1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
------- --------
Commission file number 1-7006
BRUSH WELLMAN INC.
(Exact name of Registrant as specified in charter)
OHIO 34-0119320
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
17876 ST. CLAIR AVENUE, CLEVELAND, OHIO 44110
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 216-486-4200
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
COMMON STOCK, PAR VALUE $1 PER SHARE NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
The aggregate market value of Common Stock, par value $1 per share, held
by non-affiliates of the registrant (based upon the closing sale price on the
New York Stock Exchange) on March 11, 1996 was approximately $287,884,185.
As of March 11, 1996, there were 15,918,501 shares of Common Stock, par
value $1 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual report to shareholders for the year ended December
31, 1995 are incorporated by reference into Parts I and II.
Portions of the proxy statement for the annual meeting of shareholders to
be held on May 7, 1996 are incorporated by reference into Part III.
2
PART I
ITEM 1. BUSINESS
Brush Wellman Inc. ("Company") manufactures and sells engineered
materials for use by manufacturers and others who perform further operations for
eventual incorporation into capital, aerospace/defense or consumer products.
These materials typically comprise a small portion of the final product's cost.
They are generally premium priced and are often developed or customized for the
customer's specific process or product requirements. The Company's product lines
are supported by research and development activities, modern processing
facilities and a global distribution network.
Customers include manufacturers of electrical/electronic
connectors, communication equipment, computers, automobiles, lasers, appliances,
spacecraft, aircraft, oil field instruments and equipment, sporting goods, and
defense contractors and suppliers to all of the foregoing industries.
The Company operates in a single business segment with product
lines comprised of beryllium-containing materials and other specialty materials.
The Company is a fully integrated producer of beryllium,
beryllium alloys (primarily copper beryllium), and beryllia ceramic, each of
which exhibits its own unique set of properties. The Company holds extensive
mineral rights and mines the beryllium bearing ore, bertrandite, in central
Utah. Beryllium is extracted from both bertrandite and imported beryl ore. In
1995, 73% of the Company's sales were of products containing the element
beryllium (70% in 1994 and 74% in 1993). Beryllium-containing products are sold
in competitive markets throughout the world through a direct sales organization
and through owned and independent distribution centers. NGK Metals Corporation
of Reading, Pennsylvania and NGK Insulators, Ltd. of Nagoya, Japan compete with
the Company in the beryllium alloys field. Beryllium alloys also compete with
other generally less expensive materials, including phosphor bronze, stainless
steel and other specialty copper and nickel alloys. General Ceramics Inc. is a
domestic competitor in beryllia ceramic. Other competitive materials include
alumina, aluminum nitride and composites. While the Company is the only domestic
producer of the metal beryllium, it competes with other fabricators as well as
with designs utilizing other materials.
Sales of other specialty materials, principally metal systems and
precious metal products, were 27% of total sales in 1995 (30% in 1994 and 26% in
1993). Precious metal products are produced by Williams Advanced Materials Inc.
(hereinafter referred to as "WAM"), a subsidiary of the Company comprised of
businesses acquired in 1986, 1989 and 1994. WAM's major product lines include
sealing lid assemblies, vapor deposition materials, contact ribbon products for
various segments of the semiconductor markets, clad and precious metal preforms,
ultra fine wire and restorative dental products. WAM also specializes in
precious metal refining and recovery.
- -----------
As used in this report, except as the context otherwise requires, the term
"Company" means Brush Wellman Inc. and its consolidated subsidiaries, all of
which are wholly owned.
3
WAM's principal competitors are Semi-Alloys and Johnson Matthey
in the sealing lid assembly business and Materials Research Corporation in the
vapor deposition materials product line. The products are sold directly from
WAM's facilities in Buffalo, New York and Singapore as well as through sales
representatives.
Technical Materials, Inc. (hereinafter referred to as "TMI"), a
subsidiary of the Company, produces specialty metal systems, consisting
principally of narrow metal strip, such as copper alloys, nickel alloys and
stainless steels into which strips of precious metal are inlaid. TMI also offers
a number of other narrow metal strip material systems, including electron beam
welded dual metal, contour milling and skiving, thick and thin selective solder
coatings, selective electroplated products and bonded aluminum strips on
nickel-iron alloys for semiconductor leadframes. Divisions of Cookson, Texas
Instruments and Metallon are competitors for the sale of inlaid strip. Strip
with selective electroplating is a competitive alternative as are other design
approaches. The products are sold directly and through sales representatives.
Sales and Backlog
The backlog of unshipped orders as of December 31, 1995, 1994 and
1993 was $95,718,000, $95,354,000, and $86,531,000, respectively. Backlog is
generally represented by purchase orders that may be terminated under certain
conditions. The Company expects that, based on recent experience, substantially
all of its backlog of orders at December 31, 1995 will be filled during 1996.
Sales are made to approximately 6,515 customers. Government
sales, principally subcontracts, accounted for about 1.3% of consolidated sales
in 1995 as compared to 3.2% in 1994 and 6.1% in 1993. Sales outside the United
States, principally to Western Europe, Canada and Japan, accounted for
approximately 34% of sales in 1995, 33% in 1994 and 29% in 1993. Financial
information as to sales, identifiable assets and profitability by geographic
area set forth on page 15 in Note L to the consolidated financial statements in
the annual report to shareholders for the year ended December 31, 1995 is
incorporated herein by reference.
Research & Development
Active research and development programs seek new product
compositions and designs as well as process innovations. Expenditures for
research and development amounted to $7,814,000 in 1995, $8,754,000 in 1994 and
$7,121,000 in 1993. A staff of 48 scientists, engineers and technicians was
employed in this effort during 1995. Some research and development projects were
externally sponsored and expenditures related to those projects (approximately
$36,000 in 1995, $102,000 in 1994 and $80,446 in 1993) are excluded from the
above totals.
Availability of Raw Materials
The more important raw materials used by the Company are
beryllium (extracted from both imported beryl ore and bertrandite mined from the
Company's Utah properties), copper, gold, silver, nickel and palladium. The
availability of these raw materials, as well as other materials used by the
Company, is adequate and generally not dependent on any one
2
4
supplier. Certain items are supplied by a preferred single source, but
alternatives are believed readily available.
Patents and Licenses
The Company owns patents, patent applications and licenses
relating to certain of its products and processes. While the Company's rights
under the patents and licenses are of some importance to its operations, the
Company's businesses are not materially dependent on any one patent or license
or on the patents and licenses as a group.
Environmental Matters
The inhalation of excessive amounts of airborne beryllium
particulate may present a health hazard to certain individuals. For decades the
Company has operated its beryllium facilities under stringent standards of
inplant and outplant discharge. These standards, which were first established by
the Atomic Energy Commission over forty years ago, were, in general,
subsequently adopted by the United States Environmental Protection Agency and
the Occupational Safety and Health Administration. The Company's experience in
sampling, measurement, personnel training and other aspects of environmental
control gained over the years, and its investment in environmental control
equipment, are believed to be of material importance to the conduct of its
business.
Employees
As of December 31, 1995 the Company had 1,856 employees.
ITEM 2. PROPERTIES
The material properties of the Company, all of which are owned in
fee except as otherwise indicated, are as follows:
Cleveland, Ohio - A structure containing 110,000 square feet on
an 18 acre site housing corporate and administrative offices, data processing
and research and development facilities.
Elmore, Ohio - A complex containing approximately 676,000 square
feet of building space on a 385 acre plant site. This facility employs diverse
chemical, metallurgical and metalworking processes in the production of
beryllium, beryllium oxide, beryllium alloys and related products. Beryllium ore
concentrate from the Delta, Utah plant is used in all beryllium-containing
products.
