Back to GetFilings.com
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 June 30, 2002
--------------------------------------
/ / 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 June 30, 2002 Commission File Number 1-2394
WHX CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-3768097
(State of Incorporation) (IRS Employer
Identification No.)
110 East 59th Street
New York, New York 10022
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 212-355-5200
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 as of August 5, 2002
was 16,217,571.
WHX CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2002 2001 2002 2001
- -----------------------------------------------------------------------------------------------------------
Restated Restated
(in thousands)
Net sales $ 109,159 $ 101,041 $ 201,982 $ 200,695
Cost of goods sold 86,030 81,499 161,221 164,501
--------- --------- --------- ---------
Gross profit 23,129 19,542 40,761 36,194
Selling, general and administrative expenses 17,413 21,869 34,431 40,198
Restructuring charges (Note 3) 10,700 -- 10,700 --
--------- --------- --------- ---------
Income (loss) from operations (4,984) (2,327) (4,370) (4,004)
--------- --------- --------- ---------
Other:
Interest expense 6,537 12,481 15,340 25,109
Gain on early retirement of debt 11,218 19,012 40,235 19,012
Other income (expense) (1,562) 7,217 (324) 3,786
--------- --------- --------- ---------
Income (loss) from continuing operations before taxes (1,865) 11,421 20,201 (6,315)
Tax provision (benefit) (3,159) 5,700 (3,944) (1,170)
--------- --------- --------- ---------
Income (loss) from continuing operations 1,294 5,721 24,145 (5,145)
Income from discontinued operation - net of tax 6,492 2,062 8,343 2,734
--------- --------- --------- ---------
Income (loss) before cumulative effect of an
accounting change 7,786 7,783 32,488 (2,411)
Cumulative effect of an accounting change (Note 4) -- -- (44,000) --
--------- --------- --------- ---------
Net income (loss) 7,786 7,783 (11,512) (2,411)
Dividend requirement for preferred stock 4,737 5,110 9,512 10,262
--------- --------- --------- ---------
Net income (loss) applicable to common stock $ 3,049 $ 2,673 $ (21,024) $ (12,673)
========= ========= ========= =========
Basic per share of common stock
Income (loss) from continuing operations $ (0.22) $ 0.04 $ 0.92 $ (1.06)
Income from discontinued operation 0.41 0.14 0.52 0.19
Cumulative effect of an accounting change -- -- (2.76) --
--------- --------- --------- ---------
Net income (loss) per share $ 0.19 $ 0.18 $ (1.32) $ (0.87)
========= ========= ========= =========
Diluted per share of common stock
Income (loss) from continuing operations $ (0.22) $ 0.04 $ 0.76 $ (1.06)
Income from discontinued operation 0.41 0.14 0.26 0.19
Cumulative effect of an accounting change -- -- (1.38) --
--------- --------- --------- ---------
Net income (loss) per share $ 0.19 $ 0.18 $ (0.36) $ (0.87)
========= ========= ========= =========
See notes to condensed consolidated financial statements.
2
WHX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
June 30 December 31
2002 2001
- --------------------------------------------------------------------------------
(Dollars and shares in thousands)
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 36,256 $ 7,789
Short term investments 7,224 244,883
Trade receivables - net 65,694 45,725
Inventories 87,286 85,279
Other current assets 13,227 7,451
--------- ---------
Total current assets 209,687 391,127
Advances to WPC 8,119 8,369
Note Receivable - WPC 31,473 31,005
Property, plant and equipment at cost, less
accumulated depreciation and amortization 131,832 134,923
Prepaid pension 29,494 33,294
Intangibles, net of amortization 213,505 256,831
Due from Unimast 4,207 6,427
Assets of discontinued operations 118,255 107,193
Other non-current assets 16,882 22,281
--------- ---------
$ 763,454 $ 991,450
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade payables $ 56,657 $ 34,131
Deferred income taxes - current 8,982 8,982
Other current liabilities 36,988 22,023
Short-term debt -- 110,946
--------- ---------
Total current liabilities 102,627 176,082
Long-term debt 286,867 432,454
Loss in excess of investment - WPC 39,592 39,374
Deferred income taxes - non-current 3,151 3,227
Liabilities of discontinued operations 51,471 50,011
Other liabilities 43,549 33,878
--------- ---------
527,257 735,026
Stockholders' Equity:
Preferred Stock $.10 par value -
5,523 shares and 5,571 shares 552 557
Common Stock - $.01 par value -
16,217 shares and 16,070 shares 162 161
Accumulated other comprehensive loss (1,472) (2,268)
Additional paid-in capital 555,904 555,899
Accumulated earnings (deficit) (318,949) (297,925)
--------- ---------
Total stockholders' equity 236,197 256,424
--------- ---------
$ 763,454 $ 991,450
========= =========
See notes to condensed consolidated financial statements.
3
WHX CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30
2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net loss $ (11,512) $ (2,411)
Less: Income from discontinued operaions 8,343 2,734
--------- ---------
Net loss from continuing operations and cumulative effect of an accounting change (19,855) (5,145)
Non cash income and expenses:
Cumulative effect of an accounting change 44,000 --
Restructuring charge 9,514 --
Depreciation and amortization 8,610 12,442
Amortization of debt related costs 1,391 1,942
Gain on early retirement of debt (40,235) (19,012)
Other post employment benefits 190 110
Deferred income taxes (76) (17)
Gain on sale of assets (34) (40)
Equity income in affiliated companies (175) (1,226)
Pension expense 3,800 2,753
Decrease (increase) in working capital elements,
Trade receivables (19,969) (3,056)
Inventories (2,007) 26,353
Other current assets (7,062) 4,362
Trade payables 22,308 5,417
Other current liabilities 5,291 (10,283)
Short-term investments - net 237,659 48,920
Trading account borrowings (110,946) --
Other items-net (430) 502
--------- ---------
Net cash provided by operating activities from continuing operations 131,974 64,022
--------- ---------
Cash flows from investing activities:
Capital expenditures (3,363) (7,118)
Release of restricted cash -- 33,000
Note receivable - WPC -- (30,453)
Settlement Agreement - WPC -- (32,000)
Restricted cash -- (5,000)
Proceeds from sale of property 51 167
--------- ---------
Net cash used in investing activities from continuing operations (3,312) (41,404)
--------- ---------
Cash flows from financing activities:
Early retirement of long-term debt (77,664) (15,906)
Due from Unimast 2,220 2,000
Net (payments)/borrowings of long-term debt (23,559) 12,535
--------- ---------
Net cash used by financing activities from continuing operations (99,003) (1,371)
--------- ---------
Effect of exchange rate changes on net cash 67 (13)
--------- ---------
Net cash provided by continuing operations 29,726 21,234
Net cash used by discontinued operations (1,259) (368)
Cash and cash equivalents at beginning of period 7,789 4,748
--------- ---------
Cash and cash equivalents at end of period $ 36,256 $ 25,614
========= =========
See notes to condensed consolidated financial statements.
4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
General
- -------
The unaudited condensed consolidated financial statements
included herein have been prepared by the Company. In the opinion of
management, the interim financial statements reflect all normal and
recurring adjustments necessary to present fairly the consolidated
financial position and the results of operations and changes in cash
flows for the interim periods.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Certain 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 contained in Form 10-K for the
year ended December 31, 2001. The results of operations for the quarter
and six months ended June 30, 2002 are not necessarily indicative of the
operating results for the full year.
The consolidated financial statements include the accounts of
all subsidiary companies except for Wheeling-Pittsburgh Corporation and
its subsidiaries. On November 16, 2000, Wheeling-Pittsburgh Corporation
("WPC"), a wholly owned subsidiary of WHX Corporation ("WHX"), and six
of its subsidiaries including Wheeling-Pittsburgh Steel Corporation
("WPSC" and together with WPC and its other subsidiaries, the "WPC
Group") filed a petition seeking reorganization under Chapter 11 of
Title 11 of the United States Bankruptcy Code (see Note 1). As a result
of the Bankruptcy Filing the Company has, as of November 16, 2000,
deconsolidated the balance sheet of its wholly owned subsidiary WPC.
Accordingly, the accompanying consolidated balance sheets at June 30,
2002 and December 31, 2001 do not include any of the assets or
liabilities of WPC, and the accompanying consolidated statement of
operations and the consolidated statement of cash flows for the quarter
and six months ended June 30, 2002 and 2001 exclude the operating
results of WPC.
Certain reclassifications have been made to prior period
balances to conform to current period presentation. The results from the
2001 periods have been restated in accordance with FASB Statement No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"), and FASB Statement No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." ("SFAS 145"). Accordingly, the Income Statements, Balance
Sheets and Cash Flows of Unimast Incorporated have been classified as
discontinued operations and gains on early retirement of debt have been
classified as income from continuing operations for all periods
presented.
(see Note 4)
Nature of Operations
- --------------------
WHX is a holding company that has been structured to invest in
and/or acquire a diverse group of businesses on a decentralized basis.
WHX's primary business is Handy & Harman ("H&H"), a diversified
manufacturing company whose strategic business units encompass three
segments; precious metal, wire & tubing, and engineered materials. WHX
also owns Pittsburgh-Canfield Corporation ("PCC"), a manufacturer of
electrogalvanized products used in the construction and appliance
industries. In June 2002, the Company announced the sale of its
wholly-owned subsidiary Unimast Incorporated ("Unimast"), a leading
manufacturer of steel framing and other products for commercial and
residential construction. As a result, Unimast has been classified as a
discontinued operation. The transaction closed on July 31, 2002. WHX's
other business consists of WPC and six of its subsidiaires including
WPSC, a vertically integrated manufacturer of value-added and flat
rolled steel products (see Note 1). WHX, together with all of its
subsidiaries shall be referred to herein as the "Company," and the
Company and its subsidiaries other than the WPC Group shall be referred
to herein as the "WHX Group."
5
Note 1 - WPC Group Bankruptcy
On November 16, 2000, the WPC Group filed petitions for relief
under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy
Court for the Northern District of Ohio. As a result, subsequent to the
commencement of the Bankruptcy Filing, the WPC Group sought and obtained
several orders from the Bankruptcy Court that were intended to enable
the WPC Group to continue business operations as debtors-in-possession.
Since the Petition Date, the WPC Group's management has been in the
process of stabilizing their businesses and evaluating their operations,
while continuing to provide uninterrupted services to its customers.
On November 17, 2000, the Bankruptcy Court granted the WPC
Group's motion to approve a $290 million Debtor in Possession Credit
Agreement ("DIP Credit Agreement") provided by Citibank, N.A., as
initial issuing bank, Citicorp U.S.A., Inc., as administrative agent,
and the DIP Lenders. Pursuant to the DIP Credit Agreement, Citibank,
N.A. made term loan advances to the WPC Group up to a maximum aggregate
principal amount of $35 million. In addition, the DIP Lenders agreed,
subject to certain conditions, to provide the WPC Group with revolving
loans, swing loans and letter of credit accommodations in an aggregate
amount of up to $255 million. On January 2, 2002, the WPC Group
requested and received a reduction in the revolving loans, swing loans
and letter of credit to a maximum aggregate amount of up to $175
million. In connection with the Bankruptcy Filing, WHX had guaranteed
$30 million of the term loan portion of the DIP Credit Agreement ("Term
Loan") and deposited in a pledged asset account $33 million of funds in
support of such guaranty. Effective as of June 1, 2001, WHX purchased a
participation interest comprising an undivided interest in the Term Loan
in the amount of $30 million, plus interest accrued but not paid on such
amount of the Term Loan through June 1, 2001. Concurrently with such
transaction, WHX's guaranty of $30 million of the Term Loan described
above was terminated and the $33 million of funds previously deposited
in a pledged asset account in support of such guaranty were released to
WHX. WHX paid to Citibank $30.5 million of such deposited funds to
purchase WHX's participation interest in the Term Loan.
