10-K405
1
OGLEBAY NORTON CO. 10-K405
1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994 Commission file number 0-663
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OGLEBAY NORTON COMPANY
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(Exact name of Registrant as specified in its charter)
Delaware 34-0158970
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 Superior Avenue, Cleveland, Ohio 44114-2598
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including Area Code (216) 861-3300
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock Rights to Purchase
$1 Par Value Preferred Stock
------------ ---------------
Shares of Common Stock with associated Rights to Purchase Preferred Stock
outstanding at March 6, 1995: 2,491,226 .
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The aggregate market value of voting stock held by non-affiliates of the
Registrant at March 6, 1995 (based upon excluding the total number of shares
reported under Item 12 hereof) was $51,240,710.
Portions of the following documents are incorporated by reference:
Proxy Statement for 1995 Annual Meeting of Stockholders (Part III)
The Exhibit Index is located herein beginning at sequential page 48.
---
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 .
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [x]
2
PART I
ITEM 1. BUSINESS
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A. General - Industry Segments
---------------------------
The Registrant, which was incorporated in Delaware in 1931, its wholly
owned subsidiaries and its predecessor organizations have been engaged in the
transportation, mining and sale of industrial minerals and iron ore since 1854.
The principal offices of the Registrant are located at 1100 Superior Avenue,
Cleveland, Ohio 44114-2598.
The information regarding the approximate amounts of consolidated sales
and revenues (including sales commissions, royalties and management fees),
consolidated profit from operations and consolidated identifiable assets for
the three years ended December 31, 1994, attributable to each of the
Registrant's industry segments, appears in Note K to the Consolidated Financial
Statement on pages 38 through 41 of this Annual Report on Form 10-K.
B. Principal Products and Services
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1. Marine Transportation
---------------------
The Registrant operates U.S. flag self-unloading vessels engaged in the
transportation of iron ore, coal, limestone and other dry bulk cargo on the
Great Lakes. The self-unloader fleet consists of fourteen (14) vessels.
Eleven (11) of the vessels are owned by the Registrant and three (3) are
leased as described below. The vessels' cargo capacities range in size from
13,500 tons to 60,000 tons. The newest vessel was commissioned in 1981 and the
oldest in 1925. The relatively long life of Great Lakes vessels is due to a
scheduled program of regular winter maintenance, periodic renovation and the
lack of corrosion because of freshwater operations.
One of the owned vessels, the "Columbia Star", a 1000-foot Great Lakes
self-unloading bulk carrier, has been financed through the use of bonds issued
pursuant to Title XI of the Merchant Marine Act of 1936, as amended. See Note
G of the Notes to Consolidated Financial Statements for disclosure of financial
data with respect to these bonds.
One leased vessel, the Wolverine, is leased and operated by the Registrant
under a bareboat charter agreement which expires in 1999 and is renewable
thereafter for up to ten years. The agreement provides an option to purchase
the equity position in the vessel on the semiannual
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charter hire payment dates in each year and an option to purchase the vessel at
the end of the charter period. The two other leased vessels, the David Z.
Norton and the Earl W. Oglebay, formerly known as the William R. Roesch and the
Paul Thayer, respectively, are leased under bareboat subcharter and charter
agreements, respectively, which expire in 1998 and provide options to purchase
the vessels at the end of their respective terms.
The standard annual Great Lakes vessel season of navigation is 259 days. In
1994, the Registrant operated twelve (12) vessels during the season. The
Registrant's fleet carried approximately 14% more tons of commodities than in
1993.
2. Iron Ore
--------
The Registrant held iron ore mining rights located near Eveleth,
Minnesota, which were assigned in exchange for an overriding royalty to Eveleth
Taconite Company ("Taconite Company") and Eveleth Expansion Company ("Expansion
Company"), in which the Registrant and its wholly owned subsidiary, ONCO
Eveleth Company, hold 15% and 20.5% interests, respectively ("Eveleth Mines").
The Eveleth Mines reserves are sufficient to support the normal level of
operations for approximately 40 years. The Registrant also has a contract to
serve, on a fee basis, as Manager of the Eveleth Mines operations. Upon one
year's prior written notice, the Registrant's employment as Manager of the
Eveleth Mines operations may be terminated as of December 31, 1996, and each
year thereafter.
In addition to the mine, the Eveleth facility consists of a concentrating
and pellet production plant, located approximately eight miles south of the
mine. In 1994, the Registrant produced approximately 1,900,000 long tons of
Eveleth pellets and sold them under contracts or on the open market.
Approximately 1,100,000 tons of these pellets were available in 1994 because
other owners elected not to claim their full share of Eveleth pellets. The
sale of these additional pellets contributed approximately $4,000,000 to the
operating profit of the Registrant's Iron Ore segment in 1994. In 1995, the
other Eveleth owners are claiming their share of pellets. The Registrant's
share of pellet production is currently limited to its contractual allotment of
775,000 tons.
Eveleth Mines is a cost-sharing operation. The basic agreements, entered
into as of January 1, 1974, govern the operation for the life of the mine.
Under the basic agreements, Eveleth Mines is required to operate at full
capacity, with participants sharing fixed and variable costs in proportion to
their respective equity interests.
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These agreements were modified, effective as of January 1, 1991, to permit the
participants greater production flexibility and to alter the cost-sharing
arrangements through December 31, 1996. Under the modified agreements, each of
the participants pays fixed costs in proportion to its equity interest and
variable costs in proportion to the amount of iron ore nominated by it.
Discussions continue about a possible restructuring of the operations as
a result of one of the participants expressed interest in possibly exiting
Eveleth Mines. No agreement has been reached regarding the terms or timing of
any such exit; therefore, it is impossible to predict how any such exit might
affect Eveleth Mines or the impact, if any, upon the Registrant.
3. Refractories & Minerals
-----------------------
The Registrant's manufacturing operations were merged during the third
quarter of 1994 to achieve administrative and cost efficiencies. The
Registrant's wholly owned subsidiaries, Indiana Manufacturing Company Inc. and
ONCO Minerals, Inc., were merged into Tuscarawas Manufacturing Company, which
changed its name to Oglebay Norton Refractories & Minerals, Inc. In addition,
the Registrant's Ferro Engineering Division and Brownsville Briquetting Plant
were transferred to Oglebay Norton Refractories & Minerals, Inc.
Oglebay Norton Refractories & Minerals, Inc. and Canadian Ferro Hot
Metal Specialties Limited, the Registrant's Canadian manufacturing subsidiary,
continue to design, manufacture and market continuous casting refractories
and ingot hot topping products used in molten steel processing and to design,
produce and market metallurgical treatment products used in the refining of
molten steel. The Brownsville Plant has exited the fluorspar business, and
management is investigating other options for the plant's briquetting
capabilities.
Canadian Ferro Hot Metal Specialties Limited and Oglebay Norton
Refractories & Minerals, Inc. own the plants and the properties on which the
plants are located except for the Brownsville Plant, which is held under a
lease that expires July 31, 1999.
4. Industrial Sands
----------------
The Registrant, for reasons of administrative simplification and cost
reduction, combined its three wholly owned sand subsidiaries during the fourth
quarter of 1994 to form Oglebay Norton Industrial Sands, Inc., a wholly owned
subsidiary of the Registrant. This was accomplished by
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merging Central Silica Company and Texas Mining Company into California Silica
Products Company, which changed its name to Oglebay Norton Industrial Sands,
Inc.
During the fourth quarter of 1994, Oglebay Norton Industrial Sands, Inc.
acquired certain industrial sand assets located in Voca, Texas.
The following is a list of the plants of Oglebay Norton Industrial Sands,
Inc.:
Minimum
Name and Current Capacity Years of
Location Products (tons in 1000's) Reserves(1)
-------- -------- ---------------- --------
Orange County Construction, 550 16.6
Plant Golf Course and
Stucco Sand
Riverside Plant Pulverized Sand 50 N/A
Glass Rock Plant Glass, Foundry 500 25.4
and Pulverized
Sand
Millwood Plant Glass, Foundry 250 50.0
and Pulverized
Sand
Brady Plant Fracture and 1,500 62.0(2)
Pulverized Sand
(1) Based on full production at current rated annual capacity.
(2) The increase in the minimum years of reserves from prior
years is due to acquisition of additional reserves.
The Registrant's silica sand operations produced approximately 1,300,000
tons of sand in 1994.
The finished products produced by the Registrant's industrial sand
business move by truck and rail to consumers.
5. Other
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The Registrant completed the sale of its coal transfer business at
Ceredo, West Virginia, during the second quarter of 1994.
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The Registrant's wholly owned subsidiary, National Perlite Products
Company, became inactive as of January 31, 1994. Prior to the cessation of
operations, National Perlite had not been mining perlite ore from its reserves
near Malad City, Idaho. The Registrant has decided to withdraw from the
perlite industry and is attempting to sell this subsidiary.
C. Competition
-----------
The Registrant experiences intense competition in all of its business
segments from both foreign and domestic companies with which it competes in
supplying products and services or which offer alternative choices as to modes
of transportation. Vessel rates are an important factor as to the ability of
the Registrant's Great Lakes fleet to compete with other independent and
captive fleets, railroads and other providers of surface transportation. The
Registrant believes that product quality, differentiation and customer service
are significant competitive considerations for all of its business segments.
D. Environmental, Health and Safety Considerations
-----------------------------------------------
The Registrant is subject to various environmental laws and regulations
imposed by federal, state and local governments. The Registrant cannot
reasonably estimate future costs, if any, related to compliance with these
laws and regulations. However, costs incurred to comply with environmental
regulations have not been other than in the ordinary course of business.
Although it is possible that the Registrant's future operating results could be
affected by future costs of environmental compliance, it is management's belief
that such costs will not have a material adverse effect on the Registrant's
consolidated financial position. The Registrant is unable to predict the
effect of future environmental laws and regulations upon its business.
E. Principal Customers
-------------------
More than 10% of the Registrant's 1994 sales and revenues was
attributable to AK Steel Corporation and LTV Steel Company, Inc. A long-term
vessel transportation contract and a contract for iron ore pellets were the
primary sources of revenues from AK Steel Corporation. In the case of LTV Steel
Company, Inc., revenues were largely attributable to vessel transportation
services and refractory and metallurgical treatment products sold in 1994.
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F. Employees
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At December 31, 1994, the Registrant and its subsidiaries employed 1,579
persons.
ITEM 2. PROPERTIES
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The Registrant's principal operating properties are described in
response to Item 1. The Registrant's executive offices are located at 1100
Superior Avenue, Cleveland, Ohio, under a sublease expiring on March 31, 2003.
The total area involved is approximately 55,000 square feet.
ITEM 3. LEGAL PROCEEDINGS
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(1) The Registrant's subsidiary, Laxare, Inc., has been named as a
Defendant in two lawsuits now consolidated in the Circuit Court of Kanawha
County, West Virginia. Plaintiffs Mary Catherine Marks and Josephine W. Luther
("Plaintiffs") allege that they owned an interest in property ("Subject
Property") upon which Laxare engaged in coal mining and other activity pursuant
to a 1968 lease ("Subject Lease"), allegedly invalid as against Plaintiffs.
Plaintiffs make identical allegations against Cannelton Industries, Inc., to
which Laxare subleased its interest under the Subject Lease. Plaintiffs seek
compensatory and punitive damages in an unspecified amount against Laxare and
Cannelton. Plaintiffs also instituted since-settled claims against the
individuals ("Lessors") who leased Laxare its interest under the Subject Lease.
Laxare denied the material allegations, asserted various defenses and a
counterclaim against Plaintiffs, and cross claimed against the Lessors.
Cannelton has cross claimed against the Lessors and Laxare.
The Circuit Court denied Laxare's Motion for Summary Judgment, finding
that the Plaintiffs have an interest in the Subject Property, unencumbered by
the Subject Lease, but it has withheld ruling on Laxare's affirmative defenses.
Laxare has moved for reconsideration of the Circuit Court's ruling. The Court
dismissed Laxare's cross claim against the Lessors. Laxare and Cannelton filed
motions to dismiss Plaintiffs' claims on the basis of various affirmative
defenses, and Plaintiffs have moved for judgment in their favor on all issues,
except amount of damages. Those motions remain pending.
Trial is scheduled for September 1995. Depending on further rulings and
possible appeals, trial may be postponed beyond that date.
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Discovery is not complete, particularly with regard to damages. The
preliminary damage figures asserted by Plaintiffs against Laxare and Cannelton
range as high as approximately $150,000,000, which includes trebling of damages
for intentional trespass, to approximately $5,000,000 for negligent trespass.
No claims in respect of this matter have been asserted against the Registrant,
which was not a party to the Subject Lease.
The Registrant believes that Laxare's affirmative defenses are valid,
the damage figures asserted by plaintiffs are excessive, and, therefore, it is
unlikely that this litigation will have a material adverse effect on the
Registrant's consolidated financial position.
(2) The Registrant; its wholly owned subsidiary, Oglebay Norton Taconite
Company; Eveleth Taconite Company; Eveleth Expansion Company; and The United
Steel Workers of America, Local 6860, have been named Defendants in a Complaint
filed on August 16, 1988, in Federal District Court, 5th District of Minnesota,
by Lois E. Jenson and Patricia S. Kosmach, in their own behalf and on behalf of
all others similarly situated. The Complaint alleges both sexual harassment
and sexual discrimination under Title VII of the Civil Rights Act of 1964 (the
Act), Title 42, United States Code, 2000e et seq., and under the provision of
the Minnesota Human Rights Act, Minnesota Statutes, Section 363.01 et seq.
(3) On November 22, 1988, Kathleen O'Brien Anderson, a former employee
of Eveleth Mines, filed a Notice of Charge of Discrimination with the Equal
Employment Opportunity Commission, alleging sexual harassment and sexual
discrimination. Ms. Anderson was issued a Notice of Right to Sue by the Equal
Employment Opportunity Commission, which has been consolidated with the
preceding Federal Court proceeding.
These proceedings have been certified as a class action. This
matter was tried in December 1992 and February 1993.
On May 14, 1993, the Court issued its decision, dismissing
seven of Plaintiffs' nine claims of discrimination and harassment against
Defendants, Oglebay Norton Taconite Company and the Registrant. In addition,
it was determined that Eveleth Taconite Company, Eveleth Expansion Company and
Eveleth Expansion Financing Corporation were not "employers", as defined
under the Act, and they were dismissed as parties defendant. This dismissal,
however, does not relieve them of their contractual obligations to the
Registrant and Oglebay Norton Taconite Company.
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The Registrant and Oglebay Norton Taconite Company received
unfavorable decisions on the remaining two claims, one involving discrimination
in the promotion of hourly employees to step-up foreman and the other harass-
ment. Proceedings continue with regard to the two remaining counts against the
Registrant and its subsidiary. As final orders have not been issued, the
opportunity for appeal is not yet available. Trial of the claims of the named
Plaintiffs and sixteen individual class members began on January 17, 1995,
before a United States Magistrate Judge sitting as a special master. Trial
recessed on February 10, 1995, and will resume in May 1995.
