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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
COMMISSION FILE NO. 1-10244
WEIRTON STEEL CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 06-1075442
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 THREE SPRINGS DRIVE,
WEIRTON, WEST VIRGINIA 26062
(Address of principal executive offices) (Zip code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 304-797-2000
SECURITIES REGISTERED UNDER SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, Par Value $0.01 Per Share New York Stock Exchange
10 7/8% Notes due 1999 New York Stock Exchange
11 3/8% Notes due 2004 New York Stock Exchange
10 3/4% Notes due 2005 New York Stock Exchange
</TABLE>
SECURITIES REGISTERED UNDER SECTION 12(G) OF THE ACT: None
Indicate by check mark 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: ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
Based on the closing price as of March 16, 1998, the aggregate market value
of the voting stock held by nonaffiliates of the Registrant was $158,286,280.
(The foregoing calculation includes shares allocated under the Registrant's 1984
and 1989 Employee Stock Ownership Plans to the accounts of employees who are not
otherwise affiliates and unallocated shares under the Registrant's 1989 Employee
Stock Ownership Plan subject to voting instructions of employees who are not
otherwise affiliates.)
The number of shares of Common Stock ($.01 par value) of the Registrant
outstanding as of March 16, 1998 was 42,925,093.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Certain portions of the Registrant's 1997 Annual Report to Stockholders are
incorporated by reference into Parts I, II and IV of this Annual Report on
Form 10-K to the extent provided herein.
(2) Certain portions of the Registrant's definitive Proxy Statement filed
pursuant to Regulation 14 (filed within 120 days after the end of the fiscal
year covered hereby) in connection with the Registrant's 1998 Annual Meeting
of Stockholders are incorporated by reference into Part III of this Annual
Report on Form 10-K to the extent provided herein.
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TABLE OF CONTENTS
ITEM
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PAGE
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PART I................................................................ 1
1. Business.................................................... 1
2. Properties.................................................. 12
3. Legal Proceedings........................................... 13
4. Submission of Matters to a Vote of Security Holders......... 13
PART II............................................................... 13
5. Market for the Registrant's Common Equity and Related
Stockholder Matters....................................... 13
6. Selected Financial Data..................................... 14
7. Management's Discussion and Analysis of Results of
Operations and
Financial Condition....................................... 14
8. Financial Statements and Supplementary Data................. 14
9. Changes in and Disagreements with Accountants on Accounting
and
Financial Disclosure...................................... 14
PART III.............................................................. 14
10. Directors and Executive Officers of the Registrant.......... 14
11. Executive Compensation...................................... 16
12. Security Ownership of Certain Beneficial Owners and
Management................................................ 16
13. Certain Relationships and Related Transactions.............. 16
PART IV............................................................... 16
14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K....................................................... 16
SIGNATURES............................................................ 20
EXHIBIT INDEX......................................................... 21
FINANCIAL STATEMENT SCHEDULES......................................... S-2
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PART I
ITEM 1. BUSINESS
BACKGROUND
Weirton Steel Corporation (the "Company") and its predecessor companies
have been in the business of making and finishing steel products for nearly 90
years at the Company's facilities located in Weirton, West Virginia. From
November 1929 to January 1984, the Company's business had been operated as the
Weirton Steel Division of National Steel Corporation. Incorporated in Delaware
in November 1982, the Company acquired its principal operating assets in January
1984.
The Company is a major "integrated" steelmaker. As such, it makes carbon
steel from raw materials to industry and customer specifications. 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 Company's multi-
strand continuous caster. The slabs are then reheated, reduced and finished into
coils by extensive rolling and shaping at the Company's modern hot strip mill
and, in many cases, by further tempering, plating or coating at the Company's
downstream finishing operations. See Item 2. "Properties" for a more detailed
description of the specific units involved in the Company's operations.
PRINCIPAL PRODUCTS AND MARKETS
The Company offers a wide range of rolled carbon steel products, including
hot and cold rolled sheet steel and both hot-dipped and electrolytic galvanized
products (collectively, "Sheet Products"), as well as a broad line of coated
steels, including tin plate, chrome coated, and black plate, comprising Tin Mill
Products ("TMP"). The Company's products emphasize the narrow to medium widths,
up to 48" wide, reflective of its rolling and finishing equipment, and cover a
broad range of gauges, finishes and performance specifications. The Company has
developed significant expertise in filling orders with demanding specifications.
The percentages of the Company's total revenues derived from the sale of
Sheet Products and TMP for each year in the five year period ended December 31,
1997 are shown in the following table. Total revenues include the sale of
"secondary" products, principally those products not meeting prime
specifications. Revenues from the sale of semi-finished products have been
combined with Sheet Products.
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1997 1996 1995 1994(1) 1993
---- ---- ---- ------- ----
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Sheet products................................. 62% 59% 64% 70% 54%
Tin mill products.............................. 38 41 36 30 46
--- --- --- --- ---
100% 100% 100% 100% 100%
=== === === === ===
</TABLE>
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(1) The percentage increase during 1994 in Sheet Product revenues compared to
TMP revenues resulted from strong market demand for the Company's Sheet
Products and a fire in April 1994 that severely damaged a cold rolling
facility required for the production of a substantial portion of the
Company's TMP. The facility was rebuilt and returned to normal operations in
the first quarter of 1995, which allowed the Company to resume a more
traditional product mix.
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The following table shows the percentage of total net tons of steel
products shipped by the Company to each of its principal markets for the five
year period ended December 31, 1997.
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1997 1996 1995 1994 1993
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Service Centers and Sheet and Strip
Converters................................... 43% 48% 43% 45% 30%
Food and Beverage.............................. 31 30 25 25 37
Pipe and Tube.................................. 5 6 7 6 12
Construction................................... 10 8 9 13 9
Consumer Durables.............................. 3 2 3 4 4
Exports........................................ 4 2 9 -- 1
Other.......................................... 4 4 4 7 7
--- --- --- --- ---
100% 100% 100% 100% 100%
=== === === === ===
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A substantial portion of the Company's revenues are derived from long-time
customers, although the Company actively seeks new customers and constantly
seeks new markets for its products. A substantial share of the Company's Sheet
Products and TMP are shipped to customers located in the eastern portion of the
United States. A strong demand worldwide for flat rolled carbon steel products
that began in 1994 continued throughout 1995. The Company responded by exporting
approximately 9% of its shipments in 1995 compared to previous years when only
nominal quantities were shipped to export markets. The Company's export efforts
were hampered in 1996 by unfavorable exchange rates and prices in foreign
markets which disadvantaged domestic producers. As a result, the Company
experienced a sharp reduction in its 1996 exports of Sheet Products, while TMP
exports actually increased. The Company's 1997 exports improved over 1996
levels, but remained adversely affected, particularly for Sheet Products, by the
continuing strength of the US Dollar. The Company plans to ship products to
international markets through its joint venture, WeBCo International LLC
("WeBCo"), when favorable economic and business conditions exist. See "Business
Strategy and Development."
The Company's products are sold through salaried Company employees who
operate from corporate headquarters and through seven regional sales offices.
Sales orders taken in the field are subject to home office approval. Several
years ago the Company combined its sales force structure from separate Sheet
Products and TMP organizations into a unified commercial sales organization. The
unified organization is closely linked with technical services personnel who
assist the Company with product engineering and development. The Company
believes that the sales organization plays an important role in identifying and
achieving a more favorable strategic market mix for the Company. In October
1996, the Company became the first major domestic producer to initiate product
sales from its Internet website (http://www.weirton.com), which is updated daily
with excess and non-prime offerings. The Company continues to explore new means
and methods of expanding customer access through electronic markets.
Trade orders on hand for the Company's products at December 31, 1997, 1996
and 1995 amounted to approximately 471, 528, and 418 thousand tons,
respectively. Substantially all orders on hand at any time are expected to be
filled within a 12 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 material to its business.
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" or "hot rolled pickled and
oiled." Hot roll is used for unexposed parts in machinery, construction products
and other durable goods. Most of the Company's sales of hot rolled products have
been to steel service centers, pipe and tube manufacturers and converters. In
1997, the Company shipped 753 thousand tons of hot rolled sheet, which accounted
for 19% of its total revenues.
Cold rolled sheet requires further processing including additional rolling,
annealing and tempering to enhance ductility and surface characteristics. Cold
roll is used in the construction, steel service center, commercial equipment and
container markets, primarily for exposed parts where appearance and surface
quality
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are important considerations. In 1997, the Company shipped 383 thousand tons of
cold rolled sheet, which accounted for 12% of its total revenues.
Galvanized hot-dipped and electrolytic sheet is coated primarily with zinc
compounds to provide extended anti-corrosive properties. Galvanized is sold to
the electrical, construction, automotive, container, appliance and steel service
center markets. In 1997, the Company shipped 613 thousand tons of galvanized
products, which accounted for 27% of total revenues.
Generally, the Company obtains relatively higher profit margins on those
Sheet Products that require more extensive processing. Differences in pricing
among these products have varied over time depending on changes in their uses,
demand and the competitive environment. Sheet Products of the hot rolled variety
are widely regarded as commodity items in the steel industry.
The following table, based on information from the American Iron and Steel
Institute ("AISI"), shows the Company's historical share of the domestic Sheet
Products market for each year in the five year period ended December 31, 1997.
SHEET PRODUCTS
HISTORICAL MARKET SHARE
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1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(IN THOUSANDS OF TONS)
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Industry shipments.................... 52,015 50,022 47,845 47,217 41,616
Company shipments(1).................. 1,918 1,957 1,955 1,991 1,536
Company market share.................. 3.7% 3.9% 4.1% 4.2% 3.7%
</TABLE>
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(1) Includes secondary products.
While the Company's presence in the overall domestic Sheet Products market
is limited, in order to compete more effectively, the Company has concentrated
on developing offerings of more highly processed products and production
capability to provide the coil sizes favored by most of its customers. The
Company's strategy for development of its sheet business is focused on
increasing its mix of coated products, such as galvanized, while capitalizing on
developing specialty markets, such as construction, where the Company believes
that its GALFAN (registered trademark) products have potential applications in
roofing and framing. As part of its Sheet Products marketing strategy, the
Company is also making efforts to develop relationships with strip re-rollers to
increase sales of its cold rolled products, to enhance high quality end use of
its products marketed through steel service centers, and to develop the hot
rolled market for heavier gauge and higher carbon applications.
Tin Mill Products. The Company has enjoyed substantial market share and a
widely held reputation as a high quality producer of TMP. Although categorized
as "tin mill products," these products actually comprise a wide variety of light
gauge coated steels. Tin plate and black plate products are sold under the
Company name and under such registered trademarks as WEIRITE and WEIRLITE. In
addition to tin plate and black plate, the Company produces electrolytic
chromium coated steel under the registered trademark WEIRCHROME.
The Company is one of the largest domestic producers of TMP. During 1997,
the Company's market share of TMP was approximately 20%. The Company's market
share of TMP has consistently approximated that level, except for 1994 when it
achieved only a 15% share due to an extended cold rolling facility outage which
reduced the Company's TMP shipments significantly in the second half of that
year. TMP shipments on an industry-wide basis have remained relatively steady in
recent years even as plastic, aluminum, composites and other materials have
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. This
market is characterized by a small number of manufacturers and increasing
concentration of buying power. During 1997, shipments to the Company's five
largest TMP customers accounted for 26% of total revenues and shipments to Ball
Corporation accounted for approximately 11% of total revenues. The balance of
the TMP is sold to other can manufacturers, manufacturers of caps and closures
and specialty products ranging from film
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cartridges, lighting fixtures and battery jackets to cookie sheets and curtain
rods. As a result of more predictable sales patterns for TMP, the Company is
able to determine in advance a significant portion of its production
requirements, allowing it to operate its production facilities more efficiently
and adjust its marketing and production efforts for other products.
Historically, the greater predictability of the TMP market and its relative
pricing stability have served to cushion the Company against greater price
volatility in the Sheet Product market. However, TMP has long been a market with
limited opportunities for expansion on the domestic front.
The following table, based on AISI information, shows the Company's
historical share of the domestic TMP market for each year in the five year
period ended December 31, 1997.
TIN MILL PRODUCTS
HISTORICAL MARKET SHARE
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1997 1996 1995 1994 1993
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(IN THOUSANDS OF TONS)
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TMP industry shipments..................... 4,058 4,108 3,942 4,137 4,123
Company shipments (1)...................... 854 899 763 615 895
Company market share....................... 21% 22% 19% 15% 22%
</TABLE>
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(1) Includes secondary products.
The Company has the capacity to produce sufficient quantities of "clean"
steel (steel with fewer impurities) to fill anticipated TMP orders for the near
term. 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 leading edge
technology products such as thin-walled containers.
The Company has been a leading innovator in the development of can making
technology through its WEIRTEC (registered trademark) research and development
center. Although highly competitive prices for aluminum have relegated steel to
an insignificant share of the domestic beverage container market in recent
years, the Company believes that two piece thin-walled steel beverage containers
have potential for growth in this sector, based primarily on improved production
efficiencies for steel cans and increased industry success in promoting the
recycling of steel. However, the Company also believes it is unlikely that this
potential will be realized without a sustained increase in aluminum prices and
an effective program by domestic TMP producers encouraging can makers to convert
beverage can lines to steel. The Company engages in other end product research
and development and provides support services to its customers. The Company
believes these services have been of significant assistance, particularly to its
TMP customers, and promote the consumption of the Company's products. See
"Research and Development."
The Company owns and operates a 1.1 million square foot Finished Products
Warehouse (the "FPW") near the Company's mill with storage and staging areas for
TMP. The FPW facilitates "just in time" production and delivery to five of the
Company's major TMP customers which are located in attached, or nearby,
manufacturing facilities. As steel coils are needed by customers' operations,
they are moved from the adjoining central storage areas and loaded directly on
to customers' production lines. This arrangement provides reductions in
transportation costs for the Company and its customers.
RELATED PRODUCTS AND SERVICES
The Company is currently rolling and finishing various types and grades of
stainless steel on its hot mill on a tolling basis for several major stainless
steelmakers. Special operating procedures and expertise, generally not possessed
by the Company's domestic integrated carbon steel competitors, are required to
roll and finish stainless steel. To date, revenues from these activities have
not been material to the Company. From time to time, the Company has produced
and sold carbon steel slabs and hot metal to other carbon steelmakers. On
limited occasions, the Company has also performed downstream processing of
products for other carbon steelmakers, as well as having its own products
further processed by other steelmakers.
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BUSINESS STRATEGY AND DEVELOPMENT
The Company's strategic objective is to be a first tier global provider, in
terms of cost, quality and customer service, of specialty plated, coated and
cold rolled products. The Company's business strategy seeks to achieve this
objective by: (i) continuing to implement cost and productivity improvements;
(ii) further improving its product mix toward higher value-added light gauge
cold rolled and coated products; and (iii) maximizing the utilization of its
assets.
The Company's cost and productivity projects either implemented or
currently being implemented include: new supply management programs to
coordinate and reduce costs in the procurement of material and services; new
programs to reduce energy and raw material requirements, ranging from scrap
management to enhanced blast furnace turbo blowers; and programs to rationalize
human resources with the Company's competitive needs.
The Company's product mix improvement efforts are complementary to its
productivity improvement in that they seek to take advantage of the Company's
enhanced capability to produce a greater proportion of higher value added
products. The Company's product mix improvement efforts are focused on the
targeting of selective international markets for TMP and the development of
domestic specialty markets for coated products, such as galvanized in
construction and light gauge high tensile steel in packaging, together with
enhanced sales-customer-technical coordination and improved production
management and information systems.
The Company also seeks to maximize the utilization of available assets
through a number of projects and initiatives. As indicated in Item 2
"Properties," the design capacity of the Company's hot mill (rebuilt in 1992)
exceeds the design capacity of the Company's multi-strand caster (rebuilt in
1990) to produce slabs for reduction at the hot mill. As noted in "Related
Products and Services," the Company has utilized some of its excess hot mill
capacity in tolling activities for stainless and other carbon steelmakers and in
processing purchased slabs for its own value-added products as required by the
Company's order book. The Company has also sought to increase the amount of hot
metal from blast furnace operations through the 1997 reline of its No. 1 Blast
Furnace, to improve operating practices in order to maximize steelmaking at its
BOP shop and caster, and to increase throughput at its value added downstream
finishing facilities by, among other things, enhancing its No. 9 Tandem Mill.
To further implement the Company's business strategy, in September 1997, it
formed WeBCo as a joint venture with the United Kingdom-based Balli Group, plc.
WeBCo's objective is to penetrate new foreign markets for the export of the
Company's products and to expand the Company's domestic offerings with a range
of products complementary to those from its own mill. In October 1997, the
Company announced that it was negotiating with Dutch steelmaker Koninklijke
Hoogovens NV to form a venture that would operate a new 300,000 ton per year,
60" hot dip galvanizing facility to be constructed at an out of state location.
The new facility is intended to enhance the Company's competitive presence in
the growing galvanized market and would mark its first manufacturing joint
venture. The Company has obtained commitments relating to construction of the
facility and is in the process of finalizing agreements regarding its financing
and operation. Assuming such agreements are completed, the facility is scheduled
to commence operations by mid-1999.
The Company continually develops and reviews strategies designed to enhance
the scope and improve the profitability of its business. In connection with such
activities, the Company is pursuing or considering a variety of other projects
aimed at exploiting product use, penetrating new markets or reducing operating
costs. These projects, if developed by the Company, could include joint
ventures, partnering or strategic alliances. The Company cannot predict whether,
or to what extent, the projects resulting from its ongoing business development
strategies will be implemented.
RAW MATERIALS
Unlike many of its larger competitors, the Company does not own or
participate in the ownership of raw materials, or operate production facilities,
from which it can draw its raw material requirements. As a result, the Company
must buy these materials on the open market.
The Company has a contract with a subsidiary of Cleveland-Cliffs Inc. to
purchase the majority of the Company's standard and flux grade iron ore pellet
requirements. This contract, which extends through 2005,
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provides for a minimum tonnage of pellets to be supplied based on the production
capacity of the mining source and for pricing dependent on the production costs
of one of the mines. The Company has negotiated a second agreement with that
supplier (which it is in the process of finalizing) extending through 2002 to
purchase additional pellets based on competitive market prices.
The Company has a contract with USX Corporation to purchase blast furnace
coke for a term which extends through December 31, 2001, subject to extension.
Under the contract, the Company must give notice by mid-October of each year of
its required coke volumes for the following year and has the option to purchase
up to 100% of its coke requirements for each year, subject to a minimum of
either 80% of requirements or a fixed tonnage, depending on certain operating
configurations at the Company's blast furnaces. If the Company does not commit
to take the tonnages above minimum requirements for any year, the supplier has
the option of determining whether it will supply future tonnages above the
minimum, until such time as it actually does so, after which the Company again
has the option to take its full requirements. Coke prices under the contract are
based on the prevailing market, subject to a ceiling and floor over the life of
the contract, a limit on annual change, and certain adjustments based on blast
furnace operations. In addition, the Company continues to explore and utilize
alternative sources for coke, including from overseas suppliers. The Company,
like other steelmakers, has utilized technologies calculated to achieve some
reduction in the consumption of coke in blast furnace operations. Nevertheless,
if coke making capacity available to the industry continues to decline, future
coke prices may be subject to significant escalation.
The Company obtains its limestone and other raw materials requirements, in
most cases, from multiple sources with the issue being price and quality rather
than availability of supply.
The Company utilizes scrap in its steelmaking process. Scrap is available
from multiple sources with the issue being price and quality rather than
availability of supply.
The Company operates as a 100% continuously cast producer. However, the
Company's requirements for slabs occasionally have exceeded its capacity to
produce them, and production outages from iron or steelmaking operations have
required the use of slabs from outside sources. As a result, the Company has
purchased and may purchase slabs from other sources in order to meet the demand
for its products and to maximize the overall production efficiency of its
operations. The Company believes that recent increases in hot metal capacity
following the completion of the No. 1 Blast Furnace reline should enhance the
Company's slab production capacity and substantially eliminate the Company's
need to purchase outside slabs, except for unforeseen events or favorable
commercial circumstances. Generally, the Company has been able to purchase slabs
as and when needed.
The primary sources of energy used by the Company in its steel
manufacturing process are natural gas, oil, and electricity. In recent years,
the Company has entered into natural gas purchase contracts with gas suppliers
and transportation contracts with transmission companies. These long term
arrangements have helped to reduce or control fluctuations in prices paid for
gas. In 1995, the Company entered into a 15-year contract for the supply of
oxygen to its steelmaking facilities. This agreement significantly reduced the
Company's oxygen supply costs.
The Company generates a significant amount of electricity and steam for
processing operations from a mixture of excess blast furnace gas and natural
gas. 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. 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 generally competitive terms.
COMPARATIVE PRODUCTION AND SHIPMENTS
The domestic steel industry continued a rebound in both production and
shipments over the five year period from 1993 through 1997. Similarly,
capability utilization increased to more than 90% over the period, peaking at
93% in 1995, but fell off somewhat in the two most recent years due to increases
in capacity. Industry raw steel production for 1997 reached 105.4 million tons,
which represented a 3.1% increase compared to 1996, while
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shipments increased by approximately 5.0% to 105.5 million tons. Steelmaking
capability of the domestic industry, which had been declining through 1994,
continued to increase through 1997 as new facilities entered the marketplace.
In 1997, the Company produced 2.9 million tons of raw steel and shipped 2.8
million tons of finished and semi-finished steel products. The following table
sets forth annual production capability, utilization rates and shipment
information for the Company and the domestic steel industry (as reported by the
AISI) for each year in the five year period ended December 31, 1997.
PRODUCTION AND SHIPMENTS
HISTORICAL MARKET SHARE
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<CAPTION>
1997 1996 1995 1994 1995
---- ---- ---- ---- ----
(IN THOUSANDS OF TONS)
<S> <C> <C> <C> <C> <C>
Company
Raw steel production..................... 2.9 2.8 2.8 2.7 2.7
Capability............................... 3.0 3.0 3.0 3.0 3.0
Utilization.............................. 97.0% 95.0% 95.0% 91.0% 91.0%
Shipments................................ 2.8 2.9 2.7 2.6 2.4
Shipments as a percentage of industry
total................................. 2.6% 2.9% 2.8% 2.7% 2.7%
Industry
Raw steel production..................... 105.4 102.2 102.7 97.9 96.1
Capability............................... 119.0 116.1 110.4 108.2 109.9
Utilization.............................. 88.5% 90.0% 93.0% 91.0% 87.0%
Shipments................................ 105.5 100.5 97.5 95.3 88.4
</TABLE>
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 plastics,
aluminum, cardboard, ceramics 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 the reduction of selling prices across a broad range of products.
Integrated steelmakers also face increased competition from mini-mills.
Mini-mills are efficient, low-cost producers that generally produce steel by
melting scrap in electric arc furnaces, utilize new technologies, have lower
employment costs and target regional markets. Mini-mills historically have
produced lower profit margin products, such as bars, rods, wire and other
commodity-type steel products not produced by the Company. Thin cast technology
has allowed mini-mills to enter certain of the sheet markets supplied by
integrated producers. Such facilities have been placed in operation and are
competing in the hot rolled, cold rolled and galvanized marketplace, and other
entities have announced plans or are in the process of starting similar
facilities. In other instances, mini-mills seeking to capture segments of the
flat rolled market have located facilities where they are geographically
advantaged compared to their integrated competition. In general, prices for
scrap, on which mini-mills are more dependent than integrated steel producers,
have increased the operating costs of mini-mills. In response, some mini-mills
have begun to develop scrap substitution iron-making technologies. Mini-mills
generally continue to have a cost advantage over integrated steel producers.
Most of the new capacity in the domestic industry has resulted from growth in
mini-mill operations, some of which rival the capacity and product range of the
integrated mills.
In response to increased competition, domestic steel producers have
invested heavily in new plant and equipment, which has improved efficiency and
increased productivity and quality. 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 costs. In
addition, it is estimated that approximately 4 to 6 million tons of new
steelmaking capacity (primarily mini-mills) will be in place over the next two
years, further
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threatening the viability of less efficient facilities. The Company has
responded to competitive cost reductions through its own capital improvement
program and ongoing cost reduction efforts to achieve operating efficiencies.
Prior to 1993, the Company's efforts focused on its steelmaking operations and
hot mill. Since that time, the focus has shifted to downstream operations and
primary iron making.
Domestic producers face competition from foreign producers over a broad
range of products. Many foreign steel producers are aligned with governmental
interests and thereby subject to influence by political and economic policy
considerations, as well as prevailing market conditions. As a percentage of
domestic consumption, steel imports excluding semi-finished products (primarily
slabs), were at approximately 25%, 23%, and 21% in 1997, 1996 and 1995,
respectively. In 1997, imports into the U.S. of flat-rolled steel from countries
in the Commonwealth of Independent States, primarily Russia and Ukraine, surged.
These countries face small quotas on exports to the European Union, antidumping
suits in other foreign markets and continued weak domestic demand, resulting in
large product volumes being diverted into the U.S. The Company is pursuing
research to determine if potential unfair trade practice issues raised by these
imports can be addressed under U.S. law. Competitive pressure from imports has
been most intense at times when the U.S. Dollar has risen strongly against
foreign currencies, increasing their pricing advantage. In that connection, the
Company is also closely monitoring the impact of the Asian financial crisis. In
March 1997, the Company joined with two other domestic steel producers and 29
domestic pipe and tube producers in requesting United States government agencies
to file a protest with the World Trade Organization (the "WTO") over actions
taken by the Republic of Korea to subsidize a Korean producer, allegedly in
violation of the WTO subsidy code, permitting the Korean producer to flood Asian
markets with low priced hot-rolled steel. The protest is in the fact finding
stage. If the WTO finds a subsidy violation, it could seek to force the Korean
producer to repay the subsidies or allow the United States to impose
compensatory duties.
The Company's primary competitors in Sheet Products consist of most
domestic and international integrated steel producers and mini-mills. The
Company's primary TMP competitors in recent years have been USX Corporation, LTV
Corporation, Bethlehem Steel Corporation, National 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 creating strong customer relationships by providing high quality products at
competitive prices.
RESEARCH AND DEVELOPMENT
The Company engages in research and development for the improvement of
existing products and processes, and the development of new products and product
applications. During 1997, 1996, and 1995, the Company spent approximately $3.1
million, $3.4 million, and $3.2 million, respectively, for research and
development activities. WEIRTEC, the Company's research and development center
specializing in the advancement of steel can making technology, maintains
research and prototype steel packaging manufacturing facilities, analytical
laboratory facilities and computer simulation systems in Weirton, West Virginia.
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. WEIRTEC research projects have also included clean steel production
techniques, polymer to steel lamination, and the application of galvanized steel
products to the residential and commercial construction industry. WEIRTEC
assists customers in the development of new products and collaborates with the
AISI in the development of new product lines and production techniques to
increase the use and quality of steel as a material of choice. The Company
believes that the scientists, engineers, technicians and theWEIRTEC facilities
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
8
<PAGE> 11
material importance in its overall business. The Company also owns a number of
registered trademarks for its products.
ENVIRONMENTAL CONTROL
Compliance. The Company is subject to 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 regulations have been marked by increasingly strict
compliance standards. Violators of these regulations may be subject to civil or
criminal penalties, injunctions or both. Third parties also may have the right
to sue to enforce compliance.
Capital expenditures for environmental control facilities were
approximately $8.4 million in 1997, $9.4 million in 1996 and $3.9 million in
1995. For 1998, the Company has budgeted approximately $11.0 million in capital
expenditures for environmental control facilities. Given the nature of the
steelmaking industry, it can be expected that additional capital expenditures
will be required from time to time to permit the Company to remain in compliance
with current and future environmental regulations. Since the effects of future
requirements are not determinable at present, it is not possible to predict the
ultimate future cost of compliance. The Company, like its competitors, does not
expect to be able to pass on to customers cost increases specifically resulting
from compliance with environmental regulations.
In the past, the Company has resolved environmental compliance issues
through negotiated consent orders and decrees with environmental authorities,
pursuant to which the Company has paid civil penalties. The Company believes
that it is in substantial compliance with its environmental control consent
orders and decrees.
MULTIMEDIA ENFORCEMENT SETTLEMENT
In March 1996, the Environmental Protection Agency (the "EPA") and the West
Virginia Division of Environmental Protection (the "DEP") advised the Company
that they had identified a number of enforcement issues pertaining to water
discharges, air emissions and waste handling operations by the Company and were
prepared to initiate a "multimedia" enforcement action against the Company.
Multimedia actions involve coordinated enforcement proceedings related to
various environmental media such as water, air and waste. In recent years, such
actions have resulted in penalties and other commitments being obtained from
many of the Company's competitors.
The Company executed a consent decree with the governmental agencies in
October 1996 in resolution of such issues. Under the consent decree, the Company
paid a civil penalty of $3.2 million in January 1997 and was required to
undertake certain capital projects to assure compliance with water, air and
waste-related regulations in accordance with detailed construction schedules.
The consent decree also provided for stipulated penalties for non-compliance
with the decree's provisions.
The capital projects undertaken in connection with the decree included
upgrades and modifications to air emissions control equipment, wastewater
treatment systems and waste handling facilities. Construction of a majority of
the projects has been substantially completed, resulting in Company expenditures
of approximately $8.9 million through 1997. A significant portion of these
expenditures had been included in the Company's capital budget prior to the
negotiations which led to the settlement. The Company anticipates that it will
expend approximately an additional $7.8 million through 1999 to complete the
construction and implementation of the remaining capital projects.