Shoemakersville (Reading), Pennsylvania - A 123,000 square foot
plant on a ten acre site that produces thin precision strips of beryllium copper
and other alloys and beryllium copper rod and wire.
Newburyport, Massachusetts - A 30,000 square foot manufacturing
facility on a four acre site that produces alumina, beryllia ceramic and direct
bond copper products.
3
5
Tucson, Arizona - A 45,000 square foot plant on a ten acre site
for the manufacture of beryllia ceramic parts from beryllium oxide powder
supplied by the Elmore, Ohio facility.
Delta, Utah - An ore extraction plant consisting of 86,000 square
feet of buildings and large outdoor facilities situated on a two square mile
site. This plant extracts beryllium from bertrandite ore from the Company's
mines as well as from imported beryl ore.
Juab County, Utah - The Company holds extensive mineral rights in
Juab County, Utah from which the beryllium bearing ore, bertrandite, is mined by
the open pit method. A substantial portion of these rights is held under lease.
Ore reserve data set forth on page 18 of this Form 10-K annual report
for the year ended December 31, 1995 are incorporated herein by reference.
Fremont, California - A 16,800 square foot leased facility for
the fabrication of precision electron beam welded, brazed and diffusion bonded
beryllium structures.
Theale (Reading), England - A 19,700 square foot leased facility
principally for distribution of beryllium alloys.
Stuttgart, West Germany - A 24,750 square foot leased facility
principally for distribution of beryllium alloys.
Fukaya, Japan - A 35,500 square foot facility on 1.8 acres of
land in Saitama Prefecture principally for distribution of beryllium alloys.
Lincoln, Rhode Island - A manufacturing facility consisting of
124,000 square feet located on seven and one-half acres. This facility produces
metal strip inlaid with precious metals and related metal systems products.
Buffalo, New York - A complex of approximately 97,000 square feet
on a 3.8 acre site providing facilities for manufacturing, refining and
laboratory services relating to high purity precious metals.
Singapore, Singapore - A 4,500 square foot leased facility for
the assembly and sale of precious metal hermetic sealing lids.
Production capacity is believed to be adequate to fill the
Company's backlog of orders and to meet the current level of demand. However,
the Company is currently reevaluating production capacity in light of
anticipated sales increases from development of new applications for the
Company's products and expanding international presence.
4
6
ITEM 3. LEGAL PROCEEDINGS
(a) Environmental Proceedings.
In April 1993, the Company learned that the Ohio Environmental
Protection Agency (the "Ohio EPA") had referred it to the Ohio Attorney
General's Office (the "OAG") for consideration of initiation of enforcement
proceedings against the Company with respect to alleged violations of various
environmental laws at its facility in Elmore, Ohio. On October 19, 1994, the
Court of Common Pleas for Ottawa County, Ohio entered a consent decree resolving
alleged violations relating to air emission standards. Negotiations between the
OAG and the Company regarding alleged hazardous waste and solid waste
violations, including matters discovered during the course of such negotiations,
have resulted in a preliminary agreement pursuant to which a consent decree
would be entered providing that the Company would pay a total of $227,000 and
undertake a specific pollution prevention project in lieu of paying additional
penalties. Finalization of the consent decree is awaiting administrative review
and approval of an application for a permit modification which is to be part of
the consent decree.
On or about September 25, 1992, the Company was served with a
third-party complaint alleging that the Company, along with 159 other
third-party defendants, is jointly and severally liable under the Comprehensive,
Environmental, Response Compensation and Liability Act ("CERCLA"), 42 U.S.C.
Sections 9607(a) and 9613(b), for response costs incurred in connection with the
clean-up of hazardous substances in soil and groundwater at the Douglassville
Site (the "Site") located in Berks County, Pennsylvania. United States of
America v. Berks Associates Inc. et al. v. Aamco Transmissions et al., United
States District Court for the Eastern District of Pennsylvania, Case No.
91-4868. Prior to the commencement of litigation, the Company responded to a
request for information from the United States Environmental Protection Agency
(the "United States EPA") by denying that it arranged to send any substances to
the Site. Although the Company has no documents in its own files relating to the
shipment of any waste to the Site, documents maintained by third-party
plaintiffs suggest that 8,344 gallons of waste oil from the Company may have
been taken there. According to a consultant retained by third-party plaintiffs,
approximately 153 million gallons of waste were sent to the Site. The Company
denies liability. The Company has been participating in court-ordered settlement
proceedings, which have resulted in a de minimis settlement offer by the United
States. The Company has accepted the offer and is awaiting notice from the
government showing the final settlement calculation.
On July 26, 1994, the Company received a complaint, service of
which was waived on September 29, 1994, in Glidden Company et al. v. American
Color and Chemical et al., No. 94-C-3970, filed in the United States District
Court for the Eastern District of Pennsylvania. The plaintiffs are five
companies which, pursuant to orders issued by the United States EPA under
CERCLA, have been spending funds to secure, maintain and conduct an
investigation of the Berks Landfill in Sinking Springs, Pennsylvania. The
plaintiffs are alleged to have disposed of wastes at the landfill, which
operated from the 1950 through October 1, 1986. The 18 defendants consist of
former owners or operators of the site and alleged transporters and/or
generators of waste disposed of at the site. It is believed that hundreds of
other entities disposed of waste at the site during its long period of
operation. The plaintiffs seek to recover their past and future costs pursuant
to rights of contribution under CERCLA and the Pennsylvania Hazardous Sites
Cleanup Act. Plaintiffs allege that, as of
5
7
September 1994, they had spent $355,000 to secure and maintain the site and that
they expected to spend $1.7 million for a remedial investigation/feasibility
study and a risk assessment. The remedial investigation and risk assessment have
been submitted to EPA for its approval. The feasibility study has not yet
commenced. Discovery is proceeding pursuant to a case management order entered
on June 22, 1995.
In 1989, the Company was identified by the United States EPA
as a potentially responsible party ("PRP") under CERCLA at the Spectron Site in
Elkton, Maryland. To date, the United States EPA has identified approximately
2,000 PRPs with respect to the Spectron Site. The Company resolved a portion of
its liability with respect to this Site by entering into Administrative Orders
by Consent dated August 21, 1989 and October 1, 1991. Compliance with the terms
of these Orders cost approximately $8,480,000, of which the Company's
proportionate share was $20,461. On September 29, 1995, the United States EPA
sent a "Special Notice for Negotiations for Remedial Investigation/Feasibility
Study" to approximately 700 PRPs including the Company. The United States EPA
estimates that the final remedy for the Site will cost approximately $45
million. In October 1995, the terms of several proposed de minimis
settlement/buyout options designed to resolve all remaining liability with
respect to this Site were circulated among a group of PRPs including the
Company. The Company indicated its willingness to pursue a complete resolution
of its liability with respect to this Site through a de minimis
settlement/buyout. No litigation has been initiated by the United States EPA
with respect to this matter.
(b) Beryllium Exposure Claims.
The inhalation of excessive amounts of airborne beryllium
particulate may present a health hazard to certain individuals. For decades the
Company has operated its beryllium facilities under stringent standards of
inplant and outplant discharge. These standards, which were first developed by
the Atomic Energy Commission over forty years ago, were, in general,
substantially adopted by the United States EPA and the Occupational Safety and
Health Administration.
