<PAGE> 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, 1996
/ / 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.
13,381,369 and 19,151,348 shares of Class A and Class B common stock,
respectively, outstanding as of April 30, 1996.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
--------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,389 $ 12,808
Accounts receivable, net 28,411 35,178
Inventories 93,421 89,909
Deferred income taxes 6,804 6,885
Prepaid expenses and other 12,584 2,661
-------- --------
Total current assets 146,609 147,441
-------- --------
Property, plant and equipment:
Land 1,998 1,941
Buildings 16,092 16,092
Machinery and equipment 588,270 576,066
Mineral property and development
costs 8,425 8,425
-------- --------
614,785 602,524
Less accumulated depreciation (153,261) (132,134)
-------- --------
Net property, plant and equipment 461,524 470,390
-------- --------
Other assets 10,621 10,966
-------- --------
$618,754 $628,797
========
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these condensed consolidated balance sheets.
Page 2 of 17
<PAGE> 3
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in thousands)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
--------- -------------
Current liabilities:
<S> <C> <C>
Accounts payable $ 60,053 $ 67,939
Accrued liabilities 16,738 19,045
Accrued payroll and related taxes 10,205 10,667
Production prepayments 15,000 10,000
Accrued interest payable 4,604 4,610
Accrued pension and profit
sharing costs 1,956 2,135
-------- --------
Total current liabilities 108,556 114,396
-------- --------
Long-term debt 347,477 342,033
-------- --------
Deferred income tax liabilities 9,585 13,263
-------- --------
Redeemable preferred stock 55,077 51,031
-------- --------
Stockholders' equity:
Preferred stock -- --
Common stock:
Class A 87,979 87,926
Class B 10,110 10,163
Warrants to purchase Class A
common stock 5,360 5,360
Retained earnings 12,004 22,754
Class A common stock held in
treasury, at cost (17,394) (18,129)
-------- --------
Total stockholders' equity 98,059 108,074
-------- --------
$618,754 $628,797
======== ========
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these condensed consolidated balance sheets.
Page 3 of 17
<PAGE> 4
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Net sales $159,131 $157,213
Cost of sales 151,326 141,401
-------- --------
Gross margin 7,805 15,812
Selling, general and administrative
expenses 6,166 6,250
-------- --------
Income from operations 1,639 9,562
-------- --------
Other income (expense):
Interest and other income 94 160
Interest expense (8,626) (7,962)
Other expense (558) (629)
-------- --------
(9,090) (8,431)
-------- --------
Income (loss) before benefit for income taxes (7,451) 1,131
Benefit for income taxes (2,766) --
-------- --------
Net income (loss) (4,685) 1,131
Less redeemable preferred stock dividends and
accretion for original issue discount 2,235 1,968
-------- --------
Net loss applicable to common shares $ (6,920) $ (837)
======== ========
Net loss per common share $ (.45) $ (.06)
======== ========
Weighted average common shares outstanding 15,281 15,188
======== ========
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these condensed consolidated statements.
Page 4 of 17
<PAGE> 5
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1996 AND 1995
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Net sales $326,220 $321,636
Cost of sales 306,213 289,881
-------- --------
Gross margin 20,007 31,755
Selling, general and administrative
expenses 11,899 12,082
-------- --------
Income from operations 8,108 19,673
-------- --------
Other income (expense):
Interest and other income 272 189
Interest expense (16,883) (16,716)
Other expense (1,111) (1,007)
-------- --------
(17,722) (17,534)
-------- --------
Income (loss) before benefit for income taxes (9,614) 2,139
Benefit for income taxes (3,597) --
-------- --------
Net income (loss) (6,017) 2,139
Less redeemable preferred stock dividends and
accretion for original issue discount 4,399 3,873
-------- --------
Net loss applicable to common shares $(10,416) $ (1,734)
======== ========
Net loss per common share $ (.68) $ (.11)
======== ========
Weighted average common shares outstanding 15,267 15,181
======== ========
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these condensed consolidated statements.
Page 5 of 17
<PAGE> 6
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 1996 AND 1995
(Dollars in thousands)
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (6,017) $ 2,139
Adjustments to reconcile net income (loss)
to net cash provided by (used for)
operating activities:
Depreciation 21,128 17,746
Amortization 843 1,165
Deferred income taxes (3,597) --
Loss on sale of equipment -- 5
(Increase) decrease in current
assets--
Accounts receivable, net 6,767 20,565
Inventories (3,512) 3,071
Prepaid expenses and other (9,923) 800
Increase (decrease) in current
liabilities--
Accounts payable (7,886) (3,070)
Accrued liabilities 2,340 4,329
Accrued payroll and related taxes (62) 1,270
Accrued interest payable (6) (93)
Accrued pension and profit
sharing costs (179) 908
-------- --------
Net cash provided by (used for)
operating activities (104) 48,835
-------- --------
Cash flows from investing activities:
Purchases of property, plant
and equipment (12,261) (30,118)
Proceeds from sale of property, plant
and equipment -- 14,135
Change in other assets (373) (4,515)
-------- --------
Net cash used for
investing activities $(12,634) $(20,498)
-------- --------
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these condensed consolidated statements.
Page 6 of 17
<PAGE> 7
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
SIX MONTHS ENDED MARCH 31, 1996 AND 1995
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from long-term debt $ 17,296 $ 11,305
Payments on long-term debt (11,852) (32,348)
Payments for deferred loan costs and
other assets (125) (1,599)
Bank overdraft -- (1,341)
--------- --------
Net cash provided by (used for)
financing activities 5,319 (23,983)
--------- --------
Net increase (decrease) in cash and cash
equivalents (7,419) 4,354
Cash and cash equivalents at beginning
of period 12,808 --
--------- --------
Cash and cash equivalents at end
of period $ 5,389 $ 4,354
========= ========
</TABLE>
Supplemental schedule of noncash financing activities:
For the six months ended March 31, 1996 and 1995, the Company increased the
redeemable preferred stock liquidation preference by $3,690 and $3,523
respectively, in lieu of paying a cash dividend. In addition, for the same
periods, redeemable preferred stock was increased by $356 and $350,
respectively, for the accretion required over time to amortize the original
issue discount on the redeemable preferred stock incurred at the time of
issuance. At March 31, 1996, the Company had accrued dividends payable of
$353.
The accompanying notes to condensed consolidated financial statements are
an integral part of these condensed consolidated statements.
Page 7 of 17
<PAGE> 8
GENEVA STEEL COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
- --------------------------------------------------------------------------------
(1) INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements of Geneva
Steel Company and Geneva Steel Funding Corporation, a wholly-owned subsidiary of
Geneva Steel Company (collectively, 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 accompanying unaudited
condensed consolidated financial statements 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 of
the Company.
It is suggested that these condensed consolidated 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 were comprised of the following components:
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
--------- -------------
<S> <C> <C>
Raw materials $26,349 $27,784
Semi-finished and finished goods 58,756 54,191
Operating materials 8,316 7,934
------- -------
$93,421 $89,909
======= =======
</TABLE>
(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 because
the Class B common stock is convertible to Class A common stock at this same
rate.
The net income (loss) for the three and six-month periods ended March 31,
1996 and 1995 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 17
<PAGE> 9
(4) SUBSEQUENT EVENT
Amended and Restated Revolving Credit Facility
In May 1996, the Company amended and restated its revolving credit
facility (the "Revolving Credit Facility") with a syndicate of banks led by
Citicorp USA, Inc., as agent, which is used primarily for the working capital
and capital expenditure needs of the Company. The Revolving Credit Facility, in
the amount of up to $125 million, is secured by the Company's inventories,
accounts receivable, general intangibles, and proceeds thereof, and expires on
May 14, 2000. Interest is payable monthly at the defined base rate (7.25% at
May 14, 1996) plus 1.50% or the defined LIBOR rate (5.50% at May 14, 1996) plus
2.75%. The Company pays a monthly commitment fee based on an annual rate of
5.50% of the average unused portion of the borrowing limit under the Revolving
Credit Facility. The amount available to the Company under the Revolving Credit
Facility currently ranges between 55 and 60 percent, in the aggregate, of
eligible inventories plus 85 percent of eligible accounts receivable. Borrowing
availability under the Revolving Credit Facility is also subject to other
financial tests and covenants. The Company's receivables securitization
facility was terminated in connection with the amendment. Certain deferred fees
associated with establishing the Company's previous facilities will be
written-off during the third fiscal quarter.
(5) CERTAIN RECLASSIFICATIONS
Certain reclassifications have been made in the prior period financial
statements to conform to the current period presentation.
