<PAGE> 1
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 quarter ended June 30, 1996
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-10126
-------
Tremont Corporation
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 76-0262791
- -------------------------------- --------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1999 Broadway, Suite 4300, Denver, Colorado 80202
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 296-5652
-----------------------
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
--- ---
Number of shares of common stock outstanding on July 31, 1996: 7,413,972
------------------
<PAGE> 2
TREMONT CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
number
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - December 31, 1995 and 3-4
June 30, 1996
Consolidated Statements of Operations - Three months and six 5
months ended June 30, 1995 and 1996
Consolidated Statement of Stockholders' Equity - Six months ended 6
June 30, 1996
Consolidated Statements of Cash Flows - Six months ended 7-8
June 30, 1995 and 1996
Notes to Consolidated Financial Statements 9-12
Item 2. Management's Discussion and Analysis of Financial Condition 13-24
and Results of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 25
Item 4. Submission of Matters to a Vote of Security Holders. 25
Item 6. Exhibits and Reports on Form 8-K. 26
</TABLE>
2
<PAGE> 3
TREMONT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31, June 30,
ASSETS 1995* 1996
-------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,650 $ 69,003
Accounts and notes receivable 4,104 4,317
Refundable income taxes 225 0
Receivable from related parties 274 622
Prepaid expenses 257 141
-------- --------
Total current assets 7,510 74,083
-------- --------
Other assets:
Investment in NL 31,586 31,390
Investment in TIMET 49,474 85,410
Investment in joint ventures 4,795 5,135
Receivable from related parties 27,990 5,228
Deferred income taxes 248 530
Other 12,520 9,337
-------- --------
Total other assets 126,613 137,030
-------- --------
Net property and equipment 755 730
-------- --------
$134,878 $211,843
======== ========
</TABLE>
- ------------------------------
* Reclassified
3
<PAGE> 4
TREMONT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands)
<TABLE>
<CAPTION>
December 31, June 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995* 1996
------------ ----------
<S> <C> <C>
Current liabilities:
Notes payable $ 2,500 $ 0
Accounts payable and accrued liabilities 4,631 6,393
Income taxes 0 2,644
Payable to related parties 491 44
-------- --------
Total current liabilities 7,622 9,081
-------- --------
Noncurrent liabilities:
Payable to related parties 3,450 0
Insurance claims and claim expenses 12,778 12,563
Accrued postretirement benefit cost 22,123 22,078
Deferred income taxes 0 11,285
Other 4,000 4,120
-------- --------
Total noncurrent liabilities 42,351 50,046
-------- --------
Minority interest 1,246 1,429
-------- --------
Stockholders' equity:
Common stock 7,550 7,586
Additional paid-in capital 231,815 272,875
Accumulated deficit (146,796) (120,458)
Adjustments:
Currency translation (3,145) (4,008)
Marketable securities (62) 97
Pension liabilities (2,107) (1,209)
-------- --------
87,255 154,883
Less treasury stock, at cost 3,596 3,596
-------- --------
Total stockholders' equity 83,659 151,287
-------- --------
$134,878 $211,843
======== ========
</TABLE>
Commitments and contingencies (Note 7)
- ---------------------------
* Reclassified
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
TREMONT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
------------------------ ------------------------
1995* 1996 1995* 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Equity in earnings (loss) of:
TIMET $ (1,636) $ 3,317 $ (4,608) $ 4,641
NL Industries 2,749 1,201 4,167 2,651
Other joint ventures - 673 - 673
--------- --------- --------- ---------
1,113 5,191 (441) 7,965
Gain on sale of TIMET stock - 27,599 - 27,599
Corporate expenses, net (67) 2,351 542 2,717
Interest expense - 144 - 274
--------- --------- --------- ---------
Income (loss) before income taxes and
minority interest 1,180 30,295 (983) 32,573
Income tax expense - 6,053 - 6,053
Minority interest - (125) - (182)
--------- --------- --------- ---------
Net income (loss) $ 1,180 $ 24,117 $ (983) $ 26,338
========= ========= ========= =========
Net income (loss) per common share $ 0.16 $ 3.14 $ (0.13) $ 3.44
========= ========= ========= =========
Weighted average common shares 7,353 7,675 7,353 7,646
========= ========= ========= =========
</TABLE>
- ----------------------
*Reclassified
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
TREMONT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Six months ended June 30, 1996
(In thousands)
<TABLE>
<CAPTION> Adjustments
Additional ------------------------------------ Total
Common paid-in Accumulated Currency Marketable Pension Treasury Stockholders'
stock capital deficit translation securities liabilities stock equity
----- ------- ------- ----------- ---------- ----------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $7,550 $231,815 $(146,796) $(3,145) $(62) $(2,107) $(3,596) $83,659
Net income - - 26,338 - - - - 26,338
Reduction of interest
in TIMET, net (Note 1) - 40,437 - (179) - 898 - 41,156
Common stock issued 36 567 - - - - - 603
Adjustments, net - - - (684) 159 - - (525)
Other - 56 - - - - - 56
------ -------- --------- ------- ---- ------- ------- --------
Balance at June 30, 1996 $7,586 $272,875 $(120,458) $(4,008) $ 97 $(1,209) $(3,596) $151,287
====== ======== ========= ======= ==== ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
TREMONT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six months ended
June 30,
---------------------
1995* 1996
------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (983) $ 26,338
Postretirement benefits (496) (45)
Losses (earnings) of affiliates in excess
of distributions 441 (5,818)
Gain on sale of TIMET stock - (27,599)
Deferred income taxes - 3,407
Other, net (16) 206
Change in assets and liabilities:
Accounts and notes receivable (494) (179)
Accounts with related parties (704) (494)
Accounts payable and accrued liabilities (397) 1,762
Income taxes (6) 2,869
Other, net (243) (99)
Dispositions of marketable trading securities 3,244 -
------- --------
Net cash provided from operating activities 346 348
------- --------
Cash flows from investing activities:
Loans to related party:
Loans (2,500) -
Collections - 22,460
Proceeds from disposition of:
TIMET common stock, net - 46,898
Property held for sale - 3,000
Investment in TIMET (1,148) 0
Purchases of securities (1,184) (1,280)
Other, net 192 274
------- --------
Net cash provided from (used by)
investing activities (4,640) 71,352
------- --------
</TABLE>
7
<PAGE> 8
TREMONT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In thousands)
<TABLE>
<CAPTION>
Six months ended
June 30,
---------------------
1995* 1996
------- --------
<S> <C> <C>
Cash flows from financing activities:
Loans from related party:
Loans $ 2,500 $ 50
Repayments - (3,500)
Reductions of indebtedness - (2,500)
Other - 603
------- --------
Net cash provided from (used by) financing activities 2,500 (5,347)
------- --------
Net increase (decrease) in cash and cash equivalents (1,794) 66,353
Balance at beginning of period 3,809 2,650
------- --------
Balance at end of period $ 2,015 $ 69,003
======= ========
Supplemental disclosures - cash paid (received) for:
Interest $ - $ 182
Income taxes 6 (223)
</TABLE>
- -----------------------
* Reclassified
See accompanying notes to consolidated financial statements.
