<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- ---------------------
Commission file number 1-10244
WEIRTON STEEL CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 06-1075442
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification #)
</TABLE>
400 THREE SPRINGS DRIVE, WEIRTON, WEST VIRGINIA 26062-4989
(Address of principal executive offices) (Zip Code)
(304) 797-2000
(Registrant's telephone number, including area code:)
Indicate by checkmark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of Common Stock ($.01 par value) of the Registrant
outstanding as of July 31, 1998 was 41,522,820.
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<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WEIRTON STEEL CORPORATION
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES..................................... $336,417 $363,640 $677,738 $713,225
OPERATING COSTS:
Cost of sales............................ 291,373 326,601 590,809 653,760
Selling, general and administrative
expense................................ 9,170 8,909 19,051 17,974
Depreciation............................. 17,019 15,426 34,038 32,352
Restructuring charge..................... -- 17,000 -- 17,000
Provision for profit sharing............. 2,590 -- 3,713 --
-------- -------- -------- --------
Total operating costs.................. 320,152 367,936 647,611 721,086
-------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS................. 16,265 (4,296) 30,127 (7,861)
Interest expense......................... (10,755) (11,988) (22,412) (23,938)
Other income............................. 1,498 971 2,703 1,803
ESOP contribution........................ (652) (652) (1,305) (1,305)
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES............. 6,356 (15,965) 9,113 (31,301)
Income tax provision (benefit)........... 1,176 (3,113) 1,686 (6,104)
-------- -------- -------- --------
NET INCOME (LOSS)............................. $ 5,180 $(12,852) $ 7,427 $(25,197)
======== ======== ======== ========
PER SHARE DATA:
Weighted average number of common shares (in
thousands):
Basic.................................... 42,090 42,616 42,506 42,614
Diluted.................................. 43,870 42,616 44,268 42,614
NET INCOME (LOSS) PER SHARE:
Basic.................................... $ 0.12 $ (0.30) $ 0.17 $ (0.59)
Diluted.................................. $ 0.12 $ (0.30) $ 0.17 $ (0.59)
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 3
WEIRTON STEEL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNT)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
(UNAUDITED) (AUDITED)
----------- ---------
<S> <C> <C>
Assets:
Cash and equivalents, includes restricted cash of
$2,064 and $2,046..................................... $ 111,017 $ 124,690
Receivables, less allowances of $8,908 and $9,853...... 147,577 140,843
Inventories............................................ 221,740 260,933
Deferred income taxes.................................. 34,437 34,437
Other current assets................................... 6,542 4,803
----------- ----------
Total current assets.............................. 521,313 565,706
Property, plant and equipment, net..................... 577,142 591,389
Deferred income taxes.................................. 111,212 111,148
Other assets and deferred charges...................... 20,311 14,297
----------- ----------
Total assets...................................... $ 1,229,978 $1,282,540
=========== ==========
Current portion of long term debt obligations.......... $ -- $ 42,163
Payables............................................... 123,637 132,666
Employment costs....................................... 67,104 61,800
Taxes other than income taxes.......................... 17,198 22,417
Other current liabilities.............................. 10,677 12,571
----------- ----------
Total current liabilities......................... 218,616 271,617
Long term debt obligations............................. 389,167 388,997
Long term pension obligations.......................... 91,132 97,542
Postretirement benefits other than pensions............ 340,519 338,474
Other long term liabilities............................ 33,329 32,804
----------- ----------
Total liabilities................................. 1,072,763 1,129,434
----------- ----------
Redeemable stock............................................ 21,846 20,579
Stockholders' equity:
Common stock, $0.01 par value; 50,000,000 authorized;
43,135,818 and 42,846,184 shares issued............... 431 428
Additional paid-in capital............................. 457,073 456,379
Retained earnings (deficit)............................ (315,587) (323,014)
Other stockholders' equity............................. (6,548) (1,266)
----------- ----------
Total stockholders' equity........................ 135,369 132,527
----------- ----------
Total liabilities, redeemable stock and
stockholders' equity............................ $ 1,229,978 $1,282,540
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
WEIRTON STEEL CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...................................... $ 7,427 $(25,197)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation......................................... 34,038 32,352
Amortization of deferred financing costs............. 922 918
Restructuring charge................................. -- 17,000
