<PAGE> 1
Sequential Page 1 of 14 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 September 30, 1996 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 October 31, 1996: 2,417,687
---------
Index on sequential page 2.
<PAGE> 2
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
PAGE NUMBER
-----------
PART I. FINANCIAL INFORMATION
------------------------------
<S> <C>
Condensed Consolidated Balance
Sheet - September 30, 1996 (Unaudited) and
December 31, 1995 3
Condensed Consolidated Statement of
Operations (Unaudited) - Three Months
Ended September 30, 1996 and 1995 and Nine
Months Ended September 30, 1996 and 1995 4
Condensed Consolidated Statement of
Cash Flows (Unaudited) - Nine Months
Ended September 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial
Statements 6-7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-13
PART II. OTHER INFORMATION 13-14
---------------------------
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
SEPTEMBER 30 December 31
1996 1995
---- ----
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 21,506,490 $ 22,660,436
Marketable securities 1,851,300 3,555,550
Accounts receivable, less reserve for doubtful
accounts (1996-$608,000;
1995-$511,000) 27,697,807 27,681,413
Inventories
Raw materials and finished products 2,458,546 3,456,857
Operating supplies 2,325,911 2,311,529
------------ ------------
4,784,457 5,768,386
Deferred income taxes 3,338,281 3,033,075
Prepaid expenses 5,913,331 1,775,417
------------ ------------
TOTAL CURRENT ASSETS 65,091,666 64,474,277
INVESTMENTS 9,968,911 10,519,241
PROPERTIES AND EQUIPMENT 301,779,224 304,828,977
Less allowances for depreciation
and amortization 156,585,858 153,235,099
------------ ------------
145,193,366 151,593,878
PREPAID PENSION COSTS AND OTHER ASSETS 29,027,534 27,668,477
------------ ------------
$249,281,477 $254,255,873
============ ============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
SEPTEMBER 30 December 31
1996 1995
---- ----
(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt $ 8,476,450 $ 8,476,450
Accounts payable 4,119,843 6,564,012
Payrolls and other accrued compensation 5,040,509 7,283,660
Accrued expenses 11,415,299 14,219,918
Income taxes 4,778,616 1,311,849
Iron Ore impairment obligations 2,074,993 4,699,996
------------- -------------
TOTAL CURRENT LIABILITIES 35,905,710 42,537,885
LONG-TERM DEBT, less current portion 39,283,788 43,641,125
POSTRETIREMENT BENEFITS OBLIGATIONS 31,654,161 31,559,405
OTHER LONG-TERM LIABILITIES 19,069,461 19,922,291
DEFERRED INCOME TAXES 20,755,529 20,329,760
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 9,428,440 9,078,611
Unrealized gains 810,158 1,468,476
Retained earnings 121,549,933 113,566,048
------------- -------------
135,415,197 127,739,801
Treasury stock, at cost - 1,201,134
and 1,160,790 shares at respective dates (31,492,131) (29,806,819)
Unallocated Employee Stock Ownership
Plan shares (1,310,238) (1,667,575)
------------- -------------
102,612,828 96,265,407
$ 249,281,477 $ 254,255,873
============= =============
</TABLE>
See notes to condensed consolidated financial statements.
-3-
<PAGE> 4
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------------------- ----------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Net sales $ 27,314,595 $ 26,419,446 $ 78,288,335 $ 77,597,337
Operating revenues 30,647,498 29,816,621 57,371,256 60,156,818
Royalties and management fees 1,126,229 1,152,413 2,991,909 3,061,928
------------ ------------- ------------- -------------
59,088,322 57,388,480 138,651,500 140,816,083
COSTS AND EXPENSES
Cost of goods sold 21,671,403 21,987,929 63,510,707 64,751,865
Operating expenses 25,064,722 23,925,714 50,092,550 48,424,072
General, administrative and
selling expenses 3,341,655 4,003,231 11,278,851 11,947,958
Loss on sale of production capacities and
shutdown of facilities 1,077,845 1,077,845
------------ ------------- ------------- -------------
51,155,625 49,916,874 125,959,953 125,123,895
INCOME FROM OPERATIONS 7,932,697 7,471,606 12,691,547 15,692,188
Gain on sale of assets 509,139 2,857,861 2,387,703 3,836,700
Interest, dividends and other income 493,175 410,014 2,125,763 1,128,310
Other expense (533,600) (777,002) (1,707,136) (2,197,877)
Interest expense (775,073) (1,010,763) (2,432,842) (3,393,633)
------------ ------------- ------------- -------------
INCOME BEFORE INCOME TAXES 7,626,338 8,951,716 13,065,035 15,065,688
Income taxes 1,565,000 2,142,000 2,765,000 3,744,000
------------ -------------- ------------- --------------
NET INCOME $ 6,061,338 $ 6,809,716 $ 10,300,035 $ 11,321,688
============ ============== ============ =============
NET INCOME PER SHARE OF COMMON STOCK $ 2.49 $ 2.76 $ 4.21 $ 4.57
============ ============== ============ =============
DIVIDENDS PER SHARE OF COMMON STOCK $ .35 $ .30 $ .95 $ .90
============ ============== ============ =============
Average number of shares of Common Stock
outstanding 2,432,679 2,471,526 2,444,835 2,476,053
</TABLE>
See notes to condensed consolidated financial statements.
