<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File No. 1-7170
IMCO RECYCLING INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
75-2008280
(I.R.S. Employer Identification No.)
5215 North O'Connor Blvd., Suite 940
Central Tower at Williams Square
Irving, Texas 75039
(Address of principal executive offices) (Zip Code)
(972) 401-7200
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of business on July 31, 1998.
Common Stock, $0.10 par value, 17,005,196
-----------------------------------------
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IMCO RECYCLING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------- ----------------
<S> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,680 $ 405
Accounts receivable, net 45,314 52,163
Inventories 32,272 34,556
Deferred income taxes 3,170 2,782
Other current assets 2,766 1,746
------------- ----------------
Total Current Assets 92,202 91,652
Property and equipment, net 148,642 142,100
Excess of acquisition cost over the fair value of net assets acquired, net
of accumulated amortization of $5,617 and $4,053 at June 30, 1998
and December 31, 1997, respectively 74,940 74,658
Investments in joint ventures 14,889 14,271
Other assets, net 10,695 9,855
------------- ----------------
$ 341,368 $ 332,536
============= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 30,971 $ 25,902
Accrued liabilities 8,921 7,254
Current maturities of long-term debt 498 648
------------- ----------------
Total Current Liabilities 40,390 33,804
Long-term debt 101,058 109,194
Deferred income taxes 11,358 11,278
Other long-term liabilities 9,194 9,336
STOCKHOLDERS' EQUITY
Preferred stock; par value $.10; 8,000,000 shares authorized;
none issued - -
Common stock; par value $.10; 40,000,000 shares authorized;
16,746,950 issued at June 30, 1998; 16,515,750 issued at
December 31, 1997 1,675 1,652
Additional paid-in capital 98,877 96,519
Retained earnings 79,194 71,096
Treasury stock, at cost; 41,639 shares at June 30, 1998; 39,354
shares at December 31, 1997 (378) (343)
------------- ----------------
Total Stockholders' Equity 179,368 168,924
------------- ----------------
$ 341,368 $ 332,536
============= ================
</TABLE>
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IMCO RECYCLING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except share data)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------------- ------------------------
1998 1997 1998 1997
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 124,489 $ 76,600 $ 251,721 $ 159,127
Cost of sales 110,315 64,460 223,921 136,850
---------- --------- ---------- ----------
Gross profits 14,174 12,140 27,800 22,277
Selling, general and administrative expense 4,926 4,236 9,666 8,799
Interest expense 1,801 1,943 3,799 3,659
Interest income (96) (110) (199) (179)
Equity in earnings of affiliates (564) (60) (1,028) (90)
---------- --------- ---------- ----------
Earnings before provision for income taxes, minority
interests and extraordinary item 8,107 6,131 15,562 10,088
Provision for income taxes 2,981 2,450 5,737 4,033
---------- --------- ---------- ----------
Earnings before minority interests and extraordinary item 5,126 3,681 9,825 6,055
Minority interests, net of provision for income taxes 115 114 203 208
---------- --------- ---------- ----------
Earnings before extraordinary item 5,011 3,567 9,622 5,847
Extraordinary item, net - - - (1,318)
---------- --------- ---------- ----------
Net earnings $ 5,011 $ 3,567 $ 9,622 $ 4,529
========== ========= ========= ==========
Net earnings per common share:
Basic:
------
Earnings before extraordinary item $ 0.30 $ 0.28 $ 0.58 $ 0.47
Extraordinary item - - - (0.10)
---------- --------- ---------- ----------
Net earnings $ 0.30 $ 0.28 $ 0.58 $ 0.37
========== ========= ========== ==========
Diluted:
--------
Earnings before extraordinary item $ 0.30 $ 0.28 $ 0.57 $ 0.46
Extraordinary item - - - (0.10)
---------- --------- ---------- ----------
Net earnings $ 0.30 $ 0.28 $ 0.57 $ 0.36
========== ========= ========== ==========
Weighted average shares outstanding:
Basic 16,658 12,535 16,574 12,460
Diluted 16,842 12,726 16,766 12,638
Dividends declared per common share $ 0.05 $ 0.05 $ 0.10 $ 0.10
</TABLE>
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IMCO RECYCLING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
-------------------------------------
1998 1997
----------------- ---------------
OPERATING ACTIVITIES
<S> <C> <C>
Earnings before extraordinary item $ 9,622 $ 5,847
Depreciation and amortization 10,152 7,773
Provision for deferred income taxes (307) 254
Equity in earnings of affiliates (1,028) (90)
Other noncash charges 1,228 1,073
Changes in operating assets and liabilities:
Accounts receivable 6,031 71
Inventories 2,284 32
Other current assets (1,019) (654)
Accounts payable and accrued liabilities 7,219 2,564
----------------- ---------------
NET CASH FROM OPERATING ACTIVITIES 34,182 16,870
INVESTING ACTIVITIES
Payments for property and equipment (16,149) (19,026)
Acquisition of IMSAMET, Inc., net of cash acquired - (58,272)
Other 102 (1,722)
----------------- ---------------
NET CASH USED BY INVESTING ACTIVITIES (16,047) (79,020)
FINANCING ACTIVITIES
Net repayments of short-term borrowings - (8,351)
Net repayments of long-term revolving credit facility (9,225) -
Proceeds from issuance of long-term debt 1,541 123,591
Principal payments of long-term debt (446) (54,106)
Debt issuance costs (112) (2,165)
Dividends paid (1,660) (1,253)
Other 55 2,145
----------------- ---------------
NET CASH (USED BY) PROVIDED FROM FINANCING ACTIVITIES (9,847) 59,861
----------------- ---------------
Effect of exchange rate differences on cash and cash equivalents (13) -
Net increase (decrease) in cash and cash equivalents 8,275 (2,289)
Cash and cash equivalents at January 1 405 5,070
----------------- ---------------
Cash and cash equivalents at June 30 $ 8,680 $ 2,781
================= ===============
SUPPLEMENTARY INFORMATION
Cash payments for interest $ 3,893 $ 4,797
Cash payments for income taxes $ 4,445 $ 1,991
Fair value of the shares issued in the acquisition of Rock Creek
Aluminum, Inc. $ - $ 7,125
</TABLE>
Page 4
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IMCO RECYCLING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1998
(DOLLARS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six month periods ended June
30, 1998 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1998. The accompanying financial statements
include the accounts of IMCO Recycling Inc. and all of its subsidiaries (the
"Company"). All significant intercompany accounts and transactions have been
eliminated. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1997.
NOTE B - INVENTORIES
The components of inventories are:
JUNE 30, DECEMBER 31,
1998 1997
---------- ------------
Finished goods $ 17,938 $ 16,771
Raw materials 13,748 17,313
Supplies 586 472
---------- ------------
$ 32,272 $ 34,556
========== ============
NOTE C - LONG-TERM DEBT
In June 1998, the Company borrowed $4,100,000 from the issuance of Solid Waste
Disposal Facilities Revenue Bonds (Series 1998) by the City of Morgantown,
Kentucky. These bonds were issued in connection with the Company's expansion of
its landfill in Morgantown, Kentucky. The bonds bear a 6% per annum interest
rate and mature May 1, 2023. The net proceeds from the bonds were deposited
into an escrow fund, which will be disbursed to the Company as it incurs costs
to expand its landfill. As of June 30, 1998, the Company has received
$1,541,000 in cash proceeds from the escrow fund.
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NOTE D - ACQUISITION
On July 21, 1998, the Company acquired all of the capital stock of U.S. Zinc
Corporation and its subsidiary corporations ("U.S. Zinc") for a total purchase
price of approximately $72,000,000, consisting of (i) $46,500,000 in cash, (ii)
the assumption of approximately $17,000,000 in long-term debt, (iii) the
issuance of 298,010 shares of the Company's common stock, and (iv) the issuance
of four-year warrants to purchase an aggregate of 1,500,000 shares of the
Company's common stock at a price of $19.04 per share. In addition, the
transaction provides for future contingent payments to certain former U.S. Zinc
shareholders, dependent upon the future earnings performance of U.S. Zinc and
the Company's other zinc-related operations through June 30, 2002. The
acquisition will be accounted for using the purchase method of accounting. The
estimated excess of the purchase price over the fair value of net assets
acquired is approximately $36,000,000 and will be amortized over thirty years on
a straight-line basis.
U.S. Zinc, headquartered in Houston, Texas, and its subsidiaries operate five
production facilities located in Illinois, Texas and Tennessee and have an
annual processing capacity of 200,000,000 pounds of zinc.