(4) On February 26, 1993, a Complaint was filed by Lois E. Jenson and
Kathleen O'Brien Anderson in the United States District Court, District of
Minnesota, Fifth Division, naming the Registrant; its wholly owned subsid-
iary, Oglebay Norton Taconite Company; Eveleth Taconite Company; Eveleth
Expansion Company; and The United Steel Workers of America, Local 6860,
Defendants. The Complaint alleges violations of Title VII of the Civil Rights
Act of 1964, Title 42, United States Code, Section 2000e et seq., as amended by
the Civil Rights Act of 1991, and the Minnesota Human Rights Act, Minnesota
Statutes, Section 363.01 et seq. The Plaintiffs seek injunctive relief, back
pay, with triple damages, and compensatory and punitive damages in unspecified
amounts. This suit is considered by counsel to be superfluous and barred by
the doctrine of res judicata due to the fact that these same Plaintiffs filed a
related suit in 1988, which was tried in December 1992 and February 1993 and
for which a ruling was rendered on May 14, 1993. An answer has been filed to
this Complaint. No assessment of potential loss can be predicted at this time.
(5) The Registrant and certain of its subsidiaries are involved in
various other claims and ordinary routine litigation incidental to their
businesses, including claims relating to the exposure of persons to asbestos
and silica. The full impact of these claims and proceedings in the aggregate
continues to be unknown. The Registrant continues to monitor this situation.
(6) The Registrant, as Manager of Eveleth Mines, has received a number
of demands for arbitration with respect to management of Eveleth Mines and the
allocation of certain costs, including the right of the Registrant to allocate
the cost of the litigation referred to above in paragraphs (2) and (3) among
the participants, submitted by a participant with a 35% equity interest.
Arbitration panels have not been selected to date, and no discovery has taken
place. As noted above under the heading "Iron Ore" beginning on page 3, the
35% owner continues to express an interest in exiting from Eveleth Mines.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
-------------------------------------------
HOLDERS
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No matter was submitted to a vote of the Registrant's security holders,
through the solicitation of proxies or otherwise, during the fourth quarter of
the fiscal year covered by this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
(Included pursuant to Instruction 3 to paragraph (b) of Item 401 of Regulation
S-K)
The executive officers of the Registrant as of March 6, 1995, unless
otherwise indicated, were as follows.
Name Executive Office Age
-------------------- -------------------------------- ---
R. Thomas Green, Jr. Chairman of the Board, President
and Chief Executive Officer
(since 1992); Executive Vice
President (1990-1992); Vice
President-Iron Ore Operations
(1984-1990); and Director 57
Thomas J. Croyle Vice President-Refractories &
Minerals (since October 1, 1994);
Vice President-General Manager of
Ferro Engineering Division (1988
to September 30, 1994) 45
Edward G. Jaicks Vice President-Marketing (since
1992) 38
Richard J. Kessler Vice President-Finance (since 1981),
and Development (since February 23,
1994); Treasurer (1974-1994) 58
H. William Ruf Vice President-Administrative and
Legal Affairs (since February 23,
1994); Vice President-Human Resources
(1993-1994); Vice President-Employee
Relations (1992-1993); Vice President-
Personnel and Industrial Relations
(1978-1992) 60
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Name Executive Office Age
---- ---------------- ---
John L. Selis Vice President-Iron Ore (since
February 23, 1994); Vice President-
Iron Ore Operations (1992 to
February 23, 1994); Vice President-
Administration (1981-1992) and Law
(1986-1992) 58
Stuart H. Theis Vice President-Marine Transportation
(since January 1, 1994); Assistant to
the President (December 28, 1992-
December 31, 1993) 52
David A. Kuhn, Secretary and General Counsel of the Registrant, retired
as of May 31, 1994.
Except as noted above, all executive officers of the Registrant have
served in the capacities indicated, respectively, during the past five years.
All executive officers serve at the pleasure of the Board of Directors, with no
fixed term of office.
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Part II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
---------------------------------------------
RELATED STOCKHOLDER MATTERS
---------------------------
The Company's Common Stock, par value $1 per share, as reported by NASDAQ is
traded on the Over-The-Counter Market. The following is a summary of the
market ranges and dividends declared for each quarterly period in 1994 and 1993
for the Common Stock.
Quarterly Dividends
Period High Low Declared
--------- ---- --- ---------
1994 4th $31-3/4 $29-1/4 $.30
3rd 31 24-3/4 .30
2nd 26-1/2 24-1/4 .20
1st 26-1/4 21-3/4 .20
1993 4th $23 $19-1/4 $.20
3rd 22 18 .20
2nd 24-1/2 20 .20
1st 26-1/4 22-1/2 .20
As of December 31, 1994, there were 531 stockholders of record.
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ITEM 6. SELECTED FINANCIAL DATA
-----------------------
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
(Dollars and Shares in Thousands, Except Per Share Amounts)
YEAR ENDED
1994 1993
-------------------------------
OPERATIONS
Net sales and operating revenues $202,755 $159,736
Sales commissions, royalties and management fees 4,597 3,710
-------- --------
Total revenues $207,352 $163,446
======== ========
Income (loss) from continuing operations
before taxes $ 20,122 $ 9,554
Income taxes 5,231 2,292
-------- --------
Income (loss) from continuing operations 14,891 7,262
Discontinued operation
-------- --------
Income (loss) before extraordinary provision and
cumulative effects of changes in accounting 14,891 7,262
Extraordinary provision(1)
Cumulative effects of changes in accounting(2)
-------- --------
Net income (loss)(3) $ 14,891 $ 7,262
======== ========
Depreciation and amortization $ 13,603 $ 13,432
Expenditures for properties and equipment 8,813 2,921
PER SHARE DATA
Continuing operations $ 5.98 $ 2.89
Discontinued operation
-------- --------
Income (loss) before extraordinary provision and
cumulative effects of changes in accounting 5.98 2.89
Extraordinary provision(1)
Cumulative effects of changes in accounting(2)
-------- --------
Net income (loss)(3) $ 5.98 $ 2.89
======== ========
Dividends $ 1.00 $ .80
======== ========
OTHER STATISTICS
Total assets $260,813 $259,717
Long-term debt 57,118 69,344
Other long-term liabilities 74,243 80,642
Dividends declared 2,491 2,009
Average shares of Common Stock outstanding 2,491 2,512
Shares of Common Stock outstanding at
year-end 2,483 2,504
(1) Extraordinary provision relates to the Coal Industry Retiree Health Benefit Act of 1992, as
further described in Note J to the consolidated financial statements.
(2) Cumulative effects of changes in accounting are for postretirement benefits other than pensions
and vessel inspection costs in 1992, as further described in Note A to the
consolidated financial statements.
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DECEMBER 31
1992 1991 1990
-------------------------------------
Net sales and operating revenues $148,690 $144,249 $159,951
Sales commissions, royalties and management fees 5,321 4,594 6,210
--------- --------- ---------
Total revenues $154,011 $148,843 $166,161
======== ======== ========
Income (loss) from continuing operations
before taxes $ (49,761) $ 3,839 $ 7,006
Income taxes (17,612) 528 1,829
--------- --------- ---------
Income (loss) from continuing operations (32,149) 3,311 5,177
Discontinued operation 2,440 1,816 1,773
--------- --------- ---------
Income (loss) before extraordinary provision and
cumulative effects of changes in accounting (29,709) 5,127 6,950
Extraordinary provision(1) ( 9,978)
Cumulative effects of changes in accounting(2) (17,006)
--------- --------- ---------
Net income (loss)(3) $ (56,693) $ 5,127 $ 6,950
========= ========= =========
Depreciation and amortization $ 16,165 $ 15,878 $ 13,691
Expenditures for properties and equipment 8,727 3,506 63,894
PER SHARE DATA
Continuing operations $ (12.79) $ 1.32 $ 2.03
Discontinued operation .97 .72 .69
--------- --------- ---------
Income (loss) before extraordinary provision and
cumulative effects of changes in accounting (11.82) 2.04 2.72
Extraordinary provision(1) ( 3.97)
Cumulative effects of changes in accounting(2) ( 6.77)
--------- --------- ---------
Net income (loss)(3) $ (22.56) $ 2.04 $ 2.72
========= ========= =========
Dividends $ 1.40 $ 1.60 $ 1.60
========= ========= =========
OTHER STATISTICS
Total assets $263,974 $291,133 $303,862
Long-term debt 80,534 87,937 99,839
Other long-term liabilities 85,838 52,209 53,253
Dividends declared 3,518 4,022 4,084
Average shares of Common Stock outstanding 2,513 2,514 2,556
Shares of Common Stock outstanding at
year-end 2,513 2,513 2,517
(3) The net loss for 1992 includes the effects of capacity rationalization, asset impairments,
and a loss on the disposal of a business as further described in Notes H and I to the
consolidated financial statements.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
FINANCIAL CONDITION
The Company's operating activities provided a strong cash flow
of $19,589,000 in 1994, which more than tripled when compared to $5,357,000 in
1993. Cash flow from operations of $27,958,000 in 1992 was inflated by
proceeds of $12,500,000 from the sale of a long-term coal dock contract
collected at the beginning of 1992. Accounts receivable in 1994 increased by
$3,744,000, compared to 1993, as a result of an extended Marine Transportation
sailing season, strong Iron Ore sales to the North American steel industry and
improved fourth quarter sales for Industrial Sands.
Expenditures for property and equipment amounted to $8,813,000
in 1994 compared to $2,921,000 and $8,727,000 in 1993 and 1992, respectively.
Capital expenditures include vessel inspection costs of $1,326,000 in 1994,
$364,000 in 1993 and $2,782,000 in 1992. Also included in 1994 and 1992 is
$3,204,000 and $2,400,000 of property and equipment purchased as a part of an
$8,000,000 Industrial Sands and a $6,000,000 Refractories & Minerals asset
acquisition, respectively. Capital expenditures for 1995 are currently
expected to approximate 1994 expenditures.
In December 1994 the Company amended and restated its loan
agreement with various banks to extend its term loan through 2001 and reduce
semiannual payments. Under the new loan agreement, term loan balances were
consolidated and increased to $50,000,000 and the Company's revolving credit
facility was increased to $40,000,000, of which $15,000,000 is available only
for acquisitions. The new agreement results in cumulative savings of
approximately $6,000,000 over the term of the loan. The Company did not have
to utilize its revolving credit facility throughout 1994 and repaid $10,000,000
borrowed in 1993, reducing the balance to zero in the second quarter. In 1993,
the Company had $10,000,000 outstanding on its revolving credit throughout the
year, except for a one-month period during the fourth quarter. In December
1993 the Company refinanced its Title XI Bonds reducing the fixed interest rate
from 9.65% to 5.3%. In 1992, the Company repaid $20,000,000 of borrowings
under its revolving credit and reborrowed $15,000,000 within the same year.
Long-term debt is further described in Note G to the consolidated financial
statements.
The Company declared and paid dividends on a quarterly basis
totaling $1.00 per share in 1994, $.80 per share in 1993 and $1.60 per share in
1992. Dividends paid were $2,491,000 in 1994 compared to $2,009,000 and
$3,518,000 in 1993 and 1992, respectively. In the third quarter of 1994 the
Company's Board of Directors approved a $.10 per share increase of the
quarterly dividend to $.30 per share of Common Stock. In the fourth quarter of
1992 the Company's quarterly dividend had been reduced from $.40 to $.20 per
share of Common Stock. The Company purchased 20,800 shares of its Common Stock
on the open market for $536,000 in 1994 and 9,000 shares for $189,000 in 1993
and placed these shares in treasury.
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In 1994 the Company sold its Ceredo coal dock business and
current investments resulting in pretax gains of $6,518,000 and $1,315,000,
respectively. In 1993, the Company sold certain assets of its Licking River
Terminal coal dock, generating a $1,326,000 pretax gain, and its unsecured
bankruptcy claim against LTV Steel Company, Inc., resulting in a $2,653,000
pretax gain after the retirement of $4,412,000 of long-term receivables. In
1992, the Company's wholly-owned subsidiary, Saginaw Mining Company, ceased
operation of its Ohio coal mine. Permanent closure of the mine was completed
in 1993 and funded by a public utility customer, as required by a long-term
contract. The utility customer paid the Company $1,952,000 which was
recognized as a gain on shutdown of this discontinued operation. Final
settlement of closure costs, primarily related to retiree health care benefits,
has been extended into 1995 at the request of the customer. The Company's
wholly-owned subsidiary, T & B Foundry, was disposed of in 1992 resulting in a
$3,300,000 pretax loss.
The Company is subject to various environmental laws and
regulations imposed by federal, state and local governments. Also, in the
normal course of business, the Company is involved in various pending or
threatened legal actions. The Company cannot reasonably estimate future costs,
if any, related to these matters. However, costs incurred to comply with
environmental regulations and to settle litigation have not been significant in
1994 and prior years. Although it is possible that the Company's future
operating results could be affected by future costs of environmental compliance
or litigation, it is management's belief that such costs will not have a
material adverse effect on the Company's consolidated financial position.
Anticipated cash flows from operations and current financial
resources are expected to meet the Company's needs during 1995. As was
demonstrated by the Company's 1994 restructuring of its term loans and
revolving credit facility, all financing alternatives are under constant review
to determine their ability to provide sufficient funding at the least possible
cost.
RESULTS OF OPERATIONS
Net sales, operating revenues, sales commissions, royalties and
management fees amounted to $207,352,000 in 1994 as compared to $163,446,000
and $154,011,000 in 1993 and 1992, respectively. Income from operations of
$18,301,000 in 1994 increased 48% as compared to $12,364,000 in 1993. A loss
from operations of $44,932,000 was incurred in 1992. Income from continuing
operations before taxes was $20,122,000 in 1994 as compared to $9,554,000 in
1993 and a loss of $49,761,000 in 1992. Net income for 1994 was $14,891,000 or
$5.98 per share on 2,491,000 average shares as compared to $7,262,000 or $2.89
per share in 1993 on 2,512,000 average shares and a net loss of $56,693,000 or
$22.56 per share in 1992 on 2,513,000 average shares.
As previously mentioned, pretax results in 1994 include gains
of $7,833,000 on the sale of the Company's Ceredo coal dock business and
current investments. Pretax results in 1993 included gains of $3,979,000 on
the sale of certain assets, a $1,700,000 reserve against doubtful coal customer
accounts receivable and a $652,000 charge related to refinancing the Company's
Title XI
-16-
17
Bonds. The pretax loss for 1992 increased $47,912,000 for a provision for
capacity rationalization, impairment charges and a loss on the disposal of a
business. Notes H and I to the consolidated financial statements further
describe these charges. Pretax results in 1992 also included a $1,544,000 gain
on the disposal of certain undeveloped Iron Ore and Industrial Sands
properties.
In 1993 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". The Company adopted the provisions
of the new standard, effective January 1, 1994, and increased stockholders'
equity by $2,972,000 to reflect unrealized gains on available-for-sale
investments. Available-for-sale investments are carried at fair value and are
reported as a current asset, as further described in Notes A and B to the
consolidated financial statements.
In 1994 the Company reevaluated assumptions used in determining
postretirement pension and health care benefits. The weighted-average
discount rates were adjusted from 7.25% to 8.0% to better reflect market rates.
The assumed health care cost trend rate will decline in 1995 by .50% for
retirees under age 65, while the ultimate trend rate will increase by .50% for
all retirees. The change in assumptions did not affect 1994 net income and
will not have a significant effect on net income in 1995. Postretirement
benefits are further described in Note E to the consolidated financial
statements.