-4-
<PAGE> 5
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
------------
1996 1995
---- ----
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 10,300,035 $ 11,321,688
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 10,201,536 10,289,660
Deferred income taxes 748,000 (350,519)
Gain on sale of assets (1,762,702) (3,836,699)
Gain on sale of business (625,000)
Loss on sale of production capacities and shutdown of facilities 1,077,845
Prepaid pension costs and other assets (2,099,982) (1,586,787)
Deferred vessel maintenance costs (2,994,858) (1,653,443)
Decrease in accounts receivable 20,137 3,672,009
Decrease in inventories 942,814 517,716
(Decrease) increase in accounts payable (2,421,382) 208,159
Decrease in payrolls and other accrued compensation (2,018,837) (1,835,504)
Decrease in accrued expenses (3,615,035) (688,535)
Increase in income taxes 3,474,581 1,633,631
Other operating activities (4,044,593) (2,210,306)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,182,559 15,481,070
INVESTING ACTIVITIES
Purchases of properties and equipment (4,733,003) (5,922,265)
Proceeds from sale of assets 2,859,359 4,775,372
Proceeds from sale of business 1,900,000
Iron Ore and other investments 24,417 (3,113,450)
------------ ------------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 50,773 (4,260,343)
FINANCING ACTIVITIES
Payments on long-term debt (4,357,337) (4,857,338)
Payments of dividends 2,316,150) (2,227,523)
Purchases of Treasury Stock (1,713,791) (449,192)
------------ ------------
NET CASH USED FOR FINANCING ACTIVITIES (8,387,278) (7,534,053)
------------ ------------
(Decrease) increase in cash and cash equivalents (1,153,946) 3,686,674
CASH AND CASH EQUIVALENTS, JANUARY 1 22,660,436 17,720,419
------------ ------------
CASH AND CASH EQUIVALENTS, SEPTEMBER 30 $ 21,506,490 $ 21,407,093
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
-5-
<PAGE> 6
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and
therefore, do not include all information and notes to the condensed
consolidated financial statements necessary for a fair presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. Management of the 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 1996 condensed consolidated financial statement presentation. For
further information, refer to the consolidated financial statements and
notes thereto included in the Registrant's 1995 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 the Registrant's
Marine Transportation business segment which historically does not generate
revenues in the first quarter of the year due to adverse weather conditions
on the Great Lakes.
3. In July 1996, the Registrant's Refractories & Minerals subsidiary executed
agreements to sell its refractory shapes and coatings production
capacities. A pretax loss of $1,078,000 was recognized during the third
quarter as a result of the sale of these production capacities. The loss
also includes the shutdown of the Refractories & Minerals' Cleveland
facility which manufactured these products. No further losses are
anticipated with respect to these actions.
4. At the end of 1995, the Registrant notified the other owners of Eveleth
Mines of its decision not to renew its contract as manager and employer of
Eveleth Mines beyond the current expiration date of December 31, 1996. On
June 20, 1996, the Registrant reached an agreement in principle to sell its
18.5 percent interest in Eveleth Mines to the other owners of Eveleth
Mines. Specific terms of the sale continue to be negotiated. Any gain or
loss arising from the Registrant's discontinuance of its Iron Ore business
segment will be determined once the terms of the agreement have been
finalized. Any unamortized balance of the segment's Iron Ore impairment
obligations will be included in the computation of the resulting gain or
loss. An agreement is expected to be completed by the end of 1996.
