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 September 30, 1997
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 (IRS Employer
jurisdiction of Identification
incorporation or No.)
organization)
1999 Broadway, Suite 4300, Denver, Colorado
80202
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including (303) 296-
area code: 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 October 31, 1997: 6,770,043
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 or
discussions of trends which by their nature involve substantial risks and
uncertainties. Actual results could differ materially from those described in
such forward-looking statements. Among the factors that could cause actual
results to differ materially are the risks and uncertainties discussed in this
Quarterly Report, including those in the portions referenced above and those
described from time to time in the Company's other filings with the Securities
and Exchange Commission, such as the cyclicality of the commercial aerospace
industry, future global economic conditions, global productive capacity and
pricing outlook of titanium metals and TiO2.
TREMONT CORPORATION
INDEX
Page
number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - December 31, 1996 and
September 30, 1997 2-3
Consolidated Statements of Income - Three months and
nine months ended September 30, 1996 and 1997 4
Consolidated Statements of Cash Flows - Nine months
ended September 30, 1996 and 1997 5
Consolidated Statement of Stockholders' Equity - Nine
months ended September 30, 1997 6
Notes to Consolidated Financial Statements 7-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 10-23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 24
Item 6. Exhibits and Reports on Form 8-K. 24
TREMONT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December SEPTEMBER
ASSETS 31, 1996 30, 1997
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 68,035 $ 45,455
Accounts and notes receivable 6,445 5,396
Receivable from related parties 1,026 519
Prepaid expenses 1,785 1,769
Total current assets 77,291 53,139
Other assets:
Investment in TIMET 98,479 114,607
Investment in NL Industries 26,724 16,317
Investment in joint ventures 6,937 10,637
Receivable from related parties 4,722 4,411
Other 8,656 10,723
Total other assets 145,518 156,695
Net property and equipment 714 687
$223,523 $210,521
</TABLE>
TREMONT CORPORATION
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands)
<TABLE>
<CAPTION>
December SEPTEMBER
LIABILITIES AND STOCKHOLDERS' EQUITY 31, 1996 30, 1997
<S> <C> <C>
Current liabilities:
Accrued liabilities $ 7,336 $ 6,453
Payable to related parties 225 284
Income taxes 112 198
Total current liabilities 7,673 6,935
Noncurrent liabilities:
Insurance claims and claim expenses 12,867 14,423
Accrued OPEB cost 22,072 21,353
Deferred income taxes 16,319 22,272
Other 4,677 4,926
Total noncurrent liabilities 55,935 62,974
Minority interest 1,886 3,078
Stockholders' equity:
Common stock 7,640 7,688
Additional paid-in capital 273,780 274,700
Accumulated deficit (116,834) (109,751)
Adjustments:
Currency translation (2,764) (6,632)
Marketable securities 702 1,365
Pension liabilities (899) (899)
161,625 166,471
Less treasury stock, at cost 3,596 28,937
Total stockholders' equity 158,029 137,534
$223,523 $210,521
</TABLE>
[FN] Commitments and contingencies
(Note 1).
TREMONT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months Nine months
ended ended
September 30, September 30,
1996 1997 1996 1997
<S> <C> <C> <C> <C>
Equity in earnings (loss) of:
TIMET $4,035 $ 6,461 $ 8,676 $17,389
NL Industries (1,685) 882 966 (6,727)
Other joint ventures 779 436 1,452 4,740
3,129 7,779 11,094 15,402
Gain on sale of TIMET stock - - 27,599 -
Corporate income (expense), net (236) (38) (2,953) 1,055
Interest expense - - (274) -
Income before income taxes 2,893 7,741 35,466 16,457
Income tax expense 558 2,576 6,611 8,182
Minority interest 199 109 381 1,192
Net income $2,136 $ 5,056 $28,474 $7,083
Net income per share $ .28 $ .74 $ 3.72 $ .99
Weighted average shares 7,680 6,876 7,657 7,152
outstanding
</TABLE>
TREMONT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, 1996 and 1997
(In thousands)
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $28,474 $ 7,083
Earnings of affiliates, net of distributions (8,040) (14,391)
Gain on sale of TIMET stock (27,599) -
Deferred income taxes 4,816 7,913
Minority interest 381 1,192
Other, net 130 (1,885)
Change in assets and liabilities:
Accounts with related parties (703) 835
Other, net 1,662 (11)
Net cash provided (used) by operating (879) 736
activities
Cash flows from investing activities:
Collection of loans to related party 22,460 -
Proceeds from disposition of:
TIMET common stock, net 46,898 -
Property held for sale 3,000 -
Oil and gas production well interest - 1,206
Other, net (682) (21)
Net cash provided by investing activities 71,676 1,185
Cash flows from financing activities:
Repurchases of common stock - (25,341)
Related party loan repayments (3,500) -
Borrowings from related parties 50 -
Reductions of indebtedness (2,500) -
Other 635 840
Net cash used by financing activities (5,315) (24,501)
Net increase (decrease) in cash and cash 65,482 (22,580)
equivalents
Balance at beginning of period 2,650 68,035
Balance at end of period $68,132 $45,455
Supplemental disclosures - cash paid for:
Interest $ 182 $ -
Income taxes 811 185
</TABLE>
TREMONT CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Nine months ended September 30, 1997
(In thousands)
<TABLE>
<CAPTION>
Additional
Common paid-in Accumulated
stock capital deficit
<S> <C> <C> <C>
Balance at December $7,640 $273,780 $(116,834)
31, 1996
Net income - - 7,083
Repurchases of - - -
common stock
Common stock issued 48 792 -
Adjustments, net - - -
Other - 128 -
Balance at $7,688 $274,700 $(109,751)
September 30, 1997
</TABLE>
<TABLE>
<CAPTION>
Adjustments Total
Currency Marketable Pension Treasury Stockholders'
translation securities liabilities stock Equity
<C> <C> <C> <C> <C>
$(2,764) $ 702 $(899) $(3,596) $158,029
- - - - 7,083
- - - (25,341) (25,341)
- - - - 840
(3,868) 663 - - (3,205)
- - - - 128
$(6,632) $1,365 $(899) $(28,937) $137,534
</TABLE>
[FN] See accompanying notes to consolidated financial statements.
