<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______
FORM 10-Q
(Mark One)
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| X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
| | SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended July 2, 1995
OR
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| | 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 August 2, 1995 there were 16,235,424 shares of Common Stock, par
value $1 per share, outstanding.
<PAGE> 2
PART I 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 July 2, 1995 are as follows:
Consolidated Statements of Income -
Six months ended July 2, 1995 and July 3, 1994
Consolidated Balance Sheets -
July 2, 1995 and December 31, 1994
Consolidated Statements of Cash Flows -
Six months ended July 2, 1995 and July 3, 1994
Notes to consolidated Financial Statements
1
<PAGE> 3
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SECOND QUARTER ENDED FIRST HALF ENDED
JULY 2, JULY 3, JULY 2, JULY 3,
(DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS) 1995 1994 1995 1994
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES $97,283 $86,560 $196,194 $171,354
COSTS AND EXPENSES:
COST OF SALES 70,042 61,567 141,581 123,168
SELLING, ADMINISTRATIVE
AND GENERAL EXPENSES 15,754 13,121 31,262 25,739
RESEARCH AND DEVELOPMENT
EXPENSES 1,996 2,189 3,816 4,376
INTEREST EXPENSE 349 449 861 920
OTHER-NET 84 1,063 380 1,836
----------- ----------- ----------- -----------
88,225 78,389 177,900 156,039
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 9,058 8,171 18,294 15,315
INCOME TAXES 2,382 2,279 4,830 3,828
----------- ----------- ----------- -----------
NET INCOME $6,676 $5,892 $13,464 $11,487
=========== =========== =========== ===========
PER SHARE OF COMMON STOCK: $0.40 $0.36 $0.82 $0.71
=========== =========== =========== ===========
CASH DIVIDENDS PER COMMON SHARE $0.08 $0.05 $0.16 $0.10
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 16,503,398 16,204,652 16,483,041 16,165,713
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE> 4
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JULY 2, DEC. 31,
(DOLLARS IN THOUSANDS) 1995 1994
------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $24,534 $20,441
ACCOUNTS RECEIVABLE 61,512 52,272
INVENTORIES 94,656 93,601
PREPAID EXPENSES AND OTHER
CURRENT ASSETS 15,965 14,903
----------- -----------
TOTAL CURRENT ASSETS 196,667 181,217
OTHER ASSETS 18,519 19,153
PROPERTY, PLANT AND EQUIPMENT 360,352 350,811
LESS ALLOWANCES FOR DEPRECIATION,
DEPLETION AND IMPAIRMENT 244,172 234,048
----------- -----------
PROPERTY, PLANT AND EQUIPMENT--NET 116,180 116,763
----------- -----------
$331,366 $317,133
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
SHORT-TERM DEBT $19,628 $20,643
ACCOUNTS PAYABLE 10,470 8,861
OTHER LIABILITIES AND ACCRUED
ITEMS 27,527 26,649
DIVIDENDS PAYABLE 1,288
INCOME TAXES 10,468 8,482
----------- -----------
TOTAL CURRENT LIABILITIES 68,093 65,923
OTHER LONG-TERM LIABILITIES 42,791 41,940
LONG-TERM DEBT 18,397 18,527
DEFERRED INCOME TAXES 3,280 3,803
SHAREHOLDERS' EQUITY 198,805 186,940
----------- -----------
$331,366 $317,133
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FIRST HALF ENDED
JULY 2, JULY 3,
(Dollars in thousands) 1995 1994
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET INCOME $13,464 $11,487
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED FROM OPERATING ACTIVITIES:
Depreciation, depletion and amortization 10,051 9,270
Amortization of mine development 951 721
Decrease (Increase) in accounts receivable (6,560) (8,291)
Decrease (Increase) in Inventory (1,055) 192
Decrease (Increase) in prepaid and other current assets (889) (301)
Increase (Decrease) in accounts payable and accrued expenses 556 5,217
Increase (Decrease) in interest and taxes payable 1,647 1,757
Increase (Decrease) in deferred income tax (523) (723)
Other - net 544 739
----------- -----------
NET CASH PROVIDED FROM OPERATION ACTIVITIES 18,186 20,068
Cash Flows from Investing Activities:
Payments for purchase of property, plant and equipment (9,838) (8,911)
Payments for mine development (515) (253)
Proceeds from (Payment for) other investments 668
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (9,685) (9,164)
Cash Flows from Financing Activities:
Proceeds from (Repayment of) short-term debt - net (2,347) 618
Proceeds from (Repayment of) long-term debt- net (393) (344)
Issuance of Common Stock under stock option plans 987 162
Payments of dividends (3,876) (2,414)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (5,629) (1,978)
Effects of Exchange Rate Changes 1,221 1,222
----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 4,093 10,148
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 20,441 7,690
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $24,534 $17,838
=========== ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
July 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 July 2, 1995 and December 31, 1994 and the results of operations
for the the three and six months ended July 2, 1995 and July 3, 1994.