Operating results of the Registrant's Iron Ore business segment included in
the consolidated statement of operations are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
-------------------------- -----------------------
<S> <C> <C> <C> <C>
Revenues $9,409 $8,020 $25,358 $21,373
Operating profit 1,955 1,439 5,019 3,834
Net Income 1,308 998 3,392 2,579
</TABLE>
Operating profit and net income exclude allocated corporate
and general administrative expenses of $166,000 and $219,000
for the three months ended September 30 1996 and 1995,
respectively, and $582,000 and $655,000 for the nine months
ended September 30,1996 and 1995, respectively.
5. The Registrant received a state income tax refund of $1,824,000 and related
interest of $576,000 in February 1996 for prior tax years. The interest
received is included in other income, while the tax refund reduced the
Registrant's 1996 annual effective income tax rate.
-6-
<PAGE> 7
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
6. On February 8, 1996 the Registrant sold its National Perlite Products
Company subsidiary for $1,900,000 in cash. The sale resulted in a $625,000
pretax gain, which is included in the gain on sale of assets within the
condensed consolidated statement of operations.
7. In the third quarter of 1995, the Registrant sold the idled vessels S/S J.
Burton Ayers and S/S Crispin Oglebay for a total of $2,524,000 in cash
resulting in pretax gains of $2,324,000. On March 2, 1995, the Registrant
sold for cash certain undeveloped clay properties located in Tennessee
resulting in a $522,000 pretax gain. All of these gains are included in the
gain on sale of assets.
8. On November 5, 1996, the Registrant's Refractories & Minerals segment
purchased substantially all the assets and production capacities of a
manufacturer of metallurgical treatment and hot top compound products
located in Kingsford Heights, Indiana. It is the segment's expectations to
grow its metallurgical treatments business on a regional basis and it is
anticipated that this acquisition will provide a catalyst for growth in the
Chicago steel market. This acquisition is not material to the Registrant's
consolidated assets or consolidated operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Due to the seasonal nature of the Registrant's Marine Transportation
business segment, the operating results and cash flows for the first nine months
of the year are not necessarily indicative of the results to be expected for the
full year. The Registrant's Marine Transportation business segment historically
does not generate revenues in the first quarter of the year due to adverse
weather conditions on the Great Lakes.
FINANCIAL CONDITION
-------------------
The Registrant's operating activities provided cash of $7,183,000 in the
first nine months of 1996 compared to $15,481,000 for the same period in 1995.
Vessel maintenance costs, which are included within prepaid expenses and
deferred and amortized over the Marine Transportation sailing season, totaled
$2,995,000 and $1,653,000 as of September 30, 1996 and 1995, respectively.
Accounts receivable decreased by $20,000 for the nine months ended September
1996 compared to a decrease of $3,672,000 for the same period of 1995. Accounts
payable declined $2,421,000 through the first nine months of 1996, while
accounts payable balances increased by $208,000 for the same period in 1995.
Accrued expenses decreased by $3,615,000 and $689,000 during the first nine
months of 1996 and 1995, respectively. Income taxes increased during the first
nine months of 1996 by $3,475,000 compared to an increase of $1,634,000 during
the same period of 1995. Accounts receivable collections decreased during the
first nine months of 1996 as compared to the same period of 1995 due to lower
revenues experienced during the fourth quarter of 1995 as compared to the fourth
quarter of 1994. During the first nine months of 1996 additional cash was used
for the payment of accounts payable, deferred vessel maintenance costs and
accrued expenses, as compared to the first nine months
-7-
<PAGE> 8
FINANCIAL CONDITION (CONTINUED)
-------------------
of 1995. The decrease in cash provided by operating activities during the first
nine months of 1996 resulted primarily from the Registrant's Marine
Transportation business segment. Heavy ice conditions experienced by the
Registrant's vessel fleet on the Great Lakes and rivers at the end of 1995
persisted through April and May causing delays to be 20 to 25 percent over
historical levels for the period. Delay and repair costs caused by the adverse
weather conditions are not expected to be recovered. All twelve vessels have
been in operation since mid-May. Operating results of the Company's business
segments are discussed in more detail under "RESULTS OF OPERATIONS".
