<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 June 30, 1997
[ ] 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.
13,921,574 and 19,151,348 shares of Class A and Class B common stock,
respectively, outstanding as of July 31, 1997.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ -- $ 597
Accounts receivable, net 79,587 76,527
Inventories 99,017 93,139
Deferred income taxes 8,716 7,637
Prepaid expenses and other 14,249 15,410
Related party receivable 700 250
--------- ---------
Total current assets 202,269 193,560
--------- ---------
Property, plant and equipment:
Land 1,990 1,990
Buildings 16,109 16,109
Machinery and equipment 633,497 600,290
Mineral property and development costs 8,425 8,425
--------- ---------
660,021 626,814
Less accumulated depreciation (203,693) (172,291)
--------- ---------
Net property, plant and equipment 456,328 454,523
--------- ---------
Other assets 7,873 9,303
--------- ---------
$ 666,470 $ 657,386
========= =========
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of these
condensed consolidated balance sheets.
Page 2 of 20
<PAGE> 3
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in thousands)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
--------- -------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 53,537 $ 59,575
Accrued liabilities 20,916 18,353
Accrued payroll and related taxes 12,562 10,867
Production prepayments -- 9,763
Accrued interest payable 12,728 4,746
Accrued dividends payable 11,763 4,682
Accrued pension and profit
sharing costs 1,682 2,259
--------- ---------
Total current liabilities 113,188 110,245
--------- ---------
Long-term debt 404,295 388,431
--------- ---------
Deferred income tax liabilities 9,734 10,446
--------- ---------
Redeemable preferred stock 55,985 55,437
--------- ---------
Stockholders' equity:
Preferred stock -- --
Common stock:
Class A 87,979 87,979
Class B 10,110 10,110
Warrants to purchase Class A
common stock 5,360 5,360
Retained earnings (deficit) (9,332) 5,077
Class A common stock held in
treasury, at cost (10,849) (15,699)
--------- ---------
Total stockholders' equity 83,268 92,827
--------- ---------
$ 666,470 $ 657,386
========= =========
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of these
condensed consolidated balance sheets.
Page 3 of 20
<PAGE> 4
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Net sales $ 194,089 $ 183,105
Cost of sales 173,357 173,685
--------- ---------
Gross margin 20,732 9,420
Selling, general and administrative
expenses 5,467 6,871
--------- ---------
Income from operations 15,265 2,549
--------- ---------
Other income (expense):
Interest and other income 70 253
Interest expense (10,355) (9,305)
Other expense -- (638)
--------- ---------
(10,285) (9,690)
--------- ---------
Income (loss) before provision (benefit)
for income taxes 4,980 (7,141)
Provision (benefit) for income taxes 1,018 (2,781)
--------- ---------
Net income (loss) 3,962 (4,360)
Less redeemable preferred stock dividends and
accretion for original issue discount 2,625 2,295
--------- ---------
Net income (loss) applicable to common shares $ 1,337 $ (6,655)
========= =========
Net income (loss) per common share $ .08 $ (.43)
========= =========
Weighted average common shares outstanding $ 15,831 $ 15,319
========= =========
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of
these condensed consolidated statements.
Page 4 of 20
<PAGE> 5
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Net sales $ 546,791 $ 509,326
Cost of sales 505,208 479,899
--------- ---------
Gross margin 41,583 29,427
Selling, general and administrative
expenses 16,508 18,770
--------- ---------
Income from operations 25,075 10,657
--------- ---------
Other income (expense):
Interest and other income 299 525
Interest expense (30,129) (26,188)
Other expense -- (1,749)
--------- ---------
(29,830) (27,412)
--------- ---------
Loss before benefit for income taxes (4,755) (16,755)
Benefit for income taxes (1,804) (6,378)
--------- ---------
Net loss (2,951) (10,377)
Less redeemable preferred stock dividends and
accretion for original issue discount 7,628 6,694
--------- ---------
Net loss applicable to common shares $ (10,579) $ (17,071)
========= =========
Net loss per common share $ (.68) $ (1.12)
========= =========
Weighted average common shares outstanding $ 15,598 $ 15,284
========= =========
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of
these condensed consolidated statements.
Page 5 of 20
<PAGE> 6
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Dollars in thousands)
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,951) $(10,377)
Adjustments to reconcile net loss
to net cash provided by (used for)
operating activities:
Depreciation 31,695 31,643
Amortization 1,433 1,864
Deferred income taxes (1,791) (6,378)
(Gain) loss on sale of equipment 64 (45)
(Increase) decrease in current
assets--
Accounts receivable, net (3,060) (31,484)
Inventories (5,878) 31
Prepaid expenses and other 711 (11,604)
Increase (decrease) in current
liabilities--
Accounts payable (6,038) (4,872)
Accrued liabilities (385) (885)
Accrued payroll and related taxes 2,716 2,336
Production prepayments (9,763) 5,000
Accrued interest payable 7,982 8,426
Accrued pension and profit
sharing costs (577) 63
-------- --------
Net cash provided by (used for)
operating activities 14,158 (16,282)
-------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment (33,584) (23,626)
Proceeds from sale of property, plant
and equipment 21 213
Change in other assets -- 889
-------- --------
Net cash used for investing activities $(33,563) $(22,524)
======== ========
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of
these condensed consolidated statements.
