<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 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, 1995
-------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-6202-2
--------
NORD RESOURCES CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 85-0212139
---------------- -----------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
8150 WASHINGTON VILLAGE DRIVE, DAYTON OHIO 45458
------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (513) 433-6307
--------------
Not Applicable
-------------------------------------
Former name, former address and former fiscal
year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding twelve 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
Common shares outstanding as of June 30, 1995: 15,838,408
-------------------------------------------------------------------------------
<PAGE>
NORD RESOURCES CORPORATION
AND SUBSIDIARIES
INDEX
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION:
ITEM 1. Condensed Financial Statements:
Balance Sheets - June 30, 1995
and December 31, 1994 1
Statements of Operations - Quarter and Two
Quarters ended June 30, 1995 and 1994 2
Statements of Cash Flows -
Quarter and Two Quarters ended
June 30, 1995 and 1994 3
Notes to Condensed Financial Statements 4-10
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 11-14
PART II. OTHER INFORMATION:
ITEM 1. Legal Proceedings 15
ITEM 2-5. Inapplicable 15
ITEM 6. Exhibits and Reports on Form 8-K 15
<PAGE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
CONDENSED BALANCE SHEETS
(In Thousands)
ASSETS
------
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
------ ------
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $ 8,460 $ 8,946
Restricted Cash and Investments:
Rutile 2,814 2,934
Domestic 300
Accounts Receivable 6,625 8,199
Accounts Receivable - related party 21 2,094
Inventories - at lower of cost (first-in, first-out) or market:
Finished and Semi-Finished 1,184 1,342
Supplies 1,628 1,736
------ ------
2,812 3,078
Prepaid Expenses 2,423 1,985
------ ------
TOTAL CURRENT ASSETS 23,455 27,236
RESTRICTED CASH AND INVESTMENTS 2,505 2,797
INVESTMENTS IN AND ADVANCES TO AFFILIATES 8,391 8,142
INVESTMENT IN RUTILE SEGMENT 61,002 64,353
PROPERTY, PLANT AND EQUIPMENT, net 35,616 36,804
OTHER ASSETS 7,027 6,783
------- -------
$ 137,996 $ 146,115
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
-----------------------------------
CURRENT LIABILITIES:
Accounts Payable $ 2,631 $ 3,059
Accounts Payable - related party 4,846 4,310
Accrued Expenses 2,087 2,444
Obligations in Default:
Rutile 22,762 23,234
Domestic 3,157
Current Maturities of Long-Term Debt 217 644
------- -------
TOTAL CURRENT LIABILITIES 35,700 33,691
LONG-TERM DEBT 1,710 4,701
OTHER LONG-TERM LIABILITIES 6,162 5,732
MINORITY INTEREST 3,661 4,457
STOCKHOLDERS' EQUITY:
Common Stock 158 158
Additional Paid-in Capital 58,137 58,137
Retained Earnings 32,321 39,092
Cumulative Foreign Currency
Translation Adjustment 282 282
Minimum Pension Liability (135) (135)
------- -------
90,763 97,534
------- -------
$ 137,996 $ 146,115
--------- ---------
--------- ---------
</TABLE>
See notes to condensed financial statements
1
<PAGE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
QUARTER ENDED TWO QUARTERS ENDED
JUNE 30 JUNE 30
---------------------- ---------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Sales $ 9,857 $ 15,770 $ 20,134 $ 33,086
Other Revenues 205 9 236
----- ------ ------ -----
TOTAL REVENUES 9,857 15,975 20,143 33,322
COSTS AND EXPENSES:
Cost of Sales 9,841 14,271 19,857 29,679
Selling, General & Administrative
Expenses 2,780 2,762 5,490 5,605
------ ------ ------ ------
TOTAL OPERATING COSTS & EXPENSES 12,621 17,033 25,347 35,284
------ ------ ------ ------
(LOSS) FROM OPERATIONS (2,764) (1,058) (5,204) (1,962)
OTHER INCOME (EXPENSE):
Interest Income 205 50 336 283
Interest Expense (198) (435) (345) (911)
Provision for Impairment of Investment in
Rutile Segment (3,000)
Litigation Recoveries 400 500 400 550
Equity in Net Earnings of Affiliate 454 523 245 938
Minority Interest 437 301 797 640
------ ------ ------
TOTAL OTHER INCOME (EXPENSE) 1,298 939 (1,567) 1,500
------ ------ ------ -------
(LOSS) BEFORE INCOME TAX (EXPENSE) (1,466) (119) (6,771) (462)
