SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM
10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal
year ended December 31, 1999
Oglebay Norton
Company
(Exact name of
Registrant as specified in its charter)
Delaware
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34-0158970
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| (State or other
jurisdiction of |
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(IRS
Employer |
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| incorporation or
organization) |
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Identification
No.) |
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1100 Superior
Avenue — 21st Floor,
Cleveland, Ohio
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44114-2598
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| (Address of
principal executive offices) |
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(Zip
Code) |
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| Registrant
’s telephone number, including Area Code: (216)
861-3300 |
Securities
registered pursuant to Section 12(g) of the Act:
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Common Stock
$1 Par Value
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Rights to
Purchase
Preferred Stock
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lndicate 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 ¨
Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein and will not be contained, to the best of Registrant’s
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
x
The aggregate market value of voting stock
held by non-affiliates of the Registrant at March 10, 2000 (calculated by
excluding the total number of shares reported under Item 12 hereof) was
$77,074,000.
Shares of Common Stock with associated
Rights to Purchase Preferred Stock outstanding at March 10, 2000:
4,960,296.
Portions of the following document are
incorporated by reference: Schedule 14A Information containing the
Registrant’s definitive proxy statement, dated March 14, 2000 for the
Registrant’s 2000 Annual Meeting of Stockholders.
PART
I
ITEM 1.
BUSINESS
A.
(1) About The Company
Oglebay Norton Company, founded in 1854 and
headquartered in Cleveland, Ohio, mines, processes, transports and markets
industrial minerals and enjoys significant market share in each of its
business segments. In March 1999, the Company reorganized into a Delaware
holding company. Each business segment consists of one or more
subsidiaries. The primary Standard Industrial Code for the Company is
1400. The Company serves a broad customer base primarily in four major
categories: Building Products, Energy, Environmental and Industrial. The
principal offices of the Company are located at 1100 Superior Avenue, 21st
floor, Cleveland, Ohio 44114-2598. The Company benefits from long-term
relationships with market-leading customers, many of which have multi-year
purchase contracts with the Company. In addition, the Company owns
high-quality assets, including (1) strategically located, high-quality
limestone, industrial sand and mica reserves, (2) modern mineral
extraction equipment and facilities, and (3) a well-maintained fleet of
marine transportation vessels.
The Company (1) mines and processes
limestone and manufactures lime at eight operations, six of which are
located throughout the eastern United States, through its Lime and
Limestone business segment, (2) mines and processes industrial sands
and copper slag at eight operations, located in Ohio and the southwestern
United States, through its Industrial Sands business segment, and
(3) operates a fleet of twelve self-unloading vessels on the Great Lakes,
transporting iron ore, coal, limestone and other dry bulk cargo between
U.S. ports through its Marine Services business segment. In
addition, the Company created on December 1, 1999 a Specialty Minerals
business unit which mines and processes mica and related minerals at
operations in North Carolina and New Mexico. The Company believes that its
Lime and Limestone business is one of the six largest producers of lime
and one of the largest producers of limestone in the United States; that
its Industrial Sands business is the fourth largest producer of industrial
sands in the United States; and its Specialty Minerals business is the
largest producer of mica in the United States. The Marine Services
business segment, which is one of four leading providers of marine
transportation between U.S. ports on the Great Lakes, has an approximate
20% share of such market.
During 1999, the Company completed three
acquisitions, the largest of which was the purchase of mica assets from
Franklin Industries. These assets are the basis upon which the Company
created Oglebay Norton Specialty Minerals, Inc., a wholly owned
subsidiary. In addition, the Company purchased a lime and limestone quarry
and production facility located in Winchester, Virginia from W.S. Frey
Company and a copper abrasives business located in El Paso, Texas from
Parker Brothers, Inc. Both of these acquisitions were strategic to the
growth of the lime and limestone and industrial sands segments,
respectively. None of these acquisitions are material to the financial
results or financial position of the Company.
In addition to completing three strategic
acquisitions, the company completed four divestitures during 1999. The
companies and assets sold were non-strategic to the future growth of the
company. Global Stone Ingersoll, Ltd. and Global Stone Detroit Lime
Company were acquired as part of the 1998 acquisition of Global Stone
Company. These facilities did not meet management’s expectations for
future growth and therefore the operations were sold. The company also
divested a stone dock it acquired in its 1998 acquisition of Global Stone
Port Inland and the stock of Laxare, Inc. These transactions were
completed in the third and fourth quarters of 1999, respectively. The dock
was located in Detroit, Michigan and was sold to a customer in that
region. Laxare, Inc. was a coal property the Company had owned for more
than 25 years. The company is no longer actively involved in the mining
and processing of coal.
(2) Business Strategy
The Company’s strategy for enhancing
its market leadership position and maximizing profitability and cash flow
includes the following:
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Pursue growth
through selective acquisitions. The Company
intends to continue to make strategic acquisitions of complementary
businesses to:
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supplement
internally generated growth;
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increase the
breadth of product offerings;
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add customers and
expand geographic coverage;
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take advantage of
industry consolidation; and
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capitalize on the
Company’s expertise in the industrial minerals
industry.
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The Company uses strict criteria to evaluate
business acquisition possibilities, including existing customer
relationships, potential cost reductions and synergies, return on
investment parameters and anticipated impact on earnings per
share.
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Capitalize on
increasing demand for industrial minerals for building materials.
The company has secured significant regional
market share in the building materials market, particularly with respect
to construction aggregates and industrial fillers markets. Limestone,
industrial sands and mica are used to varying degrees by building
materials manufacturers as filler material in paints, joint cements,
roofing shingles, carpet backing, and floor and ceiling tiles. In
addition, the Company’s limestone is used as construction aggregate
infrastructure projects such as roads. The Company also packages
limestone and sand for sale at the nation’s leading home centers
and regional lawn care distributors for commercial and home lawn and
garden care. With increased presence in the building materials market,
the Company also intends to capitalize on its customer relationships by
providing better service and a broader selection of minerals for
customers to purchase.
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Capitalize on
market opportunities in the energy segment.
The Company’s industrial sands segment is well positioned
to serve the increased demand for high-purity silica sands used by
oil-well service companies in the oil-well fracturing process. In
addition, the Marine Services segment has continued to increase its
share of coal transported for use by electric utilities in the Great
Lakes region.
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Capitalize on
increasing demand for minerals for environmental purposes.
Public concerns over environmental issues, reflected in
recent legislative changes in the United States, have resulted in an
increase in the demand for lime and limestone used in environmental
clean-up applications, including flue gas desulfurization, municipal
waste sludge treatment, industrial water treatment, drinking water
treatment and hazardous waste remediation. The Clean Air Act, for
example, requires the reduction of emissions, particularly sulfur, from
certain machinery. Lime is the principal agent used in the
desulfurization process. The Company believes that it is well positioned
to capitalize on this increasing demand. The Company is also
experiencing increased demand for its high-purity silica sands for use
in water filtration systems.
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Capitalize as
a consolidator of industrial minerals: The
minerals industry has been consolidating rapidly. The company has
actively participated in the consolidation and intends to continue to be
a consolidator by capitalizing on opportunities to expand its market
presence in specific geographic regions and markets in which
consolidation offers economic synergies. These markets include building
materials, glass-making, industrial coatings and aggregates.
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Maximize fleet
efficiency. The Marine Services business
segment strives to efficiently control the dispatch and movement of its
vessel fleet. This function is performed centrally and is key to
maximizing profitability. The segment attempts to negotiate contracts
and dispatch vessels to facilitate backhauls, improving efficiency and
profitability by providing tonnage on a vessel’s return trip, when
it would
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normally travel
without cargo. The business segment also attempts to maximize the fleet
’s efficiency through careful scheduling and continuous tracking of
weather, dock and traffic conditions. In addition, the fleet benefits
from an extensive preventive maintenance program. Every vessel is
brought into top mechanical condition during the winter and maintained
during the shipping season through continuous attention to maintenance
needs. Regular inspections and ongoing electronic monitoring of
equipment enable mechanics to repair or replace machinery before it
fails.
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Continue
decentralized management of operating units. The
Company’s business segments are managed on a decentralized basis by
operating managers, while the corporate management team provides
strategic direction and support, and helps identify and evaluate
potential acquisition opportunities. The Company believes that its
decentralized corporate culture eliminates many of the inefficiencies
that can result from a highly centralized corporate structure. Operating
managers have decision-making authority and are compensated based on the
profitability of their respective business segment. The Company also
believes that this philosophy results in better customer service by
allowing each operating segment the flexibility and autonomy to
implement policies and make decisions based on first-hand assessments of
individual customer requirements.
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B.
Principal Products and Services
1.
Lime and Limestone
The Company’s Lime and Limestone
business segment is headquartered in Roswell, Georgia. Through a series of
transactions in 1999 and 1998, the Company has become a major North
American supplier of crushed and ground limestone, construction
aggregates, chemical limestone, lawn and garden products and lime serving
a broad customer base in a variety of industries. Company products are
used primarily as filler in building materials, as aggregate for
construction of schools, hospitals, shopping centers and highways, as an
environmental cleaning agent for flue gas desulferization, waste water
treatment and soil stabilization and as a chemical in steel-making,
paper-making and glass-making.
Industry
Limestone accounts for about three-quarters
of crushed stone production in the United States. Crushed limestone has
four primary end uses: construction aggregates and building materials;
chemical and metallurgical processes; cement and lime manufacturing; and
agricultural purposes.
High-purity chemical limestone may be
processed into value-added products, such as lime or limestone fillers, or
sold as chemical limestone for use in manufacturing products as diverse as
poultry feed mixtures, fiberglass, and roofing shingles. Fillers, which
are finely ground limestone powders, are used in a wide range of
manufacturing processes including vinyl flooring, carpet backing,
adhesives, sealants and jointing compounds for wallboard.
Lime is a value-added product, derived from
limestone, and is widely used in a variety of manufacturing processes and
industries, including iron and steel, pulp and paper, chemical, air
purification, sewage, water and waste treatments, agricultural and
construction. The wide range of end-uses and markets for lime offers some
protection from the economic cycles experienced by individual sectors such
as the steel industry. In addition, a high proportion of lime is sold into
end-uses that have year-round requirements largely unaffected by the
weather.
Operations
The Company’s Lime and Limestone
business segment produces products for all four primary end uses described
above. The segment has eight lime and/or limestone operations in North
America that collectively
extract and process high purity limestone. These operations are located in
Tennessee, Virginia (3 operations), Michigan, Pennsylvania, Oklahoma and
Georgia.
The segment currently operates nine open pit
quarries and four underground mines. At the quarry operations, limestone
is extracted from the ground by traditional drilling and blasting
techniques. In an open pit quarrying operation, the high purity limestone
is often covered by an overburden of construction grade limestone that
must first be removed. This overburden is used whenever possible to
produce construction aggregates, usually in a dedicated crushing plant, in
order to minimize the net costs of extraction. Following extraction,
trucks or trains are used to deliver the “as-blasted” limestone
to a primary crusher. It is then processed through several stages of
crushing and screening to form products that are saleable as chemical
limestone or ready for further processing into aggregates, lime, fillers
and other value-added products. The Company assesses mineral reserves at
all of its quarries and mines utilizing external consulting geologists and
mining engineers.
High-purity chemical limestone is processed
into lime by heating it in a kiln. At December 31, 1999, the Company
believes its daily lime production capacity is approximately 4,500 tons.
The capacity over a 24-hour period cannot be projected over a full
calendar year because kilns require regular planned outages for
maintenance and equipment is subject to unplanned outages customary with
any mechanical plant. Typically, a kiln will operate between 80% and 90%
of the available hours in any year.
Customers
Transportation cost represents a significant
portion of the overall cost of lime and limestone. As a result, the
majority of lime and limestone production is sold within a 200-mile radius
of the producing facility. The Company believes that its lime and/or
limestone operations are strategically located near major markets. The
segment’s customers vary by the type of limestone products they
demand: lime, chemical limestone or construction aggregate.
In general, demand for lime and limestone
correlates to general economic cycles, principally new construction
demand, population growth rates and government spending on road
construction, which affect the demand for our customers’ products and
services. The segment has a broad customer base covering all sectors of
the demand for lime and limestone. The Company estimates that the building
materials and construction, industrial and chemical and environmental
markets account for approximately 55%, 29% and 16%, respectively, of the
business segment’s revenue.
Competition
Given that transportation cost represents a
significant portion of the overall cost of lime and limestone products,
competition generally occurs among participants in close geographic
proximity. In addition, the scarcity of high purity limestone deposits on
which the required zoning, extraction and emission permits can be obtained
serves to limit competition from start-up operations within the lime and
limestone market.
Lime is primarily purchased under annual
contracts. For many customers, the cost of lime is quite small in
comparison to their overall production costs. For 1999, the Company
estimates that the five largest lime producers in North America accounted
for approximately 72% of total industry capacity, with the Company’s
business segment accounting for approximately 6%. The four largest
companies with which the Company competes are privately owned.
The building materials and construction
aggregate industry in North America is highly fragmented. Many of the
active operations are small scale or wayside locations operated by state
or local governments, usually to meet the requirements of highway
contracts in more remote locations. There are many companies whose
positions are substantial and often centered on a particular geographic
region, including Vulcan Materials Corporation, Martin Marietta Materials
Inc. and Lafarge Corporation.
2.
Industrial Sands
The Company’s Industrial Sands segment,
headquartered in Phoenix, Arizona, is engaged in the mining and processing
of industrial sands for the oil drilling, construction, glass-making,
filtration, landscaping and ceramic and fiberglass industries and the
processing of coated sands and silica-free abrasives.
Industry
Industrial sands, often termed “silica
”, “silica sand” and “quartz sand”, include high
silicon dioxide content sands. While deposits of more common construction
sand and gravel are widespread, industrial sand deposits are limited. The
special properties of industrial sand—purity, grain size, color,
inertness, hardness and resistance to high temperatures—make it often
irreplaceable in a variety of industrial applications. Higher silica
content allows for more specialized, high margin applications than
construction sand and gravel, such as glass, ceramics, fiberglass,
foundry, abrasive, hydraulic fracturing (oil and gas drilling), and a
variety of other high margin applications.
The demand for industrial sands is driven by
a number of factors depending on end use. For example, silica flour, which
is used in the production of fiberglass, paint and ceramics, is used
primarily in new construction, making demand for silica flour highly
correlated with housing starts in the geographic markets served. Demand
for frac sands, used by oil drilling services companies, is correlated
with the price per barrel of oil. In specialized applications, the
physical properties of sand, such as strength, color, shape and texture
can also be important.
Operations
The Industrial Sands business segment
products include: (i) fracturing sands, which are used by oil drillers to
hold rock structures open; (ii) whole grain sands and silica flour, which
is used in glass-making; (iii) filtration sands, which are used in liquid
filtration systems; (iv) recreational sands, which are used in the
construction of golf courses and other recreation fields as well as in
general landscaping applications; (v) specialty construction/industrial
sands, which are used in the construction industry; (vi) coated sand and
silica-free copper abrasives for industry; and (vii) silica flour, which
is used in the manufacture of building materials, fiberglass and
ceramics.
The Industrial Sands segment has eight
operations located in Ohio and the southwestern United States. The
business segment currently operates four open pit quarries with integrated
processing plants, one processing plant supported by surface sand
purchased under a long-term contract, one processing plant supported by
copper slag purchased under a long-term contract and two remote processing
plants. Once extracted, the sand is washed to remove impurities like clay
and dirt. The sand is then dried, screened and separated into different
sized granules. At certain of the facilities, the sand is also pulverized
into powder for use in ceramic and other applications. All of the segment
’s industrial sands operations have railroad and/or highway
access.
Customers
The segment has a broad customer base
covering all sectors of demand for industrial sands. Similar to lime and
limestone, transportation cost represents a significant portion of the
overall cost of industrial sands, and the majority of production is sold
within a 200-mile radius of the producing facility. However, for the
higher-margin industrial sands materials, representing sands with
particular qualities, competition occurs among sand producers in different
geographic regions since transportation costs are less restrictive.
Customers of the Industrial Sands segment participate in the oil well
service, specialty construction, glass, fiberglass, ceramic, recreational,
foundry and filtration industries. Within these industries, sand is used
for a wide variety of applications, from fracturing sands used to increase
oil well production to sands used in the manufacture of roofing shingles,
stucco and other building materials to sands used in playground and golf
course construction. Demand for industrial sands used for oil well
fracturing was down during the first nine months of 1999, but increased
significantly during the fourth
quarter, due in part to increased activity in the domestic oil and gas
industry. Demand for industrial sands has been strong in recent years,
including 1999, due primarily to construction activity in the southwest.
In general, demand for industrial sands correlates to general economic
cycles, including the price of oil, new construction demands and
population growth rates, which affect the demand for our customers’
products and services. The Company estimates that the building materials
and construction markets, oil field/frac and other industrial uses
accounted for approximately 30%, 24% and 38%, respectively, of the
business segment’s revenue.
Competition
As stated above, since transportation cost
represents a significant portion of the overall cost of industrial sands,
competition generally occurs among participants in close geographic
proximity. Furthermore, the scarcity of high-purity sand deposits on which
the required zoning and extraction permits can be obtained serves to limit
competition. Management estimates that the Industrial Sands segment
accounts for approximately 11% of the U.S. industrial sands market, making
it the fourth largest industrial sand producer in the United States. Its
principal competition comes primarily from three companies, including
Unimin Corp., U.S. Silica Co., a wholly-owned subsidiary of Better
Minerals, Inc. and Fairmount Minerals Ltd.
3.
Marine Services
The Company’s Marine Services business
segment is headquartered in Cleveland, Ohio and operates the largest fleet
of self-unloading vessels on the Great Lakes in terms of number of vessels
and the third largest such fleet in terms of cargo capacity. The fleet
primarily serves the integrated steel, electric utility and construction
industries through the transportation of iron ore, coal, limestone and
other dry bulk commodities.
Industry
Great Lakes shipping demand is generally
related to the state of the economy and to the overall level of
manufacturing activity. Moreover, the Great Lakes marine transportation
business is seasonal. The season is affected by weather conditions (such
as the waterways freezing over), the closing/opening of the locks between
the lakes, water levels of the lakes and rivers and customer demand for
service. These factors cause the actual number of days of operation to
vary each year. Annually, the locks close around January 15 and re-open
around March 25. Management believes that the Great Lakes shipping market
in which its fleet competes operated at a utilization rate approaching
full capacity for the last three years.
