-----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, Be8g+T3ZL1itqZrHOZqu2AZdBHl3qahQxlHpcnr/el2axvi5MY+sNu0ep5jr7sVg pcgbpiAx1R10BE3Hy+6TNA== 0000912057-97-027998.txt : 19970815 0000912057-97-027998.hdr.sgml : 19970815 ACCESSION NUMBER: 0000912057-97-027998 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORD RESOURCES CORP CENTRAL INDEX KEY: 0000072316 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 850212139 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08733 FILM NUMBER: 97662603 BUSINESS ADDRESS: STREET 1: 8150 WASHINGTON VILLAGE DR CITY: DAYTON STATE: OH ZIP: 45458 BUSINESS PHONE: 5134336307 MAIL ADDRESS: STREET 1: 8150 WASHINGTON VILLAGE DRIVE CITY: DAYTON STATE: OH ZIP: 45458 10-Q 1 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 F O R M 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 0-6202-2 -------- Nord Resources Corporation -------------------------- (Exact name of registrant as specified in its charter) Delaware 85-0212139 -------- ---------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 8150 Washington Village Drive, Dayton Ohio 45458 - ------------------------------------------ ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (937) 433-6307 -------------- Not Applicable -------------- 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 twelve 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 ---- ---- Common shares outstanding as of August 7, 1997: 21,876,288 NORD RESOURCES CORPORATION AND SUBSIDIARIES INDEX PAGE NUMBER ------ PART I. FINANCIAL INFORMATION: ITEM 1. Condensed Financial Statements: Balance Sheets - June 30, 1997 and December 31, 1996 1 Statements of Operations - Quarter and Two Quarters ended June 30, 1997 and 1996 2 Statements of Cash Flows - Quarter and Two Quarters ended June 30, 1997 and 1996 3 Notes to Condensed Financial Statements 4-9 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-12 PART II. OTHER INFORMATION: ITEM 1. Legal Proceedings 13 ITEM 2-5. Inapplicable 13 ITEM 6. Exhibits and Reports on Form 8-K 13 NORD RESOURCES CORPORATION AND SUBSIDIARIES CONDENSED BALANCE SHEETS (In Thousands) ASSETS JUNE 30, DECEMBER 31, 1997 1996 -------- ------------ (Unaudited) CURRENT ASSETS: Cash and Cash Equivalents $ 17,618 $ 15,583 Restricted Cash 496 Restricted Investments - available for sale 2,376 Accounts Receivable 1,517 179 Prepaid Expenses 465 163 Net Assets of Discontinued Operations 9,766 -------- -------- TOTAL CURRENT ASSETS 20,096 28,067 INVESTMENTS IN AND ADVANCES TO AFFILIATES 11,166 9,840 INVESTMENT IN SRL 73,025 67,552 PROPERTY, PLANT AND EQUIPMENT, net 58 27 OTHER ASSETS 5,931 4,817 -------- -------- $110,276 $110,303 -------- -------- -------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts Payable $ 721 $ 77 Accrued Expenses 1,112 539 Unearned Revenue 1,500 1,500 Obligations to Lenders - SRL 21,265 21,620 -------- -------- TOTAL CURRENT LIABILITIES 24,598 23,736 RETIREMENT BENEFITS 7,518 6,987 STOCKHOLDERS' EQUITY: Common Stock 219 218 Additional Paid-in Capital 78,035 77,950 Retained Earnings (Deficit) (231) 1,274 Cumulative Foreign Currency Translation Adjustment 281 281 Minimum Pension Liability (143) (143) -------- -------- 78,161 79,580 -------- -------- $110,276 $110,303 -------- -------- -------- -------- See notes to condensed financial statements 1 NORD RESOURCES CORPORATION AND SUBSIDIARIES CONDENSED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Amounts) (Unaudited)
QUARTER ENDED TWO QUARTERS ENDED JUNE 30, JUNE 30, ---------------------- ---------------------- 1997 1996 1997 1996 ------- ------- ------- ------- GENERAL AND ADMINISTRATIVE EXPENSES $(1,584) $(1,162) $(2,538) $(2,100) OTHER INCOME (EXPENSE): Interest Income 530 234 939 378 Interest Expense (31) (36) (63) (71) Litigation Recoveries 150 Equity in Net Earnings (Loss) of Affiliate (88) 85 (68) 88 ------- ------- ------- ------- TOTAL OTHER INCOME (EXPENSE) 411 283 808 545 ------- ------- ------- ------- (LOSS) FROM CONTINUING OPERATIONS (1,173) (879) (1,730) (1,555) GAIN (LOSS) FROM DISCONTINUED OPERATIONS 225 (1,467) 225 (2,909) ------- ------- ------- ------- NET (LOSS) $ (948) $(2,346) $(1,505) $(4,464) ------- ------- ------- ------- ------- ------- ------- ------- GAIN (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE: From Continuing Operations $ (.05) $ (.05) $ (.08) $ (.09) From Discontinued Operations .01 (.08) .01 (.17) ------- ------- ------- ------- Net (Loss) $ (.04) $ (.13) $ (.07) $ (.26) ------- ------- ------- ------- ------- ------- ------- ------- AVERAGE SHARES 21,854 18,718 21,847 17,278 ------- ------- ------- ------- ------- ------- ------- -------
See notes to condensed financial statements 2 NORD RESOURCES CORPORATION AND SUBSIDIARIES CONDENSED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)
