-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UvrcrXg4GdoiX1sB3gaFWWdi1FSW1YdlbBpo7VLJXDPrmI02sUluPmpOreVoKx1E hIc4t5Vuui5HJ4zguo5kfg== 0000949111-96-000043.txt : 19960806 0000949111-96-000043.hdr.sgml : 19960806 ACCESSION NUMBER: 0000949111-96-000043 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960805 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OREGON METALLURGICAL CORP CENTRAL INDEX KEY: 0000074856 STANDARD INDUSTRIAL CLASSIFICATION: ROLLING DRAWING & EXTRUDING OF NONFERROUS METALS [3350] IRS NUMBER: 930448167 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-01339 FILM NUMBER: 96604005 BUSINESS ADDRESS: STREET 1: 530 W 34TH AVE STREET 2: P O BOX 580 CITY: ALBANY STATE: OR ZIP: 97321 BUSINESS PHONE: 5039264281 MAIL ADDRESS: STREET 1: 530 34TH AVENUE SW STREET 2: PO BOX 580 CITY: ALBANY STATE: OR ZIP: 97321 10-Q 1 ============================================================================= UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 1996 _____________ OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-1339 ______ OREGON METALLURGICAL CORPORATION (Exact name of registrant as specified in its charter) Oregon 93-0448167 _______________________________________ ___________________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 530 34th Avenue S.W. 97321 ________________________________________ ___________________ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (541) 967-9000 ______________ NONE ______________________________________________________ (Former name or address, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ ___ Indicate the number of shares of each of the issuer's classes of common stock, as of the latest practicable date: Class Outstanding as of July 31, 1996 _____________________________ _______________________________ Common stock, $1.00 par value 11,417,002 ============================================================================= PART I: FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS OREGON METALLURGICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Unaudited
Three Months Ended Six Months Ended June 30, June 30, __________________ ________________ 1996 1995 1996 1995 ____ ____ ____ ____ Net sales $ 58,760 $ 35,125 $110,069 $ 65,963 Cost of sales, including a provision for future losses on long-term agreements of $1,300 for June 30, 1995 44,492 29,834 85,440 55,340 ________ ________ ________ ________ GROSS PROFIT 14,268 5,291 24,629 10,623 Research, technical and product development expenses 326 354 943 719 Selling, general and administrative expenses 4,868 3,544 9,158 6,944 ________ ________ ________ ________ INCOME FROM OPERATIONS 9,074 1,393 14,528 2,960 Interest expense (701) (465) (1,335) (1,040) Minority interests (245) (112) (470) (218) ________ ________ ________ ________ INCOME BEFORE INCOME TAXES 8,128 816 12,723 1,702 Provision for income taxes 2,942 363 4,192 714 ________ ________ ________ ________ NET INCOME $ 5,186 $ 453 $ 8,531 $ 988 ======== ======== ======== ======== Net income per share $ 0.45 $ 0.04 $ 0.75 $ 0.09 ======== ======== ======== ======== Weighted average common shares and equivalents outstanding 11,553 11,187 11,418 11,132 ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 2 OREGON METALLURGICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except par value)
Unaudited June 30, December 31, 1996 1995 _________ ___________ ASSETS Current assets: Cash and cash equivalents $ 1,071 $ 572 Accounts receivable, net 34,697 25,894 Inventories 81,297 66,010 Prepayments 601 689 Deferred tax assets 2,536 3,242 ________ ________ Total current assets 120,202 96,407 Property, plant and equipment, net 34,512 35,138 Other assets, net 1,438 1,532 ________ ________ Total Assets $156,152 $133,077 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 2,250 $ 616 Book overdraft 2,331 2,014 Accounts payable 16,829 16,973 Accrued payroll and employee benefits 9,016 6,659 Accrued loss on long-term agreements 2,781 2,781 Other accrued expenses 4,282 3,595 ________ ________ Total current liabilities 37,489 32,638 Long-term debt, less current portion 31,103 26,746 Deferred tax liabilities 3,433 3,149 Deferred compensation payable 243 678 Accrued postretirement benefit 1,638 1,563 Accrued loss on long-term agreements, less current portion 1,059 1,636 Minority interests 1,299 780 ________ ________ Total liabilities 76,264 67,190 ======== ======== Shareholders' equity: Common stock, $1.00 par value; 25,000 shares authorized; shares issued: 1996 11,417; 1995, 11,018 11,417 11,018 Additional paid-in capital 43,409 38,340 Retained earnings 25,076 16,545 Cumulative foreign currency translation adjustment (14) (16) ________ ________ Total shareholders' equity 79,888 65,887 ________ ________ Total liabilities and shareholders' equity $156,152 $133,077 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 3 OREGON METALLURGICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands) Unaudited
Cumulative Foreign Additional Currency Common Stock Paid-in Retained Translation ____________ Shares Amount Capital Earnings Adjustment Total ______ ______ _______ ________ __________ _____ Balances, December 31, 1994 10,893 $ 10,893 $ 37,445 $ 18,960 $ (16) $ 67,282 Issuance of common stock for employee benefits 125 125 895 ---- ---- 1,020 Net loss ---- ---- (2,415) (2,415) ______ ________ ________ ________ ________ ________ Balances, December 31, 1995 11,018 11,018 38,340 16,545 (16) 65,887 Issuance of common stock for employee benefits 319 319 3,136 ---- ---- 3,455 Exercise of stock purchase warrants 80 80 430 ---- ---- 510 Tax benefits on issuance of common stock for employee benefits ---- ---- 1,503 ---- ---- 1,503 Currency translation adjustment ---- ---- ---- ---- 2 2 Net income ---- ---- ---- 8,531 ---- 8,531 ______ ________ ________ ________ ________ ________ Balance, June 30, 1996 11,417 $ 11,417 $ 43,409 $ 25,076 $ (14) $ 79,888 ====== ======== ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 4 OREGON METALLURGICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Unaudited
Six Months Ended June 30, ________________ 1996 1995 ____ ____ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 8,531 $ 988 Adjustments to reconcile net income to cash used in operating activities: Depreciation and amortization 2,295 2,329 Deferred income tax expense 990 559 Employee benefits paid or payable in common stock 3,490 1,107 Provision for loss on long-term agreements (577) 1,300 Minority interests 470 218 Decrease (increase) in: Accounts receivable (8,803) (6,108) Inventories (15,287) (11,253) Prepayments 88 714 Increase (decrease) in: Accounts payable (144) 2,766 Accrued payroll and employee benefits 2,003 1,025 Other accrued expenses 2,190 623 Other 8 (46) ________ ________ Net cash used in operating activities (4,746) (5,778) ________ ________ CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment (1,535) (733) Other (40) (429) ________ ________ Net cash used in investing activities (1,575) (1,162) ________ ________ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from revolving credit agreements 103,865 58,439 Payments on revolving credit agreements (97,980) (52,604) Proceeds from long-term debt 177 ---- Payments on long-term debt (71) (6) Book overdraft 317 ---- Proceeds from exercise of stock purchase warrant 510 ---- Net cash provided by financing activities 6,818 5,829 ________ ________ Effect of exchange rates on cash and cash equivalents 2 1 ________ ________ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 499 (1,110) CASH AND CASH EQUIVALENTS: Beginning of period 572 1,636 ________ ________ End of period $ 1,071 $ 526 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) NOTE 1. BASIS OF PRESENTATION The interim consolidated financial statements have been prepared by Oregon Metallurgical Corporation ("OREMET") and its subsidiaries (the "Company") without audit. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company's results of operations, for the three and six month periods ended June 30, 1996 and 1995; financial position as of June 30,1996, and December 31, 1995, and the cash flows of the Company for the six months ended June 30, 1996 and 1995. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto appearing in the Company's Annual Report to Shareholders. The results of operations in term periods are not necessarily indicative of the operating results of a full year or future year. NOTE 2. ORGANIZATION AND OPERATIONS The Company is one of two U.S. integrated producers and distributors of titanium sponge, ingot, mill products and castings for use in the aerospace, industrial, golf and military markets. As of June 30, 1996, the Company is 14% owned by the Oregon Metallurgical Corporation Employee Stock Ownership Plan (the "ESOP"). NOTE. 3 BASIS OF CONSOLIDATION Titanium Industries, Inc. ("TI") an eighty percent (80%) owned subsidiary opearates full-line titanium metal service centers in the United States, Canada, United Kingdom and Germany and produces small diameter bar, weld wire and fine wire. The consolidated financial statements of the Company include the accounts of TI, and the Company's wholly-owned subsidiary, OREMET France S.a.r.l. TI's accounts reflect the activities of its wholly-owned subsidiaries, Titanium International, LTD., Titanium Wire Corporation and Titanium International GmbH. All material intercompany accounts and transactions have been eliminated in consolidation. NOTE 4. INVENTORIES
