-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ri4B9NMwuLsFO4Zs7FZYokmIBcmetq14GCTpEqnJcBPWBQE8o8MMx/Z8yUXrl/Fh vOpP/ryoJ5fbBOee15f4Hg== 0000950149-94-000091.txt : 19940503 0000950149-94-000091.hdr.sgml : 19940503 ACCESSION NUMBER: 0000950149-94-000091 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940502 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENEVA STEEL CENTRAL INDEX KEY: 0000860192 STANDARD INDUSTRIAL CLASSIFICATION: 3310 IRS NUMBER: 930942346 STATE OF INCORPORATION: UT FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10459 FILM NUMBER: 94525518 BUSINESS ADDRESS: STREET 1: 10 S GENEVA RD CITY: VINEYARD STATE: UT ZIP: 84058 BUSINESS PHONE: 8012279000 MAIL ADDRESS: STREET 1: PO BOX 2500 CITY: PROVO STATE: UT ZIP: 84603 10-Q 1 FORM 10Q FOR QUARTERLY PERIOD ENDING 3/31/94 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1994 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ______________ Commission File #1-10459 GENEVA STEEL COMPANY (Exact name of registrant as specified in its charter) UTAH 93-0942346 (State of Incorporation) (I.R.S. Employer Identification No.) 10 South Geneva Road Vineyard, Utah (Address of principal executive offices) 84058 (Zip Code) Registrant's telephone number, including area code: (801) 227-9000 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 _____ _____ Indicate the number of shares outstanding of each class of the issuer's common stock, as of the latest practicable date. 13,007,599 and 21,339,688 shares of Class A and Class B common stock, respectively, outstanding as of April 25, 1994. 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GENEVA STEEL COMPANY CONDENSED BALANCE SHEETS (Dollars in thousands) ASSETS
March 31, September 30, 1994 1993 --------- ------------ (Unaudited) Current assets: Cash and cash equivalents $ 55,013 $ 64,267 Accounts receivable, net 38,767 46,257 Inventories 68,417 63,230 Prepaid expenses and other 7,611 1,426 Deferred income taxes 6,555 -- -------- --------- Total current assets 176,363 175,180 -------- -------- Property, plant and equipment: Land 1,931 1,931 Buildings 3,725 3,725 Machinery and equipment 468,006 369,490 Mineral property and development costs 8,425 8,425 -------- -------- 482,087 383,571 Less accumulated depreciation (80,240) (68,981) -------- -------- Net property, plant and equipment 401,847 314,590 -------- -------- Other assets 11,441 8,614 -------- -------- $589,651 $498,384 ======== ========
The accompanying notes to condensed financial statements are an integral part of these condensed balance sheets. Page 2 of 18 3 GENEVA STEEL COMPANY CONDENSED BALANCE SHEETS (Continued) (Dollars in thousands) LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, September 30, 1994 1993 --------- --------- (Unaudited) Current liabilities: Accounts payable $ 52,528 $ 52,982 Accrued payroll and related taxes 9,819 8,578 Accrued liabilities 13,463 11,810 Production prepayments 10,000 10,000 Accrued interest payable 3,668 1,533 Accrued pension and profit sharing costs 1,263 1,110 -------- -------- Total current liabilities 90,741 86,013 -------- -------- Long-term debt 325,000 224,991 -------- -------- Deferred income taxes 13,712 15,619 -------- -------- Redeemable preferred stock 39,398 35,986 -------- -------- Stockholders' equity: Preferred stock -- -- Common stock: Class A 86,765 86,094 Class B 11,266 11,929 Warrants to purchase Class A common stock 5,360 5,360 Retained earnings 36,902 52,542 Class A common stock held in treasury, at cost (19,493) (20,150) -------- -------- Total stockholders' equity 120,800 135,775 -------- -------- $589,651 $498,384 ======== ========
The accompanying notes to condensed financial statements are an integral part of these condensed balance sheets. Page 3 of 18 4 GENEVA STEEL COMPANY CONDENSED STATEMENTS OF INCOME THREE MONTHS ENDED MARCH 31, 1994 and 1993 (Amounts in thousands, except per share data) (Unaudited)
1994 1993 -------- -------- Net sales $121,115 $115,542 Cost of sales 119,216 113,840 -------- -------- Gross margin 1,899 1,702 Selling, general and administrative expenses 5,644 4,914 -------- -------- Loss from operations (3,745) (3,212) -------- -------- Other income (expense): Interest and other income 707 198 Interest expense (4,515) (4,475) -------- -------- (3,808) (4,277) -------- -------- Loss before benefit for income taxes and extraordinary item (7,553) (7,489) Benefit for income taxes (2,873) (2,921) -------- -------- Loss before extraordinary item (4,680) (4,568) Loss on early extinguishment of debt (net of benefit for income taxes of $5,675) 9,258 -- -------- -------- Net loss (13,938) (4,568) Less redeemable preferred stock dividends and accretion for original issue discount 1,733 261 -------- -------- Net loss applicable to common shares $(15,671) $ (4,829) ======== ======== Loss per common share before extraordinary item $ (.43) $ (.32) Extraordinary item per common share (.61) -- -------- --------- Net loss per common share $ (1.04) $ (.32) ======== ======== Weighted average shares outstanding 15,121 15,053 ======== ========
