<PAGE> 1
Sequential Page 1 of 12 Pages
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1994 Commission File number 0-663
------------- -----
OGLEBAY NORTON COMPANY
--------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 34-0158970
------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 Superior Avenue Cleveland, Ohio 44114-2598
--------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 216 861-3300
------------
None
--------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Shares of Common Stock outstanding at July 31, 1994: 2,491,226
---------
Index on sequential page 2.
<PAGE> 2
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
INDEX
SEQUENTIAL
PAGE NUMBER
-------------
PART I. FINANCIAL INFORMATION
------------------------------
Consolidated Condensed Balance
Sheet (Unaudited) - June 30, 1994 and
December 31, 1993 3
Consolidated Condensed Statement of
Operations (Unaudited) - Three Months
Ended June 30, 1994 and 1993 and Six
Months Ended June 30, 1994 and 1993 4
Consolidated Condensed Statement of
Cash Flows (Unaudited) - Six Months
Ended June 30, 1994 and 1993 5
Notes to Consolidated Condensed Financial
Statements 6 - 7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8 - 11
PART II. OTHER INFORMATION 12
---------------------------
<PAGE> 3
PART I. FINANCIAL INFORMATION
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
------ June 30 December 31
1994 1993
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 11,814,807 $ 21,243,064
Investments 6,504,063 -0-
Accounts receivable less
allowances (1994-$406,000;
1993-$2,082,000) 28,429,123 28,291,306
Inventories
Raw materials and finished products 4,723,873 4,354,120
Operating supplies 2,228,231 2,305,719
------------ ------------
6,952,104 6,659,839
Deferred income taxes 2,498,985 3,801,985
Prepaid insurance and other expenses 7,733,930 2,191,166
------------ ------------
TOTAL CURRENT ASSETS 63,933,012 62,187,360
INVESTMENTS 11,197,952 14,871,623
PROPERTIES AND EQUIPMENT 310,054,529 319,392,610
Less allowances for depreciation
and amortization 150,384,094 156,962,679
------------ ------------
159,670,435 162,429,931
PREPAID PENSION COSTS AND OTHER ASSETS 21,055,209 20,228,456
------------ ------------
$255,856,608 $259,717,370
============ ============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
June 30 December 31
1994 1993
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt $ 11,476,450 $ 11,189,664
Accounts payable 7,605,114 4,021,985
Payrolls and other accrued compensation 3,876,862 4,828,016
Accrued taxes and other expenses 13,853,755 12,772,672
Income taxes 1,790,824 733,414
Reserve for capacity rationalization 6,312,600 6,312,600
------------ ------------
TOTAL CURRENT LIABILITIES 44,915,605 39,858,351
LONG-TERM DEBT, less current portion 53,355,800 69,344,025
POSTRETIREMENT BENEFITS OBLIGATION 31,137,856 30,285,278
OTHER LONG-TERM LIABILITIES 28,035,147 30,958,323
DEFERRED INCOME TAXES 20,148,153 19,398,153
STOCKHOLDERS' EQUITY
Preferred stock, without par value,
authorized 5,000,000 shares;
none issued -0- -0-
Common stock, par value $1 per share,
authorized 10,000,000 shares;
issued 3,626,666 shares 3,626,666 3,626,666
Additional capital 8,988,043 8,988,043
Unrealized gains 2,529,225 -0-
Retained earnings 94,472,621 88,773,915
------------ ------------
109,616,555 101,388,624
Treasury stock, at cost - 1,135,440
and 1,122,740 shares at respective dates (28,970,258) (28,681,694)
Unallocated Employee Stock Ownership
Plan shares ( 2,382,250) ( 2,833,690)
------------ ------------
78,264,047 69,873,240
------------ ------------
$255,856,608 $259,717,370
============ ============
</TABLE>
See notes to consolidated condensed financial statements.
