-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CHa+a6p9Vic+a7eeMYHkgBj2YUWH3Bn4HcdQMzel/dksGOHscS0JTvz2xXOEZ/nQ ohKx8krY0W2UC+zmxWUTXw== 0000950152-99-008504.txt : 19991029 0000950152-99-008504.hdr.sgml : 19991029 ACCESSION NUMBER: 0000950152-99-008504 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991028 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OGLEBAY NORTON CO /NEW/ CENTRAL INDEX KEY: 0001082816 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 341888342 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-02781-99 FILM NUMBER: 99735785 BUSINESS ADDRESS: STREET 1: 1100 SUPERIOR AVENUE CITY: CLEVELAND STATE: OH ZIP: 44114-2598 BUSINESS PHONE: 2168613300 MAIL ADDRESS: STREET 1: 1100 SUPERIOR AVENUE CITY: CLEVELAND STATE: OH ZIP: 44114-2598 10-Q 1 OGLEBAY NORTON COMPANY 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended September 30, 1999 Commission File number 000-25651 ------------------ --------- OGLEBAY NORTON COMPANY ------------------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 34-1888342 ------------------------------- --------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1100 Superior Avenue Cleveland, Ohio 44114-2598 ----------------------------------------------------------------- (address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 216 861-3300 ------------ None --------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Shares of Common Stock outstanding at September 30, 1999: 4,886,899 ---------- 2 OGLEBAY NORTON COMPANY AND SUBSIDIARIES INDEX
PART I. FINANCIAL INFORMATION PAGE NUMBER - ----------------------------- ----------- ITEM 1 Condensed Consolidated Statement of Operations (Unaudited) - Three Months Ended September 30, 1999 and 1998 and Nine Months Ended September 30, 1999 and 1998 3 Condensed Consolidated Balance Sheet (Unaudited) - September 30, 1999 and December 31, 1998 4 Condensed Consolidated Statement of Cash Flows (Unaudited) - Nine Months Ended September 30, 1999 and 1998 5 Notes to Condensed Consolidated Financial Statements 6 - 13 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 14 - 22 ITEM 3 Quantitative and Qualitative Disclosures About Market Risk 23 PART II. OTHER INFORMATION - -------------------------- ITEM 6 Exhibits and Reports on Form 8-K 23
3 PART I. ITEM 1. FINANCIAL INFORMATION OGLEBAY NORTON COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended September 30 September 30 ------------------------------ ------------------------------ 1999 1998 1999 1998 ---- ---- ---- ---- NET SALES AND OPERATING REVENUES $ 85,377,048 $ 85,845,026 $ 217,121,834 $ 163,879,041 COSTS AND EXPENSES Cost of goods sold and operating expenses 56,574,461 55,541,037 144,235,551 106,504,922 Depreciation, depletion and amortization 7,391,186 7,848,950 20,376,159 14,236,421 General, administrative and selling expenses 6,020,052 6,717,871 17,877,618 15,317,138 ------------- ------------- ------------- ------------- 69,985,699 70,107,858 182,489,328 136,058,481 ------------- ------------- ------------- ------------- INCOME FROM OPERATIONS 15,391,349 15,737,168 34,632,506 27,820,560 Gain on disposition of assets 1,543,896 187,039 1,540,539 231,675 Interest expense (7,804,050) (7,441,271) (23,125,306) (11,888,506) Other expense - net (139,373) (30,454) (51,561) (347,266) ------------- ------------- ------------- ------------- INCOME BEFORE INCOME TAXES 8,991,822 8,452,482 12,996,178 15,816,463 Income taxes (2,562,000) (2,773,000) (3,704,000) (4,908,000) ------------- ------------- ------------- ------------- NET INCOME $ 6,429,822 $ 5,679,482 $ 9,292,178 $ 10,908,463 ============= ============= ============= ============= NET INCOME PER SHARE - BASIC $ 1.32 $ 1.19 $ 1.92 $ 2.29 ============= ============= ============= ============= NET INCOME PER SHARE - ASSUMING DILUTION $ 1.32 $ 1.19 $ 1.92 $ 2.28 ============= ============= ============= ============= DIVIDENDS PER SHARE OF COMMON STOCK $ .20 $ .20 $ .60 $ .60 ============= ============= ============= =============
See notes to condensed consolidated financial statements. -3- 4 OGLEBAY NORTON COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS (UNAUDITED) SEPTEMBER 30 December 31 1999 1998 ------------- ------------- CURRENT ASSETS Cash and cash equivalents $ -0- $ 1,940,410 Accounts receivable, less reserve for doubtful accounts (1999-$1,210,000 1998-$1,194,000) 45,924,857 36,624,374 Income tax receivable 860,026 3,460,026 Inventories 28,941,041 28,450,091 Deferred income taxes 2,510,745 2,510,745 Prepaid insurance and other expenses 8,889,503 5,069,554 ------------- ------------- TOTAL CURRENT ASSETS 87,126,172 78,055,200 PROPERTY AND EQUIPMENT 542,754,579 566,194,939 Less allowances for depreciation, depletion and amortization 211,572,200 218,752,499 ------------- ------------- 331,182,379 347,442,440 GOODWILL (net of accumulated amortization of $4,108,000 in 1999 and $2,370,000 in 1998) 66,562,665 89,262,233 PREPAID PENSION COSTS 34,909,371 31,303,221 OTHER ASSETS 17,798,118 19,560,668 ------------- ------------- TOTAL ASSETS $ 537,578,705 $ 565,623,762 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY (UNAUDITED) SEPTEMBER 30 December 31 1999 1998 ------------- ------------- CURRENT LIABILITIES Current portion of long-term debt $ 4,683,697 $ 9,506,345 Accounts payable 12,794,081 10,332,250 Payrolls and other accrued compensation 8,111,631 10,446,352 Accrued expenses 11,283,203 14,908,743 Accrued interest expense 3,349,620 5,481,665 Income taxes payable 3,076,686 68,741 ------------- ------------- TOTAL CURRENT LIABILITIES 43,298,918 50,744,096 LONG-TERM DEBT, less current portion 275,159,530 302,559,729 POSTRETIREMENT BENEFITS OBLIGATIONS 25,560,486 27,181,435 OTHER LONG-TERM LIABILITIES 19,713,448 22,059,322 DEFERRED INCOME TAXES 36,922,420 36,145,768 STOCKHOLDERS' EQUITY Common stock, par value $1 per share, authorized 10,000,000 shares; issued 7,253,332 shares 7,253,332 7,253,332 Additional capital 8,838,379 7,480,572 Retained earnings 153,248,163 146,852,300 Accumulated other comprehensive expense -0- (708,549) ------------- ------------- 169,339,874 160,877,655 Treasury stock, at cost - 2,366,433 and 2,487,901 shares at respective dates (32,415,971) (33,944,243) ------------- ------------- 136,923,903 126,933,412 ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 537,578,705 $ 565,623,762 ============= =============