The accompanying notes to condensed financial statements are an integral part of these condensed statements. Page 4 of 18 5 GENEVA STEEL COMPANY CONDENSED STATEMENTS OF INCOME SIX MONTHS ENDED MARCH 31, 1994 and 1993 (Amounts in thousands, except per share data) (Unaudited)
1994 1993 -------- -------- Net sales $248,214 $216,691 Cost of sales 234,842 213,308 -------- -------- Gross margin 13,372 3,383 Selling, general and administrative expenses 11,326 9,549 -------- -------- Income (loss) from operations 2,046 (6,166) -------- -------- Other income (expense): Interest and other income 1,140 268 Interest expense (7,987) (8,045) -------- -------- (6,847) (7,777) -------- -------- Loss before benefit for income taxes and extraordinary item (4,801) (13,943) Benefit for income taxes (1,831) (5,438) -------- -------- Loss before extraordinary item (2,970) (8,505) Loss on early extinguishment of debt (net of benefit for income taxes of $5,675) 9,258 -- -------- --------- Net loss (12,228) (8,505) Less redeemable preferred stock dividends and accretion for original issue discount 3,412 261 -------- -------- Net loss applicable to common shares $(15,640) $ (8,766) ======== ======== Loss per common share before extraordinary item $ (.43) $ (.58) Extraordinary item per common share (.61) -- -------- -------- Net loss per common share $ (1.04) $ (.58) ======== ======== Weighted average shares outstanding 15,108 15,045 ======== ========
The accompanying notes to condensed financial statements are an integral part of these condensed statements. Page 5 of 18 6 GENEVA STEEL COMPANY CONDENSED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED MARCH 31, 1994 AND 1993 (Dollars in thousands) (Unaudited) Increase (Decrease) in Cash and Cash Equivalents
1994 1993 -------- -------- Cash flows from operating activities: Net loss $(12,228) $(8,505) Adjustments to reconcile net loss to net cash provided by (used for) operating activities: Depreciation and amortization 13,978 11,807 Deferred income taxes (8,462) 4,560 Loss on sale of Equipment 44 -- (Increase) decrease in current assets-- Accounts receivable, net 7,490 2,348 Inventories (5,187) (2,125) Income taxes receivable -- 11,186 Prepaid expenses and other (6,185) 1,381 Increase (decrease) in current liabilities-- Accounts payable (454) 10,870 Accrued payroll and related taxes 1,241 768 Accrued liabilities 1,653 (109) Production prepayments -- 4,001 Accrued interest payable 2,135 (34) Accrued pension and profit sharing costs 153 34 -------- -------- Net cash provided by (used for) operating activities (5,822) 36,182 -------- -------- Cash flows from investing activities: Purchases of property, plant and equipment (98,704) (21,591) Proceeds from sale of property, plant and equipment 40 -- -------- --------- Net cash used for investing activities $(98,664) $(21,591) -------- --------
The accompanying notes to condensed financial statements are an integral part of these condensed statements. Page 6 of 18 7 GENEVA STEEL COMPANY CONDENSED STATEMENTS OF CASH FLOWS (Continued) SIX MONTHS ENDED MARCH 31, 1994 AND 1993 (Dollars in thousands) (Unaudited)
1994 1993 -------- -------- Cash flows from financing activities: Proceeds from long-term debt $190,000 $325,313 Payments on long-term debt (89,991) (278,504) Proceeds from issuance of redeemable preferred stock, net of offering costs -- 32,521 Proceeds from issuance of warrants to purchase common stock, net of offering costs -- 5,360 Payments for deferred loan costs (5,443) (6,011) Proceeds from exercise of options to purchase Class A common stock 274 -- Issuance of Class A common stock to employee savings plan 392 289 -------- -------- Net cash provided by financing activities 95,232 78,968 -------- -------- Net increase (decrease) in cash and cash equivalents (9,254) 93,559 Cash and cash equivalents at beginning of period 64,267 3,122 -------- -------- Cash and cash equivalents at end of period $ 55,013 $ 96,681 ======== ========= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest (net of amount capitalized) $ 12,593 $ 6,547 Income taxes 1,600 --
