<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, 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 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, 1997: 6,874,108
------------
<PAGE> 2
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.
<PAGE> 3
TREMONT CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
number
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - December 31, 1996 and
June 30, 1997 2-3
Consolidated Statements of Operations - Three months and
Six months ended June 30, 1996 and 1997 4
Consolidated Statements of Cash Flows - Six months
ended June 30, 1996 and 1997 5
Consolidated Statement of Stockholders' Equity - Six
months ended June 30, 1997 6
Notes to Consolidated Financial Statements 7-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 10-22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 23
Item 4. Submission of Matters to a Vote of Security Holders. 23
Item 6. Exhibits and Reports on Form 8-K. 24
</TABLE>
1
<PAGE> 4
TREMONT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31, JUNE 30,
ASSETS 1996 1997
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 68,035 $ 49,984
Accounts and notes receivable 6,445 6,180
Receivable from related parties 1,026 995
Prepaid expenses 1,785 55
------------ ------------
Total current assets 77,291 57,214
------------ ------------
Other assets:
Investment in TIMET 98,479 108,905
Investment in NL Industries 26,724 14,893
Investment in joint ventures 6,937 10,201
Receivable from related parties 4,722 4,431
Other 8,656 10,305
------------ ------------
Total other assets 145,518 148,735
------------ ------------
Net property and equipment 714 702
------------ ------------
$ 223,523 $ 206,651
============ ============
</TABLE>
2
<PAGE> 5
TREMONT CORPORATION
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands)
<TABLE>
<CAPTION>
December 31, JUNE 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1997
------------ ------------
<S> <C> <C>
Current liabilities:
Accrued liabilities $ 7,336 $ 4,680
Payable to related parties 225 727
Income taxes 112 711
------------ ------------
Total current liabilities 7,673 6,118
------------ ------------
Noncurrent liabilities:
Insurance claims and claim expenses 12,867 14,392
Accrued postretirement benefit cost 22,072 21,656
Deferred income taxes 16,319 19,304
Other 4,677 4,892
------------ ------------
Total noncurrent liabilities 55,935 60,244
------------ ------------
Minority interest 1,886 2,969
------------ ------------
Stockholders' equity:
Common stock 7,640 7,685
Additional paid-in capital 273,780 274,582
Accumulated deficit (116,834) (114,807)
Adjustments:
Currency translation (2,764) (6,121)
Marketable securities 702 1,077
Pension liabilities (899) (899)
------------ ------------
161,625 161,517
Less treasury stock, at cost 3,596 24,197
------------ ------------
Total stockholders' equity 158,029 137,320
------------ ------------
$ 223,523 $ 206,651
============ ============
</TABLE>
Commitments and contingencies (Note 1).
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
TREMONT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------- --------------------
1996 1997 1996 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Equity in earnings (loss) of:
TIMET $ 3,317 $ 6,151 $ 4,641 $ 10,928
NL Industries 1,201 (390) 2,651 (7,609)
Other joint ventures 673 353 673 4,304
-------- -------- -------- --------
5,191 6,114 7,965 7,623
Gain on sale of TIMET stock 27,599 -- 27,599 --
Corporate income (expense), net (2,351) 1,079 (2,717) 1,093
Interest expense (144) -- (274) --
-------- -------- -------- --------
Income before income taxes 30,295 7,193 32,573 8,716
Income tax expense 6,053 2,658 6,053 5,606
Minority interest 125 94 182 1,083
-------- -------- -------- --------
Net income $ 24,117 $ 4,441 $ 26,338 $ 2,027
======== ======== ======== ========
Net income per share $ 3.14 $ .62 $ 3.44 $ .28
======== ======== ======== ========
Weighted average shares outstanding 7,675 7,125 7,646 7,285
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 7
TREMONT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1996 and 1997
(In thousands)
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 26,338 $ 2,027
Earnings of affiliates, net of distributions (5,818) (6,602)
Gain on sale of TIMET stock (27,599) --
Deferred income taxes 3,407 4,824
Minority interest 182 1,083
