<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1999 Commission File number 000-25651
------------- ---------
OGLEBAY NORTON COMPANY
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 34-1888342
- -------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer incorporation or
organization) Identification No.)
1100 Superior Avenue Cleveland, Ohio 44114-2598
- -------------------------------------------------------------------------------
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 216 861-3300
------------
None
- -------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
---- ----
Shares of Common Stock outstanding at July 31, 1999: 4,864,381
------------
<PAGE> 2
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NUMBER
<S> <C>
ITEM 1
Condensed Consolidated Statement of
Operations (Unaudited) - Three Months
Ended June 30, 1999 and 1998 and Six
Months Ended June 30, 1999 and 1998 3
Condensed Consolidated Balance
Sheet (Unaudited) - June 30, 1999 and
December 31, 1998 4
Condensed Consolidated Statement of
Cash Flows (Unaudited) - Six Months
Ended June 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial
Statements 6 - 15
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 16 - 24
ITEM 3
Quantitative and Qualitative Disclosures
About Market Risk 25
PART II. OTHER INFORMATION
- --------------------------
ITEM 4
Submission of Matters to a Vote of Security Holders 25
ITEM 6
Exhibits and Reports on Form 8-K 25
</TABLE>
<PAGE> 3
PART I. ITEM 1. FINANCIAL INFORMATION
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
--------------------------- -----------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES AND OPERATING REVENUES $ 86,656,695 $ 63,726,211 $ 131,744,786 $ 78,034,015
COSTS AND EXPENSES
Cost of goods sold and operating expenses 56,657,041 41,836,165 87,661,090 50,963,885
Depreciation, depletion and amortization 8,068,403 5,426,130 12,984,973 6,387,471
General, administrative and selling expenses 5,636,932 4,833,558 11,857,566 8,599,267
------------- ------------- ------------- -------------
70,362,376 52,095,853 112,503,629 65,950,623
------------- ------------- ------------- -------------
INCOME FROM OPERATIONS 16,294,319 11,630,358 19,241,157 12,083,392
Interest expense (7,982,316) (3,666,629) (15,321,256) (4,447,235)
Other (expense) income - net (87,530) (279,534) 84,455 (272,176)
------------- ------------- ------------- -------------
INCOME BEFORE INCOME TAXES 8,224,473 7,684,195 4,004,356 7,363,981
Income taxes 2,347,000 2,235,000 1,142,000 2,135,000
------------- ------------- ------------- -------------
NET INCOME $ 5,877,473 $ 5,449,195 $ 2,862,356 $ 5,228,981
============= ============= ============= =============
NET INCOME PER SHARE - BASIC $ 1.21 $ 1.14 $ 0.59 $ 1.09
============= ============= ============= =============
NET INCOME PER SHARE - ASSUMING DILUTION $ 1.21 $ 1.13 $ 0.59 $ 1.08
============= ============= ============= =============
DIVIDENDS PER SHARE OF COMMON STOCK $ .20 $ .20 $ .40 $ .40
============= ============= ============= =============
</TABLE>
See notes to condensed consolidated financial statements.
-3-
<PAGE> 4
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
JUNE 30 DECEMBER 31
1999 1998
------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 738,540 $ 1,940,410
Accounts receivable (net of reserve for doubtful accounts
of $1,234,000 in 1999 and $1,194,000 in 1998) 41,264,513 36,624,374
Income tax receivable 1,546,439 3,460,026
Inventories 25,670,947 28,450,091
Deferred income taxes 2,510,745 2,510,745
Prepaid insurance and other expenses 13,027,819 5,069,554
------------- -------------
TOTAL CURRENT ASSETS 84,759,003 78,055,200
PROPERTY AND EQUIPMENT 549,994,469 566,194,939
Less allowances for depreciation,
depletion and amortization 215,718,684 218,752,499
------------- -------------
334,275,785 347,442,440
GOODWILL (net of accumulated amortization
of $3,720,000 in 1999 and $2,370,000 in 1998) 64,829,684 89,262,233
PREPAID PENSION COSTS 33,799,371 31,303,221
NET ASSETS HELD FOR SALE 60,000,000 -0-
OTHER ASSETS 18,303,078 19,560,668
------------- -------------
TOTAL ASSETS $ 595,966,921 $ 565,623,762
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
JUNE 30 DECEMBER 31
1999 1998
------------- -------------
CURRENT LIABILITIES
Current portion of long-term debt $ 2,744,927 $ 9,506,345
Accounts payable 8,177,135 10,332,250
Payrolls and other accrued compensation 4,992,473 10,446,352
Accrued expenses 13,703,092 14,908,743
Accrued interest expense 5,665,593 5,481,665
Income taxes payable -0- 68,741
------------- -------------
TOTAL CURRENT LIABILITIES 35,283,220 50,744,096
LONG-TERM DEBT, less current portion 347,412,150 302,559,729
POSTRETIREMENT BENEFITS OBLIGATIONS 25,661,834 27,181,435
OTHER LONG-TERM LIABILITIES 20,263,055 22,059,322
DEFERRED INCOME TAXES 36,390,420 36,145,768
STOCKHOLDERS' EQUITY
Common stock, par value $1 per share,
authorized 10,000,000 shares;
issued 7,253,332 shares 7,253,332 7,253,332
Additional capital 8,719,042 7,480,572
Retained earnings 147,797,161 146,852,300
Accumulated other comprehensive income (loss) 241,400 (708,549)
------------- -------------
164,010,935 160,877,655
Treasury stock, at cost - 2,413,058
and 2,487,901 shares at respective dates (33,054,693) (33,944,243)
------------- -------------
130,956,242 126,933,412
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 595,966,921 $ 565,623,762
============= =============
</TABLE>
See notes to condensed consolidated financial statements
-4-
<PAGE> 5
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30
-------------------------------
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,862,356 $ 5,228,981
Adjustments to reconcile net income to
net cash used for operating activities:
Depreciation, depletion and amortization 12,984,973 6,387,471
Loss (gain) on disposition of assets 3,357 (44,436)
Deferred income taxes 998,506 152,239
Increase in prepaid pension costs (2,496,150) (2,182,971)
Deferred vessel maintenance costs (5,923,943) (4,817,837)
Increase in accounts receivable (10,190,277) (5,482,472)
Increase in inventories (110,335) (910,426)
Increase (decrease) in accounts payable 1,180,380 (2,176,898)
Decrease in payrolls and other accrued compensation (3,342,945) (2,344,767)
(Decrease) increase in accrued expenses (1,431,286) 1,308,627
Increase (decrease) in accrued interest 183,928 (1,260,341)
Increase in income taxes 710,815 1,019,090
Other operating activities (1,108,385) (232,418)
------------- -------------
NET CASH USED FOR OPERATING ACTIVITIES (5,679,006) (5,356,158)
INVESTING ACTIVITIES
Capital expenditures (16,555,074) (7,391,580)
Acquisition of businesses (13,366,551) (216,134,868)
Other 6,680 7,007,598
------------- -------------
NET CASH USED FOR INVESTING ACTIVITIES (29,914,945) (216,518,850)
FINANCING ACTIVITIES
Additional long-term debt 98,905,000 242,000,000
Repayments of long-term debt (62,086,602) (21,055,637)
Financing costs (746,970) (5,914,488)
Payments of dividends (1,917,494) (1,905,921)
Purchases of treasury stock (319,025) (560,868)
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 33,834,909 212,563,086
Effect of exchange rate changes on cash and cash equivalents 557,172 -0-
------------- -------------
Decrease in cash and cash equivalents (1,201,870) (9,311,922)
CASH AND CASH EQUIVALENTS, JANUARY 1 1,940,410 29,885,922
------------- -------------
CASH AND CASH EQUIVALENTS, JUNE 30 $ 738,540 $ 20,574,000
============= =============
</TABLE>
See notes to condensed consolidated financial statements.
-5-
<PAGE> 6
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q
and, therefore, do not include all information and notes to the
condensed consolidated financial statements necessary for a fair
presentation of financial position, results of operations and cash
flows in conformity with generally accepted accounting principles.
Management of the Company, however, believes that all adjustments
considered necessary for a fair presentation of the results of
operations for such periods have been made. Additionally, certain
amounts in the prior year have been reclassified to conform with the
1999 condensed consolidated financial statement presentation. For
further information, refer to the consolidated financial statements and
notes thereto included in the Company's 1998 Annual Report on Form
10-K.
2. Operating results are not necessarily indicative of the results to be
expected for the year, due to the seasonal nature of certain aspects of
the Company's business. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the Company's condensed consolidated financial statements.
Actual results could differ from those estimates and assumptions.
3. In the second quarter of 1999, the Company announced that it
had reached an agreement in principle to sell the stock of its Global
Stone Detroit Lime Company and Global Stone Ingersoll Ltd. subsidiaries
to Carfin S. A., a Belgian corporation that is a member of the Carmeuse
Group. The transaction was divided with the sale of Global Stone
Detroit Lime Company completed on August 12, 1999. The sale of Global
Stone Ingersoll Ltd., is in the renew process with Canadian Competition
Law Division and is expected to close in the third quarter of 1999. The
agreed upon combined sale price is $62,000,000 and the net proceeds are
expected to be $60,000,000 after working capital adjustments and
closing costs.
