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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, 1996
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 10, 1997 was approximately $277,558,553.
As of March 10, 1997, there were 16,286,119 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, 1996 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 6, 1997 are incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS
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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, telecommunication equipment, computers, automobiles, lasers,
satellites, 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
1996, 73% of the Company's sales were of products containing the element
beryllium (73% in 1995 and 70% in 1994). 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 1996 (27% in 1995 and 30% in
1994). 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.
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.
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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.
Circuits Processing Technology, Inc. (hereinafter referred to as
"CPT"), a subsidiary of the Company was acquired during 1996. CPT is a producer
of high reliability thick film circuits and other types of complex circuits
supporting all aspects of hybrid circuit requirements for both Defense and the
commercial marketplace. CPT's competition are thin film deposition processors
such as M.I.C.
SALES AND BACKLOG
-----------------
The backlog of unshipped orders as of December 31, 1996, 1995 and
1994 was $94,428,000, $95,718,000 and $95,354,000, 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, 1996 will be filled during 1997.
Sales are made to approximately 5,400 customers. Government
sales, principally subcontracts, accounted for about 1.2% of consolidated sales
in 1996 as compared to 1.3% in 1995 and 3.2% in 1994. Sales outside the United
States, principally to Western Europe, Canada and Japan, accounted for
approximately 29% of sales in 1996, 34% in 1995 and 33% in 1994. Financial
information as to sales, identifiable assets and profitability by geographic
area set forth on page 16 Note M to the consolidated financial statements in the
annual report to shareholders for the year ended December 31, 1996 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 $8,309,000 in 1996, $7,814,000 in 1995 and
$8,754,000 in 1994. A staff of 50 scientists, engineers and technicians was
employed in this effort during 1996. Some research and development projects were
externally sponsored and expenditures related to those projects (approximately
$166,000 in 1996, $36,000 in 1995 and $102,000 in 1994) are excluded from the
above totals.
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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, platinum 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
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 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
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As of December 31, 1996 the Company had 1,926 employees.
FORWARD-LOOKING INFORMATION
---------------------------
The portions of narrative set forth in this Item 1 and
elsewhere in this Annual Report on Form 10-K that are not historical in nature
are forward-looking statements. The Company's actual future performance may
differ from that contemplated by the forward-looking statements as a result of a
variety of factors that include, in addition to those mentioned elsewhere
herein, the condition of the markets which the Company serves, the success of
the Company's strategic plans, the timely and successful completion of pending
capital expansions and the conclusion of pending litigation matters in
accordance with the Company's expectation that there will be no materially
adverse effects.
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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.
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 23 of this Form 10-K annual report for the
year ended December 31, 1996 is 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.
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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.
OCEANSIDE, CALIFORNIA - A 12,000 square foot leased facility
on .75 acres of leased land. Over two-thirds of the facillity is comprised of
clean rooms which meet the Mil. Stds. 209D requirements, for the production of
thick-film circuits and other complex circuits.
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 re-evaluating production capacity in light of
anticipated sales increases from development of new applications for the
Company's products and expanding international presence. In May 1996, the Board
of Directors approved a plan for a major expansion and upgrading of alloy strip
capabilities involving the investment of $110 million at the Company's Elmore ,
Ohio facility. The goal of this investment is to increase strip production
capacity, reduce production costs, improve quality, reduce delivery lead times,
and optimize working capital utilization.
ITEM 3. LEGAL PROCEEDINGS
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(a) ENVIRONMENTAL PROCEEDINGS.
--------------------------
PENDING CLAIMS. The Company received a complaint on July 26,
1994, 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 U.S. Environmental
Protection Agency (the "U.S. EPA") under the Comprehensive, Environmental,
Response Compensation and Liability Act ("CERCLA"), have been spending funds to
secure, maintain and conduct an investigation of the Berks Landfill in Sinking
Springs, Pennsylvania ("Berks Site"). The plaintiffs are alleged to have
disposed of wastes at the Berks Site, which operated from 1950 through October
1, 1986. The 22 defendants (4 of which were added in 1997) consist of former
owners or operators of the Berks Site and alleged transporters and/or generators
of waste disposed of at the Berks Site. It is believed that hundreds of other
entities disposed of waste at the Berks 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 September 1994, they had spent
$335,000 to secure and maintain the Berks 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 the U.S. EPA and approved. A draft feasibility study was prepared, submitted
to the U.S.
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EPA and revised in response to the U.S. EPA's comments. Although no
final remedy has been proposed, the revised feasibility study presents eight
alternative remedies with estimated present worth costs ranging from zero (no
action alternative) up to $14.7 million. The Company's remediation expenses at
the Berks Site will be affected by a number of uncertainties, including the
method and extent of remediation, the percentage of waste disposed of at the
Berks Site attributable to the Company relative to that attributable to other
parties, and the financial capabilities of the other Potentially Responsible
Persons ("PRPs"). Discovery is proceeding pursuant to a case management order.
On or about September 25, 1992, the Company was served with a
third-party complaint, filed in the United States District Court for the Eastern
District of Pennsylvania, alleging that the Company, along with 159 other
third-party defendants, is jointly and severally liable under 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 ("Douglassville Site") located in Berks County, Pennsylvania: UNITED STATES
OF AMERICA V. BERKS ASSOCIATES INC. ET AL. V. AAMCO TRANSMISSIONS ET AL., Case
No. 91-4868. Third-party complaints adding further parties were filed
subsequently. Prior to the commencement of litigation, the Company had responded
to a request for information from the U.S. EPA by denying that it arranged to
send any substances to the Douglassville Site. Although the Company has no
documents in its own files relating to the shipment of any waste to the
Douglassville 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 Douglassville Site. The Company denies
liability. The Company participated in court-ordered settlement proceedings,
which resulted in a DE MINIMIS settlement offer by the United States. The
Company has accepted that offer and is awaiting notice from the government
showing the final settlement calculation.