See notes to condensed consolidated financial statements. -4- 5 OGLEBAY NORTON COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30 ----------------------------- 1999 1998 ---- ---- OPERATING ACTIVITIES Net income $ 9,292,178 $ 10,908,464 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 20,376,159 14,236,420 Gain on disposition of assets (1,540,539) (231,675) Deferred income taxes 1,313,000 129,413 Increase in prepaid pension costs (3,606,150) (3,776,983) Deferred vessel maintenance costs (1,954,139) (1,189,980) Increase in accounts receivable (14,673,269) (6,859,222) Increase in inventories (5,143,953) (2,817,599) Increase (decrease) in accounts payable 4,397,238 (181,362) Decrease in payrolls and other accrued compensation (2,334,721) (887,660) (Decrease) Increase in accrued expenses (3,165,916) 1,304,429 Decrease in accrued interest (2,132,045) (1,860,148) Increase in income taxes 5,586,041 1,486,079 Other operating activities (1,206,865) 1,710,354 ------------- ------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 5,207,019 11,970,530 INVESTING ACTIVITIES Capital expenditures (19,414,926) (13,115,134) Acquisition of businesses (13,366,551) (242,660,722) Proceeds from the disposition of assets 62,952,397 9,708,424 ------------- ------------- NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 30,170,920 (246,067,432) FINANCING ACTIVITIES Additional long-term debt 162,758,500 292,000,000 Repayments on long-term debt (196,009,664) (72,569,772) Financing costs (1,172,102) (9,042,043) Payments of dividends (2,896,315) (2,859,201) Purchases of treasury stock (319,025) (560,868) ------------- ------------- NET CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES (37,638,606) 206,968,116 Effect of exchange rate changes on cash and cash equivalents 320,257 153,524 ------------- ------------- Decrease in cash and cash equivalents (1,940,410) (26,975,262) CASH AND CASH EQUIVALENTS, JANUARY 1 1,940,410 29,885,922 ------------- ------------- CASH AND CASH EQUIVALENTS, SEPTEMBER 30 $ -0- $ 2,910,660 ============= =============
See notes to condensed consolidated financial statements. -5- 6 OGLEBAY NORTON COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and notes to the condensed consolidated financial statements necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. Management of the Company, however, believes that all adjustments considered necessary for a fair presentation of the results of operations for such periods have been made. Additionally, certain amounts in the prior year have been reclassified to conform with the 1999 condensed consolidated financial statement presentation. For further information, refer to the consolidated financial statements and notes thereto included in the Company's 1998 Annual Report on Form 10-K. 2. Operating results are not necessarily indicative of the results to be expected for the year, due to the seasonal nature of certain aspects of the Company's business. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the Company's condensed consolidated financial statements. Actual results could differ from those estimates and assumptions. 3. In the third quarter of 1999, the Company sold in separate transactions the stock of its (i) Global Stone Detroit Lime Company and (ii) Global Stone Ingersoll Ltd. subsidiaries to affiliates of Carfin S. A., a Belgian Corporation and member of the Carmeuse Group. The sale of Global Stone Detroit Lime Company was completed in August, 1999 with net proceeds of $15,250,000. The sale of Global Stone Ingersoll Ltd., was completed in September, 1999 with net proceeds of $45,700,000. Global Stone Ingersoll Ltd. was a non-guarantor subsidiary of the Company's Senior Subordinated Notes. Global Stone Detroit Lime Company and Global Stone Ingersoll Ltd. combined for last twelve months sales of $29,300,000, earnings before interest, taxes, depreciation, depletion, and amortization of $5,050,000 and income from operations of $2,700,000. The net proceeds of $60,950,000 were used to reduce the Company's Senior Credit Facility. On an annualized basis this reduction in debt will result in $4,750,000 interest expense savings. In the third quarter of 1999, the Company sold its Detroit Dock operated by Global Stone Port Inland for $1,985,000 in cash. The sale resulted in a pretax gain of $1,642,000. In the first quarter of 1999, the Company's Lime and Limestone segment acquired the assets of the W.S. Frey Company ("Global Stone Winchester") for $12,088,000 in cash and 50,000 restricted shares of the Company's common stock, issued from treasury, having a guaranteed value of $1,500,000. Consideration for the acquisition also included aggregate consulting, non-competition and royalty payments of $3,500,000 of which $510,000 was paid at the date of acquisition with the balance being deferred. The addition of the Global Stone Winchester operation is not expected to have a material impact on the results of operations of the Company. -6- 7 OGLEBAY NORTON COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) During 1998 the Company completed the following acquisitions ("1998 Acquisitions"): - Purchased all of the outstanding shares of Colorado Silica Sands, Inc. ("Colorado Silica") for a total purchase price of $7,194,000 during the first quarter of 1998. - Purchased all of the outstanding common shares of Global Stone Corporation ("Global Stone") for a total purchase price of $227,600,000, including $54,000,000 of net debt during the second quarter of 1998. - Purchased substantially all the assets of a limestone operation in Port Inland, Michigan ("Port Inland"), for a total purchase price of $35,200,000 during the second quarter of 1998. - Purchased substantially all the assets of Filler Products, Inc. ("Filler Products"), for a total purchase price of $24,200,000 during the third quarter of 1998. The acquisitions of Global Stone, Port Inland and Filler Products created the Company's Lime and Limestone segment. The assets and results of operations of Colorado Silica are included within the Company's Industrial Sands segment. The following unaudited pro forma information presents a summary of consolidated results of operations for the Company and the above acquisitions for the three-month and nine-month periods ending September 30, 1999 and 1998 as if the acquisitions had occurred on January 1, 1998. The pro forma adjustments give effect to the acquisitions under the purchase method of accounting and (i) the amortization of goodwill, (ii) the amortization of the write-up of mineral reserves and property and equipment to fair market value, (iii) the interest expense on debt incurred to fund the acquisitions and (iv) the related income tax effects. This unaudited pro forma information (i) assumes that the Company incurred all acquisition related debt as of January 1, 1998, (ii) includes operating results for periods of time prior to the Company's ownership and (iii) does not take into consideration any subsequent expense reductions or disposition of assets. Additionally, the unaudited pro forma information does not reflect any other events that may occur in the future.