Page 6 of 20
<PAGE> 7
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of long-term debt $ 47,285 $ 38,550
Payments on long-term (31,421) (13,028)
Payments for deferred loan costs and
other assets (4) (1,686)
Change in bank overdraft 2,948 2,162
-------- --------
Net cash provided by
financing activities 18,808 25,998
-------- --------
Net decrease in cash and cash
equivalents (597) (12,808)
Cash and cash equivalents at beginning
of period 597 12,808
-------- --------
Cash and cash equivalents at end
of period $ -- $ --
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 20,714 $ 16,620
</TABLE>
Supplemental schedule of noncash financing activities:
For the nine months ended June 30, 1997 and 1996, the Company increased
redeemable preferred stock by $548 and $536, respectively, for the
accretion required over time to amortize the original issue discount on the
redeemable preferred stock incurred at the time of issuance. In addition,
the Company increased the redeemable preferred stock liquidation preference
by $3,690 in lieu of paying a cash dividend during the nine months ended
June 30, 1996. At June 30, 1997, the Company had accrued dividends payable
of $11,763.
The accompanying notes to condensed consolidated
financial statements are an integral part of
these condensed consolidated statements.
Page 7 of 20
<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>
June 30, September 30,
1997 1996
------- -------------
<S> <C> <C>
Raw materials $28,119 $31,064
Semi-finished and finished goods 63,236 53,604
Operating materials 7,662 8,471
------- -------
$99,017 $93,139
======= =======
</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.
Page 8 of 20
<PAGE> 9
The net income (loss) for the three and nine-month periods ended June 30,
1997 and 1996 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.
(4) PRODUCTION PREPAYMENTS
A production prepayment arrangement with Mannesmann has historically
provided the Company with up to $8 million in added liquidity. The Company's
production prepayment arrangement with Mannesmann was terminated in May 1997.
(5) INSURANCE CLAIM RECEIVABLE
At June 30, 1997, the Company had recorded an insurance claim receivable
of $11 million for lost income associated with the January 1996 power outage,
which is included in prepaid expenses and other in the accompanying consolidated
financial statements. See "Part II Other Information, Item 1 Legal Proceedings."
(6) CERTAIN RECLASSIFICATIONS
Certain reclassifications have been made in the prior period financial
statements to conform to the current period presentation.
Page 9 of 20
<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 Nine Months Ended
June 30, June 30,
------------------ --------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 89.3 94.9 92.4 94.2
----- ----- ------ -----
Gross margin 10.7 5.1 7.6 5.8
Selling, general and administrative
expenses 2.8 3.7 3.0 3.7
----- ----- ----- -----
Income from operations 7.9 1.4 4.6 2.1
----- ----- ----- -----
Other income (expense):
Interest and other income -- 0.1 0.1 0.1
Interest expense (5.4) (5.1) (5.5) (5.2)
Other expense -- (0.3) -- (0.3)
----- ----- ----- -----
(5.4) (5.3) (5.4) (5.4)
----- ----- ----- -----
Income (loss) before provision
(benefit) for income taxes 2.5 (3.9) (0.8) (3.3)
Provision (benefit) for income taxes .5 (1.5) (0.3) (1.3)
----- ----- ----- -----
Net income (loss) 2.0% (2.4)% (0.5)% (2.0)%
===== ===== ===== =====
</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 Nine Months Ended
June 30, June 30,
------------------ --------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sheet 27.9% 28.3% 33.3% 30.8%
Plate 46.7 48.5 42.7 43.0
Pipe 11.3 8.5 9.2 6.4
Slab 11.0 12.0 11.7 17.1
Non-Steel 3.1 2.7 3.1 2.7
----- ----- ----- -----
100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
Page 10 of 20
<PAGE> 11
THREE MONTHS ENDED JUNE 30, 1997 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1996
Net sales increased 6.0% due to an increase in shipments of approximately
14,400 tons, a shift in product mix to higher-priced pipe and plate products
from lower-priced slab and sheet products and an increase in overall average
selling prices for the three months ended June 30, 1997 as compared to the same
period in the previous fiscal year. The weighted average sales price (net of
transportation costs) per ton of sheet and slab products increased by 7.7% and
2.3%, respectively, while the weighted average sales price of plate and pipe
products decreased by 1.0% and 4.7%, respectively, in the three months ended
June 30, 1997 compared to the same period in the previous fiscal year. The
decrease in plate prices was due to continued pricing pressure from unfairly
traded imports and other market factors. Shipped tonnage of plate and pipe
increased approximately 6,800 tons or 2.9% and 17,000 tons or 47.7%,
respectively, while shipped tonnage of sheet and slab products decreased
approximately 4,800 tons or 2.7% and 4,600 tons or 4.9%, respectively, between
the two periods. During the quarter a shortage of railcars caused shipments to
be slightly lower than expected. Although the Company's primary rail carrier is
building additional railcars over the next several months to meet the Company's
increased needs, the shortage is expected to also limit shipments during the
fourth fiscal quarter. Consistent with the Company's strategic objectives, plate
shipments have increased, in part through utilization of outside processors to
level and cut plate from coils. The Company is currently experiencing increased
demand for pipe and is increasing its production of pipe. The Company continues
to sell slabs to maximize production from the continuous caster while efforts to
increase rolling mill throughput continue. The Company is currently in the
process of installing the rolling mill finishing stands upgrade, which is
expected to increase rolling mill throughput and product quality. In light of
recent disruptions to operations caused by work on the upgrade, the Company has
elected to extend the schedule for future work to reduce the ongoing impact.
