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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 JUNE 30, 1994
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-19162
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BW/IP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
__________________
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)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 435-3700
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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
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INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
COMMON STOCK, $.01 PAR VALUE, 24,275,000
OUTSTANDING AT JUNE 30, 1994 (SHARES)
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BW/IP, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1994 (unaudited) and December 31, 1993 2-3
Condensed Consolidated Statements of Income -
Three and six months ended June 30, 1994 and
June 30, 1993 (unaudited) 4
Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 1994 and
June 30, 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 7-8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BW/IP, INC.
Condensed Consolidated Balance Sheets
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
Assets 1994 1993
- - ------ ---------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,574 $ 7,671
Accounts and notes receivable (less allowance
for doubtful accounts of $3,466 at June 30,
1994 and $2,805 at December 31, 1993) 103,822 92,614
Inventories 91,287 77,416
Other, including net assets held for disposition 39,407 36,028
-------- --------
Total current assets 244,090 213,729
Property, plant and equipment, at cost
(net of accumulated depreciation and amortization
of $58,083 at June 30, 1994 and $54,237 at
December 31, 1993) 92,558 92,273
Goodwill (net of accumulated amortization
of $4,483 at June 30, 1994 and $3,742
at December 31, 1993) 40,888 21,392
Other assets 15,356 13,894
-------- --------
Total assets $392,892 $341,288
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
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BW/IP, INC.
Condensed Consolidated Balance Sheets
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
Liabilities and Stockholders' Equity 1994 1993
- - ------------------------------------ ------------ ------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 31,745 $ 34,569
Current maturities of long-term debt 11,760 9,611
Other current liabilities 53,847 46,668
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Total current liabilities 97,352 90,848
Long-term debt 87,316 54,471
Other long-term liabilities 48,632 49,578
Stockholders' equity:
Preferred stock - -
Common stock 245 245
Paid-in capital 85,763 85,763
Retained earnings 70,533 63,337
Cumulative translation adjustment 3,664 (2,341)
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160,205 147,004
Less common stock in treasury, at cost (613) (613)
-------- --------
Total stockholders' equity 159,592 146,391
-------- --------
Total liabilities and stockholders' equity $392,892 $341,288
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 5
BW/IP, INC.
Condensed Consolidated Statements of Income
(Dollar amounts in thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $105,540 $105,027 $202,247 $204,477
Cost of sales 63,774 62,483 122,109 122,382
-------- -------- -------- --------
Gross profit 41,766 42,544 80,138 82,095
Selling, administrative and operating expenses 30,384 27,718 58,766 55,263
-------- -------- -------- --------
Operating income 11,382 14,826 21,372 26,832
Interest expense, net 1,733 1,949 3,188 3,259
Other expenses 164 119 368 407
-------- -------- -------- --------
Income from continuing operations
before income taxes 9,485 12,758 17,816 23,166
Provision for income taxes 3,485 4,529 6,503 8,228
-------- -------- -------- --------
Income from continuing operations 6,000 8,229 11,313 14,938
Discontinued operations, net of tax 369 280 253 503
-------- -------- -------- --------
Net income $ 6,369 $ 8,509 $ 11,566 $ 15,441
======== ======== ======== ========
Earnings per share:
From continuing operations $ .25 $ .34 $ .47 $ .62
Discontinued operations, net of tax .02 .01 .01 .02
-------- -------- -------- --------
Net income per share $ .27 $ .35 $ .48 $ .64
======== ======== ======== ========
Dividends declared per share $ .10 $ .08 $ .18 $ .14
======== ======== ======== ========
Weighted average number of shares outstanding 24,275,000 24,275,000 24,275,000 24,275,000
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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BW/IP, INC.