Pending Claims. The Company is currently a defendant in the
following product liability actions in which the plaintiffs allege injury
resulting from exposure to beryllium and beryllium-containing materials and are
claiming recovery based on various legal theories. The Company believes that
resolution of these cases will not have a material adverse effect on the
Company.
6
8
====================================================================================================================================
Date Lawsuit
------------
Name of Plaintiff Instituted Forum Relief Requested
- ----------------- ---------- ----- ----------------
- ------------------------------------------------------------------------------------------------------------------------------------
Richard Neiman and Spouse November 1990 Court of Common Pleas, Damages in excess of $20,000 for personal injury
Philadelphia County, and in excess of $20,000 for loss of consortium
Pennsylvania
- ------------------------------------------------------------------------------------------------------------------------------------
Geraldine G. Ruffin, September 1991; New Jersey Superior Court -- Compensatory and punitive damages of an
individually and as executrix notice of appeal Appellate Division unspecified amount
filed by plaintiffs
May 1995
- ------------------------------------------------------------------------------------------------------------------------------------
McKinley Houk October 1992 United States District Compensatory damages of $5 million and punitive
Court, Eastern District of damages of $3 million
Tennessee
- ------------------------------------------------------------------------------------------------------------------------------------
William Ray Vance and Spouse October 1992 United States District Compensatory damages of $3 million for personal
Court, Eastern District of injury, $1 million for loss of consortium and
Tennessee combined punitive damages of $5 million
- ------------------------------------------------------------------------------------------------------------------------------------
David Taggart and Spouse October 1992 Court of Common Pleas, Compensatory damages in excess of $25,000
Chester County, Pennsylvania each for personal injury and loss of consortium
against Williams Advanced Materials, Inc. a
subsidiary of the Company
- ------------------------------------------------------------------------------------------------------------------------------------
Harry Robbins and Spouse June 1993 Court of Common Pleas, Both parties individually seek compensatory
Montgomery County, damages in excess of $50,000. Mr. Robbins also
Pennsylvania seeks punitive damages in excess of $50,000
- ------------------------------------------------------------------------------------------------------------------------------------
Troy Murphy Morgan, Corky June 1994 United States District Aggregate claim, including compensatory and
Dean McCarter and Spouse, Court, Eastern District of punitive damages, in the amount of $19 million
Richard Emory Myers, Sr. and Tennessee
Spouse and Kathlene Beatty
- ------------------------------------------------------------------------------------------------------------------------------------
Larry Roberts and Spouse December 1994 Superior Court, Orange Both parties seek compensatory damages of
County, California unspecified amounts. Mr. Roberts also seeks
punitive damages of an unspecified amount
- ------------------------------------------------------------------------------------------------------------------------------------
George F. Faccio and Spouse July 1995 United States District Compensatory and punitive damages of an
Court, District of Arizona unspecified amount
- ------------------------------------------------------------------------------------------------------------------------------------
Robert Gallo and Spouse August 1995 Court of Common Pleas, Berks Both parties seek compensatory damages in
County, Pennsylvania unspecified amounts. Mr. Gallo also seeks
punitive damages in an unspecified amount
====================================================================================================================================
Defense for each of the cases identified above is being conducted by counsel
selected by the Company and retained, with certain reservations of rights, by
the Company's insurance carriers.
The Company and certain of its employees are defendants in
separate suits filed by nine Company employees and their spouses against the
Company and certain Company employees in the Superior Court of Pima County,
Arizona. Six of such suits were instituted on June 10, 1994; one was instituted
on December 13, 1994; and two were instituted on February 28, 1995. The
plaintiffs claim that, during their employment with the Company, they contracted
chronic beryllium disease as a result of exposure to beryllium and
beryllium-containing products. The plaintiffs seek compensatory and punitive
damages of an unspecified amount based on allegations that the Company
intentionally misrepresented the potential danger of exposure to beryllium and
breached an agreement to pay certain benefits in the event the plaintiffs
contracted chronic beryllium disease. Defense of this case is being conducted by
counsel retained by the Company. The Company believes that resolution of these
cases will not have a material effect on the Company.
7
9
The State Compensation Fund filed suit against the Company and
each of the plaintiff employees discussed above in the Superior Court of Pima
County, Arizona, for which service of process on the Company occurred on
August 21, 1995. In August 1993, the Company first notified the State
Compensation Fund, a workers' compensation fund, of the filing of employee
suits. The Company requested that the State Compensation Fund defend such suits
pursuant to the Company's State Compensation Fund policies. The State
Compensation Fund has denied coverage and defense of such suits, but after
discussion, indicated that it would defend some of the employee lawsuits under
a reservation of rights. In view of the dispute with respect to defense and
indemnity, the State Compensation Fund filed a declaratory judgment action. The
State Compensation Fund's complaint seeks a determination that it is not
required to defend or indemnify the Company with respect to the employee
claims. The Company has filed an answer and counterclaim. Defense of this case
is being conducted by counsel retained by the Company.
The Company is also a defendant in two cases, filed August 1,
1995 and November 1, 1995, respectively, in the Court of Common Pleas for
Cuyahoga County, Ohio. Both cases were brought by current employees of the
Company who allege that they contracted chronic beryllium disease as a result of
exposure to beryllium or beryllium dust. The complaints include claims by the
employees for employer intentional tort, fraud and misrepresentation and claims
by family members for loss of consortium. The plaintiffs seek compensatory
damages in excess of $25,000 and punitive damages in excess of $25,000. Defense
of this case is being conducted by counsel selected by the Company, and retained
by the Company in one case and by the Company's insurance carriers, with certain
reservation of rights, in the other. A motion to dismiss one of the cases was
granted in part and denied in part on January 18, 1996. Plaintiffs then filed an
amended complaint, which the Company moved to dismiss. Motions to dismiss the
complaints in both cases remain pending. The Company believes that resolution of
these cases will not have a material effect on the Company.
Recent Developments Relating to Pending Claims.
On March 18, 1996 the United States Magistrate Judge appointed by the
District Court in the HOUK and VANCE cases described in the table above issued
a report recommending that the Company's answer in these cases be stricken,
that a default judgment be entered against the Company, and that certain facts
be taken as established for purposes of these cases. These recommendations
resulted from the plaintiffs' motion for sanctions against the Company for
alleged failure to fulfill discovery requests and failure to comply with
certain Court orders despite the Magistrate Judge's finding that the prior
local counsel retained by the Company's insurer had not reported the existence
of these orders to the Company. The report also recommended that the Court
determine whether disciplinary proceedings should be commenced against such
counsel. The Company intends to contest the default recommendation vigorously.
Claims Concluded Since the End of Third Quarter 1995.
Esmeralda Mendoza, on her own behalf and on behalf of the estate of her husband
Phillip Mendoza, filed suit against the Company in the Court of Common Pleas of
Ottawa County, Ohio on September 5, 1995. The complaint alleged that, while he
was an employee of the Company, Mr. Mendoza contracted chronic beryllium disease
as a result of exposure to beryllium dust. The estate of Mr. Mendoza sought
$500,000 in compensatory damages and $500,000 in punitive damages. Mrs. Mendoza
sought damages for loss of consortium in the amount of $250,000. On October 6,
1995, the Company's motion for summary judgment was granted. The time for appeal
has expired.
8
10
Ernest Needham filed suit against the Company in the Superior
Court of Passaic County, New Jersey, for which service of process occurred on
December 10, 1992. The complaint alleged that, while he was an employee of a
customer of the Company, Mr. Needham contracted chronic beryllium disease as a
result of exposure to beryllium-containing products. Mr. Needham sought
compensatory damages of an unspecified amount. This case has been settled, and
it is expected that the case will be dismissed with prejudice by the court
pending final settlement papers.
