-----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, Of/Quw7deBdbs0T/NPD6aNZ5QCgXbgnK97cl7G9XIk/5tlYOlrrMwh3t6bThkjGq SF5bqSisuJDHWw7EFH1Btg== 0000950152-96-006141.txt : 19961118 0000950152-96-006141.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950152-96-006141 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OGLEBAY NORTON CO CENTRAL INDEX KEY: 0000073918 STANDARD INDUSTRIAL CLASSIFICATION: WATER TRANSPORTATION [4400] IRS NUMBER: 340158970 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00663 FILM NUMBER: 96665089 BUSINESS ADDRESS: STREET 1: 1100 SUPERIOR AVE 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 Sequential Page 1 of 14 Pages SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended September 30, 1996 Commission File number 0-663 ------------------ ----- OGLEBAY NORTON COMPANY ---------------------- (Exact name of registrant as specified in its charter) Delaware 34-0158970 -------- ---------- (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 October 31, 1996: 2,417,687 --------- Index on sequential page 2. 2 OGLEBAY NORTON COMPANY AND SUBSIDIARIES INDEX
SEQUENTIAL PAGE NUMBER ----------- PART I. FINANCIAL INFORMATION ------------------------------ Condensed Consolidated Balance Sheet - September 30, 1996 (Unaudited) and December 31, 1995 3 Condensed Consolidated Statement of Operations (Unaudited) - Three Months Ended September 30, 1996 and 1995 and Nine Months Ended September 30, 1996 and 1995 4 Condensed Consolidated Statement of Cash Flows (Unaudited) - Nine Months Ended September 30, 1996 and 1995 5 Notes to Condensed Consolidated Financial Statements 6-7 Management's Discussion and Analysis of Financial Condition and Results of Operations 7-13 PART II. OTHER INFORMATION 13-14 ---------------------------
3 PART I. FINANCIAL INFORMATION OGLEBAY NORTON COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS SEPTEMBER 30 December 31 1996 1995 ---- ---- (UNAUDITED) CURRENT ASSETS Cash and cash equivalents $ 21,506,490 $ 22,660,436 Marketable securities 1,851,300 3,555,550 Accounts receivable, less reserve for doubtful accounts (1996-$608,000; 1995-$511,000) 27,697,807 27,681,413 Inventories Raw materials and finished products 2,458,546 3,456,857 Operating supplies 2,325,911 2,311,529 ------------ ------------ 4,784,457 5,768,386 Deferred income taxes 3,338,281 3,033,075 Prepaid expenses 5,913,331 1,775,417 ------------ ------------ TOTAL CURRENT ASSETS 65,091,666 64,474,277 INVESTMENTS 9,968,911 10,519,241 PROPERTIES AND EQUIPMENT 301,779,224 304,828,977 Less allowances for depreciation and amortization 156,585,858 153,235,099 ------------ ------------ 145,193,366 151,593,878 PREPAID PENSION COSTS AND OTHER ASSETS 29,027,534 27,668,477 ------------ ------------ $249,281,477 $254,255,873 ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY SEPTEMBER 30 December 31 1996 1995 ---- ---- (UNAUDITED) CURRENT LIABILITIES Current portion of long-term debt $ 8,476,450 $ 8,476,450 Accounts payable 4,119,843 6,564,012 Payrolls and other accrued compensation 5,040,509 7,283,660 Accrued expenses 11,415,299 14,219,918 Income taxes 4,778,616 1,311,849 Iron Ore impairment obligations 2,074,993 4,699,996 ------------- ------------- TOTAL CURRENT LIABILITIES 35,905,710 42,537,885 LONG-TERM DEBT, less current portion 39,283,788 43,641,125 POSTRETIREMENT BENEFITS OBLIGATIONS 31,654,161 31,559,405 OTHER LONG-TERM LIABILITIES 19,069,461 19,922,291 DEFERRED INCOME TAXES 20,755,529 20,329,760 STOCKHOLDERS' EQUITY Preferred stock, without par value, authorized 5,000,000 shares; none issued -0- -0- Common stock, par value $1 per share, authorized 10,000,000 shares; issued 3,626,666 shares 3,626,666 3,626,666 Additional capital 9,428,440 9,078,611 Unrealized gains 810,158 1,468,476 Retained earnings 121,549,933 113,566,048 ------------- ------------- 135,415,197 127,739,801 Treasury stock, at cost - 1,201,134 and 1,160,790 shares at respective dates (31,492,131) (29,806,819) Unallocated Employee Stock Ownership Plan shares (1,310,238) (1,667,575) ------------- ------------- 102,612,828 96,265,407 $ 249,281,477 $ 254,255,873 ============= =============
