Brush Engineered Materials Inc. 10-K
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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(Mark One)
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ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31, 2006
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OR
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number 1-15885
BRUSH ENGINEERED MATERIALS
INC.
(Exact name of Registrant as
specified in its charter)
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Ohio
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34-1919973
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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17876 St. Clair Avenue,
Cleveland, Ohio
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44110
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(Address of principal executive
offices)
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(Zip Code)
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Registrants telephone number, including area code
216-486-4200
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class
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Name of each exchange on which registered
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Common Stock, no par value
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark whether the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Securities
Act. Yes o No þ
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 þ No o
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 registrants 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. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act. (Check One)
Large accelerated
filer o Accelerated
filer þ Non-accelerated
filer o
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
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 30, 2006 was
$411,419,122.
As of March 2, 2007, there were 20,369,124 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, 2006 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,
2007 are incorporated by reference into Part III.
BRUSH
ENGINEERED MATERIALS INC.
Index to
Annual Report
On
Form 10-K
for
Year Ended December 31, 2006
PART I
Forward-Looking
Statements
Portions of the narrative set forth in this document that are
not statements of historical or current facts are
forward-looking statements. Our 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:
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The condition of the markets which we serve, whether defined
geographically or by segment, with the major market segments
being telecommunications and computer, data storage, aerospace
and defense, automotive electronics, industrial components and
appliance;
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Changes in product mix and the financial condition of our
customers;
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Actual sales, operating rates and margins for 2007;
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Our success in developing and introducing new products and new
product ramp up rates;
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Our success in passing through the costs of raw materials to
customers or otherwise mitigating fluctuating prices for those
materials;
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Our success in integrating newly acquired businesses;
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Our success in implementing our strategic plans and the timely
and successful completion of any capital projects;
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The availability of adequate lines of credit and the associated
interest rates;
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Other financial factors, including cost and availability of raw
materials (both base and precious metals), tax rates, exchange
rates, pension and other employee benefit costs, energy costs,
regulatory compliance costs and the cost and availability of
insurance;
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The uncertainties related to the impact of war and terrorist
activities;
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Changes in government regulatory requirements and the enactment
of new legislation that impact our obligations; and,
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The conclusion of pending litigation matters in accordance with
our expectation that there will be no material adverse effects.
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Brush Engineered Materials Inc., through its wholly owned
subsidiaries, is a leading manufacturer of high performance
advanced enabling engineered materials serving the global
telecommunications and computer, data storage, aerospace and
defense, automotive electronics, industrial components and
appliance markets. As of December 31, 2006, we had 2,185
employees.
Previously, we aggregated our businesses into two reporting
segments. The Metal Systems Group included Alloy Products,
Beryllium Products, Technical Materials, Inc. (TMI) and Brush
Resources Inc (BRI). The Microelectronics Group included
Williams Advanced Materials Inc. (WAM) and Electronic Products.
Electronic Products consisted of Brush Ceramic Products Inc. and
Zentrix Technologies Inc. Beginning with the fourth quarter of
2006, we changed our segments to more closely align with the way
the business is currently managed. We believe that the new
segments provide shareholders with increased transparency over
the sales and profitability of our businesses. Prior year
results have been adjusted for each segment to reflect the
change. Our businesses are now organized under four reportable
segments: Advanced Material Technologies and Services, Specialty
Engineered Alloys, Beryllium and Beryllium Composites, and
Engineered Material Systems. Advanced Material Technologies and
Services includes WAM. The Specialty Engineered Alloys segment
consists of Alloy Products, which includes bulk and strip form
products, and hydroxide (BRI) The Beryllium and Beryllium
Composites segment consists of Beryllium Products and Brush
Ceramic Products Inc. and the Engineered Material Systems
segment includes TMI.
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Our parent company, Brush Engineered Materials Inc., and other
corporate expenses, as well as the operating results from BEM
Services, Inc., Zentrix Technologies Inc. and Circuits
Processing Technology (CPT), all wholly owned subsidiaries, are
not part of either segment and remain in All Other. BEM Services
charges a management fee for the services it provides, primarily
corporate, administrative and financial oversight, to our other
businesses on a cost-plus basis. Zentrix manufactures electronic
packages and other components for sale to the telecommunications
and computer and automotive electronics markets and CPT
manufactures circuitry for defense and commercial applications.