INCOME TAX (EXPENSE) (203) (543)
------ ------ ------ -------
NET (LOSS) $ (1,466) $ (322) $ (6,771) $ (1,005)
------ ------ ------ -------
------ ------ ------ -------
NET (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE $ (.09) $ (.02) $ (.43) $ (.07)
------ ------ ------ -------
------ ------ ------ -------
AVERAGE SHARES 15,838 15,140 15,838 15,140
------ ------ ------ -------
------ ------ ------ -------
</TABLE>
See notes to condensed financial statements
2
<PAGE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF
CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
TWO QUARTERS ENDED
JUNE 30
-------------------
1995 1994
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)
Rutile $ $ 1,519
Domestic (6,771) (2,524)
Adjustments to reconcile Net Income (Loss) to
net cash provided by operating activities:
Changes in Assets and Liabilities:
Rutile (2,963)
Domestic 3,649 (105)
Minority Interest - Domestic (797) (639)
Depreciation, Depletion and amortization:
Rutile 2,071
Domestic 1,866 3,275
Provision for Impairment - Investment in SRL 3,000
Other Non-Cash Items:
Rutile 95
Domestic (238) (938)
------ ------
Net Cash Provided By (Used In) Operating Activities 709 (209)
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures:
Rutile (5,539)
Domestic (357) (128)
Increase (decrease) in Other Assets:
Rutile 201
Domestic (565) (471)
Increase in Investments in and Advances to Affiliates - Domestic (4) (101)
------ ------
Net Cash (Used In) Investing Activities (926) (6,038)
------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of Indebtedness:
Rutile (1,831)
Domestic (262) (267)
Restricted Cash and Investments:
Rutile 697
Domestic (7) (158)
------ ------
Net Cash (Used In) Financing Activities (269) (1,559)
------- -------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (486) (7,806)
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 8,946 20,555
------ -------
CASH AND CASH EQUIVALENTS -
END OF PERIOD $ 8,460 $12,749
------- -------
------- -------
</TABLE>
See notes to condensed financial statements
3
<PAGE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
QUARTERS ENDED JUNE 30, 1995 AND 1994
1. FINANCIAL STATEMENTS
--------------------
The balance sheet at December 31, 1994 is condensed financial information
taken from the financial statements, which are audited, but the independent
auditors' report included a disclaimer of opinion for an uncertainty
relating to the ability of the Company to continue as a going concern. The
interim financial statements are unaudited. In the opinion of management,
all adjustments, which consist of normal recurring adjustments except for
the $3 million provision for impairment recorded against the Company's
investment in SRL, necessary to present fairly the financial position and
results of operations for the interim periods presented have been made.
The results shown for the first two quarters of 1995 are not necessarily
indicative of the results that may be expected for the entire year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
financial statements be read in conjunction with the financial statements
and notes thereto included in the Company's December 31, 1994 annual report
to shareholders.
2. ACCOUNTING POLICIES
-------------------
On an interim basis, all costs subject to recurring year-end adjustments
have been estimated and allocated ratably to the quarters. Income taxes
have been provided based on the estimated tax rate for the respective years
after excluding infrequently occurring items whose specific tax effect is
reported during the same interim period as the related transaction.
The financial statements include the accounts of Nord Resources
Corporation, its majority-owned subsidiaries and its 50% interest in a
rutile mining operation ("SRL")(the "Company"). As a result of the
situation described in Note 3, the Company's 50% investment in SRL is
carried at the cost basis of accounting (which includes original cost plus
undistributed earnings through December 31, 1994, except for certain SRL
indebtedness with effective recourse to the Company, which is reported as a
separate liability, and related restricted cash) in the balance sheets.
All significant intercompany transactions and balances are eliminated.