TREMONT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and basis of presentation:
Tremont Corporation is principally a holding company with operations
conducted through 30%-owned Titanium Metals Corporation ("TIMET"), 18%-owned NL
Industries, Inc. and other joint ventures of 75%-owned TRECO L.L.C. Contran
Corporation and other entities related to Harold C. Simmons hold (i)
approximately 47% of Tremont's outstanding common stock and (ii) approximately
74% of NL's outstanding common stock (including 18% of NL held by Tremont).
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, Tremont, NL and TIMET.
The consolidated balance sheet of Tremont Corporation and subsidiaries
(collectively, the "Company") at December 31, 1996 has been condensed from the
Company's audited consolidated financial statements at that date. The
consolidated balance sheet at September 30, 1997 and the consolidated statements
of income and cash flows for the interim periods ended September 30, 1996 and
1997 and the consolidated statement of stockholders' equity for the interim
period ended September 30, 1997 have been prepared by the Company without audit.
In the opinion of management, all adjustments necessary to present fairly the
consolidated financial position, results of operations and cash flows have been
made. The results of operations for interim periods are not necessarily
indicative of the operating results of a full year or of future operations.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The accompanying consolidated financial
statements should be read in conjunction with the consolidated financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 (the "1996 Annual Report").
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," and (iii) the 1996
Annual Report, including certain information concerning TIMET's and NL's legal
proceedings incorporated therein by reference.
Note 2 - Earnings per share:
Net income per share is based upon the weighted average number of common
shares and dilutive common stock options outstanding. Antidilutive securities
are excluded from the calculation. The Company will retroactively adopt
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share", effective December 31, 1997. Basic earnings per share and diluted
earnings per share pursuant to SFAS No. 128 would not have been materially
different from earnings per share presented herein.
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 September 30, 1997, the net carrying amount of the Company's
investment in TIMET was approximately $12.06 per share, while the market price
of TIMET common stock was $37.25 per share. Tremont also holds an option,
acquired from IMI plc in 1996 and expiring in February 1999, to acquire 1.5
million shares of TIMET common stock from IMI for an aggregate purchase price of
$12 million ($7.95 per TIMET share).
NL Industries. Tremont holds 9.1 million shares, or 18%, of NL's
outstanding common stock. At September 30, 1997, the net carrying amount of the
Company's investment in NL was approximately $1.80 per share while the market
price of NL common stock was $16.00 per share.
Joint Ventures. Investment in joint ventures represents holdings of 75%-
owned TRECO, which is principally comprised of (i) a 12% direct interest in
Victory Valley Land Company, L.P. ("VVLC"), which is actively engaged in efforts
to develop certain real estate, and (ii) a 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. BII, through a
wholly-owned subsidiary, owns an additional 50% interest in VVLC.
Note 4 - Stockholders' equity:
In February 1997, Tremont's Board of Directors authorized the repurchase of
up to 2 million shares of Tremont common stock in open market or privately
negotiated transactions. Such shares represented approximately 27% of the
Company's 7.5 million shares then outstanding. During the nine months ended
September 30, 1997, the Company repurchased 663,100 shares of its common stock
for approximately $25.3 million and during October 1997 repurchased an
additional 82,000 shares for approximately $4.5 million.
Note 5 - Income taxes:
The difference between the Company's income tax expense in the 1997 periods
and the amount that would be expected using the U.S. federal statutory income
tax rate of 35% is primarily due to no tax provision or benefit being recognized
on equity in NL's earnings or losses. In the 1996 periods, the variance also
reflected a reduction in the deferred tax valuation allowance to reflect current
utilization of U.S. net operating loss carryforwards.
Note 6 - Accrued liabilities:
<TABLE>
<CAPTION>
December SEPTEMBER 30,
31, 1996 1997
(In thousands)
<S> <C> <C>
Postretirement benefit cost $1,924 $1,924
Other employee benefits 1,107 237
Environmental cost 300 289
Legal costs 546 658
Miscellaneous taxes 256 154
Other 3,203 3,191
$7,336 $6,453
</TABLE>
Note 7 - Related party transactions:
Receivables from related parties principally represent amounts due from NL
and Baroid Corporation under insurance loss sharing arrangements and amounts due
from TIMET pursuant to compensation arrangements. Current payables to related
parties include amounts due to Contran, NL and TIMET under intercorporate
services arrangements.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Tremont's operations are conducted through TIMET, NL and other joint
ventures. The results of TIMET, NL, other joint ventures and general corporate
and other items are discussed below. The information included below relating to
the financial position, results of operations and liquidity and capital
resources of TIMET and NL has been summarized from reports filed with the
Commission by TIMET (File No. 0-28538) and NL (File No. 1-640), which reports
contain more detailed information concerning TIMET and NL, respectively,
including complete financial statements.
