BRUSH WELLMAN INC, 10-Q, 2000-05-15

BRUSH WELLMAN INC
10-Q, 2000-05-15
PRIMARY SMELTING & REFINING OF NONFERROUS METALS

Previous: BROWN & SHARPE MANUFACTURING CO /DE/, 10-Q, 2000-05-15

Next: DIXON TICONDEROGA CO, NT 10-Q, 2000-05-15

<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 31,2000

[ ] 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)

<TABLE>
<S> <C>
OHIO 34-0119320
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)

17876 ST. CLAIR AVENUE, CLEVELAND, OHIO 44110
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>

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 5, 2000 there were 16,342,008 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 31, 2000 are as follows:

Consolidated Statements of Income -- Three months ended March 31, 2000
and April 2, 1999

Consolidated Balance Sheets -- March 31, 2000 and December 31, 1999

Consolidated Statements of Cash Flows -- Three months ended March 31,
2000 and April 2, 1999

1
<PAGE> 3

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

<TABLE>
<CAPTION>
FIRST QUARTER ENDED
--------------------------
MARCH 31, APRIL 2,
(DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS) 2000 1999
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Net sales................................................... $ 135,424 $ 113,168
Cost of sales............................................. 107,129 89,069
----------- -----------
Gross Margin................................................ 28,295 24,099
Selling, administrative and general expenses.............. 21,818 17,501
Research and development expenses......................... 2,014 1,819
Other-net................................................. 228 448
----------- -----------
Operating Profit............................................ 4,235 4,331
Interest expense.......................................... 1,120 937
----------- -----------
Income before income taxes.................................. 3,115 3,394
Income taxes.............................................. 866 908
----------- -----------
Net Income.................................................. $ 2,249 $ 2,486
=========== ===========
Per Share of Common Stock: Basic............................ $ 0.14 $ 0.15
Weighted average number of common shares outstanding........ 16,206,038 16,193,359
Per Share of Common Stock: Diluted.......................... $ 0.14 $ 0.15
Weighted average number of common shares outstanding........ 16,314,518 16,232,112
Cash dividends per common share............................. $ 0.12 $ 0.12
</TABLE>

See notes to consolidated financial statements.
2
<PAGE> 4

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

<TABLE>
<CAPTION>
MAR. 31, DEC. 31,
(DOLLARS IN THOUSANDS) 2000 1999
- ----------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................................. $ 2,159 $ 99
Accounts receivable....................................... 90,393 79,772
Inventories............................................... 101,622 110,570
Prepaid expenses.......................................... 7,260 7,204
Deferred income taxes..................................... 27,195 26,610
-------- --------
Total Current Assets.............................. 228,629 224,255
Other Assets................................................ 33,543 33,213
Property, Plant and Equipment............................... 441,901 440,234
Less allowances for depreciation, depletion and
impairment............................................. 273,683 269,296
-------- --------
168,218 170,938
-------- --------
$430,390 $428,406
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt........................................... $ 28,006 $ 34,687
Accounts payable.......................................... 30,755 27,731
Other liabilities and accrued items....................... 28,953 29,869
Dividends payable......................................... 1,960 1,959
Income taxes.............................................. 6,575 5,178
-------- --------
Total Current Liabilities......................... 96,249 99,424
Other Long-Term Liabilities................................. 15,979 14,407
Retirement and Post-Employment Benefits..................... 39,283 39,430
Long-Term Debt.............................................. 45,305 42,305
Deferred Income Taxes....................................... 12,990 12,202
Shareholders' Equity........................................ 220,584 220,638
-------- --------
$430,390 $428,406
======== ========
</TABLE>