See notes to condensed consolidated financial statements. -3- 4 OGLEBAY NORTON COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended September 30 September 30 -------------------------------------- ---------------------- 1996 1995 1996 1995 ---- ---- ---- ---- REVENUES Net sales $ 27,314,595 $ 26,419,446 $ 78,288,335 $ 77,597,337 Operating revenues 30,647,498 29,816,621 57,371,256 60,156,818 Royalties and management fees 1,126,229 1,152,413 2,991,909 3,061,928 ------------ ------------- ------------- ------------- 59,088,322 57,388,480 138,651,500 140,816,083 COSTS AND EXPENSES Cost of goods sold 21,671,403 21,987,929 63,510,707 64,751,865 Operating expenses 25,064,722 23,925,714 50,092,550 48,424,072 General, administrative and selling expenses 3,341,655 4,003,231 11,278,851 11,947,958 Loss on sale of production capacities and shutdown of facilities 1,077,845 1,077,845 ------------ ------------- ------------- ------------- 51,155,625 49,916,874 125,959,953 125,123,895 INCOME FROM OPERATIONS 7,932,697 7,471,606 12,691,547 15,692,188 Gain on sale of assets 509,139 2,857,861 2,387,703 3,836,700 Interest, dividends and other income 493,175 410,014 2,125,763 1,128,310 Other expense (533,600) (777,002) (1,707,136) (2,197,877) Interest expense (775,073) (1,010,763) (2,432,842) (3,393,633) ------------ ------------- ------------- ------------- INCOME BEFORE INCOME TAXES 7,626,338 8,951,716 13,065,035 15,065,688 Income taxes 1,565,000 2,142,000 2,765,000 3,744,000 ------------ -------------- ------------- -------------- NET INCOME $ 6,061,338 $ 6,809,716 $ 10,300,035 $ 11,321,688 ============ ============== ============ ============= NET INCOME PER SHARE OF COMMON STOCK $ 2.49 $ 2.76 $ 4.21 $ 4.57 ============ ============== ============ ============= DIVIDENDS PER SHARE OF COMMON STOCK $ .35 $ .30 $ .95 $ .90 ============ ============== ============ ============= Average number of shares of Common Stock outstanding 2,432,679 2,471,526 2,444,835 2,476,053
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 ------------ 1996 1995 ---- ---- OPERATING ACTIVITIES Net income $ 10,300,035 $ 11,321,688 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,201,536 10,289,660 Deferred income taxes 748,000 (350,519) Gain on sale of assets (1,762,702) (3,836,699) Gain on sale of business (625,000) Loss on sale of production capacities and shutdown of facilities 1,077,845 Prepaid pension costs and other assets (2,099,982) (1,586,787) Deferred vessel maintenance costs (2,994,858) (1,653,443) Decrease in accounts receivable 20,137 3,672,009 Decrease in inventories 942,814 517,716 (Decrease) increase in accounts payable (2,421,382) 208,159 Decrease in payrolls and other accrued compensation (2,018,837) (1,835,504) Decrease in accrued expenses (3,615,035) (688,535) Increase in income taxes 3,474,581 1,633,631 Other operating activities (4,044,593) (2,210,306) ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 7,182,559 15,481,070 INVESTING ACTIVITIES Purchases of properties and equipment (4,733,003) (5,922,265) Proceeds from sale of assets 2,859,359 4,775,372 Proceeds from sale of business 1,900,000 Iron Ore and other investments 24,417 (3,113,450) ------------ ------------ NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 50,773 (4,260,343) FINANCING ACTIVITIES Payments on long-term debt (4,357,337) (4,857,338) Payments of dividends 2,316,150) (2,227,523) Purchases of Treasury Stock (1,713,791) (449,192) ------------ ------------ NET CASH USED FOR FINANCING ACTIVITIES (8,387,278) (7,534,053) ------------ ------------ (Decrease) increase in cash and cash equivalents (1,153,946) 3,686,674 CASH AND CASH EQUIVALENTS, JANUARY 1 22,660,436 17,720,419 ------------ ------------ CASH AND CASH EQUIVALENTS, SEPTEMBER 30 $ 21,506,490 $ 21,407,093 ============ ============
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 Registrant, however, believes that all adjustments considered necessary for a fair presentation of the results of operations for such period have been made. Certain amounts in the prior year have been reclassified to conform with the 1996 condensed consolidated financial statement presentation. For further information, refer to the consolidated financial statements and notes thereto included in the Registrant's 1995 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 the Registrant's Marine Transportation business segment which historically does not generate revenues in the first quarter of the year due to adverse weather conditions on the Great Lakes. 3. In July 1996, the Registrant's Refractories & Minerals subsidiary executed agreements to sell its refractory shapes and coatings production capacities. A pretax loss of $1,078,000 was recognized during the third quarter as a result of the sale of these production capacities. The loss also includes the shutdown of the Refractories & Minerals' Cleveland facility which manufactured these products. No further losses are anticipated with respect to these actions. 4. At the end of 1995, the Registrant notified the other owners of Eveleth Mines of its decision not to renew its contract as manager and employer of Eveleth Mines beyond the current expiration date of December 31, 1996. On June 20, 1996, the Registrant reached an agreement in principle to sell its 18.5 percent interest in Eveleth Mines to the other owners of Eveleth Mines. Specific terms of the sale continue to be negotiated. Any gain or loss arising from the Registrant's discontinuance of its Iron Ore business segment will be determined once the terms of the agreement have been finalized. Any unamortized balance of the segment's Iron Ore impairment obligations will be included in the computation of the resulting gain or loss. An agreement is expected to be completed by the end of 1996. Operating results of the Registrant's Iron Ore business segment included in the consolidated statement of operations are as follows (in thousands):
