<PAGE> 1
Sequential Page 1 of 13 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, 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 July 31, 1996: 2,434,032
---------
Index on sequential page 2.
<PAGE> 2
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
PAGE NUMBER
-----------
PART I. FINANCIAL INFORMATION
------------------------------
<S> <C> <C>
Condensed Consolidated Balance
Sheet - June 30, 1996 (Unaudited) and
December 31, 1995 3
Condensed Consolidated Statement of
Operations (Unaudited) - Three Months
Ended June 30, 1996 and 1995 and Six
Months Ended June 30, 1996 and 1995 4
Condensed Consolidated Statement of
Cash Flows (Unaudited) - Six Months
Ended June 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial
Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7 - 12
PART II. OTHER INFORMATION 12 - 13
---------------------------
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
JUNE 30 December 31
1996 1995
------------ ------------
(UNAUDITED)
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 6,498,397 $ 22,660,436
Marketable securities 2,277,575 3,555,550
Accounts receivable, less reserve for doubtful
accounts (1996-$640,000;
1995-$511,000) 32,823,912 27,681,413
Inventories
Raw materials and finished products 2,803,361 3,456,857
Operating supplies 2,341,116 2,311,529
------------ ------------
5,144,477 5,768,386
Deferred income taxes 3,245,281 3,033,075
Prepaid insurance and other expenses 9,979,870 1,775,417
------------ ------------
TOTAL CURRENT ASSETS 59,969,512 64,474,277
INVESTMENTS 10,142,458 10,519,241
PROPERTIES AND EQUIPMENT 301,377,863 304,828,977
Less allowances for depreciation
and amortization 153,047,032 153,235,099
------------ ------------
148,330,831 151,593,878
PREPAID PENSION COSTS AND OTHER ASSETS 28,321,459 27,668,477
------------ ------------
$246,764,260 $254,255,873
============ ============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
June 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 3,799,719 6,564,012
Payrolls and other accrued compensation 4,283,773 7,283,660
Accrued expenses 14,376,825 14,219,918
Income taxes 4,009,120 1,311,849
Iron Ore impairment obligations 2,949,994 4,699,996
------------- -------------
TOTAL CURRENT LIABILITIES 37,895,881 42,537,885
LONG-TERM DEBT, less current portion 39,402,900 43,641,125
POSTRETIREMENT BENEFITS OBLIGATIONS 31,980,811 31,559,405
OTHER LONG-TERM LIABILITIES 19,393,469 19,922,291
DEFERRED INCOME TAXES 19,944,529 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 9,422,965 9,078,611
Unrealized gains 989,895 1,468,476
Retained earnings 116,333,483 113,566,048
------------- -------------
130,373,009 127,739,801
Treasury stock, at cost - 1,185,134
and 1,160,790 shares at respective dates (30,796,989) (29,806,819)
Unallocated Employee Stock Ownership
Plan shares (1,429,350) (1,667,575)
------------- -------------
98,146,670 96,265,407
------------- -------------
$ 246,764,260 $ 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 Six Months Ended
June 30 June 30
---------------------------- ----------------------------
1996 1995 1996 1995
---- ---- ---- ----
REVENUES
<S> <C> <C> <C> <C>
Net sales $ 24,500,491 $ 27,418,927 $ 50,973,740 $ 51,177,891
Operating revenues 26,311,481 29,014,104 26,723,758 30,340,197
Royalties and management fees 998,899 1,063,220 1,865,680 1,909,515
------------ ------------ ------------ ------------
51,810,871 57,496,251 79,563,178 83,427,603
COSTS AND EXPENSES
Cost of goods sold 19,736,615 22,642,968 41,839,304 42,763,936
Operating expenses 24,578,140 23,728,773 25,027,828 24,498,358
General, administrative and
selling expenses 3,898,628 3,929,843 7,937,196 7,944,727
------------ ------------ ------------ ------------
48,213,383 50,301,584 74,804,328 75,207,021
INCOME FROM OPERATIONS 3,597,488 7,194,667 4,758,850 8,220,582
Gain on sale of assets 262,738 456,358 1,878,564 978,839
Interest, dividends and other income 473,623 235,604 1,632,588 718,296
Other expense (643,112) (815,641) (1,173,536) (1,420,875)
Interest expense (814,250) (1,148,281) (1,657,769) (2,382,870)
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 2,876,487 5,922,707 5,438,697 6,113,972
