence of the damage to
the No. 9 Tandem, its operating performance would have continued to
improve through the third quarter of 1994.
The traditional markets for the Registrant's sheet products
continued to soften throughout the third quarter, continuing a
trend that began late in the first quarter of 1995. Although
average prices for sheet products for the quarter were slightly
above the average for the same quarter last year, high levels of
inventory in the domestic manufacturing sector caused a reduction
in the volume of sheet product shipments. In order to maximize its
operations and shipments, the Registrant focused on opportunities
to expand its role in the export market. Export sales of the
Registrant's hot rolled and galvanized sheet products, which
traditionally represent an insignificant amount of sales, accounted
for approximately 33% of total sheet product shipments during the
quarter. Sheet product shipments supplemented by exports were less
than the level achieved in the same quarter last year, principally
because of the significant shift in production toward sheet
products which occurred during 1994 stemming from the No. 9 Tandem
outage.
The increase in volume of TMP shipments during the third
quarter of 1995 when compared to the third quarter of 1994 was due
to the Registrant's shift in production back toward its higher
profit margin TMP following the return to production of the No. 9
Tandem. However, the increase in volume of TMP shipments was not
as great as anticipated as demand for the Registrant's TMP was
adversely affected by the severe weather conditions during the mid-
year growing season which lowered the expectations of food canners.
TMP also experienced a decline in aerosol can industry orders.
The combined effect of the above factors on the revenues
generated by the Registrant in the third quarter of 1995 compared
to the same quarter last year resulted in an increase in revenues
of $45.6 million.
<TABLE>
<CAPTION>
(In millions of dollars) Selling Shipments Product Total
Price Mix
<S> <C> <C> <C> <C>
Sheet products $ 0.5 $ (10.0) $ (1.7) $(11.2)
Tin mill products 3.6 50.8 2.4 56.8
---- ------ ------ ------
Total $ 4.1 $ 40.8 $ 0.7 $ 45.6
=== ==== ==== =====
</TABLE>
Operating costs per ton in the third quarter of 1995, when
compared to the relatively low operating costs in 1994's third
quarter, reflect the Registrant's shift in production back toward
higher margin TMP following the return to full production of the
No. 9 Tandem and the effect of higher energy, raw material and
costs associated with filling export orders.
<TABLE>
<CAPTION>
(Dollars in thousands, except per
ton data) Third Third
Quarter Quarter
1995 1994
------ ------
<S> <C> <C>
Operating costs $ 331,189 $ 291,634
Shipments in tons 697,981 625,378
Operating costs per ton $ 474 $ 466
</TABLE>
The Registrant recognized $2.4 million lower interest expense
in the third quarter of 1995 compared to the same quarter a year
ago as a result of a reduction in its debt obligations. In
addition, the Registrant lowered its financing cash requirements by
$.8 million compared to a year ago as a result of the redemption of
its Preferred Stock, Series B. See Liquidity and Capital
Resources.
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH NINE MONTHS
ENDED SEPTEMBER 30, 1994
In the first nine months of 1995, the Registrant had net
income of $45.5 million, or $1.04 per share, compared to net income
of $17.2 million, of $0.48 per share, in the first nine months of
1994. The net results for the first nine months of 1995 were
favorably affected by a $7.5 million pretax adjustment to recognize
the settlement of a business interruption insurance claim related
to an outage at the Registrant's hot strip mill in March 1991,
caused by an explosion of as reversing rougher roller and by the
recognition of $34.0 million related to the recovery under its
business interruption coverage regarding the damage to the No. 9
Tandem. Also, during the first nine months of 1995, the Registrant
received a property damage insurance recovery of $9.0 million.
This caused the Registrant to recognize additional cost basis in
the No. 9 Tandem for the amount of the recovery. The net results
for the first nine months of 1995 were adversely affected by an
extraordinary charge of $6.7 million for costs to refinance a
portion of the Registrant's 10 7/8% and 11 1/2% Senior Notes. The
net results for the first nine months of 1994 includes a pretax
favorable adjustment of $32.5 million related to the recognition of
a new cost basis for the amount of property insurance recovery with
respect to a claim for the damage to the No. 9 Tandem.
The net results for the first nine months of 1995, exclusive
of the above mentioned special adjustments, would have been $21.3
million or $.05 per share compared to a net loss of $4.3 million or
$.14 per share in the first nine months of 1994, adjusted to
exclude the effect of the No. 9 Tandem property insurance and
business interruption recoveries.
