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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
For the fiscal year ended December 31, 2002
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 001-15885
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. [ ]
Indicate by check mark whether the registrant is an accelerated filed (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]
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 June 28, 2002 was approximately $206,293,369.
As of March 10, 2003, there were 16,633,843 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, 2002 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 6, 2003 are incorporated by reference into Part III.
BRUSH ENGINEERED MATERIALS INC.
Index to Annual Report
On Form 10-K for
Year Ended December 31, 2002
PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 4
Item 3. Legal Proceedings........................................... 5
Item 4. Submission of Matters to a Vote of Security Holders......... 6
Item 4A. Executive Officers of the Registrant........................ 6
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters..................................................... 8
Item 6. Selected Financial Data..................................... 8
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 8
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 8
Item 8. Financial Statements and Supplementary Data................. 8
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 8
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 9
Item 11. Executive Compensation...................................... 9
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.................. 9
Item 13. Certain Relationships and Related Transactions.............. 9
Item 14. Controls and Procedures..................................... 9
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 10
Signatures.................................................. 15
Certifications.............................................. 16
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, whether defined
geographically or by segment, with the major market segments being
telecommunications and computer, optical media, automotive electronics,
industrial components, aerospace and defense, and appliance;
- Changes in product mix and the financial condition of particular
customers;
- The Company's success in implementing its strategic plans and the timely
and successful completion of pending capital expansion projects;
- The availability of adequate lines of credit and the associated interest
rates;
- Other financial factors, including tax rates, exchange rates, pension
costs, energy costs and the cost and availability of insurance;
- Changes in government regulatory requirements and 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
global telecommunications and computer, optical media, automotive electronics,
industrial components, aerospace and defense and appliance markets. As of
December 31, 2002 the Company had 1,862 employees.
The Company's subsidiaries are 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
Technical Materials, Inc. (TMI). The Microelectronics Group includes Williams
Advanced Materials Inc. (WAM) and Electronic Products, which in turn consists of
Zentrix Technologies Inc. (Zentrix) and Brush Ceramic Products Inc. (a wholly
owned subsidiary of Brush Wellman Inc.). Portions of Brush International, Inc.
are included in both segments. Included in "All Other" in the Company's
financial statements included later in this Form 10-K are the operating results
from BEM Services, Inc. and Brush Resources Inc., two wholly owned subsidiaries
of the Company. BEM Services charges a management fee for services, such as
administrative and financial oversight, to the other businesses within the
Company on a cost-plus basis. Brush Resources sells beryllium hydroxide produced
through its Utah operations to outside customers and to businesses within the
Metal Systems Group. As of December 31, 2002 BEM Services, Inc. and Brush
Resources Inc. had 165 employees.
METAL SYSTEMS GROUP
The Metal Systems Group is comprised of Alloy Products, Beryllium Products
and TMI. In 2002, 61% of the Company's sales were from this segment (63% in 2001
and 67% in 2000). As of December 31, 2002 the Metal Systems Group had 1,110
employees.
Alloy Products manufactures products that 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 the telecommunications and computer, automotive electronics,
aerospace, oil exploration, undersea housing for telecommunications equipment,
bushings, bearings, appliances and plastic mold tooling markets. These products
are sold
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domestically through Brush distribution centers and internationally through
Company-owned and independent distribution centers and independent sales
representatives.
Beryllium Products manufactures products that include beryllium, AlBeMet(R)
and E-materials. Beryllium is a lightweight metal possessing unique mechanical
and thermal properties. Its specific stiffness is much greater than other
engineered structural materials such as aluminum, titanium and steel. Beryllium
is extracted from both bertrandite and imported beryl ore. In 2001, the Company
purchased land and mineral rights that were previously leased by its mining
operations in Utah. Beryllium products are used in a variety of high-performance
applications in the defense, electronics, automotive, medical and optical
scanning markets. Beryllium-containing products are sold throughout the world
through a direct sales organization and through company-owned and independent
distribution centers. While the Company is the only domestic producer of
metallic beryllium, it competes with other fabricators as well as with designs
utilizing other materials.
Alloy Products' only direct competitor in the beryllium alloys field is NGK
Insulators, Ltd. of Nagoya, Japan, with subsidiaries in the U.S. and Europe.
Alloy Products competes with alloy systems manufactured by Olin Corporation,
Wieland Electric, Inc. and Stolberger Metallwerke GmbH, and also 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.