Frances Lutz filed suit against the Company in the Superior
Court of Passaic County, New Jersey, on February 24, 1994, for which service
of process occurred on March 3, 1994. The complaint alleged that, while she was
an employee of a customer of the Company, Ms. Lutz contracted chronic beryllium
disease as a result of exposure to beryllium-containing products. Ms. Lutz
sought compensatory damages of an unspecified amount. This case has been
settled, and it is expected that the case will be dismissed with prejudice by
the court pending final settlement papers.
(c) Asbestos Exposure Claims.
A subsidiary of the Company (the "Subsidiary") is a
co-defendant in twenty-eight cases making claims for asbestos-induced illness
allegedly relating to the former operations of the Subsidiary, then known as
The S. K. Wellman Corp. twenty-four of these cases have been reported in prior
filings with the S.E.C. In all but a small portion of these cases, the
Subsidiary is one of a large number of defendants in each case. The plaintiffs
seek compensatory and punitive damages, in most cases of unspecified sums. Each
case has been referred to a liability insurance carrier for defense. With
respect to those referrals on which a carrier has acted to date, a carrier has
accepted the defense of the actions, without admitting or denying liability.
Two hundred twenty-five similar cases previously reported have been dismissed
or disposed of by pre-trial judgment, one by jury verdict of no liability and
ten others by settlement for nominal sums. The Company believes that resolution
of the pending cases referred to above will not have a material effect upon the
Company.
The Subsidiary has entered into an agreement with the
predecessor owner of its operating assets, Pneumo Abex Corporation (formerly
Abex Corporation), and five insurers, regarding the handling of these cases.
Under the agreement, the insurers share expenses of defense, and the Subsidiary,
Pneumo Abex Corporation and the insurers share payment of settlements and/or
judgments. In eleven of the pending cases, both expenses of defense and payment
of settlements and/or judgments are subject to a limited, separate reimbursement
agreement with MLX Corp., the parent of the company that purchased the
Subsidiary's operating assets in 1986.
9
11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
Executive Officers of the Registrant
The following table provides information as to the executive
officers of the Company.
Name Age Positions and Offices
---- --- ---------------------
Gordon D. Harnett 53 Chairman of the Board, President, Chief Executive Officer
and Director
Michael D. Anderson 44 Vice President Beryllium Products
Carl Cramer 47 Vice President Finance, Chief Financial Officer
Stephen Freeman 49 Vice President Alloy Products
Craig B. Harlan 58 Vice President International - Europe
Alfonso T. Lubrano 46 President - Technical Materials, Inc.
Snowden A. Moyer 55 Director Ceramic Operations
John J. Paschall 58 President - Williams Advanced Materials Inc.
Robert H. Rozek 61 Senior Vice President International
Andrew J. Sandor 56 Vice President Alloy Technology
Daniel A. Skoch 46 Vice President Administration and Human Resources
Mr. Harnett was elected Chairman of the Board, President, Chief
Executive Officer and Director of the Company effective January 22, 1991. He had
served as a Senior Vice President of The B. F. Goodrich Company from November,
1988.
Mr. Anderson was elected Vice President Beryllium Products
effective March 5, 1996. He was promoted to executive officer status effective
December 5, 1995. He had served as Director Sales and Marketing-Beryllium
Products since November, 1994, Director of Marketing-Ceramics since February,
1994 and Director of Marketing since April, 1989.
Mr. Cramer was elected Vice President - Finance and Chief
Financial Officer in December 1994. Prior to that, he served as President of
U.S. Operations and Director for the Americas and Australasia for the Swedish
multinational, Esselte Meto.
Mr. Freeman was elected Vice President Alloy Products effective
February 7, 1995. He had served as Vice President Sales and Marketing since
August 3, 1993. He had
10
12
served as Vice President Sales and Marketing-Alloy Products since July, 1992.
Prior to that, he had served as Management Consultant for Adastra, Inc.
Mr. Harlan was elected Vice President International-Europe
effective June 7, 1994. He had served as Vice President Business Development
since August, 1993. He had served as Senior Vice President, Sales and Marketing
since October, 1991. He had served as Vice President/General Manager, Alloy
Division since January 1, 1987.
Mr. Lubrano was promoted to executive officer status of Brush
Wellman Inc. effective December 5, 1995. He was elected President - Technical
Materials, Inc. effective Apirl, 1995 and Vice President and General Manager
effective March, 1992. Prior to that, he served as Vice President and Business
Director of Engelhard Corporation from 1987.
Mr. Moyer was promoted to executive officer status effective
December 5, 1995. He was elected Director Ceramic Operations effective June,
1990.
Mr. Paschall was promoted to executive officer status of Brush
Wellman Inc. effective December 5, 1995. He was elected President - Williams
Advanced Materials Inc. effective November, 1991. He had served as Vice
President Operations - Williams Advanced Materials Inc. since April, 1989.
Mr. Rozek was elected Senior Vice President International
effective March 5, 1996. He had served as Senior Vice President International
and Beryllium Products since March 7, 1995. Prior to that, he has served as Vice
President International effective October 1991 and Vice President Corporate
Development effective February 27, 1990.
Mr. Sandor was elected Vice President Alloy Technology effective
March 5, 1996. He had served as Vice President Operations since October 1991. He
had served as Senior Vice President since September 1989.
Mr. Skoch was elected Vice President Administration and Human
Resources effective March 5, 1996. He had served as Vice President Human
Resources since July, 1991. Prior to that he was Corporate Director - Personnel.
11
13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock is traded on the New York Stock
Exchange. As of March 11, 1996, there were 2,308 shareholders of record.
Information as to stock price and dividends declared set forth on page 16 in
Note M to the consolidated financial statements in the annual report to
shareholders for the year ended December 31, 1995 is incorporated herein by
reference. The Company's ability to pay dividends is generally unrestricted,
except that it is obligated to maintain a specified level of tangible net worth
pursuant to an existing credit facility.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data on pages 22 and 23 of the annual report
to shareholders for the year ended December 31, 1995 is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1995 to 1994 Comparison
Worldwide sales in 1995 were a record $370 million compared to $346 million in
1994. All product lines, except precious metals, increased over the prior year
with beryllium alloys and specialty metal systems increasing significantly.
Sales of beryllium alloy products increased in both the domestic and
international markets. The focused marketing efforts -- teams dedicated towards
particular markets and/or end use applications -- helped support the domestic
growth. Successful examples of these efforts include the continued penetration
into the automotive electronics market and a significant increase in shipments
of products used in aircraft bearings and bushings. Telecommunications and
computers also remain important markets for beryllium alloys as do appliances,
especially in Europe. Favorable economic conditions in portions of western
Europe, particularly in the first half of the year, helped fuel an addition in
sales there. Sales in Asia grew as a result of increased market share and
development of new applications. The sales trend in general for beryllium alloy
strip products is for customers to move toward the lower price alloys such as
the Company's Alloy 174. The sales increase in 1995 over 1994 was also due, in
part, to favorable foreign currency exchange rates and the pass-through effect
of higher commodity costs, particularly copper.
Beryllium sales increased slightly in 1995 over 1994, but were still somewhat
lower than in the recent years prior to 1994. A large portion of beryllium sales
continues to be for defense/aerospace applications and 1995 sales were enhanced
by shipments for defense programs in Europe and growth in new domestic defense
applications in avionics. The two targets for
12
14
growth are new defense/aerospace systems, particularly upgrades of current
defense systems, and commercial applications. Research and development,
marketing and manufacturing efforts have now been re-deployed to concentrate on
specific applications in these and related markets.
