SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File Number 0-6839
BRENCO, INCORPORATED
- --------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-0493835
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Park West Circle
Midlothian, Virginia 23113
- ------------------------------- --------------------------------------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (804) 732-0202
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- -------------------------
None None
- --------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1 Par Value
- --------------------------------------------------------------------------
(Title of Class)
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
(CONTINUED)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
X
As of February 25, 1994, there were 10,037,572 shares of common
stock outstanding and the aggregate market value of common stock of Brenco,
Incorporated held by nonaffiliates was approximately $75 million.
DOCUMENTS INCORPORATED BY REFERENCE
Information from the following documents has been incorporated by reference
in this report:
Annual Report to shareholders for year ended December 31, 1993 - Part II
Proxy Statement dated March 11, 1994 - Part III
PART I
Item 1. Business
General
Brenco, Incorporated was founded in 1949. Initially Brenco was
engaged in the manufacture and sale of bronze bearings for use on railroad
freight cars. In the early 1960s Brenco expanded into the manufacture and
sale of tapered roller bearings for use on railroad freight cars and in
recent years has begun the manufacture and sale of tapered roller bearings
and forgings for application in industrial markets. Brenco also services
and repairs used railroad bearings, and manufactures lubrication seals for
use in railroad bearings and for sale to third parties. In 1979 Brenco
discontinued the manufacture of bronze friction bearings.
The customer base for Brenco's products and services is made up
of major railroads, car builders and automobile manufacturers, of which
there are a limited number. During 1993, sales to Trinity Industries,
Inc., Ford Motor Company and CSX amounted to $8,236,000, $7,517,000 and
$7,237,000, or approximately 8.3%, 7.6% and 7.3% of 1993 net sales,
respectively. Accounts receivable at December 31, 1993, includes $901,000,
$837,000 and $905,000 for the above customers, respectively.
Regulations prescribed by the Association of American Railroads
require that principal component parts used by a railroad in the repair and
maintenance of railroad roller bearings be parts made by the original
bearing manufacturer. Thus as domestic sales of new railroad roller
bearings increase, it may be anticipated that the market for reconditioned
Brenco bearings and component parts for Brenco bearings will also increase.
In 1993, sales of automotive forgings represented 11.8% of
Brenco's business. Automotive forgings sales amounted to $11.6 million in
1993, $10.9 million in 1992 and $6.9 million in 1991. These products are
sold principally to original equipment manufacturers.
2
Export sales to India, Canada, Brazil, Korea, Mexico, Saudi
Arabia, Australia and to FAG for their worldwide markets amounted to $17.8
million in 1993, $11.1 million in 1992 and $14.1 million in 1991. Brenco
has no foreign manufacturing facilities and all products manufactured for
export sales are manufactured at Brenco's Petersburg, Virginia facilities.
Payment for export sales, other than Canadian, FAG and Australian sales, is
made through the utilization of letters of credit. The Company believes
the profitability of its export business is approximately the same as its
domestic business.
Products
The roller bearing is an anti-friction bearing that contains
steel rollers that turn as the axle rotates. Basically, the tapered roller
bearing made by Brenco consists of four components: (1) the cone or inner
race, (2) the cup or outer race, (3) the tapered rollers which roll between
the cup and cone and (4) the cage which serves as a retainer and maintains
proper spacing between the rollers. The design of such bearings permits
the distribution of unit pressures over the full length of the roller.
This fact, coupled with its tapered design, high precision tolerances and
top quality material, provides a bearing with high load carrying capacity,
excellent friction-reducing qualities and a significantly longer life than
older friction-type bearings. The tapered principle of bearings permits
ready absorption of radial loads, imposed at right angles to the axis of
the bearing, and thrust loads which are exerted parallel to the axis of the
bearing. For this reason, they are particularly adapted to reducing
friction where shafts, gears or wheels are used.
Brenco's tapered roller bearings have wide applications including
railroad freight cars. Over-the-road trailers, forklift trucks,
construction machinery, oil and gas rigs, steel mills and mining machinery
are some of the industrial applications for Brenco's tapered roller
bearings.