Supplemental schedule of noncash financing activities: For the six months ended March 31, 1994 and 1993, the Company increased the redeemable preferred stock liquidation preference by $3,070 and $233, respectively, in lieu of paying a cash dividend. In addition, for the same periods, redeemable preferred stock was increased by $342 and $28, respectively, for the accretion required over time to amortize the original issue discount on the redeemable preferred stock incurred at the time of issuance. The accompanying notes to condensed financial statements are an integral part of these condensed statements. Page 7 of 18 8 GENEVA STEEL COMPANY NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) (1) INTERIM FINANCIAL STATEMENTS The accompanying condensed financial statements of Geneva Steel Company (the "Company") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The unaudited condensed financial statements as of March 31, 1994 and 1993 and for the three and six-month periods ended March 31, 1994 and 1993, reflect all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial position and results of operations as of such dates and for such periods. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's latest annual report on Form 10-K. (2) INVENTORIES Inventories are comprised of the following components:
March 31, September 30, 1994 1993 -------- -------- Raw materials $28,779 $20,138 Semi-finished and finished goods 31,197 34,462 Operating materials 8,441 8,630 ------- ------- $68,417 $63,230 ======= =======
(3) NET INCOME (LOSS) PER COMMON SHARE Net income (loss) per common share is calculated based upon the weighted average number of common and common equivalent shares outstanding during the periods. Common equivalent shares consist of warrants and options to purchase Class A common stock which have a dilutive effect when applying the treasury stock method. Class B common stock is included in the weighted average number of common shares outstanding at one share for every ten shares outstanding as the Class B common stock is convertible to Class A common stock at this same rate. The net loss for the three and six-month periods ended March 31, 1994 and 1993 was adjusted for redeemable preferred stock dividends and the accretion required over time to amortize the original issue discount on the redeemable preferred stock incurred at the time of issuance. Page 8 of 18 9 (4) PUBLIC DEBT OFFERING On February 1, 1994, the Company completed a public offering of $190 million aggregate principal amount of 9 1/2% senior notes (the "9 1/2% Senior Notes"). The 9 1/2% Senior Notes mature in 2004, are unsecured and require interest payments semi-annually on January 15 and July 15. On or after January 15, 1999, the 9 1/2% Senior Notes are redeemable, in whole or in part, at the option of the Company, subject to certain redemption premiums plus accrued interest. In the event of a change of control, the Company must offer to purchase all 9 1/2% Senior Notes then outstanding at a premium plus accrued interest. The 9 1/2% Senior Notes were issued under an indenture dated as of January 15, 1994 between the Company and Bankers Trust Company, as trustee, and are governed by the terms and conditions contained therein. A portion of the net proceeds from the offering was used to repay an aggregate of approximately $90 million principal amount of privately-placed senior and subordinated term debt bearing a weighted average interest rate of 11.24%, plus contractual prepayment premiums and accrued interest. The balance of the net proceeds will be used for capital expenditures and general corporate purposes. Page 9 of 18 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS The following table sets forth the percentage relationship of certain cost and expense items to net sales for the periods indicated with respect to the Company:
Three Months Ended Six Months Ended March 31, March 31, ------------------ ----------------- 1994 1993 1994 1993 ---- ---- ---- ---- Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales 98.4 98.5 94.6 98.4 ----- ----- ----- ----- Gross margin 1.6 1.5 5.4 1.6 Selling, general and administrative expenses 4.7 4.3 4.6 4.4 ----- ----- ----- ----- Income (loss) from operations (3.1) (2.8) 0.8 (2.8) ----- ----- ----- ----- Other income (expense): Interest and other income 0.6 0.1 0.5 0.1 Interest expense (3.7) (3.8) (3.2) (3.7) ----- ----- ------ ------ (3.1) (3.7) (2.7) (3.6) ----- ----- ------ ------ Loss before benefit for income taxes (6.2) (6.5) (1.9) (6.4) Benefit for income taxes (2.4) (2.5) (0.7) (2.5) ----- ----- ------ ------ Net loss before extraordinary item (3.8)% (4.0)% (1.2)% (3.9)% ===== ===== ====== =====
The following table sets forth the sales product mix as a percentage of net sales for the periods indicated with respect to the Company:
Three Months Ended Six Months Ended March 31, March 31, ------------------ ----------------- 1994 1993 1994 1993 ---- ---- ---- ---- Sheet 73.0% 56.1% 68.5% 53.2% Plate 16.9 32.5 21.3 32.8 Pipe 6.5 8.4 6.7 10.9 Non-Steel 3.6 3.0 3.5 3.1 ----- ----- ----- ----- 100.0% 100.0% 100.0% 100.0% ===== ===== ===== =====
