-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UoTA3qv1jkkLlAUUU/c2o7REhF0oidkIEY124khK0V8XqV7Bd7BygiGvISfQbMsQ hUv5FkLq5uwoqhNdCeDmHw== 0000034046-97-000011.txt : 19970813 0000034046-97-000011.hdr.sgml : 19970813 ACCESSION NUMBER: 0000034046-97-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970812 SROS: BSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXOLON ESK CO CENTRAL INDEX KEY: 0000034046 STANDARD INDUSTRIAL CLASSIFICATION: ABRASIVE ASBESTOS & MISC NONMETALLIC MINERAL PRODUCTS [3290] IRS NUMBER: 160427000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07276 FILM NUMBER: 97656996 BUSINESS ADDRESS: STREET 1: 1000 E NIAGARA ST STREET 2: P O BOX 590 CITY: TONAWANDA STATE: NY ZIP: 14150 BUSINESS PHONE: 7166934550 MAIL ADDRESS: STREET 1: 1000 E NIAGARA STREET STREET 2: P O BOX 590 CITY: TONAWANDA STATE: NY ZIP: 14150 FORMER COMPANY: FORMER CONFORMED NAME: EXOLON CO DATE OF NAME CHANGE: 19840517 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF One) THE SECURITIES EXCHANGE ACT OF 1934 [X] For the quarterly period ended June 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-7276 EXOLON-ESK COMPANY (Exact name of registrant as specified in its charter) Delaware 16-0427000 (State or other (I.R.S. Employer jurisdiction of Identification No.) incorporation or organization) 1000 East Niagara Street, Tonawanda, New York 14150 (Address of Principal Executive Offices) (Zip Code) (716) 693-4550 (Registrant's telephone number, including area code) (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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES..X.. NO..... As of August 12, 1997, the registrant had outstanding 481,995 shares of $1 par value Common Stock and 512,897 shares of $1 par value Class A Common Stock. PART I - FINANCIAL INFORMATION Item 1. Financial Statements Exolon-ESK Company Consolidated Condensed Balance Sheet (in thousands except share amounts) (Unaudited) ASSETS June 30, December 31, 1997 1996 Current assets: Cash $14 $275 Accounts receivable (less allowance for doubtful accounts of $490 in 1996 and $419 in 1995) 9,913 9,061 Inventories 21,020 18,439 Prepaid expenses 475 526 Total Current Assets 31,422 28,301 Investment in Norwegian joint venture 5,891 5,812 Property, plant and equipment, at cost 67,408 61,157 Accumulated depreciation (44,281) (42,772) Net property, plant and equipment 23,127 18,385 Other assets 5,544 8,985 Total Assets $65,984 $61,483 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $181 $219 Current maturities of long-term debt 1,267 1,667 Accounts payable 2,296 4,636 Accrued expenses 2,102 1,780 Income taxes payable 668 466 Deferred income taxes 50 Total Current Liabilities 6,514 8,818 Deferred income taxes 1,436 1,436 Long-term debt excluding current installments 24,400 20,433 Other long-term liabilities 2,547 2,538 Stockholder' equity: Preferred stock Series A - 19,364 shares issued 276 276 Series B - 19,364 shares issued 166 166 Common stock of $1 par value - Authorized 600,000 shares, 512,897 issued 513 513 Class A common stock of $1 par value - Authorized 600,000 shares, 512,897 issued 513 513 Additional paid-in capital 4,345 4,345 Retained earnings 25,828 22,999 Cumulative translation adjustment (186) (186) Treasury stock, at cost (368) (368) Total Stockholders' Equity 31,087 28,258 Total Liabilities and Stockholders' $65,984 $61,483 Equity The accompanying notes are an integral part of these statements. Exolon-ESK Company Consolidated Condensed Statements of Income Unaudited (in thousands except per share amounts) Three Months Six Months Ended Ended June 30, June 30, 1997 1996 1997 1996 Net sales $20,034 $19,739 $40,225 $39,585 Cost of goods sold 15,145 15,044 30,754 30,346 Gross Profit Before Depreciation 4,889 4,695 9,471 9,239 Depreciation 755 773 1,511 1,545 Selling, general & administrative 1,384 1,347 2,714 2,745 expenses Research and development 9 5 23 5 2,148 2,125 4,248 4,295 Operating Income 2,741 2,570 5,223 4,944 Other Expenses (Income): Equity in (Earnings) before income taxes of Norwegian Jt. venture (67) (224) (79) (382) Interest expense 264 337 516 705 Miscellaneous expense (income) 155 (166) 241 (434) 352 (53) 678 (111) Earnings before income taxes 2389 2,624 4,545 5,053 Income tax expense 897 1,020 1,705 2,040 Net Earnings $1,492 $1,604 $2,840 $3,013 EARNINGS PER COMMON SHARE: Primary $1.54 $1.65 $2.92 $3.10 Fully diluted $1.51 $1.59 $2.84 $2.99 EARNINGS PER CLASS A COMMON SHARE: Primary $1.44 $1.55 $2.75 $2.92 Fully