<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q/A
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
----------------------------------
For Quarter Ended June 30, 1997 Commission File Number 0-325
------------- -----
FLOWSERVE CORPORATION
---------------------
(Exact name of Registrant as specified in its charter)
New York
--------
(State or other jurisdiction of incorporation or organization)
31-0267900
----------
(I.R.S. Employer Identification Number)
3100 Research Boulevard, Dayton, Ohio 45420
------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (937) 476-6100
-------------
DURCO INTERNATIONAL INC.
------------------------
(Former name, former address and former fiscal year, if changed since
last report)
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
----- -----
Shares of Common Stock, $1.25 par value, outstanding as of
June 30, 1997..........23,543,843
<PAGE> 2
PART I: Financial Information
<PAGE> 3
FLOWSERVE CORPORATION
Consolidated Statement of Income
Quarters Ended June 30, 1997 and 1996
(dollars in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Net sales $162,671 $151,071
Costs and expenses:
Cost of sales 93,314 88,463
Selling and administrative 37,021 36,871
Research, engineering and development 4,095 3,973
Interest 1,397 1,469
Other, net 1,737 1,343
Restructuring -- 5,778
-------- --------
137,564 137,897
Earnings before income taxes 25,107 13,174
Provision for income taxes 9,541 4,259
-------- --------
Net earnings 15,566 8,915
======== ========
Earnings per share $ 0.65 $ 0.36
======== ========
</TABLE>
(See accompanying notes)
<PAGE> 4
FLOWSERVE CORPORATION
Consolidated Statement of Income
Six Months Ended June 30, 1997 and 1996
(dollars in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Net sales $310,468 $300,265
Costs and expenses:
Cost of sales 181,065 177,743
Selling and administrative 72,649 73,331
Research, engineering and development 8,476 8,242
Interest 2,873 2,863
Other, net 2,473 3,080
Restructuring -- 5,778
-------- --------
267,536 271,037
Earnings before income taxes 42,932 29,228
Provision for income taxes 16,314 10,199
-------- --------
Net earnings 26,618 19,029
======== ========
Earnings per share $ 1.12 $ 0.77
======== ========
</TABLE>
(See accompanying notes)
<PAGE> 5
FLOWSERVE CORPORATION
Consolidated Balance Sheet
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
ASSETS 1997 1996
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 23,407 $ 29,474
Accounts receivable 121,052 112,710
Inventories 101,115 101,070
Prepaid expenses 12,413 9,164
--------- ---------
Total current assets 257,987 252,418
Property, plant and equipment, at cost 254,756 257,680
Less accumulated depreciation and amortization 159,077 157,768
--------- ---------
Net property, plant and equipment 95,679 99,912
Intangibles and other assets 73,972 73,160
--------- ---------
Total assets $ 427,638 $ 425,490
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 32,196 $ 31,256
Notes payable 6,787 5,784
Income taxes 5,113 3,298
Accrued liabilities 40,102 50,535
Long-term debt due within one year 5,253 7,525
--------- ---------
Total current liabilities 89,451 98,398
Long-term debt due after one year 58,062 63,239
Postretirement benefits and other deferred items 67,060 64,074
Shareholders' equity:
Serial preferred stock, $1.00 par value,
no shares issued -- --
Common stock, $1.25 par value, 24,569,000
shares issued (24,568,000 in 1996) 30,712 30,710
Capital in excess of par value 8,012 8,377
Retained earnings 209,425 189,390
--------- ---------
248,149 228,477
Treasury stock, 1,025,000 shares at cost (1,081,000 in 1996) (26,051) (27,455)
Foreign currency and other equity adjustments (9,033) (1,243)
--------- ---------
Total shareholders' equity 213,065 199,779
--------- ---------
Total liabilities and shareholders' equity $ 427,638 $ 425,490
========= =========
</TABLE>
(See accompanying notes)
<PAGE> 6
FLOWSERVE CORPORATION
Consolidated Statement of Cash Flows
Six Months Ended June 30, 1997 and 1996
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Increase (decrease) in cash and cash equivalents:
Operating activities:
Net earnings $ 26,618 $ 19,029
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 9,847 10,185
Loss on the sale of fixed assets (42) 149
Change in assets and liabilities net of
effects of acquisitions and divestitures:
Accounts receivable (12,336) (7,749)
Inventories (3,742) (13,069)
Prepaid expenses (3,388) (4,760)
Accounts payable and accrued liabilities (6,756) 3,764
Income taxes 1,146 2,607
Postretirement benefits and other deferred items 1,546 1,441
Net deferred taxes 576 (600)
Other (1,761) (2,717)
-------- --------
Net cash flows from operating activities 11,708 8,280
Investing activities:
Capital expenditures (8,758) (8,161)
-------- --------
Net cash flows from investing activities (8,758) (8,161)
Financing activities:
Net borrowings under lines-of-credit 1,674 4,445
Payments on long-term debt (6,456) (3,720)
Proceeds from long-term debt 2,321 340
Proceeds from issuance of common stock 856 1,727
Dividends paid (6,583) (6,369)
-------- --------
Net cash flows from financing activities (8,188) (3,577)
Effect of exchange rate changes (829) (301)
-------- --------
Net decrease in cash and cash equivalents (6,067) (3,759)
Cash and cash equivalents at beginning of year 29,474 19,434
-------- --------
Cash and cash equivalents at end of period $ 23,407 $ 15,675
======== ========
Supplemental disclosures of
cash flow information:
Cash paid during period for:
Interest $ 2,745 $ 2,270
Income taxes $ 14,499 $ 8,179
</TABLE>
(See accompanying notes)
<PAGE> 7
FLOWSERVE CORPORATION
Notes to Consolidated Financial Statements
(dollars presented in tables in thousands except per share data)
1. Except as otherwise specifically noted, the foregoing information is
exclusive of the impact of the Company's merger with BW/IP Inc. (BW/IP).
2. Inventories.
The amount of inventories and the method of determining costs for the
quarter ended June 30, 1997 and the year ended December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
Domestic Foreign
inventories inventories Total
(LIFO) (FIFO) inventories
---------------------------------------------------
<S> <C> <C> <C>
June 30, 1997
Raw materials $ 4,108 $ 6,641 $ 10,749
Work in process and finished goods 52,502 37,864 90,366
-------- -------- --------
$ 56,610 $ 44,505 $101,115
======== ======== ========
December 31, 1996
Raw materials $ 2,285 $ 3,339 $ 5,624
Work in process and finished goods 52,613 42,833 95,446
-------- -------- --------
$ 54,898 $ 46,172 $101,070
======== ======== ========
</TABLE>
LIFO inventories at current cost are $38,981,000 and $38,039,000 higher
than reported at June 30, 1997 and December 31, 1996, respectively.
3. Shareholders' equity. There are authorized 60,000,000 shares of $1.25 par
value common stock and 1,000,000 shares of $1.00 par value preferred stock.