Expenditures for property and equipment amounted to $4,733,000 through the
first nine months of 1996 compared to $5,922,000 for the same period in 1995.
Included in the 1995 expenditures for property and equipment is $2,037,000 in
vessel inspection costs. No vessel inspections are required in 1996.
In the first nine months of 1996, the Registrant received $2,050,000 and
$2,709,000 on the sale of marketable securities and certain non-operating
properties, respectively. The non-operating properties sold during 1996 include
the Registrant's National Perlite Products Company subsidiary for $1,900,000 and
the Registrant's Brownsville, Texas facility for $275,000. In addition, the
Registrant sold its refractory shapes and coatings production capacities for
$165,000 in July 1996. The Registrant received $1,373,000 and $3,402,000 on the
sale of marketable securities and certain non-operating properties,
respectively, for the same period in 1995. The principal properties sold in 1995
include certain undeveloped clay properties for $530,000 and the idled vessels
S/S J. Burton Ayers and S/S Crispin Oglebay for $2,524,000.
The Registrant made long-term debt payments of $4,357,000 and $4,857,000 in
the first nine months of 1996 and 1995, respectively. In the first half of 1995,
the Registrant also made Iron Ore investment advances of $2,812,000 to fund its
proportionate share of Eveleth Mines' debt. Eveleth's debt was fully paid in May
1995.
The Registrant declared dividends of $.95 in the first nine months of 1996
and $.90 in the first nine months of 1995. Dividends paid were $2,316,000 for
the first nine months of 1996 compared to $2,228,000 for the same period of
1995. The Registrant purchased on the open market, and placed in treasury,
41,444 shares of its Common Stock for $1,714,000 in the first nine months of
1996 and 14,450 shares for $475,000 in the first nine months of 1995.
Anticipated cash flows from operations and current financial resources are
expected to meet the Registrant's needs during the remainder of 1996. All
financing alternatives are under constant review to determine their ability to
provide sufficient funding at the least possible cost.
-8-
<PAGE> 9
RESULTS OF OPERATIONS
---------------------
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1995
The Registrant's income from operations declined by 19% in the first nine
months of 1996 to a level of $12,692,000 on revenues of $138,652,000, compared
to $15,692,000 on revenues of $140,816,000 for the same period in 1995. Income
before income taxes was $13,065,000 for the first nine months of 1996, compared
to $15,066,000 for the first nine months of 1995. Net income for the first three
quarters of 1996 was $10,300,000 or $4.21 per share compared to $11,322,000 or
$4.57 per share for the same period in 1995.
Income before income taxes for the first nine months of 1996 includes gains
of $1,344,000 on the sale of current marketable securities and $1,044,000 on the
sale of non-operating properties. Properties sold include National Perlite
Products Company, which had not operated over the past two years. A $625,000
nontaxable gain was realized on the sale of this wholly-owned subsidiary. In the
third quarter of 1996, the Registrant's Refractories & Minerals subsidiary sold
its refractory shapes and coatings production capacities and shutdown its
Cleveland facility which manufactured these products, resulting in a loss of
$1,078,000. No further losses are anticipated with respect to these actions. The
Registrant received a $1,824,000 state income tax refund, which related to prior
tax years, and related interest income of $576,000, during the first quarter of
1996. As a result, the Registrant's 1996 annual effective income tax rate was
reduced. Income before income taxes for the first nine months of 1995 included
gains of $836,000 on the sale of current marketable securities and $3,001,000 on
the sale of certain non-operating properties. The gains recognized include
$520,000 on the sale of undeveloped clay properties in Tennessee and $2,324,000
on the idled vessels S/S J. Burton Ayers and S/S Crispin Oglebay. Net income,
excluding the above items, was $7,895,000 or $3.23 per share for the first nine
months of 1996 and $8,790,000 or $3.55 per share for the first nine months of
1995.
Interest expense declined 28% in the first three quarters of 1996, compared
to the same period in the prior year, due to an overall reduction in debt and
lower interest rates.