The required capital projects, as well as other terms of the consent
decree, have necessitated, and will necessitate, changes in operating procedures
at the Company's facilities. While the Company has mitigated many of the
increased operating costs attributable to these changes, operating costs are
likely to increase as a result of the requirements. Based on its experience thus
far, the Company does not believe that any such increase will be material to its
results of operations.
9
<PAGE> 12
WATER DISCHARGE PERMITTING
In June 1994, the DEP issued a renewal National Pollutant Discharge
Elimination System ("NPDES") permit to the Company for its water discharges. The
renewal NPDES permit contained a number of new requirements and effluent
limitations. In February 1997, the Company reached a settlement with the DEP
regarding remaining NPDES issues. That settlement was amended in July 1997.
Among other things, the amended settlement requires the Company to achieve
compliance by June 1999 with more stringent effluent limitations and to conduct
certain defined studies with regard to other potentially more stringent effluent
limitations. It is not possible at this time to estimate the costs which may be
necessitated to achieve compliance with the final limitations, in part because
DEP has not made final determinations regarding the limitations.
RCRA CORRECTIVE ACTION ORDER
In connection with the multimedia consent decree in 1996, the EPA also
issued a corrective action order. The order requires 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 to evaluate and
propose corrective measures needed to abate any unacceptable risks. Areas within
the Company's property have been prioritized, and the Company has been
developing investigation workplans for the high priority areas. The Company does
not know the nature or extent of hazardous materials located on its property and
it is not possible at present to estimate the ultimate cost to comply with the
order or to conduct any required remedial activity. The Company believes that it
may be entitled to indemnification, as described below, for at least a portion
of the costs incurred by the Company to comply with the corrective action order
and to undertake any required remedial action.
Waste Sites. Under the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended ("CERCLA"), and similar state statutes,
the EPA and state regulators have authority to impose strict, joint and several
liability on waste generators, owners, operators and other potentially
responsible parties ("PRPs") for the cost of remediating contaminated
properties. By reason of the agreements pursuant to which the Company purchased
the operating assets of the Weirton Steel Division (the "Division") from
National Steel Corporation ("National"), the Company is entitled to
indemnification from National for certain environmental liabilities, including
those relating to the remediation of certain contaminated sites, as more fully
described below. The Company understands that National has provided notices to
EPA regarding a number of such sites as required by law. The Company further
understands that National has been involved, at the request of the EPA or state
agencies, in voluntary remedial activities with respect to a number of such
sites. Insofar as any of those sites involve liabilities under environmental
laws or regulations for prior Division activities, the Company believes it is
indemnified by National.
The Company and/or its predecessors have been conducting steel
manufacturing and related operations at various locations, including the
Company's current plant site, for almost 90 years. Although the Company and its
predecessors utilized operating practices that were standard in the industry at
the time, hazardous substances may have been released on or under these sites.
In accordance with regulatory requirements under the previously described RCRA
order, the Company is required to investigate these prior releases and take
corrective action where deemed appropriate. See "RCRA Corrective Action Order."
In addition, the Company and its predecessors have disposed of solid and
hazardous wastes at various off-site waste disposal sites. Pursuant to CERCLA
and similar state laws, the Company may be required to remediate contamination
at some of these sites or participate in the sharing of such costs as deemed
necessary. The Company does not have sufficient information to estimate its
potential liability in connection with potential future remediation in general.
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 indemnity obligations by National to
the Company.
TEX TIN SITE
In September 1989, the EPA notified the Company that it was considered to
be among a number of PRPs for the disposal of wastes 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 the site by
10
<PAGE> 13
the Company. Both the Company and National were named as defendants in a suit
filed by Amoco Chemical Corporation in the U.S. District Court for the Southern
District of Texas in May 1996; the Company, however, was never served with a
summons and thus is not currently a party to the action. The suit alleges that
the Company, National and numerous other defendants are liable for Amoco's
remedial costs expended at the Tex Tin site. 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. Since the
Company's notification of non-involvement in the matter to the parties, the
action has not been amended to properly include the Company as a party.
HANOVER TOWNSHIP SITE
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 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 with respect to the
closure of this facility is limited to $1.0 million. Although there can be no
assurances, the Company does not anticipate that the costs for site closure will
exceed the limitation on National's liability.
SHILOH LANDFILL
The Company leases certain real property in Hancock County, West Virginia,
known as the Shiloh Landfill ("Shiloh Landfill"), from Shiloh River Corporation
("SRC"). Under an agreement with SRC, which remains the operator of the solid
waste landfill at that site, the Company is the intended sole disposer. The
Company disposes of some of its general refuse, construction and demolition
debris, and industrial nonhazardous waste materials at the Shiloh Landfill. In
February 1997, SRC received a compliance order from the DEP, which cited a
number of operational deficiencies and required Shiloh Landfill to undertake
numerous activities for the purposes of remediating alleged violations of
applicable law and regulations. Although certain of the required activities were
undertaken by Shiloh Landfill in a timely manner, SRC and the Company filed a
notice of appeal on March 11, 1997 with regard to certain other requirements and
allegations. The Company and SRC entered into settlement discussions with DEP,
and these discussions culminated in a Consent Order and Agreement ("CO&A") which
was entered by the West Virginia Environmental Quality Board ("EQB") in
September 1997. Under the terms of the CO&A, SRC is to cease accepting waste at
the Shiloh Landfill on or before December 31, 1998, and to complete closure
activities at the facility on or before June 30, 1999. SRC and the Company are
jointly responsible for conducting post-closure care at the facility. The
Company is evaluating alternative waste disposal facilities for use after the
December 31, 1998 deadline.
Indemnification. According to the agreements by which the Company acquired
the assets of the Division from National, the Company is entitled to
indemnification from National for liabilities, including governmental and
third-party claims, arising from violations prior to the acquisition, and
National is entitled to indemnification from the Company for such items after
the acquisition. 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
acquisition. Third-party liability claims relating to Waste Sites are likewise
covered by the respective indemnifications.
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 any differences relating to
indemnification rights and the outcome of any proceedings involving the Company
and National regarding such issues.
11
<PAGE> 14
EMPLOYEES
At December 31, 1997, the Company had 4,873 employees, of whom 3,773 were
engaged in the manufacture of steel products, 524 in support services, 149 in
sales and marketing activities and 426 in management and administration. In
1992, the Company implemented a strategic program designed to reduce its
workforce primarily through retirement programs and attrition. Through that
program, the Company reduced its overall workforce by 19% through 1995. In 1996,
the Company implemented an additional program to reduce its supervisory and
managerial workforce by approximately 20%. In 1997, the Company reduced its
represented workforce by approximately 13% from 1995 levels through a retirement
program.
At December 31, 1997, approximately 4,053 Company employees in bargaining
units covering production and maintenance workers, clerical workers and nurses
were represented by the Independent Steelworkers Union (the "ISU"). The Company
is a party to collective bargaining agreements with the ISU for those units and
with the Independent Guard Union for security personnel, which expire in March
2001 and May 2000, respectively. The Company believes that the terms of its
collective bargaining agreements are generally comparable to those between other
major steel producers and their unions. However, the Company's agreements
provide for the continuation of a Company-wide profit sharing plan pursuant to
which up to 35% of adjusted net earnings may be paid to employees and
substantially eliminate many restrictive workrules pertaining to the assignment
and scheduling of employees.
From January 1984 until June 1989, the Company was owned in its entirety by
its employees through the Company's 1984 Employee Stock Ownership Plan (the
"1984 ESOP"), in which substantially all employees were participants. In June
1989, the 1984 ESOP completed a public offering of common stock, resulting in
that security being listed and traded on the New York Stock Exchange.
Substantially all the Company's employees participate in its two ESOPs
which owned approximately 24.5% of the outstanding common and substantially all
of the outstanding preferred shares of the Company at March 16, 1998. These
securities represented approximately 45.6% of the voting power of the Company's
voting stock.
ITEM 2. PROPERTIES
The Company owns approximately 2,400 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 real 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 3.0 million tons. Although the
Company does not anticipate operating a three blast furnace configuration in the
near term, under that operating scenario, its annual hot metal capacity could be
increased to approximately 3.6 million tons. In March 1997, the Company
completed a planned major reline and rebuild of its largest iron making
facility, the No. 1 Blast Furnace, as part of a capital expenditure program for
that facility approximating $85.0 million. The rebuild was designed to increase
iron production and quality, improve production efficiencies, reduce costs and
enhance environmental protection. While the rebuild was in progress, the Company
utilized only its smaller No. 4 Blast Furnace, which necessitated the purchase
of some outside slabs for finishing purposes. See Item 1. "Business--Raw
Materials." The Company's ironmaking operations through 1996 also included a
sinter plant, used to process scale, sludge and other by-products for recycling
back into blast furnace operations. In December 1996, the Company temporarily
discontinued operations at the sinter plant pending an assessment of the
facility's production equipment and the feasibility of improvements believed
necessary to assure the plant's continuing compliance with more stringent future
air pollution control standards. This assessment is ongoing, and operations at
the sinter plant did not resume in 1997. The Company increased its purchasing of
iron pellets from outside commercial sources to replace the sinter plant output.
The Company's primary steelmaking facilities include a two vessel BOP shop with
an annual capacity of 3.0 million tons of raw steel (based on a two blast
furnace operation). Primary steelmaking facilities also include a CAS-OB
facility, two RH degassers, and a four
12
<PAGE> 15
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, 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. See the
"Comparative Production and Shipments" section of Item 1 for additional
information regarding production capacity and utilization rates.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved as a defendant or plaintiff in various litigation
relating to claims arising out of its operations in the normal course of
business. Such claims involving the Company as a defendant are generally covered
by insurance. It is management's opinion that any liability resulting from
existing litigation would not have a material effect on the Company's business,
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
As of March 16, 1998, there were 42,925,093 shares of common stock, $.01
par value ("Common Stock"), outstanding held by 3,789 stockholders of record.
The principal market for the Common Stock is the New York Stock Exchange, on
which that security has been listed since June 1989.
Dividends on the Company's Common Stock may be paid when and as declared by
the Company's Board of Directors. The payment of dividends is subject to the
applicable provisions of Delaware corporate law governing the Company and the
discretion of the Company's Board of Directors, which, in exercising such
discretion, considers the financial performance and capital requirements of the
Company.
Under restrictive covenants relating to the Company's indebtedness, the
Company's ability to pay dividends on its stock is limited 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
subsequent issuances of certain capital stock, less certain allowable payments.
As of December 31, 1997, pursuant to these covenants, the Company could pay
dividends on its Common Stock of up to $110.4 million.
As of March 16, 1998, 10,504,071 shares of Common Stock, or 24.5% of the
outstanding shares of Common Stock, were held by one stockholder of record,
United National Bank--North, as Trustee of the 1984 ESOP. As of that date, the
1984 ESOP had approximately 6,540 participants who were active or former
employees of the Company. In addition, as of March 16, 1998 there were 1,743,981
shares of Convertible Voting Preferred Stock, Series A (the "Series A Preferred
Stock"), outstanding held by 364 stockholders of record. As of that date, United
National Bank--North, as Trustee of the Company's second Employee Stock
Ownership Plan (the "1989 ESOP"), was the record owner of 1,699,171 shares of
the Series A Preferred Stock, or over 97.4% of the outstanding shares of Series
A Preferred Stock, subject to the terms and conditions of said Plan. As of that
date, the 1989 ESOP had approximately 5,252 participants who were active or
former employees of the Company. The Series A Preferred Stock is not listed for
trading on any exchange. The Series A Preferred Stock has a liquidation
preference of $5 per share and is convertible into one share of Common Stock,
subject to adjustment. Each share of Series A Preferred Stock is entitled to 10
votes in all matters presented to the stockholders for approval. Participants in
the Company's two ESOPs have full voting rights over all shares allocated to
their accounts. See "Employees" under Item 1.
13
<PAGE> 16
The following table sets forth, for the periods indicated, the high and low
sales prices of the Common Stock as reported in the consolidated transaction
reporting system.
<TABLE>
<CAPTION>
1996 1997 1998(1)
----------- ----------- -----------
QUARTER HIGH LOW HIGH LOW HIGH LOW
------- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
First............................. 4 5/8 3 3/4 3 3/8 2 1/2 3 13/16 2 11/16
Second............................ 4 1/4 3 3 1/4 2 1/2
Third............................. 3 3/8 2 3/8 5 1/4 2 15/16
Fourth............................ 3 1/2 2 4 5/8 2 1/2
</TABLE>
- ---------
(1) First Quarter 1998 through March 16, 1998.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated herein by reference
to "Selected Financial and Statistical Data" on page 39 of the Company's 1997
Annual Report to Stockholders. With the exception of the information
specifically incorporated by reference, the 1997 Annual Report to Stockholders
is not to be deemed filed as part of this Report for purposes of this Item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this Item is incorporated herein by reference
to pages 13 to 16, inclusive, of the Company's 1997 Annual Report to
Stockholders. With the exception of the information specifically incorporated by
reference, the 1997 Annual Report to Stockholders is not to be deemed filed as
part of this Report for purposes of this Item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this Item are
incorporated herein by reference to pages 17 to 39 inclusive, of the Company's
1997 Annual Report to Stockholders and are listed in Item 14. "Exhibits,
Financial Statement Schedules and Reports on Form 8-K" hereof. With the
exception of the information specifically incorporated by reference, the 1997
Annual Report to Stockholders is not to be deemed filed as part of this Report
for purposes of this Item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS OF THE COMPANY
The information required by this item with respect to Directors of the
Company is incorporated herein by reference to the caption "Election of
Directors" and "Security Ownership of Certain Beneficial Owners and Management"
in the Company's definitive Proxy Statement relating to its 1998 Annual Meeting
of Stockholders. With the exception of the information specifically incorporated
by reference, said definitive Proxy Statement is not to be deemed filed as part
of this report for purposes of this item.
14
<PAGE> 17
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company as of March 16, 1998 were as follows:
<TABLE>
<CAPTION>
AGE AT
NAME MARCH 16, 1998 OFFICE
---- -------------- ------
<S> <C> <C>
Richard K. Riederer................... 54 President and Chief Executive Officer
James B. Bruhn........................ 57 Executive Vice President
Craig T. Costello..................... 50 Executive Vice
President--Manufacturing and Chief
Operating Officer
Earl E. Davis, Jr..................... 49 Executive Vice President--Commercial
David L. Robertson.................... 54 Executive Vice President--Human
Resources and Corporate Law
Narendra M. Pathipati................. 40 Senior Vice President--Corporate
Development and Strategy
Thomas W. Evans....................... 61 Vice President--Materials Management
David M. Gould........................ 59 Vice President--Economic Development
William R. Kiefer..................... 48 Vice President--Law and Secretary
Frank G. Tluchowski................... 47 Vice President--Engineering
Mark E. Kaplan........................ 36 Controller
Patrick B. Stewart.................... 35 Chief Information Officer
</TABLE>
Unless otherwise indicated below, the executive officers of the Company
have held the positions described for at least the last five years.
Richard K. Riederer has been President since January 1995 and Chief
Executive Officer since November 1995. From September 1994 to January 1995, he
was Executive Vice President Finance and Chief Financial Officer. Prior to that,
he served as Vice President and Chief Financial Officer beginning in January
1989. He has been a director of the Company since October 1993.
James B. Bruhn has been Executive Vice President since September 1994. From
September 1994 to March 1997, he was Executive Vice President--Commercial. He
joined the Company as Vice President--Sales and Marketing--Tin Mill Products in
July 1987, and was named Vice President--Tin Mill Products Business in November
1992.
Craig T. Costello has been Chief Operating Officer since January 1997. From
September 1994 to the present, he also served as Executive Vice
President--Manufacturing. From October 1993 to September 1994 he served as Vice
President--Operations. Mr. Costello served as General Manager--Operations from
1988 to 1993. He has been a director of the Company since April 1996.
Earl E. Davis, Jr. has been Executive Vice President--Commercial since
October 1997. From July 1995 to October 1997 he served as Vice
President--Finance and Chief Financial Officer. From May 1994 to July 1995, he
served as Controller. From August 1991 to April 1994, he served as Assistant
Controller. He has been a director of the Company since October 1997.
David L. Robertson has served as the Executive Vice President--Human
Resources and Corporate Law since March 1996. Prior to that, Mr. Robertson was a
senior partner in the law firm of Volk, Robertson & Hellerstedt.
Narendra M. Pathipati has been serving as Senior Vice President--Corporate
Development and Strategy since October 1997. From July 1995 until October 1997,
Mr. Pathipati served as Vice President--Corporate Development and Strategy. He
also served as Treasurer of the Company from August 1991 to July 1995.
Thomas W. Evans has been Vice President--Materials Management since
February 1988.
15
<PAGE> 18
David M. Gould was named Vice President--Economic Development in September
1994. Mr. Gould previously was Vice President--Sales and Marketing--Sheet
Products from 1983 until September 1994.
William R. Kiefer has been Vice President--Law and Secretary since May
1990.
Frank G. Tluchowski was appointed to the position of Vice
President-Engineering and Technology in February 1998. Prior to that
appointment, Mr. Tluchowski served as general manager-engineering since
September 1996. He was also area manager of the tin mill from November 1990 to
September 1996.
Mark E. Kaplan has served as Controller since September 1995. Prior to
that, Mr. Kaplan was employed by Arthur Andersen LLP, where he held a number of
positions, most recently as Senior Audit Manager.
Patrick B. Stewart has served as Chief Information Officer since August
1997. From January 1994 to August 1997 Mr. Stewart served as
Director-Information Services. He served as Senior Manager Distributed
Processing from April 1993 to January 1994, and prior to that as Manager
Distributed Processing from June 1991 to April 1993.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference
to the caption "Executive Compensation" in the Company's definitive Proxy
Statement relating to its 1998 Annual Meeting of Stockholders. With the
exception of the information specifically incorporated by reference, said
definitive Proxy Statement is not to be deemed to be filed as part of this
report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by reference
to the caption "Security Ownership of Certain Beneficial Owners and Management"
in the Company's definitive Proxy Statement relating to its 1998 Annual Meeting
of Stockholders. With the exception of the information specifically incorporated
by reference, said definitive Proxy Statement is not to be deemed to be filed as
part of this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. The list of financial statements required to be filed by Item 8.
Financial Statements and Supplementary Data of this Annual Report on Form
10-K is as follows:
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS PAGE
-------------------- ----
<S> <C>
Report of Independent Public Accountants.................... (*)
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995.......................... (*)
Consolidated Balance Sheets as of December 31, 1997 and
1996...................................................... (*)
Consolidated Statements of Cash Flows for the years ended
December 31, 1997,
1996 and 1995............................................. (*)
Notes to Consolidated Financial Statements.................. (*)
Supplementary Financial Information......................... (*)
------------------------------------------------------------------
* Incorporated in this Report by reference from pages 17 to 39,
inclusive, of the Company's 1997 Annual Report to Stockholders
referred to in Exhibit 13.1 below.
</TABLE>
16
<PAGE> 19
2. The list of financial statement schedules required to be filed by Item
8. Financial Statements and Supplementary Data of this Annual Report on
Form 10-K is as follows:
<TABLE>
<S> <C>
Report of Independent Public Accountants on Financial
Statement Schedules....................................... S-1
Schedules:
I Condensed Financial Information of Registrant...... S-2
II Valuation and Qualifying Accounts.................. S-5
</TABLE>
3. Exhibits.
The following exhibits are included in this Annual Report or are
incorporated herein by reference:
<TABLE>
<S> <C>
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 Certificate of Amendment to the Restated Certificate of
Incorporation of the Company (incorporated by reference to
Exhibit 3.2 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, Commission File No.
1-10244).
Exhibit 3.3 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 3.4 Amendment to the By-laws of the Company (incorporated by
reference to Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994,
Commission File No. 1-10244).
Exhibit 3.5 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 on Form 10-K for the fiscal year ended
December 31, 1989, Commission File No. 1-10244).
Exhibit 4.1 Indenture dated October 17, 1989 between the Company and
First Bank (N.A.) as Trustee, relating to the Company's
10 7/8% Senior Notes due October 15, 1999, including Form of
Note (incorporated by reference to Exhibits 4.1 and 4.2 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989, Commission File No. 1-10244).
Exhibit 4.2 Indenture dated as of June 12, 1995 between the Company and
Bankers Trust Company, as trustee, relating to $125,000,000
principal amount of 10 3/4% Senior Notes due 2003, including
Form of Note (incorporated by reference to Exhibit 4.4 to
the Company's Registration Statement on Form S-4 filed on
July 27, 1995, Commission File No. 33-61345).
Exhibit 4.3 First Supplemental Indenture dated as of August 12, 1996
between the Company and Bankers Trust Company, as trustee,
relating to the Company's 10 3/4% Senior Notes due 2005
(incorporated by reference to Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1996, Commission File No. 1-10244).
Exhibit 4.4 Indenture dated July 3, 1996 between the Company and Bankers
Trust Company, as trustee, relating to the Company's 11 3/8%
Notes due 2004 (incorporated by reference to Exhibit 4.5 to
the Company's Registration Statement on Form S-4 filed on
July 10, 1996, Commission File No. 333-07913).
Exhibit 10.1 Redacted Pellet Sale and Purchase Agreement dated as of
September 30, 1991 between Cleveland-Cliffs Iron Company and
the Company (incorporated by reference to Exhibit 10.18 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1992, Commission File No. 1-10244).
</TABLE>
17
<PAGE> 20
<TABLE>
<S> <C>
Exhibit 10.2 Coke Sale Agreement dated December 9, 1996 between the
Company and USX Corporation (incorporated by reference to
Exhibit 10.2 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, Commission File No.
1-10244).
Exhibit 10.3 1984 Employee Stock Ownership Plan, as amended and restated
(incorporated by reference to Exhibit 10.3 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1989, Commission File No. 1-10244).
Exhibit 10.4 1989 Employee Stock Ownership Plan (incorporated by
reference to Exhibit 10.4 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1989,
Commission File No. 1-10244).
Exhibit 10.5 Amendments to the 1984 and 1989 Employee Stock Ownership
Plans, effective May 26, 1994 (incorporated by reference to
Exhibit 10.5 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995).
Exhibit 10.6 Weirton Steel Corporation 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 10.7 Weirton Steel Corporation 1998 Stock Option Plan (filed
herewith).
Exhibit 10.8 Deferred Compensation Plan for Directors (incorporated by
reference to Exhibit 10.19 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990,
Commission File No. 1-1024).
Exhibit 10.9 Weirton Steel Corporation Amended Performance Incentive Plan
for the Period 1996 through 1998 (filed herewith).
Exhibit 10.10 Weirton Steel Corporation Supplemental Senior Executive
Retirement Plan (filed herewith).
Exhibit 10.11 Weirton Steel Corporation Supplemental Executive Retirement
Plan (filed herewith).
Exhibit 10.12 Employment Agreement between Richard K. Riederer and the
Company dated April 24, 1996 (incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996, Commission File No.
1-10244)
Exhibit 10.13 Letter Agreement between Richard K. Riederer and the Company
dated December 24, 1996 (incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, Commission File No.
1-10244).
Exhibit 10.14 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 10.15 Employment Agreement between Thomas W. Evans and the Company
dated April 21, 1987, including Amendment dated July 19,
1993 (incorporated by reference to Exhibit 10.8 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 and Exhibit 10.28 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, Commission File No. 1-10244).
Exhibit 10.16 Employment Agreement between Craig T. Costello and the
Company dated July 20, 1993 (incorporated by reference to
Exhibit 10.19 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993, Commission File
No. 1-10244).
Exhibit 10.17 Employment Agreement between William R. Kiefer and the
Company dated July 21, 1993 (incorporated by reference to
Exhibit 10.20 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993, Commission File
No. 1-10244).
</TABLE>
18
<PAGE> 21
<TABLE>
<S> <C>
Exhibit 10.18 Employment Agreement between David L. Robertson and the
Company dated March 11, 1996 (incorporated by reference to
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996, Commission File No.
1-10244).
Exhibit 10.19 Employment Agreement between Narendra M. Pathipati and the
Company dated December 16, 1993 (incorporated by reference
to Exhibit 10.23 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993, Commission File
No. 1-10244).
Exhibit 10.20 Employment Agreement between Patrick B. Stewart and the
Company dated August 22, 1997 (filed herewith).
Exhibit 10.21 Amendment dated July 19, 1993 to Employment Agreement dated
June 8, 1987 between David M. Gould and the Company
(incorporated by reference to Exhibit 10.26 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, Commission File No. 1-10244).
Exhibit 10.22 Employment Agreement between Earl E. Davis, Jr. and the
Company dated December 20, 1995 (incorporated by reference
to Exhibit 10.3 to the Company's Form 10-Q for the quarter
ended June 30, 1996, Commission File No. 1-10244).
Exhibit 10.23 Employment Agreement between Mark E. Kaplan and the Company
dated August 13, 1996 (incorporated by reference to Exhibit
10.1 on the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996, Commission File No.
1-10244).
Exhibit 13.1 1997 Annual Report to Stockholders of Weirton Steel
Corporation (filed herewith). Except for those portions of
the Annual Report specifically incorporated by reference,
such report is furnished for the information of the
Securities and Exchange Commission and is not to be deemed
filed as part of this Annual Report on Form 10-K.
Exhibit 22.1 Subsidiaries of the Company (filed herewith).
Exhibit 23.1 Consent of Arthur Andersen LLP, independent public
accountants (filed herewith).
Exhibit 27 Financial data schedule for year ended December 31, 1997
(filed herewith).
</TABLE>
(b) The Company filed reports on Form 8-K each in reference to Item 5 thereof on
January 31, 1997 and October 3, 1997.
(c) The exhibits as listed under Item 14(a)(3), are filed herewith or
incorporated herein by reference.
(d) The financial statement schedules listed under Item 14(a)(2), are filed
herewith.
19
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Weirton Steel Corporation has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly authorized,
on the 27th day of March, 1998.
WEIRTON STEEL CORPORATION
By: /s/ RICHARD K. RIEDERER
----------------------------------
Richard K. Riederer
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended this Report has been signed below by the following persons on behalf of
Weirton Steel Corporation and in the capacities indicated on the 27th day of
March, 1998.
/s/ RICHARD K. RIEDERER
- ------------------------------------------------------Richard K. Riederer
President and Chief Executive Officer (principal executive and financial
officer)
/s/ MARK E. KAPLAN
- ------------------------------------------------------Mark E. Kaplan Controller
(principal accounting officer)
/s/ MICHAEL BOZIC
- ------------------------------------------------------Michael Bozic Director
/s/ R. BURT
- ------------------------------------------------------Richard R. Burt Chairman
of the Board of Directors
/s/ CRAIG T. COSTELLO
- ------------------------------------------------------Craig T. Costello Director
/s/ ROBERT J. D'ANNIBALLE
- ------------------------------------------------------Robert J. D'Anniballe
Director
/s/ EARL E. DAVIS
- ------------------------------------------------------Earl E. Davis Director
/s/ MARK G. GLYPTIS
- ------------------------------------------------------Mark G. Glyptis Director
/s/ PHILLIP A. KARBER
- ------------------------------------------------------Phillip A. Karber Director
/s/ JOSEPH J. NOWAK
- ------------------------------------------------------Joseph J. Nowak Director
/s/ ROBERT S. REITMAN
- ------------------------------------------------------Robert S. Reitman Director
/s/ RICHARD F. SCHUBERT
- ------------------------------------------------------Richard F. Schubert
Director
/s/ THOMAS R. STURGES
- ------------------------------------------------------Thomas R. Sturges Director
/s/ D. I. J. WANG
- ------------------------------------------------------David I. J. Wang Director
/s/ RONALD C. WHITAKER
- ------------------------------------------------------Ronald C. Whitaker
Director
20
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<S> <C>
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 Certificate of Amendment to the Restated Certificate of
Incorporation of the Company (incorporated by reference to
Exhibit 3.2 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, Commission File No.
1-10244).
Exhibit 3.3 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 3.4 Amendment to the By-laws of the Company (incorporated by
reference to Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994,
Commission File No. 1-10244).
Exhibit 3.5 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 on Form 10-K for the fiscal year ended
December 31, 1989, Commission File No. 1-10244)
Exhibit 4.1 Indenture dated October 17, 1989 between the Company and
First Bank (N.A.) as Trustee, relating to the Company's
10 7/8% Senior Notes due October 15, 1999, including Form of
Note (incorporated by reference to Exhibits 4.1 and 4.2 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989, Commission File No. 1-10244).
Exhibit 4.2 Indenture dated as of June 12, 1995 between the Company and
Bankers Trust Company, as trustee, relating to $125,000,000
principal amount of 10 3/4 Senior Notes due 2003, including
Form of Note (incorporated by reference to Exhibit 4.4 to
the Company's Registration Statement on Form S-4 filed on
July 27, 1995, Commission File No. 33-61345).
Exhibit 4.3 First Supplemental Indenture dated as of August 12, 1996
between the Company and Bankers Trust Company, as trustee,
relating to the Company's 10 3/4% Senior Notes due 2005
(incorporated by reference to Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1996, Commission file No. 1-10244).
Exhibit 4.4 Indenture dated July 3, 1996 between the Company and Bankers
Trust Company, as trustee, relating to the Company's 11 3/8%
Notes due 2004 (incorporated by reference to Exhibit 4.5 to
the Company's Registration Statement on Form S-4 filed on
July 10, 1996, Commission File No. 333-07913).
Exhibit 10.1 Redacted Pellet Sale and Purchase Agreement dated as of
September 30, 1991 between Cleveland-Cliffs Iron Company and
the Company (incorporated by reference to Exhibit 10.18 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1992, Commission File No. 1-10244).
