<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission file number 1-7006
BRUSH WELLMAN INC.
(Exact name of Registrant as specified in charter)
Ohio 34-0119320
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17876 ST. CLAIR AVENUE, CLEVELAND, OHIO 44110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 216-486-4200
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 May 1, 1995 there were 16,149,825 shares of Common Stock, par
value $1 per share, outstanding.
<PAGE> 2
PART 1. FINANCIAL INFORMATION
BRUSH WELLMAN INC. AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
The consolidated financial statements of Brush Wellman Inc. and its
subsidiaries for the quarter ended April 2, 1995 are as follows:
Consolidated Statements of Income -
Three months ended April 2, 1995 and April 3, 1994
Consolidated Balance Sheets -
April 2, 1995 and December 31, 1994
Consolidated Statements of Cash Flows -
Three months ended April 2, 1995 and April 3, 1994
Notes to Consolidated Financial Statements
1
<PAGE> 3
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
First Quarter Ended
April 2, April 3,
(Dollars in thousands except share and per share amounts) 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $98,912 $84,794
Costs and expenses:
Cost of sales 71,540 61,600
Selling, administrative
and general expenses 15,507 12,617
Research and development
expenses 1,821 2,186
Interest expense 512 471
Other-net 297 776
---------- ----------
89,677 77,650
---------- ----------
Income before income taxes 9,235 7,144
Income taxes 2,447 1,550
---------- ----------
Net Income $ 6,788 $ 5,594
========== ==========
Per Share of Common Stock: $0.42 $0.35
Cash dividends per common share $0.08 $0.05
Weighted average number
of common shares outstanding 16,290,649 16,157,216
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 4
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
April, 2 Dec. 31,
(Dollars in thousands) 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 13,843 $ 20,441
Accounts receivable 60,767 52,272
Inventories 95,264 93,601
Prepaid expenses and other
current assets 15,079 14,903
-------- --------
Total Current Assets 184,953 181,217
Other Assets 18,710 19,153
Property, Plant and Equipment 354,067 350,811
Less allowances for depreciation,
depletion and impairment 238,473 234,048
-------- --------
115,594 116,763
-------- --------
$319,257 $317,133
======== ========
Liabilities and Shareholders' Equity
Current Liabilities
Short-term debt $ 17,619 $ 20,643
Accounts payable 7,973 8,861
Other liabilities and accrued
items 25,945 26,649
Dividends payable - 1,288
Income taxes 11,272 8,482
-------- --------
Total Current Liabilities 62,809 65,923
Other Long-Term Liabilities 42,102 41,940
Long-Term Debt 18,719 18,527
Deferred Income Taxes 3,161 3,803
Shareholders' Equity 192,466 186,940
-------- --------
$319,257 $317,133
======== ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
April 2, April 3,
(Dollars in thousands) 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income $ 6,788 $ 5,594
Adjustments to Reconcile Net Income to Net Cash
Provided From Operating Activities:
Depreciation, depletion and amortization 5,130 4,638
Amortization of mine development - 721
Decrease (Increase) in accounts receivable (6,667) (2,449)
Decrease (Increase) in Inventory (1,663) 779
Decrease (Increase) in prepaid and other current assets 97 (312)
Increase (Decrease) in accounts payable and accrued expenses (2,623) (229)
Increase (Decrease) in interest and taxes payable 2,217 1,456
Increase (Decrease) in deferred income tax (642) (368)
Other - net 23 618
------- -------
Net Cash Provided From Operating Activities 2,660 10,448
Cash Flows from Investing Activities:
Payments for purchase of property, plant and equipment (3,741) (3,608)
Payments for mine development (312) (141)
Proceeds from (Payments for)other investments 504 -
------- -------
Net Cash Provided From (Used in) Investing Activities (3,549) (3,749)
Cash Flows from Financing Activities:
Proceeds from (Repayment of) short-term debt - net (4,013) 1,029
Issuance of Common Stock under stock option plans 29 14
Payments of dividends (2,580) (1,609)
------- -------
Net Cash Provided From ( Used in) Financing Activities (6,564) (566)
Effects of Exchange Rate Changes 855 620
------- -------
Net Change in Cash and Cash Equivalents (6,598) 6,753
Cash and Cash Equivalents at Beginning of Period 20,441 7,690
------- -------
Cash and Cash Equivalents at End of Period $13,843 $14,443
======= =======
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
April 2, 1995
NOTE A - ACCOUNTING POLICIES
In management's opinion, the accompanying consolidated financial statements
contain all adjustments necessary to present fairly the financial position as
of April 2, 1995 and December 31, 1994 and the results of operations for the
the three months ended April 2, 1995 and April 3, 1994.
