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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 31,1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-19162
BW/IP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 33-0270574
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 OCEANGATE BOULEVARD
SUITE 900
LONG BEACH, CALIFORNIA 90802
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(Address of principal executive offices) (Zip Code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 435-3700
BWIP HOLDING, 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
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.*
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CLASS A COMMON STOCK, $.01 PAR VALUE, 24,275,000
OUTSTANDING AT MARCH 31, 1994 (SHARES)
CLASS B COMMON STOCK, $.01 PAR VALUE, NONE
OUTSTANDING AT MARCH 31, 1994 (SHARES)
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___________
* ON MAY 10, 1994, THE STOCKHOLDERS OF THE REGISTRANT AGREED, AMONG OTHER
THINGS, TO CONVERT THE REGISTRANT'S TWO-CLASS COMMON STOCK STRUCTURE INTO A
ONE-CLASS COMMON STOCK STRUCTURE. THIS CHANGE BECAME EFFECTIVE ON MAY 11,
1994, AT WHICH TIME, AMONG OTHER THINGS, THE CLASS B COMMON STOCK WAS
ELIMINATED AND THE CLASS A COMMON STOCK WAS REDESIGNATED SIMPLY "COMMON
STOCK". THERE WAS NO CHANGE IN THE NUMBER OF SHARES OUTSTANDING.
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BW/IP, INC.
INDEX
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PAGE NUMBER
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1994 (unaudited) and December 31, 1993 2-3
Condensed Consolidated Statements of Income -
Three months ended March 31, 1994 and
March 31, 1993 (unaudited) 4
Condensed Consolidated Statements of Cash Flows -
Three months ended March 31, 1994 and
March 31, 1993 (unaudited) 5
Notes to Condensed Consolidated Financial Statements
(unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BW/IP, INC.
Condensed Consolidated Balance Sheets
(Dollar amounts in thousands)
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March 31, December 31,
Assets 1994 1993
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(Unaudited)
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Current assets:
Cash and cash equivalents $ 10,390 $ 7,671
Accounts and notes receivable (less allowance
for doubtful accounts of $3,098 at March 31,
1994 and $2,805 at December 31, 1993) 92,744 92,614
Inventories 85,737 77,416
Other, including net assets held for disposition 40,219 36,028
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Total current assets 229,090 213,729
Property, plant and equipment, at cost
(net of accumulated depreciation and amortization
of $55,728 at March 31, 1994 and $54,237 at
December 31, 1993) 93,178 92,273
Goodwill (net of accumulated amortization
of $4,105 at March 31, 1994 and $3,742
at December 31, 1993) 37,690 21,392
Other assets 16,824 13,894
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Total assets $376,782 $341,288
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See accompanying notes to condensed consolidated financial statements.
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BW/IP, INC.
Condensed Consolidated Balance Sheets
(Dollar amounts in thousands)
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March 31, December 31,
Liabilities and Stockholders' Equity 1994 1993
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(Unaudited)
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Current liabilities:
Accounts payable $ 27,913 $ 34,569
Current maturities of long-term debt 12,547 9,611
Other current liabilities 50,579 46,668
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Total current liabilities 91,039 90,848
Long-term debt 83,804 54,471
Other long-term liabilities 49,215 49,578
Stockholders' equity:
Preferred stock - -
Common stock 245 245
Paid-in capital 85,763 85,763
Retained earnings 66,592 63,337
Cumulative translation adjustment 737 (2,341)
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153,337 147,004
Less common stock in treasury, at cost (613) (613)
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Total stockholders' equity 152,724 146,391
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Total liabilities and stockholders' equity $376,782 $341,288
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See accompanying notes to condensed consolidated financial statements.
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BW/IP, INC.
Condensed Consolidated Statements of Income
(Dollar amounts in thousands, except share and per share data)
(Unaudited)
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Three Months Ended
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March 31, March 31,
1994 1993
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Net sales $96,707 $99,450
Cost of sales 58,335 59,899
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Gross profit 38,372 39,551
Selling, administrative and operating expenses 28,382 27,545
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Operating income 9,990 12,006
Interest expense, net 1,455 1,310
Other expenses 204 288
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Income from continuing operations
before income taxes 8,331 10,408
Provision for income taxes 3,018 3,699
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Income from continuing operations 5,313 6,709
Discontinued operations, net of tax (116) 223
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Net income $ 5,197 $ 6,932
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Earnings per share:
From continuing operations $ .22 $ .28
Discontinued operations, net of tax (.01) .01
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Net income per share $ .21 $ .29
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Dividends declared per share $ .08 $ .06
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Weighted average number of shares outstanding 24,275,000 24,275,000
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See accompanying notes to condensed consolidated financial statements.
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BW/IP, INC.
