<PAGE> 1
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, 2000
-----------------------------------------
[ ] 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, 2000 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
November 1, 2000.
<PAGE> 2
WHEELING-PITTSBURGH CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED SEPT. 30, NINE MONTHS ENDED SEPT. 30,
------------------------- ---------------------------
2000 1999 2000 1999
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Net Sales $272,530 $282,358 $845,869 $788,205
-------- -------- -------- --------
Operating Costs
Cost of goods sold 254,251 243,715 747,740 700,489
Depreciation 20,189 19,738 61,798 59,098
Selling, administrative and general expense 17,185 15,810 52,777 48,446
-------- -------- -------- --------
291,625 279,263 862,315 808,033
-------- -------- -------- --------
Operating Income (Loss) (19,095) 3,095 (16,446) (19,828)
Interest expense on debt 10,075 9,691 29,343 28,098
Other income (expense) (1,339) (491) (2,030) 212
-------- -------- -------- --------
Loss Before Taxes (30,509) (7,087) (47,819) (47,714)
Tax provision (benefit) (9,138) (3,078) (55,267) (17,988)
-------- -------- -------- --------
Net Income (Loss) $(21,371) $ (4,009) $ 7,448 $(29,726)
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 3
WHEELING-PITTSBURGH CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31,
2000 1999
------------ ------------
(Dollars in thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ -- $ --
Trade receivables - net 57,031 57,688
Inventories:
Finished and semi-finished products 201,592 158,190
Raw materials 52,954 61,483
Other materials and supplies 20,247 28,033
Excess of LIFO over current cost 4,489 4,489
---------- ----------
279,282 252,195
Prepaid expenses and deferred charges 7,996 4,425
---------- ----------
Total current assets 344,309 314,308
Investments in associated companies 62,587 64,229
Property, plant and equipment at cost, less
accumulated depreciation 660,470 653,234
Deferred income taxes 176,372 162,344
Due from affiliates 52,598 56,203
Deferred charges and other assets 17,727 27,704
---------- ----------
$1,314,063 $1,278,022
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade payables $ 144,000 $ 127,448
Short-term debt 135,264 79,900
Deferred income taxes - current 27,406 27,406
Other current liabilities 93,020 90,309
Long-term debt due in one year 415 415
---------- ----------
Total current liabilities 400,105 325,478
Long-term debt 356,563 353,978
Other employee benefit liabilities 383,599 392,143
Other liabilities 29,551 69,626
---------- ----------
1,169,818 1,141,225
---------- ----------
Stockholders' Equity:
Common Stock - $.01 par value - 100
shares issued and outstanding -- --
Additional paid-in capital 335,138 335,138
Accumulated earnings (deficit) (190,893) (198,341)
---------- ----------
Total stockholders' equity 144,245 136,797
---------- ----------
$1,314,063 $1,278,022
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 4
WHEELING-PITTSBURGH CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPT. 30,
2000 1999
--------- ---------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 7,448 $(29,726)
Items not affecting cash from
operating activities:
Depreciation 61,798 59,098
Other postretirement benefits (6,944) (4,678)
Income taxes (55,299) (6,773)
Equity income in affiliated companies (2,239) (3,077)
Pension expense 1,936 4,554
(Gain)/loss on disposition of assets (947) 2,718
Decrease (increase) in working capital elements:
Trade receivables (4,343) (19,457)
Trade receivables sold 5,000 3,225
Inventories (27,087) (22,868)
Other current assets (3,571) (10,625)
Trade payables 16,552 9,309
Other current liabilities 2,711 9,040
Other items - net 7,583 (20,010)
-------- --------
Net cash provided by (used in) operating activities 2,598 (29,270)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Plant additions and improvements (71,000) (47,024)
Investment in affiliates 131 3,212
Dividends from affiliated companies 3,750 5,000
Proceeds from sale of property 2,967 881
-------- --------
Net cash used in
investing activities (64,152) (37,931)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long term borrowings 2,585 4,583
Short term borrowings 55,364 45,244
Receivables from affiliates 3,605 2,414
Letter of credit collateralization -- 8,229
-------- --------
Net cash provided by financing activities 61,554 60,470
-------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS -- (6,731)
Cash and cash equivalents
at beginning of period -- 6,731
-------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ -- $ --
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
WHEELING-PITTSBURGH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
GENERAL
The consolidated balance sheet as of September 30, 2000 the
consolidated statement of operations for the three and nine month periods
ended September 30, 2000 and 1999 and the consolidated statement of cash
flows for the nine month periods ended September 30, 2000 and 1999 have
been prepared by Wheeling-Pittsburgh Corporation ("WPC" or "the Company")
without audit. In the opinion of management, all recurring adjustments
necessary to present fairly the consolidated financial position at
September 30, 2000 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. This quarterly
report on Form 10-Q should be read in conjunction with the Company's
audited consolidated financial statements for the year ended December 31,
1999. The results of operations for the period ended September 30, 2000
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 Corporation and eight of its direct and indirect subsidiaries
filed voluntary petitions for relief under Chapter 11 of Title 11 of the
United States Code (the "Federal bankruptcy laws") on November 16, 2000.