Corporate employees not covered as part of either reportable
segment, including employees of BEM Services, Inc., Zentrix
Technologies Inc. and CPT, totaled 191 as of December 31,
2006.
Our website address is www.beminc.com. Information
contained on our website does not constitute part of this
Form 10-K.
We make available, free of charge through our website, our
annual report on
Form 10-K,
quarterly reports on
Form 10-Q
and current reports on
Form 8-K,
as well as amendments to those reports, as soon as reasonably
practicable after we file such reports with, or furnish such
reports to, the Securities and Exchange Commission.
ADVANCED
MATERIAL TECHNOLOGIES AND SERVICES
Advanced Material Technologies and Services (AMTS) is comprised
of WAM. In 2006, 45% of our sales were from this segment (39% in
2005 and 33% in 2004). As of December 31, 2006 Advanced
Material Technologies and Services had 597 employees.
AMTS manufactures and fabricates precious, non-precious and
specialty metal products for the data storage, medical and the
wireless, semiconductor, photonic and hybrid segments of the
microelectronics market. AMTS also has refining capabilities for
the reclaim of precious metals from internally or
customer-generated scrap. In addition, AMTS provides chamber
services for its customers to reclaim precious metals and
refurbish reusable components used in its customers vapor
deposition systems. Advanced Material Technologies and
Services major product lines include vapor deposition
systems, clad and precious metals preforms, high temperature
braze materials, ultra fine wire, sealing lids for the
semiconductor/hybrid markets and specialty inorganic materials.
AMTS products are sold directly from its facilities in
Buffalo, New York; Brewster, New York; Wheatfield, New York;
Buellton, California; Milwaukee, Wisconsin; Ireland; Singapore;
Taiwan; Japan; Korea 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, Heraeus Inc., Praxair, Inc., Honeywell
International Inc. and a number of smaller regional and national
suppliers.
Advanced
Material Technologies and Services Sales and
Backlog
The backlog of unshipped orders for Advanced Material
Technologies and Services as of December 31, 2006, 2005 and
2004 was $28,711,000, $15,971,000 and $10,632,000, respectively.
Backlog is generally represented by purchase orders that may be
terminated under certain conditions. We expect that
substantially all of our backlog of orders for this segment at
December 31, 2006 will be filled during 2007. The increase
in backlog from 2005 to 2006 is primarily due to the acquisition
of CERAC, incorporated in January 2006 and an increase in the
demand for vapor deposition targets.
Sales are made to over 3,000 customers. Government sales,
principally subcontracts, accounted for less than 1% of the
volume in 2006, and 0% in 2005 and 2004. Sales outside the
United States, principally to Europe and Asia, accounted for
approximately 18% of sales in 2006, 2005 and 2004. Other segment
reporting and geographic information set forth on page 56
in Note M to the consolidated financial statements in the
annual report to shareholders for the year ended
December 31, 2006 is incorporated herein by reference.
Advanced
Material Technologies and Services Research and
Development
Active research and development programs seek new product
compositions and designs as well as process innovations.
Expenditures for research and development for AMTS amounted to
$382,192 in 2006, $767,511 in 2005 and $635,741 in 2004. A staff
of seven scientists, engineers and technicians was employed in
this effort as of year-end 2006.
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SPECIALTY
ENGINEERED ALLOYS
Specialty Engineered Alloys (SEA) sells strip products, bulk
products and hydroxide (BRI). In 2006, 36% of our sales were
from this segment (39% in 2005 and 42% in 2004) As of
December 31, 2006, Specialty Engineered Alloys had 942
employees.
Specialty Engineered Alloys manufactures beryllium-containing
and other high performance-based materials including
copper-nickel-tin alloys that are metallurgically tailored to
meet specific customer performance requirements. These products
exhibit high electrical and thermal conductivities, high
strength and hardness, good formability, lubricity, 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, industrial components
(including oil and gas, heavy equipment and plastic mold
tooling) and appliance markets. These products are sold
domestically through SEA and independent distribution centers
and internationally through Company-owned and independent
distribution centers and independent sales representatives.
