<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 March 31, 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 April 30, 1999: 4,820,966
---------
<PAGE> 2
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
PART I. FINANCIAL INFORMATION
------------------------------
<S> <C>
ITEM 1
Condensed Consolidated Statement of
Operations (Unaudited) - Three Months
Ended March 31, 1999 and 1998 3
Condensed Consolidated Balance
Sheet (Unaudited) - March 31, 1999 and
December 31, 1998 4
Condensed Consolidated Statement of
Cash Flows (Unaudited) - Three Months
Ended March 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial
Statements 6 - 13
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 14 - 19
ITEM 3
Quantitative and Qualitative Disclosures
About Market Risk 20
PART II. OTHER INFORMATION
---------------------------
ITEM 2
Changes in Securities and Use of Proceeds 20
ITEM 4
Submission of Matters to a Vote of Security Holders 20
ITEM 6
Exhibits and Reports on Form 8-K 21
</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
March 31
----------------------------
1999 1998
---- ----
<S> <C> <C>
NET SALES AND OPERATING REVENUES $ 45,088,091 14,307,804
COSTS AND EXPENSES
Cost of goods sold and operating expenses 31,004,049 9,127,720
Depreciation, depletion and amortization 4,916,570 961,341
General, administrative and selling expenses 6,220,634 3,765,709
------------ ------------
42,141,253 13,854,770
------------ ------------
INCOME FROM OPERATIONS 2,946,838 453,034
Interest expense (7,338,940) (780,606)
Other income - net 171,985 7,358
------------ ------------
LOSS BEFORE INCOME TAXES (4,220,117) (320,214)
Income tax benefit (1,205,000) (100,000)
------------ ------------
NET LOSS $ (3,015,117) $ (220,214)
============ ============
NET LOSS PER SHARE - BASIC $ (.63) $ (.05)
============ ============
NET LOSS PER SHARE - ASSUMING DILUTION $ (.63) $ (.05)
============ ============
DIVIDENDS PER SHARE OF COMMON STOCK $ .20 $ .20
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
-3-
<PAGE> 4
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
March 31 December 31
1999 1998
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,017,294 $ 1,940,410
Accounts receivable, less reserve for doubtful accounts
(1999-$1,200,000 1998-$1,194,000) 31,484,131 36,624,374
Income tax receivable 2,204,904 3,460,026
Inventories 28,096,194 28,450,091
Deferred income taxes 2,510,745 2,510,745
Prepaid insurance and other expenses 12,916,906 5,069,554
------------ ------------
TOTAL CURRENT ASSETS 79,230,174 78,055,200
PROPERTY AND EQUIPMENT 587,133,401 566,194,939
Less allowances for depreciation,
depletion and amortization 222,451,306 218,752,499
------------ ------------
364,682,095 347,442,440
GOODWILL (net of accumulated amortization
of $3,308,000 in 1999 and $2,370,000 in 1998) 88,377,060 89,262,233
PREPAID PENSION COSTS 32,219,134 31,303,221
OTHER ASSETS 19,564,732 19,560,668
------------ ------------
TOTAL ASSETS $584,073,195 $565,623,762
============ ============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31 December 31
1999 1998
------------ -------------
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt $ 9,802,931 $ 9,506,345
Accounts payable 9,624,964 10,332,250
Payrolls and other accrued compensation 6,057,484 10,446,352
Accrued expenses 11,311,565 14,908,743
Accrued interest expense 2,456,214 5,481,665
Income taxes payable -0- 68,741
------------ ------------
TOTAL CURRENT LIABILITIES 39,253,158 50,744,096
LONG-TERM DEBT, less current portion 334,839,318 302,559,729
POSTRETIREMENT BENEFITS OBLIGATIONS 27,440,023 27,181,435
OTHER LONG-TERM LIABILITIES 21,460,926 22,059,322
DEFERRED INCOME TAXES 36,427,456 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 7,902,156 7,480,572
Retained earnings 142,883,882 146,852,300
Accumulated other comprehensive expense (184,145) (708,549)
------------ ------------
157,855,225 160,877,655
Treasury stock, at cost - 2,433,566
and 2,487,901 shares at respective dates (33,202,911) (33,944,243)
------------ ------------
124,652,314 126,933,412
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $584,073,195 $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>
Three Months Ended
March 31
-----------------------------
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (3,015,117) $ (220,214)
Adjustments to reconcile net loss to
net cash used for operating activities:
Depreciation, depletion and amortization 4,916,570 961,341
Deferred income taxes 299,506 62,000
Decrease (increase) in prepaid pension costs 940,554 (867,652)
Deferred vessel maintenance costs (5,652,930) (4,570,042)
Decrease in accounts receivable 5,186,888 12,532,170
Decrease (increase) in inventories 368,843 (278,974)
Decrease in accounts payable (737,057) (2,973,727)
Decrease in payrolls and other accrued compensation (4,794,541) (4,113,156)
Decrease in accrued expenses (3,183,121) (1,474,881)
Decrease in accrued interest (3,025,451) (277,462)
Increase (decrease) in income taxes 1,189,675 (510,000)
Operating activities of discontinued operations - net -0- 1,833,081
Other operating activities (3,893,086) (221,936)
------------ ------------
NET CASH USED FOR OPERATING ACTIVITIES (11,399,267) (119,452)
INVESTING ACTIVITIES
Capital expenditures (7,126,331) (3,447,233)
Acquisition of businesses (12,597,530) (4,522,567)
Proceeds from the disposition of assets 43,386 817,308
------------ ------------
NET CASH USED FOR INVESTING ACTIVITIES (19,680,475) (7,152,492)
FINANCING ACTIVITIES
Payments on long-term debt (22,785,728) (236,542)
Additional long-term debt 55,280,000 -0-
Financing costs (531,458) -0-
Payments of dividends (953,301) (952,154)
Purchases of treasury stock -0- (560,868)
------------ ------------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 31,009,513 (1,749,564)
Effect of exchange rate changes on cash and cash equivalents 147,113 -0-
------------ ------------
Increase (decrease) in cash and cash equivalents 76,884 (9,021,508)
CASH AND CASH EQUIVALENTS, JANUARY 1 1,940,410 29,885,922
------------ ------------
CASH AND CASH EQUIVALENTS, MARCH 31 $ 2,017,294 $ 20,864,414
============ ============
</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 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 value of $1,019,000 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. 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:
- Purchased all of the outstanding shares of Colorado Silica Sands,
Inc. ("Colorado Silica") for a total purchase price of $7,194,000
during the first quarter of 1998.
- Purchased all of the outstanding common shares of Global Stone
Corporation ("Global Stone") for a total purchase price of
$227,600,000, including $54,000,000 of net debt during the second
quarter of 1998.
- Purchased substantially all the assets of a limestone operation
in Port Inland, Michigan ("Port Inland"), for a total purchase
price of $35,200,000 during the second quarter of 1998.
- Purchased substantially all the assets of Filler Products, Inc.
("Filler Products"), for a total purchase price of $24,200,000
during the third quarter of 1998.
-6-
<PAGE> 7
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
All acquisitions have been accounted for under the purchase method. The
results of operations of the acquired businesses are included in the
consolidated financial statements from their respective acquisition dates.
The purchase prices have been allocated, on a preliminary basis, based on
estimated fair values at the dates of acquisition. The purchase price
allocations will be finalized during the second quarter of 1999.
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 periods ending March 31, 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 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 March 31
-----------------------------------------
1999 1998
---- ----
(In thousands, except earnings per share)
<S> <C> <C>
Net sales and operating revenues $47,200 $48,800
Net Loss (3,200) (3,300)
Earnings per share - basic (0.66) (0.69)
Earnings per share - assuming dilution (0.66) (0.68)
EBITDA 8,300 8,200
EBITDA margin 18% 17%
</TABLE>
(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 income 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 first quarter of 1999
includes 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. Marine Services and Industrial Sands 1999 first quarter
operating results were unfavorably affected by lower tonnage hauled and
continued softness in oilfield demand, respectively, as further described
in Item 2 in the Results of Operations section of Management's Discussion
and Analysis. Lime and Limestone's 1999 first quarter operating results
were impacted by an interruption in shipments to a major customer in
Detroit, Michigan due to the customer's production outage.