These financial statements have been prepared on a going concern basis,
which contemplates continuity of operations, realization of assets, and
liquidation of liabilities in the ordinary course of business., There is
no assurance that the carrying amounts of assets will be realized or that
liabilities will be liquidated or settled for the amounts recorded as a
result of the bankruptcy filing and related events. A plan of
reorganization could change the amounts reported in the financial
statements and cause a material decrease in the carrying amount of the
assets. See Note 1.
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, culvert, bridge form and other products used primarily
by the construction, highway and agricultural markets.
NOTE 1 - SUBSEQUENT EVENT
The second steel import crisis since 1998 has caused a severe
deterioration of the U.S. steel industry. The deterioration has resulted
in severely reduced steel pricing. This decline, coupled with the
indebtedness incurred by the Corporation in recovering from a 10-month
strike has resulted in the Corporation suffering substantial losses and
the severe erosion of its financial position and liquidity. As a result,
the Corporation has been forced to seek the protection of the Federal
bankruptcy laws.
<PAGE> 6
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On November 16, 2000, the Corporation and eight of its direct and
indirect wholly-owned subsidiaries, representing substantially all of the
consolidated group's business (Wheeling-Pittsburgh Steel Corporation, WP
Steel Venture Corporation, Consumers Mining Company, WP Coal Company,
Mingo Oxygen Company, Monessen Southwestern Railway Company, Wheeling
Empire Company and Pittsburgh Canfield Corporation, collectively the
"Debtors") filed voluntary petitions for relief under Chapter 11 of the
Federal bankruptcy laws in the United States Bankruptcy Court for the
Northern District of Ohio in Youngstown, Ohio (the "Bankruptcy Court").
The Debtors are continuing all normal business operations and will
continue to provide uninterrupted services to their customers. No trustee
examiner or similar officer has been appointed by the Bankruptcy Court.
Subsequent to the commencement of the Chapter 11 Filing, the
Debtors sought and obtained several orders from the Bankruptcy Court which
were intended to stabilize their businesses and enable each Debtor to
continue business operations as a debtor-in-possession.
The Federal bankruptcy laws provide that the Debtors have an
exclusive period during which only they may propose and file and solicit
acceptances of a plan of reorganization. The exclusive period to propose a
plan for reorganization currently expires on March 16, 2001. If the
Debtors fail to file a plan of reorganization during the exclusive period
(including any extensions thereof) or, after such plan has been filed, if
the Debtors fail to obtain acceptance of such plan from the requisite
impaired classes of creditors and equity security holders during the
exclusive solicitation period, any party in interest, including a
creditor, an equity security holder, a committee of creditors or equity
security holders, or an indenture trustee, may file their own plan of
reorganization for the Debtors.
After a plan of reorganization has been filed with the Bankruptcy
Court, the plan, along with a disclosure statement approved by the
Bankruptcy Court, will be sent to impaired creditors and equity security
holders who are entitled to vote. Following the solicitation period, the
Bankruptcy Court will consider whether to confirm the plan. In order to
confirm a plan of reorganization, the Bankruptcy Court is required to
find, among other things, that (i) with respect to each impaired class of
creditors and equity security holders, each holder in such class has
accepted the plan or will, pursuant to the plan, receive at least as much
as such holder would receive in a liquidation, (ii) each impaired class of
creditors and equity security holders has accepted the plan by the
requisite vote (except as provided in the following sentence), and (iii)
confirmation of the plan is not likely to be followed by the liquidation
of the Debtors or a need for their further financial reorganization unless
the plan proposes such liquidation or reorganization. If any impaired
class of creditors or equity security holders does not accept a plan and
so long as all of the other requirements of the Federal bankruptcy laws
are met, the proponent of the plan may invoke the "cram down" provisions
of the Federal bankruptcy laws. Under these provisions, the Bankruptcy
Court may confirm a plan notwithstanding the non-acceptance of the plan by
an impaired class of creditors or equity security holders if certain
requirements of the Federal bankruptcy laws are met. These requirements
may, among other things, necessitate payment in full for senior classes of
creditors before payment to a junior class can be made.