Operations
The Marine Services fleet focuses primarily
on the bulk transportation of iron ore, coal and limestone for
approximately 30 customers. Substantially all the fleet’s
transportation services are conducted between U.S. ports on the Great
Lakes, including Cleveland, Detroit, Milwaukee, Toledo and Duluth. The
largest vessels in the fleet, the 1,000-foot M/V Columbia Star and M/V
Oglebay Norton, transport primarily iron ore and coal. Management believes
that these 1,000-foot vessels, of which there are 13 operating on the
Great Lakes, are the most efficient and desirable method of transporting
these commodities. The smaller vessels also transport limestone in
addition to iron ore and coal and are subject to more flexible scheduling.
Generally, the transportation of iron ore represents the highest revenue
per ton, but it also often involves the longest routes. Many factors
contribute to the overall profitability of a particular vessel and
commodity. Delays, including those caused by weather, dock congestion and
lake and river traffic also effect profitability. The key to maximizing
profitability is effective control of the dispatch and movement of the
vessels in the fleet. Through continuous monitoring of fleet sailing
patterns and weather, dock and traffic conditions, delays can be
minimized, increasing the fleet’s profitability.
In addition to the Marine Services fleet,
the segment operates a bulk material dock facility in Cleveland, Ohio. The
dock facility is operated under a ten-year agreement with the
Cleveland-Cuyahoga County Port Authority expiring in March 2007 (with an
option to extend for an additional ten years). The dock facility receives
cargo from Great Lakes vessels, stores cargo as needed and transfers cargo
for further shipment via rail
or water transportation. While the Cleveland dock facility handled only iron
ore cargoes during 1999, it can also be utilized for the transshipment of
in-bound and out-bound cargoes of other dry-bulk commodities such as coal,
sand, limestone, magnetic concentrate ore, salt, cement and coke. The dock
operates throughout the year, although the winter months are dedicated
primarily to loading stored material on trains rather than unloading from
vessels.
Customers
The segment has long-established
relationships with many of its customers and provides services to many of
them pursuant to long-term contracts. Management estimates that
approximately 80% of the tonnage hauled by the vessel fleet was shipped
pursuant to multi-year contracts. To a certain extent, demand for marine
transportation services correlates to general economic cycles, including
steel production, and construction activity in the Great Lakes region. The
segment’s customers include integrated steel manufacturers (which use
our services to transport iron ore, coal and limestone), electric utility
companies (which use our services to transport coal) and chemical
limestone and construction aggregate producers and purchasers (which use
our services to transport limestone). The segment has three principal iron
ore customers including The LTV Corporation and AK Steel Holding
Corporation, eight principal coal customers including Detroit Edison
Company, and approximately 15 limestone customers. The Company estimates
that integrated steel customers account for approximately 50% of the
segment’s revenues.
Competition
The most important competitive factors
impacting the Marine Services segment are price, customer relationships
and customer service. Management believes that customers are generally
willing to continue to use the same carrier assuming such carrier provides
satisfactory service with competitive pricing. The vessel fleet competes
only among U.S. flag Great Lakes vessels because of the U.S. federal law
known as the Jones Act. The Jones Act requires that cargo moving between
U.S. ports be carried in a vessel that was built in the United States, has
a U.S. crew, and is owned (at least 75%) by U.S. citizens or corporations.
As a result, Canadian-flag Great Lakes vessels or foreign-flag oceanic
vessels do not carry dry bulk cargo between U.S. ports. Moreover, the size
limitation imposed by the St. Lawrence Seaway prevents large oceanic
vessels from entering the Great Lakes. The competitive landscape has
remained relatively stable over the last ten years with the overall number
of vessels available for service decreasing from 75 to 69. The fleet
principally competes against three other similar-sized U.S. flag Great
Lakes commercial fleets, American Steamship Company, The Interlake
Steamship Company and U.S.S. Great Lakes Fleet, Inc. It also competes with
certain companies that operate smaller captive fleets and, to a lesser
extent, with rail and truck transportation companies serving the Great
Lakes region.
4.
Other Businesses
On December 1, 1999, the company acquired
mica mining and processing assets from Franklin Industries, Inc., creating
the basis for a new subsidiary, Oglebay Norton Specialty Minerals, Inc.,
an Ohio corporation. Oglebay Norton Specialty Minerals, Inc. mines and
processes mica for use primarily in the building materials industry as
well as in certain other industrial applications. The company mines and
processes mica from two facilities, located in North Carolina and New
Mexico. The company maintains its headquarters in Cleveland,
Ohio.
Mica is used as functional filler in
building materials for its unique physical characteristics, including
color, flexibility, durability, thermal properties and weight. It is used
in the manufacture of numerous industrial and consumer products such as
joint compound, paints, automotive sound deadening materials,
thermoplastics, coatings and even cosmetics.
Competition is international. Unlike
limestone and sand, transporting mica long distances is not economically
prohibitive because of its high unit value. Competition is primarily from
privately-held international businesses with the only public competitors
being Zemex, Inc., and Engelhard Corporation.
C.
Environmental, Health and Safety
Considerations
The Company is subject to various
environmental laws and regulations imposed by federal, state and local
governments. In 1999, the Company commenced an Environmental, Health and
Safety Initiative for continuous improvement in the Company’s
performance in this area. Although the Company cannot reasonably estimate
future costs related to compliance with these laws and regulations, costs
incurred to comply with environmental regulations historically have not
been outside the ordinary course of business. It is possible that the
Company’s future operating results could be affected by future costs
of environmental compliance, however, management believes that such costs
will not have a material adverse effect on the Company’s consolidated
financial position. The Company is unable to predict the effects of future
environmental laws and regulations upon its business.
D.
Employees
At December 31, 1999, the Company employed
approximately 1,720 people, of whom 200 are management. About one-half of
the Company’s employees are unionized, and the Company is party to
nine collective bargaining agreements with various labor unions. The
Company believes that it maintains good relations with each of these
unions. During 1999, the collective bargaining agreements covering
employees at the Ingersoll, Ontario operation and the unlicensed crew of
the Marine Services vessel fleet expired. Both agreements were
successfully renegotiated. The Company no longer owns the Ingersoll
operation. In 2000, collective bargaining agreements covering employees at
our Tennessee, New Mexico and Ohio operations and the licensed crew of the
Marine Services vessel fleet will be negotiated commencing in the second
quarter of 2000.
ITEM 2.
PROPERTIES
The Company’s principal operating
properties are described below. The Company’s executive offices are
located at 1100 Superior Avenue, Cleveland, Ohio, under a sublease
expiring on March 31, 2003. The total area involved is approximately
55,000 square feet.
Location
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Use
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Owned/
Leased
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Reserves(1)
(years remaining)
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| Corporate
Headquarters |
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| Cleveland,
Ohio |
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Offices |
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Leased |
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N/A |
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| Marine
Services |
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| Cleveland,
Ohio |
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Marine
transportation
Bulk commodity dock |
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Leased |
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N/A |
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| Cleveland,
Ohio |
|
Offices |
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Leased |
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N/A |
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| Industrial
Sands |
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| California
Operations: |
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Orange County, California |
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Sand quarry and
processing plant |
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(2) |
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13 |
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(San Juan Capistrano) |
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Riverside, California |
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Sand processing
plant |
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Owned |
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Supplied by third
parties |
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Bakersfield, California |
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Sand processing
plant |
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(3) |
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Supplied by Voca
facility |
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| Ohio
Operations: |
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|
|
|
|
| |
|
Glenford and Howard |
|
Sand quarries and
processing
plants |
|
Owned |
|
16 and 24,
respectively |
| |
| Texas
Operations: |
|
|
|
|
|
|
| |
|
Brady and Voca |
|
Sand quarries and
processing
plants |
|
Owned |
|
70 |
| |
|
El Paso, Texas |
|
Copper slag
processing plant |
|
|
|
N/A |
| |
| Colorado Springs,
Colorado |
|
Sand processing
plant |
|
(4) |
|
5 |
| |
|
| Lime and
Limestone |
|
|
|
|
|
|
| Luttrell,
Tennessee |
|
Limestone mine
and lime works |
|
(5) |
|
16 |
| |
| Chemstone
operations: |
|
|
|
|
|
|
| |
Strasburg, Middletown, And
Winchester,
Virginia |
|
Limestone
quarries, processing
plants and lime works |
|
(6) |
|
More than 100,
collectively |
| |
| York,
Pennsylvania |
|
Limestone
quarries and processing
plants |
|
Owned |
|
31 |
| |
| Marble City,
Oklahoma |
|
Limestone mine
and lime works |
|
Owned |
|
60 |
| |
| Buchanan,
Virginia |
|
Limestone
quarries and processing
plants |
|
Owned |
|
44 |
| |
| Gulliver,
Michigan |
|
Limestone
quarries, ship loading
facility and processing plant |
|
Owned/Leased |
|
43 |
| |
| Filler Products
Operations: |
|
|
|
|
|
|
| |
Chatsworth, Ellijay and
Cisco,
Georgia |
|
Limestone mines
and processing
plants |
|
(7) |
|
49 |
| |
|
| Other
Businesses |
|
|
|
|
|
|
Kings Mountain,
North
Carolina |
|
Mica mines and
processing plant |
|
Leased |
|
21 |
| |
| Velarde, New
Mexico |
|
Mica mines and
processing plant |
|
Owned |
|
50 |
(1)
|
Certain estimates
of reserves are based on the life of a mineral reserve and not the
actual reserves remaining at the location.
|
(2)
|
The processing
plant is owned and the sand quarry is subject to a mineral lease
agreement through 2013.
|
(3)
|
The sand
processing plants are owned, however, they are located on land, which is
leased through December 31, 2000 with a right to renew for an additional
5-year term.
|
(4)
|
The processing
plant is owned and the operation acquires feedstock under supply
agreements that provide six years of reserves at current production
levels.
|
(5)
|
The lime works is
owned and the limestone mine is subject to a mineral lease agreement
through 2015.
|
(6)
|
The limestone
quarry and lime works at Strasburg and Winchester and the processing
plant at Middletown are owned. The limestone quarry at Middletown is
subject to a 100-year mineral lease agreement, however, it is estimated
that there are 45 years of reserves remaining on the
property.
|
(7)
|
The processing
plants are owned and the limestone mines are subject to a 99-year
mineral lease agreement, however, it is estimated that there are 50
years of reserves remaining on the properties.
|
ITEM 3.
LEGAL PROCEEDINGS
The Company and certain of its subsidiaries
are involved in various claims and routine litigation incidental to their
businesses, including claims relating to the exposure of persons to
asbestos and silica. The full impact of these claims and proceedings in
the aggregate continues to be unknown. The Company believes that these
claims and proceedings are covered by insurance and are unlikely to have a
material adverse effect on the Company’s financial
position.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
No matter was submitted to a vote of the
Company’s security holders, through the solicitation of proxies or
otherwise, during the fourth quarter of the fiscal year covered by this
report.
PART
II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company’s common stock is traded on
the NASDAQ National Market (NASDAQ/NMS Symbol: OGLE). The Company had 422
and 413 stockholders of record at December 31, 1999 and 1998,
respectively. During the first quarter of 1999, the Company issued 50,000
unregistered shares of common stock as part of the consideration for the
Global Stone Winchester acquisition. The following is a summary of the
market range and dividends for each quarterly period in 1999 and 1998 for
the Company’s common stock.
| |
|
Market
Range
|
|
Dividends
|
Quarterly
Period
|
|
High
|
|
Low
|
| 1999 |
|
|
|
|
|
|
| 4th |
|
$25.00 |
|
$17.63 |
|
$0.20 |
| 3rd |
|
23.75 |
|
19.56 |
|
0.20 |
| 2nd |
|
24.88 |
|
20.88 |
|
0.20 |
| 1st |
|
27.75 |
|
17.94 |
|
0.20 |
| |
|
| 1998 |
|
|
|
|
|
|
| 4th |
|
$27.75 |
|
$22.38 |
|
$0.20 |
| 3rd |
|
41.00 |
|
26.50 |
|
0.20 |
| 2nd |
|
50.50 |
|
39.50 |
|
0.20 |
| 1st |
|
41.25 |
|
36.00 |
|
0.20 |
ITEM 6.
SELECTED FINANCIAL DATA
OGLEBAY NORTON
COMPANY AND SUBSIDIARIES
(Dollars and
shares in thousands, except per share amount)
| |
|
Year Ended
December 31
|
| |
|
1999
|
|
1998
|
|
1997
|
|
1996
|
|
1995
|
| OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net sales and
operating revenues |
|
$293,902 |
|
$238,852 |
|
$145,185 |
|
|
$129,697 |
|
$126,373 |
|
|
| Operating
income |
|
46,544 |
|
37,035 |
|
24,465 |
|
|
11,653 |
|
12,973 |
| Income from
continuing operations |
|
13,646 |
|
12,036 |
|
18,356 |
|
|
11,039 |
|
10,624 |
| Discontinued
operations |
|
-0- |
|
-0- |
|
(2,104 |
) |
|
4,518 |
|
4,737 |
| Net
income |
|
13,646 |
|
12,036 |
|
16,252 |
|
|
15,557 |
|
15,361 |
|
|
| PER SHARE
DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) per
common share—basic: |
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations |
|
$
2.81 |
|
$
2.52 |
|
$
3.84 |
|
|
$
2.26 |
|
$
2.15 |
|
Discontinued
operations |
|
-0- |
|
-0- |
|
(0.44 |
) |
|
0.93 |
|
0.95 |
|
Net income |
|
2.81 |
|
2.52 |
|
3.40 |
|
|
3.19 |
|
3.10 |
|
|
| Income (loss) per
common share—assuming dilution: |
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations |
|
2.80 |
|
2.51 |
|
3.81 |
|
|
2.26 |
|
2.15 |
|
Discontinued
operations |
|
-0- |
|
-0- |
|
(0.44 |
) |
|
0.92 |
|
0.95 |
|
Net income |
|
2.80 |
|
2.51 |
|
3.37 |
|
|
3.18 |
|
3.10 |
|
|
| Dividends |
|
0.80 |
|
0.80 |
|
0.75 |
|
|
0.65 |
|
0.60 |
|
|
| Market price at
December 31 |
|
23.75 |
|
24.75 |
|
41.00 |
|
|
21.88 |
|
18.63 |
| Book value at
December 31 |
|
28.62 |
|
26.64 |
|
24.77 |
|
|
22.01 |
|
19.52 |
|
|
| Shares of common
stock outstanding |
|
4,927 |
|
4,765 |
|
4,752 |
|
|
4,835 |
|
4,932 |
| Average shares of
common stock—basic |
|
4,857 |
|
4,772 |
|
4,785 |
|
|
4,876 |
|
4,948 |
Average shares of
common stock—assuming
dilution |
|
4,870 |
|
4,786 |
|
4,816 |
|
|
4,891 |
|
4,948 |
|
|
| FINANCIAL
CONDITION |
|
|
|
|
|
|
|
|
|
|
|
| Capital
expenditures |
|
$
25,939 |
|
$
19,119 |
|
$
24,554 |
|
|
$
5,573 |
|
$
5,968 |
| Working
capital |
|
38,731 |
|
27,311 |
|
37,955 |
|
|
28,561 |
|
24,780 |
| Total
assets |
|
568,099 |
|
565,624 |
|
263,224 |
|
|
234,696 |
|
247,220 |
| Capitalization: |
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
301,706 |
|
312,066 |
|
47,533 |
|
|
37,141 |
|
52,117 |
|
Stockholders’
equity |
|
141,009 |
|
126,933 |
|
117,716 |
|
|
106,449 |
|
96,265 |
Results for 1999 include Specialty Minerals
and Global Stone Winchester from their respective dates of acquisition.
Results in 1998 include Global Stone, Port Inland and Colorado Silica from
their respective dates of acquisition. Discontinued operations include the
Company’s Engineered Materials business segment discontinued in 1997
and Iron Ore business segment discontinued in 1996.
ITEM 7.
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 certain safe harbor provisions 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, Mid-Atlantic and
California construction activity; (6) successful negotiations of labor
agreements; (7) the loss or bankruptcy of major customers and (8) changes
in environmental laws. The Company did not have any year 2000 failures
with its information system hardware or software. Expenditures incurred by
the Company during its year 2000 remediation efforts were not material.
The Company also did not experience any material year 2000 software
conversion failures of vendors, suppliers or customers. Fluctuations in
oil prices have both a positive and negative impact on the Company. High
oil prices generally result in more drilling activity, positively
impacting our Industrial Sands business segment, while at the same time
increasing the Marine Services fleet’s operating costs. The Company
does not anticipate a significant increase in drilling activity during
2000.
Financial
Condition
In December of 1999 the Company acquired the
assets of Franklin Industries’ mica business (subsequently renamed
Oglebay Norton Specialty Minerals Inc. (“Specialty Minerals”))
for a purchase price of $32,000,000. Specialty Minerals is grouped with
Corporate and Other. Also in 1999 the Company acquired the assets of the
W.S. Frey Company (“Global Stone Winchester”) for $12,008,000 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 non-compete and royalty
payments of $3,500,000 of which $510,000 was paid at the acquisition date
and the balance was deferred. Global Stone Winchester is part of the Lime
and Limestone segment. The above acquisitions were accounted for as
business combinations applying the purchase method of accounting. Assuming
the above acquisitions had taken place at the beginning of 1998, proforma
results for 1999 and 1998 would not be materially different from the
Company’s actual results. The purchase price allocations for
Specialty Minerals will be finalized in 2000 after the asset and liability
valuations are completed.
During 1999, the Company sold in separate
transactions the stock of its (i) Global Stone Detroit Lime Company (
“Detroit Lime”) and (ii) Global Stone Ingersoll Ltd. (
“Ingersoll”) subsidiaries to affiliates of Carfin S. A., a
Belgian corporation and member of the Carmuese Group. The sale of Detroit
Lime netted proceeds of $15,250,000 in August 1999, while net proceeds of
$45,700,000 were received on the sale of Ingersoll in September 1999. The
combined net proceeds of $60,950,000 were used to reduce amounts
outstanding on the Company’s Senior Credit Facility. In finalizing
the purchase price allocation for the Global Stone acquisition, the
underlying assets and liabilities of Detroit Lime and Ingersoll were
adjusted to fair market value based upon an agreement entered into during
the second quarter of 1999 to sell these entities. The re-allocation of
the Global Stone purchase price resulted in a $23,300,000 reduction in
goodwill.
In December of 1999, the Company announced
that it had reached an agreement to acquire Michigan Limestone Operations
Limited Partnership (“Michigan Limestone”) and the Company is in
the process of arranging financing for this acquisition. The transaction
is expected to close during the second quarter of 2000.
During 1998, the Company acquired the assets
and liabilities of Global Stone Inc. (“Global Stone”) and
Colorado Silica Sand, Inc. (“Colorado Silica”) and the assets of
the Port Inland, Michigan operations of Minerals Technologies, Inc.