Three Months Ended Nine Months Ended September 30 September 30 1996 1995 1996 1995 -------------------------- ----------------------- Revenues $9,409 $8,020 $25,358 $21,373 Operating profit 1,955 1,439 5,019 3,834 Net Income 1,308 998 3,392 2,579
Operating profit and net income exclude allocated corporate and general administrative expenses of $166,000 and $219,000 for the three months ended September 30 1996 and 1995, respectively, and $582,000 and $655,000 for the nine months ended September 30,1996 and 1995, respectively. 5. The Registrant received a state income tax refund of $1,824,000 and related interest of $576,000 in February 1996 for prior tax years. The interest received is included in other income, while the tax refund reduced the Registrant's 1996 annual effective income tax rate. -6- 7 OGLEBAY NORTON COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 6. On February 8, 1996 the Registrant sold its National Perlite Products Company subsidiary for $1,900,000 in cash. The sale resulted in a $625,000 pretax gain, which is included in the gain on sale of assets within the condensed consolidated statement of operations. 7. In the third quarter of 1995, the Registrant sold the idled vessels S/S J. Burton Ayers and S/S Crispin Oglebay for a total of $2,524,000 in cash resulting in pretax gains of $2,324,000. On March 2, 1995, the Registrant sold for cash certain undeveloped clay properties located in Tennessee resulting in a $522,000 pretax gain. All of these gains are included in the gain on sale of assets. 8. On November 5, 1996, the Registrant's Refractories & Minerals segment purchased substantially all the assets and production capacities of a manufacturer of metallurgical treatment and hot top compound products located in Kingsford Heights, Indiana. It is the segment's expectations to grow its metallurgical treatments business on a regional basis and it is anticipated that this acquisition will provide a catalyst for growth in the Chicago steel market. This acquisition is not material to the Registrant's consolidated assets or consolidated operations. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Due to the seasonal nature of the Registrant's Marine Transportation business segment, 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. The Registrant's Marine Transportation business segment historically does not generate revenues in the first quarter of the year due to adverse weather conditions on the Great Lakes. FINANCIAL CONDITION ------------------- The Registrant's operating activities provided cash of $7,183,000 in the first nine months of 1996 compared to $15,481,000 for the same period in 1995. Vessel maintenance costs, which are included within prepaid expenses and deferred and amortized over the Marine Transportation sailing season, totaled $2,995,000 and $1,653,000 as of September 30, 1996 and 1995, respectively. Accounts receivable decreased by $20,000 for the nine months ended September 1996 compared to a decrease of $3,672,000 for the same period of 1995. Accounts payable declined $2,421,000 through the first nine months of 1996, while accounts payable balances increased by $208,000 for the same period in 1995. Accrued expenses decreased by $3,615,000 and $689,000 during the first nine months of 1996 and 1995, respectively. Income taxes increased during the first nine months of 1996 by $3,475,000 compared to an increase of $1,634,000 during the same period of 1995. Accounts receivable collections decreased during the first nine months of 1996 as compared to the same period of 1995 due to lower revenues experienced during the fourth quarter of 1995 as compared to the fourth quarter of 1994. During the first nine months of 1996 additional cash was used for the payment of accounts payable, deferred vessel maintenance costs and accrued expenses, as compared to the first nine months -7- 8 FINANCIAL CONDITION (CONTINUED) ------------------- of 1995. The decrease in cash provided by operating activities during the first nine months of 1996 resulted primarily from the Registrant's Marine Transportation business segment. Heavy ice conditions experienced by the Registrant's vessel fleet on the Great Lakes and rivers at the end of 1995 persisted through April and May causing delays to be 20 to 25 percent over historical levels for the period. Delay and repair costs caused by the adverse weather conditions are not expected to be