WPC borrowings outstanding under the DIP Credit Facility at
June 30, 2002 include $34.7 million Term Loan, $124.1 million in
revolving credit borrowings and approximately $2.8 million of letters of
credit. WPC borrowings outstanding under the DIP Credit Facility for
revolving loans totaled $127.2 million at December 31, 2001. Term loans
under the DIP Credit Facility totaled $34.4 million at December 31,
2001. At June 30, 2002, availability under the DIP Credit Facility was
$6.1 million. The DIP Credit Facility expires on the earlier of November
17, 2002 or the completion of a Plan of Reorganization. WPC intends to
have completed a Plan of Reorganization by November 16, 2002. If a Plan
of Reorganization is not completed by then, WPC will pursue an extension
of or a replacement of the current DIP Credit Facility. There can be no
guarantee that this will occur.
Although the WPC Group expects to file a Plan of Reorganization
at an appropriate time in the future, there can be no assurance at this
time that a Plan of Reorganization will be proposed by the WPC Group,
approved or confirmed by the Bankruptcy Court, or that such plan will be
consummated. The WPC Group currently has the exclusive right to file a
Plan of Reorganization. The exclusive filing period has been extended
most recently until August 30, 2002 by the Bankruptcy Court at the WPC
Group's request, and while the WPC Group intends to request extensions
of the exclusivity period if necessary, there can be no assurance that
the Bankruptcy Court will grant future extensions. If the exclusivity
period were to expire or be terminated, other interested parties, such
as creditors of the WPC Group, would have the right to propose
alternative plans of reorganization.
During the period January 1, 2002 through June 30, 2002, the
WPC Group incurred a net loss of $51.5 million, which is not reflected
in the Company's June 30, 2002 consolidated results of operations. (see
Note 12)
At January 1, 2000, $136.8 million of the Company's net equity
represented its investment in the WPC Group. In addition to this
investment, WHX, on November 17, 2000, guaranteed $30 million of the WPC
Group's debtor-in-possession term loan. Such guaranty was terminated
effective as of June 1, 2001 concurrently with WHX's purchase of a
participation interest in the Term Loan as discussed above. The
recognition of the WPC Group's net loss of $176.6 million, in the year
6
2000, eliminated the investment's carrying value of $136.8 million. In
November of 2000, WHX recorded a liability of $39.8 million representing
the excess of the WPC Group's loss over the carrying amount of the
investment.
A Settlement and Release Agreement ("Settlement Agreement") by
and among WPSC, WPC, WHX, and certain affiliates of WPSC, WPC and WHX,
received approval of the United States Bankruptcy Court for the Northern
District of Ohio on May 24, 2001, was entered into on May 25, 2001, and
became effective on May 29, 2001. Pursuant to the Settlement Agreement
certain outstanding claims among the parties thereto were resolved,
including without limitation, all inter-company receivables and payables
between the WHX Group and the WPC Group.
The Settlement Agreement provided, in part, that the Settlement
Agreement shall be effective upon the occurrence of each of the
following transactions, (i) the payment by WHX to WPC of $17 million;
(ii) the exchange of releases between the WPC Group and the WHX Group;
(iii) WHX or its designee would enter into a binding agreement to
purchase certain assets of Pittsburgh-Canfield Corporation ("PCC") for
$15 million, plus the assumption of certain trade payables, subject to
bidding procedures as may be established by the bankruptcy court, and
certain other terms and conditions; (iv) the termination of the Tax
Sharing Agreements between WHX and WPC; (v) WHX would deliver an
agreement to the WPC Group whereby it agreed not to charge or allocate
any pension obligations, expenses or charges to the WPC Group with
respect to the WHX Pension Plan, subject to certain limitations as
provided therein, through and including the earlier of the effective
date of a Plan or Plans of Reorganization and December 31, 2002; (vi)
the DIP Credit Agreement shall have been amended as provided in the
Settlement Agreement; (vii) WPC Land Corporation shall execute such
instruments as may be necessary to effect the transfer of title, to
WPSC, of certain properties specified in the Settlement Agreement; and
(viii) the lenders party to the DIP Credit Agreement shall have
consented to the transaction described in the Settlement Agreement. Such
transactions, other than the acquisition of certain assets of
Pittsburgh-Canfield Corporation, all occurred effective May 29, 2001.
The sale of certain assets of Pittsburgh-Canfield Corporation closed on
June 29, 2001. The PCC agreement included a one-year repurchase option
for the seller. The repurchase option expired on June 29, 2002.
As a result of the total cash payments of $32 million to the
WPC Group by WHX, all intercompany receivables and liabilities (except
for commercial trade transactions), including the liability for
redeemable common stock, were settled. In addition, WHX recorded the
fair value of the net assets of PCC of $5.4 million.
On October 22, 2001, the Bankruptcy Court entered an order
("October Order"), approving several transactions intended, among other
things, to provide the WPC Group with additional liquidity. As part of
the October Order, the Bankruptcy Court approved a Memorandum of
Understanding by and among the Company, Wheeling-Pittsburgh Corporation
("WPC"), Wheeling-Pittsburgh Steel Corporation ("WPSC") and the United
Steelworkers of America, AFL-CIO-CLC ("USWA"), pursuant to which the
Company agreed to provide to WPSC (1) up to $5 million of secured loans
and $5 million of liquidity support (part of which consisted of secured
financing terms) during the period from the Order through January 31,
2002, (2) if certain conditions are met, an additional $2 million of
secured loans (for an aggregate of $7 million) and the maintenance of
the $5 million of liquidity support referred to above, during the period
from February 1, 2002 through March 31, 2002, (the conditions were not
met, accordingly the additional $2.0 million in secured loans were not
made), and (3) a $25 million contribution to a new WPSC defined benefit
pension plan contingent upon a confirmed WPSC Chapter 11 Plan of
Reorganization. Through June 30, 2002, WHX had advanced $5.0 million of
the secured loans and up to $5.5 million of secured financing. At June
30, 2002, the outstanding balance of these secured advances was $5.0
million and $3.1 million, respectively.
The October Order also approved a Supplemental Agreement among
the members of the WPC Group and WHX, under which all of the extensions
of credit referred to in the preceding paragraph are granted
super-priority claim status in WPSC's Chapter 11 case and are secured by
a lien on substantially all of the assets of WPSC, junior to the liens,
security interests and super-priority claims of the lenders to WPSC
under the DIP Credit Agreement. The Supplemental Agreement also
provides, among other things, that the Company may sell, transfer or
dispose of the stock of WPC free from the automatic stay imposed under
the Bankruptcy Code, and under specified circumstances requires WPC to
support certain changes to the WHX Pension Plan.
7
Additionally, the October Order approved the terms of the
Modified Labor Agreement ("MLA") by and among WPC, WPSC and the USWA.
WHX is not a party to the MLA. The MLA modifies the current WPSC
collective bargaining agreement to provide for, among other things,
immediate reductions in wages and the cost of providing medical benefits
to active and retired employees in exchange for improvement in wages and
pension benefits for hourly employees upon a confirmed WPSC Chapter 11
Plan of Reorganization. The MLA is part of a comprehensive support
arrangement that also involves concessions from WPSC salaried employees,
WPSC's vendors and other constituencies in the Chapter 11 proceedings.
In January 2002, WPSC finalized a financial support plan which
included a $5.0 million loan from the State of West Virginia, a $7.0
million loan and a $0.2 million grant from the State of Ohio, a $10.0
million advance by the WHX Group for future steel purchases (all of
which were delivered before June 30, 2002) and additional wage and
salary deferrals from WPSC union and salaried employees. At June 30,
2002, the balance outstanding with the State of West Virginia was $5.0
million, and $7.0 million with the State of Ohio.
Management of the Company cannot at this time determine with
certainty the ultimate outcome of the Chapter 11 proceedings; however it
is possible that the following outcomes could result:
o The WPC Group could reorganize, and its creditors could
receive a portion of their claims in cash or in stock of WPC
or WPSC.
o The WPC Group could be sold in its entirety or segments
could be sold, and the proceeds from such sale(s) would be
utilized to satisfy creditor claims.
o The creditors could assume ownership of the WPC Group or
WPSC and continue to operate such businesses.
In each of the above possible outcomes, the WHX Group would
have little or no future ownership in or involvement with the WPC Group,
and the WHX Group future cash obligations to or on behalf of the WPC
Group would be minimal to none (other than the $25 million pension
contribution referred to above). It is also possible that none of the
above outcomes would occur and the WPC Group may shut down a number of
their operations. According to WHX's preliminary evaluation of potential
pension obligations, if a partial shutdown of the WPC Group's operations
were to occur in the immediate future WHX's liability for early
retirement pension benefits could range from approximately $80 million
to $100 million. It is also possible that the WPC Group could cease
operations in their entirety and this liability would then be
significantly greater. However, management does not believe this
occurrence is likely. Under current pension law and regulations based on
WHX's analysis of the current funded status of the pension plan, if a
partial shutdown were to occur after June 30, 2002, the cash funding
obligations related to such partial shutdown would not begin until 2003
and would extend over several years. Such cash funding obligations would
have a material adverse impact on the liquidity, financial position and
capital resources of WHX. WHX's funding obligation and the impact on the
Company's liquidity, financial position and capital resources could be
substantially reduced or eliminated if (1) a partial shutdown, if it
occurs, were to occur at such a time that the fair market value of the
assets of the plan approximates or exceeds the plan's liabilities
(including the early retirement benefits), (2) a shutdown were to occur
gradually over several years or (3) the number of the WPC Group's
operations shut down were less than those assumed in estimating the
above-mentioned amounts.
In connection with past collective bargaining agreements by
and between the WPC Group and the United Steelworkers of America,
AFL-CIO-CLC ("USWA"), the WPC Group is obligated to provide certain
medical insurance, life insurance, disability and surviving spouse
retirement benefits to retired employees and their dependents ("OPEB
Obligations"). WHX is not a signatory to any of these agreements.
However, WHX has separately agreed to be contingently liable for a
portion of the OPEB Obligations. WHX's contingent obligation would be
triggered in the event that the WPC Group was to fail to satisfy its
OPEB Obligations. WHX's contingent obligation is limited to 25% of the
Accumulated Post-Retirement Benefit Obligation with respect to the WPC
Group's employees and retirees represented by the USWA. WPSC's total
OPEB Obligation at June 30, 2002 is estimated to be $271.2 million. WHX
has estimated that approximately 85% of employees and retirees entitled
to such OPEB Obligations are represented by the USWA.
8
WHX's contingency for OPEB Obligations exists only so long as
(1) a majority of the directors of WPSC or WPC are affiliated with WHX;
(2) WHX controls the Board of Directors of WPSC or WPC through
appointment or election of a majority of such directors; or (3) WHX,
through other means, exercises a level of control normally associated
with (1) or (2) above.
Note 2 - Discontinued Operations
- --------------------------------
On June 24, 2002, the Company signed a definitive agreement to
sell the stock of Unimast, Inc., its wholly-owned subsidiary, to
Worthington Industries, Inc. for $95.0 million in cash. Under the terms
of the agreement, the buyer will also assume certain debt of Unimast,
which was approximately $20.7 million at June 30, 2002. The transaction
closed on July 31, 2002. In the third quarter, the Company will
recognize a pre-tax gain on the sale of approximately $20.0 million. The
estimated gain on sale is net of closing costs, transaction fees,
employee related payments, and other costs and expenses. Net cash
proceeds from the sale, after escrow of $2.5 million, closing costs,
transaction fees, employee related payments, and other costs and
expenses are estimated to be $85.0 million. The Company will apply these
proceeds in accordance with the terms of the Indenture for the Company's
10 1/2 % Senior Notes, including the payment of certain WHX Group
indebtedness.
As a result of the sale, the Condensed Consolidated Financial
Statements and related Notes for the periods presented herein reflect
Unimast as a discontinued operation.