Operating results of the Registrant's business segments for the nine months
ended September 30, 1996 and 1995 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 business
segment decreased 5% to $57,371,000 for the first three quarters of 1996
compared to $60,157,000 for the same period in 1995. The segment's operating
profit of $5,111,000 for the first nine months of 1996 decreased 45% compared to
$9,362,000 for the same period in 1995. The start of the Marine Transportation
season was slow and costly with the fleet encountering heavy ice conditions in
the rivers and upper Great Lakes regions. These conditions were as difficult or
worse than those encountered at the end of the 1995 sailing season, when year
end financial performance was adversely affected. At the start of the 1996
sailing season, only seven of the twelve vessels in the fleet marginally
operated, compared to 1995 when eleven of the twelve operated in extremely
favorable conditions. The segment's operating profit was also adversely impacted
due to higher fuel costs and higher labor and repair charges as a result of the
unfavorable sailing conditions. Currently, all twelve vessels are in operation.
Provided that favorable weather conditions continue through the end of the
sailing season, tonnage levels for the year are expected to be comparable to the
21,486,000 tons hauled in 1995, however, it is anticipated that operating
profit will fall short of the prior year level.
-9-
<PAGE> 10
RESULTS OF OPERATIONS (CONTINUED)
---------------------
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1995
Net sales for the Registrant's Industrial Sands business segment amounted
to $32,743,000 for the first nine months of 1996, a 6% increase over sales of
$30,967,000 for the first nine months of 1995. The segment's operating profit
increased by 16% from $5,886,000 for the first nine months of 1995 compared to
$6,853,000 for the same period of 1996. The increase in operating profit can be
attributed to the segment's Brady, Texas and Riverside, California operations.
Increased oil prices have resulted in a strong demand in frac sand from the
Brady operation, while the Riverside operation experienced strong demand from
the construction markets. Both operations benefited from a decrease in operating
costs per ton. The segment's increase in operating profit was tempered by a
decrease in operating profit at the segment's Glass Rock operation. Its
inability to reliably service major customers, as a result of production
problems and high iron content in the sand, negatively impacted sales and
operating profit earlier in the year.
Operating results of the Registrant's Iron Ore business segment were as
follows (in thousands):
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1996 1995
---- ----
<S> <C> <C>
Net sales $ 22,366 $ 18,312
Cost of sales 23,329 20,416
-------- --------
Gross margin (963) (2,104)
Credit through reduction of Iron Ore
impairment obligations 2,625 2,625
-------- --------
Adjusted gross margin 1,662 521
Royalties and management fee revenue 2,992 3,062
General, administrative and selling expenses - net 217 404
-------- --------
Operating profit $ 4,437 $ 3,179
======== ========
</TABLE>
Net sales and operating profit were significantly higher for the first nine
months of 1996 on increased shipments at higher market prices to meet a strong
spot market demand from the steel industry.
At the end of 1995, the Registrant notified the other owners of the Eveleth
Mines of its decision not to renew its contract as manager and employer of
Eveleth Mines beyond the current expiration date of December 31, 1996. On June
20, 1996, the Registrant announced that it reached an agreement in principle to
sell its 18.5 percent interest in Eveleth Mines to the other owners. Specific
terms of the sale continue to be negotiated. Any gain or loss arising from the
Registrant's discontinuance of its Iron Ore business segment will be determined
once the terms of the agreement have been finalized. Any unamortized balance of
the segment's Iron Ore impairment obligations will be included in the
computation of the resulting gain or loss. An agreement is expected to be
completed by the end of 1996. Included in the Iron Ore business segment's
general, administrative and selling expenses - net is $582,000 and $655,000 of
allocated corporate and general administrative expenses for the three quarters
ended September 30, 1996 and 1995, respectively. The Registrant expects to
allocate these expenses over the remaining business segments subsequent to the
sale of its interest in Eveleth Mines.
-10-
<PAGE> 11
RESULTS OF OPERATIONS (CONTINUED)
---------------------
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1995
Net sales for the Registrant's Refractories & Minerals business segment
amounted to $23,134,000 for the first nine months of 1996, which was a decrease
of 18% compared to $28,190,000 for the first nine months of 1995. The segment's
operating loss of $944,000 for the first nine months of 1996 includes, as
previously discussed, the recognition of a $1,078,000 loss on the sale of its
refractory shapes and coatings productions capacities and the shutdown of the
Cleveland facility which manufactured these products. No further losses are
anticipated with respect to these actions. The segment experienced an operating
profit of $455,000 for the first three quarters of 1995. Although metallurgical
treatment product sales declined by $2,247,000 for the first nine months of
1996, compared to the same period of 1995, profitability of this product line
continues to improve in relation to sales. Net sales and operating profit of the
segment's ingot hot top products declined by $2,381,000 and $545,000,
respectively, for the first nine months of 1996 compared to the first nine
months of 1995. The decline was anticipated, as the Registrant is one of the few
remaining suppliers of ingot products to steel producers who have not shifted to
the continuous casting process. Combined, refractory shapes and coatings
products represented $3,635,000 in net sales and $308,000 in operating profit
for the first nine months of 1996, compared to $4,056,000 in net sales and
$57,000 in operating profit for the first nine months of 1995.