-7-
<PAGE> 8
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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. As of March 31,
1999, $6,286,000 relating to these notes is 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 loss
to its comprehensive loss (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------------
1999 1998
---- ----
<S> <C> <C>
Net loss $(3,015) $(220)
Other comprehensive expense:
Foreign currency
translation adjustments (184) -0-
------- -----
Comprehensive loss $(3,199) $(220)
======= =====
</TABLE>
-8-
<PAGE> 9
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The calculation of net loss per share follows (in thousands, except
per share data):
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------------------------
1999 1998
---- ----
<S> <C> <C>
NET LOSS PER SHARE-BASIC:
Net loss $(3,015) $ (220)
======= ======
Average number of
shares outstanding 4,791 4,767
======= ======
Net loss per share-basic $ (.63) $ (.05)
======= ======
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31
1999 1998
---- ----
<S> <C> <C>
NET LOSS PER SHARE-
ASSUMING DILUTION:
Net loss $(3,015) $ (220)
======= ======
Average number of shares
outstanding 4,791 4,767
Dilutive effect of stock plans 13 17
------- ------
Adjusted average number of
shares outstanding 4,804 4,784
======= ======
Net loss per share-assuming
dilution $ (.63) $ (.05)
======= ======
</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 March 31, 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 $ 227,488 $ 136,513 $ 53,625 $ 417,626 $ 166,447 $ 584,073
Depreciation, depletion and
amortization expense 3,705 21 1,154 4,880 37 4,917
Capital expenditures 4,765 1,498 784 7,047 79 7,126
Net sales and operating revenues $ 32,040 $ 2,577 $ 10,471 $ 45,088 $ 45,088
Income (loss) from operations $ 2,800 $ 24 $ 1,381 $ 4,205 $ (1,258) $ 2,947
Interest expense (7,339) (7,339)
Other income- net 22 22 150 172
--------- --------- --------- --------- --------- ---------
Income (loss) before
income taxes $ 2,800 $ 24 $ 1,403 $ 4,227 $ (8,447) $ (4,220)
========= ========= ========= ========= ========= =========
1998
Identifiable assets $ 137,648 $ 51,503 $ 189,151 $ 67,198 $ 256,349
Depreciation, depletion and
amortization expense 14 916 930 31 961
Capital expenditures 2,331 1,100 3,431 16 3,447
Net sales and operating revenues $ 3,108 $ 11,200 $ 14,308 $ 14,308
Income (loss) from operations $ 544 $ 1,732 $ 2,276 $ (1,823) $ 453
Interest expense (781) (781)
Other income - net 16 16 (8) 8
--------- --------- --------- --------- ---------
Income (loss) before
income taxes $ 544 $ 1,748 $ 2,292 $ (2,612) $ (320)
========= ========= ========= ========= =========
</TABLE>
-10-
<PAGE> 11
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 Senior Subordinated Notes. The
guarantees are full, unconditional and joint and several. Separate financial
statements of these guarantor subsidiaries are not presented as management
has determined that they would not be material to investors.
Certain of the Company's subsidiaries are not guarantors of the Senior
Subordinated Notes. These subsidiaries were principally 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 subsidiaries as of and for the three months ended March 31,
1999 is presented below. The amounts presented are based on the preliminary
purchase price allocations using estimated fair values at the dates of
acquisition. The purchase price allocations will be finalized during the
first quarter of 1999.