In the first quarter of 1999, the Company's Lime and Limestone segment
acquired the assets of the W.S. Frey Company ("Global Stone
Winchester") for $12,088,000 in cash and 50,000 restricted shares of
the Company's common stock, issued from treasury, having a guaranteed
value of $1,500,000. Consideration for the acquisition also included
aggregate consulting, non-competition and royalty payments of
$3,500,000 of which $510,000 was paid at the date of acquisition with
the balance being deferred. The addition of the Global Stone Winchester
operation is not expected to have a material impact on the results of
operations of the Company.
During 1998 the Company completed the following acquisitions ("1998
Acquisitions"):
- Purchased all of the outstanding shares of Colorado Silica
Sands, Inc. ("Colorado Silica") for a total purchase price of
$7,194,000 during the first quarter of 1998.
- Purchased all of the outstanding common shares of Global Stone
Corporation ("Global Stone") for a total purchase price of
$227,600,000, including $54,000,000 of net debt during the
second quarter of 1998.
-6-
<PAGE> 7
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- Purchased substantially all the assets of a limestone
operation in Port Inland, Michigan ("Port Inland"), for a
total purchase price of $35,200,000 during the second quarter
of 1998.
- Purchased substantially all the assets of Filler Products,
Inc. ("Filler Products"), for a total purchase price of
$24,200,000 during the third quarter of 1998.
The acquisitions of Global Stone, Port Inland and Filler Products
created the Company's Lime and Limestone segment. The assets and
results of operations of Colorado Silica are included within the
Company's Industrial Sands segment.
The following unaudited pro forma information presents a summary of
consolidated results of operations for the Company and the above
acquisitions for the three-month and six-month periods ending June 30,
1999 and 1998 as if the acquisitions had occurred on January 1, 1998.
The pro forma adjustments give effect to the acquisitions under the
purchase method of accounting and (i) the amortization of goodwill,
(ii) the amortization of the write-up of mineral reserves and property
and equipment to fair market value, (iii) the interest expense on debt
incurred to fund the acquisitions and (iv) the related income tax
effects. This unaudited pro forma information (i) assumes that the
Company incurred all acquisition related debt as of January 1, 1998,
(ii) includes operating results for periods of time prior to the
Company's ownership and (iii) does not take into consideration any
subsequent expense reductions. Additionally, the unaudited pro forma
information does not reflect any other events that may occur in the
future.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30
--------------------
1999 1998
---- ----
(IN THOUSANDS, EXCEPT
EARNINGS PER SHARE)
<S> <C> <C>
Net sales and operating revenues $ 86,700 $ 86,100
Net Income 5,900 500
Net Income per share - basic 1.21 0.10
Net Income per share - assuming dilution 1.21 0.10
EBITDA 24,500 17,500
EBITDA margin 28% 20%
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
----------------------
1999 1998
---- ----
(IN THOUSANDS, EXCEPT
EARNINGS PER SHARE)
<S> <C> <C>
Net sales and operating revenues $ 133,900 $ 134,900
Net Income (loss) 3,000 (2,800)
Net Income (loss) per share - basic 0.62 (0.58)
Net Income (loss) per share - assuming dilution 0.61 (0.57)
EBITDA 32,800 25,700
EBITDA margin 25% 19%
</TABLE>
-7-
<PAGE> 8
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EBITDA is defined as income before (i) income taxes, (ii)
interest, (iii) depreciation, depletion and amortization.
EBITDA is not a measure of performance under generally
accepted accounting principles ("GAAP"). EBITDA should not be
considered as a substitute for net income or other financial
information prepared in accordance with GAAP or as a measure
of profitability or liquidity. The Company's definition of
EBITDA may not be comparable to that of other companies.)
The unaudited pro forma financial information for the second quarter
and first six months of 1999 and 1998 include actual operating results
for the Company's business segments. Operating results for the segments
are detailed in the operating segment information included in Note 4 to
the Condensed Consolidated Financial Statements. Lime and Limestone's
1998 second quarter operating results were unfavorably affected by
higher general and administrative expenses, including $2,360,000 of
takeover defense costs. In 1999 there are no defense costs and general
and administrative expenses have been reduced by office shutdowns and
cost containments.
On May 15, 1998, the Company sold the assets of its Engineered
Materials metallurgical treatment operations for $14,573,000, which
included a cash payment of $3,650,000 and notes receivable of
$10,923,000. Through June 30, 1999 $5,012,000 has been collected on
this note receivable, leaving $5,911,000 representing these notes
included primarily within other assets on the condensed consolidated
balance sheet. The Engineered Materials segment was classified as a
discontinued operation at December 31, 1997.
4. The following table sets forth the reconciliation of the Company's net
income to its comprehensive income (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1999 1998 1999 1998
---- ---- ---- -----
<S> <C> <C> <C> <C>
Net income $5,877 $5,449 $2,862 $5,229
Other comprehensive income:
Foreign currency
translation adjustments 425 -0- 950 -0-
------ ------ ------ ------
Comprehensive income $6,302 $5,449 $3,812 $5,229
====== ====== ====== ======
</TABLE>
-8-
<PAGE> 9
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The calculation of net income per share follows (in thousands, except
per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income per share-basic:
- ---------------------------
Net income $5,877 $5,449 $2,862 $5,229
====== ====== ====== ======
Average number of
shares outstanding 4,846 4,775 4,818 4,777
====== ====== ====== ======
Net income per share-basic $ 1.21 $ 1.14 $ 0.59 $ 1.09
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income per share-assuming dilution:
Net income $5,877 $5,449 $2,862 $5,229
====== ====== ====== ======
Average number of shares outstanding 4,846 4,775 4,818 4,777
Dilutive effect of stock plans 14 35 14 43
------ ------ ------ ------
Adjusted average number of shares
outstanding 4,860 4,810 4,832 4,820
====== ====== ====== ======
Net income per share-
assuming dilution $ 1.21 $ 1.13 $ 0.59 $ 1.08
====== ====== ====== ======
</TABLE>
-9-
<PAGE> 10
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company supplies essential natural resources to industrial and
commercial customers. Through its three operating segments --- Lime and
Limestone, Marine Services and Industrial Sands - the Company serves
customers, through a direct sales force, in a wide range of industries,
including steel, construction, oil, ceramic, chemical, glass and
electric utilities.
The following table sets forth the operating segment information as of
and for the three months ended June 30, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
LIME AND MARINE INDUSTRIAL TOTAL CORPORATE AND
LIMESTONE SERVICES SANDS SEGMENTS OTHER CONSOLIDATED
--------- -------- ----- -------- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
1999
Identifiable assets $ 224,996 $ 146,203 $ 56,082 $ 427,281 $ 168,686 $ 595,967
Depreciation, depletion and
amortization expense 4,648 2,223 1,156 8,027 41 8,068
Capital expenditures 6,045 2,357 948 9,350 79 9,429
Net sales and
operating revenues $ 43,998 $ 29,870 $ 12,789 $ 86,657 $ 86,657
Income (loss)
from operations $ 7,549 $ 7,126 $ 2,522 $ 17,197 $ (903) $ 16,294
Interest expense (7,982) (7,982)
Other expense- net (88) (88)
--------- --------- --------- --------- --------- ---------
Income (loss) before
income taxes $ 7,549 $ 7,126 $ 2,522 $ 17,197 $ (8,973) $ 8,224
========= ========= ========= ========= ========= =========
1998
Identifiable assets $ 213,011 $ 147,707 $ 53,811 $ 414,529 $ 148,914 $ 563,443
Depreciation,
depletion and
amortization expense 2,316 2,171 908 5,395 31 5,426
Capital expenditures 1,277 1,207 1,459 3,943 2 3,945
Net sales and
operating revenues $ 19,141 $ 31,608 $ 12,977 $ 63,726 $ 63,726
Income (loss)
from operations $ 2,591 $ 7,719 $ 2,622 $ 12,932 $ (1,302) $ 11,630
Interest expense (3,667) (3,667)
Other (expense) income- net (3) 33 30 (309) (279)
--------- --------- --------- --------- --------- ---------
Income (loss) before
income taxes $ 2,588 $ 7,719 $ 2,655 $ 12,962 $ (5,278) $ 7,684
========= ========= ========= ========= ========= =========
</TABLE>
-10-
<PAGE> 11
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table sets forth the operating segment information as of
and for the six months ended June 30, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
LIME AND MARINE INDUSTRIAL TOTAL CORPORATE AND
LIMESTONE SERVICES SANDS SEGMENTS OTHER CONSOLIDATED
--------- -------- ---------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1999
Identifiable assets $ 224,996 $ 146,203 $ 56,082 $ 427,281 $ 168,686 $ 595,967
Depreciation, depletion and
amortization expense 8,353 2,244 2,310 12,907 78 12,985
Capital expenditures 10,810 3,855 1,732 16,397 158 16,555
Net sales and
operating revenues $ 76,038 $ 32,447 $ 23,260 $ 131,745 $ 131,745
Income (loss)
from operations $ 10,349 $ 7,150 $ 3,903 $ 21,402 $ (2,161) $ 19,241
Interest expense (15,321) (15,321)
Other income- net 22 22 62 84
---------- ----------- ----------- ---------- --------- ---------
Income (loss) before
income taxes $ 10,349 $ 7,150 $ 3,925 $ 21,424 $ (17,420) $ 4,004
========== ========= =========== ========== ========== ===========
1998
Identifiable assets $213,011 $ 147,707 $ 53,811 $ 414,529 $ 148,914 $ 563,443
Depreciation,
depletion and
amortization expense 2,316 2,185 1,824 6,325 62 6,387
Capital expenditures 1,277 3,538 2,559 7,374 18 7,392
Net sales and
operating revenues $ 19,141 $ 34,716 $ 24,177 $ 78,034 $ 78,034
Income (loss)
from operations $ 2,591 $ 8,263 $ 4,353 $ 15,207 $ (3,124) $ 12,083
Interest expense (4,447) (4,447)
Other (expense) income- net (3) 48 45 (317) (272)
---------- ----------- ----------- ---------- --------- ---------
Income (loss) before
income taxes $ 2,588 $ 8,263 $ 4,401 $ 15,252 $ (7,888) $ 7,364
========== =========== =========== ========== ========== =========
</TABLE>
-11-
<PAGE> 12
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. The Company's domestic subsidiaries, all of which are directly or
indirectly wholly owned, are the only guarantors of the Company's
Senior Subordinated Notes. The guarantees are full, unconditional and
joint and several.