Condensed Consolidated Statements of Cash Flows
(Dollar amounts in thousands)
(Unaudited)
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Three Months Ended
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March 31, March 31,
1994 1993
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Cash flows (used in) operating activities $ (1,513) $ (6,512)
Cash flows (used in) from investing activities:
Capital expenditures (1,959) (2,498)
Expenditures for acquisitions (22,977) (3,425)
Proceeds from disposition of property
and equipment 20 121
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Net cash (used in) investing activities (24,916) (5,802)
Cash flows from (used in) financing activities:
Net borrowings under credit agreements 30,296 7,179
Dividends paid (1,942) (1,456)
Other 131 -
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Net cash from financing activities 28,485 5,723
Effect of exchange rate changes on cash 663 (52)
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Net increase (decrease) in cash and cash equivalents 2,719 (6,643)
Cash and cash equivalents at beginning of period 7,671 10,214
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Cash and cash equivalents at end of period $ 10,390 $ 3,571
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Supplemental cash flow disclosures:
Interest paid $ 1,080 $ 355
Income taxes paid 2,313 1,499
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See accompanying notes to condensed consolidated financial statements.
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BW/IP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The accompanying condensed consolidated balance sheet as of March 31,
1994 and the related condensed consolidated statements of income and
cash flows for the three months ended March 31, 1994 and 1993 are
unaudited. In management's opinion, all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of
such financial statements have been made.
The accompanying condensed consolidated financial statements and notes
in this Form 10-Q are presented as permitted by Regulation S-X, and do
not contain certain information included in the Company's annual
financial statements and notes. Accordingly, the accompanying
condensed consolidated financial information should be read in
conjunction with the Company's 1993 Annual Report to Stockholders.
Interim results are not necessarily indicative of results to be
expected for a full year and are subject to audit and adjustment at
the end of the year.
BW/IP, Inc. (formerly known as BWIP Holding, Inc.) is the parent
company of BW/IP International, Inc. (BW/IP). Unless the context
otherwise requires, references herein to "the Company" are to BW/IP,
Inc. and BW/IP International, Inc. and its consolidated subsidiaries.
2. Inventories
Inventories consist of the following (amounts in thousands):
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March 31, December 31,
1994 1993
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Finished parts $45,093 $38,121
Work in process 36,894 36,723
Raw materials and supplies 13,302 12,951
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95,289 87,795
Less progress billings (9,552) (10,379)
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Net inventories $85,737 $77,416
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3. Acquisitions
In January 1994, the Company acquired Pacific Wietz GmbH & Co. KG
(Pacific Wietz), a manufacturer of mechanical seals primarily for the
chemical industry, for $24.0 million. The acquisition was accounted
for by the purchase method and, accordingly, the results of Pacific
Wietz have been included with the results of the Company from the date
of acquisition.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company currently operates in one business segment: Pump/Seal. The
Pump/Seal segment consists primarily of centrifugal pumps, mechanical seals,
nuclear valves and related equipment and services. In 1993, the Company
initiated its plan to dispose of its Fluid Controls segment. The disposition
is being accounted for as a discontinued operation and prior quarterly periods
have been reclassified to reflect this accounting.
Net sales of $96.7 million for the three months ended March 31, 1994 were $2.7
million, or approximately 3% lower than the corresponding period in 1993. The
decrease in net sales reflects a decrease in original equipment (OE) sales of
approximately $7 million, offset by an increase in aftermarket sales of
approximately $4 million. Although aftermarket sales increased as a percentage
of net sales to 61% in the first quarter of 1994 from 56% in the first quarter
of 1993, a shift in mix within aftermarket sales, and the volume decrease in OE
sales, resulted in a slight decrease in gross profit. Included in the first
quarter 1994 sales are $5.3 million in sales related to the Company's
acquisition of Pacific Wietz GmbH & Co. KG (Pacific Wietz), completed in
January 1994.
Results in the first quarter 1994 reflect the market conditions in effect
during 1993. Bookings in 1993 were adversely affected by sluggish economic and
project activity worldwide. Petroleum and power customers continued to defer
expenditures, primary in response to lower crude oil prices and the
increasingly competitive environment facing the utilities. Although first
quarter 1994 bookings indicated improvement in certain markets, for instance
the cogeneration market, project activity can vary significantly from quarter
to quarter, therefore the level of bookings in the first quarter 1994 should
not be viewed as a trend, either positive or negative.
Selling, administrative and operating expenses increased as a percentage of net
sales from 27.7% for the three months ended March 31, 1993 to 29.3% for the
corresponding period in 1994. The increase was due primarily to lower sales
volume during the first quarter of 1994, increased selling expenses and the
first quarter 1994 addition of Pacific Wietz.