Page 9 of 17
<PAGE> 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:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------- ----------------
1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 95.1 89.9 93.9 90.1
----- ----- ----- -----
Gross margin 4.9 10.1 6.1 9.9
Selling, general and admini-
strative expenses 3.9 4.0 3.6 3.8
----- ----- ----- -----
Income from operations 1.0 6.1 2.5 6.1
----- ----- ----- -----
Other income (expense):
Interest and other income 0.1 0.1 0.1 0.1
Interest expense (5.4) (5.1) (5.2) (5.2)
Other expense (0.4) (0.4) (0.3) (0.3)
----- ----- ----- -----
(5.7) (5.4) (5.4) (5.4)
----- ----- ----- -----
Income (loss) before benefit
for income taxes (4.7) 0.7 (2.9) 0.7
Benefit for income taxes (1.8) -- (1.1) --
----- ----- ----- -----
Net income (loss) (2.9)% 0.7% (1.8)% 0.7%
===== ===== ===== =====
</TABLE>
The following table sets forth the sales product mix as a percentage of
net sales for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------ -----------------
1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
Sheet 29.8% 44.0% 32.2% 48.7%
Plate 45.2 36.8 39.8 34.2
Pipe 6.2 6.6 5.3 5.5
Slab 16.1 9.6 20.0 8.6
Non-Steel 2.7 3.0 2.7 3.0
----- ----- ----- -----
100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
Page 10 of 17
<PAGE> 11
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1995
Net sales increased 1.2% due to increased shipments of approximately 55,100
tons, offset in large part by decreased overall average selling prices for the
three months ended March 31, 1996 as compared to the same period in the
previous fiscal year. The weighted average sales price (net of transportation
costs) per ton of sheet, plate, pipe and slab products decreased by 11.1%,
2.9%, 0.6% and 22.2%, respectively, in the three months ended March 31, 1996
compared to the same period in the previous fiscal year. The decrease in prices
resulted from efforts by service centers to reduce high inventory levels, an
increase in domestic hot-rolled capacity, unfairly traded imports and other
market factors. The overall average selling price realization per ton also
decreased between the periods as a result of a shift in product mix to
lower-priced slab products. This decrease was offset, in part, by the Company's
increased sales of higher-priced plate products. The Company increased slab
shipments to maximize production from the continuous caster while efforts to
increase rolling mill throughput continue. Despite weakened slab prices, the
Company expects that slab sales will continue. The Company expects, however,
that slab shipments will gradually decrease as rolling mill throughput
improves. Consistent with the Company's strategic objectives, plate shipments
have increased as various upgrades to plate processing and finishing equipment
have been completed and are being implemented. The Company intends to continue
shifting its product mix toward higher-margin plate. Shipped tonnage of plate
and slabs increased approximately 42,400 tons or 28.4% and 62,100 tons or
118.9%, respectively, while shipped tonnage of sheet and pipe decreased
approximately 48,300 tons or 22.9% and 1,100 tons or 4.4%, respectively,
between the two periods.
In response to strengthening orders, the Company announced four price
increases during the current calendar year, effective at various dates after
March 31, 1996. The Company has phased in price increases as new orders have
been accepted. The Company intends, however, to react to price increases or
decreases in the market as justified by competitive 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 increases and decreases more
quickly than many of its competitors.
Cost of sales includes raw materials, labor costs, energy costs,
depreciation and other operating and support costs associated with the
production process. The Company's cost of sales, as a percentage of net sales,
increased to 95.1% for the three months ended March 31, 1996 from 89.9% for the
same period in the previous fiscal year as a result of lower average selling
prices. The overall average cost of sales per ton shipped decreased
approximately $16 per ton between the two periods. The decreased cost per ton
resulted from lower operating costs and increased sales of lower-cost slab
products offset, in part, by a shift in product mix to higher-cost plate
products. Operating costs decreased as a result of improved production yields
and throughput rates, offset in part by higher depreciation expense, the
adverse impact of the plant wide-power outage discussed below, increased raw
materials costs, higher wages and benefits and other increased costs. The
Company expects that production yields and throughput will continue to improve
in future periods as the induction furnace and wide coiled plate project
continue to be integrated into the production process. The Company continues to
evaluate its slab heating requirements and may elect to install
additional heating capacity.
Page 11 of 17
<PAGE> 12
A plant-wide power outage caused by unusual weather conditions in late
January had a significant adverse effect on production, resulting in a loss of
approximately 40,000 tons, reduced operating efficiencies and damage to certain
facilities. The Company maintains insurance for both property damage and
business interruption, subject to a deductible of $1 million per occurrence. The
Company is continuing to assess the full financial impact of the outage and
recorded a portion of the expected loss recovery during the
second fiscal quarter.
The Company has been testing its new plasma-fired cupola ironmaking
facility and expects the facility to be available for operation during the third
fiscal quarter. The cupola will be used to replace or supplement blast furnace
iron production, particularly when scrap prices are favorable or during relines
and other periods requiring additional ironmaking capacity. The Company expects
the facility lease cost of the cupola to add approximately $2 per ton to
finished product cost. The full impact of the cupola facility on finished
product cost will be dependent on raw material costs, particularly scrap and
coke, and the level of integration of the cupola.
Depreciation costs included in cost of sales increased approximately $1.8
million for the three months ended March 31, 1996 compared with the same period
in the previous fiscal year. This increase was due to increases in the asset
base resulting from capital expenditures. Depreciation expense will further
increase due to implementation of the Company's capital projects.
Selling, general and administrative expenses for the three months ended
March 31, 1996 decreased approximately $0.1 million as compared to the same
period in the previous fiscal year. The lower expenses resulted primarily from
reduced outside services.
Interest expense increased approximately $0.7 million during the three
months ended March 31, 1996 as compared to the same period in the previous
fiscal year reflecting higher levels of borrowing.
Other expense decreased approximately $0.1 million for the three months
ended March 31, 1996, as compared to the same period in the previous fiscal year
as a result of decreased fundings under the Company's receivables securitization
program.
For the three months ended March 31, 1996, the Company recognized a
benefit for income taxes by carrying back the loss to the prior year's income.
The Company did not recognize a provision for income taxes for the three months
ended March 31, 1995 as a result of utilizing net operating loss carryforwards
for financial reporting purposes.
SIX MONTHS ENDED MARCH 31, 1996 COMPARED WITH SIX MONTHS ENDED MARCH 31, 1995
Net sales increased 1.4% due to increased shipments of approximately
104,800 tons, offset in part by decreased overall average selling prices and a
shift in product mix to lower-priced slab products for the six months ended
March 31, 1996 as compared to the same period in the previous fiscal year. The
weighted average sales price (net of transportation costs) per ton of sheet,
plate and slab products decreased by 9.5%, 1.6% and 13.0%, respectively, while
the weighted average sales price of pipe products increased by 4.1% in the six
months ended March 31, 1996 compared to the same period in the previous fiscal
year. The
Page 12 of 17
<PAGE> 13
overall average selling price realization per ton also decreased between the
periods as a result of a shift in product mix to lower-priced slab products.
This decrease was offset, in part, by the Company's increased sales of
higher-priced plate products. Shipped tonnage of plate and slabs increased
approximately 57,700 tons or 20.3% and 174,600 tons or 172.4%, respectively,
while shipped tonnage of sheet and pipe decreased approximately 124,600 tons or
25.7% and 2,900 tons or 6.5%, respectively, between the two periods.
The Company's cost of sales, as a percentage of net sales, increased to
93.9% for the six months ended March 31, 1996 from 90.1% for the same period in
the previous fiscal year as a result of lower average selling prices. The
overall average cost of sales per ton shipped decreased approximately $17 per
ton between the two periods. The decreased cost per ton resulted from lower
operating costs and increased sales of lower-cost slab products offset, in part,
by a shift in product mix to higher-cost plate products. Operating costs
decreased as a result of improved production yields and throughput offset in
part by higher depreciation expense, the adverse impact of the plant-wide
power outage, increased raw materials costs, higher wages and benefits and
other increased costs.
Depreciation costs included in cost of sales increased approximately $3.6
million for the six months ended March 31, 1996 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, 1996 decreased approximately $0.2 million as compared to the same
period in the previous fiscal year. The lower expenses resulted primarily from
reduced outside services.
Interest expense increased approximately $0.2 million for the six months
ended March 31, 1996 as compared to the same period in the previous fiscal year
reflecting higher levels of borrowing and lower levels of capitalized interest.
Other expense increased approximately $0.1 million for the six months
ended March 31, 1996, as compared to the same period in the previous fiscal year
as a result of increased fundings under the Company's receivables securitization
facility.
For the six months ended March 31, 1996, the Company recognized a benefit
for income taxes by carrying back the loss to the prior year's income. The
Company did not recognize a provision for income taxes for the six months ended
March 31, 1995 as a result of utilizing net operating loss carryforwards for
financial reporting purposes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements arise from capital expenditures and
working capital requirements, including interest and dividend payments. The
Company has met these requirements principally from the incurrence of
additional long-term indebtedness, including borrowings under the Company's
various credit facilities, the sale of preferred stock, equipment lease
financing and cash provided by operations.
On May 14, 1996, the Company amended and restated its revolving credit
facility (the "Revolving Credit Facility") with a syndicate of banks led by
Citicorp USA, Inc., as agent, which is used primarily for the working capital
and
Page 13 of 17
<PAGE> 14
capital expenditure needs of the Company. The Revolving Credit Facility, in the
amount of up to $125 million, is secured by the Company's inventories, accounts
receivable, general intangibles, and proceeds thereof, and expires on May
14, 2000. Interest is payable monthly at the defined base rate (7.25% at May
14, 1996) plus 1.50% or the defined LIBOR rate (5.50% at May 14, 1996) plus
2.75%. The Company pays a monthly commitment fee based on an annual rate of
.50% of the average unused portion of the borrowing limit under the Revolving
Credit Facility. The amount available to the Company under the Revolving Credit
Facility ranges between 55 to 60 percent, in the aggregate, of eligible
inventories plus 85 percent of eligible accounts receivable. Borrowing
availability under the Revolving Credit Facility is also subject to other
financial tests and covenants. The Company's receivables securitization
facility was terminated in connection with the amendment. As of May 14, 1996,
the Company's eligible inventories and accounts receivable supported access to
$94.9 million under the Revolving Credit Facility. As of May 14, 1996, the
Company had $49.5 million in borrowings and $8.4 million in letters of credit
outstanding under the Revolving Credit Facility. As a result of the amendment
to the Revolving Credit Facility, the Company increased its availability by
approximately $18 million as of May 14, 1996.
