<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission file number 1-10244
WEIRTON STEEL CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
DELAWARE 06-1075442
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification #)
</TABLE>
400 THREE SPRINGS DRIVE, WEIRTON, WEST VIRGINIA 26062-4989
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code:)
(304) 797-2000
Indicate by checkmark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of Common Stock ($.01 par value) of the Registrant
outstanding as of April 30, 1998 was 42,925,833.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WEIRTON STEEL CORPORATION
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1998 1997
---- ----
<S> <C> <C>
NET SALES................................................... $341,321 $349,585
OPERATING COSTS:
Cost of sales.......................................... 299,436 327,159
Selling, general and administrative expense............ 9,881 9,065
Depreciation........................................... 17,019 16,926
Provision for profit sharing........................... 1,123 --
-------- --------
Total operating costs................................ 327,459 353,150
-------- --------
INCOME (LOSS) FROM OPERATIONS............................... 13,862 (3,565)
Interest expense....................................... (11,657) (11,950)
Interest income........................................ 1,205 832
ESOP contribution...................................... (653) (653)
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES........................... 2,757 (15,336)
Income tax provision (benefit)......................... 510 (2,991)
-------- --------
NET INCOME (LOSS)........................................... $ 2,247 $(12,345)
======== ========
PER SHARE DATA:
Weighted average number of common shares (in thousands):
Basic.................................................. 42,926 42,613
Diluted................................................ 44,675 42,613
NET INCOME (LOSS) PER SHARE:
Basic.................................................. $ 0.05 $ (0.29)
Diluted................................................ $ 0.05 $ (0.29)
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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WEIRTON STEEL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
(UNAUDITED) (AUDITED)
----------- ---------
<S> <C> <C>
Assets:
Cash and equivalents, includes restricted cash of
$2,055 and $2,046, respectively...................... $ 85,267 $ 124,690
Receivables, less allowances of $7,482 and $9,853,
respectively......................................... 169,360 140,843
Inventories............................................ 210,796 260,933
Deferred income taxes.................................. 34,437 34,437
Other current assets................................... 7,832 4,803
---------- ----------
Total current assets.............................. 507,692 565,706
Property, plant and equipment, net..................... 583,401 591,389
Deferred income taxes.................................. 112,138 111,148
Other assets and deferred charges...................... 15,272 14,297
---------- ----------
Total assets...................................... $1,218,503 $1,282,540
========== ==========
Current portion of long term debt obligations.......... $ -- $ 42,163
Other current liabilities.............................. 205,294 229,454
Long term debt obligations............................. 389,082 388,997
Long term pension obligations.......................... 97,682 97,542
Postretirement benefits other than pensions............ 340,769 338,474
Other long term liabilities............................ 29,677 32,804
---------- ----------
Total liabilities................................. 1,062,504 1,129,434
---------- ----------
Redeemable stock............................................ 21,194 20,579
Stockholders' equity:
Common stock, $0.01 par value; 50,000,000 authorized;
43,135,476 and 42,846,184 shares issued,
respectively......................................... 431 428
Additional paid-in capital............................. 457,073 456,379
Retained earnings (deficit)............................ (320,767) (323,014)
Other stockholders' equity............................. (1,932) (1,266)
---------- ----------
Total stockholders' equity........................ 134,805 132,527
---------- ----------
Total liabilities, redeemable stock and
stockholders' equity............................ $1,218,503 $1,282,540
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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WEIRTON STEEL CORPORATION
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...................................... $ 2,247 $(12,345)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation......................................... 17,019 16,926
Amortization of deferred financing costs............. 519 544
ESOP Contribution.................................... 653 653
Deferred income taxes................................ (990) (2,991)
Cash provided (used) by working capital items:
Receivables....................................... (28,517) (3,100)
Inventories....................................... 50,137 30,252
Other current assets.............................. (3,029) (1,366)
Payables.......................................... (12,675) (18,385)
Other current liabilities......................... (11,485) (9,054)
Long term pension obligation......................... 140 2,219
Other................................................ (422) 3,145
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 13,597 6,498
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in unconsolidated subsidiary................ (1,826) --
Capital spending....................................... (9,031) (43,337)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES....................... (10,857) (43,337)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt obligations.......................... (42,163) --
-------- --------
NET CASH USED BY FINANCING ACTIVITIES....................... (42,163) --
-------- --------
NET CHANGE IN CASH AND EQUIVALENTS.......................... (39,423) (36,839)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD................. 124,690 112,092
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD....................... $ 85,267 $ 75,253
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid, net of capitalized interest............. $ 9,950 $ 9,937
Income taxes paid, net................................. 1,500 --
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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WEIRTON STEEL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, OR IN MILLIONS OF DOLLARS WHERE INDICATED)
NOTE 1
BASIS OF PRESENTATION
The Consolidated Condensed Financial Statements presented herein are
unaudited. Weirton Steel Corporation and/or Weirton Steel Corporation together
with its wholly owned subsidiaries, are hereafter referred to as the "Company."
