<PAGE> 1
Sequential Page 1 of 11 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 March 31, 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 April 30, 1996: 2,448,532
Index on sequential page 2.
<PAGE> 2
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
PAGE NUMBER
-----------
PART I. FINANCIAL INFORMATION
------------------------------
<S> <C>
Consolidated Condensed Balance
Sheet (Unaudited) - March 31, 1996 and
December 31, 1995 3
Consolidated Condensed Statement of
Operations (Unaudited) - Three Months
Ended March 31, 1996 and 1995 4
Consolidated Condensed Statement of
Cash Flows (Unaudited) - Three Months
Ended March 31, 1996 and 1995 5
Notes to Consolidated Condensed Financial
Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7 - 9
PART II. OTHER INFORMATION 10 - 11
---------------------------
</TABLE>
<PAGE> 3
PART I. ITEM 1. FINANCIAL INFORMATION
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
March 31 December 31
1996 1995
------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 20,761,136 $ 22,660,436
Marketable securities 2,509,050 3,555,550
Accounts receivable, less reserve for doubtful
accounts (1996-$571,000; 1995-$511,000) 17,014,919 27,681,413
Inventories
Raw materials and finished products 3,045,725 3,456,857
Operating supplies 2,232,130 2,311,529
------------- -------------
5,277,855 5,768,386
Deferred income taxes 3,195,281 3,033,075
Prepaid insurance and other expenses 8,578,152 1,775,417
------------- -------------
TOTAL CURRENT ASSETS 57,336,393 64,474,277
INVESTMENTS 10,314,497 10,519,241
PROPERTIES AND EQUIPMENT 301,218,196 304,828,977
Less allowances for depreciation
and amortization 150,878,957 153,235,099
------------- -------------
150,339,239 151,593,878
PREPAID PENSION COSTS AND OTHER ASSETS 28,014,624 27,668,477
------------- -------------
$246,004,753 $254,255,873
============= =============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31 December 31
1996 1995
------------- -------------
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt $ 8,476,450 $ 8,476,450
Accounts payable 4,236,535 6,546,012
Payrolls and other accrued compensation 3,023,588 7,283,660
Accrued expenses 10,621,090 14,219,918
Income taxes 4,145,912 1,311,849
Iron Ore impairment obligations 3,824,995 4,699,996
------------- -------------
TOTAL CURRENT LIABILITIES 34,328,570 42,537,885
LONG-TERM DEBT, less current portion 43,522,013 43,641,125
POSTRETIREMENT BENEFITS OBLIGATION 31,820,576 31,559,405
OTHER LONG-TERM LIABILITIES 19,838,264 19,922,291
DEFERRED INCOME TAXES 19,975,529 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 9,078,611 9,078,611
Unrealized gains 1,087,927 1,468,476
Retained earnings 114,810,028 113,566,048
------------- -------------
128,603,232 127,739,801
Treasury stock, at cost - 1,179,234
and 1,160,790 shares at respective dates (30,534,968) (29,806,819)
Unallocated Employee Stock Ownership
Plan shares ( 1,548,463) ( 1,667,575)
------------- --------------
96,519,801 96,265,407
------------- -------------
$246,004,753 $254,255,873
============= ==============
</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
March 31
------------------------------------
1996 1995
---- ----
<S> <C> <C>
REVENUES
Net sales $ 26,473,249 $ 23,758,964
Operating revenues 412,277 1,326,093
Sales commissions, royalties
and management fees 866,781 846,295
----------- -----------
27,752,307 25,931,352
COSTS AND EXPENSES
Cost of goods sold 22,102,689 20,120,968
Operating expenses 449,688 769,585
General, administrative and
selling expenses 4,038,568 4,014,884
----------- -----------
26,590,945 24,905,437
INCOME FROM OPERATIONS 1,161,362 1,025,915
Gain on sale of assets 1,615,826 522,481
Interest, dividends and other income 1,158,965 482,692
Interest expense (843,519) (1,234,589)
Other expense (530,424) ( 605,234)
----------- -----------
INCOME BEFORE INCOME TAXES 2,562,210 191,265
Income taxes 584,000 54,000
----------- -----------
NET INCOME $ 1,978,210 $ 137,265
=========== ===========
NET INCOME PER SHARE OF COMMON STOCK $ .80 $ .06
=========== ===========
DIVIDENDS PER SHARE OF COMMON STOCK $ .30 $ .30
=========== ===========
Average number of shares of Common Stock
outstanding 2,458,408 2,481,193
</TABLE>
See notes to consolidated condensed financial statements.