recovered. All twelve vessels have been in operation since mid-May. Operating results of the Company's business segments are discussed in more detail under "RESULTS OF OPERATIONS". Expenditures for property and equipment amounted to $4,733,000 through the first nine months of 1996 compared to $5,922,000 for the same period in 1995. Included in the 1995 expenditures for property and equipment is $2,037,000 in vessel inspection costs. No vessel inspections are required in 1996. In the first nine months of 1996, the Registrant received $2,050,000 and $2,709,000 on the sale of marketable securities and certain non-operating properties, respectively. The non-operating properties sold during 1996 include the Registrant's National Perlite Products Company subsidiary for $1,900,000 and the Registrant's Brownsville, Texas facility for $275,000. In addition, the Registrant sold its refractory shapes and coatings production capacities for $165,000 in July 1996. The Registrant received $1,373,000 and $3,402,000 on the sale of marketable securities and certain non-operating properties, respectively, for the same period in 1995. The principal properties sold in 1995 include certain undeveloped clay properties for $530,000 and the idled vessels S/S J. Burton Ayers and S/S Crispin Oglebay for $2,524,000. The Registrant made long-term debt payments of $4,357,000 and $4,857,000 in the first nine months of 1996 and 1995, respectively. In the first half of 1995, the Registrant also made Iron Ore investment advances of $2,812,000 to fund its proportionate share of Eveleth Mines' debt. Eveleth's debt was fully paid in May 1995. The Registrant declared dividends of $.95 in the first nine months of 1996 and $.90 in the first nine months of 1995. Dividends paid were $2,316,000 for the first nine months of 1996 compared to $2,228,000 for the same period of 1995. The Registrant purchased on the open market, and placed in treasury, 41,444 shares of its Common Stock for $1,714,000 in the first nine months of 1996 and 14,450 shares for $475,000 in the first nine months of 1995. Anticipated cash flows from operations and current financial resources are expected to meet the Registrant's needs during the remainder of 1996. All financing alternatives are under constant review to determine their ability to provide sufficient funding at the least possible cost. -8- 9 RESULTS OF OPERATIONS --------------------- NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1995 The Registrant's income from operations declined by 19% in the first nine months of 1996 to a level of $12,692,000 on revenues of $138,652,000, compared to $15,692,000 on revenues of $140,816,000 for the same period in 1995. Income before income taxes was $13,065,000 for the first nine months of 1996, compared to $15,066,000 for the first nine months of 1995. Net income for the first three quarters of 1996 was $10,300,000 or $4.21 per share compared to $11,322,000 or $4.57 per share for the same period in 1995. Income before income taxes for the first nine months of 1996 includes gains of $1,344,000 on the sale of current marketable securities and $1,044,000 on the sale of non-operating properties. Properties sold include National Perlite Products Company, which had not operated over the past two years. A $625,000 nontaxable gain was realized on the sale of this wholly-owned subsidiary. In the third quarter of 1996, the Registrant's Refractories & Minerals subsidiary sold its refractory shapes and coatings production capacities and shutdown its Cleveland facility which manufactured these products, resulting in a loss of $1,078,000. No further losses are anticipated with respect to these actions. The Registrant received a $1,824,000 state income tax refund, which related to prior tax years, and related interest income of $576,000, during the first quarter of 1996. As a result, the Registrant's 1996 annual effective income tax rate was reduced. Income before income taxes for the first nine months of 1995 included gains of $836,000 on the sale of current marketable securities and $3,001,000 on the sale of certain non-operating properties. The gains recognized include $520,000 on the sale of undeveloped clay properties in Tennessee and $2,324,000 on the idled vessels S/S J. Burton Ayers and S/S Crispin Oglebay. Net income, excluding the above items, was $7,895,000 or $3.23 per share for the first nine months of 1996 and $8,790,000 or $3.55 per share for the first nine months of 1995. Interest expense declined 28% in the first three quarters of 1996, compared to the same period in the prior year, due to an overall reduction in debt and lower interest rates. Operating results of the Registrant's business segments for the nine months ended September 30, 1996 and 1995 are discussed below. It is the policy of the Registrant to allocate