THREE MONTHS ENDED SEPTEMBER 30 --------------------------------- 1999 1998 ---- ---- (IN THOUSANDS, EXCEPT EARNINGS PER SHARE) Net sales and operating revenues $85,400 $88,900 Net Income 6,400 5,500 Net Income per share - basic and assuming dilution 1.32 1.14 EBITDA 24,200 24,200 EBITDA margin 28% 27%
-7- 8 OGLEBAY NORTON COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30 -------------------------------------- 1999 1998 ---- ---- (IN THOUSANDS, EXCEPT EARNINGS PER SHARE) Net sales and operating revenues $219,300 $223,800 Net Income 9,400 2,800 Net Income per share - basic and assuming dilution 1.94 0.57 EBITDA 57,000 49,900 EBITDA margin 26% 22%
(EBITDA is defined as income before (i) income taxes, (ii) interest, (iii) depreciation, depletion and amortization. EBITDA is not a measure of performance under generally accepted accounting principles ("GAAP"). EBITDA should not be considered as a substitute for net income or other financial information prepared in accordance with GAAP or as a measure of profitability or liquidity. The Company's definition of EBITDA may not be comparable to that of other companies.) The unaudited pro forma financial information for the third quarter and first nine months of 1999 and 1998 include actual operating results for the Company's business segments. Operating results for the segments are detailed in the operating segment information included in Note 4 to the Condensed Consolidated Financial Statements. Lime and Limestone's 1998 nine months ended September 30, 1998 were unfavorably affected by higher general and administrative expenses, including $2,360,000 of takeover defense costs. In 1999 there are no defense costs and general and administrative expenses have been reduced by office shutdowns and cost containments. On May 15, 1998, the Company sold the assets of its Engineered Materials metallurgical treatment operations for $14,573,000, which included a cash payment of $3,650,000 and notes receivable of $10,923,000. Through September 30, 1999 $5,092,000 has been collected on this note receivable, leaving $5,831,000 included within other assets on the condensed consolidated balance sheet. The Engineered Materials segment was classified as a discontinued operation at December 31, 1997. -8- 9 OGLEBAY NORTON COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 4. The following table sets forth the reconciliation of the Company's net income to its comprehensive income (in thousands):
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ------------------ ----------------- 1999 1998 1999 1998 ---- ---- ---- ---- Net income $ 6,430 $ 5,679 $ 9,292 $10,908 Other comprehensive income (loss): Foreign currency translation adjustments 34 1,097 984 1,097 Reclassification adjustment for sale of foreign subsidiary (275) (275) ------- ------- ------- ------- Comprehensive income $ 6,189 $ 6,776 $10,001 $12,005 ======= ======= ======= =======
-9- 10 OGLEBAY NORTON COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The calculation of net income per share follows (in thousands, except per share data):
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ------------------ ----------------- 1999 1998 1999 1998 ---- ---- ---- ---- Net income per share-basic: - --------------------------- Net income $ 6,430 $ 5,679 $ 9,292 $10,908 ======= ======= ======= ======= Average number of shares outstanding 4,882 4,772 4,837 4,771 ======= ======= ======= ======= Net income per share-basic $ 1.32 $ 1.19 $ 1.92 $ 2.29 ======= ======= ======= =======
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ------------------ ----------------- 1999 1998 1999 1998 ------- ------- ------- ------- Net income per share-assuming dilution: - --------------------------------------- Net income $ 6,430 $ 5,679 $ 9,292 $10,908 ======= ======= ======= ======= Average number of shares outstanding 4,882 4,772 4,837 4,771 Dilutive effect of stock plans 7 17 14 24 ------- ------- ------- ------- Adjusted average number of shares outstanding 4,889 4,789 4,851 4,795 ======= ======= ======= ======= Net income per share- assuming dilution $ 1.32 $ 1.19 $ 1.92 $ 2.28 ======= ======= ======= =======
-10- 11 OGLEBAY NORTON COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The Company supplies essential natural resources to industrial and commercial customers. Through its three operating segments --- Lime and Limestone, Marine Services and Industrial Sands - the Company serves customers, through a direct sales force, in a wide range of markets, including metallurgy, building materials, energy, environmental and industrial. The following table sets forth the operating segment information as of and for the three months ended September 30, 1999 and 1998 (in thousands):
LIME AND MARINE INDUSTRIAL TOTAL CORPORATE LIMESTONE SERVICES SANDS SEGMENTS & OTHER CONSOLIDATED --------- -------- ----- -------- ------- ------------ 1999 Identifiable assets $ 231,803 $ 142,580 $ 57,581 $ 431,964 $ 105,615 $ 537,579 Depreciation, depletion and amortization expense 3,884 2,262 1,200 7,346 45 7,391 Capital expenditures 2,032 772 2,804 59 2,863 Net sales and operating revenues $ 40,468 $ 31,250 $ 13,659 $ 85,377 $ 85,377 Income (loss) from operations $ 6,513 $ 6,874 $ 3,139 $ 16,526 $ (1,135) $ 15,391 (Loss) gain on disposition of assets (98) (98) 1,642 1,544 Interest expense (7,804) (7,804) Other expense- net (139) (139) --------- --------- --------- --------- --------- --------- Income (loss) before income taxes $ 6,415 $ 6,874 $ 3,139 $ 16,428 $ (7,436) $ 8,992 ========= ========= ========= ========= ========= ========= 1998 Identifiable assets $ 216,281 $ 141,953 $ 54,371 $ 412,605 $ 159,256 $ 571,861 Depreciation, depletion and amortization expense 4,546 2,224 1,047 7,817 32 7,849 Capital expenditures 4,153 14 1,549 5,716 7 5,723 Net sales and operating revenues $ 40,575 $ 32,546 $ 12,724 $ 85,845 $ 85,845 Income (loss) from operations $ 6,123 $ 8,535 $ 2,492 $ 17,150 $ (1,413) $ 15,737 Gain on disposition of assets 67 33 100 87 187 Interest expense (7,441) (7,441) Other expense- net (31) (31) --------- --------- --------- --------- --------- --------- Income (loss) before income taxes $ 6,190 $ 8,535 $ 2,525 $ 17,250 $ (8,798) $ 8,452 ========= ========= ========= ========= ========= =========
-11- 12 OGLEBAY NORTON COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following table sets forth the operating segment information as of and for the nine months ended September 30, 1999 and 1998 (in thousands):
LIME AND MARINE INDUSTRIAL TOTAL CORPORATE LIMESTONE SERVICES SANDS SEGMENTS & OTHER CONSOLIDATED --------- -------- ----- -------- ------- ------------ 1999 Identifiable assets $ 231,803 $ 142,580 $ 57,581 $ 431,964 $ 105,615 $ 537,579 Depreciation, depletion and amortization expense 12,237 4,507 3,509 20,253 123 20,376 Capital expenditures 12,842 3,855 2,504 19,201 214 19,415 Net sales and operating revenues $ 116,507 $ 63,696 $ 36,919 $ 217,122 $ 217,122 Income (loss) from operations $ 16,862 $ 14,024 $ 7,042 $ 37,928 $ (3,296) $ 34,632 (Loss) gain on disposition of assets (98) 22 (76) 1,617 1,541 Interest expense (23,125) (23,125) Other expense- net (52) (52) --------- --------- --------- --------- --------- --------- Income (loss) before income taxes $ 16,764 $ 14,024 $ 7,064 $ 37,852 $ (24,856) $ 12,996 ========= ========= ========= ========= ========= ========= 1998 Identifiable assets $ 226,796 $ 141,953 $ 54,371 $ 423,120 $ 148,741 $ 571,861 Depreciation, depletion and amortization expense 6,862 4,409 2,872 14,143 93 14,236 Capital expenditures 5,430 3,552 4,108 13,090 25 13,115 Net sales and operating revenues $ 59,716 $ 67,262 $ 36,901 $ 163,879 $ 163,879 Income (loss) from operations $ 8,715 $ 16,798 $ 6,845 $ 32,358 $ (4,537) $ 27,821 Gain on disposition of assets 64 81 145 86 231 Interest expense (11,889) (11,889) Other expense - net (347) (347) --------- --------- --------- --------- --------- --------- Income (loss) before income taxes $ 8,779 $ 16,798 $ 6,926 $ 32,503 $ (16,687) $ 15,816 ========= ========= ========= ========= ========= =========