The Company reported third quarter net income of $5.1 million, or $.74 per
share, compared to $2.1 million, or $.28 per share, for the same quarter in
1996. For the first nine months of 1997, Tremont reported net income of $7.1
million, or $.99 per share, compared to $28.5 million, or $3.72 per share, for
the same period in 1996. Tremont recognized a $27.6 million pre-tax gain on the
sale of TIMET stock in the second quarter of 1996.
The Company's equity in earnings of 30%-owned TIMET was $6.5 million in the
third quarter of 1997 compared to $4.0 million in the third quarter of 1996.
TIMET reported net income of $21.4 million in the third quarter of 1997 on sales
of $177.2 million, up from net income of $13.3 million for the third quarter of
1996. The significant improvement in TIMET's titanium metals business in 1997
was driven by higher average selling prices and a 20% year-to-date increase in
mill product volume.
The Company's equity in earnings of 18%-owned NL Industries was $.9 million
in the third quarter of 1997 compared to a loss of $1.7 million in the third
quarter of 1996. NL reported net income of $9.8 million in the third quarter of
1997 on sales of $248.2 million compared to a loss of $4.2 million in the same
quarter of 1996. NL's third quarter average selling prices for titanium dioxide
pigments ("TiO2") were 3% higher than the second quarter of 1997 and 1% higher
than year-ago levels.
The Company's equity in earnings of other joint ventures principally
represents earnings from the VVLC real estate development partnership.
Corporate income, net in the first nine months of 1997 includes $2.2 million of
interest income from invested cash and a $1.2 million gain on sale of oil and
gas production well interests. The Company's income tax rate in 1997
approximates the statutory rate except that no tax provision or benefit is
recognized on NL's earnings or losses.
TIMET
<TABLE>
<CAPTION>
Three months Nine months
ended ended
September 30, September 30,
1996 1997 Change 1996 1997 Change
<S> <C> <C> <C> <C> <C> <C>
Net Sales $123.4 $177.2 $53.8 $349.8 $525.6 $175.8
Operating income $17.8 $ 33.3 $15.5 $ 38.4 $92.7 $ 54.3
Corporate income, .2 1.5 .6 3.9
net
Interest expense (.4) (.9) (7.3) (1.9)
17.6 33.9 $16.3 31.7 94.7 $ 63.0
Income tax expense 4.3 9.9 7.8 28.8
Minority interest - 2.6 .4 8.4
Net income $13.3 $ 21.4 $ 8.1 $ 23.5 $57.5 $ 34.0
Tremont's equity in
Timet's earnings $ 4.0 $ 6.5 $ 2.5 $ 8.7 $17.4 $ 8.7
</TABLE>
The Company's equity in TIMET's earnings for the 1996 periods differs from
the amounts that would be expected by applying Tremont's current 30%-ownership
percentage to TIMET's separately-reported earnings because of changes in
Tremont's level of ownership in TIMET during the first half of 1996.
The significant improvement in TIMET's 1997 earnings compared to last year
was driven by price increases and a 20% increase in mill products volume
compared to the first nine months of 1996. Titanium mill products shipments in
the third quarter were 8.1 million pounds (23.7 million pounds for the 1997
nine-month period), up from 7.1 million pounds and 19.7 million pounds,
respectively, in the comparable 1996 periods. TIMET's operating income margin
increased to 18.8% in the third quarter of 1997, significantly above year-ago
levels, and up from 18.1% in the second quarter of 1997. Firm order backlog at
September 30, 1997 was approximately $530 million, up from $440 million at year-
end 1996.
In August 1997, TIMET announced that it has been selected by Boeing
Commercial Airplane Group to serve as the principal supplier to Boeing of
titanium mill products under a long-term agreement beginning in 1998. Boeing
and its suppliers, as a group, are the largest consumers of titanium in the
world and therefore this new alliance is expected to have a positive impact on
TIMET. This contract, when finalized, is expected to help mitigate the
historical cyclicality of aerospace-related titanium business. The contract
will give Boeing and its suppliers lower cost titanium and shorter lead times
for deliveries, in return for minimum quantities of orders and long term
pricing. The parties expect to execute a definitive agreement during the fourth
quarter and begin the long-term arrangement in 1998.
In the third quarter of 1997, TIMET completed its tubing joint venture,
ValTimet. As a result, TIMET now sells intermediate strip product to the joint
venture rather than selling finished tubing, which reduces TIMET's average sales
price per mill product pound shipped compared to prior periods. TIMET's average
price per mill product pound shipped in the third quarter of 1997 was $15.50
(approximately $16.20 on a basis adjusting for the effect of the ValTimet
transaction so as to be comparable to the second quarter average price of $16.18
and the third quarter 1996 average price of $14.09).
Operating levels at TIMET's plants in 1997 were generally higher than in
the comparable 1996 periods and contributed to improved operating results.
However, sales and operating income in the third quarter were negatively
impacted by reduced production levels associated with (i) management decisions
to complete capacity-increasing projects early to help insure the higher demand
levels expected in 1998 are met, (ii) startup of the ValTimet joint venture and
(iii) a fire in September which destroyed a portion of the Oregon castings
facility (substantially all of the damage is covered by insurance). In
addition, operating levels at TIMET's other casting facility, which primarily
produced for non-aerospace markets, were well below 1996 levels.