In November 1996, the Company, together with another domestic plate
producer, filed anti-dumping petitions with the Department of Commerce and the
International Trade Commission against imports of cut-to-length carbon plate
from the Russian Federation, Ukraine, the People's Republic of China and the
Republic of South Africa (the "Plate Trade Cases"). The petitions allege large
dumping margins and also set forth the injury to the U.S. industry caused by
dumped imports from the subject countries. In its preliminary injury
determination, the International Trade Commission ("ITC") ruled unanimously in
late December that dumped imports of cut-to-length carbon plate were causing or
threatening to cause material injury to the domestic industry. During the
quarter ended June 30, 1997, the Department of Commerce announced its
preliminary determination that imports of cut-to-length steel plate from these
countries were sold at significant dumping margins, and imposed substantial
preliminary margins on cut-to-length steel plate imports from those countries.
The Company believes that the allegations of injurious dumping will be upheld by
the Commerce Department and the ITC in their respective final determinations.
Failure to win the Plate Trade Cases, or a governmental settlement of the cases
on terms adverse to the Company, would have a material
Page 11 of 20
<PAGE> 12
adverse effect upon the Company. Dumped imports from countries not covered by
the Plate Trade Cases continue to suppress plate prices. The Company continues
to monitor plate imports from other countries as well as imports of other of its
products and may file additional trade cases in the future.
Domestic competition remains intense and imported steel continues to
adversely affect the market. 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 or decreases more quickly than many of its competitors. The
Company intends to react to price increases or decreases in the market as
required by competitive conditions.
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,
decreased to 89.3% for the three months ended June 30, 1997 from 94.9% for the
same period in the previous fiscal year. The overall average cost of sales per
ton shipped decreased approximately $9 per ton between the two periods primarily
as a result of a decrease in operating costs, offset slightly by a shift in
product mix to higher-cost plate and pipe products from lower-cost sheet and
slab products. Operating costs decreased as a result of significant improvements
in product yields and throughput rates, lower plant administrative costs and
lower freight rates partially offset by production disruptions associated with
the rolling mill finishing stands upgrade, higher wages and benefits and other
increased costs as compared to the same quarter in the previous year.
Depreciation costs included in cost of sales increased approximately $0.5
million for the three months ended June 30, 1997 compared with the same period
in the previous fiscal year. This increase was due to increases in the asset
base resulting primarily from the No. 1 blast furnace reline.
Selling, general and administrative expenses for the three months ended
June 30, 1997 decreased approximately $1.4 million as compared to the same
period in the previous fiscal year. These lower expenses resulted primarily from
Company efforts to reduce administrative staff, to decrease outside services and
to reduce other costs.
Interest expense increased approximately $1.1 million during the three
months ended June 30, 1997 as compared to the same period in the previous fiscal
year as a result of significantly lower capitalized interest and higher levels
of borrowing. The higher levels of borrowing resulted, in part, from the
termination of the Company's receivables securitization facility and termination
of the Company's prepayment arrangement with Mannesmann.
In May 1996, the Company terminated its receivables securitization
facility in connection with an amendment to and restatement of the Company's
revolving
Page 12 of 20
<PAGE> 13
credit facility. As a result, other expense decreased approximately $0.6 million
for the three months ended June 30, 1997, as compared with the same period in
the previous fiscal year.
For the three months ended June 30, 1997, the Company utilized a net
operating loss carryforward of approximately $2.3 million, which resulted in a
lower provision for income taxes of approximately $875,000. As of June 30, 1997,
the Company had utilized all net operating loss carryforwards for financial
reporting purposes.
NINE MONTHS ENDED JUNE 30, 1997 COMPARED WITH NINE MONTHS ENDED JUNE 30, 1996
Net sales increased 7.4% due to increased shipments of approximately
53,900 tons, a shift in product mix to higher priced plate, pipe and sheet
products from lower-priced slab products and increased overall average selling
prices for the nine months ended June 30, 1997 as compared to the same period in
the previous fiscal year. The weighted average sales price (net of
transportation costs) per ton of sheet and slab products increased by 4.6% and
0.2%, respectively, while the weighted average sales price per ton of plate and
pipe products decreased by 1.8% and 2.1%, respectively, in the nine months ended
June 30, 1997 compared to the same period in the previous fiscal year. Shipped
tonnage of plate, pipe and sheet increased approximately 50,000 tons or 8.7% ,
43,700 or 56.3% and 60,000 tons or 11.2%, respectively, while shipped tonnage of
slabs decreased approximately 99,800 tons or 26.9% between the two periods.
The Company's cost of sales, as a percentage of net sales, decreased to
92.4% for the nine months ended June 30, 1997 from 94.2% for the same period in
the previous fiscal year. The overall average cost of sales per ton shipped
increased approximately $5 per ton between the two periods primarily as a result
of a shift in product mix to higher-cost plate, pipe and sheet products from
lower-cost slab products as well as an increase in operating costs. Operating
costs increased as a result of increased natural gas and other fuel costs, hot
metal costs associated with a blast furnace reline, higher wages and benefits
and other increased costs. These increased costs were partially offset by
significant improvements in production yields and throughput rates.
Depreciation costs included in cost of sales increased approximately $0.1
million for the nine months ended June 30, 1997 compared with the same period in
the previous fiscal year.
Selling, general and administrative expenses for the nine months ended
June 30, 1997 decreased approximately $2.3 million as compared to the same
period in the previous fiscal year. The lower expenses resulted primarily from
reduced outside services and other costs.
Interest expense increased approximately $3.9 million for the nine months
ended June 30, 1997 as compared to the same period in the previous fiscal year,
reflecting higher levels of borrowing, in part from the termination of the
Page 13 of 20
<PAGE> 14
Company's receivables securitization facility, and lower levels of capitalized
interest.
