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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D C 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
Commission File Number 1-10244
WEIRTON STEEL CORPORATION
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(Exact name of Registrant as specified in its charter)
Delaware 06-1075442
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(State or other jurisdiction (IRS employer identification
#)
of incorporation or organization)
400 Three Springs Drive, Weirton, West Virginia 26062
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(304)-797-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, par New York Stock Exchange
value $.01 per share
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by checkmark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes[X] No[ ]
Indicate by checkmark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Based on the closing price as of March 15, 1996, the aggregate
market value of the voting stock held by nonaffiliates of the
Registrant was $176,007,674. (The foregoing calculation includes
shares allocated under the Registrant's 1984 and 1989 Employee
Stock Ownership Plans to the accounts of employees who are not
otherwise affiliates and unallocated shares under the
Registrant's 1989 Employee Stock Ownership plan subject to voting
instructions of employees who are not otherwise affiliates.)
The number of shares of Common Stock ($.01 par value) of the
Registrant outstanding as of March 15, 1996 was 42,356,332.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Certain portions of the Registrant's 1995 Annual Report to
Stockholders are incorporated by reference into Parts I, II and
IV of this Annual Report on Form 10-K to the extent provided
herein.
(2) Certain portions of the Registrant's definitive Proxy
Statement filed pursuant to Regulation 14A (filed within 120 days
after the end of the fiscal year covered hereby) in connection
with the 1996 Annual Meeting of Stockholders are incorporated by
reference into Part III of this Annual Report on Form 10-K to the
extent provided herein.
PART I
Item 1. Description of Business
Background
Weirton Steel Corporation (the "Company") and its predecessor
companies have been in the business of making and finishing
steel products for nearly 90 years at the Company's facilities
located in Weirton, West Virginia. From November 1929 to January
1984, the Company's business had been operated as the Weirton
Steel Division (the "Division") of National Steel Corporation
("National"). Incorporated in Delaware in November 1982, the
Company acquired the principal assets of the Division in January
1984.
The Company is a major "integrated" steelmaker. As such, it
makes carbon steel from raw materials to industry and customer
specifications. In primary steelmaking, iron ore pellets, iron
ore, coke, limestone and other raw materials are consumed in
blast furnaces to produce molten iron or "hot metal." The
Company then converts the hot metal into raw or liquid steel
through its basic oxygen furnaces where impurities are removed,
recyclable scrap is added and metallurgy for end use is
determined on a batch by batch basis. The Company's basic oxygen
process shop ("BOP") is one of the largest in North America,
employing two vessels, each with a steelmaking capacity of 360
tons per heat. Liquid steel from the BOP is then formed into
slabs through the Company's multi-strand continuous caster. The
slabs are then reheated, reduced and finished by extensive
rolling, shaping, tempering and, in many cases, by the
application of plating or coating at the Company's downstream
operations. Finished products are normally shipped to customers
in the form of coils.
Principal Products and Markets
The Company offers a wide range of rolled carbon steel products
including hot and cold rolled sheet steel and both hot-dipped and
electrolytic galvanized products (collectively "Sheet Products")
as well as a broad line of coated steels, including tin plate,
chrome coated, and black plate, comprising Tin Mill Products
("TMP"). The Company's products emphasize the narrow to medium
widths, up to 48" wide, reflective of its rolling and finishing
equipment, and cover a broad range of gauges, finishes and
performance specifications. The Company has developed
significant expertise in filling orders with demanding
specifications.
The percentages of the Company's total revenues derived from the
sale of Sheet Products and TMP for each year in the period 1991
through 1995 are shown in the following table. Total revenues
include the sale of secondary products, principally those
products not meeting prime specifications. Revenues from the
sale of semi-finished products have been combined with Sheet
Products.
1995 1994(1) 1993 1992 1991
Sheet products ...... 64% 70% 54% 48% 46%
Tin mill products ... 36 30 46 52 54
100% 100% 100% 100% 100%
==== ==== ==== ==== ====
(1) The percentage increase during 1994 in Sheet Product
revenues versus TMP revenues compared to the trend in prior years
resulted from strong market demand for the Company's Sheet
Products and a fire in April 1994 that severely damaged a cold
rolling facility (the "No. 9 Tandem") required for the production
of a substantial portion of the Company's TMP. The No. 9 Tandem
was rebuilt and was returned to normal operations in the first
quarter of 1995, which allowed the Company to resume a more
traditional product mix in 1995. See "Production and Shipments"
herein and Item 7, herein, "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
The following table shows the percentage of total net tons of
steel products shipped for each year in the period 1991 through
1995 by the Company to each of its principal markets.
1995 1994 1993 1992 1991
Service Centers and Sheet
and Strip Converters.... 43% 45% 30% 24% 21%
Food and Beverage......... 25 25 37 41 44
Pipe and Tube............. 7 6 12 11 9
Construction.............. 9 13 9 8 7
Consumer Durables......... 3 4 4 6 8
Exports................... 9 - 1 3 1
Other .................... 4 7 7 7 10
100% 100% 100% 100% 100%
==== ==== ==== ==== ====
A substantial portion of the Company's revenues are derived from
long-time customers, although the Company actively seeks new
customers and constantly seeks new markets for its products. A
substantial share of the Company's sheet and TMP products are
shipped to customers located in the eastern portion of the United
States. The strong demand worldwide for flat rolled carbon steel
products that began in early 1994 continued throughout 1995. The
Company responded by exporting approximately 9% of its shipments
compared to previous years when only nominal quantities where
shipped to the export market. The Company's products are sold
through salaried Company employees who operate from 7 district
sales offices. Sales orders taken in the field are subject to home
office approval.
Trade orders on hand for the Company's products at December 31,
1995, 1994 and 1993 amounted to approximately 418, 494 and 449
thousand tons, respectively. Substantially all orders on hand at
any time are expected to be filled within a 12 month period. Since
the Company produces steel in response to orders primarily of
established grades and specifications, resulting in short order
processing time and relatively rapid inventory turnover, it does
not believe that order backlog is material to its business.
Sheet Products. Hot rolled products are sold directly from the hot
strip mill as "hot bands," or are further processed using
hydrochloric acid to remove surface scale and are sold as "hot
rolled pickled." Hot rolled sheet is used for unexposed parts in
machinery, construction products and other durable goods. Most of
the Company's sales of hot rolled products have been to steel
service centers, pipe and tube manufacturers and converters. In
1995, the Company shipped 1,072 thousand tons of hot rolled sheet,
which accounted for 28.2% of its total revenues.
Cold rolled sheet requires further processing including additional
rolling, annealing and tempering to enhance ductility and surface
characteristics. Cold roll is used in the construction, steel
service center, commercial equipment and container markets,
primarily for exposed parts where appearance and surface quality
are important considerations. In 1995, the Company shipped 173
thousand tons of cold rolled sheet, which accounted for 6.5% of its
total revenues.
Galvanized hot-dipped and electrolytic sheet is coated primarily
with zinc compounds to provide extended anti-corrosive properties.
Galvanized is sold to the electrical, construction, automotive,
container, appliance and steel service center markets. In 1995,
the Company shipped 636 thousand tons of galvanized products, which
accounted for 27.9% of total revenues.
Generally the Company obtains relatively higher profit margins on
its Sheet Products that require more extensive processing.
The following table, based on information from the American Iron
and Steel Institute ("AISI"), shows the Company's historical share
of the domestic Sheet Products market.
Sheet Products
Historical Market Share
(In thousands of tons) 1995 1994 1993 1992 1991
Industry shipments..... 47,458 47,217 41,616 38,099 35,590
Company shipments(1)... 1,956 1,991 1,536 1,206 1,082
Company market share... 4.1% 4.2% 3.7% 3.2% 3.0%
(1) Includes secondary products.