The Company filed a petition before the U.S. Department of Commerce,
International Trade Administration and the U.S. International Trade Commission
on March 14, 1996 requesting the imposition of antidumping duties on imports of
beryllium metal from Kazakhstan. The Company believes that beryllium from
Kazakhstan was dumped in the United States, and that, as a consequence, the
Company has lost substantial domestic sales to the principal Kazakhstan
manufacturer of beryllium metal, the Ulba Metallurgical Complex (also known as
the Ulbinsky Metal factory) in Ust Kamenogorsk, Kazakhstan which directly
competes with the Company in beryllium sales.
Ceramic sales grew in 1995 as compared to 1994. The increase is primarily a
result of the continued development of products utilizing the direct bond copper
technology. These sales were not profitable due to new process development and
other start-up costs. Equipment designed to increase efficiencies was installed
late in the year.
Sales of specialty metal systems increased in 1995 over 1994. Most products
experienced gains in 1995 with CERDIP sales increasing significantly. Sales
improved as a result of developing new product applications, increasing market
share and continued expansion into the international markets. Major applications
for these products continue to be automotive electronics and telecommunications.
Precious metal sales declined significantly in 1995 as compared to 1994. Frame
lid assembly sales were reduced due to a customer's re-design of a major
microprocessor application. The re-design had been anticipated by management and
resources have been directed towards developing alternative products and
markets. Sales of vapor deposition targets, which service the CD-ROM, specialty
coatings, telecommunications and semiconductor fabrication markets, continue to
increase. A small acquisition in late 1994 gave the Company access to the
ultra-fine wire market. These sales were minor in 1995, but are anticipated to
grow.
International operations consist of distribution centers in Germany, England and
Japan, primarily for alloy products, a marketing office in Singapore and a small
precious metal finishing facility in Singapore. Sales by these operations
totaled $91 million in 1995 compared to $84 million in 1994. As previously
noted, sales of beryllium alloy increased while sales of frame lid assemblies
from Singapore declined. Sales by the international operations are predominantly
in their respective local currencies with the balance in U.S. dollars. Direct
export sales to unaffiliated customers totaled $36 million in 1995 and $31
million in 1994. The majority of these sales are to Canada and western Europe.
U.S. exports are all denominated in dollars.
As outlined in Note F to the Consolidated Financial Statements, the Company has
a foreign currency hedge program to protect against adverse currency movements.
Should the dollar strengthen significantly, the decrease in value of foreign
currency transactions will be partially offset by gains on the hedge contracts.
As of December 31, 1995, outstanding hedge contracts totaled $24.8 million
compared to $18.2 million at December 31, 1994.
13
15
Gross margin was 27.3% in 1995 as compared to 26.6% in 1994. The increase in
international sales, which generally carry higher margins, contributed to this
improvement as did the favorable exchange rates. The direct bond copper start-up
costs and a shift in the remaining frame lid assembly business to smaller and
costlier pieces offset a portion of this increase. Certain manufacturing
expenses, including maintenance at the Elmore, Ohio facility, were higher in
1995 than 1994. Commercial applications of beryllium, particularly those
products containing AlBeMet(R), also have lower margins than traditional defense
applications, although restructuring efforts have reduced certain overhead
costs. The pass-through effect of higher commodity costs in beryllium alloy
sales reduced the margin percent while having no bearing on the actual margin
measured in dollars.
Selling, administrative and general expenses were $62.7 million (17.0% of sales)
in 1995 compared to $55.5 million (16.0% of sales) in 1994. Most expense
categories were higher. Causes of the increases include the alloy products
re-design effort and start-up costs associated with the Singapore subsidiary
established to provide marketing support in South Asia. Portions of these
expenses should be lower in future periods. Distribution and other sales-related
expenses grew due to higher volumes of beryllium alloy products. The exchange
rate effect on the international operations' expenses was also unfavorable.
Research and development (R&D) expenses were $7.8 million in 1995 compared to
$8.8 million in 1994. The decrease was due to focusing beryllium products'
research efforts on selected key applications. R&D expenses supporting all other
products either increased or were flat with the prior year. The R&D efforts for
new process and product development are coordinated with the Company's overall
marketing strategies and growth plans.
Other-net expense was $1.3 million in 1995 and $2.6 million in 1994. This
category included such expenses as amortization of intangible assets and other
non-operating items. The decrease in net expense was due, in part, to an
increase in foreign currency exchange gains in 1995.
Interest expense fell to $1.7 million in 1995 from $2.1 million in 1994 due to a
lower average level of debt outstanding and an increase in capitalized interest
associated with active capital expenditure projects.
Income before income taxes rose to $27.4 million in 1995 from $23.0 million in
1994. Higher sales and the resulting gross margin, along with a favorable
foreign currency effect, combined to improve earnings. This improvement was
partially offset by the increase in selling, general and administrative
expenses.
In 1995, an effective tax rate of 24.6% of pre-tax earnings was employed
compared to 19.4% of pre-tax earnings in 1994. Higher domestic and foreign
pre-tax earnings account for the increase. The 1995 effective rate is still well
below the statutory rate as detailed in Note H to the Consolidated Financial
Statements.
Comparative earnings per share were $1.26 in 1995 and $1.14 in 1994.
1994 to 1993 Comparison
Worldwide sales in 1994 were $346 million compared to $295 million in 1993. The
product lines of beryllium alloys, specialty metal systems and precious metal
products achieved
14
16
significant sales increases in 1994. Sales also increased in
the ceramics product line while beryllium product line sales had a significant
reduction in 1994 as compared to 1993.
The significant sales growth in beryllium alloys was achieved in both domestic
and international markets. The principal markets driving the increase were
automotive electronics, computers, telecommunications and appliances. Most
beryllium alloy products experienced gains in 1994 as compared to 1993.
Beryllium alloys were supported by a strong U.S. economy, continued economic
growth in Asia and improving conditions in Europe. While the favorable economic
background was a plus, the key to the added volume was a focused marketing
effort. This effort was a combination of the marketing, sales, technical,
quality and operating groups working as a team to provide quality,
cost-competitive products on a timely basis. This was best seen in the
expanding use of the Company's Alloy 174 strip in automotive electronics on a
growing list of car platforms and global demand for the Company's products in
undersea cable components. Also, in the steel industry, Phase 3HP Mold Plate
underwent field trials at two slab casters during 1994 with performance results
exceeding expectations in all respects.
Beryllium sales were lower due to completion of the Defense Logistics Agency
(DLA) supply contract and reduced AlBeMet(R) sales due to the end of an
application at a computer disk drive manufacturer. Although overall defense
spending is at a reduced level, this is still the base business to support the
beryllium product line in the near term.
Ceramic sales increased in 1994 as compared to 1993. The increase was
principally in the U.S. automotive and worldwide telecommunications industries,
which have more than offset declining defense applications.
Specialty metal systems saw major gains in 1994 as compared to 1993. During
1994, this product line was able to maintain the momentum of programs initiated
in prior years. The additional sales resulted primarily from a combination of
successfully executing marketing strategies, enlarging market share and new
product applications. The improved economy also contributed to growth.
Sales of precious metal products also increased significantly in 1994 over 1993.
Continued high demand and increased market share for frame lid assemblies from
semiconductor manufacturers, along with increasing vapor deposition target
sales, accounted for most of the improved volume. A substantial portion of the
increase came from frame lid assembly sales in Asia through the Singapore
facility. To further enhance this product line, the Company purchased the assets
of Hydrostatics Inc., a small manufacturer of precious metal ultra-fine wire
produced using an innovative technology in October 1994. This product fills an
identified need to support markets in the semiconductor and hybrid
microelectronics industries.