Brenco has a separate plant for the manufacture of grease seals
which is a component part of the railroad roller bearing.
Brenco produces automotive forgings for automobile manufacturers.
These products are sold as both unmachined and machined forgings.
Sales of all Brenco's products are made through both a company
sales force and independent manufacturer's representatives.
Through its wholly-owned subsidiary, Rail Link, Inc., Brenco
offers third party switching. This service, currently offered in ten
different states, entails the switching of railcars between the railroad
and the ultimate customers.
Carolina Coastal Railway, Inc., Carolina and Northwestern
Railroad, Inc. and Commonwealth Railway, Inc., wholly-owned subsidiaries of
Rail Link, Inc. operate short line railroads in North Carolina and
Virginia. In performing this service, railcars are moved over the short
line route from the railroad to the ultimate customer. All short line
operations are under 25 miles in length.
In 1993, the Company purchased from Epilogics, Inc., an
engineering design firm in California, the rights to a one-way clutch
design for automotive transmissions. The MD clutch has the potential for
substantially increasing the future sales of our Powertrain Products
division, but will require substantial development and marketing efforts
over the next two years in order to gain acceptance of the product by the
major U.S. automobile manufacturers.
3
Competition
Brenco is principally in competition with one other domestic
manufacturer of railroad roller bearings, The Timken Company, and a number
of foreign bearing manufacturers.
Bearing specifications for railroad roller bearings are largely
determined by the Association of American Railroads. As a result, there
are no significant differences between manufacturers in terms of bearing
design. Consequently, the market for roller bearings, and railroad roller
bearings in particular, is extremely competitive in terms of product
performance and price. Brenco believes that its emphasis on service to its
customers, including the development of a number of service facilities at
various locations throughout the United States for the reconditioning of
used bearings, has been important to the development of its competitive
position.
There are numerous manufacturers of automotive forgings including
the original equipment manufacturers themselves. Brenco's primary
competition is currently these original equipment manufacturers. The
market for automotive forgings is extremely price competitive.
Backlog
Brenco's backlog of orders at December 31, 1993 was approximately
$9.0 million, compared to $19.9 million and $11.5 million at December 31,
1992 and 1991, respectively. There is no seasonal or other significant
aspect in the backlog. The backlog at December 31, 1993, represented 1.2
months of sales based upon average monthly sales for 1993. Railroad
replacement bearings were down $7.6 million while new bearing orders were
up $2.0 million. Automotive forgings were down $3.1 million as compared to
the prior year end. Included in the December 31, 1992 backlog of
replacement bearings were $2.9 million for India and $3.3 million for
Pakistan. There were no large export orders in the backlogs for 1993 or
1991.
Raw Materials and Energy Use
Raw materials used in Brenco's business consist principally of
high-grade steel bars, sheet and strip, wire and tubing. Such products are
available from a number of major steel producers, both domestic and
foreign. To date Brenco has experienced no difficulty in obtaining
adequate supplies of these raw materials for production purposes. Brenco
does not have any long-term supply contracts.
Brenco is a significant user of electricity. Natural gas is also
used in one department. Brenco has had no difficulty in obtaining adequate
gas supplies to date, nor has Brenco received any indication that its
supply of electricity will be restricted or curtailed in the foreseeable
future.
Capital Expenditures, Plant Expansion and Research
Brenco's capital expenditures were $8.8 million in 1993.
Brenco's capital expenditure budget for 1994 is approximately
$9.6 million, the major project being a new reconditioning facility in
Little Rock, Arkansas.
4
The amount spent on research and development during Brenco's
three most recent fiscal years is not material.
Environmental Matters
In the first quarter of 1990, the Company voluntarily initiated
the process of seeking the approval of the Virginia Department of Waste
Management (the "Virginia Department") for proposed remediation activities
involving industrial waste materials at the Company's original
manufacturing site at Puddledock Road in Petersburg, Virginia. The site
had been used as a foundry operation during the period of 1950-1979, but
has not been used by the Company for manufacturing since that time.
