Back to GetFilings.com
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
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------- ----------------
Commission file number 1-7006
BRUSH ENGINEERED MATERIALS INC.
(Exact name of Registrant as specified in charter)
OHIO 34-1919973
(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, no par value 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. [ ]
The aggregate market value of Common Stock, no par value, held by
non-affiliates of the registrant (based upon the closing sale price on the New
York Stock Exchange) on March 9, 2001 was approximately $351,774,927.
As of March 9, 2001, there were 16,539,756 shares of Common Stock, no par
value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual report to shareholders for the year ended December
31, 2000 are incorporated by reference into Parts I, II and IV.
Portions of the proxy statement for the annual meeting of shareholders to
be held on May 1, 2001 are incorporated by reference into Part III.
2
PART I
Portions of the narrative set forth in this document that are not
statements of historical or current facts are forward-looking statements. The
Company's actual future performance may materially differ from that contemplated
by the forward-looking statements as a result of a variety of factors. These
factors include, in addition to those mentioned elsewhere herein, the condition
of the markets which the Company serves (especially as impacted by events in
particular markets, including telecommunications, computers, automotive
electronics and optical media, or in particular geographic regions), the
Company's success in implementing its strategic plans, the timely and successful
completion of pending capital expansion projects, changes in government
regulatory requirements, the enactment of new legislation that impacts the
Company's obligations and the conclusion of pending litigation matters in
accordance with the Company's expectation that there will be no material adverse
effects.
ITEM 1. BUSINESS
Brush Engineered Materials Inc., through its wholly-owned subsidiaries, is
a leading manufacturer of high performance engineered materials serving the
fast-growing global telecommunications, computer, automotive electronics,
industrial components and optical media markets. As of December 31, 2000 the
Company had 2,500 employees.
Brush Engineered Materials Inc.'s largest subsidiary, Brush Wellman Inc.,
is the only fully-integrated producer of beryllium, beryllium alloys and
beryllia ceramic in the world. Other subsidiaries include Technical Materials,
Inc. (TMI), which produces engineered material systems including clad metals,
plated metal, electron beam welded, solder plated and reflow materials, Williams
Advanced Materials Inc. (WAM), manufacturer of precious metal and specialty
alloy products, and Zentrix Technologies Inc. (Zentrix), which produces
electronic packaging, circuitry and powder metal products. Beyond its
manufacturing capabilities, Zentrix markets and distributes beryllia ceramics
for Brush Ceramic Products Inc.
A new organizational and capital structure, approved by the shareholders in
May 2000, was completed in January of 2001. The new organizational structure
better reflects the way the Company is managed today and will operate in the
future. In addition, the businesses are better positioned to capture the
benefits of their individual growth opportunities unencumbered by the financial,
economic and operating risks of other regions or businesses.
Under this new structure, the Company's subsidiaries continue to be
organized under two reportable segments: the Metal Systems Group and the
Microelectronics Group. The Metal Systems Group includes Brush Wellman Inc.
(Alloy Products and Beryllium Products) and TMI. The Microelectronics Group
includes WAM, Zentrix and Brush Ceramic Products Inc. Portions of Brush
International, Inc. are included in both segments. Corporate and certain
unallocated costs, non-operating items of other income and expense, and revenues
and related costs from one manufacturing facility are included in All Other. As
of December 31, 2000 the All Other group had 193 employees.
METAL SYSTEMS GROUP
The Metal Systems Group is comprised of Alloy Products (primarily copper
beryllium), Beryllium Products and TMI. In 2000, 67% of the Company's sales were
from this segment (67% in 1999 and 72% in 1998). As of December 31, 2000 the
Metal Systems Group had 1,638 employees.
Alloy Products are metallurgically tailored to meet specific customer
performance requirements. Copper beryllium alloys exhibit high electrical and
thermal conductivities, high strength and hardness, good formability and
excellent resistance to corrosion wear and fatigue. These alloys, sold in strip
and bulk form, are ideal choices for demanding applications in computers,
telecommunications, automotive electronics, aerospace, oil exploration, undersea
fiber optic cables, and plastic mold tooling.
Beryllium Products include beryllium, AlBeMet(R), AlBeCast(R) and
E-materials. Beryllium is a lightweight metal possessing unique mechanical and
thermal properties. Its specific stiffness is much greater and its weight is
much less than other engineered structural materials such as aluminum, titanium
and steel.
1
3
Beryllium is extracted from both bertrandite and imported beryl ore. The Company
holds extensive mineral rights and mines the bertrandite in central Utah.
Beryllium products are used in a variety of high-performance applications,
primarily, but not exclusively, in defense and aerospace markets.
The Company sells beryllium-containing products throughout the world
through a direct sales organization and through Company owned and independent
distribution centers. NGK Metals Corporation of Reading, Pennsylvania and NGK
Insulators, Ltd. of Nagoya, Japan are the only major direct competitors 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 which are produced by a variety of companies
around the world. 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.
