FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ____________________
For Quarter Ended September 30, 1998 Commission File Number 033-89746
WHEELING-PITTSBURGH CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 55-0309927
(State of Incorporation) (I.R.S. Employer
Identification No.)
1134 Market Street
Wheeling, WV 26003
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 304-234-2400
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
The number of shares of Common Stock issued and outstanding was 100 shares as of
October 30, 1998.
<PAGE>
WHEELING-PITTSBURGH CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Sept. 30, Nine Months Ended Sept. 30,
----------------------- ---------------------------
1998 1997 1998 1997
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net Sales $ 297,717 $ 103,217 $ 845,605 $ 270,109
Operating Costs
Cost of goods sold 252,470 134,838 718,815 356,694
Depreciation 19,456 8,771 58,568 29,926
Selling, administrative and general expense 15,660 13,129 45,912 38,677
Special charge -- 88,910 -- 88,910
--------- --------- --------- ---------
287,586 245,648 823,295 514,207
--------- --------- --------- ---------
Operating Income (Loss) 10,131 (142,431) 22,310 (244,098)
Interest expense on debt 9,145 7,140 27,288 19,657
Other income (expense) 1,472 679 3,572 (214)
--------- --------- --------- ---------
Income (Loss) Before Taxes 2,458 (148,892) (1,406) (263,969)
Tax provision (benefit) 499 (52,107) (506) (92,349)
--------- --------- --------- ---------
Net Income (Loss) $ 1,959 $ (96,785) $ (900) $(171,620)
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
WHEELING-PITTSBURGH CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
------------- ------------
1998 1997
---- ----
(Dollars and shares in thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ -- $ --
Trade receivables - net 62,931 44,569
Inventories:
Finished and semi-finished products 189,170 149,550
Raw materials 86,123 103,735
Other materials and supplies 26,290 19,811
Excess of LIFO over current cost (17,239) (17,239)
----------- -----------
284,344 255,857
Other current assets 3,319 24,938
----------- -----------
Total current assets 350,594 325,364
Investments in other companies 68,817 68,742
Property, plant and equipment at cost, less
accumulated depreciation and amortization 658,137 694,108
Deferred income taxes 152,374 196,966
Intangible asset-pensions -- 76,714
Due from affiliates 44,425 27,955
Deferred charges and other assets 33,200 34,719
----------- -----------
$ 1,307,547 $ 1,424,568
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade payables $ 124,316 $ 116,559
Short-term borrowings 67,201 89,800
Deferred income taxes - current 30,023 32,196
Other current liabilities 91,482 77,441
Long-term debt due in one year 212 199
----------- -----------
Total current liabilities 313,234 316,195
Long-term debt 349,800 349,904
Pension liability -- 166,652
Other employee benefit liabilities 415,606 427,125
Other liabilities 52,022 49,980
----------- -----------
1,130,662 1,309,856
----------- -----------
Stockholders' Equity:
Common Stock - $.01 par value - 100
shares issued and outstanding -- --
Additional paid-in capital 335,138 272,065
Accumulated earnings (deficit) (158,253) (157,353)
----------- -----------
Total stockholders' equity 176,885 114,712
----------- -----------
$ 1,307,547 $ 1,424,568
=========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
WHEELING-PITTSBURGH CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Sept. 30,
---------------------------
1998 1997
---- ----
(Dollars in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (900) $(171,620)
Non cash expenses:
Depreciation 58,568 29,927
Other postemployment benefits (4,650) (1,390)
Income taxes 17,761 (88,246)
Equity income in affiliated companies (5,074) 1,191
Pension expense 8,894 3,655
Special charge, net of current portion -- 57,459
Decrease (increase) in working capital elements:
Trade receivables (44,362) (3,516)
Trade receivables sold 26,000 3,500
Inventories (28,487) (63,004)
Other current assets 21,619 3,284
Trade payables 7,757 38,728
Other current liabilities 11,868 29,808
Other items - net (29,818) 39,913
--------- ---------
Net cash provided by (used in) operating activities 39,176 (120,311)
--------- ---------
Cash flows from investing activities:
Plant additions and improvements (22,706) (17,977)
Investment in affiliates -- (5,450)
Dividends from affiliates 5,000 2,500
Proceeds from sale of property -- 1,217
--------- ---------
Net cash provided by (used in)
investing activities (17,706) (19,710)
--------- ---------
Cash flows from financing activities:
Payments on long-term borrowings (91) (1,928)
Short term borrowings (payments) (22,599) 97,000
Letter of credit collateralization 1,220 8,999
--------- ---------
Net cash provided by (used in) financing activities (21,470) 104,071
--------- ---------
Increase (Decrease) in cash and
cash equivalents -- (35,950)
--------- ---------
Cash and cash equivalents
at beginning of period -- 35,950
--------- ---------
Cash and cash equivalents
at end of period $ -- $ --
========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
WHEELING-PITTSBURGH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
General
- -------
The consolidated balance sheet as of September 30, 1998, the
consolidated statement of operations for the three and nine month periods
ended and the consolidated statement of cash flows for the nine month
periods ended September 30, 1998 and 1997, have been prepared by
Wheeling-Pittsburgh Corporation ("WPC" or "the Company") without audit. In
the opinion of management, all normal and recurring adjustments necessary
to present fairly the consolidated financial position at September 30,
1998 and the results of operations and changes in cash flows for the
periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The results of
operations for the period ended September 30, 1998 are not necessarily
indicative of the operating results for the full year. Presentation of
earnings per share is not meaningful since the Company is a wholly-owned
subsidiary of WHX Corporation ("WHX").
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.
Business Segment
- ----------------
The Company is primarily engaged in one line of business and has
one industry segment, which is the making, processing and fabricating of
steel and steel products. The Company's products include hot rolled and
cold rolled sheet, and coated products such as galvanized, prepainted and
tin mill sheet. The Company also manufactures a variety of fabricated
steel products including roll formed corrugated roofing, roof deck, form
deck, floor deck, bridge form and other products used primarily by the
construction, highway and agricultural markets.
Note 1 - Corporate Reorganization
- ---------------------------------
Formation of WHX Corporation
On July 26, 1994 the Company and its subsidiaries were reorganized
and a new holding company, WHX, was formed. Upon effectiveness of the
merger each share of then outstanding WPC Common Stock, WPC Series A
Preferred Stock and each WPC warrant was converted into a share of WHX
Common Stock, WHX Series A Preferred Stock and a WHX Warrant,
respectively. WHX also assumed the obligation to purchase the Redeemable
Common Stock of the ESOP and guaranteed substantially all of the Company's
then outstanding indebtedness.
At September 30, 1998 and December 31, 1997, amounts due from
affiliates totaled $44.4 million and $28.0 million, respectively. These
amounts reflect cash advances between affiliates, dividends paid by WPC on
behalf of WHX, intercompany tax allocations and working capital advances
to Unimast, Inc., ("Unimast"), a wholly-owned subsidiary of WHX. These
amounts could be settled in cash or through the equity accounts.
Note 2 - Merger of Pension Plans
- --------------------------------
In May 1998 WHX completed the merger of WPC's defined benefit
pension plan with the pension plans of its wholly owned Handy & Harman
("H&H") subsidiary. Under the terms of the merged WHX Pension Plan there
is a series of benefit structures, which essentially continue the
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various pension plans for employees of the Wheeling-Pittsburgh Steel
Corporation ("WPSC") and H&H pension plans as they existed before the
mergers. The pension plan merger eliminates both the underfunding in the
WPC Pension Plan and WPC's balance sheet liability and will materially
reduce WPC's net periodic pension expense in future periods. Based on
current actuarial assumptions, the merged pension plan is expected to be
fully funded for several years under the Internal Revenue Code guidelines.