TWO QUARTERS ENDED JUNE 30, --------------------------- 1997 1996 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net (Loss) $(1,505) $(4,464) Adjustments to reconcile net (loss) to net cash (used in) operating activities: Changes in Assets and Liabilities 778 164 (Gain) Loss from Discontinued Operations (225) 2,909 Depreciation and Amortization 15 20 Equity in Net (Earnings) Loss of Affiliate 67 (88) Net Cash (Used in) Discontinued Operations (690) (3,277) ------- ------- Net Cash (Used In) Operating Activities (1,560) (4,736) ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Net Cash from Sale of Fixed Assets 134 Capital Expenditures (40) Additions to Other Assets (155) (445) Sale (Purchase) of Short Term Investments 2,376 (6,820) Proceeds from Sale of Investment 243 Proceeds from Sale of Discontinued Operations 9,453 Increase in Investments in and Advances to Affiliates (2,539) (58) Increase in Investment in SRL (5,828) (887) ------- ------- Net Cash Provided By (Used In) Investing Activities 3,510 (8,076) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Stock Option Activity 85 Restricted Cash and Investments (4) Issuance of Common Stock 10,000 ------- ------- Net Cash Provided by Financing Activities 85 9,996 ------- ------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 2,035 (2,816) CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 15,583 6,026 ------- ------- CASH AND CASH EQUIVALENTS - END OF PERIOD $17,618 $ 3,210 ------- ------- ------- -------
See notes to condensed financial statements 3 NORD RESOURCES CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED FINANCIAL STATEMENTS QUARTERS ENDED JUNE 30, 1997 AND 1996 1. FINANCIAL STATEMENTS The balance sheet at December 31, 1996 presents condensed financial information taken from the financial statements, which are audited, but the independent auditors report included a disclaimer of opinion for an uncertainty relating to the ability of the Company to continue as a going concern. The interim financial statements are unaudited. In the opinion of management, all adjustments, which consist of normal recurring adjustments necessary to present fairly the financial position and results of operations for the interim periods presented have been made. The results shown for the first two quarters of 1997 are not necessarily indicative of the results that may be expected for the entire year. In February 1997, the Financial Accounting Standard Board issued SFAS No. 128, "Earnings Per Share," which is effective for the Company at December 31, 1997. SFAS No. 128 establishes standards for computing and presenting earnings per share. It replaces the presentation of primary earnings per share with a presentation of basic earnings per share. It also requires dual presentation of basic and diluted earnings per share for entities with complex capital structures. As the Company incurred a loss in the first two quarters of 1997 and 1996, the adoption of SFAS No. 128 will have no effect on the Company's financial statements for the period ended June 30, 1997 and 1996. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income," which will require disclosure in the financial statements of all the changes in equity during a period from transactions and other events and circumstances from non-owner sources. Items included in comprehensive income will include separate classification of items based upon their nature. The Statement requires that comparative information for prior years to be restated. SFAS No. 130 is effective for financial statements for fiscal years beginning after December 15, 1997. The effect on the Corporation's financial statements has not yet been determined. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1996 annual report to shareholders. 2. BASIS OF PRESENTATION The consolidated financial statements include the accounts of Nord Resources Corporation and its 50% interest in a rutile mining operation ("SRL") (collectively the "Company"). All significant intercompany transactions and balances are eliminated. 4 SRL as used in these financial statements includes Sierra Rutile Holdings, Sierra Rutile Limited (the mining operation) and other subsidiaries of the Company and Sierra Rutile Holdings that are economically dependent on the mining operation. As a result of the situation described in Note 3, the Company's 50% investment in SRL is carried at the cost basis of accounting in the balance sheet. Investments in 20% to 40%-owned affiliates and joint ventures are carried using the equity method. On an interim basis, all costs subject to recurring year-end adjustments have been estimated and allocated ratably to the quarters. Income taxes, if necessary, have been provided based on the estimated tax rate for the respective years after excluding infrequently occurring items whose specific tax effect is reported during the same interim period as the related transaction. The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements do not contain any adjustments that might be necessary should the Company be unable to continue as a going concern. Certain reclassifications have been made to the June 30, 1996 and December 31, 1996 financial statements to conform to the classifications used in 1997. 