(subsequently renamed Global Stone Port Inland (“Port Inland”))
and Filler Products, Inc. (subsequently renamed Global Stone Filler
Products (“Filler Products”)). The operating results of Global
Stone, Port Inland and Filler Products formed the Company’s Lime and
Limestone segment, while the operating results of Colorado Silica are
included within the Industrial Sands segment. These acquisitions
(collectively referred to as the “1998 Acquisitions”) were
accounted for as business combinations applying the purchase method of
accounting. The combined purchase prices of these acquisitions, including
assumed debt, totaled $294,194,000.
During 1997, the Company’s Industrial
Sands segment acquired certain assets of a sand screening plant in
California and a supplier of blending sand and organic mixes in Ohio. The
combined purchase prices of these assets totaled $3,400,000.
The Company’s operating activities
provided cash of $22,496,000 in 1999 which was a decrease of 14%, or
$3,653,000, compared with $26,149,000 for 1998. Cash from operations
during 1999 decreased $1,194,000, or 5%, when compared with $23,690,000
for 1997. The Company’s net income was $13,646,000 in 1999 compared
with $12,036,000 and $16,252,000 in 1998 and 1997, respectively. The
decrease in operating cash primarily results from increased interest
expense paid. Interest payments in 1999 totaled $27,465,000 compared with
$13,593,000 in 1998 and $2,353,000 in 1997. Also, reducing cash from
operations is the increase in accounts receivable and inventories at
December 31, 1999. Some of the increase is attributable to having larger
revenues from Marine Services in December 1999 compared with 1998 due to a
longer sailing season. The increase is also the result of an increase in
sales from a few large oil service industry customers accounting for a
greater percentage of 1999 fourth quarter sales compared with 1998. The
increase in accounts receivable from 1999 compared with 1997 is primarily
the result of the 1998 Acquisitions. These reductions to cash from
operations were partially offset by increases in non-cash charges for
depreciation, depletion and amortization of $27,150,000 for 1999 compared
with $20,875,000 for 1998 and $8,947,000 for 1997 as a result of the
timing of the 1998 Acquisitions. Operating results of the Company’s
business segments are discussed in more detail under “RESULTS OF
OPERATIONS”.
Expenditures for property and equipment,
including vessel inspection costs, amounted to $25,939,000 in 1999
compared with $19,119,000 and $24,554,000 in 1998 and 1997, respectively.
During 1999, the Company’s Lime and Limestone segment had a full year
of capital expenditures for various expansion projects totaling
$17,087,000 compared with $8,322,000 in 1998 for the portion of the year
following the formation of the Lime and Limestone segment. In 1999, the
Company’s Industrial Sands segment expended $4,501,000, including
almost $1,000,000 on a quarry relocation project at the Brady, Texas
operation. The Marine Services segment expended $4,113,000 in 1999
primarily related to vessel automation and equipment improvements as well
as vessel inspection costs. In 1998, the Company’s Industrial Sands
segment expended $6,069,000, primarily on plant expansion projects at the
Brady, Texas and Orange County, California operations. The Marine Services
segment expended $4,703,000 in 1998 related to vessel inspection costs and
various equipment improvements. In 1997, the Company’s Industrial
Sands segment expended $4,108,000 and the Marine Services segment expended
$3,234,000. Expenditures in 1997 also include $17,000,000 for the
acquisition of two self-unloading vessels that the Company had been
operating under long-term leases. Expenditures for property and equipment
for 2000, excluding business acquisitions, are currently expected to
approximate $30,000,000. Of this amount, $16,400,000 would be classified
as spending on expansion projects.
In December 1997, the Company recognized a
net loss of $1,262,000 on the disposal of its Engineered Materials assets.
During 1998, the Company completed the sale of these assets and received
installment payments totaling $9,082,000. Discontinued operations are
described in Note C to the consolidated financial statements.
During May 1998, the Company negotiated a
$215,000,000 Senior Credit Facility with a group of banks in order to
finance a portion of the acquisition of Global Stone, refinance existing
debt and for general purposes. In March 1999, the Company’s Senior
Credit Facility was increased to $232,000,000 to finance the acquisition
of Global Stone Winchester. The variable interest rate on the Senior
Credit Facility approximated 8.2% at December 31, 1999. The Company’s
Senior Subordinated Notes, used to finance the Global Stone acquisition,
mature in February 2009 and have a fixed interest rate of 10%.
The Company generated free cash flow during
1999 which enabled it to reduce net borrowings by $12,127,000 on the
Senior Credit Facility. The 1998 Acquisitions increased net borrowings by
$208,021,000 in 1998. In addition with the acquisition of Global Stone,
the Company assumed additional debt and various capital leases totaling
$43,100,000 and $10,900,000, respectively, as of the acquisition date. In
1997, the Company’s net borrowings increased by $8,524,000
representing financing a $17,000,000 acquisition of two Marine Services
vessels under a ten-year term loan with a bank partially offset by regular
debt payments. As a result of the financing associated with the Global
Stone acquisition, this term loan was amended from a fixed interest rate
of 7.32% to a semi-variable interest rate not to exceed 8.32%. The
interest rate at December 31, 1999 was 8.1%.
The Company’s Senior Credit Facility
requires interest rate protection on fifty-percent of the Company’s
senior secured debt. The Company entered into separate interest rate swap
agreements with banks to substitute fixed interest rates for LIBOR-based
interest rates on notional amounts totaling $90,000,000 at December 31,
1999. The effect of these agreements, which expire in 2000 and 2001, was
to cap the Company’s interest rate at 7.48% on $90,000,000 of the
Senior Credit Facility. As a result of the swap agreements, interest
expense increased by $154,000 in 1999 and $55,000 in 1998. No such swap
agreements were in place during 1997.
The following tables provides information
about the Company’s derivative and other financial instruments that
are sensitive to changes in interest rates, which include interest rate
swaps and debt obligations. For debt obligations, the table presents cash
flows and related weighted average interest by expected maturity dates.
For interest rate swaps, the table presents notional amounts and weighted
average LIBOR interest rates by contractual maturity dates. Notional
amounts are used to calculate the contractual payments to be exchanged
under the contract. Weighted average variable rates are based on implied
forward LIBOR rates in the yield curve, plus a 2.0% margin for variable
rate long-term debt in 1999 and 2.5% margin in 1998. The Company does not
hold or issue financial instruments for trading purposes.
| |
|
December
31, 1999
|
| |
|
2000
|
|
2001
|
|
2002
|
|
2003
|
|
2004
|
|
Thereafter
|
|
Total
|
|
Fair
Value
|
| |
|
(In
thousands) |
| Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
$4,791 |
|
|
$
2,534 |
|
|
$
1,269 |
|
|
$1,954 |
|
|
$2,016 |
|
|
$112,962 |
|
|
$125,526 |
|
$117,822 |
|
|
Average interest rate |
|
9.65 |
% |
|
9.70 |
% |
|
9.70 |
% |
|
9.70 |
% |
|
9.76 |
% |
|
9.79 |
% |
|
|
|
|
|
|
Variable rate |
|
200 |
|
|
175,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
176,180 |
|
176,180 |
|
|
Average interest rate |
|
7.60 |
% |
|
7.97 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest rate
derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable to fixed |
|
50,000 |
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000 |
|
(889 |
) |
|
Average LIBOR pay rate |
|
5.44 |
% |
|
5.65 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average LIBOR receive rate |
|
6.47 |
% |
|
7.13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
December 31,
1998
|
| |
|
1999
|
|
2000
|
|
2001
|
|
2002
|
|
2003
|
|
Thereafter
|
|
Total
|
|
Fair
Value
|
| |
|
(In
thousands) |
| Liabilities: |
|
|
|
|
Long-term debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
$9,306 |
|
|
$
5,176 |
|
|
$
2,570 |
|
|
$
513 |
|
|
$1,602 |
|
|
$114,050 |
|
|
$133,216 |
|
$128,775 |
|
|
Average interest
rate |
|
9.74 |
% |
|
9.71 |
% |
|
9.70 |
% |
|
9.70 |
% |
|
9.73 |
% |
|
9.76 |
% |
|
|
|
|
|
|
Variable rate |
|
200 |
|
|
200 |
|
|
178,450 |
|
|
|
|
|
|
|
|
|
|
|
178,850 |
|
178,850 |
|
|
Average interest
rate |
|
7.60 |
% |
|
7.92 |
% |
|
8.15 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest rate
derivatives: |
|
|
|
|
Interest rate swaps: |
|
|
|
|
Variable to fixed |
|
|
|
|
50,000 |
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
90,000 |
|
903 |
|
|
Average LIBOR pay rate |
|
5.48 |
% |
|
5.44 |
% |
|
5.65 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average LIBOR receive rate |
|
5.10 |
% |
|
5.47 |
% |
|
5.65 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 1999, the Company sold a dock in Detroit,
Michigan for cash of $1,985,000, which resulted in a pretax gain of
$1,642,000 (net gain of $1,067,000 or $0.22 per share, assuming dilution).
The Company also sold an inactive coal property and received cash of
$1,520,000, which resulted in a pre-tax and net gain of $1,835,000 (or
$0.37 per share, assuming dilution). In 1998, the Company disposed of
certain assets resulting in net proceeds of $875,000 and a pretax gain of
$125,000 (net gain of $81,000 or $0.02 per share, assuming dilution). In
1997 proceeds from the disposition of assets totaled $8,192,000, primarily
from the sale of certain coal reserves and recognized pretax gains of
$5,548,000 (net gain of $3,606,000 or $0.75 per share, assuming
dilution).
The Company declared dividends of $0.80 per
share during 1999 and 1998 compared with $0.75 per share in 1997.
Dividends paid were $3,881,000 for 1999 compared with $3,813,000 and
$3,584,000 in 1998 and 1997, respectively. In 1999 the Company purchased
from its Incentive Savings Plan, and placed in treasury, 13,723
shares of its
Common Stock for $319,000. The Company purchased on the open market, and
placed in treasury, 16,046 shares for $600,000 during 1998 and 87,990
shares for $1,970,000 during 1997.
At the end of 1999, the Company re-evaluated
assumptions used in determining postretirement pension and health care
benefits. The weighted-average discount rates were adjusted from 7.0% to
8.0% to better reflect market rates. The increase in the discount rate
reduced the Company pension plans’ projected benefit obligation by
$6,645,000. The increase in the discount rate is expected to reduce
pension expense by $542,000 for 2000. In 1999, the Company’s
liability and expense resulting from the Coal Industry Retiree Health
Benefit Act of 1992 was reduced $1,082,000 as a result of the increase in
the discount rate to 8.0%. The increase in discount rate reduced the
remaining postretirement benefits projected benefit obligation by $953,000
for 1999 and had no material effect on the estimated expense for 2000. In
1998, the weighted-average discount rates were adjusted from 7.25% to
7.00% and that change did not materially impact 1999 and 1998 consolidated
results of operations.
As further described in Note A to the
consolidated financial statements, the Company is required to adopt SFAS
No. 133, “Accounting for Derivative Instruments and Hedging Activities
”, on January 1, 2001. This new standard is not expected to have a
material impact on the Company’s consolidated results of operations
or financial position.
Anticipated cash flows from operations and
current financial resources are expected to meet the Company’s needs
during 1999. All financing alternatives are under constant review to
determine their ability to provide sufficient funding at the least
possible cost.
Results of
Operations
The Company’s net sales and operating
revenues in 1999 of $293,902,000 were 23% greater than the 1998 level of
$238,852,000 and more than doubled 1997 net sales and operating revenues
of $145,185,000. Operating income increased $9,509,000, or 26%, to
$46,544,000 compared with 1998 and increased $22,079,000, or 90%, from
1997. Net income was $13,646,000 ($2.80 per share, assuming dilution) for
1999 compared with $12,036,000 ($2.51 per share, assuming dilution) and
$16,252,000 ($3.37 per share, assuming dilution) for 1998 and 1997,
respectively. The increases in net sales and operating revenues and
operating income are primarily attributable to the timing of the 1998
Acquisitions. The increase in net income in 1999 compared with 1998 is
primarily due to the increase in operating income described above, plus
non-recurring gains and a lower effective tax rate offset by a full year
of interest expense on borrowings used to fund the 1998 Acquisitions and
the 1999 Global Stone Winchester acquisition. The decrease in 1999 net
income compared with 1997 is primarily the result of increased interest
expense used to fund the 1998 Acquisitions and the 1999 Global Stone
Winchester acquisition.
In 1999, net income includes the effect of
goodwill amortization totaling $2,830,000 (net of tax $1,840,000 or $0.38
per share, assuming dilution) primarily resulting from the 1998
acquisitions and prior Industrial Sands segment acquisitions. Net income
for 1998 and 1997 include the effect of goodwill amortization totaling
$1,579,000 (net of tax $1,026,000 or $0.21 per share, assuming dilution)
and $549,000 (net of tax $357,000 or $0.07 per share, assuming dilution).
Net income, excluding the amortization of goodwill, approximated
$15,486,000 ($3.18 per share, assuming dilution) in 1999, compared with
$13,062,000 ($2.73 per share, assuming dilution) and $16,609,000 ($3.45
per share, assuming dilution) in 1998 and 1997, respectively.
The operating results of the Company’s
business segments for 1999, 1998 and 1997 are discussed below.
Net Sales and Operating Revenues
Lime and Limestone.
Net sales for the Lime and Limestone segment increased 55% to
$148,148,000 in 1999 compared with $95,498,000 in 1998. The increase is
the result of a full year of sales from the Global Stone and Filler
Products acquisitions plus the additional sales from the 1999 Global Stone
Winchester acquisition. 1998 sales include the operations of Port Inland,
Global Stone and Filler Products as of their respective purchase dates of
April 28, May 22, and August 31, 1998.
Industrial Sands.
Net sales for the Industrial Sands segment increased by
$2,305,000, or 5%, to $50,105,000 during 1999, compared with $47,800,000
for the same period of 1998. The increase primarily resulted from the
strong performance of the segment’s non-oilfield operations in Orange
County, California. The strong construction market in the southwestern
United States increased tonnage shipped 8% in 1999 from 1998
and a favorable
shift in product mix also increased pricing. The increase in sales from
Orange County was partially offset by the decrease in shipments to the
oilfield service industry in the first nine months of 1999 compared with
1998. This drop in sales resulted from a decline in oil prices and related
oilfield demand for frac sands. Accordingly, the demand declined for sands
provided to oilfields by the Brady, Texas, Bakersfield, California and
Riverside, California operations. While net sales for these operations
were down in 1999 compared with 1998, demand and net sales recovered in
the fourth quarter of 1999, as oil prices increased compared with prior
year. The segment’s 1999 net sales increased $621,000, or 1%,
compared with 1997 net sales of $49,484,000. The strong performance of
Orange County, including tonnage increases and favorable pricing, as well
as the 1998 acquisition of Colorado Silica substantially offset the
effects of a 35% decline in net sales at the Brady, Texas operation. The
decline in net sales at Brady is attributable to a similar decline in
tonnage shipped, resulting from depressed oil field demand and
pricing.
Marine Services.
1999 operating revenues for the Marine Services segment of
$94,558,000 decreased 1% compared to $95,554,000 in 1998 and $95,701,000
in 1997. Strong customer demand and favorable weather conditions increased
sailing days to 3,477 in 1999 compared with 3,363 and 3,405 in 1998 and
1997, respectively. Favorable operating conditions at the end of 1999 and
1997 extended the fleet’s sailing season in those years. In 1999 the
vessel fleet hauled 23,141,000 tons, comparable to 1998 tonnage, but 3%
off the record tonnage hauled during 1997. The tonnage shipped did not
increase in the same proportion as the increase in sailing days because of
substantially lower water levels on the Great Lakes. The vessels are
limited in the cargo they carry by the depth of the lakes and
rivers.
Corporate and Other.
Net sales include the operations of Specialty Minerals as of its
purchase date of December 1, 1999 and totaled $1,091,000.
Cost of Goods Sold and Operating Expenses
Lime and Limestone.
Cost of goods sold for the Lime and Limestone segment totaled
$99,413,000 in 1999, an increase of 52% from 1998’s total of
$65,192,000. This increase is the result of the 1999 Global Stone
Winchester acquisition and a full year of the Global Stone and Filler
Products acquisitions. Cost of goods sold as a percentage of net sales was
67% in 1999 compared with 68% during 1998. This small improvement in
margin is primarily the result of improved mining efficiency at the
Luttrell, Tennessee operation.
Industrial Sands.
Cost of goods sold for the Industrial Sands segment totaled
$30,573,000 in 1999 a decline of 1% from $30,749,000 in 1998 and a 4%
decline from $31,732,000 in 1997 despite an increase in net sales in 1999,
compared with 1998 and 1997. Cost of goods sold as a percentage of net
sales was 61% during 1999, an improvement from 64% during 1998 and 1997.
This improved margin is primarily the result of the improved operating
efficiencies and full production capacity at our Orange County, California
operations attributable to strong construction demand.
Marine Services.
Operating expenses for the Marine Services segment totaled
$64,255,000 in 1999, an increase of 3% compared with $62,590,000 in 1998.
Operating expenses decreased 4% when compared with
$67,210,000 in 1997. Operating expenses as a percentage of operating
revenues were 68% for 1999 compared with 66% for 1998 and 70% for 1997.
The increase in operating expenses in 1999 when compared with 1998 was the
result of increased fuel costs. These higher costs, and more importantly,
the lower water levels limiting tonnage shipped per vessel, increased
operating expenses as a percentage of operating revenues in 1999 from
1998. The reduction in operating expenses in 1999 when compared to 1997
and the corresponding improvement in operating expenses as a percentage of
operating revenues is the result of a reduction on insurance premiums and
claims in 1999, and the elimination of charter fees after acquiring two
vessels during 1997.
Corporate and Other.
Cost of goods sold for Specialty Minerals totaled $800,000, or
73%, in December of 1999 and was included in this category.
Depreciation, Depletion and
Amortization
Depreciation, depletion and amortization
expense increased to $27,150,000 compared with $20,875,000 during 1998 and
$8,947,000 during 1997. The increase in 1999 is principally related to the
1998 Acquisitions, including goodwill amortization. Depreciation,
depletion and amortization from the 1998 Acquisitions was $5,223,000
greater in 1999 compared with 1998, the result of a full year of
ownership. The 1999 Global Stone Winchester and Specialty Minerals
acquisitions added $650,000 to the 1999 total. Depreciation, depletion and
amortization as a percentage of revenue is 9% in both 1999 and 1998. Of
the $18,203,000 increase from 1999 compared with 1997, $16,451,000
resulted from the 1999 Global Stone Winchester, Specialty Minerals, and
the 1998 Acquisitions. Other increases were the result of quarry
development at the Brady, Texas operation, expansion at the Orange County,
California operation, as well as additional depreciation from vessel
improvements and amortizing of capitalized vessel inspection
costs.