-4-
<PAGE> 5
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,978,210 $ 137,265
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 1,371,925 1,289,514
Deferred income taxes ( 32,000) 41,000
Gain on sale of assets ( 989,078) ( 522,481)
Gain on sale of business ( 625,000)
Prepaid pension costs and other assets ( 593,122) ( 836,053)
Deferred vessel maintenance costs (6,412,998) (4,589,524)
Decrease in accounts receivable 10,659,900 14,838,459
Decrease (increase) in inventories 460,631 ( 407,357)
(Decrease) increase in accounts payable (2,305,623) 506,544
Decrease in payrolls and other accrued compensation (4,260,072) (3,678,682)
Decrease in accrued expenses (3,673,909) (4,504,715)
Increase (decrease) in income taxes 2,841,877 (1,679,453)
Other operating activities ( 968,482) ( 502,404)
----------- -----------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (2,547,741) 92,113
INVESTING ACTIVITIES
Purchase of properties and equipment (1,139,859) (2,840,944)
Proceeds from sale of assets 1,459,777 534,150
Proceeds from sale of business 1,900,000
Iron Ore and other investments 10,014 (1,462,739)
----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 2,229,932 (3,769,533)
FINANCING ACTIVITIES
Payments on long-term debt ( 119,112) ( 619,113)
Dividends paid ( 734,230) ( 744,338)
Purchase of treasury stock ( 728,149) ( 61,504)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (1,581,491) (1,424,955)
------------ ------------
Decrease in cash and cash equivalents (1,899,300) (5,102,375)
CASH AND CASH EQUIVALENTS, JANUARY 1 22,660,436 17,720,419
----------- -----------
CASH AND CASH EQUIVALENTS, MARCH 31 $ 20,761,136 $ 12,618,044
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
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<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
condensed 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 consolidated condensed 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 certain aspects of
the Registrant's business.
3. In 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets to be Disposed
Of". Adoption of this Statement, which was required in the first
quarter of 1996, did not result in any assets considered to be
impaired.
4. On February 8, 1996, the Registrant sold its National Perlite Products
Company for $1,900,000 in cash. The sale resulted in a $625,000 pretax
gain which is included in gain on sale of assets.
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
ITEM 2. 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 quarter
ended March 31, 1996 are not necessarily indicative of the results to be
expected for the full year.
FINANCIAL CONDITION
-------------------
The Registrant's operating activities used cash of $2,548,000 in
the first quarter of 1996 compared to $92,000 provided by operations for the
same period in 1995. Accounts receivable declined by $10,660,000 in the first
quarter of 1996, compared to $14,838,000 for the same period in 1995. Accounts
payable also dropped $2,306,000 in the first quarter of 1996 compared to a
$507,000 increase for the same period of 1995. Vessel maintenance costs,
deferred and amortized over the Marine Transportation sailing season, were
$6,413,000 for the first quarter of 1996, compared to $4,590,000 for the same
period in 1995. Cash generated through the collection of receivables in the
first quarter of 1996 was not as significant as the same quarter in the prior
year, while additional cash was used for the payment of accounts payable and
vessel maintenance costs. This change in cash used by operating actvities in
the first quarter 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
continued through the first quarter of 1996 hampering the start of the sailing
season. Operating results of the Company's business segments are discussed in
more detail under "RESULTS OF OPERATIONS".
Expenditures for property and equipment amounted to $1,140,000 in
the first quarter of 1996 compared to $2,841,000 for the same period in 1995.
Expenditures in the first quarter of 1995 include vessel inspection costs and
improvements of $1,127,000 and $705,000, respectively. No vessel inspections
are required in 1996.
In the first quarter of 1996, the Registrant received
$1,336,000 and $2,024,000 on the sale of marketable securities and certain
properties, respectively. Properties sold included the Registrant's National
Perlite Products business for $1,900,000 in cash. Undeveloped clay properties
in Tennessee were sold in the first quarter of 1995. Total proceeds from the
sale of these assets and business were $3,360,000 in the first quarter of 1996
and $534,000 for the same quarter in 1995.