TMI manufactures engineered material systems which are combinations of
precious and non-precious metals in continuous strip form, and are used in
complex electronic and electrical components in telecommunications systems,
automobiles and computers. Divisions of Cookson, Metallon and several European
manufacturers are competitors for the sale of inlaid strip. Strip with selective
electroplating is a competitive alternative as are other design approaches.
TMI's products are sold directly and through its sales representatives.
METAL SYSTEMS GROUP -- SALES AND BACKLOG
The backlog of unshipped orders as of December 31, 2000, 1999 and 1998 was
$140,246,000, $91,844,000 and $81,199,000, 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 for this segment at December 31, 2000 will be filled during
2001.
Sales are made to approximately 3,400 customers. Government sales,
principally subcontracts, accounted for about 2.3% of Metal Systems Group sales
in 2000 as compared to 2.0% in 1999 and 2.4% in 1998. Sales outside the United
States, principally to Western Europe, Canada and Asia, accounted for
approximately 33% of Metal Systems Group sales in 2000, 34% in 1999 and 35% in
1998. Other segment reporting and geographic information set forth on page 41 in
Note N to the consolidated financial statements in the annual report to
shareholders for the year ended December 31, 2000 is incorporated herein by
reference.
METAL SYSTEMS GROUP -- RESEARCH AND DEVELOPMENT
Active research and development programs seek new product compositions and
designs as well as process innovations. Expenditures for research and
development amounted to $5,543,000 in 2000, $6,799,000 in 1999 and $6,628,000 in
1998. A staff of 34 scientists, engineers and technicians was employed in this
effort during 2000. Some research and development projects were externally
sponsored. Expenditures related to those externally sponsored projects were not
material in 2000, 1999 and 1998 and are excluded from the above totals.
MICROELECTRONICS GROUP
The Microelectronics Group is comprised of WAM, Zentrix and Brush Ceramic
Products Inc. In 2000, 32% of the Company's sales were from this segment (31% in
1999 and 26% in 1998). As of December 31, 2000 the Microelectronics Group had
669 employees.
WAM manufactures and fabricates precious metal and specialty metal products
for the hybrid microelectronics, semiconductors, optical media, electron tube,
magnetic head including MR and GMR materials, crystal, aerospace, and
performance film industries. WAM's major product lines include vapor deposition
materials, high-temperature braze materials, clad and precious metal preforms,
ultra fine wire, sealing lids for the semiconductor/hybrid markets and
restorative dental alloys.
WAM's principal competition includes companies such as Sumitomo Metals,
Praxair, Engelhard, Honeywell and a number of smaller regional or national
suppliers. WAM's products are sold directly from
2
4
WAM's facilities in Buffalo, New York; Brewster, New York; Wheatfield, New York
and Singapore as well as through direct sales offices and independent sales
representatives throughout the world.
Zentrix produces electronic packaging, circuitry and powder metal products.
Zentrix also markets and distributes beryllia ceramics for Brush Ceramic
Products Inc. These products are used in wireless communications, automotive,
medical and aerospace applications. CBL Ltd. is a competitor in beryllia
ceramic. Other competitive materials include alumina, aluminum nitride and
composites.
MICROELECTRONICS GROUP -- SALES AND BACKLOG
The backlog of unshipped orders as of December 31, 2000, 1999 and 1998 was
$31,225,000, $20,283,000 and $11,606,000, 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 for this segment at December 31, 2000 will be filled during
2001.
Sales are made to approximately 1,200 customers. Government sales,
principally subcontracts, accounted for less than 0.1% of Microelectronics Group
sales in 2000, 1999 and 1998. Sales outside the United States, principally to
Western Europe, Canada and Asia, accounted for approximately 15% of
Microelectronics Group sales in 2000, 23% in 1999 and 25% in 1998. Other segment
reporting and geographic information set forth on page 41 in Note N to the
consolidated financial statements in the annual report to shareholders for the
year ended December 31, 2000 is incorporated herein by reference.
MICROELECTRONICS GROUP -- RESEARCH AND DEVELOPMENT
Active research and development programs seek new product compositions and
designs as well as process innovations. Expenditures for research and
development amounted to $1,894,000 in 2000, $1,707,000 in 1999 and $2,037,000 in
1998. A staff of 15 scientists, engineers and technicians was employed in this
effort during 2000.
GENERAL
AVAILABILITY OF RAW MATERIALS
Beryllium-containing products account for over 50% of the Company's sales.
Beryllium is extracted from imported beryl ore and from bertrandite mined from
the Company's Utah properties (ore reserve data in Management's Discussion and
Analysis on page 20 of the Company's annual report to shareholders for the year
ended December 31, 2000 is incorporated herein by reference). The Company also
purchases scrap beryllium materials from customers and beryllium containing
materials from government agencies and other suppliers. Other important raw
materials used by the Company include copper, gold, silver, nickel, aluminum,
platinum and palladium. The availability of these and other raw materials used
is adequate and generally not dependent upon any one supplier. Certain items are
supplied by a preferred 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.