The Company was identified as one of the potentially
responsible parties under CERCLA at the Spectron Superfund Site in Elkton,
Maryland ("Elkton Site"). The Company reached a settlement with the U.S. EPA
resolving the Company's liability under the Administrative Orders by Consent
dated August 21, 1989 and October 1, 1991. Compliance with the terms of these
Orders costs approximately $8,480,000, of which the Company's proportionate
share was $20,461. On September 29, 1995, the U.S. EPA sent a "Special Notice
for Negotiations for Remedial Investigation/Feasibility Study" to approximately
700 PRPs including the Company. The U.S. EPA estimates that the final remedy for
the Elkton Site will cost in the aggregate 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 the Elkton Site were
circulated among a group of PRPs including the Company. The Company indicated
its willingness to pursue resolution of its liability through a DE MINIMIS
settlement/buyout. No litigation has been initiated by the U.S. EPA with respect
to this matter.
CLAIMS CONCLUDED SINCE THE END OF THIRD QUARTER 1996. The
Company had learned in April 1993 that the Ohio Environmental Protection Agency
had referred to the Ohio Attorney General's Office (the "OAG") for consideration
the initiation of enforcement proceedings against the Company respecting 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
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waste and solid waste violations, including matters discovered during the course
of such negotiations, resulted in a preliminary agreement pursuant to which the
Company was required to pay a total of $227,000 and undertake a specific
pollution prevention project in lieu of paying additional penalties. This
agreement was finalized in a consent decree entered by the Court of Common Pleas
for Ottawa County on November 12, 1996: STATE OF OHIO V. BRUSH WELLMAN INC. The
Company has made the required payments and currently is implementing the
pollution prevention project in accordance with a schedule set out in the
Consent Decree.
(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 U.S. EPA and the Occupational Safety and Health
Administration (OSHA). The Government has continued to review these standards,
and governmental agencies continue to debate their adequacy. For example, the
Department of Energy has recently concluded that, in its opinion, current
beryllium standards may not be adequate to protect its own workers, and has
commenced gathering data, views and other relevant information to develop a
possible revised standard for occupational exposure to beryllium at Department
of Energy facilities. Moreover, some of the private litigants mentioned below
have made similar claims. In contrast, the American Conference of Governmental
Industrial Hygienists, a professional organization devoted to the administrative
and technical aspects of occupational and environmental health, has proposed
retention of the current occupational exposure standards and addition of a new
standard to limit high short-term exposures.
There were a number of new cases filed against the Company in
1996. Many of these cases were brought by present or former employees of the
Company who were found to have asymptomatic or subclinical forms of chronic
beryllium disease after participating in a blood-testing program voluntarily
initiated by the Company for all of its employees.
PENDING CLAIMS. The Company is currently a defendant in the
following eleven product liability cases in which the plaintiffs allege injury
resulting from exposure to beryllium and beryllium-containing materials, other
than as employees of the Company, and are claiming recovery based on various
legal theories. Nine of these cases were previously reported in the Company's
annual report on Form 10-K for the year ended December 31, 1995. Two cases were
filed after the end of third quarter 1996: BALLINGER ET AL. V. BRUSH WELLMAN
INC., filed in the U.S. District Court of Colorado on November 7, 1996; and GARY
FOSTER ET AL. V. BRUSH WELLMAN INC. ET AL., filed in the U.S. District Court,
Eastern District of Tennessee, on February 19, 1997. The Company believes that
resolution of these cases will not have a material adverse effect on the
Company. Defense for each of the cases identified in the table below is being
conducted by counsel selected by the Company and retained, with reservations of
rights, by the Company's insurance carriers.
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NAME OF PLAINTIFF DATE LAWSUIT FORUM RELIEF REQUESTED
INSTITUTED
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Richard Neiman and Spouse November 1990 Court of Common Pleas, Damages in excess of $20,000 for personal
Montgomery County, injury and in excess of $20,000 for loss of
Pennsylvania consortium
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Geraldine G. Ruffin, September New Jersey Superior Compensatory and punitive damages of an
individually and as 1991; notice Court -- Appellate unspecified amount
executrix of appeal Division (appeal from
filed by trial court summary
plaintiffs judgment entered in
May 1995 favor of the Company on
March 31, 1995)
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McKinley Houk October 1992 United States District Compensatory damages of $5 million and
Court, Eastern District punitive damages of $3 million
of Tennessee
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William Ray Vance and October 1992 United States District Compensatory damages of $3 million for
Spouse Court, Eastern District personal injury, $1 million for loss of
of Tennessee consortium and combined punitive damages of
$5 million
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David Taggart and Spouse October 1992 Court of Common Pleas, Compensatory damages in excess of $25,000
Chester County, each for personal injury and loss of
Pennsylvania consortium against Williams Advanced
Materials, Inc., a subsidiary of the Company
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Harry Robbins and Spouse June 1993 Court of Common Pleas, Both plaintiffs individually seek
Montgomery County, compensatory damages in excess of $50,000.
Pennsylvania Mr. Robbins also seeks punitive damages in
excess of $50,000
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Troy Murphy Morgan, June 1994 United States District Aggregate claims, including compensatory and
Corky Dean McCarter and Court, Eastern District punitive damages, in the amount of $19
Spouse, Richard Emory of Tennessee million
Myers, Sr. and Spouse
and Kathlene Beatty
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George F. Faccio and July 1995 United States District Compensatory and punitive damages of an
Spouse Court, District of unspecified amount
Arizona
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Robert Gallo and Spouse August 1995 Court of Common Pleas, Both plaintiffs seek compensatory damages in
Berks County, unspecified amounts. Mr. Gallo also seeks
Pennsylvania punitive damages of an unspecified amount
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Ballinger et al. November 1996 United States District Compensatory damages of an unspecified
Court, Colorado amount and punitive damages of an
unspecified amount.