Operating results of discontinued operations were as follows:
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
----------- ----------- --------- ------------
(in thousands)
Net sales $ 71,890 $ 61,748 $ 127,052 $ 118,165
Operating income 10,849 3,868 14,215 6,100
Interest expense 382 231 790 1,111
Other income (expense) (219) 13 (102) 14
Income taxes 3,756 1,588 4,980 2,269
Net income 6,492 2,062 8,343 2,734
9
Assets and liabilities of discontinued operations were as follows:
June 30, December 31,
2002 2001
---------- ------------
(in thousands)
Current Assets
Cash $ 701 $ 86
Receivables 32,747 22,773
Inventory 30,192 29,556
Other current assets 1,682 814
Property, plant and equipment - net 35,633 36,101
Other long-term assets 17,300 17,863
-------- --------
Total assets 118,255 107,193
-------- --------
Accounts payable and accrued liabilities 28,280 21,293
Long-term debt 20,725 22,100
Other long-term liabilities 2,466 6,618
-------- --------
Total liabilities 51,471 50,011
-------- --------
Net assets of discontinued operations $ 66,784 $ 57,182
======== ========
Note 3 - Business Restructuring Charges
- ---------------------------------------
In April 2002, the Company's wholly-owned subsidiary, Handy & Harman,
announced its decision to exit certain of its precious metal activities. The
affected product lines are manufactured at H&H's Fairfield, CT and East
Providence, RI facilities.
The decision to exit these operating activities resulted in a second
quarter restructuring charge of $10.7 million. These charges include $5.3
million in employee separation expenses, $1.1 million of contractual
obligations, and $4.3 million in costs to close the facilities, including
refining charges for inventory remaining after operations cease. Additional
costs of approximately $1.3 million above the aforementioned separation expenses
will be incurred in the third and fourth quarter in order to maintain the
employee base during the period after operations cease and completion of
shutdown efforts.
The Company expects to fund these costs through the sale of the related
property, plant and equipment. To date, the Company has received $5.0 million in
deposits for such sales.
The following table represents the activity of the restructuring
reserve during the second quarter:
Reserve
Initial Cost Balance
Reserve Incurred June 30, 2002
-------- --------- -------------
(in thousands)
Employee separation $ 5,274 $ 606 $ 4,668
Facility closing and refining costs 4,326 580 3,746
Contractual obligations 1,100 -- 1,100
------- ------- -------
$10,700 $ 1,186 $ 9,514
======= ======= =======
Note 4 - New Accounting Standards
- ---------------------------------
In July 2001, FASB issued SFAS 141 and 142, "Business Combinations"
("SFAS 141") and "Goodwill and Other Intangible Assets" ("SFAS 142"),
respectively. SFAS 141 supercedes Accounting Principles Board Opinion No. 16
("APB 16"), "Business Combinations." The most significant changes made by SFAS
141 are: (1) requiring that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001, (2) establishing specific
10
criteria for the recognition of intangible assets separately from goodwill, and
(3) requiring unallocated negative goodwill to be written off immediately as an
extraordinary gain, instead of being amortized.
SFAS 142 supercedes APB 17, "Intangible Assets". SFAS 142 primarily
addresses the accounting for goodwill and intangible assets subsequent to their
acquisition (i.e., post-acquisition accounting). The provisions of SFAS 142 are
effective for fiscal years beginning after December 15, 2001 and must be adopted
at the beginning of a fiscal year. The most significant changes made by SFAS 142
are 1) goodwill and indefinite lived intangible assets will no longer be
amortized, (2) goodwill be will tested for impairment at least annually at the
reporting unit level, (3) intangible assets deemed to have an indefinite life
will be tested for impairment at least annually, and (4) the amortization period
of intangible assets with finite lives will no longer be limited to forty (40)
years.
The Company has adopted the provisions of SFAS 142 effective January
1, 2002. As a result of the adoption of SFAS 142, the Company will not record
amortization expense for existing goodwill during the year ending December 31,
2002. The Company recorded amortization expense of $3.6 million on this goodwill
for the six months ended June 30, 2001. Any intangible assets acquired or
goodwill arising from transactions after June 30, 2001 will be subject to the
amortization and non-amortization provisions of SFAS 141 and SFAS 142. The
Company has recorded a $44.0 million non-cash goodwill impairment charge related
to the H&H Wire Group in the first quarter of 2002. This charge is shown as a
cumulative effect of an accounting change. The Company recorded this charge
because the present value of current estimated cash flow projections will not be
sufficient to recover this Group's recorded goodwill. The Company is still
committed to this business and expects improved performance from this Group in
future periods as a result of management changes, cost reductions, and improving
economic conditions.
The following table provides comparative earnings per share had the
non-amortization provisions of SFAS 142 been adopted for all periods presented:
(in thousands)
Three Months Ended June 30 Six Months Ended June 30
2002 2001 2002 2001
---------- ------------ ------------------------
Reported income (loss) before discontinued operations and
cumulative effect of an accounting change $ (3,443) $ 611 $ 14,633 $ (15,407)
Goodwill amortization -- 1,700 -- 3,619
--------- --------- ---------- ----------
Adjusted income (loss) before discontinued operations and
cumulative effect of an accounting change $ (3,443) $ 2,311 $ 14,633 $ (11,788)
========= ========= ========== ==========
Basic and Diluted per share of common stock:
Reported income (loss) before discontinued operations and
cumulative effect of an accounting change $ (0.22) $ 0.04 $ 0.92 $ (1.06)
Goodwill amortization -- 0.11 -- 0.25
--------- --------- ---------- ----------
Adjusted income (loss) before discontinued operations and
cumulative effect of an accounting change $ (0.22) $ 0.15 $ 0.92 $ (0.81)
========= ========= ========== ==========
The changes in the carrying amount of goodwill for the six months ended
June 30, 2002 were as follows:
11
(in thousands)
Precious Wire & Engineered
Metals Tubing Materials Total
--------- --------- ----------- ---------
Balance as of January 1, 2002 $ 106,971 $ 104,918 $ 43,977 $ 255,866
Impairment loss -- (44,000) -- (44,000)
--------- --------- --------- ---------
Balance at June 30, 2002 $ 106,971 $ 60,918 $ 43,977 $ 211,866
========= ========= ========= =========
As of June 30, 2002, the Company had $1.6 million of other intangible
assets, which will continue to be amortized over their remaining useful lives
ranging from 3 to 17 years.
In August 2001, the FASB issued Statement No. 143, "Accounting for
Asset Retirement Obligation" ("SFAS 143"). SFAS 143 requires that obligations
associated with the retirement of a tangible long-lived asset be recorded as a
liability when those obligations are incurred, with the amount of the liability
initially measured at fair value. Upon initially recognizing a liability for an
asset-retirement obligation ("ARO"), an entity must capitalize the cost by
recognizing an increase in the carrying amount of the related long-lived asset.
Over time, the liability is accreted to its present value each period, and the
capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, an entity either settles the obligation for its
recorded amount or incurs a gain or loss upon settlement. SFAS 143 will be
effective for the financial statement for fiscal years beginning after June 15,
2002. WHX would be required to adopt the provisions of SFAS 143 in fiscal 2003;
however, SFAS 143 is not expected to have a significant effect on WHX's
financial statements.
In October 2001, the FASB issued Statement No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets". SFAS 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
The Statement also extends the reporting requirements to report separately, as
discontinued operations, components of an entity that have either been disposed
of or classified as held for sale. WHX has adopted the provisions of SFAS 144 as
of the beginning of fiscal 2002.
On June 24, 2002, WHX announced that it had signed a purchase
agreement to sell the stock of Unimast, Inc., its wholly-owned subsidiary for
$95.0 million in cash. As a result of this purchase agreement, Unimast, Inc. has
been accounted for as a discontinued operation in accordance with SFAS 144. (see
Note 2).
In April 2002, the FASB issued Statement No. 145, "Rescission of
FASB Statements No. 4,44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections". This Statement eliminates the automatic classification
of gain or loss on extinguishment of debt as an extraordinary item of income and
requires that such gain or loss be evaluated for extraordinary classification
under the criteria of Accounting Principles Board No. 30, "Reporting Results of
Operations." This Statement also requires sales-leaseback accounting for certain
lease modifications that have economic effects that are similar to
sales-leaseback transactions, and makes various other technical corrections to
existing pronouncements. The Company has elected to adopt the provisions of SFAS
145 in the second quarter of 2002. As a result, prior period results have been
restated to reflect gains on retirement of debt as income from continuing
operations. These gains were previously accounted for as extraordinary items.
The following table presents the effect of the change on earnings for the 2001
period.
12
(thousands - except per-share) Three months Six months
ended ended
June 30 June 30
2001 2001
------------ -----------
Income (loss) from continuing operations
before change in accounting method $ (6,636) $ (17,502)
Change in accounting method for
gain on retirement of debt 12,357 12,357
---------- ----------
Income (loss) from continuing operations - restated 5,721 (5,145)
Discontinued operations 2,062 2,734
---------- ----------
Net income (loss) $ 7,783 $ (2,411)
========== ==========
Income (loss) per share - basic and diluted
Income (loss) from continuing operations
before change in accounting method $ (0.79) $ (1.89)
Change in accounting method for
gain on retirement of debt 0.83 0.83
---------- ----------
Income (loss) from continuing operations - restated 0.04 (1.06)
Discontinued operations 0.14 0.19
---------- ----------
Net income (loss) $ 0.18 $ (0.87)
========== ==========
In the first quarter of 2002, the Company recorded an extraordinary gain
on the retirement of debt of $29.0 million ($18.9 million after tax). This gain
has been reclassified to earnings from continuing operations in the six-month
period ended June 30, 2002.
Note 5 - Earnings Per Share
- ---------------------------
The computation of basic earnings per common share is based upon the
average number of shares of Common Stock outstanding. In the computation of
diluted earnings per common share in the six months ended June 30,2002, the
conversion of preferred stock and redeemable common stock would have had an
anti-dilutive effect. In the computation of diluted earnings per common share in
the three months ended June 30, 2002 and six and three month periods ended June
30, 2001, the conversion of preferred stock and redeemable common stock and
exercise of options would have had an anti-dilutive effect. A reconciliation of
the income and shares used in the computation follows:
Reconciliation of Income and Shares in EPS Calculation
(in thousands except per share amounts)
13
For the Three Months Ended June 30, 2002
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ----------
Net income from continuing operations $ 1,294
Less: Preferred stock dividends 4,737
---------
Basic and Diluted EPS
Loss from continuing operations
available to common stockholders $ (3,443) 16,004 $ (0.22)
=========== ======== =======
For the Six Months Ended June 30, 2002
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ----------
Net income from continuing operations $ 24,145
Less: Preferred stock dividends 9,512
-----------
Basic EPS
Income from continuing operations
available to common stockholders $ 14,633 15,976 $ 0.92
Effect of Dilutive Securities
Convertible Preferred Stock $ 9,512 15,408
Redeemable Common Stock 217
------------ -------
Diluted EPS
Income from continuing operations available
to common stockholders plus assumed conversion $ 24,145 31,601 $ 0.76
============= ======= ======
For the Three Months Ended June 30, 2001
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Net income from continuing operations $ 5,721
Less: Preferred stock dividends 5,110
----------
Basic and Diluted EPS
Income from continuing operations
available to common stockholders $ 611 14,804 $ 0.04
=========== ======== ======
For the Six Months Ended June 30, 2001
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Net loss from continuing operations $ (5,145)
Less: Preferred stock dividends 10,262
--------
Basic and Diluted EPS
Loss from continuing operations
available to common stockholders $ (15,407) 14,723 $ (1.06)
=========== ====== ========
Outstanding stock options for common stock granted to officers,
directors, key employees and others totaled 6.4 million at June 30, 2002.
Preferred Stock
The Company has accrued $34.0 million representing dividends in
arrears at June 30, 2002 for preferred shares Series A and Series B.
14
Redeemable Common Stock
At December 31, 2000 certain present and former employees of the WPC
Group held, through an Employee Stock Ownership Plan ("ESOP"), 244,507 shares of
common stock of WHX. These employees received such shares as part of the 1991
Chapter 11 Plan of Reorganization in exchange for Series C preferred shares of
Wheeling-Pittsburgh Steel Corporation (WPC's predecessor company prior to the
1990 bankruptcy). Beneficial owners of such shares who were active employees on
August 15, 1990 and who have either retired, died or become disabled, or who
reach 30 years of service, may sell their shares to the Company at a price of
$15 or, upon qualified retirement, $20 per share. These contingent obligations
are expected to extend over many years, as participants in the ESOP satisfy the
criteria for selling shares to the Company. In addition, each beneficiary can
direct the ESOP to sell any or all of its common stock into the public markets
at any time; provided, however, that the ESOP will not on any day sell in the
public markets more than 20% of the number of shares of Common Stock traded
during the previous day. Management had estimated the liability for future
redemptions to be approximately $2.6 million at December 31, 2001. As a result
of the Settlement Agreement discussed in Note 1, the liability for redeemable
common shares was assumed by WPC, accordingly participants will sell their
shares to WPC. Approximately 207,000 shares of Common Stock of WHX were held by
the ESOP at June 30, 2002.