8
<PAGE> 9
TREMONT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and basis of presentation:
Tremont Corporation is principally a holding company with operations
conducted through its 30%-owned subsidiary, Titanium Metals Corporation
("TIMET"), and 18%-owned affiliate, NL Industries, Inc. Contran Corporation
holds, directly or through subsidiaries, approximately 44% of Tremont's
outstanding common stock and 55% of NL's outstanding common stock.
Substantially all of Contran's outstanding voting stock is held by trusts
established for the benefit of the children and grandchildren of Harold C.
Simmons, of which Mr. Simmons is sole trustee. Mr. Simmons may be deemed to
control each of Contran, NL and Tremont.
On February 15, 1996, TIMET acquired the titanium metals businesses of
IMI plc ("IMI") and, on June 4, 1996, completed an initial public offering of
6.2 million shares of its common stock (the "Offerings"). These transactions
reduced Tremont's ownership in TIMET from 75% at December 31, 1995 to 30%. See
Note 3. As a result of its reduced ownership level, Tremont has ceased to
consolidate TIMET and instead reports its interest in TIMET by the equity
method of accounting. Tremont accounted for these transactions as a reduction
of ownership interest in an affiliate and, accordingly, recorded a $41.2
million net increase to stockholders' equity in the six months ended June 30,
1996. The change in stockholders' equity resulted from the difference between
the book values of Tremont's current 30% interest in TIMET and its 75% interest
in TIMET before the acquisition and initial public offering.
The consolidated balance sheet of Tremont Corporation and subsidiaries
(collectively, the "Company") at December 31, 1995 has been derived from the
Company's audited consolidated financial statements at that date. The
consolidated balance sheet at June 30, 1996, the consolidated statements of
operations and cash flows for the interim periods ended June 30, 1995 and 1996
and the consolidated statement of stockholders' equity for the interim period
ended June 30, 1996 have been prepared by the Company, without audit. In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the consolidated financial position,
results of operations and cash flows have been made. Prior period amounts have
been reclassified to conform to the current year presentation. The results of
operations for the interim periods are not necessarily indicative of the
operating results for a full year or of future operations.
Certain information normally included in financial statements prepared
in accordance with generally accepted accounting principles has been condensed
or omitted. The accompanying consolidated financial statements should be read
in conjunction with the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 (the "1995 Annual Report").
Note 2 - Income (loss) per common share:
Income (loss) per common share is based upon the weighted average
number of common shares and equivalents outstanding. Common stock equivalents,
consisting of
9
<PAGE> 10
nonqualified stock options, are excluded from the computation when their effect
is immaterial or antidilutive.
Note 3 - Unconsolidated affiliates and joint ventures:
See Item 2 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for summarized information relating to the
results of operations, financial position and cash flows of TIMET and NL, which
information is incorporated herein by reference.
TIMET
Tremont holds 9.5 million shares or 30% of TIMET's outstanding common
stock. At June 30, 1996, the net carrying amount of the Company's investment
in TIMET was about $9.00 per share while the market price of TIMET common stock
on that date was $25.875 per share.
On February 15, 1996, TIMET acquired IMI's titanium metals businesses
(the "IMI Titanium Acquisition"). IMI previously conducted its titanium
businesses principally through its wholly-owned United Kingdom subsidiary, IMI
Titanium Ltd. (now known as TIMET UK), and its United States subsidiary, IMI
Titanium, Inc. (now known as TIMET Castings). TIMET UK is Western Europe's
largest producer of titanium ingot and mill products for aerospace and
industrial applications. TIMET Castings manufactures titanium castings
principally for aerospace applications and golf club heads. IMI conveyed all
of its titanium related businesses to TIMET in exchange for 9.5 million newly
issued shares of TIMET's Class A common stock valued at $70 million, and TIMET
issued $20 million of TIMET's subordinated debt to IMI in exchange for a like
amount of debt previously owed to IMI by its U.K. subsidiary. In connection
with the IMI Titanium Acquisition, Tremont was granted an option expiring
February 15, 1999 to purchase up to an additional 2 million shares of TIMET's
common stock from IMI for $16 million. Tremont assigned to UTSC the right to
acquire from IMI for $4 million up to .5 million shares of TIMET's common stock
under the option. TIMET accounted for the IMI Titanium Acquisition by the
purchase method of accounting.
The following Tremont pro forma financial information has been
prepared assuming the IMI Titanium Acquisition occurred at the beginning of
fiscal 1995. The pro forma financial information is not necessarily indicative
of the results which actually would have been obtained if the IMI Titanium
Acquisition had been effected at such earlier date or of the results which may
be obtained in the future.
<TABLE>
<CAPTION>
Six months ended
June 30,
------------------------------------
1995 1996
------- ------
(In millions, except per share data)
<S> <C> <C>
Equity in earnings (loss) of:
TIMET $ (8.4) $ 4.5
NL 4.2 2.7
Other joint ventures - .7
------- ------
$ (4.2) $ 7.9
======= ======
Net income (loss) $ (4.7) $ 26.2
======= ======
Net income (loss) per common share $ (.64) $ 3.43
======= ======
</TABLE>
10
<PAGE> 11
On June 4, 1996, TIMET completed the sale of 6.2 million shares of its
common stock to the public pursuant to a registration statement filed with the
Securities and Exchange Commission. TIMET's net proceeds from the Offerings
approximated $132 million. TIMET used approximately $42.5 million of the net
proceeds to repay existing indebtedness to stockholders ($22.5 million to
Tremont and $20 million to IMI) and $82 million to repay indebtedness under its
U.S. credit facility, and the 600,000 shares of NL stock securing Tremont's
guarantee of such U.S. credit facility were released.
NL Industries
Tremont holds 9.1 million shares or 18% of NL's outstanding common
stock. At June 30, 1996, the net carrying amount of the Company's investment
in NL was about $3.50 per share while the market price per share of NL common
stock on June 30, 1996 and August 12, 1996 was $12.25 and $10.00, respectively.