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Foster et al. February 1997 United States District There are several defendants. Gary Foster
Court, Eastern District seeks compensatory damages from each
of Tennessee corporate defendant of $5 million. His
spouse seeks compensatory damages from each
defendant of $1 million. Both plaintiffs seek
punitive damages from each defendant of $10
million.
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During the fourth quarter of 1996, settlement agreements were
reached in the HOUK and VANCE cases, but the settlements have not yet been
finalized. A substantial portion of the settlement payments for both these cases
will be paid by insurance.
Nine Company employees and their spouses had filed law suits
against the Company and certain of its employees in the Superior Court of Pima
County, Arizona: COLE ET AL. V. BRUSH WELLMAN INC. ET AL.; CRUZ ET AL. V. BRUSH
WELLMAN INC. ET AL.; HAYNES-KERN ET AL. V. BRUSH WELLMAN INC. ET AL.; MATULIN ET
AL. V. BRUSH WELLMAN INC. ET AL.; FIMBRES ET AL. V. BRUSH WELLMAN INC. ET AL.;
FLORES ET AL. V. BRUSH WELLMAN INC. ET AL.; KOFIRA ET AL. V. BRUSH WELLMAN INC.
ET AL.; MALDONADO ET AL. V. BRUSH WELLMAN INC. ET AL.; and STOECKER ET AL. V.
BRUSH WELLMAN INC. ET AL. Six of these suits were instituted on June 10, 1994;
one was instituted on December 13, 1994; and two were instituted on February 28,
1995. The plaintiffs claimed 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 sought 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 should the plaintiffs contract
chronic beryllium disease. On July 5, 1996, Rudy Gamez, an employee of the
Company, filed a suit in the Superior Court of Pima County, Arizona (GAMEZ ET
AL. V. BRUSH WELLMAN INC. ET AL.), based upon similar claims and seeking similar
relief. The first nine cases noted above were dismissed by the trial court and
currently are on appeal following a summary judgment entered in favor of the
Company on August 26, 1996. However, the Company's motion for summary judgment
did not cover the GAMEZ case, which was filed after the Company had filed its
summary judgment motion. The GAMEZ case remains pending at the trial court.
Defense of all of these cases is being conducted by counsel retained by the
Company. The Company believes that resolution of these cases will not have a
material adverse effect on the Company.
In August 1994 and April 1995, the Company notified the State
Compensation Fund, a workers' compensation fund in the State of Arizona, of the
filing of certain of the above-mentioned employee suits and requested that the
State Compensation Fund defend such suits pursuant to the Company's State
Compensation Fund policies. The State Compensation Fund 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. Pursuant to that
commitment, the State Compensation Fund has reimbursed the Company for a
substantial portion of the costs incurred by the Company in defending the first
nine employee lawsuits noted above at the trial court level.
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In view of the dispute with respect to coverage, however, the
State Compensation Fund filed a declaratory judgment action against the Company
and certain of its employees in the Superior Court of Pima County, Arizona, for
which service of process occurred on August 21, 1995: STATE COMPENSATION FUND V.
BRUSH WELLMAN INC. ET AL. The Company filed an answer and counterclaim to the
effect that, INTER ALIA, the State Compensation Fund had a duty to defend and
indemnify the Company. The Company sought an award of not only the costs of
defending the underlying actions, but also the costs incurred with respect to
the coverage litigation and punitive damages. On May 13, 1996, the Court entered
an order granting the State Compensation Fund's motions for partial summary
judgment, which, among other things, sought a declaration of no duty to defend
or indemnify the Company against claims for breach of contract and claims for
intentional tort. These rulings did not completely dispose of the State
Compensation Fund's claims and did not address the Company's counterclaim. As of
September 1, 1996, the State Compensation Fund refused to reimburse the Company
for any further defense costs that the Company might incur. The State
Compensation Fund has also indicated that it plans to seek reimbursement of
defense costs already paid. Further proceedings in this action have been stayed
pending a ruling on the employees' appeals from the dismissal of their lawsuits
by the Superior Court of Pima County, Arizona, in the underlying cases noted
above.
In September 1995 and January 1996, the Company notified the
Argonaut Insurance Company that it was requesting the defense of two of the
aforementioned employee lawsuits. Argonaut denied coverage, and, in April 1996,
it filed a declaratory judgment action against the Company and certain of its
employees in the Superior Court of Pima County, Arizona: ARGONAUT INSURANCE
COMPANIES V. BRUSH WELLMAN INC. ET AL. Subsequently, in September 1996, Argonaut
and the Company agreed that Argonaut would dismiss its declaratory judgment
action (with the right to refile it later), that they would not litigate any
coverage issues between themselves until the State Compensation Fund's
declaratory judgment action has been completely resolved and that both parties
would be bound by the resolution of the coverage issues in the State
Compensation Fund's declaratory judgment action.
The Company was a defendant in three cases brought by three of
the Company's current employees and filed in the Court of Common Pleas for
Cuyahoga County, Ohio: WATT ET AL. V. BRUSH WELLMAN INC., filed August 1, 1995;
SLEEK ET AL. V. BRUSH WELLMAN INC., filed November 1, 1995; and DAMRON ET AL. V.