Page 10 of 18 11 THREE MONTHS ENDED MARCH 31, 1994 COMPARED WITH THREE MONTHS ENDED MARCH 31, 1993 The steel industry is cyclical in nature and generally characterized by overcapacity. Beginning late in fiscal year 1989 and continuing through December 1992, the industry experienced declining prices due to, among other things, reduced demand for steel products and significant price competition. Since early calendar year 1993, the industry has experienced increasing steel prices resulting from increased demand. Beginning in the first quarter of calendar year 1993, the Company has announced several price increases for various steel products. In addition, various producers have recently announced future price increases which the Company intends to follow as justified by market conditions. The Company sells substantially all of its products in the spot market at prevailing market prices. The Company believes its percentage of such sales is significantly higher than that of most of the other domestic integrated producers. Consequently, the Company may be affected by price decreases and increases more quickly than many of its competitors. Industry experience has shown, however, that announced price increases may not be immediately realized, if at all, due to the competitive environment within the industry. The Company has phased in price increases as new orders have been accepted, subject to adjustments as necessary in response to market conditions. Net sales increased 4.8% on decreased shipments of approximately 12,700 tons, or 3.3%, for the three months ended March 31, 1994 as compared to the same quarter of the previous fiscal year. The increased sales resulted from increased average selling prices. The weighted average sales price (net of transportation costs) per ton of sheet, plate and pipe products increased in the three months ended March 31, 1994 compared to the same quarter of the previous fiscal year by 16.6%, 1.8% and 3.6%, respectively. The overall average selling price realization per ton also increased between the periods; however, this increase was offset, in part, by a shift in product mix to lower priced sheet products from higher priced plate and pipe products. Shipped tonnage of sheet increased approximately 42,000 tons or 16.9%, while shipped tonnage of plate and pipe decreased approximately 52,400 tons or 46.6% and 5,700 tons or 21.7%, respectively, between the two periods. During the three months ended March 31, 1994, the Company increased its percentage of sheet products sold. This shift in product mix reflected a continued emphasis on sheet products, which have, under recent market conditions and prior to the completion of various modernization projects, contributed to higher operating margins. This shift also resulted from the suspension of production of certain plate products while upgrades to various processing equipment are implemented. The suspension of production of certain plate products is expected to continue through approximately two months of the third fiscal quarter. Cost of sales includes raw materials, labor costs, energy costs (consisting primarily of oxygen, electricity and natural gas), depreciation, and other operating and support costs associated with the production process. The Company's cost of sales, as a percentage of net sales, decreased slightly to 98.4% for the three months ended March 31, 1994 from 98.5% for the same quarter of the previous fiscal year as a result of higher average selling prices offset by increased operating costs. The average cost of sales per ton shipped increased approximately $24 per ton between the two periods. Costs increased primarily as a result of production inefficiencies associated with construction of various modernization and other capital projects, increased ironmaking costs due to reconditioning work at the blast furnace operation and increased coke costs as a result of purchasing coke to supplement internal coke production. Page 11 of 18 12 In addition, costs increased as a result of increased depreciation expense resulting from additional capital expenditures, increased wages and benefits as required by the union labor agreement, increased costs of purchased scrap and certain other increased operating costs. These increased costs were offset, in part, by a shift in product mix to lower cost sheet products. The Company believes that ironmaking costs will decline as reconditioning work is completed, throughput increases and the Company moves to a lower-cost coal blend. The Company has completed construction of its new continuous casting facility. The Company produced the first continuously cast steel slabs from the caster on April 24, 1994 and expects the start-up period for the continuous caster to be approximately six months. The Company has incurred and is incurring significant start-up and transition costs associated with the continuous caster and other capital projects, which costs have adversely affected the Company's operating results. These costs are expected to continue through the current quarter and decline as the continuous caster and other capital projects are fully implemented. Although the Company has implemented measures designed