<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 March 29, 1996
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 April 30, 1996 there were 15,872,193 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 March 29, 1996 are as follows:
Consolidated Statements of Income -
Three months ended March 29, 1996 and April 2, 1995
Consolidated Balance Sheets -
March 29, 1996 and December 31, 1995
Consolidated Statements of Cash Flows -
Three months ended March 29, 1996 and April 2, 1995
Notes to consolidated Financial Statements
1
<PAGE> 3
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
First Quarter Ended
March 29, April 2,
(Dollars in thousands except share and per share amounts) 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $93,801 $98,912
Cost of sales 69,008 71,540
------- -------
Gross Profit 24,793 27,372
Selling, administrative
and general expenses 15,480 15,507
Research and development
expenses 1,798 1,821
Other-net (125) 297
-------- -------
Operating Profit 7,640 9,747
Interest expense 286 512
-------- -------
Income before income taxes 7,354 9,235
Income taxes 2,199 2,447
-------- -------
Net Income $5,155 $6,788
======== =======
Per Share of Common Stock: $ 0.32 $ 0.42
======== =======
Cash dividends per common share $ 0.10 $ 0.08
Weighted average number
of common shares outstanding 16,135,141 16,290,649
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 4
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
Mar. 29, Dec. 31,
(Dollars in thousands) 1996 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $13,255 $29,553
Accounts receivable 61,131 52,532
Inventories 92,026 92,727
Prepaid expenses and other current assets 18,727 16,935
-------- --------
Total Current Assets 185,139 191,747
Other Assets 19,437 18,912
Property, Plant and Equipment 379,768 374,367
Less allowances for depreciation,
depletion and impairment 258,526 253,173
-------- --------
Property, Plant and Equipment -- net 121,242 121,194
-------- --------
$325,818 $331,853
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $23,014 $22,757
Accounts payable 5,690 8,772
Other liabilities and accrued items 23,181 23,734
Dividends payable 1,621
Income taxes 11,234 9,707
-------- --------
Total Current Liabilities 63,119 66,591
Other Long-Term Liabilities 4,261 4,148
Retirement and Post Retirement Benefits 41,453 41,297
Long-Term Debt 16,633 16,996
Deferred Income Taxes 2,341 2,519
Shareholders' Equity 198,011 200,302
-------- --------
$325,818 $331,853
======== ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 29, April 2,
(Dollars in thousands) 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income $ 5,155 $ 6,788
Adjustments to Reconcile Net Income to Net Cash
Provided From Operating Activities:
Depreciation, depletion and amortization 4,946 5,130
Amortization of mine development 1,097
Decrease (Increase) in accounts receivable (9,059) (6,667)
Decrease (Increase) in Inventory 767 (1,663)
Decrease (Increase) in prepaid and other current assets (2,472) 97
Increase (Decrease) in accounts payable and accrued expenses (2,831) (2,623)
Increase (Decrease) in interest and taxes payable 1,351 2,217
Increase (Decrease) in deferred income tax (179) (642)
Other - net 51 23
------ ------
Net Cash Provided From Operating Activities (1,174) 2,660
Cash Flows from Investing Activities:
Payments for purchase of property, plant and equipment (5,898) (3,741)
Payments for mine development (101) (312)
Proceeds from other investments 311 504
------ ------
Net Cash Used in Investing Activities (5,688) (3,549)
Cash Flows from Financing Activities:
Repayment of short-term debt - net 323 (4,013)
Repayment of long-term debt - net (342)
Issuance of Common Stock under stock option plans 1,040 29
Purchase of Common Stock for treasury (6,656)
Payments of dividends (3,197) (2,580)
------ ------
Net Cash Used in Financing Activities (8,832) (6,564)
Effects of Exchange Rate Changes (604) 855
------- -------
Net Change in Cash and Cash Equivalents (16,298) (6,598)
Cash and Cash Equivalents at Beginning of Period 29,553 20,441
------- -------
Cash and Cash Equivalents at End of Period $13,255 $13,843
======= =======
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
MARCH 29, 1996
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
March 29, 1996 and December 31, 1995 and the results of operations for the
three months ended March 29, 1996 and April 2, 1995.