Note 6 - Comprehensive Income (Loss)
- ------------------------------------
Comprehensive income (loss) for the three-month and six-month periods
ended June 30, 2002 and 2001 is as follows:
(in thousands) Three Months Ended Six Months Ended
June 30 June 30
2002 2001 2002 2001
-------- --------- --------- ---------
Net income (loss) $ 7,786 $ 7,783 $(11,512) $ (2,411)
Other comprehensive income (loss):
Foreign currency translation adjustments 1,105 (152) 796 (802)
Cumulative effect on equity of SFAS No. 133 adoption - net of tax of $227 -- -- -- (423)
Interest rate swap, net of tax of $123 and ($106) -- 228 -- (196)
-------- -------- -------- --------
Comprehensive income (loss) $ 8,891 $ 7,859 $(10,716) $ (3,832)
======== ======== ======== ========
Accumulated other comprehensive income (loss) balances as of June 30, 2002 and
December 31, 2001 consisted of foreign currency translation adjustments are as
follows:
(in thousands)
June 30, 2002
- -----------------------------------------
Balance on January 1, 2002 $ (2,268)
Period change 796
--------
Balance on June 30, 2002 $ (1,472)
=========
December 31, 2001
- -----------------------------------------
Balance on January 1, 2001 $ (1,501)
Period change (767)
---------
Balance on December 31, 2001 $ (2,268)
=========
15
Note 7 - Short Term Investments
- -------------------------------
Net realized and unrealized gains and losses on trading securities
included in other income (loss) for the six-months ended June 30, 2002 and 2001
were a loss of $0.1 million and income of $8.3 million, respectively.
Net realized and unrealized gains on trading securities included in
other income (loss) for the second quarter of 2002 was income $0.2 million.
There was no gain or loss on trading securities in the second quarter of 2001.
Note 8 - Inventory
- ------------------
Inventories at June 30, 2002 and December 31, 2001 are comprised as
follows:
(in thousands) June 30, December 31,
2002 2001
---------- ------------
Finished products $ 16,015 $ 17,134
In-process 14,391 13,854
Raw materials 22,520 19,251
Fine and fabricated precious metal in various stages of completion 36,144 36,027
-------- --------
89,070 86,266
LIFO reserve (1,784) (987)
-------- --------
$ 87,286 $ 85,279
======== ========
16
Note 9 - Long-Term Debt
- -----------------------
The Company's long-term debt consists of the following debt instruments:
(in thousands) June 30, December 31,
2002 2001
--------- ------------
Senior Notes due 2005, 10 1/2% $123,031 $245,059
Handy & Harman Senior Secured Credit Facility 141,198 168,155
Unimast Revolving Credit Facility 14,325 11,045
Other 8,313 8,195
-------- --------
286,867 432,454
Less portion due within one year -- --
-------- --------
Total long-term debt $286,867 $432,454
======== ========
The Unimast Revolving Credit Facility presented above will be paid
down from the cash proceeds of the sale of Unimast. (see Note 2)
In the six months ended June 30, 2002 the Company purchased and
retired $122.0 million aggregate principal amount of 10 1/2% Senior
Notes in the open market for $77.7 million. After the write off of $4.1
million of deferred debt related costs, the Company recognized a gain of
$40.2 million. In the quarter ended June 30, 2002, the Company purchased
and retired $39.5 million aggregate principal amount of the 10 1/2%
Senior Notes in the open market for $27.0 million. After the write off
of $1.2 million of deferred debt related costs, the Company recognized a
gain of $11.2 million.
In the quarter ended June 30, 2001, the Company purchased and
retired $36.4 million aggregate principal amount of the 10 1/2% Senior
Notes in the open market for $15.9 million. After the write off of $1.5
million of deferred debt related costs, the Company recognized a gain of
$19.0 million.
Note 10- Contingencies
- ----------------------
SEC Enforcement Action
On June 25, 1998, the Securities and Exchange Commission ("SEC")
instituted an administrative proceeding against the Company alleging
that it had violated certain SEC rules in connection with the tender
offer for Dynamics Corporation of America ("DCA") commenced on March 31,
1997 through the Company's wholly-owned subsidiary, SB Acquisition Corp.
("Offer"). The Company previously disclosed that the SEC intended to
institute this proceeding. Specifically, the Order Instituting
Proceedings (the "Order") alleges that, in its initial form, the Offer
violated the "All Holders Rule," Rule 14d-10(a)(1) under the Securities
Exchange Act of 1934, as amended ("Exchange Act"), based on the
Company's inclusion of a "record holder condition" in the Offer. No
shareholder had tendered any shares at the time the condition was
removed. The Order further alleges that the Company violated Rules
14d-4(c) and 14d-6(d) under the Exchange Act upon expiration of the
Offer, by allegedly waiving material conditions to the Offer without
prior notice to shareholders and purchasing the approximately 10.6% of
DCA's outstanding shares tendered pursuant to the offer. The SEC does
not claim that the Offer was intended to or in fact defrauded any
investor.
The Order institutes proceedings to determine whether the SEC should
enter an order requiring the Company (a) to cease and desist from
committing or causing any future violation of the rules alleged to have
been violated and (b) to pay approximately $1.3 million in disgorgement
of profits. The Company filed an answer denying any violations and
seeking dismissal of the proceeding. On October 6, 2000, the initial
decision of the Administrative Law Judge who heard the case dismissed
all charges against the Company, with the finding that the Company had
not violated the law. The Division of Enforcement has filed a petition
for the SEC to review the decision and a brief, but only as to the All
Holders Rule Claim. The Commission, however, has authority to review any
issues on its own accord. WHX has filed its opposition brief.
17
The WHX Group General Litigation
The WHX Group is a party to various litigation matters including
general liability claims covered by insurance. In the opinion of
management, such claims are not expected to have a material adverse
effect on the financial condition or results of operations of the
Company. However, it is possible that the ultimate resolution of such
litigation matters and claims could have a material adverse effect on
quarterly or annual operating results when they are resolved in future
periods.
The WPC Group General Litigation
The WPC Group is a party to various litigation matters including
general liability claims covered by insurance. Claims that are
"pre-petition" claims for Chapter 11 purposes will ultimately be handled
in accordance with the terms of a confirmed Plan of Reorganization in
Chapter 11 cases. In the opinion of management, litigation claims are
not expected to have a material adverse effect on the WPC Group's
results of operations or its ability to reorganize.
Environmental Matters
WPC has been identified as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act
("Superfund") or similar state statutes at several waste sites. The WPC
Group 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 WPC Group is unable to reasonably
estimate the ultimate cost of compliance with Superfund Laws. The WPC
Group believes, based upon information currently available, that its
liability for clean up and remediation costs in connection with the
Buckeye Reclamation Landfill will be between $1.5 and $2.0 million. At
several other sites the WPC Group estimates costs of approximately $0.5
million. The WPC Group is currently funding its share of remediation
costs.
The WPC Group, 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 WPC Group has incurred capital expenditures for
environmental control projects aggregating $3.4 million, $0.8 million
and $0.3 million for 2000, 2001, and the six months ended June 30, 2002,
respectively. WPC anticipates spending approximately $22.6 million in
the aggregate on major environmental compliance projects through the
year 2004, estimated to be spent as follows: $2.7 million in 2002, $11.0
million in 2003, and $8.9 million in 2004. However, due to the
possibility of unanticipated factual or regulatory developments and in
light of limitations imposed by the pending Chapter 11 cases, the amount
and timing of future expenditures may vary substantially from such
estimates.
WPC's non-current accrued environmental liabilities totaled $19.1
million at June 30, 2002. These accruals were initially determined by
WPC, based on all available information. As new information becomes
available, including information provided by third parties, and changing
laws and regulation, the liabilities are reviewed and the accruals
adjusted quarterly. Management believes, based on its best estimate,
that WPC has adequately provided for remediation costs that might be
incurred or penalties that might be imposed under present environmental
laws and regulations.
The Bankruptcy Code may distinguish between environmental
liabilities that represent pre-petition liabilities and those that
represent ongoing post-petition liabilities. Based on information
currently available, including the WPC Group's prior capital
expenditures, anticipated capital expenditures, consent agreements
negotiated with Federal and State agencies and information available to
the WPC Group on pending judicial and administrative proceedings, the
WPC Group does not expect its environmental compliance, including the
incurrence of additional fines and penalties, if any, relating to the
operation of its facilities, to have a material adverse effect on the
results of operations of the WPC Group or on the WPC Group's ability to
reorganize. However, it is possible that litigation and environmental
contingencies could have a material effect on quarterly or annual
operating results when they are resolved in future periods. As further
information comes into the WPC Group's possession, it will continue to
reassess such evaluations.
18
In the event the WPC Group is unable to fund these liabilities,
claims may be made against WHX for payment of such liabilities.
Note 11 - Reported Segments
- ---------------------------
The Company has three reportable segments: (1) Precious
Metal. This segment manufactures and sells precious metal products
and electroplated material, containing silver, gold, and palladium
in combination with base metals for use in a wide variety of
industrial applications; (2) Wire & Tubing. This segment
manufactures and sells metal wire, cable and tubing products and
fabrications primarily from stainless steel, carbon steel and
specialty alloys, for use in a wide variety of industrial
applications; (3) Engineered Materials. This segment manufactures
specialty roofing and construction fasteners and products for gas,
electricity and water distribution using steel and plastic which are
sold to the construction, and natural gas and water distribution
industries. As a result of the sale of Unimast, Inc., the operating
results of PCC have been reclassified to the Engineered Materials
Segment. PCC was previously in the Unimast Segment. PCC is a
manufacturer of electrogalvinized products used in the construction
and appliance industries.
Management reviews operating income to evaluate segment
performance. Operating income for the reportable segments excludes
unallocated general corporate expenses and for the 2001 period,
goodwill amortization. Other income and expense, interest expense,
and income taxes are not presented by segment since they are
excluded from the measure of segment profitability reviewed by the
Company's management.