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1995
The Registrant's income from operations increased by 6% in the third
quarter of 1996 to $7,933,000, on revenues of $59,088,000, compared to
$7,472,000, on revenues of $57,388,000 for the same period of 1995. Income
before income taxes was $7,626,000 for the third quarter of 1996 compared to
$8,952,000 for the same period of 1995. Net income was $6,061,000 or $2.49 per
share compared to net income of $6,810,000 or $2.76 per share for the same
quarter of 1995. The increase in consolidated revenues can be attributed to
higher sales volume experienced by the Registrant's Marine Transportation, Iron
Ore and Industrial Sands business segments. The decline in net income is
primarily a result of non-recurring gains and losses recognized during the third
quarter of 1996 compared to the same period of 1995.
Net income for the third quarter of 1996 improved compared to the same
quarter of 1995, when such non-recurring gains and losses are excluded. Net
income for the third quarter of 1996 includes the effects of pretax gains of
$311,000 on the sale of current marketable securities and $198,000 on the sale
of non-operating properties. During the third quarter of 1996, the Registrant's
Refractories & Minerals subsidiary sold its refractory shapes and coatings
production capacities and shutdown the Cleveland facility which manufactured
these products, resulting in a loss of $1,078,000. No further losses are
anticipated with respect to these actions. The Registrant received a $1,824,000
state income tax refund, which related to prior tax years, during the first
quarter of 1996. As a result, the Registrant's annual effective income tax rate
was reduced. Net income for the same quarter in 1995 includes the effects of
pretax gains of $836,000 on the sale of current marketable securities and
$3,001,000 on the sale of non-operating properties. The gains recognized include
$520,000 on the sale of undeveloped clay properties in Tennessee and $2,324,000
on the sale of the idled vessels S/S J. Burton Ayers and S/S Crispin Oglebay.
Net income, excluding the above non-recurring items was $5,835,000, or $2.40 per
share, for the quarter ended September 30 1996, compared to $4,924,000, or $1.99
per share, for the same period in 1995.
-11-
<PAGE> 12
RESULTS OF OPERATIONS (CONTINUED)
---------------------
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1995
Interest expense declined 23% in the third quarter of 1996, compared to the
same quarter in the prior year, due to an overall reduction in debt and lower
interest rates.
Operating results of the Registrant's business segments for the quarters
ended September 30, 1996 and 1995 are discussed below. The comments set forth
above in the nine months comparison generally apply, except as noted, when
comparing the third quarter of 1996 to the same period in 1995.
Operating revenues for the Registrant's Marine Transportation business
segment of $30,647,000 for the third quarter of 1996 increased 3% compared to
$29,817,000 for the third quarter of 1995. The increase in revenues can be
attributed to rate increases and favorable commodity mix. The segment's
operating profit of $4,913,000 for the third quarter of 1996 was 4% less than
the operating profit of $5,093,000 for the same period of 1995. The decrease in
operating profit is the result of unfavorable fuel costs and higher repair and
labor costs associated with the heavy ice conditions experienced at the start of
the sailing season.
Net sales for the Registrant's Industrial Sands business segment totaled
$11,450,000 for the third quarter of 1996, a 10% increase from the 1995 third
quarter sales of $10,453,000. The segment's 1996 third quarter operating profit
of $2,844,000 increased 47% from the 1995 third quarter profit of $1,937,000.
The increases in net sales and operating profit can be attributed to the
segment's Brady, Texas and Riverside, California operations, as previously
discussed.
