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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 27, 1998
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BRUSH WELLMAN INC.
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(exact name of registrant as specified in its charter)
Ohio 1-7006 34-0119320
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(State or other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification No.)
17876 St. Clair Avenue Cleveland, Ohio 44110
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (216) 486-4200
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Item 5. Other Events
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On July 27, 1998, Brush Wellman Inc. issued a press release, a
copy of which is attached as Exhibit 99 hereto.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(C) Exhibits
99 Press Release, dated July 27, 1998
SIGNATURES
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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 hereunto duly authorized.
BRUSH WELLMAN INC.
Date: July 27, 1998 By: /s/ Carl Cramer
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Carl Cramer
Vice President Finance and
Chief Financial Officer
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INDEX TO EXHIBITS
Exhibit Number Description of Exhibit
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99 Press Release, dated July 27, 1998
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Exhibit 99
BRUSH WELLMAN REPORTS SECOND QUARTER 1998 RESULTS
FOR IMMEDIATE RELEASE
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CLEVELAND, Ohio -- July 27, 1998 -- Brush Wellman Inc. (NYSE-BW) today
reported a net loss for the second quarter 1998 of $13.1 million, or $0.80 per
share, diluted. This compares with net income of $7.5 million and diluted
earnings per share of $0.46 in the second quarter 1997. The second quarter 1998
loss primarily resulted from charges for asset write-downs and reserves totaling
$15.6 million after taxes, with a per share impact of $0.95. The total pre-tax
charge was $21.8 million. The asset write-downs reflect reductions in the
carrying value of various assets relating to Alloy, Beryllium and Ceramic
Products, including certain fixed assets, goodwill, and inventory. The reserves
were taken principally in support of a plan to pursue a voluntary environmental
remediation of a former manufacturing site under the State of Ohio's Voluntary
Action Program. Absent these items, the Company achieved net income of $2.5
million and earnings of $0.15 per share, diluted.
Sales during the second quarter 1998 totaled $103 million, down 9% from
second quarter 1997 sales of $113 million. Second quarter sales declined in all
major lines of business except Beryllium Products. The decreases in sales
relative to the second quarter 1997 reflect principally three factors. First,
Williams Advanced Materials Inc. (WAM), working with customers, began to switch
them from gold-based to lower value precious and non-precious metal-based alloys
for Vapor Deposition Products. This resulted in a significant reduction in
revenue for WAM. However, the actual level of business at WAM, as measured by
value-added sales, increased in the quarter. Williams Advanced Materials is a
wholly-owned subsidiary of Brush Wellman Inc. In addition, exchange rates and
lower copper prices contributed to the decline in revenues relative to the
second quarter last year. Excluding these three factors, sales were
approximately level with the second quarter 1997. However, compared with the
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first quarter of 1998, revenues declined due to the aforementioned mix shift at
WAM as well as softness in Asian and U.S. electronics markets. This market
softness grew progressively worse in the latter part of the quarter. In
addition, sales of certain Alloy products continue to be constrained by
production capacity limitations. Revenues had increased by 14% in the first
quarter despite the impacts of the strong dollar and low copper prices.
For the first half of 1998, Brush Wellman recorded a net loss of $6.9
million, or $0.42 per share, diluted. Absent the charges taken in the second
quarter, the Company earned net income of $8.7 million and earnings per share,
diluted, of $0.52 for the first half of 1998. This compares with net income of
$14.0 million and earnings per share, diluted, of $0.86 in the first half of
1997.
Sales for the first half 1998 were a record $217 million, a 2% increase
from first half 1997 sales of $213 million, the previous record.
Commenting on the results, Gordon Harnett, Chairman, President and
Chief Executive Officer said, "The slowdown in Asian and U.S. electronics
markets affected our revenues to a greater degree than expected, particularly in
the latter part of the second quarter. In addition, throughout the quarter,
capacity constraints and start-up issues on our alloy expansion inhibited our
ability to meet customer demand for certain products and adversely impacted
operating costs. Earnings also continue to be pressured by the strong dollar.
Many of these factors are persisting into the third quarter. In addition, second
quarter results were affected to a small degree by the strike at General Motors.
This situation could have a more significant impact on future results if the
strike continues."
Regarding the asset write-downs, Mr. Harnett stated, "In reviewing our
long-range plans, several issues became apparent. First, the installation of our
major expansion and upgrading of our Alloy strip production facilities in
Elmore, Ohio remains on schedule. As we bring this new production capacity
on-line, many of the older manufacturing assets at the Elmore, Ohio facility
will become obsolete. Second, upon review it became clear that the carrying
values of certain assets relating to Beryllium Products and Ceramic Products
could not be supported by current or projected cash flows, based on our latest
long-range analysis. Third, the decision has been made to attempt to develop a
parcel of land owned by a subsidiary of the Company under the
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Ohio Voluntary Action Program. The asset write-downs and reserves relate
principally to these three conclusions. The $21.8 million pre-tax charge taken
in the second quarter represents the vast majority of the charges relating to
these items. An additional $0.9 million pre-tax charge is expected to be taken
in the second half. Thus for the year, the total pre-tax charge is expected to
be $22.7 million.