June 30, December 31, 1996 1995 ________ ____________ Finished goods $ 21,118 $ 18,141 Work-in-progress 26,053 19,837 Raw materials 34,126 28,032 ________ ________ Total $ 81,297 $ 66,010 ======== ========
6 NOTE 5. PROPERTY, PLANT AND EQUIPMENT
June 30, December 31, 1996 1995 ________ ____________ Land $ 1,189 $ 1,189 Buildings and improvements 11,455 11,455 Machinery and equipment 42,592 42,248 Integrated sponge facility 45,660 45,641 Construction in progress 1,966 846 ________ ________ 102,862 101,379 Less accumulated depreciation (68,350) (66,241) ________ ________ $ 34,512 $ 35,138 ======== ========
NOTE 6. STOCK PURCHASE WARRANTS: At December 31, 1995, warrants to purchase 200 thousand shares of the Company's common stock were outstanding in connection with the Company's acquisition of TI. The warrants were issued at fair market value and are exercisable at $6.375 per share, expiring in September 2004. The warrant holder is the president of TI, who is also an officer and director of the Company. In May 1996, warrants were exercised to purchase 80 thousand shares of common stock for $510. As of June 30, 1996, 120 thousand stock purchase warrants remain outstanding, none are exercisable at June 30, 1996. NOTE 7. STOCK OPTIONS: Effective June 11, 1996, substantially all employees of OREMET were each granted options to purchase five hundred shares of common stock for $30.25 a share the fair market value on the date of grant. At June 30, 1996, options to purchase 252 thousand shares of Company common stock are outstanding. Such options vest 100% on the fourth anniversary and expire on the tenth anniversary of the grant. No options are presently exercisable. 7 NOTE. 8 EMPLOYEE BENEFIT PLANS OREMET Savings Plan - Beginning in 1995, OREMET implemented a domestic 401(k) retirement savings plan for the benefit of both union and salaried employees. Under the provision of the plan, OREMET will contribute one share of common stock for each day worked, or approximately 260 shares a year for a full-time employee as defined by the plan. Effective April 1, 1996, the Company's contribution to the 401(k) plan was amended, such that when the value of the common stock exceeds thirty two dollars, a partial entitlement up to thirty two dollars of common stock will be contributed. OREMET will also contribute a matching contribution based on the profitability of the Company. The matching contribution is limited to 3% of the participant's compensation. Costs under the plan totaled $431 and $1,642 for the six months ended June 30, 1996 and 1995, respectively. Stock Compensation Plans - Beginning in 1995, OREMET implemented stock compensation plans for the benefit of both its union and salaried employees. Eligible employees earn one share of the Company's common stock for every one hundred dollars in salaries and wages. Effective April 1, 1996, the Company's obligation under the Stock Compensation Plans was amended, such that when the value of the common stock exceeds twenty dollars per share, a partial share entitlement up to twenty dollars will be paid in common stock for every one hundred dollars of eligible compensation earned. Costs under the plans totaled $676 and $1,762 for the six months ended June 30, 1996 and 1995, respectively. 8 PART 1: FINANCIAL INFORMATION ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Company's 1995 Annual Report on Form 10-K and the Consolidated Financial Statements and Notes thereto of the Company. The following information contains forward-looking statements which involve certain risks and uncertainties. Actual results and events may differ significantly from those discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, dependence on aerospace industry, uncertainty of emerging golf market, highly competitive industry, substantial excess production capacity, planned significant investment in electron beam, furnace, dependence on essential machinery and equipment, dependence on raw materials and services. OVERVIEW Historically, aerospace applications in both the commercial and military sectors have accounted for a majority of U.S. titanium consumption. The aerospace industry has been characterized by severe cyclicality, which has had a significant impact on the sales and profitability of titanium producers, including OREMET. The last cyclical peak for the titanium industry occurred in the 1988-1990 period, when domestic industry mill product shipments averaged over 50 million pounds per year. In 1991, U.S. titanium industry mill product shipments declined by approximately 35% to 34 million pounds. This decline was primarily due to lower demand resulting from a slump in commercial aerospace and the curtailment or cancellation of military programs as the Cold War ended. Data reported by the U.S. Department of the Interior U.S. Geological Survey ("USGS") indicate that industry shipments reached approximately 36 million pounds in 1993 but dropped to about 35 million pounds in 1994. The USGS reported that in 1995, U.S. industry shipments of titanium mill products increased by 26% over 1994 levels to 44 million pounds, and mill product shipments in the first quarter of 1996 totaled approximately 12 million pounds. The improvement in industry shipments was the result of an increase in demand in the commercial aerospace market and the emergence of new uses of titanium metal, primarily in golf clubheads. Reported orders for new commercial aircraft have increased significantly, particularly for wide body planes such as the Boeing 777, which use a greater percentage of titanium per plane than narrow body aircraft. The Company believes that industry mill product shipments to the commercial aerospace market increased by more than three million pounds to 20 million pounds in 1995. While shipments to the military industry have fallen below delivery levels in the 1980s as a result of reduced defense budgets, this decline has been offset by demand from new markets. The Company believes that in 1996, shipments to the golf market, which were 1.5 million pounds in 1994, will be approximately 9 million pounds and be greater than shipments to the entire military sector. The Company's twelve-month order backlog has increased from $64 million as of June 30, 1995 to $141 million as of June 30, 1996. OREMET's backlog is based on firm purchase orders scheduled for delivery during the subsequent twelve-month period. Beginning in the second half of 1995 and continuing to the present, the Company has experienced a significant increase in requests for quotations as well as increased orders and prices on accepted orders. The increase in demand is primarily a result of the recovery in the commercial aerospace market and the growth of the golf clubhead market. Because of the strong demand, the Company has been increasingly selective in the new orders that it accepts. In addition, the Company delayed opening its first quarter 1997 order book until early June 1996 in order to better assess future raw material costs. The Company started accepting orders for second quarter 1997 beginning in early July 1996. In 1995, the increase in demand for titanium products has resulted in higher prices for certain raw materials used by the Company, including titanium scrap, titanium sponge and alloying materials. During 1995, the Company's profitability was negatively impacted by higher raw material costs and fixed price long-term sales agreements with certain customers, primarily in the commercial aerospace industry. The Company recorded a $4.4 million provision in the fourth quarter of 1995 to recognize anticipated losses on existing long-term agreements ("LTAs") as a result of higher raw material costs. During the first six months of 1996, the Company incurred losses of $0.6 million on certain of its LTA's, reducing its accrual for future losses to $3.8 million at June 30, 1996. Starting with the first quarter of 1996, the Company added raw material surcharges in order to more directly link changes in raw material costs to its contracts. The Company has also instituted price increases for certain of its long-term sales agreements which were entered into prior to 1996. However, there can be no assurance as to the Company's continuing ability to recover raw material cost increases. The future profitability of the Company's fixed price LTAs is subject to change based upon the Company's costs of production. 9 RESULTS OF OPERATIONS The following table sets forth certain operating items of the Company's consolidated results of operations as a percentage of net sales for each of the years in the five-year period ended December 31, 1995, and for the six months ended June 30, 1995 and 1996.