3. INVESTMENT IN SRL In January 1995, the Company's 50% owned rutile mining operation in Sierra Leone was attacked by non-government forces. As a result, SRL was forced to suspend mining operations and subsequently terminated all nonessential personnel. The resumption of operations by SRL is dependent upon many conditions including (1) Sierra Leone having an acceptable political environment within which to operate, (2) having adequate levels of security in and around the minesite area, (3) completing an accurate assessment of the cost of resuming operations, (4) successfully renegotiating SRL's operating agreements with the government of Sierra Leone and (5) obtaining adequate levels of financing at acceptable terms. Cost of resuming operations includes repair or replacement of assets which have incurred damage and deterioration during the period of suspension of operations and costs to reestablish and train a workforce, replenish supplies and restore and recommission facilities. Until SRL personnel can complete a detailed 5 assessment of the condition of SRL's assets, it is not possible to accurately estimate these costs. There is no certainty that adequate financing would be available to fund the above noted costs, although management of the Company, SRL and the other 50% owner of SRL are engaged in advanced discussions with potential financing sources. The Company is not yet able to determine when operations will resume at the Sierra Leone mine. If the above noted conditions for resuming operations in Sierra Leone are not satisfied, the Company may have to record an impairment reserve against a significant portion or possibly all of its investment in SRL. Prior to December 31, 1994, the Company proportionately consolidated its share in each of the assets, liabilities and operations of SRL. As of December 31, 1994, the Company adopted the cost basis of accounting for its investment in SRL because the mine was no longer controlled by SRL. The Company's investment includes original cost plus undistributed earnings through December 31, 1994 plus SRL obligations to lenders, payment of which is guaranteed by the Company, less any related restricted cash. The Company intends to resume proportional consolidation for its 50% share in each of the assets, liabilities and operations of SRL once SRL reestablishes its operations. At that time, the Company will recognize its share of SRL's operating results since January 1, 1995 in its statement of operations. If the Company had resumed proportional consolidation at June 30, 1997, it would have recognized $16,022,000 as its share of SRL's operating loss since January 1, 1995. During the two quarters ended June 30, 1997 the Company contributed $5,828,000 as its 50% share of funding for SRL's cash needs, primarily to satisfy vendor payments, to fund costs for the ongoing operational needs of SRL and for certain costs related to the SRL mine rehabilitation program. Summarized financial data for the Company's 50% share of SRL's operations are as follows: Two Quarters Ended June 30, ------------------------ 1997 1996 ------- ------- (in thousands) Revenues $ 1,216 $ 1,052 Less Costs and Expenses: Cost of Sales 539 255 Selling, General and Administrative 3,373 1,777 Other Expense 1,566 1,000 Income Tax Expense 32 24 ------- ------- Net (Loss) $(4,294) $(2,004) ------- ------- ------- ------- 6 Included in revenues for 1996 is $409,000 received in an insurance settlement from claims made for costs related to the evacuation of the SRL operations in Sierra Leone. The increase in selling, general and administrative costs in 1997 compared to 1996 is primarily related to security costs incurred in 1997 and increased activity related to commencement of the mine rehabilitation program. An impairment reserve of $3,000,000 was recorded in the first quarter of 1995 as the Company's 50% share of damage to assets. The Company will likely record an additional impairment reserve when a more extensive damage assessment can be performed. Although SRL will incur costs to restart the operations, the amount of an additional impairment and costs to restart the operations cannot be estimated currently. 