The Company had engaged outside consultants to conduct
environmental studies at the site and to prepare a proposed remediation
plan based on those studies. On the basis of reports to the Company by
these consultants, the Company notified the Virginia Department of the
presence of certain waste materials at the site. The Company also
established a reserve to account for the costs anticipated to be incurred
in implementing the remediation plan based on consultants' cost estimates.
To reflect the effect of the reserve, the Company took a charge to earnings
in the fourth quarter of 1989, which resulted in an after-tax loss of
sixteen cents per share for the quarter. The charge reduced 1989 after-
tax net income to 31 cents a share, down from 47 cents per share before the
charge.
The reserve was increased by $300,000 in 1992 and $300,000 in
1991 in anticipation of the impact of inflation on estimated costs of the
proposed remediation plan. The additional charges in 1992 and 1991
resulted in an after-tax loss of two cents per share in each year.
In November, 1992 the Company received approval from the Virginia
Department to proceed with a plan of actual site restoration. The
remediation process began in December 1992; however, actual work at the
site did not commence until the spring of 1993.
During 1993, the Company's outside consultants reevaluated the
expected cost estimate of the remediation plan. Based on the results of
this study, an additional $2,300,000 was recorded to the reserve to account
for the expected cost to complete the remediation plan. To reflect the
effect of the reserve, the Company took a charge to earnings in the fourth
quarter of 1993, which resulted in an after-tax loss of fourteen cents per
share for the quarter. The charge reduced 1993 after-tax net income to 43
cents a share, down from 57 cents per share before the charge.
Weather delays, extensive dewatering of the site, and
substantially increased quantities of soil removed and processed were the
principal causes for exceeding the plan's original estimate of the time and
monies required to complete the project. The Company expects the project
to be completed in the spring of 1994. Actual cost incurred may vary from
the amount reserved.
Employees
Brenco had 901 employees at December 31, 1993. Though union
organization campaigns have been conducted at its Petersburg, Virginia
plant on several occasions in prior years, Brenco is not a party to any
collective bargaining agreement. Brenco believes its employee labor
relations are good.
5
Item 2. Properties
At December 31, 1993 Brenco operated a total of four
manufacturing plants located on approximately 150 acres of land adjoining
its headquarters in Petersburg, Virginia. The four plants and surrounding
facilities adjacent to its headquarters occupy approximately 60 of the 150
acre tract. Small service plants are operated by Brenco affiliates at
three locations in various states. The plants in Virginia are on land
owned by Brenco. All other plants are subject to leases that are not
considered material. Brenco's production facilities at its Petersburg,
Virginia plant occupy approximately 400,000 square feet of production area.
In general, the buildings are in good condition, are considered
to be adequate for the uses to which they are being put and are in regular
use. At December 31, 1993 Brenco was operating at approximately 70% of
capacity at its Petersburg manufacturing facility.
The Company leases 13,749 square feet on the second floor of a
three story concrete and steel building in good condition in Midlothian,
Virginia. Approximately 40 people are located at this location including
Administration, Finance and Marketing personnel.
The Company owns the machinery and equipment which is necessary
to conduct its operations.
Item 3. Legal Proceedings
In 1984 the Connecticut Department of Transportation ("CDOT") and
the Metropolitan Transportation Authority ("MTA") filed companion lawsuits
in the Superior Court of Connecticut against General Electric Company
("GE") alleging certain defects and failures with respect to 244 high speed
railroad passenger cars supplied to CDOT and MTA by GE. In performing its
contracts to supply the railroad cars, GE had purchased certain journal
bearings from the Company. GE initially chose not to bring a third-party
action against the Company; however, in order to preserve GE's ability to
do so at a later date, GE and the Company entered into an agreement tolling
the statute of limitations, terminable by either party upon 30 days'
notice.