to minimize such costs and other start-up difficulties, there can be no assurance that such conditions will not be greater than currently expected or not extend beyond the anticipated start-up periods. Depreciation costs included in cost of sales increased approximately $0.5 million in the three months ended March 31, 1994 compared with the same quarter of the previous fiscal year. This increase was due to increases in the asset base resulting from capital expenditures. Depreciation expense will increase substantially as the various capital improvements contemplated by the Company's capital maintenance and modernization program become operational. Selling, general and administrative expenses for the three months ended March 31, 1994 increased approximately $0.7 million as compared to the same quarter of the previous fiscal year. The higher expenses resulted primarily from increased wages and salaries and increased outside services. Interest and other income increased by approximately $0.5 million during the three months ended March 31, 1994 as compared to the same period in the previous fiscal year as a result of an increase in the amount of invested cash and cash equivalents. Interest expense remained relatively constant during the three months ended March 31, 1994 as compared to the same quarter of the previous fiscal year. Increased interest expense due to higher levels of borrowing during the second quarter of fiscal year 1994 was offset by an increase in interest capitalized. SIX MONTHS ENDED MARCH 31, 1994 COMPARED WITH SIX MONTHS ENDED MARCH 31, 1993 Net sales increased 14.5% on increased shipments of approximately 36,900 tons, or 5.1%, for the six months ended March 31, 1994 as compared to the same period in the previous fiscal year. The increased sales resulted from higher shipments and increased average selling prices on all products. The weighted average sales price per ton of sheet, plate and pipe products increased in the six months ended March 31, 1994 compared to the same period in the previous fiscal year by 17.9%, 4.4% and 2.6%, respectively. The overall average selling price realization per ton also increased between the periods, however, this increase was offset, in part, by a shift in product mix to lower priced sheet products from higher priced plate and pipe products. Shipped tonnage of sheet increased approximately 112,700 tons or 25.3%, while shipped tonnage of plate Page 12 of 18 13 and pipe decreased approximately 62,300 tons or 28.9% and 19,800 tons or 31.4%, respectively, between the two periods. During the six months ended March 31, 1994, the Company increased its percentage of sheet products sold. The shift in product mix reflected a continued emphasis on sheet products, which have, under recent market conditions and prior to the completion of various modernization projects, contributed to higher operating margins. This shift also resulted from the suspension of production of certain plate products while upgrades to various processing equipment are implemented. The Company's costs of sales as a percentage of net sales decreased to 94.6% for the six months ended March 31, 1994 from 98.4% for the same period in the previous fiscal year as a result of higher average selling prices, offset, in part, by higher operating costs. The average cost of sales per ton shipped increased approximately $14 per ton between the two periods. Costs increased primarily as a result of production inefficiencies associated with construction of various modernization and other capital projects, an equipment failure that temporarily interrupted operation of one of the Company's blast furnaces, increased ironmaking costs due to reconditioning work at the blast furnace operation and increased coke costs as a result of purchasing coke to supplement internal coke production. In addition, costs increased as a result of increased depreciation expense resulting from additional capital expenditures, increased wages and benefits as required by the union labor agreement, increased costs of purchased scrap and increases in certain other operating costs. These increased costs were offset, in part, by a shift in product mix to lower cost sheet products. Depreciation costs included in cost of sales increased approximately $1.0 million in the six month period ended March 31, 1994 compared with the same period in the previous fiscal year. This increase was due to increases in the asset base resulting from capital expenditures. Selling, general and administrative expenses for the six months ended March 31, 1994 increased approximately $1.8 million as compared to the same period in fiscal year 1993. The higher expenses resulted primarily from increased wages and salaries and increased outside services in fiscal year 1994. Interest and other income increased approximately $0.9 million during the first six months of