<PAGE> 7
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On November 17, 2000, the Debtors entered into a
Debtor-in-Possession Credit Agreement (the "DIP Credit Agreement") with a
group of lenders (the "Lenders"), led by Citicorp USA, Inc., pursuant to
which the Lenders have agreed to provide the Debtors with a revolving
credit facility in an aggregate principal amount not to exceed $255
million and a term loan facility in an aggregate principal amount of $35
million. The Debtors' obligations under the DIP Credit Agreement are
secured by substantially all of the Debtors' assets. The Court approved
the DIP Credit Agreement on an interim basis on November 17, 2000,
allowing the Debtors to borrow up to the full amount of the facilities.
Borrowings under the DIP Credit Agreement in the amount of $105.0 million
were used to repay all obligations under WPSC's Receivables Facility and
$84.7 million were also used to repay all obligations under WPSC's
Revolving Credit Facility. See "Financial Position and MDA." The Company
believes that this financing will enable the Debtors to pay for the
post-petition delivery of goods and services and continue operations and
administration necessary to meet current and future customer needs.
NOTE 2 - SALES OF RECEIVABLES
On May 27, 1999, the Company renegotiated its $100 million
Receivables Facility agreement on terms and conditions similar to its
previous facility. On June 30, 2000, the Company amended the agreement to
increase the program limit to $115 million. On September 22, 2000, the
Company amended its agreement to reduce the program limit to $105 million,
to waive an Early Amortization Event through December 20, 2000 and to
increase certain fees associated with the agreement during the waiver
period. The Early Amortization Event was caused by a reduction in rating
by Standard & Poors on the long-term Senior Unsecured debt. The
agreement, which was expected to expire in May 2003, was replaced by the
DIP Credit Agreement. Accounts receivable at September 30, 2000 and
December 31, 1999 exclude $105.0 million and $100 million, respectively,
representing uncollected accounts receivable sold with recourse limited to
the extent of uncollectible balances. Fees paid by the Company under such
Receivables Facility ranged from approximately 5.91% to 7.63% of the
outstanding amount of receivables sold. See Note I and MDA - Financial
Position.
NOTE 3 - REVOLVING CREDIT FACILITY
On April 30, 1999, Wheeling-Pittsburgh Steel Corporation ("WPSC")
entered into a Third Amended and Restated Revolving Credit Facility
("RCF") with Citibank, N.A. as agent. The RCF, as amended, provided for
borrowings for general corporate purposes up to $150 million and a $25
million sub-limit for Letters of Credit. The RCF was expected to expire
in May 2003 and was replaced by the DIP Credit Agreement. Interest rates
were based on the Citibank prime rate plus 1.375% and/or a Eurodollar rate
plus 2.50%. The margin over the prime rate and the Eurodollar rate
fluctuated based upon performance. On September 26, 2000, the Company
amended the RCF to waive certain financial covenants through January 20,
2001 and increase the interest rate from a Eurodollar rate plus 2.375% to
Eurodollar rate plus 2.50%. Borrowings outstanding against the RCF at
September 30, 2000 totaled $132.0 million. Letters of credit outstanding
under the RCF were $2.8 million at September 30, 2000. See Note I and MDA
- Financial Position.
<PAGE> 8
-4-
NOTE 4 - CONTINGENCIES
ENVIRONMENTAL MATTERS
The Company has been identified as a potentially responsible party
under the Comprehensive Environmental Response, Compensation and Liability
Act ("Superfund") and/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 Landfill will be between $1.5 million and $2.0 million. At
five other sites (MIDC Glassport, Tex-Tin, Breslube Penn, Four County
Landfill and Beazer) the Company estimates costs to aggregate
approximately $500,000. 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 $9.5 million, $7.7 million and $2.6 million
for 1998, 1999 and the first nine months of 2000, respectively. The
Company anticipates spending approximately $28.6 million in the aggregate
on major environmental compliance projects through the year 2003,
estimated to be spent as follows: $4.3 million in 2000, $10.9 million
in 2001, $7.4 million in 2002, and $6.0 million in 2003. 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 $14.7 million
at December 31, 1999 and $14.6 at September 30, 2000. These accruals are
determined by the Company based on all known available information. As new
information becomes available, including information provided by third
parties, and changing laws and regulations, the liabilities are reviewed
and the accruals are 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 operations 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.