NOTE B - INVENTORIES
<TABLE>
<CAPTION>
April 2, Dec 31,
(Dollars in thousands) 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C>
Principally average cost:
Raw materials and supplies $ 18,171 $ 21,020
In Process 58,473 55,008
Finished 41,188 39,530
-------- --------
117,832 115,558
Excess of average cost over
LIFO inventory value 22,568 21,957
-------- --------
$ 95,264 $ 93,601
======== ========
</TABLE>
NOTE C - OTHER POSTEMPLOYMENT BENEFITS
Effective January 1, 1994, the Company adopted Financial Accounting Standards
Board Statement No. 112,"Employers' Accounting for Postemployment Benefits."
The cumulative effect of adoption had essentially no effect on earnings and no
effect on the Company's cash position.
5
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
First quarter 1995 sales were a record $99 million. This represents a 17%
increase over the $85 million recorded in first quarter 1994 and 13% over the
$88 million recorded in fourth quarter 1994. All product lines, except
beryllium, recorded increases. International sales totaled $36 million and
comprised 36% of total sales in the first quarter 1995 compared to $25 million
or 29% of total sales in 1994. This international growth was primarily from
higher volume, although sales were favorably affected by the impact of currency
rates on revenues generated outside the United States.
Sales of Alloy Products increased significantly in first quarter 1995 from the
year ago period. Principal areas of growth were automotive electronics,
telecommunications, computers and appliances. These growth markets, coupled
with applications development efforts, were the key to continued strength in
this product line. Sales comparisons were also impacted by higher pass-through
commodity costs, especially copper. The international component of this
product line experienced significant volume gains along with the favorable
impact of currency rate changes.
Beryllium Products sales declined in the first quarter compared with last year
due to the absence of sales to the Defense Logistics Agency stockpile. Efforts
continue to be focused on development of new products and applications in the
aerospace and avionics markets.
6
<PAGE> 8
Ceramic Products showed solid growth over the year ago period, the key markets
being automotive electronics and telecommunications. The successful efforts to
expand the sale of products based on direct bond copper technology were another
factor in the increased sales.
Specialty Metal Systems sales increased in first quarter 1995 as compared to
first quarter 1994. The gains result from application development efforts
focused on such growth markets as automotive electronics and
telecommunications.
Sales of Precious Metal Products were up slightly in first quarter 1995
over the comparable 1994 period, but below the strong fourth quarter of 1994.
For the rest of 1995, it is expected that year-to-year comparisons to be
unfavorable due to lower frame lid assembly shipments. To partly offset this
volume drop was the continued development of the vapor deposition target
business and a move into the precious metal ultra-fine wire market.
Gross margin (sales less cost of sales) increased slightly to 27.7% of sales in
first quarter 1995 as compared to 27.4% of sales in first quarter 1994.
Although the product mix shift was towards lower margin products, the higher
volumes and the impact from currency rate changes provided for the increase in
gross margin.
Selling, administrative and general expenses were $15.5 million or 15.7% of
sales, up from $12.6 million or 14.9% of sales in first quarter 1994. The
increase was across all expense categories. A portion of the increase relates
to an Alloy Products business process re-design effort that was started during
the third quarter of 1994. In addition, a subsidiary was established in
Singapore to provide marketing for alloy and beryllium products to customers in
Singapore, India, China, ASEAN and Australia.
7
<PAGE> 9
Research and development expenses in first quarter 1995 were $1.8 million or
1.8% of sales as compared to the $2.2 million or 2.6% of sales in the first
quarter 1994. The first quarter of 1994 included a high level of activity in
product development for AlBeMet(R) materials. The results of these activities
are now in further engineering and process development in manufacturing.
Interest expense was slightly higher in first quarter 1995 as compared to first
quarter 1994. This is due to lower capitalized interest on active capital
projects in first quarter 1995.
Other-net expense was $0.3 million in first quarter 1995 compared to $0.8
million in first quarter 1994. This category includes non-operating items such
as currency exchange and translation effects, interest income and amortization
of goodwill.
First quarter 1995 income before income taxes increased to $9.2 million from
$7.1 million in first quarter 1994. The margin on higher sales volume and the
impact of currency rate changes account for the improvement. Income taxes
were provided for at an effective rate of 26.5% of pre-tax income in first
quarter 1995 compared to 21.7% in first quarter 1994. The higher rate results
from the increased pre-tax income and lower available tax credits. First
quarter earnings per share were $0.42 in 1995 compared to $0.35 in 1994.