Changes in the six months ended June 30, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
Capital in Foreign currency
Common excess of Retained & other equity
stock par value earnings adjustments
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 $ 30,506 $ 6,022 $ 158,754 $ 700
Net earnings 19,029
Cash dividends (6,369)
Net shares issued (159,621) under stock plans 200 2,515 (988)
Foreign currency translation adjustment (1,051)
----------- ---------- ----------- -----------
Balance at June 30, 1996 $ 30,706 $ 8,537 $ 171,414 $ (1,339)
=========== ========== =========== ===========
Balance at December 31, 1996 $ 30,710 $ 8,377 $ 189,390 $ (1,243)
Net earnings 26,618
Cash dividends (6,583)
Net shares issued (55,325) under stock plans 2 (365) (185)
Foreign currency translation adjustment (7,605)
----------- ---------- ----------- -----------
Balance at June 30, 1997 $ 30,712 $ 8,012 $ 209,425 $ (9,033)
=========== ========== =========== ===========
Total
Treasury shareholders'
stock equity
------------------------------------
<S> <C> <C>
Balance at December 31, 1995 $ (210) $ 195,772
Net earnings 19,029
Cash dividends (6,369)
Net shares issued (159,621) under stock plans 1,727
Foreign currency translation adjustment (1,051)
---------- -----------
Balance at June 30, 1996 $ (210) $ 209,108
========== ===========
Balance at December 31, 1996 (27,455) $ 199,779
Net earnings 26,618
Cash dividends (6,583)
Net shares issued (55,325) under stock plans 1,404 856
Foreign currency translation adjustment (7,605)
---------- -----------
Balance at June 30, 1997 $ (26,051) $ 213,065
========== ===========
</TABLE>
<PAGE> 8
As of June 30, 1997, 2,653,978 shares of common stock were reserved for
exercise of stock options and grants of restricted shares.
4. Dividends.
Dividends paid during the quarters ended June 30, 1997 and 1996 were
based on 23,520,471 and 24,547,672 respectively, common shares
outstanding on the applicable dates of record.
5. Earnings per share.
Earnings per share for the six months ended June 30, 1997 and 1996 were
based on average common shares and common share equivalents outstanding
of 23,785,868 and 24,824,170 respectively.
6. Contingencies.
As of June 30, 1997, the Company was involved as a "potentially
responsible party" at five former public waste disposal sites which may
be subject to remediation under pending government procedures. The
sites are in various stages of evaluation by federal and state
environmental authorities. The projected cost of remediating these
sites, as well as the Company's alleged "fair share" allocation, is
uncertain and speculative until all studies have been completed and the
parties have either negotiated an amicable resolution or the matter has
been judicially resolved. At each site, there are many other parties
who have similarly been identified, and the identification and location
of additional parties is continuing under applicable federal or state
law. Many of the other parties identified are financially strong and
solvent companies which appear able to pay their share of the
remediation costs. Based on the Company's preliminary information about
the waste disposal practices at these sites and the environmental
regulatory process in general, the Company believes that it is likely
that ultimate remediation liability costs for each site will be
apportioned among all liable parties, including site owners and waste
transporters, according to the volumes and/or toxicity of the wastes
shown to have been disposed of at the sites.
The Company is a defendant in numerous pending lawsuits (which include,
in many cases, multiple claimants) which seek to recover damages for
alleged personal injury allegedly resulting from exposure to asbestos
containing products formerly manufactured and distributed by the
Company. All such products were used within self-contained process
equipment, and management does not believe that there was any emission
of ambient asbestos fiber during the use of this equipment. The Company
has resolved numerous claims at an average of about $100 per claim, the
cost of which was fully paid by insurance. The Company continues to
have a substantial amount of available insurance from financially
solvent carriers to cover the cost of both defending and resolving the
claims.
The Company is also a defendant in several other products liability
lawsuits which are insured, subject to the applicable deductibles, and
certain other non-insured lawsuits received in the ordinary course of
business. The Company has fully accrued the estimated loss reserve for
each such lawsuit. No insurance recovery has been projected for any of
the insured claims because management currently believes that all will
be resolved within applicable deductibles. The Company is also a party
to other non-insured litigation which is incidental to its business and
which, in management's opinion, will be resolved without a material
impact on the Company.
On July 22, 1997, the Company completed a merger with BW/IP Inc. and
effectively assumed certain contingent liabilities of BW/IP as a result
thereof. Management does not now believe that any such newly assumed
contingent liabilities will either individually nor in the aggregate be
resolved in a way that has a material impact on the Company.
<PAGE> 9
Although none of the aforementioned gives rise to any additional
liability that can now be reasonably estimated, it is possible that the
Company could incur additional costs in the range of $250,000 to
$1,000,000 over the upcoming five years to fully resolve these matters.
Although the Company has accrued the minimum end of this range as a
precaution, management has no current reason to believe that any such
additional costs are probable or quantifiable. The Company will
continue to evaluate these contingent loss exposures and, if they
develop, recognize expense as soon as such losses can be reasonably
estimated.
7. Impact of Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share, which is required to be adopted
on December 31, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share and to
restate all prior periods. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options would
be excluded. The impact of Statement 128 on the calculation of primary
and fully diluted earnings per share is not material for the periods
presented.
In June 1997, the Financial Accounting Standards Board issued Statement
No. 130, Reporting Comprehensive Income, and Statement No. 131,
Disclosures about Segments of an Enterprise and Related Information.
These statements will not be required to be adopted by the Company
until 1998. The Company has not yet determined any impact of these
statements on the financial statements of the Company.
8. Merger
On July 22, 1997, shareholders of the Company and BW/IP, Inc. (BW/IP)
voted to approve a merger between a wholly owned subsidiary of the
Company and BW/IP in a stock-for-stock merger of equals that will be
accounted for as a pooling of interests transaction. As part of the
merger agreement, the company changed its name to Flowserve
Corporation. The Company's common stock began trading on the New York
Stock Exchange on July 23, 1997, under the symbol "FLS." The Company
and BW/IP were, prior to the merger, two of the largest manufacturers
and distributors of pumps, seals, valves and control valves in the
U.S., and the strategic combination will create a leading global
supplier of fluid handling and control equipment.
Under the terms of the transaction, the Company's shareholders retain
their present shares, and former BW/IP shareholders will receive .6968
shares of the Company's common stock for each previously owned share of
BW/IP. The exchange ratio was based on the average ratio of closing
share prices of the Company's and BW/IP's common stock for the 15
consecutive trading days ended May 2, 1997.
The merger was consummated on July 22, 1997 and the Company is
obligated to issue approximately 16,914,820 shares of its common stock
in exchange for all of the outstanding common shares of BW/IP. The
merger qualifies as a tax-free reorganization for federal income tax
purposes and was accounted for as a pooling of interests. BW/IP's
common stock has been de-registered under the Securities Exchange Act
of 1934, and consequently, BW/IP will not file a Form 10-Q for the
quarter ended June 30, 1997.