Total international sales were $115 million in 1994 and $86 million in 1993.
Sales from foreign operations were $84 million in 1994 compared to $51 million
in 1993, while direct exports totaled $31 million in 1994 and $35 million in
1993. The 1994 increase was primarily from beryllium alloys and the previously
mentioned frame lid assemblies fabricated in Singapore. This increase occurred
even though delivery of disk drive components ceased in 1994. Although much of
the beryllium alloy sales increase was in Europe and Asia, growth was also seen
in other parts of the world.
15
17
Gross margin (sales less cost of sales) was 26.6% in 1994 and 22.9% in 1993. In
1994, a provision of $2 million was reserved for downsizing the Fremont,
California facility and a provision of $0.6 million was made to transfer direct
bond copper production from the Syracuse, New York facility to the Newburyport,
Massachusetts plant. Without these charges, gross margin would have been 27.2%.
Higher sales and production volumes of beryllium alloys account for much of the
improvement. The beryllium alloy product line experienced lower unit costs from
the higher throughput and benefited from manufacturing improvements, especially
in strip products. In the beryllium product line, margins recovered in 1994
from 1993. However, the major reason for improvement in the beryllium product
line was that 1994 did not experience the negative impact of manufacturing
problems with the AlBeMet(R) disk drive component that occurred in 1993.
Selling, administrative and general expenses in 1994 were $55.5 million (16.0%
of sales) compared to $47.8 million (16.2% of sales) in 1993. The increase was
across all expense categories and includes an increased accrual for incentive
compensation. A portion of the increase in administrative costs relate to an
alloy business process redesign effort. A group of employees and consultants
have been charged with reviewing and analyzing specific activities in the
Company to find opportunities for improvement.
Research and development (R&D) expenses of $8.8 million in 1994 exceeded the
$7.1 million spent in 1993 by more than 20%. The addition was primarily in the
beryllium and ceramic product lines where efforts centered on new product
development. The beryllium alloy product line also saw an increase as efforts
were directed at both product development and process technology enhancements.
Interest expense was $2.1 million in 1994 and $3.0 million in 1993. All amounts
are net of interest capitalized on active construction and mine development
projects. Lower average debt reduced interest costs in 1994.
Other-net expense was $2.6 million in 1994 and $2.2 million in 1993. Included in
both years were the postretirement benefit costs pursuant to Statement of
Financial Accounting Standard (FAS) 106 for a divested operation. In 1993, the
Company made an adjustment to the FAS 106 demographic assumptions for the
divested operation, which resulted in a reduction of the liability and increased
income by $1.3 million. Concurrently, the carrying value of a building from the
divested operation was reduced by $0.9 million.
Income before income taxes in 1994 of $23.0 million was significantly higher
than the 1993 pre-tax income of $7.7 million. Higher sales volume and related
gross margin improvements account for the increase. The increased selling,
general and administrative expense offsets some of the gains in gross margin.
The effective tax rate employed for 1994 was 19.4% of pre-tax income as compared
to 16.2% of pre-tax income in 1993. The increase in pre-tax income accounts for
the higher rate. The effective rate was significantly below statutory rates due
to relatively fixed tax credits and allowances as shown in Note H to the
Consolidated Financial Statements.
Comparative earnings per share were $1.14 in 1994 and $0.40 in 1993.
16
18
FINANCIAL POSITION
CAPITAL RESOURCES AND LIQUIDITY
Cash flow from operating activities totaled $39.6 million in 1995. Cash
balances increased $9.1 million and total debt increased $0.6 million. Accounts
receivable were essentially unchanged from year-end 1994. FIFO inventories
increased $3.4 million, primarily due to higher copper and nickel costs and an
increase in international inventories corresponding to higher sales. The LIFO
reserve, however, increased $4.3 million resulting in a net decrease of $0.9
million in the LIFO inventory value.
Capital expenditures for property, plant and equipment amounted to
$24.2 million in 1995. Major expenditures included a new rod mill for the
Elmore, Ohio facility that is scheduled to be completed in mid-1996 and a
plating line and a stretch bend leveler for the Lincoln, Rhode Island facility.
There were also several environmental remediation projects that were
capitalized at the Elmore, Ohio and Delta, Utah plant sites. Management is
currently studying plans for modernizing portions of the alloy strip
manufacturing process in order to reduce costs, improve quality and add
capacity in selected areas. Capital expenditures are anticipated to increase in
1996.
During the fourth quarter 1995, the Company initiated a program to re-purchase
up to one million shares of its Common Stock. Approximately 165,000 shares at a
cost of $2.8 million were re-purchased under this program as of December 31,
1995, with the balance anticipated to be re-purchased during 1996. The average
number of shares outstanding increased in 1995 over 1994 due to an increase in
the number of previously issued stock options included in the diluted
outstanding share calculation as a result of a higher share price. Dividends
paid on outstanding shares totaled $5.5 million.
Short-term debt at December 31, 1995 was $22.8 million, including $1.5 million
of the current portion of long-term debt. The $21.3 million balance is
denominated principally in gold and foreign currencies to provide hedges against
current assets so denominated. Credit lines amounting to $71.5 million are
available for additional borrowing. The domestic and foreign lines are
uncommitted, unsecured and renewed annually. The precious metal facility is
committed, secured and renewed annually.
Long-term debt was $17.0 or 8% of total capital at December 31, 1995. Long-term
financial resources available to the Company include $60 million of medium-term
notes and $50 million under a revolving credit agreement.
Funds being generated from operations plus the available borrowing capacity are
believed adequate to support operating requirements, capital expenditures,
remediation projects, dividends and small acquisitions. Excess cash, if any, is
invested in money market instruments and other high quality investments.
Cash flow from operating activities in 1994 was $35.2 million. During 1994, cash
balances increased $12.7 million while total debt decreased $1.1 million.
Capital expenditures totaled $17.2 million and dividends paid were $3.7 million.
Long-term debt of $18.5 million was 9% of total capital at December 31, 1994.
17
19
ORE RESERVES
The Company's reserves of beryllium-bearing bertrandite ore are located in Juab
County, Utah. An ongoing drilling program has generally added to proven
reserves. Proven reserves are the measured quantities of ore commercially
recoverable through the open pit method. Probable reserves are the estimated
quantities of ore known to exist, principally at greater depths, but prospects
for commercial recovery are indeterminable. Ore dilution that occurs during
mining approximates 7%. About 87% of beryllium in ore is recovered in the
extraction process. The Company augments its proven reserves of bertrandite ore
through the purchase of imported beryl ore (approximately 4% beryllium) which
is also processed at the Utah extraction plant.
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Proven bertrandite ore reserves at
year end (thousands of dry tons) 6,927 6,747 6,786 6,787 6,855
Grade % beryllium 0.249% 0.251% 0.251% 0.251% 0.251%
Probable bertrandite ore reserves at
year-end (thousands of dry tons) 7,346 7,559 7,594 7,482 7,215
Grade % beryllium 0.281% 0.279% 0.279% 0.281% 0.284%
Bertrandite ore processed (thousands
of dry tons, diluted) 96 79 92 91 80
Grade % beryllium, diluted 0.232% 0.240% 0.232% 0.234% 0.237%
INFLATION AND CHANGING PRICES
The prices of major raw materials, such as copper, nickel and gold, purchased by
the Company increased during 1995. Such changes in costs are generally reflected
in selling price adjustments. The prices of labor and other factors of
production generally increase with inflation. Additions to capacity, while more
expensive over time, usually result in greater productivity or improved yields.