ESOP contribution.................................... 1,305 1,305
Deferred income taxes................................ (64) (6,104)
Cash provided (used) by working capital items:
Receivables....................................... (6,734) (13,944)
Inventories....................................... 39,193 18,153
Other current assets.............................. (1,739) (8,029)
Payables.......................................... (9,029) (7,763)
Other current liabilities......................... (1,809) (3,314)
Long term pension obligation......................... (6,410) 3,060
Other................................................ 3,119 8,552
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 60,219 16,989
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in unconsolidated subsidiaries.............. (7,321) --
Capital spending....................................... (19,791) (47,110)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES....................... (27,112) (47,110)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt obligations.......................... (42,163) --
Purchase of treasury stock............................. (4,617) --
-------- --------
NET CASH USED BY FINANCING ACTIVITIES....................... (46,780) --
-------- --------
NET CHANGE IN CASH AND EQUIVALENTS.......................... (13,673) (30,121)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD................. 124,690 112,092
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD....................... $111,017 $ 81,971
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid, net of capitalized interest............. $ 24,027 $ 24,215
Income taxes paid...................................... 2,437 --
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
NOTES TO UNAUDITED 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 and/or Weirton Steel Corporation together
with its wholly owned subsidiaries are hereafter referred to as the "Company."
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 financial results of operations for a full year. As such, these financial
statements should be read in conjunction with the audited financial statements
and notes thereto included or incorporated by reference in the Company's 1997
Annual Report on Form 10-K.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Certain prior period amounts have been reclassified, where necessary, to
conform to the presentation in the current period.
NOTE 2
INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
Raw materials....................................... $ 74,746 $ 97,974
Work-in-process..................................... 45,097 69,418
Finished goods...................................... 101,897 93,541
-------- --------
$221,740 $260,933
======== ========
</TABLE>
NOTE 3
EARNINGS PER SHARE
The following represents a reconciliation between basic earnings per share
and diluted earnings per share for the three months and the six months ended
June 30, 1998. For the three months and the six months ended June 30, 1997,
basic and diluted earnings per share were the same; however, securities totaling
1,761,500 and 1,782,600, respectively, were excluded from the diluted earnings
per share calculation due to their antidilutive effect.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1998
------------------------------- -------------------------------
PER SHARE PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share:
Net Income...................... $5,180 42,090,427 $0.12 $7,427 42,505,685 $0.17
Effect of dilutive securities
Series A Preferred.................. -- 1,726,189 -- -- 1,726,987 --
Stock options................... -- 53,193 -- -- 35,766 --
------ ---------- ----- ------ ---------- -----
Diluted earnings per share:
Net income...................... $5,180 43,869,809 $0.12 $7,427 44,268,438 $0.17
====== ========== ===== ====== ========== =====
</TABLE>
5
<PAGE> 6
NOTE 4
COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." SFAS No. 130, which establishes standards for reporting
and displaying comprehensive income and its components, requires the reporting
of all changes in equity of an enterprise that result from transactions and
other economic events other than transactions with owners. Comprehensive income
is the total of net income and all other nonowner changes in equity. SFAS No.
130 is effective for fiscal years beginning after December 15, 1997.
Comprehensive income calculated under SFAS No. 130 is the same as the net income
reported by the Company for the three months and the six months ended June 30,
1998 and 1997.
NOTE 5
ENVIRONMENTAL COMPLIANCE
The Company, as well as its domestic competitors, is subject to stringent
federal, state and local environmental laws and regulations concerning, among
other things, waste water discharge, air emissions and waste disposal.
In March 1996, the West Virginia Department of Environmental Protection
("DEP") and the United States Environmental Protection Agency ("EPA") advised
the Company that it had identified a number of enforcement issues pertaining to
waste water discharge, air emissions and waste handling operations of the
Company. In September 1996, the Company and DEP and EPA reached a settlement
regarding these water, air and waste-related issues. Under the settlement, the
Company paid a penalty of $3.2 million in 1997.