<PAGE> 9
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PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
SUBSEQUENT EVENTS
On November 16, 2000, the Corporation and eight of its direct and
indirect wholly-owned subsidiaries, representing substantially all of the
consolidated group's business (Wheeling-Pittsburgh Steel Corporation, WP
Steel Venture Corporation, Consumers Mining Company, WP Coal Company,
Mingo Oxygen Company, Monessen Southwestern Railway Company, Wheeling
Empire Company and Pittsburgh Canfield Corporation, collectively the
"Debtors") filed voluntary petitions for relief under Chapter 11 of the
Federal bankruptcy laws in the United States Bankruptcy Court for the
Northern District of Ohio in Youngstown, Ohio (the "Bankruptcy Court").
The Debtors are continuing all normal business operations and will
continue to provide uninterrupted services to their customers. No trustee
examiner or similar officer has been appointed by the Bankruptcy Court.
Subsequent to the commencement of the Chapter 11 Filing, the
Debtors sought and obtained several orders from the Bankruptcy Court which
were intended to stabilize their businesses and enable each Debtor to
continue business operations as a debtor-in-possession.
The Federal bankruptcy laws provide that the Debtors have an
exclusive period during which only they may propose and file and solicit
acceptances of a plan of reorganization. The exclusive period to propose a
plan for reorganization currently expires on March 16, 2001. If the
Debtors fail to file a plan of reorganization during the exclusive period
(including any extensions granted thereunder) or, after such plan has been
filed, if the Debtors fail to obtain acceptance of such plan from the
requisite impaired classes of creditors and equity security holders during
the exclusive solicitation period, any party in interest, including a
creditor, an equity security holder, a committee of creditors or equity
security holders, or an indenture trustee, may file their own plan of
reorganization for the Debtors.
After a plan of reorganization has been filed with the Bankruptcy
Court, the plan, along with a disclosure statement approved by the
Bankruptcy Court, will be sent to impaired creditors and equity security
holders who are entitled to vote. Following the solicitation period, the
Bankruptcy Court will consider whether to confirm the plan. In order to
confirm a plan of reorganization, the Bankruptcy Court, among other
things, is required to find that (i) with respect to each impaired class
of creditors and equity security holders, each holder in such class will,
pursuant to the plan, receive at least as much as such holder would
receive in a liquidation, (ii) each impaired class of creditors and equity
security holders has accepted the plan by the requisite vote (except as
provided in the following sentence), and (iii) confirmation of the plan is
not likely to be followed by the liquidation of the Debtors or a need for
their further financial reorganization or any successors to the Debtors
unless the plan proposes such liquidation or reorganization. If any
impaired class of creditors or equity security holders does not accept a
plan and assuming that all of the other requirements of the Federal
bankruptcy laws are met, the proponent of the plan may invoke the "cram
down" provisions of the Federal bankruptcy laws. Under these provisions,
the Bankruptcy Court may confirm a plan notwithstanding the non-acceptance
of the plan by an impaired class of creditors or equity security holders
if certain requirements of the Federal
<PAGE> 10
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bankruptcy laws are met. These requirements may, among other things,
necessitate payment in full for senior classes of creditors before payment
to a junior class can be made.
Since the Petition Date, the WPC Group has continued to conduct
business in the ordinary course as debtor-in-possession under the
protection of the Bankruptcy Court. Management is in the process of
stabilizing its business and evaluating its operations before beginning
the development of a reorganization plan. Until a reorganization plan is
confirmed by the Bankruptcy Court, payments of prepetition liabilities,
including WPC's 9 1/4% Senior Notes, are limited to those approved by the
Bankruptcy Court. The Chapter 11 filing is an event of default under the
9 1/4% Senior Notes.
