<PAGE> 1
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, 1998 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, 1998: 4,765,431
-----------
<PAGE> 2
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
PART I. FINANCIAL INFORMATION
------------------------------
<S> <C>
Condensed Consolidated Balance
Sheet - September 30, 1998 (Unaudited) and
December 31, 1997 3
Condensed Consolidated Statement of
Operations (Unaudited) - Three Months
Ended September 30, 1998 and 1997 and Nine
Months Ended September 30, 1998 and 1997 4
Condensed Consolidated Statement of
Cash Flows (Unaudited) - Nine Months
Ended September 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial
Statements 6 - 9
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10-17
PART II. OTHER INFORMATION 18-19
---------------------------
</TABLE>
<PAGE> 3
PART I. ITEM 1. FINANCIAL INFORMATION
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30 December 31
1998 1997
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,910,660 $ 29,885,922
Accounts receivable, less reserve for doubtful accounts
(1998-$921,000; 1997-$723,000) 47,153,911 22,292,432
Inventories
Raw materials and finished products 18,783,748 1,210,940
Operating supplies 7,938,143 3,382,764
------------ ------------
26,721,891 4,593,704
Deferred income taxes 3,050,091 3,050,091
Prepaid insurance and other expenses 4,458,834 1,300,715
Discontinued operations -0- 15,571,082
------------ ------------
TOTAL CURRENT ASSETS 84,295,387 76,693,946
PROPERTIES, PLANT, EQUIPMENT AND
MINERAL RESERVES
Property, plant and equipment 588,147,114 304,958,566
Minerals reserves 47,541,624 -0-
------------ ------------
635,688,738 304,958,566
Less allowances for depreciation,
depletion and amortization 216,366,071 154,022,177
------------ ------------
419,322,667 150,936,389
EXCESS OF COST OVER NET ASSETS
OF BUSINESSES ACQUIRED 46,131,595 5,337,459
PREPAID PENSION COSTS 29,140,883 25,361,290
OTHER ASSETS 22,472,635 5,123,246
------------ ------------
$601,363,167 $263,452,330
============ ============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
SEPTEMBER 30 December 31
1998 1997
------------- ------------
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt $ 11,277,565 $ 9,086,708
Accounts payable 15,262,909 6,875,498
Payrolls and other accrued compensation 7,685,595 7,547,241
Accrued expenses 17,408,643 12,150,509
Income taxes 3,846,169 2,277,749
------------- ------------
TOTAL CURRENT LIABILITIES 55,480,881 37,937,705
LONG-TERM DEBT, less current portion 309,534,847 38,445,616
POSTRETIREMENT BENEFITS OBLIGATIONS 27,724,111 24,341,252
OTHER LONG-TERM LIABILITIES 22,491,216 23,901,405
DEFERRED INCOME TAXES 58,008,687 21,109,949
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 7,253,332 shares 7,253,332 7,253,332
Additional capital 7,362,791 6,288,822
Retained earnings 146,677,983 138,628,719
Accumulated other comprehensive income 1,097,230 -0-
------------- ------------
162,391,336 152,170,873
Treasury stock, at cost - 2,486,936
and 2,501,152 shares at respective dates (33,910,573) (33,739,795)
Unallocated Employee Stock Ownership
Plan shares (357,338) (714,675)
------------- ------------
128,123,425 117,716,403
------------- ------------
$ 601,363,167 $263,452,330
============= ============
</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
------------------------------- -------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Net sales $ 53,298,806 $ 13,177,978 $ 96,616,758 $ 37,833,198
Operating revenues 32,546,220 32,424,231 67,262,283 64,130,740
------------- ------------- ------------- -------------
85,845,026 45,602,209 163,879,041 101,963,938
COSTS AND EXPENSES
Cost of goods sold 34,538,255 8,232,143 62,719,048 23,178,473
Operating expenses 20,694,897 20,908,107 43,139,627 43,792,081
Depreciation, depletion and amortization 7,848,950 2,907,390 14,236,421 6,369,574
General, administrative and
selling expenses 7,025,956 3,343,351 15,963,385 10,046,937
------------- ------------- ------------- -------------
70,108,058 35,390,991 136,058,481 83,387,065
------------- ------------- ------------- -------------
INCOME FROM OPERATIONS 15,736,968 10,211,218 27,820,560 18,576,873
Gain on sale of assets 187,239 36,700 231,676 829,734
Interest, dividends and other income 403,755 242,377 1,131,377 1,971,065
Other expense ( 434,209) (627,320) (1,478,643) (2,003,080)
Interest expense (7,441,270) (826,582) (11,888,506) (2,020,025)
------------- ------------- ------------- -------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 8,452,483 9,036,393 15,816,464 17,354,567
Income taxes 2,773,000 2,605,350 4,908,000 4,987,569
------------- ------------- ------------- -------------
INCOME FROM CONTINUING OPERATIONS 5,679,483 6,431,043 10,908,464 12,366,998
Discontinued operations -0- 45,203 -0- 70,702
------------- ------------- ------------- -------------
NET INCOME $ 5,679,483 $ 6,476,246 $ 10,908,464 $ 12,437,700
============= ============= ============= =============
Income per share of common stock - basic:
Continuing operations $ 1.19 $ 1.35 $ 2.29 $ 2.58
Discontinued operations -0- .01 -0- .01
------------- ------------- ------------- -------------
NET INCOME PER SHARE - BASIC $ 1.19 $ 1.36 $ 2.29 $ 2.59
============= ============= ============= =============
Income per share of common stock - assuming dilution:
Continuing operations $ 1.19 $ 1.34 $ 2.28 $ 2.57
Discontinued operations -0- .01 -0- .01
------------- ------------- ------------- -------------
NET INCOME PER SHARE - ASSUMING DILUTION $ 1.19 $ 1.35 $ 2.28 $ 2.58
============= ============= ============= =============
DIVIDENDS PER SHARE OF COMMON STOCK $ .20 $ .20 $ .60 $ .55
============= ============= ============= =============
</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
-------------------------------
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 10,908,464 $ 12,437,700
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 14,236,420 6,369,574
Deferred income taxes 129,413 906,000
Gain on sale of assets ( 231,676) ( 829,734)
Prepaid pension costs ( 3,776,983) ( 2,701,975)
Deferred vessel maintenance costs ( 1,189,980) ( 1,474,761)
Increase in accounts receivable ( 6,859,222) ( 2,099,337)
Increase in inventories ( 2,817,599) ( 254,105)
Decrease in accounts payable ( 181,362) ( 2,718,101)
Decrease in payrolls and other accrued compensation ( 887,660) ( 810,323)
(Decrease) increase in accrued expenses ( 555,719) 526,769
Increase in income taxes 1,486,079 514,574
Operating activities of discontinued operations - net -0- 1,819,583
Other operating activities 1,710,355 ( 1,087,811)
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 11,970,530 10,598,053
INVESTING ACTIVITIES
Capital expenditures ( 13,115,134) (23,635,805)
Proceeds from sale of assets 661,312 1,362,325
Acquisition of businesses (242,660,722) ( 1,600,000)
Proceeds from the sale of discontinued operations 9,047,112 -0-
Investing activities of discontinued operations - net -0- ( 1,725,915)
------------- -------------
NET CASH USED FOR INVESTING ACTIVITIES (246,067,432) (25,599,395)
FINANCING ACTIVITIES
Additional long-term debt 292,000,000 17,000,000
Payments on long-term debt ( 72,569,772) ( 4,357,338)
Financing costs ( 9,042,043) -0-
Payments of dividends ( 2,859,201) ( 2,633,088)
Purchases of treasury stock ( 560,868) ( 1,969,984)
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 206,968,116 8,039,590
Effect of exchange rate changes on cash and cash equivalents 153,524 -0-
------------- -------------
Decrease in cash and cash equivalents ( 26,975,262) ( 6,961,752)
CASH AND CASH EQUIVALENTS, JANUARY 1 29,885,922 21,850,282
------------- -------------
CASH AND CASH EQUIVALENTS, SEPTEMBER 30 $ 2,910,660 $ 14,888,530
============= =============
</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 periods have been made.
The accompanying condensed consolidated financial statements have been
reclassified to report separately the operating results of the Registrant's
discontinued Engineered Materials business segment for the three and nine
month periods ended September 30, 1997. Additionally, certain amounts in
the prior year have been reclassified to conform with the 1998 condensed
consolidated financial statement presentation. For further information,
refer to the consolidated financial statements and notes thereto included
in the Registrant's 1997 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. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the Registrant's condensed consolidated financial statements.
Actual results could differ from those estimates and assumptions.
3. On March 9, 1998, the Registrant's Industrial Sands segment acquired 100%
of the outstanding shares of Colorado Silica Sands, Inc. ("Colorado
Silica") for $4,523,000 in cash and a note payable of $1,337,000. The
addition of this operation is not expected to have a material impact on the
results of operations of the Registrant.
On April 28, 1998, Oglebay Norton Limestone Company, a wholly-owned
subsidiary of the Registrant, purchased the Port Inland, Michigan limestone
operations of Minerals Technologies Inc. for $34,300,000. The acquisition,
renamed Global Stone Port Inland, Inc. ("Port Inland"), included
inventories, land, mineral reserves, equipment and other tangible property
used in the business of mining, processing, marketing and distributing
limestone, chemical limestone and construction aggregate to the iron and
steel, chemical, environmental, agricultural and construction industries.