In 1992 the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
than Pensions." As a part of adopting the new standard, the Company recorded a
one-time, non-cash charge of $17,541,000 or $6.98 per share in 1992. The
Company also changed its method of accounting for vessel inspection costs from
expensing such costs over one shipping season to deferring these costs and
amortizing them over five shipping seasons between required inspections. This
change resulted in a cumulative adjustment of $534,000 or $.21 per share. Note
A to the consolidated financial statements further describes these changes in
accounting. The net loss for 1992 increased $9,978,000 or $3.97 per share for
an extraordinary provision for the Coal Industry Retiree Health Benefit Act of
1992. This legislation required former coal mining companies to assume certain
health care benefit obligations for retired coal miners and their dependents,
as further described in Note J to the consolidated financial statements.
Record tonnages carried by the Company's Great Lakes fleet,
strong Iron Ore sales and improved sales from the Industrial Sands segment
combined to strengthen the Company's 1994 results. The Company benefitted from
strong North American steel industry demand and significant cost reductions
achieved from a realignment into four business units - Marine Transportation,
Iron Ore, Refractories & Minerals and Industrial Sands.
The operating results of the Company's business segments for
the three years ended December 31, 1994 are discussed below. It is the policy
of the Company to allocate certain corporate general and administrative
expenses to its business segments. The Company continues to stress quality
products, cost reductions and improved marketing practices for its products and
services in order to remain competitive and grow within the industries served.
-17-
18
MARINE TRANSPORTATION - Operating revenues amounted to $82,153,000 in 1994
which were 12% greater than revenues of $73,143,000 in 1993 and 16% greater
than revenues of $70,654,000 in 1992. Operating profit was $12,467,000 in 1994
which was a 16% and 31% increase over 1993 and 1992 levels of $10,791,000 and
$9,538,000, respectively. Income from continuing operations before taxes was
$8,270,000 in 1994 compared to $5,492,000 and $2,228,000 in 1993 and 1992,
respectively.
Revenues improved in 1994 for the Company's Great Lakes vessel
fleet as operating days increased 20% from an extended sailing season after a
delayed start due to severe ice conditions on the Great Lakes. The average
rate per ton in 1994 was comparable to rates in the prior two years. The fleet
experienced a 14% increase in tonnage carried in 1994, representing a record
level, compared to 1993. Tonnage carried in 1994 exceeded 1992 tonnage by 17%.
Transportation of iron ore in 1994 was comparable to 1993, while coal and stone
shipments increased by 25%. Iron ore shipments in 1994 were 14% greater than
in 1992 and shipments of coal and stone improved 19%. The Company operated
twelve vessels during the 1994 sailing season. In 1993, ten vessels sailed for
the full sailing season, while one vessel operated for part of the season.
Eleven vessels operated for the full season in 1992.
The 1994 operating profit improvement, compared to prior years,
resulted from better business conditions for the Company's customers, favorable
weather conditions once the sailing season commenced and lower operating costs.
Capital expenditures and depreciation expense increased in 1994 as more vessels
required their 5-year inspections prior to sailing. Depreciation expense was
lower in 1993, as compared to 1992, as a result of the prior year asset
impairment charges. Interest expense declined in 1994, compared to prior
years, as a result of reductions in outstanding debt and a lower fixed interest
rate on the Company's Title XI Bonds.
A new collective bargaining agreement was reached in early 1995
with Marine Transportation's unlicensed seamen. This agreement will help to
bring about a smooth beginning to the 1995 navigation season.
IRON ORE - Net sales, royalties and management fees amounted to $54,656,000 in
1994, as compared to $23,634,000 and $18,821,000 in 1993 and 1992,
respectively. Operating profit was $6,866,000 compared to $4,031,000 in 1993
and an operating loss of $2,832,000 in 1992. Income from continuing operations
before taxes was $6,524,000 in 1994 compared to $3,405,000 in 1993 and a loss
of $38,206,000 in 1992.
Both iron ore pellet production lines at Eveleth Mines were in
operation in 1994 with total production approximating 5,000,000 tons, as
compared to 3,100,000 tons in 1993 and 3,600,000 in 1992. Additional pellet
tonnage was available to the Company to sell in 1994, as other owners elected
not to claim their full share of Eveleth production. The Company, in addition
to its sales to long-term contract customers, sells the balance of its share of
Eveleth Mines' iron ore pellet production each year on the spot market.
Revenues and operating results increased in 1994 with strong sales to the North
American steel industry, as compared to prior years. The improvement in 1994
was partially offset by a 10% and 22% decline in the average selling price per
ton as compared to 1993 and 1992 average prices, respectively. Spot market
selling prices increased in 1994, while
-18-
19
prices declined for long-term contract customers. Sales to contract customers
and new customers in the spot market accounted for the increase in revenues in
1993, as compared to 1992. In addition, Eveleth Mines was shut down for a part
of 1992.
In 1992, the Company recorded a provision for capacity
rationalization of $34,694,000 and asset impairment charges of $330,000, as
further described in Note I to the consolidated financial statements. The
charges resulted from Eveleth's high costs and depressed economic conditions in
the steel industry. A $550,000 gain on the sale of certain undeveloped iron
ore properties reduced the loss in 1992. The capacity rationalization steps
taken improved operating profit in 1994 and 1993 by $4,393,000 and $5,220,000,
respectively. Increased production, resulting in higher royalties, and reduced
costs also contributed to the improvements. Interest expense declined in 1994,
compared to prior years, due to reductions in outstanding debt which is
scheduled to be paid off in 1995.
Discussions, started in 1993, have continued regarding one
partner's possible exit from Eveleth Mines. However, no agreement has been
reached regarding the terms of such an exit or of a potential restructuring of
Eveleth Mines. Until an agreement has been reached, it is not possible to
predict how these events may affect the Company. All owners have presently
claimed their share of Eveleth production for 1995. Therefore, the Company's
1995 sales and operating results for its Iron Ore segment will likely be more
comparable to 1993 levels. With a new six year labor contract at Eveleth
Mines, the Company continues its efforts to reduce costs and more aggressively
market its share of Eveleth's production.
REFRACTORIES & MINERALS - Net sales of $39,502,000 in 1994 were 10% and 15%
greater than 1993 and 1992 levels of $35,756,000 and $34,422,000, respectively.
Operating profit was $1,074,000 in 1994 compared to $2,809,000 and $257,000 in
1993 and 1992, respectively. Income from continuing operations before taxes
was $952,000 in 1994 compared to $2,608,000 in 1993 and a loss of $4,077,000 in
1992.
Strong demand for a more diverse product line and the dramatic
escalation in the price of aluminum, a key component in several products,
resulted in a 24% increase in 1994 metallurgical treatment product sales.
Sales of tundish refractory and ingot hot topping products increased 3% and 2%,
respectively, in 1994. The Company's plan to remain the leader among the few
remaining ingot product suppliers is on track. However, intense competition
prevented the Company from making anticipated market penetration into the
tundish coating and refractory shape sector of the steel industry in 1994.
Fluorspar net sales declined in 1994, compared to prior years, as the Company
exited the fluorspar business. Other options are being investigated for the
Texas facility's briquetting capabilities. The increase in net sales in 1993,
as compared to 1992, was attributable to new business for almost all products.
An 11% increase in net sales related to this new business was partially offset
by the loss of revenues from T & B Foundry, which was disposed of at the end of
1992. T & B Foundry accounted for 16% of the segment's net sales in 1992.
Operating profit declined in 1994, compared to 1993, as the
sales mix shifted away from higher margin ingot and tundish products, and as a
result of exiting the fluorspar business. The Company's Warren, Ohio facility,
which manufactures metallurgical treatment products, incurred higher
production, maintenance and inventory costs as it operated near full capacity
throughout 1994.
-19-
20
Administrative, selling and research and development costs increased by almost
10% for the same period with the Company's effort to increase market share,
customer base and product diversification. Operating profit improved in 1993,
compared to 1992, as a result of market penetration and cost reductions in the
production of tundish coatings and hot top products. Interest expense declined
in 1994, compared to prior years, as outstanding debt was reduced.
The loss from continuing operations before taxes in 1992
included a $3,300,000 loss on the disposal of T & B Foundry and $755,000
related to certain liabilities incurred at the Company's Canadian facilities.
INDUSTRIAL SANDS - Net sales of $28,818,000 in 1994 increased 8% and 18%
compared to $26,606,000 and $24,447,000 in 1993 and 1992, respectively.
Operating profit of $2,834,000 in 1994 compared to $1,827,000 in 1993 and
$944,000 in 1992. Income from continuing operations before taxes was
$2,893,000 compared to $1,846,000 in 1993 and a loss of $2,699,000 in 1992.
Tonnage shipped in 1994 increased by 3% and 15% compared to
1993 and 1992 levels, respectively. The average sales price per ton in 1994
improved by 5% and 3% compared to 1993 and 1992 average prices, respectively.
The largest tonnage gains were in frac sand sold in the oil and gas extraction
markets and specialty bulk and strip sand sold in the construction materials
and recreational markets. Frac sand sales were especially strong in the fourth
quarter of 1994 with the Company's $8,000,000 purchase of additional sand
assets. Glass and pulverized sand sales in 1994 were comparable to prior
years, while foundry sand sales improved during the second half of 1994.
Customers in the glass sand market operated at reduced production capacities
throughout most of 1994. The 1993 sales improvement, as compared to 1992, was
primarily the result of sales to the glass and recreational sand markets. A
magnetic separation process enabled the Company to obtain new business,
although this improvement was partially offset by reductions in glass sand
customers' production capacity.
The 1994 operating profit improvement is attributable to
reduced operating costs and a higher utilization of sand production capacity in
the fourth quarter. In addition, steps to streamline the segment's management
processes were implemented during the fourth quarter which reduced overhead
costs and are expected to accelerate long-term productivity gains. Certain
overlapping support functions were consolidated in Cleveland, Ohio, while
responsibility for operating decisions were moved to the production sites.
Operating profit increased in 1993, compared to 1992, on higher sales and a
better mix of products sold. Depreciation expense was lower in both 1994 and
1993 due to asset impairment charges recognized in 1992.
Income from continuing operations before taxes in 1992 includes
a $993,000 gain on the sale of certain undeveloped sand properties and
impairment charges of $4,640,000. The charges resulted from impaired asset
carrying values at the Company's Texas and California facilities.
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21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Oglebay Norton Company
We have audited the accompanying consolidated balance sheet of Oglebay Norton
Company and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Oglebay Norton Company and subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in Note A to the consolidated financial statements, in 1992 the
Company changed its method of accounting for postretirement benefits other than
pensions and vessel inspection costs.
ERNST & YOUNG LLP
Cleveland, Ohio
February 15, 1995
-21-
22
CONSOLIDATED BALANCE SHEET
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
December 31
1994 1993
---------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 17,720,419 $ 21,243,064
Investments 5,772,650 -0-
Accounts receivable, less reserves for
doubtful accounts of $440,000 in
1994 and $2,082,000 in 1993 32,035,408 28,291,306
Inventories
Raw materials and finished products 3,846,094 4,354,120
Operating supplies 2,261,747 2,305,719
------------- -------------
6,107,841 6,659,839
Deferred income taxes 2,213,246 3,801,985
Prepaid insurance and other expenses 2,237,793 2,191,166
------------- -------------
TOTAL CURRENT ASSETS 66,087,357 62,187,360
INVESTMENTS 10,563,835 14,871,623
PROPERTIES AND EQUIPMENT
Marine Transportation 234,867,117 239,999,642
Iron Ore 1,305,258 113,508
Industrial Sands 52,467,527 49,911,250
Refractories & Minerals 17,330,863 16,252,996
Other 8,872,597 13,115,215
------------- -------------
314,843,362 319,392,611
Less allowances for depreciation
and amortization 156,886,610 156,962,679
------------- -------------
157,956,752 162,429,932
PREPAID PENSION COSTS AND OTHER ASSETS 26,205,459 20,228,456
------------- -------------
$ 260,813,403 $ 259,717,371
============= =============
-22-
23
December 31
1994 1993
--------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 8,476,450 $ 11,189,664
Accounts payable 4,569,067 4,035,129
Payrolls and other accrued compensation 7,057,615 4,814,871
Accrued expenses 16,013,208 12,772,673
Income taxes 2,270,951 733,414
Reserve for capacity rationalization 6,312,600 6,312,600
------------ ------------
TOTAL CURRENT LIABILITIES 44,699,891 39,858,351
LONG-TERM DEBT, less current portion 57,117,575 69,344,025
POSTRETIREMENT BENEFITS OBLIGATION 31,071,022 30,285,278
OTHER LONG-TERM LIABILITIES 24,019,063 30,958,324
DEFERRED INCOME TAXES 19,152,931 19,398,153
STOCKHOLDERS' EQUITY
Preferred Stock, without par value - authorized
5,000,000 shares; none issued -0- -0-
Common Stock, par value $1.00 per share - authorized
10,000,000 shares; issued 3,626,666 shares 3,626,666 3,626,666
Additional capital 9,035,841 8,988,043
Unrealized gains 2,278,273 -0-
Retained earnings 101,173,484 88,773,915
------------ ------------
116,114,264 101,388,624
Treasury Stock, at cost - 1,143,540 and
1,122,740 shares at respective dates (29,217,318) (28,681,694)
Unallocated Employee Stock Ownership
Plan shares ( 2,144,025) ( 2,833,690)
------------ ------------
84,752,921 69,873,240
------------ ------------
$260,813,403 $259,717,371
============ ============
See notes to consolidated financial statements.
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24
CONSOLIDATED STATEMENT OF OPERATIONS
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
Year Ended December 31
1994 1993 1992
----------------------------------------------------------
REVENUES
Net sales and operating revenues $202,754,512 $159,736,471 $148,690,067
Sales commissions, royalties and
management fees 4,597,517 3,709,687 5,321,222
------------ ------------ ------------
207,352,029 163,446,158 154,011,289
COSTS AND EXPENSES
Cost of goods sold and operating expenses 172,453,991 133,335,772 133,827,997
General, administrative and selling expenses 16,295,454 15,854,049 16,564,471
Reserve for doubtful accounts 301,652 1,892,419 638,110
Provision for capacity rationalization 34,693,983
Impairment charges 9,918,497
Loss on disposal of business 3,300,000
------------ ------------ ------------
189,051,097 151,082,240 198,943,058
------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS 18,300,932 12,363,918 (44,931,769)
Gain on sale of assets 8,093,805 4,116,906 1,560,218
Interest, dividends and other income 1,387,443 1,184,208 1,465,075
Interest expense (5,992,018) (7,554,878) ( 7,610,195)
Other expense (1,668,327) ( 556,119) ( 244,048)
------------ ------------ ------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE TAXES 20,121,835 9,554,035 (49,760,719)
INCOME TAXES
Current 4,825,000 233,000 2,330,000
Deferred 406,000 2,059,000 (19,942,000)
------------ ------------ ------------
5,231,000 2,292,000 (17,612,000)
------------ ------------ ------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS 14,890,835 7,262,035 (32,148,719)
Discontinued operation:
Income from discontinued operation 1,152,566
Gain on shutdown of discontinued operation 1,287,791
------------
Income and gain from discontinued operation 2,440,357
------------ ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY
PROVISION AND CUMULATIVE EFFECTS
OF CHANGES IN ACCOUNTING 14,890,835 7,262,035 (29,708,362)
Extraordinary provision for Coal Industry Retiree
Health Benefit Act of 1992 ( 9,977,900)
Cumulative effects of changes in accounting for
postretirement benefits other than pensions
and vessel inspection costs (17,006,415)
------------ ------------ ------------
NET INCOME (LOSS) $ 14,890,835 $ 7,262,035 $(56,692,677)
============ ============ ============
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25
CONSOLIDATED STATEMENT OF OPERATIONS - (CONTINUED)
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
Year Ended December 31
1994 1993 1992
-----------------------------------------------------
Income (loss) per share of common stock:
Continuing operations $ 5.98 $ 2.89 $(12.79)
Discontinued operation .97
------- ------ -------
Before extraordinary provision and cumulative
effects of changes in accounting 5.98 2.89 (11.82)
Extraordinary provision ( 3.97)
Cumulative effects of changes in accounting ( 6.77)
------- ------ -------
NET INCOME (LOSS) PER SHARE $ 5.98 $ 2.89 $(22.56)
======= ====== =======
See notes to consolidated financial statements.