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,
automotive electronics, semi-conductors and computers. TMI's products are sold
directly and through its sales representatives. TMI has limited competition in
the United States 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.
METAL SYSTEMS GROUP -- SALES AND BACKLOG
The backlog of unshipped orders as of December 31, 2002, 2001 and 2000 was
$35,064,000, $60,945,000 and $140,246,000, respectively. Backlog is generally
represented by purchase orders that may be terminated under certain conditions.
The Company expects that substantially all of its backlog of orders for this
segment at December 31, 2002 will be filled during 2003.
Sales are made to approximately 2,000 customers. Government sales,
principally subcontracts, accounted for about 9.2% of Metal Systems Group sales
in 2002 as compared to 3.3% in 2001 and 2.3% in 2000. Sales outside the United
States, principally to Western Europe, Canada and Asia, accounted for
approximately 35% of the Metal Systems Group sales in 2002, 38% in 2001 and 33%
in 2000. Other segment reporting and geographic information set forth on pages
43 and 44 in Note M to the consolidated financial statements in the annual
report to shareholders for the year ended December 31, 2002 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 $2,522,000 in 2002, $4,679,000 in 2001 and $5,543,000 in
2000. A staff of 20 scientists, engineers and technicians was employed in this
effort as of year end 2002. Some research and development projects, expenditures
for which are not material, were externally sponsored.
MICROELECTRONICS GROUP
The Microelectronics Group is comprised of WAM and Electronic Products,
which consists of Zentrix and Brush Ceramic Products Inc. In 2002, 37% of the
Company's sales were from this segment (36% in 2001 and 32% in 2000). As of
December 31, 2002 the Microelectronics Group had 587 employees.
WAM manufactures and fabricates precious metal and specialty metal products
for the optical media, magnetic head, including magnetic resistive (MR) and
giant magnetic resistive (GMR) materials, electron tube markets and the
wireless, semiconductor, photonic and hybrid segments of the microelectronics
market.
2
WAM's major product lines include vapor deposition materials, clad and precious
metals preforms, high temperature braze materials, ultra fine wire, sealing lids
for the semiconductor/hybrid markets and restorative dental alloys.
WAM's products are sold directly from WAM's facilities in Buffalo, New
York; Brewster, New York; Wheatfield, New York; Singapore and the Philippines,
as well as through direct sales offices and independent sales representatives
throughout the world. Principal competition includes companies such as Sumitomo
Metals, Praxair, Inc., Honeywell International Inc. and a number of smaller
regional and national suppliers.
Zentrix produces electronic packaging, circuitry and powder metal products.
Production sites include Oceanside, California; Tucson, Arizona and Newburyport,
Massachusetts. These products are used in wireless telecommunication,
fiberoptics, automotive and defense applications. Zentrix's products are sold
directly and through its sales representatives. Zentrix's principal competitor
in the beryllia ceramics market is CBL Ltd. Other competitors of Zentrix include
Kyocera Corporation, Semx Corporation, Aeroflex, Inc., American Technical
Ceramics and Anaren Microwave, Inc. Competitive materials include alumina,
aluminum nitride and composites.
MICROELECTRONICS GROUP -- SALES AND BACKLOG
The backlog of unshipped orders as of December 31, 2002, 2001 and 2000 was
$19,833,000, $20,458,000 and $31,225,000, respectively. Backlog is generally
represented by purchase orders that may be terminated under certain conditions.
The Company expects that substantially all of its backlog of orders for this
segment at December 31, 2002 will be filled during 2003.
Sales are made to approximately 1,700 customers. Government sales,
principally subcontracts, accounted for less than 1% of Microelectronics Group
sales in 2002 as compared to 2.8% in 2001 and 1.2% in 2000. Sales outside the
United States, principally to Western Europe, Canada and Asia, accounted for
approximately 18% of Microelectronics Group sales in 2002, 13% in 2001 and 15%
in 2000. Other segment reporting and geographic information set forth on pages
43 and 44 in Note M to the consolidated financial statements in the annual
report to shareholders for the year ended December 31, 2002 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 $1,743,000 for 2002, $1,648,000 in 2001 and $1,894,000
in 2000. A staff of 6 scientists, engineers and technicians was employed in this
effort as of year end 2002.