NOTE E - OPERATIONS
The Company's operations, like those of other basic industries, are subject to
federal, state, local and foreign laws, regulations and ordinances that (1)
govern activities or operations that may have adverse environmental effects,
such as discharges to air and water, as well as handling and disposal practices
for solid and hazardous wastes and (2) impose liability for costs of cleaning
up, and certain damages resulting from, past spills, disposals, or other
releases of hazardous substances (together, "Environmental Laws"). It is
possible that more rigorous Environmental Laws will be enacted that could
require the Company to make substantial expenditures in addition to those
referred to herein.
From time to time, operations of the Company have resulted or may result in
certain noncompliance with applicable requirements under Environmental Laws.
However, the Company believes that any such noncompliance under current
Environmental Laws would not have a material adverse effect on the Company's
financial position or results of operations.
The Illinois Environmental Protection Agency ("IEPA") recently notified the
Company that its zinc subsidiary ("IZI") is a potentially responsible party
("PRP") pursuant to the Illinois Environmental Protection Act for the cleanup of
contamination at a site in Marion County, Illinois to which IZI, among others,
in the past sent zinc oxide for processing and resale. IZI has joined a group
of PRPs that is planning to negotiate with the IEPA regarding the cleanup of the
site. Although the site has not been fully investigated and final cleanup costs
not yet determined, based on current cost estimates and information regarding
the amount and type of materials sent to the site by IZI, the Company does not
believe, although there can be no assurance, that its liability at this site
will have a material adverse effect on its financial position or results of
operations.
Page 6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Most of the Company's processing consists of aluminum, magnesium and zinc tolled
for its customers. To a lesser (but increasing) extent, the Company's
processing also consists of buy/sell business, which involves purchasing scrap
metal and dross for processing and resale. The Company's buy/sell business
revenues include the cost of the metal, the processing cost and the Company's
profit margin. Tolling revenues reflect only the processing cost and the
Company's profit margin. Accordingly, tolling business produces lower revenues
and costs of sales than does the buy/sell business. Variations in the mix of
these two businesses can cause revenues to change significantly from period to
period while not significantly affecting gross profit, since both types of
business generally produce approximately the same gross profit per pound of
metal processed. As a result, the Company considers processing volume to be a
more important determinant of performance than revenues.
The Company's aluminum alloying facility (acquired in November 1997) is
primarily engaged in buy/sell business, as opposed to tolling; therefore, the
Company has experienced higher levels of buy/sell business relative to tolling
during 1998. With the recent acquisition of U.S. Zinc (see "ACQUISITION"
below), the level of overall buy/sell business for the Company is expected to
continue to increase. The higher levels of buy/sell business increase the
Company's working capital requirements and subject the Company to greater risks
associated with price fluctuations in the metals markets.
The following table shows the total pounds of metal melted, the percentage of
total pounds melted represented by tolled metal, total revenues and total gross
profits:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------- ---------------------------------
1998 1997 1998 1997
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Pounds of metal melted 591,336 489,880 1,170,723 922,314
Percentage of pounds tolled 72% 84% 72% 83%
Revenues $ 124,489 $ 76,600 $ 251,721 $ 159,127
Gross profits $ 14,174 $ 12,140 $ 27,800 $ 22,277
</TABLE>
ACQUISITION
On July 21, 1998, the Company acquired all of the capital stock of U.S. Zinc for
a total purchase price of approximately $72,000,000, consisting of (i)
$46,500,000 in cash, (ii) the assumption of approximately $17,000,000 in long-
term debt, (iii) the issuance of 298,010 shares of the Company's common stock,
and (iv) the issuance of four-year warrants to purchase an aggregate of
1,500,000 shares of the Company's common stock at a price of $19.04 per share.
In addition, the transaction provides for future contingent payments to certain
former U.S. Zinc shareholders, dependent upon the future earnings performance of
U.S. Zinc and the Company's other zinc-related operations through June 30, 2002.
On July 21, 1998, the closing price per share of the Company's common stock, as
reported on New York Stock Exchange composite transactions, was $17.3125. The
acquisition will be accounted for using the purchase method of accounting.
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The estimated excess of the purchase price over the fair value of net assets
acquired is approximately $36,000,000 and will be amortized over thirty years on
a straight-line basis.
U.S. Zinc, headquartered in Houston, Texas, and its subsidiaries operate five
production facilities located in Illinois, Texas and Tennessee and have an
annual processing capacity of 200,000,000 pounds of zinc. The acquisition of
U.S. Zinc is expected to increase the Company's total annual processing capacity
in 1998 to approximately 2.7 billion pounds.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED
JUNE 30, 1997 AND SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED
JUNE 30, 1997
PRODUCTION: For the three and six month periods ended June 30, 1998, the
Company melted 21% and 27%, respectively, more metal than it did during the same
periods in 1997. Aluminum processing at the Company's newest plants in
Coldwater, Michigan (which began production in the first quarter of 1997) and
Swansea, Wales (which began production in the fourth quarter of 1997) and the
Alchem facility (which was acquired in November 1997) accounted for 79% and 70%
of the increase in production for the three and six month periods ended June 30,
1998, respectively. The large increase in production for the second quarter of
1998 was partially offset by lower production at the Bedford facility due to a
reconfiguration of the furnaces and work force at that facility. In addition,
the Company's June 1998 production was modestly impacted by a strike at several
of the facilities of General Motors, a customer of the Company.
REVENUES: For the three months ended June 30, 1998, revenues increased 63% to
$124,489,000, compared to $76,600,000 for the same period in 1997. In the first
six months of 1998, the Company's revenues totaled $251,721,000, which was 58%
higher than revenues of $159,127,000 for the same period in 1997. The
acquisition of Alchem and operations at the new Coldwater, Michigan and Swansea,
Wales plants accounted for most of the increase for both the three and six month
periods ended June 30, 1998; however, this increase was partially offset, in the
second quarter of 1998, by lower aluminum selling prices. Tolling activity
represented 72% of the Company's pounds melted for the three and six months
ended June 30, 1998, compared to 84% and 83% for the same periods of 1997,
respectively. As discussed above, a reduction in the tolling percentage will
generally increase revenues. Prior to November 1997, materials processed for
Alchem at the Company's Coldwater, Michigan facility were classified as tolling
business, but because the Company acquired Alchem in November 1997, these pounds
are now classified as buy/sell business.
GROSS PROFIT: Gross profits for the three month period ended June 30, 1998 were
$14,174,000, an increase of $2,034,000, or 17% over gross profits for the second
quarter of 1997. Gross profits were $27,800,000 for the six months ended June
30, 1998, an increase of $5,523,000 or 25% over the same period of 1997. The
November 1997 acquisition of Alchem and operations at the new Coldwater and
Swansea plants accounted for virtually all of the increase for the three and
six month periods ending June 30, 1998.
SG&A EXPENSES: Selling, general and administrative expenses were $4,926,000 for
the three month period and $9,666,000 for the six month period ended June 30,
1998, compared to $4,236,000 and $8,799,000, respectively, for the same periods
in 1997. The increase for both the
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three and six month periods ended June 30, 1998, was primarily due to higher
selling and goodwill amortization expenses resulting from the November 1997
acquisition of Alchem.
INTEREST: Interest expense for the three month periods ended June 30, 1998 and
1997 was $1,801,000 and $1,943,000, respectively, a decrease of 7%. Interest
expense was $3,799,000 for the first six months of 1998, or 4% higher than
$3,659,000 for the first six months of 1997. For the three month period ended
June 30, 1998, the decrease in interest expense was primarily related to lower
levels of borrowings outstanding. For the six month period ended June 30, 1998,
the increase in interest expense was primarily due to higher levels of
capitalized interest during the first quarter of 1997 in connection with the
construction of the Company's new plant in Coldwater, Michigan.