See notes to consolidated financial statements.
3
<PAGE> 5

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
MARCH 31, APRIL 2,
(DOLLARS IN THOUSANDS) 2000 1999
- -----------------------------------------------------------------------------------
<S> <C> <C>
NET INCOME.................................................. $ 2,249 $ 2,486
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED FROM OPERATING ACTIVITIES:
Depreciation, depletion and amortization.................. 5,493 5,648
Amortization of mine development.......................... 838 1,715
Decrease (Increase) in accounts receivable................ (11,385) (16,225)
Decrease (Increase) in inventory.......................... 8,414 (2,287)
Decrease (Increase) in prepaid and other current assets... 327 (1,450)
Increase (Decrease) in accounts payable and accrued
expenses............................................... 2,741 10,872
Increase (Decrease) in interest and taxes payable......... 968 3,261
Increase (Decrease) in deferred income tax................ (62) 1,047
Increase (Decrease) in other long-term liabilities........ 1,060 (439)
Other -- net.............................................. (280) 1,405
-------- --------
NET CASH PROVIDED FROM OPERATING ACTIVITIES....... 10,363 6,033
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchase of property, plant and equipment.... (3,480) (2,074)
Payments for mine development............................. (70) (69)
Proceeds from (Payments for) other investments............ -- (118)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES............. (3,550) (2,261)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance/repayment of short-term debt....... (5,665) (13,596)
Proceeds from issuance of long-term debt.................. 9,000 12,000
Repayment of long-term debt............................... (6,000) (2,000)
Issuance of Common Stock under stock option plans......... 5 76
Purchase of Common Stock for treasury..................... -- --
Payments of dividends..................................... (1,959) (1,966)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES............. (4,619) (5,486)
Effects of Exchange Rate Changes............................ (134) (125)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS........... 2,060 (1,839)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD.......................................... 99 1,938
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................ $ 2,159 $ 99
======== ========
</TABLE>

See notes to consolidated financial statements.
4
<PAGE> 6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 31, 2000 and December 31, 1999 and the results of operations for the three
months ended March 31, 2000 and April 2, 1999. Certain amounts in prior years
have been reclassified to conform with the 2000 consolidated financial statement
presentation.

NOTE B -- INVENTORIES

NOTE C -- COMPREHENSIVE INCOME

During the first quarter 2000 and 1999, comprehensive income amounted to
$1,847,763 and $1,884,500, respectively. The difference between net income and
comprehensive income is the cumulative translation adjustment for the periods
presented.

NOTE D -- SEGMENT REPORTING

Selected financial data by business segment as prescribed by SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information", for the
first quarter 2000 and first quarter 1999 are as follows:

<TABLE>
<CAPTION>
METAL MICRO- TOTAL ALL
SYSTEMS ELECTRONICS SEGMENTS OTHER TOTAL
(Dollars in thousands) ------- ----------- -------- ------ --------
<S> <C> <C> <C> <C> <C>
FIRST QUARTER 2000
- --------------------
Revenues from external customers....... $91,175 $41,607 $132,782 $2,642 $135,424
Intersegment revenues.................. 160 286 446 -- 446
Segment profit (loss) before interest
and taxes............................ 7,156 3,204 10,360 (6,125) 4,235

FIRST QUARTER 1999
- --------------------
Revenues from external customers....... 78,623 32,655 111,278 1,890 113,168
Intersegment revenues.................. 139 412 551 -- 551
Segment profit (loss) before interest
and taxes............................ 7,081 1,750 8,831 (4,500) 4,331
</TABLE>

NOTE E -- NEW PRONOUNCEMENTS

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition" (SAB 101), which provides
guidance on the measurement and timing of revenue recognition in financial
statements. The provisions of SAB 101 must be adopted by the second quarter
2000. Management has not determined the effect SAB 101 will have, if any, on the
Company's financial statements.

5
<PAGE> 7

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

FORWARD-LOOKING STATEMENTS

Portions of the narrative set forth in this document that are not
historical in nature are forward-looking statements. The Company's actual future
performance may differ from that contemplated by the forward-looking statements
as a result of a variety of factors. These factors include, in addition to those
mentioned elsewhere herein, the condition of the markets which the Company
serves (especially as impacted by events in particular markets, including
telecommunications, computers, automotive electronics, industrial components and
optical media, or in particular geographic regions), the success of the
Company's strategic plans, the timely and successful completion of pending
capital expansions and remediation projects, tax rates, exchange rates and the
conclusion of pending litigation matters in accordance with the Company's
expectation that there will be no materially adverse effects.