The purchase price was financed using the Registrant's variable rate
revolving credit agreement in place at the time of the acquisition.
On May 22, Oglebay Norton Acquisition Company Limited, an indirect
wholly-owned subsidiary of the Registrant, acquired all of the outstanding
common shares of Global Stone Corporation ("Global Stone"), a publicly
traded Canadian company. Global Stone, which at the time of acquisition had
eight operations in the United States and Canada, is engaged in the mining,
production and marketing of lime, chemical limestone and construction
aggregate used in a variety of manufacturing processes and industries,
including iron and steel, pulp and paper, chemical, environmental,
agricultural and construction. The total purchase price of $226,000,000,
including $54,000,000 of net debt, was financed through borrowings under a
three year, $215,000,000 bank revolving credit facility ("Senior Credit
Facility") and a private placement of $100,000,000 in ten year senior
subordinated debt ("Senior Subordinated Facility"). The new borrowings
replaced the Registrant's existing variable rate revolving credit and term
loan agreements, which were retired using the proceeds from the Senior
Credit Facility. The Registrant incurred $9,042,000 in financing costs
associated with the Senior Credit and Senior Subordinated Facilities. The
financing costs are being amortized over the terms of the respective
agreements and are included within Other Assets as of September 30, 1998.
-6-
<PAGE> 7
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On August 31, 1998, Global Stone (U.S.A.) Inc. an indirect wholly-owned
subsidiary of the Registrant, purchased the assets of Filler Products, Inc.
a privately owned producer of chemical limestone in Chatsworth, Georgia,
for $24,000,000. The acquisition, renamed Global Stone Filler Products,
Inc. ("Filler Products"), included inventories, land, mineral reserves,
equipment and other tangible property used in the business of mining,
processing, marketing and distributing chemical limestone, to the carpet
and decorative gardening industries. The purchase price was financed using
cash on hand and borrowings under the Registrant's Senior Credit Facility.
The above four acquisitions have been recorded applying the purchase method
of accounting and the purchase price allocations are preliminary. Upon
final determination, the purchase prices will be allocated to the assets
and liabilities acquired based on the fair value of the assets acquired.
The following unaudited pro forma information presents a summary of
consolidated results of operations for the Registrant and the acquisitions
of Global Stone and Port Inland for the nine month periods ending September
30, 1998 and 1997 as if the acquisitions had occurred on January 1, 1997.
The pro forma adjustments give effect to the acquisitions under the
purchase method of accounting and (i) the amortization of goodwill, (ii)
the amortization of the write-up of mineral reserves to fair market value,
(iii) the interest expense on debt incurred to fund the acquisitions and
(iv) the related income tax effects. This unaudited pro forma information
(i) assumes that the Registrant incurred all acquisition related debt as of
January 1, 1997, (ii) included operating results for periods of time prior
to the Registrant's ownership for certain business segments and (iii) does
not take into consideration any expense reductions or the expected future
benefits from Global Stone's significant capital expenditures made prior to
its acquisition by the Registrant. Additionally, the unaudited pro forma
information does not reflect any other events that may occur in the future.
<TABLE>
<CAPTION>
Nine Months Ended September 30
-----------------------------------------
1998 1997
---- ----
(In thousands, except earnings per share)
<S> <C> <C>
Revenues $ 212,000 $ 202,000
Net Income 4,200 5,800
Earnings per share - basic 0.89 1.21
Earnings per share - assuming dilution 0.88 1.20
EBITDA 47,900 42,200
EBITDA margin percentage 22.6% 20.9%
</TABLE>
(EBITDA is defined as income before (i) income
taxes, (ii) interest, (iii) depreciation,
amortization and depletion, (iv) non-recurring
gains and other income (as described below) and
(v) in 1997, an unusual item related to a flood at
an operating unit of Global Stone. EBITDA is not a
measure of performance under generally accepted
accounting principles ("GAAP") . EBITDA should not
be considered as a substitute for net income or
other income or cash flow data prepared in
accordance with GAAP or as a measure of
profitability or liquidity. The Registrant's
definition of EBITDA may not be comparable to that
of other companies.)
-7-
<PAGE> 8
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
During the first nine months of 1997, the Registrant recorded a gain on the
sale of marketable securities of $656,000 and other income of $804,000 from
the receipt of insurance proceeds. The net income impact of non-recurring
gains and other income recognized during the first nine months of 1997 was
$1,272,000 or $0.27 per share - assuming dilution. Excluding these
non-recurring items, pro forma net income and earnings per share would have
been:
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1997
-----------------------------------------
(In thousands, except earnings per share)
<S> <C>
Net Income $ 4,500
Earnings per share - basic 0.94
Earnings per share - assuming dilution 0.93
</TABLE>
On May 15, 1998, the Registrant sold the assets of its Engineered Materials
metallurgical treatment operations for $14,573,000, which included a cash
payment of $3,650,000 and notes receivable of $10,923,000. The notes
receivable will be paid over a four year period, beginning in 1999 with a
final payment of $2,400,000 in June 2003. As of September 30, 1998,
$6,292,000 relating to these notes is included within Other Assets. The
Engineered Materials segment was classified as a discontinued operation at
December 31, 1997.
4. In the first quarter of 1998, the Registrant adopted Statement of Financial
Accounting Standard (SFAS) No. 130, "Reporting Comprehensive Income".
Comprehensive income generally represents all changes in stockholders'
equity except those resulting from investments or contributions by
stockholders. Accordingly, foreign currency translation adjustments have
been recorded as a separate component of Stockholders Equity. The following
reconciles net income to comprehensive income under SFAS 130 (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $ 5,679 $ 6,476 $10,908 $12,438
Other comprehensive income:
---------------------------
Foreign currency
translation adjustments 1,097 -0- 1,097 -0-
------- ------- ------- -------
Comprehensive income $ 6,776 $ 6,476 $12,005 $12,438
======= ======= ======= =======
</TABLE>
In the first quarter of 1998, the Registrant also adopted Statement of
Financial Accounting Standard (SFAS) No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits". SFAS No 132 revises employers'
disclosures about pension and other postretirement benefit plans. It does
not change the measurement or recognition of those plans and, accordingly,
does not have any effect on the Registrant's financial position or results
of operations.
-8-
<PAGE> 9
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Registrant will adopt, as required, Statement of Financial Accounting
Standard (SFAS) No. 131, "Disclosure about Segments of an Enterprise and
Related Information" at the end of 1998. SFAS No. 131 requires the
Registrant to provide information about operating segments in annual
financial statements and requires selected information about operating
segments in interim financial reports. It also requires certain related
disclosures about products and services, geographic areas and major
customers. The Registrant is not required to, and has elected not to,
report segment information in its interim financial statements during 1998.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting
and reporting standards for derivative instruments and hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair
value. SFAS No. 133 is effective for years beginning after June 15, 1999.
Adoption of the new Standard is not expected to have a material impact on
the results of operations or financial position of the Registrant.
The calculation of net income per share-basic and net income per
share-assuming dilution follows (in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income per share-basic:
---------------------------
Net income $ 5,679 $ 6,476 $10,908 $12,438
Average number of
shares outstanding 4,772 4,764 4,771 4,793
======= ======= ======= =======
Net income per share $ 1.19 $ 1.36 $ 2.29 $ 2.59
======= ======= ======= =======
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income per share-
-----------------------
assuming dilution:
------------------
Net income $ 5,679 $ 6,476 $10,908 $12,438
Average number of shares
outstanding 4,772 4,764 4,771 4,793
Dilutive effect of stock plans 17 36 24 30
------- ------- ------- -------
Adjusted average number of
shares outstanding 4,789 4,800 4,795 4,823
======= ======= ======= =======
Net income per share $ 1.19 $ 1.35 $ 2.28 $ 2.58
======= ======= ======= =======
</TABLE>
-9-
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition
and Results of Operations may contain statements concerning certain trends and
other forward-looking information, within the meaning of certain safe harbor
provisions of the federal securities laws. Such forward-looking statements are
subject to uncertainties and factors relating to the Registrant's operations and
business environment, all of which are difficult to predict and many of which
are beyond the control of the Registrant. The Registrant believes that the
following factors, among others, could affect its future performance and cause
actual results to differ materially from those expressed or implied by
forward-looking statements made by or on behalf of the Registrant: (1)
unfavorable weather conditions; (2) fluctuations in oil prices; (3) steel
production; (4) changes in the demand for the Registrant's products or services
due to changes in technology; (5) Great Lakes and Mid-Atlantic construction
activity; (6) the California economy and population growth rates in the
Southwestern United States; (7) labor unrest; (8) the loss or bankruptcy of
major customers; and (9) year 2000 software conversion failures of vendors,
suppliers and customers.
Due to the seasonal nature of certain aspects of the
Registrant's business, 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.
FINANCIAL CONDITION
-------------------
During the first nine months of 1998, the Registrant acquired
the assets and liabilities of Global Stone Inc. ("Global Stone") and Colorado
Silica, Inc. ("Colorado Silica") and the assets of the Port Inland, Michigan
operations of Minerals Technologies, Inc. (subsequently renamed Global Stone
Port Inland ("Port Inland")) and Filler Products, Inc. (subsequently renamed
Global Stone Filler Products ("Filler Products")). These acquisitions were
accounted for as business combinations accounted using the purchase method of
accounting. The combined purchase prices of these acquisitions totaled
$290,160,000. During the first nine months of 1997, the Registrant acquired
certain assets of a sand screening plant in California and a supplier of
blending sand and organic mixes in Ohio. The combined purchase prices of these
assets totaled $3,400,000.
