<PAGE>
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 30,1996
-------------------
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)
__________________
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
--------------
__________________
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,
OUTSTANDING AT JUNE 30, 1996 24,275,000(SHARES)
<PAGE>
BW/IP, INC.
-----------
INDEX
-----
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - 2-3
June 30, 1996 (unaudited) and December 31, 1995
Condensed Consolidated Statements of Income -
Three and six months ended June 30, 1996 and
June 30, 1995 (unaudited) 4
Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 1996 and
June 30, 1995 (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>
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,
1996 1995
Assets ----------- ------------
- ------ (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,923 $ 9,162
Accounts and notes receivable (less allowance
for doubtful accounts of $3,773 at June 30,
1996 and $3,775 at December 31, 1995) 109,537 110,215
Inventories 91,281 85,381
Other current assets 23,003 22,462
-------- --------
Total current assets 231,744 227,220
Property, plant and equipment, at cost
(net of accumulated depreciation and amortization
of $77,103 at June 30, 1996 and $73,291 at 105,274 106,251
December 31, 1995)
Goodwill (net of accumulated amortization
of $8,768 at June 30, 1996 and $6,556 51,307 53,835
at December 31, 1995)
Other assets 15,776 18,441
-------- --------
Total assets $404,101 $405,747
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
BW/IP, INC.
Condensed Consolidated Balance Sheets
(Dollar amounts in thousands)
________________________________
<TABLE>
<CAPTION>
June 30, December 31,
Liabilities and Stockholders' Equity 1996 1995
- ------------------------------------ ----------- -------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 8,428 $ 8,836
Accounts payable 33,650 42,955
Other current liabilities 55,235 58,655
-------- --------
Total current liabilities 97,313 110,446
Long-term debt 84,456 74,175
Other long-term liabilities 41,786 41,652
Stockholders' equity:
Preferred stock -- --
Common stock 245 245
Paid-in capital 85,763 85,763
Retained earnings 99,735 92,008
Cumulative translation adjustment (4,584) 2,071
-------- --------
181,159 180,087
Less common stock in treasury, at cost (613) (613)
-------- --------
Total stockholders' equity 180,546 179,474
-------- --------
Total liabilities and stockholders' equity $404,101 $405,747
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
BW/IP, INC.
Condensed Consolidated Statements of Income
(Dollar amounts in thousands, except per share data)
(Unaudited)
_______________________
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $119,764 $110,332 $241,702 $217,364
Cost of sales 72,929 66,159 148,089 130,631
------- ------- ------- -------
Gross profit 46,835 44,173 93,613 86,733
Selling, administrative and operating expenses 33,392 31,638 68,232 63,371
-------- ------- ------- -------
Operating income 13,443 12,535 25,381 23,362
Interest expense, net 1,724 1,414 3,438 2,982
Other expenses 248 320 522 429
------- ------- ------- -------
Income before taxes 11,471 10,801 21,421 19,951
Provision for income taxes 4,474 4,267 8,354 7,881
-------- ------- -------- -------
Net income $ 6,997 $ 6,534 $ 13,067 $ 12,070
======== ======== ======== ========
Net income per share $ .29 $ .27 $ .54 $ .50
======== ======== ======== ========
Dividends declared per share $ .11 $ .11 $ .22 $ .21
======== ======== ======== ========
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>
BW/IP, INC.
Condensed Consolidated Statements of Cash Flows
(Dollar amounts in thousands)
(Unaudited)
_____________________
<TABLE>
<CAPTION>
Six Months Ended
June 30, June 30,
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities $ 2,336 $ 12,830
------ -------
Cash flows from investing activities:
Capital expenditures (7,070) (9,822)
Expenditures for acquisitions -- (8,601)
Proceeds from disposition of property and equipment 365 1,205
------- --------
Net cash used in investing activities (6,705) (17,218)
------- --------
Cash flows from financing activities:
Net borrowings under credit agreements 18,500 17,000
Payment of senior notes (8,333) (8,333)
Dividends paid (5,341) (4,855)
Other -- (820)
------- --------
Net cash from financing activities 4,826 2,992
------- --------
Effect of exchange rate changes on cash (1,696) (289)
------- --------
Net decrease in cash and cash equivalents (1,239) (1,685)
Cash and cash equivalents at beginning of period 9,162 9,152
------- --------
Cash and cash equivalents at end of period $ 7,923 $ 7,467
====== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
BW/IP, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
---------------------
The accompanying condensed consolidated balance sheet as of June 30, 1996
and the related condensed consolidated statements of income for the three
and six months, and cash flows for the six months ended June 30, 1996 and
1995 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 1995
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,
1996 1995
--------- -------------
<S> <C> <C>
Finished parts $48,813 $47,985
Work in process 38,616 34,054
Raw materials and supplies 11,141 10,595
------- -------
98,570 92,634
Less progress billings (7,289) (7,253)
------- -------
Net inventories $91,281 $85,381
======= =======
</TABLE>
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended June 30, 1996 Compared To Three Months Ended June 30, 1995
Net sales of $119.8 million for the three months ended June 30, 1996 were $9.4
million or 9% higher than the corresponding period in 1995. Gross profit margin
for the three months ended June 30, 1996 decreased to approximately 39% from 40%
in the corresponding period in 1995 due primarily to a decline in higher margin
aftermarket sales as a percentage of total sales to 62% in the second quarter of
1996 from 65% in the second quarter of 1995. In addition, gross profit margins
continue to be negatively impacted by pricing pressures in the original
equipment (OE) sector. By geographic region, net sales increased in the second
quarter of 1996 as compared with 1995 in the United States, Mexico and the
Pacific Rim, offset by a slight decrease in Europe. The Company's results of
operations during the quarter were negatively impacted by approximately $1.0
million due to the dollar's strengthening against most European currencies and
the Japanese yen, locations where the Company has significant investment.