Joint Ventures
Investment in joint ventures represents the Company's 75% interest in
TRECO L.L.C., which is principally comprised of a (i) 32% equity interest in
Basic Investments, Inc. ("BII"), which, among other things, provides utility
services in the industrial park where one of TIMET's plants is located, and a
(ii) 12% interest in Victory Valley Land Company, L.P. ("VVLC"), which is
actively engaged in efforts to develop certain real estate. BII, through a
wholly-owned subsidiary, owns an additional 50% interest in VVLC.
Note 4 - Accounts payable and accrued liabilities:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
-------- --------
(In thousands)
<S> <C> <C>
Accounts payable $ 35 $ 31
Accrued liabilities:
Postretirement benefit cost 1,819 1,819
Employee benefits - 2,029
Other 2,777 2,514
-------- --------
$ 4,631 $ 6,393
======== ========
</TABLE>
11
<PAGE> 12
Note 5 - Income taxes:
The difference between the income tax expense attributable to the
Company's income (loss) before income taxes and minority interest and the
amounts that would be expected using the U.S. federal statutory income tax rate
of 35% is presented below.
<TABLE>
<CAPTION>
Six months ended
June 30,
-------------------------
1995 1996
------- ---------
(In thousands)
<S> <C> <C>
Expected income tax expense (benefit) $ (344) $ 11,401
Incremental tax and rate differences on equity
in income of companies not included in the
consolidated tax group - (113)
Adjustment of deferred tax valuation allowance 351 (6,192)
U.S. state income taxes, net - 650
Other, net (7) 307
------- ---------
Income tax expense $ - $ 6,053
======= =========
</TABLE>
During the second quarter of 1996, the Company utilized all of its
U.S. net operating loss ("NOL") carryforwards and, at June 30, 1996, the
Company had no outstanding NOL's for financial reporting purposes.
Note 6 - Related party transactions:
Current receivables from related parties at December 31, 1995 and June
30, 1996 principally represent amounts due from NL and Baroid Corporation under
insurance loss sharing arrangements, which business is in runoff. Noncurrent
receivables from related parties at December 31, 1995 include $22.5 million of
loans and interest due from TIMET with the balance principally representing
additional amounts due under loss sharing arrangements. In connection with the
completion of the Offerings, TIMET repaid all $22.5 million of loans and
interest owed to Tremont. Noncurrent receivables from related parties at June
30, 1996 principally represent amounts due under loss sharing arrangements.
Current payables to related parties principally include amounts due to NL and
TIMET under intercorporate services agreements and interest due to Contran at
December 31, 1995. Noncurrent payables to related parties at December 31, 1995
represent loans from Contran, which loans were repaid in 1996.
Note 7 - Commitments and contingencies:
For information concerning certain legal proceedings, income tax and
other contingencies related to the Company, TIMET and NL, see (i) Item 2 --
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," (ii) Part II, Item 1 -- "Legal Proceedings," (iii) the 1995 Annual
Report, including certain information concerning TIMET's and NL's legal
proceedings incorporated therein by reference, and (iv) Tremont's quarterly
report on Form 10-Q for the period ended March 31, 1996.
12
<PAGE> 13
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Forward - Looking Information
The statements contained in this Report on Form 10-Q ("Quarterly
Report") which are not historical facts, including, but not limited to,
statements found under the captions "Results of Operations" and "Liquidity and
Capital Resources", both contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations", are forward-looking statements
that involve a number of risks and uncertainties. The actual results of the
future events described in such forward-looking statements in this Quarterly
Report could differ materially from those stated in such forward-looking
statements. Among the factors that could cause actual results to differ
materially are the risks and uncertainties discussed in the Quarterly Report
and in the 1995 Annual Report, including, without limitation, the portions of
such reports under the captions referenced above, and the uncertainties set
forth from time to time in the Company's, TIMET's and NL's public reports and
statements.
RESULTS OF OPERATIONS:
Tremont Corporation is principally a holding company with operations
conducted through TIMET and NL. The Company currently holds 30% of the
outstanding common stock of TIMET and 18% of NL's outstanding common stock.
The results of Tremont, TIMET, NL and other items are discussed below.
Corporate expenses, net and other items
Tremont's corporate expenses, net for the three month and six month
periods ended June 30, 1996 include a $2 million special compensation accrual
to an executive officer of the Company as approved by the Company's Board of
Directors. Certain amounts of the compensation award will be deferred under an
agreement between the Company and the executive officer.
In connection with the Offerings in June 1996, Tremont sold 2.2
million shares of TIMET common stock with net proceeds of approximately $47
million, resulting in a pre-tax gain of $27.6 million.
Income taxes
The Company's income tax rate in the first half of 1996 varied from the
U.S. statutory rate principally due to a reduction in the deferred income tax
valuation allowance to reflect the expected utilization of its U.S. NOL's in
1996.
During the second quarter of 1996, the Company utilized all of its
U.S. NOL's and, at June 30, 1996, the Company had no outstanding NOL's for
financial reporting purposes.
13
<PAGE> 14
TIMET
The results of operations for 1996 include the results of the IMI
titanium businesses acquired on February 15, 1996. All price and volume
comparisons are pro forma assuming the IMI Titanium Acquisition occurred at the
beginning of fiscal 1995.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
----------------------- -----------------------
1995 1996 Change 1995 1996 Change
------ ------- ------ ------- ------- -------
(In millions, except percentages and price data)
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 45.6 $ 118.8 $ 73.2 $ 87.3 $ 226.4 $ 139.1
------ ------- ------ ------- ------- -------
Operating income (loss) $ 1.0 $ 13.7 $ 12.7 $ (0.5) $ 20.6 $ 21.1
General corporate
income (expense) (0.3) 0.5 0.8 (0.2) 0.4 0.6
Interest expense 2.8 3.3 (0.5) 5.3 6.9 (1.6)
------ ------- ------ ------- ------- -------
Income (loss) before
income taxes and
preacquisition earnings (2.1) 10.9 13.0 (6.0) 14.1 20.1
Income tax expense 0.1 2.8 (2.7) 0.1 3.5 (3.4)
Preacquisition earnings - - - - (.4) (.4)
------ ------- ------ ------- ------- -------
Net income (loss) $ (2.2) $ 8.1 $ 10.3 $ (6.1) $ 10.2 $ 16.3
------ ------- ------ ------- ------- -------
Tremont's equity in TIMET's
income (loss) $ (1.6) $ 3.3 $ 4.9 $ (4.6) $ 4.6 $ 9.2
------ ------- ------ ------- ------- -------
Mill products:
Sales volume (in pounds) 5.2 6.2 1.0 10.4 12.5 2.1
Average price per pound $12.50 $ 14.54 $ 2.04 $ 11.89 $ 14.01 $ 2.12
Percent changes:
Mill product sales volume +19% +20%
Average selling prices +22% +20%
</TABLE>
TIMET's operating income in the second quarter and first half of 1996
improved significantly from the comparable periods in 1995. The improvement
was principally driven by price and volume increases in the commercial
aerospace market, as well as continuing growth in demand for titanium products
across all market segments. For the first half of 1996, sales volume of
titanium mill products increased to 12.5 million pounds compared to 10.4
million pounds in the year-ago period. Average selling prices in the first
half of 1996 were up approximately 20% over the first half of 1995 and second
quarter average selling prices were approximately 5% higher than the first
quarter of 1996.