<TABLE>
Note B - Inventories
<CAPTION>
March 29, Dec. 31,
(Dollars in thousands) 1996 1995
- -----------------------------------------------------
<S> <C> <C>
Principally average cost:
Raw materials and supplies $ 21,360 $ 19,719
In Process 54,822 57,012
Finished 42,647 42,223
-------- --------
118,829 118,954
Excess of average cost over
LIFO inventory value 26,803 26,227
-------- --------
$ 92,026 $ 92,727
======== ========
</TABLE>
5
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Sales for the first quarter 1996 were $93.8 million, a 5% decline from the
record first quarter 1995 sales of $98.9 million. Weak demand in segments of
the telecommunications and defense markets was main causes of the decline.
International sales were $28 million and comprised 30% of total first quarter
1996 sales compared to $36 million or 36% of total sales in 1995. The decrease
in international sales was primarily in Alloy Products and was due to softening
economic conditions, principally in Germany, and the translation effects of a
stronger dollar.
Sales of Alloy Products were flat with the first quarter of last year, as
higher domestic sales offset the decline in international sales. Sales of bulk
products, which include rod, plate, ingot and tube, increased. These products
are used in the aerospace, welding, plastic tooling and consumer products
industries. Sales of precision strip, which is used in the telecommunications
and computer markets, were down from the prior year. The pass-through effect
of lower commodity costs, primarily copper, negatively impacted sales as
compared to last year.
Sales of Beryllium Products in the first quarter 1996 were lower than last year
due to weaker demand for pure beryllium metal in the defense market. Sales of
the Company's AlBeMet(R) rose slightly over the prior year. Encouraging test
results from investment casting have been achieved which could potentially lead
to an increase in applications for AlBeMet(R). The sales backlog at quarter end
improved from the year ago period.
6
<PAGE> 8
As previously reported in Part II, Item 7, of the Company's Form 10-K for the
fiscal year ended December 31, 1995, the Company filed a petition before the
U.S. Department of Commerce, International Trade Administration and the U.S.
International Trade Commission on March 14, 1996, requesting the imposition of
anti-dumping duties on imports of beryllium metal from Kazakhstan. On April 3,
1996, the U.S. Department of Commerce decided to initiate an anti-dumping
investigation, and on April 29, 1996, the U.S. International Trade Commission
found that there was a reasonable indication that imported beryllium from
Kazakhstan caused material injury to the U.S. beryllium industry. In view of
these favorable initial results, the Company expects that the anti-dumping
proceedings will continue.
Ceramic product sales in the first quarter 1996 were down significantly from
the first quarter 1995. Weak demand in telecommunication applications,
particularly cellular phones and base stations, was the main cause of the
decline, exacerbated by inventory adjustments at several major customers.
Direct bond copper sales were slightly higher than first quarter 1995 and,
while still not profitable, margins have recently been improved by the
automation equipment installed late last year.
Specialty Metal System sales increased in the first quarter 1996 as compared to
first quarter 1995. Automotive electronic shipments were delayed due to a
customer's strike during the current quarter, but strong demand in other
markets more than compensated for the loss in those sales. Overseas demand for
these products remains strong. Focused application development is the key for
growing these sales.
Precious Metal sales in the first quarter 1996 were less than in the comparable
period last year as a result of a customer's re-design of a major
microprocessor application in the second
7
<PAGE> 9
quarter of 1995. Growth in sales of new products, including vapor deposition
products and fine wire, offset a large portion of the lost sales.
Gross profit was $24.8 million or 26.4% of sales in the first quarter 1996
compared to $27.4 million or 27.7% of sales in the first quarter 1995. The
decline in the international sales, which tend to carry higher margins, coupled
with the stronger dollar, were the main reasons for the change. The product
mix also shifted towards lower margin products. Unplanned downtime on several
key pieces of equipment and weather-related issues contributed to slightly
higher manufacturing costs.