General, Administrative and Selling
Expenses
General, administrative and selling expenses
increased to $25,167,000 for 1999 compared with $22,027,000 and
$12,828,000 for 1998 and 1997, respectively. The increase in general,
administrative and selling expenses during 1999 is principally the result
of the 1998 Acquisitions. As a percentage of total revenues, general,
administrative and selling expenses remained comparable for all three
years at 9%.
Operating Income
Lime and Limestone.
The Lime and Limestone segment contributed $22,156,000 in
operating income in 1999. The acquisitions of Port Inland, Global Stone
and Filler Products contributed $11,943,000 to operating income in 1998.
The increase of $10,213,000 or 86% is primarily attributable to the timing
of the Global Stone Winchester, Global Stone and Filler Products
acquisitions. Additionally, the Company benefited from the seasonality of
the Buchanan, Virginia operations, which has 70% of its operating income
realized in the first five months of a fiscal year, and the improved
mining efficiency realized at the Luttrell, Tennessee
operation.
Industrial Sands.
Operating income for the Industrial Sands segment increased 18%
to $9,723,000 during 1999 compared with $8,247,000 during 1998, but
decreased 7% compared with $10,499,000 (a record for the segment) during
1997. The increase in operating income in 1999 compared with 1998 is
primarily related to the increased demand in Orange County, California
attributable to the strong construction market in the southwestern United
States. The decline in operating income in 1999 from 1997 was principally
the result of reduced oil field demand for frac sand supplied by the
Brady, Texas operations, partially offset by the addition of the Colorado
Silica acquisition and improvements in product mix and increased demand at
the Orange County operations.
Marine Services.
Operating income for the Marine Services segment decreased 13%
to $20,260,000 during 1999 compared with $23,266,000 during 1998, but
increased 2% compared with $19,826,000 during 1997. The reduction in 1999
operating income compared with 1998 is the result of the lower Great Lakes
water levels reducing the tonnage shipped per vessel, and increase in fuel
prices. The slight increase in 1999 operating income compared with 1997 is
the result of reduced insurance premiums and claims, as well as net
savings realized on charter fees following the purchase of two vessels in
1997.
Corporate and Other.
Included in this category are operating income are from other
non-segment operations and corporate general and administrative expenses,
which are not allocated to the business segments. Corporate and Other
operations recognized an operating loss of $5,595,000, $6,421,000 and
$5,860,000 for 1999, 1998 and 1997, respectively. The reduction in loss
was primarily the result of lower benefit plan costs.
Other
Interest expense increased in 1999 to
$29,947,000 from $19,280,000 and $2,834,000 during 1998 and 1997,
respectively. The increase in interest expense was principally the result
of increased debt levels and the amortization of financing costs incurred
related to the 1998 Acquisitions. During 1999, the Company recognized net
pretax gains of $3,043,000 from the disposition of assets compared with
$125,000 for 1998 and $5,548,000 for 1997. The gains recognized in 1999
were primarily from the sale of an inactive coal property and a dock in
Detroit, Michigan. The gains recognized during 1997 principally
represented a gain related to the sale of certain coal reserves. Other
expense, net increased $1,084,000 during 1999 when compared to 1998. The
principal reason was the 1999 charge related to the accrual of an
operating lease obligation on vacant space on the Company’s corporate
office as described in Note L to the consolidated financial statements.
Other expense, net decreased $334,000 in 1999 compared to 1997. The
principal reason for this decrease was a reduction in the Coal Act expense
partially offset by the rental expense charge described above.
ITEM 7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The response to this item is submitted in a
separate section of this Annual Report on Form 10-K on page 15 under ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
The response to this item is submitted in a
separate section of this Annual Report on Form 10-K on pages F-1 through
F-21.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART
III
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE
COMPANY
Information regarding Directors of the
Company, as required by Part III, Item 10, is incorporated herein by
reference to the information contained in the Company’s proxy
statement dated March 14, 2000, filed in connection with the Company
’s 2000 Annual Meeting of Stockholders.
The Executive Officers of the Company as of
March 14, 2000 were as follows:
Name
|
|
Age
|
|
Position
|
| John N.
Lauer |
|
61 |
|
Chairman,
President and Chief Executive Officer |
| Michael F.
Biehl |
|
44 |
|
Vice President,
Finance and Treasurer |
| Ronald J.
Compiseno |
|
48 |
|
Vice President,
Human Resources |
| Jeffrey S.
Gray |
|
43 |
|
Vice President,
Industrial Sands |
| David H.
Kelsey |
|
49 |
|
Vice President
and Chief Financial Officer |
| Kenneth P.
Pavlich |
|
45 |
|
Vice President,
Specialty Minerals |
| Danny R.
Shepherd |
|
48 |
|
Vice President,
Lime and Limestone |
| Stuart H.
Theis |
|
57 |
|
Vice President,
Marine Services |
| Rochelle F.
Walk |
|
39 |
|
Vice President
and Secretary |
John N. Lauer has served as
President, Chief Executive Officer and Director of the Company since
January 1, 1998 and as Chairman of the Board since July 1998. From 1994 to
December 1997, Mr. Lauer was retired and pursued activities as a private
investor. Mr. Lauer served as the President and Chief Operating Officer of
The B.F. Goodrich Company, a chemical and aerospace company, from 1990
until 1994. Mr. Lauer also serves on the Boards of Directors of Diebold,
Incorporated, Menasha Corporation and BorsodChem, Rt.
Michael F. Biehl has been Vice
President, Finance and Treasurer since July 1998. Mr. Biehl joined the
Company in 1992 as Corporate Controller and was promoted to Treasurer and
Director of Finance in 1994. Prior to joining the Company, Mr. Biehl was a
Senior Manager in the audit practice of Ernst & Young LLP in
Cleveland, Ohio for 14 years.
Ronald J. Compiseno was elected
Vice President, Human Resources in September 1998. Prior to joining the
Company Mr. Compiseno was Group Director of Human Resources for Invacare
Corporation of Elyria, Ohio.
Jeffrey S. Gray has served as Vice
President, Industrial Sands and President, Oglebay Norton Industrial
Sands, Inc. since August, 1999 and was Vice President, Corporate
Development and General Counsel of the Company since March 17, 1997. Mr.
Gray was an associate from 1987 to 1994 and a partner from 1995 to 1997 of
Ulmer & Berne LLP, a law firm.
David H. Kelsey has been Vice
President and Chief Financial Officer of the Company, since February 23,
1998. Prior to joining the Company, Mr. Kelsey served as the Executive
Vice President and Chief Financial Officer of Host Communications, Inc., a
sports marketing and management firm from 1994 to 1997. Prior to joining
Host Communications, Mr. Kelsey was Senior Vice President and Director of
GE Capital Equity Funding Group, a growth capital provider from 1992 to
1994 and was Senior Vice President and Portfolio Manager of GE Capital
Corporate Finance Group, a provider of senior and mezzanine financing,
from 1988 to 1992.
Kenneth P. Pavlich was elected
Vice President, Specialty Minerals and President Oglebay Norton Specialty
Minerals in December 1999 and was Vice President, Business Development for
Oglebay Norton Specialty Minerals, Inc. and Vice President, Operations for
Oglebay Norton Industrial Sands, Inc. from July 1998 until December 1999
and from December 1997 until July 1998, respectively. Mr. Pavlich was
General Manager from 1992 to 1997 of Lone Tree Complex in Nevada for
Newmont Mining Corporation.
Danny R. Shepherd was elected to
the position of Vice President, Lime and Limestone and President of Global
Stone Corporation in October 1998. Mr. Shepherd served as Executive Vice
President and General Manager of Global Stone (U.S.A.) Eastern Region from
1994 to 1998.
Stuart H. Theis has been President
Oglebay Norton Marine Sevices Company, L.L.C. since October 1998 and has
served as a Vice President of the Company since 1993. From 1992 to 1993 he
was Assistant to the President of the Company.
Rochelle F. Walk was elected Vice
President of the Company in August 1999 and continues as Secretary of the
Company, a position she has held since June 1998. Prior to joining the
Company, she was Corporate Counsel, a Business Unit Director and Marketing
Director of the Sherwin Williams Company.
Except as noted above, all executive
officers of the Company have served in the capacities indicated,
respectively, during the past five years. All executive officers serve at
the pleasure of the Board of Directors, with no fixed term of
office.
ITEM 11.
EXECUTIVE COMPENSATION
Information regarding Executive
Compensation, as required by Part III, Item 11; is incorporated herein by
reference to the information contained in the Company’s proxy
statement dated March 14, 2000, filed in connection with the Company
’s 2000 Annual Meeting of Stockholders.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information regarding Security Ownership of
Certain Beneficial Owners and Management, as required by Part III, Item
12, is incorporated herein by reference to the information contained in
the Company’s proxy statement dated March 14, 2000, filed in
connection with the Company’s 2000 Annual Meeting of
Stockholders.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Information regarding Certain Relationships
and Related Transactions, as required by Part III, Item 13, is
incorporated herein by reference to the information contained in the
Company’s proxy statement dated March 14, 2000, filed in connection
with the Company’s 2000 Annual Meeting of Stockholders.
Stockholder
Inquiries:
Copies of the SEC Form 10-K for 1999 are
available on the company’s Web site and will be provided without
charge to stockholders upon written request to:
|
Vice President
and Secretary
|
PART
IV
ITEM 14.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)(1) List of Financial Statements:
The following consolidated financial
statements of Oglebay Norton Company and its Subsidiaries are included in
Item 8:
|
Report of
Independent Auditors
|
|
Consolidated
Statement of Operations—Years Ended December 31, 1999, 1998 and
1997
|
|
Consolidated
Balance Sheet—December 31, 1999 and 1998
|
|
Consolidated
Statement of Cash Flows—Years Ended December 31, 1999, 1998, and
1997
|
|
Consolidated
Statement of Stockholders’ Equity—Years Ended December 31,
1999, 1998, and 1997
|
|
Notes to
Consolidated Financial Statements—December 31, 1999, 1998 and
1997
|
(a)(2) and (d) Financial Statement
Schedules: No consolidated financial statement
schedules are presented because the schedules are not required, the
information is not present or not present in amounts sufficient to require
submission of the schedules, or because the information required is
included in the financial statements and related notes.
(a)(3) and (c) Exhibit Index:
The response to this portion of Item 14 is submitted
in a separate section of this Annual Report on Form 10-K at pages 1-1
through 1-6.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
REPORT OF
INDEPENDENT AUDITORS
BOARD OF
DIRECTORS
OGLEBAY NORTON
COMPANY
We have audited the accompanying
consolidated balance sheet of Oglebay Norton Company and subsidiaries as
of December 31, 1999 and 1998, and the related consolidated statements of
operations, stockholders’ equity, and cash flows for each of the
three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with
auditing standards generally accepted in the United States. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the
consolidated financial position of Oglebay Norton Company and subsidiaries
at December 31, 1999 and 1998, and the consolidated results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/ ERNST
&
YOUNG LLP
Cleveland,
Ohio
February 16,
2000
OGLEBAY NORTON
COMPANY AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF OPERATIONS
(In thousands,
except per share amounts)
| |
|
Year Ended
December 31
|
| |
|
1999
|
|
1998
|
|
1997
|
| NET SALES AND
OPERATING REVENUES |
|
$293,902 |
|
|
$238,852 |
|
|
$145,185 |
|
| |
| COSTS AND
EXPENSES |
|
Cost of goods sold and operating expenses |
|
195,041 |
|
|
158,915 |
|
|
98,945 |
|
|
Depreciation, depletion and amortization |
|
27,150 |
|
|
20,875 |
|
|
8,947 |
|
|
General, administrative and selling expenses |
|
25,167 |
|
|
22,027 |
|
|
12,828 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
247,358 |
|
|
201,817 |
|
|
120,720 |
|
| |
|
|
|
|
|
|
|
|
|
| OPERATING
INCOME |
|
46,544 |
|
|
37,035 |
|
|
24,465 |
|
| |
|
Gain on disposition of assets |
|
3,043 |
|
|
125 |
|
|
5,548 |
|
|
Interest expense |
|
(29,947 |
) |
|
(19,280 |
) |
|
(2,834 |
) |
|
Other expense—net |
|
(1,269 |
) |
|
(185 |
) |
|
(1,603 |
) |
| |
|
|
|
|
|
|
|
|
|
INCOME FROM
CONTINUING OPERATIONS
BEFORE INCOME TAXES |
|
18,371 |
|
|
17,695 |
|
|
25,576 |
|
| INCOME
TAXES |
|
Current |
|
2,973 |
|
|
(2,256 |
) |
|
6,967 |
|
|
Deferred |
|
1,752 |
|
|
7,915 |
|
|
253 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
4,725 |
|
|
5,659 |
|
|
7,220 |
|
| |
|
|
|
|
|
|
|
|
|
| INCOME FROM
CONTINUING OPERATIONS |
|
13,646 |
|
|
12,036 |
|
|
18,356 |
|
| Discontinued
operations: |
|
Loss from discontinued operations |
|
-0- |
|
|
-0- |
|
|
(2,104 |
) |
| |
|
|
|
|
|
|
|
|
|
| NET
INCOME |
|
$
13,646 |
|
|
$
12,036 |
|
|
$
16,252 |
|
| |
|
|
|
|
|
|
|
|
|
| PER SHARE
AMOUNTS: |
| Income (loss) per
common share—basic: |
|
Continuing operations |
|
$
2.81 |
|
|
$
2.52 |
|
|
$
3.84 |
|
|
Discontinued operations |
|
|
|
|
|
|
|
(.44 |
) |
| |
|
|
|
|
|
|
|
|
|
| NET INCOME PER
SHARE—BASIC |
|
$
2.81 |
|
|
$
2.52 |
|
|
$
3.40 |
|
| |
|
|
|
|
|
|
|
|
|
| Income (loss) per
common share—assuming dilution: |
|
Continuing operations |
|
$
2.80 |
|
|
$
2.51 |
|
|
$
3.81 |
|
|
Discontinued operations |
|
|
|
|
|
|
|
(.44 |
) |
| |
|
|
|
|
|
|
|
|
|
| NET INCOME PER
SHARE—ASSUMING DILUTION |
|
$
2.80 |
|
|
$
2.51 |
|
|
$
3.37 |
|
| |
|
|
|
|
|
|
|
|
|
See notes to
consolidated financial statements.
OGLEBAY NORTON
COMPANY AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEET
(In thousands,
except per share amounts)
| |
|
December
31
|
| |
|
1999
|
|
1998
|
| ASSETS |
| CURRENT
ASSETS |
|
Cash and cash equivalents |
|
$
-0- |
|
|
$
1,940 |
|
|
Accounts receivable (net of reserve for doubtful accounts of
$1,215 in 1999 and $1,194 in 1998) |
|
46,088 |
|
|
36,624 |
|
|
Income taxes receivable |
|
1,197 |
|
|
3,460 |
|
|
Inventories |
|
Raw materials and finished
products |
|
22,606 |
|
|
19,628 |
|
|
Operating supplies |
|
10,098 |
|
|
8,822 |
|
| |
|
|
|
|
|
|
| |
|
32,704 |
|
|
28,450 |
|
|
Deferred income taxes |
|
2,384 |
|
|
2,511 |
|
|
Prepaid insurance and other expenses |
|
5,523 |
|
|
5,070 |
|
| |
|
|
|
|
|
|
| TOTAL CURRENT
ASSETS |
|
87,896 |
|
|
78,055 |
|
| PROPERTY AND
EQUIPMENT |
|
Land and improvements |
|
27,530 |
|
|
27,208 |
|
|
Mineral reserves |
|
74,809 |
|
|
88,478 |
|
|
Buildings and improvements |
|
38,500 |
|
|
26,550 |
|
|
Machinery and equipment |
|
424,213 |
|
|
423,959 |
|
| |
|
|
|
|
|
|
| |
|
565,052 |
|
|
566,195 |
|
|
Less allowances for depreciation, depletion and
amortization |
|
211,656 |
|
|
218,752 |
|
| |
|
|
|
|
|
|
| |
|
353,396 |
|
|
347,443 |
|
| GOODWILL (net of
accumulated amortization of $5,686 in 1999 and $2,855 in
1998) |
|
75,138 |
|
|
89,877 |
|
| PREPAID PENSION
COSTS |
|
34,895 |
|
|
31,303 |
|
| OTHER
ASSETS |
|
16,774 |
|
|
18,946 |
|
| |
|
|
|
|
|
|
| TOTAL
ASSETS |
|
$568,099 |
|
|
$565,624 |
|
| |
|
|
|
|
|
|
| |
| LIABILITIES AND
STOCKHOLDERS’ EQUITY |
| CURRENT
LIABILITIES |
|
Current portion of long-term debt |
|
$
4,991 |
|
|
$
9,506 |
|
|
Accounts payable |
|
13,208 |
|
|
10,332 |
|
|
Payrolls and other accrued compensation |
|
10,878 |
|
|
10,446 |
|
|
Accrued expenses |
|
10,461 |
|
|
14,909 |
|
|
Accrued interest expense |
|
5,853 |
|
|
5,482 |
|
|
Income taxes payable |
|
3,774 |
|
|
69 |
|
| |
|
|
|
|
|
|
| TOTAL CURRENT
LIABILITIES |
|
49,165 |
|
|
50,744 |
|
| LONG-TERM DEBT,
less current portion |
|
296,715 |
|
|
302,560 |
|
| POSTRETIREMENT
BENEFITS OBLIGATION |
|
25,856 |
|
|
27,182 |
|
| OTHER LONG-TERM
LIABILITIES |
|
17,550 |
|
|
22,059 |
|
| DEFERRED INCOME
TAXES |
|
37,804 |
|
|
36,146 |
|
| STOCKHOLDERS
’ EQUITY |
|
Common stock, par value $1.00 per share—authorized
10,000 shares; issued 7,253 shares |
|
7,253 |
|
|
7,253 |
|
|
Additional capital |
|
9,112 |
|
|
7,481 |
|
|
Retained earnings |
|
156,617 |
|
|
146,852 |
|
|
Accumulated other comprehensive loss |
|
(111 |
) |
|
(709 |
) |
| |
|
|
|
|
|
|
| |
|
172,871 |
|
|
160,877 |
|
|
Treasury stock, at cost—2,326 and 2,488 shares at
respective dates |
|
(31,862 |
) |
|
(33,944 |
) |
| |
|
|
|
|
|
|
| |
|
141,009 |
|
|
126,933 |
|
| |
|
|
|
|
|
|
| TOTAL LIABILITIES
AND STOCKHOLDERS’ EQUITY |
|
$568,099 |
|
|
$565,624 |
|
| |
|
|
|
|
|
|
See notes to
consolidated financial statements.