Other, net (21) (1,597)
Change in assets and liabilities:
Accounts and notes receivable (179) 271
Accounts with related parties (494) 855
Accounts payable and accrued liabilities 1,762 (2,656)
Income taxes 2,869 601
Other, net (99) 1,741
-------- --------
Net cash provided from operating activities 348 547
-------- --------
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
Purchases of securities (1,280) (174)
Other, net 274 200
-------- --------
Net cash provided from investing activities 71,352 1,232
-------- --------
Cash flows from financing activities:
Repurchases of common stock -- (20,601)
Related party loan repayments (3,500) --
Borrowings from related parties 50 --
Reductions of indebtedness (2,500) --
Other 603 771
-------- --------
Net cash used by financing activities (5,347) (19,830)
-------- --------
Net increase (decrease) in cash and cash equivalents 66,353 (18,051)
Balance at beginning of period 2,650 68,035
-------- --------
Balance at end of period $ 69,003 $ 49,984
======== ========
Supplemental disclosures - cash paid for:
Interest $ 182 $ --
Income taxes (received) (223) 184
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 8
TREMONT CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Six Months ended June 30, 1997
(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, 1996 $ 7,640 $ 273,780 $(116,834) $ (2,764) $ 702 $ (899) $ (3,596) $ 158,029
Net income -- -- 2,027 -- -- -- -- 2,027
Repurchases of common stock -- -- -- -- -- -- (20,601) (20,601)
Common stock issued 45 726 -- -- -- -- -- 771
Adjustments, net -- -- -- (3,357) 375 -- -- (2,982)
Other -- 76 -- -- -- -- -- 76
--------- --------- --------- --------- --------- --------- --------- ---------
Balance at June 30, 1997 $ 7,685 $ 274,582 $(114,807) $ (6,121) $ 1,077 $ (899) $ (24,197) $ 137,320
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE> 9
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 46% 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 June 30, 1997 and the consolidated statements of
operations and cash flows for the interim periods ended June 30, 1996 and 1997
and the consolidated statement of stockholders' equity for the interim period
ended June 30, 1997 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. 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.
7
<PAGE> 10
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, 1997, the net carrying amount of the Company's
investment in TIMET was approximately $11.43 per share, while the market price
of TIMET common stock was $31.625 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 June 30, 1997, the net carrying amount of the Company's investment in
NL was approximately $1.64 per share while the market price of NL common stock
was $14.50 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 six months ended
June 30, 1997, the Company repurchased 560,300 shares of its common stock for
approximately $20.6 million and during July 1997 repurchased an additional
78,800 shares for approximately $3.6 million.
8
<PAGE> 11
Note 5 - Accrued liabilities:
<TABLE>
<CAPTION>
December 31, JUNE 30,
1996 1997
------------ ------------
(In thousands)
<S> <C> <C>
Postretirement benefit cost $ 1,924 $ 1,924
Other employee benefits 1,107 233
Environmental cost 300 360
Legal costs 546 653
Miscellaneous taxes 256 147
Other 3,203 1,363
------------ ------------
$ 7,336 $ 4,680
============ ============
</TABLE>
Note 6 - 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 benefit being recognized on
equity in NL's losses. In the 1996 periods, the variance was due principally to
a reduction in the deferred tax valuation allowance to reflect current
utilization of U.S. net operating loss carryforwards ("NOL's").
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.
9
<PAGE> 12
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Tremont Corporation is principally a holding company with operations
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 second quarter net income of $4.4 million, or
$.62 per share, compared to $24.1 million, or $3.14 per share, for the same
quarter in 1996. For the first six months of 1997, Tremont reported net income
of $2.0 million, or $.28 per share, compared to $26.3 million, or $3.44 per
share, for the same period in 1996. Tremont recognized a $27.6 million pretax
gain on the sale of TIMET stock in the second quarter of 1996.