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26
CONSOLIDATED STATEMENT OF CASH FLOWS
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
Year Ended December 31
1994 1993 1992
---------------------------------------------------------
OPERATING ACTIVITIES
Net income (loss) $14,890,835 $ 7,262,035 $(56,692,677)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 13,603,183 13,431,957 16,165,164
Deferred income taxes 170,517 447,200 ( 19,968,342)
Gain on sale of assets ( 8,094,005) ( 4,116,906) ( 2,848,009)
Impairment charges 9,918,497
Capacity rationalization 34,693,983
Loss on disposal of business 3,300,000
Extraordinary provision for Coal Act of 1992 9,977,900
Cumulative effects of changes in accounting 17,006,415
Prepaid pension costs and other assets ( 1,919,098) ( 2,147,271) ( 1,921,313)
Decrease (increase) in accounts
receivable ( 3,744,102) ( 8,981,222) 11,315,860
Decrease (increase) in inventories 396,592 ( 902,301) (422,785)
Increase (decrease) in accounts payable 533,938 ( 492,806) 374,061
Other operating activities 3,751,390 856,188 7,058,844
------------ ------------ ------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 19,589,250 5,356,874 27,957,598
INVESTING ACTIVITIES
Purchase of properties and equipment ( 5,609,103) ( 2,921,175) ( 6,326,590)
Proceeds from sale of assets 11,849,592 8,656,012 4,221,097
Iron Ore and other investments ( 2,885,830) ( 2,829,389) ( 2,751,257)
Acquisition of assets ( 8,000,000) ( 6,000,000)
------------ ------------ ------------
NET CASH PROVIDED BY (USED FOR)
INVESTING ACTIVITIES ( 4,645,341) 2,905,448 (10,856,750)
FINANCING ACTIVITIES
Payments on long-term debt (24,189,664) (18,152,879) (28,652,850)
Additional long-term debt 8,750,000 10,000,000 21,000,000
Dividends paid ( 2,491,266) ( 2,009,481) ( 3,518,096)
Purchase of Treasury Stock ( 535,624) ( 189,240)
------------ ------------ ------------
NET CASH USED FOR FINANCING ACTIVITIES (18,466,554) (10,351,600) (11,170,946)
------------ ------------ ------------
Increase (decrease) in cash and cash
equivalents ( 3,522,645) ( 2,089,278) 5,929,902
Cash and cash equivalents, January 1 21,243,064 23,332,342 17,402,440
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, DECEMBER 31 $17,720,419 $21,243,064 $ 23,332,342
=========== ============ ============
See notes to consolidated financial statements.
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27
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
Common Additional Unrealized
Stock Capital Gains
---------- ----------- ------------
Balance,
January 1, 1992 $3,626,666 $8,866,493
Net Loss
Dividends
$1.40 per share
Tax benefit of unallocated
shares in ESOP 80,048
Allocated ESOP shares
---------- -----------
Balance,
December 31, 1992 3,626,666 8,946,541
Net Income
Dividends
$.80 per share
Tax benefit of unallocated
shares in ESOP 41,502
Purchase of Treasury
Stock
Allocated ESOP shares
---------- -----------
Balance,
December 31, 1993 3,626,666 8,988,043
Adjustment for change
in accounting $2,971,792
Net Income
Dividends
$1.00 per share
Change in unrealized gains (693,519)
Tax benefit of unallocated
shares in ESOP 47,798
Purchase of Treasury
Stock
Allocated ESOP shares
---------- ----------- ------------
Balance,
December 31, 1994 $3,626,666 $9,035,841 $2,278,273
========== ========== ============
Unallocated
Common Employee Stock Total
Retained Stock in Ownership Stockholders'
Earnings Treasury Plan Shares Equity
------------ ------------ ----------- ------------
Balance,
January 1, 1992 $143,732,134 $(28,492,454) $(4,639,446) $123,093,393
Net Loss (56,692,677) (56,692,677)
Dividends
$1.40 per share ( 3,518,096) ( 3,518,096)
Tax benefit of unallocated
shares in ESOP 80,048
Allocated ESOP shares 902,878 902,878
------------ ------------ ----------- ------------
Balance,
December 31, 1992 83,521,361 (28,492,454) (3,736,568) 63,865,546
Net Income 7,262,035 7,262,035
Dividends
$.80 per share ( 2,009,481) ( 2,009,481)
Tax benefit of unallocated
shares in ESOP 41,502
Purchase of Treasury
Stock ( 189,240) ( 189,240)
Allocated ESOP shares 902,878 902,878
------------ ------------ ----------- ------------
Balance,
December 31, 1993 88,773,915 (28,681,694) (2,833,690) 69,873,240
Adjustment for change
in accounting 2,971,792
Net Income 14,890,835 14,890,835
Dividends
$1.00 per share ( 2,491,266) ( 2,491,266)
Change in unrealized gains ( 693,519)
Tax benefit of unallocated
shares in ESOP 47,798
Purchase of Treasury
Stock ( 535,624) ( 535,624)
Allocated ESOP shares 689,665 689,665
------------ ------------ ----------- ------------
Balance,
December 31, 1994 $101,173,484 $(29,217,318) $(2,144,025) $ 84,752,921
============ ============ =========== ============
See notes to consolidated financial statements.
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28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
December 31, 1994, 1993 and 1992
NOTE A - ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Company and its majority owned subsidiaries. Intercompany
transactions and accounts have been eliminated upon consolidation.
CASH EQUIVALENTS: The Company considers all highly liquid investments with a
maturity of three months or less to be cash equivalents. Cash equivalents are
stated at cost which approximates market value.
INVENTORIES: Inventories are stated at the lower of average cost (first-in,
first-out method) or market.
INVESTMENTS: Available-for-sale investments are carried at fair value, based
on quoted market prices, and are reported as a current asset in the
consolidated balance sheet. Realized gains and losses on the sale of such
investments are based on average cost. In prior years, the Company reported
these investments at the lower of cost or market and as long-term.
The Company holds a long-term investment in Eveleth Mines through a 15 percent
interest in Eveleth Taconite Company (ETC) and a 20.5 percent interest in
Eveleth Expansion Company (EEC).
PROPERTIES AND EQUIPMENT: Properties and equipment are carried at cost.
DEPRECIATION AND AMORTIZATION: The Company provides depreciation on the
straight-line method over the estimated useful lives of the assets. The
amortization of advances to Eveleth Mines equivalent to the Company's share of
depreciation of the underlying plant is computed on the units-of-production
method adjusted for levels of operation. Such adjustment provides for a
minimum of 75% of depreciation calculated on a straight-line basis.
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29
NOTE A - ACCOUNTING POLICIES - (CONTINUED)
NET INCOME (LOSS) PER SHARE: Net income (loss) per share of Common Stock is
based on the average number of shares outstanding.
ACCOUNTING CHANGES AND RECLASSIFICATION: In 1993, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities". The
Company adopted the provisions of the new standard, effective January 1, 1994,
and increased stockholders' equity by $2,971,792 (net of income taxes of
$1,531,000) to reflect unrealized gains on available-for-sale investments.
Prior years consolidated financial statements have not been restated for the
accounting change.
In 1992, the Company adopted the accounting provisions of Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions." This standard requires that the
expected cost of retiree health benefits be charged to expense during the years
that employees render service rather than recognizing these costs on a cash
basis. As a part of adopting the standard, the Company recorded a, one-time,
non-cash charge of $17,540,830 (net of income taxes of $9,037,000), or $6.98
per share.
In 1992, the Company changed its method of accounting for vessel inspection
costs from expensing such costs over one shipping season to deferring these
costs and amortizing them over the five shipping seasons between required
inspections. This change results in a better matching of these expenses with
revenues generated during the periods benefitted and improves financial
reporting. This change in accounting resulted in a cumulative adjustment of
$534,415 (net of income taxes of $275,000), or $.21 per share.
Certain amounts in prior years have been reclassified to conform with the 1994
consolidated financial statement presentation.
NOTE B - INVESTMENTS
The fair value of available-for-sale investments is $5,772,650 at December 31,
1994 and includes unrealized gains of $3,451,273 based on a cost of $2,321,377.
The Company realized gains of $1,315,000 from proceeds of $2,166,000 on the
sale of such investments for the year ended December 31, 1994.
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NOTE C - STOCKHOLDERS' EQUITY
The Company's Preferred Stock is issuable in series and the Board of Directors
is authorized to fix the number of shares and designate the terms of each
issue.
Certain shares of Series C $10.00 Preferred Stock and Common Stock have been
reserved for issuance upon exercise of Rights under a Stockholders' Rights
Plan. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors, because the Board, at its
option, may redeem the Rights at their redemption price.
The Company has a noncontributory Employee Stock Ownership Plan (ESOP) and
Trust for the benefit of certain salaried employees. In prior years, the Trust
financed the purchase of 250,000 shares of the Company's Common Stock. The
Company has guaranteed the financing and is obligated to make annual
contributions to enable the Trust to repay the loan, including interest. The
Company, as guarantor, has recorded the loan as long-term debt and a like
amount as a reduction of stockholders' equity.
NOTE D - INCOME TAXES
Total income tax expense (benefit) from continuing operations differs from the
tax computed by applying the U.S. federal corporate income tax statutory rate
for the following reasons (in thousands):
1994 1993 1992
------------------------------------------------
Computed income tax expense (benefit)
at statutory rate $ 6,854 $3,248 $(16,919)
Tax differences due to:
Percentage depletion (1,270) (751) (696)
State & local income taxes 40 ( 22) 87
Other ( 393) (183) ( 84)
---------- ---------- ----------
Total income tax expense (benefit)
from continuing operations $ 5,231 $2,292 $(17,612)
========== ========== ==========
The Company made income tax payments of $3,103,000, $40,000 and $2,483,000
during 1994, 1993 and 1992, respectively. The Company received income tax
refunds of $1,652,000, $222,000 and $106,000 during those same periods.
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NOTE D - INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax liabilities and assets are
as follows (in thousands):
December 31
1994 1993
------------------------------------
Deferred tax liabilities:
Tax in excess of book depreciation $42,204 $43,106
Pension benefits 4,837 4,323
Other 5,134 2,776
-------- --------
Total deferred tax liabilities 52,175 50,205
Deferred tax assets:
Capacity rationalization and asset
impairment 13,582 13,575
Postretirement benefits other than
pensions 9,993 9,459
Coal Act liability 4,664 4,869
Other 6,996 6,706
-------- --------
Total deferred tax assets 35,235 34,609
-------- --------
Net deferred tax liabilities $16,940 $15,596
======== ========
-31-
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NOTE E - POSTRETIREMENT BENEFITS
The Company has a number of noncontributory defined benefit pension plans
covering certain employees. The plans provide benefits based on the
participants' years of service and compensation or stated amounts for each year
of service. The Company's funding policy is to contribute amounts to the plans
sufficient to meet the minimum funding required by applicable regulations.
A summary of the components of the net periodic pension credit for defined
benefit plans follows (in thousands):
1994 1993 1992
----------------------------------------------------------
Service cost-benefits earned
during the period $ 1,417 $ 1,261 $ 1,156
Interest cost on projected
benefit obligation 4,550 4,644 4,574
Actual return on plan assets 531 (7,558) (5,975)
Net amortization and deferral (8,417) ( 575) (2,086)
-------- -------- --------
Net pension credit $(1,919) $(2,228) $(2,331)
======== ======== ========
Assumptions used in the accounting for defined benefit plans were:
1994 1993 1992
-----------------------------------------------
Weighted-average discount rate 8% 7-1/4% 8-1/2%
Rate of increase in compensation levels 4% 4% 5%
Expected long-term rate of return on assets 9% 9-1/2% 9-1/2%
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NOTE E - POSTRETIREMENT BENEFITS - (CONTINUED)
The following table sets forth the funded status and amounts recognized in the
consolidated balance sheet for the Company's defined benefit pension plans (in
thousands):
December 31
1994 1993
--------------------------------
Actuarial present value of
benefit obligations
Vested benefit obligation $(55,736) $(55,720)
======== ========
Accumulated benefit
obligation $(59,930) $(60,162)
======== ========
Projected benefit
obligation $(63,854) $(64,431)
Plan assets at fair value 80,215 84,854
-------- --------
Plan assets in excess of
projected benefit obligation 16,361 20,423
Unrecognized net loss (gain) 1,306 ( 2,432)
Unrecognized prior service cost 4,156 2,473
Unrecognized initial net assets ( 6,005) ( 6,772)
-------- --------
Prepaid pension costs recognized $ 15,818 $ 13,692
======== ========
Plan assets consist primarily of debt and equity securities.
Defined contribution plans are maintained for certain employees and Company
contributions are based on specified percentages of employee contributions,
except for the ESOP. The expense for these plans was $1,160,000, $1,434,000
and $1,321,000 for 1994, 1993 and 1992, respectively. The Company also pays
into certain defined benefit multi-employer plans under various union
agreements which provide pension and other benefits for various classes of
employees. Payments are based upon negotiated contract rates and the expense
amounted to $1,703,000, $1,348,000 and $1,088,000 for 1994, 1993 and 1992,
respectively.
In addition to providing pension benefits, the Company provides health care and
life insurance benefits for certain retired employees. Substantially, all of
the Company's employees are eligible for these benefits when they reach normal
retirement age. The Company's policy is to fund these postretirement benefit
costs principally on a cash basis as claims are incurred.
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NOTE E - POSTRETIREMENT BENEFITS - (CONTINUED)
Net periodic postretirement benefits cost includes the following components (in
thousands):
1994 1993 1992
---------------------------------------------------------
Service cost $ 59 $ 826 $ 691
Interest cost 1,730 2,228 2,180
Net amortization (552) (13) -0-
------ ------- -------
Net periodic postretirement
benefit cost $1,777 $3,041 $2,871
====== ======= =======
Components of the unfunded postretirement benefits obligation are as follows
(in thousands):
December 31
1994 1993
-------------------------------
Retirees $14,019 $14,478
Fully eligible active plan participants 2,261 2,728
Other active plan participants 7,535 10,255
------- -------
Accumulated postretirement benefits obligation 23,815 27,461
Unrecognized prior service credit 2,120 1,962
Unrecognized net gain 5,136 862
------- -------
Postretirement benefits obligation recognized $31,071 $30,285
======= =======
The weighted-average discount rate used in determining the accumulated
postretirement benefits obligation was 8.0% and 7.25% at December 31, 1994 and
1993, respectively.