While the Company's presence in the overall Sheet Products market
is limited, the Company has concentrated on developing offerings of
more highly processed products and production capability to provide
the coil sizes favored by most of its customers. The Company's
goals for development of its sheet business are focused on
increasing its percentage of coated products, such as galvanized,
while capitalizing on developing specialty markets such as
construction where the Company believes that its GALFAN (registered
trademark) product has potential in roofing and framing
applications. As part of its sheet products marketing strategy,
the Company is also making efforts to enhance high quality end use
of its products marketed through steel service centers, as well as
developing the hot rolled market for heavier gauge and higher
carbon applications for all markets.
Tin Mill Products. The Company has enjoyed substantial market
share and a widely held reputation as a high quality producer of
TMP, which comprise a wide variety of light gauge coated steels.
Tin plate and black plate products are sold under the Company name
and under such registered trademarks as WEIRITE and WEIRLITE. In
addition to tin plate and black plate, the Company produces
electrolytic chromium coated steel under the registered trademark
WEIRCHROME.
The Company is one of the largest domestic producers of TMP.
During 1995, the Company's market share of TMP was approximately
19%, an increase from the 15% market share it held in 1994. Prior
to 1994, the Company's market share of TMP was consistenly greater
than 20%. However, the outage of the No. 9 Tandem in April 1994
reduced the Company's TMP shipments significantly in the second
half of 1994. During 1995, the Company began to regain its TMP
market share and achieved a more traditional product mix, as it
resumed normal operations following the rebuild of the No. 9
Tandem. See "Production and Shipments." TMP shipments on an
industry-wide basis have remained relatively steady in recent years
even as plastic, aluminum, composites and other materials have
competed for potential growth in some applications. The TMP market
is now primarily directed at food, beverage, and general line cans.
The majority of the Company's TMP sales have been to can
manufacturing and packaging companies, a substantial amount of
whose annual requirements are established in advance. This market
is characterized by a relatively low number of manufacturers.
During 1995, shipments to ten major can manufacturers accounted for
approximately 71% of the Company's TMP sales and its five largest
TMP customers accounted for 18% of total revenues. The balance of
the TMP is sold to other can manufacturers, manufacturers of caps
and closures and specialty products ranging from film cartridges,
lighting fixtures and battery jackets to cookie sheets and curtain
rods. As a result of more predictable sales patterns for TMP, the
Company is able to determine in advance a significant portion of
its production requirements, allowing it to operate its production
facilities more efficiently and adjust its marketing and production
efforts for other products. Historically, the greater
predictability of the TMP market and its relative pricing stability
have served to cushion the Company against greater price volatility
in the Sheet Product market.
The following table, based on AISI information, shows the Company's
historical share of the domestic TMP market.
Tin Mill Products
Historical Market Share
(In thousands of tons) 1995 1994 1993 1992 1991
TMP industry shipments... 3,942 4,137 4,123 3,927 4,040
Company shipments(1)..... 752 615 895 890 857
Company market share..... 19% 15% 22% 23% 21%
(1) Includes secondary products
The Company has the capacity to produce sufficient quantities of
"clean" steel (steel with fewer impurities) to fill anticipated TMP
orders for the near term. The Company's facilities and expertise
also allow it to produce the lightest gauges of tin plate,
enhancing the manufacturing efficiencies of the Company's customers
and promoting the use of its steel in leading edge technology
products such as thin-walled containers.
The Company has been a leading innovator in the development of can
making technology through its WEIRTEC (registered trademark)
research and development center. Although accounting for less than
5% of the domestic beverage container market in recent years,
largely due to highly competitive prices for aluminum, the Company
believes that two piece thin-walled steel beverage containers have
significant potential for growth, primarily based on improved
production efficiencies for steel cans and increased industry
success in promoting the recycling of steel. The Company engages
in other end product research and development and provides support
services to its customers. The Company believes these services
have been of significant assistance, particularly to its TMP
customers, and promote the consumption of the Company's products.
See "Research and Development."
A Company-owned 1.1 million square foot Finished Products Warehouse
with storage and staging areas for TMP is located near the
Company's mill to facilitate "just in time" production and delivery
to several of the Company's major customers which are located in
attached, or nearby, manufacturing facilities. As steel coils are
needed by customers' operations, they are moved from the adjoining
central storage areas and loaded directly on to customers'
production lines. This arrangement provides reductions in
transportation costs for the Company and its customers.
Related Products and Services
From time to time, the Company has produced and sold slabs and hot
metal to other carbon steelmakers. On limited occasions, the
Company has also performed downstream processing of products for
other carbon steelmakers, as well as having its own products
further processed by other steelmakers. Since 1993, the Company
has successfully conducted developmental activities relating to
rolling and finishing various types and grades of stainless steel
on its hot mill. As a result, the Company is currently rolling and
finishing stainless steel on a tolling basis for a major stainless
steelmaker. To date, revenues from these activities have not been
material to the Company. The Company cannot predict whether it
will continue to provide such services on a tolling basis for
stainless products in the future.
Production and Shipments
In 1991, after three years of approximately 100 million tons of raw
steel production per year, the domestic steel industry's raw steel
production fell to 87.3 million tons and shipments declined to 78.9
million tons. However, starting with December 1991 and continuing
through 1995, the steel industry experienced a rebound in both
production and shipments. Similarly, capability utilization, which
had dropped to 74%, increased to 92% over this same period.
Industry raw steel production for 1995 was up approximately 3% to
100.9 million tons compared to 1994, while shipments increased by
approximately 1.7% to 96.9 million tons. The high levels of
production are continuing into the first quarter of 1996 for both
the Company and the domestic steel industry.
In 1995, the Company produced 2.8 million tons of raw steel and
shipped 2.7 million tons of finished and semi-finished steel
products including the highest level of prime product shipments in
the Company's history. Although production and shipments levels
were slightly higher for 1995 as compared to 1994, the Company's
finished product mix in 1995 included more traditional levels of
TMP, as the rebuilt No. 9 Tandem was brought on line. The
following table sets forth annual production capability,
utilization rates and shipment information for the Company and the
domestic steel industry (as reported by the AISI) for the period
1991 through 1995.
Production and Shipments
(In millions of tons) 1995 1994 1993 1992 1991
Company
Raw steel production... 2.8 2.7 2.7 2.5 2.3
Capability............. 3.0 3.0 3.0 3.0(1) 3.4
Utilization............ 95% 91% 91% 83% 68%
Shipments ............. 2.7 2.6 2.4 2.1 1.9
Shipments as a percentage
of industry total... 2.8% 2.7% 2.7% 2.6% 2.4%
Industry
Raw steel production... 100.9 97.9 96.1 91.6 87.9
Capability........ 110.0 108.2 109.9 113.1 117.6
Utilization............ 92% 91% 87% 81% 74%
Shipments ............. 96.9 95.3 88.4 82.3 78.9
(1)The reduction in 1992 reflects the discontinuation of ingot
teeming and reduction operations.
Raw Materials
Unlike many of its larger competitors, the Company does not own or
participate in the ownership of raw material mining reserves from
which it can draw its production requirements. As a result, the
Company must buy these materials on the open market.
In October 1991, the Company entered into a contract with a
subsidiary of Cleveland-Cliffs Inc ("Cliffs") to purchase a
substantial part of the Company's standard and flux grade iron ore
pellet requirements through 2005. The contract provides for a
minimum tonnage of pellets to be supplied based on the production
capacity of the mining source during the contract periods, and for
additional tonnages of pellets in specified circumstances.
Purchase prices under the contract generally depend upon the
product costs of one of the mines.
The Company obtains the balance of its iron ore pellets and
limestone requirements, in most cases, from multiple sources with
the issue being price and quality rather than availability of
supply.
The Company, unlike a number of its larger competitors, does not
have its own coke making facilities. In July 1993, the Company
entered into an agreement with USX Corporation to purchase blast
furnace coke. The agreement provides for tonnages of 750,000 per
calendar year through 1996, or the actual annual requirements of
the Company if less than the stated amount. The price is to be the
prevailing market price (subject to a ceiling and floor) for blast
furnace coke determined each October prior to the delivery year.