Exhibit 10.2 Coke Sale Agreement dated December 9, 1996 between the
Company and USX Corporation (incorporated by reference to
Exhibit 10.2 to this Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996, Commission File
No. 1-10244).
Exhibit 10.3 1984 Employee Stock Ownership Plan, as amended and restated
(incorporated by reference to Exhibit 10.3 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1989, Commission File No. 1-10244).
Exhibit 10.4 1989 Employee Stock Ownership Plan (incorporated by
reference to Exhibit 10.4 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1989,
Commission File No. 1-10244).
Exhibit 10.5 Amendments to the 1984 and 1989 Employee Stock Ownership
Plans, effective May 26, 1994 (incorporated by reference to
Exhibit 10.5 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995).
</TABLE>
21
<PAGE> 24
<TABLE>
<S> <C>
Exhibit 10.6 Weirton Steel Corporation 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 10.7 Weirton Steel Corporation 1998 Stock Option Plan (filed
herewith).
Exhibit 10.8 Deferred Compensation Plan for Directors (incorporated by
reference to Exhibit 10.19 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990,
Commission File No. 1-10244).
Exhibit 10.9 Weirton Steel Corporation Amended Performance Incentive Plan
for the period 1996 through 1998 (filed herewith).
Exhibit 10.10 Weirton Steel Corporation Supplemental Senior Executive
Retirement Plan (filed herewith).
Exhibit 10.11 Weirton Steel Corporation Supplemental Executive Retirement
Plan (filed herewith).
Exhibit 10.12 Employment Agreement between Richard K. Riederer and the
Company dated April 24, 1996 (incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996, Commission File No.
1-10244).
Exhibit 10.13 Letter Agreement between Richard K. Riederer and the Company
dated December 24, 1996 (incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, Commission File No.
1-10244).
Exhibit 10.14 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 10.15 Employment Agreement between Thomas W. Evans and the Company
dated April 21, 1987, including Amendment dated July 19,
1993 (incorporated by reference to Exhibit 10.8 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 and Exhibit 10.28 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, Commission File No. 1-10244).
Exhibit 10.16 Employment Agreement between Craig T. Costello and the
Company dated July 20, 1993 (incorporated by reference to
Exhibit 10.19 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993, Commission File
No. 1-10244).
Exhibit 10.17 Employment Agreement between William R. Kiefer and the
Company dated July 21, 1993 (incorporated by reference to
Exhibit 10.20 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993, Commission File
No. 1-10244).
Exhibit 10.18 Employment Agreement between David L. Robertson and the
Company dated March 11, 1996 (incorporated by reference to
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996, Commission File No.
1-10244).
Exhibit 10.19 Employment Agreement between Narendra M. Pathipati and the
Company dated December 16, 1993 (incorporated by reference
to Exhibit 10.23 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993, Commission File
No. 1-10244).
Exhibit 10.20 Employment Agreement between Patrick B. Stewart and the
Company dated August 22, 1997 (filed herewith).
Exhibit 10.21 Amendment dated July 19, 1993 to Employment Agreement dated
June 8, 1987 between David M. Gould and the Company
(incorporated by reference to Exhibit 10.26 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, Commission File No. 1-10244).
Exhibit 10.22 Employment Agreement between Earl E. Davis, Jr. and the
Company dated December 20, 1995 (incorporated by reference
to Exhibit 10.3 to the Company's Form 10-Q for the quarter
ended June 30, 1996, Commission File No. 1-10244).
</TABLE>
22
<PAGE> 25
<TABLE>
<S> <C>
Exhibit 10.23 Employment Agreement between Mark E. Kaplan and the Company
dated August 13, 1996 (incorporated by reference to Exhibit
10.1 on the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996, Commission File No.
1-10244).
Exhibit 13.1 1997 Annual Report to Stockholders of Weirton Steel
Corporation (filed herewith). Except for those portions of
the Annual Report specifically incorporated by reference,
such report is furnished for the information of the
Securities and Exchange Commission and is not to be deemed
filed as part of this Annual Report on Form 10-K.
Exhibit 22.1 Subsidiaries of the Company (filed herewith).
Exhibit 23.1 Consent of Arthur Andersen LLP, independent public
accountants(filed herewith).
Exhibit 27 Financial data schedule for the year ended December 31, 1997
(filed herewith).
</TABLE>
23
<PAGE> 26
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of
Weirton Steel Corporation:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in Weirton Steel Corporation's
annual report to stockholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated January 26, 1998. Our audit was made for
the purpose of forming an opinion on those statements taken as a whole. The
schedules listed in the index in Item 14(a)2 of the Form 10-K are the
responsibility of the Company's management and are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not a part
of the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
January 26, 1998
S-1
<PAGE> 27
WEIRTON STEEL CORPORATION
CONDENSED PARENT COMPANY STATEMENTS OF INCOME
SCHEDULE I
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
NET SALES............................................. $1,397,204 $1,383,301 $1,351,711
OPERATING COSTS:
Cost of sales....................................... 1,258,035 1,282,424 1,179,950
Discount on sale of finance receivables to
subsidiary....................................... 19,369 19,768 18,522
Selling, general and administrative expense......... 32,544 35,600 31,142
Depreciation........................................ 60,855 58,019 54,699
Restructuring charge................................ 17,000 16,959 --
Provision for profit sharing........................ -- -- 22,499
Insurance recoveries................................ -- -- (41,502)
---------- ---------- ----------
Total operating costs............................ 1,387,803 1,412,770 1,265,310
---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS......................... 9,401 (29,469) 86,401
---------- ---------- ----------
Adjustment to carrying value of damaged facility.... -- -- 9,000
Interest expense.................................... (48,095) (43,806) (41,920)
Interest income..................................... 5,585 6,191 5,423
Dividends received from subsidiary.................. 4,232 6,436 6,056
ESOP contribution................................... (2,610) (2,610) (2,610)
---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES..................... (31,487) (63,258) 62,350
Income tax provision................................ (6,140) (12,335) 12,181
---------- ---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM............... (25,347) (50,923) 50,169
Extraordinary loss on early extinguishment of
debt............................................. -- (5,431) (6,718)
---------- ---------- ----------
NET INCOME (LOSS)..................................... $ (25,347) $ (56,354) $ 43,451
========== ========== ==========
PER SHARE DATA:
Weighted average number of common shares:
Basic............................................ 42,622 42,370 42,040
Diluted.......................................... 42,622 42,370 43,781
BASIC EARNINGS PER SHARE:
Income (loss) before extraordinary item............... $ (0.59) $ (1.20) $ 1.19
Loss on early extinguishment of debt.................. -- (0.13) (0.16)
---------- ---------- ----------
NET INCOME (LOSS) PER COMMON SHARE.................... $ (0.59) $ (1.33) $ 1.03
========== ========== ==========
DILUTED EARNINGS PER SHARE:
Income (loss) before extraordinary item............... $ (0.59) $ (1.20) $ 1.15
Loss on early extinguishment of debt.................. -- (0.13) (0.16)
---------- ---------- ----------
NET INCOME (LOSS) PER COMMON SHARE.................... $ (0.59) $ (1.33) $ 0.99
========== ========== ==========
</TABLE>
S-2
<PAGE> 28
WEIRTON STEEL CORPORATION
CONDENSED PARENT COMPANY BALANCE SHEET
SCHEDULE I
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNT)
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
---- ----
<S> <C> <C>
Assets:
Cash and equivalents........................................ $ 107,617 $ 102,876
Receivables................................................. 28,116 15,608
Inventories:
Raw materials............................................. 97,974 87,733
Work-in-process........................................... 69,418 76,526
Finished goods............................................ 93,541 94,880
Deferred income taxes....................................... 34,437 32,942
Other current assets........................................ 4,985 3,574
---------- ----------
Total current assets................................... 436,088 414,139
Property, plant and equipment, net.......................... 591,389 610,494
Investment in Weirton Receivables, Inc...................... 99,322 125,707
Deferred income taxes....................................... 116,952 114,863
Other assets and deferred charges........................... 14,113 18,162
---------- ----------
Total assets.............................................. $1,257,864 $1,283,365
========== ==========
Liabilities:
Current liabilities:
Current portion of long term obligations.................. $ 42,163 $ --
Payables.................................................. 132,666 164,778
Employment costs.......................................... 61,800 65,067
Pension liability......................................... -- 12,000
Other..................................................... 34,382 28,670
---------- ----------
271,011 270,515
Long term debt obligations.................................. 388,997 430,820
Long term pension obligations............................... 97,542 74,750
Postretirement benefits other than pensions................. 338,474 329,154
Other long term liabilities................................. 32,804 26,941
---------- ----------
Total liabilities...................................... 1,128,828 1,132,180
---------- ----------
Redeemable stock............................................ 20,579 18,447
Stockholders' equity:
Common stock, $0.01 par value; 50,000,000 authorized;
42,846,184 and 42,592,850 shares issued................... 428 426
Additional paid-in capital.................................. 456,379 455,311
Retained earnings........................................... (347,089) (321,742)
Other stockholders' equity.................................. (1,261) (1,257)
---------- ----------
Total stockholders' equity............................. 108,457 132,738
---------- ----------
Total liabilities, redeemable stock and stockholders'
equity................................................ $1,257,864 $1,283,365
========== ==========
</TABLE>
S-3
<PAGE> 29
WEIRTON STEEL CORPORATION
CONDENSED PARENT COMPANY STATEMENT OF CASH FLOWS
SCHEDULE I
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES.................. $ 37,862 $ 31,293 $125,362
CASH FLOWS USED BY INVESTING ACTIVITIES
Investment in unconsolidated subsidiaries................ (100) -- --
Insurance recoveries on damage facility.................. -- -- 9,000
Other capital spending................................... (60,070) (67,937) (52,358)
Investment in Weirton Receivables, Inc................... 26,385 4,220 (18,833)
-------- -------- --------
NET CASH USED BY INVESTING ACTIVITIES...................... (33,785) (63,717) (62,191)
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES
Repayment of debt obligations............................ -- (105,676) (118,800)
Proceeds from issuance of long term debt obligations..... -- 122,610 125,000
Common shares issuable................................... 664 773 (577)
Deferred financing costs................................. -- (4,097) (4,325)
-------- -------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES........... 664 13,610 1,298
NET CHANGE IN CASH AND EQUIVALENTS......................... 4,741 (18,814) 64,469
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD................ 102,876 121,690 57,221
-------- -------- --------
CASH AND EQUIVALENTS AT END OF PERIOD...................... $107,617 $102,876 $121,690
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid, net of capitalized interest............... $ 48,489 $ 40,275 $ 44,416
Income taxes paid (refunded), net........................ (2,556) (3,699) 10,593
Dividends from Weirton Receivables, Inc.................. 4,232 6,436 6,805
</TABLE>
S-4
<PAGE> 30
WEIRTON STEEL CORPORATION AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGES TO BALANCE AT
BEGINNING OF COST AND END OF
DESCRIPTION YEAR PERIOD EXPENSE DEDUCTIONS PERIOD
----------- ---- ------ ------- ---------- ------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts,
discounts, claims and allowances........ 1997 $ 7,684 $30,865 $28,696 $ 9,853
1996 8,688 26,832 27,836 7,684
1995 6,405 19,396 17,113 8,688
Valuation allowance for deferred tax
assets.................................. 1997 $41,249 $ 4,298 -- $45,547
1996 30,943 10,306 -- 41,249
1995 42,640 -- 11,697 30,943
</TABLE>
S-5
<PAGE> 1
Exhibit 10.7
WEIRTON STEEL CORPORATION
1998 STOCK OPTION PLAN
ARTICLE I
PURPOSE
This 1998 Stock Option Plan (the "Plan") is intended as an incentive
to improve the performance and encourage the continued employment of eligible
employees of Weirton Steel Corporation (the "Company") participating in the
Plan, by means of increasing their proprietary interest in the Company's
long-term success through stock ownership and by affording them the opportunity
for additional compensation related to the value of the Company's stock.
The word "Company," when used in the Plan with reference to
employment, shall include subsidiaries of the Company. The word "subsidiary,"
when used in the Plan, shall mean any subsidiary of the Company within the
meaning of Section 425(f) of the Internal Revenue Code of 1986, as it may be
amended from time to time.
ARTICLE II
ADMINISTRATION
The Plan shall be administered by a Stock Option Committee (the
"Committee") appointed by the Board of Directors of the Company (the "Board")
solely from among its members and shall consist of not less than two members
thereof who are (and shall remain Committee members only so long as they remain)
"non-employee directors" as defined in Rule 16b-3 under the Securities Exchange
Act of 1934 or any successor provision thereto.
Subject to the provisions of the Plan, the Committee shall have sole
authority, in its absolute discretion: (a) to determine which of the eligible
employees of the Company and its subsidiaries shall be granted options; (b) to
authorize the granting of non-qualified stock options; (c) to determine the
times when options shall be granted and the number of shares to be subject to
options; (d) to determine the option price of the shares subject to each option,
which price shall be not less than the minimum specified in ARTICLE V; (e) to
determine the time or times when each option becomes exercisable, the duration
of the exercise period and any other restrictions on the exercise of options
issued hereunder; (f) to prescribe the form or forms of the option agreements
under the Plan (which forms shall be consistent with the terms of the Plan, but
need not be identical and may contain such terms as the Committee may deem
appropriate to carry out the purposes of the Plan); (g) to adopt, amend and
rescind such rules and regulations as, in its opinion, may be advisable in the
administration of the Plan; and (h) to construe and interpret the Plan, the
rules and regulations and the option agreements under the Plan and to make all
other determinations deemed necessary or advisable for the administration of the
Plan, in connection with which all such decisions, determinations and
interpretations of the
<PAGE> 2
Committee shall be final and binding on all optionees.
ARTICLE III
STOCK
The stock subject to options granted under the Plan shall be shares of
Common Stock of the Company, par value $.01 per share ("Stock"), which shall
consist of authorized but unissued shares or previously issued shares reacquired
by the Company and held in its treasury, or any combination of the foregoing, as
authorized from time to time by the Board. Under the Plan, the total number of
shares of Stock which may be purchased pursuant to options granted hereunder
shall not exceed, in the aggregate, 3,250,000 shares, except as such number of
shares shall be adjusted in accordance with the provisions of ARTICLE X hereof.
The number of shares of Stock available for grant of options under the
Plan shall be decreased by the sum of the number of shares with respect to which
options have been issued and are then outstanding and the number of shares
issued upon exercise of options. In the event that any outstanding option under
the Plan for any reason expires, is terminated, or is canceled prior to the end
of the period during which options may be granted, the shares of Stock called
for by the unexercised portion of such option may again be subject to an option
under the Plan.
ARTICLE IV
ELIGIBILITY OF PARTICIPANTS
Officers and other key employees of the Company or of its subsidiaries
(excluding any person who is a member of the Committee) shall be eligible to
participate in the Plan.
ARTICLE V
OPTION PRICE
The option price of each option granted under the Plan shall be
determined by the Committee; provided, however, that the option price shall be
not less than the fair market value of the Stock at the time the option is
granted. Notwithstanding the preceding sentence, in the event options are
granted hereunder in substitution for previously granted stock appreciation
rights or similar units, the option price of each such option may be not less
than the per share price of the Company's Common Stock used as the amount to be
subtracted to derive the value of each such right or unit. In no event, shall
the option price of any option which relates to an authorized but unissued share
of Stock be less than the par value on the date an option is granted.
If the Company's Common Stock is listed on one or more national
securities
2
<PAGE> 3
exchanges, the fair market value shall be deemed to be the mean between the
highest and lowest sale prices reported on the principal national securities
exchange on which such stock is listed and traded on the date immediately
preceding the date on which the option is granted, or, if there is no such sale
on that date, then on the last preceding date on which such a sale was reported.
ARTICLE VI
EXERCISE AND TERMS OF OPTIONS
The Committee shall determine the dates after which, and/or the
conditions or restrictions which must be satisfied before, options may be
exercised, in whole or in part. If an option is exercisable in installments,
installments or portions thereof which are exercisable and are not exercised
shall remain exercisable until the option expires.
Any other provision of the Plan notwithstanding, no option shall be
exercised after the date ten years from the date of grant of such option (the
"Termination Date") .
Stock options granted hereunder to employees may provide that if, prior
to the Termination Date, an optionee shall cease to be employed by the Company
or a subsidiary thereof for any reason (including death or disability), the
option will remain exercisable by the optionee or, in the event of his death, by
the person or persons to whom the optionee's rights under the option would pass
by will or the applicable laws of descent and distribution for a period not
extending beyond three years after the date of cessation of employment, but in
no event later than the Termination Date, to the extent it was exercisable at
the time of cessation of employment.
ARTICLE VII
PAYMENT FOR SHARES
Payment for shares of Stock acquired pursuant to an option granted
hereunder shall be made in full, upon exercise of the option, by certified or
bank cashier's check payable to the order of the Company, by the surrender to
the Company of shares of Stock or by any combination thereof. The form of
payment shall be at the election of the optionee. The Company in its discretion,
and subject to any reasonable procedures required by its registrars and transfer
agents, may credit or apply shares of Stock held by the optionee and identified
to the Company toward payment of the applicable option exercise price without
actual surrender of the certificate representing such shares and may cause to be
issued to the optionee certificates for shares representing the balance of the
shares to be issued upon exercise of the option. The Company may, in its
discretion, require that an optionee pay to the Company, at the time of
exercise, such amount as the Company deems necessary to satisfy its obligation
to withhold Federal, state, or local income or other taxes incurred by reason of
the exercise or the transfer of shares thereupon.
3
<PAGE> 4
ARTICLE VIII
NON-TRANSFERABILITY OF OPTION RIGHTS
No option shall be transferable, except by will or the laws of descent
and distribution. During the lifetime of the optionee, the option shall be
exercisable only by the optionee.
ARTICLE IX
ADJUSTMENT FOR RECAPITALIZATION, MERGER, ETC.
The aggregate number of shares of Stock which may be purchased or
acquired pursuant to options granted hereunder, the number of shares of Stock
covered by each outstanding option and the price per share thereof in each such
option shall be appropriately adjusted for any increase or decrease in the
number of outstanding shares of Stock resulting from a stock split or other
subdivision or consolidation of shares of Stock or for other capital adjustments
or payments of stock dividends or distributions or other increases or decreases
in the outstanding shares of Stock effected without receipt of consideration by
the Company. Any adjustment shall be conclusively determined by the Committee.
If the Company shall be the surviving corporation in any merger or
reorganization or other business combination, any option granted hereunder shall
cover the securities or other property to which a holder of the number of shares
of Stock covered by the unexercised portion of the option would have been
entitled pursuant to the terms of the merger. Upon any merger or reorganization
or other business combination in which the Company shall not be the surviving
corporation, or a dissolution or liquidation of the Company, or a sale of all or
substantially all of its assets, the Company shall pay to each optionee in cash,
in exchange for the cancellation of any outstanding options of the optionee
hereunder, an amount equal to the difference between the fair market value (on
the date of the applicable corporate transaction) of the Stock subject to the
unexercised portion of the option and the exercise price of such portion of the
option. Notwithstanding the foregoing, in the event of such merger or other
business combination or a sale of all or substantially all of the Company's
assets, the surviving or resulting corporation, as the case may be, or any
parent or acquiring corporation thereof may grant substitute options to purchase
its shares on such terms and conditions, both as to the number of shares and
otherwise, which shall substantially preserve, in the good faith judgment of the
Committee, the rights and benefits of any option then outstanding hereunder.
Stock option agreements under the Plan may provide that upon stockholder
approval of a merger, reorganization or other business combination, whether or
not the Company is the surviving corporation, or a dissolution or liquidation of
the Company or a sale of all or substantially all of its assets, all unmatured
installments of the stock option shall vest and become immediately exercisable
in full.
4
<PAGE> 5
The foregoing adjustments and the manner of application of the foregoing
provisions, including the issuance of any substitute options, shall be
determined by the Committee in its sole discretion. Any such adjustment may
provide for the elimination of any fractional share which might otherwise become
subject to an option.
ARTICLE X
NO OBLIGATION TO EXERCISE OPTION
Granting of an option shall impose no obligation on the recipient to
exercise such option.
ARTICLE XI
USE OF PROCEEDS
The proceeds received from the sale of Stock pursuant to the Plan shall
be used for general corporate purposes.
ARTICLE XII
RIGHTS AS A STOCKHOLDER
An optionee or a transferee of an option (to the extent permitted
hereunder) shall have no rights as a stockholder with respect to any share
covered by the option until such person shall have become the holder of record
of such share, and such person shall not be entitled to any dividends or
distributions or other rights in respect of such share for which the record date
is prior to the date on which such person shall have become the holder of record
thereof, except as otherwise provided in ARTICLE IX.
ARTICLE XIII
NO EMPLOYMENT RIGHTS
Nothing in the Plan or in any option granted hereunder shall confer on
any optionee any right to continue in the employ of the Company or any of its
subsidiaries, or to interfere in any way with the right of the Company or any of
its subsidiaries to terminate the optionee's employment at any time.
5
<PAGE> 6
ARTICLE XIV
COMPLIANCE WITH LAW
The Company is relieved from any liability for the non-issuance or
non-transfer, or any delay in the issuance or transfer, of any shares of Stock
subject to options under the Plan which results from the inability of the
Company to obtain, or any delay in obtaining, from any regulatory body having
jurisdiction all requisite authority to issue or transfer any such shares if
counsel for the Company deems such authority necessary for lawful issuance or
transfer thereof. Appropriate legends may be placed on the stock certificates
evidencing shares issued upon exercise of options to reflect any transfer
restrictions.
ARTICLE XV
CANCELLATION OF OPTIONS
The Committee, in its discretion, may, with the consent of any optionee,
cancel any outstanding option hereunder.
ARTICLE XVI
EFFECTIVE DATE; EXPIRATION DATE OF PLAN
The Plan shall become effective upon adoption by the Company's Board of
Directors. The expiration date of the Plan, after which no option may be granted
hereunder, shall be the tenth anniversary of the adoption of the Plan by the
Board of Directors.
ARTICLE XVII
AMENDMENT OR DISCONTINUANCE OF PLAN
The Board may, without the consent of the optionees under the Plan, at
any time terminate the Plan entirely and at any time or from time to time amend
or modify the Plan, provided that no such action shall adversely affect options
theretofore granted hereunder without the optionee's consent.
6
<PAGE> 1
Exhibit 10.9
WEIRTON STEEL CORPORATION
AMENDED PERFORMANCE INCENTIVE PLAN
FOR THE PERIOD 1996 THROUGH 1998
<PAGE> 2
INTRODUCTION
This document constitutes the Amended Performance Incentive Plan (the "Amended
PIP") and is effective for the three-year period 1996 through 1998. The Amended
PIP is designed to align with the strategic goals of Weirton Steel Corporation
(the "Company") over such three-year period.
PARTICIPATION
Participation is limited to individuals considered to have the opportunity to
affect the financial results of the Company. These individuals will be
identified by the Company's Chief Executive Officer and confirmed by the
Company's Management Development and Compensation Committee (the "Compensation
Committee"). The identification is expected to be made at the beginning of the
three-year period 1996 through 1998 (the "Performance Cycle"). Upon the
recommendation of the Chief Executive Officer, the Compensation Committee also
may admit individuals or classes of individuals as participants as of the
beginning of any of the other two years in the Performance Cycle.
If an individual is hired into a position that should be included in the Amended
PIP after the Performance Cycle has already started, the Chief Executive Officer
will determine the level of that individual's participation in the Amended PIP.
This determination will be made as soon as practicable after the individual is
hired.
Participation in the Amended PIP does not confer any rights to continue in the
employ of the Company.
ANNUAL AND MULTI-YEAR AWARD COMPONENTS
The total incentive opportunity for each participant will be separated into
annual and multi-year components. Participants will have the opportunity to earn
one-third of their target award on an annual basis. The remaining two-thirds
will be earned based on predetermined financial objectives at the end of the
Performance Cycle.
PERFORMANCE GOALS
The ANNUAL PERFORMANCE GOALS will be established each year and will include:
safety, delivery and/or customer satisfaction standards (or other similar
areas). If performance meets the established standards, participants will
receive a payout -- threshold and maximum opportunities will not apply.
The MULTI-YEAR PERFORMANCE GOAL will be operating income improvement over the
Performance Cycle. The base period for computing the incentive is the fourth
quarter
1
<PAGE> 3
1995 compared to the first quarter 1999. Threshold, target and maximum levels of
operating income improvement and related incentive award opportunities have been
established for the Performance Cycle.
PERFORMANCE MEASUREMENT
ANNUAL COMPONENT
o Awards related to the annual component will be tied to pre-established
standards in the areas of safety, delivery and/or customer satisfaction (or
other similar areas). These standards will be approved by the Compensation
Committee each year.
-- Each annual goal will be assigned a relative weight (the total being
100%).
-- If the standard is met or exceeded, the award related to that goal will
be earned in full.
-- If the standard is not fully met, no award will be earned relative to
that particular goal.
o If a particular position does not have an opportunity to affect safety,
delivery, or customer satisfaction, other measurable annual performance
goals will be established by the participant's manager in consultation with
the Chief Executive Officer.
MULTI-YEAR COMPONENT
o The multi-year component of the total award opportunity over the
Performance Cycle will be aligned with specific operating income
improvement levels, as follows:
-- No awards will be earned if cumulative operating income improvement is
less than $100 million.
-- Threshold awards will be earned if cumulative operating income
improvement equals $100 million.
-- Target awards will be earned at $150 million.
-- Maximum awards will be earned at $200 million. .
o Improvement in operating income is expected to result primarily from:
-- Controlling the cost per ton by product line; and
2
<PAGE> 4
-- Improving the mix of products sold -- by selling more of the higher
profitability products.
OPERATING INCOME will be calculated before profit sharing plus (minus)
income (loss) from joint ventures or minority interests.
OPERATING INCOME for purposes of the Amended PIP is defined as operating
income as determined in accordance with generally accepted accounting
principles and disclosed in the Company's quarterly reports on Form 10-Q or
annual reports on Form 10-K, adjusted to exclude the effects of
extraordinary, unusual, unanticipated, or other nonrecurring events,
including but not limited to, the following:
-- Business interruption insurance recoveries to the extent that such
recoveries are related to prior reporting periods (e.g., Second Quarter
1995 Reversing Rougher insurance recovery);
-- Restructuring charges to the extent that the benefit of such charges
will be realized in future periods (e.g., Second Quarter 1996 manpower
reduction restructuring charge);
-- Required adoption of any new accounting pronouncements since the first
quarter of 1996, to the extent they have an impact on operating income
for the period (e.g., similar to ongoing FAS 106 post retirement health
care charges);
-- Any other unusual or nonrecurring events(s) that would require
disclosure in any of the Company's Exchange Act filings, whether 10-K,
10-Q or 8-K. For example:
o material unplanned/unscheduled outages (e.g., Second Quarter 1996
No. 3 Blast Furnace outage);
o resolution of prior period items significantly in excess of
amounts accrued, such as environmental and legal matters (e.g.,
potential final settlement of costs associated with EPA
multi-media enforcement action);or
o significant write downs of intangible assets or adjustments to the
carrying value of fixed assets.
-- Other events as subsequently defined by action of the Compensation
Committee.
OPERATING INCOME will be adjusted by adding or subtracting changes in
selling price. This adjustment is determined by multiplying the
difference between the current quarter pricing and the base period
pricing by the volume in the base period for each major product
category.
3
<PAGE> 5
o Award levels will be interpolated for results falling between $100
million(threshold) and $200 million(maximum).
MEASUREMENT PERIOD
For the annual component of the plan the measurement period will be each
calendar year. The measurement period for the multi-year component will be a
benchmark quarter immediately preceding the beginning of the Performance Cycle
as compared to a benchmark quarter immediately following the end of the
Performance Cycle.
AWARD PAYOUTS
o Awards earned under the annual component will be paid to participants
annually, and as soon as practical after verification by the Company's
independent auditors of the results for that calendar year. Participants
must be employed with the Company for the full calendar year to receive
payment under the annual component.
o Awards earned under the multi-year component will be paid to participants
after the end of the Performance Cycle, and as soon as practical after
verification of results for the Performance Cycle. If a participant
voluntarily terminates or is involuntarily terminated for just cause prior
to the end of the Performance Cycle, the multi-year payout is forfeited. If
a participant is involuntarily terminated without just cause, retires,
dies, or becomes disabled, a pro-rata payment may be awarded at the
discretion of the Compensation Committee.
o Awards may be settled in cash and/or shares of the Company's Common Stock
in the discretion of the Compensation Committee. Settlement of awards in
stock will be subject to the availability of shares at the time.
DEFERRAL AND FORFEITURE OF PAYOUTS
o Payment of an award (annual and/or multi-year) may not be made in any year
in which benefits are not paid from the Company's Profit Sharing Plan (the
"Profit Plan") and shall be deferred to the first subsequent year in which
Profit Plan payments are made. During the deferral period, interest shall
be credited on the unpaid amount of an award at the one year LIBOR rate
plus 1.5%, such interest to be paid if, and at such time as, an award is
paid.
o Any awards (annual and/or multi-year) which have not been paid as a result
of deferral, together with any interest accrued thereon, will be forfeited
if no benefits under the Profit Sharing Plan are earned by the year 2001.