"These actions are consistent with our long-range strategic plan of
improving our base businesses, expanding Alloy and building a microelectronics
business. The asset write-downs do not suggest any plan or desire on the part of
management to exit any of our current business units, rather, they reflect
reduced expectations for growth in some products, and the obsolescence of some
equipment which is being replaced by our new, state-of-the-art Alloy
manufacturing facility."
Any forward-looking statements in this announcement are based on
current expectations. The Company's actual future performance may differ from
that contemplated by the forward-looking statements as a result of a variety of
factors including the continuing slow down in Asian and U.S. electronics
markets, the General Motors strike, and other factors affecting the global
economy, changes in product mix, the timely and successful completion of pending
capital expansions, and exchange rates.
Brush Wellman Inc., with headquarters in Cleveland, Ohio, is a
manufacturer of engineered materials. The Company and its subsidiaries supply
worldwide markets with Beryllium Products, Alloy Products, Ceramic Products,
Precious Metal Products and Engineered Material Systems.
For further information, please contact:
Timothy J. Reid
Vice President Corporate Communications
Brush Wellman Inc.
17876 St. Clair Ave.
Cleveland, Ohio 44110
(216) 383-6835
http://www.brushwellman.com
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CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SECOND QUARTER ENDED FIRST HALF ENDED
JULY 3, JUNE 27, JULY 3, JUNE 27,
(DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS) 1998 1997 1998 1997
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<S> <C> <C> <C> <C>
NET SALES $ 102,992 $ 113,374 $ 217,174 $ 213,062
COST OF SALES 85,476 83,587 171,629 157,584
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GROSS MARGIN 17,516 29,787 45,545 55,478
SELLING, ADMINISTRATIVE
AND GENERAL EXPENSES 16,450 17,161 32,783 32,561
RESEARCH AND DEVELOPMENT
EXPENSES 1,967 1,982 4,172 3,560
OTHER-NET 17,963 20 18,660 (504)
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OPERATING PROFIT (18,864) 10,624 (10,070) 19,861
INTEREST EXPENSE 172 79 408 364
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INCOME BEFORE INCOME TAXES (19,036) 10,545 (10,478) 19,497
INCOME TAXES (5,952) 3,056 (3,556) 5,518
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NET INCOME $ (13,084) $ 7,489 $ (6,922) $ 13,979
============ ============ ============= ============
PER SHARE OF COMMON STOCK: BASIC $ (0.80) $ 0.46 $ (0.42) $ 0.86
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 16,372,170 16,285,043 16,344,844 16,244,158
PER SHARE OF COMMON STOCK: DILUTED $ (0.80) $ 0.46 $ (0.42) $ 0.86
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 16,372,170 16,582,135 16,344,844 16,477,099
CASH DIVIDENDS PER COMMON SHARE $ 0.12 $ 0.11 $ 0.24 $ 0.22
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUL. 3, DEC. 31,
(DOLLARS IN THOUSANDS) 1998 1997
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<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $747 $7,170
ACCOUNTS RECEIVABLE 61,593 62,812
INVENTORIES 95,001 90,714
PREPAID EXPENSES AND OTHER
CURRENT ASSETS 17,577 18,215
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TOTAL CURRENT ASSETS 174,918 178,911
OTHER ASSETS 38,583 31,319
PROPERTY, PLANT AND EQUIPMENT 418,355 463,689
LESS ALLOWANCES FOR DEPRECIATION,
DEPLETION AND IMPAIRMENT 247,785 290,067
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170,570 173,622
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$384,071 $383,852
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
SHORT-TERM DEBT $53,602 $28,877
ACCOUNTS PAYABLE 8,979 13,519
OTHER LIABILITIES AND ACCRUED
ITEMS 28,822 28,580
DIVIDENDS PAYABLE 0 1,967
INCOME TAXES (928) 5,369
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TOTAL CURRENT LIABILITIES 90,475 78,312
OTHER LONG-TERM LIABILITIES 6,786 8,200
RETIREMENT AND POST-EMPLOYMENT BENEFITS 39,389 39,825
LONG-TERM DEBT 17,905 17,905
DEFERRED INCOME TAXES 3,927 2,797
SHAREHOLDERS' EQUITY 225,589 236,813
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$384,071 $383,852
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</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FIRST HALF ENDED
JULY 3, JUNE 27,
(Dollars in thousands) 1998 1997
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<S> <C> <C>
NET INCOME ($6,922) $13,979
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED FROM OPERATING ACTIVITIES:
Depreciation, depletion and amortization 11,852 9,619
Amortization of mine development 1,937 1
Decrease (Increase) in accounts receivable (26) (20,233)
Decrease (Increase) in Inventory (4,784) 3,799
Decrease (Increase) in prepaid and other current assets 246 (1,011)
Increase (Decrease) in accounts payable and accrued expenses (3,754) 4,948
Increase (Decrease) in interest and taxes payable (6,230) (286)