The following unaudited pro forma condensed combined balance sheet as
of June 30, 1997 and December 31, 1996; and the pro forma condensed
combined statements of income for the three months ended June 30, 1997,
the three months ended June 30, 1996, the six months ended June 30,
1997, and the six months ended June 30, 1996 give effect to the merger
accounted for as a pooling of interests. This pro forma information is
based on the historical consolidated financial statements of Durco and
BW/IP and their subsidiaries under the assumptions and adjustments set
forth in the accompanying notes.
<PAGE> 10
The unaudited pro forma condensed combined financial statements have
been prepared by the management of Durco and BW/IP based upon their
respective historical consolidated financial statements. Pro forma per
share amounts are based on the exchange ratio of 0.6968 shares of Durco
common stock for each share of BW/IP common stock. The pro forma
condensed combined financial statements of income, which include
results of operations as if the merger had been consummated on January
1, 1996, do not reflect the merger expenses expected to be incurred by
Durco and BW/IP or any anticipated cost savings. As a result, the pro
forma condensed combined financial conditions and results of operations
of Flowserve as of and after the effective date of the merger may not
be indicative of the results that actually would have occurred if the
merger had been in effect during the periods presented or which may be
attained in the future. Actual performances will differ and the
differences may be material. The pro forma condensed combined financial
statements should be read in conjunction with the historical
consolidated financial statements and notes thereto for Durco and
BW/IP.
<PAGE> 11
FLOWSERVE CORPORATION
Unaudited Pro Forma Condensed Combined Balance Sheet
June 30, 1997
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
ASSETS Durco BW/IP Adjustments Combined
--------- --------- ----------- --------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 23,407 $ 14,791 $ $ 38,198
Accounts receivable 121,052 106,380 227,432
Inventories 101,115 94,611 195,726
Prepaid expenses 12,413 16,391 28,804
--------- --------- -------- --------
Total current assets 257,987 232,173 -- 490,160
Property, plant and equipment, at cost 254,756 204,079 458,835
Less accumulated depreciation and amortization 159,077 89,580 248,657
--------- --------- -------- --------
Net property, plant and equipment 95,679 114,499 -- 210,178
Intangibles and other assets 73,972 75,215 149,187
--------- --------- -------- --------
Total assets $ 427,638 $ 421,887 $ -- $849,525
========= ========= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 32,196 $ 40,507 $ $ 72,703
Notes payable 6,787 -- 6,787
Income taxes 5,113 1,808 6,921
Accrued liabilities 40,102 47,766 10,000(4) 97,868
Long-term debt due within one year 5,253 8,759 14,012
--------- --------- -------- --------
Total current liabilities 89,451 98,840 10,000 198,291
Long-term debt due after one year 58,062 93,334 151,396
Postretirement benefits and other deferred items 67,060 41,515 108,575
Shareholders' equity:
Serial preferred stock
no shares issued -- -- --
Common stock 30,712 245 20,899 (3) 51,856
Capital in excess of par value 8,012 85,763 (20,899)(3) 72,876
Retained earnings 209,425 118,895 (10,000)(4) 318,320
--------- --------- -------- --------
248,149 204,903 (10,000) 443,052
Treasury stock (26,051) (613) (26,664)
Foreign currency and other equity adjustments (9,033) (16,092) (25,125)
--------- --------- -------- --------
Total shareholders' equity 213,065 188,198 (10,000) 391,263
--------- --------- -------- --------
Total liabilities and shareholders' equity $ 427,638 $ 421,887 $ -- $849,525
========= ========= ======== ========
</TABLE>
(See accompanying notes)
<PAGE> 12
FLOWSERVE CORPORATION
Unaudited Pro Forma Condensed Combined Balance Sheet
December 31, 1996
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
ASSETS Durco BW/IP Adjustments Combined
--------- --------- ----------- --------
Current assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 29,474 $ 9,458 $ $ 38,932
Accounts receivable 112,710 110,564 223,274
Inventories 101,070 81,353 182,423
Prepaid expenses 9,164 15,241 24,405
--------- --------- -------- ---------
Total current assets 252,418 216,616 -- 469,034
Property, plant and equipment, at cost 257,680 197,369 455,049
Less accumulated depreciation and amortization 157,768 85,542 243,310
--------- --------- -------- ---------
Net property, plant and equipment 99,912 111,827 -- 211,739
Intangibles and other assets 73,160 75,843 149,003
--------- --------- -------- ---------
Total assets $ 425,490 $ 404,286 $ -- $ 829,776
========= ========= ======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 31,256 $ 36,755 $ $ 68,011
Notes payable 5,784 -- 5,784
Income taxes 3,298 1,663 4,961
Accrued liabilities 50,535 43,160 10,000(4) 103,695
Long-term debt due within one year 7,525 9,087 16,612
--------- --------- -------- --------
Total current liabilities 98,398 90,665 10,000 199,063
Long-term debt due after one year 63,239 80,723 143,962
Postretirement benefits and other deferred items 64,074 44,053 108,127
Shareholders' equity:
Serial preferred stock
no shares issued -- -- --
Common stock 30,710 245 20,899 (3) 51,854
Capital in excess of par value 8,377 85,763 (20,899)(3) 73,241
Retained earnings 189,390 109,173 (10,000)(4) 288,563
--------- --------- -------- ---------
228,477 195,181 (10,000) 413,658
Treasury stock (27,455) (613) (28,068)
Foreign currency and other equity adjustments (1,243) (5,723) (6,966)
--------- --------- -------- ---------
Total shareholders' equity 199,779 188,845 (10,000) 378,624
--------- --------- -------- ---------
Total liabilities and shareholders' equity $ 425,490 $ 404,286 $ -- $ 829,776
========= ========= ========= =========
</TABLE>
(See accompanying notes)
<PAGE> 13
FLOWSERVE CORPORATION
Unaudited Pro Forma Condensed Combined Statement of Income
Quarter Ended June 30, 1997
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Durco BW/IP Adjustments (1), (2) Combined
-------- -------- -------------------- ---------
<S> <C> <C> <C>
Net sales $162,671 $137,986 $ $ 300,657
Costs and expenses:
Cost of sales 93,314 86,133 179,447
Selling and administrative 37,021 35,380 1,458 73,859
Research, engineering and development 4,095 -- 2,468 6,563
Interest 1,397 2,128 75 3,600
Other, net 1,737 23 (4,001) (2,241)
-------- -------- -------- ---------
137,564 123,664 -- 261,228
Earnings before income taxes 25,107 14,322 -- 39,429
Provision for income taxes 9,541 5,013 14,554
-------- -------- -------- ---------
Net earnings 15,566 9,309 -- 24,875
======== ======== ======== =========
Earnings per share $ 0.65 $ 0.38 $ -- $ 0.61
======== ======== ======== =========
Average shares outstanding 23,785 24,275 40,700
</TABLE>
(See accompanying notes)
<PAGE> 14
FLOWSERVE CORPORATION
Unaudited Pro Forma Condensed Combined Statement of Income
Quarter Ended June 30, 1996
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Durco BW/IP Adjustments (1), (2) Combined
----- ----- -------------------- --------