4
<PAGE> 1
Exhibit 10.10
WEIRTON STEEL CORPORATION
SUPPLEMENTAL SENIOR EXECUTIVE
RETIREMENT PLAN
As Established Effective August 1, 1995
and
As Amended Through January 1, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
Introduction and Purpose 1
ARTICLE II
Definitions 1
ARTICLE III
Administration 4
ARTICLE IV
Participation 6
ARTICLE V
Target Benefit; Accrued Target Benefit 6
ARTICLE VI
Payments to Participants 9
ARTICLE VII
Retirement Benefits 14
ARTICLE VIII
Trust 15
ARTICLE IX
Amendment and Termination 16
ARTICLE X
Miscellaneous 16
2
<PAGE> 3
ARTICLE I
Introduction and Purpose
1.1 Weirton establishes and adopts this Plan to provide supplemental
retirement benefits to a select group of senior executive employees.
1.2 It is intended that this Plan constitute an unfunded "top-hat" plan
which provides deferred compensation benefits to a select group of management or
highly compensated employees within the meaning of Section 201(2) of ERISA and
that as a result thereof, this Plan is not subject to the provisions of ERISA.
1.3 It is intended that any Trust which may be established by a
Participant constitute an "employee grantor trust" within the meaning of
Sections 671-679 of the Code.
ARTICLE II
Definitions
2.1 As used in this Plan, the following terms shall have the meanings
hereinafter set forth:
"Plan" means the Weirton Steel Corporation Supplemental Senior
Executive Retirement Plan, as embodied herein and as amended from time to time.
"Weirton" means Weirton Steel Corporation, a Delaware corporation, and
any successor thereto which adopts this Plan.
"Effective Date" means August 1, 1995.
"Accrued Target Benefit" is defined in Section 5.2.
"Actuarial Assumptions" is defined in Section 6.1(a).
"Administrative Committee" means the committee appointed under Section
3.1(a) which administers the Plan.
"Average Monthly Earnings" as of any date means Average Monthly
Earnings for
1
<PAGE> 4
a Salaried Employee as defined in the Weirton Retirement Plan and as determined
as of such date.
"Beneficiary" means the beneficiary designated by a Participant to
receive benefits under the Plan by reason of his death. Such beneficiary shall
be designated by the Participant in a written notice to the Administrative
Committee. Any such designation may be revoked and a new beneficiary designated
by written notice to the Administrative Committee. If upon the death of the
Participant there is no designated beneficiary then living, "Beneficiary" shall
mean the first surviving class of the following classes of successive preference
beneficiaries: (a) his surviving spouse; (b) his surviving children; (c) his
surviving parents; (d) his surviving brothers and sisters; and (e) the executor
or administrator of his estate.
"Benefit Payment Date" is defined in Section 7.2
"Benefit Service" means Benefit Service as defined in the Weirton
Retirement Plan or, if applicable, as provided for in a Participant's Employment
Agreement; provided, however, that a Participant's actual and projected Benefit
Service for purposes of the Plan shall not be determined in accordance with the
Employment Agreement until so provided under the terms of such agreement.
"Calculation Date" is defined in Section 5.1.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the Administrative Committee and the Investment
Committee, individually and collectively.
"Contribution Year" is defined in Section 6.2(a).
"Employment Agreement" means the employment agreement between Weirton
and a Participant hereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Funding Target Date" is defined in Section 6.2(b).
"Initial Participant" is defined in Section 4.1(a).
2
<PAGE> 5
"Investment Committee" means the committee appointed under Section
3.1(b) which manages the investment of the Trust.
"IPP" means the Weirton Steel Corporation Income Protection Plan.
"Level Percent" is defined in Section 6.2(b).
"National Retirement Plan" means the National Steel Corporation Weirton
Retirement Program (Plan 056), as in effect from time to time.
"New Participant" is defined in Section 4.1(b).
"Noncontributory Year" is defined in Section 6.6.
"Participant" is defined in Section 4.1(c).
"Pension Earnings" for any year means Earnings for a Salaried Employee
as defined in the Weirton Retirement Plan and as determined for such year.
"Service" means Service as defined in the Weirton Retirement Plan or,
if applicable, as provided for in a Participant's Employment Agreement;
provided, however, that a Participant's actual and projected Service for
purposes of the Plan shall not be determined in accordance with the Employment
Agreement until so provided under the terms of such agreement.
"Target Benefit" is defined in Section 5.1.
"Target Calculation Date is defined in Section 5.1
"Target Date" is defined in Section 5.1.
"Trust" means the trust which may be established by a Participant in
accordance with ARTICLE VIII hereof. As to each applicable Participant, Trust
shall mean the Trust established by him.
"Vesting Date" is defined in Section 6.1(c).
"Weirton CEO" means Weirton's Chief Executive Officer.
"Weirton Retirement Plan" means the Weirton Steel Corporation
Retirement Plan (Plan 001), as in effect from time to time.
3
<PAGE> 6
"Weirton SERP" means the Weirton Steel Corporation Supplemental
Executive Retirement Plan, as in effect from time to time.
2.2 The masculine pronoun shall be deemed to include the feminine, and
the singular number shall be deemed to include the plural unless a different
meaning is plainly required by the context.
ARTICLE III
Administration
3.1(a) The complete authority to control and manage the operation and
administration of the Plan shall be placed in the Administrative Committee. The
Administrative Committee will consist of at least three members appointed from
time to time by the Weirton CEO to serve at the pleasure thereof. Any member of
the Administrative Committee may resign by delivering his written resignation to
the Weirton CEO.
(b) The general authority to control and manage the assets of the Trust
shall be placed in the Investment Committee. The Investment Committee will
consist of at least three members appointed from time to time by the Weirton CEO
to serve at the pleasure thereof. Any member of the Investment Committee may
resign by delivering his written resignation to the Weirton CEO.
3.2 Subject to the limitations of the Plan, the Administrative
Committee shall have all powers and duties necessary or appropriate to operate
and administer the Plan. The Administrative Committee from time to time will
establish rules for the administration and interpretation of the Plan and the
transaction of its business. Without limiting the foregoing, the Administrative
Committee shall have discretionary authority to construe the terms and
provisions of the Plan, including, but not limited to, questions relating to
eligibility for benefits, service and earnings and making reasonable estimates
of Participants' earnings and the value of Trust assets for any year. In
addition, the Administrative Committee is authorized to make recommendations to
the Weirton CEO as to amendments to the Plan. The determination of the
Administrative Committee as to any disputed question will be conclusive. All
actions, decisions and interpretations of the Administrative Committee in
administering the Plan will be performed in a uniform and non-discriminatory
manner.
4
<PAGE> 7
3.3 Subject to the limitations of the Trust, the Investment Committee
shall have all powers and duties necessary or appropriate to control and manage
the assets of the Trust.
3.4 Any act which the Plan or Trust authorizes or requires the
Committee to do may be done by a majority of its members. The action of such
majority, expressed by a vote at a meeting (conducted in person or by conference
telephone call) or in writing without a meeting, will constitute the action of
the Committee and will have the same effect for all purposes as if assented to
by all members of the Committee at the time in office.
3.5 The members of the Committee may authorize one or more of their
number to execute or deliver any instrument or perform any other act which the
Plan or Trust authorizes or requires the Committee to do.
3.6 The Committee may employ counsel and other agents and may procure
such clerical, accounting and other services as they may require in carrying out
the provisions of the Plan and Trust.
3.7 No member of the Committee will receive any compensation for his
services as such. All expenses of administering the Plan and Trust, including,
but not limited to, fees of accountants, counsel and other agents, will be paid
by Weirton.
3.8 Weirton will indemnify and save harmless each member of the
Committee against all expenses and liabilities arising out of membership on the
Committee, excepting only expenses and liabilities arising from his own gross
negligence or willful misconduct, as determined by Weirton.
5
<PAGE> 8
ARTICLE IV
Participation
4.1(a) The senior executive employees of Weirton on the Effective Date
as designated by the Weirton CEO shall become Initial Participants hereunder on
such date.
(b) Any other senior executive employee of Weirton (officer and/or vice
president) shall become a New Participant hereunder after the Effective Date
when designated as such by the Weirton CEO.
(c) Initial Participants and New Participants, collectively, are
referred to as Participants.
4.2 If the employment position of a Participant with Weirton is reduced
below senior executive status, as determined by the Weirton CEO, such individual
shall cease to be an active Participant hereunder as of the date of such
reduction.
ARTICLE V
Target Benefit; Accrued Target Benefit
5.1 A Participant's Target Benefit at the Effective Date or any
subsequent January 1 (the "Calculation Date") is a monthly benefit payable in
the form of a single life annuity for his life commencing on the first day of
the month coincident with or next following his 62nd birthday (the "Target
Date") or on the applicable Calculation Date, if later (the "Target Calculation
Date"), which is equal to (A) reduced by the sum of (B), (C), (D) and (E).
(A) 3.3% (or such greater percentage as determined in
accordance with a Participant's Employment Agreement) of the number of
years (and fractions to the nearest month) of the Participant's
projected or actual Benefit Service at the Target Calculation Date
assuming, if applicable, continued employment with Weirton to such date
(with a maximum percentage of 55% (or such greater percentage as
determined in accordance with a Participant's Employment Agreement))
multiplied by his Average Monthly Earnings projected to the Target
Calculation Date, if applicable. For the purpose of this paragraph,
such Participant's Pension Earnings are projected through the Target
Calculation Date using the salary scale and bonus payment and profit
sharing assumptions as
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<PAGE> 9
determined in accordance with Section 6.1(a) and his Average Monthly
Earnings are determined based on such projected Pension Earnings.
(B) The Participant's projected or actual monthly regular
pension at the Target Calculation Date based on the terms and
conditions of the Weirton Retirement Plan as in effect on such
Calculation Date assuming, if applicable, continued employment with
Weirton to the Target Calculation Date with continued Pension Earnings
projected through the Target Calculation Date using the salary scale
and bonus and profit sharing payment assumptions as determined in
accordance with Section 6.1(a); provided, however that such Pension
Earnings shall be subject to the limitation set forth in Section
401(a)(17) of the Code, which limitation is projected through the
Target Date using the inflation rate assumption as determined in
accordance with Section 6.1(a).
(C) If applicable, the Participant's projected or actual
monthly regular pension at the Target Calculation Date based on the
terms and conditions of the National Retirement Plan as in effect on
such Calculation Date assuming, if applicable, continued employment
with Weirton to the Target Calculation Date.
(D) The Participant's monthly Target Benefit at the Target
Calculation Date under ARTICLE V of the Weirton SERP.
(E) 50% of the Participant's projected monthly primary old-age
Social Security benefit at the Target Calculation Date based on the
Social Security law as in effect on such Calculation Date but
projecting, if applicable, the taxable wage base and cost-of-living to
the Target Calculation Date using the inflation rate as determined in
accordance with Section 6.1(a). For the purpose of this paragraph, such
Participant's Pension Earnings are projected through the Target
Calculation Date using the salary scale and bonus and profit sharing
payment assumptions as determined in accordance with Section 6.1(a) and
his monthly primary old-age benefit is determined based on such
projected Pension Earnings.
To the extent a Participant's regular pension under the Weirton Retirement Plan
would be subject to actuarial reduction if he retired on the Target Calculation
Date, the amounts set forth in (B), (C) and (D) above shall be subject to such
reduction.
The pension amounts determined in paragraphs (B) and (C) shall be limited in
accordance with Code Section 415(b) as in effect on the Target Calculation Date,
but projecting the dollar limit in Code Section 415(b)(1)(A) to such Calculation
Date using the inflation rate as determined in accordance with Section 6.1(a).
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<PAGE> 10
5.2 A Participant's Accrued Target Benefit at any Calculation Date is a
monthly benefit payable in the form of a single life annuity for his life
commencing on the Target Calculation Date which is equal to (A) reduced by the
sum of (B), (C), (D) and (E).
(A) 3.3% (or such greater percentage as determined in
accordance with a Participant's Employment Agreement) of the number of
years (and fractions to the nearest month) of the Participant's Benefit
Service at the Calculation Date (with a maximum percentage of 55% (or
such greater percentage as determined in accordance with a
Participant's Employment Agreement)) multiplied by his Average Monthly
Earnings as of the Calculation Date.
(B) The Participant's accrued monthly regular pension at the
Calculation Date payable in the form of a single life annuity for his
life commencing on the Target Calculation Date based on the terms and
conditions of the Weirton Retirement Plan as in effect on the
Calculation Date.
(C) If applicable, the Participant's accrued monthly regular
pension at the Calculation Date payable in the form of a single life
annuity for his life commencing on the Target Calculation Date based on
the terms and conditions of the National Retirement Plan as in effect
on the Calculation Date.
(D) The Participant's monthly Accrued Target Benefit under
ARTICLE V of the Weirton SERP at the Calculation Date.
(E) 50% of the Participant's monthly primary old-age Social
Security benefit commencing on the Target Calculation Date based on the
Social Security law as in effect on the Calculation Date, but assuming
no further earnings for Social Security purposes and no increase in the
taxable wage base and cost-of-living after the Calculation Date.
To the extent a Participant's regular pension under the Weirton Retirement Plan
would be subject to actuarial reduction if he retired on the Target Date, the
amounts set forth in (B), (C) and (D) above shall be subject to such reduction.
The pension amounts determined in paragraphs (B) and (C) shall be limited in
accordance with Code Section 415(b) as in effect on the Calculation Date, but
projecting the dollar limit in Code Section 415(b)(1)(A) to the Target Date
using the inflation rate as determined in accordance with Section 6.1(a).
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<PAGE> 11
ARTICLE VI
Payments to Participants
6.1(a) Weirton shall make a cash payment to each Initial Participant
within 30 days after the Effective Date in an amount (less applicable
withholding) equal to the present value as of the Effective Date of the Initial
Participant's after-tax Accrued Target Benefit (or his after-tax Target Benefit,
if less) as of January 1, 1995 based on actuarial assumptions relating to
pre-retirement after-tax interest rate, post-retirement after-tax interest rate,
inflation rate, mortality, salary scale, bonus and profit sharing payments,
pre-retirement tax rate and post-retirement tax rate (the "Actuarial
Assumptions") as determined by Weirton (upon the recommendation of the
Administrative Committee). The Actuarial Assumptions applicable to any later
year shall be determined by Weirton (upon the recommendation of the
Administrative Committee).
(b) Weirton shall make a cash payment to each New Participant not later
than December 31 of the calendar year in which he becomes a New Participant in
an amount (less applicable withholding) equal to the excess of (i) the present
value as of the Calculation Date immediately following the end of such year of
the sum of the New Participant's after-tax Accrued Target Benefit under this
Plan and his after-tax Accrued Target Benefit under the Weirton SERP (or the sum
of his after-tax Target Benefit under this Plan and his after-tax Target Benefit
under the Weirton SERP, if less) as of such Calculation Date, based on the
Actuarial Assumptions, over (ii) the value of the Trust assets under the Weirton
SERP as of such Calculation Date (reduced by the expected tax on Trust
investment income for such year), reduced by (iii) any payment (without regard
to any gross-up provision) to such Participant for such year under the Weirton
SERP.
(c) Notwithstanding the provisions of paragraphs (a) and (b) of this
Section, if an Initial Participant or New Participant has not completed five
years of Service with Weirton as of the applicable date of payment under
paragraph (a) or (b), no payment hereunder shall be made to such Participant
under paragraph (a) or (b) and Weirton shall make a cash payment to each such
Participant not later than December 31 of (i) the calendar year in which he
completes five years of Service or, if earlier, (ii) the first calendar year for
which a payment hereunder is to be made to such Participant pursuant to his
Employment Agreement (the "Vesting Date") in an amount (less applicable
withholding) equal to the present value as of the January 1 following the
Vesting Date of the Initial Participant's or New Participant's after-tax Accrued
Target Benefit (or his after-tax Target Benefit, if less) as of the Calculation
Date next following the Vesting Date, based on the Actuarial Assumptions.
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<PAGE> 12
(d) If the Initial Participant or New Participant notifies the
Administrative Committee at least 15 days before the payment to him under
paragraph (a), (b) or (c), as applicable, of this Section that he will
contribute the amount of such payment to the Trust, Weirton shall make an
additional cash payment to him at the same time in an amount (less applicable
withholding) equal to the amount needed to compensate the Participant for
additional income tax liability resulting from the payment under paragraph (a),
(b) or (c) and this paragraph (d) estimated in accordance with the applicable
pre-retirement tax rate as determined in accordance with Section 6.1(a).
6.2(a) For the calendar year which commences (i) with the 1995 calendar
year for an Initial Participant (except for any such Participant referred to in
Section 6.1(c)), (ii) with the calendar year next following the effective date
of participation for a New Participant (except for any such Participant referred
to in Section 6.1(c)), and (iii) with the calendar year next following the year
in which the Vesting Date of an Initial or New Participant referred to in
Section 6.1(c) falls, and for each subsequent calendar year for which a payment
is to be made under this Section (each such calendar year shall be a
"Contribution Year"), Weirton shall make a cash payment not later than December
31 of the applicable Contribution Year to each Participant in an amount (less
applicable withholding) equal to the Participant's after-tax Level Percent (as
determined in paragraph (b) of this Section) multiplied by his Pension Earnings
for the Contribution Year.
(b) A Participant's Level Percent for any Contribution Year shall be
determined as follows:
(i) For the first Contribution Year, the Plan's actuary shall,
on the basis of the Actuarial Assumptions, determine an amount equal to
a percentage (the "Level Percent") of a Participant's Pension Earnings
for such year, which amount, taking into account the value of the Trust
assets under this Plan and under the Weirton SERP as of the last day of
such year (reduced by the expected tax on Trust investment income for
such year), if contributed to the Trust on an equal percentage of
projected Pension Earnings basis at the end of such year and each
subsequent year through the later of (x) the date of completion of
16-2/3 years of Service or (y) the end of the tenth Contribution Year
(but not earlier than December 31, 2004 for an Initial Participant),
but in no event later than the Target Date (the "Funding Target Date"),
is required to accumulate in the Trust as of the Funding Target Date an
amount equal to the present value as of such date of the sum of the
Participant's after-tax Target Benefit under this Plan and his
after-tax Target Benefit under the Weirton SERP.
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<PAGE> 13
(ii) For each subsequent Contribution Year which ends prior to
the Funding Target Date, the Plan's actuary shall, if necessary,
redetermine and adjust the Level Percent on the same basis set forth in
clause (i) of this paragraph.
(iii) For the Contribution Year in which the Funding Target
Date falls, the Plan's actuary shall, if necessary, redetermine and
adjust the Level Percent on the same basis set forth in clause (i) of
this paragraph, except that the Target Benefit and the value of the
Trust assets under this Plan and the Weirton SERP shall be determined
as of the Calculation Date following the end of such year.
(c) Notwithstanding the foregoing provisions of this Section,
the payment otherwise provided under paragraph (a) or (b) of this Section shall
be reduced by any payment (without regard to any gross-up provision) to such
Participant for the applicable Contribution Year under the Weirton SERP.
(d) If the Participant notifies the Administrative Committee
at least 15 days before the payment to him under paragraph (a) of this Section
that he will contribute the amount of such payment to the Trust, Weirton shall
make an additional cash payment to him at the same time in an amount (less
applicable withholding) equal to the amount needed to compensate the Participant
for additional income tax liability resulting from the payment under paragraph
(a) and this paragraph (d) estimated in accordance with the applicable
pre-retirement tax rate as determined in accordance with Section 6.1(a).
6.3(a) For the calendar year in which the Funding Target Date falls and
for each subsequent Contribution Year, Weirton shall make a cash payment not
later than December 31 of the applicable Contribution Year to each Participant
in an amount (less applicable withholding) equal to the sum of (A) and (B) --
(A) The present value as of the Calculation Date of the
increase or decrease in such Participant's after-tax Target Benefit
under this Plan and the Weirton SERP from the previous Calculation Date
to the applicable Calculation Date;
(B) An adjustment equal to the accumulated difference, for the
period between the last day of the calendar year in which the
Participant's Funding Target Date falls and the Calculation Date,
between the actual after-tax investment return and the applicable
pre-retirement after-tax interest rate as determined in accordance with
Section 6.1(a),
amortized over the period between the Calculation Date and such Participant's
Target Date based on the applicable pre-retirement after-tax interest rate as
determined in
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<PAGE> 14
accordance with Section 6.1(a). For any Noncontributory Year for
an Active Participant referred to in Section 6.6(a), this paragraph shall be
applied using imputed investment income as if his cash payments had been
contributed to the Trust, but only to the extent that such application reduces
the amount of the cash payment otherwise calculated for such Participant.
Notwithstanding the foregoing provisions of this Section:
(A) The payment otherwise provided under this paragraph (a)
shall be reduced by any payment (without regard to any gross-up
provision) to such Participant for the applicable Contribution Year
under the Weirton SERP to the extent not applied under Section 6.2(c).
(B) The cash payment to any Participant under this Section for
any Contribution Year shall not exceed the excess, if any, of (i) the
present value as of the Calculation Date immediately following the end
of such year of the sum of his after-tax Target Benefit under this Plan
and his after-tax Target Benefit under the Weirton SERP as of such date
over (ii) the value of the Trust assets under this Plan and the Weirton
SERP as of the last day of such year (reduced by the expected tax on
Trust investment income for such year).
(b) If the Participant notifies the Administrative Committee at least
15 days before the payment to him under paragraph (a) of this Section that he
will contribute the amount of such payment to the Trust, Weirton shall make an
additional cash payment to him at the same time in an amount (less applicable
withholding) equal to the amount needed to compensate the Participant for
additional income tax liability resulting from the payment under paragraph (a)
and this paragraph (b) estimated in accordance with the applicable
pre-retirement tax rate as determined in accordance with Section 6.1(a).
6.4(a) If a Participant's separation from service with Weirton occurs
other than by reason of retirement under the terms of the Weirton Retirement
Plan, involuntary termination of employment or death or if a Participant ceases
to be such pursuant to Section 4.2, Weirton shall not make a payment to such
Participant for the year in which such separation or cessation occurred or for
any subsequent year except to the extent a payment has already been made to the
Participant for such year.
(b) If a Participant's separation from service with Weirton occurs by
reason of retirement under the terms of the Weirton Retirement Plan, involuntary
termination of employment or death, Weirton shall make a cash payment to such
Participant or his Beneficiary not later than December 31 after such
Participant's separation in the same
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<PAGE> 15
amount (less applicable withholding) that would have been made to such
Participant as determined in Section 6.2 or 6.3, as applicable, had he remained
in active service with Weirton as of the last day of such year. No further
payments shall be made to or on behalf of such Participant for any subsequent
year.
(c) For purposes of paragraph (b) of this Section, the date of a
Participant's separation by reason of involuntary termination of employment
shall be determined as follows --
(A) For a Participant who is a party to an Employment
Agreement, such separation date shall be determined in accordance with
such agreement.
(B) For a Participant who is not a party to an Employment
Agreement and who is receiving severance pay following his last day
worked, such separation date shall be the date of expiration of such
severance pay.
(C) For a Participant who is not a party to an Employment
Agreement and who is receiving severance pay and IPP benefits following
his last day worked, such separation date shall be the date of
expiration of such severance pay, without regard to continuance of IPP
benefits thereafter.
6.5(a) Upon a Participant's election to receive his benefits hereunder
from the Trust as of the last day of any year after the Target Date in
accordance with Section 7.3(b), Weirton shall make a cash payment to such
Participant not later than the last day of such year in an amount (less
applicable withholding) equal to the excess of (i) the present value as of the
last day of such year of the sum of the Participant's after-tax Target Benefit
under this Plan and his after-tax Target Benefit under the Weirton SERP as of
such date, based on the Actuarial Assumptions, over (ii) the value of the Trust
assets under this Plan and under the Weirton SERP as of such date (reduced by
the expected tax on Trust investment income for such year), reduced by (iii) any
payment (without regard to any gross-up provision) to such Participant for such
year under the Weirton SERP and any payment under Section 6.4(b) for such year.
(b) Weirton shall make an additional cash payment to him at the same
time in an amount (less applicable withholding) equal to the amount needed to
compensate the Participant for additional income tax liability resulting from
the payment under paragraph (a) and this paragraph (b) estimated in accordance
with the applicable pre-retirement tax rate as determined in accordance with
Section 6.1(a).
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6.6 Notwithstanding the foregoing provisions of this ARTICLE:
(a) If a Participant does not contribute the payments to him under
Sections 6.1, 6.2 and 6.3 to the Trust for any calendar year (the
"Noncontributory Year"), his Level Percent for all subsequent Contribution Years
shall remain fixed at the Level Percent applicable to the Noncontributory Year,
subject to Section 6.2(b)(ii) and Section 6.3(a), but only to the extent such
provisions reduce such Participant's Level Percent. Following a Noncontributory
Year, no further payments to such Participant under the Plan may be contributed
to the Trust, and no payments will be made to him under Section 6.1(d), 6.2(d),
6.3(b) or 6.5.
(b) If a Participant who remains in active service with Weirton after
the Target Date elects to receive his benefits under the Plan prior to his
retirement from service, no payments shall be made to such Participant for the
year after the year in which he receives his benefits and any subsequent year.
(c) The cash payment under Section 6.2(a) or 6.3(a), as applicable, for
any Contribution Year shall not exceed the excess of (i) the present value of
the sum of the Participant's after-tax Target Benefit under this Plan and his
after-tax Target Benefit under the Weirton SERP as of the last day of such year
over (ii) the value of the Trust assets under this Plan and the Weirton SERP as
of the last day of such year (reduced by the expected tax on Trust investment
income for such year), reduced by (iii) any payment (without regard to any
gross-up provision) to such Participant for such year under the Weirton SERP.
ARTICLE VII
Retirement Benefits
7.1 All retirement benefits payable hereunder shall be payable solely
from the Trust.
7.2 Upon a Participant's Target Date or, if earlier, upon his death,
retirement from service with Weirton with eligibility for an unreduced regular
pension or involuntary termination of employment with Weirton, as determined by
the Administrative Committee (the "Benefit Payment Date"), the Participant (or,
in the case of his death, his Beneficiary) shall be entitled to receive benefits
hereunder.
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7.3(a) The assets in the Trust and/or the proceeds from the disposition
thereof shall be paid to the Participant or his Beneficiary in a lump sum, in
cash and/or in kind, as elected by the Participant or Beneficiary, within 60
days after the end of the calendar year in which his Benefit Payment Date
occurs.
(b) Notwithstanding the provisions of paragraph (a) of this Section,
the provisions of paragraph (a) shall not apply to a Participant who remains in
active service with Weirton after the Target Date unless he elects to receive
his benefits under such paragraph prior to the end of the year in which the
Target Date falls. If a Participant referred to in the preceding sentence does
not make the election referred to therein, he may elect to receive his benefits
hereunder under paragraph (a) as of the end of any subsequent year in which he
remains in active service with Weirton. If such a Participant does not elect to
receive his benefits prior to his retirement from service, the payment of
benefits referred to in paragraph (a) shall be made within 60 days after the end
of the calendar year in which his Retirement Date occurs.
7.4 A Participant shall, prior to the filing of his Federal income tax
return for any such year, withdraw from the Trust an amount equal to the
applicable pre-retirement tax rate percentage of the Trust income which is
taxable to him for any calendar year which ends prior to the payment under
Section 7.3.
ARTICLE VIII
Trust
8.1 A Participant may, as grantor, establish a Trust with a bank or
trust company designated by Weirton, as trustee.
8.2 Payments to a Participant under ARTICLE VI may be contributed to
the Trust in accordance with and subject to the provisions hereof.
8.3 Retirement benefits under ARTICLE VII shall be paid from the Trust.
8.4 The investment of the assets in the Trust shall be managed by the
Investment Committee in accordance with the terms and provisions of the Trust.
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ARTICLE IX
Amendment and Termination
9.1 Weirton, by action of the Weirton CEO, upon the recommendation of
the Administrative Committee, may, except as otherwise provided in this Section,
at any time modify or amend, in whole or in part, any or all of the provisions
of the Plan. Any such amendment shall be by an instrument in writing executed on
behalf of Weirton by the Weirton CEO. Upon the execution and delivery of any
such instrument, the Plan shall be deemed to have been amended in the manner set
forth therein, and Weirton and each Participant, former Participant, and the
Beneficiary of either of the foregoing shall be bound thereby; provided,
however, that no such amendment may cause a reduction in an amount previously
paid to any Participant hereunder or have any adverse effect on any Trust
established by a Participant.
9.2 Weirton, by action of the Weirton CEO, may discontinue payments to
Participants hereunder or terminate the Plan in part or in whole at any time.
9.3 Upon termination of the Plan in its entirety, the entire fair
market value of the assets in the Trust shall be paid to the applicable
Participant or Beneficiary within 60 days after the effective date of such
termination.
ARTICLE X
Miscellaneous
10.1 Nothing in the Plan shall be construed as a contract of employment
between Weirton and a Participant, and the Plan shall not afford a Participant a
right of continued employment with Weirton.
10.2 Payments and benefits under this Plan may not be assigned or
hypothecated. To the extent permitted by law, no such payments or benefits shall
be subject to legal process or attachment for the payment of any claim of any
person entitled to receive the same.
10.3 The validity of the Plan or of any of its provisions shall be
determined under, and it shall be construed and administered according to, the
laws of the State of West Virginia.
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<PAGE> 1
Exhibit 10.11
WEIRTON STEEL CORPORATION
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
As Established Effective December 1, 1994
and
As Amended Through January 1, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
Introduction and Purpose 1
ARTICLE II
Definitions 1
ARTICLE III
Administration 4
ARTICLE IV
Participation 6
ARTICLE V
Target Benefit and Special Payment;
Accrued Target Benefit and Special
Payment; Accrued Benefit and Special
Payment 6
ARTICLE VI
Payments to Participants 14
ARTICLE VII
Retirement Benefits 21
ARTICLE VIII
Trust 22
ARTICLE IX
Amendment and Termination 22
ARTICLE X
Miscellaneous 23
<PAGE> 3
ARTICLE I
Introduction and Purpose
1.1 Weirton establishes and adopts this Plan to provide supplemental
retirement benefits to a select group of management or highly compensated
employees.