-12- 13 OGLEBAY NORTON COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5. The Company's domestic subsidiaries, all of which are directly or indirectly wholly owned, are the only guarantors of the Company's Senior Subordinated Notes. The guarantees are full, unconditional and joint and several. The subsidiary guarantors comprise all of the direct and indirect subsidiaries of the Company (other than inconsequential subsidiaries). Oglebay Norton Company is a holding company with no operating assets or operations other than its investment in subsidiaries. Separate financial statements and other disclosures of the Company's guarantor subsidiaries are not presented as management has determined that it would not be material to investors. -13- 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations may contain statements concerning certain trends and other forward-looking information, within the meaning of the federal securities laws. Such forward-looking statements are subject to uncertainties and factors relating to the Company's operations and business environment, all of which are difficult to predict and many of which are beyond the control of the Company. The Company believes that the following factors, among others, could affect its future performance and cause actual results to differ materially from those expressed or implied by forward-looking statements made by or on behalf of the Company: (1) unfavorable weather conditions; (2) fluctuations in oil prices; (3) a decline in steel production; (4) changes in the demand for the Company's products or services due to changes in technology; (5) Great Lakes and Mid-Atlantic construction activity; (6) a slowdown in the California economy and in population growth rates in the Southwestern United States; (7) labor unrest; (8) the loss or bankruptcy of major customers; (9) year 2000 software conversion failures of vendors, suppliers and customers; and (10) changes in environmental laws. Due to the seasonal nature of certain aspects of the Company's business, the operating results and cash flows for the first nine months of the year are not necessarily indicative of the results to be expected for the full year. FINANCIAL CONDITION ------------------- In the third quarter of 1999, the Company's Lime and Limestone segment completed in separate transactions the sale of stock of the Global Stone Ingersoll Ltd. ("Global Stone Ingersoll") for $45,700,000 and the sale of stock of the Global Stone Detroit Lime Company ("Global Stone Detroit Lime") for $15,250,000. In the first nine months of 1998 the Company had proceeds of $9,708,000 from the disposition of assets, of which $9,047,000 related to the sale of the discontinued Engineered Materials business. In the first quarter of 1999, the Company's Lime and Limestone segment acquired the assets of the W.S. Frey Company ("Global Stone Winchester") for $12,088,000 in cash and 50,000 restricted shares of the Company's common stock, issued from treasury, having a guaranteed value of $1,500,000 at the date of acquisition. Consideration for the acquisition also included aggregate consulting, non-competition and royalty payments of $3,500,000 of which $510,000 was paid at the date of acquisition and the balance is deferred. In the first nine months of 1998, the Company purchased all of the outstanding common shares of Global Stone Corporation ("Global Stone") for a total purchase price of $227,600,000, including $54,000,000 of net debt. The Company purchased all the assets of a limestone operation in Port Inland, Michigan ("Port Inland"), for a total purchase price of $35,200,000. The Company purchased all the assets of a Filler Products Inc ("Filler Products"), for a total purchase price of $24,200,000. The Company purchased all the outstanding shares of Colorado Silica Sand, Inc. ("Colorado Silica") for $7,194,000, of which $4,523,000 was paid in cash with the remainder becoming a note payable. -14- 15 FINANCIAL CONDITION (CONTINUED) ------------------------------- The Company's operating activities provided cash of $5,207,000 in the first nine months of 1999 compared with $11,971,000 used in the same period in 1998. The decrease in operating cash provided resulted primarily from an increase in interest paid in the first nine months of 1999 compared to the same period in 1998. The Company made interest payments of $23,053,000 and $8,385,000 in the first nine months of 1999 and 1998, respectively. Cash provided by the collection of Marine Services' accounts receivable declined $7,590,000 in the first nine months of 1999. The decline was principally the result of reduced Marine Services operating revenues in the first nine months of 1999 compared with 1998 and the timing of year-end receivable collections. These reductions in operating cash flow were substantially offset by the increased cash provided from operations in the normal course of business. The operating results of the Company's business segments are discussed in more detail under "RESULTS OF OPERATIONS". Capital expenditures totaled $19,415,000 in the first nine months of 1999 compared with $13,115,000 for the same period in 1998. Expenditures in the first nine months of 1999 and 1998 included Marine Services vessel inspection costs of $577,000 and $2,279,000, respectively. The acquisitions of businesses in Lime and Limestone lead to increased capital expenditures in 1999 for that business segment. Lime and Limestone capital expenditures totaled $12,840,000 in the first nine months of 1999 compared with $5,430,000 in 1998. Capital expenditures for 1999 are now expected to approximate $25,700,000. In the first nine months of 1999 the Company's debt repayments exceeded additional borrowings by $33,250,000. The Company used the proceeds from the sale of Global Stone Ingersoll ($45,700,000) and Global Stone Detroit Lime, ($15,250,000) to reduce borrowings on the Company's Senior Credit Facility. These proceeds were offset by additional debt used to fund the Global Stone Winchester acquisition as well as working capital requirements. In the first quarter of 1999 the Company's Senior Credit Facility was increased from $215,000,000 to $232,000,000, in part, to fund the Global Stone Winchester acquisition. The interest rate on the Senior Credit Facility, which approximated 8.0% at September 30, 1999, is based on LIBOR interest rates, plus an applicable margin. The Company borrowed $292,000,000 ($192,000,000 on the Senior Credit Facility and $100,000,000 under a Senior Subordinated Facility) in the first nine months of 1998 to finance the Global Stone, Port Inland and Filler Products acquisitions, and to pay off a $19,250,000 Term Loan and Senior Secured Series A Debentures that were acquired with the Global Stone acquisition. The Company's notes under an interim Senior Subordinated Facility were exchanged with the lender on February 1, 1999 for Senior Subordinated Notes. The Senior Subordinated Notes, privately placed with several purchasers, mature in February 2009 and have a fixed interest rate of 10%. The Company paid $1,172,000 of financing costs in the first nine months of 1999 related to the exchange and private placement of these notes and an amendment to the Senior Credit Facility. For the initial placement of the Senior Subordinated Notes and Senior Credit Facility, the Company paid $9,042,000 of financing costs during the first nine months of 1998. -15- 16 FINANCIAL CONDITION (CONTINUED) ------------------------------- The Company declared a dividend of $0.60 per share in both the first nine months of 1999 and 1998. Dividends paid were $2,896,000 in the first three-quarters of 1999 compared with $2,859,000 for the same nine months in 1998. The Company purchased, and placed in treasury, 13,723 shares of its common stock for $319,000 in the first nine months of 1999 compared with 14,666 shares of its common stock for $561,000 in the first nine months of 1998. Anticipated cash flows from operations and current financial resources are expected to meet the Company's needs during the remainder of 1999. All