<TABLE>
<CAPTION>
INCOME STATEMENT DATA
(in thousands) Three Months Ended March 31, 1999
-----------------------------------------------------
Parent
Company and
Combined
Guarantor Non -Guarantor Total
Subsidiaries Subsidiaries Eliminations Company
------------ ------------ ------------ -------
<S> <C> <C> <C> <C>
NET SALES AND OPERATING REVENUES $ 41,220 $ 3,868 $ 45,088
COSTS AND EXPENSES
Cost of goods sold and operating expenses 28,159 2,845 31,004
Depreciation, depletion and amortization 4,545 372 4,917
General, administrative and selling expenses 6,113 112 $ (5) 6,220
-------- -------- -------- --------
INCOME FROM OPERATIONS 2,403 539 5 2,947
Interest expense (7,339) (31) 31 (7,339)
Other income- net 208 (36) 172
-------- -------- -------- --------
(LOSS) INCOME BEFORE TAXES (4,728) 508 (4,220)
Income tax benefit (1,205) (1,205)
-------- -------- -------- --------
NET (LOSS) INCOME $ (3,523) $ 508 $ - $ (3,015)
======== ======== ======== ========
</TABLE>
-11-
<PAGE> 12
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
BALANCE SHEET DATA
(in thousands) March 31, 1999
---------------------------------------------------------
Parent
Company and
Combined
Guarantor Non -Guarantor Total
Subsidiaries Subsidiaries Eliminations Company
------------ ------------ ------------ -------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,513 $ 504 $ 2,017
Accounts receivable, net 28,568 2,916 31,484
Income taxes receivable 2,205 2,205
Inventories 27,271 825 28,096
Deferred income taxes 1,532 979 2,511
Prepaid insurance and other expenses 12,743 174 12,917
Due from affiliates 24,939 $ (24,939) --
--------- --------- --------- ---------
TOTAL CURRENT ASSETS 98,771 5,398 (24,939) 79,230
PROPERTY AND EQUIPMENT, NET 336,327 28,355 364,682
GOODWILL, NET 88,377 88,377
PREPAID PENSION COSTS 32,219 32,219
OTHER ASSETS 19,565 19,565
INVESTMENT IN SUBSIDIARIES 8,476 10,094 (18,570) --
--------- --------- --------- ---------
TOTAL ASSETS $ 583,735 $ 43,847 $ (43,509) $ 584,073
========= ========= ========= =========
CURRENT LIABILITIES:
Current portion of long-term debt $ 8,190 $ 1,613 $ 9,803
Accounts payable 7,764 1,861 9,625
Payrolls and other accrued compensation 5,691 367 6,058
Accrued expenses 11,283 29 11,312
Accrued interest expense 2,456 2,456
Due to affiliates -- 24,939 $ (24,939) --
--------- --------- --------- ---------
TOTAL CURRENT LIABILITIES 35,384 28,809 (24,939) 39,254
LONG-TERM DEBT, LESS CURRENT PORTION 332,296 2,543 334,839
POSTRETIREMENT BENEFITS OBLIGATION 23,421 4,019 27,440
OTHER LONG-TERM LIABILITIES 21,461 21,461
DEFERRED INCOME TAXES 36,427 36,427
STOCKHOLDERS' EQUITY 134,746 8,476 (18,570) 124,652
--------- --------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 583,735 $ 43,847 $ (43,509) $ 584,073
========= ========= ========= =========
</TABLE>
-12-
<PAGE> 13
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
CASH FLOW DATA
(in thousands) Three Months Ended March 31, 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 $(11,450) $ 1,271 $ (1,220) $(11,399)
INVESTING ACTIVITIES:
Capital expenditures (6,090) (1,036) (7,126)
Acquisition of businesses (12,598) (12,598)
All other investing activities 43 43
-------- -------- -------- --------
NET CASH USED FOR INVESTING ACTIVITIES (18,645) (1,036) -- (19,681)
FINANCING ACTIVITIES:
Payments on long-term debt (22,490) (296) (22,786)
Additional long-term debt 55,280 55,280
All other financing activities (1,484) (1,484)
-------- -------- -------- --------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES 31,306 (296) -- 31,010
Effect of exchange rate changes on cash -- 147 147
-------- -------- -------- --------
Increase (decrease) in cash and cash equivalents 1,211 86 (1,220) 77
CASH AND CASH EQUIVALENTS, JANUARY 1, 1999 1,522 418 1,940
-------- -------- -------- --------
CASH AND CASH EQUIVALENTS, MARCH 31, 1999 $ 2,733 $ 504 $ (1,220) $ 2,017
======== ======== ======== ========
</TABLE>
-13-
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition
and Results of Operations may contain statements concerning certain trends and
other forward-looking information, within the meaning of the federal securities
laws. Such forward-looking statements are subject to uncertainties and factors
relating to the Company's operations and business environment, all of which are
difficult to predict and many of which are beyond the control of the Company.