Income taxes 616,000 1,548,000 1,200,000 1,602,000
------------ ------------ ------------ ------------
NET INCOME $ 2,260,487 $ 4,374,707 $ 4,238,697 $ 4,511,972
============ ============ ============ ============
NET INCOME PER SHARE OF COMMON STOCK $ .93 $ 1.77 $ 1.73 $ 1.82
============ ============ ============ ============
DIVIDENDS PER SHARE OF COMMON STOCK $ .30 $ .30 $ .60 $ .60
============ ============ ============ ============
Average number of shares of Common Stock
outstanding 2,443,551 2,475,347 2,450,980 2,478,353
</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>
Six Months Ended
June 30
----------------------------
1996 1995
---- ----
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 4,238,697 $ 4,511,972
Adjustments to reconcile net income to
net cash used for operating activities:
Depreciation and amortization 5,803,516 5,759,330
Deferred income taxes (63,000) 526,000
Gain on sale of assets (1,253,564) (978,839)
Gain on sale of business (625,000)
Prepaid pension costs and other assets (1,146,932) (1,231,778)
Deferred vessel maintenance costs (7,361,764) (5,684,541)
Decrease (increase) in accounts receivable (5,155,968) 1,060,667
Decrease in inventories 582,794 37,176
(Decrease) increase in accounts payable (2,741,506) 1,793,435
Decrease in payrolls and other accrued compensation (2,779,223) (2,537,057)
(Decrease) increase in accrued expenses 29,654 (1,624,687)
(Decrease) increase in income taxes 2,705,085 (953,475)
Other operating activities (2,431,681) (2,319,712)
------------ ------------
NET CASH USED FOR OPERATING ACTIVITIES (10,198,892) (1,641,509)
INVESTING ACTIVITIES
Purchases of properties and equipment (3,219,517) (4,997,006)
Proceeds from sale of assets 2,075,036 1,206,526
Proceeds from sale of business 1,900,000
Iron Ore and other investments 9,470 (3,126,598)
------------ ------------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 764,989 (6,917,078)
FINANCING ACTIVITIES
Payments on long-term debt (4,238,225) (4,738,225)
Payments of dividends (1,471,262) (1,487,430)
Purchases of Treasury Stock (1,018,649) (394,566)
------------ ------------
NET CASH USED FOR FINANCING ACTIVITIES (6,728,136) (6,620,221)
------------ ------------
Decrease in cash and cash equivalents (16,162,039) (15,178,808)
CASH AND CASH EQUIVALENTS, JANUARY 1 22,660,436 17,720,419
------------ ------------
CASH AND CASH EQUIVALENTS, JUNE 30 $ 6,498,397 $ 2,541,611
============ ============
</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
negotiated agreements to sell its refractory shapes and coatings
production capacities. An estimated pretax loss of $1,000,000 will be
recorded in the third quarter of 1996 upon consumation of these
agreements.
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. Although specific terms of the sale need to be negotiated,
the transaction does include cash proceeds of $5,000,000 plus the
assumption of certain liabilities by the other owners. 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 in the third quarter of
1996. Operating results of the Registrant's Iron Ore business segment
included in the statement of operations are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
-------------------------- ------------------------
<S> <C> <C> <C> <C>
Revenues $6,880 $8,030 $15,949 $13,353
Operating profit 1,500 1,369 3,064 2,395
Net Income 1,020 904 2,084 1,581
<FN>
Operating profit and net income exclude allocated corporate and general
administrative expenses of $195,000 and $214,000 for the three months
ended June 30, 1996 and 1995, respectively, and $416,000 and $437,000
for the six months ended June 30, 1996 and 1995, respectively.
</TABLE>
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.
7. On March 2, 1995, the Registrant sold for cash certain undeveloped clay
properties located in Tennessee resulting in a $522,000 pretax gain,
which is included in the gain on sale of assets.
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 half 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 used cash of $10,199,000
in the first half of 1996 compared to $1,667,000 for the same period in 1995.