One of the Company's subsidiaries is not a guarantor of the Senior
Subordinated Notes. Separate financial statements of this non-guarantor
subsidiary is not presented as management has determined that it would
not be material to investors. This subsidiary was acquired through the
Global Stone acquisition on May 22, 1998. Summarized consolidating
financial information for the Company and the combined guarantor
subsidiaries and the non-guarantor subsidiary as of and for the three
months and six months ended June 30, 1999 is presented below.
-12-
<PAGE> 13
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
INCOME STATEMENT DATA
(in thousands) THREE MONTHS ENDED JUNE 30, 1999
------------------------------------------------------------
PARENT
COMPANY AND
COMBINED
GUARANTOR NON -GUARANTOR TOTAL
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMPANY
--------------- ------------- ---------------- ---------------
<S> <C> <C> <C>
NET SALES AND OPERATING REVENUES $ 82,553 $ 4,104 $ 86,657
COSTS AND EXPENSES
Cost of goods sold and operating expenses 54,010 2,647 56,657
Depreciation, depletion and amortization 7,635 434 8,069
General, administrative and selling expenses 5,518 119 $ 5,637
--------- --------- --------------- ---------
INCOME FROM OPERATIONS 15,390 904 16,294
Interest expense (7,982) (29) 29 (7,982)
Other income- net (59) (29) (88)
--------- --------- --------------- ---------
INCOME BEFORE INCOME TAXES 7,349 875 8,224
Income taxes (benefit) 2,422 (75) 2,347
--------- --------- --------------- ---------
NET INCOME $ 4,927 $ 950 $ 0 $ 5,877
========= ========= =============== =========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999
------------------------------------------------------------
PARENT
COMPANY AND
COMBINED
GUARANTOR NON -GUARANTOR TOTAL
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMPANY
--------------- ------------- ---------------- ---------------
<S> <C> <C> <C> <C>
NET SALES AND OPERATING REVENUES $ 123,773 $ 7,972 $ 131,745
COSTS AND EXPENSES
Cost of goods sold and operating expenses 82,168 5,493 87,661
Depreciation, depletion and amortization 12,179 806 12,985
General, administrative and selling expenses 11,632 231 $ (5) 11,858
--------- --------- --------------- ---------
INCOME FROM OPERATIONS 17,794 1,442 5 19,241
Interest expense (15,321) (60) 60 (15,321)
Other income- net 149 (65) 84
--------- --------- --------------- ---------
INCOME BEFORE INCOME TAXES 2,622 1,382 4,004
Income taxes (benefit) 1,217 (75) 1,142
--------- --------- --------------- ---------
NET INCOME $ 1,405 $ 1,457 $ 0 $ 2,862
========= ========= =============== =========
</TABLE>
13
<PAGE> 14
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
BALANCE SHEET DATA
(in thousands) JUNE 30, 1999
-----------------------------------------------------------------------
PARENT
COMPANY AND
COMBINED
GUARANTOR NON -GUARANTOR TOTAL
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMPANY
----------------- ------------------ --------------------------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 739 $ $ 739
Accounts receivable, net 41,264 41,264
Income taxes receivable 1,546 1,546
Inventories 25,671 25,671
Deferred income taxes 2,511 2,511
Prepaid insurance and other expenses 13,028 13,028
Due from affiliates (3,012) $ 3,012
----------------- ------------------ -------------- ----------------
TOTAL CURRENT ASSETS 84,759 (3,012) 3,012 84,759
PROPERTY AND EQUIPMENT, NET 334,276 334,276
GOODWILL, NET 64,830 64,830
PREPAID PENSION COSTS 33,799 33,799
NET ASSETS HELD FOR SALE 33,889 26,111 60,000
OTHER ASSETS 18,303 18,303
INVESTMENT IN SUBSIDIARIES 23,099 (23,099)
----------------- ------------------ -------------- ----------------
TOTAL ASSETS $ 592,955 $ 23,099 $ (20,087) $ 595,967
================= ================== ============== ================
Current Liabilities:
Current portion of long-term debt $ 2,745 $ $ 2,745
Accounts payable 8,177 8,177
Payrolls and other accrued compensation 4,992 4,992
Accrued expenses 13,703 13,703
Accrued interest expense 5,666 5,666
----------------- ------------------ -------------- ----------------
TOTAL CURRENT LIABILITIES 35,283 35,283
LONG-TERM DEBT, LESS CURRENT PORTION 347,412 347,412
POSTRETIREMENT BENEFIT OBLIGATIONS 25,662 25,662
OTHER LONG-TERM LIABILITIES 20,263 20,263
DEFERRED INCOME TAXES 36,391 36,391
STOCKHOLDERS' EQUITY 127,944 23,099 $ (20,087) 130,956
----------------- ------------------ -------------- ----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 592,955 $ 23,099 $ (20,087) $ 595,967
================= ================== ============== ================
</TABLE>
14
<PAGE> 15
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
CASH FLOW DATA
(in thousands) SIX MONTHS ENDED JUNE 30, 1999
-----------------------------------------------------------------------
PARENT
COMPANY AND
COMBINED
GUARANTOR NON -GUARANTOR TOTAL
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMPANY
----------------- ------------------ -------------- ----------------
<S> <C> <C> <C> <C>
NET CASH (USED FOR) PROVIDED BY
OPERATING ACTIVITIES $ (5,641) $ 1,379 $ (1,417) $ (5,679)
INVESTING ACTIVITIES:
Capital expenditures (14,241) (2,314) (16,555)
Acquisition of businesses (13,367) (13,367)
All other investing activities 7 7
----------------- ------------------ -------------- ----------------
NET CASH USED FOR INVESTING ACTIVITIES (27,601) (2,314) (29,915)
FINANCING ACTIVITIES
Repayments on long-term debt (62,047) (40) (62,087)
Additional long-term debt 98,905 98,905
All other financing activities (2,982) (2,982)
----------------- ------------------ -------------- ----------------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITES 33,876 (40) 33,836
Effect of exchange rate changes on cash 557 557
----------------- ------------------ -------------- ----------------
Increase (decrease) in cash and cash equivalents 634 (418) (1,417) (1,201)
CASH AND CASH EQUIVALENTS, JANUARY 1, 1999 1,522 418 1,940
----------------- ------------------ -------------- ----------------
CASH AND CASH EQUIVALENTS, JUNE 30, 1999 $ 2,156 $ 0 $ (1,417) $ 739
================= ================== ============== ================
</TABLE>
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results
of Operations may contain statements concerning certain trends and other
forward-looking information, within the meaning of the federal securities laws.
Such forward-looking statements are subject to uncertainties and factors
relating to the Company's operations and business environment, all of which are
difficult to predict and many of which are beyond the control of the Company.
The Company believes that the following factors, among others, could affect its
future performance and cause actual results to differ materially from those
expressed or implied by forward-looking statements made by or on behalf of the
Company: (1) unfavorable weather conditions; (2) fluctuations in oil prices; (3)
a decline in steel production; (4) changes in the demand for the Company's
products or services due to changes in technology; (5) Great Lakes and
Mid-Atlantic construction activity; (6) a slowdown in the California economy and
population growth rates in the Southwestern United States; (7) labor unrest; (8)
the loss or bankruptcy of major customers; (9) year 2000 software conversion
failures of vendors, suppliers and customers; and (10) changes in environmental
laws.