Selling, administrative and general expenses were $15.5 million or 16.2% of
sales in the first quarter 1996 compared to $15.5 million or 15.7% of sales
last year. Included in the 1995 expense total were non-continuing costs
associated with a process re-design effort and the start-up of a marketing
office in Singapore. Most expense categories are in line with the prior year
as a result of the Company's internal efforts to control costs. The management
incentive compensation expense is down due to lower earnings.
Research and Development (R&D) expenses of $1.8 million for the first quarter
1996 were flat with the comparable 1995 period. As a percent of sales, R&D
expenses increased slightly to 1.9%. A re-organization late in the quarter
resulted in additional resources being dedicated towards R&D efforts. Projects
currently being pursued include the continued development of a lower cost and
higher quality alloy strip product.
Other net income was $0.1 million in the first quarter 1996 compared to a net
expense of $0.3 million in the first quarter last year. This category includes
non-operating items such as
8
<PAGE> 10
amortization, currency gains and losses and interest income. The major change
from last year was an increase in currency gains.
Interest expense was lower in the first quarter 1996 compared to the first
quarter 1995 due to lower interest rates and an increase in capitalized
interest associated with long-term capital projects.
First quarter 1996 income before income taxes decreased to $7.4 million from
$9.2 million in the first quarter 1995. Lower sales volume and the resulting
reduction in gross margin accounted for the decline. Income taxes were
provided at an effective rate of 30.1% of pre-tax income for the first quarter
1996 compared to 26.5% in the first quarter 1995. The higher rate results from
an increase in the effective foreign tax rates and other book versus tax
adjustments to income. First quarter earnings per share were $0.32 in 1996 and
$0.42 in 1995.
FINANCIAL CONDITION
Net cash used in operating activities was $1.2 million during the first quarter
1996 compared to net cash provided from operating activities of $2.7 million
during the first quarter 1995. Accounts receivable increased $8.6 million from
year end 1995, primarily due to an increase in sales late in the first quarter.
Inventories remained essentially flat.
Capital expenditures for property, plant and equipment totaled $5.9 million
during the first quarter 1996. The Company recently announced plans to spend
on the order of $100 million to modernize its Alloy manufacturing operations.
The project is designed to improve quality and the level of customer service,
reduce costs and increase capacity. It is expected that the
9
<PAGE> 11
funds will be spent over three years. The project may be funded by a
combination of debt, leases and future cash flow.
The Company purchased 359,000 shares of its Common Stock at a cost of $6.7
million during the quarter under a program approved by the Board of Directors
late last year. Dividends paid were $3.2 million in the first quarter 1996.
Total debt was unchanged from year end 1995, although there was a slight shift
from long-term to short-term debt. The short-term debt is primarily
denominated in foreign currencies and gold and is used as a hedge against those
asset values. Long-term debt at the end of first quarter 1996 was 8% of total
capital.
10
<PAGE> 12
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- -------------------------
(a) BERYLLIUM EXPOSURE CLAIMS
-------------------------
CLAIMS INITIATED SINCE THE END OF FISCAL YEAR 1995. The Company and
certain of its present and past Directors are defendants in a class action suit
filed on April 2, 1996 in the Court of Common Pleas for Cuyahoga County, Ohio,
by Christine A. Toth, a former employee of the Company, and her husband on
behalf of a putative class of all current and former employees of the Company
from 1949 to date of the suit. The plaintiffs claim, INTER ALIA that defendants
committed an intentional tort by misleading the Company's employees and the
public about the efficacy and adequacy of the standard adopted by the
Occupational Safety and Health Administration (OSHA) with respect to exposure to
airborne beryllium to protect employees from chronic beryllium disease and by
making misrepresentations to employees and the public about the risks of such
exposure in the work place. Plaintiffs have also alleged that defendants have
deliberately withheld or concealed material information about the effects of
such exposure to airborne beryllium. Plaintiffs seek compensatory damages in
the amount of $100 million and punitive damages in the amount of $200 million
together with certain injunctive relief. Defense of this case is being
conducted by counsel retained by the Company. The Company intends to contest
the claims vigorously.