SEAs primary direct competitor in strip form beryllium
alloys is NGK Insulators, Ltd. of Nagoya, Japan, with
subsidiaries in the U.S. and Europe. SEA also competes with
alloy systems manufactured by Olin Corporation, Wieland
Electric, Inc., Stolberger Metallwerke GmbH, Nippon Mining, PMX
Industries, Inc. 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. In the area of bulk
products (bar, plate, tube and rod), in addition to NGK
Insulators, SEA competes with several smaller regional producers
such as Freedom Alloys in the U.S., LaBronze Industriel in
Europe and Young II in Asia.
Specialty Engineered Alloys, through BRI, manages our mine and
milling operations. The milling operations produce beryllium
hydroxide from mined bertrandite ore and purchased beryl ore.
The hydroxide is used primarily as a raw material input by the
other businesses within the company. BRI also sells hydroxide
externally to SEAs primary competitor in beryllium alloys,
NGK Insulators, Ltd.
Specialty
Engineered Alloys Sales and Backlog
The backlog of unshipped orders for Specialty Engineered Alloys
as of December 31, 2006, 2005 and 2004 was $59,485,000,
$58,301,000 and $50,215,000 respectively. Backlog is generally
represented by purchase orders that may be terminated under
certain conditions. We expect that substantially all of our
backlog of orders for this segment at December 31, 2006
will be filled during 2007.
Sales are made to approximately 1,100 customers. Government
sales, principally subcontracts, accounted for less than 1% of
sales in 2006, 2005 and 2004. Sales outside the United States,
principally to Europe and Asia, accounted for approximately 54%
in 2006, 51% in 2005 and 50% in 2004. Other segment reporting
and geographic information set forth on page 56,
Note M to the consolidated financial statements in the
annual report to shareholders for the year ended
December 31, 2006 is incorporated herein by reference.
Specialty
Engineered Alloys 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 $2,112,000
in 2006, $2,644,000 in 2005 and $2,503,000 in 2004. A staff of
nine scientists, engineers and technicians was employed in this
effort as of year-end 2006.
BERYLLIUM
AND BERYLLIUM COMPOSITES
Beryllium and Beryllium Composites includes Beryllium Products
and Brush Ceramic Products, Inc. Sales from this segment were 8%
in 2006, 10% in 2005 and 11% in 2004 of total sales. As of
December 31, 2006, Beryllium and Beryllium Composites had
246 employees.
Beryllium and Beryllium Composites manufactures products that
include beryllium,
AlBeMet®
and
E-materials.
Beryllium is a lightweight metal possessing unique mechanical
and thermal properties. Its specific stiffness is
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much greater than other engineered structural materials such as
aluminum, titanium and steel. Beryllium is extracted from both
bertrandite and imported beryl ore. Beryllium products are used
in a variety of high performance applications in the defense,
space, industrial, scientific equipment, electronics (including
acoustics), medical, automotive 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 Beryllium and
Beryllium Composites is the only domestic producer of metallic
beryllium, it competes with other fabricators as well as with
designs utilizing other materials.
Beryllium and Beryllium Composites also manufactures beryllia
ceramics for electronic packaging and electro-optical
applications including lasers. Electronic components utilizing
beryllia are used in the telecommunications, medical,
industrial, automotive and defense markets. These products are
distributed through direct sales and independent sales agents.
Direct competitors include American Beryllia Inc. and
CBL Ceramics Limited.
Beryllium
and Beryllium Composites Sales and Backlog
The backlog of unshipped orders for Beryllium and Beryllium
Composites as of December 31, 2006, 2005 and 2004 was
$18,414,000, $16,489,000 and $26,638,000 respectively. Backlog
is generally represented by purchase orders that may be
terminated under certain conditions. We expect that
substantially all of our backlog of orders for this segment at
December 31, 2006 will be filled during 2007.
Sales are made to over 400 customers. Government sales,
principally subcontracts, accounted for less than 1% of
Beryllium and Beryllium Composites sales in 2006, 2005 and 2004.
Sales outside the United States, principally to Europe and Asia,
accounted for approximately 29% in 2006, 16% of sales in 2005
and 17% in 2004. Other segment reporting and geographic
information set forth on page 56, Note M to the
consolidated financial statements in the annual report to
shareholders for the year ended December 31, 2006 is
incorporated herein by reference.