EXTRAORDINARY ITEM: In connection with the Company's western plant acquisitions
in January 1997, the Company borrowed funds under a new long-term credit
facility. A portion of the funds borrowed under this credit facility was used
to retire substantially all of the Company's outstanding indebtedness prior to
its stated maturity. This early debt retirement generated an extraordinary loss
of $1,318,000 (net of income tax benefit of $878,000) for the first quarter of
1997. There has been no extraordinary item in 1998.
NET EARNINGS: Earnings before the provision for income taxes, minority
interests and extraordinary item increased 32% to $8,107,000 for the three month
period ended June 30, 1998 compared to $6,131,000 for the same period in 1997
and increased 54% to $15,562,000 for the first six months of 1998 compared to
$10,088,000 for the same period in 1997. The increase was primarily the result
of higher gross profits as a result of increases in revenue due mainly to the
Alchem acquisition. The Company's effective income tax rate was 37% for the
three and six months ended June 30, 1998, compared to 40% for the three and six
months ended June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operations. Operations provided $34,182,000 and $16,870,000 of
cash during the first six months of 1998 and 1997, respectively. Changes in the
components of operating assets and liabilities accounted for 72% of the increase
in cash provided from operations in 1998 compared to 1997. Changes in operating
assets and liabilities generated $14,515,000 and $2,013,000 of cash for the
first six months of 1998 and 1997, respectively; approximately half of this
increase in 1998 was attributable to improved collections, which resulted in a
significant reduction in the Company's accounts receivable balance since
December 31, 1997. Higher net earnings before extraordinary item in 1998 of
$9,622,000 compared to $5,847,000 for 1997 accounted for approximately 22% of
the increase in cash provided from operations. In addition, higher depreciation
and amortization of $10,152,000 in 1998 compared to $7,773,000 in 1997 accounted
for 14% of the increase in cash provided from operations. At June 30, 1998, the
relationship of current assets to current liabilities, or current ratio, was
2.28 to 1, compared to 2.71 to 1 at December 31, 1997.
For the reasons discussed above, working capital fluctuates as the mix of
buy/sell business and tolling business changes. The Company anticipates its
working capital requirements to increase in 1998 as a result of higher levels of
buy/sell business and increased processing volumes due to the acquisitions of
Alchem and U.S. Zinc and the initial operation of the new plant in Swansea,
Wales. The acquisition of U.S. Zinc is also expected to increase the level of
overall Company
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buy/sell business, and thereby further increase its working capital
requirements. Nonetheless, the Company believes that its cash on hand, the
availability of funds under its amended and restated credit facilities and its
anticipated internally generated funds will be sufficient to fund its current
needs and meet its obligations for the foreseeable future (see "Cash Flows from
Financing Activities" below).
Cash Flows from Investing Activities. During the six months ended June 30, 1998,
net cash used by investing activities decreased 80% to $16,047,000 compared to
$79,020,000 for the same period in 1997, which primarily reflected the first
quarter 1997 acquisition of IMSAMET for $58,272,000. In addition, the Company's
total payments for property, plant and equipment in the first six months of 1998
decreased to $16,149,000, compared to $19,026,000 spent in the first six months
of 1997. Capital expenditures for property, plant and equipment in 1998 are
expected to be approximately $35,000,000. Major 1998 projects include the
installation of a reverberatory furnace and delacquering equipment at the
Morgantown, Kentucky facility, the purchase of environmental equipment, the
expansion of an existing Company-owned landfill and upgrades to various
furnaces.
Cash Flows from Financing Activities. Net cash used by financing activities was
$9,847,000 for the six months ended June 30, 1998, compared to net cash provided
from financing activities of $59,861,000 in the same period of 1997. In
connection with its January 1997 acquisitions, the Company entered into a new
long-term credit agreement with certain lenders, borrowing $110,000,000 at the
closing and using approximately $61,000,000 for the IMSAMET acquisition and
$49,000,000 to retire substantially all of the Company's outstanding debt as of
December 31, 1996. Financing activities also included cash payments of
$1,660,000 in dividends for the first six months of 1998.
In June 1998, the Company borrowed $4,100,000 from the issuance of Solid Waste
Disposal Facilities Revenue Bonds (Series 1998) by the City of Morgantown,
Kentucky. These bonds were issued in connection with the Company's expansion of
its landfill in Morgantown, Kentucky. The bonds bear a 6% per annum interest
rate and mature May 1, 2023. The net proceeds from the bonds were deposited
into an escrow fund, which will be disbursed to the Company as it incurs costs
to expand its landfill. As of June 30, 1998, the Company has received
$1,541,000 in cash proceeds from the escrow fund.
The Company funded the cash portion of its acquisition of U.S. Zinc in July 1998
through borrowings under its long-term reducing revolving credit facility. Upon
the closing of the acquisition, the Company also repaid a portion of U.S. Zinc's
outstanding long-term indebtedness under its working capital line of credit
facility (approximately $16,000,000) through borrowings under the Company's
long-term reducing revolving credit facility.
As of July 31, 1998, the Company had $147,000,000 outstanding under its long-
term reducing revolving credit facility, leaving approximately $51,000,000
available for borrowings under the facility. As of June 30, 1998, the floating
interest rate was capped at 8% per annum for 45% of the total outstanding
borrowings under the long-term reducing revolving credit facility. At June 30,
1998, the Company had standby letters of credit outstanding in the amounts of
$1,752,000 with Chase Bank of Texas, N.A., $769,000 with American National Bank
and Trust Company and $2,493,000 with the Economic Development Corporation of
the City of Coldwater, Michigan.
Page 10
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Contingencies. On May 8, 1997, Harvard Industries, Inc. ("Harvard") announced
that it and its wholly-owned subsidiary, Doehler-Jarvis, Inc. ("Doehler-Jarvis")
had filed for protection under Chapter 11 of the U.S. Bankruptcy Code. The
Company has previously sold aluminum to Doehler-Jarvis. At June 30, 1998, the
Company had $3,492,000 of outstanding unsecured receivables from Doehler-Jarvis,
net of related reserves. While the Company currently believes that Harvard's
bankruptcy will not have a material adverse effect on the Company's financial
position or results of operations, no assurance can be given as to the amount
and timing of the Company's ultimate recovery, if any, of its claims. The
Company's revenues from Doehler-Jarvis totaled $12,350,000 and $17,490,000 for
the years ended December 31, 1997 and 1996, respectively. The loss of this
customer has not had a material adverse effect on the Company's financial
position or results of operations.
The Company understands that on July 10, 1998, Harvard filed its Chapter 11 plan
(the "Plan") with the United States Bankruptcy Court for the District of
Delaware. According to published accounts, the Plan contemplates a conversion
of virtually all pre-petition unsecured debt (including the Company's claims)
into 100% of the equity of the reorganized Harvard, subject to dilution for
incentive options and with respect to warrants to be issued under the Plan. The
Company understands that following a hearing before the Court scheduled for
August 19, 1998 on the adequacy of the Disclosure Statement, Harvard will
commence the solicitation of votes for approval of the Plan. If the Plan is
approved as proposed, the Company will become a holder of common stock of
Harvard. No prediction can be given as to whether the Plan will be approved and
confirmed as proposed, as to the timing of its approval or confirmation (or that
of any plan ultimately confirmed), or as to the degree of the ultimate
realization of the Company with respect to its claims against Harvard.
ENVIRONMENTAL
The Company's operations, like those of other basic industries, are subject to
federal, state, local and foreign laws, regulations and ordinances that (1)
govern activities or operations that may have adverse environmental effects,
such as discharges to air and water, as well as handling and disposal practices
for solid and hazardous wastes and (2) impose liability for costs of cleaning
up, and certain damages resulting from, past spills, disposals, or other
releases of hazardous substances (together, "Environmental Laws"). It is
possible that more rigorous Environmental Laws will be enacted that could
require the Company to make substantial expenditures in addition to those
referred to herein.
From time to time, operations of the Company have resulted or may result in
certain noncompliance with applicable requirements under Environmental Laws.
However, the Company believes that any such noncompliance under current
Environmental Laws would not have a material adverse effect on the Company's
financial position or results of operations.
The Illinois Environmental Protection Agency ("IEPA") recently notified the
Company that its zinc subsidiary ("IZI") is a potentially responsible party
("PRP") pursuant to the Illinois Environmental Protection Act for the cleanup of
contamination at a site in Marion County, Illinois to which IZI, among others,
in the past sent zinc oxide for processing and resale. IZI has joined a group of
PRPs that is planning to negotiate with the IEPA regarding the cleanup of the
site. Although the site has not been fully investigated and final cleanup costs
not yet determined, based on current cost estimates and information regarding
the amount and type of materials sent to the site by IZI, the Company does not
believe, although there can be no assurance, that its
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<PAGE>
liability at this site will have a material adverse effect on its financial
position or results of operations.