In March 1993, the Company issued 400,000 shares of 14% cumulative
redeemable exchangeable preferred stock, no par value, (the "Redeemable
Preferred Stock"). Dividends accrue at a rate equal to 14% per annum of the
liquidation preference ($151 per share as of March 31, 1996) and are payable
quarterly in cash from funds legally available therefor. Prior to April 1996,
the Company elected to add the dividends to the liquidation preference. The
Redeemable Preferred Stock is exchangeable, at the Company's option, into
subordinated debentures of the Company due 2003 (the "Exchange Debentures").
As of May 15, 1996, the Company has not elected to exchange the Redeemable
Preferred Stock.
The terms of the Revolving Credit Facility and the
Company's 11 1/8% Senior Notes issued in March 1993 and 9 1/2% Senior Notes
issued in February 1994 (collectively, the "Senior Notes") include cross default
and other customary provisions. Financial covenants contained in the Revolving
Credit Facility and/or the Senior Notes also include, among others, a limitation
on dividends and distributions on capital stock of the Company, a tangible net
worth maintenance requirement, a cash interest coverage 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 limitations
on liens. In the event of a change in control, the Company must offer to
purchase all Senior Notes then outstanding at a premium. The Company has from
time to time entered into various amendments modifying or waiving the financial
covenants and tests contained in the Revolving Credit Facility.
Besides these and other financing activities, the Company's major source
of liquidity has been cash provided by operating activities. Net cash used for
operating activities was $0.1 million for the six months ended March 31, 1996
compared with net cash provided by operating activities of $48.8 million for the
six months ended March 31, 1995. The uses of cash for operating activities
during the six months ended March 31, 1996, resulted primarily from a $3.5
million increase in inventories, a $9.9 million increase in prepaid expenses,
a $3.0 million reduction in fundings under the Company's receivables
securitization facility, a decrease in accounts payable of $7.9 million and a
net loss of $6.0 million. These uses of cash flow were offset by depreciation
and amortization of
Page 14 of 17
<PAGE> 15
$22.0 million and a decrease in accounts receivable of $9.8 million. The Company
previously entered into an arrangement with one of its major customers whereby
the customer makes a production prepayment of up to $10 million upon entry of
new orders. The Company recently completed an amendment increasing the maximum
amount of production prepayments to $15 million.
Capital expenditures were approximately $12.3 million for the six months
ended March 31, 1996. Capital expenditures for fiscal year 1996 are estimated at
$38.0 million. Capital projects for fiscal year 1996 consist of a blast furnace
reline and various other projects designed to reduce costs and increase product
quality and throughput. Substantially all of the equipment for the rolling mill
finishing stand improvements will be completed during fiscal year 1996. The
Company has, however, elected to defer installation of that equipment until the
following fiscal year. The Company anticipates that it may incur significant
start-up and transition costs when the equipment is installed and implemented.
Depending on market, operational, liquidity and other factors, the Company may
elect to adjust the design, timing and budgeted expenditures of its capital
plan. The Revolving Credit Facility contains certain limitations on capital
expenditures that are dependent, in part, on the Company's future operating
results.
The Company is required to make substantial interest and dividend payments
on the Senior Notes, its Redeemable Preferred Stock or in the alternative
exchange debentures, and outstanding balances under the Revolving Credit
Facility. Currently, the Company's annual cash interest expense is
approximately $37.0 million and its annual preferred stock dividends are
approximately $8.4 million.
The Company's future operations will be impacted by, among other factors,
pricing, product mix, throughput levels and production efficiencies. The
Company has efforts underway to increase throughput and production efficiencies
and to shift its product mix to higher-margin plate products. Pricing in
future periods is a key variable that remains subject to uncertainty. There can
be no assurance that the Company's efforts will be successful or that
sufficient demand will exist to support the Company's additional throughput
capacity.
The short-term and long-term liquidity of the Company is also dependent
upon several factors, including availability of financing, foreign currency
fluctuations, competitive and market forces, capital expenditures and general
economic conditions. Moreover, 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.
Although the Company believes that the anticipated cash from future operations
and borrowings under the Revolving Credit Facility will provide sufficient
liquidity for the Company to meet its debt service requirements and to fund
ongoing operations, including required capital expenditures, there can be no
assurance that these or other possible sources will be adequate. Moreover,
because of the Company's current leverage situation, its financial flexibility
is limited.
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 15 of 17
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The registrant held its Annual Meeting of Shareholders on March 26,
1996. The shareholders elected the following Directors to serve until the next
annual meeting of shareholders: Joseph A. Cannon, Robert J. Grow, Richard D.
Clayton, R.J. Shopf, Arch L. Madsen and Richard B. Wirthlin.
The shareholders also ratified the appointment of Arthur Andersen LLP
as independent auditors for the fiscal year 1996 by a vote of 31,474,221 shares
for, 116,126 shares against and 89,414 shares abstained and there were no
broker-non votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit Filed
Number Exhibit Herewith
10.1 Third Amendment to Amended and X
Restated Revolving Credit Agreement
dated January 31, 1996
10.2 Fourth Amendment to Amended and X
Restated Revolving Credit Agreement
dated March 31, 1996
10.3 Agreement for the Sale and Purchase of X
Coal between the Registrant and Oxbow
Carbon & Minerals, Inc. dated February 19,
1996, effective as of April 1, 1994
27 Financial data schedule X
(b) Reports on Form 8-K.
The Company has not filed any reports on Form 8-K during the three months
ended March 31, 1996.
Page 16 of 17
<PAGE> 17
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: May 15, 1996
Page 17 of 17
<PAGE> 1
THIRD AMENDMENT TO AMENDED
AND RESTATED REVOLVING CREDIT AGREEMENT
Third Amendment to Amended and Restated Revolving Credit Agreement
(this "Amendment"), dated as of January __, 1996, in respect of and to that
certain Amended and Restated Revolving Credit Agreement, dated as of November 4,
1994 (as amended by this Amendment and as the same shall have been heretofore or
shall be hereafter amended, modified or supplemented, the "Credit Agreement",
and the terms defined therein and not otherwise defined herein being used herein
as therein defined), among Geneva Steel Company, a Utah corporation (the
"Borrower"), the lenders party thereto (the "Lenders"), Citibank, N.A., as
Issuer (the "Issuer") and Citicorp USA, Inc., as Agent for the Lenders (the
"Agent").
W I T N E S S E T H :
WHEREAS, the Borrower has requested that the Credit Agreement be
amended in certain respects; and
WHEREAS, the Lenders, the Issuer and the Agent are willing to amend the
Credit Agreement but only on the terms and subject to the conditions set forth
herein;
NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the parties hereto agree as follows:
SECTION 1. Amendments to Credit Agreement. Subject to and upon the
satisfaction of the conditions set forth in Section 2 hereof, the Credit
Agreement is hereby amended as follows:
1.1. The definition of the term "Applicable Base Rate Margin" set
forth in Section 1.1 hereby amended by deleting the figure "1.75%" appearing in
the first and last lines of the first paragraph thereof and inserting in its
place in each such location the figure "2.00%".
1.2 The definition of the term "Applicable Eurodollar Rate Margin" set
forth in Section 1.1 is hereby amended by deleting the figure "3.00%" appearing
in the first and last lines of the first paragraph thereof and inserting in its
place in each such location the figure "3.25%".
1.3 Article V is hereby amended by:
(a) deleting Section 5.1 thereof in its entirety;
(b) Amending Section 5.2 thereof by deleting the Minimum Tangible Net
Worth Amounts set forth therein corresponding to the periods ending January
31, 1996, February 29, 1996, March 31, 1996 and April 30, 1996, and inserting in
their place the amounts set forth below:
During Each Month
Ending on the Date Minimum
Set Forth Below Amount
------------------ ---------------
January 31, 1996 $90,000,000
February 29, 1996 $90,000,000
March 31, 1996 $90,000,000
April 30, 1996 $91,000,000;
(c) amending Section 5.3 thereof by (i) deleting the Maximum Amounts
of Cumulative Capital Expenditures set forth therein corresponding to the
periods ending January 31, 1996, February 29, 1996, March 31, 1996 and April
30, 1996, and inserting in their place the amounts set forth below:
Maximum Amount of
During the Cumulative Capital
Period Ending Expenditures
------------- -------------------
January 31, 1996 $68,000,000
February 29, 1996 $71,000,000
March 31, 1996 $74,000,000
April 30, 1996 $80,000,000
and (ii) suspending the operation and effectiveness of the proviso appearing at
the end of such section for the periods ending January 31, 1996, February 29,
1996, March 31, 1996 and April 30, 1996;
(d) deleting Section 5.4 thereof in its entirety for purposes of being
a covenant, the breach of which by any Loan Party would constitute a Default or
Event of Default, but retaining such section for the sole and exclusive purpose
of calculating the Additional Discretionary Amount; and
(e) amending Section 5.5 thereof by deleting the Minimum EBITDA to
Cash Interest Expense Ratio set forth therein corresponding to the period
ending March 31, 1996 and inserting in its place the amount set forth below:
For the Fiscal Minimum
Quarter Ending Ratio Required
-------------- --------------
March 31, 1996 2.00:1.0
SECTION 2. Conditions Precedent.