Beryllium
and Beryllium Composites 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 $1,101,000
in 2006, $1,141,000 in 2005 and $867,000 in 2004. A staff of six
scientists, engineers and technicians was employed in this
effort as of year-end 2006. Some research and development
projects, expenditures for which are not material, were
externally sponsored.
ENGINEERED
MATERIAL SYSTEMS
Engineered Material Systems is comprised of TMI. In both 2006
and 2005, 9% of our sales were from this segment (11% in
2004). As of December 31, 2006, Engineered Material
Systems had 209 employees.
Engineered Materials Systems manufactures engineered material
systems, which include clad inlay and overlay metals, precious
and base metal electroplated systems, electron beam welded
systems, contour profiled systems and solder-coated metals
systems These products are used in telecommunications and
computer systems, automotive electronics, semi-conductors,
energy, defense and medical applications. Engineered Material
Systems products are sold directly and through its sales
representatives. Engineered Material Systems has limited
competition in the United States and several European
manufacturers are competitors for the sale of inlay strip.
Engineered
Material Systems Sales and Backlog
The backlog of unshipped orders for Engineered Material Systems
as of December 31, 2006, 2005 and 2004 was $16,131,000,
$16,259,000 and $9,252,000, respectively. Backlog is generally
represented by purchase orders that may be terminated under
certain conditions. We expect that substantially all of our
backlog of orders for this segment at December 31, 2006
will be filled during 2007.
Sales are made to approximately 300 customers. Engineered
Material Systems did not have any sales to the government for
2006, 2005 or 2004. Sales outside the United States, principally
to Europe and the Asia, accounted for approximately 9% of
Engineered Material Systems sales in 2006, 6% in 2005 and
7% in 2004. Other segment reporting and geographic information
set forth on page 56 in Note M to the consolidated
financial statements in the annual report to shareholders for
the year ended December 31, 2006 is incorporated herein by
reference.
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Engineered
Material Systems Research and Development
Active research and development programs seek new product
compositions and designs as well as process innovations.
Expenditures for research and development for Engineered
Material Systems amounted to $5,500 in both 2006 and 2005 and
$2,700 in 2004.
GENERAL
Availability
of Raw Materials
The principal raw materials we use are beryllium (extracted from
both imported beryl ore and bertrandite mined from our Utah
properties), copper, gold, silver, nickel, platinum, palladium,
aluminum and ruthenium. We will be developing a new bertrandite
pit at our Utah mine site, targeting early 2008 to begin
extracting ore. Ore reserve data in Managements Discussion
and Analysis of Financial Condition and Results of Operations on
pages 29 and 30 of our annual report to shareholders for
the year ended December 31, 2006 is incorporated herein by
reference. We have agreements to purchase stated quantities of
beryl ore, beryllium metal and copper beryllium master alloy
from the Defense Logistics Agency of the U.S. Government.
These agreements expire in 2007. We had purchased the remaining
quantities of beryl ore and copper beryllium master by
December 31, 2006 and had minor purchase of beryllium metal
in 2006. There are no remaining fixed commitments under these
agreements. In addition, we have 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 copper beryllium master alloy and beryllium vacuum
cast billet. The availability of these raw materials, as well as
other materials used by us, is adequate and generally not
dependent on any one supplier.
Patents
and Licenses
We own patents, patent applications and licenses relating to
certain of our products and processes. While our rights under
the patents and licenses are of some importance to our
operations, our business is not materially dependent on any one
patent or license or on all of our patents and licenses as a
group.
Regulatory
Matters
We are subject to a variety of laws which regulate the
manufacture, processing, use, handling, storage, transport,
treatment, emission, release and disposal of substances and
wastes used or generated in manufacturing. For decades we have
operated our facilities under applicable standards of inplant
and outplant emissions and releases. The inhalation of airborne
beryllium particulate may present a health hazard to certain
individuals. The Occupational Safety and Health Administration
is currently reviewing its beryllium standards.