NEW ACCOUNTING PRONOUNCEMENTS
In 1997, the Financial Accounting Standards Board issued Statement No. 130,
"Reporting Comprehensive Income," which is effective for periods beginning after
December 31, 1997. Statement 130 establishes standards for reporting and display
of comprehensive income and its components. During the first half of 1998, the
impact of Statement 130 was not material.
In 1997, the Financial Accounting Standards Board issued Statement No. 131,
"Disclosure about Segments of an Enterprise and Related Information," which is
effective for periods beginning after December 15, 1997. Statement 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
Based on management's review of the impact of Statement 131, the Company's
recent acquisition of U.S. Zinc is expected to increase the number of segments
the Company will be required to report.
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
effective for fiscal quarters beginning after June 15, 1999. Statement No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. The Company is currently assessing the impact
of Statement 133 on its financial position and results of operations.
YEAR 2000 COMPLIANCE
The Company relies on software and hardware technology to deliver its services
and is currently taking actions to evaluate the nature and extent of the work
required to make its systems and infrastructure "Year 2000" compliant. The
Company believes that its primary operations and accounting software are Year
2000 compliant. However, the Company has identified potential Year 2000 issues
with certain subsidiaries (including its recently acquired U.S. Zinc subsidiary)
and a joint venture partner, and is currently converting and modifying those
systems in order to achieve Year 2000 compliance. The Company does expect to
replace some systems and upgrade others; however, the ultimate costs and
expenses in connection with these efforts are still being evaluated. Based on
preliminary information, the Company believes that it will be able to manage its
total Year 2000 transition without any material adverse effect on its business,
financial position or results of operations. The Company cannot presently
determine the impact on its customers and suppliers in the event that they may
be Year 2000 non-compliant, and in such event, whether such non-compliance may
have a material adverse effect on the Company's results of operations or
financial position. The Company has prepared and distributed a Year 2000
questionnaire to its customers and suppliers to determine their respective Year
2000 issues. Currently, the Company is in the process of evaluating the
responses to the questionnaires received.
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<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF FORWARD-LOOKING STATEMENTS
Certain information contained in this ITEM 2. "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" (as well as certain
oral statements made by or on behalf of the Company) may be deemed to be
forward-looking statements within the meaning of The Private Securities
Litigation Reform Act of 1995 and are subject to the "Safe Harbor" provisions in
that enacted legislation. This information includes, without limitation,
statements concerning future revenues, earnings, costs, margins and expenses;
the expected effects of strikes or work stoppages at Company customer
facilities; future acquisitions or corporate combinations; expected effects of
the recent U.S. Zinc acquisition; future prices for metals; plans for domestic
or international expansion, facility construction schedules and projected
completion dates, and anticipated technological advances; future capabilities of
the Company to achieve "closed loop recycling" on a commercially efficient
basis; prospects for the Company's joint venture partners to purchase a portion
of the Company's interests; future (or extensions of existing) long-term supply
contracts with its customers; the outcome of and any liabilities resulting from
any claims, investigations or proceedings against the Company or its
subsidiaries; future levels of dividends (if any); the future mix of business;
future asset recoveries; future operations, future demand, future industry
conditions, future capital expenditures and future financial condition; and the
impact of the "Year 2000" technology transition on the Company, its customers
and suppliers. These statements are based on current expectations and involve a
number of risks and uncertainties. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it can
give no assurance that such expectations will prove to be correct.
When used in or incorporated by reference into this Quarterly Report on Form 10-
Q, the words "anticipate," "estimate," "expect," "may," "project" and similar
expressions are intended to be among the statements that identify forward-
looking statements. Important factors that could affect the Company's actual
results and cause actual results to differ materially from those results that
might be projected, forecasted, estimated or budgeted by the Company in such
forward-looking statements include, but are not limited to, the following:
fluctuations in operating levels at the Company's facilities, the mix of
buy/sell business as opposed to tolling business, retention and financial
condition of major customers, effects of future costs, collectibility of
receivables, the inherent unpredictability of adversarial or administrative
proceedings, effects of environmental and other governmental regulations,
currency exchange rate fluctuations, trends in the Company's key markets, the
price of and supply and demand for aluminum and zinc (and their derivatives) on
world markets, business conditions and growth in the aluminum and zinc
industries and aluminum and zinc recycling industries, and future levels and
timing of capital expenditures.
These statements are further qualified by the following:
* Estimates of future operating rates at the Company's plants are based on
current expectations by management of the Company of future levels of volumes
and prices for the Company's services or metal, and are subject to
fluctuations in customer demand for the Company's services and prevailing
conditions in the metal markets, as well as certain components of the
Company's cost of operations, including energy and labor costs. Many of the
factors affecting revenues and costs are outside of the control of the
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Company, including weather conditions, general economic and financial market
conditions, and governmental regulation and factors involved in
administrative and other proceedings. The future mix of buy/sell vs. tolling
business is dependent on customers' needs and overall demand, world and U.S.
market conditions then prevailing in the respective metal markets, and the
operating levels at the Company's various facilities at the relevant time.
* The price of primary aluminum, zinc and other metals is subject to worldwide
market forces of supply and demand and other influences. Prices can be
volatile, which could affect the Company's buy/sell metals business. The
Company's use of contractual arrangements including long-term agreements and
forward contracts, may reduce the Company's exposure to this volatility but
does not eliminate it.
* The markets for most aluminum and zinc products are highly competitive. The
major primary aluminum producers are larger than the Company in terms of
total assets and operations and have greater financial resources. In
addition, aluminum competes with other materials such as steel, vinyl,
plastics and glass, among others, for various applications in the Company's
key markets. Unanticipated actions or developments by or affecting the
Company's competitors and/or willingness of customers to accept substitutions
for aluminum products could affect the Company's financial position and
results of operations.
* Fluctuations in the costs of fuels, raw materials and labor can affect the
Company's financial position and results of operations.
* The Company's key transportation market is cyclical, and sales within that
market in particular can be influenced by economic conditions. Strikes and
work stoppages by automotive customers of the Company may have a material
adverse effect on the Company's financial condition and results of
operations.
* A strike at a customer facility or a significant downturn in the business
of a key customer supplied by the Company could affect the Company's
financial position and results of operations.
* The Company spends substantial capital and operating amounts relating to
ongoing compliance with environmental laws. In addition, the Company is
involved in certain investigations and actions in connection with
environmental compliance and past disposals of solid waste. Estimating future
environmental compliance and remediation costs is imprecise due to the
continuing evolution of environmental laws and regulatory requirements and
uncertainties about their application to the Company's operations, the
availability and applicability of technology and the allocation of costs
among principally responsible parties. Unanticipated material legal
proceedings or investigations could affect the Company's financial position
and results of operations.
REVIEW BY INDEPENDENT ACCOUNTANTS
The Company's independent accountants, Ernst & Young LLP, have reviewed the
Company's consolidated financial statements at June 30, 1998, and for the three
and six month periods then ended prior to filing, and their report is included
herein.
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<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risks include (1) floating interest rate risk on its long-
term debt, (2) foreign currency risk from its operations outside the United
States, (3) price risk for natural gas used in its production process, (4) price
risk for aluminum in its buy/sell and by-product processing businesses and (5)
credit risk from customers. The Company uses derivative financial instruments
to manage some of these risks; these financial instruments are not used for
speculative purposes. With the acquisition of U.S. Zinc in the third quarter of
1998, the Company expects to have a greater exposure to the price risk for zinc.
In order to reduce the fluctuating interest rate exposure on the term loan under
the January 1997 Credit Agreement (see ITEM 2. "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--LIQUIDITY AND CAPITAL
RESOURCES"), the Company entered into an interest rate cap transaction ("Rate
Cap Transaction") agreement with Chase Bank of Texas, N.A. on April 7, 1997.
The cost associated with this Rate Cap Transaction is being amortized as
interest expense over the four year term of the agreement. As of June 30, 1998,
the floating interest rate was capped at 8% per annum for 45% of the total
outstanding borrowings under the Amended and Restated Credit Agreement.
During the first half of 1998, the financial impact of gains and losses from
foreign currency exchange rate fluctuations associated with the construction and
operation of the Company's Wales facility and German joint venture was
immaterial.
Natural gas is the Company's second largest cost component. In order to manage
its price exposure for natural gas purchases, the Company has, at times, fixed
the future price of a portion of its natural gas requirements by entering into
firm-priced physical commitments or by entering into financial hedge agreements.