The settlement also requires the Company to conduct certain remedial
activity at one of its waste disposal sites. Additionally, the Company is
required to undertake certain capital projects to assure compliance with air,
water and waste-related regulations. These capital expenditures include upgrades
and modifications to air emissions control equipment, waste water treatment
systems and waste handling facilities. Under the settlement, the Company
committed to environmental related capital projects totaling approximately $19.0
million. Through June 30, 1998, the Company has expended approximately $12.5
million related to these capital commitments.
In connection with the negotiations, the EPA issued a corrective action
order, effective October 18, 1996, requiring the Company to conduct
investigative activities to determine the nature and extent of hazardous
materials which may be located on the Company's property and, if necessary, to
evaluate and propose corrective measures needed to abate any unacceptable risks.
The Company has accrued approximately $8.0 million related to environmental
related liabilities, including costs associated with the corrective action
order. Because the Company does not currently know the nature or the extent of
hazardous material which may be located on the property, it is not currently
possible to estimate the ultimate cost to comply with the corrective action
order or conduct remedial activity that may be required.
The Company believes that National Steel Corporation ("NSC") is obligated
to reimburse the Company for a portion of any costs that may be incurred by the
Company to comply with the corrective action order and to undertake any required
remedial action. Pursuant to the agreement whereby the Company purchased the
Division in 1984, NSC retained liability for cleanup costs related to solid or
hazardous waste facilities, areas or equipment as long as they were not used by
the Company in its operations subsequent to the acquisition.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This discussion and analysis of the Company's financial condition and
results of operations should be read together with the unaudited consolidated
condensed financial statements and notes thereto. The unaudited consolidated
condensed financial statements of Weirton Steel Corporation include the accounts
of its wholly owned subsidiaries. Weirton Steel Corporation and/or Weirton Steel
Corporation together with its subsidiaries are hereafter referred to as the
"Company."
6
<PAGE> 7
THREE MONTHS ENDED JUNE 3O, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
In the second quarter of 1998, the Company recognized net income of $5.2
million or $0.12 per diluted share compared to a net loss of $12.9 million or
$0.30 per diluted share for the same period in 1997. The results for the second
quarter of 1998 included a provision for profit sharing of $2.6 million. The
results for the second quarter of 1997 included a $17.0 million restructuring
charge. Excluding the impact of the restructuring charge and the resulting
impact on income taxes, the Company would have recognized net income of $0.8
million or $0.02 per diluted share in the second quarter of 1997.
Net sales in the second quarter of 1998 were $336.4 million, a decrease of
$27.2 million or 7% from the second quarter of 1997. Total shipments in the
second quarter of 1998 were 695 thousand tons compared to second quarter 1997
shipments of 725 thousand tons.
Sheet product net sales for the second quarter of 1998 were $218.4 million,
a decrease of $7.1 million from the second quarter of 1997. Second quarter 1998
sheet product shipments of 507 thousand tons were comparable to the second
quarter of 1997. The decrease in sheet product sales was primarily attributable
to a decrease in average selling prices.
Tin mill product net sales for the second quarter of 1998 were $118.0
million, a decrease of $20.1 million from the second quarter of 1997. Shipments
of tin mill products in the second quarter of 1998 were 188 thousand tons
compared to 220 thousand tons in the second quarter of 1997. The decrease in tin
mill product net sales was primarily attributable to a decrease in shipments.
Cost of sales for the second quarter of 1998 were $291.4 million, or $419
per ton, compared to $326.6 million, or $450 per ton, for the second quarter of
1997. Cost of sales in the second quarter of 1998 reflected a lower cost product
mix when compared to the same period in 1997. Additionally, cost of sales in the
second quarter of 1998 benefited from the Company's continuing cost reduction
programs and lower employee benefit expenses.
During the second quarter of 1997, the Company finalized its labor
agreements with members of the Independent Steelworkers' Union. The new
contracts, among other things, provided for a retirement window for its
retirement eligible employees. As a result of the retirement window the Company
recorded a restructuring charge of $17.0 million which included early retirement
benefits of $10.4 million and other separation benefits of $6.6 million.