Financial Condition
Net cash provided from operating activities was $2.7 million during first
quarter 1995 as compared to $10.4 million in the 1994 comparable period.
Accounts receivable increased $8.5 million or 16% which is slightly above the
13% sales increase from fourth quarter 1994 to first quarter 1995.
8
<PAGE> 10
Capital expenditures for property, plant and equipment amounted to $3.7 million
during the first quarter 1995 and are expected to exceed the $17 million spent
in 1994.
Total debt decreased by $2.8 million during first quarter 1995. This included
retiring $5 million of medium-term notes which matured in early March.
Long-term debt at the end of the quarter was 9% of total capital.
9
<PAGE> 11
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
(a) Beryllium Exposure Claims
Claims concluded since the end of fiscal year 1994. Bruce Hand and his
wife filed suit against the Company in the Superior Court of New Jersey, Pasaic
County, on September 22, 1993, for which service of process on the Company
occurred on September 27, 1993. This claim was disclosed on the Company's
annual report on Form 10-K for the year ended December 31, 1994. Mr. Hand
claimed that, while he was an employee of the Company, he sustained injury to
his lungs, chest, and pulmonary and nervous systems as a result of his exposure
to beryllium oxide powder. Mr. Hand sought compensatory damages of an
unspecified amount; his wife claimed damages of an unspecified amount of loss
of Mr. Hand's support, society and consortium. This suit subsequently was
removed to the District Court for the District of New Jersey and was
consolidated with certain other beryllium exposure claims against the Company.
On March 10, 1995, the U.S. District Court granted the Company's motion for
summary judgment with respect to the claims of Mr. and Mrs. Hand. The deadline
for an appeal of the court's order granting the Company's motion for summary
judgment was April 14, 1995; no appeal was filed by plaintiffs on or before
this date.
Recent Developments Relating to Pending Claims Since the End of Fiscal
Year 1994. Geraldine Ruffin, individually and as executrix of the estate of her
husband John H.P. Ruffin, filed suit against the Company and certain other
producers of beryllium-containing products, in the Superior Court of New
Jersey, Essex County, on September 25, 1991, for which service of process on
the Company occurred on October 9, 1991.
10
<PAGE> 12
This claim was disclosed on the Company's annual report on Form 10-K for the
year ended December 31, 1994. Mrs. Ruffin claimed that, while her husband was
employed by Norfolk Navel Shipyard, he sustained injuries, resulting in his
death, as a result of exposure to defendants' beryllium-containing products.
Mrs. Ruffin sought compensatory and punitive damages of an unspecified amount.
On March 31, 1995, the Superior Court of New Jersey, Essex County, granted
defendants' motion for summary judgment with respect to Mrs. Ruffin's claims.
Plaintiff's counsel has indicated to the Company its intention to appeal the
court's judgment, notice of which must be filed by May 15, 1995. The Company
believes that resolution of any such appeal would not have a material adverse
effect upon the Company.
Claims Initiated Since the End of Fiscal Year 1994. The Company is a
defendant in separate suits filed on February 28, 1995 by two Company employees
and their spouses against the Company and certain Company employees in the
Superior Court of Pima County, Arizona. These suits are similar to seven suits
currently pending in the Superior Court of Pima County (six of which were
instituted on June 10, 1994 and one of which was instituted on December 13,
1994) against the Company and certain Company employees. The plaintiffs claim
that, during their employment with the Company, they contracted chronic
beryllium disease as a result of exposure to beryllium and beryllium-containing
products. The plaintiffs seek compensatory and punitive damages of an
unspecified amount based on allegations that the Company intentionally
misrepresented the potential danger of exposure to beryllium and breached an
agreement to pay certain benefits in the event the plaintiffs contracted
chronic beryllium disease. Defense of this case is being conducted by counsel
retained by the Company, and the Company's insurance carrier is investigating
its liability for these claims. The
11
<PAGE> 13
Company believes that resolution of these cases will not have a material
adverse effect on the Company.
(b) Asbestos Exposure Claims
A subsidiary of the Company (the "Subsidiary") is a co-defendant in
nineteen cases making claims for asbestos-induced illness allegedly relating to
the former operations of the Subsidiary, then known as The S.K. Wellman Corp.
Seventeen of these cases have been reported in prior filings with the S.E.C.
The Subsidiary is one of a large number of defendants in each case. The
plaintiffs seek compensatory and punitive damages, in most cases of unspecified
sums. Each case has been referred to a liability insurance carrier for
defense. With respect to those referrals on which a carrier has acted to date,
a carrier has accepted the defense of the actions, without admitting or denying
liability. Two hundred twenty-three similar cases previously reported have
been dismissed or disposed of by pre-trial judgment, one by jury verdict of no
liability and ten others by settlement for nominal sums. The Company believes
that resolution of the pending cases referred to above will not have a material
effect upon the Company.