<TABLE>
<CAPTION>
(In thousands of dollars) First nine First nine
Months of Months of
1995 1994
-------- --------
<S> <C> <C>
Net income as reported $ 45,500 $ 17,238
After tax effect of property
insurance and business
interruption recoveries (40,654) (26,197)
Extraordinary item 6,718 -
Effect of adjustments on the
provision for profit sharing 9,740 4,626
------ -------
Net income(loss), exclusive
of special items $ 21,304 $ (4,333)
Net income(loss) per common
share, exclusive of special
item $ 0.49 $ (0.14)
</TABLE>
The comparison of the adjusted net results reflects the
adverse effect on the Registrant's operations in the first nine
months of 1994 caused by the fire that damaged the No. 9 Tandem.
Notwithstanding the disruption to the Registrant's operations
caused by the fire, revenues in the first nine months of 1994 for
all products combined were $956.6 million. This level of revenues
reflected the strong demand for the Registrant's sheet products in
1994 and the Registrant's ability to shift its production to meet
market demand.
The strong demand for the Registrant's sheet products
continued throughout 1994 and into the first quarter of 1995.
Beginning late in the first quarter and through the third quarter
of 1995, the market for the Registrant's sheet products began to
soften and although sheet product selling prices had experienced
gains over previous quarterly periods, further anticipated selling
price increases did not materialize. Sheet product shipments
supplemented by exports were less than the level achieved during
the first nine months of 1994 principally due to the shift in
production toward sheet products which occurred during 1994
stemming from the No. 9 Tandem outage.
In the first six months of 1994, in spite of the fire, the
Registrant was able to supply its tin plate customers a majority of
their orders from inventory and by the first quarter of 1995 the
No. 9 Tandem had been returned to full production. As such, the
volume of tin plate shipments in the first six months of 1994 was
relatively stable. The increase in volume of TMP shipments during
the first nine months of 1995 when compared to the first nine
months of 1994 was also due to the Registrant's shift in production
back toward its higher profit margin TMP following the return to
production of the No. 9 Tandem. However, the increase in volume of
TMP shipments was not as great as anticipated as demand for the
Registrant's TMP was adversely affected by the severe weather
conditions during the mid-year growing season which lowered the
expectations of food canners. The TMP also experienced a decline
in aerosol can industry orders.
Revenues were $58.6 million higher in the first nine months of
1995 than 1994's comparable period, principally as a result of
increases in the volume of TMP shipments and in selling prices for
the Registrant's sheet and tin mill products, which more than
offset lower shipments of sheet products.
<TABLE>
<CAPTION>
(In millions of dollars) Selling Shipments Product Total
Price Mix
<S> <C> <C> <C> <C>
Sheet products $ 28.8 $ (20.3) $ (1.9) $ 6.6
Tin mill products 12.5 37.6 1.9 52.0
----- ----- ------ -----
Total $ 41.3 $ 17.3 $ - $58.6
==== ==== ===== ====
</TABLE>
The adjusted operating costs per ton in the first nine months
of 1995, when compared to the relatively low operating costs in
1994's first nine months, reflects the Registrant's shift in
production back toward higher margin TMP following return to full
production of the No. 9 Tandem and the effect of higher energy and
raw material costs.
<TABLE>
<CAPTION>
(Dollars in thousands, except per ton data)
First Nine First Nine
Months of Months of
1995 1994
----- -----
<S> <C> <C>
Operating costs $928,868 $932,864
Insurance recoveries 41,502 -
Effect of the adjustment on
the provision for profit
sharing (12,099) -
-------- --------
Adjusted operating costs $958,271 $932,864
Shipments in tons 2,033,090 1,983,767
Adjusted operating costs
per ton $ 471 $ 470
==== ====
</TABLE>
The Registrant recognized $7.5 million lower interest expense
in the first nine months of 1995 compared to the same period a year
ago as a result of a reduction in its debt obligations. In
addition, the Registrant lowered its financing cash requirements by
$2.3 million compared to a year ago as a result of a redemption of
its Preferred Stock, Series B. See Liquidity and Capital
Resources.
LIQUIDITY AND CAPITAL RESOURCES
The Registrant's cash and equivalents of $111.9 million at
September 30, 1995 was higher than the $62.9 million on hand at
December 31, 1994, primarily due to recoveries on insurance claims.
The Registrant's capitalization includes three main elements:
long term debt obligations, redeemable stock, and stockholders'
equity. Such capitalization is shown below as of September 30,
1995 and December 31, 1994.