Year Ended Six Months Ended December 31, June 30, ____________________________________ ____________________ 1991 1992 1993 1994 1995 1995 1996 ____ ____ ____ ____ ____ ____ ____ (unaudited) Net sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Gross profit (loss)(1) (5.9) (1.0) 4.9 9.3 10.8 16.1 22.4 Income (loss) from opera- tions(1) (15.7) (10.4) (11.2) (3.5) (0.2) 4.5 13.2 Net income (8.6)% (7.4)% (7.4)% (2.8)% (1.6)% 1.5% 7.8% ______________ A provision for a loss on LTAs of $1.3 million and $4.4 million was recorded in the second and fourth quarters of 1995, respectively. Gross profit and income from operations, exclusive of this provision, as a percentage of net sales would have been 13.8% and 2.8% in 1995, respectively, and 18.1% and 6.5% for the six months ended June 30, 1995, respectively.
Quarterly Results of Operations _______________________________ The following table presents the Company's unaudited consolidated quarterly financial data for fiscal years 1994 and 1995, and the first and second quarters of 1996. Although the Company's business is not seasonal, growth rates of sales have varied from quarter to quarter as a result of the purchase of TI in September 1994, the timing of new products, industry cyclicality and general U.S. and international economic conditions.
1994 Quarters 1995 Quarters 1996 Quarters ____________________________________ _______________________________________ ________________ First Second Third Fourth First Second(1) Third Fourth(1) First Second _____ ______ _____ ______ _____ _________ _____ _________ _____ ______ (in millions) Net sales $ 13.3 $ 14.5 $ 17.0 $ 26.4 $ 30.8 $ 35.2 $ 41.2 $ 39.7 $ 51.3 $ 58.8 Gross profit 0.1 0.6 1.7 4.2 5.3 5.3 4.1 1.2 10.4 14.2 Income (loss) from operations (1.7) (0.9) (0.6) 0.7 1.6 1.4 0.1 (3.4) 5.5 9.0 Net income (loss) $ (1.1) $ (0.6) $ (0.4) $ 0.1 $ 0.5 $ 0.5 $ (0.4) $ (3.0) $ 3.3 $ 5.2 __________________ During the second quarter of 1995, the Company reported a pre-tax charge to income of $1.3 million to reflect the impact of projected conversion costs on long-term agreements which were in excess of selling price. During the fourth quarter of 1995, the Company reported a pre-tax charge to income of $4.4 million to reflect the impact of increased raw material costs on long-term agreements.
COMPARISON OF SECOND QUARTER OF 1996 TO SECOND QUARTER OF 1995 ______________________________________________________________ NET SALES. Net sales increased $23.6 million, or 67% to $58.8 million for the second quarter of 1996, compared to $35.1 million in the second quarter of 1995. The increase in sales was primarily driven by increased demand and higher prices for both the Company's manufactured and service center products. Of the $23.6 million net sales increase, $8.9 million was the result of volume increases and $14.7 million from higher average selling prices. TITANIUM SPONGE. During the second quarter of 1996, the Company's integrated sponge facility operated at near capacity, primarily supplying the Company's internal demand for titanium sponge as well as sales to RMI under a long-term titanium sponge conversion agreement. Sales of titanium sponge and sponge conversion services increased 129% to $4.6 million from $2.0 million for the second quarter of 1996 compared to the second quarter of 1995. Sponge shipments increased 96% and the average sponge price per pound increased 17% due to a change in product mix. INGOT. Sales of ingot increased 130% to $12.5 million for the second quarter of 1996 compared to $5.4 million for the second quarter of 1995. Ingot shipments increased 79% and the average ingot price per pound increased 29%. 10 MILL PRODUCTS. Mill product sales increased 81% to $19.7 million for the second quarter of 1996 compared to $10.9 million for the second quarter of 1995. Shipments of mill products increased 14% and the average price per pound increased 57%. Sales to producers of aerospace components and golf clubheads are responsible for a substantial portion of the growth in mill product sales. CASTINGS. Sales of castings increased 72% to $2.5 million for the second quarter of 1996 compared to $1.5 million for the second quarter of 1995. The Company is operating at a higher production rate in 1996 and is expanding its casting facilities. DISTRIBUTION. During the second quarter of 1996, sales of service center products increased 33% to $18.0 million compared to $13.6 million for the second quarter of 1995. The increase in sales was due to increased shipments and favorable pricing and product mix. COST OF SALES AND GROSS PROFIT. Cost of sales for the second quarter of 1996 increased 49% to $44.5 million, compared to $29.8 million in the second quarter of 1995. The primary reason for the increase in cost of sales were increased shipments. However, the Company's gross profit margin increased to 24.3% for the second quarter of 1996 from 15.1% for the second quarter of 1995, as a result of higher prices and improved production efficiencies. RESEARCH, TECHNICAL AND PRODUCT DEVELOPMENT EXPENSES. Research, technical and product development expenses ("RT&D") remained substantially unchanged for the second quarter of 1996 as compared to the comparable quarter of 1995. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses ("SG&A") increased $1.3 million, or 37%, for the second quarter of 1996 to $4.9 million from $3.5 million in the comparable quarter of 1995. As a percentage of sales, SG&A decreased to 8.3% in the second quarter of 1996 from 10.1% in the second quarter of 1995. INTEREST EXPENSE. Interest expense increased $0.2 million to $0.7 million in the second quarter of 1996 compared to the first quarter of 1995, resulting from an increase in borrowing needed to fund expanded operating levels. PROVISION FOR INCOME TAXES. The Company reported a provision for income taxes of $2.9 million, or an effective tax rate of 35% (on income before income taxes and minority interests) for the second quarter of 1996 compared to $0.4 million, or an effective tax rate of 39% for the comparable period in 1995. The difference between the federal and state combined statutory tax rate of 39.5% and the effective tax rate of 35% for the second quarter of 1996 is primarily due to a change in the Company's deferred tax asset valuation allowance, reflecting the belief that it is more likely than not that the deferred tax assets will be realized by the Company. NET INCOME. The Company reported net income of $5.2 million, $0.45 per share, for the second quarter of 1996 compared to net income of $0.5 million, $0.04 per share, for the comparable period in 1995. COMPARISON OF FIRST SIX MONTHS OF 1996 TO FIRST SIX MONTHS OF 1995 __________________________________________________________________ NET SALES. Net sales increased $44.1 million, or 67% to $110.1 million in the first six months of 1996, compared to $66.0 million in 1995. The increase in sales was primarily driven by increased demand and higher prices for both the Company's manufactured and service center products. Of the $44.1 million sales increase, $18.5 million was the result of volume increases and $25.6 milion from higher average selling prices. TITANIUM SPONGE. During the first six months of 1996, the Company's integrated sponge facility operated at near capacity, primarily supplying the Company's internal demand for titanium sponge as well as sales to RMI under a long-term titanium sponge conversion agreement. Sales of titanium sponge and sponge conversion services increased 87% to $7.8 million from $4.2 million for the first six months of 1996 compared to the first six months of 1995. Sponge shipments increased 70% and the average sponge price per pound increased 10%. The increase in the average price per pound can be attributed to sales of high purity sponge, which the Company started commercially producing in limited quantities in 1995. The Company projects that it will continue to operate its sponge facility at near capacity with substantially all production being utilized for internal consumption or for supply to RMI. The Company is presently supplementing its sponge production with purchases from other producers. INGOT. Sales of ingot increased 125% to $21.7 million for the first six months of 1996 compared to $9.6 million for the first six months of 1995. Ingot shipments increased 79% and the average ingot price per pound increased 26%. The Company operated its melt facilities at near capacity during the first six months of 1996 and expects to continue to do so for the remainder of 1996. The Company produces ingot for both internal use in its mill products division and for sale primarily to aerospace customers. 