4
<PAGE>
The accompanying condensed financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. The
financial statements do not contain any adjustments that might be
necessary should the Company be unable to continue as a going concern.
Investment in 20% to 40%-owned affiliates and joint ventures and in
affiliates or joint ventures in which the company's investment may
temporarily be in excess of 40% are carried using the equity method.
3. INVESTMENT IN RUTILE SEGMENT
----------------------------
Prior to December 31, 1994, the Company proportionately consolidated its
share of the assets, liabilities and operations of SRL. As of December 31,
1994, the Company adopted the cost basis of accounting because the Company
no longer controlled SRL's operations in Sierra Leone, Africa following an
attack by non-government forces and the subsequent suspension of mining
operations in January 1995. The statements of operations and cash flows
include the Company's proportionate share of operations of SRL for the
first two quarters of 1994. The Company intends to resume proportional
consolidation when it regains control of the mine.
There continues to be considerable uncertainty surrounding the future of
SRL in Sierra Leone, given the continuing civil unrest and uncertain
political environment. At the present time it is not possible to estimate
when resumption of operations might be achieved or the extent of damage and
deterioration to SRL's facilities which might occur during the period of
suspension of operations. While the security situation in Sierra Leone has
not improved to allow SRL personnel to perform an on-site inspection of the
mine facilities, SRL has received reports from various sources, believed to
be reliable, which would indicate that a loss in value of certain assets
has occurred. The Company has evaluated the available information which
has been provided by SRL management and has recorded an impairment of $3.0
million on its investment in SRL. The impairment recorded by the Company
is based on reports currently available; however, the actual amount of
impairment could exceed this once an on-site inspection is performed or if
SRL is further delayed in its efforts to regain control of the minesite.
The impairment does not include any accrual for start-up costs which SRL is
likely to incur to reestablish its operations in Sierra Leone. The extent
of the potential loss which SRL may have incurred is not estimable at this
time. The Company has an insurance policy to cover risk of loss due to
damage to SRL's property resulting from political violence, with a policy
limit of $15.7 million. The Company has provided the required notice to
the insurance carrier and intends to file its claim. The Company cannot
estimate the amount or timing of recoveries which may ultimately be
available from this
5
<PAGE>
policy nor if the amount of recoveries, if received, would be sufficient to
fund all of the Company's portion of cash required by SRL.
Summarized financial data for the Company's 50% share of SRL'S operations
are as follows:
<TABLE>
<CAPTION>
Two Quarters
Ended
June 30,
------------
1995 1994
---- ----
(in thousands)
<S> <C> <C>
REVENUES $1,939 $12,738
Less Costs and Expenses:
Cost of Sales 1,527 9,890
Selling, General and Administrative 306 255
Costs Incurred Since Mine Shutdown 4,469
Provision for Impairment 3,000
Other Expense 751 531
Income Tax Expense 78 543
------- ------
Net Income (Loss) $ (8,192) $ 1,519
-------- -------
-------- -------
</TABLE>
Since the Company began accounting for its investment in SRL on the cost
basis as of December 31, 1994, it will not recognize its share of SRL's
results in its statement of operations, beginning in 1995. However, during
the two quarters ended June 30, 1995, the Company recorded an impairment of
$3 million on its investment in SRL. Costs incurred since mine shutdown
are comprised of all operating costs since the mine shutdown including the
costs of security, evacuation of minesite personnel and subsequent
severance costs. When the Company is able to resume proportional
consolidation of the rutile segment, it is likely to record a provision to
adjust its investment to a current value, the amount of which is not
determinable at this time. The Company's statement of operations for 1994
includes SRL's results as noted above.
4. MINORITY INTEREST
-----------------
The minority investor in Norplex, Inc. ("Norplex"), which owns 100% of Nord
Kaolin Company ("NKC"), has an option to purchase an additional 31%
interest in Norplex from the Company at a price which increases from
$31,000,000 during 1995 to $36,000,000 during 1997, after which it expires
if unexercised. Under this option, the price received by the Company would
be reduced by an amount, determined at exercise date, equal to the
cumulative amount of temporary tax differences of
6
<PAGE>
Norplex plus operating losses used by the Company multiplied by Norplex's
marginal tax rate and the percentage of Norplex owned by the investor after
exercise. This amount is estimated to be $5,066,000 at December 31, 1994,
if the investor had exercised the 31% option at that date.