The Company's equity in earnings of 30%-owned TIMET was $6.1 million
in the second quarter of 1997 compared to $3.3 million in the second quarter of
1996. TIMET reported net income of $20.3 million in the second quarter of 1997
on sales of $181.4 million, up from net income of $8.1 million for the second
quarter of 1996. The significant improvement in TIMET's titanium metals
business was driven by price increases and a 30% increase in mill product
volume compared to the second quarter of 1996.
The Company's equity in earnings of 18%-owned NL Industries was a loss
of $.4 million in the second quarter of 1997 compared to income of $1.2 million
in the second quarter of 1996. NL reported net income of $2.3 million in the
second quarter of 1997 on sales of $253 million compared to net income of $11.9
million in the same quarter of 1996. NL's second quarter average selling prices
for titanium dioxide pigments ("TiO2") were 3% higher than the first quarter of
1997 and 8% below year-ago levels.
The Company's equity in earnings of other joint ventures principally
represents earnings from its real estate development partnership. General
corporate income, net in the second quarter of 1997 included $1.2 million
related to the sale of certain oil and gas production interests. The Company's
income tax rate in 1997 approximates the statutory rate except that no benefit
is recognized on NL's losses.
Based on continuing strength in the titanium metals business,
especially in aerospace, the strong demand and increasing prices NL is
experiencing for TiO2, the Company believes it will be profitable during the
last half of 1997.
10
<PAGE> 13
TIMET
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
1996 1997 Change 1996 1997 Change
------ ------ ------ ------ ------ ------
(In millions)
<S> <C> <C> <C> <C> <C> <C>
Net sales $118.8 $181.4 $ 62.6 $226.4 $348.4 $122.0
====== ====== ====== ====== ====== ======
Operating income $ 13.7 $ 32.8 $ 19.1 $ 20.6 $ 59.4 $ 38.8
Corporate income, net .5 1.4 .4 2.4
Interest expense (3.3) (3.8) (6.9) (7.9)
------ ------ ------ ------
10.9 30.4 $ 19.5 14.1 53.9 $ 39.8
Income tax expense 2.8 9.4 3.5 16.6
Minority interest -- .7 .4 1.2
------ ------ ------ ------
Net income $ 8.1 $ 20.3 $ 12.2 $ 10.2 $ 36.1 $ 25.9
====== ====== ====== ====== ====== ======
Tremont's equity in
TIMET's earnings $ 3.3 $ 6.1 $ 2.8 $ 4.6 $ 10.9 $ 6.3
====== ====== ====== ====== ====== ======
</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 quarter of
1996.
As previously reported, TIMET completed certain acquisitions during
1996 and early 1997, 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, TIMET's (i) net sales for the second quarter of 1996 were $141.1 million,
operating income was $14.7 million, net income was $7.0 million and net income
per share was $.26 and (ii) net sales for the six months ended June 30, 1996
were $265.0 million, operating income was $19.0 million, net income was $5.7
million and net income per share was $.22. The pro forma effect of the
previously-reported TISTO (July 1996), TIMET Savoie (August 1996), and LASAB
(January 1997) transactions is not material. The above TIMET 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.
The significant improvement in 1997 earnings was driven by price
increases and a 25% increase in mill products volume compared to the first six
months of 1996. Titanium mill products shipments in the second quarter were a
record 8.2 million pounds (15.6 million pounds for the 1997 six-month period).
The average selling price of mill products shipped in the second quarter of
1997 was $16.18 per pound compared to $14.54 in the second quarter
11
<PAGE> 14
of 1996 and $16.00 in the first quarter of 1997. TIMET's operating income
margin increased to 18.1% in the second quarter of 1997, significantly above
year-ago levels, and up from 15.9% in the first quarter of 1997.