Condensed Consolidated Statements of Cash Flows
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30, June 30,
1994 1993
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<S> <C> <C>
Cash flows (used in) from operating activities $ (1,091) $ 1,167
Cash flows (used in) from investing activities:
Capital expenditures (4,636) (6,935)
Expenditures for acquisitions (22,977) (3,425)
Proceeds from disposition of property
and equipment 660 613
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Net cash (used in) investing activities (26,953) (9,747)
Cash flows from (used in) financing activities:
Net borrowings under credit agreements 41,000 9,000
Payment of senior notes (8,333) -
Dividends paid (3,884) (2,913)
Other (5) -
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Net cash from financing activities 28,778 6,087
Effect of exchange rate changes on cash 1,169 (77)
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Net increase (decrease) in cash and cash equivalents 1,903 (2,570)
Cash and cash equivalents at beginning of period 7,671 10,214
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Cash and cash equivalents at end of period $ 9,574 $ 7,644
======== =======
Supplemental cash flow disclosures:
Interest paid $ 3,912 $ 2,921
Income taxes paid 5,076 8,068
</TABLE>
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 June 30,
1994 and the related condensed consolidated statements of income for
the three and six months, and cash flows for the six months, ended
June 30, 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):
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
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<S> <C> <C>
Finished parts $45,507 $38,121
Work in process 40,367 36,723
Raw materials and supplies 15,374 12,951
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101,248 87,795
Less progress billings (9,961) (10,379)
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Net inventories $91,287 $77,416
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</TABLE>
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.
Three Months Ended June 30, 1994 Compared To Three Months Ended June 30, 1993
Net sales of $105.5 million for the three months ended June 30, 1994 were
approximately equal to net sales of $105.0 million for the corresponding period
in 1993. Although aftermarket sales increased as a percentage of sales to 57%
in the second quarter of 1994 from 55% in the second quarter of 1993, a shift
in mix within aftermarket sales, and the volume decrease in OE sales, resulted
in a decrease in gross profit. Gross profit for the three months ended June
30, 1993 reflected favorable experience with respect to warranty costs. By
geographic region, net sales were down in the second quarter of 1994 as
compared with 1993 in the United States, offset by increases in Europe, Mexico
and the Pacific Rim. Included in the second quarter 1994 sales are $5.7
million in net sales related to the Company's acquisition of Pacific Wietz GmbH
& Co. KG (Pacific Wietz), completed in January 1994.
Selling, administrative and operating expenses increased as a percentage of net
sales from 26.4% for the three months ended June 30, 1993 to 28.8% for the
corresponding period in 1994. The increase was due primarily to selling
expenses outpacing sales volume within the Pump business and the first quarter
1994 addition of Pacific Wietz. Selling, administrative and operating expenses
for the three months ended June 30, 1993 were favorably impacted by the
reduction of certain performance based accruals and certain other reserves no
longer determined to be necessary.
Operating income for the three months ended June 30, 1994 was $11.4 million, a
decrease of $3.4 million, or 23.2% 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.
Six Months Ended June 30, 1994 Compared to Six Months Ended June 30, 1993
Net sales of $202.2 million for the six months ended June 30, 1994 were $2.2
million or 1.1% lower than the corresponding period in 1993. The decrease in
sales reflects a decrease in OE sales of approximately $8.1 million, offset by
an increase in aftermarket sales of approximately $5.9 million. Although
aftermarket sales increased as a percentage of sales to 59% in the first half
of 1994 from 56% in the first half of 1993, a shift in mix within aftermarket
sales, and the volume decrease in OE sales, resulted in a decrease in gross
profit. Gross profit for the six months ended June 30, 1993 reflected
favorable experience with respect to warranty costs. By geographic region, net
sales were down during the six months ended June 30, 1994 as compared with 1993
in the United States, offset by increases in Europe, Mexico and the Pacific
Rim. Included in the first half 1994 sales are $10.8 million in net sales
related to the Company's acquisition of Pacific Wietz.
Results in the first half of 1994 reflect 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, primarily in response to lower crude oil prices and the
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increasingly competitive environment facing the utilities. Although first half
bookings indicated improvement in certain markets, for instance the U. S.
petroleum market and the cogeneration market, project activity can vary
significantly from quarter to quarter, therefore the level of bookings in the
first half of 1994 should not be viewed as a trend either positive or negative.