financing alternatives are under constant review to determine their ability to provide sufficient funding at the lowest possible cost. RESULTS OF OPERATIONS --------------------- NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1998 The Company's net sales and operating revenues of $217,122,000 in the first nine months of 1999 increased 32% compared to net sales and operating revenues of $163,879,000 for the same period in 1998. Income from operations for the first nine months of 1999 increased 24% to $34,633,000 compared with $27,821,000 for the same period in 1998. The Company reported net income of $9,292,000 ($1.92 per share - assuming dilution) for the first nine months of 1999, compared with net income of $10,908,000 ($2.28 per share - assuming dilution) for the same period in 1998. The increases in net sales and operating revenues and income from operations can be primarily attributed to the timing of acquisitions. The decrease in net income is the result of interest expense on borrowings to fund the acquisitions. Interest expense increased to $23,125,000 in the first nine months of 1999, compared with $11,889,000 for the same period in the prior year. Operating results of the Company's business segments for the first nine months ended September 30, 1999 and 1998 are discussed below. Net Sales and Operating Revenues - -------------------------------- Lime and Limestone: Net sales for the Company's Lime and Limestone segment totaled $116,507,000 for the first nine months of 1999 compared with $59,716,000 in the first nine months of 1998, a 95% increase. The increase in sales is the result of the Global Stone, Port Inland, Filler Products, and Global Stone Winchester acquisitions ("Lime and Limestone Acquisitions"). The largest portion of the Lime and Limestone segment, Global Stone, was acquired in late May, 1998. Port Inland was also acquired in the second quarter of 1998. Filler Products was acquired in the third quarter of 1998 and Winchester was acquired in the first quarter of 1999. Marine Services: Operating revenues for the Company's Marine Services segment totaled $63,696,000 for the first nine months of 1999, a 5% decline compared with $67,262,000 for the first nine months of 1998. The decline in operating revenues resulted primarily from reduced tonnage shipped. The major reason for the decrease is because of the lower water levels on the Great Lakes. The vessels are limited in the cargo they can carry by the depth of the lakes and rivers. Also contributing to the decline is that the 1998 sailing season on the Great Lakes opened under more favorable weather conditions compared with 1999, providing an opportunity for an early start to the 1998 season. -16- 17 RESULTS OF OPERATIONS (CONTINUED) --------------------------------- NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1998 Industrial Sands: Net sales for the Company's Industrial Sands segment of $36,919,000 for the first nine months of 1999 were comparable with $36,901,000 for the same period of 1998. Increases in sales included the strong nine-month performance of the segment's non-oilfield operations in Orange County, California resulting from the strong construction market in the southwestern United States and the acquisition of Colorado Silica in March 1998. This offset the decline in net sales attributable to decreased shipments to the oilfield services industry in the first half of 1999 compared with 1998. This drop in sales was principally due to continued decline in oil prices and related oilfield demand for frac sands. Accordingly, the demand declined for sands provided to oilfields by the Brady, Texas, Bakersfield, California and Riverside, California operations. This demand showed signs of recovery in the third quarter of 1999. Cost of Goods Sold and Operating Expenses - ----------------------------------------- Lime and Limestone: Cost of goods sold for the Lime and Limestone segment totaled $79,054,000 for the first nine months of 1999, compared with $39,388,000 in the first nine months of 1998, an increase of 101%. The increase in costs is attributable to the timing of the Lime and Limestone Acquisitions. Cost of goods sold as a percentage of net sales increased to 68% for the first nine months of 1999 compared with 66% in the same period of 1998 due to the timing of acquisitions. Marine Services: Operating expenses for the Marine Services segment totaled $42,549,000 for the nine months ended September 30, 1999, compared with $43,638,000 for the same period in 1998, a decrease of $1,089,000, or 2%. Operating expenses as a percentage of operating revenues increased to 67% in the first nine months of 1999 compared with 65% during the first nine months of 1998. The slight increase in operating expenses as a percentage of operating revenues was because of lower Marine Services' revenues because of lower Great Lakes water levels limiting tonnage shipped per vessel and an increase in fuel prices. Industrial Sands: Cost of goods sold for the Industrial Sands segment decreased $756,000, or 3%, to $22,633,000 for the first three quarters of 1999 down from $23,389,000 for the same period in 1998. Cost of goods sold as a percentage of net sales were lower at 61% for the first nine months of 1999 compared with 63% for the same period in 1998. This reduction is primarily the result of improved operating efficiencies at our Orange County, California operations resulting from the strong demand from that operation. Depreciation, Depletion and Amortization - ---------------------------------------- Primarily as a result of the Lime and Limestone Acquisitions, depreciation, depletion and amortization expense increased by 43% to a level of $20,376,000 for the first nine months of 1999 compared with $14,236,000 for the same period of 1998. Equipment expansion at the Industrial Sands' Orange County, California facility also contributed to the increase. Depreciation, depletion and amortization as a percentage of revenue is 9% in both 1999 and 1998. -17- 18 RESULTS OF OPERATIONS (CONTINUED) --------------------------------- NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1998 General, Administrative and Selling Expenses - -------------------------------------------- As a result of the Lime and Limestone Acquisitions, total general, administrative and selling expenses increased $2,561,000 or 17% to $17,878,000 for first nine months of 1999 compared with $15,317,000 for the same period of 1998. The percentage of general and administrative expenses to total net sales and operating revenues declined to 8% in the first nine months of 1999 compared with 9% in the first nine months of 1998. In addition, corporate general and administrative expenses declined in the nine months ended September 30, 1999 compared with the same period of 1998 by $438,000, or 13%. The reduction in these expenses was primarily the result of a decrease in the Company's net cost for its defined benefit plans in the first nine months of 1999 compared with 1998. Income From Operations - ---------------------- Lime and Limestone: The Lime and Limestone segment contributed $16,862,000 to income from operations for the first nine months of 1999, an increase of 94% compared with $8,715,000 in the first nine months of 1998. As previously discussed, the increase in operating income is the direct result of the timing of the Lime and Limestone Acquisitions. Marine Services: The Company's Marine Services segment had income from operations of $14,024,000 for the first three quarters of 1999, a decrease of 17% compared with operating income of $16,798,000 for the same period of 1998. The reduction in operating income was the result of lower Great Lakes water levels reducing the tonnage shipped per vessel, and an increase in fuel prices. Industrial Sands: Income from operations for the Industrial Sands segment increased $197,000, or 3% to $7,042,000 for the first nine months of 1999 compared with $6,845,000 for the same period of 1998. The increase in operating income was primarily led by the increased demand at