REORGANIZATION

On May 2, 2000, the Company's shareholders approved the reorganization of
the Company's capital stock and corporate structure. Through a merger, Brush
Wellman Inc. will become a wholly owned subsidiary of a holding company, Brush
Engineered Materials, Inc. According to the merger agreement, each share of
Brush Wellman Inc., common stock will be exchanged for one share of Brush
Engineered Materials, Inc. common stock. The merger is expected to be effective
May 16, 2000.

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
FIRST QUARTER
----------------
(MILLIONS, EXCEPT PER SHARE DATA) 2000 1999
- ------------------------------------------------------------------------------
<S> <C> <C>
Sales....................................................... $135.4 $113.2
Operating Profit............................................ 4.2 4.3
Diluted E.P.S............................................... $ 0.14 $ 0.15
</TABLE>

First quarter 2000 sales of $135.4 million established a new record high
for the Company, growing 20% from the first quarter 1999. The resulting diluted
earnings per share were $0.14 in the first quarter 2000 and $0.15 in the first
quarter 1999. The Company has two business groups - the Metal Systems Group and
the Microelectronics Group. Sales from both groups increased in the first
quarter 2000 over the first quarter 1999.

METAL SYSTEMS GROUP

<TABLE>
<CAPTION>
FIRST QUARTER
--------------
(MILLIONS) 2000 1999
- ----------------------------------------------------------------------------
<S> <C> <C>
Sales....................................................... $91.2 $78.6
Operating Profit............................................ 7.2 7.1
</TABLE>

The Metal Systems Group consists of Alloy Strip and Bulk Products,
Engineered Material Systems and Beryllium Products. Metal Systems Group sales
were $91.2 million in the first quarter 2000, a 16% improvement from the first
quarter 1999. The following chart highlights business unit sales as a percent of
the total Metal Systems Group sales:

<TABLE>
<CAPTION>
FIRST QUARTER
--------------
2000 1999
- ----------------------------------------------------------------------------
<S> <C> <C>
Percent of Segment Sales:
Alloy Products............................................ 73.6% 73.5%
Engineered Material Systems............................... 20.7 18.6
Beryllium Products........................................ 5.7 7.9
</TABLE>

6
<PAGE> 8

Alloy sales increased 16% in the first quarter 2000 over the first quarter
1999 as shipments of both strip and bulk products were higher. Production levels
from the new strip mill at the Elmore, Ohio facility increased during the
quarter but the strong demand for strip products, particularly from the
telecommunications market, continued to outpace the supply. The higher sales
level was achieved in part by further reducing finished goods inventories,
particularly overseas inventories, and through shipments of rod and wire
products, which do not have the same capacity constraints as other strip
products. Strip pounds sold increased significantly, with the lower beryllium-
containing alloys accounting for the majority of the growth. Sales of alloy bulk
products increased as a result of demand from the undersea and welding markets.
Demand from the oil and gas market also showed improvements from the prior year
levels. Bulk product pounds shipped increased over the prior quarter. Pounds
shipped of non-beryllium containing alloys from the Company's Lorain, Ohio
facility were the highest of any quarter since the plant started operations in
1997.

Engineered Material Systems established new quarterly sales and profit
records in the first quarter 2000, with sales improving 31% from the first
quarter 1999. These products are manufactured by Technical Materials Inc. (TMI),
a wholly owned subsidiary of the Company. Strong demand from all market segments
served, as well as increased business from TMI's new plating technology, were
responsible for the sales growth. All of TMI's product lines performed well in
the first quarter 2000.

Beryllium Product revenues declined in the first quarter 2000 from the
first quarter 1999 as a result of the continuing weak demand from the defense
market. Management believes this trend will probably continue for the next
several quarters. Commercial applications for beryllium products, including
medical equipment, remain solid but their growth has not been able to offset the
decline in defense applications.