In August 1997, the hourly workers at TIMET's Toronto, Ohio facility
ratified a three-year extension to the existing labor pact that will now expire
in July 2002. The 415 production, maintenance, clerical and technical workers
affected are represented by the United Steelworkers of America, AFL-CIO-CLC.
The extension provides for wage increases over the next five years, plus modest
enhancements in pension benefits and certain one-time payments. The Union
agreed to certain workrule changes allowing for increased workplace flexibility.
TIMET agreed to transfer certain work currently being performed in Morristown,
Tennessee to Toronto and to make additional investments in Toronto under certain
circumstances. In addition, TIMET and the Union agreed to jointly pursue the
design and implementation of a gainsharing program that will allow affected
employees to share in the benefits derived from targeted cost reduction and
productivity improvements at the facility.
Substantially all interest expense in the 1997 periods and the third
quarter of 1996 relates to capital lease obligations and short-term European
working capital borrowings. Interest in the 1996 nine-month period includes
interest on indebtedness repaid with the proceeds of TIMET's June 1996 initial
public stock offering.
Dividends on the Convertible Preferred Securities, previously reported as
interest expense, are now reported by TIMET net of tax benefit as minority
interest. This reclassification within TIMET's income statement has no effect
on its net income or earnings per share.
TIMET has substantial operations and assets located in Europe, principally
the United Kingdom. The U.S. dollar value of TIMET's foreign sales and
operating costs are subject to currency exchange rate fluctuations which can
impact reported earnings and may affect the comparability of period-to-period
operating results. Approximately one-half of TIMET's European sales are
denominated in currencies other than the U.S. dollar, principally major European
currencies. Certain purchases of raw materials, principally titanium sponge,
for TIMET's European operations are denominated in U.S. dollars while labor and
other production costs are primarily denominated in local currencies.
TIMET operates in several tax jurisdictions and is subject to varying
income tax rates. As a result, the geographical mix of pretax income can impact
the Company's effective income tax rate. For financial reporting purposes,
TIMET has previously recognized substantially all of its net operating loss and
other carryforwards, and, accordingly, its effective income tax rate in 1997 is
higher than in 1996.
As previously reported, TIMET completed certain acquisitions during 1996,
principally IMI's titanium metals business in February 1996 and the assets of
Axel Johnson Metals ("AJM") in October 1996. On a pro forma basis assuming the
IMI and AJM acquisitions had occurred at the beginning of 1996, (i) net sales
for the third quarter of 1996 were $142.1 million, operating income was $20.3
million, net income was $13.4 million and net income per share was $.43 and (ii)
net sales for the nine months ended September 30, 1996 were $407.1 million,
operating income was $39.3 million, net income was $19.1 million and net income
per share was $.68. The pro forma effect of the previously-reported TISTO (July
1996), TIMET Savoie (August 1996), and LASAB (January 1997) acquisitions is not
material. The above pro forma financial information is not necessarily
indicative of the operating results that might have occurred if the IMI and AJM
acquisitions had actually been completed at the beginning of 1996. Operating
income in the first nine months of 1996 included special charges of $4.3 million
related to the IMI titanium acquisition.
NL Industries
The Company's 18% interest in NL is reported 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. Valhi, Inc. and
Tremont together may be deemed to control NL. 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, and increases losses, attributable
to NL as reported by Tremont.
NL's chemical operations are conducted in two business segments - TiO2
conducted by Kronos and specialty chemicals conducted by Rheox.
<TABLE>
<CAPTION>
Three months Nine months
ended ended
September 30, September 30,
1996 1997 Change 1996 1997 Change
<S> <C> <C> <C> <C> <C> <C>
Net Sales
Kronos $215.1 $210.4 -2% $649.7 $629.2 -3%
Rheox 33.4 37.8 +13% 102.4 111.3 +9%
$248.5 $248.2 NC $752.1 $740.5 -2%
Operating income:
Kronos $ 9.7 $ 24.9 +157% $64.6 $50.4 -22%
Rheox 9.8 12.3 +26% 32.9 34.6 +5%
19.5 37.2 +91% 97.5 85.0 -13%
General corporate
items:
Securities 1.2 .6 3.6 1.8
earnings, net
Expenses, net (5.7) (5.8) (12.4)(44.8)
Interest expense (18.5) (19.5) (56.1)(57.9)
(3.5) 12.5 $16.0 32.6 (15.9) $(48.5)
Income tax expense (.7) (2.7) (11.5) (7.7)
Net income (loss) $(4.2) $ 9.8 $14.0 $21.1 $(23.6) $(44.7)
Tremont's equity in
NL's earnings,
including
amortization of
basis differences $(1.7) $ .9 $2.6 $ .9 $(6.7) $(7.6)
</TABLE>
Kronos' TiO2 operating income in the third quarter of 1997 increased from
the comparable period in 1996 due to higher production and sales volumes, 1%
higher average TiO2 selling prices and $9.7 million of income resulting from
refunds of German trade capital taxes. Kronos' operating income in the nine
months ended September 30, 1997 declined from the 1996 period due to 8% lower
average selling prices, partially offset by higher sales and production volumes.
Kronos' average TiO2 selling prices for the third quarter of 1997 were 3% higher
than the second quarter of 1997 and 6% higher than the first quarter of 1997.