1.2 It is intended that this Plan constitute an unfunded "top-hat" plan
which provides deferred compensation benefits to a select group of management or
highly compensated employees within the meaning of Section 201(2) of ERISA and
that as a result thereof, this Plan is not subject to the provisions of ERISA.
1.3 It is intended that any Trust which may be established by a
Participant constitute an "employee grantor trust" within the meaning of
Sections 671-679 of the Code.
ARTICLE II
Definitions
2.1 As used in this Plan, the following terms shall have the meanings
hereinafter set forth:
"Plan" means the Weirton Steel Corporation Supplemental Executive
Retirement Plan, as embodied herein and as amended from time to time.
"Weirton" means Weirton Steel Corporation, a Delaware corporation, and
any successor thereto which adopts this Plan.
"Effective Date" means December 1, 1994
"Accrued Benefit" is defined in Sections 5.5 and 5.6.
"Accrued Target Benefit" is defined in Section 5.3(a) and (b).
"Accrued Target Special Payment" is defined in Section 5.4.
"Active Participant" is defined in Section 4.1(c).
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"Actuarial Assumptions" is defined in Section 6.1(a).
"Administrative Committee" means the committee appointed under Section
3.1(a) which administers the Plan.
"Average Monthly Earnings" as of any date means Average Monthly
Earnings for a Salaried Employee as defined in the Weirton Retirement Plan and
as determined as of such date.
"Beneficiary" means the beneficiary designated by a Participant to
receive benefits under the Plan by reason of his death. Such beneficiary shall
be designated by the Participant or Senior Participant in a written notice to
the Administrative Committee. Any such designation may be revoked and a new
beneficiary designated by written notice to the Administrative Committee. If
upon the death of the Participant or Senior Participant there is no designated
beneficiary then living, "Beneficiary" shall mean the first surviving class of
the following classes of successive preference beneficiaries: (a) his surviving
spouse; (b) his surviving children; (c) his surviving parents; (d) his surviving
brothers and sisters; and (e) the executor or administrator of his estate.
"Benefit Service" means Benefit Service as defined in the Weirton
Retirement Plan or, if applicable, as provided for in a Participant's Employment
Agreement; provided, however, that a Participant's actual and projected Benefit
Service for purposes of the Plan shall not be determined in accordance with the
Employment Agreement until so provided under the terms of such agreement.
"Calculation Date" is defined in Section 5.1(a).
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the Administrative Committee and the Investment
Committee, individually and collectively.
"Contribution Year" is defined in Section 6.2(a).
"Earliest Benefit Payment Date" is defined in Section 7.2.
"Employment Agreement" means the employment agreement between Weirton
and a Participant hereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
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<PAGE> 5
"Frozen Percentage" is defined in Section 5.1(a)(B).
"Initial Active Participant" is defined in Section 4.1(a).
"Investment Committee" means the committee appointed under Section
3.1(b) which manages the investment of the Trust.
"IPP" means the Weirton Steel Corporation Income Protection Plan.
"National Retirement Plan" means the National Steel Corporation Weirton
Retirement Program (Plan 056), as in effect from time to time.
"New Participant" is defined in Section 4.1(b).
"Noncontributory Year" is defined in Section 6.9(a).
"Participant" is defined in Section 4.1(c).
"Pension Earnings" for any year means Earnings for a Salaried Employee
as defined in the Weirton Retirement Plan and as determined for such year.
"Retired Participant" is defined in Section 4.1(a).
"Retirement Date" is defined in Section 5.5(A).
"Service" means Service as defined in the Weirton Retirement Plan or,
if applicable, as provided for in a Participant's Employment Agreement;
provided, however, that a Participant's actual and projected Service for
purposes of the Plan shall not be determined in accordance with the Employment
Agreement until so provided under the terms of such agreement.
"Special Payment" is defined in Section 5.7.
"Target Benefit" is defined in Section 5.1(a) and (b).
"Target Date" is defined in Section 5.1(a).
"Target Special Payment" is defined in Section 5.2.
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<PAGE> 6
"Trust" means the trust which may be established by a Participant in
accordance with ARTICLE VIII hereof. As to each applicable Participant, Trust
shall mean the Trust established by him.
"Vesting Date" is defined in Section 6.1(c).
"Weirton CEO" means Weirton's Chief Executive Officer.
"Weirton Retirement Plan" means the Weirton Steel Corporation
Retirement Plan (Plan 001), as in effect from time to time.
"Weirton Senior SERP" means the Weirton Steel Corporation Supplemental
Senior Executive Retirement Plan.
2.2 The masculine pronoun shall be deemed to include the feminine, and
the singular number shall be deemed to include the plural unless a different
meaning is plainly required by the context.
ARTICLE III
Administration
3.1(a) The complete authority to control and manage the operation and
administration of the Plan shall be placed in the Administrative Committee. The
Administrative Committee will consist of at least three members appointed from
time to time by the Weirton CEO to serve at the pleasure thereof. Any member of
the Administrative Committee may resign by delivering his written resignation to
the Weirton CEO.
(b) The general authority to control and manage the assets of the Trust
shall be placed in the Investment Committee. The Investment Committee will
consist of at least three members appointed from time to time by the Weirton CEO
to serve at the pleasure thereof. Any member of the Investment Committee may
resign by delivering his written resignation to the Weirton CEO.
3.2 Subject to the limitations of the Plan, the Administrative
Committee shall have all powers and duties necessary or appropriate to operate
and administer the Plan. The Administrative Committee from time to time will
establish rules for the administration and interpretation of the Plan and the
transaction of its business. Without
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limiting the foregoing, the Administrative Committee shall have discretionary
authority to construe the terms and provisions of the Plan, including, but not
limited to, questions relating to eligibility for benefits, service and earnings
and making reasonable estimates of Participants' earnings and the value of Trust
assets for any year. In addition, the Administrative Committee is authorized to
make recommendations to the Weirton CEO as to amendments to the Plan. The
determination of the Administrative Committee as to any disputed question will
be conclusive. All actions, decisions and interpretations of the Administrative
Committee in administering the Plan will be performed in a uniform and
non-discriminatory manner.
3.3 Subject to the limitations of the Trust, the Investment Committee
shall have all powers and duties necessary or appropriate to control and manage
the assets of the Trust.
3.4 Any act which the Plan or Trust authorizes or requires the
Committee to do may be done by a majority of its members. The action of such
majority, expressed by a vote at a meeting (conducted in person or by conference
telephone call) or in writing without a meeting, will constitute the action of
the Committee and will have the same effect for all purposes as if assented to
by all members of the Committee at the time in office.
3.5 The members of the Committee may authorize one or more of their
number to execute or deliver any instrument or perform any other act which the
Plan or Trust authorizes or requires the Committee to do.
3.6 The Committee may employ counsel and other agents and may procure
such clerical, accounting and other services as they may require in carrying out
the provisions of the Plan and Trust.
3.7 No member of the Committee will receive any compensation for his
services as such. All expenses of administering the Plan and Trust, including,
but not limited to, fees of accountants, counsel and other agents, will be paid
by Weirton.
3.8 Weirton will indemnify and save harmless each member of the
Committee against all expenses and liabilities arising out of membership on the
Committee, excepting only expenses and liabilities arising from his own gross
negligence or willful misconduct, as determined by Weirton.
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ARTICLE IV
Participation
4.1(a) The select group of active and retired (including deceased
retired) management or highly compensated employees of Weirton as designated by
Weirton shall become Initial Active Participants and Retired Participants,
respectively, hereunder on the Effective Date. Retired Participant shall include
the surviving spouse of a deceased Retired Participant on the Effective Date.
(b) Any other selected management or highly compensated employee of
Weirton shall become a New Participant hereunder on the later of the date he
first becomes a salaried employee of Weirton in job class 56 or higher (or such
equivalent job class, if applicable) or January 1, 1995.
(c) Initial Active Participants and New Participants, collectively, are
referred to as Active Participants. Initial Active Participants, Retired
Participants and New Participants, collectively, are referred to as
Participants.
4.2(a) An Initial Active Participant shall remain as an Active
Participant hereunder as long as he remains as a salaried exempt employee of
Weirton.
(b) If the job class of a New Participant is reduced below job class
56, such Participant shall cease to be an Active Participant hereunder as of the
date his job class is reduced below job class 56. If such a Participant is
promoted to job class 56 or higher, he will again become an Active Participant
on the effective date of his promotion.
ARTICLE V
Target Benefit and Special Payment; Accrued Target Benefit and Special Payment;
Accrued Benefit and Special Payment
5.1(a) An Initial Active Participant's Target Benefit at the Effective
Date or any subsequent January 1 (the "Calculation Date") is a monthly benefit
payable in the form of a single life annuity for his life commencing on the
first day of the month coincident with or next following his 62nd birthday or
the Effective Date, if later (the "Target Date") which is equal to the greater
of (A) or (B) reduced by the sum of (C) and (D).
(A) 1.7% of the number of years (and fractions to the nearest
month) of the Initial Active Participant's projected or actual Benefit
Service at the Target Date assuming, if applicable, continued
employment with Weirton to such date
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multiplied by his Average Monthly Earnings projected to the Target
Date, if applicable. For the purpose of this paragraph, such
Participant's Pension Earnings are projected through the Target Date
using the salary scale and bonus and profit sharing payment assumptions
as determined in accordance with Section 6.1(a) and his Average Monthly
Earnings is determined based on such projected Pension Earnings.
(B) The sum of (i) 1.6% of the number of years (and fractions
to the nearest month) of the Initial Active Participant's projected or
actual Benefit Service from January 1, 1990 to the Target Date, and
(ii) the Initial Active Participant's Frozen Percentage as designated
by Weirton multiplied by his Average Monthly Earnings projected to the
Target Date, if applicable, determined in the same manner as set forth
in paragraph (A) above.
(C) The Initial Active Participant's projected monthly regular
pension at the Target Date based on the terms and conditions of the
Weirton Retirement Plan as in effect on the Calculation Date assuming,
if applicable, continued employment with Weirton to the Target Date
with continued Pension Earnings projected through the Target Date using
the salary scale and bonus and profit sharing payment assumptions as
determined in accordance with Section 6.1(a); provided, however that
such Pension Earnings shall be subject to the limitation set forth in
Section 401(a)(17) of the Code, which limitation is projected through
the Target Date using the inflation rate assumption as determined in
accordance with Section 6.1(a).
(D) The Initial Active Participant's projected monthly regular
pension at the Target Date based on the terms and conditions of the
National Retirement Plan as in effect on the Calculation Date assuming,
if applicable, continued employment with Weirton to the Target Date.
To the extent an Initial Active Participant's regular pension under the Weirton
Retirement Plan would be subject to actuarial reduction if he retired on the
Target Date, the amounts set forth in (A), (B), (C) and (D) above shall be
subject to such reduction.
The pension amounts determined in paragraphs (C) and (D) shall be limited in
accordance with Code Section 415(b) as in effect on the Calculation Date, but
projecting the dollar limit in Code Section 415(b)(1)(A) to the Target Date
using the inflation rate as determined in accordance with Section 6.1(a).
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(b) A New Participant's Target Benefit at the Calculation Date is a
monthly benefit payable in the form of a single life annuity for his life
commencing on the Target Date which is equal to (A) reduced by the sum of (B)
and (C).
(A) 1.7% of the number of years (and fractions to the nearest
month) of the New Participant's projected Benefit Service at the Target
Date assuming continued employment with Weirton to such date multiplied
by his Average Monthly Earnings projected to the Target Date, if
applicable, determined in the same manner as set forth in paragraph
(a)(A) of this Section.
(B) The New Participant's projected monthly regular pension at
the Target Date based on the terms and conditions of the Weirton
Retirement Plan as in effect on the Calculation Date assuming continued
employment with Weirton to the Target Date with continued Pension
Earnings projected through the Target Date using the salary scale and
bonus and profit sharing payment assumptions as determined in
accordance with Section 6.1(a); provided, however that such Pension
Earnings shall be subject to the limitation set forth in Section
401(a)(17) of the Code, which limitation is projected through the
Target Date using the inflation rate assumption as determined in
accordance with Section 6.1(a).
(C) The New Participant's projected monthly regular pension at
the Target Date based on the terms and conditions of the National
Retirement Plan as in effect on the Calculation Date assuming continued
employment with Weirton to the Target Date.
To the extent a New Participant's regular pension under the Weirton Retirement
Plan would be subject to actuarial reduction if he retired on the Target Date,
the amounts set forth in (A), (B) and (C) above shall be subject to such
reduction.
The pension amounts determined in paragraphs (B) and (C) shall be limited in
accordance with Code Section 415(b) as in effect on the Calculation Date, but
projecting the dollar limit in Code Section 415(b)(1)(A) to the Target Date
using the inflation rate as determined in accordance with Section 6.1(a).
5.2 An Active Participant's Target Special Payment at any Calculation
Date is a lump sum amount payable on the Target Date equal to (A) reduced by the
sum of (B) and (C).
(A) 13 or 14 (whichever is applicable based on the number of
weeks of vacation to which the Active Participant would be entitled in
the year in which the Target Date falls assuming, if applicable,
continued employment with Weirton to
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such date) multiplied by 1/12th of his projected Pension Earnings for
the 12-month period preceding the Target Date, divided by 4-1/3 and
further multiplied by the applicable Special Payment Factor as
designated by Weirton. The amount determined under the next preceding
sentence is then reduced by the projected vacation pay of such
Participant in the calendar year which includes the Target Date,
assuming that such Participant will take four weeks of vacation in such
year and that his Pension Earnings increase in accordance with the
salary scale assumption as determined in accordance with Section
6.1(a).
(B) The Active Participant's projected special payment at the
Target Date assuming retirement on such date based on the terms and
conditions of the Weirton Retirement Plan as in effect on the
Calculation Date and assuming, if applicable, continued employment with
Weirton to the Target Date and further assuming that such Participant
will take four weeks of vacation in such year and that his vacation pay
increases in accordance with the salary scale assumption as determined
in accordance with Section 6.1(a).
(C) The Active Participant's projected special payment at the
Target Date assuming retirement on such date based on the terms and
conditions of the National Retirement Plan as in effect on the
Calculation Date and assuming, if applicable, continued employment with
Weirton to the Target Date.
Notwithstanding the foregoing provisions of this Section, an Active
Participant's Target Special Payment shall be zero if such Participant's
projected Service as of the Target Date is less than 15 years (ten years if such
Participant will be over age 65 as of the Target Date). If the next preceding
sentence is applicable to any Active Participant, such Participant's regular
monthly pension under the Weirton Retirement Plan is assumed to commence
immediately following the Target Date.
5.3(a) An Initial Active Participant's Accrued Target Benefit at any
Calculation Date is a monthly benefit payable in the form of a single life
annuity for his life commencing on the Target Date or, if later, the Calculation
Date, which is equal to the greater of (A) or (B) reduced by the sum of (C) and
(D).
(A) 1.7% of the number of years (and fractions to the nearest
month) of the Initial Active Participant's Benefit Service at the
Calculation Date multiplied by his Average Monthly Earnings as of such
date.
(B) The sum of (i) 1.6% of the number of years (and fractions
to the nearest month) of the Initial Active Participant's Benefit
Service from January 1,
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<PAGE> 12
1990 to the Calculation Date, and (ii) the Initial Active Participant's
Frozen Percentage as designated by Weirton multiplied by his Average
Monthly Earnings as of the Calculation Date.
(C) The Initial Active Participant's accrued monthly regular
pension at the Calculation Date payable in the form of a single life
annuity for his life commencing on the Target Date based on the terms
and conditions of the Weirton Retirement Plan as in effect on the
Calculation Date.
(D) The Initial Active Participant's accrued monthly regular
pension at the Calculation Date payable in the form of a single life
annuity for his life commencing on the Target Date based on the terms
and conditions of the National Retirement Plan as in effect on the
Calculation Date.
To the extent an Initial Active Participant's regular pension under the Weirton
Retirement Plan would be subject to actuarial reduction if he retired on the
Target Date, the amounts set forth in (A), (B), (C) and (D) above shall be
subject to such reduction.
The pension amounts determined in paragraphs (C) and (D) shall be limited in
accordance with Code Section 415(b) as in effect on the Calculation Date, but
projecting the dollar limit in Code Section 415(b)(1)(A) to the Target Date
using the inflation rate as determined in accordance with Section 6.1(a).
(b) A New Participant's Accrued Target Benefit at any Calculation Date
is a monthly benefit payable in the form of a single life annuity for his life
commencing on the Target Date or, if later, the Calculation Date, which is equal
to (A) reduced by the sum of (B) and (C).
(A) 1.7% of the number of years (and fractions to the nearest
month) of the New Participant's Benefit Service at the Calculation Date
multiplied by his Average Monthly Earnings as of the Calculation Date.
(B) The New Participant's accrued monthly regular pension at
the Calculation Date payable in the form of a single life annuity for
his life commencing on the Target Date based on the terms and
conditions of the Weirton Retirement Plan as in effect on the
Calculation Date.
(C) The New Participant's accrued monthly regular pension at
the Calculation Date payable in the form of a single life annuity for
his life commencing on the Target Date based on the terms and
conditions of the National Retirement Plan as in effect on the
Calculation Date.
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To the extent a New Participant's regular pension under the Weirton Retirement
Plan would be subject to actuarial reduction if he retired on the Target Date,
the amounts set forth in (A), (B) and (C) above shall be subject to such
reduction.
The pension amounts determined in paragraphs (B) and (C) shall be limited in
accordance with Code Section 415(b) as in effect on the Calculation Date, but
projecting the dollar limit in Code Section 415(b)(1)(A) to the Target Date
using the inflation rate as determined in accordance with Section 6.1(a).
5.4 An Active Participant's Accrued Target Special Payment at any
Calculation Date is a lump sum amount payable on the Calculation Date equal to
(A) reduced by the sum of (B) and (C).
(A) 13 or 14 (whichever is applicable based on the number of
weeks of vacation to which the Active Participant would be entitled in
the year in which the Calculation Date falls) multiplied by his monthly
Pension Earnings as of the Calculation Date divided by 4-1/3 and
further multiplied by the applicable Special Payment Factor as
designated by Weirton. The amount determined under the next preceding
sentence is then reduced by the vacation pay of such Participant in the
calendar year which includes the Calculation Date, assuming that such
Participant will take four weeks of vacation in such year.
(B) The Active Participant's special payment at the
Calculation Date assuming retirement with eligibility for a special
payment on such date based on the terms and conditions of the Weirton
Retirement Plan as in effect on the Calculation Date.
(C) The Active Participant's special payment at the
Calculation Date assuming retirement with eligibility for a special
payment on such date based on the terms and conditions of the National
Retirement Plan as in effect on the Calculation Date.
Notwithstanding the foregoing provisions of this paragraph, an Active
Participant's Accrued Target Special Payment shall be zero if such Participant's
Service as of the Calculation Date is less than 15 years (ten years if such
Participant is over age 65 as of the Calculation Date). If the next preceding
sentence is applicable to any Active Participant, such Participant's regular
monthly pension under the Weirton Retirement Plan is assumed to commence
immediately following the Target Date.
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5.5 A Retired Participant's Accrued Benefit at the Effective Date is a
monthly benefit payable in the form of a single life annuity for his life
commencing on the Effective Date which is equal to the greater of (A) or (B)
reduced by the sum of (C) and (D).
(A) 1.7% of the number of years (and fractions to the nearest
month) of the Retired Participant's Benefit Service at the date of his
retirement from service with Weirton (the "Retirement Date") multiplied
by his Average Monthly Earnings at his Retirement Date.
(B) The sum of (i) 1.6% of the number of years (and fractions
to the nearest month) of the Retired Participant's Benefit Service from
January 1, 1990 to his Retirement Date, and (ii) the Retired
Participant's Frozen Percentage as designated by Weirton, multiplied by
his Average Monthly Earnings at his Retirement Date.
(C) The Retired Participant's actual monthly regular pension
at the Effective Date under the Weirton Retirement Plan determined as
if it were being paid in the form of a single life annuity for his
life.
(D) The Retired Participant's actual monthly regular pension
at the Effective Date under the National Retirement Plan determined as
if it were being paid in the form of a single life annuity for his
life.
To the extent a Retired Participant's regular pension under the Weirton
Retirement Plan is subject to actuarial reduction, the amounts set forth in (A)
and (B) above shall be subject to such reduction.
5.6(a) An Initial Active Participant's Accrued Benefit at his
Retirement Date is a monthly benefit payable in the form of a single life
annuity for his life commencing on his Retirement Date which is equal to the
greater of (A) or (B), reduced by the sum of (C) and (D).
(A) 1.7% of the number of years (and fractions to the nearest
month) of the Active Participant's Benefit Service at his Retirement
Date multiplied by his Average Monthly Earnings at his Retirement Date.
(B) The sum of (i) 1.6% of the number of years (and fractions
to the nearest month) of the Initial Active Participant's Benefit
Service from January 1, 1990 to his Retirement Date, and (ii) the
Initial Active Participant's Frozen Percentage multiplied by his
Average Monthly Earnings at his Retirement Date.
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(C) The Initial Active Participant's actual monthly regular
pension at his Retirement Date under the Weirton Retirement Plan
determined as if it were being paid in the form of a single life
annuity for his life.
(D) The Initial Active Participant's actual monthly regular
pension at his Retirement Date under the National Retirement Plan
determined as if it were being paid in the form of a single life
annuity for his life.
To the extent an Initial Active Participant's regular pension from the Weirton
Retirement Plan is subject to actuarial reduction upon his retirement, the
amounts set forth in (A) and (B) above shall be subject to such reduction.
(b) A New Participant's Accrued Benefit at his Retirement Date is a
monthly benefit payable in the form of a single life annuity for his life
commencing on his Retirement Date which is equal to (A) reduced by the sum of
(B) and (C).
(A) 1.7% of the number of years (and fractions to the nearest
month) of the New Participant's Benefit Service at his Retirement Date
multiplied by his Average Monthly Earnings at his Retirement Date.
(B) The New Participant's actual monthly regular pension at
his Retirement Date under the Weirton Retirement Plan determined as if
it were being paid in the form of a single life annuity for his life.
(C) The New Participant's actual monthly regular pension at
his Retirement Date under the National Retirement Plan determined as if
it were being paid in the form of a single life annuity for his life.
To the extent a New Participant's regular pension from the Weirton Retirement
Plan is subject to actuarial reduction upon his retirement, the amount set forth
in (A) above shall be subject to such reduction.
5.7 An Active Participant's Special Payment at his Retirement Date is a
lump sum amount payable on his Retirement Date equal to (A) reduced by the sum
of (B), (C) and (D).
(A) 13 or 14 (whichever is applicable based on the number of
weeks of vacation to which the Active Participant is entitled in the
year in which his Retirement Date falls) multiplied by his monthly
Pension Earnings as of his Retirement Date divided by 4-1/3 and further
multiplied by the applicable Special Payment Factor as designated by
Weirton.
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(B) The actual vacation pay received from Weirton during the
year in which his Retirement Date falls.
(C) The Active Participant's actual special payment at his
Retirement Date under the Weirton Retirement Plan.
(D) The Active Participant's actual special payment at his
Retirement Date under the National Retirement Plan.
Notwithstanding the foregoing provisions of this Section, (i) an Active
Participant is not entitled to a Special Payment under this Section if he is not
entitled to receive a special payment under the Weirton Retirement Plan, and
(ii) in the event an Active Participant has received a Special Payment under the
Weirton Retirement Plan as a result of a prior retirement from Weirton, Sections
5.2, 5.4 and 5.7 shall not apply to such Participant. If an Active Participant
is not entitled to receive a Special Payment hereunder, his regular monthly
pension under the Weirton Retirement Plan is assumed to commence immediately
following his retirement.
ARTICLE VI
Payments to Participants
6.1(a) Weirton shall make a cash payment to each Initial Active
Participant within 30 days after the Effective Date in an amount (less
applicable withholding) equal to the present value as of the Effective Date of
the Initial Active Participant's after-tax Accrued Target Benefit and Accrued
Target Special Payment as of the January 1, 1995 Calculation Date based on
actuarial assumptions relating to pre-retirement after-tax interest rate,
post-retirement after-tax interest rate, inflation rate, mortality, salary
scale, bonus and profit sharing payments, pre-retirement tax rate and
post-retirement tax rate (the "Actuarial Assumptions") as determined by Weirton
(upon the recommendation of the Administrative Committee). The Actuarial
Assumptions applicable to any later year shall be determined by Weirton (upon
the recommendation of the Administrative Committee).
(b) Weirton shall make a cash payment to each New Participant not later
than December 31 of the calendar year in which he becomes a New Participant in
an amount (less applicable withholding) equal to the present value as of the
Calculation Date
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immediately following the end of such year of the New Participant's after-tax
Accrued Target Benefit and Accrued Target Special Payment as of such Calculation
Date, based on the Actuarial Assumptions.
(c) Notwithstanding the provisions of paragraphs (a) and (b) of this
Section, if an Initial Active Participant or New Participant has not completed
five years of Service with Weirton as of the applicable date of payment under
paragraph (a) or (b), no payment hereunder shall be made to such Participant
under paragraph (a) or (b) and Weirton shall make a cash payment to each such
Participant not later than December 31 of (i) the calendar year in which he
completes five years of Service or, if earlier, (ii) the first calendar year for
which a payment hereunder is to be made to such Participant pursuant to his
Employment Agreement (the "Vesting Date") in an amount (less applicable
withholding) equal to the present value as of the January 1 following the
Vesting Date of the Initial Active Participant's or New Participant's after-tax
Accrued Target Benefit and Accrued Target Special Payment as of the Calculation
Date next following the Vesting Date, based on the Actuarial Assumptions.
(d) If the Initial Active Participant or New Participant notifies the
Administrative Committee at least 15 days before the payment to him under
paragraph (a), (b) or (c), as applicable, of this Section that he will
contribute the amount of such payment to the Trust, Weirton shall make an
additional cash payment to him at the same time in an amount (less applicable
withholding) equal to the amount needed to compensate the Participant for
additional income tax liability resulting from the payment under paragraph (a),
(b) or (c) and this paragraph (d) estimated in accordance with the applicable
pre-retirement tax rate as determined in accordance with Section 6.1(a).
6.2(a) For the calendar year which commences (i) with the 1995 calendar
year for an Initial Active Participant (except for any such Participant referred
to in Section 6.1(c)), (ii) with the calendar year next following the effective
date of participation for a New Participant (except for any such Participant
referred to in Section 6.1(c)), and (iii) with the calendar year next following
the year in which the Vesting Date of an Initial Active Participant or New
Participant referred to in Section 6.1(c) falls, and for each subsequent
calendar year which ends prior to the earlier of (i) the Active Participant's
Target Date, or (ii) the date of the Active Participant's separation from
service with Weirton for any reason (each such calendar year shall be a
"Contribution Year"), Weirton shall make a cash payment not later than December
31 of the applicable Contribution Year to each Active Participant in an amount
(less applicable withholding) equal to the sum of (A) and (B).
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(A) The present value as of the Calculation Date of the
increase or decrease in such Participant's Accrued Target Benefit and
Accrued Special Payment from the previous Calculation Date to this
Calculation Date.
(B) An adjustment equal to the accumulated difference, as of
the Calculation Date, between the actual after-tax investment return
and the applicable pre-retirement after-tax interest rate as determined
in accordance with Section 6.1(a), amortized over the period between
the Calculation Date and such Participant's Target Date based on the
applicable pre-retirement after-tax interest rate as determined in
accordance with Section 6.1(a). For any Noncontributory Year for an
Active Participant referred to in Section 6.9(a), this paragraph (B)
shall be applied using imputed investment income as if his cash
payments had been contributed to the Trust, but only to the extent that
such application reduces the amount of the cash payment otherwise
calculated for such Participant.
Notwithstanding the foregoing, the cash payment to any Active Participant under
this paragraph (b) for any Contribution Year shall not exceed the excess, if
any, of (i) the present value as of the Calculation Date immediately following
the end of such year of his after-tax Accrued Target Benefit and after-tax
Accrued Special Payment as of such date over (ii) the value of the Trust assets
as of the last day of such year (reduced by the expected tax on Trust investment
income for such year).
(b) If the Active Participant notifies the Administrative Committee at
least 15 days before the payment to him under paragraph (a) of this Section that
he will contribute the amount of such payment to the Trust, Weirton shall make
an additional cash payment to him at the same time in an amount (less applicable
withholding) equal to the amount needed to compensate the Participant for
additional income tax liability resulting from the payment under paragraph (a)
and this paragraph (b) estimated in accordance with the applicable
pre-retirement tax rate as determined in accordance with Section 6.1(a).
6.3(a) Weirton shall make a cash payment to each Retired Participant
not later than February 1, 1995 in an amount (less applicable withholding) equal
to the present value as of the Effective Date of the Retired Participant's
after-tax Accrued Benefit as of the Effective Date based on the Actuarial
Assumptions.
(b) Weirton shall make an additional cash payment to him at the same
time in an amount (less applicable withholding) equal to the amount needed to
compensate the Participant for additional income tax liability resulting from
the payment under paragraph (a) and this paragraph (b) estimated in accordance
with the applicable pre- and post-retirement tax rates as determined in
accordance with Section 6.1(a).
