<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 3, 1995
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-1339
------
OREGON METALLURGICAL CORPORATION
(Exact name of registrant as specified in its charter)
Oregon 93-0448157
- -------------------------------- ----------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
530 West 34th Avenue, Albany, Oregon 97321
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 925-4281
--------------
NONE
------------------------------------------------------
(Former name or address, 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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
-------- -------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 11, 1995
- ----------------------------- -----------------------------
Common Stock, $1.00 par value 10,911,002
<PAGE>
PART I: Financial Information
ITEM 1: Financial Statements
OREGON METALLURGICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Unaudited
<TABLE>
<CAPTION>
Three Months
---------------------
For the period ended March 31, 1995 1994
------- -------
<S> <C> <C>
Net sales $30,838 $13,294
Cost of sales 25,506 13,205
------- -------
Gross profit 5,332 89
Research, technical and product
development expenses 365 243
Selling, general and administrative
expenses 3,400 1,530
------- -------
Income (loss) from operations 1,567 (1,684)
Interest income -- 132
Interest expense (575) (90)
Minority interest in subsidiary (106) --
------- -------
Income (loss) before income taxes 886 (1,642)
Provision (benefit) for income tax 351 (557)
------- -------
Net income (loss) $ 535 $(1,085)
======= =======
Net income (loss) per share $ 0.05 $ (0.10)
======= =======
Weighted average shares
and share equivalents outstanding 11,055 10,889
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
OREGON METALLURGICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
Unaudited
March 31 December 31
1995 1994
---------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 525 $ 1,636
Accounts receivable, net 22,903 20,444
Inventories 56,305 49,023
Income taxes receivable 227 321
Prepayments 613 1,031
Deferred income taxes 582 517
-------- --------
TOTAL CURRENT ASSETS 81,155 72,972
Property, Plant and equipment, net 36,785 37,520
Other Assets, net 1,758 1,480
-------- --------
TOTAL ASSETS $119,698 $111,972
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 18,863 $ 16,860
Accrued payroll and employee benefits 3,930 2,944
Other accrued expenses 4,380 4,073
Current portion of long-term debt 10 13
-------- --------
TOTAL CURRENT LIABILITIES 27,183 23,890
Other Liabilities
Note payable to bank 15,811 12,496
Long-term debt, less current portion 4,668 4,668
Deferred income taxes 1,251 1,098
Deferred compensation payable 881 881
Accrued postretirement benefit 1,502 1,457
Minority interest 378 200
-------- --------
TOTAL LIABILITIES 51,674 44,690
-------- --------
Shareholders' Equity
Common stock, $1.00 par value;
25,000 shares authorized; shares issued:
1995, 10,896; 1994, 10,893 10,896 10,893
Additional paid-in capital 37,462 37,445
Retained earnings 19,495 18,960
Cumulative foreign currency translation
adjustment 171 (16)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 68,024 67,282
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $119,698 $111,972
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
OREGON METALLURGICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Unaudited
<TABLE>
<CAPTION>
Three Months
-------------------
For the period ended March 31, 1995 1994
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net incomes (loss) $ 535 $(1,085)
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation and amortization 1,126 1,113
Deferred income taxes 88 (557)
Minority interest 178 --
Decrease (increase) in:
Accounts receivable (2,340) (421)
Inventories (7,140) 1,206
Income taxes receivable 94 95
Prepayments 414 203
Increase (decrease) in:
Accounts payable 1,897 43
Accrued payroll and employee benefits 986 392
Other accrued expenses 283 (65)
Other 45 76
------- -------
Net cash provided by (used in) operating activities (3,834) 1,000
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to properties (219) (139)
Short-term investments, purchased -- (1,228)
Short-term investments, redeemed -- 1,661
Other (383) --
------- -------
Net cash provided by (used in) investing
activities (602) 294
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings, note payable to bank 3,315 --
Repayment of long-term debt (3) (837)
Payment on note receivable - ESOP -- 556
Other 20 --
------- -------
Net cash provided by (used in) financing activities 3,332 (281)
------- -------
Effect of exchange rates on cash and
cash equivalents (7) --
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS: (1,111) 1,013
CASH AND CASH EQUIVALENTS:
Beginning of period 1,636 37
------- -------
End of period $ 525 $ 1,050
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements of Oregon Metallurgical
Corporation and subsidiaries (the Company) have not been audited by
independent accountants, except for the balance sheet at December 31, 1994.