The merger eliminates approximately $135 million of future cash funding
obligations of WPC over the next four years.
Note 3 - Sales of Receivables
- -----------------------------
Accounts receivable at September 30, 1998 and 1997 exclude $95.0
million and $48.5 million, respectively, representing uncollected accounts
receivable sold with recourse limited to the extent of uncollectible
balances. Fees paid by the Company under such agreement range from 6.1375%
to 8.5% of the outstanding amount of receivables sold. Based on the
Company's collection history, the Company believes that the credit risk
associated with the above arrangement is immaterial.
Note 4 - Revolving Credit Facility
- ----------------------------------
On December 28, 1995, WPSC entered into a Second Amended and
Restated Revolving Credit Facility ("RCF") with Citibank, N.A. as agent.
The RCF, as amended, provides for borrowings for general corporate
purposes up to $150 million and a $35 million sub-limit for Letters of
Credit. Borrowings outstanding against the RCF at September 30, 1998
totaled $67.2 million. Letters of credit outstanding under the RCF were
$8.7 million at September 30, 1998.
In August 1994 WPSC entered into a separate facility for letters of
credit up to $50 million. At September 30, 1998 letters of credit totaling
$8.1 million were outstanding under this facility. The letters of credit
are collateralized at 105% with U.S. Government securities owned by the
Company, and are subject to an administrative charge of .4% per annum on
the amount of outstanding letters of credit.
Note 5 - Contingencies
- ----------------------
Environmental Matters
The Company has been identified as a potentially responsible party
under the Comprehensive Environmental Response, Compensation and Liability
Act ("Superfund") or similar state statutes at several waste sites. The
Company is subject to joint and several liability imposed by Superfund on
potentially responsible parties. Due to the technical and regulatory
complexity of remedial activities and the difficulties attendant to
identifying potentially responsible parties and allocating or determining
liability among them, the Company is unable to reasonably estimate the
ultimate cost of compliance with Superfund laws. The Company believes,
based upon information currently available, that the Company's liability
for clean up and remediation costs in connection with the Buckeye
reclamation will be between $3.0 million and $4.0 million. At six other
sites (MIDC Glassport, United Scrap Lead, Tex-Tin, Breslube Penn, Four
County Landfill and Beazor) the Company estimates costs to aggregate up to
$700,000. The Company is currently funding its share of remediation costs.
The Company, as are other industrial manufacturers, is subject to
increasingly stringent standards relating to the protection of the
environment. In order to facilitate compliance with these environmental
standards, the Company has incurred capital expenditures for environmental
control projects aggregating $6.8 million, $12.4 million and $6.5 million
for 1996, 1997 and the nine months of 1998, respectively. The Company
anticipates spending approximately $27.6 million in the aggregate on major
environmental compliance projects through the year 2000,
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-3-
estimated to be spent as follows: $10.5 million in 1998, $13.2 million in
1999 and $3.9 million in 2000. Due to the possibility of unanticipated
factual or regulatory developments, the amount of future expenditures may
vary substantially from such estimates.
Non-current accrued environmental liabilities totaled $10.6 million
at December 31, 1997 and $12.7 million at September 30, 1998. As new
information becomes available, including information provided by third
parties, and changing laws and regulations, the liabilities are reviewed
and the accruals adjusted quarterly. Management believes, based on its
best estimate, that the Company has adequately provided for remediation
costs that might be incurred or penalties that might be imposed under
present environmental laws and regulations.
Based upon information currently available, including the Company's
prior capital expenditures, anticipated capital expenditures, consent
agreements negotiated with Federal and state agencies and information
available to the Company on pending judicial and administrative
proceedings, the Company does not expect its environmental compliance and
liability costs, including the incurrence of additional fines and
penalties, if any, relating to the operation of its facilities, to have a
material adverse effect on the financial condition or results of
operations of the Company. However, as further information comes into the
Company's possession, it will continue to reassess such evaluations.