<S> <C> <C> <C>
Net sales $151,071 $119,764 $ $ 270,835
Costs and expenses:
Cost of sales 88,463 72,929 161,392
Selling and administrative 36,871 33,392 (199) 70,064
Research, engineering and development 3,973 -- 2,252 6,225
Interest 1,469 1,724 149 3,342
Other, net 1,343 248 (2,202) (611)
Restructuring 5,778 -- 5,778
-------- ------- -------- ---------
137,897 108,293 -- 246,190
Earnings before income taxes 13,174 11,471 -- 24,645
Provision for income taxes 4,259 4,474 8,733
-------- ------- -------- ---------
Net earnings 8,915 6,997 -- 15,912
=========
Earnings per share $ 0.36 $ 0.29 $ -- $ 0.38
======== ======= ======== =========
Average shares outstanding 24,824 24,275 41,739
</TABLE>
(See accompanying notes)
<PAGE> 15
FLOWSERVE CORPORATION
Unaudited Pro Forma Condensed Combined Statement of Income
Six Months Ended June 30, 1997
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Durco BW/IP Adjustments (1), (2) Combined
-------- -------- ------------------- --------
<S> <C> <C> <C>
Net sales $310,468 $252,701 $ $ 563,169
Costs and expenses:
Cost of sales 181,065 156,745 337,810
Selling and administrative 72,649 68,865 284 141,798
Research, engineering and development 8,476 -- 4,337 12,813
Interest 2,873 3,746 316 6,935
Other, net 2,473 172 (4,937) (2,292)
-------- -------- -------- ---------
267,536 229,528 -- 497,064
Earnings before income taxes 42,932 23,173 -- 66,105
Provision for income taxes 16,314 8,111 24,425
-------- -------- -------- ---------
Net earnings 26,618 15,062 -- 41,680
======== ======== ======== =========
Earnings per share $ 1.12 $ 0.62 $ -- $ 1.02
======== ======== ======== =========
Average shares outstanding 23,785 24,275 40,700
</TABLE>
(See accompanying notes)
<PAGE> 16
FLOWSERVE CORPORATION
Unaudited Pro Forma Condensed Combined Statement of Income
Six Months Ended June 30, 1996
(dollars in thousands except per share data)
Pro Forma Pro Forma
<TABLE>
<CAPTION>
Durco BW/IP Adjustments (1), (2) Combined
-------- -------- -------------------- ---------
<S> <C> <C> <C>
Net sales $300,265 $241,702 $ $ 541,967
Costs and expenses:
Cost of sales 177,743 148,089 325,832
Selling and administrative 73,331 68,232 (251) 141,312
Research, engineering and development 8,242 -- 4,313 12,555
Interest 2,863 3,438 298 6,599
Other, net 3,080 522 (4,360) (758)
Restructuring 5,778 -- 5,778
-------- -------- --------- ---------
271,037 220,281 -- 491,318
Earnings before income taxes 29,228 21,421 -- 50,649
Provision for income taxes 10,199 8,354 18,553
-------- -------- --------- ---------
Net earnings 19,029 13,067 -- 32,096
-------- -------- --------- ---------
Earnings per share $ 0.77 $ 0.54 $ -- $ 0.77
======== ======== ========= =========
Average shares outstanding 24,824 24,275 41,739
</TABLE>
(See accompanying notes)
<PAGE> 17
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
1. Certain Durco and BW/IP expenses have been reclassified to
reflect consistent reporting on a pro forma combined basis, as
follows:
(a) BW/IP interest income has been reclassified from
interest expense, net to other, net.
(b) Durco incentive compensation expenses and goodwill
amortization expenses have been reclassified from
other, net to selling and administrative expense.
(c) BW/IP foreign currency transaction gains and losses
have been reclassified from selling, administrative
and operating expenses to other, net.
(d) BW/IP research, engineering and development expenses
have been reclassified and shown separately for
selling, administrative, and operating expenses.
2. Intercompany transactions between Durco and BW/IP are
immaterial.
3. The pro forma condensed combined financial statements reflect
the issuance of 16,914,820 shares of Durco common stock in
exchange for all the outstanding BW/IP common stock. This
reflects a 0.6968 exchange ratio of Durco for BW/IP shares.
4. Total costs incurred by Durco and BW/IP in connection with the
merger are estimated at $10.0 million. These costs relate to
financial advisory, legal, accounting, printing and other
related services. These non-tax deductible costs will be
charged against income of the combined company in the period
of consummation. The liabilities associated with these costs
have been applied to reduce shareholders' equity in the pro
forma financial statements. Actual costs related to the merger
incurred by each company were not significant during the six
months ended June 30, 1997. The combined company also expects
to incur substantial costs relating to termination benefits
paid to certain employees and other costs necessary to combine
and realign operations. Because decisions have not yet been
made regarding specific employee terminations or the manner or
extent of operational realignment that will be necessary to
effect the combination, these costs cannot be reasonably
estimated at this time. Accordingly, no such costs have been
included in the adjustments to shareholders' equity in the pro
forma condensed combined balance sheet.
5. Inventories of both Durco and BW/IP are stated at the lower of
cost or market. For Durco, cost is determined for all domestic
inventories using the last-in, first-out (LIFO) method and for
foreign inventories using the first-in, first-out (FIFO)
method. For BW/IP, cost is determined for all inventories
using the FIFO method. Decisions as to possible combination of
certain domestic units after the merger have not yet been made
and, accordingly, it is not possible currently to determine
the costing method or methods that will be used for computing
domestic inventories of the combined company. As such,
adjustments relating to these matters have not been made in
preparing the pro forma condensed combined financial
statements.
<PAGE> 18
In connection with the merger, the Company expects to record a
one-time charge of approximately $10.0 million for
merger-related expenses in the third quarter of 1997. These
expenses include investment banking fees and other costs
related to the merger. These costs will be charges against
income of the combined company in the period of consummation.
The liabilities associated with these costs have been applied
to reduce shareholders' equity in the pro forma financial
statements. The Company also expects to recognize a
restructuring charge in the fourth quarter of 1997. Although
expected to be significant, the amount of the charge is being
determined by the plans to capture synergies and eliminate
redundancies in the new organization. When the plans are
complete, the Company expects to announce the amount of the
charge and explain the benefits that will provide a payback in
approximately two years.
BW/IP is a worldwide supplier of advanced-technology fluid
transfer and control equipment, systems and services. Its
principal products are pumps, mechanical seals and valves. In
1996, BW/IP reported sales of $492.2 million and generated net
earnings of $27.8 million.
9. Name Change
On July 22, 1997, the Company changed its name from Durco
International Inc. to Flowserve Corporation following approval
by its Board of Directors and shareholders. On April 23, 1997
the Company announced it had legally changed its corporate
name to Durco International Inc.