11 MILL PRODUCTS. The Company produces or contracts for outside production a variety of mill products including: billet, bar, plate, sheet and engineered parts. Mill product sales increased 93% to $38.3 million for the first six months of 1996 compared to $19.9 million for the first six months of 1995. Shipments of mill products increased 29% and the average price per pound increased 50%. Sales to producers of aerospace components and golf clubheads are responsible for a substantial portion of the growth in mill product sales. CASTINGS. Sales of castings increased 56% to $4.7 million for the first six months of 1996 compared to $3.0 million for the first six months of 1995. The Company is operating at a higher production rate in 1996 and is expanding its casting facilities. DISTRIBUTION. The Company's service centers market a wide variety of mill products including engineered parts that are manufactured by various producers. During the first six months of 1996, sales of service center products increased 30% to $34.7 million compared to $26.7 million for the first six months of 1995. The increase in sales was due to increased shipments and favorable pricing and product mix. COST OF SALES AND GROSS PROFIT. Cost of sales for the first six months of 1996 increased 54% to $85.4 million, compared to $55.3 million in the first six months of 1995. The primary reason for the increase in cost of sales was increased shipments. The Company's gross profit margin increased to 22.4% for the first six months of 1996 from 16.1% for the first six months of 1995, as a result of higher prices and improved production efficiencies. RESEARCH, TECHNICAL AND PRODUCT DEVELOPMENT EXPENSES. RT&D increased by $0.2 million for the first six months of 1996 to $0.9 million from the comparable six month period of 1995. The main focus of RT&D is to develop enhanced production procedures, provide customers with required technical support and develop new products and markets. RT&D works jointly on projects with customers, research agencies and universities. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A increased $2.2 million, or 32%, for the first six months of 1996 to $9.2 million from $6.9 million in the comparable six month period of 1995. The increase is primarily a resultof additional employees hired to support the increase in operating activity. As a percentage of sales, SG&A decreased to 8.3% in the first six months of 1996 from 10.5% in the first six months of 1995. INTEREST EXPENSE. Interest expense increased $0.3 million to $1.3 million in the first six months of 1996 compared to the first six months of 1995, resulting from an increase in borrowing needed to fund expanded operating levels. PROVISION FOR INCOME TAXES. The Company reported a provision for income taxes of $4.2 million, or an effective tax rate of 32% (on income before income taxes and minority interests) for the first six months of 1996 compared to $0.7 million, or an effective tax rate of 37% for the comparable period in 1995. The difference between the federal and state combined statutory tax rate of 39.5% and the effective tax rate of 32% for the first six months of 1996 is primarily due to a change in the Company's deferred tax asset valuation allowance, reflecting the belief that it is more likely than not that the deferred tax assets will be realized by the Company. NET INCOME. The Company reported net income of $8.5 million, $0.75 per share, for the first six months of 1996 compared to net income of $1.0 million, $0.09 per share, for the comparable period in 1995. LIQUIDITY AND CAPITAL RESOURCES OVERVIEW. _________ Net cash used in operating activities totaled $4.7 million for the first six months of 1996, compared to $5.8 million for the comparable period of 1995. Increases in sales and the sales backlog accounted for the increased levels of accounts receivable and inventory, which represented the primary uses of cash for the six month period. Working capital increases required to support the sharp increase in operating levels were responsible for the most significant portion of the cash used by the Company's operating activities. The increase in the amount of cash flow used in operating activities is a trend which began in the second quarter of 1994, consistent with the Company's experience of increasing sales, sales order backlog and production. During the first six months of 1996 and 1995, the Company incurred $3.5 million and $1.1 million in expenses relating to its Stock Compensation Plans and Savings Plan. Liabilities arising under these plans are satisfied by issuing shares of the Company's common stock. Increases in the average market value of the Company's common stock and in the number of eligible employees are the primary factors for the 1996 increase. 12 Net cash used in investing activities totaled $1.6 million for the first six months of 1996 compared to $1.2 million for the first six months of 1995. The Company had additions to property, plant and equipment of $1.5 million and $0.7 million in the first six months of 1996 and 1995, respectively. Net cash provided by financing activities totaled $6.8 million for the first six months of 1996, compared to $5.8 million for the comparable period of 1995. For the first six months of 1996, $6.2 million was provided from net borrowings on the Company's credit agreements and book overdraft compared to $5.8 million in 1995. REVIEW OF SIGNIFICANT WORKING CAPITAL ACCOUNTS. _______________________________________________ INVENTORIES. Inventories increased by $15.3 million, or 23% during the first six months of 1996, to $81.3 million, while they increased $10.0 million, or 20%, to $59.1 million during the comparable period of 1995. In addition to an increase in finished goods inventory, increases in raw materials and work-in-process have been made in support of higher production levels. In response to a growing sales backlog, the Company is continuing to raise its production levels. The Company is also experiencing higher raw material and conversion costs, which have increased the cost of the Company's inventory. ACCOUNTS RECEIVABLE. Accounts receivable increased by $8.8 million, or 34%, during the first six months of 1996 to $34.7 million, while they increased by $6.2 million, or 30% to $26.6 million during the comparable period of 1995. The increase in accounts receivable is consistent with the Company's increase in sales volume. BOOK OVERDRAFT. The Company had a book overdraft at June 30, 1996, December 31, 1995 and June 30, 1995 of $2.3 million, $2.0 million, and $0.0 