To try to ensure that the Debtors have the capital necessary to
continue to operate their businesses as normal during the Chapter 11
Filing, the Debtors entered into a Debtor in Possession Credit Agreement
to provide borrowings of up to $290.0 million to refinance certain
obligations of the Debtors, to provide working capital for the Debtors and
for other general corporate purposes. See "Financial Position." The
Company believes that this financing will enable the Debtors to pay for
the post-petition delivery of goods and services and continue operations
and administration necessary to meet current and future customer needs.
In the Chapter 11 Filing, the Debtors may, with Bankruptcy Court
approval, sell assets and settle liabilities, including for amounts other
than those reflected in the financial statements. The administrative and
reorganization expense resulting from the Chapter 11 Cases will
unfavorably affect results. Moreover, future results may be adversely
affected by other claims and factors resulting from the Chapter 11 Filing.
RISK FACTORS AND CAUTIONARY STATEMENTS
This Report includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), including, in particular, forward-looking
statements under the heading "Item 2. Management's Discussion and
Analysis." These statements appear in a number of places in this Report
and include statements regarding the Company's intent, belief or current
expectations with respect to (i) its financing plans, (ii) trends
affecting its financial condition or results of operations, (iii) the
impact of competition, and (iv) the impact and effect of the Chapter 11
filing by the Company and several of its direct and indirect wholly
owned subsidiaries. The words "expect," "anticipate," "intend," "plan,"
"believe," "seek," "estimate," and similar expressions are intended to
identify such forward-looking statements; however, this Report also
contains other forward-looking statements in addition to historical
information.
Any forward-looking statements made by the Company are not
guarantees of future performance and there are various important factors
that could cause actual results to differ materially from those indicated
in the forward-looking statements. This means that indicated results may
not be realized. Factors which could cause the Company's actual results in
future periods to differ materially include, but are not limited to, the
following:
o The Company and each of its subsidiaries that has filed for
bankruptcy may not generate or have enough cash on hand from
operations and from debtor-in-possession financing to fund its
operations until it is able to propose a plan of reorganization that
will be acceptable to creditors and other parties in interest and
confirmed by the Bankruptcy Court;
o If the liabilities of the Debtors exceed the value of their assets,
the equity value of the Debtors could be eliminated;
o The creditors or landlords of each Debtor may take action that
prevents or unduly delays confirmation of a plan of reorganization
in connection with the filing under Chapter 11;
<PAGE> 11
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o The suppliers of each Debtor may stop providing supplies or services
to it or provide such supplies or services only on "cash on
delivery," "cash on order" or other terms that could have an adverse
impact of such Debtor's cash flow;
o The Bankruptcy Court may not confirm the plan of reorganization of
each Debtor;
o The Company may not be able to obtain sufficient additional
financing sources to meet its future obligations;
o The overall long-term operational reorganization and financial
restructuring plan of each Debtor may fail;
o The results of operations of the Company and its subsidiaries are
sensitive to the steel prices realized in the market, and the
continuation of the low steel prices at current levels would
continue to have a material adverse affect on the business of the
Company;
o The Company's business requires that it expend substantial capital
to maintain its productivity and facilities in order to remain
competitive and in compliance with environmental laws and
regulations;
o The cost of complying with environmental standards continues to
increase and the Company not only may be held liable for future
clean up costs, but also is at a disadvantage with foreign
competitors who are not held to similar strict regulations;
o The steel industry is very competitive, and the Company and its
subsidiaries face competition from both foreign and domestic
producers who are able to charge less than the Company because of
lower operating costs.
o The Company may fail or be unable to comply with, or there may be
changes in, governmental regulations and adverse outcomes from legal
and regulatory proceedings;
o Any changes in existing environmental regulatory matters; and
o General economic and business conditions and industry trends.
By making these forward-looking statements, the Company does
not undertake to update them in any manner except as may be required by its
disclosure obligations in filings it makes with the Securities and Exchange
Commission under the Federal securities laws.
GENERAL LITIGATION
On October 27, 1998, the Company filed a complaint in Belmont County, Ohio
against ten trading companies, two Japanese mills and three Russian mills
alleging that it had been irreparably harmed as a result of sales of hot-rolled
steel by the defendants at prices below the cost of production. The Company
asked the Court for injunctive relief to prohibit such sales. On November 6,
1998, defendants removed the case from Belmont County to the U.S. District Court
for the Southern District of Ohio. The Company subsequently amended its
complaint to allege violations of the 1916 Antidumping Act by nine trading
companies. The amended complaint sought treble damages and injunctive relief.