2.1 This Amendment shall become effective (the "Effective Date") if
and when, and only when, the Agent shall have received counterparts of this
Amendment executed by the Borrower, the Agent, the Issuer and the Majority
Lenders, and the Agent shall have additionally received all of the following
documents, each document
<PAGE> 2
(unless otherwise indicated) being dated as of the date hereof, in form and
substance satisfactory to the Agent and in sufficient original copies for each
Lender:
(a) Certified copies of the resolutions of the Board of Directors of
the Borrower, evidencing authorization of the Borrower to enter into this
Amendment and the documents, transactions and matters contemplated hereby;
(b) A certificate of the Secretary or an Assistant Secretary of the
Borrower, certifying the names and true signatures of the officers of the
Borrower authorized to execute and deliver this Amendment on behalf of the
Borrower; and
(c) A certificate, signed by a Responsible Officer of the Borrower,
stating that the conditions specified in Section 2.2 hereof have been satisfied.
2.2. The effectiveness of this Amendment is subject to the further
conditions precedent that:
(a) The execution and delivery by the Borrower of this Amendment are
not enjoined, temporarily, preliminarily or permanently;
(b) All costs and accrued and unpaid fees and expenses owing by the
Borrower to the Agent or the Lenders, to the extent due and payable on or prior
to the Effective Date, shall have been paid; and
(c) The following statements shall be true and correct on the Effective
Date:
(i) The representations and warranties of the Borrower in each
Loan Document (after giving effect to this Amendment) and
in this Amendment are correct and accurate on and as of
the Effective Date, as though made on and as of the
Effective Date; and
(ii) After giving effect to this Amendment, no Default or Event
of Default shall have occurred and be continuing.
SECTION 3. Representations and Warranties. In order to induce the
Lenders, the Issuer and the Agent to enter into this Amendment, the Borrower
represents and warrants to the Lenders, the Issuer and the Agent as follows:
2
<PAGE> 3
3.1. The execution, delivery and performance by the Borrower of this
Amendment and each other document and instrument to be delivered hereunder:
(a) are within the Borrower's corporate powers;
(b) have been duly authorized by all necessary corporate action,
including, without limitation, the consent of shareholders where required;
(c) do not and will not (i) contravene its Articles of Incorporation,
by-laws or other comparable governing documents, (ii) violate any Requirement of
Law (including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System), or any order or decree of any court or
Governmental Authority, (iii) conflict with or result in the breach of, or
constitute a default under, or result in or permit the termination or
acceleration of, any Contractual Obligation of the Borrower, or (iv) result in
the creation or imposition of any Lien upon any of the property of the Borrower;
and
(d) do not require the consent, authorization by, or approval of, or
notice to, or filing or registration with, any Governmental Authority or any
other Person, other than those which have been obtained and copies of which have
been delivered to the Agent, each of which is in full force and effect.
3.2. This Amendment has been duly executed and delivered by the
Borrower.
3.3. This Amendment is the legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its terms.
SECTION 4. Miscellaneous.
4.1. This Amendment and the rights of the parties hereto shall be
governed by, and construed in accordance with, the law of the State of New York.
Wherever possible, each provision of this Amendment shall be interpreted in such
a manner as to be effective and valid under applicable law, but if any provision
of this Amendment shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Amendment.
4.2. Any legal action or proceeding with respect to this Amendment or
any document related hereto may be brought in the courts of the State of New
York or of
3
<PAGE> 4
the United States of America for the Southern District of New York, and, by
execution and delivery of this Amendment, the Borrower hereby accepts, and
submits to, for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The parties hereto
hereby irrevocably waive any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of forum non
conveniens, which any of them may now or hereafter have to the bringing of any
such action or proceeding in such respective jurisdictions. The Borrower agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
4.3. Nothing contained in this Section 4 shall affect the right of the
Agent, the Issuer, any Lender or any holder of a Note to serve process in any
manner permitted by law or commence legal proceedings or otherwise proceed
against the Borrower in any other jurisdiction.
4.4. Each of the parties hereto waives any right it may have to trial
by jury in respect of any litigation based on, or arising out of, under or in
connection with this Amendment, or any course of conduct, course of dealing,
verbal or written statement or action of any party hereto.
4.5. The Section titles contained in this Amendment are and shall be
without substantive meaning or content of any kind whatsoever and are not a part
of the agreement between the parties hereto.
4.6. This Amendment may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
4.7. Except as expressly amended by this Amendment, the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed.
4
<PAGE> 5
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be executed by an officer thereunto duly authorized, as of the date
first above written.
GENEVA STEEL COMPANY
By: /s/ Dennis L. Wanlass
-----------------------
Name: Dennis L. Wanlass
Title: Vice President,
Treasurer and Chief
Financial Officer
CITICORP USA, INC.,
as Agent
By: /s/ Keith R. Karako
-----------------------
Name: Keith R. Karako
Title: Attorney-in-Fact
CITICORP USA, INC.,
as Lender
By: /s/ Keith R. Karako
-----------------------
Name: Keith R. Karako
Title: Attorney-in-Fact
CITIBANK, N.A.,
as Issuer
By: /s/ Keith R. Karako
-----------------------
Name: Keith R. Karako
Title: Attorney-in-Fact
5
<PAGE> 6
CORESTATES BANK, N.A.,
as Lender
By: /s/ Michele A. Walcoff
-----------------------
Name:
Title: Vice President
BANK ONE, UTAH, N.A.,
as Lender
By:
-----------------------
Name:
Title: Vice President
FIRST SECURITY BANK
OF UTAH, N.A., as Lender
By: /s/ David P. Williams
-----------------------
Name:
Title: Vice President
HELLER FINANCIAL, INC., as
Lender
By: /s/ Tom Bukowski
-----------------------
Name:
Title: Vice President
6
<PAGE> 1
FOURTH AMENDMENT TO AMENDED
AND RESTATED REVOLVING CREDIT AGREEMENT
Fourth Amendment to Amended and Restated Revolving Credit Agreement
(this "Amendment"), dated as of March 29, 1996, in respect of and to that
certain Amended and Restated Revolving Credit Agreement, dated as of November 4,
1994 (as amended by this Amendment and as the same shall have been heretofore or
shall be hereafter amended, modified or supplemented, the "Credit Agreement",
and the terms defined therein and not otherwise defined herein being used herein
as therein defined), among Geneva Steel Company, a Utah corporation (the
"Borrower"), the lenders party thereto (the "Lenders"), Citibank, N.A., as
Issuer (the "Issuer") and Citicorp USA, Inc., as Agent for the Lenders (the
"Agent").
W I T N E S S E T H :
WHEREAS, the Borrower has requested that the Credit Agreement be
amended in certain respects; and
WHEREAS, the Lenders, the Issuer and the Agent are willing to amend the
Credit Agreement but only on the terms and subject to the conditions set forth
herein;
NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the parties hereto agree as follows:
SECTION 1. Amendments to Credit Agreement. Subject to and upon the
satisfaction of the conditions set forth in Section 2 hereof, the Credit
Agreement is hereby amended as follows:
1.1. Section 5.2 is hereby amended by deleting the Minimum Tangible Net
Worth Amounts set forth therein corresponding to the periods ending March 31,
1996 and April 30, 1996, and inserting in their place the amounts set forth
below:
<PAGE> 2
<TABLE>
<CAPTION>
During Each Month
Ending on the Date Minimum
Set Forth Below Amount
--------------- ------
<S> <C>
March 31, 1996 $ 82,000,000
April 30, 1996 $ 82,000,000
May 31, 1996 $ 80,000,000;
</TABLE>
SECTION 2. Conditions Precedent.
2.1. This Amendment shall become effective (the "Effective Date") if
and when, and only when, the Agent shall have received counterparts of this
Amendment executed by the Borrower, the Agent, the Issuer and the Majority
Lenders, and the Agent shall have additionally received all of the following
documents, each document (unless otherwise indicated) being dated as of the date
hereof, in form and substance satisfactory to the Agent and in sufficient
original copies for each Lender:
(a) A certificate of the Secretary or an Assistant Secretary of the
Borrower, certifying the names and true signatures of the officers of the
Borrower authorized to execute and deliver this Amendment on behalf of the
Borrower; and
(b) A certificate, signed by a Responsible Officer of the Borrower,
stating that the conditions specified in Section 2.2 hereof have been satisfied.
2.2. The effectiveness of this Amendment is subject to the further
conditions precedent that:
(a) The execution and delivery by the Borrower of this Amendment are
not enjoined, temporarily, preliminarily or permanently;
(b) All costs and accrued and unpaid fees and expenses owing by the
Borrower to the Agent or the Lenders, to the extent due and payable on or prior
to the Effective Date, shall have been paid; and
2
<PAGE> 3
(c) The following statements shall be true and correct on the Effective
Date:
(i) The representations and warranties of the Borrower in each
Loan Document (after giving effect to this Amendment) and in
this Amendment are correct and accurate on and as of the
Effective Date, as though made on and as of the Effective
Date or, as to those representatives and warranties limited
by their terms to a specified date, were correct on and as
of such date; and
(ii) After giving effect to this Amendment, no Default or Event
of Default shall have occurred and be continuing.
SECTION 3. Representations and Warranties. In order to induce the
Lenders, the Issuer and the Agent to enter into this Amendment, the Borrower
represents and warrants to the Lenders, the Issuer and the Agent as follows:
3.1. The execution, delivery and performance by the Borrower of this
Amendment and each other document and instrument to be delivered hereunder:
(a) are within the Borrower's corporate powers;
(b) have been duly authorized by all necessary corporate action,
including, without limitation, the consent of shareholders where required;
(c) do not and will not (i) contravene its Articles of Incorporation,
by-laws or other comparable governing documents, (ii) violate any Requirement of
Law (including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System), or any order or decree of any court or
Governmental Authority, (iii) conflict with or result in the breach of, or
constitute a default under, or result in or permit the termination or
acceleration of, any Contractual Obligation of the Borrower, or (iv) result in
the creation or imposition of any Lien upon any of the property of the Borrower;
and
(d) do not require the consent, authorization by, or approval of, or
notice to, or filing or registration with, any Governmental Authority or any
other Person, other than those which have been obtained and copies of which have
been delivered to the Agent, each of which is in full force and effect.