million, respectively. The book overdraft represents Company checks which have been disbursed and are in transit as of the end of the reporting period. When the checks clear the Company's bank, they are funded by draws on the Company's U.S. credit facility to the extent they are not funded by deposits. ACCOUNTS PAYABLE. Accounts payable at June 30, 1996 and December 31, 1995 were $16.8 million and $17.0 million, respectively, which are less than the June 30, 1995 balance of $19.7 million. The decrease in accounts payable was funded by increased borrowings on the Companies U.S. credit agreement. ACCRUED PAYROLL AND RELATED LIABILITIES. Accrued payroll and employee benefits increased by $2.4 million, or 35% during the first six months of 1996 to $9.0 million, while they increased by $2.1 million, or 72% to $5.1 million during the comparable period of 1995. For the first six months of 1996, accruals related to the Company's Cash Bonus Program and Stock Appreciation Rights Plan accounted for a substantial portion of the increase. For the first six months of 1995, accruals related to the Company's Stock Compensation Plan and Savings Plans accounted for a substantial portion of the increase. CREDIT AGREEMENTS. __________________ The Company may borrow up to $35 million under the terms of a U.S. revolving credit agreement with BankAmerica Business Credit, Inc. ("BABC"). The U.S. credit agreement expires in September 1997. The balance outstanding under the credit agreement as of June 30, 1996 was $26.1 million. As of June 30, 1996, interest charged under the credit agreement was calculated based on BABC's reference rate plus 1.5% or a borrowing option based on LIBOR plus 2.5%. The U.S. credit agreement was amended as of March 14, 1996 and May 1, 1996 to, among other things, modify the debt to equity ratio covenant and certain other restrictive covenants and to increase the line from $25 to $35 million. The amendments to the covenants were needed for the Company to remain in compliance with certain financial covenants in the U.S. credit agreement in light of increased working capital growth. Upon completion of the Offering (see below), the Company intends to seek a new $50 million U.S. credit facility. Titanium International Limited, a subsidiary of TI, has a short-term credit facility with Midland Bank plc, in the U.K., permitting borrowings of approximately L2.3 million ($3.6 million at current exchange rates). The U.K. credit agreement is subject to renewal on December 31, 1996. The balance outstanding under the U.K. credit agreement as of June 30, 1996 was $1.5 million (at current exchange rates). THE OFFERING. ______________ On June 26, 1996, the Company filed a registration statement with the United States Securities and Exchange Commission to register for sale to the public approximately 4,025 thousand shares of Common Stock. The Company intends to use the proceeds from the Offering to (i) build or invest in an electron beam furnace, (ii) repay certain indebtedness, (iii) expand the Company's distribution business, and (iv) provide funds for working capital and general corporate purposes. 13 CAPITAL EXPENDITURES. _____________________ The Company intends to use approximately $32 million of the net proceeds from the Offering for the construction, equipment and facility costs for a new EB furnace and related upgrade of scrap reprocessing facilities. The construction and production ramp-up periods are expencted to take approximately 18 months with approximately $4 million expended in 1996 (design and procurement phases), $20 milion in 1997 (construction phase) and approximately $8 million in 1998 (testing phase). The Company also intends to use approximately $15 million of the net proeeds from the Offering to establish or purchase additional service centers in the Pacific Rim, Northeastern United States and Southern Europe by the end of 1997. Currently, no potential acquisitions have been identified. The Company anticipates that capital expenditures during 1996, other than those related to the EB furnace (see the Offering, above), will approximate $9 million which will be provided by internally generated funds or credit facilities. Capital expenditures required to maintain compliance with applicable environmental regulations are included in the Company's capital expenditure plan to the extent that they can be determined. The Company has no material open commitments which obligate it to make future capital expenditures. INCOME TAXES. _____________ The Company anticipates that in 1996 it will fully utilize its federal net operating loss carryforwards of $3.5 million and will pay federal taxes on any remaining balance of its federal taxable income. The Company has a State of Oregon net operating loss carryforward of $30.0 million which will limit the amount of state taxes paid in 1996. In addition, the Company pays minimal franchise and income taxes in various other states and foreign jurisdictions. ADEQUACY OF LIQUIDITY AND CAPITAL RESOURCES. ____________________________________________ The Company's access to borrowing facilities, internally generated cash and the net proceeds from the Offering are expected to be sufficient to support the Company's operating needs and to finance its continued growth, capital expenditures and repayment of long-term debt obligations. NON-U.S. OPERATIONS AND MONETARY ASSETS. ________________________________________ Approximately 9% of the Company's net sales for the first six months of 1996 were derived from its service centers in the U.K. and France. Changes in the value of non-U.S. currencies relative to the U.S. dollar cause fluctuations in U.S. dollar financial position and operating results. The impact of currency fluctuations on the Company was not significant in the first six months of 1996. CHANGES IN ACCOUNTING PRINCIPLES The Company expects to elect the disclosure alternative prescribed by Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," and to account for stock-based employee compensation with respect to the Common Stock in accordance with Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees," and its various interpretations. Under APB No. 25, no compensation cost is generally recognized for fixed stock options in which the exercise price is not less than the market price on the grant date. Under the disclosure alternative SFAS No. 123, the Company will disclose, starting with its 1996 fiscal year, its respective pro forma net income and earnings per share as if the fair value based accounting method of SFAS No. 123 had been used to account for stock-based compensation cost for all awards granted by the Company after January 1, 1996. 14 PART 2: OTHER INFORMATION ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ___________________________________________________ (A) An Annual Meeting of Shareholders was held on April 25, 1996. (B) Carlos E. Aguirre, Gilbert E. Bezar, Thomas B. Boklund, Roger V. Carter, Nicholas P. Collins, Howard T. Cusic, David H. Leonard, James S. Paddock and James R. Pate were elected as directors of the Company. (C) The matters voted upon at the Annual Meeting of Shareholders were: i. The election of nine directors. The results of the election were as follows: Nominee Votes For _______ _________ Carlos. E. Aguirre 9,484,868 Gilbert E. Bezar 7,838,138 Thomas B. Boklund 7,713,908 Robert V. Carter 9,131,382 Nicholas P. Collins 8,228,528 Howard T. Cusic 8,454,679 David H. Leonard 13,919,849 James S. Paddock 7,856,276 James R. Pate 14,969,223 ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K ________________________________ A. Exhibits 10.1 Amendment No. 3 Dated as of March 14, 1996 to Loan and Security Agreement with Oregon Metallurgical Corporation and Titanium Industries, Inc., Dated as of September 19, 1994. 