The higher average selling prices reflect the pass-through of cost
increases, particularly raw material costs, real price increases associated
with increased market demand and product mix. Although TIMET and the titanium
industry are continuing to experience increases in the cost of certain raw
materials, TIMET's higher selling prices have more than offset those cost
increases. Firm order backlog at June 30, 1997 was approximately $485 million,
up from $440 million at year-end 1996. Average prices on recent orders have
continued to be above prior period levels.
Operating levels at TIMET's plants in 1997 were generally higher than
in the comparable 1996 period and contributed to the improved operating
results. However, operating levels at one of TIMET's two casting facilities,
which facility primarily produced for non-aerospace markets, were well below
1996 levels and negatively impacted earnings. Total worldwide employment at
June 30, 1997 approximated 3,050 compared to 2,950 at year-end 1996 and 3,050
one year ago (proforma for the AJM acquisition).
Operating income in the first half of 1996 included special charges
of $4.3 million related to the IMI titanium acquisition.
Interest expense in the first half of 1997 includes $6.8 million
related to TIMET's Convertible Preferred Securities issued in November 1996.
Interest in the 1996 period relates primarily to indebtedness repaid with the
proceeds of TIMET's June 1996 initial public stock offering.
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
may slightly 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. 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 was higher than in
1996. Such effective rate for the full year 1997 may vary slightly from that in
the first half of the year due to the combined effects of state income taxes
and varying non-U.S. rates.
12
<PAGE> 15
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 ended Six months ended
June 30, June 30,
---------------- ----------------
1996 1997 Change 1996 1997 Change
---- ---- ------ ---- ---- ------
(In millions, except percentages)
<S> <C> <C> <C> <C> <C> <C>
Net sales:
Kronos $ 228.3 $ 214.4 -6% $ 434.6 $ 418.8 -4%
Rheox 34.9 38.4 +10% 69.0 73.5 +7%
-------- -------- -------- --------
$ 263.2 $ 252.8 -4% $ 503.6 $ 492.3 -2%
======== ======== ======= ======== ======== =======
Operating income:
Kronos $ 25.4 $ 16.8 -34% $ 54.9 $ 25.5 -54%
Rheox 10.7 12.2 +14% 23.1 22.3 -3%
-------- -------- -------- --------
36.1 29.0 -20% 78.0 47.8 -39%
General corporate items:
Securities earnings, net 1.1 .5 2.4 1.2
Expenses, net (1.7) (5.1) (6.6) (39.1)
Interest expense (18.5) (19.4) (37.6) (38.4)
-------- -------- -------- --------
17.0 5.0 $(12.0) 36.2 (28.5) $(64.7)
Income tax expense (5.1) (2.7) (10.8) (5.0)
-------- -------- -------- --------
Net income (loss) $ 11.9 $ 2.3 $ (9.6) $ 25.4 $ (33.5) $ (58.9)
======== ======== ======= ======== ======== =======
Tremont's equity in NL's
earnings, including
amortization of basis
differences $ 1.2 $ (.4) $ (1.6) $ 2.7 $ (7.6) $ (10.3)
======== ======== ======= ======== ======== =======
</TABLE>
13
<PAGE> 16
Kronos' TiO2 operating income in the second quarter and first half of
1997 decreased from the comparable periods in 1996 due to lower average TiO2
selling prices, partially offset by higher production and sales volumes.
Kronos' average TiO2 selling prices for the second quarter of 1997 were 3%
higher than the first quarter of 1997 and 8% lower than the second quarter of
1996. Selling prices at the end of the second quarter of 1997 were 1% higher
than the average for the quarter. Kronos achieved record second quarter sales
volumes, reflecting continued strong TiO2 demand. Kronos' second quarter and
six months sales volumes increased 9% and 14%, respectively, from the
year-earlier periods with higher sales volumes worldwide. While Kronos
currently expects its full-year 1997 TiO2 sales volumes will be higher than
the full-year 1996 volumes, TiO2 sales volumes in the last half of 1997 are
expected to be lower than the first half of 1997. Kronos' operating income in
the second quarter of 1997 includes a $2.7 million gain related to the sale of
surplus assets.