In the opinion of the Company's management, the financial statements reflect
all adjustments necessary to present fairly the results of operations for the
three-month periods ended March 31, 1995 and 1994; the Company's financial
position at March 31, 1995 and December 31, 1994; and the cash flows for the
three months periods ended March 31, 1995 and 1994. These adjustments are of
a normal recurring nature.
Certain notes and other information have been condensed or omitted from the
interim financial statements presented in this Quarterly Report on Form 10-Q.
Therefore, these financial statements should be read in conjunction with the
Company's 1994 Annual Report on Form 10-K.
The results for the first quarter of 1995 are not necessarily indicative of
future financial results.
NOTE 2. ORGANIZATION AND OPERATIONS
Oregon Metallurgical Corporation (OREMET) and Subsidiaries (the Company) is
a major producer and distributor of titanium sponge, ingot, mill products
and castings for aerospace, industrial and recreation applications. As of
December 31, 1994, the Company is 41% owned by the Oregon Metallurgical
Corporation Employee Stock Ownership Plan (the ESOP).
On September 20, 1994, the Company completed the acquisition of the net
operating assets and subsidiaries of Titanium Industries Distribution Group
from Karnyr, Inc. The acquired business is being operated under the name of
Titanium Industries Inc., an eighty percent (80%) owned subsidiary of OREMET.
Titanium Industries, Inc. is a full-line service titanium metals distributor
with facilities in the United States, Canada and the United Kingdom.
NOTE 3. BASIS OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts of
its majority-owned subsidiary, Titanium Industries, Inc. and the Company's
wholly-owned subsidiary, OREMET France S.a.r.l. Titanium Industries, Inc.'s
accounts reflect the activities of its wholly-owned subsidiaries, Titanium
International, LTD. and Titanium Wire Corporation. All material intercompany
accounts and transactions have been eliminated in consolidation.
<PAGE>
NOTE 4. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
--------- ------------
<S> <C> <C>
Finished Goods....................... $13,639 $14,656
Work-in-Process...................... 19,653 15,288
Raw Materials........................ 23,013 19,079
------- -------
$56,305 $49,023
======= =======
</TABLE>
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are comprised of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
--------- ------------
<S> <C> <C>
Land................................. $ 1,189 $ 1,189
Buildings and improvements........... 11,142 11,087
Machinery and equipment.............. 40,104 39,940
Integrated sponge facility........... 45,309 45,309
Construction in progress............. 2,067 1,976
------- -------
99,611 99,501
Less Accumulated Depreciation........ (63,026) (61,981)
------- -------
$36,785 $37,520
======= =======
</TABLE>
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Since 1991, the Company, as well as other major U.S. titanium producers have
reported annual losses. Other major U.S. titanium producers reported first
quarter results which indicated, that consistent with the Company's
observations, industry sales are increasing and operating results are
continuing to improve from those reported in the prior year. The quarter
ended March 31, 1995, represented the Company's fifth consecutive quarter of
increasing sales and improving operating results. The Company reported net
earnings of $.5 million for the first quarter of 1995.
The Company's net sales and twelve-month sales order backlog (sales backlog)
continued to grow at a brisk pace. Net sales increased 17% to $30.8 million,
compared to $26.4 million for the fourth quarter of 1994. The sales backlog
was $48 million on March 31, 1995, an increase of 9% over the December 31,
1994 sales backlog of $44 million. The twelve-month sales order backlog
reflects recent customer order placement but may not be an accurate indicator
of annual or quarterly sales volume.