10.2 Amendment No. 4 Dated as of May 1, 1996 to Loan and Security Agreement with Oregon Metallurgical Corporation and Titanium Industries, Inc., Dated as of September 19, 1994. 11.1 Statement re: computation of per share earnings. 27.1 Financial Data Schedule. B. Forms 8-K No reports on Form 8-K were filed by the company during the quarter ended June 30, 1996. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OREGON METALLURGICAL CORPORATION Registrant Date: August 5, 1996 /s/ Dennis P. Kelly ______________________________________ Dennis P. Kelly Vice President, Finance and Chief Financial Officer Signing on behalf of the Registrant and as Chief Accounting Officer 15 EX-10 2 EXHIBIT 10.1 AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT WITH OREGON METALLURGICAL CORPORATION AND TITANIUM INDUSTRIES, INC. DATED AS OF SEPTEMBER 19, 1994 THIS AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT ("AMENDMENT") is dated as of March 14, 1996, by and between OREGON METALLURGICAL CORPORATION, an Oregon corporation ("OREMET"), TITANIUM INDUSTRIES, INC., an Oregon corporation formerly know as New TI, Inc. ("TI" and, together with Oremet sometimes hereinafter referred to collectively as the "BORROWERS"), and BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation, as successor-in- interest to Bank of America Illinois, an Illinois banking corporation ("LENDER"). Capitalized terms used herein but not otherwise defined herein shall have the respective meanings assigned to such terms in the "Loan Agreement" (as defined below). WITNESSETH: __________ WHEREAS, Borrowers and Lender have entered into that certain Loan and Security Agreement dated as of September 19, 1994, as amended (the "THE LOAN AGREEMENT"), pursuant to which Lender has agreed to make certain loans and other financial accommodations to Borrowers; and WHEREAS, Borrowers and Lender have agreed to further amend the Loan Agreement, on the terms and subject to the conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the respective parties hereto hereby agree as follows: 1. Amendment to Loan Agreement. ___________________________ Effective as of the date hereof, upon satisfaction of the conditions precedent set forth in Section 3 _________ below, and in reliance upon the representations and warranties of Borrowers set forth herein, the Loan Agreement is hereby amended as follows: 1.1 Section 2.1.3 _____________ of the Loan Agreement is hereby deleted in its entirety and the following language is hereby substituted therefor: OREMET.AM3:11911 2/15/96 -1- "2.1.3 MAXIMUM OUTSTANDING LOANS. Notwithstanding any other provision of this Agreement, the aggregate outstanding principal balance of the Loans plus Letter of Credit Obligations shall not exceed at any time (A) in the case of OREMET, $21,000,000, (B) in the case of TI, $7,000,000, and (C) in the case of both Borrowers in the aggregate, $28,000,000; provided, however, _________________ that the foregoing shall not limit the right of Lender to advance Revolving Loans to either of the Borrowers pursuant to the provisions of Sections 2.2(b), 2.2(c), 2.2(e), 3.2(c), 5.5, 5.6, 7.4, 11.3, 11.4, __________________________________________________________________ or any other provision of this Agreement or any Related Agreement that permits Lender to advance Revolving Loans to such Borrower." 1.2 The first sentence of Section 2.15 ____________ of the Loan Agreement is hereby deleted and the following language is hereby substituted therefor: "OREMET agrees to pay to Lender a fee equal to one-half of one percent (0.5%) per annum on the daily average amount by which $28,000,000 exceeds the aggregate outstanding principal balance of the Revolving Loans plus the Letter of Credit Obligations, in each case of each of the Borrowers." 1.3 Section 2.1 of Supplement A ___________________________ of the Loan Agreement is hereby deleted and the following language is hereby substituted therefor: "2.1 Revolving Credit Amounts. ________________________ The maximum amount of Revolving Loans which Lender will make available to each Borrower (such amount is hereinafter called, with respect to each Borrower, such Borrower's `REVOLVING CREDIT AMOUNT') is (i) in the case of OREMET, $21,000,000 and (ii) in the case of TI, $7,000,000 (in each case, unless such amount is reduced or increased by Lender in its sole discretion)." 2. Conditions Precedent. ____________________ This Amendment shall become effective as of the date hereof, upon the Lender's receipt of (a) this Amendment duly executed and delivered and (b) a copy, duly certified by the secretary or assistant secretary of each of the Borrowers of (i) resolutions of the Executive Committee of the Board of Directors of such Borrower authorizing this Amendment, (ii) all documents evidencing any other necessary corporate action with respect to this Amendment, and (iii) all approvals, consents, if any, with respect to this Amendment. 3. Representations, Warranties, and Covenants. __________________________________________ 3.1 Each of the Borrowers hereby represents and warrants that: (a) this Amendment and the Loan Agreement, as amended hereby, constitute legal, valid, and binding obligations of the respective Borrowers and are enforceable against each of the Borrowers in accordance with their respective terms; OREMET.AM3:11911 2/15/96 -2- (b) before and after giving effect to this Amendment, no Unmatured Event of Default or Event of Default has occurred and is continuing; and (c) the execution and delivery by each of the Borrowers of this Amendment does not require the consent or approval of any Person, other than the Borrower. 3.2 Each of the Borrowers hereby reaffirms all agreements, covenants, representations, and warranties made by such Borrower in the Loan Agreement and each of the Related Agreements to the extent the same are not amended hereby and agrees that all such agreements, covenants, representation and warranties shall be deemed to have been remade as of the date hereof and the effective date of this Amendment. 4. Reference to and Effect on the Loan Agreement and Related _________________________________________________________ Agreements. __________ 4.1 Upon the effectiveness of this Amendment, each reference in the Loan Agreement to "this Agreement," "hereunder," "hereof," "herein," or words of like import, and each reference in each of the Related Agreements to the "Loan Agreement," shall in each case mean and be a reference to the Loan Agreement as amended hereby. 4.2 Except as expressly set forth herein, (i) the execution and delivery of this Amendment shall in no way affect any right, power, or remedy of Lender with respect to any Event of Default nor constitute a waiver of any provision of the Loan Agreement or any of the Related Agreements, and (ii) all terms and conditions of the Loan Agreement, the Related Agreements, and all other documents, instrument, amendments, and agreements executed and/or delivered by either or both of the Borrowers pursuant thereto or in connection therewith shall remain in full force and effect and are hereby ratified and confirmed in all respects. The execution and delivery of this Amendment by Lender shall in no way obligate Lender, at any time hereafter, to consent to any other amendment or modification of any term or provision of the Loan Agreement or any of the Related Agreements. 