3
<PAGE> 4
3.2. This Amendment has been duly executed and delivered by the
Borrower.
3.3. This Amendment is the legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its terms.
SECTION 4. Miscellaneous.
4.1. This Amendment and the rights of the parties hereto shall be
governed by, and construed in accordance with, the law of the State of New York.
Wherever possible, each provision of this Amendment shall be interpreted in such
a manner as to be effective and valid under applicable law, but if any provision
of this Amendment shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Amendment.
4.2. Any legal action or proceeding with respect to this Amendment or
any document related hereto may be brought in the courts of the State of New
York or of the United States of America for the Southern District of New York,
and, by execution and delivery of this Amendment, the Borrower hereby accepts,
and submits to, for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The parties hereto
hereby irrevocably waive any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of forum non
conveniens, which any of them may now or hereafter have to the bringing of any
such action or proceeding in such respective jurisdictions. The Borrower agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
4.3. Nothing contained in this Section 4 shall affect the right of the
Agent, the Issuer, any Lender or any holder of a Note to serve process in any
manner permitted by law or commence legal proceedings or otherwise proceed
against the Borrower in any other jurisdiction.
4.4. Each of the parties hereto waives any right it may have to trial
by jury in respect of any litigation based on, or arising out of, under or in
connection with this Amendment, or any course of conduct, course of dealing,
verbal or written statement or action of any party hereto.
4
<PAGE> 5
4.5. The Section titles contained in this Amendment are and shall be
without substantive meaning or content of any kind whatsoever and are not a part
of the agreement between the parties hereto.
4.6. This Amendment may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
4.7. Except as expressly amended by this Amendment, the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed.
5
<PAGE> 6
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be executed by an officer thereunto duly authorized, as of the date
first above written.
GENEVA STEEL COMPANY
By: /s/ Dennis L. Wanlass
-------------------------------
Name: Dennis L. Wanlass
Title: Vice President,
Treasurer and Chief
Financial Officer
CITICORP USA, INC.,
as Agent
By: /s/ Keith R. Karako
-------------------------------
Name: Keith R. Karako
Title: Attorney-in-Fact
CITICORP USA, INC.,
as Lender
By: /s/ Keith R. Karako
-------------------------------
Name: Keith R. Karako
Title: Attorney-in-Fact
CITIBANK, N.A.,
as Issuer
By: /s/ Keith R. Karako
-------------------------------
Name: Keith R. Karako
Title: Attorney-in-Fact
6
<PAGE> 7
CORESTATES BANK, N.A.,
as Lender
By: /s/ Michele A. Walcoff
-------------------------------
Name: Michele A. Walcoff
Title: Vice President
BANK ONE, UTAH, N.A.,
as Lender
By:
-------------------------------
Name:
Title: Vice President
FIRST SECURITY BANK
OF UTAH, N.A., as Lender
By: /s/ David P. Williams
-------------------------------
Name: David P. Williams
Title: Vice President
HELLER FINANCIAL, INC.,
as Lender
By: /s/ Tom Bukowski
-------------------------------
Name: Tom Bukowski
Title: Vice President
7
<PAGE> 1
AGREEMENT FOR THE SALE AND PURCHASE OF COAL
This Agreement for the Sale and Purchase of Coal (this "Agreement") is
entered into this 19th day of February, 1996 effective as of the 1st day of
April, 1994 (the "Effective Date"), between GENEVA STEEL COMPANY, a Utah
corporation ("Purchaser") and OXBOW CARBON & MINERALS, INC., a Delaware
corporation ("Seller").
RECITALS:
A. Purchaser owns and operates the Geneva steel mill at Vineyard,
Utah, which has coke batteries (the "Coke Batteries") that require
high-volatile, metallurgical grade coking coal.
B. Seller is the owner of certain land, mining equipment and
mineral interests known as the Sanborn Creek Mine located near Somerset,
Colorado (the "Coal Property").
C. Purchaser desires to obtain from the Coal Property
high-volatile, metallurgical grade coking coal with the specifications set forth
herein (the "Coal").
NOW, THEREFORE, in consideration of the premises and covenants
contained herein, the parties hereto agree as follows:
1. Sale and Purchase of Coal. Seller agrees to sell to Purchaser and
Purchaser agrees to buy from Seller the quantity of Coal indicated in Section 6
hereof on the terms and conditions set forth herein.
2. Term of Agreement; Contract Year; Contract Quarter. This Agreement
shall commence on the Effective Date and expire on March 31, 2004 (the "Term"),
unless terminated sooner or extended as herein provided. Notwithstanding the
foregoing, upon the expiration of the initial Term, upon the mutual written
agreement of Purchaser and Seller, this Agreement shall be extended for
successive one (1) year terms on the same terms and conditions as set forth
herein for so long as the Coke Batteries are operational. If Purchaser and
Seller fail to so agree, no further extensions of the Term shall occur and upon
the expiration of the then existing Term, Seller shall have no obligation to
continue the supply of Coal to Purchaser hereunder. For purposes of this
Agreement, the following terms shall have the indicated meanings: (a) "Contract
Year" shall mean each of the twelve (12) month periods beginning on the
Effective Date or on an anniversary date thereof during the Term, (b) "Contract
Quarter" shall mean each of the three (3)- calendar-month periods during the
Term that begin on the Effective Date or on the first day of the calendar month
immediately succeeding the completion of the preceding such three (3)-calendar-
month period, and (c) "ton" shall mean a ton of two thousand (2,000) pounds
avoirdupois weight.
3. Price. The price, f.o.b. railcar at the coal loading facilities
operated by Seller and located near Somerset, Colorado (the "Loadout"), for each
ton of Coal shipped under the terms of this
<PAGE> 2
Agreement (the "Purchase Price") shall be determined in accordance with the
following provisions of this Section 3.
3.1 First Contract Year. For the first Contract Year
hereunder the Purchase Price shall be: (a)
per net ton (the "Base Price") plus per
net ton (the "Override") on the first tons of Coal shipped
to Purchaser during such Contract Year, and (b) the Base Price per net
ton for the balance of the Coal shipped to Purchaser during such
Contract Year.
3.2 Second and Subsequent Contract Years. For the second and
each subsequent Contract Year, effective as of the first day of such
Contract Year (the "Adjustment Date"), the Purchase Price shall be the
Base Price multiplied by a fraction, the numerator of which is the
Adjustment Index, as hereinafter defined, and the denominator of which
is the Beginning Index, as hereinafter defined, adjusted to the nearest
one cent per ton. The calculations shall be made within thirty (30)
days after the last of the Indices, as hereinafter defined, becomes
available and a corrected invoice shall be issued promptly for all
shipments made between the Adjustment Date and the date the calculation
is made. If the corrected invoice indicates that additional amounts are
due Seller from Purchaser, Purchaser shall pay such additional amounts
within thirty (30) days after receipt of any such corrected invoice. If
the corrected invoices indicate that a credit is due to Purchaser,
Seller shall apply such credit against invoices for future shipments
until the credit is extinguished. The Purchase Price shall in no event
be reduced below the Base Price set forth in this Agreement for the
first Contract Year.
3.3 Definitions.
a. Adjustment Index; Beginning Index. For the
purposes of this Section 3, the term "Adjustment Index" means
the average of the Indices, as hereinafter defined, published
for each of the twelve (12) months immediately preceding the
Adjustment Date; and the term "Beginning Index" means the
average of the Indices published for each of the twelve (12)
months immediately preceding the Effective Date.
b. Indices. For the purposes of this Section 3, the
term "Indices" means the published
by the United States Department of Labor, Bureau of Labor
Statistics, for the applicable months. If the computation of
the Indices is changed so that the base year differs from that
used at the time the Beginning Index is first published, the
Indices shall be converted in accordance with the conversion
factor published by the United States Department of Labor,
Bureau of Labor Statistics. If the Indices are discontinued or
revised, such government indices or computation with which
they are replaced shall be used in order to obtain
substantially the same result as would be obtained if the
Indices had not been discontinued or revised.
2
<PAGE> 3
3.4 Purchase Price All Inclusive. Subject to Section 14
hereof, it is understood that the Purchase Price includes any
processing or quality control work necessary to meet the quality
specifications hereof, all costs of compliance by Seller with the
Federal Surface Mining Control and Reclamation Act of 1977, as amended,
and other federal, state and local laws and regulations applicable to
the Coal Property and all other items as set forth in this Agreement.
3.5 Purchase Price Adjustment. At the end of each Contract
Year hereunder, Seller shall provide Purchaser with evidence
satisfactory to Purchaser reflecting the aggregate number of tons of
Coal purchased by Purchaser during such Contract Year (the "Purchased
Tons") pursuant to this Agreement. For the purpose of calculating the
Purchase Price for such Contract Year pursuant to Sections 3.1 and 3.2
hereof the Base Price and the Override shall be adjusted to be (a)
, and ,
respectively, if the Purchased Tons are less than the Maximum Estimated
Quantity but greater than the Minimum Estimated Quantity, as such terms
are hereinafter defined, for such Contract Year, or (b)
, and ,
respectively, if the Purchased Tons are less than the Minimum Estimated
Quantity for such Contract Year. The manner in which such adjustment
will be calculated is illustrated on Exhibit A hereto. Notwithstanding
anything in this Agreement to the contrary, the Override shall be
applicable only during the Term of this Agreement.