(b) ASBESTOS EXPOSURE CLAIMS
------------------------
A subsidiary of the Company (the "Subsidiary") is a co-defendant in
twenty-seven cases making claims for asbestos-induced illness allegedly relating
to the former operations of the Subsidiary, then known as The S. K. Wellman
Corp. twenty-seven of these cases have been reported in prior filings with the
S.E.C. In all but a small portion of these cases, the Subsidiary is one of a
large number of defendants in each case. The plaintiffs seek
11
<PAGE> 13
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-six 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 ten 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 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) EXHIBITS
--------
11. Statement re: computation of per share earnings.
27. Financial Data Schedule.
99. Management Performance Compensation Plan
(b) REPORTS ON FORM 8-K
-------------------
There have been no reports on Form 8-K during the quarter ended
March 29, 1996.
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:
/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>
FIRST QUARTER ENDED
-------------------------------------
March 29, April 2,
1996 1995
---- ----
<S> <C> <C>
Primary:
Average shares outstanding 16,114,128 16,123,733
Dillutive stock options based
on the treasury stock method
using average market price 20,353 107,779
----------- -----------
TOTALS 16,134,481 16,231,512
=========== ===========
Net Income $ 5,155,000 $ 6,788,000
Per share amount $0.32 $0.42
=========== ===========
Fully diluted:
Average shares outstanding 16,114,128 16,123,733
Dillutive stock options based
on the treasury stock method
using average market price 21,013 166,916
----------- -----------
TOTALS 16,135,141 16,290,649
=========== ===========
Net Income $ 5,155,000 $ 6,788,000
Per share amount $0.32 $0.42
=========== ===========
</TABLE>
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-29-1996
<CASH> 13,255
<SECURITIES> 0
<RECEIVABLES> 61,131
<ALLOWANCES> 967
<INVENTORY> 92,026
<CURRENT-ASSETS> 185,139
<PP&E> 379,768
<DEPRECIATION> 258,526
<TOTAL-ASSETS> 325,818
<CURRENT-LIABILITIES> 63,119
<BONDS> 16,633
<COMMON> 0
0
21,488
<OTHER-SE> 176,523
<TOTAL-LIABILITY-AND-EQUITY> 325,818
<SALES> 93,801
<TOTAL-REVENUES> 93,801
<CGS> 69,008
<TOTAL-COSTS> 86,286
<OTHER-EXPENSES> (148)
<LOSS-PROVISION> 23
<INTEREST-EXPENSE> 286
<INCOME-PRETAX> 7,354
<INCOME-TAX> 2,199
<INCOME-CONTINUING> 5,155
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,155
<EPS-PRIMARY> $0.32
<EPS-DILUTED> $0.32
</TABLE>
<PAGE> 1
Exhibit 99
BRUSH WELLMAN INC. AND SUBSIDIARIES
MANAGEMENT PERFORMANCE COMPENSATION PLAN
(as adopted December 16, 1991, effective January 1, 1992 and as restated
February 24, 1992, December 15, 1992, February 22, 1993, February 7, 1995 and
February 6, 1996.)
I. INTRODUCTION
------------
The Management Performance Compensation Plan ("the Plan") provides
compensation opportunity to eligible employees based principally on
annual financial performance. Any Plan awards for members of the
Operations Team are linked essentially to Company performance and in
some cases, Business Unit performance. Opportunity for other
participants is also predicated upon Company performance and includes
recognition of individual and combined contributions toward
personal/team objectives and if applicable, Business Unit performance.
II. DEFINITIONS
-----------
PLAN YEAR:
The fiscal year for which the Company's Earnings Per Share, Business
Unit performance and any Plan awards are calculated.
EARNINGS PER SHARE (EPS):
Net Income as presented in the Audited Financial Statement divided by
the weighted average number of outstanding shares of Common Stock
including common stock equivalents as determined under the treasury
stock method. For the purposes of this Plan, EPS will include the
effects of any special charge, write-off or accounting change and
accrued incentive compensation.