5. Governing Law. _____________ This Amendment shall be governed by and construed in accordance with the internal laws (as opposed to conflicts of law provisions) of the state of Illinois. 6. Headings. ________ Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 7. Counterparts. ____________ This Amendment may be executed by the parties hereto on separate counterparts and each of said counterparts taken together shall be deemed to constitute one and the same instrument. OREMET.AM3:11911 2/15/96 -3- 8. Expenses. ________ The Borrowers shall pay to the Lender all fees and expenses incurred in the negotiation and preparation of this Amendment (including the allocated costs of the Lender's in-house counsel). IN WITNESS WHEREOF this Amendment has been duly executed as of the day and year first written above. OREGON METALLURGICAL CORPORATION By: /s/ Dennis P. Kelly ________________________________________ Name: Dennis P. Kelly ______________________________________ Title: Vice President - Treasurer _____________________________________ TITANIUM INDUSTRIES, INC. By: /s/ Dennis P. Kelly ________________________________________ Name: Dennis P. Kelly ______________________________________ Title: Assistant Treasurer _____________________________________ BANKAMERICA BUSINESS CREDIT, INC. By: /s/ Margaret E. Lambka ________________________________________ Name: Margaret E. Lambka ______________________________________ Title: Vice President _____________________________________ OREMET.AM3:11911 2/15/96 -4- EX-10 3 EXHIBIT 10.2 AMENDMENT NO. 4 TO LOAN AND SECURITY AGREEMENT WITH OREGON METALLURGICAL CORPORATION AND TITANIUM INDUSTRIES, INC. THIS AMENDMENT NO. 4 TO LOAN AND SECURITY AGREEMENT ("AMENDMENT") is dated as of May 1st, 1996, by and between OREGON METALLURGICAL CORPORATION, an Oregon corporation ("OREMET"), TITANIUM INDUSTRIES, INC., an Oregon corporation formerly know as New TI, Inc. ("TI" and, together with OREMET sometimes hereinafter referred to collectively as the "BORROWERS"), and BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation ("LENDER"), as successor-in-interest to Bank of America Illinois. Capitalized terms used herein but not otherwise defined herein shall have the meanings assigned to such terms in the "Loan Agreement" (as defined below). WITNESSETH: __________ WHEREAS, Borrowers and Lender have entered into that certain Loan and Security Agreement dated as of September 19, 1994, as amended (the "THE LOAN AGREEMENT"), pursuant to which Lender has agreed to make certain loans and other financial accommodations to Borrowers; and WHEREAS, Borrowers and Lender have agreed to further amend the Loan Agreement, on the terms and subject to the conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the respective parties hereto hereby agree as follows: 1. Amendment to Loan Agreement. ___________________________ Effective as of the date hereof, upon satisfaction of the conditions precedent set forth in Section 2 _________ below, and in reliance upon the representations and warranties of Borrowers set forth herein, the Loan Agreement is hereby amended as follows: 1.1 Section 1 of the Loan Agreement _______________________________ is hereby amended by deleting items (10) and (19) under the definition of Eligible Account Receivable and inserting in lieu thereof the following: "(10) the Account Debtor with respect thereto is a resident or citizen of, and is located within, the United States of America, or the Account Debtor with respect thereto is a resident or citizen of a foreign country ("Foreign Account Debtor), provided, however, the Revolving Loans based on Eligible Account Receivables owing by Foreign Account Debtors shall not exceed the lesser of (i) $2,000,000 and (ii) ten percent (10%) of the Revolving Loans based on all Eligible Account Receivables (excluding Eligible Account Receivables owing by Foreign Account Debtors) and, (OREMET.AM4) 5/15/96 -1- provided further, Lender reserves the right to approve the extension of credit to each Foreign Account Debtor, individually. (19) it is due and payable in full within sixty (60) days of the date of the invoice evidencing such Account Receivable and is not unpaid on the date that is ninety (90) days after the date of such invoice; and" 1.2 Section 2.1.3 of the Loan Agreement ___________________________________ is hereby deleted in its entirety and the following language is hereby substituted therefor: "2.1.3 Maximum Outstanding Loans. _________________________ Notwithstanding any other provision of this Agreement, the aggregate outstanding principal balance of the Loans plus Letter of Credit Obligations shall not exceed at any time (A) in the case of OREMET, $27,000,000, (B) in the case of TI $10,000,000, and (C) in the case of both Borrowers in the aggregate, $35,000,000; provided, however, ________, _______ that the foregoing shall not limit the right of Lender to advance Revolving Loans to either of the Borrowers pursuant to the provisions of Sections 2.2(b), 2.2(c), 2.2(e), 3.2(c), 5.5, 5.6, 7.4, 11.3, 11.4, __________________________________________________________________ or any other provision of this Agreement or any Related Agreement that permits Lender to advance Revolving Loans to such Borrower." 1.3 Section 2.15 of the Loan Agreement __________________________________ is hereby amended by deleting the first sentence of Section 2.15 and inserting in lieu thereof the following: "OREMET agrees to pay to Lender a fee equal to one-half of one percent (0.5%) per annum on the daily average amount by which $35,000,000 exceeds the aggregate outstanding principal balance of the Revolving Loans plus the Letter of Credit Obligations, in each case of each of the Borrowers." 1.4 Section 2.1 of Supplement A ___________________________ of the Loan Agreement is hereby deleted and the following language is hereby substituted therefor: "2.1 Revolving Credit Amounts. ________________________ The maximum amount of Revolving Loans which Lender will make available to each Borrower (such amount is hereinafter called, with respect to each Borrower, such Borrower's `REVOLVING CREDIT AMOUNT') is (i) in the case of OREMET, $27,000,000 and (ii) in the case of TI, $10,000,000 (in each case, unless such amount is reduced or increased by Lender in its sole discretion)." 1.5 Section 2.2 of Supplement A ___________________________ of the Loan Agreement is hereby deleted and the following language is hereby substituted therefor: "2.2 Borrowing Bases. _______________ The term "Borrowing Base", as used herein with respect to each Borrower, shall mean: (i) an amount (with respect to each Borrower, such Borrower's "Accounts Receivable Availability") of up to eighty percent (80%) of the net amount (after deduction of such reserves and allowances as Lender deems proper and necessary) of such (OREMET.AM4) 5/15/96 -2- Borrower's Eligible Accounts Receivable, plus ____ (ii) an amount of up to the least of: (A) the sum of: (1) 50% of the net value (as determined by Lender and after deduction of such reserves and allowances as Lender deems proper and necessary) of Eligible Inventory of such Borrower consisting of finished goods; (2) in the case of OREMET only, 50% of the net value (as determined by Lender and after deduction of such reserves and allowances as Lender deems proper and necessary) of Eligible Inventory of such Borrower consisting of green tag scrap, sponge, tic14 alloys and mill products work-in-process; and (3) in the case of OREMET only, 30% of the net value (as determined by Lender and after deduction of such reserves and allowances as Lender deems proper and necessary) of Eligible Inventory of such Borrower consisting of usable remelt scrap; (B) an amount equal to (1) in the case of OREMET, $16,000,000 and (2) in the case of TI, $5,000,000; or (C) an amount (with respect to each Borrower) not exceeding one hundred twenty percent (120%) at any time of such Borrower's Accounts Receivable Availability at such time." 1.6 Section 3.1 of Supplement A ___________________________ of the Loan Agreement is hereby amended by deleting the words, "(i) the Liabilities to Net Worth Ratio is equal to or greater than 1.00 to 1.00" and inserting in lieu thereof the words, "(i) the Liabilities to Net Worth Ratio is equal to or greater than 1.25 to 1.00." 