The weighted-average annual assumed rate of increase in the health care cost
trend rate for 1995 is 8.25% (9% in 1994) for retirees age 65 and over and
10.75% (12% in 1994) for retirees under age 65, and both are assumed to
decrease gradually to 5.75% in 2000 and 2005, respectively (5.25% in 1994) and
remain at that level thereafter. The health care cost trend rate assumption
has a significant effect on the amounts reported. For example, increasing the
assumed health care cost trend rate by 1% in each year would increase the
accumulated postretirement benefits obligation as of December 31, 1994 by
approximately $3,359,000 and the aggregate of the service and interest cost
components of net periodic postretirement benefits cost for 1994 by
approximately $377,000.
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NOTE F - COMMITMENTS
Rental expense was $5,067,000, $5,162,000 and $5,181,000 in 1994, 1993 and
1992, respectively. In general, the leases are renewable or contain purchase
options at the end of the lease term. The purchase price or renewal lease
payment is based on the fair market value of the asset at the date of purchase
or renewal.
Future minimum payments at December 31, 1994, under noncancelable operating
leases, primarily vessel charters, are $4,421,000 in 1995, $4,252,000 in 1996,
$4,088,000 in 1997, $4,036,000 in 1998, $1,790,000 in 1999 and $1,938,000
thereafter.
The Company and its partners in Eveleth Mines have guaranteed to reimburse ETC
and EEC for all costs incurred in production of iron ore pellets, including
EEC's debt service. Each partner of Eveleth Mines pays its share of costs
based upon its share of production or ownership interest, whichever is
applicable. Purchases by the Company under an Eveleth Mines contract amounted
to $49,757,000, $24,800,000 and $21,764,000 for the years ended December 31,
1994, 1993 and 1992, respectively. Maturities on EEC's debt are $2,813,000 in
1995 and are included in the reserve for capacity rationalization. Accrued
expenses include $5,897,000 and $4,955,000 payable in 1994 and 1993,
respectively, for ETC's and EEC's working capital requirements.
NOTE G - LONG-TERM DEBT
Long-term debt is as follows (in thousands):
December 31
1994 1993
-------------------------------
Title XI Ship Financing Bonds
Fixed rate, 5.3% $16,200 $18,700
Term Loan, Variable rate, 7.5% 47,250 44,750
Revolving Credit, Variable rate -0- 10,000
Term Loan, Variable rate -0- 4,250
Guaranteed ESOP Loans
Variable rate -0- 213
Variable rate, 5.45%, and 794 971
Fixed rate, 8.88%,
due in equal quarterly
installments through May 31, 1999 1,350 1,650
------- -------
65,594 80,534
Less current portion 8,476 11,190
------- -------
$57,118 $69,344
======= =======
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NOTE G - LONG-TERM DEBT (CONTINUED)
The Title XI Ship Financing Bonds relate to a first preferred ship mortgage on
the M/V Columbia Star and are guaranteed by the U.S. Government under the
Federal Ship Financing Program. In 1993, the Company refinanced the Title XI
Bonds at a pretax cost of $652,000, reducing the fixed interest rate from 9.65%
to 5.3%. The Bonds require sinking fund payments of $1,250,000 semiannually
through December 15, 2000, with a final payment of $1,200,000 in 2001.
The Title XI Bonds and a vessel charter agreement may require the Company,
under certain conditions, to make deposits to a reserve fund, maintain
specified levels of stockholders' equity or obtain prior written consent from
the Maritime Administrator, U.S. Department of Transportation, for certain
designated financial transactions. No approval was required through 1994 and
the Company does not anticipate any such consent will be required in the
future.
In December 1994, the Company amended and restated its loan agreement with
various banks to extend the Term Loan through December 31, 2001 and reduce
semiannual payments. Under the new loan agreement, the Term Loan balances were
consolidated and increased to $50,000,000 and the Revolving Credit was
increased to $40,000,000, of which $15,000,000 is available only for
acquisitions. The commitment fee on the unused Revolving Credit was reduced to
.25%, while the variable interest rate premium declined on both the Revolving
Credit and Term Loan. The variable interest rate premium, under the new loan
agreement, will fluctuate based upon the Company's funded debt to total capital
and interest coverage ratios.
The Company has mandatory semiannual payments under the Term Loan of $2,750,000
from December 31, 1994 through June 30, 2001, with a final payment of
$11,500,000 on December 31, 2001. The Revolving Credit terminates on December
31, 1997, subject to annual renewals under certain conditions to December 31,
2001. The Company has $40,000,000 of borrowing available under the Revolving
Credit at December 31, 1994.
Collateral for the Title XI Ship Financing Bonds and the Term Loan is in the
form of first preferred ship mortgages on five of the Company's vessels with a
net book value of $107,000,000.
The Company, in separate agreements which expire in 1995, entered into interest
rate swaps with major financial institutions to substitute fixed rates for
LIBOR-based interest rates on notional amounts totaling $24,030,000 at December
31, 1994. The interest rate differential is recognized over the lives of the
agreements as an adjustment to interest expense. The weighted average interest
rate was 9.9% on the amounts covered by the swap agreements during 1994.
Market risks associated with the swap agreements are mitigated since increased
interest payments under the agreements resulting from a decrease in LIBOR-based
interest rates are effectively offset by decreased variable rate interest
payments under the debt obligations.
-36-
37
NOTE G - LONG-TERM DEBT (CONTINUED)
The Company's debt agreements, as amended, contain various covenants with the
most restrictive covenant requiring the Company to maintain specified levels of
tangible net worth during each year. The Company's tangible net worth was
$76,707,000 at December 31, 1994, compared to a minimum specified level of
$64,445,000.
Long-term debt maturities are $8,476,000 in 1995 through 1998, $8,238,000 in
1999, $8,000,000 in 2000 and $15,450,000 in 2001. The Company made interest
payments of $5,345,000, $7,973,000 and $7,279,000 during 1994, 1993 and 1992,
respectively.
The fair value of the Company's long-term debt and interest rate swaps is
estimated to be $64,400,000 and $230,000, respectively, at December 31, 1994.
Such fair values were estimated using discounted cash flow analysis based on
the Company's current incremental borrowing rates for similar types of
arrangements.
NOTE H - DISPOSITIONS
In 1994, the Company sold its Ceredo coal dock business resulting in a
$6,518,000 pretax gain. The Company sold certain assets of its Licking River
Terminal coal dock in 1993, which resulted in a $1,326,000 pretax gain. Also
in 1993, the Company sold for cash its unsecured bankruptcy claim against LTV
Steel Company, Inc. resulting in a $2,653,000 pretax gain after the retirement
of $4,412,000 of long-term receivables.
In 1992, the Company's wholly owned subsidiary, Saginaw Mining Company, ceased
operation of its Ohio coal mine. Permanent closure of the mine was completed
in 1993 and was funded by a public utility customer, as required by a long-term
contract. The utility customer paid the Company $1,951,791 in 1992 which was
recognized as a gain on shutdown of discontinued operation of $1,287,791 (net
of income taxes of $664,000), or $.51 per share. The discontinued operation
had total revenues of $19,365,000 and pretax income of $1,603,000 in 1992.
Final settlement of closure costs, primarily related to retiree health care
benefits, has been extended into 1995 at the request of the customer.
The Company's wholly owned subsidiary, T & B Foundry, was disposed of in 1992
resulting in a $3,300,000 pretax loss. The Foundry was included in the
Company's Refractories & Minerals segment in 1992.
-37-
38
NOTE I - ASSET IMPAIRMENTS AND RESERVES
In 1992, the Company recorded a $34,693,983 provision for capacity
rationalization. The charge included a $12,256,183 write-down of the Company's
investment in Eveleth Mines and the establishment of a $22,437,800 reserve for
certain fixed obligations, including the Company's share of Eveleth's long-term
debt. The charge resulted from Eveleth's high costs and economic conditions in
the steel industry. Other long-term liabilities include the remaining
capacity rationalization reserves of $4,700,000 and $9,800,000 at December 31,
1994 and 1993, respectively. Also in 1992, the Company recorded charges of
$9,918,497 related to changes in market conditions and circumstances that
impaired certain asset carrying values and resulted in certain liabilities
primarily in its Marine Transportation, Refractories & Minerals and Industrial
Sands segments.
NOTE J - EXTRAORDINARY PROVISION
In 1992, the Coal Industry Retiree Health Benefit Act was enacted. This
legislation requires companies that mine coal or previously mined coal to
assume certain health care benefit obligations for retired coal miners and
their dependents. Some of these coal miners never worked for the companies or
have had no relationship with the companies for decades. While the exact
amount of the liability was difficult to determine, the Company recorded a,
non-cash, extraordinary charge of $9,977,900 (net of income taxes of
$5,140,000), or $3.97 per share, to accrue for this obligation in 1992. The
Coal Act liability was $13,718,000 and $14,320,000 at December 31, 1994 and
1993, respectively. The change in the liability in 1994 is a result of
interest accretion, changes in actuarial assumptions and payments of $881,000.
The continuing effects of the Coal Act are expected to reduce future annual net
income by approximately $700,000.
NOTE K - INDUSTRY SEGMENTS AND MAJOR CUSTOMERS
Oglebay Norton Company is a Cleveland-based firm serving the steel, ceramic,
chemical, glass, electric utility, construction and oil-and gas- well service
industries. The Company provides Great Lakes marine transportation, industrial
minerals, refractory and metallurgical treatment products used in steelmaking
and related industries. The Company's operations were consolidated in 1994
from numerous entities into four distinct business groups:
OGLEBAY NORTON MARINE TRANSPORTATION
Formerly known as the Columbia Transportation Division and the Pringle
Transit Company, and now under one name, Marine Transportation operates a
fleet of vessels shipping bulk commodities, primarily iron ore, coal and
limestone, on the Great Lakes.
OGLEBAY NORTON IRON ORE
The Company is an equity partner in and manager of the iron ore mining and
pelletizing operations of Eveleth Mines, located near Eveleth, Minnesota,
on the Mesabi Range.
-38-
39
NOTE K - INDUSTRY SEGMENTS AND MAJOR CUSTOMERS (CONTINUED)
OGLEBAY NORTON REFRACTORIES & MINERALS, INC.
The Refractories & Minerals unit is comprised of the former Ferro
Engineering Division, Indiana Manufacturing Company, Tuscarawas
Manufacturing Company, and ONCO Minerals which, together with Canadian
Ferro Hot Metal Specialties Limited, produce precast refractory shapes,
tundish coatings, ingot hot tops and metallurgical treatment products for
the casting and refining of molten steel. The Company's mineral
processing plant in Brownsville, Texas, also services the steel industry.
OGLEBAY NORTON INDUSTRIAL SANDS, INC.
This group consists of five operating units, all providing silica and
related sand products to a wide range of markets. The former Central
Silica Company, with two facilities in Ohio, supplies the glass, paint,
ceramic, recreation and foundry industries. The former Texas Mining
Company, with facilities in Brady, Texas, and Riverside, California,
primarily serves the oil-and gas-well, filtration and construction
sectors. The former California Silica Products Company, located near San
Juan Capistrano, California, serves principally the construction and
recreation industries.
Accounts receivable of $21,091,000 at December 31, 1994 are due from companies
in steel related industries. Credit is extended based on an evaluation of a
customer's financial condition, and generally collateral is not required.
Credit losses have, historically, been insignificant. Sales to two major steel
producers exceeded 10% of consolidated net sales and operating revenues and are
summarized as follows (in thousands):
Marine Iron Refractories &
Customer Transportation Ore Minerals Other Total
-------- ---------------- --- --------------- ----- -----
1994
A $16,868 $ 6,948 $ 555 $ 20 $24,391
B 17,207 -0- 7,122 700 25,029
-------- ------- ------- -------- --------
$34,075 $ 6,948 $7,677 $ 720 $49,420
======= ======= ====== ======= =======
1993
A $14,523 $ 8,935 $ 752 $ 68 $24,278
B 19,384 -0- 6,698 1,513 27,595
-------- ------- -------- -------- --------
$33,907 $ 8,935 $7,450 $ 1,581 $51,873
======= ======= ====== ======= =======
1992
A $14,462 $10,090 $ 572 $ 105 $25,229
B 23,700 -0- 6,428 1,464 31,592
-------- ------- ------- -------- --------
$38,162 $10,090 $7,000 $ 1,569 $56,821
======= ======= ====== ======= =======
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40
INDUSTRY SEGMENT DATA
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
(In Thousands)
Marine Iron
Transportation Ore
-------------- ----
1994
Identifiable assets $ 140,661 $ 19,354
Depreciation and amortization expense 8,359 886
Expenditures for properties and equipment 1,397 1,192
Total revenues 82,153 54,656
Operating profit (loss) $ 12,467 $ 6,866
Gain on sale of assets 86 18
Company's proportionate share in interest
expense of Eveleth Mines (360)
Interest expense (4,283)
--------- --------
Income (loss) from continuing operations before taxes $ 8,270 $ 6,524
========= ========
1993
Identifiable assets $ 146,918 $ 16,022
Depreciation and amortization expense 8,157 1,086
Expenditures for properties and equipment 364
Total revenues 73,143 23,634
Operating profit (loss) $ 10,791 $ 4,031
Gain on sale of assets 10 4
Company's proportionate share in interest
expense of Eveleth Mines (630)
Interest expense (5,309)
--------- --------
Income (loss) from continuing operations before taxes $ 5,492 $ 3,405
========= ========
1992
Identifiable assets $ 149,830 $ 12,649
Depreciation and amortization expense 8,677 2,627
Expenditures for properties and equipment 3,359
Total revenues 70,654 18,821
Operating profit (loss) $ 9,538 $ (2,832)
Provision for capacity rationalization (34,694)
Impairment charges (1,492) (330)
Gain on sale of assets 550
Loss on disposal of business
Company's proportionate share in interest
expense of Eveleth Mines (900)
Interest expense (5,818)
--------- --------
Income (loss) from continuing operations before taxes $ 2,228 $(38,206)
========= ========
(1) Consists primarily of cash and cash equivalents, investments and prepaid pension costs.
-40-
41
Refractories Industrial Total Corporate
& Minerals Sands Segments and Other Consolidated
----------- --------- -------- --------- ------------
1994
Identifiable assets $20,256 $34,048 $214,319 $ 46,494(1) $ 260,813
Depreciation and amortization expense 1,913 2,149 13,307 296 13,603
Expenditures for properties and equipment 1,225 4,622 8,436 377 8,813
Total revenues 39,502 28,818 205,129 2,223 207,352
Operating profit (loss) $ 1,074 $ 2,834 $ 23,241 $ (4,861)(2) $ 18,380
Gain on sale of assets 73 59 236 7,858 8,094
Company's proportionate share in interest
expense of Eveleth Mines (360) (360)
Interest expense (195) (4,478) (1,514) (5,992)
------- ------- -------- -------- ---------
Income from continuing operations before taxes $ 952 $ 2,893 $ 18,639 $ 1,483 $ 20,122
======= ======= ======== ======== =========
1993
Identifiable assets $21,807 $25,682 $210,429 $49,2881 $ 259,717
Depreciation and amortization expense 1,657 2,055 12,955 477 13,432
Expenditures for properties and equipment 1,202 943 2,509 412 2,921
Total revenues 35,756 26,606 159,139 4,307 163,446
Operating profit (loss) $ 2,809 $ 1,827 $ 19,458 $ (5,836)(2) $ 13,622
Gain on sale of assets 19 33 4,084 4,117
Company's proportionate share in interest
expense of Eveleth Mines (630) (630)
Interest expense (201) ( 5,510) (2,045) (7,555)
------- ------- -------- -------- ---------
Income (loss) from continuing operations before taxes $ 2,608 $ 1,846 $ 13,351 $ (3,797) $ 9,554
======= ======= ======== ======== =========
1992
Identifiable assets $20,304 $27,532 $210,315 $53,659(1) $ 263,974
Depreciation and amortization expense 1,906 2,504 15,714 451 16,165
Expenditures for properties and equipment 3,622 1,545 8,526 201 8,727
Total revenues 34,422 24,447 148,344 5,667 154,011
Operating profit (loss) $ 257 $ 944 $ 7,907 $ (2,806)(2) $ 5,101
Provision for capacity rationalization (34,694) (34,694)
Impairment charges (755) (4,640) (7,217) (2,701) (9,918)
Gain on sale of assets 5 997 1,552 8 1,560
Loss on disposal of business (3,300) (3,300) (3,300)
Company's proportionate share in interest
expense of Eveleth Mines (900) (900)
Interest expense (284) (6,102) (1,508) (7,610)
------- ------- -------- -------- ---------
Income (loss) from continuing operations before taxes $(4,077) $(2,699) $(42,754) $ (7,007) $ (49,761)
======= ======= ======== ======== =========
(2) Includes other operations, certain corporate expenses, net of dividends, interest and other
income, and in 1993 a $1,700,000 reserve against doubtful coal customer accounts receivable
and $652,000 of debt refinancing costs.