Operating income for the three months ended March 31, 1994 was $10.0 million, a
decrease of $2.0 million, or 16.8% from the comparable period in 1993. The
decrease in operating income reflects the reduction in gross profit and the
increase in selling, administrative and operating expenses, which more than
offset certain favorable contributions caused by the reduction of certain
performance based accruals and certain contract dispute and other reserves no
longer determined to be necessary.
Order input for the three months ended March 31, 1994 was $115.9 million
compared with $93.3 million for the corresponding period in 1993. The increase
in input is primarily due to higher bookings in the United States, Mexico and
the Pacific Rim, offset by lower bookings in Europe. Pacific Wietz contributed
approximately $8 million in bookings during the first quarter 1994. Backlog at
March 31, 1994 was $177.5 million compared to $204.2 million at March 31,
1993, down primarily due to the lower bookings levels in 1993.
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During the fourth quarter of 1993 the Company recorded a restructuring charge
of $22.7 million. The charge, was comprised of $15.5 million for the
relocation and rationalization of product lines and operations, and work force
reductions in the pump manufacturing operations, and $7.2 million for related
organizational and facility realignments. Of these amounts, approximately $6
million is for non-cash expenses related to the disposal of property, plant and
equipment. The majority of the cash costs of the restructuring are expected to
be incurred during the balance of 1994 and 1995. During the first quarter of
1994 over 100 employees were removed from the work force, and detailed planning
for implementation of the restructuring continued with site and final machinery
selection for the new large component pump facility nearing completion. With
the exception of costs associated with severance, no significant costs or
commitments for expenditures were incurred during this period.
Continued over capacity in the pump manufacturing industry, and the increased
importance of price competition led the company to recognize the need to take
strong actions to become a lower cost producer of its original equipment pump
products. The restructuring, which will impact manufacturing, selling and other
aspects of the company's facilities, equipment and systems, should lead to
substantial reductions in costs to produce and sell products, particularly
original equipment pumps, and permit the company to selectively improve its
competitive position and sales in its served markets, while also improving
profits.
In addition to the costs to be incurred under the company's restructuring plan,
the company is also committed to an integrated plan of capital expenditures to
support the goals of the restructuring. These capital expenditures, which are
incremental to ongoing customary expenditures, will total between $3 million
and $10 million per year during 1994 and 1995, and continue into 1996, will
support the development of the new large component manufacturing facility, and
the addition of new more efficient state of the art machine tools in this
factory as well as more modern manufacturing machinery and support systems in
selected other facilities.
The benefits of the restructuring and capital expenditures will be realized
incrementally over the period during which the changes are implemented. The
ultimate amount of the savings generated by the restructuring will depend upon
numerous variables which will be determined as the plan is implemented. The
cost benefits of staff reductions are realized almost immediately, while the
benefits from the addition of machinery and other facilities and equipment are
realized only after the longer lead times for their purchase, integration into
the overall manufacturing system, and "learning curve" are completed. This
period is expected to extend over 1994, 1995 and into 1996 as the longer lead
time portions of the restructuring and capital expenditure plans are completed.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations, credit available under its credit agreements and
customer progress payments have been the Company's primary sources of
short-term liquidity. During the three-month period ended March 31, 1994, the
Company used $1.5 million of net funds from operating activities, as compared
to the first quarter of 1993 during which the Company used $6.5 million of net
funds from operating activities.
At March 31, 1994, the Company had outstanding under its credit facilities
borrowings totaling $43.2 million and letters of credit totaling $13.2 million,
and there was $53.4 million available for borrowing thereunder. In January
1994, the Company borrowed approximately $18 million under its U.S. credit
facility to finance the acquisition of Pacific Wietz. As of March 31, 1994,
the Company had outstanding $22.2 million of obligations relating to
performance bonds.
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Interest on the Company's $50 million outstanding senior notes is fixed at
7.92%. However, all of the Company's borrowings under its other senior credit
facilities are currently at floating interest rates. Interest costs are
therefore subject to significant changes depending upon the movement of
short-term interest rates.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) There were no reports on Form 8-K filed during the quarter ended
March 31, 1994. However, a Report on Form 8-K dated May 12, 1994
was filed with respect to Item 5, "Other Events," to report that
the stockholders of the registrant had agreed on May 10, 1994 to
(a) change the Company's name from "BWIP Holding, Inc." to "BW/IP,
Inc." and (b) convert the Company's two-class common stock
structure into a one-class common stock structure. These changes
became effective on May 11, 1994.
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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.
BW/IP, INC.
(Registrant)
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Date: May 13, 1994 By: /s/ E. P. Cross
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E. P. Cross
Vice President - Finance
(Duly Authorized Officer)
Date: May 13, 1994 By: /s/ N. A. Ludlam
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N. A. Ludlam
(Chief Accounting Officer)
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