During the second quarter of 1998, the Company recognized interest expense
of $10.8 million compared to $12.0 million for the same period in 1997. The
decrease was due to a lower level of outstanding debt obligations during the
period
During the quarter ended June 30, 1998, the Company had an income tax
provision of $1.2 million compared to an income tax benefit of $3.1 million in
the corresponding period in 1997.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
In the first half of 1998, the Company recognized net income of $7.4
million or $0.17 per diluted share, compared to a net loss of $25.2 million or
$0.59 per common share for the same period in 1997. The results for the first
half of 1998 included a provision for profit sharing of $3.7 million. The
results in the first half of 1997 included a $17.0 million restructuring charge.
Excluding the effects of the restructuring charge and the resulting impact on
income taxes, the net loss for the first half 1997 would have been $11.5 million
or $0.27 per diluted share.
Net sales in the first half of 1998 were $677.7 million, a decrease of
$35.5 million or 5.0% from the first half of 1997. Total shipments in the first
half of 1998 were 1,381 thousand tons compared to first half of 1997 shipments
of 1,423 thousand tons.
7
<PAGE> 8
Sheet product sales for the first half of 1998 decreased $19.8 million to
$422.3 million. Shipments of sheet product in the first half of 1998 were 974
thousand tons compared to 989 thousand tons in the first half of 1997. The
decrease in sheet product sales is attributable to a decrease in selling prices
and the decrease in shipments.
Tin mill product sales for the first half of 1998 decreased $15.4 million
to $255.4 million. Shipments of tin mill products in the first half of 1998 were
407 thousand tons compared to 434 thousand tons in the first half of 1997. The
decrease in tin mill product sales results primarily from lower tin mill product
shipments.
Cost of sales for the first half of 1998 were $590.8 million, or $428 per
ton, compared to $653.8 million, or $459 per ton, for the first half of 1997.
Cost of sales in the first half of 1998 benefited from the Company's continuing
cost reduction programs and lower employee benefit expenses. Additionally, cost
of sales in the first half of 1998 reflect the benefit of the rebuild of the No.
1 Blast Furnace that was completed in the first quarter of 1997.
During the first half of 1997, the Company finalized its labor agreements
with members of the Independent Steelworkers' Union. The new contracts, among
other things, provided for a retirement window for its retirement eligible
employees. As a result of the retirement window the Company recorded a
restructuring charge of $17.0 million which included early retirement benefits
of $10.4 million and other separation benefits of $6.6 million.
Interest expense for the first half of 1998, was $22.4 million, a decrease
of $1.5 million compared to the same period in 1997. The decrease in interest
expense is due to the lower levels of outstanding debt obligations during the
first half of 1998 compared to 1997.
During the first half of 1998, the Company recognized an income tax
provision of $1.7 million compared to an income tax benefit of $6.1 million in
the corresponding period in 1997.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1998, the Company had cash and equivalents of $111.0 million
compared to $124.7 million as of December 31, 1997. The Company generated $60.2
million in cash from operating activities in the first six months of 1998
compared to $17.0 million in the first half of 1997. The Company repaid $42.2
million of 11 1/2% Senior Notes which became due on March 1, 1998.
The Company has no required minimum pension contribution for 1998 due to a
funding credit of approximately $79.0 million as of the beginning of the year.
However, in the first half of 1998, the Company contributed $19.1 million to its
pension fund and the Company plans to contribute an additional $23.9 million in
the second half of 1998.
As of June 30, 1998, and December 31, 1997, after reductions for amounts in
place under its letter of credit subfacility, Weirton Receivables Inc.(a wholly
owned subsidiary of the Company) had a base amount of participation interests
available for cash sales under a receivables participation agreement of
approximately $62.1 and $57.9 million, respectively. Letters of credit
outstanding under the receivables participation agreement were $12.8 million as
of June 30, 1998.
Based upon available cash on hand and the amount of cash expected to be
generated from operating activities, the Company expects to have sufficient cash
to meet its short term needs, including the completion of the 1998 capital
spending plan. To the extent that cash on hand and cash from operating
activities do not generate an adequate amount of cash, the Company expects that
its cash requirements can be met by the receivables participation agreement.