Due to the seasonal nature of certain aspects of the Company's
business, the operating results and cash flows for the first six months of the
year are not necessarily indicative of the results to be expected for the full
year.
FINANCIAL CONDITION
-------------------
In the first six months of 1999, the Company's Lime and Limestone
segment acquired the assets of the W.S. Frey Company ("Global Stone Winchester")
for $12,088,000 in cash and 50,000 restricted shares of the Company's common
stock, issued from treasury, having a guaranteed value of $1,500,000 at the date
of acquisition. Consideration for the acquisition also included aggregate
consulting, non-competition and royalty payments of $3,500,000 of which $510,000
was paid at the date of acquisition and the balance is deferred. In the same
period of 1998, the Company purchased all of the outstanding common shares of
Global Stone Corporation ("Global Stone") for a total purchase price of
$227,600,000, including $54,000,000 of net debt, purchased all the assets of a
limestone operation in Port Inland, Michigan ("Port Inland"), for a total
purchase price of $35,200,000, and purchased all the outstanding shares of
Colorado Silica Sand, Inc. ("Colorado Silica") for $7,194,000, of which
$4,523,000 was paid in cash with the remainder becoming a note payable.
The Company's operating activities used cash of $5,679,000 in the
first half of 1999 compared with $5,356,000 used in the same period in 1998. The
increase in operating cash used resulted primarily from an increase in interest
paid in the first half of 1999 compared to the same period in 1998. The Company
made interest payments of $13,713,000 and $2,548,000 in the first six months of
1999 and 1998, respectively. Cash provided by the collection of Marine
Services' accounts receivable declined $5,182,000 in the first six months of
1999. The decline was principally the result of an extended 1997 sailing season
experienced by the fleet due to favorable weather conditions and strong
customer demand at the end of 1997 compared with the end of 1998, as well as
slightly reduced operating revenues in the first half of 1999 compared with
1998. These reductions in operating cash flow were substantially offset by the
$32,311,000 in income produced before interest expense, taxes, and
depreciation, depletion and amortization ("EBITDA") in the first six months of
1999 compared with $18,199,000 in the first six months of 1998. The operating
results of the Company's business segments are discussed in more detail under
"RESULTS OF OPERATIONS".
-16-
<PAGE> 17
FINANCIAL CONDITION (CONTINUED)
-------------------------------
Capital expenditures totaled $16,555,000 in the first six months of
1999 compared with $7,392,000 for the same period in 1998. Expenditures in the
first half of 1999 and 1998 included Marine Services vessel inspection costs of
$577,000 and $2,279,000, respectively. The increase in expenditures in 1999
relates to businesses acquired after the first quarter of 1998, as capital
expenditures in the Lime and Limestone business segment totaled $10,810,000 in
the first half of 1999 compared with $1,277,000 in 1998. With the acquisition of
Global Stone Winchester, capital expenditures for 1999 are now expected to
approximate $28,000,000.
In the first six months of 1998 the Company had proceeds of $7,008,000
from the disposition of assets, of which $6,934,000 related to the sale of the
Engineered Materials business. Proceeds from the disposition of assets in the
first half of 1999 were minimal.
In the first six months of 1999 the Company's Senior Credit Facility
was increased from $215,000,000 to $232,000,000, and the Company borrowed an
additional $36,818,000, net of long-term debt payments. The additional debt was
used to fund the Global Stone Winchester acquisition as well as working capital
requirements. The interest rate on the Senior Credit Facility, which
approximated 7.7% at June 30, 1999, is based on LIBOR interest rates, plus an
applicable margin. The Company borrowed $242,000,000 ($142,000,000 on the Senior
Credit Facility and $100,000,000 under the Senior Subordinated Facility) in the
first half of 1998 to finance the Global Stone and Port Inland acquisitions, and
to pay off a $19,250,000 Term Loan.
The Company's notes under an interim Senior Subordinated Facility were
exchanged with the lender on February 1, 1999 for Senior Subordinated Notes. The
Senior Subordinated Notes, privately placed with several purchasers, mature in
February 2009 and have a fixed interest rate of 10%. The Company paid $747,000
of financing costs in the first six months of 1999 related to the exchange and
private placement of these notes. For the initial placement of the Senior
Subordinated Notes and Senior Credit Facility, the Company paid $5,914,000 of
financing costs during the first six months of 1998.
The Company declared a dividend of $0.40 per share in both the first
six months of 1999 and 1998. Dividends paid were $1,917,000 in the first half
of 1999 compared with $1,906,000 for the same six months in 1998. The Company
purchased, and placed in treasury, 13,723 shares of its common stock for
$319,000 in the first six months of 1999 compared with 14,666 shares of its
common stock for $561,000 in the first half of 1998.
Anticipated cash flows from operations and current financial resources
are expected to meet the Company's needs during the remainder of 1999. All
financing alternatives are under constant review to determine their ability to
provide sufficient funding at the lowest possible cost.
-17-
<PAGE> 18
RESULTS OF OPERATIONS
---------------------
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO
SIX MONTHS ENDED JUNE 30, 1998
The Company's net sales and operating revenues of $131,745,000 in the
first six months of 1999 increased 69% compared to net sales and operating
revenues of $78,034,000 for the same period in 1998. Income from operations for
the first six months of 1999 increased 59% to $19,241,000 compared with
$12,083,000 for the same period in 1998. The Company reported net income of
$2,862,000 ($0.59 per share - assuming dilution) for the first six months of
1999, compared with net income of $5,229,000 ($1.08 per share - assuming
dilution) for the same period in 1998. The increases in net sales and operating
revenues and income from operations can be primarily attributed to the
acquisitions completed after the first quarter of 1998. The decrease in net
income is the result of interest expense on borrowings to fund the acquisitions.
Interest expense increased to $15,321,000 in the first half of 1999, compared
with $4,447,000 for the same period in the prior year.
Operating results of the Company's business segments for the first six
months ended June 30, 1999 and 1998 are discussed below.
NET SALES AND OPERATING REVENUES
Lime and Limestone: Net sales for the Company's Lime and Limestone
segment totaled $76,038,000 for the first six months of 1999 compared with
$19,141,000 in the first six months of 1998. The increase in sales is the
result of the 1998 Global Stone, Port Island, Filler Products, Inc. ("Filler
Products"), and W.S Frey Company ("Global Stone Winchester") acquisitions
("Lime and Limestone Acquisitions.") The largest portion of the Lime and
Limestone segment, Global Stone, was acquired in late May, 1998. Port Inland
was also acquired in the second quarter of 1998. Both the Winchester and Filler
Products acquisitions were completed subsequent to June 30, 1998.
Marine Services: Operating revenues for the Company's Marine Services
segment totaled $32,447,000 for the first six months of 1999, a 7% decline
compared with $34,716,000 for the first half of 1998. The decline in operating
revenues resulted primarily from reduced tonnage shipped. The 1998 sailing
season opened under favorable weather conditions on the Great Lakes providing an
opportunity for an early start to the season. Tonnage hauled in the first
quarter of 1999 was 835,000 tons compared with 1,084,000 tons in the first
quarter of 1998. Other factors reducing 1999 first half revenues included lower
water levels and fewer second quarter sailing days.
Industrial Sands: Net sales for the Company's Industrial Sands segment
decreased by $917,000 or 4%, to $23,260,000 for the first six months of 1999,
compared with $24,177,000 for the same period of 1998. The decline in net sales
is attributable to decreased shipments to the oilfield services industry,
principally due to continued softness in oil prices and related oilfield demand.
Accordingly, the demand declined for sands provided to the oilfield by the
Brady, Texas, Bakersfield, California and Riverside, California operations. The
overall decrease in net sales and tonnage was partially offset by the strong
performance of the segment's non-oilfield operations in Orange County,
California resulting from the strong construction market in the Southwestern
United States and Colorado Springs, Colorado, acquired in March 1998.
-18-
<PAGE> 19
RESULTS OF OPERATIONS (CONTINUED)
---------------------------------
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO
SIX MONTHS ENDED JUNE 30, 1998
COST OF GOODS SOLD AND OPERATING EXPENSES
Lime and Limestone: Cost of goods sold for the Lime and Limestone
segment totaled $51,615,000 for the first six months of 1999 compared with
$12,666,000 in the first six months of 1998. The increase in costs is
attributable to the timing of the Lime and Limestone Acquisitions. Cost of
goods sold as a percentage of net sales was comparable at 68% for the first six
months of 1999 and 66% in the same period of 1998.
Marine Services: Operating expenses for the Marine Services segment
totaled $21,419,000 for the six months ended June 30, 1999, compared with
$22,694,000 for the same period in 1998, a decrease of $1,275,000, or 6%.
Operating expenses as a percentage of operating revenues increased to 66% in the
first six months of 1999 compared with 65% during the first six months of 1998.
The slight increase in operating expenses as a percentage of operating revenues
was because of lower revenues from lower water levels limiting tonnage per
vessel, and softer trade patterns partially offset by better pricing on iron ore
deliveries.