Beginning in the second quarter of 1998, the Company began utilizing financial
hedge agreements to hedge its anticipated natural gas purchases. Under these
agreements, payments are made or received based on the differential between the
monthly closing price on the New York Mercantile Exchange, ("NYMEX") and the
actual price of the natural gas. These contracts are accounted for as hedges,
with all gains and losses recognized in cost of sales when the gas is consumed.
In addition, the Company has cost escalators included in some of its long-term
supply contracts with its customers, which limit the Company's exposure to
natural gas price risk. In addition, as of June 30, 1998, the Company has
outstanding swap agreements to hedge its anticipated domestic natural gas
requirements in the following approximate amounts: 45% for the remainder of
1998, 31% for 1999 and 32% for the first quarter of 2000. In addition, as of
June 30, 1998, approximately 21% of the Company's projected domestic natural gas
requirements were locked-in at fixed delivery for the remainder of 1998 and 17%
were locked-in for the first quarter of 1999.
Aluminum ingot is an internationally priced, sourced and traded commodity, and
its principal trading market is the London Metal Exchange. From time to time,
the Company has entered into forward sale contracts and a series of put and call
option contracts with metal brokers to cover the future selling prices on a
portion of the aluminum generated by the Company's salt cake processing facility
in Kentucky. These contracts are settled in the month of the corresponding
production. The contracts did not have a significant effect on the Company's
financial position
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<PAGE>
or results of operations for the first half of 1998. Based upon the Company's
increased amount of buy/sell business in recent years and expected as a result
of the U.S. Zinc acquisition (see "NOTE D ACQUISITION" and ITEM 2. "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS-
ACQUISITION"), it is likely that the degree of the Company's metals hedging
activities will increase during the remainder of 1998 and for the foreseeable
future.
In May 1997, one of the Company's customers filed for protection under Chapter
11 of the U.S. Bankruptcy Code--see "LIQUIDITY AND CAPITAL RESOURCES" above.
Because the Company is not yet required to provide the disclosures otherwise
mandated under Item 305 of Regulation S-K promulgated by the Securities and
Exchange Commission (pursuant to General Instruction 1. of General Instructions
to Paragraphs 305(a), 305(b), 305(c), 305(d) and 305(e)), the foregoing
disclosures under this ITEM 3. "QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK" do not and are not intended to comply with Item 305.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company paid $835,000 in cash dividends during the second quarter of 1998.
On July 21, 1998, in connection with the acquisition of all of the issued and
outstanding capital stock of U.S. Zinc, the Company issued to the former
stockholders of U.S. Zinc (the "U.S. Zinc Stockholders") (i) 298,010 shares of
the Company's Common Stock, , and (ii) four-year Warrants to purchase an
aggregate of 1,500,000 shares of Common Stock. The shares of Common Stock and
Warrants issued to the U.S. Zinc Stockholders were issued in a private placement
transaction exempt from registration pursuant to Section 4(2) of the Securities
Act of 1933, based upon the limited number of U.S. Zinc Stockholders and their
representations as contained in the purchase documents. See PART I, ITEM 2
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS-ACQUISITION."
The Warrants issued to the U.S. Zinc Stockholders are exercisable for an
exercise price of $19.04 per share of Common Stock, subject to adjustment for
stock dividends, distributions, recapitalizations and other extraordinary
corporate transactions. On July 21, 1998, the closing price per share of Common
Stock as reported on the New York Stock Exchange composite transactions was
$17.3125. The exercisability of the Warrants vests in four equal annual
installments over the term of the Warrants, beginning January 1, 1999, which
vesting accelerates upon a "Change in Control" of the Company (as defined in the
Warrants). The Warrants also provide that the U.S. Zinc Stockholders may effect
a cashless exercise of the Warrants and thereby receive a number of shares of
Common Stock equal to the quotient of (i) the excess of
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<PAGE>
the market value of the Common Stock at the time of exercise over the exercise
price thereof with respect to the vested shares being exercised, divided by (ii)
the market value per share of the Common Stock at the time of exercise. The
Warrants are also subject to certain restrictions on transfer. Upon any
attempted sale of such Warrants (other than as permitted under their terms), the
Company shall have a right of first refusal to purchase, at its option, all or
any portion of the offered Warrants at the purchase price per Warrant offered to
be paid by the proposed transferee.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on May 13, 1998, at
which the election of two Class I Directors, amendment of the Company's
Certificate of Incorporation, amendment to the Company's Annual Incentive
Program, amendment to the Company's 1992 Stock Option Plan and the appointment
of Ernst & Young LLP as the Company's independent public accountants for 1998
were considered. Don V. Ingram was re-elected as a director and received
14,221,597 votes for his election, with 630,668 votes withheld. Steve Bartlett
was elected as a director and received 14,236,679 votes for his election, with
615,586 votes withheld The following directors continued in office: J.M.
Brundrett, Ralph L. Cheek, Don Navarro, John J. Fleming and Jack C. Page. The
amendment to the Company's Certificate of Incorporation was approved with
13,006,601 votes in favor of its approval, 1,685,537 votes against and 160,127
votes abstaining. The amendment to the Company's Annual Incentive Program was
approved with 13,551,239 votes in favor of the amendment, 1,137,352 votes
against and 163,674 votes abstaining. The amendment to the Company's 1992 Stock
Option Plan was approved with 13,601,292 votes in favor of the amendment,
1,085,449 votes against and 165,523 votes abstaining. Ernst & Young LLP was
ratified as the independent public accountants for the Company for 1998 and
received 14,352,149 votes for their ratification, 75,354 votes against and
424,762 votes abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
3.1 IMCO Recycling Inc. Certificate of Incorporation, as amended May 13,
1998.
10.1 IMCO Recycling Inc. Annual Incentive Program, as amended February 25,
1997; April 1, 1997; May 13, 1997 and May 13, 1998.
10.2 IMCO Recycling Inc. 1992 Stock Option Plan, as amended December 15,
1994; February 28, 1996; February 25, 1997; May 13, 1997 and May 13,
1998.
15.1 Acknowledgment letter regarding unaudited financial information from
Ernst & Young LLP
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<PAGE>
27 Financial Data Schedule
(b) Reports on Form 8-K:
None filed during quarter ended June 30, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IMCO Recycling Inc.
(Registrant)
Date: August 6, 1998 By: /s/ Robert R. Holian
-------------------------------------
Robert R. Holian
Vice President and Controller
(Principal Accounting Officer)
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<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Stockholders and
Board of Directors
IMCO Recycling Inc.
We have reviewed the accompanying consolidated balance sheet of IMCO Recycling
Inc. as of June 30, 1998, and the related consolidated statements of earnings
for the three-month and six-month periods ended June 30, 1998, and 1997 and the
consolidated statement of cash flows for the six-month periods ended June 30,
1998, and 1997. These financial statements are the responsibility of the
Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, which will be
performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of IMCO Recycling Inc. as of December
31, 1997, and the related consolidated statements of earnings, stockholders'
equity, and cash flows for the year ended December 31, 1997, not presented
herein, and in our report dated February 2, 1998, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet as of
December 31, 1997, is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
ERNST & YOUNG LLP
Dallas, Texas
July 27, 1998
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<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
FRONTIER TEXAS CORPORATION
FIRST. The name of the corporation is Frontier Texas Corporation.
SECOND. The address of its registered office in the State of Delaware is 1209
Orange Street, Wilmington, Delaware 19801, County of New Castle. The name of
its registered agent at such address is The Corporation Trust Company.
THIRD. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH. The total number of shares of stock which the corporation shall have
authority to issue is Twenty Million (20,000,000), and the par value of each
share, designated as "Common Stock", is Ten Cents ($0.10), amounting in the
aggregate to Two Million Dollars ($2,000,000).
FIFTH. Cumulative voting for the election of directors shall not be
permitted.
SIXTH. The number of directors shall be fixed in the manner provided in the
Bylaws of the corporation, and until changed in the manner provided in the
Bylaws shall be five (5); and the names and mailing addresses of those who are
to serve as directors until the first annual meeting of the stockholders, or
until their successors be elected and qualified, are as follows:
Name Address
- ---- -------
Larry Thrasher 2828 Diamond Shamrock Tower
Dallas, Texas 75201
Robert D. Liscombe 2828 Diamond Shamrock Tower
Dallas, Texas 75201
<PAGE>
Michael Caolo Plaza of the Americas
South Tower, Suite 2100
Dallas, Texas 75201
Dr. Jack M. Brundertt 617 Durango Circle North
Irving, Texas 75062
John B. Tuthill 11745 Valleydale
Dallas, Texas 75230
SEVENTH. The board of directors of the corporation shall have power to make,
alter or repeal Bylaws of the corporation, subject to such restrictions upon the
exercise of such power as may be imposed by the stockholders in any Bylaws
adopted by them from time to time.