Related party transactions with the minority investor in Norplex include
the following (in thousands):
<TABLE>
<CAPTION>
Two Quarters
Ended
June 30,
--------------
1995 1994
---- ----
<S> <C> <C>
Sales $3,381
Raw material purchases $5,936 $5,880
</TABLE>
5. INDEBTEDNESS
------------
As a result of the suspension of its mining operations resulting from civil
disturbances in January 1995, SRL is not in compliance with certain
financial and operational covenants under its financing agreements. The
lenders agreed through May 15, 1995 to forebear from accelerating payment
of the loans to allow SRL to assess the situation in Sierra Leone. SRL has
held discussions with these lenders regarding an extension of this
forebearance period beyond May 15, 1995. No extension has been agreed upon
and the lenders have not accelerated the loan obligations. Further
discussions are anticipated regarding terms for a further period of
forebearance with respect to the loan obligations. If the lenders request
acceleration of payment of the indebtedness by SRL, funds for which are
required to be provided by the Company and the other 50% owner of SRL, the
Company will likely have to seek additional funds, if available, from as
yet undetermined sources, as the Company does not presently have funds
necessary to repay its share of the SRL indebtedness. As of June 30, 1995
and December 31, 1994, 50% of all SRL debt in default has been classified
as an Obligation in Default and a current liability in the Condensed
Balance Sheet.
The Company did not require any additional borrowings and repaid $262,000
of debt during the first two quarters of 1995.
7
<PAGE>
6. LEASES
------
NKC entered into lease agreements under which $22.6 million of equipment
has been provided to NKC. Payments under the leases are guaranteed by the
Company. Under the terms of the guaranty, the company is required to
maintain minimum levels of (1) tangible net worth compared to total
liabilities and (2) cash flow relative to current maturities of long-term
debt. The lease agreements also place restrictions on the amount of cash
which NKC may transfer to the company and limit repayment of advances
previously made by the Company to NKC. The Company's ability to comply
with the above covenants has been adversely impacted by the suspension of
SRL'S operations and the Company is not in compliance with the cash flow
covenant at June 30, 1995. As a result of the covenant violation, the
lessors have certain rights under the lease including the ability to
require payment of liquidated damages of $15.7 million including the $3.7
million noted below, and could elect to terminate the leases, take
possession of and retain ownership of the equipment. The Company is
seeking a waiver or modification of the covenant but cannot determine the
willingness of the lessors to agree to any waiver or modification on terms
which would be acceptable to the Company.
Certain of the leases have been considered capital leases under generally
accepted accounting principles and, accordingly, an asset has been
recognized by NKC, along with corresponding indebtedness. At June 30, 1995
the net book value of equipment leased under these capital leases was $2.7
million, while $3.2 million of indebtedness was outstanding. As a result
of the lease covenant violation at June 30, 1995, the indebtedness
outstanding under the capital leases has been classified as an Obligation
in Default and a current liability in the Condensed Balance Sheet at June
30, 1995. The liquidated damages associated with these leases was $3.7
million at June 30, 1995.
If the lessors request payment of liquidated damages, the Company does not
presently have the financial resources available to pay the entire amount
of the liquidated damages. Consequently, the Company would have to seek
additional funds, if available, from as yet undetermined sources, which may
or may not be available to the Company on conditions acceptable to the
Company. If the lessors terminate the leases and take possession of the
equipment, such an event would have a material adverse effect on NKC's
ability to operate its business.
8
<PAGE>
7. INCOME TAX
----------
Income tax expense consists of the following:
<TABLE>
<CAPTION>
Two Quarters Ended
June 30, 1994
--------------
(In Thousands)
<S> <C>
Foreign:
Currently payable $ 476
Long-term deferred (benefit) 67
---
Total $ 543
-----
-----
</TABLE>
No tax benefit has been recorded for the operating losses in 1995.
8. NET (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
-------------------------------------------------
Net (loss) per common share and common equivalent share is computed by
dividing net earnings by the weighted average number of common shares
outstanding during the period adjusted for the dilutive effect of common
share equivalents when applicable.