During April 1998, the Company announced that it had been authorized by the
board of directors to repurchase up to 10%, or approximately 4.2 million shares
of its outstanding common stock. Through July 31, 1998, the Company had
repurchased approximately 1,422,500 shares of its outstanding common stock at
prices ranging from $3.38 to $4.50 per share.
8
<PAGE> 9
The Company's net deferred tax assets are $145.6 million as of June 30,
1998, which consist of the carrying value of net operating loss carryforwards
and other tax credits and net deductible temporary differences available to
reduce the Company's cash requirements for the payment of future federal income
tax.
INVESTMENT IN FACILITIES
Expenditures for property, plant and equipment for the first six months of
1998 totaled $19.8 million. The Company's planned capital additions for 1998 are
approximately $50.0 million. Included in the Company's planned capital
expenditures for 1998 is approximately $10.0 million related to environmental
compliance projects and approximately $6.0 million for information systems.
During the first half of 1998, Company invested approximately $6.4 million
in GALVSTAR L.P., an unconsolidated subsidiary, formed with Koninklijke
Hoogovens for the purpose of constructing and operating a 300,000 ton hot-dipped
galvanizing line. During the first half of 1998, the Company also invested $0.9
million in W&A Manufacturing, an unconsolidated subsidiary, formed with ATAS
International for the purpose of manufacturing a steel roofing product.
YEAR 2000
A task force continues to analyze potential areas of risk associated with
the Year 2000 and to make any required modifications as they relate to business
computer systems, technical infrastructure, end-user computing, manufacturing
and environmental operations. An inventory of computer systems and
date-sensitive automated devices for the aforementioned areas was completed in
June 1998; however, the impact assessment is continuing. The Company anticipates
that the technical software infrastructure for mainframe computers will be
essentially Year 2000 ready in October 1998. Vendor software and other computing
platforms continue to be analyzed for Year 2000 readiness. Management believes
that roughly twenty-five percent of the mainframe applications are capable of
correctly processing transactions with dates before, during and after the Year
2000. The Company is also monitoring the efforts of entities with which it does
business and is participating with steel industry and other trade associations
to collect information on the Year 2000 readiness of such entities.
Additionally, as part of its continuing efforts, the Company will develop
contingency plans that include an analysis of strategies and available resources
to restore operations, a recovery program that identifies participants,
processes, and any significant equipment needed and alternative sourcing
strategies.
The Company's objective is to achieve Year 2000 readiness by the end of the
first quarter of 1999. Thereafter, the task force will continue to test Year
2000 readiness, including continued monitoring of progress by entities with
which the Company does business.
As part of its capital plan, the Company has replaced or is in the process
of replacing certain of its business systems dealing with human resources and
financial reporting. The planned replacement of these systems was accelerated
for the purpose of achieving Year 2000 readiness. Through June 1998, the Company
had spent $10.8 million on these projections. The Company plans to spend an
additional $7.2 million to complete these projects.
As the work of the task force progresses, the Company will continually
revise its estimates of costs required to achieve Year 2000 readiness. Based on
information available at this time, management believes that the incremental
costs associated with achieving Year 2000 readiness will not be material to the
operating results of the Company. However, there can be no assurance that the
costs to ultimately achieve Year 2000 readiness will not be material to the
Company's financial position or results of operations.
ENVIRONMENTAL COMPLIANCE
The Company, as well as its domestic competitors, is subject to stringent
federal, state and local environmental laws and regulations concerning, among
other things, waste water discharge, air emissions and waste disposal.
In March 1996, the West Virginia Department of Environmental Protection
("DEP") and the United States Environmental Protection Agency ("EPA") advised
the Company that it had identified a number of enforcement
9
<PAGE> 10
issues pertaining to waste water discharge, air emissions and waste handling
operations of the Company. In September 1996, the Company and DEP and EPA
reached a settlement regarding these water, air and waste-related issues. Under
the settlement, the Company paid a penalty of $3.2 million in 1997.