NOTE B - INVENTORIES
<TABLE>
<CAPTION>
July 2, Dec 31,
(Dollars in thousands) 1995 1994
--------------------------------------------------------------------
<S> <C> <C>
Principally average cost:
Raw materials and supplies $19,382 $21,020
In Process 56,956 55,008
Finished 42,363 39,530
----------- -----------
118,701 115,558
Excess of average cost over
LIFO inventory value 24,045 21,957
----------- -----------
$94,656 $93,601
=========== ===========
</TABLE>
5
<PAGE> 7
Item 2. Management's Discussion and Analysis
---------------------------------------------
Results of Operations
---------------------
Second quarter sales of $97 million represent a 12% increase over the second
quarter 1994. Sales of Alloy, Ceramic and Specialty Metal Products increased
over last year. International sales, primarily Alloy Products, totaled $37
million and accounted for 38% of total second quarter sales as compared to $26
million or 30% of sales in the second quarter 1994. The majority of the
international growth was due to 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 second quarter 1995 as
compared to the second quarter 1994. Application development efforts and
continued strength in key markets, including automotive electronics,
telecommunications and computers, helped fuel this increase in sales. Sales in
1995 were also favorably impacted by the higher pass-through commodity costs,
primarily copper, and foreign currency exchange rates.
Beryllium Products sales decreased in the second quarter 1994, but were flat
with the first quarter 1995. Efforts continue to be focused on development of
new products and applications in the aerospace and avionics markets to offset
the absence of sales to the Defense Logistics Agency stockpile.
Ceramic Products showed strong growth over last year. The key markets for
these products are telecommunications, which may now be softening slightly for
these products, and automotive electronics. The continued successful
development and
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expansion of products based on direct bond copper technology helped to increase
sales.
Sales of Specialty Metal Systems also increased significantly in the second
quarter as compared to the year-ago period. The increase is due, in part, to
market development application efforts, quality improvements and a continued
penetration into the Asian markets.
Sales of Precious Metal Products were flat with the second quarter 1994. Sales
of frame lid assemblies have, and are expected to continue to, decline over the
balance of this year. The continued development of the vapor deposition target
business, the transition into the precious metal ultra-fine wire market and
strong results from the refining operations have helped to offset the decline
in the frame lid assembly volume.
Gross margin (sales less cost of sales) increased to $27 million for the
quarter as compared to $25 million last year. The margin percent, however,
decreased slightly to 28.0% from 28.9% in 1994. The decreased margin
percentage was caused by a product mix shift towards lower margin products, the
effect of the higher pass through commodity costs and a slight decrease in
manufacturing performance.
Sales for the first half of 1995 were $196 million, an increase of 14% over
1994. All product lines, except Beryllium Products, increased in 1995 with
Alloy Products and Specialty Metal Systems showing the largest increases.
International sales were also up significantly in the first half. Gross margin
for the half decreased slightly to 27.8% of sales from 28.1% last year. The
factors affecting second quarter gross margin also apply to first half
performance.