The selling price increases reflect both the pass-through of cost
increases, particularly raw material costs, and real price improvement
associated with increased market demand.
14
<PAGE> 15
Average selling prices per mill product pound is also effected by changes in
product mix. Although TIMET and the titanium industry are continuing to
experience increases in the cost of certain raw materials, TIMET's increased
selling prices more than offset those cost increases. Prices on recent orders
for titanium products have continued to increase relative to 1995 levels and
TIMET expects this trend to continue through 1996. TIMET's backlog of firm
orders increased to $341 million at June 30, 1996, from $213 million at
December 31, 1995 (including $78 million related to the IMI titanium
businesses).
Operating levels at TIMET's plants in the first half of 1996 were
higher than the same period in 1995 and contributed to the better operating
results. The VDP titanium sponge plant operated near its practical capacity of
20 million pounds annually in the first half of 1996 compared to about 75% of
practical capacity in 1995. TIMET presently expects its VDP plant to operate
near practical capacity in 1996 if current conditions continue. TIMET
restarted production of titanium sponge at its original Kroll-leach facility
during July in response to demand for certain grades of titanium sponge. TIMET
presently intends to increase Kroll-leach titanium sponge production to at
least 4 million pounds of annual production. Costs to restart the Kroll-leach
facility were $1 million in the first half of 1996 and are expected to
aggregate $1.8 million for the full year. TIMET's overall mill product
capacity utilization for the first six months of 1996 approximated 75%.
Depreciation expense increased $2.7 million in the first half of 1996 over the
year-ago period principally as a result of the IMI Titanium Acquisition.
TIMET recorded special charges to operating income of $.1 million and
$4.3 million in the second quarter and first half of 1996, respectively,
related to the IMI Titanium Acquisition. Such charges included $3 million
($1.5 million common stock and $1.5 million cash) related to compensation of
certain of TIMET's officers in consideration for their services in connection
with the IMI Titanium Acquisition, and $1.3 million related to integration
costs. TIMET expects integration related special charges during the balance of
1996 to be less than $1 million.
Interest expense in the second quarter and first half of 1996 was
higher than the year-ago periods principally due to higher average borrowings
under TIMET's U.S. credit agreement and the $20 million of subordinated debt
issued to IMI in connection with the IMI Titanium Acquisition. Interest
expense is expected to be substantially reduced in the last half of 1996
compared to the first half of the year due to completion of the Offerings.
See Note 3 to the Consolidated Financial Statements regarding the IMI
Titanium Acquisition and the Offerings.
TIMET's income tax rate in the first half of 1995 varied from the U.S.
statutory rate due to losses which resulted in temporary differences between
book and taxable income for which recognition of a deferred tax asset was not
considered appropriate at the time. TIMET's income tax rate in the first half
of 1996 varied from the U.S. statutory rate principally due to a reduction in
the deferred tax valuation allowance to reflect the expected utilization of a
portion of its U.S. NOL's in 1996.
TIMET may further release a portion of its deferred tax asset
valuation allowance later in 1996, resulting in a tax benefit, if it concludes
that the "more likely than not" realization criteria of SFAS No. 109 are met.
In making its assessment of realizability, TIMET will continue to consider a
number of factors, including the length of time it has remained profitable, its
backlog level, general improvement in overall industry operating conditions,
the cyclicality of the commercial aerospace market and business fundamentals in
TIMET's key market sectors. When preparing future financial statements, TIMET
will evaluate its strategic and business
15
<PAGE> 16
plans, in light of evolving business conditions, and the valuation allowance
will be adjusted for future expectations resulting from that process, to the
extent different from those inherent in the valuation allowance as of June 30,
1996.
At June 30, 1996, TIMET had, for financial reporting purposes, U.S.
NOL's of approximately $34 million. The utilization of TIMET's NOL's is
subject to an annual limitation of approximately $15 million.
NL Industries
The Company's 18% interest in NL is reported by the equity method.
Tremont reports its 18% interest in NL by the equity method due to the fact
that Tremont and NL may be deemed to be under common control by reason of stock
ownership and common directors and executive officers. The information
included below relating to the financial position, results of operations and
liquidity and capital resources of NL has been summarized from reports filed
with the Securities and Exchange Commission by NL (File No. 1-640), which
reports contain more detailed information concerning NL, including complete
financial statements on NL's historical basis of accounting.
Tremont's equity in earnings of NL differs from the amount that would
be expected by applying Tremont's ownership percentage to NL's
separately-reported earnings because of the effect of amortization of purchase
accounting adjustments made by Tremont in conjunction with the acquisitions of
its interest in NL. Amortization of such basis differences generally reduces
earnings attributable to NL as reported by Tremont.
