SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 2004
Commission File number 000-32665
OGLEBAY NORTON COMPANY
(Exact name of registrant as specified in its charter)
| Ohio | 34-1888342 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S.employer identification no.) | |
| North Point Tower, 1001 Lakeside Ave., 15th Floor, Cleveland, Ohio | 44114-1151 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code 216 861-3300
N/A
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x
Common shares outstanding at May 11, 2004: 5,064,149
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
| Page Number | ||
| PART I. FINANCIAL INFORMATION |
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| Item 1 |
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| 3 | ||
| Condensed Consolidated Balance Sheet (Unaudited) - March 31, 2004 and December 31, 2003 |
4 | |
| 5 | ||
| 6-18 | ||
| Item 2 |
||
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
19-28 | |
| Item 3 |
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| 29 | ||
| Item 4 |
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| 30 | ||
| PART II. OTHER INFORMATION |
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| Item 1 |
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| 31-34 | ||
| Item 2 |
||
| Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
34 | |
| Item 3 |
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| 34 | ||
| Item 4 |
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| 34 | ||
| Item 5 |
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| 35 | ||
| Item 6 |
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| 35 | ||
| 36-40 | ||
-2-
Part I. Item 1. FINANCIAL INFORMATION
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(UNAUDITED)
| Three Months Ended March 31 |
||||||||
| 2004 |
2003 |
|||||||
| NET SALES AND OPERATING REVENUES |
$ | 69,434 | $ | 62,884 | ||||
| COSTS AND EXPENSES |
||||||||
| Cost of goods sold and operating expenses |
54,534 | 49,544 | ||||||
| Depreciation, depletion, amortization and accretion |
5,491 | 5,473 | ||||||
| General, administrative and selling expenses |
9,341 | 10,075 | ||||||
| Provision for restructuring, asset impairments and early retirement programs |
1,315 | 0 | ||||||
| 70,681 | 65,092 | |||||||
| OPERATING LOSS |
(1,247 | ) | (2,208 | ) | ||||
| Reorganization items, net |
(4,565 | ) | 0 | |||||
| (Loss) gain on disposition of assets |
(15 | ) | 63 | |||||
| Interest expense |
(12,555 | ) | (13,281 | ) | ||||
| Other income (expense), net |
93 | (1,591 | ) | |||||
| LOSS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE |
(18,289 | ) | (17,017 | ) | ||||
| INCOME TAX BENEFIT |
(552 | ) | (7,358 | ) | ||||
| LOSS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE |
(17,737 | ) | (9,659 | ) | ||||
| CUMULATIVE EFFECT OF ACCOUNTING CHANGE FOR ASSET RETIREMENT OBLIGATIONS (net of tax benefit of $889) |
— | (1,391 | ) | |||||
| NET LOSS |
$ | (17,737 | ) | $ | (11,050 | ) | ||
| PER SHARE AMOUNTS—BASIC AND ASSUMING DILUTION: |
||||||||
| Loss before cumulative effect of accounting change |
$ | (3.40 | ) | $ | (1.90 | ) | ||
| Cumulative effect of accounting change for asset retirement obligations (net of tax benefit of $0.18) |
— | (0.27 | ) | |||||
| Net loss per share—basic and assuming dilution |
$ | (3.40 | ) | $ | (2.17 | ) | ||
See notes to condensed consolidated financial statements.