Gross margin on Metal Systems Group sales increased $0.8 million in the
first quarter 2000 from the first quarter 1999. Higher costs and production flow
issues, product mix and the translation effect of the stronger dollar (primarily
compared to the deutschmark) offset the majority of the benefit from the higher
sales volumes. The product mix effect was unfavorable, as the majority of the
growth in Alloy Products was in the lower margin alloys as opposed to the higher
beryllium-containing, higher margin strip alloys. In addition, sales of
Beryllium Products, which typically generate high margins, declined. The new
cast shop in Elmore is producing larger quantities of billets on a more
consistent basis. However, the strip mill output, while improved, fell short of
demand in the first quarter 2000, causing product shortages, inefficient
scheduling and increased use of airfreight. The large reduction furnaces used in
the manufacture of beryllium were out of service for a portion of the quarter,
disrupting material flow and costing an additional $0.3 million. Total
manufacturing overhead costs were $2.0 million higher, with most of that
increase in Elmore for utilities, rent and additional costs associated with the
ramp up of the strip mill. The stronger dollar reduced the translated value of
foreign currency sales by approximately $0.8 million in the first quarter 2000
as compared to the first quarter 1999. Since the majority of the product cost is
incurred in dollars, the reduced sales value will flow against margins as well.

Operating profit for the Metal Systems Group was $7.2 million in the first
quarter 2000 and $7.1 million in the first quarter 1999. Gross margins increased
by $0.8 million for reasons discussed above while selling, administrative and
general expenses and net-other expense increased by $0.7 million.

MICROELECTRONICS GROUP

<TABLE>
<CAPTION>
FIRST QUARTER
--------------
(MILLIONS) 2000 1999
- ----------------------------------------------------------------------------
<S> <C> <C>
Sales....................................................... $41.6 $32.7
Operating Profit............................................ 3.2 1.8
</TABLE>

Sales from the Microelectronics Group (MEG) were $41.6 million in the first
quarter 2000, an $8.9 million improvement over the first quarter of last year.
Sales from both MEG businesses -- Williams Advanced Materials

7
<PAGE> 9

(WAM) and Electronic Products (formerly Ceramics) -- were higher in the current
year. The following chart highlights business unit sales as a percent of the
total MEG sales:

<TABLE>
<CAPTION>
FIRST QUARTER
--------------
2000 1999
- ----------------------------------------------------------------------------
<S> <C> <C>
Percent of Segment Sales:
WAM....................................................... 76.6% 77.6%
Electronic Products....................................... 23.4 22.4
</TABLE>

WAM manufactures precious and non-precious metal physical vapor deposition
targets, specialty alloys and other precious metal products. Demand from the
optical media and the wireless sector of the microelectronic markets fueled the
25% growth in WAM's sales in the first quarter 2000. Shipments from Pure Tech, a
wholly owned subsidiary of WAM, continued to grow, including materials for
applications in the fiber optics industry. Precious metal prices, including
palladium and platinum, were higher in the first quarter 2000 as compared to the
first quarter 1999. Metal prices are typically passed through to the customer
and approximately $2.3 million of WAM's sales increase was attributed to the
higher metal prices. The higher metal prices also resulted in increased
inventory carrying costs and limited the availability of metal under existing
credit lines. WAM continues to invest in expanding its product offerings,
technologies and capabilities, particularly at its specialty alloy and Pure Tech
facilities.

Sales from Electronic Products increased in the first quarter 2000 as a
result of higher shipments of core beryllia ceramic products into the
telecommunications market. Direct bond copper shipments from the Newburyport,
Massachusetts facility were also higher. Other markets served by Electronic
Products include microelectronics, circuitry and automotive. Portions of the
Tucson, Arizona facility are operating near full capacity and, in light of the
continuing robust demand, incremental capital additions are being made to expand
output.

Gross margin on MEG sales increased $2.6 million in the first quarter 2000
over the first quarter 1999 as a result of the higher sales volumes. While total
MEG sales increased $8.9 million, $2.3 million of that total was due to higher
metal prices which did not generate additional margin. The product mix was
slightly favorable while manufacturing overhead costs increased by $0.7 million
as a result of outside metal refining costs and other costs to support the
higher level of activity at both WAM and Electronic Products.