The Court dismissed WPC's state law causes of action, but allowed it to proceed
with its claims under the 1916 Antidumping Act. In early June 1999, the U.S.
District Court issued an order holding that injunctive relief is not available
as a remedy under the 1916 Antidumping Act. The Company appealed the Court's
decision to the Sixth Circuit Court of Appeals. The Company has reached
out-of-court settlements with six of the nine steel trading companies named in
this lawsuit. The Company's claims for treble damages, but not injunctive
relief, against the three remaining defendants were subsequently dismissed as a
result of settlement negotiations. The Sixth Circuit Court ruled against the
Company and the Company has elected not to seek a review by the U.S. Supreme
Court of the adverse ruling by the Sixth Circuit Court of Appeals. Therefore,
this case is effectively concluded.
RESULTS OF OPERATIONS
Net sales for the third quarter of 2000 totaled $272.5 million on
shipments of steel products totaling 549,415 tons. Net sales for the third
quarter of 1999 totaled $282.4 million on shipments of 614,452 tons. The
decrease in net sales is due to a decrease of 10.6% in volume of tons of steel
products shipped and a decrease of 0.7% in steel prices, due to very high levels
of steel imports.
Third quarter 2000 operating costs increased to $291.6 million from $279.3
million in the 1999 third quarter. Operating cost per ton increased to $531 per
ton in the 2000 third quarter from $454 per ton in the 1999 third quarter. The
increase in operating cost per ton reflects a richer product mix, higher raw
material and energy costs, and the cost of making increased volumes of coke sold
in the open market during the third quarter of 2000. The Company produced
603,792 tons of raw steel in the 2000 third quarter and 602,666 tons in the 1999
third quarter.
Depreciation expense increased $0.5 million to $20.2 million in the third
quarter of 2000 from $19.7 million in the comparable period in 1999 due to
higher levels of depreciable assets in the third quarter of 2000.
<PAGE> 12
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Selling, administrative and general expense for the third quarter of 2000
increased $1.4 million to $17.2 million from $15.8 million in the comparable
period in 1999 due to an increased marketing effort and expansion of the
fabricated products business.
Interest expense for the third quarter of 2000 increased $0.4 million to
$10.1 million from the comparable period in 1999 due to increased borrowings and
higher rates under the Revolving Credit Facility (RCF), partially offset by
higher amounts of capitalized interest during the third quarter of 2000.
Other income (expense) increased $0.8 million to $1.3 million expense in
the third quarter of 2000, compared to $0.5 million expense in the 1999 third
quarter. The increase in other expense reflects lower equity income from joint
venture operations, increased securitization fees and lower royalty income
earned.
The 2000 third quarter tax benefit reflects an estimated annual effective
tax rate of 35.8%. The 1999 third quarter tax benefit reflects an estimated
annual effective tax rate of 37.7%. The decrease in the 2000 effective tax rate
during the third quarter reflects changes in estimated annual pretax loss and in
permanent tax differences.
Net loss for the 2000 third quarter totaled $21.4 million compared to 1999
third quarter net loss which totaled $4.0 million.
Net sales for the first nine months of 2000 totaled $845.9 million on
shipments of steel products totaling 1,769,005 tons. Net sales for the first
nine months of 1999 totaled $788.2 million on shipments of steel products
totaling 1,780,967 tons. Average sales prices increased to $478 per ton shipped
from $442 per ton shipped due to a 2.2% increase in steel prices, higher
value-added mix of products sold, and increased sales of coke during the nine
months of 2000 as compared to the nine month period of 1999.
Operating costs for the first nine months of 2000 increased to $862.3
million or $487 per ton from $808.1 million or $454 per ton in the 1999 first
nine months. The increase in operating costs is due to a higher cost sales mix,
increased raw material and energy costs and the cost of making increased volumes
of coke sold in the open market as compared to the same period of 1999. In the
first nine months of 2000, the Company produced 1,863,930 tons of raw steel as
compared to production of 1,810,633 tons of raw steel in the 1999 first nine
months.
Depreciation expense increased $2.7 million to $61.8 million in the first
nine months of 2000 from $59.1 million in the comparable period in 1999 due to
higher levels of depreciable assets and increased raw steel production in 2000
and its effect on the modified units of production depreciation method.