REGULATORY MATTERS
The Company is subject to a variety of laws including those which regulate
the use, handling, treatment, storage, discharge and disposal of substances and
hazardous wastes used or generated in the Company's manufacturing processes. 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
3
5
Commission over forty years ago, were, in general, substantially adopted by the
United States Environmental Protection Agency (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. The Department of Energy has proposed chronic beryllium
disease preventive regulation for occupational exposure to beryllium at
Department of Energy facilities. The Company currently is the subject of
newspaper articles concerning the beryllium industry and chronic beryllium
disease. These articles, and others similar to them, may exacerbate the
regulatory environment in which the Company operates.
ITEM 2. PROPERTIES
The material properties of the Company, all of which are owned in fee
except as otherwise indicated, are as follows:
MANUFACTURING FACILITIES
BREWSTER, NEW YORK -- A 35,000 square foot facility on a 6.0 acre site for
manufacturing services relating to non-precious metals.
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.
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.
ELMORE, OHIO -- A complex containing approximately 856,000 square feet of
building space on a 439 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.
FREMONT, CALIFORNIA -- A 16,800 square foot leased facility for the
fabrication of precision electron beam welded, brazed and diffusion bonded
beryllium structures.
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 20 in the annual report to shareholders for the
year ended December 31, 2000 is incorporated herein by reference.
LINCOLN, RHODE ISLAND -- A manufacturing facility consisting of 124,000
square feet located on seven and one-half acres. This facility produces
reel-to-reel strip metal products which combine precious and non-precious metals
in continuous strip form and related metal systems products.
LORAIN, OHIO -- A manufacturing facility consisting of 55,000 square feet
located on 15 acres. This facility produces metal alloys in electronic induction
furnaces which are continually cast into bar stock and heat treated.
NEWBURYPORT, MASSACHUSETTS -- A 30,000 square foot manufacturing facility
on a four acre site that produces alumina, beryllia ceramic and direct bond
copper products.
OCEANSIDE, CALIFORNIA -- Two leased facilities totaling 20,200 square feet
on 1.25 acres of leased land. Over three-quarters of these facilities are
comprised of clean rooms which meet Mil.Std. 209D requirements for the
production of thick-film circuits and other complex circuits.
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.
TUCSON, ARIZONA -- A complex containing approximately 63,000 square feet of
building space on a ten acre site for the production of beryllium oxide ceramic
substrates and copper/tungsten heatsinks for use in electronic applications.
4
6
WHEATFIELD, NEW YORK -- A 29,000 square foot facility on a 10.2 acre site
for manufacturing services relating to braze material and specialty alloys.
RESEARCH FACILITIES AND ADMINISTRATIVE OFFICES
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.
SERVICE AND DISTRIBUTION CENTERS
ELMHURST, ILLINOIS -- A 28,500 square foot leased facility principally for
distribution of beryllium alloys.
FAIRFIELD, NEW JERSEY -- A 24,500 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.
SINGAPORE -- A 4,500 square foot leased facility for the assembly and sale
of precious metal hermetic sealing lids.
STUTTGART, WEST GERMANY -- A 24,750 square foot leased facility principally
for distribution of beryllium alloys.
THEALE (READING), ENGLAND -- A 19,700 square foot leased facility
principally for distribution of beryllium alloys.
TORRANCE, CALIFORNIA -- A 20,000 square foot leased facility principally
for distribution of beryllium alloys.
WARREN, MICHIGAN -- A 34,500 square foot leased facility principally for
distribution of beryllium alloys.
Production capacity, except in the case of Alloy Products, is believed to
be adequate to fill the Company's backlog of orders and to meet the current
level of demand. In May 1996, the Board of Directors approved a plan for a major
expansion and upgrading of alloy casting and strip capabilities involving the
investment of $117 million at the Company's Elmore, Ohio facility. The purpose
of this investment is to increase alloy casting and strip production capacity,
reduce production costs, improve quality, reduce delivery lead times, and
improve working capital utilization. The plant became fully operational during
1999. However, demand for strip products has outpaced the ramp-up of the mill
equipment. Production output improved substantially during 2000, and the Company
anticipates that output should continue to improve in 2001. The ability to fill
the current backlog will be dependent upon achieving strip capacity ramp-up
targets and the rate of growth in the Company's major markets for 2001.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are subject, from time to time, to a
variety of civil and administrative proceedings arising out of their normal
operations, including, without limitation, product liability claims, health,
safety and environmental claims and employment-related actions. Among such
proceedings are the cases described below.
CBD CLAIMS
There are claims pending in various state and federal courts against Brush
Wellman, one of the Company's subsidiaries, by its employees, former employees
or surviving spouses and third party individuals alleging that they contracted,
or have been placed at risk of contracting, chronic beryllium disease ("CBD") or
related ailments as a result of exposure to beryllium. Plaintiffs in CBD cases
seek recovery under theories of intentional tort and various other legal
theories and seek compensatory and punitive damages, in many cases of an
unspecified sum. Spouses, if any, claim loss of consortium.