The Company's sales orders from the industrial and recreation markets
continue to expand. While the demand for military aerospace applications
continues to be weak, the military sector appears to have a growing interest
in utilizing titanium for armor. Sales orders from our commercial aerospace
customers have also improved.
Raw material costs, principally alloys and scrap titanium, have increased
significantly during the last portion of 1994 and the first quarter of 1995.
The reliability of the supply of low cost titanium products from the Former
Soviet Union coupled with increasing demand, appears to have impacted the
cost of these items. In response, the Company has raised prices and imposed
surcharges for certain alloys. We have approached customers who have placed
long-term supply contracts with us and are exploring mutually beneficial
solutions to address increases in our cost structure.
During the first quarter of 1995, the integrated sponge, ingot, mill products
and castings facilities all operated at a significant level of practical
capacity. These increased levels of activity have aggravated the production
bottlenecks which exist in our manufacturing processes. Our ability to
capitalize on market opportunities and maintain on-time deliveries to our
customers has deteriorated. In response to these matters, we have
restructured our production planning and control operations and will be
expanding our use of outside conversion facilities.
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 1994:
Net sales were $30.8 million for the first quarter of 1995, an increase of
37% over the first quarter of 1994 sales of $13.2 million. The Company's net
sales of $30.8 million include $13.0 million of sale attributable to Titanium
Industries, Inc., which was acquired on September 20, 1994.
Net sales of ingot increased 40% for the first quarter of 1995 compared to
the first quarter of 1994. Ingot shipments increased 28% and average ingot
price per pound increased 10% during this comparable period.
Net sales of titanium sponge decreased 49% for the first quarter of 1995
compared to the first quarter of 1994. Sponge shipments decreased 47% and
average sponge price per pound decreased 4%. Sales of titanium sponge have
decreased due to competition from lower-priced material which has been
available from producers in the Former Soviet Union. During the first quarter
of 1995, the Company's integrated sponge facility operated at a significant
level of capacity, supplying the Company's internal demand for titanium
sponge and sales to RMI Titanium Company under our long-term titanium sponge
supply agreement.
Net sales of mill products increased 125% for the first quarter of 1995
compared to the first quarter of 1994. Mill products shipments increased 142%
and mill products average price per pound decreased 7%. The decrease in the
average price per pound is the result of competitive pressures in the
marketplace.
Net sales of castings increased 35% for the first quarter of 1995 compared to
the first quarter of 1994.
Cost of sales as a percentage of net sales decreased for the first quarter of
1995 to 83% from 99% for the comparable period in 1994. The positive change
is primarily due to the increase in volume. As a result, gross profit
increased $5.2 million to $5.3 million for the first quarter of 1995 from $.1
million for the comparable period in 1994.
Research, technical and product development expenses (RT&D) increased 50% for
the first quarter of 1995 to $.4 million from $.2 million in the comparable
quarter of 1994. The increase in RT&D reflects the Company's commitment to
research and the development of new products and improvements in operating
processes.
Selling, general and administrative expenses (SG&A) increased 122% for the
first quarter of 1995 to $3.4 million from $1.5 million in the comparable
quarter of 1994. The addition of Titanium Industries, Inc. is the basis for
the increase in SG&A.
For the first quarter of 1994, the Company reported interest income of $.1
million, derived from earnings on short-term investments and the ESOP note
receivable. The Company liquidated its portfolio of short-term investments in
1994 and the ESOP note receivable matured in December 1994. The Company
expects that interest income for 1995 and the foreseeable future should be
negligible.
<PAGE>
Interest expense increased to $.6 million in the first quarter of 1995
compared to $.1 million in the comparable quarter of 1994. The increase in
interest expense is the direct result of borrowings related to the purchase of
Titanium Industries, Inc. and increased operating levels.
As a result of the foregoing, the Company reported income from operations of
$1.5 million for the first quarter of 1995 compared to a loss from operations
of $1.7 million for the comparable period in 1994.