Selling, administrative and general expense for the first nine months of
2000 increased $4.4 million to $52.8 million from $48.4 million in the
comparable period in 1999 due primarily to an increased marketing effort in 2000
and expansion of the fabricated products business during 2000.
Interest expense for the first nine months of 2000 increased $1.2 million
to $29.3 million from the comparable period in 1999 due to increased borrowings
and higher rates under the RCF and increased long term debt, partially offset by
increased capitalized interest.
Other income (expense) decreased $2.2 million to $2.0 million expense in
the first nine months of 2000, compared to $0.2 million income in the 1999 first
nine months. The decrease in other income reflects lower equity income from
joint venture operations, lower royalty income earned and increased
securitization fees.
The 2000 nine month tax benefit reflects an estimated annual effective tax
rate of 35.8% and includes a non-cash benefit of $38.1 million from the
settlement of prior years' federal taxes. The 1999 nine month tax benefit
reflects an estimated annual effective tax rate of 37.7%. The change
<PAGE> 13
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in the 2000 effective tax rate reflects changes in estimated annual pretax loss
and in the amount of permanent tax differences.
Net income for the first nine months of 2000 totaled $7.4 million compared
to the 1999 first nine months net loss which totaled $29.7 million. Net income
was favorably impacted by the aforementioned income tax benefit of $38.1
million.
FINANCIAL POSITION
A high level of imports since the Company's 10-month strike and the
subsequent decrease in steel prices has substantially weakened the Company's
position. During the first nine months of 2000, borrowings under the Revolving
Credit Facility (RCF) totaled $132.0 million, leaving liquidity at September 30,
2000 of $10.4 million.
Net cash flow provided by operating activities for the first nine months
of 2000 totaled $2.6 million. Working capital accounts (excluding cash,
short-term borrowings and current maturities of long term debt) used $10.7
million of funds. Accounts receivable increased by $4.3 million, excluding a
$5.0 million sale of trade receivables under the Receivables Facility.
Inventories, valued principally by the LIFO method for financial reporting
purposes, totaled $279.3 million at September 30, 2000, an increase of $27.1
million from December 31, 1999 due to the seasonality of the fabricated and tin
mill products divisions and to facilitate a planned steelmaking facility outage.
Trade payables increased by $16.6 million, primarily as a result of increased
inventories.
In the first nine months of 2000, $71.0 million was spent on capital
improvements including $2.6 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 capital expenditures including required environmental
expenditures in future years will approximate depreciation expense and represent
a material use of operating funds.
On November 17, 2000 in connection with the Chapter 11 Filing, WPC, WPSC,
WP Steel Venture Corporation, Consumers Mining Company, WP Coal Company,
Wheeling Empire Company and Pittsburgh Canfield Company, as borrowers, the
lenders party thereto and Citibank, N.A., as Initial Issuing Bank and Citicorp
USA, Inc., as Administrative Agent entered into a Debtor in Possession Credit
Agreement ("DIP Credit Agreement") to provide borrowings of up to $290.0 million
to refinance certain obligations of the WPC Group, to provide working capital
for the WPC Group and for other general corporate purposes. The DIP Credit
Agreement will be composed of two pieces, a $255 million Revolving Credit
Facility and a $35 million term loan. The DIP credit agreement includes a $25.0
million sublimit for letters of credit. The DIP Credit Agreement expires
November 17, 2002. Interest rates for the Revolving Credit Facility are based on
base rate plus 1.75% to 2.25% or a Eurodollar rate plus 2.75% to 3.25% based on
performance. The margin over the prime rate and the Eurodollar rate can
fluctuate based upon performance. Borrowings outstanding under the DIP Credit
Agreement at November 17, 2000 totaled $198.0 million and letters of credit
outstanding under the DIP Credit Agreement were $17.0 million.
On April 30, 1999, WPSC entered into a Third Amended and Restated RCF with
Citibank, N.A. as agent. The RCF, as amended, provides for borrowings for
general corporate purposes up to $150 million and a $25 million sub-limit for
Letters of Credit. Interest rates are based on the Citibank Prime Rate plus
1.375% and/or a Eurodollar rate plus 2.50%. The margin over the prime rate and
the Eurodollar rate can fluctuate based upon performance. On September 26, 2000,
the Company amended the RCF to waive certain financial covenants through January
20, 2001 and increase the interest rate from a Eurodollar rate plus 2.375% to
Eurodollar rate plus 2.50%. Borrowings outstanding against the RCF at September
30, 2000 totaled $132.0 million and letters of credit outstanding under the RCF
totaled $2.8 million. Borrowings under the DIP Credit Agreement in the amount of
$84.7 million were also used to repay all obligations under WPSC's Revolving
Credit Facility. Upon repayment, the WPSC Revolving Credit Agreement and all
related documents were terminated.