BRUSH WELLMAN INC., filed July 12, 1996. The plaintiffs in all three cases
alleged that they contracted chronic beryllium disease as a result of exposure
to beryllium or beryllium dust. The complaints included claims by the employees
for employer intentional tort, fraud and misrepresentation and claims by family
members for loss of consortium. The plaintiffs sought compensatory damages in
excess of $25,000 and punitive damages in excess of $25,000. Pursuant to an
interim arrangement between the Company and certain insurance carriers,
approximately one-half of the Company's defense costs are payable by the
carriers, subject to a full reservation of rights.
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On October 4, 1996, the plaintiffs in the WATT, SLEEK and
DAMRON cases voluntarily dismissed their claims. On January 22, 1997, the
plaintiffs in these three cases refiled a suit against the Company in the Court
of Common Pleas of Cuyahoga County, Ohio, along with four other current and
former employees of the Company and their family members: MIA JOHNSON, EXECUTRIX
OF ESTATE OF ETHEL JONES, ET AL. V. BRUSH WELLMAN INC. The plaintiffs 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 and claims by family members for loss of consortium.
Each plaintiff seeks compensatory damages in excess of $25,000 and punitive
damages in excess of $25,000.
The Company is also a defendant in separate suits filed by
five current employees and two former employees of the Company and, in some of
the cases, their family members in the Court of Common Pleas for Cuyahoga
County, Ohio: WHITAKER ET AL. V. BRUSH WELLMAN INC., filed August 23, 1996;
MUSSER ET AL. V. BRUSH WELLMAN INC., filed October 25, 1996; JACOBS ET AL. V.
BRUSH WELLMAN INC., filed December 31, 1996; STARIN V. BRUSH WELLMAN INC., filed
December 31, 1996; BERLIN V. BRUSH WELLMAN INC., filed January 24, 1997; and
KNEPPER ET AL. V. BRUSH WELLMAN INC., filed January 23, 1997. The WHITAKER case
is a putative class action filed by two current employees of the Company and
their spouses, on behalf of all current and former employees of the Company from
1949 to date of the suit and their family members. The complaints in all of
these cases allege that the employees contracted chronic beryllium disease at
the workplace and include claims by the employees for employer intentional tort
and, except in the STARIN and BERLIN cases, claims by family members. The
plaintiffs in the WHITAKER case seek compensatory damages in the amount of $100
million and punitive damages in the amount of $200 million together with certain
injunctive relief. The plaintiffs in the JACOBS and STARIN cases seek
compensatory damages in excess of $25,000 and punitive damages in excess of
$25,000. The plaintiffs in the KNEPPER case seek damages in the amount of $5
million. The plaintiff in the BERLIN case seeks compensatory damages in excess
of $25,000 and punitive damages in the amount of $1 million. The plaintiffs in
the MUSSER case seek compensatory damages in excess of $25,000 and punitive
damages in excess of $25,000.
On October 4, 1996, the Company moved for the dismissal of the
entire complaint in the WHITAKER case or partial summary judgment disposing of
the claims of one of the plaintiffs. On January 7, 1997, the court denied these
motions. The Company has filed a motion for judgment on the pleadings in the
MUSSER case and a motion to dismiss in the KNEPPER case, and these motions are
pending before the court. On February 18, 1997, the plaintiffs in the WHITAKER,
MIA JOHNSON, MUSSER, JACOBS, STARIN and BERLIN cases submitted a motion to the
Court of Common Pleas for Cuyahoga County, Ohio, to consolidate the cases. On
March 20, 1997, the court ordered the consolidation of the WHITAKER and MIA
JOHNSON cases.
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The Company has sought reimbursement of defense costs incurred
to date on the MIA JOHNSON, WHITAKER, MUSSER, JACOBS and KNEPPER cases pursuant
to the interim arrangement with certain insurance carriers mentioned above. The
Company believes that the insurance carriers will pay approximately one-half of
the defense costs in the MUSSER case. The Company is awaiting a response from
these insurance carriers on the costs submitted for the defense of the remaining
claims brought by its Ohio employees and their families.
An action was filed by the Arizona State Compensation Fund
against the Company on December 11, 1996 in the Superior Court of Pima County,
Arizona, seeking a declaratory judgment that the Fund is not required to defend
or indemnify the Company against claims made in the WHITAKER putative class
action, despite the fact that the WHITAKER putative class action purports to
include the Company's employees in Arizona and their families: STATE
COMPENSATION FUND V. BRUSH WELLMAN INC. The parties have agreed not to initiate
any motion or other proceedings in the case until April 10, 1997.
CLAIMS CONCLUDED SINCE THE END OF THIRD QUARTER 1996. In
a suit brought by an employee of the Company against a number of defendants,
including a customer of the Company, for personal injury resulting from exposure
to beryllium-containing materials, the customer filed a third-party complaint
against the Company on December 12, 1996 in the Superior Court of New Jersey,
Hunterdon County, seeking indemnification: MICHAEL LINDSTEDT V. NATIONAL
BERYLLIUM CORP. ET AL., SPECTRA-PHYSICS, INC. V. BRUSH WELLMAN INC. The
third-party complaint was dismissed on February 21, 1997.
The Company was also a defendant in a product liability case
filed on December 23, 1994 in the Superior Court of Orange County, California by
Mr. Roberts, an employee of a customer of the Company, and his spouse: ROBERTS
ET AL. V. BRUSH WELLMAN INC. In the complaint, Mr. Roberts alleged injury
resulting from exposure to beryllium and beryllium-containing materials. Both
plaintiffs sought compensatory damages of unspecified amounts and Mr. Roberts
also sought punitive damages of an unspecified amount. This case was settled for
a non-material amount, over 90% of which was paid by insurance. The case was
dismissed by the court on March 19, 1997.
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(c) ASBESTOS EXPOSURE CLAIMS.