5
7
During 2000, the number of CBD cases grew from 37 (involving 119
plaintiffs), as of December 31, 1999, to 71 cases (involving 192 plaintiffs), as
of December 31, 2000. During 2000, an aggregate of two cases involving five
plaintiffs were settled; however, the Company is awaiting final court dismissal
on one of those cases. One case involving two plaintiffs was voluntarily
dismissed by the plaintiffs. The courts granted favorable summary judgments in
two cases, which have been appealed by the plaintiffs. One purported class
action involving four named plaintiffs was dismissed; the time for filing an
appeal has passed. No other cases were dismissed in 2000.
The 71 pending CBD cases fall into three categories: 38 "employee cases"
involving an aggregate of 38 Brush Wellman employees, former employees or
surviving spouses (in 23 of these cases, a spouse has also filed claims as part
of his or her spouse's case); 30 cases involving third party individual
plaintiffs, with 65 individuals (and 44 spouses who have filed claims as part of
their spouse's case, and six children who have filed claims as part of their
parent's case); and three purported class actions, involving 14 individuals (and
two spouses who have filed claims as part of their spouse's case), as discussed
more fully below. Employee cases, in which plaintiffs have a high burden of
proof, have historically involved relatively small losses to the Company. Third
party plaintiffs (typically employees of customers) face a lower burden of proof
than do employees or former employees, but these cases are generally covered by
insurance, at least partially.
In the three purported class actions that are pending against Brush
Wellman, the named plaintiffs allege that past exposure to beryllium has
increased their risk of contracting CBD, though most of them do not claim to
have actually contracted it. They seek medical monitoring funds to be used to
detect medical problems that they believe may develop as a result of their
exposure and, in some cases, also seek compensatory and punitive damages.
One of the three purported class actions pending against Brush Wellman was
brought by named plaintiffs on behalf of tradesmen who worked in one of Brush
Wellman's facilities as employees of independent contractors. The two others
were brought on behalf of current and former employees of Brush Wellman's
present and former customers and vendors.
A fourth purported class action, brought against Brush Wellman by named
plaintiffs on behalf of current and former employees of Brush Wellman's present
and former customers, was dismissed during the third quarter. That dismissal
became final during the fourth quarter. The allegations made and the relief
sought by the named plaintiffs in that case were similar to the allegations made
and the relief sought in the purported class actions that are still pending.
From January 1, 2001 to March 28, 2001, four additional CBD claims were
served on Brush Wellman. Three claims are employee cases, and the other claim is
a third party case. In all of these cases, the plaintiffs generally assert the
same types of claims and seek the same damages under the same theories as
discussed above for the year ended December 31, 2000.
ENVIRONMENTAL CLAIMS
Brush Wellman was identified as one of the Potentially Responsible Persons
(the "PRPs") under the Comprehensive, Environmental, Response, Compensation and
Liability Act ("CERCLA") at the Spectron Superfund Site in Elkton, Maryland. It
reached a settlement with the U.S. Environmental Protection Agency (the "U.S.
EPA") resolving its liability under the Administrative Orders by Consent dated
August 21, 1989 and October 1, 1991. The cost of compliance with the terms of
these Orders is approximately $8,480,000, of which Brush Wellman's proportionate
share is $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 Brush Wellman. 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 Brush Wellman. Brush Wellman
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. In 1998, Brush Wellman received information from the
group of PRPs negotiating the terms of the de minimis settlement with the U.S.
EPA that the U.S. EPA is in the process of reviewing the
6
8
allocation information underpinning the terms of the proposed settlement.
Originally, the U.S. EPA expected to complete its review in a relatively short
amount of time and consummate the settlement before the 1998 year end. Brush
Wellman, however, has received no new information concerning when the U.S. EPA
expects to complete its review and finalize the settlement.
OTHER CLAIMS
As previously reported in the Form 10-K for the year ended December 31,
1998, a subsidiary of the Company, Technical Materials, Inc. ("TMI"), and an
employee of TMI are defendants in a case filed in the Superior Court of the
State of Rhode Island on October 15, 1997: Handy & Harman Electronic Materials
Corporation v. Technical Materials, Inc., et al. The complaint alleges that TMI
tortiously induced the employee to breach his confidentiality obligations to his
former employer, the plaintiff, and misappropriated trade secrets of the
plaintiff. The plaintiff seeks permanently to enjoin TMI from using any
confidential information obtained by the employee while he was employed with the
plaintiff, and compensatory and punitive damages of unspecified amounts. The
case is scheduled for trial on May 14, 2001.