Other expense decreased approximately $1.7 million for the nine months
ended June 30, 1997, as compared to the same period in the previous fiscal year
as a result of the termination in May 1996 of the Company's receivables
securitization facility.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements arise from capital expenditures and
working capital requirements, including interest payments. The Company has met
these requirements principally from the sale of equity, the incurrence of
long-term indebtedness, including borrowings under the Company's credit
facilities, equipment lease financing and cash provided by operations. As of
June 30, 1997, the Company's eligible inventories and accounts receivable
supported access to $111.5 million under the revolving credit facility (the
"Revolving Credit Facility"). As of June 30, 1997, the Company had $79.3 million
in borrowings and $8.4 million in letters of credit outstanding under the
Revolving Credit Facility, leaving $23.8 million in additional borrowing
availability.
The terms of the Revolving Credit Facility and of 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 requirement, a cash interest coverage requirement, a cumulative capital
expenditure limitation, limitations 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's ability to pay cash dividends on its 14% cumulative
redeemable exchangeable preferred stock (the "Redeemable Preferred Stock") is
subject to covenants and tests contained in the indentures governing the Senior
Notes and in the Company's Revolving Credit Facility. Restricted payment
limitations under the Company's Senior Notes precluded payment of the quarterly
preferred stock dividends beginning with the dividend due June 15, 1996. Unpaid
dividends were approximately $11.8 million at June 30, 1997. Unpaid dividends
accumulate until paid and accrue additional dividends at a rate of 14% per
annum. As a result of the Company's failure to pay four full quarterly
dividends, the holders of the Redeemable Preferred Stock elected two directors
on May 30, 1997. The right of such holders to elect directors continues until
the Company has paid all dividends in arrears and has paid the dividends due for
two consecutive quarters thereafter. While not affecting net income/loss,
dividends and the accretion required over time to amortize the original issue
discount associated with the Redeemable
Page 14 of 20
<PAGE> 15
Preferred Stock will negatively impact quarterly earnings per share by
approximately $.17 per share.
Besides these financing activities, the Company's major source of
liquidity has been cash provided by operating activities. Net cash provided by
operating activities was $14.2 million for the nine months ended June 30, 1997,
compared with net cash used for operating activities of $16.3 million for the
nine months ended June 30, 1996. The sources of cash provided by operating
activities during the nine months ended June 30, 1997 included depreciation and
amortization of $33.1 million and an increase in accrued interest of $8.0
million. These sources of cash flow were offset in part by an increase in
accounts receivable of $3.1 million, an increase in inventories of $5.9 million
related to stocking inventories at the Company's outside processors, a decrease
in deferred income tax liabilities of $1.8 million, a decrease in production
prepayments of $9.8 million, a decrease in accounts payable and accrued
liabilities of $4.3 million and a net loss of $3.0 million.
In addition to ongoing operations, the Company's potential sources of
liquidity include resolving its outstanding insurance claim associated with a
January 1996 power outage. During the quarter ended June 30, 1997, the
production prepayment arrangement with Mannesmann was terminated, resulting in
approximately $8 million in reduced liquidity. Termination of the production
prepayment arrangement does not otherwise affect Mannesmann's sales agency
arrangement with the Company.
Capital expenditures were approximately $33.6 million for the nine months
ended June 30, 1997. Capital expenditures for fiscal year 1997 are estimated at
$45 million, which include capital spending for its No. 1 Blast Furnace reline
and No. 2 Blast Furnace repairs. Capital expenditures for the fiscal year were
higher than anticipated due to increased reline costs and repairs on the No. 1
and No. 2 Blast Furnaces, respectively. The No. 1 Blast Furnace reline was
completed and the furnace placed in service in early January 1997. The No. 2
Blast Furnace repairs are currently in process and are expected to be completed
in September 1997. Additional capital projects for fiscal year 1997 consist of
installation of certain rolling mill finishing stand equipment and various other
projects designed to reduce costs and increase product quality and throughput.
The Company anticipates incurring start-up and transition costs as the rolling
mill finishing stand equipment is installed and implemented. Depending on
market, operational, liquidity and other factors, the Company may elect further
to adjust the design, timing and budgeted expenditures of its capital plan. In
addition, the Revolving Credit Facility contains certain limitations on capital
expenditures.
The Company has formed a limited liability company with certain unrelated
parties, which in turn has entered into a cooperative agreement with the United
States Department of Energy ("DOE") for the demonstration of a cokeless
ironmaking facility and associated power generation and air separation
facilities. As of June 30, 1997, the Company had spent approximately $1.1
million in connection with
Page 15 of 20
<PAGE> 16
the project, which has been included in construction in progress in the
accompanying consolidated financial statements. Expenditures on the project are
subject to government cost sharing arrangements. Completion of the project
remains subject to several contingencies. Under certain circumstances, the
Company may be required to repay some or all of the government cost share funds
and expense other funds included in construction in progress in the event the
project is terminated.
The Company is required to make substantial interest and dividend payments
on the Senior Notes, outstanding balances under the Revolving Credit Facility
and its Redeemable Preferred Stock. Currently, the Company's annual cash
interest expense is approximately $39.9 million and its annual dividends on
preferred stock are approximately $10.5 million.
FACTORS AFFECTING FUTURE RESULTS
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
continue shifting its product mix to higher-margin products. 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.
Pricing in future periods is a key variable to the Company's future operating
results that remains subject to significant uncertainty. Future pricing will be
affected by several factors including the level of imports, the final outcome of
the Plate Trade Cases, future capacity additions and other market factors such
as increased domestic plate production capacity currently coming on line.
The short-term and long-term liquidity of the Company is also dependent
upon several other 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. As stated
above, pricing remains a key variable with respect to future operating results.