Note 6 - Comprehensive Income
- -----------------------------
The Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (SFAS No. 130), effective January 1,
1998. This Statement establishes standards for reporting and display of
comprehensive income and its components in the financial statements.
Comprehensive income is defined as net income plus changes in equity
resulting from nonowner sources (e.g., foreign currency gains and losses,
unrealized gains and losses on certain securities, pension liability
adjustments). The Company does not have any items of comprehensive income
other than net income; accordingly, comprehensive income has not been
separately presented in the accompanying financial statements.
<PAGE>
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PART I
Item 2. Management's Discussion and Analysis
General
WPSC announced on September 30, 1998 that it is actively supporting the
"Stand Up for Steel" Campaign initiated by the United Steel Workers of America
and other steel producers. The Campaign is aimed at creating government action
against dumping foreign steel at prices below the cost of production.
On October 27, 1998 WPSC also filed suit against 15 Japanese and Russian
steel producers and trading companies, alleging that they are selling hot-rolled
steel to WPSC's customers in Ohio below the cost of production and are causing
the company irreparable harm. The suit seeks to have the defendant companies
immediately enjoined from selling or otherwise providing hot-rolled steel
manufactured in Russia or Japan below its cost of production and delivery to the
Ohio market. It asked for accelerated handling of the complaint by the Belmont
County Common Pleas Court. The defendant companies have filed a Notice of
Removal removing the action from the Common Pleas Court to the United States
District Court for the Southern District of Ohio. WPSC has filed a motion to
remand the action to the Common Pleas Court. The notion is currently pending.
WHX, the parent company of WPC, continues to pursue strategic alternatives
to maximize the value of its portfolio of businesses. Some of these alternatives
have included, and will continue to include selective acquisitions, divestitures
and sales of certain assets. The Company has provided, and may from time to time
in the future, provide information to interested parties regarding portions of
its businesses for such purposes.
Results of Operations
- ---------------------
Net sales for the third quarter of 1998 totaled $297.7 million on
shipments of steel products totaling 591,043 tons. Net sales for the third
quarter of 1997 totaled $103.2 million on shipments of 147,888 tons. The
increase in net sales and shipments of steel products primarily reflects the
return to pre-strike levels of sales for Wheeling-Pittsburgh Steel Corporation's
("WPSC") operations compared to the third quarter 1997, which earlier period
reflects the effect of the strike by the United Steel Workers of America. The
new labor agreement resulted in the elimination of 850 jobs, directly affecting
operating costs.
Third quarter 1998 operating costs increased to $287.6 million from $156.7
million, excluding the special charge, in third quarter 1997. Operating cost per
ton decreased to $487 per ton in the 1998 third quarter from $1,060 per ton in
the 1997 third quarter. The increase in operating costs primarily reflects the
effects of higher volumes of production and shipments in the 1998 third quarter
compared to the strike affected 1997 third quarter. The Company also recorded
unfavorable physical inventory adjustments of $4.5 million in the third quarter.
The lower operating costs per ton shipped reflects higher production levels and
lower fixed cost per ton during the third quarter of 1998. Also, the Company
experienced lower pension expense due to the merged overfunded pension plans.
The Company produced 617,303 tons of raw steel in the 1998 third quarter, as
compared to 118,541 tons in the 1997 third quarter.
Depreciation expense increased $10.7 million to $19.5 million in the third
quarter of 1998 from $8.8 million in the comparable period in 1997 due to the
effects of the strike on production in the third quarter of 1997 and the higher
levels of raw steel production in 1998 and its effect on the units of production
depreciation method.
Selling, administrative and general expense for the third quarter of 1998
increased $2.5 million to $15.7 million from $13.1 million in the comparable
period in 1997 due primarily to lower expenses
<PAGE>
-5-
incurred during the strike and an increased salaried workforce following the
settlement of the strike in 1998.