19
The following table presents information about reported
segments for the three month and six month periods ending June 30, 2002
and 2001:
(in thousands) Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
----------- --------- ---------- ----------
Revenue
Precious Metal $ 42,792 $ 45,758 $ 77,664 $ 92,746
Wire & Tubing 35,528 34,130 70,141 71,375
Engineered Materials 30,839 21,153 54,177 36,574
--------- --------- --------- ---------
Consolidated revenue $ 109,159 $ 101,041 $ 201,982 $ 200,695
========= ========= ========= =========
Segment operating income
Precious Metal $ (7,757) $ 3,055 $ (6,170) $ 4,047
Wire & Tubing 2,297 1,077 4,140 3,016
Engineered Materials 4,506 2,480 6,394 2,691
--------- --------- --------- ---------
(954) 6,612 4,364 9,754
--------- --------- --------- ---------
Unallocated corporate expenses 4,030 7,239 8,734 10,139
Goodwill amortization -- 1,700 -- 3,619
--------- --------- --------- ---------
Operating loss (4,984) (2,327) (4,370) (4,004)
Interest expense 6,537 12,481 15,340 25,109
Gain on early retirement of debt 11,218 19,012 40,235 19,012
Other income (expense) (1,562) 7,217 (324) 3,786
--------- --------- --------- ---------
Income (loss) before taxes, discontinued operations
and cumulative effect of an accounting change (1,865) 11,421 20,201 (6,315)
Income tax expense (benefit) (3,159) 5,700 (3,944) (1,170)
Income from discontinued operations - net of tax 6,492 2,062 8,343 2,734
--------- --------- --------- ---------
Income (loss) before cumulative effect of an
accounting change 7,786 7,783 32,488 (2,411)
Cumulative effect of an accounting change - net of tax -- -- (44,000) --
--------- --------- --------- ---------
Net income (loss) $ 7,786 $ 7,783 $ (11,512) $ (2,411)
========= ========= ========= =========
20
Note 12 - Supplemental WPC Group Income Statement Data
- ------------------------------------------------------
During the six months ended June 30, 2002 and 2001, the WPC Group
incurred a net loss of $51.5 million and $98.7 million, respectively. These
results are not reflected in WHX's June 30, 2002 and 2001 consolidated results
of operations. (see Note 1) The WPC Group's summarized income statement data for
the three and six months ended June 30, 2002 and 2001 is as follows (in
thousands):
Three months ended June 30 Six months ended June 30
2002 2001 2002 2001
--------- --------- --------- ----------
(Unaudited) (Unaudited)
Net sales $ 241,642 $ 207,941 $ 447,723 $ 410,647
Cost of goods sold, excluding depreciation 216,457 219,269 428,115 439,090
Depreciation 19,436 18,670 37,253 36,974
Selling, general and administrative expenses 11,614 13,105 23,454 26,609
Reorganzation expenses 2,343 4,158 5,300 8,194
--------- --------- --------- ---------
Operating loss (8,208) (47,261) (46,399) (100,220)
Interest expense 4,056 4,495 7,861 8,881
Reorganization income (expense) 1,297 11,976 1,297 11,976
Other income (expense) 487 1,025 1,464 884
--------- --------- --------- ---------
Pre-tax loss (10,480) (38,755) (51,499) (96,241)
Tax provision 6 6 12 2,506
--------- --------- --------- ---------
Net loss $ (10,486) $ (38,761) $ (51,511) $ (98,747)
========= ========= ========= ==========
21
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Risk Factors and Cautionary Statements
This Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended ("Securities
Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended ("Exchange Act"), including, in particular, forward-looking
statements under the headings "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Item 8.
Financial Statements and Supplementary Data." These statements appear in
a number of places in this Report and include statements regarding WHX's
intent, belief or current expectations with respect to (i) its financing
plans, (ii) trends affecting its financial condition or results of
operations, (iii) the impact of competition and (iv) the impact and
effect of the Bankruptcy Filing by the WPC Group. The words "expect,"
"anticipate," "intend," "plan," "believe," "seek," "estimate," and
similar expressions are intended to identify such forward-looking
statements; however, this Report also contains other forward-looking
statements in addition to historical information.
Any forward-looking statements made by WHX are not guarantees of
future performance and there are various important factors that could
cause actual results to differ materially from those indicated in the
forward-looking statements. This means that indicated results may not be
realized.
Factors that could cause the actual results of the WHX Group in
future periods to differ materially include, but are not limited to, the
following:
o The WHX Group's businesses operate in highly
competitive markets and are subject to significant competition from
other businesses;
o A decline in the general economic and business
conditions and industry trends and the other factors detailed from time
to time in the Company's filings with the Securities and Exchange
Commission could continue to adversely affect the Company's results of
operations;
o WHX's senior management may be required to expend a
substantial amount of time and effort dealing with issues arising from
the WPC Group's Bankruptcy Filing, which could have a disruptive impact
on management's ability to focus on the operation of its businesses;
o In connection with the Bankruptcy Filing, WHX
purchased $30.5 million of the senior secured term loan portion of the
DIP Credit Agreement provided to the WPC Group. In addition, at June 30,
2002, WHX had balances due from WPSC totaling $8.1 million in the form
of secured advances and liquidity support. There can be no assurance
that the WPC Group will be able to repay these loans and rhs in full.
o Due to the Bankruptcy Filing, the operations of the
WPC Group are subject to the jurisdiction of the Bankruptcy Court and,
as a result, WHX's access to the cash flows of the WPC Group is
restricted. Accordingly, the WHX Group will have to fund its operations
and debt service obligations without access to the cash flow of the WPC
Group;
o The WPC Group has a large net operating loss
carryforward due to prior losses and continues to incur losses. WPC is
part of the Company's consolidated tax group. In accordance with federal
tax laws and regulations, WPC's tax attributes have been utilized by the
Company's consolidated group to reduce its consolidated federal tax
obligations. Depending on the final outcome of the WPC Group's
Bankruptcy Filing, the WPC Group's tax attributes may no longer be
available to the WHX Group;
o Various subsidiaries of the WPC Group participate in
the pension plan sponsored by the Company. While such pension plan is
fully funded at December 31, 2001, there can be no assurance that the
plan will remain fully funded. Various developments could adversely
22
affect the funded status of the plan. Such developments include (but are
not limited to): (a) a material reduction in the value of the pension
assets; (b) a change in actuarial assumptions relating to asset
accumulation and liability discount rates; and (c) events triggering
early retirement obligations such as plant shutdowns and/or large scale
hourly workforce reductions resulting from the Bankruptcy Filing or
otherwise. WHX has also agreed to be contingently liable for a portion
of the OPEB Obligations (as defined below), subject to certain
conditions. Funding obligations, if they arise, may have an adverse
impact on WHX's liquidity. WPC Group's ability to maintain its current
operating configurations and levels of permanent employment are
dependent upon its ability to maintain adequate liquidity. There can be
no assurances that the WPC Group will be able to maintain adequate
resources;
o Various members of the WPC Group have existing and
contingent liabilities relating to environmental matters, including
environmental capital expenditures, costs of remediation and potential
fines and penalties relating to possible violations of national and
state environmental laws. In the event the WPC Group is unable to fund
these liabilities, claims may be made against WHX for payment of such
liabilities;
o WHX and H&H each have a significant amount of
outstanding indebtedness, and their ability to access capital markets in
the future to refinance such indebtedness may be limited; and
o The credit agreement of H&H has certain financial
covenants that limit the amount of cash distributions that can be paid
to WHX.
Bankruptcy Filing of the WPC Group
On November 16, 2000, the WPC Group filed petitions
for relief under Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the Northern District of Ohio. As a result,
subsequent to the commencement of the Bankruptcy Filing, the WPC Group
sought and obtained several orders from the Bankruptcy Court that were
intended to enable the WPC Group to continue business operations as
debtors-in-possession. Since the Petition Date, the WPC Group's
management has been in the process of stabilizing their businesses and
evaluating their operations, while continuing to provide uninterrupted
services to their customers.
On November 17, 2000, the Bankruptcy Court granted the
WPC Group's motion to approve a $290 million Debtor in Possession Credit
Agreement ("DIP Credit Agreement") provided by Citibank, N.A., as
initial issuing bank, Citicorp U.S.A., Inc., as administrative agent,
and the DIP Lenders. Pursuant to the DIP Credit Agreement, Citibank,
N.A. made term loan advances to the WPC Group up to a maximum aggregate
principal amount of $35 million. In addition, the DIP Lenders agreed,
subject to certain conditions, to provide the WPC Group with revolving
loans, swing loans and letter of credit accommodations in an aggregate
amount of up to $255 million. On January 2, 2002, the WPC Group
requested and received a reduction in the revolving loans, swing loans
and letter of credit to a maximum aggregate amount of up to $175
million. In connection with the Bankruptcy Filing, WHX had guaranteed
$30 million of the term loan portion of the DIP Credit Agreement ("Term
Loan") and deposited in a pledged asset account $33 million of funds in
support of such guaranty. Effective as of June 1, 2001, WHX purchased a
participation interest comprising an undivided interest in the Term Loan
in the amount of $30 million, plus interest accrued but not paid on such
amount of the Term Loan through June 1, 2001. Concurrently with such
transaction, WHX's guaranty of $30 million of the Term Loan described
above was terminated and the $33 million of funds previously deposited
in a pledged asset account in support of such guaranty were released to
WHX. WHX paid to Citibank $30.5 million of such deposited funds to
purchase WHX's participation interest in the Term Loan.
WPC borrowings outstanding under the DIP Credit Facility at
June 30, 2002 include $34.7 million Term Loan, $124.1 million in
revolving credit borrowings and approximately $2.8 million of letters of
credit. WPC borrowings outstanding under the DIP Credit Facility for
revolving loans totaled $127.2 million at December 31, 2001. Term loans
under the DIP Credit Facility totaled $34.4 million at December 31,
2001. At June 30, 2002, availability under the DIP Credit Facility was
$6.1 million. The DIP Credit Facility expires on the earlier of November
17, 2002 or the completion of a Plan of Reorganization. WPC intends to
have completed a Plan of Reorganization by November 16, 2002. If a Plan
23
of Reorganization is not completed by then, WPC will pursue an extension
of or a replacement of the current DIP Credit Facility. There can be no
guarantee that this will occur.
Although the WPC Group expects to file a Plan of
Reorganization at an appropriate time in the future, there can be no
assurance at this time that a Plan of Reorganization will be proposed by
the WPC Group, approved or confirmed by the Bankruptcy Court, or that
such plan will be consummated. The WPC Group currently has the exclusive
right to file a Plan of Reorganization. The exclusive filing period has
been extended most recently until August 30, 2002 by the Bankruptcy
Court at the WPC Group's request, and while the WPC Group intends to
request extensions of the exclusivity period if necessary, there can be
no assurance that the Bankruptcy Court will grant future extensions. If
the exclusivity period were to expire or be terminated, other interested
parties, such as creditors of the WPC Group, would have the right to
propose alternative plans of reorganization.
During the period January 1, 2002 through June 30, 2002,
the WPC Group incurred a net loss of $51.5 million, which is not
reflected in the Company's June 30, 2002 consolidated results of
operations.
At January 1, 2000, $136.8 million of the Company's net
equity represented its investment in the WPC Group. In addition to this
investment, WHX, on November 17, 2000, guaranteed $30 million of the WPC
Group's debtor-in-possession term loan. Such guaranty was terminated
effective as of June 1, 2001 concurrently with WHX's purchase of a
participation interest in the Term Loan as discussed above. The
recognition of the WPC Group's net loss of $176.6 million, in the year
2000, has eliminated the investment's carrying value of $136.8 million.
In November of 2000, WHX recorded a liability of $39.8 million
representing the excess of the WPC Group's loss over the carrying amount
of the investment.
A Settlement and Release Agreement ("Settlement
Agreement") by and among WPSC, WPC, WHX, and certain affiliates of WPSC,
WPC and WHX, received approval of the United States Bankruptcy Court for
the Northern District of Ohio on May 24, 2001, was entered into on May
25, 2001, and became effective on May 29, 2001. Pursuant to the terms of
the Settlement Agreement certain outstanding claims among the parties
thereto were resolved, including without limitation, all inter-company
receivables and payables between the WHX Group and the WPC Group.
The Settlement Agreement provided, in part, that the
Settlement Agreement shall be effective upon the occurrence of each of
the following transactions, (i) the payment by WHX to WPC of $17
million; (ii) the exchange of releases between the WPC Group and the WHX
Group; (iii) WHX or its designee would enter into a binding agreement to
purchase certain assets of Pittsburgh-Canfield Corporation ("PCC") for
$15 million, plus the assumption of certain trade payables, subject to
bidding procedures as may be established by the Bankruptcy Court, and
certain other terms and conditions; (iv) the termination of the Tax
Sharing Agreements between WHX and WPC; (v) WHX would deliver an
agreement to the WPC Group whereby it agreed not to charge or allocate
any pension obligations, expenses or charges to the WPC Group with
respect to the WHX Pension Plan, subject to certain limitations as
provided therein, through and including the earlier of the effective
date of a plan or plans of reorganization and December 31, 2002; (vi)
the DIP Credit Agreement shall have been amended as provided in the
Settlement Agreement; (vii) WPC Land Corporation shall execute such
instruments as may be necessary to effect the transfer of title, to
WPSC, of certain properties specified in the Settlement Agreement; and
(viii) the lenders party to the DIP Credit Agreement shall have
consented to the transaction described in the Settlement Agreement. Such
transactions, other than the acquisition of certain assets of
Pittsburgh-Canfield Corporation, all occurred effective May 29, 2001.