Selling prices at the end of the third quarter of 1997 were 2% higher than the
average for the quarter. Kronos achieved record third quarter sales volumes
reflecting continued strong TiO2 demand, particularly in Europe. Kronos' third
quarter and nine months sales volumes increased 7% and 12%, respectively, from
the year-earlier periods.
Kronos' operating income for the third quarter included income of $9.7
million resulting from German trade capital tax refunds related to prior years,
including interest. The German tax authorities were required to remit refunds
based on (i) recent court decisions which resulted in reducing the trade capital
tax base and (ii) prior agreements between NL and the German tax authorities
regarding payment of disputed taxes.
Kronos expects further increases in its TiO2 selling prices during the
fourth quarter of 1997 and expects its full-year 1997 operating income will
exceed that of 1996. Kronos' cost of sales as a percentage of net sales
compared to 1996 decreased in the third quarter of 1997 and increased in the
first nine months of 1997 due to higher average prices in the third quarter of
1997 and lower average prices in the first nine months of 1997. Kronos'
selling, general and administrative expenses in the third quarter and the first
nine months of 1997 were lower than the 1996 periods due to favorable effects of
foreign currency translation and German trade capital tax refunds, partially
offset by higher distribution expenses associated with higher 1997 sales
volumes.
Rheox's operating income for the third quarter of 1997 increased $2.5
million compared to the third quarter of 1996 on higher sales and production
volumes. Rheox's operating income in the first nine months of 1997 was $4.4
million higher than the 1996 period, excluding a first-quarter 1996 $2.7 million
gain related to the curtailment of certain U.S. employee pension benefits.
Rheox's cost of sales as a percentage of net sales decreased in the third
quarter and first nine months of 1997 due to higher production volumes in both
periods of 1997 compared to 1996. Selling, general and administrative expenses
increased in the third quarter and first nine months of 1997 compared to the
1996 periods primarily due to higher selling and distribution expenses
associated with higher 1997 sales volumes.
A significant amount of NL's sales generated from its non-U.S. operations
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 third quarter and first nine months of 1997 by $23
million and $46 million, respectively, compared to the respective 1996 periods.
Although exchange rate fluctuations resulted in an unfavorable impact on
operating income for the third quarter of 1997, the impact was nominal for the
first nine months of 1997 compared with the same periods in 1996.
Securities earnings declined due to lower average cash equivalent balances
available for investment. Corporate expenses, net in the first nine months of
1997 were higher than the comparable period in 1996 due to the $30 million
noncash charge related to NL's adoption of SOP No. 96-1, "Environmental
Remediation Liabilities." This charge is included in selling, general and
administrative expense in NL's Consolidated Statements of Operations. Interest
expense was higher in the third quarter and first nine months of 1997 primarily
due to higher variable interest rates and higher average principal balances.
LIQUIDITY AND CAPITAL RESOURCES
Tremont
The Company had cash and cash equivalents of $45.5 million at September 30,
1997. Tremont's 9.5 million shares of TIMET common stock and 9.1 million shares
of NL common stock had a market value of about $355 million and $145 million,
respectively, at September 30, 1997. Tremont also has the right to acquire 1.5
million shares of TIMET's common stock from IMI with a September 30, 1997 market
value of $56 million for an aggregate purchase price of $12 million. At
September 30, 1997, Tremont also had approximately $15 million of letters of
credit outstanding under a third party credit agreement.
The Company's equity in earnings of affiliates are primarily noncash. The
Company received a $1 million cash distribution from VVLC in 1997 primarily to
cover taxes associated with VVLC's income from land sales. In 1996 NL paid
cash dividends of $.10 per NL share aggregating $.9 million. NL suspended
dividends in October 1996 and is currently unable to pay dividends due to
restrictions under certain of its debt agreements. TIMET did not pay any cash
dividends during 1996 or 1997. TIMET's new bank credit agreement generally
limits dividend payments to approximately 25% of TIMET's net income and TIMET's
Convertible Preferred Securities may also, under certain circumstances, limit
TIMET's ability to pay dividends. Relative changes in assets and liabilities
did not materially impact the Company's cash flow from operating activities.
In February 1997, Tremont's Board of Directors authorized the repurchase of
up to 2 million shares of Tremont common stock in open market or privately
negotiated transactions. Such shares represented approximately 27% of the
Company's 7.5 million shares then outstanding. During the nine months ended
September 30, 1997, the Company repurchased 663,100 shares of its common stock
for approximately $25.3 million and during October 1997, the Company repurchased
an additional 82,000 shares for approximately $4.5 million.
In the second quarter of 1996, 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 its IPO in June 1996. Additionally, in
conjunction with the public offering, Tremont sold 2.2 million shares of TIMET
common stock with net proceeds of approximately $47 million and recognized a
pre-tax gain of $27.6 million. In June 1996, Tremont repaid the amount
outstanding under the revolving credit agreement with Contran Corporation and
terminated the facility. Also during the first nine months of 1996, the Company
received $3 million from the sale of surplus property and repaid a $2.5 million
margin loan from an investment bank.