---------------------------------------------
The financial information contained in this report is
unaudited, but, in the opinion of the Company, all adjustments
(consisting of normal recurring accruals) which are necessary
for a fair presentation of the operating results for the
period have been made.
<PAGE> 19
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Capital Resources and Liquidity - Six Months Ended June 30, 1997
The Company's capital structure, consisting of long-term debt, deferred
items and shareholders' equity, continues to enable the Company to finance short
and long-range business objectives. At June 30, 1997, long-term debt was 17.2%
of the Company's capital structure, compared to 19.3% at December 31, 1996.
Based upon annualized 1997 results, the interest coverage ratio of the Company's
indebtedness was 15.9 at June 30, 1997, compared with 14.0 for the twelve months
ended December 31, 1996.
The return on average net assets at June 30, 1997 was 16.7% based upon
1997 annualized results, compared to 14.3% at December 31, 1996. Annualized
return on average shareholders' equity was 25.9% at June 30, 1997, compared to
21.7% at December 31, 1996. Management continues to focus on improving its
performance in these areas as many of the Company's incentive compensation plans
are linked to return on net assets and economic value added measurements.
Capital spending in 1997 is expected to be over $20.0 million, compared
with $16.9 million in 1996. The 1997 expenditures will be invested in low cost
manufacturing facilities in India, new product development and machine
replacement and upgrades.
The Company's liquidity position is reflected in a current ratio of 2.9
to 1 at June 30, 1997. This compares to 2.6 to 1 at December 31, 1996. Cash in
excess of current requirements was invested in high-grade, short-term
securities. Cash and amounts available under borrowing arrangements will be
adequate to fund operating needs and capital expenditures through the remainder
of the year.
On July 22, 1997, shareholders of the Company and BW/IP, Inc. (BW/IP)
voted to approve a merger between a subsidiary of the Company and BW/IP in a
stock-for-stock merger of equals that will be accounted for as a pooling of
interests transaction. The company also changed its name to Flowserve
Corporation. The Company's common stock began trading on the New York Stock
Exchange on July 23, 1997, under the symbol "FLS." The Company and BW/IP were,
prior to the merger, two of the largest manufacturers and distributors of pumps,
seals, valves and control valves in the U.S., and the strategic combination will
create a leading global supplier of fluid handling and control equipment.
Under the terms of the transaction, the Company's shareholders retain
their present shares, and BW/IP shareholders will receive .6968 shares of the
Company's common stock for each previously owned share of BW/IP. The exchange
ratio was based on the average ratio of closing share prices for the Company's
and BW/IP's common stock for the 15 consecutive trading days ended May 2, 1997.
BW/IP is a worldwide supplier of advanced-technology fluid transfer and
control equipment, systems and services. Its principal products are pumps,
mechanical seals and valves. In 1996, BW/IP reported sales of $492.2 million and
generated net earnings of $27.8 million.
<PAGE> 20
Except as otherwise specifically noted, the foregoing analysis of the Company's
"Capital Resources and Liquidity" is exclusive of the impact of this merger.
Results of Operations - Six Months Ended June 30, 1997
Net sales for the six months ended June 30, 1997 were a record $310.5
million, compared to net sales of $300.3 million for the same period in 1996.
The change reflects an increase in shipments from all business units, in
particular, the Flow Control Group and strong shipments within the Asia-Pacific
market. Partially offsetting the increase in sales was the impact of the
strengthening of the U.S. dollar against the European currencies which reduced
reported net sales by approximately 3% when compared with the first six months
of 1996. International contributions to consolidated net sales were 32.8% and
33.4% for the six month periods ended June 30, 1997 and 1996, respectively. The
reduction in international contributions reflects the impact of the weaker
European currencies. Total net sales to international customers including export
sales from the U.S. were 41.1% and 40.7%, respectively for such periods.
Incoming business was a record $312.5 million for the first six months
of 1997. This compares to $310.3 million in 1996's first six months. Incoming
business was adversely affected by strengthening of the U.S. dollar against the
European currencies. Backlog at June 30, 1997 was $102.6 million, compared with
a backlog of $111.9 million at December 31, 1996. This reduction followed
management's plan to improve customer service by shortening delivery lead times.
The gross profit margin was 41.7% for the six months ended June 30,
1997. This compares to 40.8% for the same period in 1996. The margin reflects a
more favorable product mix and favorable operating variances resulting from
higher levels of plant utilization and cost control.
Selling and administrative expenses as a percentage of net sales for
the six months ended June 30, 1997 were 23.4%, compared to 24.4% for the same
period in 1996. The reduction in expense in dollars reflects continued emphasis
on cost containment and currency impacts. The decrease in expense as a
percentage of net sales is consistent with the Company's plan to further
leverage expense and control costs in 1997 while continuing to invest in the
development and growth of international operations.
Research, engineering and development expense as a percentage of net
sales for the six months ended June 30, 1997 was 2.7%, compared with an
equivalent amount for the same period in 1996. The expense level during the
first six months of 1997 reflects the Company's continued investment in new
products and production processes.
<PAGE> 21
The Company recognized a restructuring charge of $5.8 million before
income taxes, or $.12 per share after tax, during the second quarter of 1996 to
consolidate Durco and its recently acquired Durametallic operations in Europe
and Australia. Durametallic operations in Belgium, Germany, Italy, France and
Australia were combined with larger and more efficient Durco facilities during
the second half of 1996. The restructuring was a part of the plan to obtain
positive synergies between the two companies. The restructuring plan resulted in
the termination of approximately 55 employees at a cost of $3.2 million. In
addition, exit costs associated with the plant closings of approximately $2.6
million were incurred. Through June 30, 1997, essentially all termination fees
and exit costs were incurred with minimal changes in estimate from the original
accrual.
The effective tax rate for the first six months of 1997 was 38.0%,
compared with 34.9% in 1996. The 1996 effective tax rate included significant
benefits associated with restructuring the Company's European entities and with
utilization of tax loss carryforwards which were not expected to recur in 1997.
Excluding the tax impact on the restructuring in 1996, the tax rate for the
first six months of 1996 was 37%.
Net earnings for the first six months of 1997 were a record $26.6
million, or $1.12 per share, compared with $19.0 million, or $.77 per share, for
the same period in 1996. The increase in earnings reflects an improvement in the
gross margin, a reduction in selling and administrative expenses and the impact
of the restructuring expense recorded in 1996.
Results of Operations - Three Months Ended June 30, 1997
Net sales for the three months ended June 30, 1997 were a record $162.7
million, compared to net sales of $151.1 million for the same period in 1996.
The 8% increase in net sales reflects strong shipments from all business units
including shipments of the major Tyvek and LNG (liquid natural gas) control
valve orders. Partially offsetting the increase in sales was the impact of the
strengthening of the U.S. dollar against the European currencies. International
contributions to consolidated net sales were 32.4% and 33.4% for the three month
periods ended June 30, 1997 and 1996, respectively. Total net sales to
international customers including export sales from the U.S. were 40.5% and
41.2%, respectively. The reduction in international contributions reflects the
impact of the weaker European currencies.