OGLEBAY NORTON
COMPANY AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF CASH FLOWS
(In
thousands)
| |
|
Year Ended
December 31
|
| |
|
1999
|
|
1998
|
|
1997
|
| OPERATING
ACTIVITIES |
|
Net income |
|
$
13,646 |
|
|
$
12,036 |
|
|
$
16,252 |
|
Adjustments to reconcile net income to net cash
provided by
operating activities: |
|
Depreciation, depletion and amortization |
|
27,150 |
|
|
20,875 |
|
|
8,947 |
|
|
Deferred income taxes |
|
1,752 |
|
|
7,915 |
|
|
253 |
|
|
Gain on disposition of assets |
|
(3,043 |
) |
|
(125 |
) |
|
(5,548 |
) |
|
Loss on disposition of discontinued operations |
|
-0- |
|
|
-0- |
|
|
1,262 |
|
|
Increase in prepaid pension costs |
|
(3,592 |
) |
|
(4,458 |
) |
|
(4,205 |
) |
|
(Increase) decrease in accounts receivable |
|
(12,739 |
) |
|
4,009 |
|
|
2,671 |
|
|
Decrease (increase) in income taxes receivable |
|
2,263 |
|
|
(3,460 |
) |
|
-0- |
|
|
Increase in inventories |
|
(8,137 |
) |
|
(4,452 |
) |
|
(698 |
) |
|
Increase (decrease) in accounts payable |
|
4,149 |
|
|
(8,637 |
) |
|
1,367 |
|
|
Increase in payrolls and other accrued compensation |
|
399 |
|
|
1,800 |
|
|
882 |
|
|
(Decrease) increase in accrued expenses |
|
(2,913 |
) |
|
(981 |
) |
|
715 |
|
|
Increase in accrued interest |
|
371 |
|
|
4,791 |
|
|
643 |
|
|
Increase (decrease) in income taxes payable |
|
3,671 |
|
|
(2,493 |
) |
|
1,465 |
|
|
Other operating activities |
|
(481 |
) |
|
(671 |
) |
|
(1,071 |
) |
|
Net operating activities of discontinued operations |
|
-0- |
|
|
-0- |
|
|
755 |
|
| |
|
|
|
|
|
|
|
|
|
| NET CASH PROVIDED
BY OPERATING ACTIVITIES |
|
22,496 |
|
|
26,149 |
|
|
23,690 |
|
| |
| INVESTING
ACTIVITIES |
|
Capital expenditures |
|
(25,939 |
) |
|
(19,119 |
) |
|
(24,554 |
) |
|
Acquisition of businesses |
|
(45,656 |
) |
|
(239,639 |
) |
|
(1,600 |
) |
|
Proceeds from sale of assets |
|
64,472 |
|
|
874 |
|
|
8,192 |
|
|
Proceeds from sale of discontinued operations |
|
-0- |
|
|
9,082 |
|
|
-0- |
|
|
Net investing activities of discontinued
operations |
|
-0- |
|
|
-0- |
|
|
(662 |
) |
| |
|
|
|
|
|
|
|
|
|
| NET CASH USED FOR
INVESTING ACTIVITIES |
|
(7,123 |
) |
|
(248,802 |
) |
|
(18,624 |
) |
| |
| FINANCING
ACTIVITIES |
|
Repayments on long-term debt |
|
(244,715 |
) |
|
(94,629 |
) |
|
(8,476 |
) |
|
Additional long-term debt |
|
232,588 |
|
|
302,650 |
|
|
17,000 |
|
|
Financing costs |
|
(1,231 |
) |
|
(9,396 |
) |
|
-0- |
|
|
Payments of dividends |
|
(3,881 |
) |
|
(3,813 |
) |
|
(3,584 |
) |
|
Purchases of treasury stock |
|
(319 |
) |
|
(600 |
) |
|
(1,970 |
) |
| |
|
|
|
|
|
|
|
|
|
| NET CASH (USED
FOR) PROVIDED BY FINANCING ACTIVITIES |
|
(17,558 |
) |
|
194,212 |
|
|
2,970 |
|
| Effect of
exchange rate changes on cash |
|
245 |
|
|
495 |
|
|
-0- |
|
| |
|
|
|
|
|
|
|
|
|
| (Decrease)
increase in cash and cash equivalents |
|
(1,940 |
) |
|
(27,946 |
) |
|
8,036 |
|
| Cash and cash
equivalents, January 1 |
|
1,940 |
|
|
29,886 |
|
|
21,850 |
|
| |
|
|
|
|
|
|
|
|
|
| CASH AND CASH
EQUIVALENTS, DECEMBER 31 |
|
$
-0- |
|
|
$
1,940 |
|
|
$
29,886 |
|
| |
|
|
|
|
|
|
|
|
|
See notes to
consolidated financial statements.
OGLEBAY NORTON
COMPANY AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY
(Dollars in
thousands, except per share amounts)
| |
|
|
|
|
|
|
|
Other
Comprehensive
Income (Loss)
|
| |
|
Common
Stock
|
|
Additional
Capital
|
|
Retained
Earnings
|
|
Unrealized
Gains
|
|
Foreign
Currency
Translation
Adjustment
|
|
Common
Stock In
Treasury
|
|
Unallocated
Employee Stock
Ownership
Plan Shares
|
|
Total
Stockholders’
Equity
|
| Balance, January
1, 1997 |
|
$3,626 |
|
$
9,476 |
|
|
$125,961 |
|
|
$
411 |
|
|
|
|
|
$(31,834 |
) |
|
$(1,191 |
) |
|
$106,449 |
|
| Comprehensive
income: |
|
Net income |
|
|
|
|
|
|
16,252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,252 |
|
|
Change in unrealized gains |
|
|
|
|
|
|
|
|
|
(411 |
) |
|
|
|
|
|
|
|
|
|
|
(411 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,841 |
|
| |
| Dividends, $.75
per share |
|
|
|
|
|
|
(3,584 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,584 |
) |
| Stock
plans |
|
|
|
440 |
|
|
|
|
|
|
|
|
|
|
|
63 |
|
|
476 |
|
|
979 |
|
| Two-for-one stock
split |
|
3,627 |
|
(3,627 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-0- |
|
| Purchases of
treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,969 |
) |
|
|
|
|
(1,969 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, December
31, 1997 |
|
7,253 |
|
6,289 |
|
|
138,629 |
|
|
-0- |
|
|
|
|
|
(33,740 |
) |
|
(715 |
) |
|
117,716 |
|
| Comprehensive
income: |
|
Net income |
|
|
|
|
|
|
12,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,036 |
|
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
$(709 |
) |
|
|
|
|
|
|
|
(709 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,327 |
|
| |
| Dividends, $.80
per share |
|
|
|
|
|
|
(3,813 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,813 |
) |
| Stock
plans |
|
|
|
1,192 |
|
|
|
|
|
|
|
|
|
|
|
396 |
|
|
715 |
|
|
2,303 |
|
| Purchases of
treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(600 |
) |
|
|
|
|
(600 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, December
31, 1998 |
|
7,253 |
|
7,481 |
|
|
146,852 |
|
|
-0- |
|
|
(709 |
) |
|
(33,944 |
) |
|
-0- |
|
|
126,933 |
|
| Comprehensive
income: |
|
Net income |
|
|
|
|
|
|
13,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,646 |
|
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
598 |
|
|
|
|
|
|
|
|
598 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,244 |
|
| |
| Dividends, $.80
per share |
|
|
|
|
|
|
(3,881 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,881 |
) |
| Shares issued for
acquisition |
|
|
|
818 |
|
|
|
|
|
|
|
|
|
|
|
682 |
|
|
|
|
|
1,500 |
|
| Stock
plans |
|
|
|
813 |
|
|
|
|
|
|
|
|
|
|
|
1,719 |
|
|
|
|
|
2,532 |
|
| Purchases of
treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(319 |
) |
|
|
|
|
(319 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, December
31, 1999 |
|
$7,253 |
|
$
9,112 |
|
|
$156,617 |
|
|
$
-0- |
|
|
$(111 |
) |
|
$(31,862 |
) |
|
$
-0- |
|
|
$141,009 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to
consolidated financial statements.
OGLEBAY NORTON
COMPANY AND SUBSIDIARIES
NOTES TO
FINANCIAL STATEMENTS—(Continued)
December 31,
1999, 1998 and 1997
(Dollars in
thousands, except per share amounts)
NOTE A
—ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. Intercompany
transactions and accounts have been eliminated upon
consolidation.
Cash Equivalents:
The Company considers all highly liquid investments with a maturity
of three months or less at the date of purchase to be cash equivalents.
Cash equivalents are stated at cost which approximates market
value.
Inventories:
Inventories are stated at the lower of average cost (first-in,
first-out method) or market.
Marketable Securities:
Available-for-sale securities are carried at fair value, based
on quoted market prices. Realized gains and losses on the sale of such
securities are based on average cost.
Property and Equipment:
Property and equipment are stated at cost. The Company
provides depreciation on buildings and improvements and machinery and
equipment using the straight-line method over the assets estimated useful
lives that range from 2 to 60 years. Depletion of mineral reserves is
recognized on a units-of-production basis.
Intangible Assets:
Intangible assets, consisting primarily of the purchase price in
excess of net assets of acquired businesses (“Goodwill”), are
amortized using the straight-line method over the periods of expected
benefit, which range from 15 to 40 years. Financing costs are amortized
using the straight-line method over the periods of the loan agreements,
which range from 3 to 10 years. Included in depreciation, depletion and
amortization in the Consolidated Statement of Operations is goodwill
amortization of $2,830, $1,579, and $549 in 1999, 1998 and 1997,
respectively.
Impairment of Long-Lived Assets:
The Company assesses the recoverability of its
long-lived and intangible assets by determining whether the amortization
of the remaining balance of an asset over its remaining useful life can be
recovered through undiscounted future operating cash flows. If impairment
exists, the carrying amount of the related asset is reduced.
Foreign Currency Translation:
The financial statements of the Company’s
subsidiaries outside the United States (“U.S.”) are generally
measured using the local currency as the functional currency. Assets and
liabilities of these subsidiaries are translated at the rates of exchange
at the balance sheet dates. Income and expense items are translated at
average monthly rates of exchange. Translation adjustments are included in
accumulated other comprehensive income (loss), a separate component of
stockholders’ equity. Generally, gains and losses from foreign
currency transactions of these subsidiaries and the U.S. parent are
included in net income. Gains and losses from foreign currency
transactions which hedge a net investment in a foreign subsidiary and from
intercompany foreign currency transactions of a long-term investment
nature are included in accumulated other comprehensive income
(loss).
Derivative Financial Instruments:
The Company periodically uses derivative financial
instruments to manage its exposure to fluctuations in interest rates. The
Company designates its interest rate swap agreements as hedges of specific
debt instruments and recognizes the interest differentials as adjustments
to interest expense over the terms of the related debt obligations. When
using interest rate swap agreements, the intermediaries to such agreements
expose the Company to the risk of nonperformance, though such risk is not
considered likely under the circumstances. The Company does not hold or
issue financial instruments for trading purposes.
OGLEBAY NORTON
COMPANY AND SUBSIDIARIES
NOTES TO
FINANCIAL STATEMENTS—(Continued)
December 31,
1999, 1998 and 1997
(Dollars in
thousands, except per share amounts)
Stock Compensation:
The Company accounts for stock based compensation in accordance with
the provisions of Accounting Principles Board Opinion No. 25,
“Accounting for Stock Issued to Employees,” and related
interpretations.
Use of Estimates:
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
consolidated financial statements and accompanying notes. Actual results
could differ from those estimates and assumptions.
New Financial Accounting Standards:
Statement of Financial Accounting Standard (
“SFAS”) No. 133, “Accounting for Derivative Instruments and
Hedging Activities” was issued in 1998. This SFAS establishes
accounting and reporting standards for derivative instruments and hedging
activities. It requires that all derivatives be recognized as assets or
liabilities on the balance sheet at fair value. The Company will adopt
SFAS No. 133 on January 1, 2001, as currently required. The SFAS is not
expected to have a material impact on the Company’s consolidated
results of operations or financial position.
Revenue Recognition:
Sales are generally recognized when products are shipped to
customers. Operating revenues are recognized as services are provided to
customers over the Great Lakes sailing season.
Reclassifications:
Certain amounts in prior years have been reclassified to conform to
the 1999 consolidated financial statement presentation.
NOTE B
—ACQUISITIONS AND DISPOSITIONS
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 $12,008 in cash and
50,000 restricted shares of the Company’s common stock, issued from
treasury, having a guaranteed value of $1,500. Consideration for the
acquisition also included non-competition and royalty payments of $3,500
of which $510 was paid at the date of acquisition with the balance being
deferred. Global Stone Winchester operates a high purity limestone quarry
and lime works and is located near two other of the Company’s
operations. In the fourth quarter of 1999, the Company acquired the assets
of Franklin Industries’ Mica business (renamed Oglebay Norton
Specialty Minerals, Inc. (“Specialty Minerals”)) for $32,000 in
cash. The business has two operations in the United States (North Carolina
and New Mexico) and consists of mining reserves, production facilities,
equipment and other assets used in the mining, processing, and
distribution of mica.
The acquisitions were accounted for under
the purchase method. The results of operations of for these acquisitions
are included in the consolidated financial statements from the respective
dates of acquisition. 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 2000
as the asset and liability valuations are completed. Assuming the above
acquisitions had taken place at the beginning of 1998, proforma results
for 1999 and 1998 would not be materially different from the Company
’s actual results.
In the third quarter of 1999, the Company
sold in separate transactions the stock of its (i) Global Stone Detroit
Lime Company (“Detroit Lime”) and (ii) Global Stone Ingersoll
Ltd. (“Ingersoll”) subsidiaries. The sale of Detroit Lime was
completed in August 1999 with net proceeds of $15,250. The sale of
Ingersoll was completed in September 1999 with net proceeds of $45,700.
(Ingersoll was a non-guarantor subsidiary of the Company’s Senior
Subordinated Notes.) Detroit Lime and Ingersoll combined for 1999 revenues
of $20,564 and
operating income of $2,050. The net proceeds of $60,950 were used to reduce
amounts outstanding on the Company’s Senior Credit Facility. In
finalizing the purchase price allocation for the Global Stone acquisition,
the underlying assets and liabilities of Detroit Lime and Ingersoll were
adjusted to fair market value based upon an agreement entered into during
the second quarter of 1999 to sell these entities. The re-allocation of
the Global Stone purchase price resulted in a $23,300 reduction in
goodwill.
In the third quarter of 1999, the Company
sold a dock, located in Detroit, Michigan for $1,985 in cash. The sale
resulted in a pretax gain of $1,642 (net gain of $1,067 or $0.22 per
share, assuming dilution). In the fourth quarter of 1999, the Company sold
an inactive coal property for $1,520 in cash. The sale resulted in a
pretax and net gain of $1,836 (or $0.37 per share, assuming
dilution).
In the first quarter of 1998, the Company
’s Industrial Sands segment acquired all of the outstanding common
shares of Colorado Silica Sands, Inc. (“Colorado Silica”) for
$6,127 in cash and a $1,067 note payable over three years. In the second
quarter of 1998, the Company acquired for cash all of the outstanding
common shares of Global Stone Corporation (“Global Stone”),
which is part of the Company’s Lime and Limestone business segment.
Global Stone had eight operations in the United States and Canada, engaged
in the mining, production and marketing of lime, chemical limestone and
construction aggregate used in a variety of manufacturing processes and
industries, including iron and steel, pulp and paper, chemical,
environmental, agricultural and construction. The total purchase price was
$227,600, including $54,000 of net debt. In the second quarter of 1998,
the Company also purchased the assets of a limestone operation in Port
Inland, Michigan, (“Port Inland”) part of the Company’s
Lime and Limestone business segment, for $35,200 in cash. The acquisition
included inventories, land, mineral reserves, equipment and other tangible
property used in the business of mining, processing, marketing and
distributing limestone, chemical limestone and construction aggregate. In
the third quarter of 1998, the Company’s Lime and Limestone segment
purchased the assets of Filler Products, Inc., a privately owned producer
of chemical limestone in Chatsworth, Georgia, for $24,200 in cash. The
acquisition included inventories, land, mineral reserves, equipment and
other tangible property used in the business of mining, processing,
marketing and distributing chemical limestone to the carpet and decorative
gardening industries.
The following unaudited pro forma
information presents a summary of consolidated results of operations for
the Company and the acquisitions of Global Stone, Port Inland and Colorado
Silica for the years ended December 31, 1998 and 1997 as if the
acquisitions had occurred on January 1, 1997. The pro forma adjustments
give effect to (i) the amortization of goodwill, (ii) the amortization of
the write-up of mineral reserves 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, 1997,
(ii) included operating results for periods of time prior to the Company
’s ownership for certain business segments and (iii) takes into
consideration expense reductions of $1,200 during 1998 and $1,600 during
1997, principally due to a reduction of general and administrative
costs.
| |
|
1998
|
|
1997
|
| Revenues |
|
$288,000 |
|
$283,000 |
| Net
Income |
|
6,300 |
|
9,800 |
| Earnings per share
—basic |
|
1.31 |
|
2.04 |
| Earnings per share
—assuming dilution |
|
1.30 |
|
2.03 |
The pro forma results do not necessarily
represent results that would have occurred if the acquisitions had taken
place on the basis assumed above, nor are they indicative of the results
of future combined operations.
OGLEBAY NORTON
COMPANY AND SUBSIDIARIES
NOTES TO
FINANCIAL STATEMENTS—(Continued)
December 31,
1999, 1998 and 1997
(Dollars in
thousands, except per share amounts)
In 1997, the Company purchased, for $3,400
in cash and notes payable, the assets of two sand operations. Operating
results for these businesses have been included within the Industrial
Sands business segment since acquisition, and are not material.
Additionally, two self-unloading vessels were purchased for $17,000. These
vessels have been operated on the Great Lakes under charter as part of the
Company’s Marine Services fleet for over 20 years. In the fourth
quarter of 1997, the Company sold its interest in certain coal reserves
for $6,000 in cash. The sale resulted in a $5,212 pretax gain (net gain of
$3,388 or $0.70 per share, assuming dilution).
NOTE C
—DISCONTINUED OPERATIONS
In December 1997, the Company decided to
divest the assets of its Engineered Materials business segment. The loss
upon disposition of these operations was $1,262 (net of an income tax
benefit of $807 in 1997).