The Company reported a provision for income taxes of $.4 million (effective
tax rate of 35%) for the first quarter of 1995 compared to a tax benefit of
$.6 million, or an effective tax rate of 34% for the comparable period in
1994.
The Company reported net income of $.5 million ($0.05 per share) for the
first quarter of 1995 compared to a net loss of $1.1 million ($.10 per share)
for the comparable period in 1994.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL
Working capital increased $4.9 million to $54.0 million as of March 31, 1995,
compared to $49.1 million as of December 31, 1994. The growth in working
capital is principally attributable to increases in accounts receivable and
inventory during the first quarter. The increase in working capital was
partially funded by a $3.3 million increase in the note payable to bank which
is reported as a long-term liability on the Company's consolidated balance
sheet.
CREDIT AGREEMENT (NOTE PAYABLE TO BANK)
The Company may presently borrow up to $20 million under the terms of a
revolving credit agreement with BankAmerica Business Credit, Inc. (BABC). The
credit agreement expires in September 1997. The balance outstanding under the
credit agreement as of March 31, 1995 is $15.8 million. The Company has
entered into preliminary discussions with BABC to increase the credit limit by
$5 million to a total of $25 million. The increased credit facility will
primarily be used to finance projected increases in the Company's working
capital.
As of March 31, 1995, interest charged under the credit agreement is at
BABC's reference rate (9%) plus 1.5%. During the second quarter of 1995, BABC
reduced its interest rate on borrowings to their reference rate plus 1%.
The reduction in the interest rate was in accordance with the terms of the
credit facility which provides for a LIBOR based borrowing option and a lower
interest charge once the Company has met specified financial performance
targets.
<PAGE>
PART II: OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Page No.
- --------
11 10.16 Amendment No. 1 Dated as of March 17, 1995 to Loan
and Security Agreement with Oregon Metallurgical
Corporation and Titanium Industries, Inc., Dated as
of September 19, 1994
21 11.1 Statement re: computation of per share earnings.
22 27.1 Financial Data Schedule
B. Forms 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended March 31, 1995
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.
OREGON METALLURGICAL CORPORATION
Registrant
Date: May 12, 1995 --------------------------------
---------------- Dennis P. Kelly
Vice President, Finance and
Chief Financial Officer
Signing on behalf of the Registrant
and as Chief Accounting Officer
<PAGE>
EXHIBIT 10.16
AMENDMENT NO. 1
TO
LOANS AND SECURITY AGREEMENT
WITH
OREGON METALLURGICAL CORPORATION
AND
TITANIUM INDUSTRIES, INC.
Dated as of September 15, 1994
THIS AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT ("Amendment") is
dated as of March 17, 1995, by and between OREGON METALLURGICAL CORPORATION,
an Oregon corporation ("Oremet"), TITANIUM INDUSTRIES, INC., an Oregon
corporation formerly known as New IT, Inc. ("TI" and, together with Oremet
sometimes hereinafter referred to collectively as the "Borrowers") and
BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation, as successor-in-
interest to Bank of America Illinois, an Illinois banking corporation
("Lender"). Capitalized terms used herein but not otherwise defined herein
shall have the respective meanings assigned to such terms in the "Loan
Agreement" (as defined below).
WITNESSETH:
WHEREAS, Borrowers and Lender have entered into that certain Loan and
Security Agreement dated as of September 19, 1994 (the "Loan Agreement"),
pursuant to which Lender has agreed to make certain loans and other financial
accommodations to Borrowers; and
WHEREAS, Borrowers and Lender have agreed to amend the Loan Agreement,
on the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the respective parties hereto hereby agree as follows:
1. AMENDMENT TO LOAN AGREEMENT. Effective as of September 19, 1994,
upon satisfaction of the conditions precedent set forth in SECTION 2 below,
and in reliance upon the representations and warranties of Borrowers set
forth herein, SUPPLEMENT A to the Loan Agreement is hereby amended and
restated in its entirety in the form attached hereto as EXHIBIT A ("Amended
and Restated Supplement A").