the non-oilfield operations in Orange County, California resulting from the strong construction market in the southwestern United States and the March 1998 Colorado Silica acquisition. This increase was substantially offset by the decline in income from operations because of reduced oilfield demand for sand supplied by the Brady, Texas, Bakersfield, California and Riverside, California operations, primarily in the first six months of 1999 compared with 1998. Corporate and Other: Certain cost of goods sold and general and administrative expenses are not allocated to the business segments. Accordingly, Corporate and Other recognized a loss of $3,296,000 in the first nine months of 1999, which was $1,241,000, or 27% less than the $4,537,000 loss for the first nine months of 1998. The reduction in loss was primarily the result of a decrease in the Company's net cost for its defined benefit plans. Other - ----- Interest expense for the nine months ended September 30, 1999 increased 95% to $23,125,000 compared with $11,889,000 for the same period of 1998. The increase in interest expense is principally the result of increased debt levels and the amortization of financing costs related to the Lime and Limestone Acquisitions. -18- 19 RESULTS OF OPERATIONS (CONTINUED) --------------------------------- THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1998 The Company's net sales and operating revenues of $85,377,000 in the third quarter of 1999 was comparable with net sales and operating revenues of $85,845,000 for the same quarter in 1998. Income from operations for the third quarter of 1999 was $15,391,000 compared with $15,737,000 for the same quarter in 1998. The Company reported net income of $6,430,000 ($1.32 per share - assuming dilution) for the three months ended September 30,1999, compared with net income of $5,679,000 ($1.19 per share - assuming dilution) for the same period in 1998. The 2% decrease in income from operations can be primarily attributed to the lower Great Lakes water levels reducing the tonnage shipped per vessel, decreasing revenues and income for Marine Services. The $751,000 or 13% increase in net income was primarily the result of gain on the sale of a dock in Detroit, Michigan that was part of Lime and Limestone's Port Inland Operation. Operating results of the Company's business segments for the three months ended September 30, 1999 and 1998 are discussed below. Net Sales and Operating Revenues - -------------------------------- Lime and Limestone: Net sales for the Company's Lime and Limestone segment totaled $40,468,000 for the three months ended September 30, 1999 compared with $40,575,000 in the same quarter of 1998. The 1999 Global Stone Winchester and the third quarter 1998 Filler Products acquisitions increased third quarter sales. This was offset by the disposition of Global Stone Detroit Lime in August 1999. Additionally, Port Inland experienced a 22% reduction in sales as aggregate stone sales have decreased in the Great Lakes region, and chemical stone sales have decreased to all regions as well. Marine Services: Operating revenues for the Company's Marine Services segment decreased by $1,296,000 or 4%, to $31,250,000 for the third quarter of 1999 from $32,546,000 for the third quarter of 1998. The reduction in operating revenues was primarily from lower water levels in the Great Lakes, which reduced the tonnage shipped per vessel trip. All twelve vessels were fully booked in both third quarter of 1999 and 1998. Industrial Sands: Net sales for the Company's Industrial Sands segment totaled $13,659,000 in the three months ended September 30, 1999, an increase of 7% from $12,724,000 for the same quarter of 1998. The increase in net sales is attributable to the increased demand in the segment's non-oilfield Orange County, California operations resulting from the strong construction market in the southwestern United States. . Additionally, the demand for sands provided to the oilfield by the Brady, Texas operation showed signs of recovery in the third quarter of 1999. -19- 20 RESULTS OF OPERATIONS (CONTINUED) --------------------------------- THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1998 Cost of Goods Sold and Operating Expenses - ----------------------------------------- Lime and Limestone: Cost of goods sold for the Lime and Limestone segment totaled $27,438,000 for the three months ended September 30, 1999, compared with $26,722,000 in the three months ended September 30, 1998, an increase of 3%. Cost of goods sold as a percentage of net sales was 68% in the third quarter of 1999 and 66% in the third quarter of 1998. Cost of goods sold was higher in 1999 because of repair costs related to the shutdown of both lime kilns at the Global Stone St. Clair operation in Marble City, Oklahoma. Marine Services: Operating expenses for the Marine Services segment totaled $21,130,000 for the three months ended September 30, 1999, compared with $20,944,000 for the same period in 1998, a increase of $186,000, or 1%. Operating expenses as a percentage of operating revenues was 68% in the third quarter of 1999 and 64% in the third quarter of 1998. The increase in operating expenses as a percentage of operating revenues resulted from decreased revenues attributable to lower Great Lakes water levels which reduced tonnage shipped per vessel, and from a 10% increase in fuel prices. Industrial Sands: Cost of goods sold for the Industrial Sands segment increased $162,000, or 2%, to $8,007,000 in the third quarter of 1999 from $7,845,000 for the same period in 1998. Cost of goods sold as a percentage of net sales was lower at 59% for the third quarter of 1999 compared with 62% for the same quarter of 1998. This reduction is primarily the result of improved operating efficiencies at our Orange County, California operations resulting from the strong demand for construction sand from that operation. Depreciation, Depletion and Amortization - ---------------------------------------- Depreciation, depletion and amortization expense decreased 6% to $7,391,000 for the third quarter of 1999 compared with $7,849,000 for the same period of 1998. The decrease in depreciation reflects assets dispositions related to Port Inland's Detroit Dock and the Global Stone Detroit Lime transactions, partially offset by equipment purchases at the Industrial Sands' Orange County, California facility. General, Administrative and Selling Expenses - -------------------------------------------- Total general, administrative and selling expenses were $6,020,000 for third quarter of 1999, compared with $6,718,000 for 1998, a decrease of $698,000 or 10%. The percentage of general, administrative and selling expenses to total net sales and operating revenues declined to 7% in the third quarter of 1999 compared with 8% in the third quarter of 1998. General and administrative expenses were down in Port Inland because of lower commissions resulting from lower sales. -20- 21 RESULTS OF OPERATIONS (CONTINUED) --------------------------------- THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1998 Income From Operations - ---------------------- Lime and Limestone: The Lime and Limestone segment contributed $6,513,000 to income from operations for the three months ended September 30, 1999, compared with $6,123,000 in 1998. The 6% increase in operating income is the result of the timing of the Global Stone Winchester and Filler Products acquisitions, offset by the reduced operating income from the third quarter dispositions of Global Stone Detroit Lime and Global Stone Ingersoll. Marine Services: The Company's Marine Services segment had income from operations of $6,874,000 for the third quarter of 1999, compared with operating income of $8,535,000 for the same quarter of 1998. The $1,661,000 or 19% reduction in operating income was the result of lower Great Lakes water levels, which limited the tonnage shipped per vessel trip, and higher fuel prices compared with the same period of 1998. Industrial Sands: Income from operations for the Industrial Sands