-3-
<PAGE> 4
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
---------------------------------- ------------------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Net sales $ 28,677,654 $ 22,029,237 $ 57,816,621 $ 37,120,219
Operating revenues 24,808,818 24,974,863 26,087,073 26,388,944
Sales commissions, royalties
and management fees 966,560 964,192 1,917,913 1,674,799
------------- ------------- ------------ --------------
54,453,032 47,968,292 85,821,607 65,183,962
COSTS AND EXPENSES
Cost of goods sold 25,096,632 18,289,570 50,131,362 31,608,514
Operating expenses 20,865,540 21,082,111 22,000,516 22,386,977
General, administrative and
selling expenses 4,056,843 4,051,276 8,268,018 7,916,364
Reserve for doubtful accounts 31,844 1,253,299 89,938 1,299,637
------------- ------------- ------------ --------------
50,050,859 44,676,256 80,489,834 63,211,492
INCOME FROM OPERATIONS 4,402,173 3,292,036 5,331,773 1,972,470
Gain on sale of assets 6,984,053 2,656,811 7,386,243 2,686,446
Interest, dividends and other income 315,471 333,484 585,730 668,255
Other expense 501,920 361,781 883,065 608,662
Interest expense 1,392,442 1,877,735 2,808,424 3,667,933
------------- ------------- ----------- -------------
Income before income taxes 9,806,035 4,042,815 9,612,257 1,050,576
Income taxes 2,968,000 1,233,000 2,917,000 329,000
------------- ------------- ------------ -------------
NET INCOME $ 6,838,035 $ 2,809,815 $ 6,695,257 $ 721,576
============ ============ =========== ============
NET INCOME PER SHARE OF COMMON STOCK $ 2.75 $ 1.12 $ 2.69 $ .29
============ ============ ============ ============
DIVIDENDS PER SHARE OF COMMON STOCK $ .20 $ .20 $ .40 $ .40
============ ============ ============ ============
Average number of shares of Common Stock
outstanding 2,491,291 2,512,926 2,492,339 2,512,926
</TABLE>
See notes to consolidated condensed financial statements.
-4-
<PAGE> 5
<TABLE>
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended
June 30
-------------------------------------------
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 6,695,257 $ 721,576
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 5,686,366 5,610,263
Deferred income taxes 750,000 632,710
Gain on sale of assets (7,386,243) ( 2,686,446)
Prepaid pension costs and other assets (1,182,450) ( 949,330)
Decrease (increase) in accounts receivable (1,054,112) ( 6,742,584)
Decrease (increase) in inventories ( 447,671) ( 299,811)
Increase (decrease) in accounts payable 2,198,462 574,503
Other operating activities (3,108,929) (10,727,661)
------------ -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,150,680 (13,866,780)
INVESTING ACTIVITIES
Proceeds from sale of assets 10,734,898 7,033,863
Purchase of properties and equipment (3,156,101) ( 1,540,294)
Investments in Iron Ore (1,671,180) ( 1,447,278)
------------ ------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 5,907,617 4,046,291
FINANCING ACTIVITIES
Payments on long-term debt (16,201,439) ( 3,951,439)
Dividends paid ( 996,551) ( 1,005,170)
Purchase of treasury stock ( 288,564) -0-
------------ ---------------
NET CASH USED IN FINANCING ACTIVITIES (17,486,554) ( 4,956,609)
------------ -------------
Decrease in cash and cash equivalents ( 9,428,257) (14,777,098)
CASH AND CASH EQUIVALENTS, JANUARY 1 21,243,064 23,332,342
------------ ------------
CASH AND CASH EQUIVALENTS, JUNE 30 $ 11,814,807 $ 8,555,244
============ ============
</TABLE>
See notes to consolidated condensed financial statements.
-5-
<PAGE> 6
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with the instructions to Form 10-Q
and, therefore, do not include all information and notes to the
consolidated financial statements necessary for a fair presentation of
financial position, results of operations and cash flows in conformity
with generally accepted accounting principles. Management of the
Registrant, however, believes that all adjustments considered
necessary for a fair presentation of the results of operations for
such period have been made. Certain amounts in the prior year have
been reclassified to conform with the 1994 consolidated condensed
financial statement presentation. For further information, refer to
the consolidated financial statements and notes thereto included in
the Registrant's 1993 annual report on Form 10-K.
2. Operating results are not necessarily indicative of the results to be
expected for the year, due to the seasonal nature of certain aspects
of the Registrant's business.
3. On June 24, 1994, the Registrant sold for cash its Ceredo coal
handling dock resulting in a $6,518,000 pretax gain.