The difference between the actual payments to Seller for such Contract
Year and the amount due to Seller as a result of the adjustment
provided for in this Section 3.5 shall be paid to Seller, or refunded
to Purchaser, as the case may be, within thirty (30) days after receipt
of such evidence by Purchaser. In lieu of receiving the refund provided
for in the immediately foregoing sentence, Purchaser may elect to
offset and recoup such amounts against the Purchase Price for Coal
during subsequent Contract Years. As used in this Agreement, the terms
"Minimum Estimated Quantity" and "Maximum Estimated Quantity" shall
mean the amount of Coal for the applicable Contract Year identified as
such on Exhibit B hereto. The provisions of this Section 3.5 relate to
pricing only and shall not modify or affect other provisions of this
Agreement relating to the quantity of Coal to be purchased and sold
hereunder.
4. Billing and Payment. Seller shall invoice Purchaser for each
shipment of Coal sold and shipped at the Loadout at the Purchase Price
applicable on the date of shipment. Each such invoice shall specify the date of
shipment and the quantity of Coal shipped. Invoices shall be accompanied by
supporting documentation including railcar numbers and weights. Purchaser shall
pay such invoices to Seller within thirty (30) days from the date of shipment.
3
<PAGE> 4
5. Shipment and Freight Charges.
5.1 Shipment. Purchaser and Seller shall cooperate to arrange
for and schedule the availability of unit train car sets in order that
the Coal to be delivered hereunder may be moved at the scheduled rate
of delivery. Railcars to be provided by the railroad under Purchaser's
contract therewith shall be open-top bottom dump one hundred (100) ton
hopper cars commonly used and in good operating condition whose use
will be compatible with the facilities at the Loadout and with
Purchaser's unloading facilities. Seller shall, at its own expense,
load at the Loadout each railcar to its approximate full visible
capacity or stenciled weight, whichever is less, consistent with good
operating practice in the industry. At the Loadout, Seller shall be
allowed three (3) hours free time for loading each train consisting of
84 or fewer cars. In the event Seller does not complete loading of all
cars at the Loadout within three (3) hours after the first empty car is
placed into position for loading by the railroad, or Seller fails to
satisfy the loading requirements of the applicable tariff or rail
contract, Seller will notify Purchaser within twenty-four (24) hours
that a delay has occurred and the length of time involved or expected
to be involved in such delay, and shall promptly pay Purchaser, with
right of set off by Purchaser against payments for Coal in the event of
nonpayment, for any resulting car detention penalties, demurrage or
other charges (including without limitation, charges for car sets not
loaded to a minimum average weight of ninety-five (95) tons per car and
for individual cars loaded in excess of marked capacity) assessed
against Purchaser by the railroad under Purchaser's applicable tariff
or freight contract. Any new loading conditions imposed by Buyer's rail
contract beyond those contained in this Section 5.1 must be approved by
Seller.
5.2 Freight Charges. Except as otherwise provided in Section
5.1 hereof, Purchaser shall pay all freight and other charges imposed
by its freight contract applicable to the destination of the shipment
after each shipment has been loaded on railcars.
6. Quantity.
6.1 Quantity of Coal.
a. Subject to Section 6.1(b) hereof, the parties
intend that this Agreement shall be a contract whereby Seller
is obligated to supply and Purchaser is obligated to purchase
for use at the Coke Batteries all of Purchaser's requirements
for high volatile Coal mined in the western United States.
b. Seller acknowledges that
, (ii) is currently purchasing, and intends
to continue to purchase for use in its blast furnaces,
metallurgical coke ("Coke"), and for use in the Coke Batteries
coals produced at other locations, (iii) is investigating
alternative processes to replace the use of its Coke
Batteries, and (iv) has the absolute right to determine at any
time, and from time
4
<PAGE> 5
to time, the amount and types of purchased Coke to be blended
with Coke produced at the Coke Batteries, or whether to
operate or suspend, in whole or in part, the operation of the
Coke Batteries at the Geneva Works, or the amount and types of
Coal for use in its coal blend at the Coke Batteries.
Therefore, subject only to Section 6.1(c) hereof, Purchaser
shall not be obligated to purchase any Coal from Seller in
excess of the amount of Coal that Purchaser requires to be
reasonably utilized during any Contract Year in the making, in
those Coke Batteries then being operated by Purchaser, of Coke
that meets the coking characteristics and blends that
Purchaser determines are desirable from time to time in
Purchaser's blast furnaces.
----------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
c. Notwithstanding Section 6.1(b), if (and only if)
Purchaser (i) purchases less than the Maximum Estimated
Quantity of Coal in any Contract Year, and (ii) during the
Term hereof, installs and operates an injection system for the
use of pulverized coal on its blast furnaces (a "PCI System")
during the Term hereof, Purchaser shall be obligated to
purchase from Seller, on an as-needed basis, and Seller shall
be obligated to sell to Purchaser, the difference in tonnage
between such amount and the amount of Coal actually purchased
(the "Shortfall") for each such Contract Year, upon the terms
and conditions set forth herein (including the then current
Purchase Price); provided, however, that in no event shall
Purchaser be obligated to purchase more than Three Hundred
Thousand (300,000) Tons of such Shortfall. The amount of any
Shortfall determined pursuant to the foregoing sentence shall
be reduced to the extent Purchaser purchases more than the
Maximum Estimated Quantity of Coal during any Contract Year
during the Term. Purchaser shall have the absolute right to
determine at any time, and from time to time, the amount of
purchased Coke and the amount of pulverized coal to be used at
the blast furnaces. If the PCI System is not installed on
Purchaser's blast furnaces during the Term hereof, Purchaser
shall have no obligation to purchase any portion of the
Shortfall. The provisions of this Section 6.1(c) shall survive
the expiration (but not termination) of the Term hereof.
5
<PAGE> 6
6.2 Forecasts and Nomination.
a. For Seller's planning purposes and as an
expression of Purchaser's then-current best estimate only,
Purchaser shall provide Seller with a forecast of its Coal
requirements at the Coke Batteries for each Contract Year
during the Term hereof. The annual forecast shall be
calculated on a Contract Quarter by Contract Quarter basis and
submitted to Seller on or before the first day of the third
month preceding the beginning of each Contract Year; provided,
however, that the annual forecast for the first Contract Year
hereunder shall be submitted to Seller within ten (10) days
after the execution of this Agreement.
b. Purchaser shall nominate the quantity of Coal
which Seller shall deliver during each sixty (60) day period
during the Term hereof, said nomination to be received by
Seller no later than the fifteenth day of the month preceding
said sixty (60) day period; provided, however, that the
nomination for the sixty (60) day period beginning on the date
of this Agreement shall be submitted to Seller within ten (10)
days after the execution of this Agreement. Seller shall
supply such Coal from only the Coal Property.
7. Weighing. The weight of Coal sold and delivered hereunder shall be
determined from Purchaser's weigh-in-motion scales located at its Geneva steel
mill in Vineyard, Utah, which shall be maintained and operated so as to satisfy
the requirements of the State of Utah and the Western Weighing and Inspection
Bureau for certified railroad scale weights. In the event Purchaser's scales
fail to meet such requirements, Seller and Purchaser shall mutually agree on the
use of substitute weigh scales or methods for determining the weight of any
shipment of Coal hereunder. A net weight will be determined and reported to
Seller within two (2) business days after delivery for each shipment of Coal
hereunder.
8. Loading and Coal Specifications.
8.1 Preparation and Loading of Coal. Purchaser shall make all
reasonable efforts to cause the railroad to provide, and Seller shall
make all reasonable efforts to load Coal only into, railcars that are
reasonably clean and free of debris, Coal remaining from earlier
deliveries, ice, snow and/or any other material that might inhibit
unloading or cause contamination of the Coal. Seller shall reject any
railcars delivered by the railroad that are not in the condition
required hereunder and shall promptly advise Purchaser of such
rejection.
6
<PAGE> 7
9. Coal Specifications. All Coal delivered by Seller pursuant to this
Agreement shall have, on a per train average basis, moisture, ash, sulfur and
- -100 mesh content less than or equal to, and have a free swelling index,
reflectance and oxidation greater than or equal to, and a size distribution
standard no greater than, the following (determined, where applicable, on an "as
received" basis for moisture content and on a "dry basis" for ash and sulfur
content):
<TABLE>
<CAPTION>
Subject Specification
------- -------------
<S> <C>
Moisture 9.00%
Ash 9.70%
Sulfur 0.75%
-100 Mesh 5.00%
Free Swelling Index 3.00
Size 2" x 0
Reflectance 0.69%
Oxidation 90% Minimum
Transmittance
</TABLE>
9.1 Penalties. Penalties for moisture, ash and sulfur shall
be calculated and paid to Purchaser on a train average basis as
follows:
a. Moisture. If the total moisture content exceeds
9.00%, the weight for settlement purposes in determining the
Purchase Price of the Coal shall be reduced by the weight of
the excess moisture determined as the percentage of moisture
in excess of 9.00%. Seller shall also reimburse Purchaser for
all increased freight and transportation costs incurred by
Purchaser attributable to the weight of the moisture in excess
of 9.00%.
b. Ash. If the ash content exceeds 9.7%, a penalty
of $ per ton for each one tenth of one percent
(0.10%) of ash in excess of 9.7% shall be applied pro rata.
c. Sulfur. If the sulfur content exceeds 0.75%, a
penalty of $ per ton for each one hundredth of one
percent (0.01%) of sulphur in excess of 0.75% shall be applied
pro rata.