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 16 of 20
<PAGE> 17
This quarterly report contains certain forward-looking statements with
respect to the Company that are subject to risks and uncertainties that include,
but are not limited to, those identified throughout this report, described from
time to time in the Company's other Securities and Exchange Commission filings
or discussed in the Company's press releases. Actual results may vary materially
from expectations.
Page 17 of 20
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 25, 1997, the Company filed a Verified Complaint in the Fourth
Judicial District Court for Utah County, State of Utah, against Commerce &
Industry Insurance Company ("Commerce & Industry"), a New York corporation,
seeking recovery under the Company's policy of insurance with Commerce &
Industry (the "Policy") of losses and damages to the Company's steel plant
arising out of a storm-related power outage occurring on January 24, 1996 (the
"Incident"). The Complaint was filed but not served on Commerce & Industry as
investigation and discussion of the Company's claims was ongoing. On April 9,
1997, the Company filed and caused to be served its First Amended Verified
Complaint asserting its claims and seeking judgement against Commerce & Industry
for all Incident-related losses and damages properly payable under the policy
in an amount to be proven at trial, as well as the Company's reasonable
attorneys' fees and costs. On the same date, the Company submitted a Proof of
Loss for its claims to Commerce & Industry of approximately $99 million. The
claims have been and are expected to be the subject of extensive investigation
and discussion and there can be no assurance that the amounts ultimately
recovered through negotiation or litigation will approximate the amount of the
claims asserted. The Company's insurance is a layered program, and therefore,
the Company secured insurance on the deductibles under the Policy in the amount
of $5 million from a separate group of insurers, all of which has been paid to
the Company.
On May 1, 1997, Commerce & Industry filed a Notice of Removal of the
Action to the United States District Court for the District of Utah, Central
Division. Commerce & Industry has not yet filed an answer to the First Amended
Verified Complaint.
Page 18 of 20
<PAGE> 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
10.1 Amendment No. 1 to the Geneva Steel X
Management Employee Savings and Pension Plan,
effective as of January 1 1997, dated
June 25, 1997
27 Financial Data Schedule X
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the three months
ended June 30, 1997.
Page 19 of 20
<PAGE> 20
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: August 14, 1997
Page 20 of 20
<PAGE> 1
EXHIBIT 10.1
AMENDMENT NO. 1 TO THE
GENEVA STEEL MANAGEMENT EMPLOYEE
SAVINGS AND PENSION PLAN
The Geneva Steel Management Employee Savings and Pension Plan (the
"Plan"), as amended and restated generally effective January 1, 1994, is hereby
amended effective (unless otherwise provided below) as of January 1, 1997 as
follows:
1. Section 2.1 shall be amended by the deletion of the word "or"
from the end of Section 2.1(c), and the addition of the following after Section
2.1(d):
(e) Compensated for services by an entity other than a
Participating Company and for any reason is deemed to be an
Employee;
(f) Subject to a written agreement that provides that
such individual is ineligible to participate in the Plan;
(g) Designated (or is in a group of Employees who are
designated) in writing by a Participating Company as
ineligible to participate in the Plan; or
(h) Is an individual who has not been treated by a
Participating Company as an Employee and, for that reason, the
Participating Company has not withheld employment taxes with
respect to that individual, even in the event that the
individual is determined, retroactively, to have been an
Employee.
2. The first sentence of Section 7.1 shall be amended to read as
follows:
7.1 Limitation on Contributions. The Annual Additions
allocated or contributed to a Participant for any Plan Year shall not
exceed the lesser of the following:
(a) $30,000; or
(b) 25% of the Participant's Compensation for such year.
<PAGE> 2
3. Effective August 1, 1997, Section 8.2 shall be amended to read
as follows:
8.2 Investment Funds. The Trust Fund established under the
Plan shall consist of the Balanced Fund, the Equity Fund, the
Short-Term Income Fund, the Bond Fund, the Geneva Stock Fund, and the
Life Insurance Fund. The Company may change the available Investment
Funds at any time in its sole discretion by adding Investment Funds,
removing Investment Funds, or changing Investment Funds. The
Balanced, Equity, Short-Term Income, Bond, Geneva Stock and Life
Insurance Funds shall be invested and reinvested as follows:
(a) The Balanced Fund shall be invested in those
investments selected by the Company that are designed to
achieve a balance between capital appreciation and
preservation of capital and generation of income.
(b) The Equity Fund shall be invested in equity
securities or in such other types of equity investments as are
authorized by the Trust Agreement.
(c) The Short-Term Income Fund shall be invested
in short term fixed-income investments as are authorized by
the Trust Agreement.
(d) The Bond Fund shall be invested primarily in
debt instruments or other types of debt investments as are
authorized by the Trust Agreement.
(e) The Geneva Stock Fund shall be invested
primarily in Geneva Stock, except that small amounts in the
Stock Fund may be invested in interest-bearing short-term debt
obligations, money market instruments, savings accounts or
similar investments. The Geneva Stock Fund shall consist of
all Stock Fund investments held by the Trustee and all cash
held by the Trustee which is derived from dividends on Geneva
Stock, interest and other income from Stock Fund investments,
Company Contributions to be invested in the Geneva Stock Fund
and proceeds from sales of Geneva Stock and Stock Fund
investments.
-2-
<PAGE> 3
(f) The Life Insurance Fund shall be invested in
life insurance policies on the lives of those Participants who
elected before September 1, 1989 to have their Accounts
invested in life insurance contracts. As of September 1,
1989, Participants whose Accounts were not invested in the
Life Insurance Fund could not (and still cannot) elect to
invest their Accounts in the Life Insurance Fund.
