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 March 31, 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 March 31, 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
April 30, 2000.
<PAGE>
WHEELING-PITTSBURGH CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Quarter Ended March 31,
-----------------------
2000 1999
---- ----
(In thousands)
Net Sales $ 279,594 $ 250,048
--------- ---------
Operating Costs
Cost of goods sold 240,549 238,585
Depreciation 20,074 20,215
Selling, administrative and general expense 18,124 16,052
--------- ---------
278,747 274,852
--------- ---------
Operating Income (Loss) 847 (24,804)
--------- ---------
Interest expense on debt 9,811 9,176
Other income (expense) (347) 481
--------- ---------
Loss Before Taxes (9,311) (33,499)
--------- ---------
Tax provision (benefit) (4,181) (13,232)
--------- ---------
Net Loss $ (5,130) $ (20,267)
========= =========
See notes to consolidated financial statements.
<PAGE>
WHEELING-PITTSBURGH CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---- ----
(Unaudited)
(Dollars and shares in thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ -- $ --
Trade receivables - net 69,221 57,688
Inventories:
Finished and semi-finished products 172,943 158,190
Raw materials 66,798 61,483
Other materials and supplies 24,290 28,033
Excess of LIFO over current cost 4,489 4,489
----------- -----------
268,520 252,195
Prepaid expenses and deferred charges 4,573 4,425
----------- -----------
Total current assets 342,314 314,308
Investments in associated companies 62,688 64,229
Property, plant and equipment at cost, less
accumulated depreciation 661,112 653,234
Deferred income taxes 166,124 162,344
Due from affiliates 51,803 56,203
Deferred charges and other assets 26,880 27,704
----------- -----------
$ 1,310,921 $ 1,278,022
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade payables $ 144,752 $ 127,448
Short-term debt 89,690 79,900
Deferred income taxes - current 27,406 27,406
Other current liabilities 102,056 90,309
Long-term debt due in one year 415 415
----------- -----------
Total current liabilities 364,319 325,478
Long-term debt 353,902 353,978
Other employee benefit liabilities 391,330 392,143
Other liabilities 69,703 69,626
----------- -----------
1,179,254 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) (203,471) (198,341)
Total stockholders' equity 131,667 136,797
----------- -----------
$ 1,310,921 $ 1,278,022
=========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
WHEELING-PITTSBURGH CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
2000 1999
---- ----
(Dollars in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (5,130) $(20,267)
Items not affecting cash
from operating activities:
Depreciation 20,074 20,215
Other postretirement benefits (437) 1,270
Income taxes (4,203) (17,175)
Equity income in affiliated companies (840) (1,378)
Pension expense 1,212 1,518
(Gain)/loss on disposition of assets (1,654) 2,479
Decrease (increase) in working capital elements:
Trade receivables (11,533) (21,672)
Inventories (16,325) 10,151
Other current assets (148) 304
Trade payables 17,304 23,509
Other current liabilities 11,747 14,806
Other items - net (282) (2,722)
-------- --------
Net cash provided by operating activities 9,785 11,038
-------- --------
Cash flows from investing activities:
Plant additions and improvements (29,204) (14,848)
Investment in affiliates (1,369) 1,031
Proceeds from sale of assets 2,924 --
Dividends from affiliated companies 3,750 5,000
-------- --------
Net cash used in
investing activities (23,899) (8,817)
-------- --------
Cash flows from financing activities:
Payments on long-term borrowings (76) (30)
Short term debt (payments) borrowings 9,790 (17,002)
Receivables from affiliates 4,400 (149)
Letter of credit collateralization -- 8,229
-------- --------
Net cash provided by (used in) financing activities 14,114 (8,952)
-------- --------
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>
WHEELING-PITTSBURGH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
General
- -------
The consolidated balance sheet as of March 31, 2000,
the consolidated statement of operations and the consolidated
statement of cash flows for the three month periods ended March 31,
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 March 31, 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 March 31, 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 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 - 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. The agreement expires in May 2003.
Effective June 1999, Unimast, a wholly-owned subsidiary of WHX
Corporation, withdrew from participation in the Receivables Facility.
Accounts receivable at March 31, 2000 and December 31, 1999 exclude
$100 million 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 6.01% 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 2 - 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, provides for borrowings for general corporate
purposes up to $150 million and a $25 million sub-limit for Letters
of Credit. The RCF expires May 3, 2003. Interest rates are based on
the Citibank prime rate plus 1.25% and/or a Eurodollar rate plus
2.25%. The margin over the prime rate and the Eurodollar rate can
fluctuate based upon performance. Borrowings outstanding
<PAGE>
-2-
against the RCF at March 31, 2000 totaled $89.7 million. Letters of
credit outstanding under the RCF were $0.1 million at March 31, 2000.
Note 3 - 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 $0.8 million for 1998, 1999 and the first
quarter of 2000, respectively. The Company anticipates spending
approximately $18.6 million in the aggregate on major environmental
compliance projects through the year 2003, estimated to be spent as
follows: $5.8 million in 2000, $5.7 million in 2001, $4.8 million in
2002, and $2.3 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 March 31, 2000. These accruals
were initially determined by the Company in 1991 based on all then
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
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>
-3-
PART I
Item 2. Management's Discussion and Analysis
General
- -------
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 first quarter of 2000 totaled $279.6 million on
shipments of steel products totaling 604,476 tons. Net sales for the first
quarter of 1999 totaled $250.0 million on shipments of 598,666 tons. The
increase in net sales is due to an increase of 3.8% in steel prices, reflecting
partial recovery from the import impacted prices of the first quarter of 1999, a
higher valued mix of products shipped and higher sales of coke.