7
<PAGE> 8
9.2 Rejection of Coal.
a. Specifications. Purchaser shall have the right to
reject any trainload of Coal having on a per train average
basis a moisture, ash, sulfur, or -100 mesh content greater
than, or having a free swelling index, reflectance or
oxidation less than, the following limits (determined, where
applicable, on an "as received" basis for moisture content and
on a "dry basis" for ash and sulfur content):
<TABLE>
<CAPTION>
Subject Rejection Limit
------- ---------------
<S> <C>
Moisture 10.00%
Ash 10.50%
Sulfur 0.80%
-100 Mesh 7.00%
Free Swelling Index 2.00
Reflectance 0.68%
Oxidation 84% Minimum
Transmittance
</TABLE>
Purchaser shall have the right to reject any Coal that is not
shipped within twenty (20) days after it is mined from the
Coal Property.
b. Exercise of Rejection Right. If Purchaser's
rejection is based on Seller's analytical results, exercise of
Purchaser's rejection right shall be made by Purchaser's
prompt notice to Seller by telecopier or by telephone within
three (3) hours after receipt of Seller's analytical results.
Where Purchaser's rejection is based on third-party laboratory
analyses, or on Purchaser's analyses for reflectance and
oxidation only, then Purchaser shall give Seller notice of
rejection no later than fifteen (15) days after Purchaser's
receipt of Seller's analytical results. Upon rejection, the
parties shall negotiate a commercially reasonable price
reduction for Purchaser's purchase of the rejected Coal if
Purchaser can use such Coal. If the parties fail to agree on a
price reduction or if Purchaser cannot use such Coal, Seller
shall, at its sole expense, remove the rejected Coal from
Purchaser's premises. Seller shall reimburse Purchaser for any
freight, handling or other costs Purchaser incurs in dealing
with rejected Coal.
8
<PAGE> 9
c. Replacement Obligation. Notwithstanding anything
to the contrary herein, including, without limitation, Section
6.1 hereof, Seller shall be obligated to supply to Purchaser,
if Purchaser so elects, Coal in an amount sufficient to
replace any Coal rejected by Purchaser hereunder, but the
minimum amounts of Coal that Purchaser shall be obligated to
purchase under this Agreement shall be reduced by the amount
of any such rejected Coal.
10. Coal Sampling and Analysis.
10.1 Taking of Samples. At Seller's cost, Seller shall sample,
at the Loadout, each train shipment of Coal made hereunder. Seller
shall use car top sampling (or an equivalent method approved by
Purchaser) in accordance with American Society for Testing and
Materials ("ASTM") sampling procedures and such other procedures and
protocol mutually developed and agreed upon by the parties hereto.
10.2 Preparation of Samples. At the time each such sample is
taken, it shall be sealed from atmospheric exposure to prevent change
in moisture. The representative composite sample of each unit train
shall be split into three (3) subsamples. One laboratory subsample
shall be sent to Purchaser, one laboratory subsample retained by Seller
for at least sixty (60) days from the date of shipment as a reserve
subsample, and one laboratory subsample shall be analyzed by Seller.
Each subsample shall be appropriately labeled by Seller so as to
identify the loading date, sample preparation date and the sample from
which the subsample was prepared. Immediately upon sample preparation,
each subsample shall be stored and sealed from atmospheric exposure.
The subsamples retained by Seller shall, at Purchaser's request, be
delivered to Purchaser's agent or to an independent commercial testing
laboratory designated by Purchaser.
10.3 Analysis. Each laboratory subsample taken by Seller under
Section 9.1 shall be analyzed for each of the specifications guaranteed
pursuant to Section 8.2 to determine the quality of the Coal
represented by the train sampled. Analyses shall be performed either in
Seller's laboratory or, at Seller's option, a third-party laboratory,
pursuant to the applicable ASTM analytical procedures with the
exception of reflectance and oxidation which shall be analyzed by
Purchaser, or at Purchaser's option a third party laboratory, pursuant
to the applicable ASTM standard or the standard U.S. Steel alkali
extraction procedure.
10.4 Reporting of Analytical Results. Seller shall report to
Purchaser, by telecopy or by telephone, the results of each train
analysis within seventy-two (72) hours after such Coal is shipped or as
soon as reasonably possible when analysis is done by an independent
laboratory.
10.5 Destination Sampling. At Purchaser's expense,
destination sampling and analysis may be conducted by Purchaser or a
third party. If Purchaser finds that material discrepancies persist
between the results of the sampling and analyses performed by Seller
and Purchaser,
9
<PAGE> 10
the sampling and analytical procedures of Seller and Purchaser shall be
reviewed by both parties and necessary steps will be taken to reduce
such discrepancies to a reasonable amount.
10.6 Dispute of Analytical Results. Any dispute by Purchaser
of Seller's analytical results must be raised within seven (7) days
after receipt of Seller's analytical results by Purchaser. After notice
from Purchaser of such dispute, the referee subsample shall be analyzed
by a third party independent, commercial laboratory mutually agreed
upon by Seller and Purchaser. The results of any such analysis shall be
binding on both parties. The cost of any such referee analysis shall be
shared equally by Purchaser and Seller.
11. Default. In the event of the failure of either Seller or Purchaser
to comply in good faith with any material obligation herein set forth, or the
insolvency of, the making of an assignment for the benefit of creditors by, the
institution of bankruptcy, reorganization, liquidation, or receivership
proceedings by, either Seller or Purchaser, (collectively, "Events of Default")
then the non-defaulting party shall have the right to terminate this Agreement
by giving to the other thirty (30) days notice in writing of its intention so to
do, specifying the default complained of. At the expiration of said thirty (30)
day period, unless the party in default shall have remedied such default, the
party not in default shall have the right at its election to terminate this
Agreement forthwith. The right to termination provided for in this Section 10
shall be in addition to the rights provided to either party in other portions of
this Agreement, at law or in equity. Notwithstanding the foregoing, for Events
of Default involving the failure to pay any amount provided for hereunder, the
notice and cure period provided for above shall be ten (10) days after written
notice of any such Event of Default.
12. Force Majeure. Performance by either Seller or Purchaser shall be
excused to the extent such party's performance is rendered impossible or
impracticable by one or more events of Force Majeure, as hereinafter defined.
For the purposes hereof, the term "Force Majeure" means any of the following
causes to the extent such cause was neither foreseen nor reasonably foreseeable
and is beyond the reasonable control of the party affected thereby: acts of
government or government authority, acts of God, strikes or other collective
action of labor, fires, floods, storms, tornados, earthquakes, explosions,
public disturbances, wars (whether declared or not), insurrections or sabotage,
or any other cause whether similar or dissimilar to those specifically
enumerated herein which was neither foreseen nor reasonably foreseeable and is
beyond the reasonable control of the party affected thereby; provided, however,
that nothing herein shall require the settlement of any labor dispute against
the will of the party affected thereby. Performance by Seller means mining,
preparing and delivering Coal to the Loadout and loading of Coal into railcars.
Performance by Purchaser means the operation of its Coke Batteries, the
transportation and delivery of Coal purchased hereunder from the Loadout to its
Coke Batteries, and utilization at its Coke Batteries of Coal to be supplied by
Seller hereunder. Any obligation of a party hereto to make payment of money to
the other party hereto under the terms of this Agreement shall not be excused by
reason of any claim of Force Majeure hereunder.
13. Pro Rata Delivery. In the event of reduced production at the Coal
Property as a result of the occurrence of an event of Force Majeure, Seller
shall for the period of reduced production (a)
10
<PAGE> 11
tender a commercially reasonable substitute coal, if such coal is available at a
price (including transportation) comparable to the delivered cost to Purchaser
of the Coal hereunder, and (b) allocate to the extent necessary among Purchaser
and Seller's other regular contract customers, in a manner which is fair and
reasonable, Seller's unaffected production, up to the whole thereof, required to
satisfy to the fullest extent commercially practicable Seller's obligations
under this Agreement. In making such allocations Seller shall take into account
the critical nature of the Coal to Purchaser's manufacturing operations, the
potential irreparable damage to Purchaser's Coke Batteries in the event of an
inadequate supply of Coal, and other relevant circumstances, all without regard
to the price paid by Seller's other customers.
14. No Requirement of Substitute Performance. If Section 11 hereof
excuses Purchaser from taking Coal for its Coke Batteries, Purchaser shall not
be required to purchase Coal hereunder for use in another plant or any other
part of the Geneva steel mill.
15. New or Changed Regulations. The parties hereto are entering into
this Agreement in reliance upon the laws, rules, regulations and decrees (the
"Regulations") of governments or governmental instrumentalities in effect as of
the Effective Date with respect to or directly affecting the Coal to be
delivered hereunder (including, without limitation, the mining, taxation,
transportation, sale, delivery, storage and use thereof). If at any time during
the Term (but not as a result of the fault or participation of the party
claiming the benefit of this Section), any Regulations are changed or new
Regulations are promulgated, and the effect on a party (the "affected party") of
compliance with such changed or new Regulations (a) is not covered by any other
provision of this Agreement, and (b) has or will have a materially adverse
effect on the affected party in its performance hereunder, then the affected
party shall have the option to request renegotiation of the Purchase Price and
other pertinent terms set forth in this Agreement to the extent reasonably
necessary to mitigate the effect of the new or changed Regulations. Such option
may be exercised by the affected party at any time after such new or changed
Regulations is promulgated by giving written notice to the other party. Such
written notice shall describe with reasonable specificity the new or changed
Regulations precipitating the request, the economic effect of the new or changed
Regulations, and the revised Purchase Price or other terms proposed by the
affected party. If the parties are unable to agree in writing upon a revised
Purchase Price or other terms within ______________ after such written notice is
given, either party shall have the right to terminate this Agreement at the end
of such _____________ period.