As a secondary coke supply, the Company also entered into an
agreement with another coke producer which runs through December
1996. The Company, like other steelmakers, has utilized or is
planning to install technologies calculated to achieve some
reduction in the consumption of coke in blast furnace operations.
The Company is actively pursuing future long term sources of coke,
both domestically and abroad, and believes that it will be
successful in obtaining coke necessary for its anticipated
operations. However, if coke making capacity available to the
industry continues to decline, future coke prices may be subject to
significant escalation.
The Company utilizes scrap in its steelmaking process. Scrap steel
is available from a number of sources at prevailing market prices.
The Company's requirements for slabs have from time to time
exceeded the production capacity of the Company's caster and the
Company has purchased and may continue to purchase slabs from other
sources in order to meet the demand for its products and to
maximize the overall production efficiency of its entire
operations. At the present time, the Company expects to be able to
purchase slabs as and when needed.
The primary sources of energy used by the Company in its steel
manufacturing process are natural gas, oil, and electricity. In
recent years, the Company has entered into natural gas purchase
contracts with gas suppliers and transportation contracts with
transmission companies to reduce prices paid for gas. The Company
generates a significant amount of electricity and steam for
processing operations from a mixture of excess blast furnace gas
and natural fuels. The Company continually attempts to conserve
and reduce the consumption of energy in its steelmaking operations.
A number of the Company's facilities have alternate fuel burning
capability. A substantial increase in the Company's energy costs
or a shortage in the availability of its sources could have an
adverse effect on the Company.
Management believes that the Company's long term raw materials
contracts are at generally competitive terms.
Competition and Other Industry Factors
The domestic steel industry is a cyclical business with intense
competition among producers. Manufacturers of products other than
steel, including plastics, aluminum, cardboard, ceramics and glass,
have made substantial competitive inroads into traditional steel
markets. During recessionary periods, the industry's high level of
production capacity relative to demand levels has resulted in the
reduction of selling prices across a broad range of products.
Integrated steelmakers also face increased competition from mini-
mills. Mini-mills are efficient, low-cost producers that generally
produce steel by melting scrap in electric furnaces, utilize new
technologies, have lower employment costs and target regional
markets. Mini-mills historically have produced lower profit margin
products, such as bars, rods, wire and other commodity-type steel
products not produced by the Company. Recently developed thin cast
technology has allowed mini-mills to enter certain of the sheet
markets supplied by integrated producers. Two such facilities have
been placed in operation and are competing in the hot rolled, cold
rolled and galvanized marketplace, and other entities have
announced plans or are in the process of starting similar
facilities. In other instances, mini-mills seeking to capture
segments of the flat rolled market have located facilities where
they are geographically advantaged compared to their integrated
competition. In general, prices for scrap, on which mini-mills are
more dependent than integrated steel producers, have increased the
operating costs of mini-mills. In response, some mini-mills have
begun to develop scrap substitution iron-making technologies.
In response to increased competition, domestic steel producers have
invested heavily in new plant and equipment, which has improved
efficiency and increased productivity and quality. Many of these
improvements are in active service and, together with the
achievement of other production efficiencies, such as manning and
other work rule changes, have tended to lower costs. In addition,
it is estimated that approximately 12.0 million tons of new
steelmaking capacity will be in place within the next five years,
further threatening the viability of older facilities. The Company
has responded to competitive cost reductions through its own
capital improvement program and cost reduction efforts to achieve
operating efficiencies.
Domestic producers face competition from foreign producers over a
broad range of products. Many foreign steel producers are owned,
controlled or subsidized by their governments, making these
producers subject to influence by political and economic policy
considerations as well as the prevailing market conditions.
Voluntary restraint arrangements covering 17 steel exporting
nations and the European Community, which limited steel imports
into the United States market, expired on March 31, 1992. A
replacement structure to reduce subsidies and other unfair trade
practices by foreign producers has not emerged. In 1992, a number
of domestic steel producers filed extensive unfair trade cases
covering imports of flat rolled carbon steel products. These cases
sought the imposition of anti-dumping and countervailing duties on
products alleged to have caused injury to domestic producers. In
July 1993, the U.S. International Trade Commission (the "ITC")
ruled antidumping and/or countervailing duties should be imposed on
imports of galvanized sheet and plate from a number of countries
representing the majority of imports, and on cold-rolled sheet from
three countries accounting for approximately one-third of total
imports. No duties were imposed on hot-rolled sheet imports. A
number of these cases were appealed and the rulings made thus far
by the Court of International Trade have upheld the ITC decisions.
However, the Company believes that the decisions have not
significantly increased the duties for those imports to levels
where they have served as effective competitive barriers. As a
percentage of domestic consumption, steel imports excluding semi-
finished products (primarily slabs), were at approximately 18%, 20%
and 16% in 1995, 1994 and 1993, respectively.
The Company's primary competitors in Sheet Products consist of the
entire steel industry. The Company's primary TMP competitors in
recent years have been USX Corporation, LTV Corporation, Bethlehem
Steel Corporation, National Steel Corporation, Wheeling-Pittsburgh
Steel Corporation and USS-POSCO Industries.
The Company experiences strong competition in all its principal
markets with respect to price, service and quality. The Company
believes that it competes effectively in all these categories by
focusing its marketing efforts on creating strong customer
relationships by providing high quality products at competitive
prices.
Research and Development
The Company engages in research and development for the improvement
of existing products, the development of new products, and the
development of product applications. It also seeks more efficient
operating techniques. During 1995, 1994 and 1993 the Company spent
approximately $3.2 million, $6.3 million and $5.4 million,
respectively, for Company sponsored research and development
activities. Expenditures for customer sponsored research have not
been material to the Company. The Company operates WEIRTEC, its
research and development center specializing in the advancement of
steel food and beverage packaging and steel manufacturing
processes. WEIRTEC maintains research and prototype steel
packaging manufacturing facilities and analytical laboratory
facilities located in Weirton, West Virginia. The facilities are
engaged in improving the Company's production and finishing
processes for TMP and sheet products. In recent years, WEIRTEC
has played a central role in the development of thin-wall, two
piece beverage can technology and other products seeking to
capitalize on the Company's production expertise, particularly in
coated products. See "Principal Products and Markets." The
Company believes that the scientists, engineers, technicians and
the WEIRTEC facilities enhance the Company's technical excellence,
product quality and customer service.
The Company owns a number of patents that relate to a wide variety
of products and applications and steel manufacturing processes, has
pending a number of patent applications, and has access to other
technology through agreements with other companies. The Company
believes that none of its patents or licenses, which expire from
time to time, or any group of patents or licenses relating to a
particular product or process, is of material importance in its
overall business. The Company also owns a number of registered
trademarks for its products.
Environmental Control
Compliance. The Company's is subject to extensive federal,
state and local laws and regulations governing discharges into the
air and water, as well as the handling and disposal of solid and
hazardous wastes. The Company is also subject to federal and state
requirements governing the remediation of environmental
contamination associated with past releases of hazardous
substances. In recent years, environmental control regulations
have been marked by increasingly strict compliance standards.
Governmental authorities have the power to enforce compliance with
these requirements, and violators may be subject to civil or
criminal penalties, injunctions or both. Third parties also may
have the right to sue to enforce compliance.
Company expenditures for environmental control facilities were
approximately $3.9 in 1995, $3.2 million in 1994 and $1.0 million
in 1993. For 1996, the Company has budgeted approximately $7.7
million in capital expenditures for environmental control
facilities. Given the nature of the steelmaking industry, it can
be expected that substantial additional capital expenditures will
be required from time to time to permit the Company to remain in
compliance with environmental regulations.