Certain information and footnote disclosures normally prepared in accordance
with generally accepted accounting principles have been either condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. Although the Company believes that all adjustments necessary for a
fair presentation have been made, interim periods are not necessarily indicative
of the financial results of operations for a full year. As such, these financial
statements should be read in conjunction with the audited financial statements
and notes thereto included or incorporated by reference in the Company's 1997
Annual Report on Form 10-K.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Certain prior period amounts have been reclassified, where necessary, to
conform to the presentation in the current period.
NOTE 2
INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
Raw materials....................................... $ 59,288 $ 97,974
Work-in-process..................................... 60,525 69,418
Finished goods...................................... 90,983 93,541
-------- --------
$210,796 $260,933
======== ========
</TABLE>
NOTE 3
EARNINGS PER SHARE
The following represents a reconciliation between basic earnings per share
and diluted earnings per share for the quarter ended March 31, 1998. For the
quarter ended March 31, 1997, basic and diluted earnings per
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share were the same; however, securities totaling 1,748,100, were excluded from
the diluted earnings per share calculation due to their antidilutive effect.
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
MARCH 31, 1998
-------------------------------
PER SHARE
INCOME SHARES AMOUNT
------ ------ ------
<S> <C> <C> <C>
Basic earnings per share:
Net income............................................. $2,247 42,925,557 $0.05
Effect of dilutive securities
Series A Preferred..................................... -- 1,727,794 --
Stock options.......................................... -- 21,757 --
------ ---------- -----
Diluted earnings per share:
Net income............................................. $2,247 44,675,108 $0.05
====== ========== =====
</TABLE>
NOTE 4
COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." SFAS No. 130, which establishes standards for reporting
and displaying comprehensive income and its components, requires the reporting
of all changes in equity of an enterprise that result from transactions and
other economic events other than transactions with owners. Comprehensive income
is the total of net income and all other nonowner changes in equity. SFAS No.
130 is effective for fiscal years beginning after December 15, 1997.
Comprehensive income calculated under SFAS No. 130 is the same as the net income
reported by the Company for the quarters ended March 31, 1998 and 1997.
NOTE 5
ENVIRONMENTAL COMPLIANCE
The Company, as well as its domestic competitors, is subject to stringent
federal, state and local environmental laws and regulations concerning, among
other things, waste water discharge, air emissions and waste disposal.
In March 1996, the West Virginia Department of Environmental Protection
("DEP") and the United States Environmental Protection Agency ("EPA") advised
the Company that it had identified a number of enforcement issues pertaining to
waste water discharge, air emissions and waste handling operations of the
Company. In September 1996, the Company and DEP and EPA reached a settlement
regarding these water, air and waste-related issues. Under the settlement, the
Company paid a penalty of $3.2 million in 1997.
The settlement also requires the Company to conduct certain remedial
activity at one of its waste disposal sites. Additionally, the Company is
required to undertake certain capital projects to assure compliance with air,
water and waste-related regulations. These capital expenditures include upgrades
and modifications to air emissions control equipment, waste water treatment
systems and waste handling facilities. Under the settlement, the Company
committed to environmental related capital projects totaling approximately $17.3
million. Through March 31, 1998, the Company has expended approximately $10.8
million related to these capital commitments.
In connection with the negotiations, the EPA issued a corrective action
order, effective October 18, 1996, requiring the Company to conduct
investigative activities to determine the nature and extent of hazardous
materials which may be located on the Company's property and, if necessary, to
evaluate and propose corrective measures needed to abate any unacceptable risks.
6
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The Company has accrued approximately $8.0 million related to environmental
related liabilities, including costs associated with the corrective action
order. Because the Company does not currently know the nature or the extent of
hazardous material which may be located on the property, it is not currently
possible to estimate the ultimate cost to comply with the corrective action
order or conduct remedial activity that may be required.
The Company believes that National Steel Corporation ("NSC") is obligated
to reimburse the Company for a portion of any costs that may be incurred by the
Company to comply with the corrective action order and to undertake any required
remedial action. Pursuant to the agreement whereby the Company purchased the
former NSC Steel Division in 1984, NSC retained liability for cleanup costs
related to solid or hazardous waste facilities, areas or equipment as long as
they were not used by the Company in its operations subsequent to the
acquisition.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This discussion and analysis of the Company's financial condition and
results of operations should be read together with the unaudited consolidated
condensed financial statements and notes thereto. The unaudited consolidated
condensed financial statements of Weirton Steel Corporation include the accounts
of its wholly owned subsidiaries. Weirton Steel Corporation and/or Weirton Steel
Corporation together with its subsidiaries are hereafter referred to as the
"Company."