GENERAL
AVAILABILITY OF RAW MATERIALS
The principal 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. Ore reserve
data in Management's Discussion and Analysis on pages 20 and 21 of the Company's
annual report to shareholders for the year ended December 31, 2002 is
incorporated herein by reference. The Company has agreements to purchase stated
quantities of beryl ore, beryllium metal and beryllium-copper master alloy from
the Defense Logistics Agency of the U.S. Government. In addition, the Company
has a long-term supply arrangement with Ulba/Kazatomprom of the Republic of
Kazakhstan and its marketing representative, Nukem, Inc. of New York, to
purchase quantities of beryllium-copper master. 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.
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,
3
the Company's business is not materially dependent on any one patent or license
or on all of its 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. For
decades the Company has operated its facilities under stringent standards of
inplant and outplant discharge. The inhalation of airborne beryllium particulate
may present a health hazard to certain individuals. The Occupational Safety and
Health Administration ("OSHA") is currently reviewing its beryllium standards.
AVAILABLE INFORMATION
The Company makes available, free of charge through its internet website,
www.beminc.com, this annual on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act, as soon as
reasonably practicable after it electronically files such material with, or
furnishes it to, the Securities and Exchange Commission.
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 leased 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 4,400 acre 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.
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 -- 7,500 acres with respective mineral rights in Juab
County, Utah from which the beryllium-bearing ore, bertrandite, is mined by the
open pit method. A small portion of the mineral rights is held under lease. Ore
reserve data set forth on pages 20 and 21 in the annual report to shareholders
for the year ended December 31, 2002 is incorporated herein by reference.
LINCOLN, RHODE ISLAND -- A manufacturing facility consisting of 140,000
square feet located on 7.5 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 non-beryllium 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 4 acre site that produces alumina, beryllia ceramic and direct bond copper
products.
4
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 for the production of thick-film circuits and other
complex circuits.
SANTA CLARA, CALIFORNIA -- A 5,800 square foot leased facility that
provides bonding services relating to physical vapor deposition (PVD) materials.
SHOEMAKERSVILLE (READING), PENNSYLVANIA -- A 123,000 square foot plant on a
10 acre site that produces thin precision strips of copper beryllium and other
alloys and copper beryllium rod and wire.
SINGAPORE -- A 4,500 square foot leased facility for the assembly and sale
of precious metal hermetic sealing lids.
SUBIC BAY, PHILIPPINES -- A 5,000 square foot leased facility that
manufactures Combo-Lid(R) and performs preform assembly, inspection and
packaging.
TUCSON, ARIZONA -- A complex containing approximately 63,000 square feet of
building space on a 10 acre site for the production of beryllium oxide ceramic
substrates and copper/tungsten heatsinks for use in electronic applications.
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 110,000 square foot building 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 copper beryllium alloys.
FAIRFIELD, NEW JERSEY -- A 24,500 square foot leased facility principally
for distribution of copper beryllium alloys.
FUKAYA, JAPAN -- A 35,500 square foot facility on 1.8 acres of land in
Saitama Prefecture principally for distribution of copper beryllium alloys.
SINGAPORE -- A 2,500 square foot leased sales office that houses employees
of Brush Wellman and WAM Far East.
STUTTGART, GERMANY -- A 24,750 square foot leased facility principally for
distribution of copper beryllium alloys.
THEALE (READING), ENGLAND -- A 19,700 square foot leased facility
principally for distribution of copper beryllium alloys.
WARREN, MICHIGAN -- A 34,500 square foot leased facility principally for
distribution of copper beryllium alloys.
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.
5
BERYLLIUM CLAIMS
There are claims pending in various state and federal courts against Brush
Wellman Inc., one of the Company's subsidiaries, by some of its employees,
former employees or their surviving spouses and by third party individuals
(typically employees of customers or of independent contractors) alleging that
they contracted, or have been placed at risk of contracting, chronic beryllium
disease or other lung conditions as a result of exposure to beryllium.
Plaintiffs in beryllium 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.
During 2002, the number of beryllium cases decreased from 76 (involving 193
plaintiffs), as of December 31, 2001, to 33 cases (involving 70 plaintiffs) as
of December 31, 2002. During 2002, an aggregate of 34 cases involving 107
plaintiffs were settled. Eight cases involving 11 plaintiffs were voluntarily
dismissed by the plaintiffs. One case involving two plaintiffs was dismissed for
lack of prosecution. One other plaintiff was dismissed with prejudice. In
addition, the Company received notice during 2002 that two cases (involving four
plaintiffs) and two additional plaintiffs were dismissed during prior periods.