certain corporate general and administrative expenses to its business segments. Operating revenues for the Registrant's Marine Transportation business segment decreased 5% to $57,371,000 for the first three quarters of 1996 compared to $60,157,000 for the same period in 1995. The segment's operating profit of $5,111,000 for the first nine months of 1996 decreased 45% compared to $9,362,000 for the same period in 1995. The start of the Marine Transportation season was slow and costly with the fleet encountering heavy ice conditions in the rivers and upper Great Lakes regions. These conditions were as difficult or worse than those encountered at the end of the 1995 sailing season, when year end financial performance was adversely affected. At the start of the 1996 sailing season, only seven of the twelve vessels in the fleet marginally operated, compared to 1995 when eleven of the twelve operated in extremely favorable conditions. The segment's operating profit was also adversely impacted due to higher fuel costs and higher labor and repair charges as a result of the unfavorable sailing conditions. Currently, all twelve vessels are in operation. Provided that favorable weather conditions continue through the end of the sailing season, tonnage levels for the year are expected to be comparable to the 21,486,000 tons hauled in 1995, however, it is anticipated that operating profit will fall short of the prior year level. -9- 10 RESULTS OF OPERATIONS (CONTINUED) --------------------- NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1995 Net sales for the Registrant's Industrial Sands business segment amounted to $32,743,000 for the first nine months of 1996, a 6% increase over sales of $30,967,000 for the first nine months of 1995. The segment's operating profit increased by 16% from $5,886,000 for the first nine months of 1995 compared to $6,853,000 for the same period of 1996. The increase in operating profit can be attributed to the segment's Brady, Texas and Riverside, California operations. Increased oil prices have resulted in a strong demand in frac sand from the Brady operation, while the Riverside operation experienced strong demand from the construction markets. Both operations benefited from a decrease in operating costs per ton. The segment's increase in operating profit was tempered by a decrease in operating profit at the segment's Glass Rock operation. Its inability to reliably service major customers, as a result of production problems and high iron content in the sand, negatively impacted sales and operating profit earlier in the year. Operating results of the Registrant's Iron Ore business segment were as follows (in thousands):
Nine Months Ended September 30 1996 1995 ---- ---- Net sales $ 22,366 $ 18,312 Cost of sales 23,329 20,416 -------- -------- Gross margin (963) (2,104) Credit through reduction of Iron Ore impairment obligations 2,625 2,625 -------- -------- Adjusted gross margin 1,662 521 Royalties and management fee revenue 2,992 3,062 General, administrative and selling expenses - net 217 404 -------- -------- Operating profit $ 4,437 $ 3,179 ======== ========
Net sales and operating profit were significantly higher for the first nine months of 1996 on increased shipments at higher market prices to meet a strong spot market demand from the steel industry. At the end of 1995, the Registrant notified the other owners of the Eveleth Mines of its decision not to renew its contract as manager and employer of Eveleth Mines beyond the current expiration date of December 31, 1996. On June 20, 1996, the Registrant announced that it reached an agreement in principle to sell its 18.5 percent interest in Eveleth Mines to the other owners. Specific terms of the sale continue to be negotiated. Any gain or loss arising from the Registrant's discontinuance of its Iron Ore business segment will be determined once the terms of the agreement have been finalized. Any unamortized balance of the segment's Iron Ore impairment obligations will be included in the computation of the resulting gain or loss. An agreement is expected to be completed by the end of 1996. Included in the Iron Ore business segment's general, administrative and selling expenses - net is $582,000 and $655,000 of allocated corporate and general administrative expenses for the three quarters ended September 30, 1996 and 1995, respectively. The Registrant expects to allocate these expenses over the remaining business segments subsequent to the sale of its interest in Eveleth Mines. -10- 11 RESULTS OF OPERATIONS (CONTINUED) --------------------- NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1995 Net sales for the Registrant's Refractories & Minerals business segment amounted to $23,134,000 for the first nine months of 1996, which was a decrease of 18% compared to $28,190,000 for