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6.4(a) Notwithstanding the foregoing provisions of this ARTICLE, if an
Active Participant completes 30 years of Service (without regard to any
additional Service granted pursuant to the terms of his Employment Agreement)
prior to December 31 of any year preceding his Target Date or if an Active
Participant's Employment Agreement so provides, Weirton shall make an additional
cash payment to such Participant not later than December 31 of such year in an
amount (less applicable withholding) equal to the excess, if any, of the sum of
(i) 90% (or such greater percentage as determined in accordance with such
Participant's Employment Agreement) of the present value as of such December 31
of his after-tax Accrued Benefit as of such date, (ii) 90% (or such greater
percentage as determined in accordance with such Participant's Employment
Agreement) of the present value of his after-tax Special Payment as of such
December 31, and (iii) 90% (or such greater percentage as determined in
accordance with such Participant's Employment Agreement) of the present value as
of such December 31 of his after-tax Accrued Target Benefit under the Weirton
Senior SERP, over the sum of (iv) the value of the Trust assets under this Plan
as of such date (reduced by the expected tax on Trust investment income for such
year), and (v) the value of the assets in the Trust under the Weirton Senior
SERP as of such date (reduced by the expected tax on Trust investment income for
such year), with all such amounts estimated on the basis of the Actuarial
Assumptions.
(b) If the Active Participant notifies the Administrative Committee at
least 15 days before the payment to him under paragraph (a) of this Section that
he will contribute the amount of such payment to the Trust, Weirton shall make
an additional cash payment to him at the same time in an amount (less applicable
withholding) equal to the amount needed to compensate the Participant for
additional income tax liability resulting from the payment under paragraph (a)
and this paragraph (b) estimated in accordance with the applicable
pre-retirement tax rate as determined in accordance with Section 6.1(a).
6.5(a) For an Active Participant who retires from service with Weirton
under the terms of the Weirton Retirement Plan prior to December 31 of the year
preceding the Target Date, Weirton shall make a cash payment to each such
Participant not later than December 31 following his Retirement Date in an
amount (less applicable withholding) equal to the excess, if any, of the present
value as of his Retirement Date of his after-tax Accrued Benefit and Special
Payment as of such date based on the Actuarial Assumptions over the value of the
Trust assets as of such date (reduced by the expected tax on Trust investment
income for such year).
(b) If the Active Participant notifies the Administrative Committee at
least 15 days before the payment to him under paragraph (a) of this Section that
he will contribute the amount of such payment to the Trust, Weirton shall make
an additional cash payment to him at the same time in an amount (less applicable
withholding) equal to the amount
17
<PAGE> 20
needed to compensate the Participant for additional income tax liability
resulting from the payment under paragraph (a) and this paragraph (b) estimated
in accordance with the applicable pre-retirement tax rate as determined in
accordance with Section 6.1(a).
6.6(a) For an Active Participant who remains in service with Weirton as
of December 31 of the year preceding the Target Date, Weirton shall make an
additional cash payment to each such Participant not later than December 31 of
such year in an amount (less applicable withholding) equal to the excess, if
any, of the sum of (i) the present value as of the Target Date of his after-tax
Accrued Benefit as of such date and (ii) the value of his after-tax Special
Payment as of the Target Date, over (iii) the value of the Trust assets as of
such date (reduced by the expected tax on Trust investment income for such
year), with all such amounts estimated on the basis of the Actuarial
Assumptions.
(b) If the Active Participant notifies the Administrative Committee at
least 15 days before the payment to him under paragraph (a) of this Section that
he will contribute the amount of such payment to the Trust, Weirton shall make
an additional cash payment to him at the same time in an amount (less applicable
withholding) equal to the amount needed to compensate the Participant for
additional income tax liability resulting from the payment under paragraph (a)
and this paragraph (b) estimated in accordance with the applicable
pre-retirement tax rate as determined in accordance with Section 6.1(a).
6.7(a) For an Active Participant who remains in active service with
Weirton after the Target Date, for each Contribution Year in which he is in
active service on December 31 and for the year in which he retires or separates
from service with Weirton, Weirton shall make a cash payment to each such
Participant within 30 days after the end of each such year or after his
retirement or termination date, as applicable, in an amount (less applicable
withholding) equal to the excess, if any, of the sum of (i) the present value as
of the last day of such year or his retirement or termination date, as
applicable, of his after-tax Accrued Benefit as of such date and (ii) the value
of his after-tax Special Payment as of such date, over (iii) the value of the
Trust assets as of such date (reduced by the expected tax on Trust investment
income for such year), based on the Actuarial Assumptions.
(b) If the Active Participant notifies the Administrative Committee at
least 15 days before the payment to him under paragraph (a) of this Section that
he will contribute the amount of such payment to the Trust, Weirton shall make
an additional cash payment to him at the same time in an amount (less applicable
withholding) equal to the amount needed to compensate the Participant for
additional income tax liability resulting from the payment under paragraph (a)
and this paragraph (b) estimated in accordance with the applicable
pre-retirement tax rate as determined in accordance with Section 6.1(a).
18
<PAGE> 21
6.8(a) If an Active Participant's separation from service with Weirton
occurs other than by reason of retirement under the terms of the Weirton
Retirement Plan, involuntary termination of employment or death or if a
Participant ceases to be such pursuant to Section 4.2, Weirton shall not make a
payment to such Participant for the year in which such separation or cessation
occurred or for any subsequent year.
(b) If an Active Participant's separation from service with Weirton
occurs by reason of death, Weirton shall make a cash payment to the Beneficiary
of such Participant not later than December 31 after such Participant's death in
the same amount (less applicable withholding) that would have been made to such
Participant, if any, as determined in Section 6.5(a) and (b) had he retired from
service with Weirton on the date of his death if eligible for retirement under
the Weirton Retirement Plan on such date; provided, however, that if such
Participant was not eligible to retire under the Weirton Retirement Plan on the
date of his death, Weirton shall make a cash payment to the Beneficiary of such
Participant not later than December 31 after such Participant's death in the
same amount (less applicable withholding) that would have been made to such
Participant as determined in Section 6.2(a) and (b) had he remained in active
service with Weirton as of the last day of such year. No further payments shall
be made on behalf of such Participant for any subsequent year.
(c) If an Active Participant's separation from service with Weirton
occurs by reason of involuntary termination of employment, Weirton shall make a
cash payment to such Participant not later than December 31 after such
Participant's separation. The amount of such payment shall be determined on the
basis of the assumptions in effect as of the Calculation Date next preceding
such Participant's separation date and shall equal --
(A) the amount of the payment (less applicable withholding)
that would have been made to such Participant as determined in Section
6.2(a) and (b) had he remained in active service with Weirton as of the
last day of such year,
(B) multiplied by a fraction, the numerator of which is the
number of months from the first day of such year through the last day
of the month in which such separation occurred, and the denominator of
which is 12.
No further payments shall be made to such Participant for any subsequent year.
(d) For purposes of paragraph (c) of this Section, the date of a
Participant's separation by reason of involuntary termination of employment
shall be determined as follows --
19
<PAGE> 22
(A) For a Participant who is a party to an Employment
Agreement, such separation date shall be determined in accordance with
such agreement.
(B) For a Participant who is not a party to an Employment
Agreement and who is receiving severance pay following his last day
worked, such separation date shall be the date of expiration of such
severance pay.
(C) For a Participant who is not a party to an Employment
Agreement and who is receiving severance pay and IPP benefits following
his last day worked, such separation date shall be the date of
expiration of such severance pay, without regard to continuance of IPP
benefits thereafter.
6.9 Notwithstanding the foregoing provisions of this ARTICLE:
(a) If an Active Participant does not contribute the payments to him
under Sections 6.1 and 6.2 to the Trust for any calendar year (the
"Noncontributory Year"), Sections 6.4, 6.5, 6.6, 6.7 and 6.8(b) shall not apply
to such Active Participant. Following a Noncontributory Year, no further
payments to such Participant under the Plan may be contributed to the Trust and
no payments will be made to him under Section 6.2(b).
(b) If an Active Participant who remains in active service with Weirton
after the Target Date elects to receive his benefits under the Plan prior to his
retirement from service, no further payments shall be made to such Participant
for the year in which he receives his benefits hereunder or for any subsequent
year.
(c) The cash payment under Section 6.2(a), 6.4(a), 6.5(a) or 6.6(a), as
applicable, shall be limited to the amount by which such payment (without
reduction for withholding) is greater than the excess of (i) the present value
of the sum of (x) the Participant's after-tax Target Benefit and (y) the
Participant's after-tax Target Special Payment, over (ii) the value of the Trust
assets (reduced by the expected tax on Trust investment income for the
applicable year), both calculated as of the applicable Calculation Date.
6.10 For an Active Participant to whom Section 6.4(a) applies, in the
event that the sum of (i) the value of the assets in the Trust under this Plan
and (ii) the value of the assets in the Trust under the Weirton Senior SERP as
of the last day of any year after the year for which the additional cash payment
under Section 6.4(a) is made (exclusive of the year in which he retires) exceeds
the sum of (i) the present value of the Participant's after-tax Accrued Benefit
as of such date, (ii) the present value of his after-tax Special Payment as of
such date, and (iii) the present value of the Participant's Accrued Target
Benefit under the Weirton Senior SERP as of such date, such Active Participant
shall pay the
20
<PAGE> 23
amount of such excess to Weirton from the assets of the Trust under this Plan
not later than 30 days after the end of such year. Notwithstanding the
foregoing, no payment under this Section shall be required as of the last day of
any year after such Participant's 62nd birthday.
ARTICLE VII
Retirement Benefits
7.1 All retirement benefits payable hereunder shall be paid solely from
the Trust.
7.2 Upon an Active Participant's Target Date or, if earlier, upon his
death, retirement from service with Weirton with eligibility for an unreduced
regular pension or involuntary termination of employment with Weirton, as
determined by the Administrative Committee (the "Earliest Benefit Payment
Date"), such Participant (or, in the case of his death, his Beneficiary) shall
be entitled to receive benefits hereunder.
7.3(a) The assets in the Trust and/or the proceeds of the disposition
thereof shall be paid to the Participant or his Beneficiary in a lump sum, in
cash and/or in kind, as elected by the Participant or Beneficiary, within 60
days after the end of the calendar year in which his Earliest Benefit Payment
Date occurs.
(b) Notwithstanding the provisions of paragraph (a) of this Section,
the provisions of paragraph (a) shall not apply to an Active Participant who
remains in active service with Weirton after the Target Date unless he elects to
receive his benefits under such paragraph prior to the end of the year in which
the Target Date falls. If an Active Participant referred to in the preceding
sentence does not make the election referred to therein, he may elect to receive
his benefits hereunder under paragraph (a) as of the end of any subsequent year
in which he remains in active service with Weirton. If such an Active
Participant does not elect to receive his benefits prior to his retirement from
service, the payment of benefits referred to in paragraph (a) shall be made
within 60 days after the end of the calendar year in which his Retirement Date
occurs.
7.4 A Participant shall, prior to the filing of his Federal income tax
return for any such year, withdraw from the Trust an amount equal to the
applicable pre-retirement tax rate percentage of the Trust income which is
taxable to him for any calendar year which ends prior to the payment under
Section 7.3.
21
<PAGE> 24
ARTICLE VIII
Trust
8.1 A Participant may, as grantor, establish a Trust with a bank or
trust company designated by Weirton, as trustee.
8.2 Payments to a Participant under ARTICLE VI may be contributed to
the Trust in accordance with and subject to the provisions hereof.
8.3 Retirement benefits under ARTICLE VII shall be paid from the Trust.
8.4 The investment of the assets in the Trust shall be managed by the
Investment Committee in accordance with the terms and provisions of the Trust.
ARTICLE IX
Amendment and Termination
9.1 Weirton, by action of the Weirton CEO upon the recommendation of
the Administrative Committee, may, except as otherwise provided in this Section,
at any time modify or amend, in whole or in part, any or all of the provisions
of the Plan. Any such amendment shall be by an instrument in writing executed on
behalf of Weirton by the Weirton CEO. Upon the execution and delivery of any
such instrument, the Plan shall be deemed to have been amended in the manner set
forth therein, and Weirton and each Participant, former Participant, and the
Beneficiary of either of the foregoing shall be bound thereby; provided,
however, that no such amendment may cause a reduction in an amount previously
paid to any Participant hereunder or have any adverse effect on any Trust
established by a Participant.
9.2 Weirton, by action of the Weirton CEO, may discontinue payments to
Participants hereunder or terminate the Plan in part or in whole at any time.
9.3 Upon termination of the Plan in its entirety, the entire fair
market value of the assets in the Trust shall be paid to the applicable
Participant or Beneficiary within 60 days after the effective date of such
termination.
22
<PAGE> 25
ARTICLE X
Miscellaneous
10.1 Nothing in the Plan shall be construed as a contract of employment
between Weirton and a Participant, and the Plan shall not afford a Participant a
right of continued employment with Weirton.
10.2 Payments and benefits under this Plan may not be assigned or
hypothecated. To the extent permitted by law, no such payments or benefits shall
be subject to legal process or attachment for the payment of any claim of any
person entitled to receive the same.
10.3 The validity of the Plan or of any of its provisions shall be
determined under, and it shall be construed and administered according to, the
laws of the State of West Virginia.
23
<PAGE> 1
Exhibit 10.20
EMPLOYMENT AGREEMENT
AGREEMENT made as of the date written below by and between
WEIRTON STEEL CORPORATION, a Delaware corporation, with its principal executive
offices located at Three Springs Drive, Weirton, West Virginia 26062
(hereinafter called the "Corporation") and the individual employee whose name
and address appear on the signature page hereto (hereinafter called "Employee").
The parties hereto agree as follows:
First: Term and Duties: The term of this Agreement shall
commence on the date hereof and shall continue until terminated in accordance
with Paragraph Second. During the term hereof, Employee shall serve as a
full-time, salaried employee of the Corporation. Employee's duties, title,
salary and other benefits shall be as agreed upon from time to time between
Employee and the Corporation.
Second: Eligibility for Termination Benefits: (a) Subject to
paragraph (d) of Paragraph Third, if Employee's employment with the Corporation
is terminated by the Corporation without just cause, Employee shall receive such
benefits hereunder ("Termination Benefits") as determined in accordance with
Paragraph Third, provided Employee, if requested, remains in the employment of
the Corporation for a period not exceeding 60 days following receipt of a
written notice of such termination. For purposes of this Agreement, termination
of Employee's employment by the Corporation shall constitute a termination for
"just cause" only if such termination is for one of the following reasons: (i)
conviction of a felony punishable by a prison sentence of more than one year;
(ii) habitual use of drugs without a prescription or habitual, excessive use of
alcohol to the extent that any of such uses materially interferes with
Employee's performance of his duties; or (iii) refusal or failure, after notice,
by Employee to perform or discharge duties and responsibilities appropriate to
his position, which refusal or failure amounts to an extended and gross neglect
of his duties to the Corporation. Except as otherwise specifically set forth in
this Agreement or as otherwise prohibited by law, all rights of Employee, and
all obligations of the Corporation under this Agreement, shall cease and
terminate on, and as of, the date of termination of employment for just cause.
(b) The Corporation shall be deemed to have agreed to a
termination in accordance with paragraph (a) of this Paragraph Second from and
after the date (i) the Employee is assigned duties
<PAGE> 2
or responsibilities significantly inconsistent with and less than the Employee's
position, duties, responsibilities or status with the Corporation as in effect
upon execution of this Agreement, (ii) the Employee's base salary, excluding any
bonus or other compensation derived from any employee benefit plan, is ever
reduced below any level attained by the Employee, or (iii) the Employee is
required to reside other than in the Greater Pittsburgh Area in order to perform
his duties for the Corporation; provided, that such action is taken without the
Employee's consent, and within 30 days after the occurrence of any such event
the Employee notifies the Corporation that he is so deeming the Corporation to
have elected to terminate his employment, whereupon the Corporation shall be
deemed to have terminated such employment as of the date of any such action or
the date of such notice at the option of the Employee. If the date of
termination is deemed to be a date earlier than the date of such notice, and the
Corporation, upon receipt of such notice, promptly takes all actions hereunder
required in the event of such termination, no intervening delay in taking such
actions may be construed as a violation of this Agreement.
Third: Amount and Duration of Termination Benefits:
(a) Upon the termination of Employee's employment on any date
in accordance with Paragraph Second (the "Termination Date"), Employee shall be
treated as being an inactive employee for 18 months following the Termination
Date, and Employee shall receive a total of 18 months base salary (excluding
vacation or special pay) in effect at the Termination Date as follows: (i) 12
months base salary to be paid in one lump sum within 10 days following the
Termination Date; (ii) starting in the 13th month following the Termination Date
and ending in the 18th month following the Termination Date, six months base
salary to be paid in six monthly installments. Any income earned by Employee
from employment, or otherwise from a trade or business, in the 13th through the
18th month following the Termination Date (excluding any self-employment
income), shall reduce on a dollar-for-dollar basis the compensation payable to
Employee during such months pursuant to this paragraph. Employee shall report
all such other compensation to the Corporation. Furthermore, for a period of 18
months following the Termination Date, the Corporation shall (iii) continue to
provide coverage for Employee and applicable dependents under all benefit plans
of the Corporation providing life insurance or health, disability,
hospitalization and major medical insurance at such levels as are not less than
those in effect at the time of the Termination Date; and (iv) to the extent
allowable under applicable law, cause Employee to continue to earn service
credit for all purposes under any pension or retirement plan maintained by the
Corporation in which Employee participated at the time of the Termination Date;
provided, however, that the coverage referred to
2
<PAGE> 3
in clause (iii) shall be suspended during any period in which and to the extent
Employee is eligible for similar coverage under another employer plan.
Notwithstanding the above, the Corporation shall not be obligated as provided in
this Paragraph Third during any period when employee does not comply with
Paragraph Fourth. For all other purposes, Employee's employment shall terminate
on the Termination Date.
(b) Nothing in paragraph (a) of this Paragraph Third shall be
construed to require the Corporation to maintain any employee or management
benefit program solely for the purpose of covering or providing benefits to
Employee.
(c) The Corporation shall promptly reimburse Employee for the
reasonable legal fees and expenses incurred by Employee in connection with
enforcing any right of Employee pursuant to paragraph (a) or (b) of Paragraph
Second, or paragraph (a) of this Paragraph Third; provided, however, that the
Corporation will only reimburse Employee for such legal fees and expenses if, in
connection with enforcing any right of Employee pursuant to this Agreement,
either (i) a judgment has been rendered in favor of Employee by a duly
authorized court of law, or (ii) the Corporation and Employee have entered into
a settlement agreement providing for the payment to Employee of any or all
amounts due hereunder.
(d) Notwithstanding any other provision of this Agreement, if
the Employee's employment with the Corporation is terminated for any reason and
(i) the Employee has attained 65 years of age, (ii) for the 2-year period
immediately prior to such termination the Employee is employed in a bona fide
executive or a high policy-making position and (iii) the Employee is entitled to
an immediate nonforfeitable annual retirement benefit from a pension, profit
sharing, savings, or deferred compensation plan, or any combination of such
plans, of the Corporation, which equals in the aggregate, at least $44,000, the
Employee will not be entitled to any Termination Benefits hereunder.
Fourth: Confidentiality and Non-Competition:
(a) Employee shall not, during the term hereof or subsequent
to the Termination Date, divulge, furnish or make accessible to anyone
(otherwise than as consented to by the Corporation) any knowledge or
information, techniques, plans, trade or business secrets or confidential
information relating to the business of the Corporation or with respect to any
other confidential or secret aspect of the business of the Corporation, nor
shall Employee make any use of the same for his own purposes or for the benefit
of anyone under any circumstances; provided that, after the Termination Date,
these restrictions shall not apply to such knowledge, techniques, plans, trade
or business secrets or
3
<PAGE> 4
confidential information which is then in, or subsequently becomes part of, the
public domain, except because of disclosure by Employee without the
Corporation's consent.
(b) Except with the consent of the Corporation and provided
the Corporation has made the payment required under clause (i) of paragraph (a)
of Paragraph Third, for a period of one year after the Termination Date,
Employee shall not engage in any business (whether as an officer, director,
owner, employee, partner or other direct or indirect participant and except for
and to the extent of any business engaged in by Employee at the Termination Date
and consented to by the Corporation) competing with any portion of the steel
business in which the Corporation is actively engaged in the United States as of
the Termination Date. For such period, Employee also shall not interfere with,
disrupt or attempt to disrupt the relationship, contractual or otherwise,
between the Corporation and any customer, supplier, lessor, lessee or employee
of the Corporation.
(c) It is the desire of the parties that the provisions of
this Paragraph Fourth be enforced to the fullest extent permissible under the
laws and public policies in each jurisdiction in which enforcement might be
sought. Accordingly, if any particular portion of this Paragraph Fourth be
adjudicated as invalid or unenforceable, this Paragraph Fourth shall be deemed
amended to delete therefrom such portion so adjudicated, such deletion to apply
only with respect to the operation of this Paragraph Fourth in the particular
jurisdiction so adjudicating. If there is a breach or threatened breach of this
Paragraph Fourth by Employee, the Corporation shall be entitled to an injunction
restraining Employee from such breach, but nothing herein shall be construed as
prohibiting the Corporation from pursuing any other remedies for such breach or
threatened breach.
Fifth: Disability: If Employee is unable to render full-time
services to the Corporation of the character required to perform the duties of
his employment with the Corporation with reasonable efficiency for a period of
six consecutive months, commencing after the date hereof, by reason of illness,
disability or incapacity and the Corporation terminates Employee's employment
thereafter, Employee shall not be entitled to any Termination Benefits
hereunder; provided, that this Paragraph Fifth shall not apply in any case where
Employee, upon such termination, would not qualify under any program of
long-term disability benefits provided by the Corporation.
Sixth: Waiver of Breach: A waiver by the Corporation or
Employee of a breach of any provision of this Agreement by the
4
<PAGE> 5
other party shall not operate or be construed as a waiver of any subsequent
breach by the other party.
Seventh: Entire Agreement: This Agreement contains the entire
understanding and agreement between the parties and cannot be amended, modified
or supplemented in any respect, except by an agreement in writing signed by the
party against whom enforcement of any amendment, modification or supplement is
sought.
Eighth: Successors and Assigns: This Agreement shall inure to
the benefit of and be binding upon the Corporation and its successors and
assigns including, without limitation, any corporation or other entity which may
acquire all or substantially all of the capital stock, assets and/or business of
the Corporation or with or into which the Corporation may be consolidated or
merged, and Employee, his heirs, executors, administrators and legal
representatives.
Ninth: Governing Law: This Agreement shall be governed
by the laws of the State of West Virginia.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day written below.
WEIRTON STEEL CORPORATION
Dated: August 22, 1997 By: /s/ RICHARD K. RIEDERER
------------------------------
Richard K. Riederer
Title: President & CEO
EMPLOYEE
Name: /s/ PATRICK B. STEWART
----------------------------
Patrick B. Stewart
Chief Informational Officer
Address: 127 Beaver Creek Court
Sewickley, PA 15143
5
<PAGE> 1
Exhibit 13.1
Weirton Steel Corporation
M D & A
---------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------------------------------------
OVERVIEW
This discussion and analysis of Weirton Steel Corporation's (the "Company")
financial condition and results of operations should be read together with
the consolidated financial statements and notes thereto, which begin on
page 17.
The Company is a major integrated producer of flat rolled carbon steels
with major product lines consisting of sheet and tin mill product. Sheet
product includes hot and cold rolled and both hot-dipped and electrolytic
galvanized steels. Tin mill product includes tin-plate, chrome coated and
black plate.
RESULTS OF OPERATIONS
1997 COMPARED TO 1996
The net loss for 1997 was $17.7 million or $0.42 per diluted share compared
to a net loss of $49.9 million or $1.18 per diluted share in 1996. The
results for 1997 and 1996 included pretax restructuring charges of
approximately $17.0 million in each year associated with employee reduction
programs. The 1996 results also included a $5.4 million after-tax
extraordinary loss on the early extinguishment of debt. Excluding the
effect of these non-recurring items, and the resulting impact on income
taxes, the net loss for 1997 would have been $4.1 million or $0.10 per
diluted share compared to a net loss for 1996 of $30.8 million or $0.73 per
diluted share.
Total shipments in 1997 were 2,772 thousand tons compared to 2,857 thousand
tons in 1996. Net sales were $1,397.2 million in 1997 compared to $1,383.3
million in 1996.
Sheet product shipments in 1997 were 1,918 thousand tons or 2% lower than
in 1996. However, net sales generated by sheet product in 1997 increased
$39.6 million to $862.6 million, due to an improved product mix and overall
higher average selling prices.
Tin mill product shipments in 1997 were 854 thousand tons compared to 900
thousand tons in 1996, a decrease of 5%. Tin mill product shipments
resulted in net sales of $534.6 million in 1997, a decrease of $25.7
million compared to 1996. The decrease in net sales is attributable to the
decrease in tin mill product shipments.
Cost of sales as a percentage of net sales was 90% in 1997 compared to 93%
in 1996 reflecting an improved product mix, higher average selling prices,
lower operating costs in 1997 due to the Company's ongoing cost reduction
program and improved operations after the rebuild of the No. 1 Blast
Furnace. Operating costs in the fourth quarter of 1996 and the first
quarter of 1997 were adversely affected by the planned shut down of the No.
1 Blast Furnace, however, these costs were offset during the remainder of
1997 as a result of the improved operations at the facility.
Selling, general and administrative expense in 1997 was $36.3 million
compared to $39.1 million in 1996. The decrease was primarily attributable
to decreased outside purchased services and lower employee costs resulting
from the managerial and supervisory workforce reduction in 1996.
Depreciation expense increased $2.9 million to $60.9 million in 1997. This
increase was the result of a higher depreciable asset base as a result of
the capital expenditures associated with the No. 1 Blast Furnace rebuild,
offset by revisions to assumptions used under the production-variable
method of depreciation.
During 1997, the Company finalized labor agreements with its principle
union. The new contracts, among other things, provided for a retirement
window for represented retirement eligible employees. As a result of the
retirement window, the Company recorded a restructuring charge of $17.0
million which included early retirement pension benefits of $10.4 million
and other separation benefits of $6.6 million. During 1996, the Company
also recognized a $17.0 million restructuring charge associated with an
approximately 20%
1 9 9 7 A N N U A L R E P O R T 13
<PAGE> 2
Weirton Steel Corporation
M D & A
---------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------------------------------------
reduction in the supervisory and managerial workforce. The charge related
to this employee reduction consisted of early retirement benefits for those
eligible to retire and severance benefits for those choosing not to retire
or ineligible to retire.
Interest expense was $48.7 million in 1997, an increase of $4.3 million
from 1996. The increase resulted from a net increase of approximately $23.0
million of senior debt obligations during the second half of 1996.
1996 COMPARED TO 1995
The net loss for 1996 was $49.9 million or $1.18 per diluted share compared
to net income of $48.4 million or $1.10 per diluted share in 1995. The
results for 1996 included a pretax restructuring charge of $17.0 million
associated with the approximately 20% reduction in the managerial and
supervisory workforce and a $5.4 million after-tax extraordinary loss on
the early extinguishment of debt. The 1995 results included favorable
adjustments for business interruption and property damage insurance
recoveries. The Company received $9.0 million for property damage and $34.0
million for business interruption in 1995 related to its No. 9 Tandem Mill.
In addition, the Company's business interruption claim stemming from an
outage at its hot strip mill in March 1991 was settled for $7.5 million.
The 1995 results included a pretax provision for employee profit sharing of
$24.2 million. Net income for 1995 also included a $6.7 million after-tax
extraordinary loss on the early extinguishment of debt. Excluding the
effect of these non-recurring items, and their resulting impact on the
provisions for profit sharing and income taxes, the net loss for 1996 would
have been $30.8 million or $0.73 per diluted share compared to net income
for 1995 of $24.2 million or, $0.55 per diluted share.
Total shipments in 1996 were 2,857 thousand tons compared to 2,718 thousand
tons in 1995. Net sales were $1,383.3 million in 1996 compared to $1,351.7
million in 1995.
Sheet product shipments in 1996 were slightly more than in 1995 at 1,957
thousand tons reflecting high demand for the Company's product. However,
net sales generated by sheet product in 1996 declined $41.8 million to
$823.0 million primarily as a result of lower average selling prices,
particularly in the first half of the year reflecting weak industry-wide
pricing.
Tin mill product shipments in 1996 were 900 thousand tons compared to 763
thousand tons in 1995, an increase of 18%. Tin mill product shipments
resulted in net sales of $560.3 million in 1996, an increase of $73.4
million compared to 1995. The increase in revenues was attributable to the
increase in tin mill product shipments, but was partially offset by lower
average selling prices compared to 1995.
Cost of sales as a percentage of net sales was 93% in 1996 compared to 87%
in 1995 reflecting lower average selling prices, higher raw material and
energy costs and costs associated with shutdown of the No.1 Blast Furnace
for a major rebuild in the fourth quarter of 1996. Additionally, operating
costs in 1996 were adversely affected by an unplanned blast furnace outage
in April 1996, costs associated with an environmental settlement and a
higher cost product mix.
Selling, general and administrative expenses were $39.1 million compared to
$34.4 million in 1995. The increase was primarily attributable to higher
employee benefit costs and increased outside purchased services, partially
offset by lower salaries resulting from the workforce reduction in 1996.
Depreciation expense increased $3.3 million to $58.0 million in 1996. This
increase was the result of increased production and a higher depreciable
asset base.