2. CONDITIONS PRECEDENT. This Amendment shall become effective as of
September 19, 1994, upon satisfaction of each of the following conditions:
<PAGE>
(1) as of the date first above written (after giving effect to this
Amendment) no Unmatured Event of Default or Event of Default shall have
occurred and be continuing; and
(2) Lender shall have received two (2) copies of this Amendment
duly executed by each of the Borrowers.
(3) Lender shall have received two (2) copies of Amended and
Restated Supplement A duly executed by each of the Borrowers.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS.
3.1 Each of the Borrowers hereby represents and warrants that:
(a) this Amendment and the Loan Agreement (including AMENDED AND
RESTATED SUPPLEMENT A) as amended hereby, constitute legal, valid and
binding obligations of the respective Borrowers and are enforceable
against each of the Borrowers in accordance with their respective terms;
(b) before and after giving effect to this Amendment, no Unmatured
Event of Default or Event of Default has occurred and is continuing; and
(c) the execution and delivery by each of the Borrowers of this
Amendment does not require the consent or approval of any Person.
3.2 Each of the Borrowers hereby reaffirms all agreements, covenants,
representations and warranties made by such Borrower in the Loan Agreement
and each of the Related Agreements to the extent the same are not amended
hereby and agrees that all such agreements, covenants, representations and
warranties shall be deemed to have been remade as of the date hereof and the
effective date of this Amendment.
4. REFERENCE TO AND EFFECT ON THE LOAN AGREEMENT AND RELATED AGREEMENTS.
4.1 Upon the effectiveness of this Amendment, each reference in the Loan
Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of
like import, and each reference in each of the Related Agreements to the
"Loan Agreement," shall in each case mean and be a reference to the Loan
Agreement as amended hereby.
4.2 Except as expressly set forth herein, (i) the execution and delivery
of this Amendment shall in no way affect any right, power or remedy of Lender
with respect to any Event of Default nor constitute a waiver of any provision
of the Loan Agreement or any of the Related Agreements and (ii) all terms and
conditions of the Loan Agreement, the Related Agreements and all other
documents, instruments, amendments and agreements executed and/or delivered
<PAGE>
by either or both of the Borrowers pursuant thereto or in connection
therewith shall remain in full force and effect and are hereby rectified and
confirmed in all respects. The execution and delivery of this Amendment by
Lender shall in no way obligate Lender, at any time hereafter, to consent to
any other amendment or modification of any term or provision of the Loan
Agreement or any of the Related Agreements.
5. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the internal laws (as opposed to conflicts of law provisions)
of the State of Illinois.
6. HEADINGS. Section headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
7. COUNTERPARTS. This Amendment may be executed by the parties hereto
on separate counterparts and each of said counterparts taken together shall
be deemed to constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS THEREOF, this Amendment has been duly executed as of the day
and year first written above.
OREGON METALLURGICAL CORPORATION
By_______________________________
Title:
TITANIUM INDUSTRIES, INC.
By_______________________________
Title:
BANKAMERICA BUSINESS CREDIT, INC.
By_______________________________
Vice President
<PAGE>
EXHIBIT A
TO
FIRST AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
AMENDED AND RESTATED SUPPLEMENT A
ATTACHED
<PAGE>
AMENDED AND RESTATED SUPPLEMENT A
TO
LOAN AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 19, 1994
AMONG
OREGON METALLURGICAL CORPORATION,
AND
TITANIUM INDUSTRIES, INC.