Third quarter 1997 operating costs include a special charge of $88.9
million related to the new labor agreement. The special charge included $66.7
million for enhanced retirement benefits, $15.5 million for signing and
retention bonuses and special assistance payments and other employee benefits
totaling $6.7 million.
Interest expense for the third quarter 1998 increased $2.0 million to $9.1
million from the comparable period in 1997 due to higher levels of long-term
debt.
Other income increased $.8 million to $1.5 million in the third quarter of
1998, compared to $.7 million in the 1997 third quarter. The increase in other
income reflects increased equity income from joint venture operations, which
were also adversely impacted in the prior period by the strike, partially offset
by a decrease in other income resulting from increased fees on trade receivables
sold in 1998.
The 1998 third quarter tax provision reflects an estimated annual
effective tax rate of 36% and a cumulative adjustment to the first six months.
The change in annual effective tax rate is due to changes in estimates for
annual pre-tax income. The 1997 third quarter tax benefit reflects an estimated
annual effective tax rate of 35%.
Net income for the 1998 third quarter totaled $2.0 million compared to the
1997 third quarter net loss which totaled $96.8 million. This is the first
profitable quarter since the beginning of the ten-month strike on October 1,
1996.
Net sales for the nine month period of 1998 totaled $845.6 million on
shipments of steel products totaling 1,679,356 tons. Net sales for the nine
month period of 1997 totaled $270.1 million on shipments of 362,778 tons. The
increase in net sales and shipments of steel products primarily reflects the
effect of the strike. The 1998 nine month results reflect progress toward and
ultimately achieving pre-strike production and shipping levels.
Operating costs for the nine month period of 1998 increased to $823.3
million from $425.3 million, excluding the special charge in the 1997 nine
months. Operating cost per ton decreased to $490 per ton in the 1998 nine month
period from $1,172 per ton in the 1997 nine month period. The increase in
operating costs reflects the increased volume of raw steel production at WPSC's
operations, which were idled throughout much of 1997 due to the strike and
includes an unfavorable physical inventory adjustment of $4.5 million recorded
in the third quarter. The lower operating costs per ton shipped reflects higher
production levels and lower fixed cost per ton during the nine months of 1998.
Also, the Company experienced lower pension expense due to the merged overfunded
pension plans. The Company produced 1,861,806 tons of raw steel in the 1998 nine
month period, while producing 118,541 tons in the 1997 nine month period.
Depreciation expense increased $28.7 million to $58.6 million in the nine
month period of 1998 from $29.9 million in the comparable period of 1997 due to
the effects of the strike on production in the nine months of 1997 and the
higher levels of raw steel production in 1998 and its effect on the units of
production depreciation method.
Selling, administrative and general expense for the nine month period of
1998 increased $7.2 million to $45.9 million from $38.7 million in the
comparable period in 1997 due primarily to lower expenses incurred during the
strike, severance expense incurred for the former CEO, and increased management
fees paid to WPN Corporation during 1998.
Interest expense for the nine month period of 1998 increased $7.6 million
to $27.3 million from the comparable period in 1997 due to higher levels of
long-term debt and increased borrowing under the revolving credit facility.
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Other income increased $3.8 million to $3.6 million in the nine month
period of 1998, compared to an expense of $.2 million in the 1997 nine month
period. The increase in other income reflects increased equity income from joint
venture operations, which were also adversely impacted by the strike, partially
offset by a decrease in other income resulting from increased fees on trade
receivables sold in 1998 and lower interest income earned on investments.
The 1998 nine month tax benefit reflects an estimated annual effective tax
rate of 36%, while the 1997 nine month tax benefit reflects an estimated annual
effective tax rate of 35%. The increase in effective tax rate reflects changes
in estimated annual pretax income.
Net loss for the 1998 nine month period totaled $.9 million compared to
the 1997 nine month net loss which totaled $171.6 million.