fiscal year 1994 as compared to the same period in the previous fiscal year as a result of an increase in the amount of invested cash and cash equivalents. Interest expense remained relatively constant during the first six months of fiscal year 1994 as compared to the same period of fiscal year 1993. Increased interest expense due to higher levels of borrowing in fiscal year 1994 was offset by an increase in interest capitalized. LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity requirements arise from capital expenditures and working capital requirements, including interest payments. The Company has met these requirements over the last three years principally from the incurrence of additional long-term indebtedness and cash provided by operations. In April 1992, the Company obtained its existing revolving credit facility in the amount of $50 million from a syndicate of banks led by Citicorp USA, Inc., as agent (the "Revolving Credit Facility"), for the working capital and Page 13 of 18 14 capital expenditure needs of the Company. The Revolving Credit Facility is secured by the Company's inventories, accounts receivable, certain general intangibles and proceeds thereof, and expires on February 28, 1995. At such time, management believes it will be necessary to obtain new or replacement credit arrangements. The Company currently has access to $25 million in borrowings under such facility. The Company's ability to borrow funds in excess of $25 million under the Revolving Credit Facility is subject to certain conditions. Moreover, the Company's access to any borrowings under the Revolving Credit Facility is subject to compliance with various other financial covenants and tests contained therein. The indentures governing the Company's 11 1/8% senior notes (the "11 1/8% Senior Notes") and its recently issued 9 1/2% senior notes (the "9 1/2% Senior Notes" and, together with the 11 1/8% Senior Notes, the "Senior Notes") also contain certain restrictions on the Company's ability to borrow additional funds. On February 1, 1994, the Company completed a public offering of $190 million aggregate principal amount of 9 1/2% Senior Notes (the "Public Offering"). The 9 1/2% Senior Notes mature in 2004, are unsecured and require interest payments semi-annually on January 15 and July 15. On or after January 15, 1999, the 9 1/2% Senior Notes are redeemable, in whole or in part, at the option of the Company, subject to certain redemption premiums plus accrued interest. In the event of a change of control, the Company must offer to purchase all 9 1/2% Senior Notes then outstanding at a premium plus accrued interest. The 9 1/2% Senior Notes were issued under an indenture dated as of January 15, 1994 between the Company and Bankers Trust Company, as trustee, and are governed by the terms and conditions contained therein. A portion of the net proceeds from the offering was used to repay an aggregate of approximately $90 million principal amount of privately-placed senior and subordinated term debt bearing a weighted average interest rate of 11.24%, plus contractual prepayment premiums and accrued interest. The balance of the net proceeds will be used for capital expenditures and general corporate purposes. The debt instruments governing the Revolving Credit Facility and the Senior Notes contain cross default or acceleration and other customary provisions. Financial covenants contained in the Revolving Credit Facility and/or the Senior Notes also include, among other things, a limitation on dividends and distributions on capital stock of the Company, a tangible net worth maintenance requirement, a leverage ratio maintenance requirement, an interest coverage requirement, a cumulative cash flow requirement, a cumulative capital expenditure limitation, a limitation on the incurrence of additional indebtedness unless certain financial tests are satisfied, a limitation on mergers, consolidations and dispositions of assets and a limitation on liens. The Company has from time to time entered into amendments relaxing certain of the covenants and tests contained in the Revolving Credit Facility and may be required to seek additional amendments in the future. Besides these and other financing activities, the Company's major source of liquidity has been cash provided by operations. Net cash provided by (used for) operating activities was $(5.8) million for the six months ended March 31, 1994 compared with $36.2 million for the same period of the previous fiscal year. The $5.8 million used for operating activities during the six months ended March 31, 1994 included approximately $20.7 million resulting from a net loss of $12.2 million and a change in deferred income taxes of $8.5 million, offset, in part, by depreciation and amortization of approximately $14.0 million. Page 14 of 18 15 The Company expects its modernization program and