-41-
42
NOTE L - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Unaudited quarterly results of operations for the years ended December 31, 1994
and 1993 are summarized as follows (in thousands, except per share amounts):
Net Net
Sales and Income
Three Months Operating Gross Net Income (Loss)
Ended Revenues Profit (Loss) Per Share
-------------- -------- ------- ------------- ---------
1994
December 31 $61,352 $8,828 $4,119 $1.65
September 30 57,499 9,701 4,077 1.64
June 30 53,487 7,525 6,838 2.75
March 31 30,417 4,247 (143) (.06)
1993
December 31 $48,281 $8,703 $ 4,229 $1.68
September 30 47,946 8,215 2,311 .92
June 30 47,004 7,632 2,810 1.12
March 31 16,505 1,850 (2,088) (.83)
Per share amounts are based on the average number of shares outstanding during
each quarter.
Second quarter net income for 1994 increased $4,302,000 ($1.73 per share)
related to the sale of the Company's Ceredo coal dock business, as disclosed in
Note H.
Fourth quarter net income for 1994 decreased $594,000 ($.24 per share) related
to a reevaluation of the capacity rationalization reserve and $403,000 ($.16
per share) on the write-off of unamortized financing costs associated with the
Company's former loan agreement, as disclosed in Note G.
Second quarter net income for 1993 increased $1,751,000 ($.70 per share)
related to the sale of an unsecured bankruptcy claim, as disclosed in Note H,
and declined $792,000 ($.32 per share) as a result of a reserve against
doubtful coal customer accounts receivable.
Fourth quarter net income for 1993 increased $875,000 ($.35 per share) related
to the sale of certain assets, as disclosed in Note H, and declined $760,000
($.30 per share) related to bond refinancing costs and an additional reserve
against remaining doubtful coal customer accounts receivable.
-42-
43
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None
PART III
Information in this Part III required by Item 10 ("Directors and
Officers of the Registrant"), Items 11 and 13 ("Executive Compensation" and
"Certain Relationships and Related Transactions") and Item 12 ("Security
Ownership of Certain Beneficial Owners and Management") is incorporated herein
by reference to the information contained in the Registrant's definitive Proxy
Statement for its 1995 Annual Meeting of Stockholders under the captions
"Nominees for Board of Directors" on page 3, "Ownership of Voting Securities"
on pages 7 through 9 and "Compensation of Executive Officers" on pages 10
through 13, respectively. A definitive Proxy Statement will be filed with the
Securities and Exchange Commission on or before March 31, 1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
-------------------------------------------
REPORTS ON FORM 8-K
-------------------
(a)(1) LIST OF FINANCIAL STATEMENTS: The response to this portion
of Item 14 is submitted as a separate section of this Annual Report on Form
10-K.
(a)(2) LIST OF FINANCIAL STATEMENT SCHEDULES: The response to this
portion of Item 14 is submitted as a separate section of this Annual Report on
Form 10-K.
(a)(3) LIST OF EXHIBITS: See the Exhibit Index beginning at
sequential Page 48 of this Annual Report on Form 10-K.
(b) REPORTS ON FORM 8-K: The Registrant did not file any reports
on Form 8-K in 1994.
(c) EXHIBITS: The response to this portion of Item 14 is
submitted as a separate section of this Annual Report on Form 10-K beginning at
sequential Page 51.
(d) FINANCIAL STATEMENT SCHEDULES: None
- 43 -
44
ANNUAL REPORT ON FORM 10-K
ITEM 14(A) (1) AND (2), AND 14(C)
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
YEAR ENDED DECEMBER 31, 1994
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
CLEVELAND, OHIO
45
FORM 10-K
ITEM 14(A) (1) AND (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
The following consolidated financial statements of the Registrant and its
subsidiaries are included in Item 8:
Consolidated Balance Sheet - December 31, 1994 and 1993
Consolidated Statement of Operations - Years ended December 31, 1994,
1993, and 1992
Consolidated Statement of Cash Flows - Years ended December 31, 1994,
1993 and 1992
Consolidated Statement of Stockholders' Equity - Years ended December
31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
All schedules for which provision is made in the applicable regulation of
the Securities and Exchange Commission have been omitted for the reason that
they are not required or are not applicable, or the required information is
shown in the consolidated financial statements or notes thereto.
46
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned thereunto duly authorized.
OGLEBAY NORTON COMPANY
/S/ Richard J. Kessler
-----------------------
Richard J. Kessler
Vice President-Finance
and Development
March 31, 1995
47
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the Principal Executive Officer, the
Principal Financial Officer, the Principal Accounting Officer and a majority of
the Directors of the Registrant on March 31, 1995.
Chairman of the Board,
/S/ R. Thomas Green, Jr. President and Chief Executive
---------------------------- Officer and Director; Principal
R. Thomas Green, Jr. Executive Officer
/S/ Richard J. Kessler Vice President-Finance and
---------------------------- Development; Principal Financial
Richard J. Kessler and Accounting Officer
/S/ Brent D. Baird
----------------------------
Brent D. Baird Director
/S/ Malvin E. Bank
----------------------------
Malvin E. Bank Director
/S/ William G. Bares
----------------------------
William G. Bares Director
/S/ Albert C. Bersticker
----------------------------
Albert C. Bersticker Director
/S/ John J. Dwyer
----------------------------
John J. Dwyer Director
/S/ Ralph D. Ketchum
----------------------------
Ralph D. Ketchum Director
/S/ Herbert S. Richey
----------------------------
Herbert S. Richey Director
/S/ Renold D. Thompson
---------------------------- Vice Chairman of the Board and
Renold D. Thompson Director
/S/ John D. Weil
----------------------------
John D. Weil Director
/S/ Fred R. White, Jr.
----------------------------
Fred R. White, Jr. Director
48
Item 14 (a) 3
EXHIBIT INDEX
SEC Location or
Exhibit No. Description Sequential Page
----------- ----------- ---------------
3 (a) Restated Certificate Incorporated by reference in
of Incorporation Exhibit 3(a) in the
Registrant's Annual Report on
Form 10-K for the year ended
December 31, 1993
(b) By-Laws Incorporated by reference in
Exhibit 3(b) in the
Registrant's Annual Report on
Form 10-K for the year ended
December 31, 1993
4 (a) The
Registrant is a party to
instruments,
copies of which will be
furnished to the Securities
and Exchange
Commission upon request,
defining the rights of
holders of its
long-term debt identified in
Note G to the
Consolidated
Financial
Statements
(b) Form of Rights Agreement Incorporated by reference in
Exhibit 4(b) in the
Registrant's Annual Report on
Form 10-K for the year ended
December 31, 1993
49
SEC Location or
Exhibit No. Description Sequential Page
----------- ----------- ---------------
10 (a) Form of Incorporated by reference in
Supplemental Exhibit 10(a) in the
Pension Agreements with Registrant's Annual Report on
selected Form 10-K for the year ended
former officers December 31, 1993
(b) Agreement with Brent D. Incorporated by reference in
Baird Exhibit 10(b) in the
Registrant's Annual Report on
Form 10-K for the year ended
December 31, 1993
(c) Trust Incorporated by reference in
Agreement for Exhibit 10(c) in the
Oglebay Norton Company Registrant's Annual Report on
Incentive Savings Plan and Form 10-K for the year ended
Trust (January 1, 1991 December 31, 1993
Restatement)
(d) Form of Change-in-Control Incorporated by reference in
Agreements with seven Exhibit 10(d) in the
Executive Officers Registrant's
Annual Report on Form 10-K for
the year ended
December 31, 1993
(d)(1) Amendment to form of 52
Change-in-Control
Agreements with four Executive
Officers
(d)(2) Form of Change-in- 58
Control Agreements with three
Executive Officers
50
SEC Location or
Exhibit No. Description Sequential Page
----------- ----------- ---------------
(e) Form of Right of First Incorporated by reference in
Refusal Agreements with seven Exhibit 10(e) in the
Directors Registrant's Annual Report on
Form 10-K for the year ended
December 31, 1993
(f) Agreement with John D. Incorporated by reference in
Weil Exhibit 10(f) in the
Registrant's Annual Report on
Form 10-K for the year ended
December 31, 1993
(g) Employment Agreement with Incorporated by reference in
Chairman, Presi- Exhibit 10(g) in the
dent and Chief Executive Registrant's Annual Report on
Officer Form 10-K for the year ended
December 31, 1993
11 Statement re: Not Applicable
Computation of Per Share
Earnings
12 Statement re: Not Applicable
Computations of Ratios
13 1994 Annual Report to Not Applicable
Stockholders
18 Letter re: Change in Not Applicable
Accounting
Principles
21 Subsidiaries of the Registrant 82
22 Published Report Regarding Not Applicable
Matters Submitted to Vote of
Security
Holders
23 Consent of 83
Independent
Auditors
24 Power of Attorney Not Applicable
51
SEC Location or
Exhibit No. Description Sequential Page
----------- ----------- ---------------
27 Financial Data Schedule 84
28 Information from reports Not Applicable
furnished to state insurance
regulatory authorities
EX-10.D.1
2
OGLEBAY NORTON CO. 10-K405 EXHIBIT 10(D)(1)
1
EXHIBIT 10(d)(1)
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
THIS AMENDMENT TO EMPLOYMENT AGREEMENT is entered into as of the 29th
day of July, 1989, by and between OGLEBAY NORTON COMPANY, a Delaware
corporation (the "Company"), and THOMAS J. CROYLE ("Employee"), and amends the
agreement entered into between the Company and Employee on June 24, 1987 (the
"Agreement").
W I T N E S S E T H:
WHEREAS, the Company and Employee desire to amend the Agreement to
provide for the possible undoing of the consequences of a Change in Control
resulting from the acquisition by any person of 25% or more of the combined
voting power of the Company's securities if the acquiring person subsequently
transfers or otherwise disposes of sufficient securities of the Company so
that, after such transfer or other disposition, the acquiring person holds less
than 10% of the voting power of the Company's securities and no other Change
in Control has occurred;
WHEREAS, the Company and Employee desire to further amend the Agreement
to provide that Employee will be treated, for purposes of retirement benefit
eligibility and calculations, as if he were five years older than his actual
age if Employee's employment with the Company is terminated following a Change
in Control, either during or after the Contract Period, by the Company without
"cause" or by Employee for "good reason;"
2
WHEREAS, the Company and Employee desire to amend the Agreement as
provided herein and to otherwise reaffirm the Agreement;
NOW, THEREFORE, the Company and Employee agree as follows:
1. POSSIBLE "UNDOING" OF A CHANGE IN CONTROL. If a report is filed
with the SEC disclosing that a person (the "Acquiror") is or has become a
beneficial owner, directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's
outstanding securities and, as a result of that filing, a Change in Control, as
defined in Paragraph 1(a) of the Agreement occurs, while Employee is in the
employ of the Company, then, as provided in Paragraph 1 of the Agreement, the
Agreement will become immediately operative. The Agreement is hereby amended
to provide that if:
(a) a Change in Control as described in Paragraph 1(a) of the
Agreement occurs while Employee is in the employ of the Company;
(b) the Acquiror subsequently transfers or otherwise disposes
of sufficient securities of the Company in one or more transactions, to
a person or persons other than affiliates of the Acquiror or any
persons with whom the Acquiror has agreed to act together for the
purpose of acquiring, holding, voting or disposing of securities of the
Company, so that, after such transfer or other disposition, the
Acquiror is no longer the beneficial owner, directly or indirectly, of
securities of the Company representing 10% or more of the combined
voting power of the Company's then outstanding securities;
-2-
3
(c) at the time of the subsequent transfer or disposition that
reduced the Acquiror's holdings to less than 10% as provided in (b),
immediately above, no other event constituting a Change in Control had
occurred; and
(d) at the time of the subsequent transfer or other disposition
that reduced the Acquiror's holdings to less than 10%, Employee's
employment with the Company had not been terminated by the Company
without cause or by Employee for good reason,
then, for all purposes of the Agreement, the filing of the report constituting
a Change in Control under Section 1(a) shall be treated as if it had not
occurred and the Agreement shall return to the status it had immediately
before the filing of the report constituting a Change in Control under
Paragraph 1(a) of the Agreement. Accordingly, if and when a new Change in
Control occurs, the Agreement will again become operative on the date of that
new Change in Control.
2. ADDITIONAL BENEFIT. If a Change in Control occurs and the Agreement
becomes operative and thereafter Employee's employment is terminated by the
Company without cause or by Employee for good reason, whether such termination
occurs before, on, or after the Contract Expiration Date, the Company shall pay
and provide benefits to or with respect to Employee in such amounts and at such
times so that the aggregate benefits payable to or with respect to Employee
under the Salaried Plan and the Excess Benefit Plan and under the Agreement
with respect to the Salaried Plan and the Excess Benefit Plan will be equal
-3-
4
to the aggregate benefits that would have been paid to or with respect to
Employee under the Salaried Plan and the Excess Benefit Plan if Employee were
exactly five years older than his actual age and his credit under the Salaried
Plan and the Excess Benefit Plan were equal to the greater of his actual
service or the amount of service he is deemed to have under Paragraph 9(a)(iii)
of the Agreement. If Employee's employment is terminated after a Change in
Control by the Company without cause or by the Executive for good reason and
Employee is entitled to additional benefits by virtue of the additional five
years of deemed age provided for in this Paragraph 2, then the Company shall
directly provide such benefits to Employee in the same manner as additional
benefits are to be provided to Employee under Paragraph 9(a) of the Agreement.
3. PRIORITY OF AMENDMENTS. The amendment made by Paragraph 1 of this
Amendment shall take precedence over the amendment made by Paragraph 2 of this
Amendment so that if a Change in Control occurs and is subsequently undone
under Paragraph 1 of this Amendment, Employee will thereafter have no rights
under Paragraph 2 of this Amendment unless and until a further Change in
Control occurs.
4. DEFINED TERMS. All terms used in this Amendment that are used in
the Agreement shall have the same meaning in this Amendment as in the
Agreement.
-4-
5
5. REAFFIRMATION OF AGREEMENT AS AMENDED. This Amendment is hereby made
a part of the Agreement and the Company and Employee hereby reaffirm the
Agreement as amended by this Amendment.