The Registrant's operating activities provided cash of
$11,971,000 in the first nine months of 1998 compared to $10,598,000 for the
same period of 1997 reflecting an increase of $1,373,000. The increase in cash
provided by operations during the first nine months of 1998 compared to the same
period of 1997 is principally due to the operating activities of the
acquisitions of Global Stone and Port Inland, as described in the accompanying
Notes to Condensed Consolidated Financial Statements. Operating results of the
Registrant's business segments are discussed in more detail under "RESULTS OF
OPERATIONS".
Expenditures for property and equipment, including vessel
inspection costs, amounted to $13,115,000 through the first nine months of 1998
compared with $23,636,000 for the same period in 1997. During the first nine
months of 1998, the Registrant's Marine Transportation segment expended
$3,552,000 related to vessel inspection costs and various equipment additions on
the vessel fleet, while the Industrial Sands segment expended $4,108,000
primarily on plant expansion projects at the Brady, Texas and Orange County,
California operations. The Registrant's Lime and Limestone segment expended
$5,430,000 for various capital projects through the first nine months of 1998.
During the first nine months of 1997, the Registrant's Marine Transportation
segment purchased two vessels for $17,000,000 and expended $3,219,000 for vessel
inspection costs and various additions to vessels, while the Industrial Sands
segment expended $3,218,000 in various capital projects.
-10-
<PAGE> 11
FINANCIAL CONDITION (CONTINUED)
During the first nine months of 1998, the Registrant received
installment payments totaling $9,047,000 related to the sale of its discontinued
Engineered Materials segment. While there were no such receipts during the first
nine months of 1997, the discontinued operations used $1,726,000 for investing
activities, principally for various capital expenditures.
The Registrant made long-term debt payments of $72,570,000
during the first nine months of 1998 compared with $4,357,000 during the same
period of 1997. During the first nine months of 1998, the Registrant borrowed
$292,000,000 ($192,000,000 on the Senior Credit Facility and $100,000,000 under
the Senior Subordinated Facility) to finance the Global Stone and Filler
Products acquisitions. The interest rate on the Senior Credit Facility, which
approximated 7.8% at September 30, 1998, is based on LIBOR interest rates, plus
an applicable margin, while interest accrues at a fixed rate of 9.4% on the
Senior Subordinated Facility. In June 1997, the Registrant borrowed $15,000,000,
at a variable interest rate of 6.2%, against its then existing Revolving Credit
facility for the acquisition of two Marine Transportation vessels. During July
1997, the Registrant refinanced the entire $17,000,000 purchase amount under a
10 year term loan with a bank at a fixed interest rate of 7.3%.
The Registrant declared dividends of $0.60 per share during
the first nine months of 1998 compared with $0.55 per share for the same period
of 1997. Dividends paid were $2,859,000 for the first nine months of 1998
compared with $2,633,000 for the same period of 1997. The Registrant purchased
on the open market, and placed in treasury, 14,666 shares of its Common Stock
for $561,000 during the first nine months of 1998 and 87,990 shares for
$1,970,000 during the first nine months of 1997.
Anticipated cash flows from operations and current financial
resources are expected to meet the Registrant's needs during the remainder of
1998. All financing alternatives are under constant review to determine their
ability to provide sufficient funding at the least possible cost.
RESULTS OF OPERATIONS
---------------------
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1997
The Registrant's income from operations increased $9,244,000,
or 49.8%, to $27,821,000 on revenues of $163,879,000 for the first nine months
of 1998, compared with $18,577,000 on revenues of $101,964,000 for the same
period of 1997. Net income was $10,908,000 ($2.28 per share - assuming dilution)
for the first nine months of 1998 compared with $12,438,000 ($2.58 per share
assuming dilution) for the first nine months of 1997. The increases in income
from operations and revenues for the first nine months of 1998 are attributable
to the acquisitions of Global Stone, Port Inland, Colorado Silica and Filler
Products and strong operating results of the Registrant's Marine Transportation
segment. The decline in net income is primarily due to increased interest
expense on borrowings used to fund the 1998 acquisitions and a higher effective
tax rate. Additionally, the Registrant recorded a gain from the sale of
marketable securities of $656,000 and $804,000 in other income from the receipt
of insurance proceeds during in the first nine months of 1997. The net income
impact of non-recurring gains and other income recognized during the first nine
months of 1997 was $1,272,000, ($0.27 per share - assuming dilution).
-11-
<PAGE> 12
RESULTS OF OPERATIONS (CONTINUED)
---------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1997
Operating results of the Registrant's business segments for
the nine months ended September 30, 1998 and 1997 are discussed below. It is the
policy of the Registrant to allocate a portion of corporate general and
administrative expenses to its business segments. Corporate general and
administrative expenses for the first nine months of 1997 that were previously
allocated to discontinued operations have been reallocated to the remaining
business segments.
Net Sales and Operating Revenues
- - --------------------------------
Marine Transportation. Operating revenues for the Registrant's
Marine Transportation segment increased by $3,132,000, or 4.9%, to $67,263,000
for the first nine months of 1998, compared with $64,131,000 for the same period
in 1997. The increase can be attributed to strong customer demand and good
operating conditions on the Great Lakes. The mild winter provided an early start
to the sailing season and the weather conditions favorably impacted sailing days
and operating activities. Sailing days increased 3.6% to 2,294 during the first
nine months of 1998 compared with 2,214 during the same period of 1997. Tonnage
levels increased 0.8% to 16,307,000 for the first nine months of 1998 compared
with 16,171,000 for the same period in 1997. Additionally, a shift in the
product mix of tonnage levels hauled improved operating revenues during the
first nine months of 1998 compared with 1997.
Industrial Sands. Net sales for the Registrant's Industrial
Sands segment decreased by $932,000, or 2.5%, to $36,901,000 for the first nine
months of 1998, compared with $37,833,000 for the same period of 1997. The
decline in net sales is attributable to a 9.2% decrease in shipments, from
1,359,000 for the first nine months of 1997 to 1,234,000 for the first nine
months of 1998. The decreases in tonnage and net sales are related to softness
in oil prices and related oil field demand. Accordingly, the demand for frac
sands provided by the segment's Brady, Texas operations, were negatively
impacted as tonnage levels and average selling prices decreased. The acquisition
of the Colorado Silica operations during March 1998 and the strong performance
of the segment's Orange County, California operations tempered the overall
decrease in net sales. Although tonnage levels at the Orange County operations
declined when compared with the same period of 1997, a favorable shift in
product mix resulted in an increase in net sales when compared with the prior
year.
Lime and Limestone. Net sales for the Registrant's Lime and
Limestone segment include the operations of Port Inland, Global Stone and Filler
Products as of their respective purchase dates of April 28, May 22, and August
31, 1998 and totaled $59,716,000 through September 30, 1998.
Cost of Goods Sold and Operating Expenses
- - -----------------------------------------
Marine Transportation. Operating expenses for the Marine
Transportation segment totaled $43,140,000 for the first nine months of 1998,
compared with $43,792,000 for the same period in 1997, a decrease of $652,000,
or 1.5%. Operating expenses as a percentage of operating revenues improved to
64.1% during the first nine months of 1998 compared with 68.3% for the same
period of 1997, principally due to lower fuel costs, favorable operating
conditions and increased efficiencies within the segment's fleet dispatch
operations.
-12-
<PAGE> 13
RESULTS OF OPERATIONS (CONTINUED)
---------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1997
Industrial Sands. Cost of goods sold for the Industrial Sands
segment increased less than 1% for the first nine months of 1998 compared with
the same period of 1997. Cost of goods sold as a percentage of net sales was
63.0% for the first nine months of 1998 compared with 61.3% for the first nine
months of 1997. The marginal increase in cost of goods sold was primarily
attributable to the lower overall tonnage levels.
Lime and Limestone. Cost of goods sold for the Lime and
Limestone segment totaled $38,770,000, or 64.9% of net sales, for the nine
months ended September 30, 1998.
Depreciation, Depletion and Amortization
- - ----------------------------------------
Depreciation, depletion and amortization expense increased by
$7,866,000 to $14,236,000 for the first nine months of 1998 compared with
$6,370,000 for the same period of 1997. Of this increase, $7,238,000 relates to
the acquisitions consummated during the first nine months of 1998. The balance
of the increase is principally due to additional depreciation recognized by the
Registrant's Marine Transportation segment as a result of the purchase of two
vessels in June 1997 and the nature and timing of vessel inspection costs
incurred prior to the 1998 sailing season.
General, Administrative and Selling Expenses
- - --------------------------------------------
As a result of the acquisitions described in the accompanying
Notes to Condensed Consolidated Financial Statements, total general,
administrative and selling expenses increased $5,916,000, or 58.9%, to
$15,963,000 for the first nine months of 1998 compared with $10,047,000 for the
same period of 1997. As a percentage of total revenues, general, administrative
and selling expenses remained comparable at approximately 10.0%.
Income From Operations
- - ----------------------
Marine Transportation. Due to the favorable operating
conditions previously described, income from operations for the Registrant's
Marine Transportation segment increased $3,058,000 to $16,513,000 for the first
nine months of 1998 compared with $13,455,000 for the first nine months of 1997.