Industrial Sands: As a result of the overall decrease in volumes, cost
of goods sold for the Industrial Sands segment decreased $917,000, or 6%, to
$14,627,000 for the first half of 1999 from $15,544,000 for the same period in
1998. Cost of goods sold as a percentage of net sales were comparable at 63% for
the first half of 1999 compared with 64% for the same period in 1998.
DEPRECIATION, DEPLETION AND AMORTIZATION
Primarily as a result of the Lime and Limestone Acquisitions,
depreciation, depletion and amortization expense increased to a level of
$12,985,000 for the first six months of 1999 compared with $6,387,000 for the
same period of 1998. Expansion at the Industrial Sands' non-oilfield Orange
County, California facility also contributed to the increase.
GENERAL, ADMINISTRATIVE AND SELLING EXPENSES
As a result of the 1998 Acquisitions, total general, administrative and
selling expenses increased $3,259,000 to $11,858,000 for first six months of
1999 compared with $8,599,000 for the same period of 1998. The percentage of
general, administrative and selling expenses to total net sales and operating
revenues declined to 9% in the first six months of 1999 compared with 11% in the
first six months of 1998. In addition, corporate general and administrative
expenses declined in the first half of 1999 compared with the first half of 1998
by $903,000. The reduction in corporate general and administrative expense was
primarily the result of a decrease in the Company's net cost for its defined
benefit pension plans in the first half of 1999 compared with 1998.
-19-
<PAGE> 20
RESULTS OF OPERATIONS (CONTINUED)
--------------------------------
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO
SIX MONTHS ENDED JUNE 30, 1998
INCOME FROM OPERATIONS
Lime and Limestone: The Lime and Limestone segment contributed
$10,349,000 to income from operations for the first six months of 1999 compared
with $2,591,000 in the first six months of 1998. As previously discussed, the
increase in operating income is the direct result of the timing of the Lime and
Limestone Acquisitions.
Marine Services: The Company's Marine Services segment had income from
operations of $7,150,000 for the first half of 1999 compared with operating
income of $8,263,000 for the first half of 1998. The reduction in operating
income was the result of less tonnage as previously described, lower water
levels reducing the efficiency of the vessels, different trade patterns, all
partially offset by favorable pricing.
Industrial Sands: Income from operations for the Industrial Sands
segment declined $450,000 to $3,903,000 for the first six months of 1999
compared with $4,353,000 for the same period of 1998. The decline in income
from operations was principally the result of reduced oilfield demand for sand
supplied by the Brady, Texas, Bakersfield, California and Riverside, California
operations. This reduction in operating income was partially offset by the
increased demand at the non-oilfield operations in Orange County, California
resulting from the strong construction market in the southwestern United States
and Colorado Springs, Colorado acquired in March, 1998.
Corporate and Other: Certain cost of goods sold and general and
administrative expenses are not allocated to the business segments. Accordingly,
Corporate and Other recognized a loss of $2,161,000 in the first six months of
1999, which was $963,000 less than the $3,124,000 loss for the first six months
of 1998. The reduction in loss was primarily the result of a decrease in the
Company's net cost for its defined benefit pension plans.
OTHER
Interest expense for the first half of 1999 increased $10,874,000 to
$15,321,000 in the first six months of 1999 compared with $4,447,000 for the
same period of 1998. The increase in interest expense is principally the result
of increased debt levels and the amortization of financing costs related to the
Lime and Limestone acquisitions.
-20-
<PAGE> 21
RESULTS OF OPERATIONS (CONTINUED)
---------------------------------
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO
THREE MONTHS ENDED JUNE 30, 1998
The Company's net sales and operating revenues of $86,657,000 in the
second quarter of 1999 increased 36% when compared with net sales and operating
revenues of $63,726,000 for the same quarter in 1998. Income from operations for
the second quarter of 1999 was $16,294,000 compared with $11,630,000 for the
same quarter in 1998. The Company reported net income of $5,877,000 ($1.21 per
share - assuming dilution) for the three months ended June 30,1999, compared
with net income of $5,449,000 ($1.13 per share - assuming dilution) for the same
period in 1998. The increases in net sales and operating revenues and income
from operations can be primarily attributed to the acquisitions completed during
the second quarter of 1998. The increase in net income is the result of
increased operating income, partially offset by interest expense on borrowings
to fund the acquisitions. Interest expense increased to $7,982,000 in the second
quarter of 1999, compared with $3,667,000 for the same quarter in the prior
year.
Operating results of the Company's business segments for the three
months ended June 30, 1999 and 1998 are discussed below.
NET SALES AND OPERATING REVENUES
Lime and Limestone: Net sales for the Company's Lime and Limestone
segment totaled $43,998,000 for the three months ended June 30, 1999 compared
with $19,141,000 in the same quarter of 1998. The increase in sales is the
result of the Lime and Limestone Acquisitions. The largest portion of the Lime
and Limestone segment, Global Stone, was acquired in late May 1998. Port Inland
was also acquired in the second quarter of 1998. Both the Winchester and Filler
Products acquisitions were completed subsequent to June 30, 1998.
Marine Services: Operating revenues for the Company's Marine Services
segment decreased by $1,738,000 or 6%, to $29,870,000 for the second quarter of
1999 from $31,608,000 for the second quarter of 1998. The reduction in operating
revenues was primarily from fewer sailing days than 1998 and lower water levels,
which reduced the tonnage per vessel trip.
Industrial Sands: Net sales for the Company's Industrial Sands segment
totaled $12,789,000 in the three months ended June 30, 1999, a slight decrease
from $12,977,000 for the same quarter of 1998. The slight decline in net sales
is attributable to decreased shipments to the oilfield services industry,
principally due to continued decline in oil prices and related oilfield demand.
Accordingly, the demand for sands provided by the Brady, Texas, Bakersfield,
California and Riverside, California operations. The overall decrease in net
sales and tonnage was substantially offset by the strong performance of the
segment's non-oilfield Orange County, California operations resulting from the
strong construction market in the southwestern United States.
-21-
<PAGE> 22
RESULTS OF OPERATIONS (CONTINUED)
---------------------------------
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO
THREE MONTHS ENDED JUNE 30, 1998
COST OF GOODS SOLD AND OPERATING EXPENSES
Lime and Limestone: Cost of goods sold for the Lime and Limestone
segment totaled $29,122,000 for the three months ended June 30, 1999 compared
with $12,666,000 in the three months ended June 30, 1998. The increase is
attributable to the timing of the Lime and Limestone Acquisitions. Cost of
goods sold as a percentage of net sales was 66% in both the second quarter of
1999 and 1998.
Marine Services: Operating expenses for the Marine Services segment
totaled $19,740,000 for the three months ended June 30, 1999, compared with
$20,936,000 for the same period in 1998, a decrease of $1,196,000, or 6%.
Operating expenses as a percentage of operating revenues was 66% in the second
quarter of 1999 and 1998.
Industrial Sands: As a result of the overall decrease in volumes, cost
of goods sold for the Industrial Sands segment decreased $409,000, or 5%, to
$7,795,000 for the first quarter of 1999 from $8,204,000 for the same period in
1998. Cost of goods sold as a percentage of net sales were comparable at 61% for
the second quarter of 1999 compared with 63% for the same quarter of 1998.
DEPRECIATION, DEPLETION AND AMORTIZATION
Primarily as a result of the Lime and Limestone Acquisitions,
depreciation, depletion and amortization expense increased to a level of
$8,068,000 for the second quarter of 1999 compared with $5,426,000 for the same
period of 1998. Equipment Expansion at the Industrial Sands' non-oilfield
Orange County, California facility also contributed to the increase.
GENERAL, ADMINISTRATIVE AND SELLING EXPENSES
As a result of the 1998 Lime and Limestone Acquisitions, total
general, administrative and selling expenses increased $803,000 to $5,637,000
for second quarter of 1999 compared with $4,834,000 for the same period of
1998. As a result of the above Lime and Limestone Acquisitions, the percentage
of general, administrative and selling expenses to total net sales and
operating revenues declined to 7% in the second quarter of 1999 compared with
8% in the second quarter of 1998. Also, corporate general and administrative
expenses declined for the three months ended June 30, 1999 compared with the
same period of 1998 by $368,000 despite the acquisitions.
-22-
<PAGE> 23
RESULTS OF OPERATIONS (CONTINUED)
---------------------------------
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO
THREE MONTHS ENDED JUNE 30, 1998
INCOME FROM OPERATIONS
Lime and Limestone: The Lime and Limestone segment contributed
$7,549,000 to income from operations for the three months ended June 30, 1999
compared with $2,591,000 in the same period in 1998. As previously discussed,
the increase in operating income is the direct result of the timing of
acquisitions.
Marine Services: The Company's Marine Services segment had income from
operations of $7,126,000 for the second quarter of 1999 compared with operating
income of $7,719,000 for the same quarter of 1998. The reduction in operating
income was the result of the lower tonnage and decreased efficiency from lower
water levels, fewer sailing days and different trading patterns than in the same
period of 1998.