4. Effective April 1, 1994, the Registrant extended the period by 15 days
over which certain fixed costs are amortized for its Marine
Transportation segment to approximate the navigation season. These
costs were amortized over the period of April 1 through November 30 in
the prior year. The change, which will have no impact on annual
results, had the effect of reducing operating expenses by $418,000 and
increasing net income by $276,000 or $.11 per share in the second
quarter and first half of 1994.
5. In 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". The Registrant adopted
the provisions of the new standard, effective January 1, 1994, and
increased stockholders' equity by $2,971,792 (net of $1,531,000 in
income taxes) to reflect unrealized holding gains on investments
reported as available-for-sale. Unrealized holding gains of
$2,529,225 (net of $1,303,000 in income taxes) are included in
stockholders' equity at June 30, 1994. In accordance with the
Statement, prior year financial statements have not been restated for
the accounting change.
6. Available-for-sale investments are carried at fair value, based on
quoted market prices, and are reported as a current asset in the
consolidated condensed balance sheet. Realized gains and losses on
the sale of such investments are based on average cost. In 1993, the
Registrant reported these investments at the lower of cost or market
and as long-term.
-6-
<PAGE> 7
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
7. In June 1993, the Registrant recorded a reserve of $1,200,000 against
a coal customer accounts receivable. The Registrant fully reserved
for this receivable by recording an additional provision of $500,000
in December 1993.
8. On April 19, 1993, the Registrant sold its unsecured bankruptcy claim
against LTV Steel Company, Inc. (LTV) for cash resulting in a
$2,653,000 pretax gain. The Registrant would have received certain
equities in LTV as settlement of its claim had the sale for cash not
been affected.
9. The Registrant's wholly owned subsidiary Saginaw Mining Company,
ceased operation of its St. Clairsville, Ohio coal mine on August 28,
1992, and began the mine closing process. Permanent closure of the
mine was completed in 1993. Closure costs of this discontinued
operation are being fully funded by a public utility customer, as
required by contract. Final settlement and funding of remaining
closure costs is expected to occur by the end of 1994. Remaining
liabilities related to the discontinued operation are included in the
accounts of the Registrant on the consolidated condensed balance
sheet.
-7-
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Due to the seasonal nature of certain aspects of the
Registrant's business, the operating results and cash flows for the first six
months of the year are not necessarily indicative of the results to be expected
for the full year.
FINANCIAL CONDITION
-------------------
At June 30, 1994 the Registrant's net current assets were
$19,017,000 as compared to $22,329,000 at December 31, 1993. Net current assets
declined from the end of last year primarily as a result of the purchase of
properties and equipment, the reduction of long-term debt and other
liabilities, the payment of dividends, the purchase of Treasury Stock, and the
payment of the Registrant's portion of Eveleth Mines debt. This decline was
partially offset by the reclassification of available-for-sale investments to
current assets.
The Registrant purchased 200 shares of its Common Stock on the
open market in the second quarter of 1994 and 12,700 shares in the first half
of 1994 and placed these shares in treasury. The Registrant made no purchases
of its Common Stock in the first half of 1993. The Registrant declared and
paid dividends of $.20 per share in the second quarter of 1994 and 1993 and
$.40 per share in the first half of 1994 and 1993.
During the second quarter of 1994, the Registrant sold for
cash its Ceredo coal handling dock resulting in a $6,518,000 pretax gain.
During the second quarter of 1993, the Registrant sold for cash its unsecured
bankruptcy claim against LTV Steel Company, Inc. resulting in a $2,653,000
pretax gain.
Cash flow from operations in the first half of 1994 improved
significantly compared to the first half of 1993. As a result of its improved
cash position, the Registrant repaid a total of $16,201,000 of its debt in the
first half of 1994 compared with $3,951,000 for the same period in 1993.
Included in 1994 is a $10,000,000 reduction in revolving credit debt with no
balance presently outstanding. Anticipated cash flows from operations and
current financial resources are expected to meet the Registrant's needs during
the remainder of 1994.
RESULTS OF OPERATIONS
---------------------
SIX MONTHS ENDED JUNE 30, 1994 COMPARED TO
SIX MONTHS ENDED JUNE 30, 1993
The Registrant's 1994 first half consolidated net income was
$6,695,000 or $2.69 per share on consolidated revenues of $85,822,000 compared
to net income of $722,000 or $.29 per share on revenues of $65,184,000 for the
first half of 1993. Consolidated revenues for the first half of 1994 improved
32% compared to the first half of 1993.