In January, 1991, the Company was advised by GE that CDOT, MTA
and GE had reached a settlement agreement in 1990 concerning the lawsuits
on terms not disclosed by GE. On February 4, 1991 GE filed companion
lawsuits against the Company and another major domestic bearing
manufacturer in the Federal District Court of Connecticut alleging defects
in the roller bearings sold to GE for use on the railroad passenger cars
involved in the lawsuits previously settled with CDOT and MTA. In the
present suits, GE is attempting to recover from the Company and the other
bearing manufacturer the settlement cost and defense expenses it incurred
in settling the earlier lawsuits. In September 1992, discovery and
counter-discovery proceedings were initiated by the parties. The suits
have been pending approximately 3 years. The Company believes it has
meritorious defenses to the claims alleged against it by GE. The Company
has primary liability insurance coverage applicable to claims such as these
and excess coverage in an amount the Company believes to be more than
sufficient to cover this exposure. The primary insurance carrier has
indicated to the Company that no substantial issues appear to exist
regarding the applicability of the Company's primary insurance coverage to
the transactions at issue in this litigation.
Except as set forth above, neither Brenco nor its subsidiaries is
a party to any material pending legal proceeding before any court,
administrative agency or other tribunal (See also Item 1, Environmental
Matters, page 5).
Item 4. Submission of Matters to a Vote of Security Holders
None.
6
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Brenco are elected by the board of
directors of the Company to serve one year terms. Following is information
about the executive officers of Brenco as of the most recent practicable
date:
Needham B. Whitfield, age 57, has served as Chief Executive
Officer and Chairman of the Board of Directors of the Corporation and all
subsidiaries since 1985. Mr. Whitfield was a principal in the firm of
Harper and Whitfield, P. C., Certified Public Accountants, until August
1989. Mr. Whitfield is the brother-in-law of John C. Kenny, a director.
J. Craig Rice, age 46, has served as President, Chief Operating
Officer and Director of the Corporation and Director and Officer of all
subsidiaries since 1985 and is responsible for overall corporate policy.
Jacob M. Feichtner, age 56, has served as Executive Vice
President, Secretary and Treasurer and Director of the Corporation and
Director and Officer of all subsidiaries since 1985.
Robert V. Lawrence, age 56, has served as Vice President of
Engineering since 1984.
Howard J. Bush, age 40, has served as Vice President of Planning,
Marketing and Distribution since 1989.
PART II
Item 5. Market for Brenco, Incorporated Common Stock and Related
Shareholder Matters
The principal market in which the Common Stock of Brenco,
Incorporated is traded is the NASDAQ Over-the-Counter-National Market
System. The high and low sales prices for the Common Stock on the NASDAQ
Over-the-Counter-National Market System and the dividends paid per Common
Share for each quarter in the last two fiscal years are incorporated by
reference to page 8 of the 1993 Annual Report. For information on
restrictions on payment of dividends, see Note 5 of Notes to Consolidated
Financial Statements under item 8 of this Report.
The approximate number of shareholders of record on February 25,
1994 was 2,196 (including brokers, dealers, banks and other nominees
participating in The Depository Trust Company).
Item 6. Selected Financial Data
Information required by this item is incorporated by reference to
the Brenco Annual Report to shareholders, page 17.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Information required by this item is incorporated by reference to
the Brenco Annual Report to shareholders, pages 17 and 18.
7
Item 8. Financial Statements and Supplementary Data
Information required by this item is incorporated by reference to
the Brenco Annual Report to shareholders as follows:
Financial Statements and Independent Auditors' Report - pages 9
through 16.
Supplementary data - page 8, the information under "Selected
Quarterly Data".
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information required by this item concerning directors of the
registrant is incorporated by reference to the Brenco Proxy Statement dated
March 11, 1994, pages 3 through 5 under "Election of Directors".
Information on the executive officers of the registrant is included in Part
I under the caption "Executive Officers of the Registrant".
Item 11. Executive Compensation
Information required by this item is incorporated by reference to
the Brenco Proxy Statement dated March 11, 1994, pages 6 through 9 under
"Executive Compensation".
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information required by this item is incorporated by reference to
the Brenco Proxy Statement dated March 11, 1994, pages 1 through 3 under
"Security Ownership of Certain Beneficial Owners and Management".