EIGHTH. The name and mailing address of the incorporator is Larry Thrasher,
2828 Diamond Shamrock Tower, Dallas, Texas 75201.
The undersigned, being the incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the General Corporation Law of the State of
Delaware, does make this certificate, hereby declaring and certifying that this
is his act and deed and the facts herein stated are true, and accordingly has
hereunto set his hand this 12th day of February, 1985.
/s/ Larry Thrasher
---------------------------
Larry Thrasher
<PAGE>
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BE IT REMEMBERED that on this 12th day of February, 1985, personally came
before me, a Notary Public for the State of Texas, Larry Thrasher, the person
who signed the foregoing certificate of incorporation, known to me personally to
be such, and acknowledged the said certificate to be his act and deed and that
the facts therein stated are true.
GIVEN UNDER MY HAND AND SEAL of office the day and year aforesaid.
/s/ Barbara Thorn
---------------------------------------
Notary Public in and for Dallas County,
Texas
(SEAL)
My Commission Expires:
5-4-87
- ----------------------------
<PAGE>
ARTICLES OF AMENDMENT TO
THE CERTIFICATE OF INCORPORATION
OF FRONTIER TEXAS CORPORATION
Pursuant to the provisions of Section 242 of the Delaware General
Corporation Law, the undersigned corporation adopts the following Articles of
Amendment to its Certificate of Incorporation:
ARTICLE ONE
The name of the corporation is Frontier Texas Corporation.
ARTICLE TWO
The following amendment to the Certificate of Incorporation was adopted by
the directors and majority shareholders of the corporation on August 21, 1986
and September 16, 1986, respectively. The amendment alters the original
Certificate of Incorporation. The nature and full text of the amendment is as
follows:
Article Eighth is amended by deleting the original Article Eighth and
substituting therefor a new Article which shall read in its entirety as
follows:
ARTICLE EIGHTH
The corporation shall indemnify the directors and officers to the extent
permitted by the Delaware General Corporation Law. A director of the
corporation shall not be held personally liable to the corporation or its
shareholders for monetary damages for breach of a director's fiduciary duty
of care, except that a director shall continue to be held personally liable
for (i) breach of the duty of loyalty, (ii) failure to act in good faith,
(iii) engaging in intentional misconduct or knowingly violating a law, (iv)
paying a dividend or approving a stock repurchase which was illegal under
Delaware law or (v) obtaining an improper personal benefit. A director's
personal liability for violation of the federal securities laws and for any
act or omission occurring prior to the date this provision becomes
effective, and the availability of equitable remedies for breach of a
director's fiduciary duty shall not be limited by this Article in any way.
ARTICLE THREE
Original Article Eighth of the Certificate of Incorporation shall be
renumbered Article Ninth, but shall not be changed in any other manner.
<PAGE>
ARTICLE FOUR
The amendments stated herein do not effect a change in the amount of stated
capital of the corporation.
Dated as of this 18th day of September, 1986.
FRONTIER TEXAS CORPORATION
By: /s/ Larry Thrasher
----------------------------
Larry Thrasher, President
ATTEST: By: /s/ Marietta Allen
----------------------------
Marietta Allen, Secretary
THE STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
BEFORE ME, a notary public, on this day personally appeared Larry Thrasher,
known to me to be the President of Frontier Texas Corporation and the person
whose name is subscribed to the foregoing instrument, and, being by me first
duly sworn, declared that the statements therein contained are true and correct.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 18th day of September, 1986.
/s/ Beverly Johnson
-------------------------------------------
Notary Public in and for the State of Texas
Printer Name of Notary
Beverly Johnson
--------------------------------------------
(Seal)
My Commission Expires:
Dated March 22, 1989
- ---------------------------------
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER MERGING
INTERNATIONAL METAL CO., AN OKLAHOMA CORPORATION
INTO FRONTIER TEXAS CORPORATION, A DELAWARE CORPORATION
(PURSUANT TO SECTION 253 OF THE
GENERAL CORPORATION LAW OF DELAWARE)
Frontier Texas Corporation, a corporation incorporated on the fourteenth
day of February, 1985, pursuant to the provisions of the General Corporation Law
of the State of Delaware does hereby certify that it owns at least ninety
percent (90%) of the outstanding shares of each class of capital stock of
International Metal Co., a corporation incorporated under the laws of the State
of Oklahoma, and that it, pursuant to resolutions of the Board of Directors,
duly adopted by the unanimous written consent of the members thereof on October
3, 1988, determined to and did merge into itself International Metal Co., an
Oklahoma corporation, which resolutions are in the following words, to wit:
WHEREAS, Frontier Texas Corporation ("Frontier") is a corporation duly
organized and validly existing under the laws of the State of Delaware; and
WHEREAS, International Metal Co. ("IMCO") is a corporation duly organized
and validly existing under the laws of the State of Oklahoma; and
WHEREAS, the undersigned directors deem it to be in the best interests of
Frontier and IMCO to merge IMCO with and into Frontier pursuant to a Plan and
Agreement of Merger (the "Merger Agreement"); now, therefore, be it
RESOLVED, that the form, terms and provisions of the Merger Agreement
be, and the same hereby are, approved and adopted in all respects and that,
pursuant to such Merger Agreement, IMCO merge with and into Frontier (the
"Merger"), with the result that Frontier will be the surviving corporation;
and
FURTHER RESOLVED, that each share of the Common Stock of IMCO issued
and outstanding immediately prior to the Merger pursuant to the terms of
the Merger Agreement shall be converted into 68,222 shares of Common Stock
of Frontier; provided, however, that each share of the Common Stock of IMCO
held by Frontier shall be cancelled; and
FURTHER RESOLVED, that the President or a Vice President and the
Secretary or any Assistant Secretary of Frontier be, and they hereby are,
authorized, empowered and directed, for and in the name and on behalf of
Frontier, to execute the Merger Agreement, any Certificate of Merger and
the Certificate of Ownership and Merger in the form any such officer shall
deem appropriate and any other certificates, articles, instruments and
other documents in form and substance as any such officer shall deem
appropriate, all as may be required by the laws of the States of Delaware
and Oklahoma, to waive any and all conditions and to do all things
necessary or helpful to carry out the purposes of the foregoing resolutions
and the Merger Agreement
<PAGE>
adopted thereby, and all acts and deeds of the officers and agents of
Frontier which are consistent with the purposes and intent of the above
resolutions shall be, and the same hereby are, in all respects, ratified,
approved, confirmed and adopted as the acts and deeds of Frontier; and
FURTHER RESOLVED, that the Certificate of Incorporation of Frontier,
upon consummation of the Merger shall be amended to change the name of
Frontier to "IMCO Recycling Inc.," and that the President or a Vice
President and the Secretary or any Assistant Secretary of Frontier be, and
they hereby are, authorized, empowered and directed, for and in the name of
and on behalf of Frontier, to take any and all actions any such officer
shall deem appropriate in order to effectuate the aforementioned Merger and
related transactions, and all acts and deeds of the officers and agents of
Frontier which are consistent with the purpose and intent of this
resolution shall be, and the same hereby are, in all respects ratified,
approved, confirmed and adopted as the acts and deeds of Frontier.
IN WITNESS WHEREOF, Frontier Texas Corporation has caused this Certificate
to be signed by its President and attested by its Secretary, and its corporate
seal to be affixed, the 3rd day of October, 1988.
By: /s/ Ralph L. Cheek
------------------------------
Ralph L. Cheek, President
ATTEST:
/s/ Paul V. Dufour
- --------------------------------
Paul V. Dufour, Secretary
(Seal)
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF INCORPORATION
OF IMCO RECYCLING INC.
IMCO RECYCLING INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company"),
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Company,
resolutions were duly adopted setting forth a proposed amendment to the
Certificate of Incorporation of the Company, declaring such amendment to be
advisable and directing that the proposed amendment be submitted to the
stockholders of the Company for their consideration and approval at the next
annual meeting of the stockholders. The resolutions setting forth the proposed
amendment are as follows:
FURTHER RESOLVED, that the Board of Directors of the Company declares
it advisable to adopt an amendment providing for the authorization for
issue of up to 8,000,000 shares of Preferred Stock, par value $0.10 per
share, upon the determination of the Board of Directors (the "Amendment"),
to Article FOURTH of the Certificate of Incorporation of the Company so
that such Article FOURTH shall read in its entirety as follows:
"FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 28,000,000, 8,000,000 of
such shares to be classified as preferred stock (the "Preferred
Stock"), par value $0.10 per share, and 20,000,000 of such shares to
be classified as common stock (the "Common Stock"), par value $0.10
per share.