4. Effective August 1, 1997, Section 8.4 shall be amended to read
as follows:
8.4 Investment of Accounts. A Participant's Pension
Contribution Account shall be invested in the Balanced Fund, which may
consist of a Balanced Fund that is different from the Balanced Fund
for other Accounts. A Participant's Geneva Stock Account shall be
invested solely in the Geneva Stock Fund, provided, however, that a
Participant may, in accordance with Section 8.5, elect to transfer an
amount from the Geneva Stock Fund to those Investment Funds selected
under this Section. A Participant's Salary Deferral Account,
Discretionary Contribution Account, Matching Contribution Account and
Rollover Account, if any, shall be apportioned among one or more of
the Investment Funds in such whole percentages as the Participant may
specify pursuant to the election procedures prescribed by the Company.
If the Company receives no valid investment directions from the
Participant, such Accounts shall be invested entirely in the
Short-Term Income Fund. A Participant may change the investment
instructions with respect to future contributions with such frequency
as shall be established by the Company. Any such change shall be made
in the manner prescribed by the Company.
5. Effective August 1, 1997, Section 8.5 shall be amended to read
as follows:
8.5 Transfers Among Accounts. With such frequency as shall
be established by the Company, a Participant may elect to transfer all
or any part of his or her Accounts (except for his or her Pension
Contribution Account and Geneva Stock Account) to one or more of the
Investment Funds in the manner prescribed by the Company. Any such
transfer shall be applicable as soon administratively feasible
pursuant to the procedure established by the Company. With
-3-
<PAGE> 4
respect to the Geneva Stock Account, prior to the end of each Plan
quarter, a Participant may elect to transfer ten percent (10%) of the
vested portion of his or her Geneva Stock Account to one or more of
the Investment Funds (other than the Life Insurance Fund) as elected
pursuant to Section 8.4. Such a transfer from the Geneva Stock Account
shall be effective as soon as administratively feasible following the
end of the Plan quarter in which the election is made. Upon
attainment of age 55, a Participant may elect prior to the end of each
Plan quarter to transfer all (or any portion in 10% increments) of his
or her Geneva Stock Account to one or more of the Investment Funds as
elected pursuant to Section 8.4. Any transfer from the Geneva Stock
Fund shall be made in accordance with the requirements of this Section
8.5 and such additional rules as may be prescribed by the Company.
6. Effective August 1, 1997, Section 8.6 shall be amended to read
as follows:
Each Account shall be revalued at fair market value and adjusted each
Valuation Date for contributions, distributions and other items since
the last Valuation Date, to reflect the Participant's share of any
realized or unrealized investment income, gains, losses and investment
expenses of the Fund or Funds in which such Account was invested that
have accrued since the prior Valuation Date. A Participant's share
shall be proportionate to the ratio that the adjusted balance in his
or her Account bears to the total adjusted balances of all Accounts
invested in the Funds determined as of the Valuation Date.
7. Effective August 1, 1997, Section 8.8 shall be amended to read
as follows:
8.8 Life Insurance Fund Rules.
(a) No Participant shall have any right, title, interest or incident
of ownership in any life insurance contract purchased by the Trustee, except at
the time or times and upon the terms and conditions set forth in this Plan.
The Trustee shall be the sole owner of all incidents of ownership in each life
insurance contract but the Company may direct the Trustee as to the exercise of
all such incidents of ownership.
(b) The aggregate premiums for all ordinary life insurance purchased
for each Participant shall at all times be less than 50% of the Company
Contributions allocated to the Participant's Accounts, 25% in the case of term
insurance. In the event that
-4-
<PAGE> 5
payment of any life insurance premiums would cause the aggregate premiums to
exceed these limitations, then the premium will not be made, and the insurance
contract shall be converted to a paid-up contract. Alternatively, the face
amount of insurance shall be reduced so that the premium will not exceed the
limitations.
(c) Upon the death of a Participant, the proceeds of any life
insurance contract(s) will be paid to the Trustee and distributed in accordance
with the terms of this Plan. Upon a Participant's change in investment
election involving a transfer of all of his or her assets out of the Life
Insurance Fund, the life insurance contract must be surrendered and the cash
value of the surrendered contract shall be paid to the Trustee to be disposed
of in accordance with the terms of this Plan and the Participant's investment
election. Upon a Participant's termination of employment, the life insurance
contract must be surrendered and the cash value of the surrendered contract
shall be paid to the Trustee to be disposed of in accordance with the terms of
this Plan unless the Participant has elected to receive a lump sum distribution
of his or her Plan Benefit, in which case the Participant may elect to receive
either the cash value of the surrendered contract, or a distribution of the
contract.
8. Section 10.4 shall be amended by deleting the third sentence
thereof, and inserting the following in its place:
Notwithstanding any other provision of the Plan to the contrary,
distribution of the Plan Benefit of a Participant shall be made no
later than April 1 of the calendar year following the later of (a) the
calendar year in which the Participant attains age 70 1/2 or (b) the
calendar year in which the employee retires. Notwithstanding the
above, Section 10.04(b) shall not apply to any Participant who is a
"5-percent owner" (as defined in section 416 of the Code) with respect
to the Plan Year ending in the calendar year in which the Participant
attains age 70 1/2. To the extent that the Commissioner of the
Internal Revenue Service determines in a ruling, notice or other
document of general authority, that the required beginning date set
forth in the Plan prior to January 1, 1997 for distributions with
respect to Participants who remain Employees on or after attaining age
70 1/2 constitutes a "protected benefit" within the meaning of section
411(d)(6) of the Code, the provisions of the Plan in effect as of
December 31, 1996 shall continue to apply, as elected by the
Participant.