4. INDEBTEDNESS The suspension of its mining operations has resulted in SRL not being in compliance with certain financial and operational covenants under its bank financing agreements. The lenders had agreed to forebear from accelerating the maturities of the loans or enforcing their rights against any collateral until July 1, 1997 to allow SRL time to determine the damage to the mining operations, assess the political situation in Sierra Leone and develop and present a plan for refinancing, rehabilitating and reopening the mining operation. This forebearance period was extended through September 30, 1997 by the lenders in exchange for a prepayment of interest due during the extension period and payment of 50% of the next principal payment due each lender. The Company's share of this payment was $1,492,000. The forebearance agreement would terminate if there is a material change in circumstances. As of June 30, 1997 and December 31, 1996, amounts due the lenders by SRL have been classified in the balance sheet as a current liability. The financing agreements contain restrictive covenants relating to SRL including requirements to maintain minimum current and debt coverage ratios and a limit on indebtedness compared to net worth and a limit on the amount of dividends. Additional covenants under these agreements include restrictions on change of control of SRL and limitations on additional indebtedness at SRL. 7 Separately, as a condition to the forebearance and as security for its guarantee, the Company has pledged proceeds it may receive from claims made under a political risk insurance policy issued by an agency of the United States government. The Company will be able to retain the first $2.7 million of the proceeds. Any additional proceeds will be held in trust and funds will be released from the trust when the Company's 50% share of the deferred principal payments have been made and no events of default exist under the financing agreements. 5. DISCONTINUED OPERATIONS On April 23, 1997 the Company sold substantially all the assets (except cash and accounts receivable) of its 80% owned subsidiary, Nord Kaolin Company ("NKC"), for $20 million less $735,000 relating to certain accruals assumed by the purchaser. Under the sale agreement, the Company is responsible for the payment of a majority of the liabilities of NKC. At December 31, 1996 the Company recorded a loss on disposal of $18,912,000 and a provision for operating losses to disposal date of $2,500,000. Through June 30, 1997 the Company received $9.5 million in cash as a result of this transaction (including collection of accounts receivable and payment of a majority of NKC's liabilities and other liabilities incurred as a result of the transaction). The Company received an additional $1.1 million in July 1997 which the Company estimates to be substantially all of the cash it will receive as a result of this transaction. Sales of $8.6 million and $16.8 million for the two quarters ended June 30, 1997, and 1996, respectively, and the respective cost of sales, selling, general and administrative expenses and interest expense, have been reclassified from continuing operations in the statement of operations and are included in the loss from discontinued operations. During the first two quarters of 1997, the Company charged $2,275,000 against the provision for operating losses to disposal date. At June 30, 1997 the Company has determined that the remaining provision is not required, has eliminated the remaining accrual for loss on disposition and has recorded a $225,000 gain in the second quarter of 1997. 6. NET (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE Net (loss) per common share and common equivalent share is computed by dividing net (loss) by the weighted average number of common shares 8 outstanding during the period adjusted for the dilutive effect of common share equivalents when applicable. 7. EQUITY IN NET (LOSS) OF AFFILIATE The Company has a 35% interest in Nord Pacific Limited at June 30, 1997. Summary financial data for the operations of Nord Pacific Limited for the periods are as follows: Two Quarters Ended June 30 -------------------------- 1997 1996 ------- ------- (in thousands) Sales $ 8,125 $ 7,079 Less costs and expenses (6,752) (6,135) Foreign currency transaction gain (loss) 88 (22) Forward currency exchange contracts gain (loss) (579) 379 Copper contracts gain (loss) 382 (265) Other income (expense) (257) (146) Provision for taxes (1,400) (835) ------- ------- Net income (loss) $ (393) $ 55 ------- ------- ------- ------- The Company's share of the net (loss) for the two quarters ended June 30, 1997 and 1996 was $(138,216) and $19,379, respectively. In connection with a public offering of stock by Nord Pacific Limited ("Pacific"), on July 31, 1997, the Company used $1,748,000 of the amount owed it by Pacific to purchase 349,549 Units in a private placement at $5.00 per unit, the same price received by Pacific in its public offering. A Unit consists of one common share and one-half of one purchase warrant. The warrant can be exercised at a price of $9.00 (Canadian) or currently $6.50 (U.S.) per share at any time prior to July 3, 1998. As a result of the above transaction the Company's ownership interest in Pacific decreased to 30%. 