First quarter 2000 operating costs increased to $278.7 million from
$274.9 million in the 1999 first quarter. Operating cost per ton increased to
$461 per ton in the 2000 first quarter from $459 per ton in the 1999 first
quarter. The Company's first quarter 2000 operating costs include a
non-recurring credit of $7.4 million from insurance recoveries resulting from a
temper mill fire. Operating costs in the first quarter 2000, absent the
non-recurring credit, total $473 per ton. The increase in operating costs
reflects higher raw material costs and lower fixed costs absorption due to lower
production levels. The Company produced 589,535 tons of raw steel in the 2000
first quarter and 622,972 tons in the 1999 first quarter.
Depreciation expense decreased $0.1 million to $20.1 million in the
first quarter of 2000 from $20.2 million in the comparable period in 1999 due to
lower levels of capital expenditures in 1999, and lower levels of raw steel
production in the first quarter of 2000 and the effect on the units of
production depreciation method.
Selling, administrative and general expense for the first quarter of
2000 increased $2.0 million to $18.1 million from $16.1 million in the
comparable period in 1999 due primarily to bonus payments to all salaried
employees in the first quarter of 2000.
Interest expense for the first quarter of 2000 increased $0.6 million
to $9.8 million from the comparable period in 1999 due to increased borrowing
under the RCF.
Other income (expense) decreased $0.8 million to $0.3 million expense
in the first quarter of 2000, compared to $0.5 million income in the 1999 first
quarter. The decrease in other income reflects lower equity income from joint
venture operations and lower interest income earned.
The 2000 and 1999 first quarter tax benefits reflect estimated annual
effective tax rates of 44.9% and 39.5%, respectively. The increase in the 2000
effective tax rate during the first quarter reflects changes in estimated annual
pretax income(loss) and in permanent differences.
Net loss for the 2000 first quarter totaled $5.1 million compared to
1999 first quarter net loss which totaled $20.3 million.
<PAGE>
-4-
Financial Position
- ------------------
Net cash flow provided by operating activities for the first three
months of 2000 totaled $9.8 million. Working capital accounts (excluding cash,
short-term borrowings and current maturities of long term debt) provided $1.0
million of funds. Accounts receivable increased by $11.5 million due to higher
volume of shipments late in the quarter. Inventories, valued principally by the
LIFO method for financial reporting purposes, totaled $268.5 million at March
31, 2000, an increase of $16.3 million from December 31, 1999.
In the first three months of 2000, $29.2 million was spent on capital
improvements including $.8 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.
On April 30, 1999, WPSC entered into a Third 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 $25 million sub-limit for Letters of Credit. The RCF expires May
3, 2003. Interest rates are based on the Citibank Prime Rate plus 1.25% and/or a
Eurodollar rate plus 2.25%. The margin over the prime rate and the Eurodollar
rate can fluctuate based upon performance. Borrowings outstanding against the
RCF at March 31, 2000 totaled $89.7 million and letters of credit outstanding
under the RCF totaled $0.1 million.
On May 27, 1999, the Company renegotiated its $100 million
Receivables Facility agreement on terms and conditions similar to its previous
facility. The agreement expires in May 2003. Effective June 23, 1999, Unimast, a
wholly-owned subsidiary of WHX Corporation, withdrew from participation in the
Receivables Facility. Accounts receivable at March 31, 2000 and December 31,
1999 exclude $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 6.01% 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.
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. WPC pension expense is allocated by the common parent and totaled $1.2
million in the first quarter of 2000 and $1.5 million in the first quarter of
1999.
<PAGE>
-5-
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 the Receivables Facility, borrowing availability
under the RCF 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 first quarter 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.
Year 2000 Project
- -----------------
Mainframe business systems, external data interfaces, mainframe
software, voice and data systems, internal networks, personal computers and
building controls, as well as process control and auxiliary systems proved to be
year 2000 compliant. The year 2000 project addressed all aspects of computing at
the Company 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 surveying WPC's major suppliers and customers to
assure their readiness. Critical suppliers and customers are being monitored
with no major problems identified to date.
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 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.
******
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, 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>
-6-
PART II Other Information
-----------------
Item 6.(a) Exhibits
--------
27 Financial Data Schedule
6.(b) Report on Form 8-K
------------------
None
<PAGE>
-7-
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)
May 12, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Wheeling-Pittsburgh Corporation Consolidated Financial Statements as of March
31, 2000 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-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 69,221
<ALLOWANCES> 1,626
<INVENTORY> 268,520
<CURRENT-ASSETS> 342,314
<PP&E> 1,149,281
<DEPRECIATION> 500,695
<TOTAL-ASSETS> 1,285,675
<CURRENT-LIABILITIES> 364,319
<BONDS> 353,902
<COMMON> 0
0
0
<OTHER-SE> 131,667
<TOTAL-LIABILITY-AND-EQUITY> 1,310,921
<SALES> 279,594
<TOTAL-REVENUES> 279,594
<CGS> 240,549
<TOTAL-COSTS> 278,747
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,811
<INCOME-PRETAX> (9,311)
<INCOME-TAX> (4,181)
<INCOME-CONTINUING> (5,130)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,130)
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