-------------------------
A subsidiary of the Company (the "Subsidiary") is a
co-defendant in twenty-nine 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-eight 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 for defense pursuant to liability insurance coverage and
has been accepted for defense without admission or denial of carrier liability.
Two hundred thirty-two similar cases previously reported have been dismissed or
disposed of by pretrial judgment, one by jury verdict of no liability and twelve
others by settlement for nominal sums. In one pending case, a Delaware
subsidiary of the Subsidiary, formerly known as The S.K. Wellman Company, is a
defendant along with several other defendants. The Company believes that
resolution of the pending cases referred to in this paragraph will not have a
material effect upon the Company.
The Subsidiary is a party to 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 certain of the pending cases, both expenses of defense and payment
of settlements and/or judgements 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.
(d) OTHER MISCELLANEOUS CLAIMS.
---------------------------
PENDING CLAIMS. The Company is also a defendant in a
personal injury case filed in the Court of Common Pleas for Ottawa County, Ohio,
by an employee of the Company and his spouse: MATHIAS ET AL. V. BRUSH WELLMAN
INC., filed January 24, 1997. The plaintiffs seek compensatory damages in excess
of $25,000 and punitive damages in excess of $25,000 for an alleged acid spill.
CLAIMS CONCLUDED SINCE THE END OF THIRD QUARTER 1996. A
subsidiary of the Company, Williams Advanced Materials, Inc., settled for a
non-material amount a lawsuit filed on December 6, 1994 in the Circuit Court of
Dade County, Florida, and subsequently removed to the United States District
Court for the Southern District of Florida, Dade County, Florida: JACOBSEN V.
CERAMCO, INC., ET AL.. Williams Advanced Materials, Inc. was a co-defendant in
the law suit along with eight other defendants. In his complaint, the plaintiff
alleged that he had contracted silicosis from being exposed to silicon dental
products and sought damages in excess of $15,000. The case was dismissed on
October 15, 1996.
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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 54 Chairman of the Board, President,
Chief Executive Officer and Director
Michael D. Anderson 45 Vice President Beryllium Products
Carl Cramer 48 Vice President Finance, Chief
Financial Officer
Stephen Freeman 50 Vice President Alloy Products
Craig B. Harlan 59 Vice President International - Europe
Alfonso T. Lubrano 47 President - Technical Materials, Inc.
John J. Paschall 59 President - Williams Advanced Materials Inc.
Robert H. Rozek 62 Senior Vice President International
Andrew J. Sandor 57 Vice President Alloy Technology
Daniel A. Skoch 47 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 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.
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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 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 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. PASCHALL 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.
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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 10, 1997 there were 2,507 shareholders of record.
Information as to stock price and dividends declared set forth on page 17 in
Note N to the consolidated financial statements in the annual report to
shareholders for the year ended December 31, 1996 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.
As previously stated on page 2 of this annual report on Form
10-K, the Company acquired Circuits Processing Technology, Inc. ("CPT") on
October 2, 1996 pursuant to an Agreement and Plan of Merger dated October 2,
1996 (the "Merger Agreement") by and among the Company, CPT Acquisition, Inc. a
California corporation and a direct wholly owned subsidiary of the Company
("Merger Sub"), and CPT, a California corporation. Pursuant to the Merger
Agreement, as consideration for the merger of Merger Sub with and into CPT (the
"Merger"), the Company issued and sold 368,421 shares of the Company's Common
Stock, par value $1 per share (the "Merger Shares"), to four individuals, who
were the holders of all of the issued and outstanding shares of common stock of
CPT (the "CPT Holders") immediately prior to the effective time of the Merger.
At the effective time of the Merger, Merger Sub was merged
into CPT (with CPT as the surviving corporation), the separate corporate
existence of Merger Sub ceased and each share of common stock of Merger Sub
issued and outstanding immediately prior to the effective time of the Merger, by
virtue of the Merger and without any action on the part of the holders thereof,
was converted into and became one fully-paid and non-assessable share of common
stock of CPT. As a result of the Merger, CPT became a wholly owned subsidiary of
the Company.
The Merger Shares were issued and sold by the Company to the
CPT Holders pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), provided by Section
4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.
The Company relied upon the representations of the four CPT Holders that they
were acquiring the Merger Shares solely for their own account, for investment
purposes and without any intention or view towards the distribution of such
shares in violation of the Securities Act. In addition, the Company relied upon
the representations of the CPT Holders that each such holder was an "accredited
investor", as such term is defined in Rule 501(a) of Regulation D under the
Securities Act. The Merger Agreement gives the CPT Holders rights to register
the Merger Shares in certain circumstances specified therein.
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ITEM 6. SELECTED FINANCIAL DATA
- - -------------------------------
Selected Financial Data on page 23 of the annual report to
shareholders for the year ended December 31, 1996 is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- - -------------------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
RESULTS OF OPERATIONS
1996 TO 1995 COMPARISON
- - -----------------------
Worldwide sales in 1996 were a record $376.3 million surpassing the previous
record of $369.6 million achieved in 1995. The revenue growth came primarily
from domestic beryllium alloy products and specialty metal systems. The
resulting profits grew faster than sales, as earnings per share were $1.52 in
1996, an improvement of 21% over last year.
Worldwide sales of beryllium alloys increased in 1996 over 1995. Domestically,
sales of beryllium copper precision strip, rod and wire were higher as shipments
to the automotive electronics and telecommunications markets grew. In electronic
applications, these alloys frequently offer a superior combination of
reliability, conductivity and formability over competitive materials. In other
applications, depending upon their composition, beryllium alloys' performance
characteristics include good thermal conductivity, strong wear resistance and
high strength and hardness. Sales of bulk products (bar, tube, plate, custom
fabricated parts) also increased in 1996, capitalizing on these characteristics
to further penetrate the aerospace, plastic tooling and various industrial
markets. The recreation and leisure market emerged as a potentially large
application for bulk products; however, with a limited customer base, sales into
this market may be seasonal and inconsistent from year to year.