9. EQUITY IN NET EARNINGS OF AFFILIATE
-----------------------------------
The Company has a 35% interest in Nord Pacific Limited at June 30, 1995
(47% until February 15, 1994). Summary financial data for the operations
of Nord Pacific Limited for the periods are as follows:
<TABLE>
<CAPTION>
Two Quarters Ended
June 30,
------------------
(In Thousands)
1995 1994
---- ----
<S> <C> <C>
Revenues $ 7,853 $ 6,496
Costs and Expenses (6,465) (5,472)
Gain (Loss) on Foreign
Currency Contracts ( 888) 1,364
-------- -------
Net Earnings $ 500 $ 2,388
-------- -------
-------- -------
</TABLE>
9
<PAGE>
10. LITIGATION
----------
The Company has reached settlements with all principal defendants in SRL's
action against those allegedly responsible for certain allegedly improper
and fraudulent transactions against SRL, except for one remaining defendant
and certain related parties thereto. The settling defendants have agreed
to pay $8.0 million to the Company, of which $7.0 million has already been
collected and recognized as revenue. The financial statements of the
Company for the two quarters ended June 30, 1995 and 1994 include $400,000
and $550,000, respectively, of other income in connection with these
settlements. The remainder of the settlements will be included in earnings
upon perfection of collateral or assurance of collectibility.
10
<PAGE>
ITEM 2.
-------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Cash has decreased from $8.9 million at December 31, 1994 to $8.5 million at
June 30, 1995. The Company's operating activities provided $700,000 in cash
during the first two quarters of 1995 primarily through reduction in accounts
receivable. Cash of $920,000 was used for additions to property, plant and
equipment and other assets and $260,000 was used to repay indebtedness.
The Company's cash flow from operating activities for the first two quarters of
1995 benefitted from the receipt of $2.0 million as the final payment relating
to the sale of 50% of SRL. The Company anticipates that its operations will
utilize cash in 1995, which will require use of a portion of the Company's
available cash balances, until such time as the Company's kaolin operation is
able to generate operating cash flow to fund its operations and to repay funds
previously advanced by the Company.
Due to civil disturbances in Sierra Leone, the company's rutile mining operation
was suspended in January 1995 and as a result SRL is not in compliance with
certain financial and operational covenants under its financing agreements. The
lenders had initially agreed to forebear through May 15, 1995 from calling a
default and accelerating payment of indebtedness by SRL. SRL has held
discussions with these lenders regarding an extension of this forebearance
period beyond May 15,1995. No extension has been agreed upon and the lenders
have not accelerated the loan obligations. Further discussions are anticipated
regarding terms for a further period of forebearance with respect to the loan
obligations. If the lenders request acceleration of payment of the indebtedness
by SRL, funds for which are required to be provided by the Company and the other
50% owner of SRL, the Company will likely have to seek additional funds, if
available, from as yet undetermined sources. At June 30, 1995, the Company's
share of SRL's debt outstanding is $22.8 million, which is partially secured by
the Company's share of restricted cash of $2.8 million.
NKC entered into lease agreements under which $22.6 million of equipment has
been provided to NKC. Payments under the leases are guaranteed by the Company.
Under the terms of the guaranty, the Company is required to maintain minimum
levels of (1) tangible net worth compared to total liabilities and (2) cash flow
relative to current maturities of long term debt. The lease agreement also
places restrictions on the amount of cash which NKC may transfer to the Company
and limits repayment of advances previously made by the Company to NKC. The
Company's ability to comply with these covenants has been adversely impacted by
the suspension of SRL's operations and the company is not in
11
<PAGE>
compliance with the cash flow covenant at June 30, 1995. The Company intends to
seek a waiver or modification of the covenant but cannot determine the
willingness of the lessors to agree to any waiver or modification on terms which
would be acceptable to the Company. As a result of the covenant violation the
lessors have certain rights under the leases including the ability to require
payment of liquidated damages of $15.7 million and could elect to terminate the
leases, take possession of the equipment and retain ownership of the equipment.