diluted $1.42 $1.50 $2.68 $2.82 Weighted Average Shares Outstanding (in thousands): Common Stock 482 482 482 482 Class A Common Stock 513 513 513 513 The accompanying notes are an integral part of these statements. Exolon-ESK Company Consolidated Condensed Statements of Cash Flows Unaudited (in thousands) Six Months Ended June 30, 1997 1996 Net Cash Provided (Used) by Operating Activities (1,062) 4,298 Cash Flow from Investing Activities: Additions to property, plant and (6,252) (1,857) equipment (6,252) (1,857) Proceeds from restricted cash equivalents 3,535 - Net Cash (Used) for Investing Activities (2,717) (1,857) Cash Flow from Financing Activities: Borrowings (repayments) on long-term construction financing loans and revolving credit agreement 3,529 (2,850) Dividends paid (11) (11) Net Cash Provided (Used) by Financing Activities 3,518 (2,861) Net (decrease) in cash (261) (420) Cash at beginning of period 275 440 Cash at end of period $ 14 $ 20 The accompanying notes are an integral part of these statements. EXOLON-ESK COMPANY NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) NOTE 1 The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Results for the period ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. For further information, refer to the financial statements and footnotes thereto for the year ended December 31, 1996 included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. NOTE 2 The following are the major classes of inventories (in thousands) as of June 30, 1997 and December 31, 1996 : June 30, December 31, 1997 1996 (Unaudited) Raw Materials $3,705 $3,581 Semi-Finished and 18,721 16,294 Finished Goods Supplies and Other 1,055 925 23,481 20,800 Less: LIFO Reserve (2,461) (2,361) $21,020 $18,439 NOTE 3 Contingencies a. Environmental Issues (i) Hennepin, Illinois Plant On October 6, 1994, the Company entered into a Consent Order (the Consent Order ) with the Illinois Attorney General and the Illinois Environmental Protection Agency ( IEPA ) in complete settlement of a complaint brought by them which alleged that the Company had violated certain air quality requirements in the operating permit for its Hennepin, Illinois plant. The Consent Order provides a schedule for the Company to install a Continuous Emissions Monitoring System ( CEMS ) and to implement the required Best Available Control Technology ( BACT ) for air emissions, pursuant to an IEPA approved construction and operating permit. The Company obtained final approval for a construction permit to implement the BACT during 1996. The Company purchased a 20 acre parcel of land adjacent to its property in 1995 and construction has commenced. In order to comply with the Consent Order and complete facility improvements, the Company expects to incur capital costs within the range from $13,000,000 to $14,000,000. As of June 30, 1997, the Company has incurred approximately $8,892,000 of capital costs related to the facility improvements. The remaining costs are expected to be incurred over the next 12 months. The Company has obtained a modification of its Industrial Revenue Bond Agreement to allow for the required capital expenditures under the Consent Order. The cost of these required capital improvements is being financed with the $13,000,000 of proceeds from long-term bonds, a portion of which are tax-exempt, issued by the Upper Illinois River Valley Development Authority. (ii) Norwegian Joint Venture The Government of Norway held discussions with certain Norwegian industries including the abrasive industry concerning the implementation of reduced gaseous emission standards. The Company's joint venture is participating in these discussions to help achieve the Norwegian Government's objectives as well as assuring long term economic viability for the joint venture. The Norwegian State Pollution Control Authority has issued limits regarding dust emissions and Sulfur Dioxide emissions that will apply to all Norwegian silicon carbide producers. Specific target emission limits have been set, and a timetable stretching from the present until January 1, 2001 has been established. The costs associated with achieving compliance with these limits are uncertain as a result of various alternatives presently being considered by the Norwegian joint venture. The Company's joint venture appointed a project group to complete a study and define a project to minimize sulfur and dust emissions which was presented to the Norwegian State Pollution Control