Although Kronos expects further increases in its TiO2 selling prices
during the second half of 1997, Kronos expects its full-year 1997 operating
income will be below that of 1996, due to lower anticipated average TiO2
prices for full-year 1997 compared to 1996. Kronos' cost of sales as a
percentage of net sales increased in the second quarter and first half of 1997
due to lower average prices in both periods of 1997 compared to 1996. Kronos'
selling, general and administrative expenses decreased in the second quarter
and first half of 1997 due to favorable effects of foreign currency
translation, partially offset by higher distribution expenses associated with
higher 1997 sales volumes.
Rheox's operating income for the second quarter of 1997 increased 14%
compared to the second quarter of 1996 on higher sales volumes and slightly
higher selling prices. As a result, Rheox's operating income in the first half
of 1997 was $1.9 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 in the
second quarter and first half of 1997 were comparable to the respective 1996
periods. Selling, general and administrative expenses increased in the second
quarter and first half of 1997 compared to the 1996 periods primarily due to
higher selling and distribution expenses associated with higher 1997 sales
volumes and higher variable compensation expense.
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 second quarter and first half of
1997 by $13 million and $22 million, respectively, compared to the comparable
1996 periods. In addition, a portion of the net sales generated from NL's
non-U.S. operations are billed in U.S. dollars, and exchange rate fluctuations
do not impact such net sales. Operating margins on such net sales improved
compared to 1996 as operating costs are lower in U.S. dollar terms due to
exchange rate fluctuations. Consequently, fluctuations in the value of the U.S.
dollar relative to other currencies increased operating income in the second
quarter and first half of 1997 compared with the same periods in 1996.
14
<PAGE> 17
Securities earnings declined due to lower average balances available
for investment. Corporate expenses, net was higher in the second quarter of
1997 compared to the same period in 1996 primarily due 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. Corporate expenses, net in the first
half of 1997 was 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 second quarter and first half of 1997 primarily due
to higher variable interest rates and higher average principal balances.
Other Joint Ventures
Earnings of other joint ventures principally represents earnings from
land sales made by the VVLC real estate development partnership. Land sales can
vary significantly from period to period.
Tremont - Corporate
Corporate income, net in the first half of 1997 includes $1.5 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 the first half of 1997 approximated
the statutory federal tax rate except that no tax benefit was recognized on
Tremont's equity in losses from its investment in NL. This relationship is
expected to continue for the remainder of 1997.
The Company's income tax rate in the 1996 period varied from the
statutory rate principally due to a reduction in the deferred tax valuation
allowance to reflect the current utilization of NOL's.
15
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES
Tremont
The Company had cash and cash equivalents of $50 million at June 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 $301 million and $131 million,
respectively, at June 30, 1997. Tremont also has the right to acquire 1.5
million shares of TIMET's common stock from IMI with a June 30, 1997 market
value of $47 million for an aggregate purchase price of $12 million. At June
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 dividend from VVLC in 1997 primarily to
cover taxes associated with VVLC's income from land sales. In the 1996 period,
NL paid a cash dividend 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 six months ended
June 30, 1997, the Company repurchased 560,300 shares of its common stock for
approximately $20.6 million and during July 1997, the Company repurchased an
additional 78,800 shares for approximately $3.6 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 half 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
16
<PAGE> 19
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.