Operating profit for the MEG was $3.2 million in the first quarter 2000, a
$1.4 million increase over the first quarter 1999. Offsetting the $2.6 million
growth in margins were $1.2 million of higher selling, administrative and
general and net-other expenses.

CONSOLIDATED

Total sales, including operations not part of Metal Systems or the MEG,
were $135.4 million in the first quarter 2000 compared to $113.2 million in the
first quarter 1999. Total international sales were $38.5 million in the first
quarter 2000 compared to $35.5 million in the first quarter 1999. The majority
of the increase was in Metal Systems sales in Asia. European sales increased
slightly as well. As a percent of total sales, international sales declined to
28.5% in the current period from 31.4% last year. Sales by the Company's
international subsidiaries are typically denominated in deutschmark, yen and
sterling. Total gross margin of $28.3 million was 20.9% of sales in the first
quarter 2000 compared to $24.1 million, or 21.3% of sales, in the first quarter
1999.

Selling, Administrative and General expenses were $21.8 million, or 16.1%
of sales, in the first quarter 2000 compared to $17.5 million, or 15.5% of
sales, in the first quarter 1999. The main cause for the increase in 2000 was
higher legal and administrative costs associated with pending litigation matters
and the internal restructuring of the Company. Selling and marketing costs were
higher in order to support the current increased sales activity and as a result
of expanded market development programs. Costs also increased as a result of
additional research efforts into the causes, prevention and diagnosis of chronic
beryllium disease. Approximately half of the increase in SA&G expenses in the
current quarter was at the corporate office and not charged back to either Metal
Systems or the MEG.

8
<PAGE> 10

Research and Development (R&D) expenses were $2.0 million in the first
quarter of 2000, which was slightly higher than the $1.8 million in the first
quarter of 1999. As a percent of sales, R&D expenses were 1.5% in 2000 and 1.6%
in 1999. The majority of the R&D effort supports Metal Systems and the increase
in the current quarter's expense was related to Alloy Products.

Other-net expense was $0.2 million in the first quarter 2000 and $0.4
million in the first quarter 1999. Other-net includes foreign currency exchange
gains and losses, precious metal consignment fees, bad debt expense, cash
discounts, amortization of intangible assets and other non-operating items.
Currency exchange gains were $1.0 million in the first quarter 2000 compared to
$0.5 million in the first quarter last year. The consignment fee expense was
$1.2 million in the first quarter 2000, an increase of $0.5 million over first
quarter 1999 as a result of higher inventory levels and metal prices and rates.
Bad debt expense was slightly lower in the current period as compared to last
year.

Operating profit was $4.2 million in the first quarter 2000 compared to
$4.3 million in the first quarter of 1999 as the $4.2 million gross margin
improvement was offset by higher company-wide SA&G expenses.

Interest expense was $1.1 million in the first quarter 2000 versus $0.9
million in the first quarter 1999. The average borrowing rate was higher in 2000
than it was in 1999. Interest capitalized associated with spending on capital
projects was unchanged between periods.

Income before income taxes was $3.1 million in the first quarter 2000, a
decline of $0.3 million from the first quarter 1999. Income taxes were provided
for at 27.8% of income before income taxes in the first quarter 2000 while a
rate of 26.8% was used for the first quarter 1999. The slightly higher tax rate
in the current year is based in part on the anticipation that the available tax
credits will be lower than in 1999 as the tax rate is based upon year-end
projections. Net income was $2.2 million in the current quarter compared to $2.5
million in the previous year.

LEGAL PROCEEDINGS

The Company is a defendant in proceedings in various state and federal
courts by plaintiffs alleging that they have contracted chronic beryllium
disease ("CBD") or related ailments as a result of exposure to beryllium.
Plaintiffs in CBD cases seek recovery under theories of intentional tort and
various other legal theories and seek compensatory and punitive damages, in many
cases of an unspecified sum. Spouses, if any, claim loss of consortium.