Operating results of the Registrant's Iron Ore business segment were as
follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30
1996 1995
---- ----
<S> <C> <C>
Net sales $ 8,283 $ 6,869
Cost of sales 8,558 7,560
------- -------
Gross margin (275) (691)
Credit through reduction of Iron Ore
impairment obligations 875 875
------- -------
Adjusted gross margin 600 184
Royalties and management fee revenue 1,126 1,152
General, administrative and selling expenses - net (64) 115
------- -------
Operating profit $ 1,790 $ 1,221
======= =======
</TABLE>
The increase in net sales is the result of improved pricing and increased
tonnage sold on the spot market. Operating profit improved as a result of higher
selling prices and lower fixed costs. Any unamortized balance of the segment's
Iron Ore impairment obligations will be included in the computation of the
resulting gain or loss arising from the Registrant's discontinuance of its Iron
Ore business segment. Included in the Iron Ore business segment's general,
administrative and selling expenses - net is $165,000 and $219,000 of allocated
corporate and general administrative expenses for the third quarter of 1996 and
1995, respectively. The Registrant expects to allocate these expenses over its
remaining business segments subsequent to the sale of its interest in Eveleth
Mines.
-12-
<PAGE> 13
RESULTS OF OPERATIONS (CONTINUED)
---------------------
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1995
Net sales for the Registrant's Refractories & Minerals business segment
amounted to $7,582,000 for the quarter ended September 30 1996, which was a 16%
decline compared to $9,035,000 for the quarter ended September 30, 1995. The
segment's operating loss for the third quarter of 1996 was $804,000, which
includes the $1,078,000 loss recognized on the sale of its refractory shapes and
coatings production capacities and the shutdown of the Cleveland facility which
manufactured these products, as described earlier. No further losses are
anticipated with respect to these actions. The segments operating results,
excluding this loss, were comparable to the third quarter of 1995 operating
profit of $274,000.
PART II. OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
As previously reported by the Registrant in its Form 10-K filed for the
year ended December 31, 1995, the Registrant's subsidiary, Laxare, Inc., is a
defendant in a civil action in the Circuit Court of Kanawha County, West
Virginia (the "Circuit Court") in which plaintiffs seek compensatory and
punitive damages for coal mining and other activity on land in which plaintiffs
allegedly hold an interest. In August 1995, Laxare sought protection under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
Southern District of West Virginia (the "Bankruptcy Court"). Following an order
by the Circuit Court against a codefendant, Cannelton Industries, Inc.,
Cannelton removed the Circuit Court case to the Bankruptcy Court and then sought
reconsideration of the Circuit Court's Order.
In an order issued October 31, 1996, the Bankruptcy Court remanded the
case back to the Circuit Court and lifted its automatic stay of proceedings in
that court with respect to Laxare, provided that any claims against Laxare that
result from an award of damages by the Circuit Court must be asserted in the
Bankruptcy Court. The order also granted Laxare's motion to assume four
leases which are the property of the Bankruptcy Estate, and permitted Laxare to
sublease them to a third party.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits
(27) - Financial Data Schedule
(b) Reports on Form 8-K - None
-13-
<PAGE> 14
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: November 14, 1996 By: /s/ R. J. Kessler
--------------------------
R. J. Kessler
Vice President -
Finance and Planning
On behalf of the Registrant
and as Principal Financial
and Accounting Officer
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 21,506,490
<SECURITIES> 1,851,300
<RECEIVABLES> 27,697,807
<ALLOWANCES> 608,000
<INVENTORY> 4,784,457
<CURRENT-ASSETS> 65,091,666
<PP&E> 301,779,224
<DEPRECIATION> 156,585,858
<TOTAL-ASSETS> 249,281,477
<CURRENT-LIABILITIES> 35,905,710
<BONDS> 39,283,788
<COMMON> 3,626,666
0
0
<OTHER-SE> 98,986,162
<TOTAL-LIABILITY-AND-EQUITY> 249,281,477
<SALES> 78,288,335
<TOTAL-REVENUES> 138,651,500
<CGS> 63,510,707
<TOTAL-COSTS> 125,959,953
<OTHER-EXPENSES> 1,707,136
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,432,842
<INCOME-PRETAX> 13,065,035
<INCOME-TAX> 2,765,000
<INCOME-CONTINUING> 10,300,035
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,300,035
<EPS-PRIMARY> 4.21
<EPS-DILUTED> 4.21
</TABLE>