Industrial Sands: Income from operations for the Industrial Sands
segment was $2,522,000 for the second quarter of 1999 compared with $2,622,000
for the same period of 1998. The slight decline in income from operations was
principally the result of reduced oilfield demand for sand supplied by the
Brady, Texas and Bakersfield, California operations. This reduction in operating
income was partially offset by increased demand at the non-oilfield Orange
County, California operations resulting from the strong construction market in
the southwestern United States.
Corporate and Other: Certain cost of goods sold and general and
administrative expenses are not allocated to the business segments. Accordingly,
Corporate and Other recognized a loss of $903,000 in the second quarter of 1999,
which was $399,000 less than the $1,302,000 loss for the three months ended
June 30, 1998. The reduction in loss was primarily the result of a decrease in
the Company's net cost for its defined benefit pension plans.
OTHER
Interest expense for the second quarter of 1999 increased to $7,982,000
in the second quarter of 1999 compared with $3,667,000 for the same period of
1998. The increase in interest expense is principally the result of increased
debt levels and the amortization of financing costs related to the previously
discussed acquisitions.
YEAR 2000 COMPLIANCE
The Company continues to address the impact of the Year 2000 issue on
its business. This issue affects computer systems that have date-sensitive
programs that may not properly recognize the year 2000. Specifically, with
respect to the Company, this issue affects not only the computer software and
hardware but also machines and equipment used in production that contain
embedded computer chips.
-23-
<PAGE> 24
YEAR 2000 COMPLIANCE (CONTINUED)
The Company has reviewed and assessed its information system hardware,
business system software, production system hardware and other systems and
technology used in its internal business operations and its production. Based on
this review and assessment, the Company believes that the majority of its
internal systems are Year 2000 compliant and that any non-compliance will not
have a material adverse effect on the Company. The Company expects to complete
its internal Year 2000 remediation efforts by September 1, 1999 with the
implementation of a new order processing system for both the Industrial Sands
and Lime and Limestone business segments.
As part of its Year 2000 program, the Company has also made efforts to
determine and assess the Year 2000 compliance status of third parties with which
it does business. During 1997, the Company sent a detailed questionnaire to its
customers, suppliers, financial institutions and others to obtain information
relating to the status of such third parties with respect to Year 2000 issues.
Of the total questionnaires sent out, 90% of these third parties have returned
their questionnaires to the Company. The Company is following up on the balance
of the questionnaires not returned. Based upon its review of the returned
questionnaires, the Company does not believe that it will experience material
disruption of its operations as a result of third parties' Year 2000
noncompliance. In addition, since sending the questionnaires, the Company has
maintained ongoing correspondence with its suppliers regarding Year 2000 issues
and placed particular emphasis on determining the Year 2000 readiness of its
critical suppliers.
Due to the uncertainties associated with Year 2000 problems, the
Company has developed a contingency plan to use manual entry in its accounting
and order entry system in the event that its business or operations are
disrupted as of January 1, 2000.
The Company currently expects to incur total expenditures approximating
$250,000 in connection with its Year 2000 remediation efforts. To date, the
Company has incurred approximately $170,000 in expenses relating to its Year
2000 issues and expects to incur an additional $80,000 during the remainder of
1999. The Company believes that the cost of its remediation will not have a
material impact on the Company's consolidated results of operations or financial
condition.
The date which the Company believes it will complete its Year 2000
compliance efforts and the expenses related to the Company's Year 2000
compliance efforts are management's best estimates, which are based on
assumptions of future events, including the availability of certain resources,
third party modification plans and other factors. There can be no assurances
that these results and estimates will be achieved, and the actual results could
materially differ from those anticipated. A specific factor that might cause
such material differences is the ability to locate and correct all relevant
computer codes. In addition, there can be no assurances that the systems or
products of third parties on which the Company relies will be timely converted
or that a failure by a third party, or a conversion that is incompatible with
the Company's systems, would not have a material adverse effect on the Company.
-24-
<PAGE> 25
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information regarding the Company's financial instruments that are
sensitive to changes in interest rates was disclosed in the Form 10-K filed by
the Company on March 29, 1999. The information disclosed has not changed
materially in the interim period since December 31, 1998.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Previously disclosed in Form 10-Q filed on May 17, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
----------------------------------------------------- ----------------------------------------------------
(4)(a) Supplemental Indenture dated March 5, 1999 Incorporated by reference as Exhibit 4.8 from Form
S-4 filed on April 14, 1999
----------------------------------------------------- ----------------------------------------------------
(4)(b) Supplemental Indenture dated April 12, 1999 Incorporated by reference as Exhibit 4.10 from
Form S-4 filed on April 14, 1999
----------------------------------------------------- ----------------------------------------------------
(10) Amendment No. 4 of the Credit Agreement dated Filed herewith as Exhibit 10
May 15, 1998, as previously amended between Oglebay
Norton Company, Various Financial Institutions and
KeyBank National Association, as Agent
----------------------------------------------------- ----------------------------------------------------
</TABLE>
(b) Reports on Form 8-K
On June 15, 1999, the Company filed a report on Form 8-K with respect to
its announced intent to sell the stock of two wholly owned subsidiaries.
-25-
<PAGE> 26
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OGLEBAY NORTON COMPANY
DATE: August 16, 1999 By: /s/ DAVID H. KELSEY
------------------------------
David H. Kelsey
Vice President and
Chief Financial Officer
On behalf of the Registrant
and as Principal Financial
and Accounting Officer
-26-
<PAGE> 1
FOURTH AMENDMENT AGREEMENT
THIS FOURTH AMENDMENT AGREEMENT ("Amendment") is made effective as of
the 12th day of March, 1999, by and among OGLEBAY NORTON COMPANY, formerly known
as Oglebay Norton Holding Company, a Delaware corporation ("Borrower"), as
assignee of ON Marine Services Company, formerly known as Oglebay Norton Company
("Original Borrower"), the banking institutions listed on Schedule 1 to the
Credit Agreement, as hereinafter defined ("Banks"), and KEYBANK NATIONAL
ASSOCIATION, as agent for the Banks ("Agent"):
WHEREAS, Original Borrower, Agent and the Banks entered into a certain
Credit Agreement dated as of May 15, 1998, as amended, and as it may from time
to time be further amended, restated or otherwise modified, which provides,
among other things, for loans, letters of credit, and other financial
accommodations aggregating Two Hundred Fifteen Million Dollars ($215,000,000),
all upon certain terms and conditions stated therein ("Credit Agreement");
WHEREAS, Original Borrower and its Subsidiaries were restructured such
that Original Borrower became a Subsidiary of Borrower and Borrower, pursuant to
the terms of the Assignment and Assumption Agreement dated as of March 5, 1999,
assumed the benefits and obligations of Original Borrower under the Credit
Agreement and certain of the other Loan Documents;
WHEREAS, Borrower has requested that Agent and the Banks amend the
Credit Agreement to increase the amount of the credit facility to Two Hundred
Thirty-Two Million Dollars ($232,000,000) and to modify certain other provisions
thereof;
WHEREAS, Borrower has informed Agent and the Banks that Borrower
intends to sell certain assets of Global Stone Port Inland, Inc.;
WHEREAS, Borrower has informed Agent and the Banks that Borrower
intends to sell certain assets of Global Stone Detroit Lime Company;
WHEREAS, Borrower has informed Agent and the Banks that Borrower
intends to acquire substantially all of the assets of W.S. Frey Company, a
Virginia corporation ("W.S. Frey");
<PAGE> 2
WHEREAS, Borrower, Agent and the Banks desire to amend the Credit
Agreement to modify certain provisions thereof; and
WHEREAS, each term used herein shall be defined in accordance with the
Credit Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other valuable considerations, Borrower,
Agent and the Banks hereby agree as follows:
1. Article I of the Credit Agreement is hereby amended to delete the
definition of "Total Commitment Amount" in its entirety and to substitute in
place thereof the following:
"Total Commitment Amount" shall mean the principal amount of Two
Hundred Thirty-Two Million Dollars ($232,000,000) (or such lesser amount
as shall be determined pursuant to Section 2.5 hereof).
2. The Credit Agreement is hereby amended to delete Section 5.23 in its
entirety and to insert in place thereof the following:
SECTION 5.23. CAPITAL DISTRIBUTIONS. Borrower will not pay or commit
itself to pay Capital Distributions in excess of the aggregate sum of(a) Five
Million Dollars ($5,000,000) during Borrower's fiscal year ending December 31,
1998, and (b) Ten Million Dollars ($10,000,000) during each fiscal year of
Borrower thereafter.
3. Borrower has informed Agent and the Banks that Borrower intends to
sell a certain limestone terminal owned by Global Stone Port Inland, Inc. and
located in Michigan (the "Port Inland Assets") and either all of the assets of
or all of the stock in Global Stone Detroit Lime Company (the "Detroit Lime
Assets"). Borrower has requested that Agent and the Banks consent to the sale of
the Port Inland Assets and the Detroit Lime Assets and that Agent and the Banks
waive any violation of Section 5.12(e) as a result of such sales. Agent and the
Banks hereby consent to the sale of the Port Inland Assets and the Detroit Lime
Assets and grant such waiver on the condition that after giving effect to this
Amendment, no Unmatured Event of Default or Event of Default exists, or
immediately thereafter would exist, under the Credit Agreement. This Amendment
shall serve as evidence of such consent and waiver and, upon request of
Borrower, Agent, on behalf of the Banks, shall release any Lien of Agent and the
Banks on the Port Inland Assets or the Detroit Lime Assets.