16
<PAGE> 17
NL's chemical operations are conducted in two business segments -- Ti2
conducted by Kronos and specialty chemicals conducted by Rheox.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------- -------------------------
1995 1996 Change 1995 1996 Change
---- ---- ------ ---- ---- ------
(In millions, except percentages)
<S> <C> <C> <C> <C> <C>
Net sales:
Kronos $ 249.4 $ 228.3 -8% $ 466.7 $ 434.6 -7%
Rheox 34.1 34.9 +2% 67.6 69.0 +2%
------- ------- ------- -------
$ 283.5 $ 263.2 -7% $ 534.3 $ 503.6 -6%
======= ======= ======= =======
Operating income:
Kronos $ 47.1 $ 25.4 -46% $ 79.5 $ 54.9 -31%
Rheox 10.4 10.7 +2% 20.0 23.1 +16%
------- ------- ------- -------
57.5 36.1 -37% 99.5 78.0 -22%
General corporate items:
Securities earnings, net 2.0 1.1 4.4 2.4
Expenses, net (8.2) (1.7) (12.8) (6.6)
Interest expense (21.1) (18.5) (41.7) (37.6)
------- ------- ------- -------
30.2 17.0 $(13.2) 49.4 36.2 $(13.2)
Income tax expense (9.1) (5.1) (14.8) (10.8)
Minority interest (.1) - (.5) -
------- ------- ------- -------
Net income (loss) $ 21.0 $ 11.9 $ (9.1) $ 34.1 $ 25.4 $ (8.7)
======= ======= ====== ======= ======= ======
Tremont's equity in NL's income (loss),
including amortization of
basis differences $ 2.7 $ 1.2 $ (1.5) $ 4.2 $ 2.7 $ (1.5)
======= ======= ====== ======= ======= ======
Percent changes in TiO2:
Sales volume +4% -4%
Average selling prices (in billing currencies) -7% -2%
</TABLE>
Kronos' TiO2 operating income in the second quarter and first half of
1996 decreased from the comparable periods in 1995 due to lower average TiO2
selling prices and lower production volumes. Kronos' average TiO2 selling
prices for the second quarter of 1996 were 7% lower than the second quarter of
1995 and 6% lower than the first quarter of 1996. Selling prices at the end of
the second quarter of 1996 were 2% lower than the average for the quarter.
Kronos' second quarter sales volumes increased 4% compared with the second
quarter of 1995 due to improved U.S. sales volumes. Sales volumes in the first
half of 1996 decreased 4% compared to the year-earlier period.
Rheox's operating income for the second quarter of 1996 was slightly
higher than the year-earlier period primarily due to higher sales volumes.
Rheox's operating income in the first
17
<PAGE> 18
half of 1996 includes a first-quarter $2.7 million gain related to the
curtailment of certain U.S. employee pension benefits.
Based on the continuing decline in TiO2 selling prices during the
second quarter and the current TiO2 industry pricing outlook, NL expects its
earnings for the third and fourth quarters of 1996 will be significantly lower
than NL's earnings for the second quarter.
A significant amount of sales are denominated in currencies other than
the U.S. dollar, and fluctuations in the value of the U.S. dollar relative to
other currencies decreased the dollar value of sales for the second quarter and
first half of 1996 by $10 million and $4 million, respectively, compared to the
comparable 1995 periods.
Securities earnings were lower due to lower average balances available
for investment. Net corporate expenses were lower in the second quarter and
first half of 1996 compared to the same periods in 1995 due to lower
environmental remediation costs and to a $2.8 million gain recognized in the
second quarter of 1996 related to the settlement of certain litigation in which
NL was a plaintiff. Interest expense was lower primarily due to lower variable
interest rates.
LIQUIDITY AND CAPITAL RESOURCES:
Tremont
Tremont, with its 30% interest in TIMET and 18% interest in NL at June
30, 1996, is principally a holding company. At June 30, 1996, Tremont had
parent level cash and cash equivalents of approximately $68.3 million, and its
9.1 million shares of NL common stock and 9.5 million shares of TIMET common
stock had aggregate market values of about $111 million and $246 million,
respectively. NL paid a cash dividend in the first and second quarters of 1996
at the rate of $.10 per NL share per quarter. In July 1996, NL's Board of
Directors declared a quarterly dividend of $.10 per share to be paid in
September 1996. The indentures governing NL's Senior Notes contain minimum
interest coverage requirements and other covenants that restrict NL's ability to
pay dividends. The indentures also limit the cumulative dividends paid since
the issuance of the Senior Notes to no more than one-half of NL's aggregate
consolidated net income, as defined, during the same period. There can be no
assurance that NL will continue to meet these requirements in the future.
Tremont's intercompany loans plus accrued interest due from TIMET
aggregating $22.5 million were repaid with a portion of the net proceeds TIMET
received from the Offerings. Additionally, in connection with the Offerings,
Tremont sold 2.2 million shares of TIMET common stock with net proceeds of
approximately $47 million.
In June 1996, Tremont repaid the amount outstanding under the
revolving credit agreement with Contran Corporation and terminated the
facility. In June 1995, Tremont borrowed $2.5 million under a margin loan with
an investment bank which was repaid on March 28, 1996. Tremont also had
approximately $9 million of letters of credit outstanding under a third party
credit agreement at June 30, 1996.
The Company periodically evaluates its liquidity requirements, capital
needs and availability of resources in view of, among other things, its
alternative uses of capital, its debt service requirements and estimated future
operating cash flows. As a result of this process, the Company has in the past
and may in the future seek to raise additional capital, restructure
18
<PAGE> 19
ownership interests of subsidiaries and affiliates, incur indebtedness,
consider the sale of interests in subsidiaries, affiliates, marketable
securities or other assets, or take a combination of such steps or other steps
to increase or manage its liquidity and capital resources. In the normal
course of business, the Company may investigate, evaluate and discuss
acquisition, joint venture and other business combination opportunities. In
the event of any future acquisition or joint venture opportunities, the Company
may consider using available cash, issuing equity securities or incurring
indebtedness.
As previously reported, Tremont has taken the steps necessary to give
itself the benefits of a temporary exemption under the Investment Company Act
of 1940 (the "1940 Act") and may seek an order from the Securities and Exchange
Commission that Tremont is primarily engaged, through TIMET and NL, in a
non-investment company business. Tremont intends to study the future direction
and opportunities available to Tremont with a view to obviating, prior to
February 13, 1997 (the expiration date of the time period afforded by the
exemption), any argument concerning Tremont's possible status as an investment
company under the 1940 Act.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
19
<PAGE> 20
TIMET
Summarized historical balance sheet and cash flow information of TIMET
is presented below.