-3-
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except per share amounts)
| ASSETS | LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||
| (UNAUDITED) 2004 |
December 31, 2003 |
(UNAUDITED) 2004 |
December 31, 2003 |
|||||||||||||
| CURRENT ASSETS |
LIABILITIES NOT SUBJECT TO COMPROMISE |
|||||||||||||||
| Cash and cash equivalents |
$ | 7,441 | $ | — | CURRENT LIABILITIES |
|||||||||||
| Accounts receivable, net of reserve for doubtful accounts (2004 - $5,571; 2003 - $5,842) |
36,970 | 50,422 | Accounts payable |
$ | 15,338 | $ | 26,070 | |||||||||
| Inventories Raw materials and finished products |
31,999 | 35,236 | Payroll and other accrued compensation |
2,107 | 4,857 | |||||||||||
| Operating supplies |
12,072 | 12,795 | Accrued expenses |
7,836 | 14,906 | |||||||||||
| 44,071 | 48,031 | Accrued interest expense |
2,671 | 8,392 | ||||||||||||
| Deferred income taxes |
3,901 | 3,901 | Current portion of long-term debt |
— | 420,350 | |||||||||||
| Prepaid expenses and other current assets |
32,112 | 10,915 | Income taxes payable |
— | 480 | |||||||||||
| TOTAL CURRENT ASSETS |
124,495 | 113,269 | TOTAL CURRENT LIABILITIES |
27,952 | 475,055 | |||||||||||
| PROPERTY AND EQUIPMENT |
745,096 | 746,640 | LONG-TERM DEBT, less current portion |
— | 1,490 | |||||||||||
| Less allowances for depreciation, depletion and amortization |
334,339 | 332,447 | OTHER LONG-TERM LIABILITIES |
1,888 | 29,500 | |||||||||||
| 410,757 | 414,193 | POSTRETIREMENT BENEFITS OBLIGATION |
366 | 50,049 | ||||||||||||
| GOODWILL, net of accumulated amortization ($11,093 in 2004 and 2003) |
73,877 | 73,877 | DEFERRED INCOME TAXES |
4,283 | 4,596 | |||||||||||
| PREPAID PENSION COSTS |
34,758 | 35,319 | TOTAL LIABILITIES NOT SUBJECT TO COMPROMISE |
34,489 | 559,200 | |||||||||||
| OTHER ASSETS |
13,517 | 12,036 | LIABILITIES SUBJECT TO COMPROMISE |
552,251 | — | |||||||||||
| STOCKHOLDERS' EQUITY |
||||||||||||||||
| Common stock, par value $1 per share, authorized 30,000 shares; issued 7,253 shares |
7,253 | 7,253 | ||||||||||||||
| Additional capital |
9,272 | 9,312 | ||||||||||||||
| Retained earnings |
88,338 | 106,075 | ||||||||||||||
| Accumulated other comprehensive loss |
(4,167 | ) | (4,542 | ) | ||||||||||||
| 100,696 | 118,098 | |||||||||||||||
| Treasury stock, at cost - 2,189 and 2,193 shares at respective dates |
(30,032 | ) | (30,094 | ) | ||||||||||||
| TOTAL STOCKHOLDERS’ EQUITY |
70,664 | 88,004 | ||||||||||||||
| TOTAL ASSETS |
$ | 657,404 | $ | 648,694 | TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 657,404 | $ | 648,694 | |||||||
See notes to condensed consolidated financial statements.
-4-
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(UNAUDITED)
| Three Months Ended March 31 |
||||||||
| 2004 |
2003 |
|||||||
| OPERATING ACTIVITIES |
||||||||
| Net loss |
$ | (17,737 | ) | $ | (11,050 | ) | ||
| Adjustments to reconcile net loss to net cash provided (used) for operating activities: |
||||||||
| Cumulative effect of accounting change for asset retirement obligations, net of taxes |
0 | 1,391 | ||||||
| Depreciation, depletion, amortization and accretion |
5,491 | 5,473 | ||||||
| Deferred vessel costs |
(5,753 | ) | (5,564 | ) | ||||
| Deferred winter maintenance costs |
(8,388 | ) | (9,936 | ) | ||||
| Deferred income taxes |
(552 | ) | (6,472 | ) | ||||
| Restructuring, asset impairments and early retirement programs |
1,262 | (420 | ) | |||||
| Reorganization items, net |
4,565 | 0 | ||||||
| Gain (loss) on disposition of assets |
15 | (63 | ) | |||||
| Increase in prepaid insurance |
(5,285 | ) | (1,540 | ) | ||||
| Increase in cash collateral |
(1,376 | ) | 0 | |||||
| Decrease in prepaid pension costs |
561 | 552 | ||||||
| Decrease in accounts receivable |
13,452 | 19,546 | ||||||
| Decrease in inventories |
3,917 | 3,171 | ||||||
| Increase (decrease) in accounts payable |
8,838 | (4,829 | ) | |||||
| Decrease in payrolls and other accrued compensation |
(6 | ) | (2,414 | ) | ||||
| Increase (decrease) in accrued expenses |
1,736 | (3,415 | ) | |||||