Industrial Sands. Income from operations for the Industrial
Sands segment declined $2,101,000 to $6,701,000 for the first nine months of
1998 compared with $8,802,000 for the same period of 1997. The decline was
principally the result of reduced oil field demand for frac sand supplied by the
segment's Brady, Texas operations, partially offset by the addition of the
Colorado Silica operations and improvements in product mix at the segment's
Orange County operations.
Lime and Limestone. The acquisitions of Port Inland, Global
Stone and Filler Products contributed $8,434,000 to income from operations
during the nine month period ended September 30, 1998.
-13-
<PAGE> 14
RESULTS OF OPERATIONS (CONTINUED)
---------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1997
Corporate and Other. Certain cost of goods sold and general
and administrative expenses are not allocated to the business segments.
Accordingly, Corporate and Other operations recognized a loss from operations of
$3,827,000 and $3,680,000 for the nine month periods ended September 30, 1998
and 1997, respectively.
Other
- - -----
During the first nine months of 1998, the Registrant
recognized gains of $232,000 from asset sales compared with $830,000 for the
same period of 1997. The decrease in gains is principally due to the sale of
marketable securities during the first nine months of 1997. All available for
sale marketable securities were liquidated prior to 1998. Interest, dividends
and other income decreased $840,000, or 42.6%, during the first nine months of
1998, as the comparable period in the prior year included gains recognized on
life insurance proceeds received. Interest expense for the first nine months of
1998 increased to $11,889,000, compared with $2,020,000 for the same period of
1997. The increase in interest expense is principally the result of increased
debt levels and the amortization of financing costs incurred to acquire Port
Inland, Global Stone and Filler Products.
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1997
The Registrant's income from operations increased $5,526,000,
or 54.1%, to $15,737,000 on revenues of $85,845,000 for the three months ended
September 30, 1998, compared with $10,211,000 on revenues of $45,602,000 for the
same period of 1997. Net income was $5,679,000 ($1.19 per share - assuming
dilution) for the three months ended September 30, 1998 compared with $6,476,000
($1.35 per share - assuming dilution) for the three months ended September 30,
1997. The increases in income from operations and revenues for the three months
ended September 30, 1998 can be attributed to the acquisitions of Global Stone,
Port Inland and Filler Products and strong operating results of the Registrant's
Marine Transportation segment. While both income from operations and revenues
improved substantially from the same period in the prior year, the marginal
decrease in net income is the result of increased interest expense on borrowings
to fund the acquisitions and a higher effective tax rate.
Operating results of the Registrant's business segments for
the three months ended September 30, 1998 and 1997 are discussed below. The
comments set forth above in the nine months comparisons of 1998 with 1997
generally apply, except as noted, when comparing the third quarter to the same
period in 1997.
Net Sales and Operating Revenues
- - --------------------------------
Marine Transportation. Operating revenues for the Registrant's
Marine Transportation segment of $32,546,000 for the third quarter of 1998 were
comparable to operating revenues of $32,424,000 for the same period of 1997.
Third quarter 1998 sailing days and tonnage hauled of 1,104 and 7,715,000,
respectively were also comparable to the third quarter of the prior year.
-14-
<PAGE> 15
RESULTS OF OPERATIONS (CONTINUED)
---------------------
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1997
Industrial Sands. Net sales for the Registrant's Industrial
Sands segment decreased by $454,000, or 3.5%, to $12,724,000 for the third
quarter of 1998, compared with $13,178,000 for the same period of 1997. The
decline in net sales is attributable to decreased shipments, principally due to
softness in oil prices and related oil field demand. The overall decrease in net
sales and tonnage was partially offset by the addition of the Colorado Silica
operations and the strong performance of the segment's Orange County operations.
Lime and Limestone. Net sales for the Registrant's Lime and
Limestone segment include the operations of Port Inland, Global Stone and Filler
Products as of their respective purchase dates of April 28, May 22 and August
31, 1998 and totaled $40,575,000 for the third quarter of 1998.
Cost of Goods Sold and Operating Expenses
- - -----------------------------------------
Marine Transportation. Operating expenses for the Marine
Transportation segment totaled $20,695,000 for the three months ended September
30, 1998, compared with $20,908,000 for the same period in 1997, a decrease of
$213,000, or 1.0%. Operating expenses as a percentage of operating revenues
remained comparable at 63.6% and 64.5% during the third quarters of 1998 and
1997, respectively.
Industrial Sands. As a result of the overall decrease in
volumes, cost of goods sold for the Industrial Sands segment decreased $442,000,
or 5.4%, to $7,786,000 for the third quarter of 1998 from $8,229,000 for the
same period in 1997. Cost of goods sold as a percentage of net sales were
comparable at 61.2% for the third quarter of 1998 compared with 62.4% for the
same period of 1997.
Lime and Limestone. Cost of goods sold for the Lime and
Limestone segment totaled $26,104,000, or 64.3% of net sales, for the third
quarter of 1998.
Depreciation, Depletion and Amortization
- - ----------------------------------------
As a result of the 1998 acquisitions, depreciation, depletion
and amortization expense increased to a level of $7,849,000 for the third
quarter of 1998 compared with $2,907,000 for the same period of 1997. Of this
increase, $4,762,000 relates to the acquisitions of Global Stone, Port Inland,
Colorado Silica and Filler Products.
General, Administrative and Selling Expenses
- - --------------------------------------------
As a result of the acquisitions previously described, total
general, administrative and selling expenses increased $3,683,000 to $7,026,000
for third quarter of 1998 compared with $3,343,000 for the same period of 1997.
As a percentage of total revenues, general, administrative and selling expenses
increased from 7.3% in the third quarter of 1997 to 8.2% in the third quarter of
1998.
-15-
<PAGE> 16
RESULTS OF OPERATIONS (CONTINUED)
---------------------
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1997
Income From Operations
- - ----------------------
Marine Transportation. Income from operations for the
Registrant's Marine Transportation segment was $8,530,000 for the third quarter
of 1998 compared with $8,527,000 for the third quarter of 1997.
Industrial Sands. Income from operations for the Industrial
Sands segment declined $403,000 to $2,497,000 for the third quarter of 1998
compared with $2,900,000 for the same period of 1997.
Lime and Limestone. The acquisitions of Port Inland, Global
Stone and Filler Products contributed $5,918,000 to income from operations for
the third quarter of 1998.
Corporate and Other. Certain cost of goods sold and general
and administrative expenses are not allocated to the business segments.
Accordingly, Corporate and Other operations recognized a loss from operations of
$1,208,000 and $1,216,000 for the three month periods ended September 30, 1998
and 1997, respectively.
Other
- - -----
Interest, dividends and other income increased $161,000 during
the third quarter of 1998. Interest expense for the third quarter of 1998
increased $6,615,000 to $7,441,000 in the third quarter of 1998 compared with
$827,000 for the same period of 1997. The increase in interest expense is
principally the result of increased debt levels and the amortization of
financing costs related to the Global Stone, Port Inland and Filler Products
acquisitions.
YEAR 2000 COMPLIANCE
The Registrant continues to address the impact of the Year 2000 issue
on its business. This issue affects computer systems that have date-sensitive
programs that may not properly recognize the year 2000. Specifically, with
respect to the Registrant, this issue affects not only the computer software and
hardware but also machines and equipment used in production that contain
embedded computer chips.
The Registrant has reviewed and assessed its information system
hardware, business system software, production system hardware and other systems
and technology used in its business operations. Based on this review and
assessment, the Registrant believes that the majority of its internal systems
are Year 2000 compliant. The Registrant expects to complete its internal Year
2000 remediation efforts by March 31, 1999 with the implementation of a new
order processing system for both the Industrial Sands and Lime and Limestone
business segments.
-16-
<PAGE> 17
YEAR 2000 COMPLIANCE (CONTINUED)
As part of its Year 2000 program, the Registrant has also made efforts
to determine and assess the Year 2000 compliance status of third parties with
which it does business. During 1997, the Registrant sent a detailed
questionnaire to its customers, suppliers, financial institutions and others to
obtain information relating to the status of such third parties with respect to
Year 2000 issues. Of the total questionnaires sent out, 80 percent of these
third parties have returned their questionnaires to the Registrant. The
Registrant is following up on the balance of the questionnaires not returned.
Based upon its review of the returned questionnaires, the Registrant does not
believe that it will experience material disruption of its operations as a
result of third parties Year 2000 noncompliance. In addition, since sending the
questionnaires, the Registrant has maintained ongoing correspondence with its
suppliers regarding Year 2000 issues and placed particular emphasis on
determining the Year 2000 readiness of its critical suppliers.
Due to the uncertainties associated with Year 2000 problems, the
Registrant has developed a contingency plan to use manual entry in its
accounting and order entry system in the event that its business or operations
are disrupted as of January 1, 2000.
The Registrant expects to incur total expenditures of approximately
$175,000 in connection with its Year 2000 remediation efforts. To date, the
Registrant has incurred approximately $80,000 in expenses relating to its Year
2000 issues and expects to incur an additional $95,000 during the remainder of
1998 and 1999. The Registrant believes that the cost of its remediation will not
have a material impact on the Registrant's consolidated results of operations or
financial condition.