IN WITNESS WHEREOF the Company and Employee have executed this
Amendment as of the day and year first above written.
OGLEBAY NORTON COMPANY
By: /s/ R. Thomas Green, Jr.
----------------------------------
/s/ Thomas J. Croyle
----------------------------------
THOMAS J. CROYLE
EX-10.D.2
3
OGLEBAY NORTON CO. 10-K405 EXHIBIT 10(D)(2)
1
EXHIBIT 10(d)(2)
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT is entered into on this 15th-day of August,
1994, by and between OGLEBAY NORTON COMPANY, a Delaware corporation (the
"Company"), and EDWARD G. JAICKS ("Employee").
W I T N E S S E T H:
WHEREAS, Employee is an executive officer of the Company, has fully and
ably discharged his responsibilities and duties in his service to the Company
to date, and is now serving the Company as Vice President - Marketing;
WHEREAS, the Company desires to assure itself of continuity of
management in the event of any threatened or actual Change in Control (as
hereafter defined);
WHEREAS, the Company desires to provide inducements for Employee not to
engage in activity competitive with the Company;
WHEREAS, the Company desires to assure itself, in the event of any
threatened or actual Change in Control, of the continued performance of
services by Employee on an objective and impartial basis and without
distraction by concern for his employment status and security;
WHEREAS, Employee is willing to continue in the employ of the Company
but desires assurance that his responsibilities and status as an executive of
the Company will not be adversely affected by any threatened or actual Change
in Control;
2
NOW, THEREFORE, the Company and Employee agree as follows:
1. OPERATION OF AGREEMENT. This Agreement shall be effective and
binding immediately upon its execution, but, anything in this Agreement to the
contrary notwithstanding, this Agreement shall not be operative unless and
until there has been a Change in Control while Employee is in the employ of the
Company. For purposes of this Agreement, a Change in Control shall have
occurred if at any time any of the following events occurs:
(a) a report is filed with the Securities and Exchange
Commission (the "SEC") on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form, or report), each as promulgated pursuant to
the Securities Exchange Act of 1934 (the "Exchange Act"), disclosing
that any "person" (as the term "person" is used in Section 13(d) or
Section 14(d)(2) of the Exchange Act) is or has become a beneficial
owner, directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's
then outstanding securities;
(b) the Company files a report or proxy statement with the SEC
pursuant to the Exchange Act disclosing in response to Item 1 of Form
8-K thereunder or Item 5(f) of Schedule 14A thereunder that a Change in
Control of the Company has or may have occurred or will or may occur in
the future pursuant to any then-existing contract or transaction;
-2-
3
(c) the Company is merged or consolidated with another
corporation and, as a result thereof, securities representing less than
50% of the combined voting power of the surviving or resulting
corporation's securities (or of the securities of a parent corporation
in case of a merger in which the surviving or resulting corporation
becomes a wholly-owned subsidiary of the parent corporation) are owned
in the aggregate by holders of the Company's securities immediately
prior to such merger or consolidation;
(d) all or substantially all of the assets of the Company are
sold in a single transaction or a series of related transactions to a
single purchaser or a group of affiliated purchasers; or
(e) during any period of 24 consecutive months, individuals who
were Directors of the Company at the beginning of such period cease to
constitute at least a majority of the Company's Board of Directors (the
"Board") unless the election, or nomination for election by the
Company's shareholders, of more than one half of any new Directors of
the Company was approved by a vote of at least two-thirds of the
Directors of the Company then still in office who were Directors of the
Company at the beginning of such 24 month period.
The first date on which a Change in Control occurs is referred to herein as the
"Change in Control Date." Upon the occurrence of a Change in Control while
Employee is in the employ of the Company,
-3-
4
this Agreement shall become immediately operative subject, however, to the
provisions of Section 1A, below.
1A. POSSIBLE "UNDOING" OF A CHANGE IN CONTROL. If a report is filed
with the SEC disclosing that a person (the "Acquiror") is or has become a
beneficial owner, directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's
outstanding securities and, as a result of that filing, a Change in Control, as
defined in Paragraph 1(a), above, occurs, while Employee is in the employ of
the Company, then, as provided in Paragraph 1, above, this Agreement will
become immediately operative. However, if:
(a) a Change in Control as described in Paragraph 1(a) occurs
while Employee is in the employ of the Company;
(b) the Acquiror subsequently transfers or otherwise disposes
of sufficient securities of the Company in one or more transactions, to
a person or persons other than affiliates of the Acquiror or any
persons with whom the Acquiror has agreed to act together for the
purpose of acquiring, holding, voting or disposing of securities of the
Company, so that, after such transfer or other disposition, the
Acquiror is no longer the beneficial owner, directly or indirectly, of
securities of the Company representing 10% or more of the combined
voting power of the Company's then outstanding securities;
-4-
5
(c) at the time of the subsequent transfer or disposition that
reduced the Acquiror's holdings to less than 10% as provided in (b),
immediately above, no other event constituting a Change in Control had
occurred; and
(d) at the time of the subsequent transfer or other disposition
that reduced the Acquiror's holdings to less than 10%, Employee's
employment with the Company had not been terminated by the Company
without cause or by Employee for good reason,
then, for all purposes of this Agreement, the filing of the report constituting
a Change in Control under Section 1(a) shall be treated as if it had not
occurred and this Agreement shall return to the status it had immediately
before the filing of the report constituting a Change in Control under
Paragraph 1(a). Accordingly, if and when a new Change in Control occurs, this
Agreement will again become operative on the date of that new Change in
Control.
2. EMPLOYMENT, CONTRACT PERIOD.
(a) Subject to the terms and conditions of this Agreement, upon
the occurrence of a Change in Control, the Company shall continue to
employ Employee and Employee shall continue in the employ of the
Company for the period specified in Paragraph 2(b) (the "Contract
Period"), in the position and with the duties and responsibilities set
forth in Paragraph 3.
(b) The Contract Period shall commence on the date of
occurrence of a Change in Control (the "Change in Control
-5-
6
Date") and, subject only to the provisions of Paragraph 8 below, shall
continue for a period of thirty months to the close of business on the
day (the "Contract Expiration Date") falling thirty months after the
Change in Control Date.
3. POSITION, DUTIES, RESPONSIBILITIES. At all times during the
Contract Period, Employee shall:
(a) hold the same position with substantially the same duties
and responsibilities as an executive officer of the Company as Employee
held immediately before the Change in Control Date and as those duties
and responsibilities may be extended, from time to time during the
Contract Period, by the Board with Employee's consent;
(b) adhere to and implement the policies and directives
promulgated, from time to time, by the Board;
(c) observe all Company policies applicable to executive
officers of the Company; and
(d) devote his business time, energy, and talent to the
business of and to the furtherance of the purposes and objectives of
the Company to generally the same extent as he has so devoted his
business time, energy, and talent before the Change in Control Date,
and neither directly nor indirectly render any business, commercial, or
professional services to any other person, firm, or organization for
compensation without the prior approval of the Board.
Nothing in this Agreement shall preclude Employee from devoting reasonable
periods of time to charitable and community activities
-6-
7
or the management of his investment assets provided such activities do not
materially interfere with the performance by Employee of his duties hereunder.
4. COMPENSATION. For services actually rendered by Employee on behalf
of the Company during the Contract Period as contemplated by this Agreement the
Company shall pay to Employee a base salary at a rate equal to the highest of
(a) the rate in effect immediately before the Change in Control Date, (b) the
rate in effect exactly two years before the Change in Control Date, or (c) such
greater rate as the Company may determine. The base salary shall be paid to
Employee in the same increments and on the same schedule each month as in
effect immediately before the Effective Date. Employee shall not be entitled
to any base salary during any period when he is receiving long-term disability
benefits under the Disability Benefit Arrangement provided to Employee by the
Company.
5. VACATION. Employee will be entitled to such periods of vacation and
sick leave allowance each year as are determined by the Company's vacation and
sick leave policy for executive officers as in effect immediately before the
Change in Control Date or as may be increased from time to time thereafter.
Neither vacation time nor sick leave allowance will be accumulated from year to
year.
6. OTHER COMPANY PLANS, BENEFITS, AND PERQUISITES. During the Contract
Period Employee shall be entitled to participate in the Company's Pension Plan
for Salaried Employees (the "Salaried Plan") and the related Excess
-7-
8
Benefit Retirement Plan (the "Excess Benefit Plan"); the Salary Continuation
Arrangement; the Disability Benefit Arrangement; his Split Dollar Insurance
Agreement with the Company; the post-retirement Death Benefit Arrangement; the
Incentive Savings Plan; the 1983 Stock Equivalent Plan; and every other
employee benefit plan not specifically referred to in this Agreement that is
generally available to executive officers of the Company immediately before the
Change in Control Date. Employee's participation in and benefits under any
such plan shall be on the terms and subject to the conditions specified in the
governing document of the particular plan as in effect immediately before the
Change in Control Date, which terms and conditions shall not be amended during
the Contract Period unless the benefits to Employee are at least as great under
the plan as amended (or under a substitute plan or arrangement) as were the
benefits under the plan as in effect immediately before the Change in Control
Date. The Company will also provide Employee with such perquisites during the
Contract Period as the Company customarily provided to its top executive
officers in the period immediately before the Change in Control Date.
6A. ADDITIONAL BENEFIT. If a Change in Control occurs and this
Agreement becomes operative and thereafter Employee's employment is terminated
by the Company without cause or by Employee for good reason, whether such
termination occurs before, on, or after the Contract Expiration Date, the
Company shall pay and provide benefits to or with respect to Employee in such
amounts and at such times so that the aggregate benefits
-8-
9
payable to or with respect to Employee under the Salaried Plan and the Excess
Benefit Plan and under this Agreement with respect to the Salaried Plan and the
Excess Benefit Plan will be equal to the aggregate benefits that would have
been paid to or with respect to Employee under the Salaried Plan and the Excess
Benefit Plan if Employee were exactly five years older than his actual age and
his credit under the Salaried Plan and the Excess Benefit Plan were equal to
the greater of his actual service or the amount of service he is deemed to have
under Paragraph 9(a)(iii), below. If Employee's employment is terminated after
a Change in Control by the Company without cause or by the Executive for good
reason and Employee is entitled to additional benefits by virtue of the
additional five years of deemed age provided for in this Paragraph 6A, then the
Company shall directly provide such benefits to Employee in the same manner as
additional benefits are to be provided to Employee under Paragraph 9(a), below.
6B. PRIORITY OF PARAGRAPHS 1A AND 6B AMENDMENTS. Paragraph 1A of this
Agreement shall take precedence over Paragraph 6A of this Agreement so that if
a Change in Control occurs and is subsequently undone under Paragraph 1A of
this Agreement, Employee will thereafter have no rights under Paragraph 6A of
this Agreement unless and until a further Change in Control occurs.
7. EFFECT OF DISABILITY. If during the Contract Period and before his
employment hereunder is otherwise terminated, Employee becomes disabled to such
an extent that he
-9-
10
is prevented from performing his duties hereunder by reason of physical or
mental incapacity: (a) he shall be entitled to disability and other benefits at
least equal to those that would have been available to him had the Company
continued, throughout the period of Employee's disability, all of its programs,
benefits, and policies with respect to disabled employees that were in effect
immediately before the Change in Control; and (b) if he recovers from his
disability before the end of the Contract Period he shall be reinstated as an
active employee for the remainder of the Contract Period under and subject to
all of the terms of this Agreement including, without limitation, the Company's
right to terminate Employee with or without cause under Paragraph 8(b).
8. TERMINATION FOLLOWING A CHANGE IN CONTROL. Following a Change in
Control:
(a) Employee's employment hereunder will terminate without
further notice upon the death of Employee;
(b) The Company may terminate Employee's employment hereunder
effective immediately upon giving notice of such termination:
(i) for "cause," (A) if Employee commits an act of fraud,
embezzlement, theft, or other similar criminal act constituting
a felony and involving the Company's business or (B) if Employee
breaches his agreement with respect to the time to be devoted to
the business of the Company set forth in Paragraph 3(d) hereof
and fails to cure such breach within 30 days of
-10-
11
receipt of written notice of such breach from the Board; or
(ii) without cause at any time; and
(c) Employee may terminate his employment hereunder effective
immediately upon giving of notice of such termination:
(i) without cause at any time; or
(ii) for "good reason," which, for purposes of this
Agreement shall mean the occurrence of any of the following:
(A) any reduction in base salary or position or any material
reduction in responsibilities or duties contemplated for Employee under
this Agreement or any material reduction in the aggregate of employee
benefits, perquisites, or fringe benefits contemplated for Employee
under this Agreement, provided that any particular reduction described
in this clause (A) shall constitute "good reason" only if Employee
terminates his employment within six months of the date of the
reduction; or
(B) any good faith determination by Employee that, as a result
of fundamental differences of opinion between Employee and the Board as
to the goals of the Company, Employee is unable to carry out the
responsibilities and duties contemplated for Employee under this
Agreement, provided that any determination by Employee described in
this clause (B) shall constitute "good reason" only if
-11-
12
Employee terminates his employment within six months of the Change
in Control Date.
9. SEVERANCE COMPENSATION.
(a) If, before the Contract Expiration Date, Employee's
employment is terminated by the Company without cause or by Employee
for good reason, then, except as provided in Paragraph 9(b), 9(c), or
9(d), the Company shall pay and provide to Employee the following
compensation and benefits through the last to occur of (x) the
expiration of six months after the effective date of the termination,
and (y) the Contract Expiration Date (such last-to-occur date is
hereinafter referred to as the "Severance Benefits Termination Date"):
(i) base salary at the highest monthly rate payable to
Employee during the Contract Period, to be paid at the times
provided in Paragraph 4 hereof;
(ii) coverage under the Company's medical insurance plan,
short-term disability plan, long-term disability plan, Salary
Continuation Arrangement, Disability Benefit Arrangement, Split
Dollar Insurance Agreement, and post-retirement Death Benefit
Arrangement, each as in effect on the Change in Control Date
(or, if subsequently amended to increase benefits to Employee or
his dependents, as so amended) and each as if Employee's
employment had continued through the Severance Benefits
Termination Date; and
-12-
13
(iii) coverage and service credit under the Salaried Plan
and the Excess Benefit Plan so that the aggregate benefits
payable to or with respect to the Employee under the Salaried
Plan and the Excess Benefit Plan will be equal to the aggregate
benefits that would have been paid to or with respect to
Employee under the Salaried Plan and the Excess Benefit Plan if
Employee's employment had continued through the Severance
Benefits Termination Date.
If any of the benefits to be provided under one or more of the plans,
agreements, or arrangements specified above cannot be provided through
that plan, agreement, or arrangement to Employee following termination
of his employment, the Company shall directly provide the full
equivalent of such benefits to Employee. For example, since it is not
possible to provide additional service credit directly through the
Salaried Plan, if Employee becomes entitled to an additional 18 months
of service credit under the Salaried Plan pursuant to (iii) above, the
Company will be required to pay to Employee, from its general assets,
on each date on which Employee receives a payment from the Salaried
Plan, a supplemental payment equal to the amount by which that
particular payment under the Salaried Plan would have been increased if
Employee's total service credit under the Salaried Plan were 18 months
greater than is actually the case. In addition, if in these
circumstances any payments become due under the Salaried Plan with
respect to
-13-
14
Employee following his death, the Company will be obligated to
make similar supplemental payments with respect to Employee
on the dates on which payments are made with respect to Employee
under the Salaried Plan.