The Company believes that the following factors, among others, could affect its
future performance and cause actual results to differ materially from those
expressed or implied by forward-looking statements made by or on behalf of the
Company: (1) unfavorable weather conditions; (2) fluctuations in oil prices; (3)
a decline in steel production; (4) changes in the demand for the Company's
products or services due to changes in technology; (5) Great Lakes and
Mid-Atlantic construction activity; (6) a slowdown in the California economy and
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 quarter ended
March 31, 1999 are not necessarily indicative of the results to be expected for
the full year.
FINANCIAL CONDITION
-------------------
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 value of $1,019,000 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 the outstanding shares of Colorado Silica
Sand, Inc. ("Colorado Silica") for $7,194,000, of which $4,523,000 was paid in
cash.
The Company's operating activities used cash of $11,399,000 in
the first quarter of 1999 compared with $119,000 used in the same period in
1998. The decline in operating cash flows resulted primarily from an increase in
interest paid in the first quarter of 1999 compared to the same quarter in 1998.
The Company made interest payments of $9,599,000 and $1,054,000 in the first
quarter of 1999 and 1998, respectively, of which $5,482,000 and $691,000 was
accrued at December 31, 1998 and 1997, respectively. Cash provided by the
collection of Marine Services' accounts receivable declined $3,584,000 in the
first quarter of 1999. The decline was principally the result of an extended
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. Great
Lakes marine transportation activities are limited for most of the first quarter
in each year. Cash used for Marine Services' winter vessel maintenance program
increased to $5,653,000 in the first quarter of 1999 compared with $4,570,000 in
1998. The operating results of the Company's business segments are discussed in
more detail under "RESULTS OF OPERATIONS".
-14-
<PAGE> 15
FINANCIAL CONDITION (CONTINUED)
-------------------------------
Capital expenditures totaled $7,126,000 in the first quarter
of 1999 compared with $3,447,000 for the same period in 1998. Expenditures in
the first quarter of 1999 and 1998 included Marine Services vessel inspection
costs of $357,000 and $1,444,000, 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 $4,765,000 for
the first quarter 1999. With the acquisition of Global Stone Winchester, capital
expenditures for 1999 are now expected to approximate $26,700,000.
In the first quarter of 1999 the Company's Senior Credit
Facility was increased from $215,000,000 to $232,000,000, and the Company
borrowed an additional $32,494,000, 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 March 31, 1999, is based on LIBOR interest
rates, plus an applicable margin. The Company made long-term debt payments of
$237,000 in the first quarter of 1998.
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 2000 and have a fixed interest rate of 10%. The
Company paid $531,000 of financing costs in the first quarter of 1999 related to
the exchange and private placement of these notes.
The Company declared a dividend of $.20 per share in both the
first quarter of 1999 and 1998. Dividends paid were $953,000 in the first
quarter of 1999 compared with $952,000 for the same quarter in 1998. The Company
purchased, and placed in treasury, 14,666 shares of its common stock for
$561,000 in the first quarter of 1998. There was no common stock purchased in
the first quarter of 1999.
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.
-15-
<PAGE> 16
RESULTS OF OPERATIONS
---------------------
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO
THREE MONTHS ENDED MARCH 31, 1998
The Company's net sales and operating revenues of $45,088,000
in the first quarter of 1999 more than tripled compared to net sales and
operating revenues of $14,308,000 for the same quarter in 1998. Income from
operations for the first quarter of 1999 was $2,947,000 compared with $453,000
for the same quarter in 1998. The Company reported a net loss of $3,015,000
($0.63 per share - assuming dilution) for the first quarter of 1999, compared
with net loss of $220,000 ($0.05 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 increased net loss is the result of interest
expense on borrowings to fund the acquisitions. Interest expense increased to
$7,339,000 in the first quarter of 1999, compared with $781,000 for the same
quarter in the prior year.
Operating results of the Company's business segments for the
first quarter ended March 31, 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 $32,040,000 for the first quarter of 1999. All
acquisitions which formed this segment were completed subsequent to the first
quarter of 1998.