SUBSIDIARY OPERATING INCOME:
For Technical Materials, Inc., (TMI) and Williams Advanced Materials
Inc., (WAM), the Plan's measure of each subsidiary's performance in
income before income taxes and interest expenses. Operating Income
will include any special write-off or accounting charge and accrued
performance or incentive compensation. For participants in grade B at
TMI and WAM, the subsidiary's Operating Income is the measure of
Business Unit performance. For participants in other grades at TMI and
WAM, the subsidiary's Operating Income is the measure of Company
performance.
<PAGE> 2
BUSINESS UNIT PERFORMANCE:
The Business Units recognized by the Plan include Alloy, Be Products,
and Ceramics. In addition, TMI and WAM are identified as Business
Units for participants in grade B at those subsidiaries, and Business
Unit performance for them is based on the subsidiary's Operating
Income. The measures for the other Business Units are defined below:
ALLOY WORLDWIDE OPERATING INCOME AT FIXED EXCHANGE RATES:
Consolidated profit or loss before interest and taxes for Alloy
domestic and international operations. For purposes of the Plan
only, the Alloy portion of the international subsidiaries' actual
operating results will be recalculated at the current year
budgeted exchange rates so that there will be no translation rate
impact, either favorable or unfavorable, on the reported results.
Be PRODUCTS CONTRIBUTION:
Operating results before interest and taxes for Be Products
domestic operations, including direct exports and sales to
international subsidiaries. The net profit or loss earned by the
international subsidiaries from their sales of Be Products is
excluded.
CERAMICS OPERATING INCOME:
Profit or loss before interest and taxes for Ceramic domestic
operations, including direct exports and sales to the
international subsidiaries. The net profit or loss earned by the
international subsidiaries from their sales of Ceramic products
is excluded.
PERSONAL/TEAM PERFORMANCE:
For participants in grades C through E, an assessment of an
individual's achievements and his/her contributions to work/project
teams during the Plan Year which is expressed as a percentage of base
compensation.
<PAGE> 3
BASE COMPENSATION:
The participant's annual base salary in effect on September 30 of the
Plan Year
III. PARTICIPATION
-------------
At the beginning of the Plan Year, the Operations Team will consider
the candidacy of exempt, salaried employees whose responsibilities
affect progress on critical issues facing the Company. Those
individuals selected by the Operations Team will be notified of their
participation, performance compensation grade and performance
compensation opportunity and Business Unit designation, if any.
Following the beginning of the Plan Year, the Operations Team may admit
new hires or individuals who are promoted or assigned additional and
significant responsibilities. The Operations Team may also alter
performance compensation grade assignments to reflect changed
responsibilities of participants during the Plan Year.
Participation of an individual who replaces a former participant must
be approved.
Employees who are designated as participants before April 1 of the Plan
year are eligible for full participation. Participants who are newly
employed on or after April 1 and before July 1 are eligible for half of
any award available for Personal/Team and Financial (Business Unit
and/or Company) performance.
Participants who transfer from the Exempt Salaried Performance
Compensation Plan to the Management Performance Compensation Plan on or
after April 1 and before July 1 are eligible for full participation in
the Personal/Team performance component and for half participation in
the Financial (Business Unit and/or Company) performance component.
Their eligibility under the Exempt Salaried Performance Compensation
Plan ceases for the Plan Year.
Changes in performance compensation grade assignments will result in
prorated participation in awards.
The eligibility of employees hired or with changed job responsibilities
after June 30 will not be considered until the subsequent Plan Year.
Normally, employees who are participants in any other incentive,
commission or performance compensation plan are not eligible. The
Operations Team may consider prorated participation under special
circumstances. Generally, participants must be employed on the last day
of the Plan Year in order to be eligible for any performance
compensation award. The eligibility and award for any participant who
terminates before year-end is at the discretion of the Operations Team.