International sales of beryllium alloys declined in 1996 compared to 1995 as a
result of softening economic conditions in Germany and other portions of western
Europe. The sales growth in Japan and the Pacific rim slowed down from recent
years, but modest improvements were still recorded. The strong dollar in 1996
also contributed to the reported international sales decline, as foreign
currency sales are translated into fewer dollars compared to 1995. The domestic
beryllium alloy growth more than offset the international decline.
In 1996, the Company embarked upon a $110 million project to modernize and
expand its beryllium alloy production capabilities at its Elmore, Ohio facility.
A three-year project, its objectives are to improve quality and turnaround time,
lower costs, increase capacity and provide an even safer work environment. While
the automotive market potential for the Company's precision strip products is
the main impetus behind the project, virtually all beryllium alloy products and
markets served should benefit upon the project's completion.
17
19
Sales of specialty metal systems grew in 1996 over 1995. The gains came
primarily from the telecommunications market, with some additional contribution
from the automotive market as well. Semiconductor shipments were quite strong in
the first part of the year, but a major market slow down, which continued
through year end, adversely affected second half sales.
Precious metal sales were down in 1996 from last year's levels, but sales in the
second half of 1996 were higher than in the second half of 1995. An anticipated
decline in frame lid assemblies occurred due to a major customer's re-design to
a non-precious metal material in the second quarter of 1995. Efforts to broaden
the product offering have been successful through the continued development of
physical/vapor deposition products and services and high temperature braze
alloys. Fine wire sales remained minor. International sales declined in the
current year, reflecting the drop-off in frame lid assembly sales.
Beryllium sales slowed slightly in 1996 as compared to 1995. Defense
applications remain the largest portion of these sales, but at significantly
lower levels resulting from reduced government defense spending in recent years.
Commercial applications, particularly those using AlBeMet(R) (a beryllium
aluminum alloy) are beginning to develop. AlBeMet(R)'s high stiffness and low
density provide excellent properties for a variety of aerospace and
telecommunications applications.
Ceramic sales slipped in 1996 from 1995 levels due to a slowdown in shipments of
base business beryllia ceramic to the telecommunications and automotive
industries. The growth in direct bond copper products was not sufficient to
compensate as these products continue to experience development delays.
Circuits Processing Technology, Inc. ("CPT") was acquired in late October 1996
by the Company and contributed a minor amount to sales and profits. CPT, which
produces thick film circuits using a proprietary etching process, gives the
Company an additional entree into the micro-electronics market.
International operations consist of distribution centers in Germany, England and
Japan, a marketing office in Singapore and a small precious metal finishing
facility in Singapore. Sales by these operations totaled $74.8 million in 1996
compared to $91.2 million in 1995. Sales by the international operations are
predominantly in their respective local currencies with the balance in U.S.
dollars. Direct exports to unaffiliated customers total $33.6 million in 1996
and $36.1 million in 1995. The majority of these sales are to Canada and western
Europe and are denominated in U.S. dollars. International markets served are
essentially the same as in the U.S.
As outlined in Note G 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, 1996, outstanding hedge contracts totaled $25 million, the
same as the previous year end.
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20
Cost of sales declined by $1.0 million in 1996 from 1995 on higher sales,
resulting in a $7.7 million improvement in gross profit. Improved operating
efficiencies, including higher yields on certain products, better utilization of
available capacity, effective use of recycled materials and strong cost control
measures, increased the gross margin to 28.9% of sales in 1996 from 27.3% in
1995. Stable prices and product mix helped to offset the negative margin impact
of the stronger dollar. The lower copper cost in 1996, as compared to 1995, is
passed through to the customer and thus had no impact on gross margin.
Selling, administrative and general expenses of $65.0 million represent a 4%
increase over the prior year. Expenses associated with the first phase of
implementing an enterprise-wide information system caused a portion of the
increase. The project will carry over into 1997 and beyond. Additional
administrative and legal expenses were incurred to support and structure the
$110 million modernization and expansion project and the related financial
arrangements. Compensation plans carried higher costs in 1996 and certain sales
volume related expenses increased in 1996 as well.
Research and development (R&D) expenses grew to $8.3 million or 2.2% of sales in
1996 from $7.8 million or 2.1% of sales in 1995. The increase is predominantly
from efforts to develop a new high quality, low cost precision beryllium copper
strip. The new product will be designed to augment the Company's current
offerings to the electronics markets. The R&D staffing was also increased.
Expenditures on non-beryllium alloy R&D were flat.
Other-net expense was $1.0 million in 1996 and $1.3 million in 1995. Foreign
currency gains, including realized gains on hedge contracts, were $1.2 million
higher in the current year than the last. In 1996, goodwill and other intangible
assets totaling $1.1 million associated with the Fremont, California facility
were written off. While this operation is profitable, its scope of operations,
including product offerings, research capabilities and production capacity, has
been significantly reduced since its acquisition in 1989.
Interest expense fell to $1.1 million in 1996 from $1.7 million in 1995. These
figures are net of capitalized interest associated with long-term capital
projects of $1.0 million in 1996 and $0.4 million in 1995. The weighted average
interest rate was essentially unchanged year on year.
Income before income taxes was $33.2 million in 1996, a 20.9% improvement from
1995. Slightly higher sales and significantly improved margins were responsible
for the increase.