1. LOAN AGREEMENT REFERENCES. This AMENDED AND RESTATED SUPPLEMENT A. as it
may be amended, restated, supplemented or otherwise modified from time to
time, is a part of the Loan and Security Agreement dated as of September 19,
1994 (together with all amendments, restatements, modifications and
supplements thereto, the "Loan Agreement") among BANKAMERICA BUSINESS CREDIT,
INC., a Delaware corporation having its principal office at Two North Lake
Avenue, Suite 400, Pasadena, California ("Lender"), OREGON METALLURGICAL
CORPORATION, an Oregon corporation ("OREMET') and TITANIUM INDUSTRIES, INC.,
an Oregon corporation formerly known as New TI, Inc. ("TI") (OREMET and TI
being sometimes hereinafter referred to, individually, as a "Borrower" and,
collectively, as "Borrowers"). Terms used herein which are defined in the
Loan Agreement shall have the meaning ascribed to them therein.
2. REVOLVING CREDIT AMOUNTS; BORROWING BASE.
2.1 REVOLVING CREDIT AMOUNTS. The maximum amount of Revolving Loans which
Lender will make available to each Borrower (such amount is herein called,
with respect to each Borrower, such Borrower's "Revolving Credit Amount") is
(i) in the case of OREMET, $16,000,000 and (ii) in the case of TI, $8,000,000
(in each case, unless such amount is reduced or increased by Lender in its
sole discretion).
2.2 BORROWING BASES. The term "Borrowing Base," as used herein with
respect to each Borrower, shall mean:
(i) an amount (with respect to each Borrower, such Borrower's "Accounts
Receivable Availability") of up to 80% of the net amount (after
deduction of such reserves and allowances as Lender deems proper and
necessary) of such Borrower's Eligible Accounts Receivable, PLUS
(ii) an amount of up to the least of:
<PAGE>
(A) the sum of: (1) 50% of the net value (as determined by Lender and
after deduction of such reserves and allowances as Lender deems
proper and necessary) of Eligible Inventory of such Borrower
consisting of finished goods; (2) in he case of OREMET only, 50% of
the net value (as determined by Lender and after deduction of such
reserves and allowances as Lender deems proper and necessary) of
Eligible Inventory and such Borrower consisting of green tag scrap
and ticle alloys and mill products work-in-process; and (3) in the
case of OREMET only, 30% of the net value (as determined by Lender
and after deduction of such reserves and allowances as Lender deems
proper and necessary) of Eligible Inventory of such Borrower
consisting of sponge and usable remelt scrap;
(B) an amount equal to (1) in the case of OREMET, $10,000,000 and (2) in
the case of TI, $2,500,000; or
(C) an amount not exceeding at any time (i) in the case of OREMET, one
hundred twenty percent (120%) of such Borrower's Accounts
Receivable Availability at such time and (ii) in the case of TI,
one hundred percent (100%) of such Borrower's Accounts Receivable
Availability at such time.
2.3 LENDER'S RIGHTS. Each of the Borrowers agrees that nothing contained
in this AMENDED AND RESTATED SUPPLEMENT A (i) shall be construed as Lender's
agreement to resort or look to a particular type or item of Collateral of
such Borrower as security for any specific Loan or advance or in any way
limit Lender's right to resort to any or all of the Collateral of such
Borrower as security for any of the Liabilities of such Borrower, (ii) shall
be deemed to limit or reduce any Lien on any portion of such Collateral or
other security for the Liabilities or (iii) shall supercede SECTION 2.9 of
the Loan Agreement.