8. LITIGATION The Company has reached settlements with all defendants in SRL's action against those allegedly responsible for certain allegedly improper and fraudulent transactions against SRL which occurred prior to 1991. The financial statements of the Company for the two quarters ended June 30, 1996 include a final payment of $150,000 in other income in connection with these settlements. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION ACT OF 1995. The statements contained in this report which are not historical fact are "forward looking statements" that involve various important risks, uncertainties and other factors which could cause the Company's actual results for 1997 and beyond to differ materially from those expressed in such forward looking statements. These factors include, without limitation, the risks and factors set forth below as well as other risks previously disclosed in the Company's securities filings. LIQUIDITY AND CAPITAL RESOURCES Cash increased from $15.6 million at December 31, 1996 to $18.1 million at June 30, 1997. The Company's administrative activities required $1.1 million in cash during the first two quarters of 1997 while $690,000 was used to fund the discontinued kaolin segment. Cash of $155,000 was used for additions to other assets, $5.8 million was advanced to SRL and $2.3 million was advanced to Nord Pacific during the first two quarters of 1997. The Company made available two demand loans for up to $1 million each to Nord Pacific Limited ("Pacific"), one for operating needs and one for funding an escrow account required by a lender to Pacific. During the first two quarters of 1997 the Company advanced $2.3 million to Pacific and at June 30, 1997 the Company was owed $3.3 million by Pacific. In connection with a public offering of Units by Pacific, on July 3, 1997 the Company used $1,748,000 of the amount owed it by Pacific to purchase 349,549 Units in a private placement at $5.00 per Unit, the same price received by Pacific in its public offering. A Unit consists of one common share and one-half of one purchase warrant. As a result of the above transactions, the Company's ownership interest in Pacific decreased to 30%. In July Pacific repaid $800,000 owed to the Company from the proceeds of its public offering with the balance scheduled for repayment in August, 1997. On April 23, 1997, the Company completed the sale of substantially all of the assets of Nord Kaolin Company ("NKC"). Including collection of NKC's accounts receivable and settlement of NKC's liabilities and other liabilities incurred as a result of this transaction, the Company received $9.5 million during the second quarter of 1997. In July, 1997 the Company received the final proceeds from this transaction of $1.1 million. In addition, the restriction on use of $2.4 million of investments, previously used to secure payment of certain of NKC's liabilities, has been removed. 10 The Company's business consists of a 50% ownership in SRL and a 30% ownership in Pacific. The Company anticipates that its cash balances will be sufficient to fund its administrative activities for the foreseeable future. The Company does not anticipate that it will be requested to provide any additional funding to Pacific for the foreseeable future. However, the Company expects to be required to fund SRL's cash needs as described below. During the suspension of its operations, SRL has relied and will continue to rely on funds from the Company and its other 50% owner to sustain its operations. Funds are expected to continue to be required by SRL for maintaining a limited workforce, payment of vendors, costs of security at the mine and payment of interest on loans outstanding. The Company has sufficient funds to continue funding SRL for these purposes for the foreseeable future; however, it is the Company's and SRL's intention to continue with plans for resumption of SRL's operations. Among other key factors in that process is the availability of adequate levels of funding. SRL's preliminary projections indicate that it may require approximately $90 million through 1998 for asset rehabilitation, completion of a new powerhouse and dredge, mine development and working capital. SRL has held advanced discussions with its current lenders and other lending sources to determine if funds would be available from these sources to fund the major portion of the above requirements. The Company cannot determine if any additional funding will be available, and if available whether the terms thereof would be acceptable to the Company and the other shareholder of SRL. To the extent funds are not available from these or other sources, the Company would be required to contribute its 50% share of SRL's cash requirements. However, the Company would likely not be able to fund a significant amount to SRL without obtaining capital from other sources. One source of cash could be from the payment