The Registrant made long-term debt payments of $119,000 and
$619,000 in the first quarter of 1996 and 1995, respectively. The Registrant
also made Iron Ore investment advances of $1,406,000 in 1995 to fund its
proportionate share of Eveleth Mines debt. Eveleth's debt was fully paid in
1995.
The Registrant declared dividends of $.30 per share in the
first quarter of 1996 and 1995. Dividends paid were $734,000 in the first
quarter of 1996 compared to $744,000 for the same quarter in 1995. The
Registrant purchased 18,444 shares of its Common Stock on the open market for
$728,000 in the first quarter of 1996 and 2,000 shares for $62,000 in the first
quarter of 1995 and placed these shares in treasury.
-7-
<PAGE> 8
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
---------------------
QUARTER ENDED MARCH 31, 1996 COMPARED TO
QUARTER ENDED MARCH 31, 1995
The Registrant's income from operations improved by 13% in the
first quarter of 1996 to a level of $1,161,000 on revenues of $27,752,000,
compared to $1,026,000 on revenues of $25,931,000 for the same quarter in 1995.
Income before income taxes was $2,562,000 for the first quarter of 1996,
compared to $191,000 for the first quarter of 1995. Net income for the first
quarter of 1996 was $1,978,000 or $.80 per share compared to $137,000 or $.06
per share for the same quarter in 1995.
Income before income taxes for the first quarter of 1996
includes gains of $867,000 on the sale of current marketable securities and
$749,000 on the sale of properties. Properties sold include National Perlite
Products Company, which has 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 in the first quarter of 1996 for prior tax years. As a
result, the Registrant's 1996 annual effective income tax rate was reduced.
Income before income taxes for the first quarter of 1995 included gains of
$522,000 primarily on the sale of undeveloped clay properties in Tennessee.
Net income, excluding the above gains and tax refund, was $173,000 or $.07 per
share for the first quarter of 1996 and a net loss of $208,000 or $.08 per
share for the first quarter of 1995.
In 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets to be
Disposed Of". Adoption of this Statement, which was required in the first
quarter of 1996, did not result in any assets considered to be impaired.
Interest expense declined 32% in the first quarter 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 first quarter ended March 31, 1996 and 1995 are discussed below. It is the
policy of the Registrant to allocate a portion of corporate general and
administrative expenses to its business segments.
Operating revenues for the Registrant's Marine Transportation
segment amounted to $412,000 for the first quarter of 1996 compared to
$1,326,000 for the first quarter of 1995. The segment's operating loss was
$767,000 for the first quarter of 1996 compared to $218,000 for the first
quarter of 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 have been as difficult or worse than
those encountered at the end of the 1995 sailing season, when year end financial
performance was adversely affected. Only seven of the twelve vessels in the
fleet operated in the first quarter, and only marginally, compared to the first
quarter of 1995 when eleven of twelve operated in extremely favorable
conditions. Lower operating revenues and profit for this business segment in
the first quarter of 1996 reflect that difference.
-8-
<PAGE> 9
RESULTS OF OPERATIONS (CONTINUED)
---------------------
QUARTER ENDED MARCH 31, 1996 COMPARED TO
QUARTER ENDED MARCH 31, 1995
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 segment
amounted to $10,367,000 for the first quarter of 1996, an 11% increase over
sales of $9,314,000 for the first quarter of 1995. Operating profit of
$1,660,000 for the first quarter of 1996 increased by 18% compared to
$1,409,000 for the first quarter of 1995. Shipment of 376,000 tons for the
first quarter of 1996 represents a 5% increase over the same quarter in 1995,
while the average selling price of principal products improved by 9% due to a
favorable material mix. Operating results of the segment's California
operations improved dramatically in the first quarter of 1996. Record levels
were achieved on a healthy demand for industrial sands related to the
construction of golf courses and manufacture of building materials. In
addition, Texas operations continued the strong pace, established in the prior
year, of supplying high quality frac sand to the oil and gas service markets.