7
<PAGE> 9
Selling, administrative and general expenses were $15.8 million or 16% of sales
in the second quarter compared to $13.1 million or 15% of sales in the second
quarter 1994. Year-to-date expenses totaled $31.3 million compared to $25.7
million last year. Causes of the increases include the Alloy Products process
re-design effort that was started in the third quarter 1994, start-up costs
associated with a subsidiary in Singapore established in the first quarter to
provide marketing support in South Asia, a higher volume of sales-related
activity and an increased incentive compensation accrual.
Research and development expenses were $3.8 million for the first half 1995
compared to $4.4 million in the first half 1994. Second half 1995 expenditures
should be in line with the first half.
Other-net expense was $0.4 million for the half compared to $1.8 million in the
first half 1994. This category includes non-operating items such as currency
exchange and translation effects, goodwill amortization and interest income.
The major changes in 1995 are from currency exchange gains and an increase in
interest income from a higher level of investments with a higher average
effective interest rate.
Interest expense decreased 22% for the quarter and 6% for the year as compared
to 1994. The primary cause was an increase in capitalized interest on active
capital projects in the second quarter 1995.
Income before income taxes was $9.1 million for the quarter and $18.3 for the
year, compared to $8.2 million and $15.3 million, respectively, for 1994. The
higher sales volume and the resulting gross margin partially offset by the
increase in expenses account for the increase. Income taxes were provided for
at an effective rate of 26.3%
8
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of pre-tax income in the second quarter and 26.4% for the first half. For the
first half 1994, an effective rate of 25.0% was employed. The higher rate
results from the increased pre-tax earnings and lower available tax credits.
Earnings per share were $0.40 in the second quarter and $0.82 for the first
half as compared to $0.36 and $0.71 in 1994.
Financial Condition
-------------------
Net cash provided from operating activities was $18.2 million during first half
1995 as compared to $20.1 million in the 1994 comparable period.
Accounts receivable increased $9 million or 18% since year-end 1994. The
increase is primarily due to the increase in sales and a higher proportion of
international receivables.
Inventories have remained fairly constant despite the increased sales volume
due to an increase in inventory turns and operating efficiencies.
Capital expenditures for property, plant and equipment amounted to $9.9 million
during first half 1995 and are expected to exceed the $17 million spent in
1994.
Total debt decreased by $1 million during first half 1995. Long-term debt at
the end of the quarter was 9% of total capital.
The average number of outstanding shares increased to 16.5 million due to the
implementation of a restricted stock plan for key employees and the
exercisability of previously issued stock options.
9
<PAGE> 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings
--------------------------
(a) Beryllium Exposure Claims
-------------------------
Claims Concluded Since the End of First Quarter 1995. Steven
----------------------------------------------------
Campbell filed suit against the Company in the Superior Court for Orange
County, California, on January 3, 1992, for which service of process on the
Company occurred in January, 1992. This claim was reported on the Company's
annual report on Form 10-K for the year ended December 31, 1994. Mr. Campbell
claimed that, while he was an employee of an alleged customer of the Company,
he contracted chronic beryllium disease as a result of exposure to beryllium
and beryllium-containing products. Mr. Campbell sought compensatory and
punitive damages of an unspecified amount. This case was settled and dismissed
with prejudice by the Court on February 21, 1995.
Ray Amante filed suit against the Company in the Superior
Court for Orange County, California on January 14, 1992, for which service of
process on the Company occurred on April 7, 1992. This claim was reported on
the Company's annual report on Form 10-K for the year ended December 31, 1994.
Mr. Amante claimed that, while he was an employee of an alleged customer of the
Company, he contracted berylliosis as a result of exposure to beryllium and
beryllium-containing products. Mr. Amante sought compensatory and punitive
damages of an unspecified amount. This case was settled and dismissed with
prejudice by the Court on February 21, 1995.
John W. Rosenbauer and his wife filed suit against the Company
in the Court of Common Pleas, Westmoreland County, Pennsylvania, on February 7,
1995, for which service of process on the Company occurred on February 15,
1989. This
10
<PAGE> 12
claim was reported on the Company's annual report on Form 10-K for the year
ended December 31, 1994. Mr. Rosenbauer claimed that, while he was an employee
of an alleged customer of the Company, he contracted chronic beryllium disease
as a result of exposure to beryllium and beryllium-containing products. Mrs.