<PAGE> 4
IV. PERFORMANCE COMPENSATION OPPORTUNITY FOR FINANCIAL PERFORMANCE
--------------------------------------------------------------
The Organization and Compensation Committee of the Board of Directors
will establish Threshold, Minimum, Target and Maximum levels for the
Company's Earnings per Share and for Operating Income at Technical
Materials, Inc., and at Williams Advanced Materials Inc., by February
28 of the Plan Year. The Committee will also set Minimum, Target and
Maximum values for the performance of each Business Unit under the Plan
by February 28.
For participants who are not assigned to a specific Business Unit by
the Operations Team, performance compensation opportunity for Financial
performance will be based solely on Company performance as follows:
Achieve Company
Grade Target
----- ------
A 52%
B 37%
C 17%
D 16%
E 10%
For participants who are assigned to a Business Unit by the Operations
Team, two thirds of the Financial performance component will be
comprised of Business Unit performance and one third on Company
performance. Opportunity under the Plan for Financial performance at
Business Unit and Company Targets is expressed as a percentage of base
compensation for Business Unit participants below:
<TABLE>
<CAPTION>
Achieve Business Achieve Company Total Achieve
Grade Unit Target Target Both Targets
----- ----------- ------ ------------
<S> <C> <C> <C>
B 25% 12% 37%
C 12% 5% 17%
D 11% 5% 16%
E 7% 3% 10%
</TABLE>
Two thirds of the Financial performance component for participants in
grade B at Technical Materials, Inc., and at Williams Advanced
Materials, Inc., will be based on the subsidiary's Operating Income as
Business Unit performance; one third will be determined by the
Company's Earnings per Share.
For participants in other grades than B at Technical Materials, Inc.,
and Williams Advanced Materials Inc., the Financial performance
component will be based only on Company performance as defined by the
subsidiary's Operating Income.
<PAGE> 5
Awards for Business Unit and Company performance will begin once the
Minimum level has been attained for that measure. Financial
performance which reaches or exceeds the Maximum value of the measure
will result in awards at 150 percent of Target opportunity. Award
amounts for levels of achievement between Minimum and Target or between
Target and Maximum will be prorated according to the level of
achievement.
Financial awards will be prorated for transfers between units (Business
Unit and/or Company) according to the length of service by months in
each unit during the Plan Year.
V. PERFORMANCE COMPENSATION OPPORTUNITY FOR PERSONAL/TEAM PERFORMANCE
------------------------------------------------------------------
Upon the attainment of the Company Threshold, a pool equaling eight
percent (8%) of the base compensation of participants in grades C, D
and E will be available to recognize Personal/Team performance by
participants in those grades. If an eligible participant's performance
compensation opportunity is prorated, the pool will be similarly
adjusted.
The Operations Team will decide allocation of the pool among eligible
participants.
No awards for Personal/Team performance will be paid for Company
Earnings Per Share or Operating Income below the Threshold that
pertains to the respective unit.
VI. PAYMENT
-------
Distribution of any performance compensation awards under the Plan to
participants will be no later than March 15 of the year following the
Plan Year.
In the event of death, any award due a participant will be made to the
employee's estate or, at the discretion of the Operations Team, to the
employee's spouse.
VII. GENERAL PROVISIONS
------------------
The Operations Team has authority to make administrative decisions in
the interests of the Plan.
The Board of Directors, through its Organization and Compensation
Committee, shall have final and conclusive authority for interpretation
and application of this Plan. Subject to the preceding sentence, any
determination by the Company's independent accountants shall be final
and conclusive.
The Chief Executive Officer will submit to the Committee prior to its
regularly scheduled meeting in December of each year, any changes in
the Plan due to changes in organization structure, acquisitions or
other factors which are deemed to be significant in the effective
Operation of the Plan.
<PAGE> 6
The Board of Directors may change or terminate the Plan for the current
Plan Year prior to February 28. Other than the considerations noted
for the current Plan Year, the Board of Directors reserves the right to
amend or terminate the Plan at any time.
This Plan is not a contract of employment.