Brush Wellman's Egbert subsidiary has been named as a defendant in a number
of lawsuits alleging asbestos-induced illness, arising out of the conduct of a
friction materials business whose operating assets Egbert sold in 1986. In each
of the pending cases, Egbert is one of a large number of defendants named in the
respective complaints. Egbert 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 some expenses of defense, and Egbert, Pneumo
Abex Corporation and the insurers share payment of settlements and/or judgments.
In each of the pending cases, both expenses of defense and payment of
settlements and/or judgments are subject to a limited, separate reimbursement
agreement under which a successor owner of the business is obligated. A number
of cases of this type have been disposed of to date, some by voluntary
dismissal, others by summary judgment, one by jury verdict of no liability, and
still others upon payment of nominal amounts in settlement. There are at present
23 asbestos cases pending.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 4A. 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 58 Chairman of the Board, President, Chief Executive
Officer and Director
John D. Grampa 53 Vice President Finance and Chief Financial Officer
William R. Seelbach 52 President, Brush Wellman Inc.
Daniel A. Skoch 51 Senior Vice President Administration
MR. HARNETT was elected Chairman of the Board, President, Chief Executive
Officer and Director of the Company effective January, 1991. He had served as a
Senior Vice President of The B.F. Goodrich Company from November, 1988.
MR. GRAMPA was elected Vice President Finance and Chief Financial Officer
in November, 1999. He had served as Vice President Finance since October, 1998.
He had served as Vice President, Finance for the worldwide Materials Business of
Avery Dennison Corporation since March, 1994 and prior to that time he held
other various financial positions at Avery Dennison Corporation from 1984.
MR. SEELBACH was elected President, Brush Wellman Inc. in July, 2000. Prior
to that time, he had served as President, Alloy Products since June, 1998. Prior
to that time, he had been Chairman and CEO of
7
9
Inverness Partners since October, 1987. Prior to Inverness Partners, he was a
partner with McKinsey & Company.
MR. SKOCH was elected Senior Vice President Administration in July, 2000.
Prior to that time, he had served as Vice President, Administration and Human
Resources since March, 1996. He had served as Vice President, Human Resources
since July, 1991 and prior to that time, he was Corporate Director -- Personnel.
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 9, 2001 there were 2,064 shareholders of record. Information as to stock
price and dividends declared set forth on page 42 in Note O to the consolidated
financial statements in the annual report to shareholders for the year ended
December 31, 2000 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
and a lease agreement.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data on page 43 of the annual report to shareholders for
the year ended December 31, 2000 is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The management's discussion and analysis of financial condition and results
of operations on pages 13 through 22 of the annual report to shareholders for
the year ended December 31, 2000 is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk disclosures on page 21 of the annual report to shareholders
for the year ended December 31, 2000 are incorporated herein by reference.
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, 2000 are incorporated herein by reference:
Consolidated Balance Sheets -- December 31, 2000 and 1999.
Consolidated Statements of Income -- Years ended December 31, 2000, 1999
and 1998.
Consolidated Statements of Shareholders' Equity -- Years ended December 31,
2000, 1999 and 1998.
Consolidated Statements of Cash Flows -- Years ended December 31, 2000,
1999 and 1998.
Notes to Consolidated Financial Statements.
Quarterly Data on page 42 in Note O to the consolidated financial
statements in the annual report to shareholders for the years ended December 31,
2000 and 1999 is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
8
10
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information under Election of Directors on pages 2 through 4 of the
Proxy Statement dated March 19, 2001, as filed with the Securities and Exchange
Commission pursuant to Regulation 14A, is incorporated herein by reference.
Information with respect to Executive Officers of the Company is set forth under
Item 4A -- Executive Officers of the Registrant.
ITEM 11. EXECUTIVE COMPENSATION
The information required under this heading is incorporated by reference
from pages 10 through 15 of the Proxy Statement dated March 19, 2001, as filed
with the Securities and Exchange Commission pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required under this heading is incorporated by reference
from pages 7 through 9 of the Proxy Statement dated March 19, 2001, as filed
with the Securities and Exchange Commission pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
9
11
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, 2000 are the
following consolidated financial statements:
Consolidated Balance Sheets -- December 31, 2000 and 1999.
Consolidated Statements of Income -- Years ended December 31, 2000, 1999
and 1998.
Consolidated Statements of Shareholders' Equity -- Years ended December 31,
2000, 1999 and 1998.
Consolidated Statements of Cash Flows -- Years ended December 31, 2000,
1999 and 1998.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
(a) 2. FINANCIAL STATEMENT SCHEDULES
The following consolidated financial information for the years ended
December 31, 2000, 1999 and 1998 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.
(a) 3. EXHIBITS
(2) Agreement of Merger, dated as of May 16, 2000, by and among
Brush Merger Co., Brush Wellman Inc. and Brush Engineered
Materials Inc. (filed as Annex A to the Registration
Statement on Form S-4 filed by the Company on February 1,
2000, Registration No. 333-95917), incorporated herein by
reference.
(3a) Amended and Restated Articles of Incorporation of Brush
Engineered Materials Inc. (filed as Annex B to the
Registration Statement on Form S-4 filed by the Company on
February 1, 2000, Registration No. 333-95917), incorporated
herein by reference.