The settlement also requires the Company to conduct certain remedial
activity at one of its waste disposal sites. Additionally, the Company is
required to undertake certain capital projects to assure compliance with air,
water and waste-related regulations. These capital expenditures include upgrades
and modifications to air emissions control equipment, waste water treatment
systems and waste handling facilities. Under the settlement, the Company
committed to environmental related capital projects totaling approximately $19.0
million. Through June 1998, the Company has expended approximately $12.5 million
related to these capital commitments.
In connection with the negotiations, the EPA issued a corrective action
order, effective October 18, 1996, requiring the Company to conduct
investigative activities to determine the nature and extent of hazardous
materials which may be located on the Company's property and, if necessary, to
evaluate and propose corrective measures needed to abate any unacceptable risks.
The Company accrued approximately $8.0 million related to environmental
related liabilities, including costs associated with the corrective action
order. Because the Company does not currently know the nature or the extent of
hazardous material which may be located on the property, it is not currently
possible to estimate the ultimate cost to comply with the corrective action
order or conduct remedial activity that may be required.
The Company believes that National Steel Corporation ("NSC") is obligated
to reimburse the Company for a portion of any costs that may be incurred by the
Company to comply with the corrective action order and to undertake any required
remedial action. Pursuant to the agreement whereby the Company purchased the
Division in 1984, NSC retained liability for cleanup costs related to solid or
hazardous waste facilities, areas or equipment as long as they were not used by
the Company in its operations subsequent to the acquisition.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement on
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivatives and
Hedging Activities." SFAS No. 133 establishes accounting and reporting standards
requiring that every derivative instrument be recorded in the balance sheet as
an asset or liability measured at its fair value. The statement requires that
changes in the fair value of derivatives be recognized currently in earnings
unless specific hedge accounting criteria are met. SFAS No. 133 is effective for
fiscal years beginning after June 15, 1999. Management does not believe the
adoption of SFAS No. 133 will have a material impact on the Company's financial
position or its results of operations.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor' for forward-looking statements. In addition to historical information,
this report contains forward-looking statements that are subject to risks and
uncertainties that could cause future results to differ materially from expected
results. Such statements are based on management's beliefs and assumptions made
on information currently available to it. The Company is under no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 26, 1998, the Company"s Annual Meeting of Stockholders was held and
the following proposals were voted upon:
(1) Affirmation of the four nominees to serve on the Board of Directors
until 2001:
<TABLE>
<CAPTION>
VOTES FOR VOTES WITHHELD
--------- --------------
<S> <C> <C>
Ralph E. Reins 49,744,070 5,676,064
Robert S. Reitman 49,187,934 6,232,200
Richard F. Shubert 49,069,235 6,215,560
Ronald C. Whitaker 49,489,617 5,930,517
D. Leonard Wise 49,153,785 6,266,349
</TABLE>
(2) Affirmation of Arthur Andersen LLP as the Company"s Independent Public
Accountants for the fiscal year ending December 31, 1998:
For: 50,239,497 Against: 5,033,837 Abstain: 146,800
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit 27.--Financial Data Schedule for three months ended June 30, 1998
(filed herewith.)
(B) REPORTS ON FORM 8-K
None
11
<PAGE> 12
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)
August 13, 1998
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> MAR-31-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 111,017
<SECURITIES> 0
<RECEIVABLES> 156,485
<ALLOWANCES> (8,908)
<INVENTORY> 221,740
<CURRENT-ASSETS> 521,313
<PP&E> 1,056,069
<DEPRECIATION> (478,928)
<TOTAL-ASSETS> 1,229,978
<CURRENT-LIABILITIES> 218,616
<BONDS> 389,167
21,846
128
<COMMON> 431
<OTHER-SE> 134,810
<TOTAL-LIABILITY-AND-EQUITY> 1,229,978
<SALES> 336,417
<TOTAL-REVENUES> 336,417
<CGS> 291,373
<TOTAL-COSTS> 320,152
<OTHER-EXPENSES> (846)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,755
<INCOME-PRETAX> 6,356
<INCOME-TAX> 1,176
<INCOME-CONTINUING> 5,180
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,180
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