Authority on March 1, 1995. The Authority has prepared an internal study of the report and the Authority's draft for new concessions was presented to the joint venture in February 1996. Based on a consensus for the metallurgical industry, the joint venture has initiated discussions with the Authority to obtain acceptable emissions levels. The costs associated with the implementation of environmental expenditures are uncertain as a result of various alternatives presently being considered by the Norwegian joint venture. b. Legal Matters (i) Federal Proceedings and Related Matters On December 8, 1994, in an ex parte proceeding the U.S. Defense Logistics Agency (the "DLA") issued a Memorandum of Decision that temporarily suspended certain parties including the Company (defendants) from contracting with the U.S. Government under procurement or non-procurement programs pending the completion of the Antitrust Proceedings. On January 31, 1995, the DLA amended the Memorandum of Decision (as amended, the "DLA Suspension") to include under the DLA Suspension sixteen alleged affiliates of the defendants including the Company's subsidiary, Exolon-ESK Company of Canada Ltd., and Orkla Exolon KS, the Norwegian partnership in which the Company's subsidiary, Norsk Exolon AS, has a 50% partnership interest. The DLA Suspension alleged as causes for the suspension (i) the indictments of the parties in the Antitrust Proceedings, (which have now been settled and no criminal charges were imposed) and (ii) on separate occasions in October and November of 1994 the Company's former President and former Executive Vice President individually made alleged false certifications in DLA sales contracts denying the existence within the past three years of any indictments of the kind involved in the Antitrust Proceedings. A jury trial on a separate criminal complaint against the Company and the former Executive Vice President based on the alleged false certifications in DLA sales contracts found the Company and the former Executive Vice President not guilty of all charges. The Company and the DLA have entered into an Administrative Agreement effective August 1, 1997 which lifts the current suspension and permits the Company to bid on material immediately, provided the Company complies with the final terms of the Agreement through July 1, 1999. The Company paid a $10,000 Administrative Fee in connection with this Agreement. On October 18, 1994, a lawsuit was commenced in the U.S. District Court for the Eastern District of Pennsylvania (No. 94-CV-6332) under the title "General Refractories Company v. Washington Mills Electro Minerals Corporation and Exolon-ESK Company." The suit purports to be a class action seeking treble damages from the defendants for allegedly conspiring with unnamed co-conspirators during the period from January 1, 1985 through the date of the complaint to fix, raise, maintain and stabilize the price of artificial abrasive grains and to allocate among themselves their major customers or accounts for purchases of artificial grains, in violation of Section 1 of the Sherman Act, 15 U.S.C. S 1. The plaintiffs allegedly paid more for abrasive grain products than they would have paid in the absence of such anti-trust violations and were allegedly damaged in an amount that they are presently unable to determine. On or about July 17, 1995, a lawsuit captioned Arden Architectural Specialties, Inc. v. Washington Mills Electro Minerals Corporation and Exolon-ESK Company, (95-CV-05745(m)), was commenced in the United States District Court for the Western District of New York. The Arden Architectural Specialties complaint purports to be a class action that is based on the same matters alleged in the General Refractories complaint. The Company believes that it has meritorious defenses to the allegations, and it intends to vigorously defend against the charges. In addition to the potential liabilities that the Company may experience in the legal proceedings brought by these third parties, the Company may incur material expenses in defending against the actions, and it may incur such expenses even if it is found to have no liability for any of the charges asserted against it. (ii) Exolon-ESK Company of Canada, Ltd. An action for damages was brought against Exolon-ESK Company and Exolon-ESK Company of Canada, Ltd. by International Oxide Fusion Inc. of Niagara Falls, Ontario in December, 1996. This action has been brought on the basis that the