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
------------ ---------
(In millions)
<S> <C> <C>
Cash and cash equivalents $ - $ 7.2
Other current assets 103.6 221.3
Investment in joint ventures 13.9 17.7
Other noncurrent assets 6.4 17.4
Property and equipment 124.9 179.4
------- -------
$ 248.8 $ 443.0
======= =======
Current liabilities $ 97.1 $ 101.6
Long-term debt 21.5 -
Capital lease obligation to related parties - 9.7
Payable to related parties 23.9 1.3
Accrued postretirement benefits cost 28.2 27.9
Deferred income taxes .8 9.2
Other noncurrent liabilities 9.2 10.2
Stockholders' equity:
Capital and retained earnings 70.2 284.3
Adjustments, principally minimum
pension liabilities (2.1) (1.2)
------- -------
68.1 283.1
------- -------
$ 248.8 $ 443.0
======= =======
</TABLE>
<TABLE>
<CAPTION>
Six months ended
June 30,
----------------------
1995 1996
----- ----
(In millions)
<S> <C> <C>
Net cash provided (used) by:
Operating activities $ (9.2) $ (9.8)
Investing activities:
Capital expenditures (1.7) (6.4)
Purchase of IMI titanium business - (2.3)
Other, net .4 .2
Financing activities:
Net bank borrowings (repayments) 7.1 (66.1)
Proceeds from issuance of common stock, net - 132.1
Capital contributions from related party 1.1 -
Related parties loans (repayments) 2.5 (42.5)
Foreign currency translation - .1
Cash acquired, net - 1.9
------ -------
$ .2 $ 7.2
====== =======
Cash paid for:
Interest $ 5.9 $ 6.2
Income taxes - .2
Acquisition of IMI titanium business:
Cash and cash equivalents $ - $1.2
Noncash assets - 143.6
Liabilities - (72.5)
Common stock issued to IMI - (70.0)
------ -------
Cash paid $ - $ 2.3
====== =======
</TABLE>
20
<PAGE> 21
TIMET's 1996 earnings have improved significantly compared to the
losses it incurred in recent years. TIMET's results include significant
noncash items. Depreciation expense increased to $8.4 million in the first
half of 1996 compared to $5.7 million for the year-ago period principally as a
result of the IMI Titanium Acquisition. TIMET recorded $4.3 million of special
charges in the first half of 1996 related to the IMI Titanium Acquisition,
approximately $1.5 million of which was noncash for common stock. TIMET's
equity in earnings of THT were $1.7 million and $3.8 million for the first half
of 1995 and 1996, respectively, while THT made no distributions in either
period. Cash flow from operations in the first half of 1995 was reduced by
increases in accounts receivable, which were partially offset by increases in
accounts payable. Cash flow from operations in the first half of 1996 was
reduced by increases in inventories and accounts receivable, which were
partially offset by increases in accounts payable and accrued liabilities.
TIMET's capital expenditures in the first half of 1996 were $6.4
million compared to $1.7 million in the year-ago period. TIMET estimates
capital expenditures in 1996 will be approximately $20 million, including
approximately $10 million relating to the IMI titanium businesses.
Substantially all capital expenditures are expected to be funded by cash flow
from operating activities.
TIMET completed the Offerings on June 4, 1996. TIMET's net proceeds
from the Offerings approximated $132 million. TIMET used approximately $42.5
million of the net proceeds to repay existing indebtedness to stockholders
($22.5 million to Tremont and $20 million to IMI) and $82 million to repay
indebtedness under its U.S. credit facility.
TIMET's U.S. credit facility provides for revolving loans/letters of
credit aggregating up to $105 million at June 30, 1996. Borrowings are limited
to a formula-determined amount of accounts receivable and inventories (the
"borrowing base"). Interest accrues at the prime rate plus .75% or, at TIMET's
option, LIBOR plus 2.25% (7.92% at June 30, 1996). Borrowings are
collateralized by substantially all of TIMET's assets. The credit agreement
prohibits dividends on TIMET's common stock in excess of 20% of TIMET's net
income in any fiscal year, limits TIMET's additional indebtedness and contains
other covenants customary in transactions of this type. At June 30, 1996,
TIMET had $86 million of borrowings available under its U.S. credit agreement.
In July 1996, TIMET acquired the remaining 74% interest in TISTO for
approximately $2 million in cash and guaranteed approximately $2 million in
existing loans from former TISTO shareholders. TISTO is the largest
German-based distributor of titanium products. TIMET previously owned a 26%
equity interest in TISTO. The acquisition was funded with borrowings under
TIMET UK's credit facility.
Effective August 1, 1996, TIMET and CEZUS completed an agreement to
form TIMET Savoie to manufacture and sell titanium products. TIMET Savoie is
70%-owned by TIMET and 30%-owned by CEZUS. TIMET and CEZUS contributed to
TIMET Savoie inventory, technology, and equipment and certain CEZUS employees
became employees of TIMET Savoie. TIMET contributed proprietary technology and
all of its interest in its previously existing France-based distribution
businesses valued at approximately $8 million. CEZUS provided approximately
$13 million of working capital financing upon formation of the joint venture.
Additional information regarding TIMET's liquidity and capital
resources is described above under "Tremont".
21
<PAGE> 22
NL Industries
Summarized historical balance sheet and cash flow information of NL is
presented below.
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
------------ ---------
(In millions)
<S> <C> <C>
Cash, cash equivalents and securities $ 141.3 $ 120.1
Other current assets 409.7 422.4
Noncurrent securities 20.9 23.1
Investment in joint ventures 185.9 184.4
Other noncurrent assets 54.6 50.9
Property and equipment 459.2 455.8
--------- ---------
$ 1,271.6 $ 1,256.7
========= =========
Current liabilities $ 302.4 $ 299.5
Long-term debt 740.3 742.9
Deferred income taxes 157.2 148.1
Accrued postretirement benefits cost 60.2 58.8
Other noncurrent liabilities 217.8 196.8
Minority interest 3.1 .3
Stockholders' deficit:
Capital and retained earnings (80.0) (64.6)
Adjustments, principally foreign
currency translation (129.4) (125.1)
--------- ---------
(209.4) (189.7)
--------- ---------
$ 1,271.6 $ 1,256.7
========= =========
</TABLE>
<TABLE>
<CAPTION>
Six months ended
June 30,
---------------------------
1995 1996
--------- ---------
(In millions)
<S> <C> <C>
Net cash provided (used) by:
Operating activities $ 28.1 $ (5.6)
Investing activities:
Capital expenditures (26.2) (31.4)
Other, net 1.5 (3.4)
Financing activities:
Net borrowings (repayments) (1.5) 31.6
Dividends - (10.2)
Other, net .1 (.2)
--------- ---------
$ 2.0 $ (19.2)
========= =========
Cash paid for:
Interest, net of amounts capitalized $ 28.3 $ 27.6
Income taxes 21.3 10.7
</TABLE>
22
<PAGE> 23
The TiO2 industry is cyclical and changes in economic conditions
within the industry can significantly impact the earnings and operating cash
flows of NL. Although selling prices are significantly above the trough that
occurred in the third quarter of 1993, prices began to decline during the last
half of 1995. The Company's cash flows from operations declined during the
first half of 1996 compared to the first half of 1995 primarily due to lower
earnings and relative changes in NL's working capital, excluding the effect of
currency translation.