Two cases involving four plaintiffs were filed in 2002.
The 33 pending beryllium cases fall into three categories: 16 "employee
cases" involving an aggregate of 16 Brush Wellman employees, former employees or
their surviving spouses (in 6 of these cases, a spouse has also filed claims as
part of his or her spouse's case); 16 cases involving third-party individual
plaintiffs, with 17 individuals (and 15 spouses who have filed claims as part of
their spouse's case, and ten children who have filed claims as part of their
parent's case); and one purported class action, involving six individuals, 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 Brush Wellman's
customers or contractors) face a lower burden of proof than do employees or
former employees, but these cases are generally covered by varying levels of
insurance.
In the one purported class action in which Brush Wellman is seeking review
of the appellate court's reversal of the trial court's denial of class
certification, the named plaintiffs allege that past exposure to beryllium has
increased their risk of contracting chronic beryllium disease and possibly
cancer, although they do not claim to have actually contracted any disease. They
seek medical monitoring funds to be used to detect medical problems that they
believe may develop as a result of their exposure, and seek punitive damages.
This purported class action was brought by named plaintiffs on behalf of
tradesmen who worked in one of Brush Wellman's facilities as employees of
independent contractors.
From January 1, 2003 to March 7, 2003, one third-party case (involving six
plaintiffs) was filed. Two third-party cases (involving eight plaintiffs) have
been settled and dismissed. The settlements in five employee cases (involving
eight plaintiffs) that were dismissed in 2002 have been finalized. In nine
employee cases (involving twelve plaintiffs), settlement agreements have been
signed, and the plaintiffs have dismissed their claims.
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 60 Chairman of the Board, President, Chief Executive Officer
and Director
John D. Grampa 55 Vice President Finance and Chief Financial Officer
Daniel A. Skoch 53 Senior Vice President Administration
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MR. HARNETT was elected Chairman of the Board, Chief Executive Officer and
Director of the Company effective January 1991. In addition, Mr. Harnett has
served as President of the Company from January 1991 to May 2001 and from May
2002 to the present. Prior to 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.
Prior to that, he had served as Vice President, Finance for the Worldwide
Materials Business of Avery Dennison Corporation since March 1994 and held other
various financial positions at Avery Dennison Corporation from 1984.
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.
7
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, 2003 there were 1,857 shareholders of record. Information as to stock
price and dividends declared set forth on page 45 in Note P to the consolidated
financial statements in the annual report to shareholders for the year ended
December 31, 2002 is incorporated herein by reference. The Company's ability to
pay dividends is restricted as provided in the Third Amendment to the Credit
Agreement and Consent dated December 31, 2001.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data on pages 46 and 47 of the annual report to
shareholders for the year ended December 31, 2002 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 12 through 24 of the annual report to shareholders for
the year ended December 31, 2002 is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk disclosures on pages 23 and 24 of the annual report to
shareholders for the year ended December 31, 2002 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, 2002 are incorporated herein by reference:
Consolidated Balance Sheets -- December 31, 2002 and 2001.
Consolidated Statements of Income -- Years ended December 31, 2002, 2001
and 2000.
Consolidated Statements of Shareholders' Equity -- Years ended December 31,
2002, 2001 and 2000.
Consolidated Statements of Cash Flows -- Years ended December 31, 2002,
2001 and 2000.
Notes to Consolidated Financial Statements.
Quarterly Data on page 45 in Note P to the consolidated financial
statements in the annual report to shareholders for the years ended December 31,
2002 and 2001 is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
8
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 28, 2003, 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 9 through 12 of the Proxy Statement dated March 28, 2003, as filed
with the Securities and Exchange Commission pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required under this heading is incorporated by reference on
pages 7 and 8 and the "Equity Compensation Plan Information" on page 10 of the
Proxy Statement dated March 28, 2003, as filed with the Securities and Exchange
Commission pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
ITEM 14. CONTROLS AND PROCEDURES
During the 90-day period prior to the filing the annual report on Form
10-K, the Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including the Company's Chairman of
the Board, President and Chief Executive Officer, and Vice President Finance and
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-14. Based upon that evaluation, the Company's management concluded that the
Company's disclosure controls and procedures are effective. There have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect these controls subsequent to the date of their
evaluation.