The results of discontinued operations were
as follows:
| |
|
1997
|
| Net
sales |
|
$30,883 |
|
| Cost of goods
sold |
|
28,871 |
|
| |
|
|
|
| Selling, general
and administrative expenses |
|
3,355 |
|
| |
|
|
|
| Loss before
income taxes |
|
(1,343 |
) |
| Income tax
benefit |
|
(501 |
) |
| |
|
|
|
| Loss from
discontinued operations |
|
$
(842 |
) |
| |
|
|
|
NOTE D—NET
INCOME PER SHARE
The calculation of net income per share
—basic and assuming dilution follows (shares in
thousands):
| |
|
1999
|
|
1998
|
|
1997
|
| Net income per
share—basic: |
|
Net income |
|
$13,646 |
|
$12,036 |
|
$16,252 |
| |
|
|
|
|
|
|
|
Average number of shares outstanding |
|
4,857 |
|
4,772 |
|
4,785 |
| |
|
|
|
|
|
|
|
Net income per share—basic |
|
$
2.81 |
|
$
2.52 |
|
$
3.40 |
| |
|
|
|
|
|
|
| Net income per
share—assuming dilution: |
|
Net income |
|
$13,646 |
|
$12,036 |
|
$16,252 |
| |
|
|
|
|
|
|
|
Average number of shares outstanding |
|
4,857 |
|
4,772 |
|
4,785 |
|
Common stock equivalents |
|
13 |
|
14 |
|
31 |
| |
|
|
|
|
|
|
|
Adjusted average number of shares outstanding |
|
4,870 |
|
4,786 |
|
4,816 |
| |
|
|
|
|
|
|
|
Net income per share—assuming dilution |
|
$
2.80 |
|
$
2.51 |
|
$
3.37 |
| |
|
|
|
|
|
|
OGLEBAY NORTON
COMPANY AND SUBSIDIARIES
NOTES TO
FINANCIAL STATEMENTS—(Continued)
December 31,
1999, 1998 and 1997
(Dollars in
thousands, except per share amounts)
NOTE E
—INCOME TAXES
Total income taxes from continuing
operations differs from the tax computed by applying the U.S. federal
corporate income tax statutory rate for the following reasons:
| |
|
1999
|
|
1998
|
|
1997
|
| Income from
continuing operations before taxes |
|
$18,371 |
|
|
$17,695 |
|
|
$25,576 |
|
| Income taxes at
statutory rate |
|
$
6,430 |
|
|
$
6,193 |
|
|
$
8,952 |
|
| Tax differences
due to: |
|
Percentage depletion |
|
(1,377 |
) |
|
(943 |
) |
|
(1,271 |
) |
|
State income taxes |
|
692 |
|
|
65 |
|
|
312 |
|
|
Goodwill amortization |
|
692 |
|
|
254 |
|
|
-0- |
|
|
Tax benefit on sale of subsidiaries |
|
(1,809 |
) |
|
-0- |
|
|
-0- |
|
|
Other |
|
97 |
|
|
90 |
|
|
(773 |
) |
| |
|
|
|
|
|
|
|
|
|
| Total income
taxes |
|
$
4,725 |
|
|
$
5,659 |
|
|
$
7,220 |
|
| |
|
|
|
|
|
|
|
|
|
The Company received income tax refunds of
$4,660 and $1,049 during 1999 and 1998, respectively. The Company made
income tax payments of $1,918, $3,999 and $6,161 during 1999, 1998 and
1997, respectively.
Deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for
income tax purposes. Significant components of the Company’s deferred
tax liabilities and assets from continuing operations are as
follows:
| |
|
December
31
|
| |
|
1999
|
|
1998
|
| Deferred tax
liabilities: |
|
Tax over book depreciation, amortization and
depletion |
|
$51,947 |
|
$47,035 |
|
Pension benefits |
|
12,466 |
|
10,916 |
|
Other |
|
4,672 |
|
2,379 |
| |
|
|
|
|
|
Total deferred tax
liabilities |
|
69,085 |
|
60,330 |
| Deferred tax
assets: |
|
Postretirement benefits |
|
10,830 |
|
10,276 |
|
Coal Act liability |
|
4,008 |
|
4,689 |
|
Alternative minimum tax credit carry forward |
|
8,400 |
|
2,806 |
|
Other |
|
10,428 |
|
8,924 |
| |
|
|
|
|
|
Total deferred tax
assets |
|
33,666 |
|
26,695 |
| |
|
|
|
|
|
Net deferred tax
liabilities |
|
$35,419 |
|
$33,635 |
| |
|
|
|
|
OGLEBAY NORTON
COMPANY AND SUBSIDIARIES
NOTES TO
FINANCIAL STATEMENTS—(Continued)
December 31,
1999, 1998 and 1997
(Dollars in
thousands, except per share amounts)
NOTE F
—LONG-TERM DEBT
Long-term debt is as follows:
| |
|
1999
|
|
1998
|
| Senior Credit
Facility |
|
$175,980 |
|
$171,000 |
| Senior
Subordinated Notes |
|
100,000 |
|
100,000 |
| Term
Loans |
|
16,577 |
|
16,754 |
| Capital
Leases |
|
7,209 |
|
10,317 |
| Notes
Payable |
|
1,940 |
|
6,545 |
| Title XI Ship
Financing Bonds |
|
-0- |
|
7,450 |
| |
|
|
|
|
| |
|
301,706 |
|
312,066 |
| Less current
portion |
|
4,991 |
|
9,506 |
| |
|
|
|
|
| |
|
$296,715 |
|
$302,560 |
| |
|
|
|
|
In the second quarter of 1998, the Company
entered into a three-year $215,000 revolving credit facility (“Senior
Credit Facility”) with a group of banks to finance the acquisition of
Global Stone, refinance debt and for other general purposes. In the first
quarter of 1999, the Company’s Senior Credit Facility was increased
to $232,000 to finance the acquisition of Global Stone Winchester. The
variable interest rate on the Senior Credit Facility approximated 8.2% at
December 31, 1999. The agreement matures in May 2001, but is renewable
annually thereafter at the discretion of the banks. The Company’s
Senior Subordinated Notes, used to finance the Global Stone acquisition,
mature in February 2009 and have a fixed interest rate of 10%. In 1999 the
Company incurred $1,158 of financing costs related to the exchange and
private placement of these Senior Subordinated Notes and the amendment to
the Senior Credit Facility. The Company incurred $9,396 of financing costs
during 1998 related to the Senior Subordinated Notes and Senior Credit
Facility. The financing costs are being amortized over the terms of the
respective agreements and are included in Other Assets on the consolidated
balance sheet at December 31, 1999.
In 1997, the Company entered into a $17,000
fixed rate Term Loan with a bank to finance the acquisition of two Marine
Services vessels, which had previously been under charter agreements. The
Company is required to make semi-annual payments on the Term Loan of $775,
including interest, through July 15, 2002; $1,400 payable semi-annually,
including interest, through January 15, 2007 and a final payment of
$7,951, including interest, on July 15, 2007. The loan is secured by
mortgages on the two vessels, which have a net book value of $16,334 at
December 31, 1999. The Term Loan was amended in 1998 as a result of the
Company’s increase in debt related to the acquisition of Global
Stone. The amendment revised the Term Loan covenants to the same covenants
contained in the Senior Credit Facility. In addition, the interest rate
was changed from a fixed rate of 7.32% to a semi-variable maximum rate of
8.32% (fixed portion of rate is 7.82%). The interest rate at December 31,
1999 was 8.1%.
The Company’s debt agreements contain
various covenants with the most restrictive covenants requiring the
Company to maintain a specified level of earnings before interest, taxes,
depreciation and amortization (EBITDA), a specified leverage ratio, a
specified cash flow coverage ratio, and a limitation on capital
distributions. The Company’s EBITDA, as defined, was $77,313 at
December 31, 1999, compared with a minimum specified level of $66,000. The
Company’s leverage ratio, as defined, was 3.9 at December 31, 1999
compared with a maximum of 5.0. The Company’s cash flow coverage
ratio, as defined, was 1.45 compared with a minimum of 1.10. The Company
’s capital distributions, which include payments of dividends and
purchases of treasury stock, totaled $4,200 compared with a maximum of
$10,000.
OGLEBAY NORTON
COMPANY AND SUBSIDIARIES
NOTES TO
FINANCIAL STATEMENTS—(Continued)
December 31,
1999, 1998 and 1997
(Dollars in
thousands, except per share amounts)
The Company, in separate agreements which
expire in 2000 and 2001, entered into interest rate swap agreements with
banks to substitute fixed rates for LIBOR- based variable interest rates
on notional amounts totaling $90,000 at December 31, 1999. The Company
’s debt agreement with its bank group requires interest rate
protection on fifty percent of its total senior secured debt. (The Company
’s existing fixed rate senior secured debt fulfills a portion of the
fifty-percent protection requirement.) The swap agreements limit the
effect of increases in the interest rates on any floating rate debt. The
differential between fixed and floating rates is recorded as an increase
or decrease to interest expense. The effect of these agreements is to cap
the Company’s interest rate exposure to 7.48% on $90,000 of the
Senior Credit Facility. As a result of these swap agreements, interest
expense was $154 greater in 1999 and $55 greater in 1998 than if the
Company had maintained its floating LIBOR pricing. At December 31, 1999
and 1998, the fair value of the Company’s interest rate swaps is an
asset of $889 and liability of $903, respectively and was estimated using
valuation techniques based on discounted cash flows. The fair value of
long-term debt was $294,002 and $307,625 at December 31, 1999
and 1998, respectively and was estimated by discounting future cash flows
at currently available interest rates for borrowing arrangements with
similar terms.
Substantially all of the Company’s U.S.
accounts receivable, inventories and property and equipment, which
approximates $407,850, secure long-term senior debt of $198,392 at
December 31, 1999. Long-term debt maturities are $4,991 in 2000, $178,514
in 2001 (the Senior Credit Facility expires in 2001, but is renewable
annually thereafter), $1,269 in 2002, $1,954 in 2003, $2,016 in 2004 and
$112,962 thereafter. The Company made interest payments of $27,465,
$13,593, and $2,353 during 1999, 1998, 1997, respectively.
NOTE G
—STOCKHOLDERS’ EQUITY
In 1997, the Company declared a two-for-one
split of its common stock in the form of a 100% stock dividend to
stockholders of record as of October 10, 1997. This stock split was
recorded by a transfer, within stockholders’ equity, of $3,626 from
additional capital to common stock for all periods presented, representing
$1.00 par value for each additional share issued.
The Company’s preferred stock is
issuable in series and the Board of Directors is authorized to fix the
number of shares and designate the terms of each issue. At December 31,
1999 and 1998, 5,000,000 preferred stock shares were authorized. No
preferred stock was issued or outstanding at December 31, 1999 and 1998.
In 1987, under a Stockholder Rights Plan, as amended, the Company’s
Board of Directors declared a dividend consisting of one Right for each
outstanding share of the Company’s common stock. Upon certain
“change in control” events, the Rights entitle the holder to
purchase one one-hundredth of a share of the Company’s Series C
$10.00 preferred stock for $130.00 or one share of the Company’s
common stock for $2.50, depending on the “change in control”
circumstances. The Stockholder Rights Plan, which expires December 18,
2006, should not interfere with any merger or other business combination
approved by the Board of Directors, because the Board, at its option, may
redeem the Rights at a redemption price of $0.05 per Right.
NOTE H
—COMPANY STOCK PLANS
The Company’s Long-Term Incentive Plan (
“Plan”), adopted in 1996 and revised in 1999, permits grants of
stock options, stock appreciation rights, restricted stock and other
performance awards. Included in Additional Capital at December 31, 1999
and 1998 is $563 and $902, respectively, of obligations under the Plan,
representing 23,000 and 38,000 “share units”, respectively.
“Share units” are calculated by taking the deferred payments and
dividing by the stock market price on deferral date. Compensation expense
under the Plan was $25 in 1999, $31 in 1998 and $568 in 1997. Also as
provided by the Plan, stock options have been granted to key employees.
These options vest ratably over a four-year period and expire 10 years
from the date of grant. The Company uses the intrinsic value method to
account for employee stock options. No compensation expense
has been recognized because the exercise price of the stock options equals
the market price of the underlying common stock on the date of grant.
There have been no stock appreciation rights, restricted stock or
performance awards granted under the Plan.
In connection with an employment agreement (
“Agreement”) the Company provided its Chairman, President and
Chief Executive Officer (“CEO”) with a restricted common stock
award, in lieu of annual cash compensation. In January 1998, upon the CEO
’s completion of a $1,000 personal investment in the Company’s
common stock, the Company issued to the CEO 25,744 shares of common stock
equal to the number of shares of common stock he acquired. Of the total
shares issued, 5,148 became immediately vested and non-forfeitable. On
January 1, 1999 another 5,148 shares became vested and non-forfeitable.
The remaining shares are restricted at December 31, 1999 and become vested
and non-forfeitable, ratably, on January 1, 2000, 2001 and 2003, as
defined by the Agreement.
The CEO is entitled to all voting rights and
any dividends on the restricted shares. Total compensation expense of
$965, computed based on the closing market price on the date the stock was
issued, is being recognized over the vesting period. Compensation expense
related to this award was $193 and $386 in 1999 and 1998, respectively.
Also under the Agreement, the Company granted the CEO an option to acquire
380,174 common shares at an exercise price of $38.00 per share. The option
becomes exercisable in whole or in part on January 1, 2001 and expires
June 30, 2005.
In 1998, the Company established a Director
Fee Deferral Plan (the “Directors Plan”), which allows
non-employee directors of the Company the option of deferring all or part
of their fees in the form of “share units” or “deferred cash
”. Any fees deferred as “share units” will be matched at
25% by the Company, but only in the form of additional “share units
” Included in Additional Capital at December 31, 1999 and 1998 is
$289 and $186, respectively, of obligations under the Directors Plan,
representing 11,000 and 5,000 “share units”, respectively.
Expense under the Directors Plan was $179 and $186 in 1999 and 1998,
respectively.
A summary of the Company’s stock option
activity and related information follows (shares in
thousands):
| |
|
Number of
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Fair Value
|
| Options
outstanding, January 1, 1997 |
|
-0- |
|
|
-0- |
|
|
| Granted |
|
50 |
|
|
$30.63 |
|
$7.06 |
| |
|
|
|
|
|
|
|
| Options
outstanding, December 31, 1997 |
|
50 |
|
|
30.63 |
|
|
| Granted
—CEO |
|
380 |
|
|
38.00 |
|
11.36 |
| Granted
—others |
|
98 |
|
|
29.49 |
|
8.52 |
| Forfeited |
|
(9 |
) |
|
35.79 |
|
|
| |
|
|
|
|
|
|
|
| Options
outstanding, December 31, 1998 |
|
519 |
|
|
$35.73 |
|
|
| Granted
—Others |
|
65 |
|
|
$20.05 |
|
6.62 |
| Forfeited |
|
(12 |
) |
|
$29.53 |
|
|
| |
|
|
|
|
|
|
|
| Options
outstanding, December 31, 1999 |
|
572 |
|
|
$34.07 |
|
|
| |
|
|
|
|
|
|
|
| Options
exercisable, December 31, 1999 |
|
41 |
|
|
$29.76 |
|
|
| |
|
|
|
|
|
|
|
Exercise prices for options outstanding as
of December 31, 1999 ranged from $20.00 to $42.13. The weighted-average
remaining contractual life of these options is 6.4 years.
OGLEBAY NORTON
COMPANY AND SUBSIDIARIES
NOTES TO
FINANCIAL STATEMENTS—(Continued)
December 31,
1999, 1998 and 1997
(Dollars in
thousands, except per share amounts)
There were 1,003,000 common shares
authorized for awards and distribution under all of the Company stock
plans. At the end of 1999, 354,000 shares are reserved and remain
available for use for the above plans.
As permitted, the Company has chosen to
continue accounting for stock options at their intrinsic value. Under the
alternative fair value method the estimated fair value of the options is
amortized to expense over the options’ vesting period. Had the fair
value method of accounting been applied to the Company’s stock option
plan, the impact would be as follows:
|
|
1999
|
|
1998
|
|
1997
|
| Net income, as
reported |
|
$13,646 |
|
|
$12,036 |
|
|
$16,252 |
|
| Estimated fair
value of stock option granted, net of taxes |
|
(680 |
) |
|
(306 |
) |
|
(8 |
) |
| |
|
|
|
|
|
|
|
|
|
| Net income, as
adjusted |
|
$12,966 |
|
|
$11,730 |
|
|
$16,244 |
|
| |
|
|
|
|
|
|
|
|
|
| Net income per
share—assuming dilution |
|
$
2.80 |
|
|
$
2.51 |
|
|
$
3.37 |
|
| |
|
|
|
|
|
|
|
|
|
| Net income per
share, as adjusted—assuming dilution |
|
$
2.66 |
|
|
$
2.45 |
|
|
$
3.37 |
|
| |
|
|
|
|
|
|
|
|
|
The fair value for these options was
estimated at the date of grant using a Black-Scholes option pricing model
with the following weighted average assumptions: risk-free interest rates
ranging from 5.1%–6.1%; dividend yields ranging from 2.0%–4.0%;
volatility factors of the expected market price of the Company’s
common shares of 44%, 31% and 22% in 1999, 1998 and 1997, respectively;
and a weighted-average expected life of five years for the options. Since
changes in the subjective input assumptions can materially affect the fair
value estimate, in management’s opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its
employee stock options.
NOTE I
—POSTRETIREMENT BENEFITS
The Company has a number of noncontributory
defined benefit pension plans covering certain employees. The plans
provide benefits based on the participant’s years of service and
compensation, or state amounts for each year of service. The Company
’s funding policy is to contribute amounts to the plans sufficient to
meet the minimum funding required by applicable regulations. In addition
to pension benefits, the Company provides health care and life insurance
for certain retired employees. Substantially all of the Company’s
employees are eligible for these benefits when they reach normal
retirement age. The Company’s policy is to fund these postretirement
benefit costs principally on a cash basis as claims are incurred. The Coal
Industry Retiree Health Benefit Act of 1992 (“Coal Act”)
requires companies that previously mined coal to assume certain health
care benefit obligations for retired coal miners and their
dependents.