The sale of certain assets of Pittsburgh-Canfield Corporation closed on
June 29, 2001. The PCC agreement included a one-year repurchase option
for the seller. The repurchase option expired on June 29, 2002.
As a result of the total cash payments of $32 million to
the WPC Group by WHX, all intercompany receivables and liabilities
(except for commercial trade transactions) including the liability for
redeemable common stock were settled. In addition, WHX recorded the fair
value of the net assets of PCC of $5.4 million.
On October 22, 2001, the Bankruptcy Court entered an
order ("October Order"), approving several transactions intended, among
other things, to provide the WPC Group with additional liquidity. As
part of the October Order, the Bankruptcy Court approved a Memorandum of
24
Understanding by and among the Company, Wheeling-Pittsburgh Corporation
("WPC"), Wheeling-Pittsburgh Steel Corporation ("WPSC") and the United
Steelworkers of America, AFL-CIO-CLC ("USWA"), pursuant to which the
Company agreed to provide to WPSC (1) up to $5 million of secured loans
and $5.0 million of liquidity support (part of which consisted of
secured financing terms) during the period from the Order through
January 31, 2002, (2) if certain conditions are met, an additional $2.0
million of secured loans (for an aggregate of $7.0 million) and the
maintenance of the $5.0 million of liquidity support referred to above,
during the period from February 1, 2002 through March 31, 2002, (the
conditions were not met, accordingly the additional $2.0 million in
secured loans were not made), and (3) a $25 million contribution to a
new WPSC defined benefit pension plan contingent upon a confirmed WPSC
Chapter 11 plan of reorganization. Through December 31, 2001 WHX had
advanced $5.0 million of the secured loans and up to $5.5 million of
secured financing. At June 30, 2002 the outstanding balance of these
secured advances was $5.0 million and $3.1 million, respectively.
The October Order also approved a Supplemental
Agreement among the members of the WPC Group and WHX under which all of
the extensions of credit referred to in the preceding paragraph are
granted super-priority claim status in WPSC's Chapter 11 case and are
secured by a lien on substantially all of the assets of WPSC, junior to
the liens, security interests and super-priority claims of the lenders
to WPSC under the DIP Credit Agreement. The Supplemental Agreement also
provides, among other things, that WHX may sell, transfer or dispose of
the stock of WPC free from the automatic stay imposed under the
Bankruptcy Code, and under specified circumstances requires WPC to
support certain changes to the WHX Pension Plan.
Additionally, the October Order approved the terms of the
Modified Labor Agreement ("MLA") by and among WPC, WPSC and the USWA.
WHX is not a party to the MLA. The MLA modifies the current WPSC
collective bargaining agreement to provide for, among other things,
immediate reductions in wages and the cost of providing medical benefits
to active and retired employees in exchange for improvement in wages and
pension benefits for hourly employees upon a confirmed WPSC Chapter 11
Plan of Reorganization. The MLA is part of a comprehensive support
arrangement that also involves concessions from WPSC salaried employees,
WPSC's vendors and other constituencies in the Chapter 11 proceedings.
In January 2002, WPSC finalized a financial support plan which
included a $5.0 million loan from the State of West Virginia, a $7.0
loan and a $0.2 grant from the State of Ohio, $10 million in advance by
the WHX Group for future steel purchases, all of which was delivered
before June 30, 2002, and additional wage and salary deferrals from WPSC
union and salaried employees. At June 30, 2002, the balance outstanding
with the State of West Virginia was $5.0 million and $7.0 million with
the State of Ohio.
Management of the Company cannot at this time determine
with certainty the ultimate outcome of the Chapter 11 proceedings;
however it is possible that the following outcomes could result:
o The WPC Group could reorganize, and its creditors could
receive a portion of their claims in cash or in stock of WPC or WPSC.
o The WPC Group could be sold in its entirety or segments could
be sold, and the proceeds from such sale(s) would be utilized to satisfy
creditor claims.
o The creditors could assume ownership of the WPC Group or WPSC
and continue to operate such businesses.
In each of the above possible outcomes, the WHX Group would have
little or no future ownership in or involvement with the WPC Group, and
the WHX Group future cash obligations to or on behalf of the WPC Group
would be minimal to none (other than the $25.0 million pension
contribution referred to above). It is also possible that none of the
above outcomes would occur and the WPC Group may shut down a number of
their operations. According to WHX's preliminary evaluation of potential
pension obligations, if a partial shutdown of the WPC Group's operations
were to occur in the immediate future WHX's liability for early
retirement pension benefits could range from approximately $80 million
to $100 million. It is also possible that the WPC Group could cease
operations in their entirety and this liability would then be
25
significantly greater. However, management does not believe this
occurrence is likely. Under current pension law and regulations based on
the WHX's analysis of the current funded status of the pension plan, if
a partial shutdown were to occur after June 30, 2002, the cash funding
obligations related to such partial shutdown would not begin until 2003
and would extend over several years. Such cash funding obligations would
have a material adverse impact on the liquidity, financial position and
capital resources of WHX. WHX's funding obligation and the impact on its
liquidity, financial position and capital resources could be
substantially reduced or eliminated if (1) a partial shutdown, if it
occurs, were to occur at such a time that the fair market value of the
assets of the plan approximates or exceeds the plan's liabilities
(including the early retirement benefits), (2) a shutdown were to occur
gradually over several years or (3) the number of the WPC Group's
operations shut down were less than those assumed in estimating the
above-mentioned amounts.
In connection with past collective bargaining agreements by
and between the WPC Group and the United Steelworkers of America,
AFL-CIO-CLC ("USWA"), the WPC Group is obligated to provide certain
medical insurance, life insurance, disability and surviving spouse
retirement benefits to retired employees and their dependents ("OPEB
Obligations"). WHX is not a signatory to any of these agreements.
However, WHX has separately agreed to be contingently liable for a
portion of the OPEB obligations. WHX's contingent obligation would be
triggered in the event that the WPC Group was to fail to satisfy its
OPEB Obligations. WHX's contingent obligation is limited to 25% of the
Accumulated Post-Retirement Benefit Obligation with respect to the WPC
Group's employees and retirees represented by the USWA. WPSC's total
OPEB Obligation at June 30, 2002 is estimated to be $271.2 million. WHX
has estimated that approximately 85% of employees and retirees entitled
to such OPEB obligations are represented by the USWA.
WHX's contingency for OPEB Obligations exist only so long as (1)
a majority of the directors of WPSC or WPC are affiliated with WHX; (2)
WHX controls the Board of Directors of WPSC or WPC through appointment
or election of a majority of such directors; or (3) WHX, through other
means, exercises a level of control normally associated with (1) or (2)
above.
Overview
WHX is a holding company that has been structured to invest in
and/or acquire a diverse group of businesses on a decentralized basis.
WHX's primary business is H&H, a diversified manufacturing company whose
strategic business segments encompass, precious metal plating and
fabrication, specialty wire and tubing, and engineered materials. WHX
also owns PCC, a manufacturer of electrogalvinized products used in the
construction and appliance industries. On June 24, 2002, the Company
announced the pending sale of its wholly-owned subsidiary, Unimast,
Inc., a leading manufacturer of steel framing and other products for
commercial and residential construction. The sale closed on July 31,
2002. As a result, Unimast, Inc. has been classified as a discontinued
operation. WHX's other business consists of WPC and its subsidiaries
including WPSC, a vertically integrated manufacturer of value-added and
flat rolled steel products which sought bankruptcy protection in
November 2000.
WHX 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. WHX 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
- ---------------------
Comparison of the Second Quarter of 2002 with the Second Quarter of 2001
- ------------------------------------------------------------------------
Net sales for the second quarter of 2002 were $109.2 million
compared to $101.1 million in the second quarter of 2001. Sales
decreased by $3.0 million at the Precious Metal Segment. Sales increased
at the Wire & Tubing Segment by $1.4 million and by $9.7 million at the
Engineered Materials Segment. The sales increase in the Engineered
Materials Segment is related to the acquisition of Pittsburgh-Canfield
Corporation ("PCC") by WHX from the WPC Group on June 29, 2001.
26
Operating loss for the second quarter of 2002 was $5.0
million compared to a $2.3 million operating loss for the second quarter
of 2001. Operating loss at the segment level was $1.0 million compared
to operating income of $6.6 million in 2001. The operating results in
the 2002 quarter include a $10.7 million restructuring charge related to
the Company's Precious Metal Segment.
Unallocated corporate expenses decreased from $7.2
million to $4.0 million. This decrease is primarily related to
non-recurring costs and expenses in 2001.
Interest expense for the second quarter of 2002
decreased $6.0 million to $6.5 million from $12.5 million in the second
quarter of 2001. This decrease was due to lower borrowings, primarily
from the retirement of $122.0 million aggregate principal amount of 10
1/2% Senior Notes in the first six months of 2002, lower interest rates
and reduced amortization of deferred financing and consent fees.
Other expense was $1.6 million in the second quarter of 2002
compared to income of $7.2 million in 2001. The expense for 2002 was
primarily related to an unrealized loss on an interest rate swap of $1.7
million, losses on disposal of property, plant and equipment of $0.6
million, partially offset by net investment income of $1.4 million. The
income in 2001 was primarily related to a favorable settlement of an H&H
lawsuit of $3.2 million, income from WHX Entertainment of $4.0 million,
net investment income of $0.5 million, and other expenses of $0.5
million. In December 2001, WHX Entertainment sold its 50% interest in
Wheeling-Downs Racing Association, Inc.
In the quarter ended June 30, 2002 the Company purchased and
retired $39.5 million aggregate principal amount of 10 1/2% Senior Notes
in the open market for $27.0 million. After the write off of $1.3
million of deferred debt related costs, the Company recognized a gain of
$11.2 million.
The Company has adopted the provisions of SFAS 142 effective
January 1, 2002. As a result of the adoption of SFAS 142, the Company
will not record amortization expense for existing goodwill during the
year ending December 31, 2002. The Company recorded amortization expense
of $1.7 million on this goodwill for the three months ended June 30,
2001. Any intangible assets acquired or goodwill arising from
transactions after June 30, 2001 will be subject to the amortization and
non-amortization provisions of SFAS 141 and SFAS 142.
The 2002 second quarter tax provision assumes no liability for
federal taxes. This assumption is based on the utilization of current
year losses generated by WPC, a non-consolidated subsidiary. The 2001
second quarter tax provision is based on a federal benefit of 35%,
offset by permanent differences and state and foreign tax expense.
The comments that follow compare revenues and operating income
from continuing operations by segment for the second quarter 2002 and
2001:
Precious Metal
- --------------
Sales for the Precious Metal Segment decreased $3.0 million from
$45.8 million in 2001 to $42.8 million in 2002. Approximately one-half
of this decrease was due to a fire at Sumco Inc. which occurred on
January 20, 2002. The balance of the decrease was caused by reduced
volume due to the slowdown in the economy. Operating income decreased
$10.8 million from $3.0 million in 2001 to an operating loss of $7.8
million in 2002. Included in the 2002 second quarter results is a
restructuring charge of $10.7 million, as further described below.
Excluding this charge, operating income decreased $0.1 million due to
reduced revenue resulting from the fire damage at Sumco Inc. This was
partially offset by increased customer orders after the announcement of
the exit of certain precious metal activities by the Company.
Concerning the fire at Sumco Inc., the Company believes it has
adequate insurance for both the physical property damage and business
interruption. Partial resumption of operations occurred on February 11,
2002 and repairs to the building, its infrastructure and replacement of
machinery and equipment will be completed in the second half of 2002.
27
In April 2002, the Company's wholly-owned subsidiary, Handy &
Harman, announced its decision to exit certain of its precious metal
activities. The affected product lines are manufactured at H&H's
Fairfield, CT and East Providence, RI facilities.
The decision to exit these operating activities resulted in a
second quarter restructuring charge of $10.7 million. These charges
include $5.3 million in employee separation expenses, $1.1 million of
contractual obligations, and $4.3 million in costs to close the
facilities, including refining charges for inventory remaining after
operations cease. Additional costs of approximately $1.3 million above
the aforementioned separation expenses will be incurred in the third and
fourth quarter in order to maintain the employee base during the period
after operations cease and completion of shutdown efforts.