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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT 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, 2002 are the
following consolidated financial statements:
Consolidated Balance Sheets -- December 31, 2002 and 2001.
Consolidated Statements of Income -- Years ended December 31, 2002, 2001
and 2000.
Consolidated Statements of Shareholders' Equity -- Years ended December 31,
2002, 2001 and 2000.
Consolidated Statements of Cash Flows -- Years ended December 31, 2002,
2001 and 2000.
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, 2002, 2001 and 2000 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 17, 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, N.A. 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) First Amendment to Credit Agreement dated as of March 30,
2001 among Brush Wellman Inc. and Brush Engineered Materials
Inc. as the borrowers and National City Bank, N.A. acting
for itself and as agent for certain other banking
institutions as lenders. (filed as Exhibit 4 to the
Company's Form 10-Q Quarterly Report for the quarter ended
March 30, 2001), incorporated herein by reference.
(4c) Second Amendment to Credit Agreement dated as of September
28, 2001 among Brush Wellman Inc. and Brush Engineered
Materials Inc. as the borrowers and National City Bank, N.A.
acting for itself and as agent for certain other banking
institutions as lenders (filed as Exhibit 4c to the
Company's Form 10-K Annual Report for the year ended
December 31, 2001), incorporated herein by reference.
10
(4d) Third Amendment to Credit Agreement dated as of December 31,
2001 among Brush Wellman Inc. and Brush Engineered Materials
Inc. as the borrowers and National City Bank, N.A. acting
for itself and as agent for certain other banking
institutions as lenders (filed as Exhibit 4d to the
Company's Form 10-K Annual Report for the year ended
December 31, 2001), incorporated herein by reference.
(4e) Fourth Amendment to Credit Agreement dated as of January 29,
2003 among Brush Wellman Inc. and Brush Engineered Materials
Inc. as the borrowers and National City Bank, N.A. acting
for itself and as agent for certain other banking
institutions as lenders.
(4f) Fifth Amendment to Credit Agreement dated as of March 7,
2003 among Brush Wellman Inc. and Brush Engineered Materials
Inc. as the borrowers and National City Bank, N.A. acting
for itself and as agent for certain other banking
institutions as lenders.
(4g) 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.
(4h) 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 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.
(10b)* 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.
(10c)* 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.
(10d)* 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.
(10e)* 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.
(10f)* Form of Severance Agreement entered into by the Company and
Messrs. Gordon D. Harnett, Daniel S. Skoch and John D.
Grampa dated October 8, 2001 (filed as Exhibit 10-f to the
Company's Form 10-K Annual Report for the year ended
December 31, 2001, Commission File No. 1-7006), incorporated
herein by reference.
(10g)* Form of Executive Insurance Agreement entered into by the
Company and certain employees dated January 2, 2002 (filed
as Exhibit 10-g to the Company's Form 10-K Annual Report for
the year ended December 31, 2001, Commission File No.
001-7006), incorporated herein by reference.
(10h)* 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.
(10i)* Brush Engineered Materials Inc. (formerly Brush Wellman
Inc.) Deferred Compensation Plan for Non-employee 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.
11
(10j)* Amendment, dated May 17, 2000, to the Brush Engineered
Materials Inc. Deferred Compensation Plan for Non-employee
Directors (filed as Exhibit 4b to Post-Effective Amendment
No. 1 to Registration Statement No. 333-63353), incorporated
herein by reference.
(10k)* First Amendment to the Deferred Compensation Plan for
Non-employee Directors as amended through September 11, 2001
(filed as Exhibit 4c to Post-Effective Amendment No. 1 to
Registration Statement No. 333-74296), incorporated herein
by reference.
(10l)* Form of Trust Agreement between the Company and National
City Bank, N.A. dated January 1, 1992 on behalf of
Non-employee 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.
(10m)* Incentive Compensation Plan adopted December 16, 1991,
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.
(10n)* 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.
(10o)* 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.
(10p)* 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.
(10q)* 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.
(10r)* 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.
(10s)* Amendment Number 6, adopted September, 1999, 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, 2000,
Commission File No. 1-7006), incorporated herein by
reference.
(10t)* Amendment Number 7, adopted May, 2000, to Supplemental
Retirement Benefit Plan as amended and restated December 1,
1992. (filed as Exhibit 10v to the Company's Form 10-K
Annual Report for the year ended December 31, 2000,
Commission File No. 1-7006), incorporated herein by
reference.
