<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 SEPTEMBER 30, 1995
---------------------------
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)
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DELAWARE 33-0270574
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 OCEANGATE BOULEVARD
SUITE 900
LONG BEACH, CALIFORNIA 90802
_______________________________________ __________
(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
--- ---
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 SEPTEMBER 30, 1995 (SHARES)
<PAGE> 2
BW/IP, INC.
-----------
INDEX
-----
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1995 (unaudited) and December 31, 1994 2-3
Condensed Consolidated Statements of Income -
Three and nine months ended September 30, 1995 and
September 30, 1994 (unaudited) 4
Condensed Consolidated Statements of Cash Flows -
Nine months ended September 30, 1995 and
September 30, 1994 (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 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BW/IP, INC.
Condensed Consolidated Balance Sheets
(Dollar amounts in thousands)
--------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1995 1994
- ------ ------------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,494 $ 9,152
Accounts and notes receivable (less allowance
for doubtful accounts of $3,453 at September 30,
1995 and $2,967 at December 31, 1994) 102,723 111,390
Inventories 87,836 70,927
Other current assets 26,602 22,074
-------- --------
Total current assets 222,655 213,543
Property, plant and equipment, at cost
(net of accumulated depreciation and
amortization of $71,059 at September 30,
1995 and $62,037 at December 31, 1994) 100,161 94,909
Goodwill (net of accumulated amortization
of $6,090 at September 30, 1995 and $4,952
at December 31, 1994) 53,557 45,380
Other assets 13,986 14,062
-------- --------
Total assets $390,359 $367,894
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 4
BW/IP, INC.
Condensed Consolidated Balance Sheets
(Dollar amounts in thousands)
--------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
Liabilities and Stockholders' Equity 1995 1994
- ------------------------------------ ------------- ------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 30,081 $ 38,166
Current maturities of long-term debt 9,680 12,101
Other current liabilities 58,295 54,895
--------- ---------
Total current liabilities 98,056 105,162
Long-term debt 64,350 52,973
Other long-term liabilities 47,051 43,845
Stockholders' equity:
Preferred stock -- --
Common stock 245 245
Paid-in capital 85,763 85,763
Retained earnings 89,667 79,097
Cumulative translation adjustment 5,840 1,422
--------- ---------
181,515 166,527
Less common stock in treasury, at cost (613) (613)
--------- ---------
Total stockholders' equity 180,902 165,914
--------- ---------
Total liabilities and stockholders' equity $ 390,359 $ 367,894
========= =========
</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 Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 110,144 $ 117,945 $ 327,508 $ 320,192
Cost of sales 65,208 74,118 195,839 196,227
------------ ------------ ------------ ------------
Gross profit 44,936 43,827 131,669 123,965
Selling, administrative and operating expenses 32,424 30,850 95,795 89,616
------------ ------------ ------------ ------------
Operating income 12,512 12,977 35,874 34,349
Interest expense, net 1,729 1,742 4,711 4,930
Other expenses 671 106 1,100 474
------------ ------------ ------------ ------------
Income from continuing operations
before income taxes 10,112 11,129 30,063 28,945
Provision for income taxes 3,844 4,062 11,725 10,565
------------ ------------ ------------ ------------
Income from continuing operations 6,268 7,067 18,338 18,380
Discontinued operations, net of tax -- (51) -- 202
------------ ------------ ------------ ------------
Net income $ 6,268 $ 7,016 $ 18,338 $ 18,582
============ ============ ============ ============
Earnings per share:
From continuing operations $ .26 $ .29 $ .76 $ .76
Discontinued operations, net of tax -- -- -- .01
------------ ------------ ------------ ------------
Net income per share $ .26 $ .29 $ .76 $ .77
============ ============ ============ ============
Dividends declared per share $ .11 $ .10 $ .32 $ .28
============ ============ ============ ============
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
<PAGE> 6
BW/IP, INC.