If the lessors terminate the leases and take possession of the equipment, such
an event would have a material adverse effect on NKC's ability to operate its
business.
Neither the SRL lenders nor the NKC lessors have indicated that they will
require acceleration of payments or liquidated damages, respectively. However,
the Company does not have an adequate amount of funds currently available to pay
liquidated damages to the NKC lessors, or to repay its share of SRL's debt or to
sustain SRL, including funds required to reestablish its operations. If funds
are needed to provide for any of the above requirements, the Company may need to
seek funds through additional financing or from other undetermined sources. One
source of funds which may be available to the Company is proceeds from foreign
political risk insurance policies. One policy provides up to $15.7 million of
insurance to the Company for loss of property due to political violence.
However, the amount of recoveries, if any, is not yet determinable and may not
be sufficient to fund all of the company's above noted cash requirements. The
Company is unable to determine the amount of funds which may ultimately be
required by the NKC lessors or by SRL and its lenders or if adequate funds will
be available from the above or other undetermined sources on conditions
acceptable to the Company.
RESULTS OF OPERATIONS
---------------------
Net loss for the two quarters ended June 30, 1995 was $6.8 million compared to
$1.0 million for the same period in 1994. Net loss for the second quarter of
1995 was $1.5 million compared to $320,000 for the same period in 1995. Since
the Company has adopted the cost basis of accounting for its investment in the
rutile segment, the results for 1995 do not include any amounts relating to its
operations; however, in March 1995 the company recorded a $3.0 million
impairment against its investment in the rutile segment. The Company's share of
earnings from the rutile segment was $1.5 million for the two quarters ended and
$570,000 for the quarter ended June 30, 1994. A decrease in sales volume at
the kaolin segment in 1995 compared to 1994 along with increases in certain raw
material costs caused an increase in the operating loss in 1995 compared to
1994. The Company recorded $245,000 as its share of earnings from Nord Pacific
for the first two quarters of 1995 compared to $940,000 for the first two
quarters of 1994. Interest expense decreased by $560,000 in the first two
quarters of 1995 compared to the same period in 1994 as no amounts relating to
SRL operations are recorded in 1995. The rutile segment reported $530,000 of
interest expense in the first two quarters of 1994. The Company has no tax
provision in the first two quarters of 1995 while income taxes of $540,000 were
12
<PAGE>
provided on foreign earnings in 1994.
An analysis of the changes in revenues, cost of sales and operating earnings
(before interest and income taxes) on a segment basis is contained below.
RUTILE
------
At December 31, 1994 the Company began accounting for its investment in the
rutile segment on the cost basis due to the forced suspension of mining
operations in Sierra Leone. Therefore, there are no operating results to report
for this segment in 1995. The amounts disclosed below for the first two
quarters of 1994 reflect the Company's 50% ownership of the rutile segment.
Revenues during this period were $12.7 million and operating earnings from this
segment were $2.6 million.
KAOLIN
------
Revenues decreased to $20.1 million in the two quarters ended June 30, 1995
compared to $20.4 million during the same period of 1994. Revenues for the
second quarter of 1995 decreased to $9.9 million compared to $10.8 million for
the same period in 1994. Revenues for the two quarters and quarter ended June
30, 1995 include $12.8 million and $6.3 million, respectively, from sales of the
Company's Norplex-Registered Trademark- products compared to $10.1 million and
$5.5 million for the same periods in 1994. Sales of Norcal-Registered
Trademark- products decreased to 6,700 tons for the two quarters in 1995 and
3,100 tons for the quarter ended June 30, 1995 compared to 11,400 tons and 5,300
tons sold for the same periods in 1994 at average prices slightly less than
those received in 1994. Sales of conventional products decreased by 17% for the
two quarters of 1995 and 22% for the quarter ended June 30, 1995 compared to the
same periods in 1994, at average prices 6-8% lower than those received in
1994.
Cost of sales as a percentage of sales was 98% and 100% for the two quarters and
quarter ended June 30, 1995 compared to 97% and 95% for the same periods in
1994. This increase in the cost of sales percentage is the result of the
aforementioned lower volume and lower selling prices and increases in certain
raw material prices.