segment was $3,139,000 for the third quarter of 1999 compared with $2,492,000 for the same period of 1998. The increase of $647,000 or 26% in income from operations was principally the result of increased demand at the non-oilfield Orange County, California operations resulting from the strong construction market in the southwestern United States. Corporate and Other: Certain cost of goods sold and general and administrative expenses are not allocated to the business segments. Accordingly, Corporate and Other recognized a loss of $1,135,000 in the third quarter of 1999, which was $278,000 less, or 20% than the $1,413,000 loss for the three months ended September 30, 1998. The reduction in loss was primarily the result of a decrease in the Company's net cost for its retiree supplemental benefits. Other - ----- Interest expense for the third quarter of 1999 increased 5% to $7,804,000 in the third quarter of 1999 compared with $7,441,000 for the same period of 1998. The increase in interest expense is principally the result of increased debt levels attributable to the 1999 Global Stone Winchester acquisition and third quarter 1998 Filler Product acquisition. The debt levels were significantly reduced late in the third quarter of 1999 with the proceeds received from the disposition of Global Stone Ingersoll and Global Stone Detroit Lime. -21- 22 YEAR 2000 COMPLIANCE The Company continues to address the impact of the Year 2000 issue on its business. This issue affects computer systems that have date-sensitive programs that may not properly recognize the year 2000. Specifically, with respect to the Company, this issue affects not only the computer software and hardware but also machines and equipment used in production that contain embedded computer chips. The Company has reviewed and assessed its information system hardware, business system software, production system hardware and other systems and technology used in its internal business operations and its production. Based on this review and assessment, the Company believes that the majority of its internal systems are Year 2000 compliant and that any non-compliance will not have a material adverse effect on the Company. The Company completed its internal Year 2000 remediation efforts in the third quarter of 1999 with the implementation of a new order processing system for both the Industrial Sands and Lime and Limestone business segments. As part of its Year 2000 program, the Company has also made efforts to determine and assess the Year 2000 compliance status of third parties with which it does business. During 1997, the Company sent a detailed questionnaire to its customers, suppliers, financial institutions and others to obtain information relating to the status of such third parties with respect to Year 2000 issues. Of the total questionnaires sent out, 95% of these third parties have returned their questionnaires to the Company. The Company is following up on the balance of the questionnaires not returned. Based upon its review of the returned questionnaires, the Company does not believe that it will experience material disruption of its operations as a result of third parties' Year 2000 noncompliance. In addition, since sending the questionnaires, the Company has maintained ongoing correspondence with its suppliers regarding Year 2000 issues and placed particular emphasis on determining the Year 2000 readiness of its critical suppliers. Due to the uncertainties associated with Year 2000 problems, the Company has developed a contingency plan to use manual entry in its accounting and order entry system in the event that its business or operations are disrupted as of January 1, 2000. The Company currently expects to incur total expenditures approximating $250,000 in connection with its Year 2000 remediation efforts. The Company believes that any additional cost, if any, of its remediation effort will not have a material impact on the Company's consolidated results of operations or financial condition. The Company believes it completed its internal Year 2000 compliance efforts. The remaining expenses related to the Company's Year 2000 compliance and remediation efforts are management's best estimates, which are based on assumptions of future events, including the availability of certain resources, third party modification plans and other factors. There can be no assurances that these results and estimates will be achieved, and the actual results could materially differ from those anticipated. A specific factor that might cause such material differences is the ability to locate and correct all relevant computer codes. In addition, there can be no assurances that the systems or products of third parties on which the Company relies will be timely converted or that a failure by a third party, or a conversion that is incompatible with the Company's systems, would not have a material adverse effect on the Company. -22- 23 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information regarding the Company's financial instruments that are sensitive to changes in interest rates was disclosed in the Form 10-K filed by the Company on March 29, 1999. The information disclosed has not changed materially in the interim period since December 31, 1998. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits ------------------------------------------------------- ---------------------------------------------------- (10) Fifth Amendment to Credit Agreement between (b) Filed herewith as Exhibit 10 KeyCorp, as Agent, and the Company, dated as of July 23, 1999 ------------------------------------------------------- ----------------------------------------------------
-23- 24 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. OGLEBAY NORTON COMPANY DATE: October 28, 1999 By: /s/ David H. Kelsey ---------------------------------- David H. Kelsey Vice President and Chief Financial Officer On behalf of the Registrant and as Principal Financial and Accounting Officer -24- EX-10 2 EXHIBIT 10 1 Exhibit 10 FIFTH AMENDMENT AGREEMENT THIS FIFTH AMENDMENT AGREEMENT ("Amendment") is made as of the 23rd day of July, 1999, by and among OGLEBAY NORTON COMPANY, formerly known as Oglebay Norton Holding Company, a Delaware corporation ("Borrower"), as assignee of ON Marine Services Company, formerly known as Oglebay Norton Company ("Original Borrower"), the banking institutions listed on Schedule 1 to the Credit Agreement, as hereinafter defined ("Banks"), and KEYBANK NATIONAL ASSOCIATION, as agent for the Banks ("Agent"): WHEREAS, Original Borrower, Agent and the Banks entered into a certain Credit Agreement dated as of May 15, 1998, and assumed by Borrower as of March 5, 1999, as amended, and as it may from time to time be further amended, restated or otherwise modified, which provides, among other things, for loans, letters of credit, and other financial accommodations aggregating Two Hundred Thirty-Two Million Dollars ($232,000,000), all upon certain terms and conditions stated therein ("Credit Agreement"); WHEREAS, Borrower, Agent and the Banks desire to amend the Credit Agreement to modify certain provisions thereof; and WHEREAS, each term used herein shall be defined in accordance with the Credit Agreement. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other valuable considerations, Borrower, Agent and the Banks hereby agree as follows: 1. Article I of the Credit Agreement is hereby amended to delete the definition of "Leverage Ratio" in its entirety and to insert in place thereof the following: "Leverage Ratio" shall mean, at any time, the ratio for the Companies of (a) Total Funded Indebtedness (based upon the financial statements of the Companies for the most recently completed fiscal quarter) to (b) Consolidated Pro-Forma EBITDA (based upon the financial statements of the Companies for the most recently completed four (4) fiscal quarters). 