Condensed Consolidated Statements of Cash Flows
(Dollar amounts in thousands)
(Unaudited)
---------------------
<TABLE>
<CAPTION>
Nine Months Ended
Sept. 30, Sept. 30,
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities $ 17,757 $ 7,517
Cash flows (used in) from investing activities:
Capital expenditures (15,386) (7,628)
Expenditures for acquisitions (9,306) (22,977)
Proceeds from disposition of property
and equipment 1,149 667
-------- --------
Net cash (used in) investing activities (23,543) (29,938)
Cash flows from (used in) financing activities:
Net borrowings under credit agreements 20,000 36,159
Payment of senior notes (8,333) (8,333)
Dividends paid (7,525) (6,312)
Other (2,211) (700)
-------- --------
Net cash from financing activities 1,931 20,814
Effect of exchange rate changes on cash 197 418
-------- --------
Net decrease in cash and cash equivalents (3,658) (1,189)
Cash and cash equivalents at beginning of period 9,152 7,671
-------- --------
Cash and cash equivalents at end of period $ 5,494 $ 6,482
======== ========
Supplemental cash flow disclosures:
Interest paid $ 4,439 $ 4,531
Income taxes paid 7,002 11,791
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 7
BW/IP, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
---------------------
The accompanying condensed consolidated balance sheet as of
September 30, 1995 and the related condensed consolidated statements
of income for the three and nine months, and cash flows for the nine
months, ended September 30, 1995 and 1994 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 1994 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. 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>
September 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Finished parts $ 54,067 $ 40,558
Work in process 34,750 22,841
Raw materials and supplies 10,421 13,312
-------- --------
99,238 76,711
Less progress billings (11,402) (5,784)
-------- --------
Net inventories $ 87,836 $ 70,927
======== ========
</TABLE>
3. Acquisition
-----------
In May 1995, the Company acquired the pump and switch valve businesses
of Wilson-Snyder. The acquisition was accounted for by the purchase
method and, accordingly, the results of the acquired businesses have
been included with the results of the Company from the date of
acquisition. The acquisition did not have a significant impact on the
Company's consolidated financial position or results of operations.
6
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended September 30, 1995 Compared To Three Months Ended September
30, 1994
Net sales of $110.1 million for the three months ended September 30, 1995 were
$7.8 million or 6.6% lower than the corresponding period in 1994. The decrease
in sales reflects a decrease in original equipment (OE) sales of $11.7 million
offset by an increase in aftermarket sales of $3.9 million. The increase in
aftermarket sales as a percentage of sales to 64% in 1995 from 57% in 1994,
along with certain highly profitable OE sales during the quarter, resulted in an
improvement in gross profit margin from 37.2% to 40.8%. By geographic region,
net sales were down in the third quarter of 1995 as compared with 1994 in
Europe, Mexico and the Pacific Rim, offset by an increase in South America.
Selling, administrative and operating expenses as a percentage of net sales were
29.4% for the three months ended September 30, 1995, up from 26.2% in the
corresponding period in 1994. The increase was primarily due to the lower sales
volume and certain sales and marketing initiatives outpacing sales growth.
Operating income for the three months ended September 30, 1995 was $12.5
million, a decrease of $0.5 million, or 3.6% from the comparable period in 1994.
The decrease in operating income reflects the lower sales volume and higher
selling, administrative and operating expenses. Operating income margin
increased from 11.0% for the third quarter of 1994 to 11.4% for the third
quarter of 1995 primarily due to the change in mix to the more profitable
aftermarket sales.
The Company's 1995 year-to-date effective tax rate decreased to 39.0% from 39.5%
during the third quarter. The catch-up impact in the third quarter was
approximately $.01 per share.
Activity under the Company's restructuring plan during the three months ended
September 30, 1995 is summarized as follows (amounts in thousands):
<TABLE>
<CAPTION>
Machinery
relocation, Asset disposal and
Personnel installation, and organizational
costs related costs realignment costs Total
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, June 30, 1995 $ 6,348 $ 3,865 $ 3,724 $13,937
Cash expenditures 984 909 400 2,293
Losses on asset disposals -- -- 210 210
- -------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1995 $ 5,364 $ 2,958 $ 3,114 $11,434
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Nine Months Ended September 30, 1995 Compared to Nine Months Ended September 30,
1994
Net sales of $327.5 million for the nine months ended September 30, 1995 were
$7.3 million or 2.3% higher than the corresponding period in 1994. The increase
in sales reflects an increase in aftermarket sales of approximately $20.7
million, offset by a decrease in OE sales of approximately $13.4 million.