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, the cost of debt and
equity capital, 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, modify its dividend policy, restructure ownership interests
of subsidiaries and affiliates, incur indebtedness, repurchase shares of capital
stock, 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, discuss and engage in
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, based upon the technical provisions of the
Investment Company Act of 1940 (the "1940 Act") and Tremont's ceasing to
own a majority of TIMET's common stock following the IMI titanium acquisition by
TIMET in February 1996, Tremont might arguably be deemed to have become an
"investment company" under the 1940 Act, despite the fact that Tremont does not
now engage, nor has it engaged or intended to engage in the business of
investing, reinvesting, owning, holding or trading of securities. Tremont has
taken the steps necessary to give itself the benefits of a temporary exemption
under the 1940 Act and has sought an order from the Commission that Tremont is
primarily engaged, through TIMET and NL, in a non-investment company business.
The Company believes another exemption may be currently available to it under
the 1940 Act should the Commission deny Tremont's application for an exemptive
order.
TIMET
Summarized balance sheet and cash flow information reported by TIMET is
presented below.
<TABLE>
<CAPTION>
December September
31, 1996 30, 1997
(In millions)
<S> <C> <C>
Cash and cash equivalents $ 86.5 $ 68.8
Other current assets 284.5 331.9
Goodwill and other intangible assets 86.7 78.1
Other noncurrent assets 25.7 41.3
Property and equipment, net 219.6 234.6
$703.0 $754.7
Current liabilities $112.8 $117.2
Noncurrent liabilities 58.5 51.0
Minority interest - TIMET-obligated
Convertible Preferred Securities 201.3 201.3
Other minority interest 4.2 5.8
Stockholders' equity 326.2 379.4
$703.0 $754.7
</TABLE>
<TABLE>
<CAPTION>
Nine months ended
September 30,
1996 1997
(In millions)
<S> <C> <C>
Net cash provided (used) by:
Operating activities:
Before changes in assets and $ 34.5 $ 83.9
liabilities
Changes in assets and liabilities (36.0) (38.8)
(1.5) 45.1
Investing and financing activities:
Capital expenditures (10.8) (40.9)
Business acquisitions (13.1) (.5)
Other investing, net .1 (11.6)
Proceeds from issuance of common 131.5 -
stock, net
Net borrowings (repayments) (107.6) (3.5)
Other financing, net - (6.7)
$ (1.4) $(18.1)
Cash paid for:
Interest expense $ 6.7 $ 1.4
Convertible Preferred Securities
dividends - 10.1
Income taxes .9 12.0
</TABLE>
At September 30, 1997, TIMET had $69 million of cash and equivalents and
$220 million of borrowing availability under its U.S. and European bank credit
lines. Indebtedness outstanding consisted primarily of capital lease obligations
related to certain of its European manufacturing facilities and nominal
amounts of European working capital borrowings. The Convertible Preferred
Securities do not require principal amortization and TIMET has the right to
defer dividend payments for one or more periods of up to 20 consecutive quarters
each.
Operating activities. Higher cash provided by operating activities
reflects improved operating results. Changes in assets and liabilities in 1997
used approximately the same amount of cash as in the first nine months of 1996
despite the higher levels of working capital necessary to support the higher
1997 production and sales levels. A TIMET goal is to better manage working
capital such that both "days sales outstanding" in receivables and "days sales
in inventory" improve during 1997 and 1998 over current levels.
Investing activities. TIMET estimates capital expeditures for all of 1997
to be between $55 million and $60 million, including capacity expansion and a
major project to implement integrated information systems throughout TIMET.
About 40% of planned capital expenditures in 1997 relate to capacity expansion
projects, the largest of which include a 20 million pound electron beam furnace
in the U.S. and a radial forge press in the U.K., both to be completed by the
second half of 1998. Capital spending related to the business
process/information systems project is currently estimated at over $30 million
during 1997 and 1998, about one-half of which is expected to be incurred in
1997. Certain costs associated with the business process/information systems
project, including training and reengineering, are expensed as incurred.
TIMET's strategy for developing new markets and uses for titanium includes
providing funds to third parties to prove out a new use or uses of titanium.
Other cash investments in the 1997 period include $8 million of cash
contributions in connection with the formation of ValTimet and otherwise consist
principally of TIMET's previously-reported investment in Titanium Memory
Systems, Inc.
Financing activities. Debt repayments in 1997 related primarily to
reductions in European working capital borrowings, including amounts due to
TIMET's minority partner in TIMET Savoie. Borrowings in the 1996 period were
repaid from proceeds of the June 1996 IPO. In July 1997, TIMET entered into a
new $200 million five-year secured revolving credit facility with a group of
lenders to replace an existing $105 million secured agreement which was not
scheduled to terminate until the end of 1998. Borrowings under the new
agreement, which are secured by substantially all of TIMET's assets, are
available for general corporate purposes, including potential acquisitions.
Borrowings under the new facility are initially at a rate of LIBOR plus 50 basis
points. In conjunction with the change in credit agreements, TIMET temporarily
cash collateralized approximately $5 million of outstanding letters of credit.
Substantially all of such cash collateral should be refunded in the fourth
quarter.
TIMET 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, the cost of debt and equity capital,
and estimated future operating cash flows. As a result of this process, TIMET
has in the past and may in the future seek to raise additional capital, modify
its dividend policy, restructure ownership interests, incur, refinance or
restructure indebtedness, repurchase shares of capital stock, sell 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, TIMET
investigates, evaluates and discusses acquisition, joint venture, strategic
relationship and other business combination opportunities in the titanium,
specialty metal and related industries. In the event of any future acquisition
or joint venture opportunities, TIMET may consider using available cash, issuing
additional equity securities or incurring additional indebtedness.