(3b) Amended and Restated Code of Regulations of Brush Engineered
Materials Inc. (filed as Exhibit 4(b) to the Current Report
on Form 8-K filed by Brush Wellman Inc. on May 16, 2000),
incorporated herein by reference.
(4a) Credit Agreement dated as of June 30, 2000 among Brush
Wellman Inc. and Brush Engineered Materials Inc. as the
borrowers and National City Bank acting for itself and as
agent for certain other banking institutions as lenders
(filed as Exhibit 4a to the Company's Form 10-Q Quarterly
Report for the quarter ended June 30, 2000), incorporated
herein by reference.
(4b) Rights Agreement, dated as of May 10, 2000, by and between
Brush Engineered Materials Inc. and National City Bank, N.A.
as Rights Agent (filed as Exhibit 4(a) to the Current Report
on Form 8-K filed by Brush Engineered Materials Inc. on May
16, 2000), incorporated herein by reference.
10
12
(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, Commission File
No. 1-7006), 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 (filed as Exhibit 10a to
the Company's Form 10-K Annual Report for the year ended
December 31, 1990, Commission File No. 1-7006), incorporated
herein by reference.
(10b)* Form of Employment Agreement entered into by the Company and
Mr. Lubrano on March 2, 1999 (filed as Exhibit 10c to the
Company's Form 10-K Annual Report for the year ended
December 31, 1998), incorporated herein by reference.
(10c)* Form of Employment Agreement entered into by the Company and
Mr. Daniel A. Skoch on January 28, 1992 and Mr. Stephen
Freeman dated August 3, 1993 (filed as Exhibit 10d to the
Company's Form 10-K Annual Report for the year ended
December 31, 1991, Commission File No. 1-7006), incorporated
herein by reference.
(10d)* Form of Employment Agreement entered into by the Company and
Mr. William R. Seelbach dated June 29, 1998 (filed as
Exhibit 10a to the Company's Form 10-Q Quarterly Report for
the quarter ended July 3, 1998), incorporated herein by
reference.
(10e)* Employment Arrangement between the Company and Mr. William
R. Seelbach dated June 3, 1998 (filed as Exhibit 10b to the
Company's Form 10-Q Quarterly Report for the quarter ended
July 3, 1998), incorporated herein by reference.
(10f)* Addendum to Employment Arrangement between the Company and
Mr. William R. Seelbach dated June 24, 1998 (filed as
Exhibit 10c to the Company's Form 10-Q Quarterly Report for
the quarter ended July 3, 1998), incorporated herein by
reference.
(10g) Form of Indemnification Agreement entered into by the
Company and Mr. William R. Seelbach dated June 29, 1998
(filed as Exhibit 10d to the Company's Form 10-Q Quarterly
Report for the quarter ended July 3, 1998), incorporated
herein by reference.
(10h)* Form of Employment Agreement entered into by the Company and
Mr. John Grampa dated November 2, 1999 (filed as Exhibit
10ff to the Company's Form 10-K Annual Report for the year
ended December 31, 1999), incorporated herein by reference.
(10i) Form of Indemnification Agreement entered into by the
Company and its executive officers (filed as Exhibit 10g to
the Company's Form 10-K Annual Report for the year ended
December 31, 1994, Commission File No. 1-7006), incorporated
herein by reference.
(10j) Form of Indemnification Agreement entered into by the
Company and its directors (filed as Exhibit 10h to the
Company's Form 10-K Annual Report for the year ended
December 31, 1994, Commission File No. 1-7006), incorporated
herein by reference.
(10k)* Form of Trust Agreement between the Company and Key Trust
Company of Ohio, N.A. (formerly Ameritrust Company National
Association) on behalf of the Company's executive officers
(filed as Exhibit 10e to the Company's Form 10-K Annual
Report for the year ended December 31, 1994, Commission File
No. 1-7006), incorporated herein by reference.
11
13
(10l)* Brush Engineered Materials Inc. (formerly Brush Wellman
Inc.) Deferred Compensation Plan for Nonemployee Directors
effective January 1, 1992 (filed as Exhibit I to the Proxy
Statement dated March 6, 1992, filed by Brush Wellman Inc.,
Commission File No. 1-7006), incorporated herein by
reference.
(10m)* Amendment, dated May 16, 2000, to the Brush Engineered
Materials Inc. Deferred Compensation Plan for Nonemployee
Directors (filed as Exhibit 4b to Post-Effective Amendment
No. 1 to Registration Statement No. 333-63353), incorporated
herein by reference.
(10n)* 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, Commission File No. 1-7006), incorporated
herein by reference.
(10o)* 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, Commission File No. 1-7006), incorporated
herein by reference.
(10p)* 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,
Commission File No. 1-7006), incorporated herein by
reference.
(10q)* Amendment Number 2, adopted January 1, 1996, 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, 1995, Commission File
No. 1-7006), incorporated herein by reference.