7
<PAGE> 9
The increase in aftermarket sales as a percentage of sales to 63% in the first
three quarters of 1995 from 58% in 1994 resulted in a 1.5% improvement in
gross profit margin. By geographic region, net sales were up during the nine
months ended September 30, 1995 as compared to 1994 in all regions except
Mexico. The Company's results of operations in the first three quarters of 1995
were impacted by both favorable and unfavorable foreign currency fluctuations.
The net impact of these fluctuations was not significant to the Company's
results of operations.
Selling, administrative and operating expenses as a percentage of sales for the
nine months ended September 30, 1995 were 29.2%, up from 28.0% during the same
period in 1994.
Operating income for the nine months ended September 30, 1995 was $35.9 million,
an increase of $1.5 million, or 4.4% from the comparable period in 1994. The
increase in operating income reflects the improvement in gross profit offset by
higher selling, administrative and operating expenses.
The Company's effective tax rate increased to 39.0% for the nine months ended
September 30, 1995 from 36.5% in the corresponding period in 1994. The increase
in the consolidated tax rate reflects lower utilization of foreign tax credits
in 1995 as compared to 1994 as the majority of credits generated in earlier
years were utilized.
Order input for the nine months ended September 30, 1995 was $351.5 million
compared with $346.4 million for the corresponding period in 1994. The increase
in bookings was primarily due to higher bookings in Europe and the Pacific Rim,
offset by lower bookings in the United States and Mexico. Backlog at September
30, 1995 was $172.2 million compared to $173.5 million at September 30, 1994.
The Company conducts substantial business activities in the Middle East,
including Iran. This region is subject to additional risks such as changes in
governmental policies, political risk, wars, transportation delays, tariffs and
imports, export, exchange and tax controls.
Liquidity and Capital Resources
During the nine month period ended September 30, 1995, the Company generated
$17.8 million in net funds from operating activities, as compared to the first
three quarters of 1994 during which the company generated $7.5 million of net
funds from operating activities. Operating cash flow for the first three
quarters of 1995 compared to the first three quarters of 1994 reflects a
favorable impact in working capital and lower taxes paid.
At September 30, 1995, the Company had outstanding under its credit facilities
borrowings totaling $40.0 million and letters of credit totaling $12.4 million,
and there was $58.0 million available for borrowing thereunder. As of September
30, 1995, the Company has outstanding $27.1 million of obligations relating to
performance bonds.
Interest on the Company's outstanding senior notes is fixed at 7.92%. However,
all of the Company's borrowings under its other 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
<PAGE> 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - 27. Financial Data Schedule.
(b) There were no reports on Form 8-K filed during the quarter ended
September 30, 1995.
9
<PAGE> 11
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: November 13, 1995 By: /s/ E. P. Cross
----------------- --------------------
E. P. Cross
Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer)
Date: November 13, 1995 By: /s/ N. A. Ludlam
----------------- ---------------------
N. A. Ludlam
(Chief Accounting Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1995
<CASH> 3,929
<SECURITIES> 1,565
<RECEIVABLES> 106,176
<ALLOWANCES> (3,453)
<INVENTORY> 87,836
<CURRENT-ASSETS> 222,655
<PP&E> 171,212
<DEPRECIATION> 71,051
<TOTAL-ASSETS> 390,359
<CURRENT-LIABILITIES> 98,056
<BONDS> 64,350
<COMMON> 245
0
0
<OTHER-SE> 180,657
<TOTAL-LIABILITY-AND-EQUITY> 390,359
<SALES> 110,144
<TOTAL-REVENUES> 110,144
<CGS> 65,208
<TOTAL-COSTS> 65,208
<OTHER-EXPENSES> 32,524
<LOSS-PROVISION> 571
<INTEREST-EXPENSE> 1,729
<INCOME-PRETAX> 10,112
<INCOME-TAX> 3,844
<INCOME-CONTINUING> 6,268
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,268
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