However, market factors, alternative materials and competitive pricing have
affected the Company's ability to offset wage and benefit increases. The Company
employs the last-in, first-out (LIFO) inventory valuation method domestically to
more closely match current costs with revenues.
ENVIRONMENTAL MATTERS
As indicated in Note K to the Consolidated Financial Statements, the Company
maintains an active program of environmental compliance. For projects involving
remediation, estimates of the probable costs are made and the Company has set
aside a reserve of $3.3 million at December 31, 1995 ($3.8 million at December
31, 1994). This reserve covers existing and currently foreseen projects.
18
20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of independent auditors and the following
consolidated financial statements of the Company included in the annual report
to shareholders for the year ended December 31, 1995 are incorporated herein by
reference:
Consolidated Balance Sheets - December 31, 1995 and 1994.
Consolidated Statements of Income - Years ended December 31, 1995, 1994
and 1993.
Consolidated Statements of Shareholders' Equity - Years ended December
31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows - Years ended December 31, 1995,
1994 and 1993.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
Quarterly Data on page 16 of the annual report to shareholders for the years
ended December 31, 1995 and December 31, 1994 is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
19
21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information under Election of Directors on pages 2 through
5 of the Proxy Statement dated March 18, 1996 is incorporated herein by
reference. Information with respect to Executive Officers of the Company is set
forth earlier on pages 10 and 11 of this Form 10-K annual report.
ITEM 11. EXECUTIVE COMPENSATION
The information under Executive Officer Compensation on pages
8 through 13 of the Proxy Statement dated March 18, 1996 is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information under Common Stock Ownership of Certain
Beneficial Owners, Directors and Management on pages 6 and 7 of the Proxy
Statement dated March 18, 1996 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under Related Party Transactions on page 17 of
the Proxy Statement dated March 18, 1996 is incorporated herein by reference.
20
22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements and Supplemental Information
Included in Part II of this Form 10-K annual report
by reference to the annual report to shareholders for
the year ended December 31, 1995 are the following
consolidated financial statements:
Consolidated Balance Sheets - December 31, 1995 and
1994.
Consolidated Statements of Income - Years ended
December 31, 1995, 1994 and 1993.
Consolidated Statements of Shareholders' Equity -
Years ended December 31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows - Years ended
December 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
(a) 2. Financial Statement Schedules
The following consolidated financial information for
the years 1995, 1994 and 1993 is submitted herewith:
Schedule II - Valuation and qualifying accounts.
All other schedules for which provision is made in
the applicable accounting regulations of the
Securities and Exchange Commission are not required
under the related instructions or are inapplicable,
and therefore have been omitted.
21
23
(a) 3. Exhibits
(3a) Articles of Incorporation of the Company as
amended February 28, 1989 (filed as Exhibit 3a to
the Company's Form 10-K Annual Report for the year
ended December 31, 1994), incorporated herein by
reference.
(3b) Regulations of the Company as amended April 27,
1993 (filed as Exhibit 3b to the Company's Form
10-K Annual Report for the year ended December 31,
1994), incorporated herein by reference.
(4a) Credit Agreement dated as of December 13, 1994
between the Company and National City Bank acting
for itself and as agent for three other banking
institutions (filed as Exhibit 4a to the Company's
Form 10-K Annual Report for the year ended
December 31, 1994), incorporated herein by
reference.
(4b) Rights Agreement between the Company and Society
National Bank (formerly Ameritrust Company
National Association) as amended February 28, 1989
(filed as Exhibit 4b to the Company's Form 10-K
Annual Report for the year ended December 31,
1994), incorporated herein by reference.
(4c) Issuing and Paying Agency Agreement dated as of
February 1, 1990, including a specimen form of a
medium term note issued thereunder, between the
Company and First Trust N.A. (formerly with Morgan
Guaranty Trust Company of New York) (filed as
Exhibit 4c to the Company's Form 10-K Annual
Report for the year ended December 31, 1994),
incorporated herein by reference.
(4d) Pursuant to Regulation S-K, Item 601 (b)(4), the
Company agrees to furnish to the Commission, upon
its request, a copy of the instruments defining
the rights of holders of long-term debt of the
Company that are not being filed with this report.
(10a)* Employment Agreement entered into by the Company
and Mr. Gordon D. Harnett on March 20, 1991.
(10b)* Form of Employment Agreement entered into by the
Company and Messrs. Brophy, Hanes, Harlan, Rozek
and Sandor on February 20, 1989 (filed as Exhibit
10b to the Company's Form 10-K Annual Report for
the year ended December 31, 1994), incorporated
herein by reference.
* Reflects management contract or other compensatory arrangement required to be
filed as an Exhibit pursuant to Item 14(c) of this Report.
22
24
(10c)* Form of Amendment to the Employment Agreement
(dated February 20, 1989) entered into by the
Company and Messrs. Brophy, Hanes, Harlan, Rozek
and Sandor dated February 28, 1991.
(10d)* Form of Employment Agreement entered into by the
Company and Mr. Daniel A. Skoch on January 28,
1992, Mr. Stephen Freeman dated August 3, 1993,
and Mr. Carl Cramer dated December 6, 1994 (filed
as Exhibit 10d to the Company's Form 10-K Annual
Report for the year ended December 31, 1991),
incorporated herein by reference.
(10e)* Form of Trust Agreement between the Company and
Key Trust Company of Ohio, N.A. (formerly
Ameritrust Company National Association) on behalf
of Messrs. Brophy, Hanes, Harlan, Rozek and Sandor
dated February 20, 1989, Mr. Harnett dated March
20, 1991 and Mr. Skoch dated January 28, 1992, Mr.
Freeman dated August 3, 1993, and Mr. Cramer dated
December 6, 1994 (filed as Exhibit 10e to the
Company's Form 10-K Annual Report for the year
ended December 31, 1994), incorporated herein by
reference.
(10f) Form of Indemnification Agreement entered into by
the Company and Mr. G. D. Harnett on March 20,
1991 (filed as Exhibit 10f to the Company's Form
10-K Annual Report for the year ended December 31,
1994), incorporated herein by reference.
(10g) Form of Indemnification Agreement entered into by
the Company and Messrs. J. H. Brophy, A. J.
Sandor, C. B. Harlan, H. D. Hanes, and R. H. Rozek
on June 27, 1989, Mr. D. A. Skoch on January 28,
1992, Mr. S. Freeman dated August 3, 1993, Mr. C.
Cramer on December 6, 1994 and Messrs. M. D.
Anderson, A. T. Lubrano, S. A. Moyer and J. J.
Paschall on January 19, 1996 (filed as Exhibit 10g
to the Company's Form 10-K Annual Report for the
year ended December 31, 1994), incorporated herein
by reference.
(10h) Form of Indemnification Agreement entered into by
the Company and Messrs. C. F. Brush III, F. B.
Carr, W. P. Madar, G. C. McDonough, R. M. McInnes,
H. G.Piper and J. Sherwin Jr. on June 27, 1989,
Mr. A. C. Bersticker on April 27, 1993 and Mr. D.
L. Burner on May 2, 1995 (filed as Exhibit 10h to
the Company's Form 10-K Annual Report for the year
ended December 31, 1994), incorporated here by
reference.
* Reflects management contract or other compensatory arrangement required to be
filed as an Exhibit pursuant to Item 14(c) of this Report.