2. The Credit Agreement is hereby amended to delete subpart (b) from Section 5.7 in its entirety and to insert in place thereof the following: (b) LEVERAGE RATIO. The Companies shall not suffer or permit at any time the Leverage Ratio to exceed (i) 5.00 to 1.00 on June 30, 1998 through December 31, 1999, (ii) 4.75 to 1.00 from January 1, 2000 through December 30, 2000, and (iii) 4.50 to 1.00 on December 31, 2000 and thereafter, based upon the financial statements of the Companies for the most recently completed four (4) fiscal quarters. 1 2 3. The Credit Agreement is hereby amended to delete subpart (d) from Section 5.7 in its entirety and to insert in place thereof the following: (d) INTEREST COVERAGE. The Companies shall not suffer or permit at any time the ratio of (i) Consolidated Pro-Forma Pre-Tax Earnings plus Consolidated Pro-Forma Interest Expense to (ii) Consolidated Pro-Forma Interest Expense to be less than 1.50 to 1.00, based upon the financial statements of the Companies for the most recently completed four (4) fiscal quarters. 4. The Credit Agreement is hereby amended to delete subpart (g) from Section 5.7 in its entirety and to insert in place thereof the following: (g) CONSOLIDATED PRO-FORMA EBITDA. The Companies shall not suffer or permit at any time Consolidated Pro-Forma EBITDA to be less than (i) Sixty-Six Million Dollars ($66,000,000) on June 30, 1998 through June 30, 2000, and (ii) Seventy Million Dollars ($70,000,000) on July 1, 2000 and thereafter, based upon the financial statements of the Companies for the most recently completed four (4) fiscal quarters. 5. Borrower has informed Agent and the Banks that Global Stone Corporation intends to sell all of the outstanding capital stock of Global Stone Ingersoll Ltd ("Ingersoll Stock"). Borrower has requested that Agent and the Banks consent to the sale of the Ingersoll Stock and that Agent and the Banks waive any violation of Section 5.12 as a result of such sale. Agent and the Banks hereby consent to the sale of the Ingersoll Stock and grant such waiver on the condition that after giving effect to this Amendment, no Unmatured Event of Default or Event of Default exists, or immediately thereafter would exist, under the Credit Agreement. This Amendment shall serve as evidence of such consent and waiver. 6. Concurrently with the execution of this Amendment, Borrower shall: (a) cause each Pledgor to consent and agree to and acknowledge the terms of this Amendment; (b) pay an amendment fee to each Bank that executes this Amendment prior to 12:01 P.M. (Cleveland, Ohio time) on July 23, 1999 (each such Bank, an "Executing Bank") in an amount equal to (i) twelve and one-half (12 1/2) basis points, times (ii) the Total Commitment Amount, times (iii) the Commitment Percentages of such Executing Bank. Such amendment fee shall be paid to Agent for the pro rata benefit of the Executing Banks; and (c) pay all legal fees and expenses of Agent in connection with this Amendment. 7. Borrower hereby represents and warrants to Agent and the Banks that (a) Borrower has the legal power and authority to execute and deliver this Amendment; (b) the officers executing this Amendment have been duly authorized to execute and deliver the same and bind Borrower with respect to the provisions hereof; (c) the execution and delivery hereof by Borrower and the performance and observance by Borrower of the provisions hereof do not 2 3 violate or conflict with the organizational agreements of Borrower or any law applicable to Borrower or result in a breach of any provision of or constitute a default under any other agreement, instrument or document binding upon or enforceable against Borrower; (d) no Unmatured Event of Default or Event of Default exists under the Credit Agreement, nor will any occur immediately after the execution and delivery of this Amendment or by the performance or observance of any provision hereof; (e) neither Borrower nor any Pledgor is aware of any claim or offset against, or defense or counterclaim to, any of Borrower's or any Pledgor's obligations or liabilities under the Credit Agreement or any Related Writing; and (f) this Amendment constitutes a valid and binding obligation of Borrower in every respect, enforceable in accordance with its terms. 8. Each reference that is made in the Credit Agreement or any other writing to the Credit Agreement shall hereafter be construed as a reference to the Credit Agreement as amended hereby. Except as herein otherwise specifically provided, all provisions of the Credit Agreement shall remain in full force and effect and be unaffected hereby. This Amendment is a Related Writing as defined in the Credit Agreement. 9. Borrower and each Pledgor, by signing below, hereby waives and releases Agent and each of the Banks and their respective directors, officers, employees, attorneys, affiliates and subsidiaries from any and all such claims, offsets, defenses and counterclaims of which Borrower and any Pledgor is aware, such waiver and release being with full knowledge and understanding of the circumstances and effect thereof and after having consulted legal counsel with respect thereto. 10. This Amendment may be executed in any number of counterparts, by different parties hereto in separate counterparts and by facsimile signature, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. 11. The rights and obligations of all parties hereto shall be governed by the laws of the State of Ohio, without regard to principles of conflicts of laws. [Remainder of Page Intentionally Left Blank] 3 4 12. JURY TRIAL WAIVER. BORROWER, PLEDGORS, AGENT AND EACH OF THE BANKS WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THE BANKS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. OGLEBAY NORTON COMPANY, formerly known as Oglebay Norton Holding Company Michael F. Biehl, Treasurer KEYBANK NATIONAL ASSOCIATION, as Agent and as a Bank Lawrence A. Mack, Senior Vice President 4 5 BANK ONE, NA THE BANK OF NOVA SCOTIA COMERICA BANK THE HUNTINGTON NATIONAL BANK MELLON BANK, N.A. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION HARRIS TRUST AND SAVINGS BANK THE CHASE MANHATTAN BANK 5 6 FIRSTAR BANK, NATIONAL ASSOCIATION, successor by merger to Star Bank National Association FLEET BANK, N.A. ABN AMRO BANK N.V., PITTSBURGH BRANCH FIFTH THIRD BANK OF NORTHEASTERN OHIO 6 7 GUARANTOR ACKNOWLEDGMENT ------------------------ Each of the undersigned consents and agrees to and acknowledges the terms of the foregoing Fifth Amendment Agreement. Each of the undersigned further agrees that the obligations of each of the undersigned pursuant to the Guaranty of Payment and the other Loan Documents executed by each of the undersigned shall remain in full force and effect and be unaffected hereby. ONCO Investment Company (a Delaware corporation, in its own capacity and as successor by merger to Oglebay Norton Holding Company, an Ohio corporation, and ONCO Investment Company, an Ohio corporation) ON Marine Services Company (formerly known as Oglebay Norton Company) Oglebay Norton Industrial Minerals, Inc. Oglebay Norton Management Company Oglebay Norton Industrial Sands, Inc. Colorado Silica Sand, Inc. Oglebay Norton Terminals, Inc. Oglebay Norton Engineered Materials, Inc. Global Stone Corporation (successor by merger to Oglebay Norton Acquisition Company) Global Stone Port Inland, Inc. Moreland Development Company Western Wisconsin Materials, Inc. Global Stone (USA) Inc. Global Stone Tenn Lutrell Company Global Stone Chemstone Corporation Global Stone Detroit Lime Company Global Stone St. Clair, Inc. Global Stone PenRoc Inc. Global Stone Filler Products Company Michael F. Biehl as Treasurer of each of the companies listed above Texas Mining, LP 7 8 By: Oglebay Norton Industrial Sands, Inc., General Partner Michael F. Biehl, Treasurer 8 EX-27 3 EXHIBIT 27
5 0001082816 OGLEBAY NORTON COMPANY 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 0 0 45,924,857 1,210,000 28,941,041 87,126,172 542,754,579 211,572,200 537,578,705 43,298,918 0 0 0 7,253,332 129,670,571 537,578,705 153,425,706 217,121,834 101,686,864 144,235,551 790,298 0 23,125,306 12,996,178 3,704,000 9,292,178 0 0 0 9,292,178 $1.92 $1.92
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