16. Independent Contractor. This is an agreement for the purchase and
sale of Coal in which the parties recognize and agree that neither Seller nor
Purchaser is an agent or employee of the other but each is an independent
contractor, independent of any managerial or other control or direction by the
other party hereto in the performance of their respective obligations hereunder.
Seller and Purchaser are free to perform, by such means and in such manner as
Seller or Purchaser, as the case may be, may choose, all work in pursuance of
commitments hereunder.
17. Indemnification.
11
<PAGE> 12
a. Indemnification by Seller. Seller agrees to indemnify,
defend, and hold harmless Purchaser from and against all claims,
liabilities, claims of indemnity and/or contribution from Seller's
employees or other persons or third parties, damages, losses, expenses,
royalties, rents, penalties, fines, and cost of defense (including,
without limitation, attorneys' fees), from whatever source, related to
or deriving from Seller's mining activities, right to mine and remove
Coal, its presumed mining and removal rights, or its sale and delivery
of Coal to Purchaser hereunder.
b. Indemnification by Purchaser. Purchaser agrees to
indemnify, defend, and hold harmless Seller from and against all
claims, liabilities, claims of indemnity and/or contribution from
Purchaser's employees or other persons or third parties, damages,
losses, expenses, royalties, rents, penalties, fines, and cost of
defense (including, without limitation, attorneys' fees), from whatever
source, related to or deriving from Purchaser's coking activities or
its purchase of Coal from Seller hereunder.
18. Warranties; Damages. Seller warrants title to the Coal and quiet
possession to Purchaser of Coal delivered to Purchaser pursuant to this
Agreement. Subject to Purchaser's right to reject Coal pursuant to Section 8.4
hereof, title to the Coal, as well as the risk of loss, shall transfer from
Seller when such Coal is free on board railcars at the Loadout. SELLER WARRANTS
THAT ALL COAL SOLD AND DELIVERED HEREUNDER SHALL COMPLY WITH THE QUALITY
SPECIFICATIONS SET FORTH HEREIN. NO OTHER WARRANTIES OR REPRESENTATIONS OF ANY
KIND ARE MADE BY SELLER, NOR SHALL ANY BE IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE. NEITHER SELLER NOR BUYER SHALL BE LIABLE FOR ANY SPECIAL, INCIDENTAL,
INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES.
19. Binding Effect and Assignments.
19.1 Binding Effect. This Agreement shall bind and inure to
the benefit of the parties and their respective successors and assigns.
19.2 Assignments. Neither party may assign or delegate this
Agreement or any rights or obligations hereunder without the prior
written consent of the other party, which consent shall not be
unreasonably withheld, and any assignment without such prior written
consent shall be null and void; provided, however, that consent shall
not be required for Seller or Purchaser to assign, pledge or
hypothecate this Agreement for financing purposes whereby the
transferring party retains all performance obligations hereunder.
20. Waiver. The failure of either party to insist in any one or more
instances upon strict performance of any provision of this Agreement, or to take
advantage of any right hereunder, shall not be construed as a waiver of such
provision or relinquishment of such right. To be effective, any
12
<PAGE> 13
waiver must be in writing, unambiguously setting forth the right to be waived
thereby, and executed by a duly authorized representative of the party to be
charged therewith.
21. Remedies Cumulative. Remedies provided under this Agreement shall
be cumulative and in addition to other remedies provided by applicable law.
22. Notices. Except as otherwise provided in this Agreement, any
notice, request, protest, consent, demand, report, payment or statement given by
one party to the other shall be in writing and deemed received forty-eight (48)
hours after it is deposited in the United States mail, first-class postage
prepaid, and properly addressed as follows:
If the notice is to Purchaser, to:
Geneva Steel Company
10 South Geneva Road
Vineyard, Utah 84058
Attention: Max E. Sorenson
Senior Vice President -
Engineering & Technology
and a required copy to:
Kimball, Parr Waddoups, Brown & Gee
185 South State, Suite 1300
Salt Lake City, Utah 84111
Attention: Roger D. Henriksen, Esq.
(or to such other person or address as Purchaser shall have designated
by due notice to Seller).
If the notice is to Seller, to:
Oxbow Carbon & Minerals, Inc.
3478 Buskirk Avenue, Suite 346
Pleasant Hill, CA 94523-4342
Attention: Larry Black
and a required copy to:
Oxbow Carbon & Minerals, Inc.
7901 Southpark Plaza, Suite 202
Littleton, Colorado 80120
Attention: Paul Fritzler
13
<PAGE> 14
and
Oxbow Corporation
1601 Forum Place
West Palm Beach, Florida 33401
Attention: J. Michael Smith, Esq.
(or to such other person or address as Seller shall have designated by
due notice to Purchaser).
23. Captions. The captions to Sections hereof are for convenience
only and shall not be considered a part of or used in construing or interpreting
this Agreement.
24. No Third-Party Beneficiaries. The provisions of this Agreement
are for the benefit of the parties hereto and not for any other person.
25. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Utah, including the Uniform
Commercial Code as enacted therein, without regard to choice of law rules
thereof.
26. Entire Agreement. This instrument contains the entire agreement
between the parties as to Coal produced and sold hereunder, and there are no
representations, understandings or agreements, oral or written, which are not
included herein. This Agreement cannot be changed except by duly authorized
representatives of both parties in writing.
27. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.
28. Severability. In the event that any provision or any part of any
provision of this Agreement shall be held to be invalid, illegal and/or
unenforceable, such invalidity, illegality or unenforceability shall not affect
any other provision or any part of the same provision which can be given effect
without the invalid, illegal or unenforceable provision or part thereof.
14
<PAGE> 15
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their authorized officers, as of the date and year first above
written.
GENEVA STEEL COMPANY,
a Utah corporation
By: /s/ Max E. Sorenson
--------------------------------------
Max E. Sorenson
Senior Vice President -
Engineering & Technology
Date Executed: February 21, 1996
---------------------------
OXBOW CARBON & MINERALS, INC.,
a Delaware corporation
By: /s/ B. Acton
--------------------------------------
Title: President and C.O.O.
-----------------------------------
Date Executed: May 4, 1996
---------------------------
15
<PAGE> 16
EXHIBIT A
TO
AGREEMENT FOR
SALE AND PURCHASE OF COAL
- --------------------------------------------------------------------------------
For the first Contract Year, the "Base Price" is as follows:
Annual Tonnage Base Price/N.T.
Case I. Less than the Minimum $
Estimated Quantity --------
Case II. More than the Minimum $
Estimated Quantity but --------
less than Maximum
Estimated Quantity
Case III. More than Maximum $
Estimated Quantity ========
In Case I above, the "Override" is calculated as follows:
1993-94 Contract Price per net ton
New "Base Price"
Difference
$ X 115,713 N.T. =
Then: =
In Case II, the "Override" is calculated as follows:
1993-94 Contract Price
New "Base Price"
Difference
$ X 115,713 N.T. =
Then: =
The "Override" is only applicable to the first Contract Year.
Thereafter, the Purchase Price for the second and subsequent Contract Years will
be the adjusted "Base Price" for the appropriate annual quantity category as
defined in Exhibit B of the Agreement.
<PAGE> 17
EXHIBIT B
TO
AGREEMENT FOR
SALE AND PURCHASE OF COAL
- --------------------------------------------------------------------------------
The "Minimum Estimated Quantity" and "Maximum Estimated Quantity" of
Coal referred to in the foregoing Agreement are set forth below for each
Contract Year during the Term of the Agreement:
Minimum Maximum
Estimated Estimated
Contract Quantity Quantity
Year (Tons)
(Tons)
First
--------- ---------
Second
--------- ---------
Third
--------- ---------
Fourth
--------- ---------
Fifth
--------- ---------
Sixth
--------- ---------
Seventh
--------- ---------
Eighth
--------- ---------
Ninth
--------- ---------
Tenth
--------- ---------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FROM THE REGISTRANTS BALANCE SHEET AND STATEMENT OF INCOME AS OF AND FOR THE SIX
MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 5,389
<SECURITIES> 0
<RECEIVABLES> 28,411
<ALLOWANCES> 2,171
<INVENTORY> 93,421
<CURRENT-ASSETS> 146,609
<PP&E> 614,785
<DEPRECIATION> 153,261
<TOTAL-ASSETS> 618,754
<CURRENT-LIABILITIES> 108,556
<BONDS> 347,477
<COMMON> 80,695
55,077
0
<OTHER-SE> 17,364
<TOTAL-LIABILITY-AND-EQUITY> 618,754
<SALES> 326,220
<TOTAL-REVENUES> 326,220
<CGS> 306,213
<TOTAL-COSTS> 306,213
<OTHER-EXPENSES> 11,899
<LOSS-PROVISION> 4,482
<INTEREST-EXPENSE> 16,883
<INCOME-PRETAX> (9,614)
<INCOME-TAX> (3,597)
<INCOME-CONTINUING> (6,017)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,017)
<EPS-PRIMARY> (.68)
<EPS-DILUTED> (.68)
</TABLE>