Incoming business was a record of $158.9 million for the second quarter
of 1997. This compares to $153.3 million in 1996's second quarter. Reported
incoming business for the quarter was adversely affected by strengthening of the
U.S. dollar against the European currencies. Backlog at June 30, 1997 was $102.6
million, compared with a backlog of $111.9 million at December 31, 1996. This
reduction followed management's plan to improve customer service by shortening
delivery lead times.
The gross profit margin was 42.6% for the three months ended June 30,
1997. This compares to 41.4% for the same period in 1996. The margin reflects a
more favorable product mix including the impact of the Tyvek shipment and
favorable operating variances resulting from higher levels of plant utilization
and cost control.
<PAGE> 22
Selling and administrative expenses as a percentage of net sales for
the three months ended June 30, 1997 were 22.8%, compared to 24.4% for the same
period in 1996. The decrease in expense as a percentage of net sales is
consistent with the Company's plan to further leverage expense and control costs
in 1997 while continuing to invest in the development and growth of
international operations. Selling and administrative expense in dollars includes
higher levels of commission expense offset in part by currency impacts.
The Company recognized a restructuring charge of $5.8 million before
income taxes, or $.12 per share after tax, during the second quarter of 1996.
For further information, reference the previous paragraph on the same topic
located in the review of operations for the first six months of 1997.
The effective tax rate for the second quarter of 1997 was 38.0%,
compared with 32.3% in 1996. The 1996 effective tax rate included significant
benefits associated with restructuring the Company's European entities and with
utilization of tax loss carryforwards which are not expected to occur in 1997.
Excluding the tax impact on the restructuring in 1996, the tax rate for the
second quarter of 1996 was 37%.
Net earnings for the second quarter of 1997 were a record $15.6
million, or $.65 per share, compared with $8.9 million, or $.36 per share, for
the second quarter of 1996. The increase in earnings reflects improvements in
the gross margin, continuing decline in selling and administrative expense as a
percentage of net sales and the impact of the restructuring expense recorded in
1996.
The foregoing analysis of both the Company's operations for the six
month period ended June 30, 1997 and the three month period ended the same date
is exclusive of the impact of the aforementioned BW/IP merger.
In connection with the aforementioned BW/IP merger, the Company expects
to record a one-time charge of approximately $10.0 million for merger-related
expenses in the third quarter of 1997. These expenses include investment banking
fees and other costs related to the merger. The Company expects to recognize a
restructuring charge in the fourth quarter of 1997. Although expected to be
significant, the amount of the charge is being determined by the plans to
capture synergies and eliminate redundancies in the new organization. When the
plans are complete, the Company expects to announce the amount of the charge and
explain the benefits that will provide a payback in approximately two years.
Cost savings and estimated synergies resulting from the merger are estimated at
$35 - $45 million over the next three years.
<PAGE> 23
SAFE HARBOR STATEMENT: This document contains various forward-looking statements
and includes assumptions about the Company's future market condition,
operations, and results. These statements are based on current expectations and
are subject to significant risks and uncertainties. They are made pursuant to
safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Among the many factors that could cause actual results to differ
materially from the forward-looking statements are: further changes in the
already competitive environment for the Company's products or competitor's
responses to the Company's strategies, political risks or trade embargoes
affecting important country markets, unanticipated expenses or unfavorable
market reaction to the merger of the Company and BW/IP Inc., unanticipated
difficulties or costs associated with integrating the management and operations
of the Company and BW/IP Inc. following the merger, and recognition of
significant expenses associated with adjustments to realign the combined
company's facilities and other capabilities with its strategies.
Net earnings for future quarters of 1997 and thereafter are uncertain and
dependent on general worldwide economic conditions in the Company's major
markets and their strong impact on the level of incoming business activity.
<PAGE> 24
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FLOWSERVE CORPORATION
(Registrant)
/Bruce E. Hines/
------------------------------
Bruce E. Hines
Senior Vice President
Chief Administrative Officer
Date: August 22, 1997
- ----------------------
<PAGE> 25
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
FOOTNOTE
REFERENCE
---------
<S> <C>
(3) ARTICLES OF INCORPORATION AND BY-LAWS:
2.1 Agreement and Plan of Merger dated as of May 6, 1997,
among the Company, Bruin Acquisition Corp. and BW/IP,
Inc. was filed as Annex I to the Joint Proxy Statement/
Prospectus which is part of the Registration Statement on
Form S-4, dated June 19, 1997............................. *
2.2 Durco Stock Option Agreement dated as of May 6, 1997,
between the Company, as issuer, and BW/IP, Inc. as
grantee, was filed as Annex II to the Joint Proxy Statement/
Prospectus which is part of the Registration Statement on
Form S-4, dated June 19, 1997............................. *
2.3 BW/IP Stock Option Agreement dated as of May 6, 1997,
between BW/IP Inc., as issuer, and the Company, as grantee,
was filed as Annex III to the Joint Proxy Statement/
Prospectus which is part of the Registration Statement on
Form S-4, dated June 19, 1997............................. *
3.1 1988 Restated Certificate of Incorporation of The
Duriron Company, Inc. was filed as Exhibit 3.1 to
the Company's Annual Report on Form 10-K for
the year ended December 31, 1988 ......................... *
3.2 1989 Amendment to Certificate of Incorporation
was filed as Exhibit 3.2 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1989......................................... *