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Financial Position
- ------------------
Net cash flow provided by operating activities for the nine months of 1998
totaled $39.2 million. Working capital accounts (excluding cash, short-term
borrowings and current maturities of long term debt) used $5.6 million of funds.
Accounts receivable increased by $44.4 million (excluding a $26.0 million sale
of trade receivables under the Receivables Facility), trade payables increased
$7.8 million and other current liabilities increased $11.9 million. Inventories,
valued principally by the LIFO method for financial reporting purposes, totaled
$284.3 million at September 30, 1998, an increase of $28.5 million from December
31, 1997. The increase in accounts receivable is due to increased shipments.
Other current assets decreased $21.6 million primarily due to the receipt of a
loss carry back tax refund.
In the nine months of 1998, $22.7 million was spent on capital
improvements including $6.5 million on environmental control projects.
Continuous and substantial capital and maintenance expenditures will be required
to maintain and where necessary, upgrade operating facilities to remain
competitive, and to comply with environmental control requirements. It is
anticipated that necessary capital expenditures including required environmental
expenditures in future years will approximate depreciation expense and represent
a material use of operating funds.
In December 1995, Wheeling-Pittsburgh Steel Corporation, ("WPSC") entered
into a new Revolving Credit Facility ("the Revolving Credit Facility") with
Citibank, N.A. as agent. The Revolving Credit Facility, as amended, provides for
borrowing for general corporate purposes of up to $150 million and a $35 million
sub-limit for letters of credit. The Revolving Credit Facility expires May 3,
1999. Borrowings under the Revolving Credit Facility at September 30, 1998
totaled $67.2 million and letters of credit outstanding under the Revolving
Credit Facility totaled $8.7 million.
In August 1994, WPSC entered into a separate facility for letters of
credit up to $50 million. At September 30, 1998 letters of credit totaling $8.1
million were outstanding under this facility. The letters of credit are
collateralized at 105% with U.S. Government securities owned by the Company, and
are subject to an administrative charge of .4% per annum on the amount of
outstanding letters of credit.
Effective May 31, 1998, WHX merged WPC's defined benefit pension plan with
those of its wholly owned Handy & Harman ("H&H") subsidiary. The pension
obligations will be accounted for on the WHX books. As a result of the merger of
the pension plans and based on current actuarial assumptions, on a consolidated
basis, WHX will report a net prepaid pension asset of $47.4 million. The merger
will also eliminate WPC cash funding obligations estimated in excess of $135.0
million over the next four years. The pension liability on the WPC books at the
time of the pension merger, net of the deferred tax asset, was eliminated and
credited to paid-in-capital. WPC pension expense will be allocated and charged
quarterly, and will offset the net prepaid pension asset recorded on WHX books.
Management expects the WPC allocated net periodic pension expense of the merged
plans to be significantly lower prospectively due to the overfunded status of
the plans.
Liquidity
- ---------
Short-term liquidity is dependent, in large part, on cash on hand,
investments, general economic conditions and their effect on steel demand and
prices. Long-term liquidity is dependent upon the Company's ability to sustain
profitable operations and control costs during periods of low demand or pricing
in order to sustain positive cash flow. The Company satisfies its working
capital requirements through cash on hand, investments, the Receivables
Facility, borrowing availability under the Revolving Credit Facility and funds
generated from operations. The Company believes that such sources will provide
the Company for the next twelve months with the funds required to satisfy
working capital and capital expenditure requirements. External factors, such as
worldwide steel production and demand and currency exchange rates, could
materially affect the Company's results of operations. During the 1998 third
quarter, the Company had minimal activity with respect to futures contracts,
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and the impact of such activity was not material on its financial condition or
results of operations of the Company.
Year 2000 Project
- -----------------
WPSC's company wide Year 2000 Project is proceeding on schedule. The
project addresses all aspects of computing at WPSC including mainframe systems,
external data interfaces to customers, suppliers, banks and government,
mainframe controlling software, voice and data systems, internal networks and
personal computers, plant process control systems, building controls, and in
addition surveying WPSC's major suppliers and customers to assure their
readiness.