The designations and the powers, preferences, rights,
qualifications, limitations and restrictions of the Preferred Stock
and the Common Stock of the Corporation are as follows:
A. Provisions Relating to the Preferred Stock.
1. The Preferred Stock may be issued from time to time in one or
more series, the shares of each series to have such designations and
powers, preferences, rights, qualifications, limitations and
restrictions thereof as are stated and expressed herein and in the
resolution or resolutions providing for the
<PAGE>
issue of such series adopted by the Board of Directors of the
Corporation as hereafter prescribed.
2. Authority is hereby expressly granted to and vested in the
Board of Directors of the Corporation to authorize the issuance of the
Preferred Stock from time to time in one or more series, and with
respect to each series of the Preferred Stock, to fix and state by the
resolution or resolutions from time to time adopted providing for the
issuance thereof the following:
(i) whether or not shares of a series shall have voting
rights, full, special, or limited, or shall be without voting rights,
and whether or not the holders of such shares are to be entitled to
vote as a separate class either alone or together with the holders of
one or more other classes or series of stock;
(ii) the number of shares to constitute the series and the
designations thereof;
(iii) the preferences, and relative, participating,
optional, or other special rights, if any, and the qualifications,
limitations, or restrictions thereof, if any, with respect to any
series;
(iv) whether or not the shares of any series shall be
redeemable at the option of the Corporation or the holders thereof or
upon the happening of any specified event, and, if redeemable, the
redemption price or prices (which may be payable in the form of cash,
notes, securities, or other property), and the time or times at which,
and the terms and conditions upon which, such shares shall be
redeemable and the manner of redemption;
(v) whether or not the shares of a series shall be subject
to the operation of retirement or sinking funds to be applied to the
purchase or redemption of such shares for retirement, and, if such
retirement or sinking fund or funds are to be established, the annual
amount thereof, and the terms and provisions relative to the operation
thereof;
(vi) the dividend rate, whether dividends are payable in
cash, stock of the Corporation, or other property, the conditions upon
which and the times when such dividends are payable, the preference to
or the relation to the payment of dividends payable on any other class
or classes or series of stock, whether or not such dividends shall be
cumulative or noncumulative, and if cumulative, the date or dates from
which such dividends shall accumulate;
<PAGE>
(vii) the preferences, if any, and the amounts thereof
which the holders of shares of any series shall be entitled to receive
upon the voluntary or involuntary dissolution of, or upon any
distribution of the assets of, the Corporation;
(viii) whether or not the shares of any series shall be
entitled to the benefit of conditions and restrictions upon the
creation of indebtedness of the Corporation or any subsidiary of the
Corporation, upon the issue of any additional stock (including,
without limitation, additional shares of such series or of any other
class or series) and upon the payment of dividends or the making of
other distributions on, and the purchase, redemption or other
acquisition by the Corporation or any subsidiary of the Corporation
of, any outstanding stock of the Corporation;
(ix) whether or not the shares of any series, at the
option of the Corporation or the holders thereof or upon the happening
of any specified event, shall be convertible into or exchangeable for
the shares of any other class or classes or of any other series of the
same or any other class or classes of stock, securities, or other
property of the Corporation and the conversion price or prices or
ratio or ratios or the rate or rates at which such exchange may be
made, with such adjustments, if any, as shall be stated and expressed
or provided for in such resolution or resolutions; and
(x) such other special rights and protective provisions
with respect to any series as the Board of Directors of the
Corporation may deem advisable.
3. The shares of each series of the Preferred Stock may vary
from the shares of any other class or series in any or all of the
foregoing respects. The Board of Directors of the Corporation may
increase the number of shares of the Preferred Stock designated for
any existing series (but not above the total number of authorized
shares of the class) by a resolution adding to such series authorized
and unissued shares of the Preferred Stock not designated for any
other series. The Board of Directors of the Corporation may decrease
the number of shares of the Preferred Stock designated for any
existing series (but not below the number of shares thereof then
outstanding) by a resolution, subtracting from such series unissued
shares of the Preferred Stock designated for such series, and the
shares so subtracted shall become authorized, unissued, and
undesignated shares of the Preferred Stock.
B. Provisions Relating to the Common Stock.
<PAGE>
1. Except as otherwise required by law, and subject to any
special voting rights which may be conferred upon any class or series
of stock of the Corporation, each holder of Common Stock shall be
entitled to one vote for each share of the Common Stock standing in
such holder's name on the records of the Corporation on each matter
submitted to a vote of the stockholders.
2. Subject to the rights of the holders of any class or series
of stock of the Corporation, the holders of the Common Stock shall be
entitled to receive when, as, and if declared by the Board of
Directors of the Corporation, out of funds legally available therefor,
dividends payable in cash, stock, or otherwise.
3. Upon any liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, and after the holders
of any class or series of stock of the Corporation having a preference
over the Common Stock with respect to distributions of assets upon any
such liquidation, distribution or winding up, and any bonds,
debentures, or other obligations of the Corporation shall have been
paid in full the amounts to which they shall be entitled (if any), or
a sum sufficient for such payment in full shall have been set aside,
the remaining net assets of the Corporation shall be distributed pro
rata to the holders of the Common Stock, to the exclusion of the
holders of shares of any other class or series of stock and any bonds,
debentures, or other obligations of the Corporation."
SECOND: That thereafter, an annual meeting of the stockholders of the
Company was duly called and held upon notice in accordance with Section 222 of
the General Corporation Law of the State of Delaware, and the necessary number
of shares as required by statute were voted in favor of the amendment.
THIRD: That such amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Company has caused this Certificate to be signed by
Ralph L. Cheek, its President and Chief Executive Officer, and attested by Paul
V. Dufour, its Secretary, this 7th day of May, 1991.
<PAGE>
IMCO RECYCLING INC.
By: /s/ Ralph L. Cheek
------------------------------
Ralph L. Cheek
President and
Chief Executive Officer
ATTEST:
By: /s/ Paul V. Dufour
---------------------------
Paul V. Dufour
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
IMCO RECYCLING INC.
IMCO RECYCLING INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company"),
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Company,
resolutions were duly adopted setting forth proposed amendments to the
Certificate of Incorporation of the Company, declaring such amendments to be
advisable and directing that the proposed amendments be submitted to the
stockholders of the Company for their consideration and approval at the next
annual meeting of the stockholders. The resolutions setting forth the proposed
amendments are as follows:
RESOLVED, that the Board of Directors of the Company declares it advisable
to adopt amendments to Articles Sixth and Seventh of the Company's Certificate
of Incorporation (the "Amendments"), so that Articles Sixth and Seventh shall
read in their entirety as follows:
"Sixth. The number of directors which shall constitute the whole
Board of Directors shall be not less than three and shall be fixed from
time to time exclusively by the Board of Directors pursuant to a resolution
adopted by a majority of the total number of authorized directors (whether
or not there exist any vacancies in the previously authorized directorships
at the time any such resolution is presented to the Board of Directors for
adoption). At the Annual Meeting of Stockholders at which this Article is
adopted, the directors shall be divided into three classes, designated
Class I, Class II, and Class III (which at all times shall be as nearly
equal in number as possible), with the term of office of Class III
directors to expire at the 1993 Annual Meeting of Stockholders, the term of
office of Class II directors to expire at the 1994 Annual Meeting of
Stockholders, and the term of office of Class I directors to expire at the
1995 Annual Meeting of Stockholders. At each annual meeting of
stockholders following such initial classification and election, directors
elected to succeed those directors whose terms expire shall be elected for
a term of office to expire at the third succeeding annual meeting of
stockholders after their election.
Subject to the right of the holders of any particular class or series
of capital stock of the Corporation entitled to vote generally in the
election of directors (hereinafter referred to as the "Voting Stock") then
outstanding, any
<PAGE>
director, or the entire Board of Directors, may be removed from office at
any time, with or without cause, but only by the affirmative vote of the
holders of at least a majority of the voting power of all of the then-
outstanding shares of Voting Stock, voting together as a single class.