the first nine months of 1995. The segment's operating loss of $944,000 for the first nine months of 1996 includes, as previously discussed, the recognition of a $1,078,000 loss on the sale of its refractory shapes and coatings productions capacities and the shutdown of the Cleveland facility which manufactured these products. No further losses are anticipated with respect to these actions. The segment experienced an operating profit of $455,000 for the first three quarters of 1995. Although metallurgical treatment product sales declined by $2,247,000 for the first nine months of 1996, compared to the same period of 1995, profitability of this product line continues to improve in relation to sales. Net sales and operating profit of the segment's ingot hot top products declined by $2,381,000 and $545,000, respectively, for the first nine months of 1996 compared to the first nine months of 1995. The decline was anticipated, as the Registrant is one of the few remaining suppliers of ingot products to steel producers who have not shifted to the continuous casting process. Combined, refractory shapes and coatings products represented $3,635,000 in net sales and $308,000 in operating profit for the first nine months of 1996, compared to $4,056,000 in net sales and $57,000 in operating profit for the first nine months of 1995. THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1995 The Registrant's income from operations increased by 6% in the third quarter of 1996 to $7,933,000, on revenues of $59,088,000, compared to $7,472,000, on revenues of $57,388,000 for the same period of 1995. Income before income taxes was $7,626,000 for the third quarter of 1996 compared to $8,952,000 for the same period of 1995. Net income was $6,061,000 or $2.49 per share compared to net income of $6,810,000 or $2.76 per share for the same quarter of 1995. The increase in consolidated revenues can be attributed to higher sales volume experienced by the Registrant's Marine Transportation, Iron Ore and Industrial Sands business segments. The decline in net income is primarily a result of non-recurring gains and losses recognized during the third quarter of 1996 compared to the same period of 1995. Net income for the third quarter of 1996 improved compared to the same quarter of 1995, when such non-recurring gains and losses are excluded. Net income for the third quarter of 1996 includes the effects of pretax gains of $311,000 on the sale of current marketable securities and $198,000 on the sale of non-operating properties. During the third quarter of 1996, the Registrant's Refractories & Minerals subsidiary sold its refractory shapes and coatings production capacities and shutdown the Cleveland facility which manufactured these products, resulting in a loss of $1,078,000. No further losses are anticipated with respect to these actions. The Registrant received a $1,824,000 state income tax refund, which related to prior tax years, during the first quarter of 1996. As a result, the Registrant's annual effective income tax rate was reduced. Net income for the same quarter in 1995 includes the effects of pretax gains of $836,000 on the sale of current marketable securities and $3,001,000 on the sale of non-operating properties. The gains recognized include $520,000 on the sale of undeveloped clay properties in Tennessee and $2,324,000 on the sale of the idled vessels S/S J. Burton Ayers and S/S Crispin Oglebay. Net income, excluding the above non-recurring items was $5,835,000, or $2.40 per share, for the quarter ended September 30 1996, compared to $4,924,000, or $1.99 per share, for the same period in 1995. -11- 12 RESULTS OF OPERATIONS (CONTINUED) --------------------- THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1995 Interest expense declined 23% in the third quarter of 1996, compared to the same quarter in the prior year, due to an overall reduction in debt and lower interest rates. Operating results of the Registrant's business segments for the quarters ended September 30, 1996 and 1995 are discussed below. The comments set forth above in the nine months comparison generally apply, except as noted, when comparing the third quarter of 1996 to the same period in 1995. Operating revenues for the Registrant's Marine Transportation business segment of $30,647,000 for the third quarter of 1996 increased 3% compared to $29,817,000 for the third quarter of 1995. The increase in revenues can be attributed to rate increases and favorable commodity mix. The segment's operating profit of $4,913,000 for the third quarter of 1996 was 4% less than the operating profit of $5,093,000 for the same period of 1995. The decrease in operating profit is the result of unfavorable fuel costs and higher repair and labor costs associated with the heavy ice conditions experienced at the start of the sailing season. Net sales for the Registrant's Industrial Sands business segment totaled $11,450,000 for the third quarter of 1996, a 10% increase from the 1995 third quarter sales of $10,453,000. The segment's 1996 third quarter operating profit of $2,844,000 increased 47% from the 1995 third quarter profit of $1,937,000. The increases in net sales and operating profit can be attributed to the segment's Brady, Texas and Riverside, California operations, as previously discussed. Operating results of the Registrant's Iron Ore business segment were as follows (in thousands):