The date on which the Registrant believes it will complete its Year
2000 compliance efforts and the expenses related to the Registrant's Year 2000
compliance efforts are management's best estimates, which are based on
assumptions of future events, including the availability of certain resources,
third party modification plans and other factors. There can be no assurances
that these results and estimates will be achieved, and the actual results could
materially differ from those anticipated. A specific factor that might cause
such material differences is the ability to locate and correct all relevant
computer codes. In addition, there can be no assurances that the systems or
products of third parties on which the Registrant relies will be timely
converted or that a failure by a third party, or a conversion that is
incompatible with the Registrant's systems, would not have a material adverse
effect on the Registrant.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
- - ------- ----------------------------------------
ABOUT MARKET RISK
-----------------
Not applicable.
-17-
<PAGE> 18
PART II. OTHER INFORMATION
- - ---------------------------
ITEM 5. OTHER INFORMATION
- - -------------------------
(a) The Registrant's proxies for its 1999 Annual Meeting of Stockholders
will confer discretionary authority to vote on any matter if the
Registrant does not receive timely written notice of such matter in
accordance with Section 46 of the Registrant's By-Laws. In general,
Section 46 provides that, to be timely, a stockholder's notice of
business requested to be brought before an annual meeting of
stockholders must be delivered to or mailed and received at the
principal executive offices of the Registrant not less than 60 nor more
than 90 days prior to the annual meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - ----------------------------------------
(a)
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------
<C> <S> <C>
10.1 First Amendment Agreement to Filed herewith as Exhibit 10.1
previously filed Credit Agreement
dated as of May 15, 1998 among
Oglebay Norton Company, as
Borrower, various financial
institutions, as Banks and
KeyBank National Association, as
Agent
- - ------------------------------------------------------------------------------------------------------------
10.2 Second Amendment Agreement to Filed herewith as Exhibit 10.2
previously filed Credit Agreement
dated as of May 15, 1998 among
Oglebay Norton Company, as
Borrower, various financial
institutions, as Banks and KeyBank
National Association, as Agent
- - ------------------------------------------------------------------------------------------------------------
Financial Exhibits
- - ------------------------------------------------------------------------------------------------------------
</TABLE>
(b) See Part II item 6(b) of the Registrant's quarterly report for the
Period ended June 30, 1998.
-18-
<PAGE> 19
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 16, 1998 By: /s/ David H. Kelsey
-------------------------
David H. Kelsey
Vice President and
Chief Financial Officer
-19-
<PAGE> 1
Exhibit 10.2
SECOND AMENDMENT AGREEMENT
This Second Amendment Agreement is made effective as of the 15th day of
August, 1998, by and among OGLEBAY NORTON COMPANY, a Delaware corporation
("Borrower"), the banking institutions listed on Schedule 1 to the Credit
Agreement, as hereinafter defined ("Banks"), and KEYBANK NATIONAL ASSOCIATION,
as agent for the Banks ("Agent"):
WHEREAS, Borrower, Agent and the Banks are parties to a certain Credit
Agreement dated as of May 15, 1998, as amended, and as it may from time to time
be further amended, restated or otherwise modified, which provides, among other
things, for loans, letters of credit, and other financial accommodations
aggregating Two Hundred Fifteen Million Dollars ($215,000,000), all upon certain
terms and conditions stated therein ("Credit Agreement");
WHEREAS, Borrower, Agent and the Banks desire to amend the Credit
Agreement to modify certain provisions thereof; and
WHEREAS, each term used herein shall be defined in accordance with the
Credit Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other valuable considerations, Borrower,
Agent and the Banks hereby agree as follows:
1. The first two lines of Section 4.2(c) of the Credit Agreement are
hereby amended by deleting the date "September 15, 1998" and inserting in place
thereof the date "October 15, 1998".
2. The Credit Agreement is hereby amended by deleting Section 4.2(g)
thereof in its entirety and by substituting in place thereof the following:
(g) PREFERRED SHIP MORTGAGE. On or before (i) October 31, 1998,
Borrower shall have executed and delivered to Agent a Preferred Ship
Mortgage with respect to the Columbia Star, and (ii) September 15, 1998,
Borrower shall have caused to be filed a Preferred Ship Mortgage with
respect to the Wolverine and the David Z. Norton.
3. The Credit Agreement is hereby amended by deleting the first four
lines of Section 4.2(j) thereof in their entirety and by inserting in place
thereof the following:
(j) REAL ESTATE MATTERS. Borrower shall have delivered to Agent
all of the following on or before October 31, 1998, with respect to the
Mortgaged Real Property owned by a Pledgor:
<PAGE> 2
4. The Credit Agreement is hereby amended by deleting Schedule 1 thereto
in its entirety and by substituting in place thereof the Schedule 1 attached to
this Second Amendment Agreement as EXHIBIT A and made a part hereof
5. Concurrently with the execution of this Second Amendment Agreement,
Borrower shall:
(a) cause each Pledgor to consent and agree to and acknowledge the terms
of this Second Amendment Agreement; and
(b) pay all legal fees and expenses of Agent in connection with this
Second Amendment Agreement.
6. Borrower hereby represents and warrants to Agent and the Banks that
(a) Borrower has the legal power and authority to execute and deliver this
Second Amendment Agreement; (b) the officers executing this Second Amendment
Agreement have been duly authorized to execute and deliver the same and bind
Borrower with respect to the provisions hereof; (c) the execution and delivery
hereof by Borrower and the performance and observance by Borrower of the
provisions hereof do not violate or conflict with the organizational agreements
of Borrower or any law applicable to Borrower or result in a breach of any
provision of or constitute a default under any other agreement, instrument or
document binding upon or enforceable against Borrower; (d) no Unmatured Event of
Default or Event of Default exists under the Credit Agreement, nor will any
occur immediately after the execution and delivery of the Second Amendment
Agreement or by the performance or observance of any provision hereof; (e)
neither Borrower nor any Pledgor is aware of any claim or offset against, or
defense or counterclaim to, any of Borrower's or any Pledgor's obligations or
liabilities under the Credit Agreement or any Related Writing; and (f) this
Second Amendment Agreement constitutes a valid and binding obligation of
Borrower in every respect, enforceable in accordance with its terms.
7. Each reference that is made in the Credit Agreement or any other
writing to the Credit Agreement shall hereafter be construed as a reference to
the Credit Agreement as amended hereby. Except as herein otherwise specifically
provided, all provisions of the Credit Agreement shall remain in full force and
effect and be unaffected hereby. This Second Amendment Agreement is a Related
Writing as defined in the Credit Agreement.
8. Borrower and each Pledgor, by signing below, hereby waives and
releases Agent and each of the Banks and their respective directors, officers,
employees, attorneys, affiliates and subsidiaries from any and all such claims,
offsets, defenses and counterclaims of which Borrower and any Pledgor is aware,
such waiver and release being with full knowledge and understanding of the
circumstances and effect thereof and after having consulted legal counsel with
respect thereto.
2
<PAGE> 3
9. This Second Amendment Agreement may be executed in any number of
counterparts, by different parties hereto in separate counterparts and by
facsimile signature, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.
10. The rights and obligations of all parties hereto shall be governed
by the laws of the State of Ohio, without regard to principles of conflicts of
laws.
11. JURY TRIAL WAIVER. BORROWER, PLEDGORS, AGENT AND EACH OF THE BANKS
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THE BANKS, OR
ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
OGLEBAY NORTON COMPANY
By: /s/ Michael F. Biehl
--------------------------------
Michael F. Biehl, Treasurer
KEYBANK NATIONAL ASSOCIATION
as Agent and as a Bank
By: /s/ Lawrence A. Mack
--------------------------------
Lawrence A. Mack, Senior Vice President
3
<PAGE> 4
BANK ONE, NA
By:_______________________________________
Its:______________________________________
THE BANK OF NOVA SCOTIA
By:_______________________________________
Its:______________________________________
COMERICA BANK
By:_______________________________________
Its:______________________________________
THE HUNTINGTON NATIONAL BANK
By:_______________________________________
Its:______________________________________
MELLON BANK, N A.
By:_______________________________________
Its:______________________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:_______________________________________
Its:______________________________________
HARRIS TRUST AND SAVINGS BANK
By:_______________________________________
Its:______________________________________
4
<PAGE> 5
THE CHASE MANHATTAN BANK
By:_______________________________________
Its:______________________________________
STAR BANK NATIONAL ASSOCIATION
By:_______________________________________
Its:______________________________________
FLEET BANK, N.A.
By:_______________________________________
Its:______________________________________
ABN AMRO BANK N.V.,
PITTSBURGH BRANCH
By:_______________________________________
Its:______________________________________
FIFTH THIRD BANK OF NORTHEASTERN
OHIO
By:_______________________________________
Its:______________________________________
5
<PAGE> 6
Each of the undersigned consents and agrees to and acknowledges the
terms of the foregoing Second Amendment Agreement. Each of the undersigned
further agrees that the obligations of each of the undersigned pursuant to the
Guaranty of Payment executed by each of the undersigned shall remain in full
force and effect and be unaffected hereby.
Oglebay Norton Holding Company
ONCO Investment Company
Oglebay Norton Industrial Minerals, Inc.
Oglebay Norton Management Company
Oglebay Norton Industrial Sands, Inc.
Colorado Silica Sand, Inc.
Oglebay Norton Terminals, Inc.
Oglebay Norton Engineered Materials, Inc.
Oglebay Norton Acquisition Company
Global Stone Port Inland, Inc.
Moreland Development Company
Western Wisconsin Materials, Inc.