An effective tax rate of 26.2% of pre-tax earnings was used in 1996, an increase
from the 24.6% rate in 1995. Increased pre-tax earnings, reduced foreign tax
benefits and a reduction in the allowable tax benefits from the Company-owned
life insurance program as a result of a change in the tax law caused the higher
rates. Adjustments to the statutory tax rate are detailed in Note I to the
Consolidated Financial Statements.
Comparative earnings per share were $1.52 in 1996 and $1.26 in 1995.
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1995 TO 1994 COMPARISON
- - -----------------------
Worldwide sales in 1995 were $369.6 million compared to $345.9 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 growth are new defense/aerospace
systems, particularly upgrades of current defense systems, and commercial
applications. Research and development, marketing and manufacturing efforts were
re-deployed to concentrate on specific applications in these and related
markets.
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.
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 physical/vapor deposition products, which service the hybrid
microelectronics, recordable CD, telecommunications and specialty coatings
markets, continue to increase. A small acquisition in late 1994 gave the Company
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22
access to the ultra-fine wire market.
Sales from International operations totaled $91.2 million in 1995 compared to
$83.5 million in 1994. International sales of beryllium alloy increased while
sales of frame lid assemblies from Singapore declined. Direct export sales to
unaffiliated customers totaled $36.1 million in 1995 and $31.4 million in 1994.
The majority of these sales were to Canada and western Europe.
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. 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 lower
foreign currency exchange losses 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.
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23
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 accounted for the increase.
Comparative earnings per share were $1.26 in 1995 and $1.14 in 1994.
FINANCIAL POSITION
CAPITAL RESOURCES AND LIQUIDITY
Cash flow from operations was $45.0 million in 1996, a $5.4 million improvement
from 1995. Total depreciation, depletion and amortization was $23.0 million in
1996 compared to $20.9 million in 1995. The December 31, 1996 cash balance of
$31.7 million represents a $2.2 million increase from the prior year end while
total debt increased $4.8 million. The accounts receivable balance was flat year
on year; however, with higher sales in the fourth quarter 1996 than fourth
quarter 1995, the average days sales outstanding improved.
The $110 million modernization and expansion project begun in 1996 will be
financed in part by two operating leases totaling approximately $75 million (see
Note F to the Consolidated Financial Statements). While the leases will also
finance the construction phase of the project, lease payments are not scheduled
to begin until the underlying assets are placed in service in 1997 and 1998.
Capital expenditures for property, plant and equipment, excluding items under
lease, were $26.8 million while mine development payments totaled an additional
$3.7 million. Major expenditures included a new plating line at the Providence,
Rhode Island facility and completion of the new rod mill at the Elmore, Ohio
facility. The Company also began construction of a new facility in Lorain, Ohio
that will produce a specialty family of alloys in rod, bar and tube form. The
facility is scheduled to be operational in mid-1997. To finance the majority of
this project, the Company issued $8.3 million of tax-advantaged industrial
revenue development bonds. Unexpended bond proceeds of $7.9 million are
restricted for use on the Lorain project and are included as cash and cash
equivalents on the consolidated balance sheets as of December 31, 1996.
Short-term debt at December 31, 1996 of $25.7 million includes $6.6 million of
the current portion of long-term debt. The balance is denominated in precious
metals and foreign currencies to provide hedges against current assets so
denominated. Credit lines amounting to $70.5 million are available for
additional borrowing. The domestic and international lines are uncommitted,
unsecured and reviewed annually. The precious metal facility is committed,
secured and renewed annually.
Long-term debt was $18.9 million or 8.6% of total capital at December 31, 1996.
Long-term financial resources available to the Company include $60 million of
medium-term notes and $50 million under a revolving credit agreement.
Approximately 359,000 shares of Common Stock at a cost of $6.7 million were
re-purchased in
22
24
early 1996 under a program initiated during the fourth quarter 1995. The program
was suspended in the second quarter 1996. Common Stock was used to acquire CPT
in the fourth quarter 1996. Dividends paid on outstanding shares totaled $6.5
million, an increase of $1.0 million from last year. The quarterly dividend per
share increased to $0.11 from $0.10 in the third quarter 1996 following a two
cents per share increase in the third quarter 1995.
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 1995 was $39.6 million. Cash balances
increased $9.1 million during the year while total debt increased less than $1
million. Capital expenditures were $24.2 million in 1995. The Company
re-purchased $2.8 million of Common Stock and paid $5.5 million dividends. As of
December 31, 1995, long-term debt was $17.0 million or 8% of total capital.
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.
1996 1995 1994 1993 1992
------ ----- ------ ------ -----
Proven bertrandite ore reserves at
year-end (thousands of dry tons) 6,763 6,927 6,747 6,786 6,787
Grade % beryllium 0.249% 0.249% 0.251% 0.251% 0.251%
Probable bertrandite ore reserves at
year-end (thousands of dry tons) 7,432 7,346 7,559 7,594 7,482
Grade % beryllium 0.217% 0.281% 0.279% 0.279% 0.281%
Bertrandite ore processed (thousands
of dry tons, diluted) 97 96 79 92 91
Grade % beryllium, diluted 0.236% 0.232% 0.240% 0.232% 0.234%
23
25
INFLATION AND CHANGING PRICES
The prices of certain major raw materials, including copper, nickel and gold
purchased by the Company, decreased during 1996. 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 affect 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 L 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
reserved $4.0 million at December 31, 1996 ($3.3 million at December 31, 1995).
This reserve covers existing and currently foreseen projects.
24
26
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, 1996 are incorporated herein by
reference:
Consolidated Balance Sheets - December 31, 1996 and 1995.
Consolidated Statements of Income - Years ended December 31, 1996, 1995
and 1994.