Item 13. Certain Relationships and Related Transactions
Information required by this item concerning certain relationships
is incorporated by reference to the Brenco Proxy Statement dated March 11,
1994, pages 4 and 5, footnote (1) through (3), under "Election of
Directors."
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K:
(a) 1. Financial Statements:
8
The following statements are incorporated in Part II, Item 8 by
reference to the Brenco Annual Report to Shareholders (page references are
to page numbers in the Brenco Annual Report):
Page Number
-----------
Independent Auditor's Report 16
Consolidated Balance Sheets as of
December 31, 1993 and 1992 11
Consolidated Statements of Income for
the three years ended December 31, 1993,
1992 and 1991 9
Consolidated Statements of Shareholders' Equity
for the three years ended December 31, 1993,
1992 and 1991 10
Consolidated Statements of Cash Flows for the
three years ended December 31, 1993, 1992
and 1991 12
Notes to Consolidated Financial Statements 13 - 15
(a) 2. Financial Statement Schedules:
The following schedules are included in Part IV of this report:
Independent Auditor's Report on Financial Statement Schedules
V. Property, Plant and Equipment for years ended December 31,
1993, 1992 and 1991
VI. Accumulated Depreciation and Amortization of Property, Plant
and Equipment for years ended December 31, 1993, 1992 and
1991
VIII. Valuation and Qualifying Accounts for years ended December
31, 1993, 1992 and 1991
Other schedules or information are omitted because of the absence of
conditions under which they are required or because the required
information is given in the financial statements or notes thereto.
(a) 3. Exhibits
3.1 Articles of Incorporation, as amended.
(incorporated herein by reference to Form SE dated
March 27, 1991).
3.2 Bylaws, as amended.
(filed under cover of Form SE dated March 25, 1994).
9
4.1 Note Agreements dated as of September 1, 1992,
providing for the issuance in the aggregate of
$10,000,000 7.50% Senior Notes due May 1, 2002 (filed
under cover of Form SE dated March 26, 1993).
10.1 Employment Agreement dated as of September 8, 1983,
between the Company and J. Craig Rice (filed under
cover of Form SE dated March 26, 1993).
10.2 Employment Agreement dated as of September 8, 1983,
between the Company and Jacob M. Feichtner (filed
under cover of Form SE dated March 26, 1993).
10.3 Employment Agreement dated as of September 8, 1983,
between the Company and Robert V. Lawrence (filed
under cover of Form SE dated March 25, 1994).
10.4 1987 Restricted Stock Plan of the Company
(incorporated herein by reference to the Company's
Proxy Statement for the 1987 Annual Meeting of
Stockholders dated March 13, 1987).
10.5 1988 Stock Option Plan of the Company, as amended
(filed under cover of Form SE dated March 25, 1994).
13. Annual Report to security holders.
(filed under cover of Form SE dated March 25, 1994).
21. Subsidiaries of the registrant.
23. Consent of Independent Auditors.
Management Contracts and Compensatory Plans. Set forth below are the
management contracts or compensatory plans and arrangements required to be
filed as Exhibits to this Annual Report pursuant to Item 14(c) hereof,
including their location:
Employment Agreement dated as of September 8, 1983, between the
Company and J. Craig Rice - Exhibit 10.1 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1992 (filed under cover of Form
SE dated March 26, 1993).
Employment Agreement dated as of September 8, 1983, between the
Company and Jacob M. Feichtner - Exhibit 10.2 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992 (filed under cover
of Form SE dated March 26, 1993).
Employment Agreement dated as of September 8, 1983, between the
Company and Robert V. Lawrence - Exhibit 10.3 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993 (filed under cover
of Form SE dated March 25, 1994).
1987 Restricted Stock Plan of the Company - Exhibit A to the Company's
Proxy Statement for the 1987 Annual Meeting of Stockholders dated March 13,
1987.
10
1988 Stock Option Plan of the Company, as amended April 15, 1993 -
Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 (filed under cover of Form SE dated March 25, 1994).