Rosenbauer claimed loss of consortium. The total damages in this case were
claimed to be in excess of $20,000. This case was settled and dismissed with
prejudice the Court on December 19, 1994.
Recent Developments Relating to Pending Claims Since April 2, 1995.
-------------------------------------------------------------------
Geraldine Ruffin, individually and as executrix of the estate of her
husband John H. P. Ruffin, filed suit against the Company 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. This claim was reported 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 Naval
Shipyard, he sustained injuries, resulting in his death, as a result of
exposure to beryllium and beryllium-containing products. Mrs. Ruffin sought
compensatory and punitive damages of an unspecified amount. On March 31, 1995,
the Court granted defendants' motion for summary judgment with respect to Mrs.
Ruffin's claims, as reported on the Company's quarterly report on Form 10-Q for
the quarter ended April 2, 1995. Plaintiff filed a notice of appeal in May,
1995. The Company believes that resolution of any such appeal would 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
11
<PAGE> 13
former operations of the Subsidiary, then known as The S.K. Wellman Corp. All
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-four 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
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Item 6. Exhibits and Reports on Form 8-K
------------------------------------------
(a) Exhibits
--------
11. Statement re: computation of per share earnings.
27. Financial Data Schedule.
(b) Reports on Form 8-K
-------------------
There have been no reports on Form 8-K during the quarter
ended July 2, 1995.
13
<PAGE> 15
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: August 10, 1995
/s/ Carl Cramer
----------------------------------
Carl Cramer
Vice President Finance and
Chief Financial Officer
14
<PAGE> 1
EXHIBIT 11
BRUSH WELLMAN INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
SECOND QUARTER ENDED SIX MONTHS ENDED
------------------------------ ---------------------------------
July 2, July 3, July 2, July 3,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 16,199,937 16,093,442 16,174,254 16,090,655
Dillutive stock options based
on the treasury stock method
using average market price 261,874 111,210 193,212 75,058
----------- ----------- ----------- -----------
TOTALS 16,461,811 16,204,652 16,367,466 16,165,713
=========== =========== =========== ===========
Net Income $6,676,000 $5,892,000 $13,464,000 $11,487,000
Per share amount $0.41 $0.36 $0.82 $0.71
=========== =========== =========== ===========
Fully diluted:
Average shares outstanding 16,199,937 16,093,442 16,174,254 16,090,655
Dillutive stock options based
on the treasury stock method
using average market price 303,461 111,210 308,787 75,058
----------- ----------- ----------- -----------
TOTAL 16,503,398 16,204,652 16,483,041 16,165,713
=========== =========== =========== ===========
Net Income $6,676,000 $5,892,000 $13,464,000 $11,487,000
Per share amount $0.40 $0.36 $0.82 $0.71
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUL-02-1995
<CASH> 24,534
<SECURITIES> 0
<RECEIVABLES> 61,512
<ALLOWANCES> 1,055
<INVENTORY> 94,656
<CURRENT-ASSETS> 196,667
<PP&E> 360,352
<DEPRECIATION> 244,172
<TOTAL-ASSETS> 331,366
<CURRENT-LIABILITIES> 68,093
<BONDS> 18,397
<COMMON> 21,321
0
0
<OTHER-SE> 177,484
<TOTAL-LIABILITY-AND-EQUITY> 331,366
<SALES> 196,194
<TOTAL-REVENUES> 196,194
<CGS> 141,581
<TOTAL-COSTS> 176,659
<OTHER-EXPENSES> 341
<LOSS-PROVISION> 39
<INTEREST-EXPENSE> 861
<INCOME-PRETAX> 18,294
<INCOME-TAX> 4,830
<INCOME-CONTINUING> 13,464
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,464
<EPS-PRIMARY> .82
<EPS-DILUTED> .82
</TABLE>