Vessel maintenance costs, which are deferred and amortized over the Marine
Transportation sailing season, totaled $7,362,000 and $5,685,000 as of June 30,
1996 and 1995, respectively. Accounts receivable increased by $5,156,000 for the
six months ended June 1996 compared to a decrease of $1,061,000 for the same
period of 1995. Accounts payable declined $2,742,000 in the first half of 1996,
while accounts payable balances increased by $1,793,000 for the same period in
1995. Accrued expenses and income taxes increased by $30,000 and $2,705,000,
respectively, during the first half of 1996 compared to decreases of $1,625,000
and $953,000 for the first half of 1995. Cash generated through the collection
of receivables in the first half of 1996 was not as significant as in the same
period in the prior year, while additional cash was used for the payment of
accounts payable and deferred vessel maintenance costs. The increase in cash
used for operating activities in the first half 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 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 $3,220,000
through the first six months of 1996 compared to $4,997,000 for the same period
in 1995. During the first six months of 1995 the Registrant expended $1,127,000
and $705,000 in vessel inspection costs and improvements, respectively. No
vessel inspections are required in 1996.
-7-
<PAGE> 8
FINANCIAL CONDITION (CONTINUED)
-------------------
In the first half of 1996, the Registrant received $1,585,000
and $2,390,000 on the sale of marketable securities and certain non-operating
properties, respectively. Properties sold during 1996 include the Registrant's
National Perlite Products Company subsidiary for $1,900,000 and its Brownsville,
Texas facility for $275,000. The Registrant received $504,000 and $702,000 on
the sale of marketable securities and certain non-operating properties,
respectively, for the same period in 1995. The principal property sold in 1995
was certain undeveloped clay properties for $530,000.
The Registrant made long-term debt payments of $4,238,000 and
$4,738,000 in the first six 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 $.60 in the first half of
both 1996 and 1995. Dividends paid were $1,471,000 for the first half of 1995
compared to $1,487,000 for the same period of 1995. The Registrant purchased
25,444 shares of its Common Stock on the open market for $1,019,000 in the first
half of 1996 and 12,150 shares for $395,000 in the first half of 1995 and placed
these shares in treasury.
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.
RESULTS OF OPERATIONS
---------------------
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO
SIX MONTHS ENDED JUNE 30, 1995
The Registrant's income from operations declined by 42% in the
first half of 1996 to a level of $4,759,000 on revenues of $79,563,000, compared
to $8,221,000 on revenues of $83,428,000 for the same period in 1995. Income
before income taxes was $5,439,000 for the first six months of 1996, compared to
$6,114,000 for the first six months of 1995. Net income for the first half of
1996 was $4,239,000 or $1.73 per share compared to $4,512,000 or $1.82 per share
for the same period in 1995.
Income before income taxes for the first six months of 1996
includes gains of $1,033,000 on the sale of current marketable securities and
$846,000 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. The Registrant received a $1,824,000 state income tax refund and
related interest income of $576,000 during the first half of 1996 related to
prior tax years. As a result, the Registrant's 1996 annual effective income tax
rate was reduced. Income before income taxes for the first six months of 1995
included gains of $303,000 on the sale of current marketable securities and
$522,000 on the sale of undeveloped clay properties in Tennessee. Net income,
excluding the above gains and tax refund, was $2,059,000 or $.84 per share for
the first half of 1996 and $3,968,000 or $1.60 per share for the first half of
1995.
-8-
<PAGE> 9
RESULTS OF OPERATIONS (CONTINUED)
---------------------
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO
SIX MONTHS ENDED JUNE 30, 1995
Interest expense declined 30% in the first half 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 six months ended June 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 12% to $26,724,000 for the first half of 1996
compared to $30,340,000 for the same period in 1995. The segment's operating
profit of $198,000 for the first half of 1996 decreased 95% compared to
$4,268,000 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.
Tonnage levels for the year should be comparable to the 21,486,000 tons hauled
in 1995.