4. Pursuant to Section 5.26 of the Credit Agreement, Borrower has given
written notice, and this Amendment shall serve as evidence of such written
notice, that in connection with the purchase of substantially all of the assets
of W.S. Frey by Borrower or Global Stone Chemstone Corporation, Borrower or
Global Stone Chemstone Corporation will acquire Real Property with a fair market
value in excess of One Million Dollars ($1,000,000) (the "W.S. Frey Property").
Unless Borrower shall have obtained financing in accordance with the exception
set forth in Section 5.8(b) of the Credit Agreement, Borrower shall, within
thirty (30) days of the date of the purchase of such assets, execute and deliver
to Agent, on behalf of the Banks, a Mortgage and such other documents or
agreements as may be deemed necessary or advisable by Agent and the Banks in
connection with such Mortgage.
5. The Credit Agreement is hereby amended to delete Schedule 1
therefrom in its entirety and to substitute in place thereof a new Schedule 1 in
the form of Schedule 1 attached hereto.
6. The Credit Agreement is hereby amended to delete Schedule 3
therefrom in its entirety and to substitute in place thereof a new Schedule 3 in
the form of Schedule 3 attached hereto.
<PAGE> 3
7. The Credit Agreement is hereby amended to delete Exhibit A therefrom
in its entirety and to substitute in place thereof a new Exhibit A in the form
of Exhibit A attached hereto.
8. The Credit Agreement is hereby amended to delete Exhibit B therefrom
in its entirety and to substitute in place thereof a new Exhibit B in the form
of Exhibit B attached hereto.
9. Concurrently with the execution of this Amendment or, with respect
to (c) below, within thirty (30) days of the date of this Amendment, Borrower
shall:
(a) execute and deliver to Agent for delivery to each Bank a new
Revolving Credit Note dated as of the date of this Amendment, and such new
Revolving Credit Note shall be in the form and substance of Exhibit A attached
hereto. After a Bank receives a new Revolving Credit Note, such Bank shall mark
its Revolving Credit Note being replaced thereby "Replaced" and return the same
to Agent for delivery to Borrower;
(b) execute and deliver to Agent a new Swing Line Note dated as of the
date of this Amendment, and such new Swing Line Note shall be in the form and
substance of Exhibit B attached hereto. After Agent receives such new Swing Line
Note, Agent shall mark the Swing Line Note being replaced thereby "Replaced" and
return the same to Borrower;
(c) unless excluded pursuant to Section 5.8(b) of the Credit Agreement,
execute and deliver to Agent the Mortgage with respect to the W.S. Frey Property
and the other items required pursuant to paragraph 4 of this Amendment;
(d) cause each Pledgor to consent and agree to and acknowledge the
terms of this Amendment; and
(e) pay all legal fees and expenses of Agent in connection with
this Amendment.
10. Borrower hereby represents and warrants to Agent and the Banks that
(a) Borrower has the legal power and authority to execute and deliver this
Amendment; (b) the officers executing this Amendment have been duly authorized
to execute and deliver the same and bind Borrower with respect to the provisions
hereof; (c) the execution and delivery hereof by Borrower and the performance
and observance by Borrower of the provisions hereof do not violate or conflict
with the organizational agreements of Borrower or any law applicable to Borrower
or result in a breach of any provision of or constitute a default under any
other agreement, instrument or document binding upon or enforceable against
Borrower; (d) no Unmatured Event of Default or Event of Default exists under the
Credit Agreement, nor will any occur immediately after the execution and
delivery of this Amendment or by the performance or observance of any provision
hereof; (e) neither Borrower nor any Pledgor is aware of any claim or offset
against, or defense or counterclaim to, any of Borrower's or any Pledgor's
obligations or liabilities under the Credit Agreement or any Related Writing;
and (f) this Amendment constitutes a valid and binding obligation of Borrower in
every respect, enforceable in accordance with its terms.
<PAGE> 4
11. Each reference that is made in the Credit Agreement or any other
writing to the Credit Agreement shall hereafter be construed as a reference to
the Credit Agreement as amended hereby. Except as herein otherwise specifically
provided, all provisions of the Credit Agreement shall remain in full force and
effect and be unaffected hereby. This Amendment is a Related Writing as defined
in the Credit Agreement.
12. Borrower and each Pledgor, by signing below, hereby waives and
releases Agent and each of the Banks and their respective directors, officers,
employees, attorneys, affiliates and subsidiaries from any and all such claims,
offsets, defenses and counterclaims of which Borrower and any Pledgor is aware,
such waiver and release being with full knowledge and understanding of
the circumstances and effect thereof and after having consulted legal counsel
with respect thereto.
13. This Amendment may be executed in any number of counterparts, by
different parties hereto in separate counterparts and by facsimile signature,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
14. The rights and obligations of all parties hereto shall be governed
by the laws of the State of Ohio, without regard to principles of conflicts of
laws.
[Remainder of Page Intentionally Left Blank]
<PAGE> 5
15. JURY TRIAL WAIVER. BORROWER, PLEDGORS, AGENT AND EACH OF THE BANKS
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT ANT) THE BANKS,
OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
OGLEBAY NORTON COMPANY,
formerly known as Oglebay Norton Holding
Company
By:_________
Michael F. Biehi, Treasurer
KEYBANK NATIONAL ASSOCIATION
as Agent and as a Bank
By:
Lawrence A. Mack, Senior Vice President
BANK ONE, NA
<PAGE> 6
THE BANK OF NOVA SCOTIA
By:
Its:
COMERICA BANK
By:
Its:
THE HUNTINGTON NATIONAL BANK
By:
Its:
MELLON BANK, N.A.
By:
Its:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
Its:
HARRIS TRUST AND SAVINGS BANK
By:
Its:
<PAGE> 7
THE CHASE MANHATTAN BANK
By:
Its:
STAR BANK NATIONAL ASSOCIATION
By:
Its:
FLEET BANK, N.A.
By:
Its:
ABN AMRO BANK N.V.,
PITTSBURGH BRANCH
By:
Its:
FIFTH THIRD BANK OF NORTHEASTERN
OHIO
By:
Its:
<PAGE> 8
Each of the undersigned consents and agrees to and acknowledges the
terms of the foregoing Fourth Amendment Agreement. Each of the undersigned
further agrees that the obligations of each of the undersigned pursuant to the
Guaranty of Payment and the other Loan Documents executed by each of the
undersigned shall remain in full force and effect and be unaffected hereby.
ONCO Investment Company (a Delaware corporation, in its own capacity and as
successor by merger to Oglebay Norton Holding Company, an Ohio corporation, and
ONCO Investment Company, an Ohio corporation)
ON Marine Services Company (formerly known as Oglebay Norton Company)
Oglebay Norton Industrial Minerals, Inc.
Oglebay Norton Management Company
Oglebay Norton Industrial Sands, Inc.
Colorado Silica Sand, Inc.
Oglebay Norton Terminals, Inc.
Oglebay Norton Engineered Materials, Inc.
Global Stone Corporation (successor by merger to Oglebay Norton
Acquisition Company)
Global Stone Port Inland, Inc.
Moreland Development Company
Western Wisconsin Materials, Inc.
Global Stone (USA) Inc.
Global Stone Tenn Lutrell Company
Global Stone Chemstone Corporation
Global Stone Detroit Lime Company
Global Stone St. Clair, Inc.
Global Stone PenRoc Inc.