Thorold, Ontario facility is in the possession of technology that was provided in 1990 to Exolon-ESK Company to produce MagChrome and Fused MgO and has refused to pay further royalty payments. International Oxide Fusion Inc. claims damages for loss of royalty payments from the furnaces in Thorold, Ontario which they allege use this technology. Exolon-ESK Company and Exolon-ESK Company of Canada, Ltd. have filed a Statement of Defense and Counterclaim against International Oxide Fusion Inc., Edward J. Bielawski, Robert Thiel (the principals of International Oxide Fusion Inc.), Thomas Farr and Fusion Unlimited (Niagara) Inc. which was issued in January, 1997 in Toronto, Ontario. At this time, the Company is not in a position to reasonably estimate the range of any loss or gain. The Plaintiffs seek approximately $182 million as damages, which management considers to be beyond any reasonable understanding. The Company's counterclaim is in the amount of approximately $22 million. A separate, unrelated lawsuit was commenced by The Exolon-ESK Company of Canada, Ltd. against Theeb, Ltd. and Edward J. Bielawski in August, 1997. The action arises out of a 1985 contract whereby the Defendants acted negligently in connection with a crane and its runway system. The Company is seeking $2 million in damages for negligence and punitive damages. In June 1993, the Company commenced a civil legal action in Ontario, Canada Court (General Division) against one of its former officers and certain former employees of Exolon-ESK Company of Canada, Ltd. (Exolon-Canada) ( the "Defendants") on various charges related to allegations that they defrauded the Company and Exolon-Canada of money, property and services over many years (the Perrotto Case ). Summary Judgment was granted on the issue of liability against Paul Perrotto and Michael Perrotto on July 16, 1997 with a Reference (hearing) directed to a Master in Toronto on the issue of damages. The hearing is expected to be held in Fall, 1997. The action remains ongoing against various other Defendants. Note 4 In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share," which is required to be adopted by the Company on December 31, 1997. Statement No. 128 revises the calculation of primary earnings per share, which has been renamed basic earnings per share, and renames fully diluted earnings per share as diluted earnings per share. Management does not expect that Statement No. 128 will have any impact on the Company's reported earnings per share. In June 1997, the Financial Accounting Standards Board issued Statement No. 130, "Reporting Comprehensive Income", which is effective for fiscal years beginning after December 15, 1997. The Company has not yet determined the impact Statement No. 130 will have on its financial statements. In June 1997, the Financial Accounting Standards Board issued Statement No. 131, "Disclosure about Segments of an Enterprise and Related Information," which is effective for fiscal years beginnings after December 15, 1997. The Company does not expect that Statement No. 131 will have any material effect on its financial statements. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Comparison of the Six Months Ended June 30, 1997 with the Six Months Ended June 30, 1996 Net Sales. Total net sales increased by 2% to $40,225,000 during the six months ended June 30, 1997 from $39,585,000 in the first six months of 1996. Gross Profit. Gross profit prior to depreciation expense was $9,471,000 in the first six months of 1997 when compared to $9,239,000 in the first six months of 1996. As a percent of net sales, gross margins were 24% in the first six months of 1997 compared to 23% in the same period of 1996. Operating Expenses. Total operating expenses decreased to $4,248,000 in the six months ended June 30, 1997 from $4,295,000 in the same period of 1996. Operating expenses as a percent of sales remained at 11% in the first six months of 1997 the same as the first six months of 1996. The Company's largest portion of operating expense, selling, general and administrative expense, decreased to $2,714,000 in the first six months of 1997 when compared to $2,745,000 during the first six months of 1996. As a percent of net sales, selling and general and administrative expense was 7% in the first six months of both 1997 and 1996. Operating Income. Operating income increased by 6% to $5,223,000 in the six months ended June 30, 1997 from $4,944,000 in the six months ended June 30, 