<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 JUNE 30,1995
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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)
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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)
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, 1995 (SHARES)
<PAGE> 2
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, 1995 (unaudited) and December 31, 1994 2-3
Condensed Consolidated Statements of Income -
Three and six months ended June 30, 1995 and
June 30, 1994 (unaudited) 4
Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 1995 and
June 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 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
</TABLE>
<PAGE> 3
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 1995 1994
------ ----------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,467 $ 9,152
Accounts and notes receivable (less allowance
for doubtful accounts of $3,086 at June 30,
1995 and $2,967 at December 31, 1994) 102,047 111,390
Inventories 82,212 70,927
Other current assets 25,893 22,074
-------- -------
Total current assets 217,619 213,543
Property, plant and equipment, at cost
(net of accumulated depreciation and amortization
of $69,567 at June 30, 1995 and $62,037 at
December 31, 1994) 99,365 94,909
Goodwill (net of accumulated amortization
of $5,672 at June 30, 1995 and $4,952
at December 31, 1994) 54,909 45,380
Other assets 13,339 14,062
-------- --------
Total assets $385,232 $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>
June 30, December 31,
Liabilities and Stockholders' Equity 1995 1994
------------------------------------ ------------ -------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 30,062 $ 38,166
Current maturities of long-term debt 11,212 12,101
Other current liabilities 53,964 54,895
-------- --------
Total current liabilities 95,238 105,162
Long-term debt 61,455 52,973
Other long-term liabilities 46,822 43,845
Stockholders' equity:
Preferred stock -- --
Common stock 245 245
Paid-in capital 85,763 85,763
Retained earnings 86,069 79,097
Cumulative translation adjustment 10,253 1,422
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182,330 166,527
Less common stock in treasury, at cost (613) (613)
-------- --------
Total stockholders' equity 181,717 165,914
-------- --------
Total liabilities and stockholders' equity $385,232 $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 Six Months Ended
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $110,332 $105,540 $217,364 $202,247
Cost of sales 66,159 63,774 130,631 122,109
-------- -------- -------- --------
Gross profit 44,173 41,766 86,733 80,138
Selling, administrative and operating expenses 31,638 30,384 63,371 58,766
-------- -------- -------- --------
Operating income 12,535 11,382 23,362 21,372
Interest expense, net 1,414 1,733 2,982 3,188
Other expenses 320 164 429 368
-------- -------- -------- --------
Income from continuing operations
before income taxes 10,801 9,485 19,951 17,816
Provision for income taxes 4,267 3,485 7,881 6,503
-------- -------- -------- --------
Income from continuing operations 6,534 6,000 12,070 11,313
Discontinued operations, net of tax -- 369 -- 253
-------- -------- -------- --------
Net income $ 6,534 $ 6,369 $ 12,070 $ 11,566
======== ======== ======== ========
Earnings per share:
From continuing operations $ .27 $ .25 $ .50 $ .47
Discontinued operations, net of tax -- .02 -- .01
-------- -------- -------- --------
Net income per share $ .27 $ .27 $ .50 $ .48
======== ======== ======== ========
Dividends declared per share $ .11 $ .10 $ .21 $ .18
======== ======== ======== ========
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>
Six Months Ended
June 30, June 30,
1995 1994
-------- ---------
<S> <C> <C>
Cash flows from (used in) operating activities $ 12,830 $ (1,091)
Cash flows (used in) from investing activities:
Capital expenditures (9,822) (4,636)
Expenditures for acquisitions (8,601) (22,977)
Proceeds from disposition of property
and equipment 1,205 660
-------- --------
Net cash (used in) investing activities (17,218) (26,953)
Cash flows from (used in) financing activities:
Net borrowings under credit agreements 17,000 41,000
Payment of senior notes (8,333) (8,333)
Dividends paid (4,855) (3,884)
Other (820) (5)
-------- --------
Net cash from financing activities 2,992 28,778
Effect of exchange rate changes on cash (289) 1,169
-------- --------
Net (decrease) increase in cash and cash equivalents (1,685) 1,903
Cash and cash equivalents at beginning of period 9,152 7,671
-------- --------
Cash and cash equivalents at end of period $ 7,467 $ 9,574
======== ========
Supplemental cash flow disclosures:
Interest paid $ 3,879 $ 3,912
Income taxes paid 3,746 5,076
</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 June 30,
1995 and the related condensed consolidated statements of income for
the three and six months, and cash flows for the six months, ended
June 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>
June 30, December 31,
1995 1994
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<S> <C> <C>
Finished parts $49,365 $40,558
Work in process 29,266 22,841
Raw materials and supplies 10,891 13,312
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89,522 76,711
Less progress billings (7,310) (5,784)
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Net inventories $82,212 $70,927
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</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
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended June 30, 1995 Compared To Three Months Ended June 30, 1994
Net sales of $110.3 million for the three months ended June 30, 1995 were $4.8
million or 4.5% higher than the corresponding period in 1994. Although
aftermarket sales increased as a percentage of sales to 65% in the second
quarter of 1995 from 57% in the second quarter of 1994, a shift in mix within
aftermarket sales, and the volume decrease in original equipment (OE) sales
along with continued pricing pressures, resulted in only a slight increase in
gross profit margin. In addition, gross profit for the three months ended
June 30, 1994 reflected favorable experience with respect to warranty costs.