capital maintenance and other expenditures to require significant cash resources over the next several years. Modernization program expenditures were approximately $299 million from the inception of the program through March 31, 1994. The modernization program currently provides for capital expenditures totaling approximately $122 million during fiscal years 1994 and 1995, which includes approximately $63 million spent during the first two quarters of fiscal year 1994. In addition, the Company has budgeted approximately $60 million for capital maintenance and other projects during these years. The Company may, however, increase its capital spending during these years as other capital projects are evaluated and undertaken. The Company is pursuing the rolling mill finishing stand improvements, the final remaining project included in the modernization program. These improvements are expected to be completed in June 1995. The Company will continue to incur substantial capital expenditures after completion of the modernization program. Moreover, the Company may also pursue other capital projects in addition to those presently included in the Company's capital budget. There can be no assurance that the costs of modernization or capital maintenance and other projects will not exceed those currently anticipated by the Company. The Company will be required to make substantial interest and dividend payments on the Senior Notes, the redeemable preferred stock (or the debentures exchangeable therefor), and any outstanding balances under the Revolving Credit Facility, together with interest on any additional funding necessary for the expected and future capital expenditures and other working capital needs. The Company's annual debt interest expense on currently outstanding amounts will be approximately $33 million and its annual redeemable preferred stock dividends will be approximately $6 million. Dividends not paid in cash before April 1996 will be added to the liquidation preference of the redeemable preferred stock. As of March 31, 1994, the Company had approximately $55 million in cash and cash equivalents. Although the Company believes that the cash and cash equivalents on hand, together with anticipated cash from future operations and potential borrowings under the Revolving Credit Facility, will provide sufficient liquidity for the Company to meet its debt service requirements and to complete the remaining modernization and planned capital maintenance and other projects, there can be no assurance that these sources will be adequate to fund completion of these projects. The Company continues to focus on cost control, revenue enhancement and cash flow management. The short-term and long-term liquidity of the Company is dependent upon several factors, including the Company's ongoing operations, availability of financing, foreign currency fluctuations, competitive and market forces, modernization and environmental expenditures and general economic conditions. Similarly, the United States steel market is subject to cyclical fluctuations that may affect the amount of cash internally generated by the Company and the ability of the Company to obtain external financing. Consequently, there can be no assurance that the Company will have sufficient resources to fund all of its planned and future modernization requirements and capital maintenance and other projects or to satisfy other working capital and cash needs. In such event, the Company may defer certain capital projects and/or pursue alternative financing strategies, which may include additional borrowings or the sale of equity securities. Should the Company determine to proceed with any such financing strategies in the future, there can be no assurance that the Company Page 15 of 18 16 can obtain any consents or approvals that may be required from existing lenders or stockholders or that such financing could be consummated on terms favorable to the Company or at all. Inflation can be expected to have an effect on many of the Company's operating costs and expenses. Due to worldwide competition in the steel industry, the Company may not be able to pass through such increased costs to its customers. Page 16 of 18 17 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The registrant held its Annual Meeting of Shareholders on February 2, 1994. The shareholders elected the following Directors to serve until the next annual meeting of shareholders: Joseph A. Cannon, Robert J. Grow, Richard D. Clayton, A. Blaine Huntsman, A. Thurl Jacobsen, Arch L. Madsen, and R.J. Shopf. The shareholders also ratified the appointment of Arthur Andersen & Co. as independent auditors for the fiscal year 1994 by a vote of 30,559,138 shares for, 18,530 shares against, 15,061 shares abstained and 34,191 shares as broker non-votes. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits.