A $17.0 million restructuring charge was recognized in 1996, in connection
with the approximately 20% reduction in the supervisory and managerial
workforce. The restructuring charge included approximately $10.1 million of
severance benefits for terminated employees, $3.8 million related to a
special retirement supplement for those eligible for retirement and $3.1
million for other termination related benefits.
14 W E I R T O N S T E E L C O R P O R A T I O N
<PAGE> 3
Weirton Steel Corporation
M D & A
---------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------------------------------------
Interest expense was $44.4 million in 1996, an increase of $1.8 million
from 1995. The increase resulted from a net increase of approximately $23.0
million of senior debt obligations during the second half of 1996.
In July 1996, the Company refinanced approximately $100.0 million of its
senior notes through the issuance of $125.0 million principal amount of
11-3/8% Senior Notes due 2004. The refinancing resulted in the recognition
of a $5.4 million after-tax extraordinary loss on the early extinguishment
of debt. In 1995, the Company recognized a $6.7 million after-tax
extraordinary loss on the early extinguishment of debt as the result of the
refinancing of $112.0 million of the Company's senior notes through the
issuance of $125.0 million principal amount of 10-3/4% Senior Notes due
2005.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997, the Company had cash and equivalents of $124.7
million compared to $112.1 million as of December 31, 1996. This increase
in cash and equivalents was due to improved cash flow from operations.
The Company has in place, through a wholly owned subsidiary, Weirton
Receivables, Inc. ("WRI"), a receivable participation agreement, as
amended, with a group of four banks. The facility provides for a total
commitment by the banks of up to $85.0 million, including a letter of
credit subfacility of up to $25.0 million, and is available to WRI through
April 2002. As of December 31, 1997, $19.2 million in letters of credit
under the subfacility were outstanding. In January 1998, letters of credit
outstanding were reduced by $6.4 million. As of December 31, 1997, after
reductions for amounts in place under the letter of credit subfacility, the
base amount of participation interests available for cash sale was
approximately $57.9 million.
In March 1998, $42.2 million of senior notes mature. 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 retirement of the senior notes in 1998 and the
completion of the 1998 capital spending plan. To the extent 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.
The Company's net deferred tax asset was $145.6 million as of December 31,
1997, which consisted primarily 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. The Company was required in 1997 and
1996, and may be required in future periods, to make cash payments for
income taxes under federal alternative minimum tax regulations.
INVESTMENT IN FACILITIES
Capital additions in 1997 were approximately $44.9 million compared to
$83.1 million in 1996. The Company's planned capital expenditures for 1998
are expected to be approximately $56.0 million. Included in the Company's
planned capital expenditures for 1998 is approximately $11.0 million for
environmental control projects and approximately $6.0 million for
information systems.
YEAR 2000
The Company utilizes software and related technologies throughout its
business that will be affected by the date change in the year 2000. The
Company is continuing to assess the impact of the year 2000 on its computer
information systems. Maintenance or modification costs will be expensed as
incurred, while the cost of new software will be capitalized and amortized
over the software's useful life. Costs associated with the year 2000 are
not expected to have a significant impact on the Company's ongoing results
of operations.
ENVIRONMENTAL MATTERS
In March 1996, the West Virginia Department of Environmental Protection
("DEP") and the United States Environmental Protection Agency ("EPA")
advised the Company that they had identified a number
1 9 9 7 A N N U A L R E P O R T 15
<PAGE> 4
Weirton Steel Corporation
M D & A
---------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------------------------------------
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 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, wastewater treatment
systems and waste handling facilities. Under the settlement, the Company
committed to environmental related capital projects totaling approximately
$16.7 million. Through December 31, 1997, the Company has expended $8.9
million related to these capital commitments.
In connection with the negotiations, 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 waste 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 former NSCSteel Division in 1984, NSC retained liability for
cleanup costs related to solid or hazardous waste facilities, areas or
equipment as long as such were not used by the Company in its operations
subsequent to the acquisition.
RECENT ACCOUNTING PRONOUNCEMENT
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.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards
for the way that public companies report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. SFAS No. 131
is effective for financial statements for fiscal years beginning after
December 15, 1997. Management has not determined how SFAS No. 131 will
impact the Company's financial statements.
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.
16 W E I R T O N S T E E L C O R P O R A T I O N
<PAGE> 5
Weirton Steel Corporation
I N C O M E
---------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $1,397,204 $1,383,301 $1,351,771
OPERATING COSTS:
Cost of sales 1,258,035 1,282,923 1,180,053
Selling, general and administrative expense 36,308 39,102 34,440
Depreciation 60,855 58,019 54,699
Restructuring charge 17,000 16,959 --
Provision for profit sharing -- -- 24,178
Insurance recoveries -- -- (41,502)
---------- ---------- ----------
TOTAL OPERATING COSTS 1,372,198 1,397,003 1,251,868
---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS 25,006 (13,702) 99,843
Adjustment to carrying value of damaged facilities -- -- 9,000
Interest expense (48,683) (44,366) (42,519)
Interest income 4,247 5,415 4,615
ESOP contribution (2,610) (2,610) (2,610)
---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (22,040) (55,263) 68,329
Income tax provision (benefit) (4,298) (10,776) 13,255
---------- ---------- ----------
INCOME(LOSS) BEFORE EXTRAORDINARY ITEM (17,742) (44,487) 55,074
Loss on early extinguishment of debt - net of tax -- 5,431 6,718
---------- ---------- ----------
NET INCOME(LOSS) $ (17,742) $ (49,918) $ 48,356
========== ========== ==========
PER SHARE DATA:
Weighted average number of common shares (in thousands):
Basic 42,622 42,370 42,040
Diluted 42,622 42,370 43,781
BASIC EARNINGS PER SHARE:
Income (loss) before extraordinary item $ (0.42) $ (1.05) $ 1.31
Loss on early extinguishment of debt -- (0.13) (0.16)
---------- ---------- ----------
NET INCOME (LOSS) PER COMMON SHARE $ (0.42) $ (1.18) $ 1.15
========== ========== ==========
DILUTED EARNINGS PER SHARE:
Income (loss) before extraordinary item $ (0.42) $ (1.05) $ 1.26
Loss on early extinguishment of debt -- (0.13) (0.16)
---------- ---------- ----------
NET INCOME (LOSS) PER COMMON SHARE $ (0.42) $ (1.18) $ 1.10
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
1 9 9 7 A N N U A L R E P O R T 17
<PAGE> 6
Weirton Steel Corporation
B A L A N C E
---------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Current assets:
Cash and equivalents, includes restricted cash of $2,046 and $2,010,
respectively $ 124,690 $ 112,092
Receivables, less allowances of $9,853 and $7,684, respectively 140,843 154,426
Inventories 260,933 259,139
Deferred income taxes 34,437 32,942
Other current assets 4,803 3,269
---------- ----------
TOTAL CURRENT ASSETS 565,706 561,868
---------- ----------
Property, plant and equipment, net 591,389 610,494
Deferred income taxes 111,148 110,901
Other assets and deferred charges 14,297 17,358
---------- ----------
TOTAL ASSETS $1,282,540 $1,300,621
========== ==========
LIABILITIES:
CURRENT LIABILITIES:
Current portion of long term debt obligations $ 42,163 $ --
Payables 132,666 164,778
Employment costs 61,800 65,067
Pension liability -- 12,000
Taxes other than income taxes 22,417 16,703
Other current liabilities 12,571 12,757
---------- ----------
TOTAL CURRENT LIABILITIES 271,617 271,305
Long term debt obligations 388,997 430,820
Long term pension obligation 97,542 74,750
Postretirement benefits other than pensions 338,474 329,154
Other long term liabilities 32,804 26,941
---------- ----------
TOTAL LIABILITIES 1,129,434 1,132,970
REDEEMABLE STOCK:
Preferred stock, Series A, $0.10 par value; 1,738,163 and 1,762,723
shares authorized and issued; 1,729,325 and 1,757,649 subject to put 24,652 25,188
Less: Preferred treasury stock, Series A, at cost, 10,892
and 14,865 shares (158) (216)
Deferred ESOP compensation (3,915) (6,525)
---------- ----------
TOTAL REDEEMABLE STOCK 20,579 18,447
STOCKHOLDERS' EQUITY:
Preferred stock, Series A, $0.10 par value: 8,838 and 5,074 shares
not subject to put 128 74
Common stock, $0.01 par value; 50,000,000 authorized;
42,846,184 and 42,592,850 shares issued 428 426
Additional paid-in capital 456,379 455,311
Common stock issuable, 288,423 and 259,177 shares 664 773
Deferred compensation (471) (385)
Retained earnings (deficit) (323,014) (305,272)
Less: Common treasury stock, at cost 209,514 and 239,648 shares (1,587) (1,723)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 132,527 149,204
---------- ----------
TOTAL LIABILITIES, REDEEMABLE STOCK AND STOCKHOLDERS' EQUITY $1,282,540 $1,300,621
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
18 W E I R T O N S T E E L C O R P O R A T I O N
<PAGE> 7
Weirton Steel Corporation
C A S H F L O W S
---------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- ---------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $(17,742) $(49,918) $ 48,356
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS)
TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation 60,855 58,019 54,699
Amortization of deferred financing costs 1,836 1,982 2,212
Restructuring charge 17,000 16,959 --
Adjustments to carrying value of damaged facilities -- -- (9,000)
ESOP Contribution 2,610 2,610 2,610
Loss on early extinguishment of debt -- 5,431 6,718
Deferred income taxes (1,742) (7,078) 7,240
Cash provided (used) by working capital items:
Receivables 13,583 (4,213) (18,311)
Inventories (1,794) (3,779) 15,158
Other current assets 1,606 4,131 (1,797)
Payables (16,932) 24,743 (12,933)
Other current liabilities 838 (35,188) 9,620
Long term pension obligation 368 6,973 12,397
Other 11,618 13,936 (7,750)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 72,104 34,608 109,219
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in unconsolidated subsidiary (100) -- --
Capital spending (60,070) (67,937) (52,358)
Less: Insurance recoveries -- -- 9,000
-------- -------- --------
NET CASH USED BY INVESTING ACTIVITIES (60,170) (67,937) (43,358)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt obligations -- (105,676) (118,800)
Proceeds from issuance of debt obligations -- 122,610 125,000
Common shares issuable 664 773 1,170
Deferred financing costs -- (4,097) (4,325)
-------- -------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 664 13,610 3,045
-------- -------- --------
NET CHANGE IN CASH AND EQUIVALENTS 12,598 (19,719) 68,906
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 112,092 131,811 62,905
-------- -------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $124,690 $112,092 $131,811
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid, net of capitalized interest $ 48,489 $ 40,275 $ 44,416
Income taxes paid (refunded), net (2,556) (3,699) 10,593
</TABLE>
The accompanying notes are an integral part of these statements.
1 9 9 7 A N N U A L R E P O R T 19
<PAGE> 8
Weirton Steel Corporation
C H A N G E S
---------------------------------------------------------------------------
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK
---------------------- ADDITIONAL
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) SHARES AMOUNT PAID-IN CAPITAL
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKHOLDERS' EQUITY CONSOLIDATED AT DECEMBER 31, 1994 42,027,405 $420 $452,746
Net income -- -- --
Conversion of preferred stock 22,453 1 74
Reclassification of preferred Series A not
subject to put -- -- --
Employee stock purchase plan:
Shares issued 240,086 2 1,348
Shares issuable -- -- --
Board of Directors deferred compensation plan:
Shares issued -- -- 29
Shares issuable -- -- --
- ----------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY CONSOLIDATED AT DECEMBER 31, 1995 42,289,944 423 454,197
Net loss -- -- --
Conversion of preferred stock 7,142 -- 94
Exercise of preferred stock put options -- -- 13
Purchase of treasury stock -- -- --
Employee stock purchase plan:
Shares issued 295,764 3 1,034
Shares issuable -- -- --
Board of Directors deferred compensation plan:
Shares issued -- -- (27)
Shares issuable -- -- --
Deferred compensation -- -- --
- ----------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY CONSOLIDATED AT DECEMBER 31, 1996 42,592,850 426 455,311
Net loss -- -- --
Conversion of preferred stock 24,560 -- 356
Exercise of preferred stock put options -- -- 77
Purchase of treasury stock -- -- 1
Reclassification of preferred Series A not
subject to put -- -- --
Employee stock purchase plan:
Shares issued 228,774 2 679
Shares issuable -- -- --
Board of Directors deferred compensation plan:
Shares issued -- -- (45)
Shares issuable -- -- --
Deferred compensation -- -- --
- ----------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY CONSOLIDATED AT DECEMBER 31, 1997 42,846,184 $428 $456,379
==========================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
20 W E I R T O N S T E E L C O R P O R A T I O N
<PAGE> 9
<TABLE>
<CAPTION>
COMMON COMMON PREFERRED SERIES A
SHARES ISSUABLE RETAINED TREASURY STOCK NOT SUBJECT TO PUT
- ------------------------- DEFERRED EARNINGS -------------------- ------------------- STOCKHOLDERS'
SHARES AMOUNT COMPENSATION (DEFICIT) SHARES AMOUNT SHARES AMOUNT EQUITY
- ----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
348,040 $ 1,747 $ -- $(303,710) 373,340 $(2,106) 12,312 $ 87 $149,184
-- -- -- 48,356 -- -- -- -- 48,356
-- -- -- -- -- -- (8,546) (32) 43
-- -- -- -- -- -- 1,308 19 19
(240,086) (1,350) -- -- -- -- -- -- --
295,764 893 -- -- -- -- -- -- 893
(107,954) (253) -- -- (97,511) 224 -- -- --
36,312 133 -- -- -- -- -- -- 133
- ----------------------------------------------------------------------------------------------------------------------------
332,076 1,170 -- (255,354) 275,829 (1,882) 5,074 74 198,628
-- -- -- (49,918) -- -- -- -- (49,918)
-- -- -- -- -- -- -- -- 94
-- -- -- -- -- -- -- -- 13
-- -- -- -- 131 (1) -- -- (1)
(295,764) (1,037) -- -- -- -- -- -- --
228,774 681 -- -- -- -- -- -- 681
(36,312) (133) -- -- (36,312) 160 -- -- --
30,403 92 -- -- -- -- -- -- 92
-- -- (385) -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
259,177 773 (385) (305,272) 239,648 (1,723) 5,074 74 149,204
-- -- -- (17,742) -- -- -- -- (17,742)
-- -- -- -- -- -- (542) (8) 348
-- -- -- -- -- -- -- -- 77
-- -- -- -- 269 (1) -- -- --
-- -- -- -- -- -- 4,306 62 62
(228,774) (681) -- -- -- -- -- -- --
247,865 566 -- -- -- -- -- -- 566
(30,403) (92) -- -- (30,403) 137 -- -- --
40,558 98 (98) -- -- -- -- -- --
-- -- 12 -- -- -- -- -- 12
- ----------------------------------------------------------------------------------------------------------------------------
288,423 $ 664 $(471) $(323,014) 209,514 $(1,587) 8,838 $128 $132,527
============================================================================================================================
</TABLE>
1 9 9 7 A N N U A L R E P O R T 21
<PAGE> 10
Weirton Steel Corporation
N O T E S
---------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS OR IN MILLIONS OF
DOLLARS WHERE INDICATED
---------------------------------------------------------------------------
1
NOTE 1
BASIS OF PRESENTATION
The financial statements herein include the accounts of Weirton Steel
Corporation and its consolidated subsidiaries. Weirton Steel Corporation
together with its subsidiaries are herein referred to as the "Company."
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 reclassifications have been made to prior year amounts to conform
with current year presentation.
2
NOTE 2
ORGANIZATION AND BACKGROUND
The Company and its predecessor companies have been in the business of
making and finishing steel products for nearly 90 years. From November 1929
to January 1984, the Company's business was operated as either a subsidiary
or 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 (the "Division") in January 1984.
Prior to 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 sold 4.5 million shares of the Company's common stock in a
public offering. In connection with the public offering of common stock in
June 1989, the Company sold 1.8 million shares of voting Redeemable
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 into one share of common stock, subject to adjustment, and is
entitled to 10 times the number of votes allotted to the common stock into
which it is convertible.
In May 1994, the Company's stockholders approved an amendment to the
Company's Restated Certificate of Incorporation increasing the number of
authorized shares of common stock from 30.0 million shares to 50.0 million
shares. In August 1994, the Company and its pension plan participated in a
public sale of the Company's common stock and sold 15.0 million and 4.55
million shares, respectively.
Substantially all of the Company's employees participate in the 1984 ESOP
and the 1989 ESOP which owned approximately 25.3% of the issued and
outstanding common shares and substantially all the preferred shares of the
Company as of December 31, 1997. The common and preferred shares held by
the 1984 ESOP and the 1989 ESOP collectively represented 46.3% of the
voting power of the Company's voting stock as of December 31, 1997.
22 W E I R T O N S T E E L C O R P O R A T I O N
<PAGE> 11
Weirton Steel Corporation
N O T E S
---------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS OR IN MILLIONS OF
DOLLARS WHERE INDICATED
---------------------------------------------------------------------------
3
NOTE 3
SIGNIFICANT ACCOUNTING POLICIES
CASH
The liability representing outstanding checks drawn against a zero-balance
general disbursement bank account is included in accounts payable for
financial statement presentation. Such amounts were $21.8 million and $2.5
million as of December 31, 1997 and 1996, 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 financial statement presentation, 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 cost or market, cost being
determined by the first-in, first-out method. 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 do 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.
Depreciation of steelmaking facilities is determined by the
production-variable method which adjusts straight-line depreciation to
reflect actual production levels. The cost of relining blast furnaces and
related equipment is amortized over the estimated production life of the
lining. All other assets are depreciated on a straight-line basis.
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) ACCOUNTING
The Company recognizes as compensation expense an amount based upon its
required contributions to the ESOPs. The resulting expense approximates the
cost to the ESOPs for the shares allocated to participants for the period.
The number of shares allocated to participants for the period is determined
based on the ratio of the period's debt principal payment to the total
estimated debt principal payments. Shares are then allocated to individual
participants based on the participant's relative compensation.
EMPLOYEE PROFIT SHARING
The provision for employee profit sharing is calculated in accordance with
the Profit Sharing Plan. There were no provisions for employee profit
sharing in 1997 and 1996. The pretax provision in 1995 was based upon
33-1/3% of net income.
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 $3.1 million,
$3.4 million and $3.2 million in 1997, 1996 and 1995, respectively.
1 9 9 7 A N N U A L R E P O R T 23
<PAGE> 12
Weirton Steel Corporation
N O T E S
---------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS OR IN MILLIONS OF
DOLLARS WHERE INDICATED
---------------------------------------------------------------------------
4
NOTE 4
INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1997 1996
------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 97,974 $ 87,733
Work-in-process 69,418 76,526
Finished goods 93,541 94,880
-------- --------
$260,933 $259,139
======== ========
</TABLE>
5
NOTE 5
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1997 1996
--------------------------------------------------------------------------
<S> <C> <C>
Land $ 1,115 $ 1,107
Buildings 9,088 9,088
Machinery, equipment and other 988,105 895,151
Construction-in-progress 39,581 95,881
---------- ---------
1,037,889 1,001,227
Less: Allowances for depreciation (446,500) (390,733)
---------- ----------
$ 591,389 $ 610,494
========== ==========
</TABLE>
Property damage insurance recoveries related to a 1994 fire that damaged
the Company's No. 9 Tandem Mill were $9.0 million in 1995. The Company
received $34.0 million in 1995 for its business interruption claim related
to the No. 9 Tandem Mill fire. In addition, the Company's business
interruption claim stemming from an outage at its hot strip mill in March
1991 was settled for $7.5 million in 1995.
Capitalized interest applicable to facilities under construction for the
years ended December 31, 1997, 1996 and 1995 amounted to $0.5 million, $1.1
million and $1.1 million, respectively.
6
NOTE 6
FINANCING ARRANGEMENTS
DEBT OBLIGATIONS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
11-1/2% Senior Notes due 3/1/98 $ 42,163 $ 42,163
10-7/8% Senior Notes due 10/15/99 84,712 84,712
11-3/8% Senior Notes due 7/1/2004 125,000 125,000
10-3/4% Senior Notes due 6/1/2005 125,000 125,000
8-5/8% Pollution Control Bonds due 11/1/2014 56,300 56,300
-------- --------
433,175 433,175
Less: Unamortized debt discount 2,015 2,355
-------- --------
Total debt obligations 431,160 430,820
Less: Current portion of long term debt obligations (42,163) --
-------- --------
$388,997 $430,820
======== ========
</TABLE>
24 W E I R T O N S T E E L C O R P O R A T I O N
<PAGE> 13
Weirton Steel Corporation
N O T E S
---------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS OR IN MILLIONS OF
DOLLARS WHERE INDICATED
---------------------------------------------------------------------------
In July 1996, the Company completed an offering of $125.0 million of its
11-3/8% Senior Notes due 2004. The net proceeds of the offering were $118.5
million, of which $105.7 million was used to repurchase $65.0 million
principal amount of the 10-7/8% Senior Notes and $35.0 million principal
amount of 11-1/2% Senior Notes. The Company recognized a $5.4 million
after-tax extraordinary loss on the early extinguishment of debt, which
included the premiums paid to retire the notes and the recognition of
previously deferred financing costs.
In June 1995, the Company completed an offering of $125.0 million of its
10-3/4% Senior Notes due 2005. The net proceeds were $121.0 million, of
which $118.8 million was used to purchase approximately $30.0 million
principal amount of its 11-1/2% Senior Notes and $82.0 million principal
amount of its 10-7/8% Senior Notes. The Company recognized an after-tax
extraordinary loss on the early extinguishment of debt of $6.7 million
related to premiums paid to purchase the notes and the immediate
recognition of previously deferred financing costs related to the purchased
notes.
The indentures governing the Senior Notes are substantially similar and
contain 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. 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, 1997, pursuant to this
covenant, the Company's ability to pay dividends on its common stock was
limited to $110.4 million. Upon the occurrence of a change in control, as
defined under the indentures, 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 Company has scheduled principal payments of $42.2 million on its
11-1/2% Senior Notes in 1998 and $84.7 million on its 10-7/8% Senior Notes
in 1999. No other principal payments become due within the next five years.
RECEIVABLES PARTICIPATION AGREEMENT
The Company has in place, through its subsidiary, Weirton Receivables, Inc.
("WRI"), a receivables participation agreement with a group of four banks.
The facility, as amended, provides for a total commitment by the banks of
up to $85.0 million, including a letter of credit subfacility of up to
$25.0 million. Weirton Steel Corporation sells substantially all of its
accounts receivable as they are generated, to its wholly-owned subsidiary,
WRI. WRI finances its ongoing receivable purchases from a combination of
cash collections on receivables already in the pool, short term
intercompany obligations and issuances of redeemable preferred stock to
Weirton Steel Corporation. As of December 31, 1997, while no funded
participation interests had been sold under the facility, $19.2 million in
letters of credit under the subfacility were in place. The amount of
participation interests committed to be purchased by the banks fluctuates
depending upon the amounts and nature of receivables generated by Weirton
Steel Corporation which are sold into the program, and certain financial
tests applicable to them. With respect to the receivables comprising the
pool 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 sale was approximately $57.9 million as of December 31,
1997.
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. In 1997, the Participation Agreement
was extended through April 2002. Weirton Steel Corporation acts as servicer
of the assets sold into the program and makes 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 WRI under the program,
the transactions under the facility are generally nonrecourse. WRI's
commitments
1 9 9 7 A N N U A L R E P O R T 25
<PAGE> 14
Weirton Steel Corporation
N O T E S
---------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS OR IN MILLIONS OF
DOLLARS WHERE INDICATED
---------------------------------------------------------------------------
to the banks, which do not include warranties as to collectibility of the
receivables, include those typical of sellers of similar property and are
secured by its interest in the receivables and related security. WRI 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. As of December 31, 1997, WRI
had a net worth of $105.3 million and outstanding receivables of $144.5
million. The banks and other creditors of WRI have a priority claim on all
assets of WRI prior to those assets becoming available to any of Weirton
Steel Corporation's creditors.
LEASES
The Company uses certain lease arrangements to supplement its financing
activities. Rental expense under operating leases was $6.4 million, $5.6
million and $4.7 million for the years ended December 31, 1997, 1996, and
1995, respectively. The minimum future lease payments under noncancelable
operating leases are $8.6 million, $6.5 million, $5.5 million, $5.2 million
and $4.3 million for the years ending 1998 through 2002, respectively, and
$7.2 million thereafter.
7
NOTE 7
EMPLOYEE RETIREMENT BENEFITS
PENSIONS
The Company has a noncontributory defined benefit pension plan which covers
substantially all employees (the "Pension Plan"). 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 years ended December 31, 1997, 1996 and 1995,
the Company contributed $41.1 million, $40.5 million and $22.4 million,
respectively, to the Pension Plan. The Pension Plan's assets are held in
trust, the investments of which consist primarily of common stocks, fixed
income securities and short term investments. See Note 9.
Following were the components of the Company's net pension expense
recognized in 1997, 1996 and 1995:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1997 1996 1995
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 18,629 $ 20,221 $ 16,060
Interest cost on projected benefit obligation 53,935 49,773 48,346
Actual return on plan assets (90,542) (57,634) (63,239)
Net amortization and deferral 59,426 35,325 46,123
-------- -------- --------
$ 41,448 $ 47,685 $ 47,290
======== ======== ========
</TABLE>
26 W E I R T O N S T E E L C O R P O R A T I O N
<PAGE> 15
Weirton Steel Corporation
N O T E S
---------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS OR IN MILLIONS OF
DOLLARS WHERE INDICATED
---------------------------------------------------------------------------
The following table reconciles the funded status of the Pension Plan to the
accrued pension obligation recognized as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
------------------------------
1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation:
Vested $598,789 $496,852
Nonvested 44,632 37,034
-------- --------
643,421 533,886
Effect of projected compensation increases 111,024 173,511
-------- --------
Actuarial present value of projected benefit obligation 754,445 707,397
Plan assets at fair value 588,303 499,211
-------- --------
Projected benefit obligation in excess of plan assets 166,142 208,186
Items not yet recognized:
Actuarial gains 58,707 22,156
Remaining net obligation at transition (38,352) (45,742)
Prior service cost (88,955) (97,850)
-------- --------
Accrued pension obligation $ 97,542 $ 86,750
======== ========
</TABLE>
The accrued pension obligation was classified for financial statement
presentation as of December 31, 1997 and 1996, as follows:
<TABLE>
<CAPTION>
-----------------------------
1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Pension liability, a component of current liabilities $ -- $12,000
Long term pension obligation 97,542 74,750
------- -------
$97,542 $86,750
======= =======
</TABLE>
The Company's projected, accumulated and vested pension obligations and
expense have been actuarially measured through the use of certain
significant assumptions. The table below depicts the assumptions used to
measure the Company's pension obligations and its net pension expense.
<TABLE>
<CAPTION>
-----------------------------------------------------
1997 1996 1995
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average interest rate used to discount
the projected, accumulated and vested benefit
obligations to present value 7.00% 7.75% 7.25%
Expected rate of return on plan assets 9.25% 9.25% 8.75%
Assumed increase in compensation levels 2% for 4.00% 2% for
4 years 1 year
and 3% and 4%
thereafter thereafter
</TABLE>
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.
BENEFITS OTHER THAN PENSIONS
The Company provides healthcare and life insurance benefits to
substantially all of the Company's retirees and their dependents. The
health care plans contain cost-sharing features including co-payments and
lifetime maximums. The life insurance benefits provided to retirees are
generally based upon annual base pay at retirement for salaried employees
and specific amounts for represented employees.
1 9 9 7 A N N U A L R E P O R T 27
<PAGE> 16
Weirton Steel Corporation
N O T E S
---------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS OR IN MILLIONS OF
DOLLARS WHERE INDICATED
---------------------------------------------------------------------------
The amount of net periodic expense for postretirement health care and life
insurance benefits recognized in 1997, 1996 and 1995 was comprised of the
following:
<TABLE>
<CAPTION>
--------------------------------------------------
1997 1996 1995
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned during period $ 6,852 $ 5,766 $ 5,373
Interest cost on accumulated postretirement
benefit obligation 25,917 23,767 25,082
Net amortization and deferral (4,325) (4,688) (4,693)
------- ------- -------
$28,444 $24,845 $25,762
======= ======= =======
</TABLE>
The actuarially determined net periodic expense in 1997, 1996 and 1995 for
retiree medical and life insurance benefits exceeded the $18.1 million,
$16.0 million and $20.4 million cash outlay for providing such benefits by
approximately $10.3 million, $8.8 million and $5.4 million, respectively.
The following table sets forth the components of the accumulated
postretirement benefit obligation and the reconciliation of amounts
recognized as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
------------------------------
1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation attributable to:
Retirees and beneficiaries $214,067 $229,145
Active employees fully eligible for benefits 43,172 40,289
Other active participants 80,811 76,356
-------- --------
Total accumulated postretirement benefit obligation 338,050 345,790
Items not yet recognized:
Actuarial (losses) gains (5,321) (27,706)
Prior service cost 23,745 28,070
-------- --------
Accrued postretirement benefit obligation $356,474 $346,154
======== ========
</TABLE>
The accrued postretirement benefit obligation as of December 31, 1997 and
1996, was classified for financial statement presentation as follows:
<TABLE>
<CAPTION>
------------------------------
1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Accrued postretirement benefits, a component
of accrued employment costs $ 18,000 $ 17,000
Postretirement benefits other than pensions 338,474 329,154
-------- --------
$356,474 $346,154
======== ========
</TABLE>
Consistent with the Company's approach to measuring its accumulated benefit
obligation for pensions, the interest rate used to measure the
postretirement benefit obligation as of December 31, 1997, was decreased to
7.00%. The interest rate used to discount the accumulated postretirement
obligation to present value as of December 31, 1996, was 7.75%.