Selling, administrative and operating expenses increased as a percentage of
sales from 27.0% for the six months ended June 30, 1993 to 29.1% for the
corresponding period in 1994. The increase was primarily due to selling
expenses outpacing sales growth in the Pump business and the first quarter
addition of Pacific Wietz.
Operating income for the six months ended June 30, 1994 was $21.4 million, a
decrease of $5.5 or 20.3% 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.
Interest expense, as a percentage of net sales, was unchanged for the six
months ended June 30, 1994 as compared to the same period in 1993, due in part
to increased borrowings associated with the purchase of Pacific Wietz.
Order input for the six months ended June 30, 1994 was $228.7 million compared
with $201.1 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 $13.9 million in bookings in the first half of 1994. Petroleum
order input for the first six months of 1994 was ahead of the same period last
year with gains in every sector of the petroleum markets, including pipeline,
production and refining. On the negative side, the nuclear-power area remains
weak. Backlog at June 30, 1994 was $176.3 million compared to $196.4 million
at June 30, 1993, down primarily due to the lower booking levels in 1993.
The Company's previously announced restructuring program is ongoing.
Additional headcount reductions were made in the second quarter. With the
exception of costs associated with severance and the ordering of certain long
lead time machine tools, no significant costs or commitments for expenditures
were incurred during this period.
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 six month period ended June 30, 1994, the
Company used $1.1 million in net funds from operating activities, as compared
to the first half of 1993 during which the company generated $1.2 million of
net funds from operating activities. The reduction in operating cash flow is
due primarily to lower earnings during the comparable periods.
At June 30, 1994, the Company had outstanding under its credit facilities
borrowings totaling $53.8 million and letters of credit totaling $11.7 million,
and there was $44.7 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 June 30, 1994, the
Company has outstanding $24.8 of obligations relating to performance bonds.
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.
8
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of BW/IP, Inc. was held on May
10, 1994.
(c) The following proposals were submitted to a vote of the
stockholders:
(i) A proposal to approve the re-election of eight Directors to
the Board of Directors, in each case for a term of one year,
was approved as follows with respect to each nominee for
office:
<TABLE>
<CAPTION>
ABSTENTIONS
Votes Votes and BROKER
NOMINEE Cast FOR WITHHELD NON-VOTES
------- ---------- -------- -----------
<S> <C> <C> <C>
Peter C. Valli 19,390,402 813,457 None
James J. Gavin, Jr. 19,377,954 825,905 None
H. Jack Meany 19,391,454 812,405 None
Eugene P. Cross 19,391,054 812,805 None
A. L. Dubrow 19,390,802 813,057 None
George D. Leal 19,391,054 812,805 None
James S. Pignatelli 19,377,654 826,205 None
William C. Rusnack 19,391,454 812,405 None
</TABLE>
(ii) A proposal to approve the appointment of Price
Waterhouse as the Company's independent auditors for
fiscal 1994 was approved, with 20,119,141 votes cast
for the proposal, 67,923 votes cast against the
proposal and an aggregate of 16,795 abstentions and
broker non-votes.
(iii) A proposal to amend the Company's Second Restated
Certificate of Incorporation to change the Company's
corporate name to "BW/IP, Inc." was approved, with
18,344,037 votes cast for the proposal, 352,606 votes
cast against the proposal and an aggregate of
1,507,216 abstentions and broker non-votes.
(iv) A proposal to amend the Company's Second Restated
Certificate of Incorporation to effect a
recapitalization of the Company to provide for a
single class of common stock was approved, with
17,606,023 votes cast for the proposal, 64,047 votes
cast against the proposal and an aggregate of
2,533,789 abstentions and broker non-votes.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) 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)
Date: August 12, 1994 By: /s/ E. P. Cross
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E. P. Cross
Vice President - Finance
(Duly Authorized Officer)
Date: August 12, 1994 By: /s/ N. A. Ludlam
-----------------------------------
N. A. Ludlam
(Chief Accounting Officer)
11