Net sales for the Registrant's Industrial Sands business
segment amounted to $21,293,000 for the first half of 1996, a 4% increase over
sales of $20,515,000 for the first half of 1995. The segment's operating profit
decreased by 2% from $4,106,000 for the first half of 1995 to $4,009,000 for the
first half of 1996. The decrease in operating profit can be attributed to the
segment's Glass Rock operations. Its inability to service major customers
reliably as a result of production problems and high iron content in the product
negatively impacted sales and operating profit.
Operating results of the Registrant's Iron Ore business
segment were as follows (in thousands):
<TABLE>
<CAPTION>
Six Months Ended
June 30
1996 1995
<S> <C> <C>
Net sales $ 14,083 $ 11,443
Cost of sales 14,771 12,856
-------- --------
Gross margin (688) (1,413)
Credit through reduction of Iron Ore
impairment obligations 1,750 1,750
-------- --------
Adjusted gross margin 1,062 337
Royalties and management fee revenue 1,866 1,910
General, administrative and selling expenses - net 280 289
-------- --------
Operating profit $ 2,648 $ 1,958
======== ========
</TABLE>
-9-
<PAGE> 10
RESULTS OF OPERATIONS (CONTINUED)
---------------------
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO
SIX MONTHS ENDED JUNE 30, 1995
Net sales and operating profit were significantly higher for the first six
months of 1996 on accelerated shipments at higher market prices to meet a strong
spot market demand from the steel industry. Eveleth Mines' revised estimated
production approximates 5,100,000 tons in 1996, and the Registrant anticipates
that it will sell its related contractual allotment of iron ore pellets.
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. Although specific terms of the sale remain to be negotiated, the sale
does include cash proceeds of $5,000,000 plus the assumption of certain
liabilities by the other owners. 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 in the
third quarter of 1996. Included in the Iron Ore business segment's general,
administrative and selling expenses - net is $416,000 and $437,000 of allocated
corporate and general administrative expenses for the six months ended June 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.
Net sales for the Registrant's Refractories & Minerals
business segment amounted to $15,551,000 for the first half of 1996, which was a
decrease of 19% compared to $19,154,000 for the first half of 1995. The
segment's operating loss was $140,000 for the first half 1996 compared to
operating profit of $181,000 for the first half of 1995. Although metallurgical
treatment product sales declined by $1,465,000 for the first six months of 1996
compared to the same period of 1995, the segment was able to control costs and
maintain strong profit margins related to sales of this product. Net sales and
operating profit of the segment's ingot hot top products declined by $2,146,000
and $723,000, respectively, for the first half of 1996 compared to the first
half 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. As a result of assessing the segment's existing
product lines, the Registrant reached agreements to sell its refractory shapes
and coatings production capacities in July 1996. Combined, these products
represented $2,600,000 in net sales for both the first six months of 1996 and
1995. A pretax loss of approximately $1,000,000 will be recorded in the third
quarter of 1996 as a result of these transactions.
-10-
<PAGE> 11
RESULT OF OPERATIONS (CONTINUED)
--------------------
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO
THREE MONTHS ENDED JUNE 30, 1995
The Registrant's income from operations declined by 50% in the
second quarter of 1996 to $3,597,000, on revenues of $51,811,000, compared to
$7,195,000, on revenues of $57,496,000 for the same period of 1995. Income
before income taxes was $2,876,000 for the second quarter of 1996 compared to
$5,923,000 for the same period of 1995. Net income was $2,261,000 or $.93 per
share compared to net income of $4,375,000 or $1.77 per share for the same
quarter of 1995. The decline in consolidated revenues can be attributed to lower
volume experienced by the Registrant's Marine Transportation and Refractories &
Minerals business segments. The decline in net income is primarily a result of
delays and higher costs experienced by the Marine Transportation business
segment as a result of the unfavorable conditions on the upper Great Lakes and
rivers.
Interest expense declined 29% in the second 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 second quarter ended June 30, 1996 and 1995 are discussed below. The
comments set forth above in the six months comparison generally apply, except as
noted, when comparing the second quarter of 1996 to the same period in 1995.
Operating revenues for the Registrant's Marine Transportation
business segment of $26,311,000 for the second quarter of 1996 declined 9%
compared to $29,014,000 for the second quarter of 1995. The segment's operating
profit of $965,000 for the second quarter of 1996 compared to $4,485,000 for the
second quarter of 1995.