(b) Reports on Form 8-K
There were no reports on Form 8-K for the three months ended
December 31, 1993.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
BRENCO, INCORPORATED
March 25, 1994 BY: /s/ J. Craig Rice
--------------------------------------
J. Craig Rice
President
(Chief Operating Officer)
March 25, 1994 BY: /s/ Jacob M. Feichtner
--------------------------------------
Jacob M. Feichtner
Executive Vice President
Secretary and Treasurer
(Chief Financial and
Accounting Officer)
11
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Chairman of the
/s/ Needham B. Whitfield Board and Chief Executive
- ----------------------------- Officer and Director March 25, 1994
Needham B. Whitfield
President and Chief Operating
/s/ J. Craig Rice Officer of the Company
- ----------------------------- and Director March 25, 1994
J. Craig Rice
Executive Vice President,
/s/ Jacob M. Feichtner Secretary and Treasurer of
- ----------------------------- the Company and Director March 25, 1994
Jacob M. Feichtner
/s/ Steven M. Johnson Director March 25, 1994
- -----------------------------
Steven M. Johnson
/s/ John C. Kenny Director March 25, 1994
- -----------------------------
John C. Kenny
/s/ James M. Wells III Director March 25, 1994
- -----------------------------
James M. Wells III
/s/ Frederic W. Yocum, Jr. Director March 25, 1994
- -----------------------------
Frederic W. Yocum, Jr.
12
INDEPENDENT AUDITOR'S REPORT
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Shareholders
Brenco, Incorporated
Petersburg, Virginia
In connection with our audit of the consolidated financial
statements of Brenco, Incorporated and subsidiaries as of December 31, 1993
and 1992, and for each of the three years in the period ended December
31, 1993, which is referred to in our report dated January 31, 1994, herein
incorporated by reference, we also audited the schedules listed in Item 14
(a) 2. In our opinion, such schedules present fairly, when read in
conjunction with the related consolidated financial statements, the
financial data required to be set forth therein in conformity with
generally accepted accounting principles.
McGLADREY & PULLEN
Richmond, Virginia
January 31, 1994
13
<TABLE>
<CAPTION>
BRENCO, INCORPORATED AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT SCHEDULE V
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at Balance at
Beginning Additions Other Changes End of
Classification of Period at Cost Retirements Add (Deduct) Period
-------------- ---------- --------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993:
Land and improvements $ 2,636,080 $ 134,018 $ 0 $ 0 $ 2,770,098
Buildings 11,266,284 120,859 0 0 11,387,143
Machinery and equipment 77,433,936 8,559,822 2,527,635 0 83,466,123
----------- ---------- ---------- ----------- -----------
$91,336,300 $8,814,699 $2,527,635 $ 0 $97,623,364
=========== ========== ========== =========== ===========
Year Ended December 31, 1992:
Land and improvements $ 2,636,080 $ 0 $ 0 $ 0 $ 2,636,080
Buildings 11,072,227 194,057 0 0 11,266,284
Machinery and equipment 75,506,912 5,338,870 3,411,846 0 77,433,936
----------- ---------- ---------- ----------- -----------
$89,215,219 $5,532,927 $3,411,846 $ 0 $91,336,300
=========== ========== ========== =========== ===========
Year Ended December 31, 1991:
Land and improvements $ 2,439,717 $ 196,363 $ 0 $ 0 $ 2,636,080
Buildings 10,723,194 349,033 0 0 11,072,227
Machinery and equipment 73,919,042 3,875,323 2,287,453 0 75,506,912
----------- ---------- ---------- ----------- -----------
$87,081,953 $4,420,719 $2,287,453 $ 0 $89,215,219
=========== ========== ========== =========== ===========
14
</TABLE>
<TABLE>
<CAPTION>
BRENCO, INCORPORATED AND SUBSIDIARIES
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
SCHEDULE VI
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at Charged to Balance at
Beginning Costs and Other Changes- End of
Classification of Period Expenses Retirements Add (Deduct) Period