Selling, administrative and operating expenses expressed as a percentage of net
sales were approximately 28% for the three months ended June 30, 1996, down
slightly from the corresponding period in 1995 primarily due to the higher sales
volume and cost reduction measures.
Operating income for the three months ended June 30, 1996 was $13.4 million, an
increase of $0.9 million, or 7% from the comparable period in 1995. The
increase in operating income reflects the increase in total sales offset by mix
changes and OE pricing pressures.
Activity under the Company's restructuring plan during the three months ended
June 30, 1996 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, 1996 $3,655 $2,186 $872 $6,713
Cash expenditures 353 641 158 1,152
Losses on asset disposals -- -- 131 131
===================================================================================================================
Balance, June 30, 1996 $3,302 $1,545 $583 $5,430
===================================================================================================================
</TABLE>
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Net sales of $241.7 million for the six months ended June 30, 1996 were $24.3
million or 11% higher than the corresponding period in 1995. Gross profit margin
for the six months ended June 30, 1996 declined to approximately 39% from 40% in
the corresponding period of 1995 primarily due to a decrease in aftermarket
sales as a percentage of sales to 60% in the first half of 1996 from 63% in the
first half of 1995. In addition, the gross profit margin continues to be
negatively impacted by pricing
7
<PAGE>
pressures in the OE sector. By geographic region, net sales were up during the
six months ended June 30, 1996 as compared with 1995 in the United States,
Europe, Pacific Rim and Mexico.
Selling, administrative and operating expenses as a percentage of sales for the
six months ended June 30, 1996 decreased to approximately 28% compared to
approximately 29% in the corresponding period in 1995 primarily due to increased
sales volume and cost reduction measures.
Operating income for the six months ended June 30, 1996 was $25.4 million, an
increase of $2.0 million, or 9% from the comparable period in 1995. The increase
in operating income reflects the increased sales volume.
The Company's effective tax rate decreased to 39.0% for the six months ended
June 30, 1996 from 39.5% in the corresponding period in 1995.
Order input for the six months ended June 30, 1996 was $273.0 million compared
with $238.1 million for the corresponding period in 1995. The increase in input
is primarily due to higher OE bookings. Backlog at June 30, 1996 was $178.7
million compared to $175.6 million at June 30, 1995.
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
import, export, exchange and tax controls.
LIQUIDITY AND CAPITAL RESOURCES
During the six month period ended June 30, 1996 the Company generated $2.3
million in net funds from operating activities, as compared to the first half of
1995 during which the company generated $12.8 million of net funds from
operating activities. The $10.5 million reduction in cash flow generated from
operating activities was driven primarily by positive collections in the first
half of 1995. Similar accounts receivable reductions did not occur in the first
half of 1996 due to the high level of second quarter shipments not yet collected
at June 30, 1996.
At June 30, 1996 the Company had outstanding under its credit facilities
totaling $67.9 million and letters of credit totaling $11.4 million, and there
was $37.5 million available for borrowing thereunder. As of June 30, 1996 the
Company has outstanding $22.2 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>
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 14,
1996.
(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>
Votes Cast Votes Abstentions and
Nominee For Withheld Broker non-votes
======================================================================
<S> <C> <C> <C>
Peter C. Valli 20,702,717 62,198 None
James J. Gavin, Jr. 20,702,717 62,198 None
George D. Leal 20,703,017 61,198 None
H. Jack Meany 20,702,717 62,198 None
James S. Pignatelli 20,703,017 61,898 None
Bernard G. Rethore 20,703,017 61,898 None
James O. Rollans 20,666,317 98,598 None
William C. Rusnack 20,703,017 61,898 None
</TABLE>
(ii) A proposal to adopt the BW/IP, Inc. 1996 Long-Term Incentive
Plan was approved, with 17,723,361 votes cast for the proposal,
494,371 votes cast against the proposal and an aggregate of
1,627,415 abstentions and broker non-votes.
(iii) A proposal to adopt the BW/IP, Inc. 1996 Directors Stock and
Deferred Compensation Plan was approved with 18,936,059 votes
cast for the proposal, 60,711 votes cast against the proposal
and an aggregate of 942,855 abstentions and broker non-votes.
9
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit - 27. Financial Data Schedule.
(b) There were no reports on Form 8-K filed during the quarter ended June
30, 1996.
10
<PAGE>
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 14, 1996 By: /s/ E. P. Cross
----------------- ----------------------------------
E. P. Cross
Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer)
Date: August 14, 1996 By: /s/ C. F. Cargile
----------------- ----------------------------------
C. F. Cargile
Director, Corporate Accounting
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 7,923
<SECURITIES> 0
<RECEIVABLES> 113,310
<ALLOWANCES> (3773)
<INVENTORY> 91,281
<CURRENT-ASSETS> 231,744
<PP&E> 182,377
<DEPRECIATION> 77,103
<TOTAL-ASSETS> 404,101
<CURRENT-LIABILITIES> 97,313
<BONDS> 84,456
0
0
<COMMON> 245
<OTHER-SE> 180,301
<TOTAL-LIABILITY-AND-EQUITY> 404,101
<SALES> 241,702
<TOTAL-REVENUES> 241,702
<CGS> 148,089
<TOTAL-COSTS> 148,089
<OTHER-EXPENSES> 68,538
<LOSS-PROVISION> 216
<INTEREST-EXPENSE> 3,438
<INCOME-PRETAX> 21,421
<INCOME-TAX> 8,354
<INCOME-CONTINUING> 13,067
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,067
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