The following table summarizes the activity associated with CBD cases:

<TABLE>
<CAPTION>
QUARTER ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
2000 * 1999
------------- ------------
<S> <C> <C>
Total cases pending..................................... 44 37
Total plaintiffs........................................ 136 119
Number of claims (plaintiffs) filed during the period... 7(20) 20(28)
Number of claims (plaintiffs) settled during the
period................................................ 0(0) 2(4)
Aggregate settlements paid during period ended (dollars
in thousands)......................................... $ 0 $183
Number of claims (plaintiffs) dismissed................. 0(3) 0(0)
</TABLE>

* Does not include two class action lawsuits described below.

On February 14, 2000, seven plaintiffs filed a purported class action
against the Company in the Court of Common Pleas, Cuyahoga County, Ohio,
claiming that they were exposed to hazardous levels of airborne beryllium while
working in the Company's Elmore facility as tradesmen employed by independent
contractors. Plaintiffs purport to sue on behalf of a class of all workers who
were members of unions comprising the Northwestern Ohio Building and
Construction Trades Council and who worked in the Elmore plant from 1953 to
December 31, 1999. They assert claims for negligence, strict liability,
statutory product liability, "ultrahazardous

9
<PAGE> 11

activities" and punitive damages, and seek establishment of a fund for medical
surveillance and screening. The Company has filed a motion to dismiss the class
action, which is pending.

On or about March 30, 2000, four plaintiffs filed a purported class action
against the Company in the United States District Court for the Northern
District of Ohio. Plaintiffs claim that they were exposed to airborne beryllium
from the Company's products while working as employees of Fulton Bellows &
Components, a customer of the Company. They purport to sue on behalf of a class
of all current and former employees of past and present customers of the Company
who have worked in facilities where beryllium-containing products manufactured
by the Company have been present. They assert claims for negligence and strict
product liability and seek establishment of a fund for medical surveillance and
screening.

Additional CBD claims may arise. Management believes the Company has
substantial defenses in these cases and intends to contest the suits vigorously.
Employee cases, in which plaintiffs have a high burden of proof, have
historically involved relatively small losses to the Company. Third party
plaintiffs (typically employees of the Company's customers) face a lower burden
of proof than do the Company's employees, but these cases are generally covered
by insurance. The Company recorded a reserve for CBD litigation of $7.1 million
at March 31, 2000 and $6.0 million at December 31, 1999. The Company also
recorded a receivable of $4.9 million at March 31, 2000 and $3.9 million at
December 31, 1999 from its insurance carriers as recoveries for insured claims.

Although it is not possible to predict the outcome of the litigation
pending against the Company and its subsidiaries, the Company provides for costs
related to these matters when a loss is probable and the amount is reasonably
estimable. Litigation is subject to many uncertainties, and it is possible that
some of these actions could be decided unfavorably in amounts exceeding the
Company's reserves. An unfavorable outcome or settlement of a pending CBD case
or additional adverse media coverage could encourage the commencement of
additional similar litigation. The Company is unable to estimate its potential
exposure to unasserted claims.

While the Company is unable to predict the outcome of the current or future
CBD proceedings, based upon currently known facts and assuming collectibility of
insurance, the Company does not believe that resolution of these proceedings
will have a material adverse effect on the financial condition or the cash flow
of the Company. However, the Company's results of operations could be materially
affected by unfavorable results in one or more of these cases.

FINANCIAL POSITION

Cash flow from operations was $10.4 million in the first quarter 2000, an
improvement of $4.4 million over the first quarter of 1999. Depreciation and
amortization was $6.3 million in the current period, a decline of $1.0 million
from last year due to lower mine development amortization. Accounts receivable
increased by $10.6 million since December 31, 1999 as a result of the record
sales level. The average days sales outstanding was virtually unchanged from
year-end 1999. Net owned inventory declined by $9.0 million during the first
quarter 2000. Finished goods inventories declined, particularly Alloy Products
and WAM, while in process inventories increased. Cash balances stood at $2.2
million at the end of the first quarter 2000 compared to $0.1 million at
December 31, 1999.