1996, due to the increase in net sales and reduced operating costs. Norwegian Joint Venture. The Company's 50% share of the pre-tax earnings of its Norwegian joint venture, Orkla Exolon A/S, was $79,000 for the six months ended June 30, 1997 versus $382,000 in the six months ended June 30, 1996. The Company's share in the venture's net sales was $3,938,000 in the six months ended June 30, 1997 as compared to $3,758,000 in the six months ended June 30, 1996. The joint venture's gross margins, prior to depreciation, decreased to 19% for the six months ended June 30, 1997 versus 23% for the six months ended June 30, 1996 primarily due to a change in the mix of products sold in the first six months of 1997 when compared to the same period in 1996. Interest and Miscellaneous Expense. Interest expense decreased significantly in the first six months of 1997 to $516,000 from $705,000 in the first six months of 1996. Average borrowing levels of the Company's bank debt were reduced by approximately $4,053,000 in the first six months of 1997 when compared to the first six months of 1996. Interest costs related to the Company's facility improvements in Illinois are being capitalized. Incurred interest of $159,000 were capitalized during the six months ended June 30, 1997. Miscellaneous expense of $241,000 was reported in the first six months of 1997 compared to miscellaneous income of $434,000 in the quarter ended June 30, 1996. The Company recorded $320,000 in miscellaneous income during the first quarter of 1996 due to a payment for the settlement with its insurance carrier of a claim related to a legal action in Ontario, Canada Court. Income Tax. The Company's effective tax rate was 38% for the six months ended June 30, 1997 as compared to 40% for the six months ended June 30, 1996. Comparison of the Three Months Ended June 30, 1997 with the Three Months Ended June 30, 1996. Net Sales. Total net sales increased by 1% to $20,034,000 in the three months ended June 30, 1997 from $19,739,000 in the three months ended June 30, 1996. Gross Profit. Gross profit prior to depreciation expense was $4,889,000 in the three months ended June 30, 1997 when compared to $4,695,000 in the three months ended June 30, 1996. As a percent of net sales, gross margins were 24% in both the second quarter of 1997 and the second quarter of 1996. Operating Expenses. Total operating expenses increased marginally in the three month period ended June 30, 1997 to $2,148,000 from $2,125,000 from the same period of 1996. Selling, general and administrative expense increased $37,000 in the quarter ended June 30, 1997 when compared to the quarter ended June 30, 1996. As a percent of net sales, selling, general and administrative expenses were 11% for the quarters ended June 30, 1997 and June 30, 1996. Operating Income. Operating income increased by $171,000 or 7% to $2,741,000 in the second quarter of 1997 from $2,570,000 in the second quarter of 1996, primarily as a result of the increase in net sales. Norwegian Joint Venture. The Company's 50% share of the pre-tax earnings in its Norwegian joint venture Orkla Exolon-A/S, was $67,000 for the three months ended June 30, 1997 versus a pre-tax profit of $224,000 during the three months ended June 30, 1996. The Company's share in the venture's net sales was $2,025,000 in the three months ended June 30, 1997 when compared to $1,847,000 in the three months ended June 30, 1996. Interest and Miscellaneous Expense. Interest expense decreased by $73,000 to $264,000 in the second quarter of 1997 from $337,000 during the second quarter of 1996. Average borrowing levels of the Company's bank debt were reduced by approximately $2,190,000 for the quarter ended June 30, 1997 when compared to the same period in 1996. Liquidity and Capital Resources As of June 30, 1997, working capital (current assets less current liabilities) has increased to $24,908,000, when compared to $19,483,000 as of December 31, 1996. Accounts receivable increased by $852,000 as of June 30, 1997 versus 1996 year end primarily as a result of the increase in sales levels during the first six months of 1997 versus the 1996 year. Inventory increased by $2,581,000 at June 30, 1997 when compared to December 31, 1996. Accounts payable decreased by $2,340,000 as of June 30,1997 versus December 31, 1996. For the six months ended June 30, 1997, net cash used by operating activities was $1,062,000. Cash reserves decreased by $261,000 at June 30, 1997 compared to