In the past, the Company has resolved environmental compliance
issues through consent decrees with certain environmental
authorities, pursuant to which the Company has paid fines and
penalties relating to violations, or alleged violations, of laws
and regulations. Those payments have not materially affected the
Company's financial position, results of operations, or its cash
flow. The Company believes that it is in substantial compliance
with its environmental control consent orders and agreements.
Waste Sites and Proceedings. Under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended
("CERCLA"), and similar state statutes, the Environmental
Protection Agency (the "EPA") and state regulators generally have
authority to impose joint and several liability on waste
generators, owners, operators and others with respect to CERCLA
sites as potentially responsible parties ("PRPs"), regardless of
fault or the legality of the original disposal activity. The
Company is entitled to indemnification from National for certain
environmental liabilities, including those relating to CERCLA and
similar statutes, as more fully described below. The Company
believes that National has provided notices to EPA regarding a
number of sites as required by CERCLA, some of which had been used
by the Division prior to its sale to the Company, and two of which
subsequently became the property of the Company. The Company
understands that National has been involved, at the request of the
EPA or state agencies, in voluntary remedial activities with
respect to a number of such sites. Insofar as any of those sites
involve liabilities under CERCLA or other environmental laws or
regulations for prior Division activities, the Company believes it
is fully indemnified by National.
Hanover Township Site
In May 1992, the Company received notice from the Pennsylvania
Department of Environmental Resources that it was considering a
closure plan and post-closure plan for a solid waste landfill
facility in Hanover Township, Pennsylvania (the "Hanover Site")
operated by Starvaggi Industries Inc. From at least the 1960's
through mid-1983, National and, after mid-1983, the Division and
the Company disposed of solid wastes at the facility. The Company
believes that while it disposed of various materials which were
residual to the steelmaking industry, such materials were not
classified as hazardous wastes under applicable law. At this time,
definitive closure plans and post-closure care plans have not been
adopted. National's liability with respect to the closure of this
facility is limited to $1.0 million.
Brown's Island
In January 1993, the Company received a notification from the West
Virginia Division of Environmental Protection ("DEP") that four
ground water monitoring wells situated at the Division's former
coke making facilities on Brown's Island in Hancock County, West
Virginia tested in excess of maximum levels established by the EPA
and DEP for certain contaminants. The DEP requested the Company to
supply it with additional data regarding the site and stated that
additional investigation, and possible remediation would be
required. The Company and the DEP are discussion the
implementation of an enhanced ground water monitoring program for
the area. As required by the relevant indemnification agreements,
the Company has given notice to National of the DEP communication.
The Company believes that National will be responsible for any
required remediation.
Potential Multimedia Enforcement
In December 1993, The Company was informed by the DEP that the EPA
was considering initiating a "multimedia" enforcement action
against the Company. Multimedia actions involve coordinated
enforcement proceedings related to water, air or waste-related
issues stemming from a number of federal and state statutes and
rules. In recent years, such actions have resulted in penalties
and other commitments being obtained from many of the Company's
competitors.
On March 1, 1996, the EPA advised the Company that it had
identified a number of enforcement issues pertaining to waste water
discharges, air emissions and waste handling operations by the
Company. The EPA proposed that the parties attempt to resolve these
issues during a six-month negotiation period. The EPA indicated
that it would expect a negotiated settlement to include necessary
corrective steps to address noncompliance issues, remediation
programs to address contamination at solid waste management units
as required under the Company's hazardous waste permit, and a civil
penalty. However, the EPA also indicated that consideration would
be given to offsetting any cash penalty through the Company's
performance of supplemental environmental projects. If a
negotiated settlement could not be reached by September 15, 1996,
the EPA indicated that it would commence a civil enforcement action
in federal court. The Company agreed to proceed with the
negotiation process, which began on March 14, 1996. The Company
cannot predict the results of its negotiations with the EPA,
including whether an agreement can be reached, the cost of any
required compliance, or the extent of any penalty. Likewise, the
Company cannot predict whether the EPA will initiate enforcement
proceedings or their outcome. Based on its review of the matters
involved, however, the Company believes that any fines or penalties
assessed would not be material to the Company's financial position
or results of operations.
Ambient Air Violations
In October 1995, the Company received a Notice of Violation from
the EPA alleging violations of the DEP Regulations for Air
Pollution Control at four of the Company's facilities, which may
result in fines and penalties. The alleged violations are being
discussed in the multimedia negotiation process discussed
above.
Water Discharge Permitting
In June 1994, the DEP issued a renewal NPDES permit to the Company
for its water discharges. The renewal NPDES permit contained a
number of new requirements, including stringent "water quality-
based" effluent limitations based on West Virginia regulation (the
"Regulation"). The Company appealed the Renewal permit to the West
Virginia Environmental Quality Board ("EQB").
In August 1995, the EQB submitted to the West Virginia Legislature
significant proposed changes to the Regulation. The Company
believes that these proposed changes will result in re-calculated
water quality-based effluent limitations which the Company can meet
using its existing wastewater treatment facilities. The proposed
changes were enacted by the Legislature in March 1996.
The DEP has provided the Company until June 30, 1998 to achieve
compliance with the renewal permit embodying the Regulation. The
Company is currently conducting settlement discussions with DEP on
the renewal NPEDES permit appeal. In view of the changes to the
Regulation discussed above, the Company believes that the permit
appeal discussions should be concluded without any material adverse
effect on the Company's financial position or its results of
operations.
For alleged violations in 1995 of the renewal permit, the Company
paid stipulated penalties to the DEP totaling $184,000 pursuant to
the terms of a consent order between the Company and the DEP.
Waste Handling and Underground Storage Tank Notice of Violation
In July 1994, the DEP issued notices of violation and a draft
consent order wherein it alleged various violations under the
Resource Conservation and Recovery Act ("RCRA") and violations of
underground storage tank requirements with proposed penalties
aggregating approximately $250 thousand. The Company resolved all
underground storage tank issues in a consent order with the DEP
which was executed in December 1994, pursuant to a consent order
under which the Company paid an administrative settlement of $40
thousand. The balance of the alleged RCRA violations are being
discussed in connection with the multimedia negotiation process.
Indemnification. According to the agreements by which the Company
acquired the assets of the Division from National, the Company is
entitled to indemnification from National for liabilities,
including governmental and third-party claims, arising from
violations prior to the acquisition, and National is entitled to
indemnification from the Company for such items after the
acquisition. In addition, the Company, subject to the $1.0 million
limitation applicable to the Hanover Site described above, is
entitled to reimbursement for clean-up costs related to facilities,
equipment or areas involved in the management of solid or hazardous
wastes of the Division ("Waste Sites"), as long as the Waste Sites
were not used by the Company after the acquisition. Third-party
liability claims relating to Waste Sites are likewise covered by
the respective indemnifications.
The Company's ability to obtain future reimbursement or
indemnification relating to environmental claims from National
depends, in addition to National's continued financial viability,
on the nature of future claims made by the Company, whether the
parties can settle outstanding differences relating to
indemnification rights and the outcome of any necessary litigation
between the Company and National regarding such issues. The
Company and National have disagreed as to their respective
liabilities for approximately $210 thousand spent to date by the
Company to remediate sediments from National's former Brown's
Island coke plant.
The Company does not believe the future costs of environmental
compliance will have a material effect on its financial position,
results of operations or on its ability to compete with respect to
other integrated domestic steelmakers that are subject to the same
environmental requirements. The Company, like its competitors,
does not expect to be able to pass on to customers cost increases
specifically resulting from compliance with environmental
regulations.
Employees
At December 31, 1995, the Company had 5,655 employees, of whom
4,312 were engaged in the manufacture of steel products, 685 in
support services, 128 in sales and marketing activities and 530 in
management and administration. In 1992, the Company implemented a
program, as part of its business strategy, that was designed to
reduce its workforce primarily through retirement programs and
attrition. Through this program, the Company has reduced its
workforce 19% since 1991.