<PAGE> 14
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On May 27, 1999, the Company renegotiated its $100 million Receivables
Facility agreement on terms and conditions similar to its previous facility. On
June 30, 2000, the Company amended the agreement to increase the program limit
to $115 million. On September 22, 2000, the Company amended its agreement to
reduce the program limit to $105 million, to waive an Early Amortization Event
through December 20, 2000 and to increase certain fees associated with the
agreement during the waiver period. The Early Amortization Event was caused by a
reduction in rating by Standard & Poors on the long-term Senior Unsecured debt.
Accounts receivable at September 30, 2000 and December 31, 1999 exclude $105.0
million and $100 million, respectively, representing uncollected accounts
receivable sold with recourse limited to the extent of uncollectible balances.
Fees paid by the Company under such Receivables Facility range from
approximately 5.91% to 7.63% of the outstanding amount of receivables sold.
Borrowings under the DIP Credit Agreement in the amount of $105.0 million were
used to repay all obligations under WPSC's Receivables Facility.
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 are accounted for by the parent company as a multi-employer plan.
The merger eliminated WPC cash funding obligations estimated in excess of $135
million over a four year period. WPC pension expense will be allocated and
charged quarterly, and will offset the net prepaid pension asset recorded by the
common parent.
LIQUIDITY
Short-term liquidity is dependent, in large part, on cash on hand,
availability of borrowings, 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 will satisfy its working capital requirements through the DIP Credit
Agreement and funds generated from operations. As a result of continued weakness
in steel prices and demand, the Corporation and eight of its wholly-owned
subsidiaries filed petitions for relief under Chapter 11 of the Federal
bankruptcy laws. External factors, such as worldwide steel production and demand
and currency exchange rates could also materially affect the Company's results
of operations and financial conditions. During the first nine months of 2000 the
Company had minimal activity with respect to futures contracts, and the impact
of such activity was not material to the Company's financial condition or
results of operations.
NEW ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS133). This pronouncement, as amended by SFAS 137
and 138, 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 other
comprehensive income. SFAS 133 is effective for fiscal years beginning after
June 15, 2000. 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.
In the fourth quarter 2000, WPC must adopt several recently issued
accounting pronouncements primarily related to the classification of items in
the statement of operations. In December 1999, the Securities and Exchange
Commission (SEC) issued Staff Accounting Bulletin No. 101 (SAB 101) "Revenue
Recognition in Financial Statements," which summarizes the SEC staff's
interpretations of generally accepted accounting principles related to revenue
recognition and classification. During the third quarter 2000, the EITF issued
EITF Consensus No. 99-19 "Reporting Revenue Gross as a Principal versus Net as
an Agent", which addresses whether revenues from the sale of products should be
reported at the gross amount or the net amount received, and EITF Consensus NO.
00-10 "Accounting for Shipping and Handling Fees and Costs," which addresses the
accounting for costs incurred for shipping goods to customers. The adoption of
these new pronouncements will have no material effect on the financial position
or results of operations of WPC, although they may require reclassifications of
certain amounts in the statement of operations.
******
<PAGE> 15
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PART II OTHER INFORMATION
Item 1. Legal Proceedings
The Corporation and eight of its direct and indirect subsidiaries filed
voluntary petitions for relief under Chapter 11 of Title 11 of the United
States Code with the United States Bankruptcy Court for the Northern District
of Ohio on November 16, 2000.
Item 3. Default Upon Senior Securities
As of result of the filing by the Corporation and eight of its direct and
indirect subsidiaries on November 16, 2000 of voluntary petitions for relief
under Chapter 11 of Title 11 of the United States Code, a default occurred under
the Corporation's 9 1/4% Senior Notes due 2007 currently outstanding in the
aggregate principal amount of $275 million. As of the date of this report, the
Corporation has not paid regularly scheduled interest payments on such Senior
Notes in the total amount of $12.7 million.
Item 6. (a) Exhibits
27 Financial Data Schedule
6. (b) Report on Form 8-K
None
<PAGE> 16
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 20, 2000