<TABLE>
<CAPTION>
(In thousands of dollars) September 30, % of December 31, % of
1995 Total 1994 Total
----------- ----- ---------- -----
<S> <C> <C> <C> <C>
11 1/2% Senior notes due
1998 $ 77,150 $107,150
10 7/8% Senior notes due
1999 149,749 231,749
10 3/4% Senior notes due
2005 125,000 -
8 5/8% Pollution control
bonds due 2014 56,300 56,300
Unamortized debt discount (369) (694)
Total debt obligations 407,830 66% 394,505 71%
Redeemable stock 15,228 2% 14,485 2%
Stockholders' equity:
Common stock 423 420
Additional paidin capital 454,196 452,746
Retained earnings (258,210) (303,710)
Total stockholders' equity 194,614 32% 149,184 27%
------- ----- -------- -----
Total capitalization $617,672 100% $558,174 100%
======= ==== ======= ====
</TABLE>
In order to increase its financial flexibility, on June 12,
1995, the Registrant sold $125 million of its 10 3/4% Senior Notes
due 2005 through an underwritten private placement. The 10 3/4%
Senior Notes rank pari passu with the Registrant's 10 7/8% and 11
1/2% Senior Notes. The net proceeds to the Registrant from the
sale were approximately $121 million, $118.8 million of which were
used to repurchase approximately $30 million of its 11 1/2% Senior
notes and approximately $82 million of its 10 7/8% Senior notes.
This Senior Note refinancing effectively extended the maturity
period for a portion of its debt obligations and reduced the
Registrant's interest expense. This reduction is reflected in the
Registrant's net results for the third quarter of 1995. The
Registrant's results for the first nine months of 1995 also reflect
an after tax extraordinary charge of $6.7 million for the costs of
repurchasing the 10 7/8% and 11 1/2% Senior Notes.
In conjunction with the sale of 10 3/4% senior notes, the
Registrant entered into a Registration Rights Agreement under which
the Registrant agreed (i) to file with the SEC within 45 days from
the issue date, and to use its reasonable best efforts to cause to
become effective within 135 days of the issue date of the 10 3/4%
senior notes, a registration statement relating to an offer to
exchange the previously issued 10 3/4% senior notes for notes which
will be identical in all material respects except the exchange
notes will not contain terms with respect to transfer restrictions,
and (ii) upon the registration statement being declared effective
by the SEC, to offer the exchange notes in exchange for the 10 3/4%
senior notes. On October 12, 1995, the Registrant satisfied its
obligation with respect to the Registration Rights Agreement.
As part of the sale of the 10 3/4% notes, the Registrant
obtained consent from the remaining holders of its 11 1/2% senior
notes to modify certain covenants in the indenture governing such
notes so as to conform with the covenants contained in the
indentures governing the Registrant's 10 3/4% and 10 7/8% senior
notes. the indentures governing the senior notes each contain
certain covenants that limit, among other things, the declaration
and payment of dividends and distributions on the Registrant's
capital stock. As of September 30, 1995, the Registrant's ability
to pay dividends on its common stock was limited to $143.6 million.
At September 30, 1995, and December 31, 1994, after reductions
for amounts in place under its letter of credit subfacility, the
base amount of participation interests available for cash sales
under the Registrant's receivables based credit facility 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. Early
in the third quarter of 1995, the credit facility was extended to
April 30, 2000.
The Registrant has net deferred tax assets which total $133.2
million at September 30, 1995, which represent the carrying value
of net operating loss carryforwards and other tax credits and net
deductible temporary differences available to reduce the
Registrant's cash requirements for the payment of future Federal
regular income tax. As a result of its financial performance in
the first nine months of 1995, the Registrant has been subject to
cash requirements under Federal alternative minimum tax and it
anticipates it will continue to be subject to such requirements
during the balance of 1995. As of September 30, 1995, the
Registrant paid income taxes of $7.7 million related to this
requirement.
INVESTMENT IN FACILITIES
Expenditures for property, plant and equipment in the first
nine months of 1995 totaled $34.2 million. The Registrant expects
capital spending for 1995 to approximate $68.5 million, which
includes an estimated $10 million for materials to be used in a
major blast furnace reline scheduled for 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 October 27, 1995, the Registrant received a Notice of
Violation from the United States Environmental Protection Agency
alleging seven separate violations of the West Virginia Division of
Environmental Protection Regulations for Air Pollution Control, and
which may result in the imposition of fines and penalties. At this
time the Registrant cannot assess the likely outcome of the matters
alleged, but believes that any fines and penalties assessed would
not be material to its financial position or results of operations.
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
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27--Financial data schedule for period ended September
30, 1995.
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/ Mark E. Kaplan
Mark E. Kaplan
Controller
(Principal Accounting Officer)
November 8, 1995
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