Tremont intends to study the future direction and opportunities available to
Tremont with a view to obviating any argument concerning Tremont's possible
status as an investment company under the 1940 Act. 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 31, JUNE 30,
1996 1997
-------- --------
(In millions)
<S> <C> <C>
Cash and cash equivalents $ 86.5 $ 83.7
Other current assets 284.5 313.7
Goodwill and other intangible assets 86.7 80.3
Other noncurrent assets 25.7 28.4
Property and equipment, net 219.6 242.2
-------- --------
$ 703.0 $ 748.3
======== ========
Current liabilities $ 112.8 $ 125.2
Noncurrent liabilities 58.5 55.8
Minority interest - TIMET-obligated mandatorily redeemable
preferred securities of subsidiary trust holding solely
subordinated debt securities 201.3 201.3
Other minority interest 4.2 5.4
Stockholders' equity 326.2 360.6
-------- --------
$ 703.0 $ 748.3
======== ========
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
Six months ended
June 30,
-------------------
1996 1997
-------- -------
(In millions)
<S> <C> <C>
Net cash provided (used) by:
Operating activities $ (9.8) $ 35.3
Investing and financing activities:
Capital expenditures (6.4) (29.7)
Business acquisitions (2.3) (.5)
Other investing, net .2 (3.2)
Proceeds from issuance of common stock, net 132.1 --
Net borrowings (repayments) (108.6) (4.6)
Cash acquired 1.9 --
Currency translation .1 (.1)
-------- -------
$ 7.2 $ (2.8)
======== =======
Cash paid for:
Interest $ 6.2 $ 7.6
Income taxes .2 3.6
</TABLE>
At June 30, 1997, TIMET had $84 million of cash and equivalents and
$132 million of borrowing availability under its then-existing U.S. and
European bank credit lines ($227 million of borrowing availability proforma for
the new bank credit agreement entered into in July 1997). Indebtedness
outstanding consisted primarily of capital lease obligations related to certain
of its European manufacturing facilities and a relatively nominal amount of
European working capital borrowings. TIMET's Convertible Preferred Securities
do not require principal amortization and TIMET has the right to defer interest
payments for one or more periods of up to 20 consecutive quarters each.
Operating activities. Reflecting improved operating results, cash
provided by operating activities (before changes in assets and liabilities) was
$53 million in the 1997 six-month period compared to $19 million in the same
period of 1996. Changes in assets and liabilities used approximately $18
million of cash in 1997, about $11 million less than in the first half of 1996
despite the higher levels of working capital necessary to support the higher
production and sales levels. TIMET's goal is to better manage working capital
such that both "days sales outstanding" in receivables and "days sales in
inventory" improve in 1997 and 1998 over year-end 1996.
Investing activities. TIMET estimates capital expenditures for all of
1997 to be about $60 million, including capacity expansion and a major project
to redesign business processes and 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 the next few years, about one-half of which is expected to be
incurred in 1997.
18
<PAGE> 21
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. TIMET's other cash investments in the 1997 period include its
previously-reported investment in Titanium Memory Systems, Inc.
Effective in July 1997, TIMET closed the previously-reported
transaction to combine its welded tubing operations with those of Valinox
Welded, a French manufacturer of welded tubing, principally stainless steel and
titanium, with operations in France and China. The joint venture, "ValTimet",
is 46% owned by TIMET and 54% owned by Valinox Welded. TIMET will supply
titanium strip product to ValTimet under a long-term contract as the preferred
supplier. The effect of the transaction on TIMET's 1997 financial results is
not expected to be material.
Financing activities. Debt repayments in 1997 related primarily to
reductions in European working capital borrowings, including amounts due to
CEZUS, the 30% minority owner in TIMET Savoie. Borrowings in the 1996 period
were primarily to fund working capital needs and capital expenditures prior to
outstanding borrowings being repaid from proceeds of the June 1996 initial
public stock offering. 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, will be available for TIMET's general
corporate purposes, including potential acquisitions. Borrowings under the new
facility will initially be at a rate of LIBOR plus 50 basis points.