Mainframe business systems are anticipated to be Year 2000 compliant by
the end of 1998; external data interfaces, mainframe software, voice and data
systems and internal networks and personal computers are anticipated to be Year
2000 compliant by the end of the first quarter of 1999; process control systems
are anticiapted to be compliant by the end of the second quarter of 1999.
Building controls are Year 20000 compliant at this time. Supplier and customer
survey's are 25% complete at this time and completion is expected by the end of
the second quarter of 1999.
The total costs associated with the required modifications to become Year
2000 compliant is not expected to be material to the Company's financial
condition or results of operations. The estimated total cost of the Year 2000
Project is $2.0 million. The total amount expended on the project through
October 1998 is $1.5 million. Funds are being provided to the project through
departmental expenses budgeted for at the beginning of this project.
Failure to correct a Year 2000 problem could result in an interruption of
certain normal business activities or operations. The Year 2000 project is
expected to eliminate any issues that would cause such an interruption. WPSC
believes that the implementation of the Year 2000 project changes will minimize
any interruptions. WPSC is currently in the process of developing contingency
plans regarding component failure of any Year 2000 non-compliant segment of the
business.
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New Accounting Standard
- -----------------------
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1
addresses costs incurred in connection with the implementation of internal-use
software, and specifies the circumstances under which such costs should be
capitalized or expended. The Company will be required to adopt SOP 98-1 in the
first quarter of 1999. At this time, management has not determined the impact of
adoption of SOP 98-1 on the Company's results of operations or financial
position.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). This pronouncement requires all derivative
instruments to be reported at fair value on the balance sheet; depending on the
nature of the derivative instrument, changes in fair value will be recognized
either in net income or as an element of comprehensive income. SFAS 133 is
effective for fiscal years beginning after June 15, 1999. The Company has not
engaged in significant activity with respect to derivative instruments or
hedging activities in the past. Management of the Company has not yet determined
the impact, if any, of the adoption of SFAS 133 on the Company's financial
position or results of operations.
******
When used in the Management's Discussion and Analysis, the words
"anticipate", "estimate" and similar expressions are intended to identify
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act, which are intended to be covered by the
safe harbors created thereby. Investors are cautioned that all forward-looking
statements involve risks and uncertainty, including without limitation, the
ability of the Company to develop market and sell its products, the effects of
competition and pricing, and Company and industry shipment levels. Although the
Company believes that the assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could be inaccurate, and therefore, there
can be no assurance that the forward-looking statements included herein will
prove to be accurate.
<PAGE>
-10-
PART II Other Information
-----------------
Item 6.(a) Exhibits
--------
27 Financial Data Schedule
6.(b) Report on Form 8-K
------------------
None
<PAGE>
-11-
SIGNATURES
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.
WHEELING-PITTSBURGH CORPORATION
/s/ P. J. Mooney
-------------------------------
P. J. Mooney
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
November 13, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
WHEELING-PITTSBURGH CORPORATION CONSOLIDATED FINANCIAL STATEMENTS AS OF
SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 62,931
<ALLOWANCES> 1,361
<INVENTORY> 284,344
<CURRENT-ASSETS> 350,594
<PP&E> 1,085,234
<DEPRECIATION> 427,097
<TOTAL-ASSETS> 1,307,547
<CURRENT-LIABILITIES> 313,234
<BONDS> 349,800
<COMMON> 0
0
0
<OTHER-SE> 176,885
<TOTAL-LIABILITY-AND-EQUITY> 1,307,547
<SALES> 297,717
<TOTAL-REVENUES> 297,717
<CGS> 252,470
<TOTAL-COSTS> 287,586
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,145
<INCOME-PRETAX> 2,458
<INCOME-TAX> 499
<INCOME-CONTINUING> 1,959
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,959
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