The Company has collective bargaining agreements with the
Independent Steelworkers Union, which represents approximately
4,667 employees in bargaining units covering production and
maintenance workers, clerical workers, nurses, and the Independent
Guard Union, which represents 48 employees. The agreements
terminate on September 25, 1996. Historically, the Company's
compensation structure has placed a heavier emphasis on profit
sharing compared to other major integrated steel producers. This
structure tends to cause the wage portion of the Company's
employment costs to be relatively higher during periods of
profitability and relatively lower during periods of low earnings
or losses.
The Company's current labor agreements provided for the payment of
bonuses in the gross amount of $3,500 per employee, to be paid in
installments over the three year term of the contracts, but did not
provide for wage increases. During the terms of the agreements,
the Company's profit sharing plan, which covers substantially all
employees, provides for participants to share in the Company's
profits each year at a rate equal to 1/3 of the Company's "adjusted
net earnings" for that year as defined under the plan, provided its
net worth exceeds $100 million. If, however, payment of the full
profit sharing amount would reduce the Company's net worth below
$100 million, payments are reduced to an amount necessary to
maintain the $100 million threshold. If the Company's net worth is
in excess of $250 million, the profit sharing rate increases to
35%. However, if payment of the full profit sharing amount would
reduce the Company's net worth below $250 million, payments at this
rate would be limited as necessary to maintain the $250 million
threshold and the remainder of the payment would be made at the 1/3
rate. For 1995, the Company accrued profit sharing of $24.2
million, which was paid in March 1996. The labor agreements limit
the Company's exposure to increased costs of health care while
providing increased medical coverages through a managed health care
"point of service" program and a ceiling on the Company's cash
basis cost of health care for future retirees. The agreements also
contain limitations on the Company's ability to reduce its
workforce by layoffs, with exceptions for adverse financial,
operational, and business circumstances. In addition, the
agreements provide for certain improvements in the Company's
pension plan.
The Company and its unions are commencing negotiations on new
collective bargaining agreements. The Company cannot predict
whether it will reach new contracts with its represented employees
prior to the expiration of the current agreements or what will be
the terms of the new contracts. The Company believes that its new
labor contracts should continue to emphasize cost control features
to sustain the Company's ability to withstand industry downcycles.
In March 1995, the Company filed an action in the United States
District Court for the Northern District of West Virginia entitled
Weirton Steel Corporation v. Independent Steelworkers Union under
Section 301 of the Labor-Management Relations Act of 1947, as
amended. The suit alleges that the defendant Independent
Steelworkers Union and certain of its employee members conducted an
illegal work stoppage at the Company's tin mill in February 1995 in
violation of the collective bargaining agreement between the union
and the Company. The action seeks a court order directing the
parties to utilize the grievance resolution provisions of the
bargaining agreement as the exclusive, proper procedure for
settling differences and also seeks compensatory damages for the
Company's loss of the use of its facility during the stoppage in
such amount as the court finds proper. Discovery is nearing
completion and that the matter is expected to be scheduled for
trial in the second half of 1996.
From January 1984 until June 1989, the Company was owned in its
entirety by its employees through the Company's 1984 Employee Stock
Ownership Plan (the "1984" ESOP), in which substantially all
employees were participants. In June 1989, the 1984 ESOP completed
a public offering of common stock, resulting in that security being
listed and traded on the New York Stock Exchange.
Substantially all of the Company's employees participate in its two
ESOPs which owned approximately 27.4% of the outstanding common and
substantially all of the outstanding preferred shares of the
Company at March 15, 1996. These securities represented
approximately 49.2% of the voting power of the Company's voting
stock.
Item 2. Properties and Facilities
The Company owns approximately 2,500 acres in the Weirton, West
Virginia, area which are devoted to the production and finishing of
steel products, research and development, storage, support services
and administration. The Company owns trackage and railroad rolling
stock for materials movement, water craft for barge docking, power
generation facilities and numerous items of heavy industrial
equipment. The Company has no material leases for real property.
The Company's mill and related facilities are accessible by water,
rail and road transportation. The Company believes that its
facilities are suitable to its needs and are adequately maintained.
The Company's operating facilities include a sinter plant and four
blast furnaces; however, its current operating strategy employs a
two blast furnace configuration with an annual hot metal capacity
of approximately 2.5 million tons. One currently idled furnace is
being refurbished and will replace an operating furnace that is
nearing the end of its campaign, anticipated to be in the first
half of 1997, at which time the Company will undertake a major
reline of that furnace. Although the Company does not anticipate
operating a three blast furnace configuration in the near term,
under that operating scenario, its annual hot metal capacity could
be increased to 3.2 million tons. The Company's primary
steelmaking facilities include a two vessel BOP shop with an annual
capacity of 3.0 million tons of raw steel based on a two blast
furnace operation. Primary steelmaking facilities also include a
CAS-OB facility, two RH degassers, and a four strand continuous
caster with an annual slab production capacity of up to 3.0 million
tons. The Company's downstream operations include a hot strip mill
with a design capacity of 3.8 million tons, two continuous
picklers, three tandem cold reduction mills, three hot dip
galvanize lines, one electro-galvanize line, two tin platers, one
chrome plater, one bi-metallic chrome/tin plating line and various
annealing, temper rolling, shearing, cleaning and edge slitting
lines, together with packaging, storage and shipping and receiving
facilities. See the "Production and Shipments" section of Item 1
for additional information regarding production capacity and
utilization rates.
Item 3. Legal Proceedings
The Company is involved as a defendant or plaintiff in various
litigation relating to claims arising out of its operations in the
normal course of business. Such claims involving the Company as a
defendant are generally covered by insurance. It is management's
opinion that any liability resulting from existing litigation would
not have a material effect on the Company's business, financial
position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for the Registrant's Common Stock and Related
Security Holder Matters
As of March 15, 1996, there were 42,356,332 shares of common stock,
$.01 par value ("Common Stock"), outstanding held by 3,485
stockholders of record. The principal market for the Common Stock
is the New York Stock Exchange, on which that security has been
listed since June 1989.
Dividends on the Company's Common Stock may be paid when and as
declared by the Company's Board of Directors. The payment of
dividends is subject to the applicable provisions of Delaware
corporate law governing the Company and the discretion of the
Company's Board of Directors, which, in exercising such discretion,
considers the financial performance and capital requirements of the
Company.
Under restrictive covenants relating to the Company's indebtedness,
the Company's ability to pay dividends on its stock is limited to
the greater of (i) $5.0 million or (ii) $5.0 million plus one-half
of the Company's cumulative consolidated net income since March 31,
1993, plus the net proceeds from subsequent issuances of certain
capital stock less certain allowable payments. As of December 31,
1995, pursuant to these covenants, the Company could pay dividends
on its Common Stock of up to $137.2 million.
As of March 15, 1996, 11,269,914 shares of Common Stock, or 26.6%
of the outstanding shares of Common Stock, were held by one
stockholder of record, United National Bank - North, as Trustee of
the 1984 ESOP. As of that date, the 1984 ESOP had approximately
7,398 participants who were active or former employees of the
Company. In addition, as of March 15, 1996 there were 1,726,752
shares of Convertible Voting Preferred Stock, Series A (the "Series
A Preferred Stock"), outstanding held by 299 stockholders of
record. As of that date, United National Bank - North, as Trustee
of the Company's second Employee Stock Ownership Plan (the "1989
ESOP"), was the record owner of 1,717,289 shares of the Series A
Preferred Stock, or over 99% of the outstanding shares of Series A
Preferred Stock, subject to the terms and conditions of said Plan.
As of that date, the 1989 ESOP had approximately 7,561 participants
who were active or former employees of the Company. The Series A
Preferred Stock is not listed for trading on any exchange. The
Series A Preferred Stock has a liquidation preference of $5 per
share and is convertible into one share of Common Stock, subject to
adjustment. Each share of Series A Preferred Stock is entitled to
10 votes in all matters presented to the stockholders for approval.