Marine Services. Operating revenues for the Company's Marine
Services segment totaled $2,577,000 for the first quarter of 1999 compared with
$3,108,000 for the first quarter of 1998. 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.
Industrial Sands. Net sales for the Company's Industrial Sands
segment decreased by $729,000 or 7%, to $10,471,000 for the first quarter of
1999, compared with $11,200,000 for the same period of 1998. The decline in net
sales is attributable to decreased shipments, principally due to softness in oil
prices and related oilfield demand. Accordingly, the demand for frac sands
provided by the Brady, Texas operations declined. The overall decrease in net
sales and tonnage was partially offset by the strong performance of the
segment's Orange County, California operations and a full quarter of operations
from Colorado Silica which was acquired in March 1998.
-16-
<PAGE> 17
RESULTS OF OPERATIONS (CONTINUED)
---------------------
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO
THREE MONTHS ENDED MARCH 31, 1998
Cost of Goods Sold and Operating Expenses
- -----------------------------------------
Lime and Limestone. Cost of goods sold for the Lime and
Limestone segment totaled $22,494,000, or 70% of net sales, for the first
quarter of 1999.
Marine Services. Operating expenses for the Marine Services
segment totaled $1,679,000 for the three months ended March 31, 1999, compared
with $1,758,000 for the same period in 1998, a decrease of $79,000, or 5%.
Operating expenses as a percentage of operating revenues increased to 65% in the
first quarter of 1999 compared with 57% during the first quarter of 1998. The
percentage increase in operating expenses is a result of the lower tonnage
carried by the Marine Services fleet and fewer trips on the more efficient,
1000-foot vessels in the first quarter of 1999 compared with the same quarter
in 1998.
Industrial Sands. As a result of the overall decrease in
volumes, cost of goods sold for the Industrial Sands segment decreased $508,000,
or 7%, to $6,831,000 for the first quarter of 1999 from $7,339,000 for the same
period in 1998. Cost of goods sold as a percentage of net sales were comparable
at 65% for the first quarter of 1999 compared with 66% for the same quarter of
1998.
Depreciation, Depletion and Amortization
- ----------------------------------------
Primarily as a result of the 1998 acquisitions, depreciation,
depletion and amortization expense increased to a level of $4,917,000 for the
first quarter of 1999 compared with $961,000 for the same period of 1998.
General, Administrative and Selling Expenses
- --------------------------------------------
As a result of the 1998 acquisitions, total general,
administrative and selling expenses increased $2,455,000 to $6,221,000 for first
quarter of 1999 compared with $3,766,000 for the same period of 1998. Primarily
as a result of the 1998 acquisitions, the percentage of general, administrative
and selling expenses to total net sales and operating revenues declined to 14%
in the first quarter of 1999 compared with 26% in the first quarter of 1998.
Also, corporate general, administrative and selling expenses declined in the
first quarter of 1999 compared with the first quarter of 1998 by $565,000
despite the acquisitions.
-17-
<PAGE> 18
RESULTS OF OPERATIONS (CONTINUED)
---------------------
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO
THREE MONTHS ENDED MARCH 31, 1998
Income From Operations
- ----------------------
Lime and Limestone. The Lime and Limestone segment
contributed $2,800,000 to income from operations for the first quarter of 1999.
Marine Services. The Company's Marine Services segment had
income from operations of $24,000 for the first quarter of 1999 compared with
operating income of $544,000 for the first quarter of 1998. The reduction in
operating income was the result of a 23% reduction in tonnage shipped in the
first quarter of 1999, without realizing a similar reduction in operating
expenses, as previously described.
Industrial Sands. Income from operations for the Industrial
Sands segment declined $351,000 to $1,381,000 for the first quarter of 1999
compared with $1,732,000 for the same period of 1998. The decline in income from
operations was principally the result of reduced oil field demand for frac sand
supplied by the Brady, Texas operations, partially offset by the increased
demand at the Orange County operations and a full quarter of operations at
Colorado Silica.
Corporate and Other. Certain cost of goods sold and general
and administrative expenses are not allocated to the business segments.