Net sales for the Registrant's Industrial Sands business
segment amounted to $10,926,000 for the second quarter of 1996, a 2% decrease
from 1995 second quarter sales of $11,200,000. The segment's 1996 second quarter
operating profit of $2,350,000 decreased 13% from the 1995 second quarter profit
of $2,697,000. The decreases in net sales and operating profit can be attributed
to the segment's Glass Rock operation, as previously discussed, as well as an
apparent softening of the frac sand market, which negatively impacted the
segment's Brady operation.
Operating results of the Registrant's Iron Ore business
segment were as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
June 30
1996 1995
---- ----
<S> <C> <C>
Net sales $ 5,881 $ 6,967
Cost of sales 6,289 7,620
------- -------
Gross margin (408) (653)
Credit through reduction of Iron Ore
impairment obligations 875 875
------- -------
Adjusted gross margin 467 222
Royalties and management fee revenue 999 1,063
General, administrative and selling expenses - net 161 130
------- -------
Operating profit $ 1,305 $ 1,155
======= =======
</TABLE>
-11-
<PAGE> 12
RESULTS OF OPERATIONS (CONTINUED)
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO
THREE MONTHS ENDED JUNE 30, 1995
The decline in net sales is the result of lower tonnage sold to the Eveleth
partners and on the spot market. Royalty income was also negatively impacted by
lower Eveleth Mines production and a lower royalty rate. Operating profit
improved as a result of higher selling prices and lower fixed costs.
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. Although specific terms of the sale remain to be negotiated, the sale
does include cash proceeds of $5,000,000 plus the assumption of certain
liabilities by the other owners. 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 in the
third quarter of 1996. Included in the Iron Ore business segment's general,
administrative and selling expenses - net is $195,000 and $214,000 of allocated
corporate and general administrative expenses for the second quarter of 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.
Net sales for the Registrant's Refractories & Minerals
business segment amounted to $7,693,000 for the second quarter of 1996, which
was a 16% decline compared to $9,207,000 for the second quarter of 1995.
Operating loss for the segment was $83,000 for the second quarter of 1996
compared to operating profit of $36,000 for the second quarter of 1995.
PART II. OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
As previously reported the Registrant and its wholly owned
subsidiary, Oglebay Norton Taconite Company, are defendants in a civil action
for sexual harassment before the United States District Court, District of
Minnesota, Fifth Division, captioned Lois E. Jenson et al vs. Eveleth Taconite
Company et al. On March 28, 1996, the Special Master assigned to this matter
filed his Report and Recommendation with the Court. He did not recommend an
award of punitive damages against any defendant. He did recommend a total of
$214,500 in damages be awarded to the plaintiffs in varying amounts. This award
included $32,000 in civil penalties to the State of Minnesota.
The plaintiffs have filed a motion to reject and modify the
Special Master's Report and Recommendation. Oral arguments on the plaintiffs'
motion were heard on June 7, 1996, however, a final ruling has yet to be handed
down.
-12-
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) - Financial Data Schedule
(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 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
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,498,397
<SECURITIES> 2,277,575
<RECEIVABLES> 32,823,912
<ALLOWANCES> 640,000
<INVENTORY> 5,144,477
<CURRENT-ASSETS> 59,969,512
<PP&E> 301,377,863
<DEPRECIATION> 153,047,032
<TOTAL-ASSETS> 246,764,260
<CURRENT-LIABILITIES> 37,895,881
<BONDS> 39,402,900
<COMMON> 3,626,666
0
0
<OTHER-SE> 94,520,004
<TOTAL-LIABILITY-AND-EQUITY> 246,764,260
<SALES> 50,973,740
<TOTAL-REVENUES> 79,563,178
<CGS> 41,839,304
<TOTAL-COSTS> 74,804,328
<OTHER-EXPENSES> 1,173,536
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,657,769
<INCOME-PRETAX> 5,438,697
<INCOME-TAX> 1,200,000
<INCOME-CONTINUING> 4,238,697
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,238,697
<EPS-PRIMARY> 1.73
<EPS-DILUTED> 1.73
</TABLE>