The Subsidiary has entered into an agreement with the
predecessor owner of its operating assets, Pneumo Abex Corporation (formerly
Abex Corporation), and five insurers, regarding the handling of these cases.
Under the agreement, the insurers share expenses of defense, and the
Subsidiary, Pneumo Abex Corporation and the insurers share payment of
settlements and/or judgments. In eleven of the pending cases, both expenses of
defense and payment of settlements and/or judgments are subject to a limited,
separate reimbursement agreement with MLX Corp., the parent of the company that
purchased the Subsidiary's operating assets in 1986.
12
<PAGE> 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company's Annual Meeting of Shareholders for 1995 was held on May
2, 1995.
(b) Not applicable.
(c) At the Annual Meeting, three directors were elected to serve for a
term of three years by the following vote.
<TABLE>
<CAPTION>
Shares Shares
Voted Voted
"For" "Withheld"
----------- ----------
<S> <C> <C>
Frank B. Carr 13,182,717 480,666
Gerald C. McDonough 13,182,482 480,901
John Sherwin, Jr. 13,185,001 478,382
</TABLE>
The adoption of the Brush Wellman Inc. 1995 Stock Incentive Plan was
approved by the following vote:
<TABLE>
<CAPTION>
Shares Shares Shares
Voted Voted Voted Non-Voting
"For" "Against" "Abstaining" Shares
------------- --------- ------------ ----------
<S> <C> <C> <C>
12,314,799 1,240,564 108,020 -0-
</TABLE>
The selection of Ernst & Young LLP as independent auditors for 1995 was
ratified and approved by the following vote:
<TABLE>
<CAPTION>
Shares Shares Shares
Voted Voted Voted Non-Voting
"For" "Against" "Abstaining" Shares
------------- --------- ------------ ----------
<S> <C> <C> <C>
13,459,237 146,907 57,239 -0-
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
13
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(a) Exhibits
11. Statement re computation of per share earnings.
27. Financial Data Schedule (Securities and Exchange
Commission EDGAR filing only).
(b) Reports on Form 8-K
There have been no reports on Form 8-K during the quarter ended April
2, 1995.
14
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BRUSH WELLMAN INC.
Dated: May 12, 1995
/s/ Carl Cramer
-----------------------------------------
Carl Cramer
Vice President Finance and
Chief Financial Officer
15
<PAGE> 1
EXHIBIT 11
BRUSH WELLMAN INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
----------------------------------
April 2, April 3,
1995 1994
----------- -----------
<S> <C> <C>
Primary:
Average shares outstanding 16,123,733 16,087,928
Dillutive stock options based
on the treasury stock method
using average market price 107,779 44,950
----------- -----------
TOTALS 16,231,512 16,132,878
=========== ===========
Net Income $ 6,788,000 $ 5,594,000
Per share amount $0.42 $0.35
=========== ===========
Fully diluted:
Average shares outstanding 16,123,733 16,087,928
Dillutive stock options based
on the treasury stock method
using average market price 166,916 69,288
----------- -----------
TOTALS 16,290,649 16,157,216
=========== ===========
Net Income $ 6,788,000 $ 5,594,000
Per share amount $0.42 $0.35
=========== ===========
</TABLE>
16
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000014957
<NAME> BRUSH WELLMAN
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> APR-02-1995
<CASH> 13,843
<SECURITIES> 0
<RECEIVABLES> 60,767
<ALLOWANCES> 1,010
<INVENTORY> 95,264
<CURRENT-ASSETS> 184,953
<PP&E> 354,067
<DEPRECIATION> 238,473
<TOTAL-ASSETS> 319,257
<CURRENT-LIABILITIES> 62,809
<BONDS> 18,719
<COMMON> 21,217
0
0
<OTHER-SE> 171,249
<TOTAL-LIABILITY-AND-EQUITY> 319,257
<SALES> 98,912
<TOTAL-REVENUES> 98,912
<CGS> 71,540
<TOTAL-COSTS> 88,868
<OTHER-EXPENSES> 275
<LOSS-PROVISION> 22
<INTEREST-EXPENSE> 512
<INCOME-PRETAX> 9,235
<INCOME-TAX> 2,447
<INCOME-CONTINUING> 6,788
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,788
<EPS-PRIMARY> $0.42
<EPS-DILUTED> $0.42
</TABLE>