of claims which have been and will be made by the Company under an insurance policy covering damage to assets at SRL due to political violence, as described below. SRL began various aspects of its planned rehabilitation program in early 1997. However, in late May 1997, a military coup renewed civil disturbances in Sierra Leone caused SRL to suspend its mine rehabilitation efforts and evacuate all expatriate personnel from Sierra Leone. Neither SRL nor the Company is able to project when political conditions in Sierra Leone will improve to allow resumption of the mine rehabilitation efforts. The suspension of its operations has resulted in SRL not being in compliance with certain financial and operational covenants under its bank financing agreements. At June 30, 1997, the Company's 50% share of SRL's obligations to the lenders is $21.3 million, payment of which has been guaranteed by the Company. The lenders have agreed to forebear through September 30, 1997 (extended from January 1, and July 1, 1997) from accelerating payment of the outstanding indebtedness, to enable SRL to assess its future operating alternatives. The forebearance would terminate if a material change in conditions occurs, as determined by the lenders, and requires SRL to expend at least $500,000 each quarter to pay for its liabilities and purchases. In 11 addition to discussing the availability of additional financing from these lenders, SRL has discussed revision of the terms of the present financing agreements, including deferral of payments to beyond 1999. SRL and the Company are not able to determine the willingness of the lenders to approve any modification of the present loan terms beyond September 30, 1997, at which date payment of the entire amount of the loans outstanding could be demanded by the lenders. The Company presently does not have sufficient funds to repay the entire amount of SRL's obligations to lenders for which it has guaranteed payment. If the lenders were to request full payment at the end of the forebearance period, the Company would likely have to seek funding from other sources, including funds which may be available from the political risk insurance policy described below. The Company has filed a claim for damage due to political violence at SRL under a political risk insurance policy which has a coverage limit of $15.7 million. Additional documents and proof of loss are required to be filed as more information becomes available as to damage at the mine and the cost to repair equipment. The Company has received a $1.5 million provisional payment from the insurer; however, it is not able to estimate the total amount or timing of any future payments which may be received from claims under this policy. The Company is obligated to return any or all of this payment if the final amount of damage is less than that amount. The Company has pledged any proceeds in excess of $2.7 million it may receive under this policy as security under the bank financing agreements. RESULTS OF OPERATIONS The Company incurred a net loss from continuing operations of $1,730,000 and $1,173,000 in the two quarters and quarter ended June 30, 1997 and $1,555,000 and $879,000 for the same periods in 1996. Since the Company has adopted the cost basis of accounting for its investment in the rutile segment, the results do not include any amounts relating to its operations. The increase in selling general and administrative expense in 1997 compared to 1996 was primarily due to forgiveness of $300,000 of loans to two executives as part of an employment agreements and an additional $300,000 accrued for severance of other employees. Overall costs were lower due to a reduction in administrative staff and activities. Interest income increased in 1997 compared to 1996 due primarily to a higher level of funds available for investment in 1997. 12 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEMS 2-5. Inapplicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits required by Item 601 of Regulation S-K. Exhibit No. Description ----------- ----------- 27 Financial Data Schedule (b) The Company filed a report on Form 8-K on May 8, 1997 reporting the sale of substantially all the assets of its 80% owned subsidiary, Nord Kaolin Company. 13 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. NORD RESOURCES CORPORATION (Registrant) /s/ Terence H. Lang ------------------------------------- Terence H. Lang Senior Vice President - Finance (Principal Financial Officer and Authorized Officer) DATE: August 14, 1997 14 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORD RESOURCES CORPORATION FORM 10-Q FOR THE TWO QUARTERS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 17,618 0 1,517 0 0 20,096 596 538 110,276 24,598 0 0 0 219 77,942 110,276 0 0 0 2,538 0 0 63 (1,505) 0 (1,730) 225 0 0 (1,505) (.07) 0
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