Accordingly, Corporate and Other operations recognized a loss from operations of
$1,258,000 in the first quarter of 1999, which was $565,000 less than the
$1,823,000 operating loss for the first three months of 1998. The reduction in
operating loss was primarily the result of a decrease in the Company's net cost
for its defined benefit pension plans in the first quarter of 1999 compared with
1998.
Other
- -----
Interest expense for the first quarter of 1999 increased
$6,558,000 to $7,339,000 in the first quarter of 1999 compared with $781,000 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.
-18-
<PAGE> 19
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 business operations. 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 in the third quarter of 1999 with the implementation of a new order
processing system for both the Industrial Sands and Lime and Limestone business
segments.
As part of its Year 2000 program, the Company has also made efforts to
determine and assess the Year 2000 compliance status of third parties with which
it does business. During 1997, the Company sent a detailed questionnaire to its
customers, suppliers, financial institutions and others to obtain information
relating to the status of such third parties with respect to Year 2000 issues.
Of the total questionnaires sent out, 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 $80,000 in expenses relating to its Year 2000
issues and expects to incur an additional $170,000 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.
-19-
<PAGE> 20
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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
- --------------------------------------------------
c) On March 18, 1999, the Company issued 50,000 restricted shares of
its Common Stock, par value $1 per share, as part of the consideration
for the Company's purchase of real property on which the seller mined
and processed limestone and manufactured lime. The restricted shares
were issued in a transaction not involving any public offering pursuant
to Section 4(2) of the Securities Act of 1933, as amended, and based on
representations made by the seller as to the seller's knowledge and
experience in financial matters. The purchase agreement pursuant to
which the restricted shares were issued prohibits, except for certain
limited circumstances, the transfer of the shares for a two-year period
beginning on the March 18, 1999 closing date.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
On April 28, 1999, the Company held its 1999 Annual Meeting of Stockholders at
which time John N. Lauer was elected a director in the Class of 2002. The other
directors of the company whose terms continue are M.E. Bank, W.G. Bares, J.T.
Bartlett, A.C. Bersticker, W.G. Pryor, and J.D. Weil. There were no other issues
considered at the meeting. Voting for the election of Mr. Lauer as a director
was as follows:
For: 4,191,979
Against: 0
Abstentions: 194,968
Broker Non-Votes: 377,630
Proxies were solicited on behalf of the Company by Georgesson and Company, as
set forth in the Company's definitive proxy statement dated March 23, 1999.
-20-
<PAGE> 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
(a) Exhibits
<TABLE>
<CAPTION>
<S> <C>
(2) Plan of Reorganization to form Delaware Incorporated by reference rom Exhibit 2 of the
Holding Company Company's Form 8-K filed on March 26, 1999
(3) (I) Articles of Incorporation Incorporated by reference from Exhibit 4.1 of the
Company's Form 8-K filed on March 26, 1999
(3)(ii) By-laws Incorporated by reference from Exhibit 4.2 of the
Company's Form 8-K filed on March 26, 1999
</TABLE>
(b) On March 26, 1999, the Company filed a report on Form 8-K with respect to
its reorganization into a Delaware holding company.
-21-
<PAGE> 22
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: May 17, 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
-22-
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,017,294
<SECURITIES> 0
<RECEIVABLES> 31,484,131
<ALLOWANCES> 1,200,000
<INVENTORY> 28,096,194
<CURRENT-ASSETS> 79,230,174
<PP&E> 587,133,401
<DEPRECIATION> 222,451,306
<TOTAL-ASSETS> 584,073,195
<CURRENT-LIABILITIES> 39,253,158
<BONDS> 0
0
0
<COMMON> 7,253,332
<OTHER-SE> 124,652,314
<TOTAL-LIABILITY-AND-EQUITY> 584,073,195
<SALES> 42,511,387
<TOTAL-REVENUES> 45,088,091
<CGS> 29,325,127
<TOTAL-COSTS> 42,141,253
<OTHER-EXPENSES> 164,300
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<INTEREST-EXPENSE> 7,338,940
<INCOME-PRETAX> (4,220,117)
<INCOME-TAX> (1,205,000)
<INCOME-CONTINUING> (3,015,117)
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