December 31, 1996. Proceeds from restricted cash equivalents and additional borrowings were used to fund $6,252,000 of capital expenditures in the six months ended June 30, 1997. The Company's current ratio increased to 4.8 to 1.0 at June 30, 1997, from 3.2 to 1.0 as of December 31, 1996. The ratio of total liabilities to shareholder's equity improved to 1.1 to 1.0 as of June 30, 1997, from 1.2 to 1.0 as of December 31, 1996. Management believes that the cash provided by operations and long-term borrowing arrangements will provide adequate funds for current commitments and other requirements for the following 12 months. The Company has been directed by the Illinois Environmental Protection Agency ("IEPA") to control its sulfur emissions at its Hennepin, Illinois silicon carbide furnace plant. For further information see Note 3(a)(i) to the Notes to Consolidated Condensed Financial Statements on page 5, which is incorporated herein by reference. Reference is made to the descriptions of the following legal matters, within Note 3(b) of the Notes to Consolidated Condensed Financial Statements included in this Form 10-Q Report, which descriptions are incorporated herein by reference: (1) a legal action commenced in June 1993 by the Company in Ontario, Canada seeking compensation for damages against certain former officers and employees; (2) a temporary suspension imposed upon the Company and others in December 1994 by the U.S. Defense Logistics Agency; (3) civil law suits brought against the Company and others commenced by General Refractories Company in October 1994 and by Arden Architectural Specialties, Inc. in July 1995; (4) a civil lawsuit brought against the Company in December 1996 by International Oxide Fusion, Inc.; and (5) a civil lawsuit against Theeb, Ltd. and Edward J. Bielawski commenced in August 1997. Effects of New Accounting Pronouncements In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share," which is required to be adopted by the Company on December 31, 1997. Statement No. 128 revises the calculation of primary earnings per share, which has been renamed basic earnings per share, and renames fully diluted earnings per share as diluted earnings per share. Management does not expect that Statement No. 128 will have any impact on the Company's reported earnings per share. In June 1997, the Financial Accounting Standards Board issued Statement No. 130, "Reporting Comprehensive Income", which is effective for fiscal years beginning after December 15, 1997. The Company has not yet determined the impact Statement No. 130 will have on its financial statements. In June 1997, the Financial Accounting Standards Board issued Statement No. 131, "Disclosure about Segments of an Enterprise and Related Information," which is effective for fiscal years beginnings after December 15, 1997. The Company does not expect that Statement No. 131 will have any material effect on its financial statements. PART II - OTHER INFORMATION Item 1. Legal Proceedings a. Exolon-ESK Company and Exolon-ESK Company of Canada, Ltd. v. Michael Perrotto, et al. Reference is made to the information concerning the Perrotto case contained in Note 3(b)(ii) of the Notes to Consolidated Condensed Financial Statements included in this Form 10-Q, which is hereby incorporated herein by reference. b. Federal Proceedings Reference is made to the information concerning the DLA Suspension contained in Note 3(b)(i) of the Notes to Consolidated Condensed Financial Statements included in this Form 10-Q. c. The Exolon-ESK Company of Canada, Ltd. v. Theeb, Ltd. and Edward J. Bielawski Reference is made to the information concerning a lawsuit filed against Theeb, Ltd. and Edward J. Bielawski contained in Note 3(b)(ii) of the Notes to Consolidated Condensed Financial Statements included in this Form 10-Q. Item 2. Change in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders Reference is made to Proposal 1 and Proposal 2 on pages 5 and 6 of the Company's Annual Proxy Statement dated April 1, 1997, which is incorporated herein by reference. Item 5. Other Information Effective August 15, 1997, the contract of the Company's Chief Executive Officer/President, J. Fred Silver, will expire. The Board of Directors will not be renewing this contract. A new candidate will assume this role effective September 1, 1997. Item 6. Exhibits and Reports on Form 8-K The following exhibits are included herein: 11 Computation of Earnings Per Share 27 Financial Data Schedule