Global Stone Filler Products Company
Michael F: Biehl as Treasurer of each of the
companies listed above
Texas Mining, LP
By: Oglebay Norton Industrial Sands, Inc:,
General Partner
By:
Michael F. Biehl, Treasurer
<PAGE> 9
SCHEDULE 1
<TABLE>
<CAPTION>
REVOLVING
CREDIT
BANKING INSTITUTION COMMITMENT COMMITMENT MAXIMUM
PERCENTAGE AMOUNT AMOUNT
<S> <C> <C> <C>
KeyBank National Association 13.95348838% $ 32,372,093.04 $ 32,372,093.04
The Bank of Nova Scotia 11.627906976% $ 26,976,744.19 $ 26,976,744.19
Bank of America National Trust and Savings
Association 5.581395348% $ 12,948,837.20 $ 12,948,837.20
Mellon Bank, N.A 7.906976744% $ 18,344,186.06 $ 18,344,186.06
Harris Trust and Savings Bank 5.581395348% $ 12,948,837.20 $ 12,948,837.20
Comerica Bank 7.906976744% $ 18,344,186.06 $ 18,344,186.06
The Huntington National Bank 7.906976744% $ 18,344,186.06 $ 18,344,186.06
11.627906976% $ 26,976,744.19 $ 26,976,744.19
The Chase Manhattan Bank 5.581395348% $ 12,948,837.20 $ 12,948,837.20
Star Bank, National Association 5.581395348% $ 12,948,837.20 $ 12,948,837.20
Fleet Bank, N.A 5.581395348% $ 12,948,837.20 $ 12,948,837.20
ABN AMRO Bank N.y., Pittsburgh Branch 5.581395348% $ 12,948,837.20 $ 12,948,837.20
Fifth Third Bank of Northeastern Ohio 5.581395348% $ 12,948,837.20 $ 12,948,837.20
Total Commitment Amount: 100% $ 232,000,000 $ 232,000,000
</TABLE>
<PAGE> 10
SCHEDULE 3
PLEDGORS
1. ONCO Investment Company (a Delaware corporation, in its own
capacity and as successor by merger to Oglebay Norton Holding
Company, an Ohio corporation, and ONCO Investment Company, an
Ohio corporation)
2. ON Marine Services Company (formerly known as Oglebay Norton
Company)
3: Oglebay Norton Industrial Minerals, Inc:
4. Oglebay Norton Management Company
5. Oglebay Norton Industrial Sands, Inc.
6. Texas Mining, LP
7. Colorado Silica Sand, Inc.
8. Oglebay Norton Terminals, Inc:
9: Oglebay Norton Engineered Materials, Inc:
10. Global Stone Corporation (successor by merger to Oglebay
Norton Acquisition Company)
11. Global Stone Port Inland, Inc. (formerly known as Oglebay
Norton Limestone Company)
12. Global Stone (USA) Inc.
13. Global Stone Tenn Lutrell Company
14. Global Stone Chemstone Corporation
15. Global Stone Detroit Lime Company
16. Global Stone St. Clair, Inc.
17. Global Stone PenRoc Inc.
18. Global Stone Filler Products Company
<PAGE> 11
EXHIBIT A
REVOLVING CREDIT NOTE
$_________________ Cleveland, Ohio
As of March 12, 1999
FOR VALUE RECEIVED, the undersigned, OGLEBAY NORTON COMPANY, formerly
known as Oglebay Norton Holding Company, a Delaware corporation ("Borrower"), as
assignee of ON Marine Services Company, formerly known as Oglebay Norton
Company, promises to pay on the last day of the Commitment Period, as defined in
the Credit Agreement (as hereinafter defined), to the order of
__________________ ("Bank") at the Main Office of KEYBANK NATIONAL ASSOCIATION,
as Agent, 127 Public Square, Cleveland, Ohio 44114-1306 the principal sum of
DOLLARS
or the aggregate unpaid principal amount of all Loans made by Bank to Borrower
pursuant to Section 2.1 A of the Credit Agreement, whichever is less, in
lawful money of the United States of America. As used herein, "Credit Agreement"
means the Credit Agreement dated as of May 15, 1998, among Borrower, the banks
named therein and KeyBank National Association, as Agent, as amended and as the
same may from time to time be further amended, restated or otherwise modified.
Capitalized terms used herein shall have the meanings ascribed to them in the
Credit Agreement.
Borrower also promises to pay interest on the unpaid principal amount
of each Loan from time to time outstanding, from the date of such Loan until the
payment in full thereof, at the rates per annum which shall be determined in
accordance with the provisions of Section 2. 1A of the Credit Agreement: Such
interest shall be payable on each date provided for in such Section 2.1A;
provided, however, that interest on any principal portion which is not paid when
due shall be payable on demand.
The portions of the principal sum hereof from time to time representing
Prime Rate Loans and LIBOR Loans, and payments of principal of any thereof, will
be shown on the records of Bank by such method as Bank may generally employ;
provided, however, that failure to make any such entry shall in no way detract
from Borrower's obligations under this Note.
If this Note shall not be paid at maturity, whether such maturity
occurs by reason of lapse of time or by operation of any provision for
acceleration of maturity contained in the Credit Agreement, the principal hereof
and the unpaid interest thereon shall bear interest, until paid, at a rate per
annum which shall be the Default Rate. All payments of principal of and interest
on this Note shall be made in immediately available funds.
This Note is one of the Revolving Credit Notes referred to in the
Credit Agreement. Reference is made to the Credit Agreement for a description of
the right of the undersigned to anticipate payments hereof, the right of the
holder hereof to declare this Note due prior to its stated maturity, and other
terms and conditions upon which this Note is issued.
<PAGE> 12
Except as expressly provided in the Credit Agreement, Borrower
expressly waives presentment, demand, protest and notice of any kind.
JURY TRIAL WAIVER. BORROWER, AGENT AND EACH OF THE BANKS WAIVE ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THE BANKS, OR ANY
THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
OGLEBAY NORTON COMPANY,
formerly known as Oglebay Norton Holding Company
By:__________________________
Michael F. Biehl, Treasurer
<PAGE> 13
EXHIBIT B
SWING LINE NOTE
$10,000,000 Cleveland, Ohio
As of March 12, 1999
FOR VALUE RECEIVED, the undersigned, OGLEBAY NORTON COMPANY, formerly
known as Oglebay Norton Holding Company, a Delaware corporation ("Borrower"), as
assignee of ON Marine Services Company, formerly known as Oglebay Norton
Company, promises to pay to the order of KEYBANK NATIONAL ASSOCIATION ("Bank")
at the Main Office of KEYBANK NATIONAL ASSOCIATION, as Agent, 127 Public Square,
Cleveland, Ohio 44114-1306 the principal sum of
TEN MILLION AND 00/100 DOLLARS
or the aggregate unpaid principal amount of all Swing Loans, as defined in the
Credit Agreement (as hereinafter defined), made by Bank to Borrower pursuant to
Section 2.1B of the Credit Agreement, whichever is less, in lawful money of the
United States of America on the earlier of the last day of the Commitment
Period, as defined in the Credit Agreement, or, with respect to each Swing Loan,
the Swing Loan Maturity Date applicable thereto. As used herein, "Credit
Agreement" means the Credit Agreement dated as of May 15, 1998, among Borrower,
the banks named therein and KeyBank National Association, as Agent, as amended
and as the same may from time to time be further amended, restated or otherwise
modified. Capitalized terms used herein shall have the meanings ascribed to them
in the Credit Agreement.
Borrower also promises to pay interest on the unpaid principal amount
of each Swing Loan from time to time outstanding, from the date of such Swing
Loan until the payment in full thereof, at the rates per annum which shall be
determined in accordance with the provisions of Section 2.1B of the Credit
Agreement. Such interest shall be payable on each date provided for in such
Section 2.1B; provided, however, that interest on any principal portion which is
not paid when due shall be payable on demand.
The principal sum hereof from time to time and payments of principal
hereof, shall be shown on the records of Bank by such method as Bank may
generally employ; provided, however, that failure to make any such entry shall
in no way detract from Borrower's obligations under this Note.
If this Note shall not be paid at maturity, whether such maturity
occurs by reason of lapse of time or by operation of any provision for
acceleration of maturity contained in the Credit Agreement, the principal hereof
and the unpaid interest thereon shall bear interest, until paid, at the Default
Rate. All payments of principal of and interest on this Note shall be made in
immediately available funds.
Except as expressly provided in the Credit Agreement, Borrower
expressly waives presentment, demand, protest and notice of any kind.
This Note is the Swing Line Note referred to in the Credit Agreement.
Reference is made to the Credit Agreement for a description of the
undersigned's payment obligations hereunder, the right
<PAGE> 14
of the holder hereof to declare this Note due prior to its stated maturity, and
other terms and conditions upon which this Note is issued.
JURY TRIAL WAIVER. BORROWER, AGENT AND EACH OF THE BANKS WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT
OR OTHERWISE, AMONG BORROWER, AGENT AND THE BANKS, OR ANY THEREOF, ARISING OUT
OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
OR THE TRANSACTIONS RELATED THERETO.
OGLEBAY NORTON COMPANY,
formerly known as Oglebay Norton Holding Company
By:___________________________
Michael F. Biehl, Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 738,540
<SECURITIES> 0
<RECEIVABLES> 41,264,513
<ALLOWANCES> 1,234,000
<INVENTORY> 25,670,947
<CURRENT-ASSETS> 84,759,003
<PP&E> 549,994,469
<DEPRECIATION> 215,718,684
<TOTAL-ASSETS> 595,966,921
<CURRENT-LIABILITIES> 35,283,220
<BONDS> 0
0
0
<COMMON> 7,253,332
<OTHER-SE> 123,702,910
<TOTAL-LIABILITY-AND-EQUITY> 595,966,921
<SALES> 99,298,458
<TOTAL-REVENUES> 131,744,786
<CGS> 66,242,122
<TOTAL-COSTS> 87,661,090
<OTHER-EXPENSES> 494,097
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,321,256
<INCOME-PRETAX> 4,004,356
<INCOME-TAX> 1,142,000
<INCOME-CONTINUING> 2,862,356
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,862,356
<EPS-BASIC> 0.59
<EPS-DILUTED> 0.59
</TABLE>