Certain of NL's income tax returns in various U.S. and non-U.S.
jurisdictions are being examined and tax authorities have proposed or may
propose tax deficiencies. NL has reached an agreement in principle with the
German tax authorities regarding examinations which will resolve certain
significant tax contingencies for years through 1990. NL expects to finalize
assessments and pay tax deficiencies during 1996 of approximately DM 50 million
($33 million at June 30, 1996), including interest, in settlement of these
issues. Certain other German tax contingencies remain outstanding and will
continue to be litigated. Although NL believes that it will ultimately
prevail, NL has granted a DM 100 million ($66 million at June 30, 1996) lien on
its Nordenham, Germany TiO2 plant in favor of the German tax authorities until
the litigation is resolved. No assurance can be given that this litigation
will be resolved in NL's favor in view of the inherent uncertainties involved
in court rulings. NL believes that it has adequately provided accruals for
additional income taxes and related interest expense which may ultimately
result from all such examinations and believes that the ultimate disposition of
such examinations should not have a material adverse effect on NL's
consolidated financial position, results of operations or liquidity.
Rheox acquired the minority interests of its non-U.S. subsidiaries for
$5.2 million in the first quarter of 1996.
NL borrowed DM 95 million ($64 million when borrowed) under its DM
credit facility during the first half of 1996. Repayments of indebtedness in
the same period included payments of $11.4 million on the Rheox bank term loan,
DM 16 million ($10.4 million when repaid) on DM-denominated notes payables and
$7.7 million on the joint venture term loan.
In the second quarter of 1996, NL paid a quarterly dividend of $.10
per share to shareholders aggregating $5.1 million. Dividends paid during the
first half of 1996 totaled $10.2 million. In July 1996, NL's Board of
Directors declared a quarterly dividend of $.10 per share to be paid in
September 1996. The indentures governing NL's Senior Notes contain minimum
interest coverage requirements and other covenants that restrict NL's ability
to pay dividends. The indentures also limit the cumulative dividends paid
since the issuance of the Senior Notes to no more than one-half of NL's
aggregate consolidated net income, as defined, during the same period. There
can be no assurance that NL will continue to meet these requirements in the
future.
At June 30, 1996, NL has cash and cash equivalents aggregating $120
million (32% held by non-U.S. subsidiaries) including restricted cash and cash
equivalents of $11 million. NL's subsidiaries had $5 million and $121 million
available for borrowing at June 30, 1996 under existing U.S. and non-U.S.
credit facilities, respectively, of which $82 million of the non-U.S. amount is
available only for (i) permanently reducing the DM term loan or (ii) paying
future German income tax assessments, as described above.
23
<PAGE> 24
NL has been named as a defendant, potentially responsible party
("PRP"), or both, in a number of legal proceedings associated with
environmental matters, including waste disposal sites or facilities currently
or formerly owned, operated or used by NL, many of which disposal sites or
facilities are on the U.S. Environmental Protection Agency's (the "U.S. EPA")
Superfund National Priorities List or similar state lists. On a quarterly
basis, NL evaluates the potential range of its liability at sites where it has
been named as a PRP or defendant. NL believes it has adequate accruals ($114
million at June 30, 1996) for reasonably estimable costs of such matters. It
is not possible to estimate the range of costs for certain sites. NL has
estimated that the upper end of the range of reasonably possible costs to NL
for sites for which it is possible to estimate costs is approximately $175
million. NL's estimates of such liabilities have not been discounted to
present value, and NL has not recognized any potential insurance recoveries.
No assurance can be given that actual costs will not exceed accrued amounts or
the upper end of the range for sites for which estimates have been made, and no
assurance can be given that costs will not be incurred with respect to sites as
to which no estimate presently can be made. Further, there can be no assurance
that additional environmental matters will not arise in the future.
NL is also a defendant in a number of legal proceedings seeking
damages for personal injury and property damage arising from the sale of lead
pigments and lead-based paints. Although no assurance can be given that NL
will not incur future liability in respect of this litigation, based on, among
other things, the results of such litigation to date, NL believes that the
pending lead pigment and paint litigation is without merit. NL has not accrued
any amounts for such pending litigation. Liability that may result, if any,
cannot be reasonably estimated. In addition, various legislation and
administrative regulations are, from time to time, enacted or proposed at the
state, local and federal levels seeking to impose various obligations on
present and former manufacturers of lead pigment and lead-based paint with
respect to asserted health concerns associated with the use of such products
and to effectively overturn court decisions in which NL and other pigment
manufacturers have been successful. NL currently believes the disposition of
all claims and disputes, individually and in the aggregate, should not have a
material adverse effect on NL's consolidated financial position, results of
operations or liquidity. There can be no assurance that additional matters of
these types will not arise in the future.
NL periodically evaluates its liquidity requirements, alternative uses
of capital, capital needs and availability of resources in view of, among other
things, its debt service and capital expenditure requirements and estimated
future operating cash flows. As a result of this process, NL has in the past
and may in the future seek to reduce, refinance, repurchase or restructure
indebtedness, raise additional capital, modify its dividend policy, restructure
ownership interests, sell interests in subsidiaries or other assets, or take a
combination of such steps or other steps to manage its liquidity and capital
resources. In the normal course of its business, NL may also review
opportunities for acquisitions or other business combinations in the chemicals
industry. In the event of any such transaction, NL may consider using
available cash, issuing equity securities or increasing its indebtedness to the
extent permitted by the agreements governing NL's existing debt.
24
<PAGE> 25
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
Reference is made to the 1995 Annual Report and the Company's
Quarterly Report on Form 10-Q for the period ended March 31, 1996 for
descriptions of certain legal proceedings.
Reference is made to the discussion appearing in the 1995 Annual
Report regarding an action filed against the Company in connection with the
1991 purchase by the Company of shares of NL stock from Valhi, Inc., a company
that may be deemed to be controlled by Harold Simmons (Alan Russel Kahn vs.
Tremont Corporation, et al., No. 12338). Plaintiff has filed an appeal of this
case with the Delaware Supreme Court following the earlier verdict by the
Delaware Chancery Court in favor of the defendants. The Company believes the
appeal is without merit. The Company intends, and understands that the other
defendants intend, to vigorously defend this appeal. Oral arguments before the
Delaware Supreme Court have been scheduled for October 22, 1996.
TIMET
Information called for by this item regarding TIMET's legal
proceedings is incorporated herein by reference to Part II, Item 1 -- "Legal
Proceedings" of TIMET's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996, attached hereto as Exhibit 99.2.
NL Industries
Information called for by this item regarding NL's legal proceedings
is incorporated herein by reference to Part II, Item 1 -- "Legal Proceedings"
of NL's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996,
attached hereto as Exhibit 99.1.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Stockholders on May 7, 1996.