Participants in the Company's two ESOPs have full voting rights
over all shares allocated to their accounts. See "Employees" under
Item 1.
The following table sets forth, for the periods indicated, the high
and low sales prices of the Common Stock as reported in the
consolidated transaction reporting system.
1994 1995 1996 (1)
Quarter High Low High Low High Low
First 11 6-1/4 9-3/8 6-3/8 4-5/8 3-3/4
Second 10-7/8 8 8-3/8 6-7/8
Third 10-1/4 7-1/2 7-7/8 4-3/4
Fourth 10-1/8 7-3/4 5 3-7/8
(1)First Quarter 1996 through 3/15/96
Item 6. Selected Financial Data
The information required by this Item is incorporated herein by
reference to "Selected Financial and Statistical Data" on page 44
of the Company's 1995 Annual Report to Stockholders. With the
exception of the information specifically incorporated by
reference, the 1995 Annual Report to Stockholders is not to be
deemed filed as part of this Report for purposes of this Item.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information required by this Item is incorporated herein by
reference to pages 15 to 20, inclusive, of the Company's 1995
Annual Report to Stockholders. With the exception of the
information specifically incorporated by reference, the 1995 Annual
Report to Stockholders is not to be deemed filed as part of this
Report for purposes of this Item.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data required by this
Item are incorporated herein by reference to pages 21 to 43,
inclusive, of the Company's 1995 Annual Report to Stockholders and
are listed in "Item 14.--Exhibits, Financial Statement Schedules
and Reports on Form 10-K" hereof. With the exception of the
information specifically incorporated by reference, the 1995 Annual
Report to Stockholders is not to be deemed filed as part of this
Report for purposes of this Item.
Item 9. Changes in or Disagreements with Accountants on
Accounting and Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors of the Company
The information required by this item with respect to Directors of
the Company is incorporated herein by reference to the caption "The
Election of Directors" and "Security Ownership of Certain
Beneficial Owners and Management" in the Company's definitive Proxy
Statement relating to its 1996 Annual Meeting of Stockholders.
With the exception of the information specifically incorporated by
reference, said definitive Proxy Statement is not to be deemed
filed as part of this report for purposes of this item.
Executive Officers of the Company
The executive officers of the Company as of March 15, 1996, were as
follows:
Age at
March 15,
NAME 1996 OFFICE
Richard K. Riederer 52 President, Chief
Executive Officer and
Chief Operating
Officer
James B. Bruhn 55 Executive Vice
President -
Commercial
Craig T. Costello 48 Executive Vice
President -
Manufacturing
David L. Robertson 52 Executive Vice
President - Human
Resources and
Corporate Law
Earl E. Davis, Jr. 47 Vice President-Finance
and Chief Financial
Officer
Thomas W. Evans 59 Vice President -
Materials Management
David M. Gould 57 Vice President -
Economic Development
William R. Kiefer 46 Vice President - Law
and Secretary
Narendra M. Pathipati 38 Vice President-
Corporate Development
and Strategy
John H. Walker 38 Vice President-
Operations
Mac S. White, Jr. 63 Vice President -
Engineering
Mark E. Kaplan 34 Controller
Unless otherwise indicated below, the executive officers of the
Company have held the positions described for at least the last
five years.
Richard K. Riederer has been President and Chief Operating Officer
since January 1995 and Chief Executive Officer since November 1995.
From September 1994 to January 1995, he was Executive Vice
President - Finance and Chief Financial Officer. Prior to that, he
served as Vice President and Chief Financial Officer beginning in
January 1989. He has been a director of the Company since October
1993.
James B. Bruhn has been Executive Vice President - Commercial since
September 1994. He joined the Company as Vice President - Sales
and Marketing - Tin Mill Products in July 1987, and was named Vice
President-Tin Mill Products Business in November 1992. He has been
a director of the Company since May 1990.
Craig T. Costello has been Executive Vice President - Manufacturing
since September 1994. From October 1993 to September 1994, he
served as Vice President - Operations. Mr. Costello served as
General Manager - Operations from 1988 to 1993.
David L. Robertson has served as the Executive Vice President -
Human Resources and Corporate Law since March 15, 1996. Prior to
that, Mr. Robertson was a senior partner in the law firm of Volk,
Robertson & Hellerstedt.
Earl E. Davis, Jr. has served as Vice President - Finance and Chief
Financial Officer since July 1995. From May 1994 to July 1995, he
served as Controller. From August 1991 to April 1994, he served as
Assistant Controller. Previous to August 1991, Mr. Davis was
Director of Internal Audit.
Thomas W. Evans has been Vice President - Materials Management
since February 1988.
David M. Gould was named Vice President - Economic Development in
September 1994. Mr. Gould previously was Vice President - Sales
and Marketing - Sheet Products from 1983 until September 1994.
William R. Kiefer has been Vice President - Law and Secretary since
May 1990. From March 1988 to May 1990 he was Director - Legal
Affairs and Secretary.
Narendra M. Pathipati has served as Vice President - Corporate
Development and Strategy since July 1995. Mr. Pathipati served as
Treasurer of the Company from August 1991 to July 1995. From
February 1990 to July 1991, he served as Director of Financial
Planning and Analysis.
John H. Walker has been Vice President - Operations since July
1995. From April 1994 to July 1995, Mr. Walker was General Manager
- - Operations. Mr. Walker was Director - Operations Planning from
March 1990 to April 1994.
Mac S. White, Jr. has been Vice President - Engineering of the
Company since May 1992. From April 1989 to April 1992, Mr. White
was Director of Engineering for the Company.
Mark E. Kaplan has served as Controller since September 1995.
Prior to that, Mr. Kaplan was employed by Arthur Andersen LLP,
where he held a number of positions, most recently as Senior
Manager in the Audit Department.
Item 11. Executive Compensation
The information required by this Item is incorporated herein by
reference to the caption "Executive Compensation" in the Company's
definitive Proxy Statement relating to its 1996 Annual Meeting of
Stockholders. With the exception of the information specifically
incorporated by reference, said definitive Proxy Statement is not
to be deemed to be filed as part of this report.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information required by this Item is incorporated herein by
reference to the caption "Security Ownership of Certain Beneficial
Owners and Management" in the Company's definitive Proxy Statement
relating to its 1996 Annual Meeting of Stockholders. With the
exception of the information specifically incorporated by
reference, said definitive Proxy Statement is not to be deemed to
be filed as part of this report.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated herein by
reference to the caption "Certain Relationships and Related
Transactions" in the Company's definitive Proxy Statement relating
to its 1996 Annual Meeting of Stockholders. With the exception of
the information specifically incorporated by reference, said
definitive Proxy Statement is not to be deemed to be filed as part
of this report.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
(a)1.The list of financial statements required to be filed by "Item
8--Financial Statements and Supplementary Data" of this Annual
Report on Form 10-K is as follows:
Financial Statements Page
Report of Independent Public Accountants . . . . . . . . . (*)
Consolidated Statements of Income for the years ended
December 31, 1995, 1994, and 1993. . . . . . . . . . . . . (*)
Consolidated Balance Sheets as of December 31,
1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . (*)
Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1994, and 1993. . . . . . . . . . (*)
Notes to Consolidated Financial Statements . . . . . . . . (*)
Supplementary Financial Information. . . . . . . . . . . . (*)
*Incorporated in this Report by reference from pages 21 to 43,
inclusive, of the Company's 1995 Annual Report to Stockholders
referred to in Exhibit 13.1 below.
2.The list of financial statement schedules required to be filed by
"Item 8--Financial Statements and Supplementary Data" of this
Annual Report on Form 10-K is as follows:
Report of Independent Accountants
on Financial Statement
Schedules . . . . . . . . . . . . . S-1
Schedules:
I - Condensed Financial Information
of Registrant S-2
II - Valuation and Qualifying Accounts S-3
3. Exhibits
The following exhibits are included in this Annual Report or are
incorporated herein by reference:
Exhibit 3.1 Reinstated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-1 filed May 3, 1989, Commission
File No. 33-28515).