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO
THREE MONTHS ENDED MARCH 31, 1997
In the first quarter of 1998, the Company recognized net income of $2.2
million or $0.05 per diluted share compared to a net loss of $12.3 million or
$0.29 per diluted share for the same period in 1997. The results for the first
quarter of 1998 included a provision for profit sharing of $1.1 million.
Net sales in the first quarter of 1998 were $341.3 million, a decrease of
$8.3 million or 2% from the first quarter of 1997. Total shipments in the first
quarter of 1997 were 686 thousand tons compared to the first quarter of 1997
shipments of 699 thousand tons.
Sheet product net sales for the first quarter of 1998 were $203.9 million,
a decrease of $13.0 million from the first quarter of 1997. Shipments of sheet
product in the first quarter of 1998 were 468 thousand tons compared to 486
thousand tons in the first quarter of 1997. The decrease in sheet product sales
was primarily attributable to a decrease in average selling prices as well as
lower shipping volume.
The first quarter of 1998 net sales from tin mill products were $137.4
million on shipments of 218 thousand tons compared to $132.7 million on 213
thousand tons for the same period in 1997. The increase was due primarily to
higher tin mill product shipments and overall higher average selling prices in
the first quarter of 1998 compared to the same period in 1997.
Costs of sales for the first quarter of 1998 were $299.4 million, or $436
per ton, compared to $327.2 million, or $468 per ton, for the first quarter of
1997. Cost of sales in the first quarter of 1998 benefited from the Company's
continuing cost reduction programs. Additionally, cost of sales in the first
quarter of 1997 included costs associated with the rebuild and subsequent
startup of the No. 1 Blast Furnace, an unplanned outage at the Company's hot
strip mill and minor disruptions in the primary metals facilities.
Selling, general and administrative costs were $9.9 million in the first
quarter of 1998; an increase of $0.8 million. The increase in selling, general
and administrative expense was due to higher employee related costs.
During the first quarter of 1998 the Company recognized interest income of
$1.2 million compared to $0.8 million in the first quarter of 1997. The increase
was due to a higher level of invested funds during the first quarter of 1998
compared to the first quarter of 1997.
During the quarter ended March 31, 1998, the Company had an income tax
provision of $0.5 million compared to an income tax benefit of $3.0 million in
the corresponding period in 1997. The improvement in
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operating results in the first quarter of 1998 compared to the first quarter of
1997 caused the increase in the income tax provision.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company had cash and equivalents of $85.3 million
compared to $124.7 million as of December 31, 1997. This decrease in cash and
equivalents was due primarily to the repayment of $42.2 million of the Company's
11 1/2% Senior Notes which became due on March 1, 1998. As of March 31, 1998,
and December 31, 1997, after reductions for amounts in place under its letter of
credit subfacility, Weirton Receivables Inc.(a wholly owned subsidiary of the
Company) had a base amount of participation interests available for cash sales
under a receivables participation agreement of approximately $72.2 million and
$57.9 million, respectively. Letters of credit outstanding under the receivables
participation agreement were $12.8 million at March 31, 1998.
Based upon available cash on hand and the amount of cash expected to be
generated from operating activities, the Company expects to have sufficient cash
to meet its short term needs, including the completion of the 1998 capital
spending plan. To the extent that cash on hand and cash from operating
activities do not generate an adequate amount of cash, the Company expects that
its cash requirements can be met by the receivables participation agreement.
During April 1998, the Company announced that it had been authorized by the
board of directors to repurchase up to 10%, or approximately 4.2 million shares
of its outstanding common stock. Through April 30, 1998, the Company had
repurchased approximately 442,800 shares of its outstanding common stock at
prices ranging from $3.50 to $4.19 per share.
The Company's net deferred tax assets increased $1.0 million to $146.6
million as of March 31, 1998, which consist 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.
INVESTMENT IN FACILITIES
Expenditures for property, plant and equipment for the first three months
of 1998 totaled $9.0 million. The Company's planned capital additions for 1998
are approximately $50.0 million. Included in the Company's planned capital
expenditures for 1998 is approximately $10.0 million related to environmental
compliance projects and approximately $6.0 million for information systems.
During the first quarter of 1998, the Company also invested approximately $1.8
million in GALVSTAR L.P., an unconsolidated joint venture formed with
Koninklijke Hoogovens for the purpose of constructing and operating a 300,000
ton hot-dipped galvanizing line.
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 COMPLIANCE
The Company, as well as its domestic competitors, is subject to stringent
federal, state and local environmental laws and regulations concerning, among
other things, waste water discharge, air emissions and waste disposal.