NL Industries
Summarized balance sheet and cash flow information reported by NL is
presented below.
<TABLE>
<CAPTION>
December SEPTEMBER 30,
31, 1996 1997
(In millions)
<S> <C> <C>
Cash and cash equivalents $ 114.1 $ 102.2
Other current assets 386.1 345.6
Noncurrent securities 23.7 31.1
Investments in joint ventures 181.5 175.4
Other noncurrent assets 49.9 45.0
Property and equipment 466.0 423.9
$1,221.3 $1,123.2
Current liabilities $ 290.4 $ 264.1
Long-term debt 737.1 694.6
Deferred income taxes 151.2 139.5
Accrued OPEB cost 55.9 52.2
Environmental liabilities 106.8 127.3
Other noncurrent liabilities 83.2 73.9
Minority interest .2 .3
Stockholders' deficit:
Capital and retained earnings (84.3) (107.8)
Adjustments, principally foreign
currency translation (119.2) (120.9)
(203.5) (228.7)
$1,221.3 $1,123.2
Nine months ended
September 30,
1996 1997
(In millions)
Net cash provided (used) by:
Operating activities $ 38.3 $ 70.8
Investing and financing activities,
net:
Capital expenditures (52.3) (23.3)
Other investing activities, net (.6) 8.7
Net borrowings (repayments) 21.3 (63.3)
Other financing activities, net (15.5) (3.7)
$(8.8) $(10.8)
Cash paid for:
Interest, net of amounts capitalized $ 31.5 $ 35.3
Income taxes, net 16.7 1.3
</TABLE>
The TiO2 industry is cyclical and changes in economic conditions within the
industry significantly impact the earnings and operating cash flows of NL. Cash
flows from operations before change in assets and liabilities in the first nine
months of 1997 declined from the comparable period in 1996 primarily due to
lower operating income. In the aggregate, changes in NL's inventories,
receivables and payables (excluding the effect of currency translation) provided
cash in both the first nine months of 1996 and 1997; however, the cash provided
in the first nine months of 1997 was significantly higher than the first nine
months of 1996 primarily due to greater reductions in inventory levels in the
1997 period.
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 previously reached an agreement with the
German tax authorities, and paid certain tax deficiencies of approximately DM
44 million ($28 million when paid), including interest, which resolved
significant tax contingencies for years through 1990. Certain other significant
German tax contingencies remain outstanding and will continue to be litigated.
NL has received certain tax assessments aggregating DM 130 million ($74
million), including interest, for years through 1996 and may receive tax
assessments for an additional DM 20 million ($11 million) related to these
remaining tax contingencies. No payments of tax or interest deficiencies
related to these assessments will be required until the litigation is resolved.
A recent German tax court proceeding involving a tax issue substantially the
same as that involved in NL's primary remaining income tax contingency was
decided in favor of the taxpayer. The German tax authorities have appealed the
decision to the German Supreme Court and NL believes that the decision by the
German Supreme Court will be rendered within two years and will become a legal
precedent which will likely determine the outcome of NL's primary dispute with
the German tax authorities. Although NL believes that it will ultimately
prevail, NL has granted a DM 100 million ($57 million at September 30, 1997)
lien on its Nordenham, Germany TiO2 plant in favor of the German tax
authorities. No assurance can be given that this litigation will be resolved in
NL's favor in view of the inherent uncertainties involved in court proceedings.
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.
In order to improve its near-term liquidity, NL refinanced its Rheox
subsidiary during January 1997, obtaining a net $125 million of new long-term
financing. The net proceeds, along with other available funds, were used to
prepay DM 207 million ($127 million when paid) of NL's DM term loan and to repay
DM 43 million ($26 million when paid) of NL's DM revolving credit facility. As
a result of the refinancing and prepayment, NL's aggregate scheduled debt
payments for 1997 and 1998 decreased by $103 million ($64 million in 1997 and
$39 million in 1998). Additionally, total debt was reduced by $28 million as
part of the refinancing. In connection with the prepayment, NL and its lenders
modified certain financial covenants of the DM credit agreement and NL
Industries guaranteed the facility. At September 30, 1997, NL was in compliance
with all financial covenants governing its debt agreements.
In the first nine months of 1997, in addition to the above refinancing and
prepayment, NL repaid $12 million of the joint venture term loan, $11 million of
Rheox's revolving credit facility, $4 million of Rheox's term loan and DM 10
million ($6 million when paid) of short-term notes payable.
At September 30, 1997, NL had cash and cash equivalents aggregating $102
million (54% held by non-U.S. subsidiaries) including restricted cash and cash
equivalents of $10 million. NL's subsidiaries had $21 million and $88 million
available for borrowing at September 30, 1997 under existing U.S. and non-U.S.
credit facilities, respectively.
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, mining locations and facilities currently or
previously owned, operated or used by NL, certain of which 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 ($136 million at September 30, 1997) for
reasonably estimable costs of such matters, but NL's ultimate liability may be
affected by a number of factors, including changes in remedial alternatives and
costs and the allocations of such costs among PRPs. It is not possible to
estimate the range of costs for certain sites. The upper end of the range of
reasonably possible costs to NL for sites for which it is possible to estimate
costs is approximately $180 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. There is no assurance that NL will not incur future
liability in respect of this pending litigation in view of the inherent
uncertainties involved in court and jury rulings in pending and possible future
cases. However, 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 have, from time to time, been enacted
or proposed that seek 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 in the past has
sought, and in the future may seek, to reduce, refinance, repurchase or
restructure indebtedness, raise additional capital, issue additional securities,
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 review opportunities for the acquisition, divestiture, joint
venture or other business combinations in the chemicals industry. In the event
of any such transactions, NL may consider using available cash, issuing equity
securities or refinancing or increasing its indebtedness to the extent permitted
by the agreements governing NL's existing debt.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
Reference is made to the 1996 Annual Report and the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997 for descriptions of
certain legal proceedings.