Exhibit 3.2 Certificate of Amendment to the Restated Certificate
of Incorporation of the Company (incorporated by reference to
Exhibit 3.2 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, Commission File No. 1-10244).
Exhibit 3.3 By-laws of the Company (incorporated by reference to
Exhibit 3.3 to the Company's Registration Statement on Form S-1
filed May 3, 1989, Commission File No. 33-28515).
Exhibit 3.4 Amendment to the By-laws of the Company
(incorporated by reference to Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994,
Commission File No. 1-10244).
Exhibit 3.5 Certificate of the Designation, Powers, Preferences
and Rights of the Convertible Voting Preferred Stock, Series A
(incorporated by reference to Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1989,
Commission File No. 1-10244)
Exhibit 4.1 Indenture dated October 17, 1989 between the
Company and First Bank (N.A.) as Trustee, relating to the Company's
10-7/8% Senior Notes due October 15, 1999, including Form of Note
(incorporated by reference to Exhibits 4.1 and 4.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1989, Commission File No. 1-10244).
Exhibit 4.2 Indenture dated March 1, 1993 between the Company
and Bankers Trust Company, as trustee, relating to the Company's
11-1/2% Senior Notes due 1998, including Form of Note (incorporated
by reference to Exhibit 4.1 to Amendment No. 2 to the Company's
Registration Statement on Form S-2 filed on February 9, 1993,
Commission File No. 33-53476).
Exhibit 4.3 First Supplemental Indenture dated July 25, 1995
relating to the Company's 11-1/2% Senior Notes due 1998
(incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-4 filed on July 27, 1995,
Commission File No. 33-61345).
Exhibit 4.4 Indenture dated as of June 12, 1995 between the
Company and Bankers Trust Company, as trustee, relating to
$125,000,000 principal amount of 10-3/4% Senior Notes due 2003,
including Form of Note (incorporated by reference to Exhibit 4.4 to
the Company's Registration Statement on Form S-4 filed on July 27,
1995, Commission File No. 33-61345).
Exhibit 10.1 Redacted Pellet Sale and Purchase Agreement dated
as of September 30, 1991 between Cleveland-Cliffs Iron Company and
the Company (incorporated by reference to Exhibit 10.18 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1992, Commission File No. 1-10244).
Exhibit 10.2 Coke Sale Agreement dated January 1, 1993 and
signed July 13, 1993 between the Registrant and USX Corporation
(incorporated by reference to Exhibit 10.30 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1993,
Commission File No. 1-10244).
Exhibit 10.3 1984 Employee Stock Ownership Plan, as amended and
restated (incorporated by reference to Exhibit 10.3 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1989, Commission File No. 1-10244).
Exhibit 10.4 1989 Employee Stock Ownership Plan (incorporated
by reference to Exhibit 10.4 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1989, Commission File
No. 1-10244).
Exhibit 10.5 Amendments to the 1984 and 1989 Employee Stock
Ownership Plans, effective May 26, 1994 (filed herewith).
Exhibit 10.6 1987 Stock Option Plan (incorporated by reference
to Exhibit 10.5 to the Company's Registration Statement on Form S-1
filed May 3, 1989, Commission File No. 33-28515)
Exhibit 10.7 Description of the Company's Performance
Incentive Plan (incorporated by reference to the caption "Annual
Compensation" appearing on pages 11 and 12 of the Company's
Definitive Proxy Statement dated April 25, 1995 for its 1995 Annual
Meeting of Stockholders).
Exhibit 10.8 Deferred Compensation Plan for Directors
(incorporated by reference to Exhibit 10.19 of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1990,
Commission File No. 1-10244).
Exhibit 10.9 Employment Agreement between Richard K. Reiderer
and the Company (incorporated by reference to Exhibit 10.12 to the
Company's Registration Statement on Form S-1 filed May 3, 1989,
Commission File No. 33-28515).
Exhibit 10.10 Employment Agreement between Herbert Elish and
the Company dated as of July 1, 1990, including Amendment dated
August 5, 1993 (incorporated by reference to Exhibit 10.6 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990 and Exhibit 10.25 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993,
Commission File No. 1-10244).
Exhibit 10.11 Employment Agreement between James B. Bruhn and
the Company (incorporated by reference to Exhibit 10.11 to the
Company's Registration Statement on Form S-1 filed May 3, 1989,
Commission File No. 33-28515).
Exhibit 10.12 Employment Agreement between Thomas W. Evans and
the Company dated April 21, 1987, including Amendment dated July
19, 1993 (incorporated by reference to Exhibit 10.8 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 and Exhibit 10.28 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993,
Commission File No. 1-10244).
Exhibit 10.13 Employment Agreement between Craig T. Costello
and the Company dated July 20, 1993 (incorporated by reference to
Exhibit 10.19 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, Commission File No. 1-10244).
Exhibit 10.14 Employment Agreement between William R. Kiefer
and the Company dated July 21, 1993 (incorporated by reference to
Exhibit 10.20 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, Commission File No. 1-10244).
Exhibit 10.15 Employment Agreement between John H. Walker and
the Company dated July 21, 1993 (incorporated by reference to
Exhibit 10.22 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, Commission File No. 1-10244).
Exhibit 10.16 Employment Agreement between Narendra M.
Pathipati and the Company dated December 16, 1993 (incorporated by
reference to Exhibit 10.23 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993, Commission File
No. 1-10244).
Exhibit 10.17 Employment Agreement between Mac S. White and the
Company dated July 28, 1993 (incorporated by reference to Exhibit
10.24 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993, Commission File No. 1-10244).
Exhibit 10.18 Amendment dated July 19, 1993 to Employment
Agreement dated June 8, 1987 between David M. Gould and the Company
(incorporated by reference to Exhibit 10.26 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993,
Commission File No. 1-10244).
Exhibit 10.19 Amendment dated July 21, 1993 to the Employment
Agreement dated June 8, 1987 between William C. Brenneisen and the
Company (incorporated by reference to Exhibit 10.27 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, Commission File No. 1-10244).
Exhibit 13.1 1995 Annual Report to Stockholders of Weirton
Steel Corporation (filed herewith). Except for those portions of
the Annual Report specifically incorporated by reference, such
report is furnished for the information of the Securities and
Exchange Commission and is not to be deemed filed as part of this
Annual Report on Form 10-K.
Exhibit 22.1 Subsidiaries of the Company (filed herewith).
Exhibit 23.1 Consent of Arthur Andersen LLP, independent public
accountants (filed herewith).
Exhibit 27. Financial data schedule for year ended December
31, 1995 (filed herewith).
(b) The Company filed reports on Form 8-K each in reference to
Item 5 thereof on January 30, and June 23, 1995.
(c) The exhibits as listed under Item 14.(a)(3), are filed
herewith or incorporated herein by reference.
(d) The financial statement schedules listed under Item
14.(a)(2), are filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, Weirton Steel
Corporation has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized, on the 28th day of
March, 1996.
WEIRTON STEEL CORPORATION
By /s/ Richard K. Riederer
Richard K. Riederer
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this Report has been signed below by the
following persons on behalf of Weirton Steel Corporation and in the
capacities indicated on the 28th day of March, 1996.