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Executive
Officers of the Registrant
The following table shows the name, age and position of each of
our executive officers as of December 31, 2006:
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Name
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Age
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Positions and Offices
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Richard J. Hipple
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Chairman of the Board,
President and Chief Executive
Officer. In
May 2006, Mr. Hipple was named Chairman of the Board and
Chief Executive Officer of Brush Engineered Materials Inc. He
had served as President since May 2005. He was Chief Operating
Officer from May 2005 until May 2006. Mr. Hipple served as
President of Alloy Products from May 2002 until May 2005. He
joined the Company in July 2001 as Vice President of Strip
Products and served in that position until May of 2002. Prior to
joining Brush, Mr. Hipple was President of LTV Steel
Company, a business unit of the LTV Corporation (integrated
steel producer and metal fabricator). Prior to running
LTVs steel business, Mr. Hipple held numerous
leadership positions in Engineering, Operations Strategic
Planning, Sales and Marketing and Procurement since 1975 at LTV.
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John D. Grampa
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Senior Vice President
Finance and Chief Financial
Officer. Mr.
Grampa was named Senior Vice President Finance and Chief
Financial Officer in December 2006. Prior to that he had served
as Vice President Finance and Chief Financial Officer since
November 1999 and 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 (producer of pressure sensitive materials,
office products, labels and other converted products) from 1984.
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Daniel A. Skoch
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Senior Vice President
Administration. Mr.
Skoch was named 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.
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Our business, financial condition, results of operations and
cash flows can be affected by a number of factors, including but
not limited to those set forth below and elsewhere in the Annual
Report on
Form 10-K,
any one of which could cause our actual results to vary
materially from recent results or from our anticipated future
results. Therefore, an investment in us involves some risks,
including the risks described below. The risks discussed below
are not the only risks that we may experience. If any of the
following risks occur, our business, results of operations or
financial condition could be negatively impacted.
Health
issues and litigation relating to machining and manufacturing of
beryllium-containing products could significantly reduce demand
for our products, limit our ability to operate and cause us to
pay material amounts in respect of product liability
claims.
If exposed to respirable beryllium fumes, dusts or powder, some
individuals may demonstrate an allergic reaction to beryllium
and may later develop a chronic lung disease known as chronic
beryllium disease, or CBD. Some people who are diagnosed with
CBD do not develop clinical symptoms at all. In others, the
disease can lead to scarring and damage of lung tissue, causing
clinical symptoms that include shortness of breath, wheezing and
coughing. Severe cases of CBD can cause disability or death.
Further, some scientists claim there is evidence of an
association between beryllium exposure and lung cancer, and
certain standard-setting organizations have classified beryllium
and beryllium compounds as human carcinogens.
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The health risks relating to exposure to beryllium have been,
and will continue to be, a significant issue confronting the
beryllium-containing products industry. The health risks
associated with beryllium have resulted in product liability
claims, employee and third-party lawsuits and increased levels
of scrutiny by federal, state, foreign and international
regulatory authorities. Concerns over CBD and other potential
adverse health effects relating to beryllium, as well as
concerns regarding potential liability from the use of
beryllium, may discourage our customers use of our
beryllium-containing products and significantly reduce demand
for our products.
One of our subsidiaries, Brush Wellman Inc., is a defendant in
proceedings in various state and federal courts brought by
plaintiffs alleging that they have 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 negligence 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. As of December 31, 2006 there
were 13 cases pending. Approximately 85% of our pending
beryllium-related claims are covered by various syndicates of
Lloyds of London (now reinsured through Equitas Holdings
Limited) and other London insurance market companies, some of
whom are or may become insolvent. If our insurance carriers are
insolvent or become insolvent, we may become directly
responsible for payments relating to product liability claims,
which could divert funds from other intended purposes, including
capital expenditures or other operating requirements.
Our profitability could be affected adversely by unfavorable
results in one or more of those cases. In addition, continued or
increased adverse media coverage relating to our
beryllium-containing products could damage our reputation or
cause a decrease in demand for beryllium-containing products,
which could adversely affect our profitability. Further, an
unfavorable outcome or settlement of a pending beryllium case or
additional adverse media coverage could encourage the
commencement of additional similar litigation. We are unable to
estimate the potential exposure to unasserted claims.
We are
currently self-insured for product liability claims based on
exposure to beryllium after July 2001, and we may incur material
losses from those claims, which could adversely affect our
profitability.