The Company expects to fund these costs through the sale of the
related property, plant and equipment. To date, the Company has received
$5.0 million in deposits for such sales.
Wire & Tubing
- -------------
Sales for the Wire & Tubing Segment increased $1.4 million from
$34.1 million in 2001 to $35.5 million in 2002 due to increased sales at
domestic and foreign units that serve the refrigeration industry,
partially offset by continued weakness in the semiconductor fabrication
and telecommunications markets. Operating income increased by $1.2
million from $1.1 million in 2001 to $2.3 million in 2002. Excluding an
inventory reserve of $0.5 million which was recorded in the 2001 second
quarter relating to the Wire Group, operating income increased $0.7
million, primarily due to increased revenue in the refrigeration market.
Engineered Materials
- --------------------
Sales for the Engineered Materials Segment increased $9.7
million from $21.1 million in 2001 to $30.8 million in 2002. The entire
increase was result of the purchase of PCC on June 29, 2001. Operating
income increased $2.0 million from $2.5 million in 2001 to $4.5 million
in 2002, $2.1 million of which resulted from PCC's operations.
Comparison of the First Six Months of 2002 with the First Six Months of 2001
- ----------------------------------------------------------------------------
Net sales for the first six months of 2002 were $202.0 million
compared to $200.7 million in the first six months of 2001. Sales
decreased by $15.1 million at the Precious Metal Segment and by $1.2
million at the Wire & Tubing Segment. Sales increased by $17.6 million
at the Engineered Materials Segment. The sales increase in the
Engineered Materials Segment is related to the acquisition of PCC by WHX
from the WPC Group on June 29, 2001.
Operating loss for the first six months of 2002 was $4.4 million
compared to a $4.0 million operating loss for the first six months of
2001. Operating income at the segment level was $4.4 million compared to
operating income of $9.8 million in 2001. The operating results in the
2002 period include an $10.7 million restructuring charge related to the
Company's Precious Metal Segment.
Unallocated corporate expenses decreased from $10.1 million to
$8.7 million. This decrease is primarily related to non-recurring costs
and expenses in 2001, partially offset by increased pension expense of
$1.1 million in the 2002 period.
Interest expense for the first six months of 2002 decreased $9.8
million to $15.3 million from $25.1 million in the first six months of
2001. This decrease was due to lower borrowings, primarily from the
retirement of $122.0 million of 10 1/2% Senior Notes in the first six
months of 2002, lower interest rates and reduced amortization of
deferred financing and consent fees.
Other expense was $0.3 million in the first six months of 2002
compared to income of $3.8 million in 2001. The expense for 2002 was
primarily related to an unrealized loss on an interest rate swap of $1.7
million, losses on disposal of property, plant and equipment of $0.6
million, partially offset by net investment income of $2.5 million. The
income in 2001 was primarily related to a favorable settlement of an H&H
lawsuit of $3.2 million, income from WHX Entertainment of $7.2 million,
28
net investment loss of $6.3 million, and other expenses of $0.3 million.
In December 2001, WHX Entertainment sold its 50% interest in
Wheeling-Downs Racing Association, Inc.
In the six months ended June 30, 2002 the Company purchased and
retired $122.0 million aggregate principal amount of 10 1/2% Senior
Notes in the open market for $77.0 million. After the write off of $4.1
million of deferred debt related costs, the Company recognized a gain of
$40.2 million.
The Company has adopted the provisions of SFAS 142 effective
January 1, 2002. As a result of the adoption of SFAS 142, the Company
will not record amortization expense for existing goodwill during the
year ending December 31, 2002. The Company recorded amortization expense
of $3.6 million on this goodwill for the six months ended June 30, 2001.
Any intangible assets acquired or goodwill arising from transactions
after June 30, 2001 will be subject to the amortization and
non-amortization provisions of SFAS 141 and SFAS 142. The Company has
recorded a $44.0 million non-cash goodwill impairment charge related to
the H&H Wire Group in the first quarter of 2002. This charge is shown as
a cumulative effect of an accounting change. The Company recorded this
charge because the present value of current estimated cash flow
projections will not be sufficient to recover this Group's recorded
goodwill. The Company is still committed to this business and expects
improved performance from this Group in future periods as a result of
management changes, cost reductions, and improving economic conditions.
The 2002 six month tax provision assumes no liability for
federal taxes. This assumption is based on the utilization of current
year losses generated by WPC, a non-consolidated subsidiary. The 2001
period tax provision is based on a federal benefit of 35%, offset by
permanent differences and state and foreign tax expense.
The comments that follow compare revenues and operating income
from continuing operations by segment for the six month periods 2002 and
2001:
Precious Metal
- --------------
Sales for the Precious Metal Segment decreased $15.1 million
from $92.8 million in 2001 to $77.7 million in 2002. Approximately
one-half of this decrease was due to a fire at Sumco Inc. which occurred
on January 20, 2002. The balance of the decrease was caused by reduced
volume due to the slowdown in the economy. Operating income decreased
$10.2 million from $4.0 million in 2001 to an operating loss of $6.2
million in 2002. Included in the 2002 period is a second quarter
restructuring charge of $10.7 million, as previously described, and
included in the 2001 period was a $3.3 million precious metals lower of
cost or market adjustment which was partially offset by favorable
precious metal gains of $0.9 million. Excluding the 2002 restructuring
charge and the 2001 precious metal reserve and precious metal gains,
operating income decreased by $1.9 million, primarily due to reduced
revenue resulting from the severe fire damage at Sumco Inc., as
previously discussed.
Wire & Tubing
- -------------
Sales for the Wire & Tubing Segment decreased $1.2 million from
$71.4 million in 2001 to $70.2 million in 2002 primarily due to weakness
in the semiconductor fabrication and telecommunications markets.
Partially offsetting this reduction was increased sales at domestic and
foreign units that serve the refrigeration industry, and increased sales
of tubing to the medical industry. Operating income increased by $1.1
million from $3.0 million in 2001 to $4.1 million in 2002. Excluding an
inventory reserve of $0.8 million, which was recorded in the first half
of 2001 relating to the Wire Group, operating income increased $0.3
million.
In the first quarter of 2002, the Company recorded a $44.0
million non-cash goodwill impairment charge related to the Wire Group.
This charge is shown as a cumulative effect of an accounting change. The
Company recorded this charge because the present value of current
estimated cash flow projections will not be sufficient to recover this
Group's recorded goodwill. The Company is still committed to this
business and expects improved performance from this Group in future
periods as a result of management changes, cost reductions, and
improving economic conditions.
29
Engineered Materials
- --------------------
Sales for the Engineered Materials Segment increased $17.6
million from $36.6 in 2001 to $54.2 million in 2002 primarily due to the
purchase of PCC on June 29, 2001 which contributed $16.6 million in
sales for the period. Operating income increased $3.7 million from $2.7
million in 2001 to $6.4 million in 2002, $3.1 million of which resulted
from PCC's operations.
Financial Position
- ------------------
Net cash flow provided by operating activities from continuing
operations for the six months ended June 30, 2002 totaled $132.0
million. Income from continuing operations adjusted for non-cash income
and expense items provided $7.1 million. Working capital accounts
provided $124.8 million of funds, as follows: Short-term trading
investments and related short-term borrowings are reported as cash flow
from operating activities and provided a net $126.7 million of funds in
the first six months of 2002. Accounts receivable used $20.7 million,
trade payables provided $22.3 million, and net other current items used
$1.5 million. Inventories, valued principally by the LIFO method for
financial reporting purposes, totaled $87.3 million at June 30, 2002,
and used $2.0 million.
Other non-working capital items, included in operating
activities used $0.4 million.
In the first six months of 2002, $3.4 million was spent on
capital improvements.
The Company's major subsidiary, H&H, maintains a separate and
distinct credit facility with various financial institutions.
Borrowings outstanding against the H&H Senior Secured Credit
Facility at June 30, 2002 totaled $142.0 million. Letters of credit
outstanding under the H&H Revolving Credit Facility were $11.9 million
at June 30, 2002.
H&H has entered into an interest rate swap agreement for certain
of its variable-rate debt. The swap agreement covers a notional amount
of $100.0 million and converts $100.0 million of its variable rate debt
to a fixed rate of 4.79%. The effective date of the swap is January 1,
2003 with a termination date of July 1, 2004.
In the six months ended June 30, 2002 the Company purchased and
retired $122.0 million aggregate principal amount of 10 1/2% Senior
Notes in the open market for $77.7 million. After the write off of $4.1
million of deferred debt related costs, the Company recognized a gain of
$40.2 million.
Other long-term debt increased $0.1 million from December 31,
2001 through June 30, 2002 due to working capital requirements.
Liquidity
- ---------
At June 30, 2002 the WHX Group had cash and cash equivalents of
$36.3 million and short-term investments of $7.2 million.
In December 2001, WHX Entertainment sold its 50% interest in
Wheeling-Downs Racing Association, Inc. for $105 million in cash,
resulting in an $88.5 million pre-tax gain. WHX received a management
fee from Wheeling-Downs Racing Association, Inc. of $6.6 million during
the six months ended June 30, 2001.
In the twelve months ended December 31, 2001, the Company
purchased and retired $36.4 million aggregate principal amount of 10
1/2% Senior Notes in the open market for $15.9 million. During the
period January 1, 2002 through June 30, 2002, WHX used $77.7 million of
the proceeds from the sale of Wheeling Downs Racing Association, Inc. to
purchase $122.0 million aggregate principal amount of Senior Notes in
the open market. The cumulative result of these purchases amounted to a
reduction of principal of $158.4 million and annual reduction in future
cash interest expense of $16.6 million.
On June 24, 2002, the Company signed a definitive agreement to
sell the stock of Unimast, Inc., its wholly-owned subsidiary, to
Worthington Industries, Inc. for $95.0 million in cash. Under the terms
of the agreement, the buyer will also assume certain debt of Unimast,
30
which was approximately $20.7 million at June 30, 2002. The transaction
closed on July 31, 2002. In the third quarter, the Company will
recognize a pre-tax gain on the sale of approximately $20.0 million. The
estimated gain on sale is net of closing costs, transaction fees,
employee related payments, and other costs and expenses. Net cash
proceeds from the sale, after escrow of $2.5 million, closing costs,
transaction fees, employee related payments, and other costs and
expenses are estimated to be $85.0 million. The Company will apply these
proceeds in accordance with the terms of the Indenture for the Company's
10 1/2 % Senior Notes, including the payment of certain WHX Group
indebtedness.
In 2001, in connection with the term loan portion of the WPC
Group's Debtor-In-Possession financing, WHX purchased a participation
interest comprising an undivided interest in the term loan in the amount
of $30.5 million. In addition, at June 30, 2002, WHX had balances due
from WPSC totaling $8.1 million in the form of secured advances and
liquidity support. There can be no assurances that the WPC Group will be
able to repay these loans and advances in full.
The WHX Group has a significant amount of outstanding
indebtedness, and their ability to access capital markets in the future
may be limited. However, management believes that cash on hand and
future operating cash flow will enable the WHX Group to meet its cash
needs for the foreseeable future. The credit agreement of H&H has
certain financial covenants that limit the amount of cash distributions
that can be paid to WHX. The H&H credit agreement allows for the payment
of management fees, income taxes pursuant to a tax sharing agreement,
precious metal lease repayments and related interest, and certain other
expenses. In addition, dividends may be paid under certain conditions.
At December 31, 2001, the net assets of H&H amounted to $270.3 million,
of which approximately $0.6 million was not restricted as to the payment
of dividends to WHX.
Short-term liquidity is dependent, in large part, on cash on
hand, investments, precious metal values, and general economic
conditions and their effect on market demand. Long-term liquidity is
dependent upon the WHX Group's ability to sustain profitable operations
and control costs during periods of low demand or pricing in order to
sustain positive cash flow. The WHX Group satisfies its working capital
requirements through cash on hand, investments, borrowing availability
under the H&H Revolving Credit Facility and funds generated from
operations. The WHX Group believes that such sources will provide the
WHX Group for the next twelve months with the funds required to satisfy
working capital and capital expenditure requirements. External factors,
such as world economic conditions, could materially affect the WHX
Group's results of operations and financial condition.