/s/ Richard K. Riederer
Richard K. Riederer Phillip A. Karber
President and Director
Chief Executive Officer
(principal executive officer)
/s/ Earl E. Davis /s/ Joseph J. Nowak
Earl E. Davis Joseph J. Nowak
Chief Financial Officer Director
(principal financial
officer)
/s/ Mark E. Kaplan /s/ Robert S. Reitman
Mark E. Kaplan Robert S. Reitman
Controller (principal Director
accounting officer)
/s/ Michael Bozic /s/ Richard F. Schubert
Michael Bozic Richard F. Schubert
Director Director
/s/ James B. Bruhn /s/ Thomas R. Sturges
James B. Bruhn Thomas R. Sturges
Director Director
/s/ Robert J. D'Anniballe, Jr. /s/ David I.J. Wang
Robert J. D'Anniballe, Jr. David I.J. Wang
Director Director
/s/ Mark G. Glyptis /s/ Ronald C. Whitaker
Mark G. Glyptis Ronald C. Whitaker
Director Director
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of Weirton Steel Corporation:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in
Weirton Steel Corporation's annual report to stockholders
incorporated by reference in this Form 10-K, and have issued our
report thereon dated January 22, 1996. Our audits were made for
the purpose of forming an opinion on those basic financial
statements taken as a whole. The schedules listed in the index in
Item 14 (a)2 of the Form 10-K are the responsibility of the
Company's management and are presented for purposes of complying
with the Securities and Exchange Commission's rules and are not a
part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the
basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
January 22, 1996
S-1
WEIRTON STEEL CORPORATION
CONDENSED PARENT COMPANY STATEMENTS OF INCOME
Schedule I
(Dollars in thousands, except per share data)
Year Ended December 31,
1995 1994 1993
NET SALES $1,351,711 $1,260,864 $1,201,093
OPERATING COSTS:
Cost of sales 1,179,950 1,136,936 1,105,558
Discount on sale
of finance receiv-
ables
to subsidiary 18,522 14,719 5,209
Selling, general
and
administrative
expense 31,142 28,563 31,535
Depreciation 54,699 46,309 49,113
Restructuring charge - - 17,340
Provision for
profit sharing 22,499 17,581 -
Insurance recov-
eries (41,502) (20,000) -
Total operating
costs 1,265,310 1,224,108 1,208,755
INCOME (LOSS)
FROM OPERATIONS 86,401 36,756 (7,662)
Adjustment to
carrying value
of damaged
facility 9,000 44,746 -
Interest expense (41,920) (49,260) (52,634)
Interest income 5,423 6,330 2,737
Dividends received
from subsidary 6,056 5,529 2,168
ESOP contribution (2,610) (2,610) (2,610)
INCOME (LOSS) BEFORE
INCOME TAXES 62,350 41,491 (58,001)
Income tax prov-
ision 12,181 6,484 (13,988)
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 50,169 35,007 (44,013)
Extraordinary loss
on early
extinguishment
of debt (6,718) (3,851) (6,549)
INCOME BEFORE (LOSS)
CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 43,451 31,156 (50,562)
Cumulative effect
of accounting
change - - (179,803)
NET INCOME (LOSS) $ 43,451 $ 31,156 $ (230,365)
========= ========= ============
Less: Preferred
stock dividend
requirement - 2,339 3,125
NET INCOME (Loss)
APPLICABLE TO
COMMON SHARES $ 43,451 $ 28,817 $ (233,490)
PER SHARE DATA:
Weighted average
number of common
shares and
equivalents
(in thousands) 43,781 34,470 26,473
Net income (loss)
before
extraordinary items $ 1.15 $ 0.95 $ (1.78)
Extraordinary loss
on early extin-
guishment
of debt (0.16) (0.11) (0.25)
Net income(loss)
before cumulative
effect of accounting
change 0.99 0.84 (2.03)
Cumulative effect
of accounting
change - - (6.79)
NET INCOME (LOSS)
PER COMMON SHARE $ 0.99 $ 0.84 $ (8.82)
========== ======== ============
WEIRTON STEEL CORPORATION
CONDENSED PARENT COMPANY BALANCE SHEETS
Schedule I
(Dollars in thousands, except share data)
Year Ended December 31,
1995 1994
ASSETS:
Current assets:
Cash and cash equivalents $121,690 $ 57,221
Accounts receivable, net 15,996 19,147
Inventories:
Raw Material 77,557 100,319
Work-in-process 86,49 89,106
Finished goods 91,312 81,093
Deferred income taxes 49,245 42,570
Other current assets 7,309 7,871
Total current assets 449,600 397,327
Property, plant and
equipment, net 586,430 588,903
Investment in Weirton
Receivables, Inc. 129,927 111,094
Intangible asset 31,412 17,213
Deferred income taxes 88,607 98,493
Other assets and
deferred charges 15,732 12,761
TOTAL ASSETS $1,301,708 $1,225,791
========= ============
LIABILITIES:
Current liabilities:
Payables 123,105 136,038
Employment costs 88,115 84,487
Pension liability 12,471 -
Other 27,858 36,514
Total Current Liabilities 251,549 257,039
Long term debt obligations 407,869 394,505
Long term pension obligations 94,689 68,093
Postretirement benefits other
than pensions 317,893 316,185
Other long term liabilities 25,246 31,429
TOTAL LIABILITIES 1,097,246 1,067,251
REDEEMABLE PREFERRED STOCK 15,868 14,485
STOCKHOLDERS' EQUITY
Common stock, $0.01 par
value;
50,000,000 authorized; 423 420
42,289,844 and 42,027,405
shares issued
Additional paid-in capital 454,197 452,746
Retained earnings (265,388) (308,839)
Other stockholders' equity (638) (272)
TOTAL STOCKHOLDERS' EQUITY 188,594
TOTAL LIABILITIES,
REDEEMABLE STOCK
AND STOCKHOLDERS' EQUITY $1,301,708 $1,225,791
========== ==========
Weirton Steel Corporation
Condensed Parent Company Statements of Cash Flows
Schedule I
(Dollars in Thousands)
For the Year Ended December 31,
1995 1994 1993
NET CASH PROVIDED BY
OPERATING ACTIVITIES $135,506 $46,255 $174,171
CASH FLOWS FROM
INVESTING ACTIVITIES:
Expenditures for
property,
plant and equipment:
Spending to restore
damaged facilities (2,948) (74,611) -
Less:Insurance recoveries 9,000 45,000 -
Other capital spending (49,410) (37,456) (116,913)
Investment in Weirton
Receivables, Inc. (18,833) 5,819 (13,324)
NET CASH USED BY INVESTING
ACTIVITIES (62,191) (61,248) (130,237)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Repayments of debt
obligations (118,800) (101,101) (148,114)
Proceeds from the
issuance
of common stock - 116,087 -
Redemption of preferred
stock, Series B - (25,000) -
Proceeds from issuance of
long term debt 125,000 - 140,000
Common shares issuable (577) 1,454 1,119
Dividends paid - (2,339) (3,125)
Purchase of common
treasury shares - - (1,455)
Deferred financing costs (4,325) (2,245) (13,520)
Other, principally
net book
overdrafts (10,144) 8,553 (3,229)
NET CASH USED BY FINANCING
ACTIVITIES (8,846) (4,591) (28,324)
NET CHANGE IN CASH AND
EQUIVALENTS 64,469 (19,584) 15,610
CASH AND EQUIVALENTS
AT BEGINNING OF PERIOD 57,221 76,805 61,195
CASH AND EQUIVALENTS
AT END OF PERIOD $121,690 $ 57,221 $ 76,805
Supplement cash flow
information ======== ========== ==========
Interest paid, net of
capitalized interest $ 44,416 $ 52,091 $ 47,311
Income taxes paid
(refunded) 10,593 - (1,779)
S-2
Weirton Steel Corporation and Subsidiary
Valuation and Qualifying Accounts
For the years ended December 31, 1995, 1994 and 1993
(dollars in thousands)
Balance at Charges to Balance at Beginning of Cost and End of
Description Year Period Expense Deductions Period
Allowance for
doubtful accounts
discounts, claims
and allowances
1995 $6,405 $19,396 $17,113 $8,688
1994 5,719 17,302 16,616 6,405
1993 5,545 16,346 16,172 5,719
Valuation
allowance for
deferred
tax assets
1995 $42,640 $ - $11,697 $30,943
1994 50,768 - 8,128 42,640
1993 - 50,768 - 50,768
S-3