By: /s/ Michael F. Biehl
----------------------------------------
Michael F. Biehl as Treasurer of each of
the companies listed above
Texas Mining, LP
By: Oglebay Norton Industrial Sands, Inc.,
General Partner
By: /s/ Michael F. Biehl
------------------------------------
Michael F. Biehl, Treasurer
6
<PAGE> 7
Exhibit A
SCHEDULE I
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------
REVOLVING
CREDIT
BANKING INSTITUTION COMMITMENT COMMITMENT MAXIMUM
PERCENTAGE AMOUNT AMOUNT
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KeyBank National Association 13.953488% $ 30,000,000 $ 30,000,000
- - -------------------------------------------------------------------------------------------------------------
The Bank of Nova Scotia 11.627907% $ 25,000,000 $ 25,000,000
- - -------------------------------------------------------------------------------------------------------------
Bank of America National Trust and Savings Association 5.581395% $ 12,000,000 $ 12,000,000
- - -------------------------------------------------------------------------------------------------------------
Mellon Bank, N.A 7.906977% $ 17,000,000 $ 17,000,000
- - -------------------------------------------------------------------------------------------------------------
Harris Trust and Savings Bank 5.581395% $ 12,000,000 $ 12,000,000
- - -------------------------------------------------------------------------------------------------------------
Comerica Bank 7.906977% $ 17,000,000 $ 17,000,000
- - -------------------------------------------------------------------------------------------------------------
The Huntington National Bank 7.906977% $ 17,000,000 $ 17,000,000
- - -------------------------------------------------------------------------------------------------------------
Bank One, NA 11.627907% $ 25,000,000 $ 25,000,000
- - -------------------------------------------------------------------------------------------------------------
The Chase Manhattan Bank 5.581395% $ 12,000,000 $ 12,000,000
- - -------------------------------------------------------------------------------------------------------------
Star Bank, National Association 5.581395% $ 12,000,000 $ 12,000,000
- - -------------------------------------------------------------------------------------------------------------
Fleet Bank, N.A 5.581395% $ 12,000,000 $ 12,000,000
- - -------------------------------------------------------------------------------------------------------------
ABN AMRO Bank N.V., Pittsburgh Branch 5.581395% $ 12,000,000 $ 12,000,000
- - -------------------------------------------------------------------------------------------------------------
Fifth Third Bank of Northeastern Ohio 5.581395% $ 12,000,000 $ 12,000,000
- - -------------------------------------------------------------------------------------------------------------
Total Commitment Amount: 100% $215,000,000 $215,000,000
- - -------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 1
Exhibit 10.1
FIRST AMENDMENT AGREEMENT
-------------------------
This First Amendment Agreement is made as of the 15th day of July, 1998,
by and among OGLEBAY NORTON COMPANY, a Delaware corporation ("Borrower"),
KEYBANK NATIONAL ASSOCIATION, as Agent ("Agent") and the banking institutions
listed on Schedule 1 to the Credit Agreement, as hereinafter defined ("Banks"):
WHEREAS, Borrower, Agent and the Banks are parties to a certain Credit
Agreement dated as of May 15, 1998, as it may from time to time be amended,
restated or otherwise modified, which provides, among other things, for loans,
letters of credit, and other financial accommodations aggregating Two Hundred
Fifteen Million Dollars ($215,000,000), all upon certain terms and conditions
stated therein ("Credit Agreement");
WHEREAS, Borrower, Agent and the Banks desire to amend the Credit
Agreement to modify certain provisions thereof; and
WHEREAS, each term used herein shall be defined in accordance with the
Credit Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other valuable considerations, Borrower,
Agent and the Banks hereby agree as follows:
1. Upon (a) execution of this First Amendment Agreement by all of the
parties hereto, (b) execution of the Assignment and Acceptance Agreement between
Agent and Bank One, NA, and (c) execution of the Assignment and Acceptance
Agreement between Agent and The Bank of Nova Scotia, the first paragraph of the
Credit Agreement shall be amended to add the following new sentence at the end
thereof and Bank One, NA and The Bank of Nova Scotia shall thereafter be deemed
to be Co-Agents, as defined in the Credit Agreement, thereunder:
Also parties to this Agreement are Bank One, NA, 600 Superior Avenue, 4th
Floor Cleveland, Ohio 44114 and The Bank of Nova Scotia, Suite 2700, 600
Peachtree Street NE, Atlanta, GA 30308 (collectively, "Co-Agents" and
each individually a "Co-Agent"). As used in this Agreement, the term
"Agent" shall not include Co-Agent.
2. Article I of the Credit Agreement is hereby amended by deleting the
definitions of "Global Reorganization", "Hedge Agreement", "Interest Period",
"Mortgaged Real Property" and "Note" in their entirety and by substituting in
place thereof the following:
<PAGE> 2
"Global Reorganization" shall mean the transfer of at least
ninety percent (90%) of direct ownership of all Global Domestic
Subsidiaries to one (1) or more Oglebay Domestic Subsidiaries.
"Hedge Agreement" shall mean any currency swap or hedge
agreement, interest rate swap, cap, collar or floor agreement, or other
interest rate management device entered into by Borrower with any
financial institution.
"Interest Period" shall mean, with respect to any LIBOR Loan,
the period commencing on the date such LIBOR Loan is made and ending on
the last day of such period, as selected by Borrower pursuant to the
provisions hereof, and, thereafter, each subsequent period commencing on
the last day of the immediately preceding Interest Period and ending on
the last day of such period, as selected by Borrower pursuant to the
provisions hereof. The duration of each Interest Period for any LIBOR
Loan shall be one (1) month, two (2) months, three (3) months, or six
(6) months, in each case as Borrower may select upon notice, as set
forth in Section 2.2 hereof, provided that: (a) if Borrower fails to so
select the duration of any Interest Period, Borrower shall be deemed to
have converted such LIBOR Loan to a Prime Rate Loan at the end of the
then current Interest Period; (b) Borrower may not select any Interest
Period for a LIBOR Loan which ends after any date when principal is due
on such LIBOR Loan; and (c) during the period of time commencing on July
17, 1998 and ending on July 24, 1998, Borrower may elect an Interest
Period of one (1) week so long as such Interest Period ends on or before
July 31, 1998.
"Mortgaged Real Property" shall mean each of the parcels of real
property as set forth on Schedule 2 hereto, or interests therein, owned
or leased by a Pledgor, in each case together with all of such Pledgor's
right, title and interest in the improvements and buildings thereon and
all appurtenances, easements or other rights belonging thereto.
"Note" shall mean any Revolving Credit Note, the Swing Line Note
or any other note delivered pursuant to this Agreement.
3. Article I of the Credit Agreement is hereby amended by adding the
following new definition after the definition of "Release":
"Replacement Subordinated Documentation" shall mean any
documentation executed by Borrower in connection with any replacement of
the Subordinated Note Purchase Agreement or the replacement of the
Subordinated Indebtedness incurred pursuant to the Subordinated Note
Purchase Agreement, including, but not limited to, any Permanent
Financing (as defined in the Subordinated Note Purchase Agreement), as
the same may be, with the prior written consent of Agent, which consent
shall not be unreasonably withheld, from time to time amended, restated
or otherwise modified or replaced.
2
<PAGE> 3
4. The Credit Agreement is hereby amended by adding a new Section 2.9 as
follows:
SBCTION 2.9.PARTIAL RELEASE OF MORTGAGED REAL PROPERTY. Borrower
shall have the right at any time to request that Agent, on behalf of the
Banks, release the Lien of Agent, for the benefit of the Banks, on any
of the Mortgaged Real Property or any part thereof under the following
conditions:
(a) Borrower shall submit a written request to Agent no
fewer than ten (10) Business Days prior to the proposed date of
release, describing the Mortgaged Real Property, or portion
thereof, that Borrower is seeking to have released (the
"Released Parcel") by legal description, with such request to
state (i) the proposed sale price, if any, or any other
available information regarding the fair market value of the
Released Parcel, (ii) the current use of the Released Parcel,
(iii) that such Released Parcel is no longer necessary to the
operation of any Company's business and (iv) that the business
of the Companies can continue to be operated profitably with the
remainder of the Mortgaged Real Property;
(b) the Companies agree to, and do in fact, substitute
as security any and all property, if any, acquired in exchange
for the Released Parcel or acquired with the proceeds received
from the sale of such Released Parcel; and
(c) Agent determines, in its reasonable discretion, that
such release of the Released Parcel will not have a material
adverse effect on the collateral securing the Debt or on any
Company's ability to profitably conduct its business with the
remainder of the Mortgaged Real Property.
Upon the satisfaction of all of the foregoing, Agent, on behalf of the
Banks, and Borrower shall execute such releases, agreements and other
items as may be deemed necessary by Agent.
5. Section 4.2(b) of the Credit Agreement is hereby amended by deleting
the number "seven (7)" and by substituting in place thereof the number
"twenty-one (21)".
6. The first two lines of Section 4.2(c) of the Credit Agreement are
hereby amended by deleting the words "On the Global Control Date" and inserting
in place thereof the words "on or before September 15, 1998".
3
<PAGE> 4
7. The Credit Agreement is hereby amended by deleting Section 4.2(d)
thereof in its entirety and by substituting in place thereof the following:
(d) GLOBAL REORGANIZATION. On or before August 31, 1998,
Borrower shall have provided evidence to Agent that the Global
Reorganization has occurred.