(10u)* Amendment Number 8, adopted December 21, 2001, to
Supplemental Retirement Benefit Plan as amended and restated
December 1, 1992. (filed as Exhibit 10-u to the Company's
Form 10-K Annual Report for the year ended December 31,
2001, Commission File No. 1-7006), incorporated herein by
reference.
(10v)* 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.
(10w)* Amendment No. 1 to the Brush Engineered Materials Inc. Key
Employee Share Option Plan dated May 17, 2000 (filed as
Exhibit 4b to Post-Effective Amendment No. 1 to Registration
Statement No. 333-52141), incorporated herein by reference.
12
(10x)* 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.
(10y)* Amendment, dated May 17, 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.
(10z)* 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.
(10aa)* Amendment, dated May 17, 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.
(10bb)* 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.
(10cc)* Amendment, dated May 17, 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.
(10dd)* 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.
(10ee)* Amendment, dated May 17, 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.
(10ff)* 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.
(10gg)* Amendment, dated May 17, 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.
(10hh)* Brush Engineered Materials Inc. (formerly Brush Wellman
Inc.) 1997 Stock Incentive Plan for Non-employee Directors
(filed as Appendix B to the Company's Proxy Statement dated
March 18, 2001, Commission File No. 1-7006), incorporated
herein by reference.
(10ii)* Brush Engineered Materials Inc. Executive Deferred
Compensation Plan (2000 Restatement).(filed as Exhibit 10jj
to the Company's Form 10-K Annual Report for the year ended
December 31, 2000), incorporated herein by reference.
(10jj)* 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.
(10kk) 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.
(10ll) Master Lease Agreement dated December 30, 1996 between Brush
Wellman Inc. and National City Bank, N.A. 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.
13
(10mm) 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, N.A.
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.
(10nn) Consolidated Amendment No. 2 to Master Lease Agreement and Equipment Schedules dated
as of March 30, 2001 between Brush Wellman Inc. and National City Bank, N.A. acting
for itself and as agent for certain participants (filed as Exhibit 10 to the
Company's Form 10-Q Quarterly Report for the quarter ended March 30, 2001),
incorporated herein by reference.
(10oo) Consolidated Amendment No. 3 to Master Lease Agreement and Equipment Schedules dated
as of September 28, 2001 between Brush Wellman Inc. and National City Bank, N.A.
acting for itself and as agent for certain participants (filed as Exhibit 10oo to
the Company's Form 10-K Annual Report for the year ended December 31, 2001),
incorporated herein by reference.
(10pp) Consolidated Amendment No. 8 to Master Lease Agreement and Equipment Schedules dated
as of December 31, 2001 between Brush Wellman Inc. and National City Bank, N.A.
acting for itself and as agent for certain participants (filed as Exhibit 10pp to
the Company's Form 10-K Annual Report for the year ended December 31, 2001),
incorporated herein by reference.
(10qq) Consolidated Amendment No. 9 to Master Lease Agreement and Equipment Schedules dated
as of January 29, 2003 between Brush Wellman Inc. and National City Bank, N.A.
acting for itself and as agent for certain participants.
(10rr) Consolidated Amendment No. 10 to Master Lease Agreement and Equipment Schedules
dated as of March 7, 2003 between Brush Wellman Inc. and National City Bank, N.A.
acting for itself and as agent for certain participants.
(10ss) Brush Engineered Materials Inc. Restated Pension Plan, dated June 1, 2000.
(10tt) Amendment No. 1 dated as of February 28, 2003 to the Brush Engineered Materials Inc.
Restated Pension Plan dated June 1, 2000.
(13) Annual report to shareholders for the year ended December 31, 2002
(21) Subsidiaries of the Registrant
(23) Consent of Ernst & Young LLP
(24) Power of Attorney
(99.1) Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
(99.2) Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
- ---------------
* 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
An 8-K was filed on December 6, 2002 updating the "Current Investor
Update", a presentation on its website. This presentation was updated with
the corporate strategy and financial results through the third quarter of
2002.
An 8-K was filed on March 28, 2003 updating the "Current Investor Update",
a presentation on its website. This presentation was updated with the
corporate strategy and financial results through December 2002. In
addition, the website was updated to include a new section on "Corporate
Governance". This section lists the Policy Statement on Significant
Corporate Governance Issues as well as the charters for the Audit
Committee, the Governance Committee, the Organization and Compensation
Committee and the Retirement Plan Review Committee.