By geographic region, net sales were down in the second quarter of 1995 as
compared with 1994 in the United States and Mexico, offset by increases in
Europe and the Pacific Rim. The Company's results of operations during the
quarter 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 expressed as a percentage of net
sales were 28.7% for the three months ended June 30, 1995, down slightly from
the corresponding period in 1994. Selling, administrative and operating
expenses for the three months ended June 30, 1994 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, 1995 was $12.5 million, an
increase of $1.2 million, or 10.1% from the comparable period in 1994. The
increase in operating income reflects the increase in aftermarket sales offset
by mix changes and OE pricing pressures.
Activity under the Company's restructuring plan during the three months ended
June 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, March 31, 1995 $6,877 $4,378 $5,020 $16,275
Cash expenditures 529 513 1,296 2,338
Losses on asset disposals -- -- -- --
------ ------ ------ -------
Balance, June 30, 1995 $6,348 $3,865 $3,724 $13,937
====== ====== ====== =======
</TABLE>
Six Months Ended June 30, 1995 Compared to Six Months Ended June 30, 1994
Net sales of $217.4 million for the six months ended June 30, 1995 were $15.1
million or 7.5% higher than the corresponding period in 1994. The increase in
sales reflects an increase in aftermarket sales of approximately $17 million,
offset by a decrease in OE sales of approximately $2 million. Although
aftermarket sales increased as a percentage of sales to 63% in the first half
of 1995 from 59% in the first half of 1994, a shift in mix within aftermarket
sales, and the volume decrease in OE sales along with continued pricing
pressures, resulted in only a slight increase in gross profit margin. In
addition, gross profit for the six months ended June 30, 1994 reflected
favorable experience with respect to warranty costs. By geographic region, net
sales were up during the six months ended June 30, 1995 as compared with 1994
in all regions, with the exception of Mexico. The Company's results of
operations in the first half 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.
7
<PAGE> 9
Selling, administrative and operating expenses as a percentage of sales for the
six months ended June 30, 1995 were approximately equal to the corresponding
period in 1994.
Operating income for the six months ended June 30, 1995 was $23.4 million, an
increase of $2.0 million, or 9.3% from the comparable period in 1994. The
increase in operating income reflects the slight increase in gross profit
margin.
The Company's effective tax rate increased to 39.5% for the six months ended
June 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 six months ended June 30, 1995 was $238.2 million compared
with $228.7 million for the corresponding period in 1994. The increase in
input is primarily due to higher bookings in Europe and the Pacific Rim, offset
by lower bookings in Mexico. Backlog at June 30, 1995 was $175.6 million
compared to $176.3 million at June 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 six month period ended June 30, 1995, the Company generated $12.8
million in net funds from operating activities, as compared to the first half
of 1994 during which the Company used $1.1 million of net funds from operating
activities. Operating cash flow for the first half of 1995 compared to the
first half of 1994 reflects a favorable impact in working capital and lower
taxes paid.
At June 30, 1995, the Company had outstanding under its credit facilities
borrowings totaling $37.8 million and letters of credit totaling $12.0 million,
and there was $61.7 million available for borrowing thereunder. As of June 30,
1995, the Company has outstanding $22.0 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
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
16, 1995.
(c) The following proposals were submitted to a vote of the
stockholders:
(i) A proposal to approve the re-election of seven 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 18,559,614 83,978 None
James J. Gavin, Jr. 18,559,978 83,614 None
H. Jack Meany 18,560,248 83,344 None
Eugene P. Cross 18,559,614 83,978 None
George D. Leal 18,560,278 83,314 None
James S. Pignatelli 18,559,978 83,614 None
William C. Rusnack 18,560,248 83,314 None
</TABLE>
(ii) A proposal to approve the appointment of Price
Waterhouse LLP as the Company's independent auditors for
fiscal 1995 was approved, with 18,606,265 votes cast for the
proposal, 23,388 votes cast against the proposal and an
aggregate of 13,939 abstentions and broker non-votes.
9
<PAGE> 11
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 June
30, 1995.
10
<PAGE> 12
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.
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(Registrant)
Date: August 11, 1995 By: /s/ E. P. Cross
----------------- --------------------------
E. P. Cross
Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer)
Date: August 11, 1995 By: /s/ N. A. Ludlam
------------------ --------------------------
N. A. Ludlam
(Chief Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 2,496
<SECURITIES> 4,971
<RECEIVABLES> 105,133
<ALLOWANCES> (3,086)
<INVENTORY> 82,212
<CURRENT-ASSETS> 217,619
<PP&E> 168,932
<DEPRECIATION> 69,567
<TOTAL-ASSETS> 385,232
<CURRENT-LIABILITIES> 95,238
<BONDS> 61,455
<COMMON> 245
0
0
<OTHER-SE> 181,472
<TOTAL-LIABILITY-AND-EQUITY> 385,232
<SALES> 110,332
<TOTAL-REVENUES> 110,332
<CGS> 66,159
<TOTAL-COSTS> 66,159
<OTHER-EXPENSES> 31,667
<LOSS-PROVISION> 291
<INTEREST-EXPENSE> 1,414
<INCOME-PRETAX> 10,801
<INCOME-TAX> 4,267
<INCOME-CONTINUING> 6,534
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,534
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