-8-
<PAGE> 9
RESULTS OF OPERATIONS (CONTINUED)
---------------------------------
SIX MONTHS ENDED JUNE 30, 1994 COMPARED TO
SIX MONTHS ENDED JUNE 30, 1993
In 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". As further described in Notes 5
and 6 to the consolidated condensed financial statements, the Registrant
adopted the provisions of the new standard, effective January 1, 1994. Gains
on the sale of available-for-sale investments of $374,000 and $713,000 are
included in the second quarter and first half 1994, respectively.
As described in Note 4 to the consolidated condensed financial
statements, the Registrant extended the period over which certain fixed costs
are amortized for its Marine Transportation segment, effective April 1, 1994.
The change reduced operating expenses by $418,000 and increased net income by
$276,000 or $.11 per share in the second quarter and first half of 1994.
During the second quarter of 1994 the Registrant sold for cash
its Ceredo coal handling dock located in West Virginia resulting in a
$6,518,000 pretax gain. Second quarter and first half 1994 net income
increased $4,302,000 or $1.73 per share as a result of the gain. During the
second quarter of 1993 the Registrant sold for cash its unsecured claim against
LTV Steel Company, Inc. resulting in a $2,653,000 pretax gain and recorded a
$1,200,000 reserve against a coal customer accounts receivable. Second quarter
and first half 1993 net income increased $959,000 or $.38 per share related to
the gain, partially offset by the accounts receivable reserve.
Interest expense declined 23% in the first half of 1994,
compared to the same period in the prior year, due to the refinancing of a
portion of the Registrant's long-term debt in December 1993 and an overall
reduction in debt.
Operating results of the Registrant's business segments for
the six months ended June 30, 1994 and 1993 are discussed below. It is the
policy of the Registrant to allocate certain corporate general and
administrative expenses to its business segments.
Operating revenues for the Registrant's Marine Transportation
segment amounted to $24,481,000 for the first half of 1994 compared to
$24,619,000 for the first half of 1993. The segment's operating profit of
$2,340,000 for the first half of 1994 increased 8% compared to $2,172,000 for
the first half of 1993. Due to severe ice conditions on the Great Lakes, the
start of the Registrant's shipping season was delayed until April 1994 when
eleven vessels were put into operation. A twelfth vessel was brought into
service in June 1994 as demand for coal, iron ore and limestone transportation
remains high. The Registrant expects a good year for its Marine Transportation
segment despite the delayed start. Marine Transportation had ten vessels
operating at June 30, 1993.
-9-
<PAGE> 10
RESULTS OF OPERATIONS (CONTINUED)
----------------------------------
SIX MONTHS ENDED JUNE 30, 1994 COMPARED TO
SIX MONTHS ENDED JUNE 30, 1993
Net sales, royalties and management fees for the Registrant's
Iron Ore segment increased to $26,516,000 for the first half of 1994 compared
to $7,835,000 for the first half of 1993 as a result of additional tonnage
requirements by customers. The segment's 1994 first half operating profit was
$3,644,000 compared to a profit of $1,185,000 for the first half of 1993. The
improvement was attributable to new sales, coupled with cost containment
efforts at the Registrant's Eveleth Mines iron ore operations in Minnesota.
Both pellet production lines at Eveleth Mines are now in operation with total
1994 production targeted at 5,000,000 tons.
Net sales for the Registrant's Refractories and Minerals
segment amounted to $19,515,000 for the first half of 1994, which was a 14%
improvement compared to $17,077,000 for the same period in 1993. Operating
profit for the segment was $908,000 for the first half of 1994 which was a 24%
decrease compared to $1,198,000 for the same period in 1993. Additional costs
incurred to increase the customer base and raise productivity levels accounted
for the decrease in operating profit.
Net sales for the Registrant's Industrial Sands segment
amounted to $13,466,000 for the first half of 1994, a 1% increase over 1993
first half sales of $13,364,000. The segment's 1994 first half operating
profit of $1,237,000 was comparable to a $1,234,000 profit for the first half
of 1993. Sales and profit performance in 1994 was affected in part by a second
quarter weakening in the oil and gas well service markets. Restructuring steps
and a review of pricing policies, coupled with improved prospects in the
recreational sands and construction materials businesses are expected to boost
profit levels for this segment in the second half of 1994.