3. INTEREST
3.1 REVOLVING LOANS.
3.1.1 INTEREST TO MATURITY. The unpaid principal balance of the
Revolving loans (other than Overdraft Loans and Over Advances) shall bear
interest to maturity at a rate per annum determined by reference to the
Alternate Reference Rate or the Interbank Rate (Reserve Adjusted). Subject
to the other terms and provisions of this AMENDED AND RESTATED SUPPLEMENT A
and of the Loan Agreement, (i) the applicable basis for determining the
rate of interest applicable to each Revolving Loan shall be selected by
the applicable Borrower at the time a notice of borrowing, continuation or
conversion, as the case may be, with respect to such Revolving Loan is
given by such Borrower pursuant to SECTION 2.5 of the Loan
<PAGE>
Agreement, and (ii) all Revolving Loans (other than Overdraft Loans and
Over Advances shall bear interest as follows:
(1) if a Reference Rate Revolving Loan, then at a per annum rate
equal to the sum of the Alternate Reference Rate in effect from time to
time, PLUS the Reference Rate Margin in effect at such time; or
(2) if a Eurodollar Rate Revolving Loan, then at a per annum rate
equal to the sum of the Interbank Rate (Reserve Adjusted) for the
applicable Interest Period, PLUS the Eurodollar Margin in effect from
time to time during such Interest Period;
PROVIDED, HOWEVER, that notwithstanding the foregoing or anything to
the contrary contained in this AMENDED AND RESTATED SUPPLEMENT A or the
Loan Agreement, but subject in any event to SECTION 3.1.2 hereof, at
any time that (i) the Liabilities to Net Worth Ratio is equal to or
greater than 2.00 to 1.00 OR (ii) the Grid Ratio for the fiscal quarter
of OREMET ending immediately prior to such time is equal to or less
than 2.00 to 1.00, the entire unpaid principal balance of the Revolving
Loans of each of the Borrowers (other than Overdraft Loans and Over
Advances) shall bear interest at a rate per annum equal to the
Alternate Reference Rate from time to time in effect PLUS
one-and-one-half percent (1.5%).
3.2.1 DEFAULT RATE. If any amount of the Revolving Loans of either of
the Borrowers is not paid when due, whether by acceleration or otherwise,
the entire unpaid principal balance of the Revolving Loans of each of the
Borrowers (other than Overdraft Loans and Over Advances) shall bear
interest until paid at a rate per annum equal to:
(A) the greater of (i) three and one-half percent (3.5%) above the
Alternate Reference Rate from time to time in effect and (ii) three and
one-half percent (3.5%) above the Alternate Reference Rate in effect at
the time such amount became due; and
(B) in the case of Eurodollar Rate Revolving Loans, the greater of
(i) two percent (2%) above the rate applicable to such Loan at the time
such amount became due and (ii) three and one-half percent (3.5%)
percent in excess of the Alternate Reference Rate from time to time in
effect.
3.2 OVERDRAFT LOANS; OVER ADVANCES. Overdraft Loans and Over Advances
shall bear interest at the rate(s) determined pursuant to SECTION 2.7 or
SECTION 2.8 of the Loan Agreement, as applicable.
3.3 COMPUTATION. Interest shall be calculated on the basis of a year
consisting of 360 days and paid for actual days elapsed.
<PAGE>
Changes in any interest rate provided for herein which are due to changes in
the Alternate Reference Rate shall take effect on the date of the change in
the Alternate Reference Rate.
3.4 PAYMENT. Until maturity, interest on the Loans shall be payable on each
Monthly Payment Date, and at maturity. After maturity, whether by
acceleration or otherwise, accrued interest shall be payable on demand.
4. ADDITIONAL COVENANTS. From the date of the Loan Agreement and thereafter
until all of the Liabilities of each of the Borrowers are indefeasibly paid
in full in cash, each of the Borrowers agrees that, unless Lender otherwise
consents in writing, it will:
4.1 LIABILITIES TO NET WORTH COVERAGE.
(a) Not permit the Liabilities to Net Worth Ratio of OREMET to exceed
2.00 to 1.00; and
(b) Not permit the Liabilities to Net Worth Ratio of TI to exceed
(i) 4.00 to 1.00, at any time during the period commencing on the Closing
Date and ending on December 30, 1995; (ii) 3.50 to 1.00 at any time during
the period commencing on December 31, 1995 and ending on December 30, 1995;
and (iii) 3.00 to 1.00, at any time thereafter.