14
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 31, 2003
BRUSH ENGINEERED MATERIALS INC.
By: /s/ GORDON D. HARNETT By: /s/ JOHN D. GRAMPA
- ------------------------------------------- -------------------------------------------
Gordon D. Harnett John D. Grampa
Chairman of the Board, President Vice President Finance
and Chief Executive Officer 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, President, March 31, 2003
- ------------------------------------------------ Chief Executive Officer and Director
Gordon D. Harnett (Principal Executive Officer)
/s/ JOHN D. GRAMPA Vice President Finance and Chief Financial March 31, 2003
- ------------------------------------------------ Officer (Principal Financial and Accounting
John D. Grampa Officer)
/s/ ALBERT C. BERSTICKER* Director March 31, 2003
- ------------------------------------------------
Albert C. Bersticker
/s/ CHARLES F. BRUSH, III* Director March 31, 2003
- ------------------------------------------------
Charles F. Brush, III
/s/ DAVID H. HOAG* Director March 31, 2003
- ------------------------------------------------
David H. Hoag
/s/ JOSEPH P. KEITHLEY* Director March 31, 2003
- ------------------------------------------------
Joseph P. Keithley
/s/ WILLIAM P. MADAR* Director March 31, 2003
- ------------------------------------------------
William P. Madar
/s/ N. MOHAN REDDY* Director March 31, 2003
- ------------------------------------------------
N. Mohan Reddy
/s/ WILLIAM R. ROBERTSON* Director March 31, 2003
- ------------------------------------------------
William R. Robertson
/s/ JOHN SHERWIN, JR.* Director March 31, 2003
- ------------------------------------------------
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 31, 2003
-------------------------------------------
John D. Grampa
Attorney-in-Fact
15
CERTIFICATIONS
I, Gordon D. Harnett, certify that:
1. I have reviewed this annual report on Form 10-K of Brush Engineered
Materials Inc. (the "Company");
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Company as of, and for, the periods presented in this
annual report;
4. The Company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the Company's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The Company's other certifying officer and I have disclosed, based on
our most recent evaluation, to the Company's auditors and the Audit
Committee of the Company's Board of Directors::
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Company's
ability to record, process, summarize and report financial data
and have identified for the Company's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Company's
internal controls; and
6. The Company's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Dated: March 31, 2003 /s/ GORDON D. HARNETT
-----------------------------------------------
Gordon D. Harnett
Chairman, President and Chief Executive Officer
16
CERTIFICATIONS
I, John D. Grampa, certify that:
1. I have reviewed this annual report on Form 10-K of Brush Engineered
Materials Inc. (the "Company");
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Company as of, and for, the periods presented in this
annual report;
4. The Company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the Company's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The Company's other certifying officer and I have disclosed, based on
our most recent evaluation, to the Company's auditors and the Audit
Committee of the Company's Board of Directors::
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Company's
ability to record, process, summarize and report financial data
and have identified for the Company's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Company's
internal controls; and
6. The Company's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Dated: March 31, 2003 /s/ JOHN D. GRAMPA
--------------------------------------------------
John D. Grampa
Vice President Finance and Chief Financial Officer
17
BRUSH ENGINEERED MATERIALS INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
COL. A COL. B COL. C COL. D COL. E
- ------ ---------- ----------------------- ----------- ----------
ADDITIONS
-----------------------
(2)
(1) CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING COSTS AND ACCOUNTS-- DEDUCTION-- END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- ----------- ---------- ---------- ---------- ----------- ----------
YEAR ENDED DECEMBER 31, 2002
Deducted from asset accounts:
Allowance for doubtful accounts
receivable...................... $1,513,607 $ 346,287 $0 $ 543,249(A) $1,316,645
Inventory reserves and
obsolescence.................... $4,707,000 $3,598,000 $0 $4,462,000(B) $3,843,000
YEAR ENDED DECEMBER 31, 2001
Deducted from asset accounts:
Allowance for doubtful accounts
receivable...................... $1,676,666 $ 39,814 $0 $ 202,873(A) $1,513,607
Inventory reserves and
obsolescence.................... $3,151,000 $5,599,000 $0 $4,043,000(B) $4,707,000
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.................... $3,526,000 $4,517,000 $0 $4,892,000(B) $3,151,000
Note A -- Bad debts written-off, net of recoveries.
Note B -- Inventory write-off.
18