The only matter voted upon was the election of directors, and all the nominees
for director were elected. The vote with respect to each was as follows:
<TABLE>
<CAPTION>
Director Votes For Votes Withheld
-------- --------- --------------
<S> <C> <C>
Susan E. Alderton 5,920,457 190,124
Richard J. Boushka 5,920,964 189,617
J. Landis Martin 5,919,654 190,927
Glenn R. Simmons 5,919,869 190,712
Harold C. Simmons 5,919,789 190,792
Gen. Thomas P. Stafford 5,920,442 190,139
Avy H. Stein 5,920,718 189,863
</TABLE>
25
<PAGE> 26
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
27.1 Financial Data Schedule for the six-month period ended
June 30, 1996.
99.1 Part II, Item 1 of a Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996 filed by NL
Industries, Inc. (File No. 1-640).
99.2 Part II, Item 1 of a Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996 filed by Titanium
Metals Corporation (File No. 0-28538).
(b) Reports on Form 8-K filed by the Registrant for the quarter ended
June 30, 1996 and for the month of July 1996:
April 2, 1996 - Reported Items 5 and 7
April 29, 1996 - Reported Items 5 and 7
June 14, 1996 - Reported Items 5 and 7
June 14, 1996 - Reported Items 5 and 7
July 29, 1996 - Reported Items 5 and 7
26
<PAGE> 27
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.
TREMONT CORPORATION
-------------------------------
(Registrant)
Date: August 14, 1996 By /s/ Joseph S. Compofelice
--------------- -------------------------------
Joseph S. Compofelice
Vice President and
Chief Financial Officer
By /s/ Mark A. Wallace
-------------------------------
Mark A. Wallace
Vice President and Controller
(Chief Accounting Officer)
27
<PAGE> 28
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27.1 Financial Data Schedule
99.1 Part II, Item 1 of 10-Q filed by NL Industries
99.2 Part II, Item 1 of 10-Q filed by Titanium Metals Corp.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 69,003
<SECURITIES> 0
<RECEIVABLES> 7,602
<ALLOWANCES> 2,663
<INVENTORY> 0
<CURRENT-ASSETS> 74,083
<PP&E> 1,369
<DEPRECIATION> 639
<TOTAL-ASSETS> 211,843
<CURRENT-LIABILITIES> 9,081
<BONDS> 0
<COMMON> 7,586
0
0
<OTHER-SE> 143,701
<TOTAL-LIABILITY-AND-EQUITY> 211,843
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 274
<INCOME-PRETAX> 32,573
<INCOME-TAX> 6,053
<INCOME-CONTINUING> 26,338
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,338
<EPS-PRIMARY> 3.44
<EPS-DILUTED> 3.44
</TABLE>
<PAGE> 1
EXHIBIT 99.1
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the 1995 Annual Report and the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1996 for descriptions of
certain previously-reported legal proceedings.
The City of New York, et al. v. Lead Industries Association, Inc., et al.
(No. 89-4617). In June 1996, the appeals court reversed the trial court's
dismissal of plaintiffs' restitution and indemnification claims. The time in
which defendants may request permission to appeal has not yet expired.
Wright, et al. v. Lead Industries Association Inc., et al. (Nos.
94-363042 and 94-363043). In June 1996, the trial court granted defendants'
motions for summary judgment and dismissed the Company and certain other
defendants from the cases. The time in which plaintiffs may appeal has not yet
expired.
Jefferson v. Lead Industries Association, Inc., et al. (No. 95-2835). In
June 1996, the trial court granted defendants' motion to dismiss the
complaints and entered judgment in favor of all defendants. Plaintiffs have
filed a notice of appeal and the appeal is pending.
German, et al. v. Federal Home Loan Mortgage Corp., et al. (No 93 Civ.
6491). In May 1996, the Company and the other former manufacturers of lead
pigments filed motions to dismiss the intervenors' complaint. The motions are
pending.
Pedricktown, New Jersey smelter site. In May 1996, certain PRPs, but not
the Company, entered into an administrative consent order with the U.S. EPA to
perform the remedial design aspects of the selected remedy.
Granite City, Illinois smelter site. In June 1996, the City of Granite
City brought a motion for a preliminary injunction against the U.S. EPA
seeking to enjoin certain aspects of the cleanup after the U.S. EPA
recommended the cleanup of residential yard soils. The Company and the other
PRPs joined in the City's motion. The court has not yet ruled on the motion.
Flacke v. NL Industries, Inc., et al. (Nos. 1842-80 and 3131-92). In June
1996, the previously-reported appeals of the Company and the State of New York
were both denied.
In re: Monangalia Mass II (Nos. 93-C-362, et al.). The Company has been
served with asserted claims on behalf of approximately 2,800 plaintiffs.
<PAGE> 1
EXHIBIT 99.2
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
Reference is made to the Company's Registration Statement on Form S-1, as
amended (File No. 333-2940), for descriptions of certain previously reported
legal proceedings.
In the previously reported matter of Sutherin vs. Titanium Metals
Corporation, No. 95CV00168, Court of Common Pleas, Jefferson County, Ohio, the
plaintiff in June 1996 dismissed this matter without prejudice.
As previously reported, in 1993 the Company discovered an anomaly in
certain alloyed titanium material manufactured by the Company for shipment to
a jet engine manufacturer, resulting from tungsten carbide contaminated
chromium sold to the Company by a third-party vendor and used as an alloying
addition to this titanium material. In June 1996, the Company entered into a
settlement agreement with the purchaser of the material which calls for
payment by the Company of an aggregate $2 million, payable in equal quarterly
payments over the next five years. Such liability was accrued in the Company's
financial statements at December 31, 1995 and June 30, 1996.
As previously reported, certain other companies, including Kerr-McGee
Chemical Corporation, Chemstar Lime Company and Pioneer Chlor Alkali Company,
Inc. (successor to Stauffer Chemical Company) also operate facilities in a
complex (the "BMI Complex") owned by Basic Management Inc. ("BMI"), adjacent
to the Company's Henderson, Nevada plant. In July 1996, the Company signed a
consent agreement with the Nevada Division of Environmental Protection
regarding the Phase II assessment of the Company property within the BMI
Complex. At December 31, 1995 and June 30, 1996, the Company had accrued $1
million with respect to this matter. Until the sampling and analysis that will
be involved in this Phase II assessment is completed, it is not possible to
provide a reasonable estimate of the additional remediation costs, if any, or
the Company's likely share of any such costs.