Increase (Decrease) in deferred income tax 1,130 191
Increase (Decrease) in other long-term liabilities (1,790) 1,959
Impairment of fixed assets and related intangibles 14,273 -
Other - net 708 (237)
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NET CASH PROVIDED FROM OPERATING ACTIVITIES 6,640 12,729
Cash Flows from Investing Activities:
Payments for purchase of property, plant and equipment (20,156) (26,159)
Payments for mine development (258) (6,932)
Proceeds from (Payments for) other investments (12,070) 405
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NET CASH USED IN INVESTING ACTIVITIES (32,484) (32,686)
Cash Flows from Financing Activities:
Proceeds from issuance of short-term debt 27,236 11,367
Repayment of short-term debt (1,652) (93)
Proceeds from issuance of long-term debt - -
Repayment of long-term debt - (160)
Issuance of Common Stock under stock option plans 3,433 483
Purchase of Common Stock for treasury (3,620) (508)
Payments of dividends (5,893) (3,562)
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NET CASH PROVIDED FROM FINANCING ACTIVITIES 19,504 7,527
Effects of Exchange Rate Changes (83) (3,158)
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NET CHANGE IN CASH AND CASH EQUIVALENTS (6,423) (15,588)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,170 31,749
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CASH AND CASH EQUIVALENTS AT END OF PERIOD 747 16,161
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</TABLE>
See notes to consolidated financial statements.
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Notes to Consolidated Financial Statements
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 3, 1998 and December 31, 1997 and the results of operations
for the three and six month periods ended July 3, 1998 and June 27, 1997.
<TABLE>
<CAPTION>
NOTE B - INVENTORIES
JULY 3, DEC. 31,
(DOLLARS IN THOUSANDS) 1998 1997
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<S> <C> <C>
Principally average cost:
Raw materials and supplies $21,231 $17,331
In Process 57,595 58,666
Finished 37,838 37,008
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116,664 113,005
Excess of average cost over LIFO
inventory value 21,663 22,291
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$95,001 $90,714
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</TABLE>
NOTE C - COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement 130, "Reporting
Comprehensive Income". Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this statement had no impact on the Company's net income or shareholders'
equity. Statement 130 requires certain items, including foreign currency
translation adjustments, which prior to adoption were reported separately in
shareholders' equity, to be included in other comprehensive income. Prior year
financial statements have been reclassified to conform to the requirements of
Statement 130.
For the second quarter 1998 and 1997, comprehensive income/(loss) amounted to
($13,330,601) and $8,508,685, respectively. Year to date 1998 and 1997
comprehensive income/(loss) amounted to ($7,568,532) and $14,016,973,
respectively. The difference between net income/(loss) and comprehensive
income/(loss) is the cumulative translation adjustment for the periods
presented.
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Notes to Consolidated Financial Statements
NOTE D - SPECIAL CHARGE
In the second quarter 1998, the Company recorded special charges totaling $21.8
million pre-tax and $15.6 million after-tax. The charge resulted primarily from
write-downs of property, plant and equipment, inventory and goodwill, and
increases to environmental reserves. Of the $21.8 million, $4.9 million was
charged to Cost of sales and $16.9 million was charged to Other-net on the
consolidated income statement for the second quarter 1998.
In analyzing the strategic plans for each of the Company's business units,
management determined that the carrying value of certain assets within its
Microelectronics and Metal Systems Groups were impaired based upon current cash
flow projections. Property, plant and equipment and related intangibles with a
carrying value of $19.6 million was written down by $14.3 million to its
estimated fair market value. The fair market value was determined by a
discounted cash flow analysis using the Company's estimated pre-tax weighted
average cost of capital. The impaired assets may be held for future use. The
$14.3 million impairment is included in Other-net on the consolidated income
statement.
Depreciation charges were recorded for equipment that will be taken out of
service with the completion of certain capital projects by December 31, 1998.
This will also result in additional charges of $0.8 million to be recorded in
the second half of 1998. Inventory write-downs and certain provisions were taken
as a result of the reduced growth expectations and current market conditions.