Exhibit Filed Number Exhibit Herewith ------ ------- --------- 10 Amendment dated as of December 28, X 1993 to the Agreement for the Sale and Purchase of Coke between the Company and Mitsubishi International Corporation dated November 9, 1993.
(b) Reports on Form 8-K. The Company has not filed any reports on Form 8-K during the three months ended March 31, 1994. Page 17 of 18 18 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. GENEVA STEEL COMPANY By: /s/ Dennis L. Wanlass Vice President, Treasurer and Chief Financial Officer Dated: April 29, 1994 Page 18 of 18 EX-10 2 AMENDMENT DATED 12/28/93 FOR SALE/PURCHASE OF COKE 1 EXHIBIT 10 FIRST AMENDMENT TO AGREEMENT FOR SALE AND PURCHASE OF COKE THIS FIRST AMENDMENT TO AGREEMENT FOR SALE AND PURCHASE OF COKE (the "Amendment") is entered into this 28th day of December, 1993, between GENEVA STEEL COMPANY, a Utah corporation ("Buyer") and MITSUBISHI INTERNATIONAL CORPORATION, a New York corporation ("Seller"). RECITALS: A. On or about November 9, 1993, Buyer and Seller entered into a certain Agreement for Sale and Purchase of Coke effective January 12, 1993 (the "Agreement") wherein Seller agreed to sell and Buyer agreed to purchase certain Coke. B. Buyer and Seller desire to amend the Agreement as set forth herein. AMENDMENT: NOW, THEREFORE, in consideration of the promises, terms and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows: 1. Definitions. Except as otherwise expressly indicated herein, the capitalized terms used in this Amendment, including the Recitals hereto, shall have the same meanings ascribed to such terms in the Agreement. 2. Purchase Price. Sections 3.2, 3.3 and 3.5 of the Agreement is hereby deleted in their entirety and the following added in lieu thereof: 3.2 Second Contact Year. For the second Contract Year, effective as of the first day of such second Contract Year, the Purchase Price shall be ____________________________________________ per ton of Coke. 3.3 Third Contract Year. For the third Contract Year, effective as of the first day of such third Contract Year, the Purchase Price shall be ____________________________________________ per ton of Coke. Section 3.6 of the Agreement is hereby renumbered to be Section 3.5 of the Agreement and the reference to Section 3.5 in Section 2.1 of the Agreement is hereby changed to refer to "Section 3.5" of the Agreement. 2 3. Billing and Payment. Buyer and Seller agree that invoices by Seller to Buyer during the second and third Contract Year of the Term shall be due and payable sixty (60) days after the date of the bill of lading. 4. Quantity. The word "first" in the first sentence of Section 6.1.2 of the Agreement is hereby deleted and the word "third" substituted in lieu thereof. 5. Benefit. This Amendment is for the sole benefit of the parties hereto and shall not be for the benefit of or enforceable by any other person or entity. 6. Ratification. Except as specifically amended by this Amendment, Seller and Buyer hereby ratify and reaffirm the terms, warranties and conditions set forth in the Agreement. IN WITNESS WHEREOF, the parties have caused this Amendment to be executed effective as of the date first above written. "BUYER" GENEVA STEEL COMPANY, a Utah corporation By: Max E. Sorensen Its: Senior V.P. Engineering & Technology "SELLER" MITSUBISHI INTERNATIONAL CORPORATION, a New York corporation By: Takayuki Kurachi Its: S.V.P., COO, General Manager 2 -----END PRIVACY-ENHANCED MESSAGE-----