Capital expenditures for property, plant and equipment and mine development
were $3.6 million in the first quarter 2000. The spending in the current period
was generally for multiple, small projects rather than on several large projects
as was the case in the late 1990's. Project spending in 2000 included capacity
additions in Electronic Products and environmental and other infrastructure
projects at the Elmore facility.

Total debt declined by $3.7 million since December 31, 1999, with
short-term debt declining by $6.7 million and long-term debt increasing by $3.0
million. The Company entered into an agreement with a bank during the first
quarter to lease a portion of its copper-based inventories. By the end of the
quarter, the Company had utilized $8.3 million of this facility, which also
resulted in a reduction of the owned inventory.

Dividends were paid at $0.12 per share and totaled $2.0 million in the
first quarter 2000.

10
<PAGE> 12

Cash flow from operations was $6.0 million in the first quarter 1999.
Accounts receivable increased by 25% during the first quarter 1999 as a result
of higher sales and a longer collection period. Inventories climbed slightly,
but at the higher volumes, turns actually improved. The increase in accounts
receivable and inventory was supported by an increase in accounts payable and
other accruals. Capital expenditures were $2.1 million in the first quarter
1999. Total balance sheet debt declined $4.9 million during the first quarter
1999. Dividends were paid at $0.12 per outstanding share.

Funds being generated by operations, plus the available borrowing capacity,
are believed adequate to support operating requirements, capital expenditures,
remediation projects and dividends. Excess cash, if any, is invested in money
market or other high quality investments.

MARKET RISK DISCLOSURES

For information on the Company's market risks, refer to page 34 of the
annual report to shareholders for the year ended December 31, 1999.

11
<PAGE> 13

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is subject, from time to time, to a variety of civil and
administrative proceedings arising out of its normal operations, including,
without limitation, product liability claims, health, safety and environmental
claims and employment-related actions. Among such proceedings are the cases
described below.

CBD CLAIMS

There are claims pending in various state and federal courts against the
Company by employees, former employees or surviving spouses and third party
individuals alleging that they contracted chronic beryllium disease ("CBD") or
related ailments as a result of exposure to beryllium. Plaintiffs in CBD cases
seek recovery under theories of intentional tort and various other legal
theories and seek compensatory and punitive damages, in many cases of an
unspecified sum. Spouses, if any, claim loss of consortium.

During the first quarter of 2000, the number of CBD cases grew from 37
(involving 119 plaintiffs), as of December 31, 1999 to 46 cases (involving 147
plaintiffs), as of March 31, 2000. During the first quarter, three plaintiffs
were dismissed from two cases, though the cases remain pending. No cases were
settled or otherwise concluded during the quarter.

As of March 31, 2000, the Company had an aggregate of 27 "employee cases"
involving an aggregate of 27 employees, former employees or surviving spouses
(in 18 of these cases, a spouse has also filed claims as part of their spouse's
case). 17 of the other cases involve third party individual plaintiffs, with 52
individuals (and 33 spouses who have filed claims as part of their spouse's case
and 6 children who have filed claims as part of their parent's case). In
addition, there are two purported class actions involving seven named
plaintiffs. Employee cases, in which plaintiffs have a high burden of proof,
have historically involved relatively small losses to the Company. Third party
plaintiffs (typically employees of our customers) face a lower burden of proof
than do our employees, but these cases are generally covered by insurance.

On February 14, 2000, seven plaintiffs filed a purported class action
against the Company, Wilson, et al. v. Brush Wellman Inc., No. 00-401890-CV, in
the Court of Common Pleas, Cuyahoga County, Ohio, claiming that they were
exposed to hazardous levels of airborne beryllium while working in the Company's
Elmore facility as tradesmen employed by independent contractors. Plaintiffs
purport to sue on behalf of a class of all workers who were members of unions
comprising the Northwestern Ohio Building and Construction Trades Council and
who worked in the Elmore plant from 1953 to December 31, 1999. They assert
claims for negligence, strict liability, statutory product liability,
"ultrahazardous activities" and punitive damages, and seek establishment of a
fund for medical surveillance and screening. The Company has filed a motion to
dismiss the class action, which is pending.