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, refinance or restructure indebtedness, repurchase shares of capital
stock, sell 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, TIMET may investigate, evaluate and discuss acquisition, joint
venture and other business combination opportunities in the titanium, specialty
metal and related industries, and in this regard TIMET has been exploring a
potential strategic relationship with a large titanium producer in Russia. In
the event of any future acquisition or joint venture opportunities, TIMET may
consider using available cash, issuing equity securities or incurring
indebtedness.
19
<PAGE> 22
NL Industries
Summarized balance sheet and cash flow information reported by NL is
presented below.
<TABLE>
<CAPTION>
December 31, JUNE 30,
1996 1997
---------- ----------
(In millions)
<S> <C> <C>
Cash and cash equivalents $ 114.1 $ 74.6
Other current assets 386.1 367.7
Noncurrent securities 23.7 26.8
Investment in joint ventures 181.5 178.2
Other noncurrent assets 49.9 46.0
Property and equipment 466.0 428.5
---------- ----------
$ 1,221.3 $ 1,121.8
========== ==========
Current liabilities $ 290.4 $ 226.1
Long-term debt 737.1 738.8
Deferred income taxes 151.2 140.4
Accrued OPEB cost 55.9 53.2
Environmental liabilities 106.8 129.0
Other noncurrent liabilities 83.2 76.3
Minority interest .2 .2
Stockholders' deficit:
Capital and retained earnings (84.3) (117.5)
Adjustments, principally foreign
currency translation (119.2) (124.7)
---------- ----------
(203.5) (242.2)
---------- ----------
$ 1,221.3 $ 1,121.8
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Six months ended
June 30,
------------------
1996 1997
------- -------
(In millions)
<S> <C> <C>
Net cash provided (used) by:
Operating activities $ (5.6) $ 14.3
Investing and financing activities:
Capital expenditures (31.4) (16.3)
Other investing activities, net (3.4) 6.4
Net borrowings (repayments) 31.6 (38.3)
Other financing activities, net (10.4) (3.7)
------- -------
$ (19.2) $ (37.6)
======= =======
Cash paid for:
Interest, net of amounts capitalized $ 27.6 $ 27.0
Income taxes (received) 10.7 (2.7)
</TABLE>
20
<PAGE> 23
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 six 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) used cash in both the first half of 1996 and 1997; however, the
cash used in the first half of 1997 was significantly less than the first half
of 1996 due to cash provided from 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 ($75
million), including interest, for years through 1996 and expects to receive tax
assessments for an additional DM 20 million ($12 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,
which NL anticipates may take approximately two to five years. Although NL
believes that it will ultimately prevail, NL has granted a DM 100 million ($58
million at June 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 its 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 June 30, 1997, NL was
in compliance with all financial covenants governing its debt agreements.
In addition to the above refinancing and prepayment, NL repaid $7.8
million of the joint venture term loan in the first six months of 1997.
At June 30, 1997, NL had cash and cash equivalents aggregating $75
million (36% held by non-U.S. subsidiaries) including restricted cash and cash
equivalents of $9 million. NL's subsidiaries had $9 million and $92 million
available for borrowing at June 30, 1997 under existing U.S. and non-U.S.
credit facilities, respectively.
21
<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, 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 ($138
million at June 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 $185 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.
22
<PAGE> 25
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
Reference is made to the 1996 Annual Report 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 June 30, 1997,
attached hereto as Exhibit 99.1.
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 June 1997, the
Delaware Supreme Court reversed and remanded for further proceedings the prior
trial court ruling in favor of Tremont and the other defendants in this action.
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
fourth quarter of 1997.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Stockholders on May 6, 1997.
The only matter voted upon was the election of directors, and all 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 4,559,751 211,728
Richard J. Boushka 4,559,851 211,628
J. Landis Martin 4,559,403 212,076
Glenn R. Simmons 4,559,232 212,247
Harold C. Simmons 4,559,207 212,272
Gen. Thomas P. Stafford 4,559,541 211,938
Avy H. Stein 4,559,945 211,534
</TABLE>
23
<PAGE> 26
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10.1 $200,000,000 Credit Agreement among Titanium Metals Corporation
and various lending institutions dated as of July 30, 1997,
incorporated by reference to Exhibit 10.1 to a Current Report on
Form 8-K dated July 30, 1997 filed by Titanium Metals
Corporation (File No. 0-28538).