Consolidated Statements of Shareholders' Equity - Years ended December
31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows - Years ended December 31, 1996,
1995 and 1994.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
Quarterly Data on page 17 of the annual report to shareholders for the years
ended December 31, 1996 and December 31, 1995 is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- - ------------------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
None
25
27
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 17, 1997 is incorporated herein by
reference. Information with respect to Executive Officers of the Company is set
forth earlier on pages 14 and 15 of this Form 10-K annual report.
ITEM 11. EXECUTIVE COMPENSATION
- - -------------------------------
The information under Executive Officer Compensation on pages 8
through 12 of the Proxy Statement dated March 17, 1997 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 7of the Proxy Statement dated
March 17, 1997 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- - -------------------------------------------------------
The information under Related Party Transactions on page 16 of the
Proxy Statement dated March 17, 1997 is incorporated herein by reference.
26
28
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, 1996 are the following
consolidated financial statements:
Consolidated Balance Sheets - December 31, 1996 and
1995.
Consolidated Statements of Income - Years ended
December 31, 1996, 1995 and 1994.
Consolidated Statements of Shareholders' Equity -
Years ended December 31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows - Years ended
December 31, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
(A) 2. Financial Statement Schedules
-----------------------------
The following consolidated financial information for
the years 1996, 1995 and 1994 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.
27
29
(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) First Amendment to Amended and Restated Credit
Agreement dated December 30, 1996 between Brush
Wellman Inc. and National City Bank acting for
itself and as agent for three other banking
institutions.
(4c) 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.
(4d) 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.
(4e) 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.
* Reflects management contract or other compensatory arrangement required to be
filed as an Exhibit pursuant to Item 14(c) of this report.
28
30
(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.
(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
* Reflects management contract or other compensatory arrangement required to be
filed as an Exhibit pursuant to Item 14(c) of this report.
29
31
June 27, 1989, Mr. A. C. Bersticker on April 27,
1993, Mr. D. L. Burner on May 2, 1995 and Mr.
James P. Mooney on October 1, 1996 (filed as
Exhibit 10h to the Company's Form 10-K Annual
Report for the year ended December 31, 1994),
incorporated herein by reference.
(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
* Reflects management contract or other compensatory arrangement required to be
filed as an Exhibit pursuant to Item 14(c) of this report.
30
32
Exhibit 10p to the Company's Form 10-K Annual
Report for the year ended December 31, 1992),
incorporated herein by reference.
(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.
(10v) Lease dated as of October 1, 1996, between Brush
Wellman Inc. and Toledo-Lucas County Port
Authority.
(10w) Master Lease Agreement dated December 30, 1996
between Brush Wellman Inc. and National City Bank
acting for itself and as agent for certain
participants.
(11) Statement re: calculation of per share earnings
for the years ended December 31, 1996, 1995 and
1994.
(13) Portions of the Annual Report to shareholders for
the year ended December 31, 1996.
(21) Subsidiaries of the registrant.
(23) Consent of Ernst & Young LLP.
(24) Power of Attorney.
(27) Financial Data Schedule.
* Reflects management contract or other compensatory arrangement required to be
filed as an Exhibit pursuant to Item 14(c) of this report.
31
33
(99) Form 11-K Annual Report for the Brush Wellman Inc.
Savings and Investment Plan for the year ended
December 31, 1996.
(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, 1996.
*Reflects management contract or other compensatory
arrangement required to be filed as an Exhibit pursuant to
Item 14(c) of this report.
32
34
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 27, 1997
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 March 27, 1997
Gordon D. Harnett Officer and Director
(Principal Executive Officer)
CARL CRAMER Vice President and Chief March 27, 1997
- - ---------------------------- Financial Officer
Carl Cramer
ALBERT C. BERSTICKER* Director March 27, 1997
- - ---------------------------
Albert C. Bersticker
CHARLES F. BRUSH, III* Director March 27, 1997
- - ----------------------------
Charles F. Brush, III
DAVID L. BURNER* Director March 27, 1997
- - ----------------------------
David L. Burner
FRANK B. CARR* Director March 27, 1997
- - -----------------------------
Frank B. Carr
WILLIAM P. MADAR* Director March 27, 1997
- - -----------------------------
William P. Madar
GERALD C. MCDONOUGH* Director March 27, 1997
- - -----------------------------
Gerald C. McDonough
ROBERT M. MCINNES* Director March 27, 1997
- - -----------------------------
Robert M. McInnes
JAMES P. MOONEY* Director March 27, 1997
- - -----------------------------
James P. Mooney
HENRY G. PIPER* Director March 27, 1997
- - -----------------------------
Henry G. Piper
JOHN SHERWIN, JR.* Director March 27, 1997
- - ----------------------------
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 March 27, 1997
Attorney-in-Fact
33
35
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
BRUSH WELLMAN INC. AND SUBSIDIARIES
Years ended December 31, 1996, 1995 and 1994
- - -----------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- - -----------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
-----------------------------------
DESCRIPTION Balance at Beginning (1) (2)
of Period Charged to Costs Charged to Other Deduction- Balance at End
and Expenses Accounts-Describe Describe of Period
- - -----------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1996
Deducted from assets accounts:
Allowance for doubtful
accounts receivable $1,014,704 $ 29,455 $0 $89,870 (A) $ 954,289
Inventory reserves and
obsolescence $1,600,000 $2,656,779 $0 $2,538,984 (B) $1,717,795
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 (B) $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 (B) $1,466,039
Allowance for deferred tax
assets $1,540,000 $ 0 $0 $1,540,000 (C) $ 0
<FN>
Note A - Bad debts written-off.
Note B - Inventory write-off.
Note C - Net operating loss carryforwards utilized or expired.