3.3 By-Laws of The Duriron Company, Inc.
(as restated) were filed with the Commission as
Exhibit 3.2 to The Company's Annual Report on
Form 10-K for the year ended December 31,
1987...................................................... *
</TABLE>
<PAGE> 26
<TABLE>
<S> <C> <C>
3.4 1996 Certificate of Amendment of Certificate of
Incorporation was filed as Exhibit 3.4 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1995........................................ *
3.5 Amendment No. 1 to Restated Bylaws was filed as
Exhibit 3.5 to the Company's Annual Report on
Form 10-K for the year ended December 31,
1995..................................................... *
3.6 July 1997 Certificate of Amendment of Certificate
of Incorporation......................................... Filed Herewith
(4) INSTRUMENTS DEFINING THE RIGHTS OF
SECURITY HOLDERS, INCLUDING INDENTURES:
4.1 Lease agreement, indenture of mortgage and
deed of trust, and guarantee agreement, all
executed on June 1, 1978 in connection with
9-1/8% Industrial Development Revenue Bonds,
Series A, City of Cookeville, Tennessee...................... +
4.2 Lease agreement, indenture of trust, and
guaranty agreement, all executed on June 1,
1978 in connection with 7-3/8% Industrial
Development Revenue Bonds, Series B, City of
Cookeville, Tennessee........................................ +
4.3 Form of Rights Agreement dated as of August 1,
1986 was filed as an Exhibit to the
Company's Form 8-A dated August 13, 1986....... *
4.4 Amendment to Rights Agreement dated August 1, 1996
was filed as Exhibit 4.5 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1996............. *
4.5 Interest Rate and Currency Exchange Agreement
between the Company and Barclays Bank dated
November 17, 1992 PLC in the amount of
$25,000,000 was filed as Exhibit 4.9 to
Company's Report of Form 10-K for year ended
December 31, 1992............................................. *
</TABLE>
<PAGE> 27
<TABLE>
<S> <C>
4.6 Loan Agreement in the amount of $25,000,000
between the Company and Metropolitan Life
Insurance Company dated November 12, 1992 was
filed as Exhibit 4.10 to the Company's Annual
Report on Form 10-K for the year ended
December 31, 1992 ............................................ *
4.7 Revolving Credit Agreement between the Company
and First of America Bank - Michigan, N.A. in the
amount of $20,000,000 and dated August 22,
1995.......................................................... +
4.8 Credit Facility between the Company in the amount of
$100,000,000 and National City Bank, as Agent,
dated December 3, 1996 was filed as Exhibit 4.8 to
the Company's Report on Form 10-K for the year
ended December 31, 1996...................................... *
4.9 Rate Swap Agreement in the amount of $25,000,000
between the Company and National City Bank dated
November 14, 1996 was filed as Exhibit 4.9 to the
Company's Report on Form 10-K for the year ended
December 31, 1996........................................... *
4.10 Rate Swap Agreement in the amount of $25,000,000
between the Company and Key Bank National
Association dated October 28, 1996 was filed as
Exhibit 4.10 to the Company's Report on Form 10-K
for the year ended December 31, 1996......................... *
(10) MATERIAL CONTRACTS: (See Footnote "a")
10.1 The Duriron Company, Inc. Incentive Compensation
Plan (the "Incentive Plan") for Senior Executives,
as amended and restated effective January 1, 1994,
was filed as Exhibit 10.1 to the Company's Annual Report
on Form 10-K for the year ended December 31,
1993......................................................... *
10.2 Amendment No. 1 to the Incentive Plan was filed as
Exhibit 10.2 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995.................... *
</TABLE>
<PAGE> 28
<TABLE>
<S> <S>
10.3 The Duriron Company, Inc. Supplemental Pension
Plan for Salaried Employees was filed with the
Commission as Exhibit 10.4 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1987............................................. *
10.4 The Duriron Company, Inc. amended and
restated Director Deferral Plan was filed as
Attachment A to the Company's definitive
1996 Proxy Statement filed with the Commission
on March 10, 1996............................................. *
10.5 Change in Control Agreement ("CIC") between
The Duriron Company, Inc. and William M. Jordan,
Chairman, President and CEO was filed as Exhibit
10.5 to the Company's Report on Form 10-K for
the year ended December 31, 1996.............................. *
10.6 Form of CIC Agreement between all other executive
officers of the Company was filed as Exhibit 10.6
to the Company's Report on Form 10-K for the
year ended December 31, 1996................................. *
10.7 The Duriron Company, Inc. First Master Benefit
Trust Agreement dated October 1, 1987 was filed
as Exhibit 10.24 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1987............... *
10.8 Amendment #1 to the first Master Benefit Trust
Agreement dated October 1, 1987 was filed as
Exhibit 10.24 to the Company's Annual Report
on Form 10-K for the year ended December 31,
1993......................................................... *
10.9 Amendment #2 to First Master Benefit Trust
Agreement was filed as Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1993................................. *
10.10 The Duriron Company, Inc. Second Master Benefit
Trust Agreement dated October 1, 1987 was filed
as Exhibit 10.12 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1987................ *
</TABLE>
<PAGE> 29
<TABLE>
<S> <C>
10.11 First Amendment to Second Master Benefit Trust
Agreement was filed as Exhibit 10.26 to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1993................................. *
10.12 The Duriron Company, Inc. Long-Term Incentive
Plan (the "Long-Term Plan"), as amended and
restated effective November 1, 1993 was filed as
Exhibit 10.8 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993............... *
10.13 Amendment No. 1 to the Long-Term Plan was filed
as Exhibit 10.13 to the Company's Annual Report
on Form 10-K for the year ended December 31,
1995......................................................... *
10.14 The Duriron Company, Inc. 1989 Stock Option Plan
as amended and restated effective January 1, 1997
was filed as Exhibit 10.14 to the Company's Report
on Form 10-K for the year ended December 31,
1996......................................................... *
10.15 The Duriron Company, Inc. 1989 Restricted Stock
Plan (the "Restricted Stock Plan") as amended and
restated effective January 1, 1997 was filed as
Exhibit 10.15 to the Company's Report on Form
10-K for the year ended December 31, 1996.................... *
10.16 The Duriron Company, Inc. Retirement
Compensation Plan for Directors ("Director
Retirement Plan") was filed as Exhibit 10.15 on
the Company's Annual Report to Form 10-K for
the year ended December 31, 1988............................. *
10.17 Amendment No. 1 to Director Retirement Plan
was filed as Exhibit 10.21 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1995............................................ *
10.18 The Company's Benefit Equalization Pension
Plan ("Equalization Plan") was filed as Exhibit
10.16 to the Company's Annual Report on Form
10-K for the year ended December 31, 1989.................... *
</TABLE>
<PAGE> 30
<TABLE>
<S> <C>
10.19 Amendment #1 dated December 15, 1992 to the
Equalization Plan was filed as Exhibit 10.18 to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1992................................. *
10.20 The Company's Equity Incentive Plan as amended
and restated effective July 21, 1995 was filed as
Exhibit 10.25 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995 .............. *
10.21 Supplemental Pension Agreement between the
Company and William M. Jordan dated
January 18, 1993 was filed as Exhibit 10.15
to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992......................... *
10.22 1979 Stock Option Plan, as amended and
restated April 23, 1991, and Amendment #1
thereto dated December 15, 1992, was filed as
Exhibit 10.17 to the Company's Annual Report
on Form 10-K for the year ended
December 31, 1992 ........................................... *
10.23 Deferred Compensation Plan for Executives was
filed as Exhibit 10.19 to the Company's Annual
Report on Form 10-K for the year ended
December 31, 1992 ........................................... *
10.24 Executive Life Insurance Plan of The Duriron
Company, Inc. was filed as Exhibit 10.29 to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1995................................. *
10.25 Executive Long-Term Disability Plan of The
Duriron Company, Inc. was filed as Exhibit 10.30
to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995............................. *
10.26 Consulting Agreement between James S. Ware
and Durametallic Corporation dated April 21,
1991 was filed as Exhibit 10.31 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1995............................................ *
</TABLE>
<PAGE> 31
<TABLE>
<S> <C>
10.27 Senior Executive Death Benefit Agreement
between James S. Ware and Durametallic
dated April 12, 1991 was filed as Exhibit 10.32 to
the Company's Annual Report on Form 10-K for
the year ended December 31, 1995............................ *
10.28 Executive Severance Agreement between
James S. Ware and Durametallic Corporation dated
January 6, 1994 was filed as Exhibit 10.33 to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1995................................ *
10.29 Agreement between James S. Ware and the Company
dated September 11, 1995 was filed as Exhibit 10.34 to
the Company's Annual Report on Form 10-K for the
year ended December 31, 1995................................. *
10.30 Agreement and Plan of Merger Among The Duriron
Company, Inc., Wolverine Acquisition Corporation
and Durametallic Corporation, dated as of
September 11, 1995 was filed as Annex A on the
Form S-4 Registration Statement filed by the Company
on September 11, 1995........................................ *
10.31 Split-Dollar Life Insurance Agreement between the
Company and James S. and Sheila D. Ware Irrevocable
Trust II signed March 6, 1996 was filed as Exhibit 10.36 to the
Company's quarterly report on Form 10-Q for the quarter ended
March 31, 1996................................................ *
10.32 Employee Protection Plan, as revised effective March 1, 1997
(which provides certain severance benefits to employees upon
a change of control of the Company) was filed as Exhibit
10.32 to the Company's Report on Form 10-K for the year
ended December 31, 1996....................................... *
10.33 1997 Stock Option Plan was included as Exhibit A to the
Company's 1997 Proxy Statement which was filed with
the Commission on March 17, 1997............................. *
</TABLE>
<PAGE> 32
<TABLE>
<S> <C>
(27) FINANCIAL DATA SCHEDULE
27.1 Financial Data Schedule (submitted for the SEC's
information).............................................. Filed Herewith
</TABLE>
- --------------
"*" Indicates that the exhibit is incorporated by reference into this
Quarterly Report on Form 10-Q from a previous filing with the
Commission. The Company's file number with the Commission is "0-325".