Operating loss from this segment in the first two quarters of 1995 was
$2,726,000 compared to $2,262,000 for the same period in 1994. Operating loss
for the second quarter of 1995 was $1,514,000 compared to $1,014,000 in the same
quarter of 1994. While revenues and tons sold from the Company's Norplex-
Registered Trademark- line of products increased in the first two quarters of
1995 compared to 1994, lower sales volume of the Company's
13
<PAGE>
Norcal-Registered Trademark- and conventional products, along with lower average
selling prices of these products and higher cost of certain raw materials
resulted in the increase in operating loss in 1995 compared to 1994.
NKC has incurred annual operating losses beginning in 1989 due primarily to the
costs associated with development and market introduction of its Norplex-
Registered Trademark- products and a longer than anticipated new product
introduction period. In addition, in the early 1990's lower demand and prices
for certain of its products as a result of the recession contributed to NKC's
operating losses. As a result of the above circumstances, NKC had not been able
to generate sufficient sales volume at adequate prices to recover its fixed and
variable costs of production during this period. This situation has improved
during 1994 and 1995 compared to 1993 and prior years and the sales volume and
prices of Norplex-Registered Trademark- products have reached levels sufficient
to recover the fixed and variable production costs and to begin to fund the
selling, general and administrative costs of NKC. However, during 1995, lower
sales volumes of Norcal-Registered Trademark- and conventional products caused
increased operating losses compared to 1994. NKC intends to attempt to recover
lost sales volumes for these two product-types until such time as the volume of
Norplex-Registered Trademark- products are at a level to generate adequate
operating earnings. However, until the level of Norplex-Registered Trademark-
sales volume and prices improve, NKC expects to continue to experience
operating losses. The Company cannot precisely estimate when or if adequate
sales levels of Norplex-Registered Trademark- products will be achieved or the
level of operating losses which will be incurred during the future periods.
Based upon recent conversions of customers to the Norplex-Registered Trademark-
products and probable future testing and conversion at a number of different
customer locations, the Company believes the above noted improvement in
Norplex-Registered Trademark- sales levels and operating results is likely to
occur.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company's Form 10-K for the fiscal year ended December 31, 1994 ("Form 10-
K") describes (i) an Arbitration award in favor of Sierra Rutile Limited
("SRL"), a 50% affiliate of the Company, against Brinc, Ltd., formerly known as
Bomar Resources, Inc., (ii) a proceeding in the United States District Court for
the Southern District of New York captioned SIERRA RUTILE LIMITED v. BOMAR
RESOURCES, INC., 90 Civ. 835, in which arbitration of SRL's disputes with Brinc
were compelled and (iii) an action in the United States District Court for the
Southern District of New York captioned SIERRA RUTILE LIMITED v. SHIMON Y. KATZ,
ET AL., 90 Civ. 4913 (JFK). No material changes have occurred with respect to
the Arbitration award or any of the proceedings disclosed in the Form 10-K,
except that in the SRL Lawsuit, the application filed by one of the defendants
seeking to void or modify the terms of SRL's October 1992 settlement with
several other defendants was denied by the District Judge.
ITEMS 2-5.
----------
Inapplicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
------- --------------------------------
(a) Exhibits required by Item 601 of Regulation S-K.
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
(b) No reports were filed on Form 8-K during the second quarter of 1995.
15
<PAGE>
Signature
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.
NORD RESOURCES CORPORATION
(Registrant)
/s/Terence H. Lang
----------------------
Terence H. Lang
Senior Vice President - Finance
(Principal Financial Officer and
Authorized Officer)
DATE: August 14, 1995
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Nord
Resources Corporation Form 10-Q for the two quarters ended June 30, 1995 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 8460
<SECURITIES> 0
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<CURRENT-ASSETS> 23455
<PP&E> 64895
<DEPRECIATION> 29279
<TOTAL-ASSETS> 137996
<CURRENT-LIABILITIES> 35700
<BONDS> 1710
<COMMON> 158
0
0
<OTHER-SE> 90605
<TOTAL-LIABILITY-AND-EQUITY> 137996
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<TOTAL-REVENUES> 20143
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<INTEREST-EXPENSE> 345
<INCOME-PRETAX> (6771)
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