-5-
<PAGE> 6
9. Section 15.1 shall be amended by deleting the last paragraph
thereof.
10. Effective October 12, 1996, Section 16.8 shall be added to the
Plan as follows:
16.8 Military Service Notwithstanding any provision of this
Plan to the contrary, contributions, benefits and service credit with
respect to qualified military service will be provided in accordance
with section 414(u) of the Code. Loan payments will be suspended
under this Plan as permitted under section 414(u)(4) of the Code.
11. Effective May 1, 1997, Section 18.5 shall be added to the Plan
as follows:
18.5 Transfer to Union Plan. If an Employee ceases to be an
Eligible Employee and commences participation in the Company's Union
Employee Savings and Pension Plan (the "Union Plan"), his or her
Accounts may be transferred, at the request of the Participant, to the
Union Plan and he or she shall be subject to the Union Plan's vesting
schedule; provided, however, that the Participant shall suffer no
reduction in the vested percentage of his or her Accounts transferred
to the Union Plan.
12. Section 19.9 shall be amended by deleting the last sentence
thereof.
13. Section 19.18 shall be deleted in its entirety and the
remaining Sections of the Plan renumbered accordingly. Former Section 19.19
(renumbered Section 19.18) shall be amended to read as follows:
19.18 "Investment Funds" means the Funds established under
the Trust Fund pursuant to Section 8.2.
14. Section 1.2 of Appendix I shall be amended by replacing
"3.1(c)" with "3.1(d)."
15. Section 1.3 of Appendix I shall be amended by replacing
"2.1(c)" with "2.1(d)."
-6-
<PAGE> 7
16. Section 1.8 of Appendix I shall be amended to read as follows:
1.8 "Highly Compensated Employee" means an active
Employee who:
(a) During the look-back year received Total
Compensation of more than $80,000 (or such larger amount as
may be adopted by the Commissioner of Internal Revenue to
reflect a cost-of-living adjustment) and was a member of the
Top-Paid Group; or
(b) At any time during the look-back year or the
determination year was a five-percent owner (as defined in
section 416(i)(1) of the Code).
For purposes of this Section, the determination year shall be
the Plan Year. The look-back year shall be the 12-month period
immediately preceding the determination year. The determination of
who is a Highly Compensated Employee, including the determinations of
the number and identity of Employees in the Top-Paid Group and the
Total Compensation that is considered, will be made in accordance with
section 414(q) of the Code and regulations thereunder.
The term "Highly Compensated Employee" shall also include a
former Employee who separated from service (or is deemed to have
separated) prior to the determination year, performs no service for
any member of the Affiliated Group during the determination year, and
was a Highly Compensated Employee as an active Employee for either the
separation year or any determination year ending on or after the
Employee's 55th birthday.
The Company may elect to modify the method described in this
Section for defining "Highly Compensated Employee" by electing to
apply the $80,000 limit described above without regard to whether an
Employee is in the Top-Paid Group.
17. Section 1.11(e) of Appendix I shall be amended by replacing
"402(a)(8)" with "402(e)(3)."
18. Section 1.12 of Appendix I shall be amended by the addition of
the following at the end thereof:
-7-
<PAGE> 8
The Company may elect, in a consistent and uniform manner, to apply
one or more of the age-and-service-based exclusions above by
substituting a younger age or shorter period of service, or by not
excluding individuals on the basis of age or service.
19. Section 2.1 of Appendix I shall be amended to read as follows:
2.1 Percentage Limitations. The Plan shall satisfy the
average deferral percentage test, as provided in section 401(k)(3) of
the Code and the regulations issued thereunder. Subject to the
special rules described in this Appendix, the Salary Deferral
Contributions of Highly Compensated Employees shall not exceed the
limits described below:
(a) A "Deferral Percentage" shall be determined for
each Highly Compensated Employee who, at any time during the
Plan Year, is a Participant or is eligible to participate in
the Plan, which Deferral Percentage shall be the ratio,
computed to the nearest one-hundredth of one percent, of the
Highly Compensated Employee's Salary Deferral Contributions
for the Plan Year to the Highly Compensated Employee's Section
414(s) Compensation for the Plan Year;
(b) For Plan Years beginning prior to January 1,
1997, a Deferral Percentage shall be determined for each
Nonhighly Compensated Employee who, at any time during the
Plan Year, is a Participant or is eligible to participate in
the Plan, which Deferral Percentage shall be the ratio,
computed to the nearest one-hundredth of one percent, of the
Nonhighly Compensated Employee's Salary Deferral Contributions
for the Plan Year to the Nonhighly Compensated Employee's
Section 414(s) Compensation for the Plan Year;
(c) For Plan Years beginning after December 31,
1996, and except to the extent that the Company elects (in
accordance with applicable law) to apply Subsection (b) rather
than this Subsection (c), a Deferral Percentage shall be
determined for each Nonhighly Compensated Employee who, at any
time during the preceding Plan Year, was a Participant or who
was eligible to participate in the Plan, which Deferral
-8-
<PAGE> 9
Percentage shall be the ratio, calculated to the nearest
one-hundredth of one percent, of the Nonhighly Compensated
Employee's Salary Deferral Contributions for the preceding
Plan Year to the Nonhighly Compensated Employee's Section
414(s) Compensation for the preceding Plan Year;
(d) The Aggregate 401(k) Contributions of Highly
Compensated Employees shall constitute Excess Before-Tax
Contributions and shall be reduced, pursuant to Section 2.2 of
this Appendix I, to the extent that the average Deferral
Percentage (the "Before-Tax Percentage") of Highly Compensated
Employees exceeds the greater of (i) 125 percent of the
Before-Tax Percentage of Nonhighly Compensated Employees or
(ii) the lesser of (A) 200 percent of the Before-Tax
Percentage of Nonhighly Compensated Employees or (B) the
Before-Tax Percentage of Nonhighly Compensated Employees plus
two percentage points.