"+" Indicates that the document relates to a class of indebtedness that
does not exceed 10% of the total assets of the Company and subsidiaries
and that the Company will furnish a copy of the document to the
Commission upon request.
"a" The documents identified under Item 10 include all management contracts
and compensatory plans and arrangements required to be filed as
exhibits.
<PAGE> 33
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders of the Company was held on April 24,
1997.
(b) A proposal to approve the re-election of three Directors to the Board
of Directors, in each case for a term of three years, was approved as
follows with respect to each nominee for office:
<TABLE>
<CAPTION>
Votes Cast Votes Abstentions and
Nominee For Withheld Broker Non-Votes
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Diane C. Harris 17,362,399 2,598,885
William M. Jordan 17,355,263 2,606,020
James S. Ware 17,359,731 2,601,552
</TABLE>
The other directors whose term of office continued after the meeting
were Hugh K. Coble, Ernest Green, John S. Haddick, Richard L. Molen,
James F. Schorr, Kevin E. Sheehan, and R. Elton White.
Pursuant to the aforementioned Merger Agreement with BW/IP Inc.,
Messrs. Ware, Green, Haddick, Molen, and Schorr resigned from the
Board, and Mr. Bernard G. Rethore, Mr. Michael F. Johnston, Mr. James
O. Rollans, and Mr. William C. Rusnak were newly elected to the Board,
effective July 22, 1997.
(c) The following additional matters were submitted to a vote of the
stockholders:
(i) A proposal to approve the change of name of the Company to
"Durco International Inc." was approved with 19,603,762 votes
cast for the proposal, 269,274 votes cast against the proposal
and an aggregate of 88,246 abstentions and broker non-votes.
(ii) A proposal to adopt the 1997 Stock Option Plan was approved,
with 16,225,131 votes cast for the proposal, 2,041,638 votes
cast against the proposal and an aggregate of 183,345
abstentions and broker non-votes.
(iii) A proposal to ratify the appointment of Ernst & Young LLP as
independent auditors for the Company for the year 1997 was
approved with 19,877,126 votes cast for the proposal, 29,794
votes cast against the proposal and an aggregate of 54,363
abstentions and broker non-votes.
(d) On July 22, 1997, the Company shareholders also approved the issuance
of approximately 16,914,820 shares of common stock to the shareholders
of BW/IP Inc. under the aforementioned merger agreement, the change of
the Company's name to "Flowserve Corporation" and the increase in the
amount of authorized shares of common stock from 60,000,000 to
120,000,000.
<PAGE> 1
Exhibit 3.6
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
DURCO INTERNATIONAL INC.
UNDER
SECTION 805 OF THE BUSINESS CORPORATION LAW
Pursuant to the provisions of Section 805 of the Business Corporation
Law, the undersigned, William M. Jordan, President, and Ronald F. Shuff,
Secretary, of DURCO INTERNATIONAL INC., a New York corporation (the
"Corporation"), do hereby certify as follows:
FIRST: The name of the corporation is Durco International Inc. The name
under which the corporation was formed was Duriron Castings Company.
SECOND: The Certificate of Incorporation of the Corporation was filed
by the Department of State on May 1, 1912.
THIRD: The amendments to the Certificate of Incorporation affected by
this Certificate are as follows:
Article FIRST of the Certificate of Incorporation is
hereby amended by deleting Article FIRST and by replacing such
article with the following:
"FIRST: The name of the corporation is Flowserve
Corporation."
Article THIRD of the Certificate of Incorporation is
hereby amended by deleting the first sentence of Article THIRD
and by replacing such deleted sentence with the following
sentence:
"THIRD: The aggregate number of shares which the
corporation shall have authority to issue is 121,000,000, of
which 1,000,000 shares, of the par value, of $1.00 each, shall
be Preferred Stock and 120,000,000 shares, of the par value of
$1.25 each, shall be Common Stock."
FOURTH: No change in the number of outstanding shares of
Common Stock or Preferred Stock of the Corporation resulted from the
above amendment to Article THIRD. However, as the result of such
amendment, the total number of authorized shares of the Corporation is
increased from 61,000,000 to 121,000,000 with the number of shares of
Preferred Stock, of the par value of $1.00 each, being
<PAGE> 2
unchanged from 1,000,000 shares and the number of shares of Common
Stock, of the par value of $1.25 each, being increased from 60,000,000
to 120,000,000 shares.
FIFTH, the foregoing amendment to the Certificate of
Incorporation was authorized by the unanimous vote of the Directors
present at a meeting of the Board of Directors duly convened and held
on May 5, 1997, and such amendment was thereafter approved by an
affirmative vote of a majority of all the outstanding shares of the
Common Stock at a Special Meeting of Shareholders of the Corporation
held on July 22, 1997.
IN WITNESS WHEREOF, we hereunto sign our respective names and
affirm that the statements made herein are true under penalties of
perjury, this 22nd day of July, 1997.
/s/ William M. Jordan
-----------------------------
William M. Jordan,
President
/s/ Ronald F. Shuff
-----------------------------
Ronald F. Shuff
Secretary
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
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0
0
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