In March 1996, the West Virginia Department of Environmental Protection
("DEP") and the United States Environmental Protection Agency ("EPA") advised
the Company that it had identified a number of enforcement issues pertaining to
waste water discharge, air emissions and waste handling operations of the
8
<PAGE> 9
Company. In September 1996, the Company and DEP and EPA reached a settlement
regarding these water, air and waste-related issues. Under the settlement, the
Company paid a penalty of $3.2 million in 1997.
The settlement also requires the Company to conduct certain remedial
activity at one of its waste disposal sites. Additionally, the Company is
required to undertake certain capital projects to assure compliance with air,
water and waste-related regulations. These capital expenditures include upgrades
and modifications to air emissions control equipment, waste water treatment
systems and waste handling facilities. Under the settlement, the Company
committed to environmental related capital projects totaling approximately $17.3
million. Through March 31, 1998, the Company has expended approximately $10.8
million related to these capital commitments.
In connection with the negotiations, the EPA issued a corrective action
order, effective October 18, 1996, requiring the Company to conduct
investigative activities to determine the nature and extent of hazardous
materials which may be located on the Company's property and, if necessary, to
evaluate and propose corrective measures needed to abate any unacceptable risks.
The Company has accrued approximately $8.0 million related to environmental
related liabilities, including costs associated with the corrective action
order. Because the Company does not currently know the nature or the extent of
hazardous material which may be located on the property, it is not currently
possible to estimate the ultimate cost to comply with the corrective action
order or conduct remedial activity that may be required.
The Company believes that National Steel Corporation ("NSC") is obligated
to reimburse the Company for a portion of any costs that may be incurred by the
Company to comply with the corrective action order and to undertake any required
remedial action. Pursuant to the agreement whereby the Company purchased the
former NSC Steel 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.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB also 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. The
Company has one operating segment and is therefore not required to report
segment information as provided in SFAS No. 131.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit 10.1--Amendment dated March 25, 1998 to Employment Agreement
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) between Earl E. Davis, Jr. and the Company (filed herewith).
Exhibit 10.2--Employment Agreement between Frank Tluchowski, Jr. dated
April 9, 1998 (filed herewith).
Exhibit 27.--Financial Data Schedule for three months ended March 31,
1998 (filed herewith).
(B) REPORTS ON FORM 8-K
None
10
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WEIRTON STEEL CORPORATION
Registrant
By /s/ MARK E. KAPLAN
-----------------------------------------
Mark E. Kaplan
Controller (Principal Accounting Officer)
May 14, 1998
11
<PAGE> 1
Exhibit 10.1
Addendum to Employment Agreement
Addendum to Employment 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").
WHEREAS, the Parties hereto have previously entered into an Employment
Agreement dated December 20, 1995,(hereinafter called "Employment Agreement")
providing, inter alia for severance benefits in the event of the Employee's
termination under certain circumstances; and
WHEREAS, the Corporation and the Employee desire to amend the
Employment Agreement in consideration of the Employee's promotion to the
position of Executive Vice President - Commercial of the Corporation,
NOW, THEREFORE, the Parties hereto agree as follows:
1. Section(a) of Article Third: Amount and Duration of Termination
Benefits of the Employment Agreement is hereby amended to read as
follows:
"(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 24 months following
the Termination Date, and Employee shall receive a total of 24 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 24th month following the Termination Date, 12 months base salary to
be paid in 12 monthly installments. Furthermore, for a period of 24
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;
<PAGE> 2
provided, however, that the coverage referred to 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.
2. The Parties hereto further agree that the Employment Agreement shall
remain unchanged in all other respects.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum to
Employment Agreement as of the day written below.
WEIRTON STEEL CORPORATION
Dated: March 25, 1998 By: /s/ RICHARD K. RIEDERER
-------------- -----------------------
Title: President & CEO
---------------
EMPLOYEE
Name: /s/ EARL E. DAVIS, JR.
----------------------
Earl E. Davis, Jr.
Executive Vice President-
Commercial
Address: R.D. 1, Box C
---------------------
St. Joseph Drive
---------------------
Steubenville, OH
---------------------
<PAGE> 1
Exhibit 10.2
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 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)
<PAGE> 2
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 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.
2
<PAGE> 3
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 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
3
<PAGE> 4
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 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
4
<PAGE> 5
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: April 9, 1998 By: /s/ RICHARD K. RIEDERER
------------- -----------------------
Title: President & CEO
--------------------
EMPLOYEE
Name: /s/ FRANK TLUCHOWSKI, JR.
----------------------------
Frank Tluchowski, Jr.
Vice President
Engineering & Technology
Address: 215 Murphy Avenue
-------------------------
Steubenville, OH
-------------------------
5
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