23
25
(10i)* Directors' Retirement Plan as amended January 26,
1993 (filed as Exhibit 10i to the Company's Form
10-K Annual Report for the year ended December
31, 1992), incorporated herein by reference.
(10j)* Deferred Compensation Plan for Nonemployee
Directors effective January 1, 1992 (filed as
Exhibit I to the Company's Proxy Statement dated
March 6, 1992, Commission File No. 1-7006),
incorporated herein by reference.
(10k)* Form of Trust Agreement between the Company and
National City Bank dated January 1, 1992 on behalf
of Nonemployee Directors of the Company (filed as
Exhibit 10k to the Company's Form 10-K Annual
Report for the year ended December 31, 1992),
incorporated herein by reference.
(10l)* Incentive Compensation Plan adopted December 16,
1991, effective January 1, 1992 (filed as Exhibit
10l to the Company's Form 10-K Annual Report for
the year ended December 31, 1991), incorporated
herein by reference.
(10m)* Supplemental Retirement Plan as amended and
restated December 1, 1992 (filed as Exhibit 10n to
the Company's Form 10-K Annual Report for the year
ended December 31, 1992), incorporated herein by
reference.
(10n)* Amendment Number 3, adopted February 8, 1995, to
Supplemental Retirement Benefit Plan as amended
and restated December 1, 1992 (filed as Exhibit
10o to the Company's Form 10-K Annual Report for
the year ended December 31, 1994), incorporated
herein by reference.
(10o)* Amendment Number 2, adopted January 1, 1996, to
Supplemental Retirement Benefit Plan as amended
and restated December 1, 1992.
(10p)* Form of Trust Agreement between the Company and
Key Trust Company of Ohio, N.A. (formerly Society
National Bank) dated January 8, 1993 pursuant to
the December 1, 1992 amended Supplemental
Retirement Benefit Plan (filed as Exhibit 10p to
the Company's Form 10-K Annual Report for the year
ended December 31, 1992), incorporated herein by
reference.
* Reflects management contract or other compensatory arrangement required to be
filed as an Exhibit pursuant to Item 14(c) of this Report.
24
26
(10q)* 1979 Stock Option Plan, as amended pursuant to
approval of shareholders on April 21, 1982 (filed
as Exhibit 15A to Post-Effective Amendment No. 3
to Registration Statement No. 2-64080),
incorporated herein by reference.
(10r)* 1984 Stock Option Plan as amended by the Board of
Directors on April 18, 1984 and February 24, 1987
(filed as Exhibit 4.4 to Registration Statement
No. 33-28605), incorporated herein by reference.
(10s)* 1989 Stock Option Plan (filed as Exhibit 4.5 to
Registration Statement No. 33-28605), incorporated
herein by reference.
(10t)* 1990 Stock Option Plan for Nonemployee Directors
(filed as Exhibit 4.6 to Registration Statement
No. 33-35979), incorporated herein by reference.
(10u)* 1995 Stock Incentive Plan (filed as Exhibit A to
the Company's Proxy Statement dated March 13,
1995, Commission File No. 1-7006), incorporated
herein by reference.
(11) Statement re: calculation of per share earnings
for the years ended December 31, 1995, 1994 and
1993.
(13) Portions of the Annual Report to shareholders for
the year ended December 31, 1995.
(21) Subsidiaries of the registrant.
(23) Consent of Ernst & Young LLP.
(24) Power of Attorney.
(27) Financial Data Schedule.
(99) Form 11-K Annual Report for the Brush Wellman Inc.
Savings and Investment Plan for the year ended
December 31, 1995.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth
quarter of the year ended December 31, 1995.
* Reflects management contract or other compensatory arrangement required to be
filed as an Exhibit pursuant to Item 14(c) of this Report.
25
27
SIGNATURES
Pursuant to the requirements of Section 13 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.
March 21, 1996
BRUSH WELLMAN INC.
By: /s/ Gordon D. Harnett By: /s/ Carl Cramer
-------------------- -----------------
Gordon D. Harnett Carl Cramer
Chairman of the Board, Vice President and
President and Chief Executive Officer Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
GORDON D. HARNETT* Chairman of the Board,
- ------------------------------ President, Chief Executive
Gordon D. Harnett Officer and Director March 21, 1996
(Principal Executive Officer)
CARL CRAMER Vice President and Chief March 21, 1996
- ------------------------------ Financial Officer
Carl Cramer
ALBERT C. BERSTICKER* Director March 21, 1996
- ------------------------------
Albert C. Bersticker
CHARLES F. BRUSH, III* Director March 21, 1996
- ------------------------------
Charles F. Brush, III
DAVID L. BURNER* Director March 21, 1996
- ------------------------------
David L. Burner
FRANK B. CARR* Director March 21, 1996
- ------------------------------
Frank B. Carr
WILLIAM P. MADAR* Director March 21, 1996
- ------------------------------
William P. Madar
GERALD C. McDONOUGH* Director March 21, 1996
- ------------------------------
Gerald C. McDonough
ROBERT M. McINNES* Director March 21, 1996
- ------------------------------
Robert M. McInnes
HENRY G. PIPER* Director March 21, 1996
- ------------------------------
Henry G. Piper
JOHN SHERWIN, JR.* Director March 21, 1996
- ------------------------------
John Sherwin, Jr.
*The undersigned, by signing his name hereto, does sign and
execute this report on behalf of each of the above-named officers and directors
of Brush Wellman Inc., pursuant to Powers of Attorney executed by each such
officer and director filed with the Securities and Exchange Commission.
By: /s/ Carl Cramer
--------------
Carl Cramer
Attorney-in-Fact March 21, 1996
26
28
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
BRUSH WELLMAN INC. AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- ---------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ---------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
-------------------------------------
DESCRIPTION BALANCE AT BEGINNING (1) (2) DEDUCTIONS--DESCRIBE BALANCE AT END
OF PERIOD CHARGED TO COSTS CHARGED TO OTHER OF PERIOD
AND EXPENSES ACCOUNTS--DESCRIBE
- ---------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1995
Deducted from assets accounts:
Allowance for doubtful
accounts receivable $1,036,797 $ 203,213 $ 0 $ 225,306 (A) $1,014,704
Inventory reserves and
obsolescence $1,466,039 $1,590,856 $ 0 $1,456,895 (C) $1,600,000
Year ended December 31, 1994
Deducted from assets accounts:
Allowance for doubtful
accounts receivable $ 904,913 $ 254,042 $ 0 $ 122,158 (A) $1,036,797
Inventory reserves and
obsolescence $3,187,135 $ 0 $ 0 $1,721,096 (C) $1,466,039
Allowance for deferred tax
assets $1,540,000 $ 0 $ 0 $1,540,000 (D) $ 0
Year ended December 31, 1993
Deducted from assets accounts:
Allowance for doubtful
accounts receivable $ 781,389 $ 234,392 $ 0 $ 110,868 (A) $ 904,913
Inventory reserves and
obsolescence $ 0 $3,187,135 $ 0 $ 0 $3,187,135
Allowance for deferred tax
assets $ 0 $ 0 $1,540,000 (B) $ 0 $1,540,000
Note A - Bad debts written off.
Note B - The Company adopted SFAS No. 109, "Accounting for Income Taxes,"
effective January 1, 1993. Under Statement 109, a deferred tax assets
of $1,540,000 was recorded for net operating loss carryforwards. Since
it was unknown as to whether the deferred tax assets would be utilized,
a valuation allowance was recorded to offset the asset.
Note C - Inventory written off.
Note D - Net operating loss carryforwards utilized or expired.