27.1 Financial Data Schedule for the six-month period ended June 30,
1997.
99.1 Part II, Item 1 of a Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 filed by NL Industries, Inc. (File
No. 1-640).
(b) Reports on Form 8-K filed by the Registrant for the quarter ended
June 30, 1997 and for the month of July 1997:
April 25, 1997 - Reported Items 5 and 7
June 19, 1997 - Reported Items 5 and 7
July 23, 1997 - Reported Items 5 and 7
24
<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 6, 1997 By /s/ Joseph S. Compofelice
- ----------------------------- ----------------------------------
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)
<PAGE> 28
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ------- -----------
10.1 $200,000,000 Credit Agreement among Titanium Metals Corporation
and various lending institutions dated as of July 30, 1997,
incorporated by reference to Exhibit 10.1 to a Current Report on
Form 8-K dated July 30, 1997 filed by Titanium Metals
Corporation (File No. 0-28538).
27.1 Financial Data Schedule for the six-month period ended June 30,
1997.
99.1 Part II, Item 1 of a Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 filed by NL Industries, Inc. (File
No. 1-640).
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TREMONT
CORPORATION'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE
30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 49,984
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 2,663
<INVENTORY> 0
<CURRENT-ASSETS> 57,214
<PP&E> 1,394
<DEPRECIATION> 692
<TOTAL-ASSETS> 206,651
<CURRENT-LIABILITIES> 6,118
<BONDS> 0
0
0
<COMMON> 7,685
<OTHER-SE> 129,635
<TOTAL-LIABILITY-AND-EQUITY> 206,651
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,716
<INCOME-TAX> 5,606
<INCOME-CONTINUING> 2,027
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,027
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
<PAGE> 1
Exhibit 99.1
PART II, Item I - "Legal Proceedings" of a Quarterly Report on Form 10-Q for
the Quarter ended June 30, 1997 filed by NL Industries, Inc. (File No. 1-640)
Reference is made to NL's 1996 Annual Report and NL's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997 for descriptions of
certain previously-reported legal proceedings.
Gould Inc. v. NL Industries, Inc. ("Gould Superfund Site"), (No.
91-1091). In May 1997 the U.S. EPA issued an Amended Record of Decision ("ARD")
for the Gould Superfund Site soils operable unit. The ARD requires construction
of an onsite containment facility estimated to cost between $10.5 million and
$12 million, including capital costs and operating and maintenance costs.
German, et al v. Federal Home Mortgage Loan Corp., et al. (No. 93
Civ. 6941). In May 1997 plaintiffs moved for class certification and defendants
moved for summary judgment. In June 1997 the Court stayed all further activity
in the case pending reconsideration of its 1995 decision permitting filing of
the complaint against the manufacturer defendants and joinder of the new
complaint with the pre-existing complaint against New York City and other
landlords.
NL Industries, Inc. v. Commercial Union, et al. (No. 90-2124).
In June 1997 NL reached a settlement in principle with its insurers regarding
allocation of defense costs in the lead pigment cases in which reimbursement of
defense costs had been sought.
Parker v. NL Industries, et al. (No. 97085060 CC915). In June
1997 plaintiffs moved to remand to state court and NL answered the complaint
denying liability. Trial is scheduled to begin in July 1998.
Ritchie v. NL Industries, et al. (No. 5:96-CV-166). In July 1997
defendants filed a second notice of removal to federal court.
The City of New York, et al. v. Lead Industries Association,
Inc., et al. (No. 89-4617). In July 1997 the trial court's denials of
defendants' two summary judgment motions on the fraud claim were affirmed by
the Appellate Division.