(10r)* Amendment Number 3, adopted May 5, 1998, to Supplemental
Retirement Benefit Plan as amended and restated December 1,
1992 (filed as Exhibit 10s to the Company's Form 10-K Annual
Report for the year ended December 31, 1998), incorporated
herein by reference.
(10s)* Amendment Number 4, adopted December 1, 1998, to
Supplemental Retirement Benefit Plan as amended and restated
December 1, 1992 (filed as Exhibit 10t to the Company's Form
10-K Annual Report for the year ended December 31, 1998),
incorporated herein by reference.
(10t)* Amendment Number 5, adopted December 31, 1998, to
Supplemental Retirement Benefit Plan as amended and restated
December 1, 1992 (filed as Exhibit 10u to the Company's Form
10-K Annual Report for the year ended December 31, 1998),
incorporated herein by reference.
(10u)* Amendment Number 6, adopted September, 1999, to Supplemental
Retirement Benefit Plan as amended and restated December 1,
1992.
(10v)* Amendment Number 7, adopted May, 2000, to Supplemental
Retirement Benefit Plan as amended and restated December 1,
1992.
(10w)* 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, Commission File No. 1-7006), incorporated
herein by reference.
(10x)* Brush Engineered Materials Inc. (formerly Brush Wellman
Inc.) Key Employee Share Option Plan (filed as Exhibit 4.1
to the Registration Statement on Form S-8 filed by Brush
Wellman Inc. on May 5, 1998), incorporated herein by
reference.
12
14
(10y)* Amendment No. 1 to the Brush Engineered Materials Inc. Key Employee Share Option Plan dated May
16, 2000 (filed as Exhibit 4b to Post-Effective Amendment No. 1 to Registration Statement No.
333-52141), incorporated herein by reference.
(10z)* Brush Engineered Materials Inc. (formerly Brush Wellman Inc.) 1979 Stock Option Plan, as amended
pursuant to approval of shareholders on April 21, 1982 (filed by Brush Wellman Inc. as Exhibit
15A to Post-Effective Amendment No. 3 to Registration Statement No. 2-64080), incorporated herein
by reference.
(10aa)* Amendment, dated May 16, 2000, to the Brush Engineered Materials Inc. 1979 Stock Option Plan
(filed as Exhibit 4b to Post-Effective Amendment No. 5 to Registration Statement No. 2-64080),
incorporated herein by reference.
(10bb)* Brush Engineered Materials Inc. (formerly Brush Wellman Inc.) 1984 Stock Option Plan as amended
by the Board of Directors on April 18, 1984 and February 24, 1987 (filed by Brush Wellman Inc. as
Exhibit 4.4 to Registration Statement No. 33-28605), incorporated herein by reference.
(10cc)* Amendment, dated May 16, 2000, to the Brush Engineered Materials Inc. 1984 Stock Option Plan
(filed as Exhibit 4b to Post-Effective Amendment No. 1 to Registration Statement No. 2-90724),
incorporated herein by reference.
(10dd)* Brush Engineered Materials Inc. (formerly Brush Wellman Inc.) 1989 Stock Option Plan (filed by
Brush Wellman Inc. as Exhibit 4.5 to Registration Statement No. 33-28605), incorporated herein by
reference.
(10ee)* Amendment, dated May 16, 2000, to the Brush Engineered Materials Inc. 1989 Stock Option Plan
(filed as Exhibit 4b to Post-Effective Amendment No. 1 to Registration Statement No. 33-28605),
incorporated herein by reference.
(10ff)* Brush Engineered Materials Inc. (formerly Brush Wellman Inc.) 1995 Stock Incentive Plan as
Amended March 3, 1998 (filed by Brush Wellman Inc. as Exhibit A to the Company's Proxy Statement
dated March 16, 1998, Commission File No. 1-7006), incorporated herein by reference.
(10gg)* Amendment, dated May 16, 2000, to the Brush Engineered Materials Inc. 1995 Stock Incentive Plan
(filed as Exhibit 4b to Post-Effective Amendment No. 1 to Registration Statement No. 333-63357),
incorporated herein by reference.
(10hh)* Brush Engineered Materials Inc. (formerly Brush Wellman Inc.) 1997 Stock Incentive Plan for
Non-Employee Directors (filed by Brush Wellman Inc. as Exhibit B to the Company's Proxy Statement
dated March 16, 1998, Commission File No. 1-7006), incorporated herein by reference.
(10ii)* Amendment, dated May 16, 2000, to the Brush Engineered Materials Inc. 1997 Stock Incentive Plan
for Non-Employee Directors (filed as Exhibit 4b to Post-Effective Amendment No. 1 to Registration
Statement No. 333-63355), incorporated herein by reference.
(10jj)* Brush Engineered Materials Inc. Executive Deferred Compensation Plan (2000 Restatement).