8. The Credit Agreement is hereby amended by deleting Section 4.2(g)
thereof in its entirety and by substituting in place thereof the following:
(g) PREFERRED SHIP MORTGAGE. On or before (i) September 15,
1998, Borrower shall have executed and delivered to Agent a Preferred
Ship Mortgage with respect to the Columbia Star, and (ii) August 15,
1998, Borrower shall have caused to be filed a Preferred Ship Mortgage
with respect to the Wolverine and the David Z. Norton.
9. The Credit Agreement is hereby amended by deleting Section 4.2(j)
thereof in its entirety and by substituting in place thereof the following:
(j) REAL ESTATE MATTERS. Borrower shall have delivered to Agent
all of the following on or before August 31, 1998, with respect to the
Mortgaged Real Property owned by a Pledgor other than a Global Stone
Pledgor, and on or before September 15, 1998 with respect to the
Mortgaged Real Property owned by a Global Stone Pledgor:
(i) a commitment for the issuance of a Loan Policy of
title insurance, ALTA 1970 Form B (amended 10/17/70 and
10/17/84) issued to Agent for the benefit of the Banks by
Chicago Title Insurance Company, in an amount equal to the fair
market value of the applicable Mortgaged Real Property, showing
title to such Mortgaged Real Property to be free and clear of
all defects and encumbrances except real estate taxes not yet
due, assessments, zoning and comparable governmental
restrictions and such other matters of record as are acceptable
to Agent, in its reasonable discretion;
(ii) copies of all underlying title documents,
including, without limitation, prior title policies, deeds, and
legal descriptions in the possession or control of Borrower or
any Pledgor;
(iii) copies of all environmental reports, inspections,
studies, test results and any other environmental information
with respect to the Mortgaged Real Property and the improvements
located thereon in the possession or control of Borrower or any
Pledgor;
(iv) such other information in the possession or control
of Borrower or a Pledgor relating to the ownership, use,
occupancy, operation or maintenance
4
<PAGE> 5
of the Mortgaged Real Property as Agent may request from time to
time, including, without limitation, copies of all written
inspections, reports, test results, correspondence and
management reports received or sent by Borrower or any Pledgor
that relate in any material respect to the operation of the
Mortgaged Real Property, or any part thereof; and
(v) evidence, to Agent's satisfaction, in Agent's
reasonable discretion, that no portion of the Mortgaged Real
Property is located in a Special Flood Hazard Area or is
otherwise classified as Class A or Class BX on the Flood Maps
maintained by the Federal Emergency Management Agency.
10. The Credit Agreement is hereby amended by deleting Section 5.17(b)
thereof in its entirety and by substituting in place thereof the following:
(b) Borrower shall provide notice to Agent contemporaneously
with any notice provided to the Purchaser (as defined in the
Subordinated Note Purchase Agreement or any similarly defined term under
any Replacement Subordinated Documentation) under the Subordinated Note
Purchase Agreement or any Replacement Subordinated Documentation.
11. The Credit Agreement is hereby amended by deleting Section 5.24
thereof in its entirety and by substituting in place thereof the following:
SECTION 5.24. RESTRICTED PAYMENTS. No Company shall (i) make any
payment, including, but not limited to, any prepayment, mandatory
redemption or optional redemption of any kind, or (ii) exercise any
right of defeasance or covenant defeasance or similar right, with
respect to any Subordinated Indebtedness, except that if no Unmatured
Event of Default (other than with respect to subpart (a) hereof only) or
Event of Default shall then exist or immediately thereafter shall begin
to exist:
(a) Borrower may make regularly scheduled payments of interest
with respect to any Subordinated Indebtedness;
(b) Borrower shall pay in full the Indebtedness of Global Stone
pursuant to the Global Stone Trust Indenture in accordance with Section
4.2(h) hereof and
(c) Borrower may prepay the entire outstanding principal balance
of any Subordinated Indebtedness so long as (i) Borrower shall have
provided Agent with at least ten (10) days written notice (or such
shorter period as to which Agent shall agree) prior to the proposed date
of repayment; (ii) the Subordinated Indebtedness being prepaid is being
prepaid solely with the proceeds of new Subordinated Indebtedness; (iii)
Borrower shall have provided Agent with all documentation relating to
such new Subordinated Indebtedness at least ten (10) days prior to the
proposed date of repayment, which documents shall be in form and
substance reasonably satisfactory to
5
<PAGE> 6
Agent (it being understood that covenants and events of default
substantially similar, in the reasonable opinion of Agent, to those set
forth in Articles VIM, VII and IX, including the definitions relating
thereto, of the Subordinated Note Purchase Agreement are satisfactory to
Agent); and (iv) such new Subordinated Indebtedness shall be subject to
a Subordination Agreement, in form and substance reasonably satisfactory
to Agent (it being understood that provisions substantially similar, in
the reasonable opinion Agent, to those set forth in Articles X and XI of
the Subordinated Note Purchase Agreement, including the definitions
relating thereto, are satisfactory to Agent).
12. The Credit Agreement is hereby amended by deleting Section 5.29
thereof in its entirety and by substituting in place thereof the following:
SECTION 5.29. GUARANTY OF SUBORDINATED INDEBTEDNESS; No Company
shall be or become a Guarantor of the Subordinated Indebtedness under
the Subordinated Note Purchase Agreement or under any Replacement
Subordinated Documentation unless such Company is also a Pledgor
hereunder.
13. The Credit Agreement is hereby amended by adding a new Section 5.30
as follows:
SECTION 5.30. POST CLOSING MORTGAGED REAL PROPERTY COVENANTS.
(a) If, in the opinion of Agent, any title commitment provided
by Borrower to Agent pursuant to subpart (j)(i) of Section 4.2 hereof
discloses title conditions which Agent determines, in its reasonable
discretion, may materially impact the value of any Mortgaged Real
Property or Agent's ability to realize on such Mortgaged Real Property
upon the occurrence of an Event of Default, Borrower shall provide to
Agent with respect to such Mortgaged Real Property, or such thereof as
Agent, in its reasonable discretion, may require, at Borrower's cost and
expense, a Loan Policy of title insurance, ALTA 1970 Form B (amended
10/17/70 and 10/17/84) issued by Chicago Title Insurance Company
(collectively, the "Loan Policies" and individually, a "Loan Policy") in
an amount equal to the fair market value of such Mortgaged Real Property
insuring each mortgage or deed of trust, as appropriate, to be a valid
first priority lien on such Mortgaged Real Property, free and clear of
all defects and encumbrances except such matters of record as are
acceptable to Agent, in its reasonable discretion, with such
endorsements and affirmative insurance as Agent, in its reasonable
discretion, may require. If Agent shall require Borrower to deliver a
Loan Policy of Title Insurance for any or all of the Mortgaged Real
Property, Agent shall notify Borrower in writing of such requirement,
the reason therefore, and the specific Mortgaged Real Property for which
a Loan Policy of Title Insurance is being requested and Borrower shall,
within thirty (30) days after receipt of such written notice, deliver
the required Loan Policy or Loan Policies to Agent.
6
<PAGE> 7
(b) If, in the opinion of Agent, either: (i) the information
provided by Borrower pursuant to subpart (j)(iii) of Section 4.2 hereof
with respect to any Mortgaged Real Property indicates or suggests the
existence of an environmental condition or a potential environmental
condition on such Mortgaged Real Property that requires further inquiry
or study, or (ii) Borrower fails or is unable to provide any relevant
environmental information regarding the environmental condition of any
Mortgaged Real Property, Borrower shall provide to Agent with respect to
each Mortgaged Real Property, or such thereof as Agent, in its
reasonable discretion, may require, at Borrower's cost and expense,
environmental reports or studies prepared by environmental engineering
firms acceptable to Agent (the "Reports"), which Reports shall be in
form and substance acceptable to Agent, in its sole discretion. If Agent
shall require Borrower to deliver the Reports, Agent shall notify
Borrower in writing of such requirement, the reason therefore, and the
type of environmental report or study required, and Borrower shall,
within sixty (60) days after receipt of such notice, deliver the
required Reports to Agent.
(c) If Agent shall determine that there is any question or
dispute regarding any boundary of any Mortgaged Real Property, or any
part thereof, that may materially impact the value of such Mortgaged
Real Property or Agent's ability to realize on such Mortgaged Real
Property upon the occurrence of an Event of Default, then, within thirty
(30) days after Borrower's receipt of a request from Agent, Borrower
shall initiate such action as Borrower deems appropriate to cure the
dispute (to Agent's reasonable satisfaction) and provide Agent with
periodic updates (and as may be requested by Agent) as to the status of
the disputed boundary.
(d) If Agent shall determine that there is any question or
dispute as to the zoning of any Mortgaged Real Property, or any part
thereof, that may materially impact the value of such Mortgaged Real
Property or Agent's ability to realize on such Mortgaged Real Property
upon the occurrence of an Event of Default, then, within thirty (30)
days after Borrower's receipt of a request from Agent, Borrower shall
provide evidence satisfactory to Agent that Borrower has initiated and
is diligently proceeding to comply with all building and zoning codes
applicable to such Mortgaged Real Property, or such thereof as Agent may
require; provided that in no event shall Borrower fail to be in
compliance more than one hundred fifty (150) days after receipt of such
request from Agent.