-------------- ----------- ---------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993:
Buildings and property
improvements $ 5,061,673 $ 304,441 $ 0 $ 555,030 * $ 5,921,144
Machinery and equipment 59,387,022 2,698,574 2,505,913 ( 555,030)* 59,024,653
----------- ---------- ----------- ----------- -----------
$64,448,695 $3,003,015 $ 2,505,913 $ 0 $64,945,797
=========== ========== =========== =========== ===========
Year Ended December 31, 1992:
Buildings and property
improvements $ 4,807,676 $ 253,997 $ 0 $ 0 $ 5,061,673
Machinery and equipment 60,453,576 2,297,724 3,364,278 0 59,387,022
----------- ---------- ----------- ----------- -----------
$65,261,252 $2,551,721 $ 3,364,278 $ 0 $64,448,695
=========== ========== =========== =========== ===========
Year Ended December 31, 1991:
Buildings and property
improvements $ 4,568,867 $ 238,809 $ 0 $ 0 $ 4,807,676
Machinery and equipment 60,288,902 2,337,225 2,172,551 0 60,453,576
----------- ---------- ----------- ----------- -----------
$64,857,769 $2,576,034 $ 2,172,551 $ 0 $65,261,252
=========== ========== =========== =========== ===========
<FN>
* Reclassification
15
</TABLE>
<TABLE>
<CAPTION>
BRENCO, INCORPORATED AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS SCHEDULE VIII
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Additions
---------------------
(1) (2)
Charged
Balance at to Cost Charged Balance
Beginning and to Other at End
Description of Period Expenses Accounts Deductions of Period
----------- ---------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993:
Allowance for doubtful accounts $ 272,132 $ 169,568 $ $ 183,103 $ 258,597
Inventory Valuation Allowance 171,561 171,561
$ 272,132 $ 341,129 $ 0 $ 183,103 $ 430,158
========== ========= ========= ========== ==========
Year Ended December 31, 1992:
Allowance for doubtful accounts $ 343,062 $ 120,000 $ $ 190,930 $ 272,132
Inventory Valuation Allowance
$ 343,062 $ 120,000 $ 0 $ 190,930 $ 272,132
========== ========= ========= ========== ==========
Year Ended December 31, 1991:
Allowance for doubtful accounts $ 329,424 $ 110,000 $ $ 96,362 $ 343,062
Inventory Valuation Allowance
$ 329,424 $ 110,000 $ 0 $ 96,362 $ 343,062
========== ========= ========= ========== ==========
16
</TABLE>
Exhibits 3.1, 3.2, 4.1, 10.1, 10.2, 10.3, 10.4, 10.5, 21 and 23 which
are listed under Item 14(a)3 are not included herewith but may be obtained
for a fee of $2.00 by writing to:
Secretary
Brenco, Incorporated
One Park West Circle
Suite 204
Midlothian, Virginia 23113
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BRENCO, INCORPORATED AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
EXHIBIT 21
The Company has the following wholly-owned subsidiaries,
incorporated in Virginia and included in the consolidated financial
statements:
Quality Bearing Service of Kentucky, Inc.
Quality Bearing Service of Missouri, Inc.
Brenco Holdings, Inc.
Rail Link, Inc.
SealTech, Inc.
Full Steam Ahead Rebuilding, Inc.
The Company has the following wholly-owned subsidiary, incorporated
in California and included in the consolidated financial statements:
Q.B.S. of California, Inc.
Rail Link, Inc. has the following wholly-owned subsidiaries,
incorporated in Virginia and included in the consolidated financial
statements:
Carolina Coastal Railway, Inc.
Commonwealth Railway, Inc.
Carolina and Northwestern Railroad, Inc.
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EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference of our report dated
January 31, 1994 in the Company's 1993 Annual Report on Form 10-K, in Post-
Effective Amendment No. 2 to Registration Statement No. 2-65364 on Form S-
8, Registration Statement No. 33-31361 on Form S-8, Registration Statement
No. 33-45650 on Form S-8 of Brenco, Incorporated filed with the Securities
and Exchange Commission.
McGLADREY & PULLEN
Richmond, Virginia
March 25, 1994
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