OGLEBAY NORTON
COMPANY AND SUBSIDIARIES
NOTES TO
FINANCIAL STATEMENTS—(Continued)
December 31,
1999, 1998 and 1997
(Dollars in
thousands, except per share amounts)
A summary of the Company’s pension and
other benefits is as follows:
| |
|
|
|
Other
Benefits
2
|
| |
|
Pension
Benefits
1
|
|
Postretirement
Health Care
|
|
Coal
Act
|
| |
|
1999
|
|
1998
|
|
1999
|
|
1998
|
|
1999
|
|
1998
|
| Change in
benefit obligations |
| Benefit
obligation at beginning of year |
|
$
70,529 |
|
|
$
61,443 |
|
|
$
20,324 |
|
|
$
14,976 |
|
|
$
12,023 |
|
|
$
13,551 |
|
| Service
cost |
|
1,775 |
|
|
1,708 |
|
|
623 |
|
|
528 |
|
|
|
|
|
|
|
| Interest
cost |
|
4,424 |
|
|
4,530 |
|
|
1,389 |
|
|
1,276 |
|
|
931 |
|
|
909 |
|
| Amendments |
|
1,701 |
|
|
78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Actuarial (gain)
loss |
|
(6,730 |
) |
|
1,023 |
|
|
140 |
|
|
1,751 |
|
|
(1,897 |
) |
|
(1,423 |
) |
| Benefits
paid |
|
(4,995 |
) |
|
(4,924 |
) |
|
(1,022 |
) |
|
(1,257 |
) |
|
(780 |
) |
|
(1,014 |
) |
| Acquisitions |
|
|
|
|
6,671 |
|
|
1,209 |
|
|
3,050 |
|
|
|
|
|
|
|
| Divestitures |
|
(5,561 |
) |
|
|
|
|
(3,007 |
) |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Benefit
obligations at end of year
3
|
|
61,143 |
|
|
70,529 |
|
|
19,656 |
|
|
20,324 |
|
|
10,277 |
|
|
12,023 |
|
| |
| Change in plan
assets |
| Fair value of
plan assets at beginning of year |
|
111,406 |
|
|
102,934 |
|
|
131 |
|
|
103 |
|
|
|
|
|
|
|
| Actual return on
plan assets |
|
11,208 |
|
|
6,883 |
|
|
5 |
|
|
3 |
|
|
|
|
|
|
|
| Employer
contributions |
|
283 |
|
|
1,103 |
|
|
25 |
|
|
25 |
|
|
|
|
|
|
|
| Benefits
paid |
|
(4,995 |
) |
|
(4,924 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
| Acquisitions |
|
|
|
|
5,410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Divestitures |
|
(5,038 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair value of
plan assets at end of year |
|
112,864 |
|
|
111,406 |
|
|
161 |
|
|
131 |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Funded
status |
|
51,721 |
|
|
40,877 |
|
|
(19,495 |
) |
|
(20,193 |
) |
|
(10,277 |
) |
|
(12,023 |
) |
| Unrecognized net
actuarial gain |
|
(21,144 |
) |
|
(13,350 |
) |
|
(5,203 |
) |
|
(5,638 |
) |
|
|
|
|
|
|
| Unrecognized
prior service cost (credit) |
|
3,353 |
|
|
1,993 |
|
|
(1,158 |
) |
|
(1,350 |
) |
|
|
|
|
|
|
| Unrecognized
initial net asset |
|
(1,689 |
) |
|
(2,251 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net amount
recognized |
|
$
32,241 |
|
|
$
27,269 |
|
|
$(25,856 |
) |
|
$(27,181 |
) |
|
$(10,277 |
) |
|
$(12,023 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
recognized in the
balance sheet consist of: |
| Prepaid benefit
cost |
|
$
34,895 |
|
|
$
30,151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Intangible
asset |
|
|
|
|
1,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Prepaid pension
costs |
|
34,895 |
|
|
31,303 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accrued long-term
benefit liability |
|
(2,654 |
) |
|
(4,034 |
) |
|
$(25,856 |
) |
|
$(27,181 |
) |
|
$(10,277 |
) |
|
$(12,023 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net amount
recognized |
|
$
32,241 |
|
|
$
27,269 |
|
|
$(25,856 |
) |
|
$(27,181 |
) |
|
$(10,277 |
) |
|
$(12,023 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OGLEBAY NORTON
COMPANY AND SUBSIDIARIES
NOTES TO
FINANCIAL STATEMENTS—(Continued)
December 31,
1999, 1998 and 1997
(Dollars in
thousands, except per share amounts)
| |
|
Pension
Benefits
1
|
| |
|
1999
|
|
1998
|
| Weighted-average assumption as of December 31 |
| Discount
rate |
|
8.00% |
|
6.50%
–7.00% |
| Expected return
on plan assets |
|
9.00% |
|
7.50%
–9.00% |
| Rate of
compensation increase |
|
4.00% |
|
4.00% |
| |
|
Other
Benefits
2
|
| |
|
Postretirement
Health Care
|
|
Coal
Act
|
| |
|
1999
|
|
1998
|
|
1999
|
|
1998
|
| Weighted-average assumption as of December 31 |
| Discount
rate |
|
8.00% |
|
6.50%
–7.00% |
|
8.00% |
|
7.00% |
| Expected return
on plan assets |
|
6.00% |
|
6.00% |
For measurement purposes on the Company
’s postretirement health care a 7.25% annual rate of increase in the
per capita cost of covered pre-65 health care benefits was assumed for
2000. The rate was assumed to decrease gradually to 6.0% for 2003 and
remain at that level thereafter. The post-65 benefits on the Company
’s postretirement health care are assumed at a 6.0% annual rate of
increase in per capita cost for 2000 and thereafter. The Coal Act’s
weighted-average annual assumed rate of increase in the health care cost
trend rate for 1999 and 1998 is 6.0%.
| |
|
Pension
Benefits
1
|
| |
|
1999
|
|
1998
|
|
1997
|
| Components of
net periodic benefit credit |
| Service
cost |
|
$
1,775 |
|
|
$
1,708 |
|
|
$
1,114 |
|
| Interest
cost |
|
4,424 |
|
|
4,530 |
|
|
4,255 |
|
| Expected return
on plan assets |
|
(9,558 |
) |
|
(9,659 |
) |
|
(7,831 |
) |
| Amortization of
prior service cost |
|
341 |
|
|
298 |
|
|
437 |
|
| Amortization of
initial net asset |
|
(563 |
) |
|
(711 |
) |
|
(711 |
) |
| Recognized net
actuarial gain |
|
(305 |
) |
|
(735 |
) |
|
(37 |
) |
| |
|
|
|
|
|
|
|
|
|
| Net periodic
benefit credit |
|
$(3,886 |
) |
|
$(4,569 |
) |
|
$(2,773 |
) |
| |
|
|
|
|
|
|
|
|
|
OGLEBAY NORTON
COMPANY AND SUBSIDIARIES
NOTES TO
FINANCIAL STATEMENTS—(Continued)
December 31,
1999, 1998 and 1997
(Dollars in
thousands, except per share amounts)
| |
|
Other
Benefits
2
|
| |
|
Postretirement
Health Care
|
|
Coal
Act
|
| |
|
1999
|
|
1998
|
|
1997
|
|
1999
|
|
1998
|
|
1997
|
| Components of
net periodic benefit cost (credit) |
| Service
cost |
|
$
623 |
|
|
$
528 |
|
|
$
379 |
|
|
|
|
|
|
|
|
|
|
| Interest
cost |
|
1,389 |
|
|
1,276 |
|
|
1,069 |
|
|
$
931 |
|
|
$
909 |
|
|
$974 |
|
| Expected return
on plan assets |
|
(8 |
) |
|
(6 |
) |
|
(5 |
) |
|
|
|
|
|
|
|
|
|
| Amortization of
prior service cost |
|
(192 |
) |
|
(192 |
) |
|
(192 |
) |
|
|
|
|
|
|
|
|
|
| Recognized net
actuarial gain |
|
(246 |
) |
|
(534 |
) |
|
(404 |
) |
|
(1,889 |
) |
|
(1,361 |
) |
|
(121 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net periodic
benefit cost (credit) |
|
$1,566 |
|
|
$1,072 |
|
|
$
847 |
|
|
$
(958 |
) |
|
$
(452 |
) |
|
$853 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumed health care cost trend rates have a
significant effect on the amounts reported for the health care plans. A
one-percentage point change in assumed health care cost trend rates would
have the following effects:
| |
|
Other
Benefits
2
|
| |
|
Postretirement
Health Care
|
|
Coal
Act
|
| |
|
1%
Increase
|
|
1%
Decrease
|
|
1%
Increase
|
|
1%
Decrease
|
| Effect on total
of service and interest cost components |
|
$
313 |
|
$
(249 |
) |
|
$
118 |
|
$
(96 |
) |
| Effect on
postretirement benefit obligation |
|
2,447 |
|
(2,007 |
) |
|
1,115 |
|
(923 |
) |
1
|
Reflects the
combined Pension Plans of the Company.
|
2
|
Reflects the
Postretirement Health Care, Life Insurance Plans of the Company and
benefits required under the 1992 Coal Act. Net periodic benefit cost for
the Coal Act declined in 1999 as a result of a decline in the number of
beneficiaries assigned to the Company and an increase in the discount
rate.
|
3
|
Benefit
obligations at the end of 1998 include Canadian pension and
postretirement health care benefit obligations of $5,561 and $3,007,
respectively. No such obligations exist in 1999, the result of a Company
disposition in 1999.
|
The projected benefit obligation,
accumulated benefit obligation, and fair value of plan assets for the
pension plans with accumulated benefit obligations in excess of plan
assets were $2,301, $2,210 and $0, respectively, as of December 31, 1999
and $10,559, $10,514 and $7,098, respectively, as of December 31,
1998.
The discount rate on the Company’s
pension and other benefit plans was increased to 8.0%, at December 31,
1999 from 7.0% in 1998. This change resulted in a decrease of $8,680 in
the projected benefit obligation of these benefit plans.
Pension plan assets include 293,000 shares
of the Company’s common stock at December 31, 1999 and 1998. The
ending market values for these shares were $6,959 in 1999 and $7,252 in
1998. Dividends received during both 1999 and 1998 for these shares
totaled $234.
The Company maintains defined contribution
plans for certain employees and contributes to these plans based on a
percentage of employee contributions. The expense for these plans was
$1,419, $1,533 and $1,039 for 1999, 1998 and 1997, respectively. The
Company also pays into certain defined benefit multi-employer plans
under various union agreements that provide pension and other benefits for
various classes of employees. Payments are based upon negotiated contract
rates and related expenses totaled $1,099 $1,166 and $1,688 for 1999, 1998
and 1997, respectively.
NOTE J
—COMMITMENTS AND CONTINGENCIES
The Company leases various buildings,
computers and equipment in addition to a vessel charter in its Marine
Services fleet. In general, these operating leases are renewable or
contain purchase options. The purchase price or renewal lease payment is
based on the fair market value of the asset at the date of purchase or
renewal. Rental expense was $6,024, $5,076 and $3,718 in 1999, 1998 and
1997, respectively.
Future minimum payments at December 31,
1999, under non-cancelable operating leases, are $5,794 in 2000, $4,873 in
2001, $4,052 in 2002, $3,153 in 2003, $2,044 in 2004 and $10,759
thereafter.
The Company is subject to various
environmental laws and regulations imposed by federal, state and local
governments. Also, in the normal course of business, the Company is
involved in various pending or threatened legal actions. The Company
cannot reasonably estimate future costs, if any, related to these matters.
However, costs incurred to comply with environmental regulations and to
settle litigation have not been significant in 1999 and prior years.
Although it is possible that the Company’s future operating results
could be affected by future costs of environmental compliance or
litigation, it is management’s belief that such costs will not have a
material adverse effect on the Company’s consolidated financial
position.
NOTE K
—INDUSTRY SEGMENTS AND MAJOR CUSTOMERS
The Company supplies essential natural
resources to industrial and commercial customers. Through its three
operating segments—Lime and Limestone, Industrial Sands and Marine
Services—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. Founded in 1854, the
Company is headquartered in Cleveland, Ohio. The composition of the
segments and measure of segment profitability is consistent with that used
by the Company’s management. The Company’s primary measurement
focus is operating income and EBITDA. Interest expense and other
expense-net are grouped with Corporate and Other and not presented by
segment, since they are excluded from the measure of segment profitability
used by the Company’s management.
Lime and
Limestone
The lime and limestone business segment,
headquartered in Roswell, Georgia, mines and processes limestone and
produces lime, a limestone derivative. This business segment operates
eight facilities, primarily in the eastern United States. Lime is used for
water and waste treatment, steel making, flue gas desulfurization, glass
production, animal feed, fertilizers, and fillers for plastic, latex, and
sealants. Chemical limestone is used for many diverse industrial and
agricultural processes, including fiberglass, roofing shingles and animal
feed. Limestone is sized and graded for lawn and garden applications as
well as for aggregates in construction.
Industrial
Sands
The Industrial Sands business segment,
headquartered in Phoenix, Arizona, mines and processes high-purity silica
sands at two facilities in Ohio and six facilities in the southwestern
United States. It produces fracturing sands used in oil well drilling;
filtration sands; recreational sands for golf courses, playgrounds,
athletic fields, and landscaping; industrial sands used as abrasives and
for fillers in building materials; silica flour for fiberglass and ceramic
production; and foundry sands for hot-metal die casting.
OGLEBAY NORTON
COMPANY AND SUBSIDIARIES
NOTES TO
FINANCIAL STATEMENTS—(Continued)
December 31,
1999, 1998 and 1997
(Dollars in
thousands, except per share amounts)
Marine
Services
The Marine Services business segment,
headquartered in Cleveland, Ohio, provides dry bulk transportation between
United States’ ports on the Great Lakes. This business segment
operates 12 self-unloading vessels. The fleet transports primarily iron
ore for integrated steel manufacturers, coal for electric utility
companies, and limestone for construction and other purposes.
Geographic information for revenues and
long-lived assets are as follows:
1999
|
|
Revenues
(a)
|
|
Long-Lived
Assets
|
| United
States |
|
$279,597 |
|
$397,505 |
| Canada and other
foreign |
|
14,305 |
|
|
| |
|
|
|
|
| Consolidated |
|
$293,902 |
|
$397,505 |
| |
|
|
|
|
1998
|
| United
States |
|
$227,129 |
|
$360,864 |
| Canada and other
foreign |
|
11,723 |
|
28,327 |
| |
|
|
|
|
| Consolidated |
|
$238,852 |
|
$389,191 |
| |
|
|
|
|
1997
|
| United
States |
|
$144,348 |
|
$181,995 |
| Canada and other
foreign |
|
837 |
|
|
| |
|
|
|
|
| Consolidated |
|
$145,185 |
|
$181,995 |
| |
|
|
|
|
(a)
|
Revenues are
attributed to countries based on the location of customers.
|
Accounts receivable of $9,321, $8,873 and
$5,416 are due from companies in the utilities, steel and construction
industries, respectively, at December 31, 1999. Credit is extended based
on an evaluation of a customer’s financial condition, and generally
collateral is not required. Credit losses within these industries have not
been significant for the three years in the period ended December 31,
1999. There were no customers that exceeded 10% of consolidated net sales
and operating revenues in 1999 or 1998. In 1997, Marine Services’
operating revenues from two major steel producers ($37,362) and one
utility company ($18,245) exceeded 10% of consolidated net sales and
operating revenues.
OGLEBAY NORTON
COMPANY AND SUBSIDIARIES
NOTES TO
FINANCIAL STATEMENTS—(Continued)
December 31,
1999, 1998 and 1997
(Dollars in
thousands, except per share amounts)
| |
|
Lime and
Limestone
3
|
|
Industrial
Sands
|
|
Marine
Services
|
|
Total
Segments
|
|
Corporate
and Other
4
|
|
Consolidated
|
| 1999 |
| Identifiable
assets |
|
$
283,708 |
|
|
$
59,024 |
|
$139,740 |
|
$
482,472 |
|
|
$
85,627 |
1
|
|
$568,099 |
|
Depreciation,
depletion and amortization
expense |
|
15,680 |
|
|
4,726 |
|
6,380 |
|
26,786 |
|
|
364 |
|
|
27,150 |
|
| Capital
expenditures |
|
17,087 |
|
|
4,501 |
|
4,113 |
|
25,701 |
|
|
238 |
|
|
25,939 |
|
| Net sales and
operating revenues |
|
$
148,148 |
|
|
$
50,105 |
|
$
94,558 |
|
$
292,811 |
|
|
$
1,091 |
|
|
$
293,902 |
|
| Operating
income |
|
$
22,156 |
|
|
$
9,723 |
|
$
20,260 |
|
$
52,139 |
|
|
$
(5,595 |
)
2
|
|
$
46,544 |
|
| Gain (loss) on
disposition of assets |
|
(98 |
) |
|
21 |
|
|
|
(77 |
) |
|
3,120 |
|
|
3,043 |
|
| Interest
expense |
|
|
|
|
|
|
|
|
|
|
|
(29,947 |
) |
|
(29,947 |
) |
| Other expense
—net |
|
|
|
|
|
|
|
|
|
|
|
(1,269 |
) |
|
(1,269 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations before
income taxes |
|
$
22,058 |
|
|
$
9,744 |
|
$
20,260 |
|
$
52,062 |
|
|
$(33,691 |
) |
|
$
18,371 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1998 |
| Identifiable
assets |
|
$
321,892 |
|
|
$
52,248 |
|
$137,969 |
|
$
512,109 |
|
|
$
53,515 |
1
|
|
$
565,624 |
|
Depreciation,
depletion and amortization
expense |
|
10,581 |
|
|
3,914 |
|
6,252 |
|
20,747 |
|
|
128 |
|
|
20,875 |
|
| Capital
expenditures |
|
8,322 |
|
|
6,069 |
|
4,703 |
|
19,094 |
|
|
25 |
|
|
19,119 |
|
| Net sales and
operating revenues |
|
$
95,498 |
|
|
$
47,800 |
|
$
95,554 |
|
$
238,852 |
|
|
|
|
|
$
238,852 |
|
| Operating
income |
|
$
11,943 |
|
|
$
8,247 |
|
$
23,266 |
|
$
43,456 |
|
|
$
(6,421 |
)
2
|
|
$
37,035 |
|
| Gain (loss) on
disposition of assets |
|
76 |
|
|
213 |
|
|
|
289 |
|
|
(164 |
) |
|
125 |
|
| Interest
expense |
|
|
|
|
|
|
|
|
|
|
|
(19,281 |
) |
|
(19,281 |
) |
| Other expense
—net |
|
|
|
|
|
|
|
|
|
|
|
(184 |
) |
|
(184 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations before
income taxes |
|
$
12,019 |
|
|
$
8,460 |
|
$
23,266 |
|
$
43,745 |
|
|
$(26,050 |
) |
|
$
17,695 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1997 |
| Identifiable
assets |
|
|
|
|
$
40,928 |
|
$143,554 |
|
$
184,482 |
|
|
$
78,742 |
1
|
|
$
263,224 |
|
Depreciation,
depletion and amortization
expense |
|
|
|
|
3,150 |
|
5,654 |
|
8,804 |
|
|
143 |
|
|
8,947 |
|
| Capital
expenditures |
|
|
|
|
4,108 |
|
20,234 |
|
24,342 |
|
|
212 |
|
|
24,554 |
|
| Net sales and
operating revenues |
|
|
|
|
$
49,484 |
|
$
95,701 |
|
$
145,185 |
|
|
|
|
|
$
145,185 |
|
| Operating
income |
|
|
|
|
$
10,499 |
|
$
19,826 |
|
$
30,325 |
|
|
$
(5,860 |
)
2
|
|
$
24,465 |
|
| Gain on
disposition of assets |
|
|
|
|
197 |
|
|
|
197 |
|
|
5,351 |
|
|
5,548 |
|
| Interest
expense |
|
|
|
|
|
|
|
|
|
|
|
(2,834 |
) |
|
(2,834 |
) |
| Other expense
—net |
|
|
|
|
|
|
|
|
|
|
|
(1,603 |
) |
|
(1,603 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations before
income taxes |
|
|
|
|
$
10,696 |
|
$
19,826 |
|
$
30,522 |
|
|
$
(4,946 |
) |
|
$
25,576 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Consists
primarily of prepaid pension costs and other assets each year. In 1999,
also included the assets of Speciality Minerals. In 1997, also included
cash and cash equivalents and net assets of discontinued
operations.
|
2
|
Includes other
operations, net of corporate general and administrative
expenses.
|
3
|
Includes the
results of operations of Global Stone Winchester from the acquisition
date of March 1999; and Port Inland, Global Stone and Filler Products
from their acquisition dates of April, May and August 1998,
respectively.
|
4
|
Includes the
results of operations of Speciality Minerals from its acquisition date
of December 1999.
|
OGLEBAY NORTON
COMPANY AND SUBSIDIARIES
NOTES TO
FINANCIAL STATEMENTS—(Continued)
December 31,
1999, 1998 and 1997
(Dollars in
thousands, except per share amounts)
NOTE L
—QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Unaudited quarterly results of operations
for the years ended December 31, 1999 and 1998 are summarized as
follows:
| |
|
Quarter
Ended
|
| |
|
Dec.