On or about March 30, 2000, four plaintiffs filed a purported class action
against the Company, Jones, et al. v. Brush Wellman Inc., No. 00CV777, in the
United States District Court for the Northern District of Ohio. Plaintiffs claim
that they were exposed to airborne beryllium from the Company's products while
working as employees of Fulton Bellows & Components, a Brush customer. They
purport to sue on behalf of a class of all current and former employees of past
and present customers of the Company who have worked in facilities where
beryllium-containing products manufactured by the Company have been present.
They assert claims for negligence and strict product liability and seek
establishment of a fund for medical surveillance and screening.

From March 31, 2000 through May 5, 2000, no additional CBD claims were
filed against the Company.

OTHER CLAIMS

The Company's Egbert subsidiary has been named as a defendant in a number
of lawsuits alleging asbestos-induced illness, arising out of the conduct of a
friction materials business whose operating assets Egbert sold in 1986. In each
of the pending cases, Egbert is one of a large number of defendants named in the
respective complaints. Egbert is a party to 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

12
<PAGE> 14

Agreement, the insurers share some expenses of defense, and Egbert, Pneumo Abex
Corporation and the insurers share payment of settlements and/or judgments. In
each of the pending cases, both expenses of defense and payment of settlements
and/or judgments are subject to a limited, separate reimbursement agreement
under which a successor owner of the business is obligated. A number of cases of
this type have been disposed of to date, some by voluntary dismissal, others by
summary judgment, one by jury verdict of no liability, and still others upon
payment of nominal amounts in settlement. There are at present 11 cases pending.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

(11) Statement re computation of per share earnings (filed as Exhibit 11 to
Part I of this report).

(27) Financial Data Schedule.

(b) Reports on Form 8-K

There have been no reports on Form 8-K during the quarter ended March 31,
2000.

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: May 15, 2000
/s/ John D. Grampa
--------------------------------------
John D. Grampa
Vice President Finance
and Chief Financial Officer

<PAGE> 1

EXHIBIT 11

BRUSH WELLMAN INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS

<TABLE>
<CAPTION>
FIRST QUARTER ENDED
--------------------------
MAR. 31, APR. 2,
2000 1999
----------- -----------
<S> <C> <C>
Basic:
Average shares outstanding................................ 16,206,038 16,193,359
=========== ===========
Net income................................................ $ 2,249,000 $ 2,486,000
Per share amount.......................................... $ 0.14 $ 0.15
=========== ===========
Diluted:
Average shares outstanding................................ 16,206,038 16,193,359
Dilutive stock options based on the treasury stock method
using average market price............................. 108,480 38,753
----------- -----------
Totals............................................ 16,314,518 16,232,112
=========== ===========
Net income................................................ $ 2,249,000 $ 2,486,000
Per share amount.......................................... $ 0.14 $ 0.15
=========== ===========
</TABLE>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,159
<SECURITIES> 0
<RECEIVABLES> 90,393
<ALLOWANCES> 1,692
<INVENTORY> 101,622
<CURRENT-ASSETS> 228,629
<PP&E> 441,901
<DEPRECIATION> 273,683
<TOTAL-ASSETS> 430,390
<CURRENT-LIABILITIES> 96,249
<BONDS> 12,105
0
0
<COMMON> 22,526
<OTHER-SE> 198,058
<TOTAL-LIABILITY-AND-EQUITY> 430,390
<SALES> 135,424
<TOTAL-REVENUES> 135,424
<CGS> 107,129
<TOTAL-COSTS> 130,961
<OTHER-EXPENSES> 109
<LOSS-PROVISION> 119
<INTEREST-EXPENSE> 1,120
<INCOME-PRETAX> 3,115
<INCOME-TAX> 866
<INCOME-CONTINUING> 2,249
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,249
<EPS-BASIC> 0.14
<EPS-DILUTED> 0.14

</TABLE>