The Company did not file any reports on Form 8-K during the three months ended June 30, 1997. SIGNATURE 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. EXOLON-ESK COMPANY /S/ J. Fred Silver J. Fred Silver President and Chief Executive Officer /S/ Michael Bieger Michael Bieger Vice President Finance and Chief Financial Officer Date: August 12, 1997 EXHIBIT INDEX Exhibit Description Reference No. 3A Certificate of Amendment of Exhibit 3A to the report Restated Certificate of on Form 10-K for the Incorporation dated April year ended December 31, 30, 1997 1996* 3A(1) Certificate of Merger Exhibit 3A(1) to the report on Form 10-K for the year ended December 31, 1995* 3F Certificate of Amendment of Exhibit 3F to the report Restated Certificate of on Form 10-K for the Incorporation dated April year ended December 31, 23, 1986 1994* 3G Certificate of Amendment of Exhibit 3G to the report Restated Certificate of on Form 10-K for the Incorporation dated May 4, year ended December 31, 1987 1994* 3H Amendment of Certificate of Exhibit 3H to the Report Incorporation dated October on Form 10-Q for the 28, 1992 quarter ended September 30, 1992* 3I Restated Bylaws containing Exhibit 3I to the report all previous amendments on Form 10-K for the adopted year ended December 31, 1996* 4 Instruments Defining Rights Articles of of Security Holders Incorporation, Exhibits 3A, and Exhibits 3F and 3G to the Report on Form 10-K for the year ended December 31, 1994* 10D(23) Revolving Credit Agreement Exhibit 10D(23) to the dated December 22, 1992 Report on Form 10-K for the year ended December 31, 1992* 10D(23) Amendment Credit Agreement Exhibit 10D(23)A to the A dated December 1, 1996 report on Form 10-K for the year ended December 31, 1996* 10D(24) Industrial Revenue Bond Exhibit 10D(24) to the Agreement dated January 1, Report on Form 10-K for 1993. the year ended December 31, 1992* 10D(25) Industrial Revenue Bond Loan Exhibit 10D(25) to the Agreement dated December 1, report on Form 10-K for 1996 the year ended December 31, 1996* 10D(26) Building Loan Agreement Exhibit 10D(26) to the dated December 1, 1996 report on Form 10-K for the year ended December 31, 1996* 10F Stockholder's Agreement Exhibit 10F to the dated as of April 26, 1984 report on Form 10-K for between the Registrant and the year ended December Wacker Chemical Corporation 31, 1995* 10G Restated License Agreement Exhibit 10G to the dated as of April 26, 1984 report on Form 10-K for among Elektroschmelzwerk the year ended December Kempten GmbH, ESK 31, 1995* Corporation and the Registrant 10H Distributorship Agreement Exhibit 10H to the dated April 27, 1984 between report on Form 10-K for Elektroschmelzwerk Kempten the year ended December GmbH and the Registrant 31, 1995* 10I Indemnification Agreement Exhibit 10I to the dated as of December 15, report on Form 10-K for 1984 between Wacker Chemical the year ended December Corporation and the 31, 1995* Registrant 10M Federal Indictments dated Exhibit 10M to the February 11, 1994 Report on Form 10-K for the year ended December 31, 1993* 11 Statement of computation of Exhibit 11 per share earnings 27 Financial Data Schedule Submitted electronically * Incorporated herein by reference. EX-11 2 Exhibit 11 Exolon-ESK Company and Subsidiaries Computation of Earnings Per Share (In Thousands, Except Per Share Data) Three Months Six Months Ended March Ended 31, June 30, 1997 1996 1997 1996 Net earnings $1,493 $1,604 $2,840 $3,013 Less Preferred Stock Dividends: Series A (5) (5) (11) (11) Series B (5) (5) (11) (11) Undistributed earnings $1,482 $1,594 $2,818 $2,991 Net earnings attributable to: Common Stock (50.0%) 669 796 1,409 1,495 Class A Common Stock 669 796 1,409 1,496 (50.0%) $1,338 $1,594 $2,818 $2,991 Net earnings per share of Common Stock: Primary $1.54 $1.65 $2.92 $3.10 Fully Diluted $1.51 $1.59 $2.84 $2.99 Net earnings per share of Class A Common Stock: Primary $1.44 $1.55 $2.75 $2.92 Fully Diluted $1.42 $1.50 $2.68 $2.82 Weighted Average Shares Outstanding: Primary: Common Stock 482,000 482,000 482,000 482,000 Class A Common Stock 513,000 513,000 513,000 513,000 Fully Diluted: Common Stock 504,000 504,000 504,000 504,000 Class A Common Stock 535,000 535,000 535,000 535,000 EX-27 3
5 1,000 6-MOS DEC-31-1997 JUN-30-1997 14 0 10403 490 21020 31422 67408 44281 65984 6514 21000 0 442 1028 29617 65984 40225 40225 30754 4225 185 0 516 4545 1705 2840 0 0 0 2840 2.92 2.84
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