14. The Credit Agreement is hereby amended by deleting Section 6.23
thereof in its entirety and by substituting in place thereof the following:
SECTION 6.23. SUBORDINATED NOTE PURCHASE AGREEMENT. (a) No Event
of Default (as defined in the Subordinated Note Purchase Agreement or
any Replacement Subordinated Documentation) or Default (as defined in
the Subordinated Note Purchase Agreement or any Replacement Subordinated
Documentation) or event or condition that with the passage of time or
the giving of notice or both would constitute a default or event or
default under the Subordinated
7
<PAGE> 8
Note Purchase Agreement or any Replacement Subordinated Documentation
exists, nor will any such Event of Default, Default, event of default or
default exist immediately under the Subordinated Note Purchase Agreement
or any Replacement Subordinated Documentation, or any agreement executed
in connection therewith after the granting of any Loan; (b) no Company
has "incurred" (as defined in the Subordinated Note Purchase Agreement
or any similar term as referenced or defined in any Replacement
Subordinated Documentation) any Designated Senior Indebtedness (as
defined in the Subordinated Note Purchase Agreement or any similar term
as referenced or defined in any Replacement Subordinated Documentation),
other than the Debt; and (c) no Company has "incurred" (as defined in
the Subordinated Note Purchase Agreement or any similar term as
referenced or defined in any Replacement Subordinated Documentation)
either prior to or after the granting of any Loan, any Indebtedness (as
defined in the Subordinated Note Purchase Agreement or any similar term
as referenced or defined in any Replacement Subordinated Documentation)
in violation of Section 6.8 (Limitation on Additional Indebtedness) of
the Subordinated Note Purchase Agreement or any similar section of any
Replacement Subordinated Documentation.
15. The Credit Agreement is hereby amended by deleting Section 7.12
thereof in its entirety and by substituting in place thereof the following:
SECTION 7.12. SUBORDINATED NOTE PURCHASE AGREEMENT. If (a) any
Event of Default (as defined in the Subordinated Note Purchase Agreement
or any similar term as referenced or defined in any Replacement
Subordinated Documentation), or any event or condition that with the
lapse of time or the giving of notice or both would constitute an Event
of Default (as defined in the Subordinated Note Purchase Agreement or
any similar term as referenced or defined in any Replacement
Subordinated Documentation), shall exist under the Subordinated Note
Purchase Agreement or any Replacement Subordinated Documentation or any
agreement executed in connection therewith; (b) without the prior
written consent of Agent, the Subordinated Note Purchase Agreement or
any Replacement Subordinated Documentation shall be amended or modified
in any respect; (c) the Indebtedness incurred in connection with the
Subordinated Note Purchase Agreement or any Replacement Subordinated
Documentation shall be accelerated for any reason; (d) any Company
incurs (as defined in the Subordinated Note Purchase Agreement or any
similar term as referenced or defined in any Replacement Subordinated
Documentation) any Designated Senior Indebtedness (as defined in the
Subordinated Note Purchase Agreement or any similar term as referenced
or defined in any Replacement Subordinated Documentation) other than the
Debt; or (e) Borrower exercises any rights of optional redemption,
defeasance, covenant defeasance or similar right under the Subordination
Note Purchase Agreement or any Replacement Subordinated Documentation.
16. The Credit Agreement is hereby amended by deleting Section 9.6
thereof in its entirety and by substituting in place thereof the following:
8
<PAGE> 9
SECTION 9.6 KNOWLEDGE OF DEFAULT. It is expressly understood and
agreed that Agent shall be entitled to assume that no Unmatured Event of
Default or Event of Default has occurred and is continuing, unless Agent
has been notified by a Bank or a Company in writing that such Bank or
Company, as the case may be, believes that an Unmatured Event of Default
or Event of Default has occurred and is continuing and specifying the
nature thereof.
17. Borrower has notified Agent that certain provisions of the financing
agreement (under Title XI of the United States Code) relating to the vessel, the
"Columbia Star" need to be amended (or waived) in order to take into account the
Credit Agreement and the indebtedness incurred thereunder. Borrower has
requested that Agent and the Banks temporarily waive any breach of such
financing agreement that results from the Credit Agreement and the indebtedness
incurred thereunder until September 30, 1998 in order to give Borrower time to
negotiate and finalize documentation relating thereto. Agent and the Banks are
willing to grant and hereby grant such temporary waiver expressly on the
condition that no action whatsoever is taken under such financing agreement to
accelerate or collect the indebtedness thereunder or to enforce or proceed to
enforce or assert any rights or remedies of the lender under such financing
agreement.
18. Concurrently with the execution of this First Amendment Agreement,
Borrower shall:
(a) cause each Pledgor to consent and agree to and acknowledge the terms
of this First Amendment Agreement; and
(b) pay all legal fees and expenses of Agent in connection with this
First Amendment Agreement.
19. Borrower hereby represents and warrants to Agent and the Banks that
(a) Borrower has the legal power and authority to execute and deliver this First
Amendment Agreement; (b) the officers executing this First Amendment Agreement
have been duly authorized to execute and deliver the same and bind Borrower with
respect to the provisions hereof; (c) the execution and delivery hereof by
Borrower and the performance and observance by Borrower of the provisions hereof
do not violate or conflict with the organizational agreements of Borrower or any
law applicable to Borrower or result in a breach of any provision of or
constitute a default under any other agreement, instrument or document binding
upon or enforceable against Borrower; (d) no Unmatured Event of Default or Event
of Default exists under the Credit Agreement, nor will any occur immediately
after the execution and delivery of the First Amendment Agreement or by the
performance or observance of any provision hereof; (e) neither Borrower nor any
Pledgor is aware of any claim or offset against, or defense or counterclaim to,
any of Borrower's or any Pledgor's obligations or liabilities under the Credit
Agreement or any Related Writing; and (f) this First Amendment Agreement
constitutes a valid and binding obligation of Borrower in every respect,
enforceable in accordance with its terms.
9
<PAGE> 10
20. Each reference that is made in the Credit Agreement or any other
writing to the Credit Agreement shall hereafter be construed as a reference to
the Credit Agreement as amended hereby. Except as herein otherwise specifically
provided, all provisions of the Credit Agreement shall remain in full force and
effect and be unaffected hereby. This First Amendment Agreement is a Related
Writing as defined In the Credit Agreement.
21. Borrower and each Pledgor, by signing below, hereby waives and
releases Agent and each of the Banks and their respective directors, officers,
employees, attorneys, affiliates and subsidiaries from any and all such claims,
offsets, defenses and counterclaims of which Borrower and any Pledgor is aware,
such waiver and release being with full knowledge and understanding of the
circumstances and effect thereof and after having consulted legal counsel with
respect thereto.
22. This First Amendment Agreement may be executed in any number of
counterparts, by different parties hereto in separate counterparts and by
facsimile signature, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.
23. The rights and obligations of all parties hereto shall be governed
by the laws of the State of Ohio, without regard to principles of conflicts of
laws.
[Remainder of page intentionally left blank.]
10
<PAGE> 11
24. JURY TRIAL WAIVER. BORROWER, PLEDGORS, AGENT AND EACH OF THE BANKS
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THE BANKS, OR
ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
Address: 1100 Superior Avenue OGLEBAY NORTON COMPANY
Cleveland, Ohio 44114
By: /s/ Michael F. Biehl
--------------------------------
Michael F. Biehl, Treasurer
Address: 127 Public Square KEYBANKNATIONAL ASSOCIATION
Cleveland, OH 44114-1306 as Agent and as a Bank
Attn: Large Corporate Group
By /s/ Lawrence A. Mack
--------------------------------
Lawrence A. Mack,
Senior Vice President
11
<PAGE> 12
The undersigned consent and agree to and acknowledge the terms of this
First Amendment Agreement.
Oglebay Norton Holding Company
ONCO Investment Company
Oglebay Norton Industrial Minerals, Inc.
Oglebay Norton Management Company
Oglebay Norton Industrial Sands, Inc.
Colorado Silica Sand, Inc.
Oglebay Norton Terminals, Inc.
Oglebay Norton Engineered Materials, Inc.
Oglebay Norton Acquisition Company
Global Stone Port Inland, Inc.
Moreland Development Company
Western Wisconsin Materials, Inc.
By: /s/ Michael F. Biehl
----------------------------------------
Michael F. Biehl as Treasurer of each of
the companies listed above
Texas Mining, LP
By: Oglebay Norton Industrial Sands, Inc.,
General Partner
By: /s/ Michael F. Biehl
------------------------------------
Michael F. Biehl, Treasurer
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,910,660
<SECURITIES> 0
<RECEIVABLES> 47,153,911
<ALLOWANCES> 921,000
<INVENTORY> 26,721,891
<CURRENT-ASSETS> 84,295,387
<PP&E> 635,688,738
<DEPRECIATION> 216,366,071
<TOTAL-ASSETS> 601,363,167
<CURRENT-LIABILITIES> 55,480,881
<BONDS> 0
0
0
<COMMON> 7,253,332
<OTHER-SE> 120,870,093
<TOTAL-LIABILITY-AND-EQUITY> 601,363,167
<SALES> 96,616,758
<TOTAL-REVENUES> 163,879,041
<CGS> 62,719,048
<TOTAL-COSTS> 136,058,481
<OTHER-EXPENSES> 1,478,643
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,888,506
<INCOME-PRETAX> 15,816,464
<INCOME-TAX> 4,908,000
<INCOME-CONTINUING> 10,908,464
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,908,464
<EPS-PRIMARY> 2.29
<EPS-DILUTED> 2.28
</TABLE>