Net sales, royalties and management fees for the Registrant's
Iron Ore segment improved 70% to $9,069,000 for the first quarter of 1996
compared to $5,323,000 for the first quarter of 1995. The segment's operating
profit for the first quarter of 1996 improved 67% to $1,342,000 compared to
$805,000 for the first quarter of 1995. Sales and operating profit were
significantly higher for the first quarter of 1996 on accelerated rail
shipments at higher market prices to meet a strong spot market demand from the
steel industry. Eveleth Mines is expected to produce approximately 5,300,000
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 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. Presently, the Registrant intends to continue as an
owner of Eveleth and to receive its contractual allotment of iron ore pellets
for resale. The owners continue to discuss what the operation and ownership
structure of Eveleth Mines might be after 1996. No agreement, however, has
been reached regarding a potential restructuring.
Net sales for the Registrant's Refractories & Minerals segment
amounted to $7,858,000 for the first quarter of 1996, which was a 21% decline
compared to $9,948,000 for the first quarter of 1995. The segment had an
operating loss of $57,000 for the first quarter of 1996, compared to a $145,000
operating profit for the first quarter of 1995. As anticipated, declining
ingot hot top product sales accounted for the majority of the decline in
operating results for the first quarter of 1996. The Registrant is one of the
remaining suppliers of ingot products to steel producers, who have not shifted
to the continuous casting process. Although the sale of metallurgical
treatment products in the first quarter of 1996 were below prior year's level,
profitability of this product line continues to improve. The Registrant's
Refractories & Minerals new management team has recently completed a review of
existing product lines, leading to a revised strategic business plan. Steps are
now being taken to implement the components of this plan.
-9-
<PAGE> 10
PART II. OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
As previously reported the Registrant's affiliate, Eveleth
Mines, is a defendent 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 Eveleth
Mines. 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 have been scheduled for June 7, 1996.
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 24, 1996, nominees as directors with terms
expiring in 1999 the following candidates: R. Thomas Green, Jr., Ralph D.
Ketchum, and Renold D. Thompson. The shareholders voted as follows:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
R. Thomas Green, Jr. 2,127,257 6,166
Ralph D. Ketchum 2,126,370 7,053
Renold D. Thompson 2,119,729 13,694
</TABLE>
The Registrant also submitted for approval by the shareholders
at the annual meeting the Oglebay Norton Company Long-Term Incentive Plan. The
Long-Term Incentive Plan was approved by 1,885,494 votes in favor of adopting
the Long-Term Incentive Plan. The shareholders voted 29,100 against adoption;
9,504 votes abstained and 209,325 non-votes were recorded, respectively.
-10-
<PAGE> 11
ITEM 5. OTHER INFORMATION
- ------ -----------------
On April 24, 1996, the Registrant's Board of Directors
authorized it to purchase, on the open market or through private purchases,
approximately 60,000 shares of Common Stock having an aggregate cost of up to
$3,000,000 through April 30, 1997. This new stock repurchase program replaced
a similar program authorized in 1989 which enabled the Registrant to purchase
Common Stock having an aggregate cost of up to $3,000,000. In total 95,004
shares with an aggregate cost of $2,967,575 were purchased under the 1989
program.
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: May 15, 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
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 20,761,136
<SECURITIES> 2,509,050
<RECEIVABLES> 17,014,919
<ALLOWANCES> 571,000
<INVENTORY> 5,277,855
<CURRENT-ASSETS> 57,336,393
<PP&E> 301,218,196
<DEPRECIATION> 150,878,957
<TOTAL-ASSETS> 246,004,753
<CURRENT-LIABILITIES> 34,328,570
<BONDS> 43,522,013
<COMMON> 0
0
3,626,666
<OTHER-SE> 92,893,135
<TOTAL-LIABILITY-AND-EQUITY> 246,004,753
<SALES> 26,473,249
<TOTAL-REVENUES> 27,752,307
<CGS> 22,045,689
<TOTAL-COSTS> 26,590,945
<OTHER-EXPENSES> 530,424
<LOSS-PROVISION> 57,000
<INTEREST-EXPENSE> 843,519
<INCOME-PRETAX> 2,562,210
<INCOME-TAX> 584,000
<INCOME-CONTINUING> 1,978,210
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,978,210
<EPS-PRIMARY> .80
<EPS-DILUTED> .80
</TABLE>