4.2 NET WORTH
(a) Not permit the Net Worth of OREMET to be less than (i) $65,000,000,
at any time during the period commencing on the Closing Date and ending on
December 30, 1995; (ii) $56,000,000, at any time during the period
commencing on December 31, 1995 and ending on December 30, 1996; and
(iii) $67,500,000, at any time thereafter; and
(b) Not permit the Net Worth of TI to be less than (i) $3,700,000, at
any time during the period commencing on the Closing Date and ending on
December 30, 1995; (ii) $4,600,000, at any time during the period
commencing on December 31, 1995 and ending on December 30, 1996; and
(iii) $5,600,000, at any time thereafter.
4.3 CAPITAL EXPENDITURES. Not, and not permit any Subsidiary of such
Borrower to, purchase or otherwise acquire (including, without limitation,
acquisition by way of Capitalized Lease), or commit to purchase or otherwise
acquire, any fixed asset if, after giving effect to such purchase or other
acquisition, the aggregate cost of all fixed assets purchased or otherwise
acquired (i) by OREMET and its Subsidiaries (other than TI and its
Subsidiaries) on a consolidated basis (x) during the period commencing on the
Closing Date and ending on December 31, 1994, would exceed $750,000 and
(y) in any one fiscal year would exceed
<PAGE>
$4,500,000 or (ii) by TI and its Subsidiaries on a consolidated basis in any
one fiscal year would exceed $500,000.
4.4 INTEREST COVERAGE.
(a) Not permit the Grid Ratio for any fiscal quarter of TI ending after
September 30, 1994 and for any fiscal year of TI ending after December 31,
1994 to be less than 2.00 to 1.00.
(b) Not permit the ratio of (i) earnings before interest expense,
provision for Taxes and depreciation to (ii) interest expense, in each case
of OREMET and its consolidated Subsidiaries for the fiscal quarter ending as of
December 31, 1994, to be less than 2.75 to 1.00.
(c) Not permit the Grid Ratio of OREMET to be less than 2.00 to 1.00 for
any fiscal quarter or fiscal year, respectively, ending after December 31,
1994.
OREGON METALLURGICAL CORPORATION
By:
-------------------------------
VICE PRESIDENT
TITANIUM INDUSTRIES, INC.
By:
-------------------------------
ASSISTANT TREASURER
BANKAMERICA BUSINESS CREDIT, INC.
By:
-------------------------------
VICE PRESIDENT
<PAGE>
OREGON METALLURGICAL CORPORATION
EXHIBIT 11.1
Earnings per share computation
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
(in thousands except per share data)
1995 1994
------- -------
<S> <C> <C>
Net income (loss) $ 535 $(1,085)
======= =======
Weighted average shares outstanding 10,894 10,889
Weighted average share equivalents assumed
issued from Excess Benefit Plan 116 --
Weighted average share equivalents assumed
issued from exercise of warrants 11 --
Weighted average share equivalents assumed
issued as part of Employee Compensation Policy 34 --
------- -------
Weighted average share and share
equivalents outstanding 11,055 10,889
======= =======
Net income (loss) per share $ 0.05 $ (0.10)
======= =======
</TABLE>
Earnings per share computed on both the primary and fully diluted bases are
the same.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OREGON
METALLURGICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF
MARCH 31, 1995 AND THE RELATED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE
THREE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 525
<SECURITIES> 0
<RECEIVABLES> 23,783
<ALLOWANCES> (880)
<INVENTORY> 56,305
<CURRENT-ASSETS> 81,155
<PP&E> 99,811
<DEPRECIATION> (63,026)
<TOTAL-ASSETS> 119,698
<CURRENT-LIABILITIES> 27,183
<BONDS> 20,479
<COMMON> 10,896
0
0
<OTHER-SE> 57,128
<TOTAL-LIABILITY-AND-EQUITY> 119,698
<SALES> 30,838
<TOTAL-REVENUES> 30,838
<CGS> 25,506
<TOTAL-COSTS> 25,506
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 575
<INCOME-PRETAX> 886
<INCOME-TAX> 351
<INCOME-CONTINUING> 535
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 535
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