THREE MONTHS ENDED JUNE 30, 1994 COMPARED TO
THREE MONTHS ENDED JUNE 30, 1993
The Registrant's 1994 second quarter consolidated net income
was $6,838,000 or $2.75 per share on consolidated revenues of $54,453,000
compared to net income of $2,810,000 or $1.12 per share on revenues of
$47,968,000 for the same quarter in 1993. Consolidated revenues for the second
quarter of 1994 improved 14% compared to the second quarter of 1993.
As previously discussed, the Registrant extended the period
over which certain fixed costs are amortized for its Marine Transportation
segment, effective April 1, 1994. The change had the effect of reducing
operating expenses by $418,000 and increasing net income by $276,000 or $.11
per share in the second quarter of 1994.
-10-
<PAGE> 11
RESULTS OF OPERATIONS (CONTINUED)
----------------------------------
THREE MONTHS ENDED JUNE 30, 1994 COMPARED TO
THREE MONTHS ENDED JUNE 30, 1993
As previously discussed, the Registrant sold its Ceredo coal
handling dock resulting in a $6,518,000 pretax gain in the second quarter of
1994. Second quarter 1994 net income increased $4,302,000 or $1.73 per share
as a result of the gain. During the second quarter of 1993 the Registrant sold
a bankruptcy claim resulting in a $2,653,000 pretax gain and recorded a
$1,200,000 reserve against a coal customer accounts receivable. Second quarter
1993 net income increased $959,000 or $.38 per share related to the gain,
partially offset by the receivable reserve.
Interest expense declined 26% in the second quarter of 1994,
compared to the same quarter in the prior year, due to the refinancing of a
portion of the Registrant's long-term debt in December 1993 and an overall
reduction in debt.
Operating results of the Registrant's business segments for
the second quarter ended June 30, 1994 and 1993 are discussed below. Due to
the seasonal nature of certain aspects of the Registrant's business, the
comments set forth above in the six month comparison generally apply when
comparing the second quarter of 1994 to the same period in 1993.
Operating revenues for the Registrant's Marine Transportation
segment amounted to $24,003,000 for the second quarter of 1994 compared to
$24,129,000 for the second quarter of 1993. The segment's operating profit of
$3,067,000 for the second quarter of 1994 improved 3% compared to $2,965,000
for the second quarter of 1993.
Net sales, royalties and management fees for the Registrant's
Iron Ore segment increased to $12,446,000 for the second quarter of 1994
compared to $6,174,000 for the second quarter of 1993 as a result of additional
tonnage requirements by customers. The segment's 1994 second quarter operating
profit was $1,452,000 compared to a profit of $1,132,000 for the second quarter
of 1993.
Net sales for the Registrant's Refractories and Minerals
segment amounted to $9,891,000 for the second quarter of 1994, which was a 9%
improvement compared to $9,078,000 for the same period in 1993. Operating
profit for the segment was $384,000 for the second quarter of 1994 which was a
50% decline compared to $775,000 for the same period in 1993.
Net sales for the Registrant's Industrial Sands segment
amounted to $7,232,000 for the second quarter of 1994, a 4% decline from 1993
second quarter sales of $7,497,000. The segment's 1994 second quarter
operating profit of $964,000 declined 3% from the 1993 second quarter profit of
$995,000.
-11-
<PAGE> 12
PART II. OTHER INFORMATION
---------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
- - ------ -----------------------------------------------------
The Registrant submitted for approval by the shareholders at
the annual meeting held April 27, 1994, nominees for election
as directors with terms expiring in 1997 the following
candidates: Brent D. Baird, Albert C. Bersticker, John J.
Dwyer and Ralph D. Ketchum. The shareholders voted at least
2,255,121 votes in favor of electing the nominees.
Directors whose terms of office had not expired and who
continued in office after the meeting were:
Malvin E. Bank
William G. Bares
R. Thomas Green, Jr.
Herbert S. Richey
Renold D. Thompson
John D. Weil
Fred R. White, Jr.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - ------- --------------------------------
(a) Exhibits - None
(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
OGLEBAY NORTON COMPANY
DATE: August 12, 1994 By: R. J. Kessler
-----------------------------
R. J. Kessler
Vice President -
Finance and Development
On behalf of the Registrant
and as Principal Financial
and Accounting Officer
-12-