Three Months Ended September 30 1996 1995 ---- ---- Net sales $ 8,283 $ 6,869 Cost of sales 8,558 7,560 ------- ------- Gross margin (275) (691) Credit through reduction of Iron Ore impairment obligations 875 875 ------- ------- Adjusted gross margin 600 184 Royalties and management fee revenue 1,126 1,152 General, administrative and selling expenses - net (64) 115 ------- ------- Operating profit $ 1,790 $ 1,221 ======= =======
The increase in net sales is the result of improved pricing and increased tonnage sold on the spot market. Operating profit improved as a result of higher selling prices and lower fixed costs. Any unamortized balance of the segment's Iron Ore impairment obligations will be included in the computation of the resulting gain or loss arising from the Registrant's discontinuance of its Iron Ore business segment. Included in the Iron Ore business segment's general, administrative and selling expenses - net is $165,000 and $219,000 of allocated corporate and general administrative expenses for the third quarter of 1996 and 1995, respectively. The Registrant expects to allocate these expenses over its remaining business segments subsequent to the sale of its interest in Eveleth Mines. -12- 13 RESULTS OF OPERATIONS (CONTINUED) --------------------- THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1995 Net sales for the Registrant's Refractories & Minerals business segment amounted to $7,582,000 for the quarter ended September 30 1996, which was a 16% decline compared to $9,035,000 for the quarter ended September 30, 1995. The segment's operating loss for the third quarter of 1996 was $804,000, which includes the $1,078,000 loss recognized on the sale of its refractory shapes and coatings production capacities and the shutdown of the Cleveland facility which manufactured these products, as described earlier. No further losses are anticipated with respect to these actions. The segments operating results, excluding this loss, were comparable to the third quarter of 1995 operating profit of $274,000. PART II. OTHER INFORMATION - --------------------------- ITEM 1. LEGAL PROCEEDINGS - ------- ----------------- As previously reported by the Registrant in its Form 10-K filed for the year ended December 31, 1995, the Registrant's subsidiary, Laxare, Inc., is a defendant in a civil action in the Circuit Court of Kanawha County, West Virginia (the "Circuit Court") in which plaintiffs seek compensatory and punitive damages for coal mining and other activity on land in which plaintiffs allegedly hold an interest. In August 1995, Laxare sought protection under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of West Virginia (the "Bankruptcy Court"). Following an order by the Circuit Court against a codefendant, Cannelton Industries, Inc., Cannelton removed the Circuit Court case to the Bankruptcy Court and then sought reconsideration of the Circuit Court's Order. In an order issued October 31, 1996, the Bankruptcy Court remanded the case back to the Circuit Court and lifted its automatic stay of proceedings in that court with respect to Laxare, provided that any claims against Laxare that result from an award of damages by the Circuit Court must be asserted in the Bankruptcy Court. The order also granted Laxare's motion to assume four leases which are the property of the Bankruptcy Estate, and permitted Laxare to sublease them to a third party. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------- -------------------------------- (a) Exhibits (27) - Financial Data Schedule (b) Reports on Form 8-K - None -13- 14 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: November 14, 1996 By: /s/ R. J. Kessler -------------------------- R. J. Kessler Vice President - Finance and Planning On behalf of the Registrant and as Principal Financial and Accounting Officer -14- EX-27 2 EXHIBIT 27
5 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 21,506,490 1,851,300 27,697,807 608,000 4,784,457 65,091,666 301,779,224 156,585,858 249,281,477 35,905,710 39,283,788 3,626,666 0 0 98,986,162 249,281,477 78,288,335 138,651,500 63,510,707 125,959,953 1,707,136 0 2,432,842 13,065,035 2,765,000 10,300,035 0 0 0 10,300,035 4.21 4.21
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