(10kk)* Trust Agreement for Brush Engineered Materials Inc. (formerly Brush Wellman Inc.) Executive
Deferred Compensation Plan, dated September 14, 1999 (filed as Exhibit 10hh to the Company's Form
10-K Annual Report for the year ended December 31, 1999), incorporated herein by reference.
13
15
(10ll) Lease dated as of October 1, 1996, between Brush Wellman
Inc. and Toledo-Lucas County Port Authority (filed as
Exhibit 10v to the Company's Form 10-K Annual Report for the
year ended December 31, 1996), incorporated herein by
reference.
(10mm) Master Lease Agreement dated December 30, 1996 between Brush
Wellman Inc. and National City Bank acting for itself and as
agent for certain participants (filed as Exhibit 10w to the
Company's Form 10-K Annual Report for the year ended
December 31, 1996), incorporated herein by reference.
(10nn) Consolidated Amendment No. 1 to Master Lease Agreement and
Equipment Schedules dated as of June 30, 2000 between Brush
Wellman Inc. and National City Bank acting for itself and as
agent for certain participants (filed as Exhibit 10a to the
Company's Form 10-Q Quarterly Report for the quarter ended
June 30, 2000), incorporated herein by reference.
(13) Annual Report to shareholders for the year ended December
31, 2000.
(21) Subsidiaries of the registrant.
(23) Consent of Ernst & Young LLP.
(24) Power of Attorney.
- ---------------
* Reflects management contract or other compensatory arrangement required to be
filed as an Exhibit pursuant to Item 14(c) of this Report.
(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, 2000.
14
16
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 29, 2001
BRUSH ENGINEERED MATERIALS INC.
By: /s/ GORDON D. HARNETT
-----------------------------------------------------
Gordon D. Harnett
Chairman of the Board,
President and Chief Executive Officer
By: /s/ JOHN D. GRAMPA
-----------------------------------------------------
John D. Grampa
Vice President Finance
and 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.
/s/ GORDON D. HARNETT* Chairman of the Board, March 29, 2001
- ----------------------------------------- President, Chief Executive
Gordon D. Harnett* Officer and Director
(Principal Executive
Officer)
/s/ JOHN D. GRAMPA Vice President Finance and March 29, 2001
- ----------------------------------------- Chief Financial Officer
John D. Grampa (Principal Financial and
Accounting Officer)
/s/ ALBERT C. BERSTICKER* Director March 29, 2001
- -----------------------------------------
Albert C. Bersticker*
/s/ CHARLES F. BRUSH, III* Director March 29, 2001
- -----------------------------------------
Charles F. Brush, III*
/s/ DAVID L. BURNER* Director March 29, 2001
- -----------------------------------------
David L. Burner*
/s/ DAVID H. HOAG* Director March 29, 2001
- -----------------------------------------
David H. Hoag*
/s/ JOSEPH P. KEITHLEY* Director March 29, 2001
- -----------------------------------------
Joseph P. Keithley*
/s/ WILLIAM P. MADAR* Director March 29, 2001
- -----------------------------------------
William P. Madar*
/s/ N. MOHAN REDDY* Director March 29, 2001
- -----------------------------------------
N. Mohan Reddy*
/s/ WILLIAM R. ROBERTSON* Director March 29, 2001
- -----------------------------------------
William R. Robertson*
/s/ JOHN SHERWIN, JR.* Director March 29, 2001
- -----------------------------------------
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
Engineered Materials Inc., pursuant to Powers of Attorney executed by each such
officer and director filed with the Securities and Exchange Commission.
By: /s/ JOHN D. GRAMPA March 29, 2001
- --------------------------------------------
John D. Grampa
Attorney-in-Fact
15
17
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
BRUSH ENGINEERED MATERIALS INC. AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
- ------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------------------------------------------------- ---------------------------------------
ADDITIONS
Balance -----------------------------------
DESCRIPTION at Beginning (1) (2) Deduction-Describe Balance at End
of Period Charged to Costs Charged to Other of Period
and Expenses Accounts-Describe
- -------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 2000
Deducted from asset accounts:
Allowance for doubtful
accounts receivable $1,744,149 $4,984 $0 $72,467 (A) $1,676,666
Inventory reserves and
obsolescence $3,525,844 $4,516,513 $0 $4,891,628 (B) $3,150,729
Year ended December 31, 1999
Deducted from asset accounts:
Allowance for doubtful
accounts receivable $2,127,000 ($328,043) $0 $54,808 (A) $1,744,149
Inventory reserves and
obsolescence $1,740,093 $3,513,481 $0 $1,727,730 (B) $3,525,844
Year ended December 31, 1998
Deducted from asset accounts:
Allowance for doubtful
accounts receivable $1,058,663 $1,090,170 $0 $21,833 (A) $2,127,000
Inventory reserves and
obsolescence $2,054,938 $907,438 $0 $1,222,283 (B) $1,740,093
Note A - Bad debts written-off, net of recoveries.
Note B - Inventory write-off.