1.7 Section 4.1(a) of Supplement A ______________________________ of the Loan Agreement is hereby deleted and the following language is hereby substituted therefor: "(a) Not permit the Liabilities to Net Worth Ratio of OREMET to exceed 1.25 to 1.00; and" 1.8 Section 4.3 of Supplement A ___________________________ of the Loan Agreement is hereby deleted and the following language is hereby substituted therefor: "4.3 Capital Expenditures. ____________________ Not, and not permit any Subsidiary of such Borrower to, purchase or otherwise acquire (including, without limitation, acquisition by way of Capitalized Lease), or commit to purchase or otherwise acquire, any fixed asset if, after giving effect to such purchase or other acquisition, the aggregate cost of all fixed assets purchased or otherwise acquired (i) by OREMET and (OREMET.AM4) 5/15/96 -3- its Subsidiaries (other than TI and its Subsidiaries) on a consolidated basis in any one fiscal year would exceed $7,000,000 or (ii) by TI and its Subsidiaries on a consolidated basis in any one fiscal year would exceed $500,000." 2. Conditions Precedent. ____________________ This Amendment shall become effective as of the date hereof, upon the Lender's receipt of (a) this Amendment duly executed and delivered, (b) a copy, duly certified by the secretary or assistant secretary of each of the Borrowers of resolutions of the Executive Committee of the Board of Directors or Board of Directors of such Borrower authorizing this Amendment and (c) an Amendment Fee payable by OREMET in the amount of $50,000, which Lender is authorized to charge to OREMET's loan account. 3. Representations, Warranties, and Covenants. __________________________________________ 3.1 Each of the Borrowers hereby represents and warrants that: (a) this Amendment and the Loan Agreement, as amended hereby, constitute the legal, valid, and binding obligations of the respective Borrowers and are enforceable against each of the Borrowers in accordance with their respective terms; (b) before and after giving effect to this Amendment, no Unmatured Event of Default or Event of Default has occurred and is continuing; and (c) the execution and delivery by each of the Borrowers of this Amendment does not require the consent or approval of any Person, other than the Borrower. 3.2 Each of the Borrowers hereby reaffirms all agreements, covenants, representations, and warranties made by such Borrower in the Loan Agreement and each of the Related Agreements to the extent the same are not amended hereby and agrees that all such agreements, covenants, representation and warranties shall be deemed to have been remade as of the date hereof and the effective date of this Amendment. 4. Reference to and Effect on the Loan Agreement and Related _________________________________________________________ Agreements. __________ 4.1 Upon the effectiveness of this Amendment, each reference in the Loan Agreement to "this Agreement," "hereunder," "hereof," "herein," or words of like import, and each reference in each of the Related Agreements to the "Loan Agreement," shall in each case mean and be a reference to the Loan Agreement as amended hereby. 4.2 Except as expressly set forth herein, (i) the execution and delivery of this Amendment shall in no way affect any right, power, or remedy of Lender with respect to any Event of Default nor constitute a waiver of any provision of the Loan Agreement or any of the Related Agreements, and (ii) all terms and conditions of the Loan Agreement, the Related Agreements, and all other documents, instrument, amendments, and agreements executed and/or delivered by either or both of the Borrowers pursuant thereto or in connection therewith shall remain in full force and effect and are hereby ratified and confirmed in all respects. The execution and delivery of this Amendment by Lender shall in no way obligate Lender, at any time hereafter, to consent to any other amendment or (OREMET.AM4) 5/15/96 -4- modification of any term or provision of the Loan Agreement or any of the Related Agreements. 5. Governing Law. _____________ This Amendment shall be governed by and construed in accordance with the internal laws (as opposed to conflicts of law provisions) of the state of Illinois. 6. Headings. ________ Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 7. Counterparts. ____________ This Amendment may be executed by the parties hereto on separate counterparts and each of said counterparts taken together shall be deemed to constitute one and the same instrument. 8. Expenses. ________ The Borrowers shall pay to the Lender all fees and expenses incurred in the negotiation and preparation of this Amendment (including the allocated costs of the Lender's in-house counsel). IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first written above. OREGON METALLURGICAL CORPORATION By: /s/ Dennis P. Kelly ________________________________________ Name: Dennis P. Kelly ______________________________________ Title: Vice President - Finance _____________________________________ TITANIUM INDUSTRIES, INC. By: /s/ Dennis P. Kelly ________________________________________ Name: Dennis P. Kelly ______________________________________ Title: Assistant Treasurer _____________________________________ BANKAMERICA BUSINESS CREDIT, INC. By: ________________________________________ Name: ______________________________________ Title: _____________________________________ (OREMET.AM4) 5/15/96 -5- EX-11 4 EXHIBIT 11.1 OREGON METALLURGICAL CORPORATION EXHIBIT 11.1 Earnings per share computation
Three Months Ended Six Months Ended June 30, June 30, __________________ ________________ (in thousands except per share data) 1996 1995 1996 1995 ____ ____ ____ ____ Net income $ 5,186 $ 453 $ 8,531 $ 988 ======== ======== ======== ======== Weighted average shares outstanding 11,316 10,908 11,187 10,902 Weighted average share equivalents assumed issued from Excess Benefit Plan 76 118 92 128 Weighted average share equivalents assumed issued from exercise of warrants and stock options 93 62 85 36 Weighted average share equivalents assumed issued as part of Employee Compensation Plans 68 99 54 66 ________ ________ ________ ________ Weighted average share and share equivalents outstanding 11,553 11,187 11,418 11,132 ======== ======== ======== ======== Net income (loss) per share $ 0.45 $ 0.04 $ 0.75 $ 0.09 ======== ======== ======== ========
Earnings per share computed on both the primary and fully diluted bases are the same. EX-27 5
5 This schedule contains summary financial information extracted from the Company's report on Form 10-Q for the period ended June 30, 1996, and is qualified in its entirety by reference to such financial statements. 1,000 1 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 1 1,071 0 36,604 (1,907) 81,297 120,202 102,862 (68,350) 156,152 37,489 31,103 0 0 11,417 68,471 156,152 110,069 110,069 85,440 85,440 10,571 0 1,335 12,723 4,192 0 0 0 0 8,531 0.75 0.75
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