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 September 30, 1997,
attached hereto as Exhibit 99.1.
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 September 30, 1997,
attached hereto as Exhibit 99.2
Reference is made to the discussion contained in the 1996 Annual Report
regarding the stockholder derivative case of Kahn v. Tremont Corporation, et al
(Del. Court of Chancery, No. 12339). In October 1997, the Delaware Court of
Chancery ordered additional proceedings on remand to focus on the fairness of
the price terms of the transaction in response to the previously reported order
of the Delaware Supreme Court. Tremont and the other defendants intend to
continue their vigorous defense of this suit. A decision by the trial court on
remand is not expected before the first quarter of 1998.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
27.1 Financial Data Schedule for the nine-month period
ended September 30, 1997.
99.1 Part II, Item 1 of a Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997 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 September 30, 1997 filed by
Titanium Metals Corporation (File No. 0-28538).
(b) Reports on Form 8-K filed by the Registrant for the quarter ended
September 30, 1997 and for the month of October 1997:
July 23, 1997 - Reported Items 5 and 7.
October 23, 1997 - Reported Items 5 and 7.
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: November 4, By /s/ Joseph S. Compofelice
1997
Joseph S. Compofelice
Vice President and
Chief Financial Officer
By /s/ J. Thomas Montgomery,
Jr.
J. Thomas Montgomery, Jr.
Vice President - Controller
and Treasurer
(Chief Accounting Officer)
Exhibit 99.1
PART II, Item I - "Legal Proceedings" of a Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997 filed by NL Industries, Inc. (File No. 1-640)
Reference is made to the 1996 Annual Report and NL's Quarterly Report on
Form 10-Q for the quarters ended March 31, 1997 and June 30, 1997 for
descriptions of certain previously-reported legal proceedings.
Wright v. Lead Industries, et al., (Nos. 94 363042 and 363043). In
October 1997 the Maryland court of appeals affirmed the previously-reported
summary judgment in defendants' favor. The time in which plaintiffs' may seek
to review the court of appeals decision has not yet expired.
Gates v. American Cyanamid Co., et al., (No. I1996-2114). In October
1997 plaintiffs indicated that they intend to dismiss this case with prejudice
as to all defendants.
Ritchie v. NL Industries, et al., (No. 5:96-CV-166). In August 1997
plaintiffs dismissed the complaint with prejudice against all defendants.
Gould v. NL Industries, Inc., (No. 91-1091) ("Gould Superfund Site",
Portland, Oregon). The U.S. EPA, NL and other PRPs are negotiating the terms of
a consent decree to perform the remedial action selected in the amended record
of decision. Trial in the action for contribution among the PRPs, previously
set for September 1997, has been rescheduled for January 1998.
Granite City Superfund Site. In September 1997, the U.S. EPA informed
NL that past and future cleanup costs are estimated to total approximately $63.5
million.
Cherokee County Sites. In August 1997 the U.S. EPA issued the record of
decision for the Baxter Springs and Treece subsites. The U.S. EPA has estimated
that the selected remedy will cost approximately $7.1 million.
State of Illinois vs. NL Industries. Inc. et al., (No. 88-CH-11618). In
August 1997 the trial court dismissed the case. The State has filed a notice of
appeal.
Flacke v. NL Industries, Inc., (No. 1842-80). The case has been settled
within previously accrued amounts.
Rhodes, et al. v. ACF Industries, Inc., et al., (No. 95-C-261). An
agreement in principle has been reached settling this matter, with NL being
indemnified by another party.
Exhibit 99.2
PART II, Item I - "Legal Proceedings" of a Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997 filed by Titanium Metals Corporation (File No.
0-28538)
Reference is made to TIMET's 1996 Annual Report for descriptions of
certain previously reported legal proceedings.
In September 1997, the previously reported action, Cadmus v. Titanium
Metals Corporation (No. C2-95-586, U.S. District Court, Southern District of
Ohio), was dismissed without prejudice without payment by TIMET.
TIMET Castings, a wholly owned subsidiary of TIMET, has settled the
previously reported action involving Ray Cook Golf Company for an immaterial
sum.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TREMONT
CORPORATION'S FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000842718
<NAME> TREMONT CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 45,455
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 2,663
<INVENTORY> 0
<CURRENT-ASSETS> 53,139
<PP&E> 1,394
<DEPRECIATION> 707
<TOTAL-ASSETS> 210,521
<CURRENT-LIABILITIES> 6,935
<BONDS> 0
0
0
<COMMON> 7,688
<OTHER-SE> 129,846
<TOTAL-LIABILITY-AND-EQUITY> 210,521
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
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<INCOME-PRETAX> 16,457
<INCOME-TAX> 8,182
<INCOME-CONTINUING> 7,083
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<CHANGES> 0
<NET-INCOME> 7,083
<EPS-PRIMARY> .99
<EPS-DILUTED> .99
</TABLE>