20. Section 2.2 of Appendix I shall be amended to read as follows:
2.2 Reduction of Salary Deferred Contributions. The
reduction of the Salary Deferral Contributions of Highly Compensated
Employees as required by Section 2.1(d) of this Appendix I shall be
made on the basis of the amount of contributions by or on behalf of
each Highly Compensated Employee. Such reductions in Before-Tax
Contributions shall be made in accordance with applicable regulations
and shall constitute "Excess Before-Tax Contributions." For all
affected Highly Compensated Employees such Excess Before-Tax
Contributions shall be eliminated as provided for in Article 5 of this
Appendix I.
21. Section 3.1 of Appendix I shall be amended to read as follows:
3.1 Percentage Limitations. To the extent Matching
Contributions are not treated as Salary Deferral Contributions and
tested under Article 2 of this Appendix I, the Aggregate 401(m)
Contributions of Highly Compensated Employees for any Plan Year shall
not exceed the limits described below:
(a) A "Contribution Percentage" shall be determined
for each Highly Compensated
-9-
<PAGE> 10
Employee who, at any time during the Plan Year, is a
Participant or is eligible to participate in the Plan, which
Contribution Percentage shall be the ratio, computed to the
nearest one-hundredth of one percent, of the Highly
Compensated Employee's Aggregate 401(m) Contributions for the
Plan Year to the Highly Compensated Employee's Section 414(s)
Compensation for the Plan Year;
(b) For Plan Years beginning prior to January 1,
1997, a Contribution Percentage shall be determined for each
Nonhighly Compensated Employee who, at any time during the
Plan Year, is a Participant or is eligible to participate in
the Plan, which Contribution Percentage shall be the ratio,
computed to the nearest one-hundredth of one percent, of the
Nonhighly Compensated Employee's Aggregate 401(m)
Contributions for the Plan Year to the Nonhighly Compensated
Employee's Section 414(s) Compensation for the Plan Year;
(c) For Plan Years beginning after December 31,
1996, and except to the extent that the Company elects (in
accordance with applicable law) to apply Subsection (b) rather
than this Subsection (c), a Contribution Percentage shall be
determined for each Nonhighly Compensated Employee who, at any
time during the preceding Plan Year, was a Participant or who
was eligible to participate in the Plan, which Contribution
Percentage shall be the ratio, calculated to the nearest
one-hundredth of one percent, of the Nonhighly Compensated
Employee's Aggregate 401(m) Contributions for the preceding
Plan Year to the Nonhighly Compensated Employee's Section
414(s) Compensation for the preceding Plan Year; and
(d) The Aggregate 401(m) Contributions of Highly
Compensated Employees shall constitute Excess Aggregate 401(m)
Contributions and shall be reduced, pursuant to Section 3.2 of
this Appendix I, to the extent that the average of the
Contribution Percentages (the "Aggregate 401(m) Percentage")
of Highly Compensated Employees exceeds the greater of (1) 125
percent of the Aggregate 401(m) Percentage of Nonhighly
Compensated Employees or (2) the lesser of
-10-
<PAGE> 11
(A) 200 percent of the Aggregate 401(m) Percentage of
Nonhighly Compensated Employees or (B) the Aggregate 401(m)
Percentage of Nonhighly Compensated Employees plus two
percentage points.
22. Section 3.2 of Appendix I shall be amended to read as follows:
3.2 Reduction of Aggregate 401(m) Contributions. The
reduction in the Aggregate 401(m) Contributions of Highly Compensated
Employees as required by Section 3.1(d) of this Appendix I shall be
made on the basis of the amount of contributions by or on behalf of
each Highly Compensated Employee. Such reductions shall be made in
accordance with applicable regulations and shall constitute "Excess
Aggregate 401(m) Contributions." For all affected Highly Compensated
Employees, such Excess Aggregate 401(m) Contributions shall be
eliminated as provided for in Article 5 hereof.
IN WITNESS WHEREOF, the Company hereby adopts this First Amendment
this 25th day of June, 1997.
GENEVA STEEL
By /s/ Carl E. Ramnitz
---------------------------------
As Its Vice President Human Resources
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
REGISTRANT'S CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS
AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B) CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING
THE NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 79,587
<ALLOWANCES> 3,240
<INVENTORY> 99,017
<CURRENT-ASSETS> 202,269
<PP&E> 660,021
<DEPRECIATION> (203,693)
<TOTAL-ASSETS> 666,470
<CURRENT-LIABILITIES> 113,188
<BONDS> 404,295
55,985
0
<COMMON> 87,240
<OTHER-SE> (3,972)
<TOTAL-LIABILITY-AND-EQUITY> 666,470
<SALES> 546,791
<TOTAL-REVENUES> 546,791
<CGS> 505,208
<TOTAL-COSTS> 505,208
<OTHER-EXPENSES> 16,508
<LOSS-PROVISION> 5,426
<INTEREST-EXPENSE> 29,830
<INCOME-PRETAX> (4,755)
<INCOME-TAX> (1,804)
<INCOME-CONTINUING> (2,951)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,951)
<EPS-PRIMARY> (.68)
<EPS-DILUTED> (.68)
</TABLE>