31
|
|
Sept.
30
|
|
June 30
|
|
Mar.
31
|
| 1999 |
| Net sales and
operating revenues |
|
$76,780 |
|
$85,377 |
|
$86,657 |
|
$45,088 |
|
| Gross
profit |
|
19,201 |
|
21,411 |
|
21,932 |
|
9,167 |
|
| Net
income |
|
4,354 |
|
6,430 |
|
5,877 |
|
(3,015 |
) |
| Per common
share: |
|
Net income (loss)
—basic |
|
0.89 |
|
1.32 |
|
1.21 |
|
(0.63 |
) |
|
Net income (loss)
—assuming dilution |
|
0.88 |
|
1.32 |
|
1.21 |
|
(0.63 |
) |
| 1998 |
| Net sales and
operating revenues |
|
$74,974 |
|
$85,845 |
|
$63,726 |
|
$14,307 |
|
| Gross
profit |
|
15,925 |
|
22,455 |
|
16,464 |
|
4,219 |
|
| Net
income |
|
1,127 |
|
5,680 |
|
5,449 |
|
(220 |
) |
| Per common
share: |
|
Net income (loss)
—basic |
|
0.24 |
|
1.19 |
|
1.14 |
|
(0.05 |
) |
|
Net income (loss)
—assuming dilution |
|
0.24 |
|
1.19 |
|
1.13 |
|
(0.05 |
) |
The sum of per share amounts for the four
quarters of 1999 do not equal the annual per share amounts as a result of
treasury stock purchases and the effect of stock options granted by the
Company.
See Note B for the timing of acquisitions
and dispositions that impact quarter-to-quarter comparisons.
Net income for the fourth quarter of 1999
includes: a gain of $1,835 ($0.37 per share, assuming dilution) related to
the sale of an inactive coal property; a $979 gain ($0.20 per share,
assuming dilution) as a result of a decline in the number of beneficiaries
assigned to the Company under the Coal Act and an increase in the discount
rate; and a $1,069 ($0.22 per share, assuming dilution) charge related to
the accrual of an operating lease obligation on vacant space in the Company
’s corporate office.
Net income for the second quarter of 1999
includes a gain of $1,067 ($0.22 per share, assuming dilution) related to
the sale of a dock located in Detroit, Michigan.
Net income for the fourth quarter of 1998
includes $967 ($0.20 per share, assuming dilution) as a result of a
decline in the number of beneficiaries assigned to the Company under the
Coal Act, and a $773 ($0.16 per share, assuming dilution) charge primarily
related to separation benefits provided to former Global Stone
management.
Item
14(a)3
EXHIBIT
INDEX
SEC
Exhibit
No.
|
|
Description
|
|
Location**
|
| 2 |
|
Agreement and
Plan of Merger, dated
March 3, 1999, by and among Oglebay Norton
Company, Oglebay Norton Holding Company,
ONCO Investment Company and Oglebay
Norton Merger Company |
|
Incorporated by
reference in Exhibit 2 of the
Registrant’s Form 8-K filed March 19, 1999 |
| |
|
| 3 |
|
(i) Certificate
of Incorporation |
|
Incorporated by
reference in Exhibit 4.1 in the
Registrant’s Form 8-K filed March 19, 1999 |
| |
|
| |
|
(ii)
By-Laws |
|
Incorporated by
reference in Exhibit 4.2 in the
Registrant’s Form 8-K filed March 19, 1999 |
| |
|
| |
|
(iii) Amendment
to By-Laws, dated March 9,
1999 |
|
Incorporated by
reference in Exhibit 3(iii) in
the Registrant’s Form 10-K filed March 22,
1999 |
| |
|
| 4 |
|
(a) The Company
is a party to instruments,
copies of which will be furnished to the
Securities and Exchange Commission upon
request, defining the rights of holders of its
long-term debt identified in Note F to the
Consolidated Financial Statements. |
|
|
| |
|
| |
|
(b) Form of
Rights Agreement (including first
and second amendments) |
|
Incorporated by
reference in Exhibit 4(b) in
the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 1993 |
| |
|
| |
|
(c) Form of Third
Amendment to Rights
Agreement, dated as of August 31, 1994,
between Company and the Rights Agent |
|
Incorporated by
reference in Exhibit 4(c) to
Amendment No. 3 to Form 8-A/A, filed on
September 26, 1994 |
| |
|
| |
|
(d) Form of
Fourth Amendment of Rights
Agreement, dated as of January 21, 1997,
between Company and the Rights Agent |
|
Incorporated by
reference in Exhibit 4(d) to
Form 8-A/A, filed on January 21, 1997 |
| |
|
| |
|
(e) Form of Fifth
Amendment of Rights
Agreement, dated as of October 28, 1998,
between Company and the Rights Agent |
|
Incorporated by
reference in Exhibit 4(e) to
Form 8-A/A, filed November 20, 1998 |
| |
|
| 10 |
|
(a) Form of
Change-in-Control Agreements
with Executive Officers and key employees* |
|
Incorporated by
reference in Exhibit 10(d)(3)
in the Registrant’s Annual Report on Form
10-K for the year ended December 31, 1996 |
* Indicates management
contracts or compensatory plans or arrangements in which one or more
directors or executive officers of the Company may be
participants.
**
|
As appropriate,
indicates filing made on behalf of predecessor Registrant’s, ON
Marine Services Company, a Delaware corporation, before March 8, 1999
known as Oglebay Norton Company.
|
SEC
Exhibit
No.
|
|
Description
|
|
Location**
|
| |
|
| |
|
(a)(1) Schedule
of Executive Officers and key
employees with Change-in-Control
Agreements* |
|
Filed herewith as
Exhibit 10(a)(1) |
| |
|
| |
|
(b) Agreement
with John D. Weil |
|
Incorporated by
reference in Exhibit 10(f) in
the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 1993 |
| |
|
| |
|
(b)(1)First
Amendment to Agreement with
John D. Weil |
|
Filed herewith as
Exhibit 10(b)(1) |
| |
|
| |
|
(c) Oglebay
Norton Company Long-Term
Incentive Plan* |
|
Incorporated by
reference in Exhibit 10(h) in
the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 1995 |
| |
|
| |
|
(d) Form of
Oglebay Norton Company 1999
Long-Term Incentive Plan* |
|
Filed herewith as
Exhibit 10(d) |
| |
|
| |
|
(e) Amended and
Restated Director Stock
Plan* |
|
Incorporated by
reference in Exhibit 10(i)(1)
in the Registrant’s Quarterly Report on Form
10-Q for the quarter ended September 30,
1997 |
| |
|
| |
|
(e)(1) First
Amendment to Amended and
Restated Director Stock Plan* |
|
Filed herewith as
Exhibit 10(e)(1) |
| |
|
| |
|
(f) Supplemental
Savings and Stock
Ownership Plan* |
|
Incorporated by
reference in Exhibit 10(j) in
the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 1996 |
| |
|
| |
|
(f)(1) First
Amendment to Oglebay Norton
Company Supplemental Savings and Stock
Ownership Plan* |
|
Incorporated by
reference in Exhibit 10(j)(1)
in the Registrant’s Annual Report on Form
10-K for the year ended December 31, 1996 |
| |
|
| |
|
(f)(2) Second
Amendment to Oglebay Norton
Company Supplemental Savings and Stock
Ownership Plan* |
|
Incorporated by
reference in Exhibit 10(j)(2)
in the Registrant’s Annual Report on Form
10-K for the year ended December 31, 1996 |
| |
|
| |
|
(f)(3) Form of
Third Amendment to Oglebay
Norton Company Supplemental Savings and
Stock Ownership Plan* |
|
Incorporated by
reference in Exhibit 10(h)(3)
in the Registrant’s Annual Report on Form
10-K for the year ended December 31, 1997 |
| |
|
| |
|
(g) Irrevocable
Trust Agreement I* |
|
Incorporated by
reference in Exhibit 10(k) in
the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 1996 |
*
|
Indicates
management contracts or compensatory plans or arrangements in which one
or more directors or executive officers of the Company may be
participants.
|
**
|
As appropriate,
indicates filing made on behalf of predecessor Registrant’s, ON
Marine Services Company, a Delaware corporation, before March 8, 1999
known as Oglebay Norton Company.
|
SEC
Exhibit
No.
|
|
Description
|
|
Location**
|
| |
|
| |
|
(h) Irrevocable
Trust Agreement II* |
|
Incorporated by
reference in Exhibit 10(l) in
the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 1996 |
| |
|
| |
|
(i) Executive
Life Insurance Program I (Form
of letter Agreement)* |
|
Incorporated by
reference in Exhibit 10(m) in
the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 1996 |
| |
|
| |
|
(j) Executive
Life Insurance Program II
(Program description)* |
|
Incorporated by
reference in Exhibit 10(n) in
the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 1996 |
| |
|
| |
|
(k) Oglebay
Norton Company Excess and
TRA Supplemental Benefit Retirement Plan
(January 1, 1991 Restatement)* |
|
Incorporated by
reference in Exhibit 10(o) in
the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 1996 |
| |
|
| |
|
(k)(1) First
Amendment to Oglebay Norton
Company Excess and TRA Supplemental
Benefit Retirement Plan (January 1, 1991
Restatement), dated as of December 15, 1994* |
|
Incorporated by
reference in Exhibit 10(o)(1))
in the Registrant’s Annual Report on Form
10-K for the year ended December 31, 1996 |
| |
|
| |
|
(k)(2) Form of
Second Amendment to Oglebay
Norton Company Excess and TRA
Supplemental Benefit Retirement Plan
(January 1, 1991 Restatement), dated as of
December 17, 1997* |
|
Incorporated by
reference in Exhibit 10(m)(2)
in the Registrant’s Annual Report on Form
10-K for the year ended December 31, 1997 |
| |
|
| |
|
(l) Credit
Agreement dated of May 15, 1998
among Oglebay Norton Company, as
Borrower, various financial institutions, as
Banks, and KeyBank National Association, as
agent |
|
Incorporated by
reference in Exhibit 10.2 in
the Registrant’s Quarterly Report on Form
10-Q for the quarter ended June 30, 1998 |
| |
|
| |
|
(l)(1) First
Amendment to Credit Agreement
dated as of May 15, 1998 among Oglebay
Norton Company, as Borrower, various
financial institutions, Banks, and KeyBank
National Association, as agent |
|
Incorporated by
reference in Exhibit 10.1 in
the Registrant’s Quarterly Report on as Form
10-Q for the quarter ended September 30,
1998 |
| |
|
| |
|
(l)(2) Second
Amendment to Credit
Agreement dated as of May 15, 1998 among
Oglebay Norton Company, as Borrower,
various financial institutions, as Banks, and
KeyBank National Association, as agent |
|
Incorporated by
reference in Exhibit 10.2 in
the Registrant’s Quarterly Report on Form
10-Q for the quarter ended September 30,
1998 |
* Indicates management
contracts or compensatory plans or arrangements in which one or more
directors or executive officers of the Company may be
participants.
**
|
As appropriate,
indicates filing made on behalf of predecessor Registrant’s, ON
Marine Services Company, a Delaware corporation, before March 8, 1999
known as Oglebay Norton Company.
|
SEC
Exhibit
No.
|
|
Description
|
|
Location**
|
| |
|
| |
|
(l)(3) Third
Amendment to Credit Agreement
as dated of May 15, 1998 among Oglebay
Norton Company, as Borrower, various
financial institutions, as Banks, and KeyBank
National Association, as agent |
|
Incorporated by
reference in Exhibit 10(m)(3)
in the Registrant’s Annual Report on Form
10-k for the year ended December 31, 1998 |
| |
|
| |
|
(m)(4) Fourth
Amendment to Credit
Agreement dated as of May 15, 1998 among
Oglebay Norton Company, as Borrower,
various financial institutions, as Banks, and
KeyBank National Association, as agent |
|
Incorporated by
reference in Exhibit 10 in the
Registrant’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999 |
| |
|
| |
|
(m)(5) Fifth
Amendment to Credit Agreement
dated as of May 15, 1998 among Oglebay
Norton Company, as Borrower, various
financial institutions, as Banks, and KeyBank
National Association, as agent |
|
Incorporated by
reference in Exhibit 10 in the
Registrant’s Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999 |
| |
|
| |
|
(m)(6) Assignment
and Assumption
Agreement dated March 5, 1999 in which
Registrant assumed the obligations of ON
Marine Services Company (formerly
Registrant) under the Credit Agreement dated
May 15, 1998. |
|
Incorporated by
reference in Exhibit 10(m)(4)
in the Registrant’s Annual Report on Form
10-K for the year ended December 31, 1999 |
| |
|
| |
|
(n) Annual
Incentive Plan (Performance
Management Plan) (plan description)* |
|
Incorporated by
reference in Exhibit 10(q) in
the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 1996 |
| |
|
| |
|
(o) Employment
Agreement between Company
and John N. Lauer, dated December 17, 1997* |
|
Incorporated by
reference in Exhibit 10(r) in
the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 1997 |
| |
|
| |
|
(p) Supplemental
Letter between Company
and John N. Lauer, dated December 17, 1997* |
|
Incorporated by
reference in Exhibit 10(s) in
the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 1997 |
| |
|
| |
|
(q) Oglebay
Norton Company Performance
Option Agreement between the Company and
John N. Lauer, dated as of December 17,
1997* |
|
Incorporated by
reference in Exhibit 10(t) in
the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 1997 |
| |
|
| |
|
(r) Oglebay
Norton Company Special
Supplemental Retirement Plan, dated as of
December 17, 1997* |
|
Incorporated by
reference in Exhibit 10(u) in
the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 1997 |
* Indicates management
contracts or compensatory plans or arrangements in which one or more
directors or executive officers of the Company may be
participants.
**
|
As appropriate,
indicates filing made on behalf of predecessor Registrant’s, ON
Marine Services Company, a Delaware corporation, before March 8, 1999
known as Oglebay Norton Company.
|
SEC
Exhibit
No.
|
|
Description
|
|
Location**
|
| |
|
| |
|
(s) Form of
Oglebay Norton Company
Director Fee Deferral Plan, dated as of
February 1, 1998* |
|
Incorporated by
reference in Exhibit 10(v) in
the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 1997 |
| |
|
| |
|
(t) Form of
Oglebay Norton Company Pour-
Over Trust, dated as of December 17, 1997* |
|
Incorporated by
reference in Exhibit 10(w) in
the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 1997 |
| |
|
| |
|
(w) Indenture,
dated as of February 1, 1999
among Predecessor Registrant, the Guarantors
and Norwest Bank Minnesota, National
Association |
|
Incorporated by
reference in Exhibit 10(w)(1)
in the Registrant’s Annual Report on Form
10-K for the year ended December 31, 1998 |
| |
|
| |
|
(w)(1)
Registration Rights Agreement dated as
of February 1, 1999, among Predecessor
Registrant and The guarantors and
CIBC/Oppenheimer Corp. |
|
Incorporated by
reference in Exhibit 10(w)(2)
in the Registrant’s Annual Report on Form
10-K for the year ended December 31, 1998 |
| |
|
| |
|
(w)(2)
Supplemental Indenture (Assignment
and Assumption Agreement), dated March 5,
1999 among Registrant, Predecessor Registrant
and Norwest Bank Minnesota, National
Association |
|
Incorporated by
reference in Exhibit 10(w)(3)
in the Registrant’s Annual Report on Form
10-K for the year ended December 31, 1998 |
| |
|
| |
|
(w)(3)
Supplemental Indenture dated March 5,
1999 |
|
Incorporated by
reference as Exhibit 4.10 from
Form S-4 filed on April 14, 1999 |
| |
|
| |
|
(w)(4)
Supplemental Indenture dated April 12,
1999 |
|
Incorporated by
reference as Exhibit 4.10 from
Form S-4 filed on April 14, 1999 |
| |
|
| 21 |
|
Subsidiaries of
Company |
|
Filed herewith as
Exhibit 21 |
| |
|
| 23 |
|
Consent of
Independent Auditors |
|
Filed herewith as
Exhibit 23 |
| |
|
| 27 |
|
Financial Data
Schedule |
|
Filed herewith as
Exhibit 27 |
* Indicates management
contracts or compensatory plans or arrangements in which one or more
directors or executive officers of the Company may be
participants.
**
|
As appropriate,
indicates filing made on behalf of predecessor Registrant’s, ON
Marine Services Company, a Delaware corporation, before March 8, 1999
known as Oglebay Norton Company.
|