| Increase (decrease) in accrued interest |
1,823 | (2,046 | ) | |||||
| Increase (decrease) in income taxes payable |
7 | (20 | ) | |||||
| Increase in postretirement benefits |
791 | 797 | ||||||
| Other operating activities |
1,420 | 1,782 | ||||||
| NET CASH PROVIDED (USED) FOR OPERATING ACTIVITIES |
4,781 | (15,057 | ) | |||||
| NET CASH USED FOR REORGANIZATION ITEMS |
(2,916 | ) | 0 | |||||
| INVESTING ACTIVITIES |
||||||||
| Capital expenditures |
(5,120 | ) | (6,335 | ) | ||||
| Acquisition of Erie Sand and Gravel Company |
0 | (6,831 | ) | |||||
| Proceeds from the sale of Redi-Mix |
1,225 | 0 | ||||||
| Proceeds from the sale of Richard Reiss |
1,800 | 0 | ||||||
| Proceeds from the disposition of assets |
0 | 123 | ||||||
| NET CASH USED FOR INVESTING ACTIVITIES |
(2,095 | ) | (13,043 | ) | ||||
| FINANCING ACTIVITIES |
||||||||
| Repayments on debt |
(41,577 | ) | (38,805 | ) | ||||
| Additional debt |
52,077 | 66,321 | ||||||
| Financing costs |
(2,829 | ) | (172 | ) | ||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES |
7,671 | 27,344 | ||||||
| Increase (decrease) in cash and cash equivalents |
7,441 | (756 | ) | |||||
| CASH AND CASH EQUIVALENTS, JANUARY 1 |
0 | 756 | ||||||
| CASH AND CASH EQUIVALENTS, MARCH 31 |
$ | 7,441 | $ | — | ||||
See notes to condensed consolidated financial statements.
-5-
OGLEBAY NORTON COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 1. | On February 23, 2004, the Company and all of its wholly owned subsidiaries filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. The Company intends to continue operations without interruption. The Company intends to seek emergence from Chapter 11 as rapidly as possible with a new, de-levered capital structure that will enable the Company to move forward on its strategic operating plan. |
In furtherance of the Company’s goal of emerging from Chapter 11 as expeditiously as possible, prior to the filing, the Company reached an agreement in principle, subject to certain conditions, with a majority of the holders of its $100,000,000 Senior Subordinated Notes to exchange their notes for equity. The agreement also contemplates having certain of them make a new equity investment in the reorganized Company. Additionally, prior to filing Chapter 11, the Company accepted a commitment for a new credit facility that, among other things, would retire its existing bank debt. On April 30, 2004, the Bankruptcy Court entered an order authorizing the Company to enter into this facility.
On February 24, 2004, the Bankruptcy Court also entered a variety of orders designed to afford the Company a smooth transition into Chapter 11 and permit the Company to continue operating on a normal basis post-petition. Among others, the Court entered orders authorizing the Company to continue its consolidated cash management system, pay employees their accrued pre-petition wages and salaries, honor the Company’s obligations to its customers and pay some or all of the pre-petition claims of certain vendors that are critical to the continued operations of the Company, subject to certain restrictions. The relief granted in these orders has facilitated the Company’s transition into Chapter 11 and has allowed the Company to continue its operations uninterrupted.
On February 25, 2004, U.S. Bankruptcy Judge Joel B. Rosenthal of the United States Bankruptcy Court for the District of Delaware in Wilmington entered an order granting interim approval for the Company to utilize cash collateral and to borrow up to $40,000,000 from a $75,000,000 debtor-in-possession (DIP) credit facility. The Company obtained the DIP facility from a syndicate that includes various members of its pre-petition bank group. The judge’s order provided the Company access to the liquidity necessary to continue operations without disruption and meet its obligations to its suppliers, customers and employees during the Chapter 11 reorganization process.
On April 8, 2004, the Bankruptcy Court granted final approval for the Company to borrow up to $70 million under the (DIP)