28 W E I R T O N S T E E L C O R P O R A T I O N
<PAGE> 17
Weirton Steel Corporation
N O T E S
---------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS OR IN MILLIONS OF
DOLLARS WHERE INDICATED
---------------------------------------------------------------------------
The medical cost and administrative expense rates used to project
anticipated cash flows and measure the Company's postretirement benefit
obligation as of December 31, 1997, 1996 and 1995, were as follows:
<TABLE>
<CAPTION>
FOR RETIREES WHO HAVE NOT FOR RETIREES WHO ARE
YET REACHED AGE 65 AGE 65 AND OLDER
----------------------------------------------------
1997 1996 1995 1997 1996 1995
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Base medical cost trend:
Rate in first year 8.00% 8.75% 9.00% 7.25% 7.75% 8.00%
Ultimate rate 4.25% 4.75% 4.25% 4.25% 4.75% 4.25%
Year in which ultimate rate is reached 2003 2003 2003 2003 2003 2003
Major medical cost trend:
Rate in first year 9.50% 10.50% 11.80% N/A N/A N/A
Ultimate rate 4.25% 4.75% 4.25% N/A N/A N/A
Year in which ultimate rate is reached 2003 2003 2003 N/A N/A N/A
Administrative expense trend 4.25% 4.75% 4.25% 4.25% 4.75% 4.25%
</TABLE>
An one percentage point increase in the assumed health care trend rates for
each future year would have increased the aggregate service and interest
cost components of the net periodic expense by $2.6 million, $2.0 million
and $2.0 million in 1997, 1996 and 1995, respectively, and would have
increased the accumulated postretirement benefit obligation by $25.1
million and $24.3 million as of December 31, 1997 and 1996, respectively.
For purposes of measuring life insurance benefits as of December 31, 1997
and 1996, increases in compensation levels in 1997 were assumed to be 2%
through 2001 and 3% thereafter. Increases in compensation levels for 1996
were assumed to be 2% for 1996 and 4% thereafter.
OTHER
As a condition of the purchase of the Company's assets from NSC, 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
subsequently became active employees of the Company.
8
NOTE 8
POSTEMPLOYMENT BENEFITS
The components comprising the Company's obligations for postemployment
benefits are (i) workers' compensation; (ii) severance programs which
include medical coverage continuation; and (iii) sickness and accident
protection, which includes medical and life insurance benefits.
Consistent with the assumptions used to measure the Company's accumulated
benefit obligations for pensions and retiree health care and life insurance
benefits, the interest rate used to discount the accumulated postemployment
benefit obligation to present value as of December 31, 1997 and 1996 was
7.00% and 7.75%, respectively. Other actuarial assumptions and demographic
data, as applicable, that were used to measure the postemployment benefit
obligation as of December 31, 1997 and 1996, were consistent with those
used to measure pension and other postretirement benefit obligations for
each respective year. As of December 31, 1997 and 1996, the Company had
accrued $25.4 million and $19.9 million, respectively, for postemployment
benefit obligations.
1 9 9 7 A N N U A L R E P O R T 29
<PAGE> 18
Weirton Steel Corporation
N O T E S
---------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS OR IN MILLIONS OF
DOLLARS WHERE INDICATED
---------------------------------------------------------------------------
9
NOTE 9
RESTRUCTURING CHARGES
In 1997, the Company recognized a $17.0 million restructuring charge
stemming from a retirement window offered to its represented employees as a
result of collective bargaining agreements. Approximately $10.4 million of
the restructuring charge was related to pension benefits with the remainder
resulting from other separation benefits for employees retiring during the
window. Approximately $3.2 million of the charge was paid during 1997.
In 1996, the Company recognized a restructuring charge of $17.0 million
associated with the reduction in its supervisory and managerial workforce
by approximately 20%. The restructuring charge included approximately $10.1
million of severance benefits (including compensation, health care and
outplacement services), approximately $3.8 million related to special
retirement supplements for eligible employees and $3.1 million related to
other termination related benefits.
10
NOTE 10
INCOME TAXES
Deferred income tax assets and liabilities are recognized reflecting the
future tax consequences of net operating loss and tax credit carryforwards
and differences between the tax basis and the financial reporting basis of
assets and liabilities. The components of the Company's deferred income tax
assets and liabilities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss and tax credit carryforwards $ 113,348 $ 108,517
Deductible temporary differences:
Allowance for doubtful accounts 3,354 1,950
Inventories 14,399 16,442
Pensions 17,592 21,739
Postretirement benefits other than pensions 139,024 135,000
Other deductible temporary differences 29,498 23,525
Valuation allowance (45,547) (41,249)
--------- ---------
271,668 265,924
Deferred tax liabilities:
Accumulated depreciation (126,083) (122,081)
--------- ---------
Net deferred tax asset $ 145,585 $ 143,843
========= =========
</TABLE>
As of December 31, 1997, the Company had available, for federal and state
income tax purposes, regular net operating loss carryforwards of
approximately $228.1 million expiring in 2006 through 2011; an alternative
minimum tax credit of approximately $12.1 million; and general business tax
credits of approximately $12.3 million expiring in 1999 through 2005.
In 1997, 1996 and 1995, as a result of its deferred tax attributes, the
Company did not generate any liability for regular federal income tax
purposes. The Company recognized alternative minimum tax of $2.2 million,
and $3.2 million in 1997 and 1995, respectively. The Company recognized no
alternative minimum tax in 1996. The company utilized alternative minimum
tax net operating loss carryforwards and carrybacks of $24.6 million and
general business credits of $1.1 million in 1995.
The Company's net deferred tax asset increased during 1997 due primarily to
an increase in net operating loss carryforwards and expenses in excess of
deductible amounts for postretirement benefits other than pensions.
30 W E I R T O N S T E E L C O R P O R A T I O N
<PAGE> 19
Weirton Steel Corporation
N O T E S
---------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS OR IN MILLIONS OF
DOLLARS WHERE INDICATED
---------------------------------------------------------------------------
Future operating costs for postretirement benefits other than pensions are
expected to exceed deductible amounts for income tax purposes for many
years. Based upon the length of the period during which this deferred tax
asset can be utilized and the Company's expectations that under its current
business strategy it will be able to generate taxable income 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 length of time associated with the carryforward period available to
utilize net operating losses and certain tax credits not associated with
postretirement benefits other than pensions, is more definite. A
significant portion of these net operating losses are attributable to the
realization of differences between the tax basis and financial reporting
basis of the Company's fixed assets. In the aggregate, such differences,
including depreciation, are expected to reverse within the allowable
carryforward periods. 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 lease-back arrangements, could be employed to avoid
expiration of the attributes. Notwithstanding the Company's belief that it
will be able to utilize its deferred tax assets, the Company has recorded a
valuation allowance of $45.5 million against its deferred tax assets.
The elements of the Company's deferred income taxes associated with its
results before extraordinary items for the years ended December 31, 1997,
1996 and 1995, respectively, along with the allocation of deferred taxes to
other income statement items were as follows:
<TABLE>
<CAPTION>
-------------------------------------------------
1997 1996 1995
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current income tax provision (benefit):
Federal $(2,556) $ (3,699) $ 6,014
Deferred income tax provision (benefit): (6,040) (16,067) 20,565
Valuation allowance 4,298 8,990 (13,324)
------- -------- --------
Income tax provision (benefit) (4,298) (10,766) 13,255
Deferred income tax benefit allocated to
extraordinary item -- (1,316) (1,627)
------- -------- --------
Total income tax provision (benefit) $(4,298) $(12,092) $ 11,628
======= ======== ========
</TABLE>
The total income tax provision (benefit) recognized by the Company for the
years ended December 31, 1997, 1996 and 1995, reconciled to that computed
under the federal statutory corporate rate as follows:
<TABLE>
<CAPTION>
-------------------------------------------------
1997 1996 1995
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax provision (benefit) at federal
statutory rate $(7,714) $(19,342) $ 23,853
State income taxes, net of federal (882) (2,211) 2,726
Permanent differences -- 1,787 --
Change in valuation allowance 4,298 8,990 (13,324)
------- -------- --------
Income tax provision (benefit) $(4,298) $(10,776) $ 13,255
======= ======== ========
</TABLE>
11
NOTE 11
REDEEMABLE STOCK
In June 1989, the Company sold 1.8 million shares of Series A Preferred to
the 1989 ESOP. The 1989 ESOP financed the purchase by issuing to the
Company a $26.1 million promissory note, payable ratably over a 10 year
period. Each share of Series A Preferred is convertible into one share of
common stock, subject to adjustment, and is entitled to 10 times the number
of votes allotted to the common stock into which it is convertible. The
Series A Preferred 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. As such, shares of Series A Preferred distributed to
1989 ESOP participants following termination of service are given 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
1 9 9 7 A N N U A L R E P O R T 31
<PAGE> 20
Weirton Steel Corporation
N O T E S
---------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS OR IN MILLIONS OF
DOLLARS WHERE INDICATED
---------------------------------------------------------------------------
proposed transfers of distributed shares of Series A Preferred which it has
agreed, to the extent it is permitted, to exercise and to contribute
reacquired shares to the 1989 ESOP. In 1994, the 1989 ESOP was amended to
provide that shares of Series A Preferred reacquired by the 1989 ESOP be
reallocated annually among active employee participants on a per capita
basis. 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.
12
NOTE 12
STOCK PLANS
The Company has a stock option plan (the "1987 Stock Option Plan"), an
employee stock purchase plan (the "1989 Employee Stock Purchase Plan") and
a deferred compensation plan for non-employee members of the board of
directors ( the "Directors Deferred Compensation Plan"). The Company
accounts for these plans under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," under which compensation costs,
if applicable, have been determined. Had compensation costs for these plans
been determined consistent with Statement on Financial Accounting Standards
No. 123, "Accounting for Stock Based Compensation," (SFAS No. 123), net
income (loss) and earnings per share would have been the following:
<TABLE>
<CAPTION>
--------------------------------------------------
1997 1996 1995
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income (loss): As reported $(17,742) $(49,918) $48,356
Pro forma (18,041) (50,221) 48,033
Diluted earnings per share: As reported $ (0.42) $ (1.18) $ 1.10
Pro forma (0.42) (1.19) 1.10
</TABLE>
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma
compensation costs may not be representative of that expected in future
years.
The Company may grant options for up to 750,000 shares under the 1987 Stock
Option Plan. The Company had outstanding options of 581,666 as of December
31, 1997. Under the plan, the option exercise price equals the stock's
market price on the date of grant. Generally, the options granted under the
1987 Stock Option Plan vest in one-third increments beginning after the
date of grant, with the remaining two-thirds becoming exercisable after the
second and third years. In 1997, the Company extended the 1987 Stock Option
Plan for an additional 10 years.
Activity under the 1987 Stock Option Plan was as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------
1997 1996 1995
-----------------------------------------------------------------------------------------------------
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding
at beginning of period 750,000 $7.84 748,000 $8.38 701,000 $8.60
Granted -- -- 65,000 2.50 55,000 5.61
Repurchased/forfeited (168,334) 8.30 (63,000) 8.69 (8,000) 8.69
Exercised -- -- -- -- -- --
----------------------------------------------------------------
Outstanding at end of period 581,666 7.71 750,000 7.84 748,000 8.38
Exercisable at end of period 431,303 $7.80 430,000 $8.10 270,000 $8.45
Weighted average fair value
of options granted $ -- $4.01 $9.01
</TABLE>
32 W E I R T O N S T E E L C O R P O R A T I O N
<PAGE> 21
Weirton Steel Corporation
N O T E S
---------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS OR IN MILLIONS OF
DOLLARS WHERE INDICATED
---------------------------------------------------------------------------
As of December 31, 1997, 30,000 of the 581,666 options outstanding had an
exercise price of $8.33 and a weighted average remaining contractual life
of 1.04 years. All of these options were exercisable. The remaining options
had exercise prices between $2.50 and $8.88, with a weighted average
exercise price of $7.68 and a weighted average remaining contractual life
of 7.17 years. Of these options, 401,303 were exercisable; their weighted
average exercise price was $7.76.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions for grants in 1996 and 1995. There were no option grants in
1997.
<TABLE>
<CAPTION>
-----------------------------
1996 1995
--------------------------------------------------------------------------
<S> <C> <C>
Average risk free interest rate 6.56% 6.35%
Expected dividend yield 0% 0%
Expected life of options 7 years 7 years
Expected volatility rate 0.50 0.50
</TABLE>
In October 1994, the Company registered an additional 5.0 million shares of
its common stock to be offered over a 5 year period beginning January 1,
1995, to eligible employees under its 1994 Employee Stock Purchase Plan.
The 1994 Employee Stock Purchase Plan provides for participants to purchase
the Company's common stock at 85% of the lesser of the stock's closing
price at the beginning or the end of each year. As of December 31, 1997,
247,865 shares valued at approximately $0.6 million were issuable in
accordance with the 1994 Employee Stock Purchase Plan.
During 1991, the Company adopted a deferred compensation plan (the
"Directors' Deferred Compensation Plan") to permit non-employee members of
the Board of Directors to receive shares of common stock in lieu of cash
payments for total compensation or a portion thereof for services provided
in their capacity as a member of the Board of Directors. The Company
reserved 300,000 shares for issuance under the Directors' Deferred
Compensation Plan. Shares to directors are issued to a trust until such
time as the shares are distributed to the directors. The Director's
Deferred Compensation Plan provides for the stock portion of the directors
compensation to be valued at 90% of the lesser of the stock's average
trading price at the beginning and the end of each year. As of December 31,
1997, 40,558 shares valued at $0.1 million were issuable to the directors
who selected deferred compensation and 112,134 shares with a cost of $0.4
million were held by the trust.
13
NOTE 13
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 10 year period. The Company's contribution to the
1989 ESOP for the principal and interest components of debt service is
immediately returned. As such, the respective interest income and expense
on the ESOP notes were entirely offset within the Company's net financing
costs. As of December 31, 1997, 1,350,000 shares of Series A Preferred were
allocated to participants of the 1989 ESOP.
1 9 9 7 A N N U A L R E P O R T 33
<PAGE> 22
Weirton Steel Corporation
N O T E S
---------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS OR IN MILLIONS OF
DOLLARS WHERE INDICATED
---------------------------------------------------------------------------
14
NOTE 14
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
on Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No.
128"). SFAS No. 128 differs from prior accounting guidance in that earnings
per share is classified as basic earnings per share and diluted earnings
per share, compared to primary earnings per share and fully diluted
earnings per share under prior standards. Basic earnings per share differs
from primary earnings per share in that it includes only the weighted
average common shares outstanding and does not include any dilutive common
stock equivalents in the calculation. Diluted earnings per share under the
new standard differs in certain calculations compared to fully diluted
earnings per share under prior standards. The retroactive application of
SFAS No. 128 did not have a material effect on the earnings per share
calculations for the years ended December 31, 1996 and 1995. The following
represents a reconciliation between basic earnings per share and diluted
earnings per share for the year ended December 31, 1995. For the years
ended December 31, 1997 and 1996, basic and diluted earnings per share were
the same; however, securities totaling 1,760,090 shares and 1,753,198
shares, respectively, were excluded from the diluted earnings per share
calculations due to their antidilutive effect.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------
PER SHARE
INCOME SHARES AMOUNT
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic earnings per share:
Income before extraordinary item $55,074 42,040,158 $1.31
Effective of dilutive securities
Series A Preferred -- 1,741,237 (0.05)
Stock options -- 22 --
Diluted earnings per share:
Income before extraordinary item $55,074 43,781,417 $1.26
</TABLE>
15
NOTE 15
ENVIRONMENTAL COMPLIANCE, LEGAL PROCEEDINGS AND COMMITMENTS
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 discharges, air emission and waste
disposal. The Company spent approximately $8.4 million for pollution
control capital projects in 1997.
In March 1996, the West Virginia Department of Environmental Protection
("DEP") and the United States Environmental Protection Agency ("EPA")
advised the Company that they 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 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, wastewater treatment
systems and waste handling facilities. Under the settlement, the Company
committed to environmental related capital projects totaling approximately
$16.7 million. Through December 31, 1997, the Company has expended $8.9
million related to these capital commitments.
34 W E I R T O N S T E E L C O R P O R A T I O N
<PAGE> 23
Weirton Steel Corporation
N O T E S
---------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS OR IN MILLIONS OF
DOLLARS WHERE INDICATED
---------------------------------------------------------------------------
In connection with the negotiations, 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 waste 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 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.
LEGAL PROCEEDINGS
The Company, in the ordinary course of business, is the subject of, or
party to, various pending or threatened legal 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 operations.
COMMITMENTS
In 1991, the Company entered into an agreement with a supplier to provide
the majority of its iron ore pellet requirements beginning in 1992 and
extending through 2005. In 1997, the Company entered into a second
agreement with that supplier to provide additional iron ore pellets through
2002.
In 1995, the Company entered into a 15 year agreement to purchase its
oxygen and nitrogen requirements from an independent party. The contract
specifies that the Company will pay a base monthly charge that is adjusted
annually based upon a percentage of the change in the producers price index
for industrial commodities.
In 1996, the Company entered into an agreement extending through 2000, with
a supplier to purchase blast furnace coke. The agreement provides for the
purchase of the greater of 850,000 tons of blast furnace coke annually, or
80% of the actual annual requirement of the Company. Such quantities are
subject to adjustment based upon changes in the Company's operating
configuration. The price is to be the prevailing market price (subject to a
ceiling and floor) for blast furnace coke.
16
NOTE 16
LINE OF BUSINESS INFORMATION
The Company operates a single line of business, the making and finishing of
carbon steel products including sheet and tin mill products. In 1997 and
1996, one customer accounted for 11% and 10%, of net sales, respectively.
In 1995, no single customer accounted for 10% or more of net sales.
Approximately 83% of the Company's workforce is covered under collective
bargaining agreements with the Independent Steelworkers' Union (the "ISU")
and Independent Guards' Union (the "IGU"). In 1997, the Company reached
agreements with the ISU and IGU which extend into 2001.
1 9 9 7 A N N U A L R E P O R T 35
<PAGE> 24
Weirton Steel Corporation
N O T E S
---------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS OR IN MILLIONS OF
DOLLARS WHERE INDICATED
---------------------------------------------------------------------------
17
NOTE 17
FORMATION OF JOINT VENTURES
On October 3, 1997, the Company announced their intent to form a joint
venture with Koninklijke Hoogovens for the purpose of constructing and
operating a 300,000 ton hot-dipped galvanizing line. The construction of
the galvanizing line is expected to be completed in 1999. No investment was
made in this joint venture during 1997.
On September 4, 1997, the Company announced the formation of a joint
venture with Balli Group, plc, named WeBCo International LLC ("WeBCo"). The
primary function of WeBCo will be to market and sell the Company's products
globally. In 1997, the Company invested $0.1 million in the joint venture.
18
NOTE 18
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 EQUIVALENTS
The carrying amount approximates fair value because of the short maturity
of those investments.
REDEEMABLE PREFERRED STOCK
The fair value of the Series A Preferred was determined based upon an
independent appraisal performed as of December 31, 1997 and 1996.
LONG TERM DEBT OBLIGATIONS
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 were as
follows as of December 31, 1997 and 1996, respectively:
<TABLE>
<CAPTION>
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-----------------------------------------------------
1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and equivalents $124,690 $124,690 $112,092 $112,092
Series A Preferred 24,494 4,726 24,972 5,681
Long term debt obligations 388,997 404,068 430,820 439,849
</TABLE>
SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
As of December 31, 1997 and 1996, the Company had trade receivables
outstanding of $20.6 million and $18.2 million, respectively, from highly
leveraged customers.
One customer accounted for 23% of trade receivables as of December 31,
1996.
36 W E I R T O N S T E E L C O R P O R A T I O N
<PAGE> 25
Weirton Steel Corporation
---------------------------------------------------------------------------
MANAGEMENTS' RESPONSIBILITY STATEMENT
---------------------------------------------------------------------------
The accompanying consolidated financial statements of the Company are the
responsibility of its management and have been prepared in conformity with
generally accepted accounting principles.
The Company has a system of internal controls, including a Code of Ethics,
designed to provide reasonable assurance that assets are safeguarded,
financial statements are reliable and a high standard of business conduct
is maintained. Management monitors the system for compliance, and internal
auditors independently measure its effectiveness.
The Company's independent public accountants, Arthur Andersen LLP, audit
its financial statements in accordance with generally accepted auditing
standards. The report of the independent public accountants is included in
this report.
The Board of Directors pursues its oversight role for the financial
statements through its Audit Committee. The Audit Committee continued its
practice of meeting regularly to review the financial affairs of the
Company and to interface with the internal audit staff and independent
public accountants. Both the independent public accountants and the
internal auditors have full and free access to the Audit Committee.
Management believes that the existing system of internal controls, the
independent audit and the Audit Committee provide reasonable assurance that
the Company's financial accounting system adequately maintains
accountability for assets, assures the integrity of financial statements
and maintains its commitment to a high standard of business conduct.
/s/ RICHARD K. RIEDERER /s/ MARK E. KAPLAN
---------------------------------- ----------------------------
Richard K. Riederer Mark E. Kaplan
President, Chief Executive Officer Controller and
Principal Accounting Officer
1 9 9 7 A N N U A L R E P O R T 37
<PAGE> 26
---------------------------------------------------------------------------
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 subsidiaries as of December
31, 1997 and 1996, 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, 1997. 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 subsidiaries as of December 31, 1997 and 1996, and
the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
-----------------------
Arthur Andersen LLP
Pittsburgh, Pennsylvania
January 26, 1998
38 W E I R T O N S T E E L C O R P O R A T I O N
<PAGE> 27
Weirton Steel Corporation
- --------------------------------------------------------------------------------
SELECTED FINANCIAL AND STATISTICAL DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $1,397 $1,383 $1,352 $1,261 $1,201
Operating costs 1,372 1,397 1,252 1,212 1,204
Depreciation 61 58 55 46 49
Income taxes (benefit) (4.3) (10.8) 13.3 7.5 (13.3)
Profit sharing -- -- 24.2 17.6 --
Contribution to ESOP 3 3 3 3 3
Net income (loss) (17.7) (49.9) 48.4 35.2 (229.2)
Net income (loss) per diluted share (0.42) (1.18) 1.10 0.95 (8.78)
Total assets 1,283 1,301 1,314 1,231 1,241
Additions to property, plant
and equipment 45 83 52 112 14
Long term debt obligations 389 431 408 395 495
Redeemable preferred stock, net 21 18 16 14 37
Working capital $ 294 $ 291 $ 340 $ 256 $ 262
Number of common shares
outstanding at year end, (in thousands) 42,637 42,353 42,014 41,654 26,338
Number of preferred shares
outstanding at year end, (in thousands) 1,727 1,748 1,729 1,767 2,282
Stockholders' equity (deficit) $ 133 $ 149 $ 199 $ 149 $ (1)
Stockholders' equity (deficit)
per common share $ 3.12 $ 3.52 $ 4.73 $ 3.57 $(0.05)
</TABLE>
- --------------------------------------------------------------------------------
SELECTED FINANCIAL AND STATISTICAL DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUARTERLY PERIODS IN 1997 QUARTERLY PERIODS IN 1996
(DOLLARS IN MILLIONS, ----------------------------------------------------------------------
EXCEPT PER SHARE DATA) 4TH 3RD 2ND 1ST 4TH 3RD 2ND 1ST
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 325 $ 359 $ 364 $ 350 $ 341 $ 366 $ 336 $ 341
Gross profit 38 42 37 23 18 26 26 30
Operating profit (loss) 15 17 (4) (4) (4) 1 (17) 6
Net income (loss) 3 4 (13) (12) (12) (8) (27) (3)
Basic Earnings Per Share:
Income (loss) before
extraordinary item $0.07 $0.10 $(0.30) $(0.29) $(0.29) $(0.18) $(0.51) $(0.07)
Loss on early
extinguishment of debt -- -- -- -- -- -- (0.13) --
----- ----- ------ ------ ------ ------ ------ ------
Net income (loss) per share $0.07 $0.10 $(0.30) $(0.29) $(0.29) $(0.18) $(0.64) $(0.07)
===== ===== ====== ====== ====== ====== ====== ======
Diluted Earnings Per Share:
Income (loss) before
extraordinary item $0.07 $0.10 $(0.30) $(0.29) $(0.29) $(0.18) $(0.51) $(0.07)
Loss on early
extinguishment of debt -- -- -- -- -- -- (0.13) --
----- ----- ------ ------ ------ ------ ------ ------
Net income (loss) per share $0.07 $0.10 $(0.30) $(0.29) $(0.29) $(0.18) $(0.64) $(0.07)
===== ===== ====== ====== ====== ====== ====== ======
</TABLE>
1 9 9 7 A N N U A L R E P O R T 39
<PAGE> 28
- --------------------------------------------------------------------------------
WEIRTON STEEL CORPORATION
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
BOARD OF DIRECTORS
Richard R. Burt, Chairman(A, B, D) Joseph J. Nowak(B, C, D, E) EXECUTIVE OFFICERS
Chairman Former Vice Chairman OF THE COMPANY
International Equity Partners, LLP Armco, Inc. Richard K. Riederer
Washington, DC Pittsburgh, Pennsylvania President and Chief Executive Officer
Michael Bozic(B, C) Robert S. Reitman(B, C, E) James B. Bruhn
President and CEO Chairman, President and CEO Executive Vice President
Levitz Furniture Company The Tranzonic Companies
Boca Raton, Florida Pepper Pike, Ohio Craig T. Costello
Executive Vice President - Manufacturing
Earl E. Davis, Jr.(B, D) Richard K. Riederer(E) and Chief Operating Officer
Executive Vice President President and Chief Executive Officer
Commercial Weirton Steel Corporation Earl E. Davis, Jr.
Weirton Steel Corporation Weirton, West Virginia Executive Vice President - Commercial
Weirton, West Virginia
Richard F. Schubert(C, D) David L. Robertson
Craig T. Costello(B) Former President and CEO Executive Vice President
Executive Vice President - Manufacturing The Points of Light Foundation Human Resources and Corporate Law
and Chief Operating Officer Washington, DC
Weirton Steel Corporation Narendra M. Pathipati
Weirton, West Virginia Thomas R. Sturges(A, D) Senior Vice President
Executive Vice President Corporate Development and Strategy
Robert J. D'Anniballe, Jr.(A, D) The Harding Group, Inc.
Partner Greenwich, Connecticut Thomas W. Evans
Alpert, D'Anniballe & Visnic Vice President
Weirton, West Virginia David I.J. Wang(A, B) Materials Management
Former Executive Vice President
Mark G. Glyptis(B, D, E) International Paper Company David M. Gould
President Naples, Florida Vice President
Independent Steelworkers Union Economic Development
Weirton, West Virginia Ronald C. Whitaker(A, C, E)
President and CEO William R.Kiefer
Phillip A. Karber(B, D) Johnson Worldwide Associates Vice President - Law and Secretary
Chairman of the Board of Sturtevant, Wisconsin
Directors of JFK International Patrick B. Stewart
Air Terminal Chief Information Officer
New York, New York
Frank G. Tluchowski
Vice President
Engineering and Technology
Mark E. Kaplan
Controller
Richard W. Garan
Assistant Treasurer
A Member of Audit Committee
B Member of Finance and Strategic
Planning Committee
C Member of Management Development
and Compensation Committee
D Member of Corporate Responsibility
Committee
E Member of Nominating Committee
</TABLE>
40 W E I R T O N S T E E L C O R P O R A T I O N
<PAGE> 1
EXHIBIT 22.1
SUBSIDIARIES OF WEIRTON STEEL CORPORATION
Subsidiary Percentage owned State of Incorporation
- ---------- by Registrant ----------------------
-------------
Weirton Receivables, Inc. 100% Delaware
Weirton Venture Holdings Corp. 100% Delaware
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports, included or incorporated by reference in this Form 10-K, into the
Company's previously filed Registration Statements on Form S-8, Registration No.
33-31429, relating to the Company's 1989 Employee Stock Purchase Plan and
Registration No. 33-56251, relating to the Company's 1994 Employee Stock
Purchase Plan and Deferred Compensation Plan for Directors.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
March 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000849979
<NAME> WEIRTON STEEL CORP.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 124,690
<SECURITIES> 0
<RECEIVABLES> 150,696
<ALLOWANCES> 9,853
<INVENTORY> 260,933
<CURRENT-ASSETS> 565,706
<PP&E> 1,037,889
<DEPRECIATION> 446,500
<TOTAL-ASSETS> 1,282,540
<CURRENT-LIABILITIES> 271,617
<BONDS> 388,997
20,579
128
<COMMON> 428
<OTHER-SE> 131,971
<TOTAL-LIABILITY-AND-EQUITY> 1,282,540
<SALES> 1,397,204
<TOTAL-REVENUES> 1,397,204
<CGS> 1,258,035
<TOTAL-COSTS> 1,372,198
<OTHER-EXPENSES> (1,637)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,683
<INCOME-PRETAX> (22,040)
<INCOME-TAX> (4,298)
<INCOME-CONTINUING> (17,742)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,742)
<EPS-PRIMARY> (0.42)
<EPS-DILUTED> (0.42)
</TABLE>