At June 30, 2002, there were 2.6 million shares of Series A
Convertible Preferred Stock and 2.9 million shares of Series B
Convertible Preferred Stock outstanding. Dividends on these shares are
cumulative and are payable quarterly in arrears, in an equal amount to
$3.25 per annum per share of Series A and $3.75 per annum per share of
Series B. Pursuant to the terms of the Supplemental Indenture to the
Company's 10 1/2 % Senior Notes, the Company is prohibited from paying
dividends on this Preferred Stock until after October 31, 2002, at the
earliest and thereafter only in the event that the Company satisfies
certain conditions set forth in the Indenture. Presently, management
believes that it is not likely that the Company will be able to pay
these dividends in the foreseeable future. At June 30, 2002, the Company
had accrued $34.0 million for dividends in arrears.
New Accounting Standards
- ------------------------
In July 2001, FASB issued SFAS 141 and 142, "Business
Combinations" ("SFAS 141") and "Goodwill and Other Intangible Assets"
("SFAS 142"), respectively. SFAS 141 supercedes Accounting Principles
Board Opinion No. 16 ("APB 16"), "Business Combinations." The most
significant changes made by SFAS 141 are: (1) requiring that the
purchase method of accounting be used for all business combinations
initiated after June 30, 2001, (2) establishing specific criteria for
the recognition of intangible assets separately from goodwill, and (3)
requiring unallocated negative goodwill to be written off immediately as
an extraordinary gain, instead of being amortized.
SFAS 142 supercedes APB 17, "Intangible Assets". SFAS 142
primarily addresses the accounting for goodwill and intangible assets
subsequent to their acquisition (i.e., post-acquisition accounting). The
provisions of SFAS 142 is effective for fiscal years beginning after
December 15, 2001 and must be adopted at the beginning of a fiscal year.
The most significant changes made by SFAS 142 are 1) goodwill and
indefinite lived intangible assets will no longer be amortized, (2)
goodwill be will tested for impairment at least annually at the
reporting unit level, (3) intangible assets deemed to have an indefinite
31
life will be tested for impairment at least annually, and (4) the
amortization period of intangible assets with finite lives will no
longer be limited to forty (40) years.
The Company has adopted the provisions of SFAS 142 effective
January 1, 2002. As a result of the adoption of SFAS 142, the Company
will not record amortization expense for existing goodwill during the
year ending December 31, 2002. The Company recorded amortization expense
of $3.6 million on this goodwill for the six months ended June 30, 2001.
Any intangible assets acquired or goodwill arising from transactions
after June 30, 2001 will be subject to the amortization and
non-amortization provisions of SFAS 141 and SFAS 142. The Company has
recorded a $44.0 million non-cash goodwill impairment charge related to
the H&H Wire Group in the first quarter of 2002. This charge is shown as
a cumulative effect of an accounting change. The Company recorded this
charge because the present value of current estimated cash flow
projections will not be sufficient to recover this Group's recorded
goodwill. The Company is still committed to this business and expects
improved performance from this Group in future periods as a result of
management changes, cost reductions, and improving economic conditions.
In August 2001, the FASB issued Statement No. 143, "Accounting
for Asset Retirement Obligation" ("SFAS 143"). SFAS 143 requires that
obligation associated with the retirement of a tangible long-lived asset
be recorded as a liability when those obligations are incurred, with the
amount of the liability initially measured at fair value. Upon initially
recognizing a liability for an asset-retirement obligation ("ARO"), an
entity must capitalize the cost by recognizing an increase in the
carrying amount of the related long-lived asset. Over time, the
liability is accreted to its present value each period, and the
capitalized cost is depreciated over the useful life of the related
asset. Upon settlement of the liability, an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon
settlement. SFAS 143 will be effective for the financial statement for
fiscal years beginning after June 15, 2002. WHX would be required to
adopt the provisions of SFAS 143 in fiscal 2003; however, SFAS 143 is
not expected to have a significant effect on WHX's financial statements.
In October 2001, the FASB issued Statement No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS
144 addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. The Statement also extends the reporting
requirements to report separately, as discontinued operations,
components of an entity that have either been disposed of or classified
as held for sale. WHX has adopted the provisions of SFAS 144 as of the
beginning of fiscal 2002. In June 2002, WHX announced that it had signed
a purchase agreement to sell the stock of Unimast, Inc., its
wholly-owned subsidiary for $95.0 million in cash. As a result of this
purchase agreement, Unimast, Inc. has been accounted for as a
discontinued operation in accordance with SFAS 144. (see Note 2).
In April 2002, the FASB issued Statement No. 145, "Rescission of
FASB Statements No. 4,44, and 64, Amendment of FASB Statement No. 13,
and Technical Corrections" ("SFAS 145").This Statement eliminates the
automatic classification of gain or loss on extinguishment of debt as an
extraordinary item of income and requires that such gain or loss be
evaluated for extraordinary classification under the criteria of
Accounting Principles Board No. 30, "Reporting Results of Operations."
This Statement also requires sales-leaseback accounting for certain
lease modifications that have economic effects that are similar to
sales-leaseback transactions, and makes various other technical
corrections to existing pronouncements. The Company has elected to adopt
the provisions of SFAS 145 in the second quarter of 2002. As a result,
prior period results have been restated to reflect gains on retirement
of debt as income from continuing operations. These gains were
previously accounted for as extraordinary items. The following table
presents the effect of the change on earnings for the 2001 period.
32
(thousands - except per-share) Three months Six months
ended ended
June 30 June 30
2001 2001
------------- ------------
Income (loss) from continuing operations
before change in accounting method $ (6,636) $ (17,502)
Change in accounting method for
gain on retirement of debt 12,357 12,357
---------- ----------
Income (loss) from continuing operations - restated 5,721 (5,145)
Discontinued operations 2,062 2,734
---------- ----------
Net income (loss) $ 7,783 $ (2,411)
========== ==========
Income (loss) per share - basic and diluted
Income (loss) from continuing operations
before change in accounting method $ (0.79) $ (1.89)
Change in accounting method for
gain on retirement of debt 0.83 0.83
---------- ----------
Income (loss) from continuing operations - restated 0.04 (1.06)
Discontinued operations 0.14 0.19
---------- ----------
Net income (loss) $ 0.18 $ (0.87)
========== ==========
In the first quarter of 2002, the Company recorded an extraordinary
gain on the retirement of debt of $29.0 million ($18.9 million after
tax). This gain has been reclassed to earnings from continuing
operations in the six-month period ended June 30, 2002.
*******
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, general economic conditions
and, the ability of the Company to develop markets and sell its products
and the effects of competition and pricing. 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.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no changes in financial market risk as originally
discussed in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001.
PART II OTHER INFORMATION
-----------------
ITEM 1. Legal Proceedings
On November 16, 2000, the WPC Group filed petitions for relief
under Chapter 11 of the Bankruptcy Code. The Bankruptcy Filing was made
in the United States Bankruptcy Court for the Northern District of Ohio.
As a result, subsequent to the commencement of the Bankruptcy Filing,
the WPC Group sought and obtained several orders from the Bankruptcy
Court that were intended to enable the WPC Group to continue business
33
operations as debtors-in-possession. Since the Petition Date, the WPC
Group's management has been in the process of stabilizing their
businesses and evaluating their operations, while continuing to provide
uninterrupted services to its customers. Reference is made to Note 1 of
the Consolidated Financial Statements included herewith and to the
Company's Annual Report Form 10-K for a more detailed description of the
matters referred to in this paragraph.
Reference is hereby made to Item 3. Legal Proceedings of
the Company's Annual Report on Form 10-K for the year ended December 31,
2001 for information regarding additional matters.
ITEM 3. Defaults Upon Senior Securities
At June 30, 2002, there were 2.6 million shares of
Series A Convertible Preferred Stock and 2.9 million shares of Series B
Convertible Preferred Stock outstanding. Dividends on these shares are
cumulative and are payable quarterly in arrears, in an equal amount to
$3.25 per annum per share of Series A and $3.75 per annum per share of
Series B. Pursuant to the terms of the Supplemental Indenture to the
Company's 10 1/2 % Senior Notes, the Company is prohibited from paying
dividends on this Preferred Stock until after October 31, 2002, at the
earliest and thereafter only in the event that the Company satisfies
certain conditions set forth in the Indenture. Presently, management
believes that it is not likely that the Company will be able to pay
these dividends in the foreseeable future. At June 30, 2002, the Company
had accrued $34.0 million for dividends in arrears.
ITEM 4. Submission of Matters to a Vote of Security Holders
2002 Annual Meeting of Stockholders
- -----------------------------------
(a) The 2002 Annual Meeting of Stockholders was held on June 18, 2002.
(b) All of the Company's nominees as Class III directors, as set forth
below, were elected. There was no solicitation in opposition to the
Company's nominees. The other members of the Company's Board of
Directors as of the date of the Company's annual meeting of
stockholders were William Goldsmith, Robert D. LeBlanc, Marvin L.
Olshan and Raymond S. Troubh
(c) Matters voted on at the meeting and the number of votes cast:
Votes For Withheld
--------- --------
(1) Election of Directors
Neil D. Arnold 12,241,485 1,494,054
Robert A. Davidow 12,239,488 1,496,051
Ronald LaBow 12,202,765 1,532,774
Votes For Votes Against Abstentions Broker Non-
Votes
--------- ------------- ----------- -----------
(2) Approval of an
amendment to the
Certificate of
Incorporation to
effect a reverse
stock split 12,697,927 954,001 83,611 0
(3) Ratification of
Pricewaterhouse
Coopers LLP as the
Company's Independent
Public Accountants for
the fiscal year ending
December 31, 2002 12,838,772 848,908 47,859 0
34
2002 Special Meeting of Preferred Stockholders
- ----------------------------------------------
The Company held a Special Meeting of Preferred Stockholders on June
27, 2002, where holders of the Company's Series A Convertible Preferred
Stock and Series B Convertible Preferred Stock had the right to elect up
to two directors to the Board of Directors of the Company. No quorum was
present at such Special Meeting, and accordingly no action was taken at
such meeting.
ITEM 5. Other Matters
In March 2002, the Company was notified by the New York Stock
Exchange ("NYSE") that its share price had fallen below the NYSE's
continued listing criteria requiring an average closing price of not
less than $1.00 over a consecutive 30 trading-day period. Following such
notification by the NYSE, the Company has up to six months by which time
its share price and average share price over a consecutive 30
trading-day period may not be less than $1.00. In the event these
requirements are not met by the end of the six-month period, the Company
would be subject to NYSE trading suspension and delisting and, in such
event, management believes that an alternative trading venue would be
available. Management is currently evaluating alternatives to bring its
average share price back into compliance with NYSE requirements,
including a reverse stock split which was approved by a vote of
stockholders at the 2002 Annual Meeting of Stockholders held on June 18,
2002.
Although management is actively seeking to remedy its share
price to comply with the NYSE listing criteria, the Company may not be
able to resolve the problem in a timely fashion or at all. The Company's
failure to meet the NYSE's continued listing standards in a timely
fashion or at all could cause its common stock to be delisted. Even if
the Company was able to find an alternative trading market for these
shares, delisting from the NYSE could adversely effect the liquidity of
the Company's common stock, negatively impact the Company's ability to
raise future capital through a sale of the Company's common stock and
make it more difficult for investors to obtain quotations or trade the
Company's common stock.
ITEM 6. Exhibits And Reports On Form 8-K
(a) Exhibit 99.1 Certification of Principal Executive Officer
Exhibit 99.2 Certificate of Principal Financial Officer
(b) Form 8-K filed on April 26, 2002
Form 8-K filed on May 1, 2002
Form 8-K filed on June 25, 2002
35
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.
WHX CORPORATION
/s/ Robert K. Hynes
----------------------------
Robert K. Hynes
Vice President-Finance
(Principal Accounting Officer)
August 8, 2002
36