(b) If Employee becomes entitled to compensation and benefits
pursuant to Paragraph 9(a) he shall use reasonable efforts to seek
other employment, provided, however, that he shall not be required to
accept a position of less importance and dignity or of substantially
different character than that of his position with the Company or a
position that would require Employee to engage in activity in violation
of Employee's agreement with respect to noncompetition set forth in
Paragraph 11 hereof nor shall he be required to accept a position
outside the greater Cleveland area. The Company's obligations under
items (i) and (ii) of Paragraph 9(a) will be offset by payments and
benefits received by Employee from another employer to the following
extent:
(i) The Company's obligation to pay any particular
installment of base salary following Employee's termination
will be offset, on a dollar for dollar basis, by any cash
compensation received by Employee from another employer before
the date on which the installment of base salary is payable by
the Company.
(ii) To the extent that Employee is provided medical,
dental, or short-term or long-term disability income protection
benefits by another employer during any period, the Company will
be relieved of its obligation to
-14-
15
provide such benefits to Employee. For example, if a new
employer provides Employee with a medical benefits plan that
pays $500.00 for a specific claim made by Employee and the
Company's medical insurance plan would have paid $750.00 for
that claim, then the Company will be obligated to pay Employee
$250.00 with respect to that claim.
Other than as provided in this Paragraph 9(b) Employee shall have no
duty to mitigate the amount of any payment or benefit provided for in
this Agreement.
(c) If during any period in which Employee is entitled to
payments or benefits from the Company under Paragraph 9(a):
(i) Employee materially and willfully breaches his agreement
with respect to confidential information set forth in Paragraph
10 hereof and such breach directly causes the Company
substantial and demonstrable damage; or
(ii) Employee materially and willfully breaches his
agreement with respect to noncompetition set forth in Paragraph
11 hereof and such breach directly causes the Company
substantial and demonstrable damage;
then the Company will be relieved of its obligations under
Paragraph 9(a) hereof as of the first day of the month immediately
following the date of such material breach.
(d) If Employee dies on or before the Severance Benefits
Termination Date and immediately before his death he is entitled to
payments or benefits from the Company under Paragraph 9(a), the Company
will be relieved of its obligations
-15-
16
under item (i) of Paragraph 9(a) as of the first day of the month
immediately following the month in which Employee dies and thereafter
the Company will provide to Employee's beneficiaries and dependents
salary continuation payments, benefits under the Excess Benefits Plan
(as supplemented by item (iii) of Paragraph 9(a)), and continuing
medical and dental benefits to the same extent (subject to reduction
for payments or benefits from a new employer under Paragraph 9(b)) as
if Employee's death had occurred while Employee was in the active
employ of the Company.
10. CONFIDENTIAL INFORMATION. Employee agrees that he will not, during
the term of the Agreement or at any time thereafter, either directly or
indirectly, disclose or make known to any other person, firm, or corporation
any confidential information, trade secret, or proprietary information of the
Company that Employee may acquire in the performance of Employee's duties
hereunder. Upon the termination of Employee's employment with the Company,
Employee agrees to deliver forthwith to the Company any and all literature,
documents, correspondence, and other materials and records furnished to or
acquired by Employee during the course of such employment.
11. NONCOMPETITION. During any period in which Employee is receiving
base salary under this Agreement (whether during the Contract Period pursuant
to Paragraph 4 or following termination pursuant to Paragraph 9(a)), Employee
shall not act as a proprietor, investor, director, officer, employee,
substantial stockholder, consultant, or partner in any business
-16-
17
engaged to a material extent in direct competition with the Company in any
market in any line of business engaged in by the Company during the Contract
period. If Employee delivers to the Company a written waiver of his right to
receive any further compensation or benefits pursuant to Paragraph 9(a), he
shall be released, effective as of the date of delivery of the notice, from the
post-termination noncompetition covenant contained in this Paragraph 11.
12. COSTS OF ENFORCEMENT. The Company shall pay and be solely
responsible for any and all costs and expenses (including attorneys' fees)
incurred by Employee in seeking to enforce the Company's obligations under this
Agreement unless and to the extent a court of competent jurisdiction determines
that the Company was relieved of those obligations because (a) the Company
terminated Employee for cause (as determined under Paragraph 8(b)(i) hereof),
(b) Employee voluntarily terminated his employment other than for good reason
(as determined under Paragraph 8(c)(ii) hereof), or (c) Employee materially and
willfully breached his agreement not to compete with the Company or his
agreement with respect to confidential information and such breach directly
caused substantial and demonstrable damage to the Company. The Company shall
forthwith pay directly or reimburse Employee for any and all such costs and
expenses upon presentation by Employee or by counsel selected from time to time
by Employee of a statement or statements prepared by Employee or by such
counsel of the amount of such costs and expenses. If and to the extent a court
of
-17-
18
competent jurisdiction renders a final binding judgment determining that the
Company was relieved of its obligations for any of the reasons set forth in
(a), (b), or (c) above, Employee shall repay the amount of such payments or
reimbursements to the Company. In addition to the payment and reimbursement of
expenses of enforcement provided for in this Paragraph 12, the Company shall
pay to Employee in cash, as and when the Company makes any payment on behalf
of, or reimbursement to, Employee, an additional amount sufficient to pay all
federal, state, and local taxes (whether income taxes or other taxes) incurred
by Employee as a result of (x) payment of the expense or receipt of the
reimbursement, and (y) receipt of the additional cash payment. The Company
shall also pay to Employee interest (calculated at the Base Rate from time to
time in effect at National City Bank, Cleveland, Ohio, compounded monthly) on
any payments or benefits that are paid or provided to Employee later than the
date on which due under the terms of this Agreement.
13. EMPLOYMENT RIGHTS. Nothing expressed or implied in this Agreement
shall create any right or duty on the part of the Company or Employee to have
Employee remain in the employ of the Company before any Change in Control and
Employee shall have no rights under this Agreement if his employment with the
Company is terminated for any reason or for no reason before any Change in
Control. Nothing expressed or implied in this Agreement shall create any duty
on the part of the Company to continue in effect, or continue to provide to
Employee, any plan or benefit unless and until a Change in Control occurs. If,
-18-
19
before a Change in Control, the Company ceases to provide any plan or benefit
to Employee, nothing in this Agreement shall be construed to require the
Company to reinstitute that plan or benefit to Employee upon the later
occurrence of a Change in Control.
14. NOTICES. For purposes of this Agreement, all communications
provided for herein shall be in writing and shall be deemed to have been duly
given when delivered or when mailed by United States registered or certified
mail, return receipt requested, postage prepaid, addressed to the Company
(Attention: President) at its principal executive office and to Employee at his
principal residence, or to such other address as either party may have
furnished to the other in writing and in accordance herewith, except that
notices of change of address shall be effective only upon receipt.
15. ASSIGNMENT, BINDING EFFECT.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company and the Company's successors and assigns. The
Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation, or otherwise) to all or substantially
all of the business and or assets of the Company, by agreement in form
and substance satisfactory to Employee, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession
had taken place.
-19-
20
(b) This Agreement shall be binding upon Employee and this
Agreement and all rights of Employee hereunder shall inure to the
benefit of, and be enforceable by, Employee and his personal or legal
representatives, executors, or administrators. No right, benefit, or
interest of Employee hereunder shall be subject to assignment,
anticipation, alienation, sale, encumbrance, charge, pledge,
hypothecation, or to execution, attachment, levy, or similar process;
except that Employee may assign any right, benefit, or interest
hereunder if such assignment is permitted under the terms of any plan
or policy of insurance or annuity contract governing such right,
benefit, or interest.
16. INVALID PROVISIONS.
(a) Any provision of this Agreement that is prohibited or
unenforceable shall be ineffective to the extent, but only to the
extent, of such prohibition or unenforceability without invalidating
the remaining portions hereof and such remaining portions of this
Agreement shall continue to be in full force and effect.
(b) In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable, the
parties will negotiate in good faith to replace such provision with
another provision that will be valid or enforceable and that is as
close as practicable to the provision held invalid or unenforceable.
-20-
21
17. MODIFICATION. No modification, amendment, or waiver of any of the
provisions of the Agreement shall be effective unless in writing, specifically
referring hereto, and signed by both parties.
18. WAIVER OF BREACH. The failure at any time to enforce any of the
provisions of this Agreement or to require performance by the other party of
any of the provisions of this Agreement shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement or
any part of this Agreement or the right of either party thereafter to enforce
each and every provision of this Agreement in accordance with the terms hereof.
19. GOVERNING LAW. This Agreement has been made in and shall be
governed and construed in accordance with the laws of the State of Ohio.
20. LIMITATION ON CONTINGENT PAYMENTS. Notwithstanding any other
provision of this Agreement to the contrary, amounts and benefits to be paid
and provided by the Company to Executive under this Agreement ("Agreement
Benefits") shall be reduced if necessary to avoid the application of sections
280G and 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), to
Agreement Benefits. This Paragraph 20 will be applicable to reduce Agreement
Benefits only if (a) without regard to this Paragraph 20, the aggregate present
value of the payments in the nature of compensation to (or for the benefit of)
Employee that are contingent on a Change in Control would equal or exceed an
amount equal to three times
-21-
22
Employee's "base amount" (as defined in section 280G of the Code) and if (b)
reducing the aggregate present value of such contingent payments by reducing
Agreement Benefits would result in a greater after-tax benefit to Employee
from such contingent payments. If the foregoing conditions are satisfied, the
aggregate present value of all Agreement Benefits will be limited to the
maximum amount that can be paid without equalling the threshold amount (three
times Employee's base amount) provided in section 280G(b)(2)(A)(ii) of the
Code. If reductions in the amount of Agreement Benefits are necessary to
satisfy the limit stated in the immediately preceding sentence, the reductions
shall be made in the following order:
(a) The present value of the obligation to pay base salary will
be reduced (but not to less than one half of the present value of that
obligation before reduction) by decreasing (but not by more than 50%)
the rate at which base salary is paid pursuant to Paragraph 9(a)(i).
(No change will be made in the timing of the payments of installments
of base salary.)
(b) The present value of the Salary Continuation Arrangement,
of the Disability Arrangement, and of the post-retirement Death
Benefit Arrangement will be reduced by reducing (to zero if necessary)
the amount to be paid in the future under each such arrangement upon
the occurrence of certain events. (No change will be made in the timing
of any of such benefits, if any, that are payable in spite of the
reduction.)
-22-
23
(c) The present value of coverage under the Company's medical
insurance plan, short-term disability plan, and long-term disability
plan will be reduced by reducing the level of coverage under each such
plan (to zero if necessary).
(d) The present value of any obligation to pay base salary (as
reduced under item (a)) will be further reduced by decreasing the rate
at which base salary is paid pursuant to Paragraph 9(a)(i).
Agreement Benefits in each of the first three categories above, (a), (b), and
(c), respectively, will be reduced to zero (to 50% of the unreduced present
value in the case of the reduction in category (a) in the present value of the
obligation to pay base salary), if necessary, before any reduction is made in
any Agreement Benefits listed in a later category. At any time and from time
to time the Company and Employee may agree upon a different method of reduction
of any contingent payments to avoid the application of sections 280G and 4999
of the Code if the different method is not prohibited by regulations issued
under those sections of the Code. If the Company's obligation to pay any
Agreement Benefit is reduced by mitigation as provided in Paragraph 9(b) and,
as a result of that mitigation and reduction, the amounts of other Agreement
Benefits that have been reduced under this Paragraph 20 to avoid the
application of sections 280G and 4999 of the Code can be restored in whole or
in part without triggering the application of those sections, the amount of
those other Agreement Benefits shall be so restored and paid by the
-23-
24
Company to the maximum extent possible without triggering the application of
those sections. Except as provided in either of the immediately preceding
sentences, after contingent payments having an aggregate present value equal to
such maximum amount that can be paid or provided without equalling the
threshold amount have been paid or provided, no further Agreement Benefits will
be paid or provided by the Company to Employee. For purposes of this Paragraph
20, contingent payments include all payments and benefits in the nature of
compensation to or for the benefit of Employee that are required to be taken
into account for purposes of section 280G(b)(2)(A)(ii) of the Code. For
purposes of this Paragraph 20, the present value of Agreement Benefits shall be
determined using the interest rate prescribed by section 1274(b)(2) of the Code
and applicable regulations and the method described by section 280G(d)(4) of
the Code and applicable regulations.
IN WITNESS WHEREOF, the Company and Employee have executed this
Agreement on the day and year first above written.
OGLEBAY NORTON CC)MPANY
By: /s/ R. Thomas Green, Jr.
--------------------------------
R. Thomas Green, Jr.
Chairman, President and Chief
Executive Officer
/s/ Edward G. Jaicks
-----------------------------------
EDWARD G. JAICKS
-24-
EX-21
4
OGLEBAY NORTON CO. 10-K405 EXHIBIT 21
1
EXHIBIT 21
SUBSIDIARIES OF OGLEBAY NORTON COMPANY
--------------------------------------
Jurisdiction
Subsidiaries of Incorporation
------------ ----------------
Canadian Ferro Hot Metal
Specialties Limited Ontario
Laxare, Inc. West Virginia
National Perlite Products Company Idaho
Oglebay Norton Industrial Sands, Inc. California
Oglebay Norton Refractories & Minerals, Inc. Ohio
Oglebay Norton Taconite Company Minnesota
ON Coast Petroleum Company Texas
ONCO Eveleth Company Minnesota
ONCO WVA, Inc. West Virginia
Saginaw Mining Company Ohio
EX-23
5
OGLEBAY NORTON CO. 10-K405 EXHIBIT 23
1
EXHIBIT 23
Consent of Independent Auditors
We consent to the incorporation by reference in the following Registration
Statements and Post-Effective Amendment of our report dated February 15, 1995,
with respect to the consolidated financial statements of Oglebay Norton Company
and subsidiaries included in this Annual Report (Form 10-K) for the year ended
December 31, 1994:
Registration Statement Number 33-37974 on Form S-8 dated November 23, 1990
pertaining to the Oglebay Norton Company Incentive Savings Plan and Trust;
Registration Statement Number 33-37975 on Form S-8 dated November 23, 1990
pertaining to the Oglebay Norton Taconite Company Thrift Plan and Trust;
Post-Effective Amendment Number 4 to Registration Statement Number 2-80895
on Form S-8 dated February 13, 1990 pertaining to the Oglebay Norton
Company Incentive Savings Plan and Trust;
Registration Statement Number 33-29046 on Form S-8 dated June 9, 1989
pertaining to the Oglebay Norton Company Employee Stock Ownership Plan
and Trust;
Registration Statement Number 33-21006 on Form S-8 dated April 21, 1988
pertaining to the Oglebay Norton Company Employee Stock Ownership Plan and
Trust.
ERNST & YOUNG LLP
Cleveland, Ohio
March 31, 1995
EX-27
6
OGLEBAY NORTON CO. 10-K405 EXHIBIT 27
5
YEAR
DEC-31-1994
JAN-01-1994
DEC-31-1994
17,720,419
5,772,650
32,035,408
440,000
6,107,841
66,087,357
314,843,362
156,886,610
260,813,403
44,699,891
57,117,575
3,626,666
0
0
81,126,255
260,813,403
118,994,734
207,352,029
104,809,038
189,051,097
1,668,327
301,652
5,992,018
20,121,835
5,231,000
14,890,835
0
0
0
14,890,835
5.98
5.98