Subject to the rights of the holders of any class or series of the
Voting Stock then outstanding, newly created directorships resulting from
any increase in the authorized number of directors or any vacancies on the
Board of Directors resulting from death, resignation, retirement,
disqualification, removal from office or other cause may be filled by a
majority vote of the directors then in office, though less than a quorum,
and directors so chosen shall hold office for a term expiring at the annual
meeting of stockholders at which the term of office of the class to which
they have been elected expires. No decrease in the number of authorized
directors constituting the entire Board of Directors shall shorten the term
of any incumbent director.
Notwithstanding the foregoing, whenever the holders of any series of
the Preferred Stock shall have the right to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies, and other features of such directorships shall be governed by
the terms of this Certificate of Incorporation applicable thereto, or the
resolution or resolutions of the Board of Directors relating to the
issuance of such series of Preferred Stock, and such directors so elected
shall not be divided into classes pursuant to this Article unless expressly
provided by such terms or such resolution or resolutions.
Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser
vote or no vote, but in addition to any affirmative vote of the holders of
any particular class or series of Voting Stock required by law or this
Certificate of Incorporation or the resolution or resolutions of the Board
of Directors relating to the issuance thereof, the affirmative vote of the
holders of at least 60% of the voting power of all of the then-outstanding
shares of the Voting Stock, voting together as a single class, shall be
required to alter, amend, repeal, or adopt any provision inconsistent with
this Article SIXTH.
"SEVENTH. The Board of Directors of the Corporation shall have the
power to make, alter or repeal By-Laws of the Corporation, subject to such
restrictions upon the exercise of such power as may be imposed by the
Stockholders in any By-Laws adopted by them from time to time.
Notwithstanding the foregoing and anything contained in this Certificate of
Incorporation to the contrary, Sections 2, 4, and 5 of Article III of the
By-Laws shall not be amended or repealed and no provision inconsistent
therewith shall be adopted without the affirmative vote of the holders of
at least 60% of the voting power of all of the then-outstanding shares of
Voting Stock, voting together as a single class. Notwithstanding anything
contained in this Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least 60% of the voting power of the
then-outstanding shares of Voting
<PAGE>
Stock, voting together as a single class, shall be required to alter,
amend, repeal or adopt any provision inconsistent with or repeal this
Article SEVENTH."
SECOND: That thereafter, an annual meeting of the stockholders of the
Company was duly called and held upon notice in accordance with Section 222 of
the General Corporation Law of the State of Delaware, and the necessary number
of shares as required by statute were voted in favor of the amendments.
THIRD: That such amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Company has caused this Certificate to be signed by
Ralph L. Cheek, its President and Chief Executive officer, and attested by Paul
V. Dufour, its Secretary, this ___ day of May, 1992.
IMCO RECYCLING INC.
By: /s/ Ralph L. Cheek
-----------------------------------------
Ralph L. Cheek
President and Chief Executive Officer
ATTEST:
By: /s/ Paul V. Dufour
---------------------------------
Paul V. Dufour
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
OF IMCO RECYCLING INC.
IMCO Recycling Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY: That the following amendment of the Certificate of
Incorporation of the Corporation was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware:
The first paragraph of Article FOURTH of the Corporation's Certificate of
Incorporation be amended so that, as amended, the first paragraph of
Article FOURTH shall be and read as follows:
"FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 48,000,000, 8,000,000 of
such shares to be classified as preferred stock (the "Preferred
Stock"), par value $0.10 per share, and 40,000,000 of such shares to
be classified as common stock (the "Common Stock"), par value $0.10
per share."
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Paul V. Dufour, its duly authorized officer, on May 13, 1998.
IMCO RECYCLING INC.
By: /s/ Paul V. Dufour
---------------------------------------
Paul V. Dufour
Executive Vice President
Chief Financial Officer and Secretary
<PAGE>
EXHIBIT 10.1
AMENDMENT TO THE
IMCO RECYCLING INC.
ANNUAL INCENTIVE PROGRAM
I. Article III of the IMCO Recycling Inc. Annual Incentive Program is hereby
deleted in its entirety and replaced with the following:
"ARTICLE III
SHARES SUBJECT TO PLAN
----------------------
Subject to the provisions of Articles XVI and XVII of the Plan, the
aggregate number of shares which may be issued to Participants under grants
of Stock Options and in payment of Bonuses made by the Committee under the
Plan shall be:
(a) 900,000 shares of Common Stock; plus
(b) the number of shares that are delivered or tendered, or withheld
from any exercise, by a Participant as full or partial payment made to the
Company in connection with the exercise price of any Stock Option or in
connection with satisfying the Participant's tax withholding obligations
pursuant to Section 19.6 of the Plan, to the extent that a Reload Stock
Option is granted to purchase such number of shares so delivered to or
withheld by the Company.
The aggregate number of shares of Common Stock that may be represented by
grants of Stock Options made to any Participant under the Plan in any Bonus
Year may not exceed 100,000 shares. Shares to be distributed and sold
under the Plan may be made available from either authorized but unissued
Common Stock or Common Stock held by the Company in its treasury. Shares
that by reason of the expiration or unexercised termination of a Stock
Option are no longer subject to purchase may be reoffered under the Plan.
Shares of Common Stock that are forfeited pursuant to the terms of the Plan
shall be returned to the Plan and made available for future grant."
<PAGE>
EXHIBIT 10.2
AMENDMENT TO THE
IMCO RECYCLING INC.
1992 STOCK OPTION PLAN
I. Article III of the IMCO Recycling Inc. 1992 Stock Option Plan is hereby
deleted in its entirety and replaced with the following:
"ARTICLE III
SHARES SUBJECT TO PLAN
----------------------
Subject to the provisions of Articles XII and XIII of the Plan, the
aggregate number of shares which may be issued to Participants under grants
of Stock Options made by the Committee under the Plan shall be:
a. 1,550,000 shares of Common Stock; plus
b. The number of shares that are delivered or tendered, or withheld from
any exercise, by a Participant as full or partial payment made to the
Company in connection with the exercise price of any Stock Option or in
connection with satisfying the Participant's tax withholding obligations
pursuant to Section 15.7 of the Plan, to the extent that a Reload Stock
Option is granted to purchase such number of shares so delivered to or
withheld by the Company.
The aggregate number of shares of Common Stock that may be represented by
grants of Stock Options made to any Participant under the Plan during any
fiscal year during which the Plan is in effect, may not exceed 100,000
shares. Shares to be distributed and sold may be made available from
either authorized but unissued Common Stock or Common Stock held by the
Company in its treasury. Shares that by reason of the expiration or
unexercised termination of a Stock Option are no longer subject to purchase
may be reoffered under the Plan."
<PAGE>
Exhibit 15.1
We are aware of the incorporation by reference in the Registration Statements
(Form S-8 No. 33-26641, Form S-8 No. 33-34745, Form S-8 No. 33-76780, Form S-8
No. 333-00075 and Form S-8 No. 333-07091) pertaining to the Nonqualified Stock
Option Plan of IMCO Recycling Inc., the IMCO Recycling Inc. Amended and Restated
Stock Option Plan, the IMCO Recycling Inc. 1992 Stock Option Plan, the IMCO
Recycling Inc. Amended and Restated 1992 Stock Option Plan, and the IMCO
Recycling Inc. Annual Incentive Plan of our report dated July 27, 1998 relating
to the unaudited condensed consolidated interim financial statements of IMCO
Recycling Inc. which are included in its Form 10-Q for the quarter ended June
30, 1998.
Pursuant to Rule 436(c) of the Securities Act of 1933, our report is not a part
of the registration statements prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
ERNST & YOUNG LLP
Dallas, Texas
August 7, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 8,680
<SECURITIES> 74
<RECEIVABLES> 47,299
<ALLOWANCES> 1,985
<INVENTORY> 32,272
<CURRENT-ASSETS> 92,202
<PP&E> 211,218
<DEPRECIATION> 62,576
<TOTAL-ASSETS> 341,368
<CURRENT-LIABILITIES> 40,390
<BONDS> 101,058
0
0
<COMMON> 1,675
<OTHER-SE> 177,693
<TOTAL-LIABILITY-AND-EQUITY> 341,368
<SALES> 251,721
<TOTAL-REVENUES> 251,721
<CGS> 223,921
<TOTAL-COSTS> 223,921
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 630
<INTEREST-EXPENSE> 3,799
<INCOME-PRETAX> 15,562
<INCOME-TAX> 5,737
<INCOME-CONTINUING> 9,622
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,622
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.57
</TABLE>