Although we have varying levels of insurance coverage from
insurance carriers for product liability claims based on
exposure to beryllium for most periods prior to July 2001, we
are self-insured for product liability claims based on exposure
to beryllium after July 2001 and for a short period in the
1980s. We may not be able to provide adequate coverage against
all potential liabilities. We may incur significant losses from
claims for which we are self-insured.
Our
bertrandite ore mining and our manufacturing operations and our
customers businesses are subject to extensive health and
safety regulations that impose, and will continue to impose,
significant costs and liabilities, and future regulation could
increase those costs and liabilities or effectively prohibit
production or use of beryllium-containing
products.
We and our customers are subject to laws regulating worker
exposure to beryllium. Standards for exposure to beryllium are
under review by the United States Occupational Safety and Health
Administration and by other governmental and private
standard-setting organizations. One result of these reviews will
likely be more stringent worker safety standards. More stringent
standards may affect buying decisions by the users of
beryllium-containing products. If the standards are made more
stringent or our customers decide to reduce their use of
beryllium-containing products, our operating results, liquidity
and capital resources could be materially adversely affected.
The extent of this adverse effect would depend on the nature and
extent of the changes to the standards, the cost and ability to
meet the new standards, the extent of any reduction in customer
use and other factors that cannot be estimated.
Our
bertrandite ore mining and our manufacturing operations are
subject to extensive environmental regulations that impose, and
will continue to impose, significant costs and liabilities on
us, and future regulation could increase these costs and
liabilities or prevent production of beryllium-containing
products.
We are subject to a variety of governmental regulations relating
to the environment, including those relating to our handling of
hazardous materials and air and wastewater emissions. Some
environmental laws impose
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substantial penalties for noncompliance. Others, such as the
federal Comprehensive Environmental Response, Compensation, and
Liability Act, impose strict, retroactive and joint and several
liability upon entities responsible for releases of hazardous
substances. Bertrandite ore mining is also subject to extensive
governmental regulation on matters such as permitting and
licensing requirements, plant and wildlife protection,
reclamation and restoration of mining properties, the discharge
of materials into the environment and the effects that mining
has on groundwater quality and availability. If we fail to
comply with present and future environmental laws and
regulations, we could be subject to liabilities or our
operations could be interrupted. In addition, future
environmental laws and regulations could restrict our ability to
expand our facilities or extract our bertrandite ore deposits.
They could also require us to acquire costly equipment or to
incur other significant expenses in connection with our
business, which would increase our costs of production.
The
availability of competitive substitute materials for
beryllium-containing products may reduce our customers
demand for these products and reduce our sales.
In certain product applications, we compete with manufacturers
of non-beryllium-containing products, including organic
composites, metal alloys or composites, titanium and aluminum.
Our customers may choose to use substitutes for
beryllium-containing products in their products for a variety of
reasons, including, among other things, the lower costs of those
substitutes, the health and safety concerns relating to these
products and the risk of litigation relating to
beryllium-containing products. If our customers use substitutes
for beryllium-containing products in their products, the demand
for our beryllium-containing products may decrease, which could
reduce our sales.
The
markets for our beryllium-containing and
non-beryllium-containing products are experiencing rapid changes
in technology.
We operate in markets characterized by rapidly changing
technology and evolving customer specifications and industry
standards. New products may quickly render an existing product
obsolete and unmarketable. For example, at one time we produced
beryllium-copper alloys that were used in the production of some
golf club heads, however, these beryllium-copper alloy club
heads are no longer produced by any of our customers. Our growth
and future results of operations depend in part upon our ability
to enhance existing products and introduce newly developed
products on a timely basis that conform to prevailing and
evolving industry standards, meet or exceed technological
advances in the marketplace, meet changing customer
specifications, achieve market acceptance and respond to our
competitors products.
The process of developing new products can be technologically
challenging and requires the accurate anticipation of
technological and market trends. We may not be able to introduce
new products successfully or do so on a timely basis. If we fail
to develop new products that are appealing to our customers or
fail to develop products on time and within budgeted amounts, we
may be unable to recover our significant research and
development costs, which could adversely affect our margins and
profitability.
Our
beryllium-containing and non-beryllium-containing products are
deployed in complex applications and may have errors or defects
that we find only after deployment.
Our products are highly complex, designed to be deployed in
complicated applications and may contain undetected defects,
errors or failures. Although our products are generally tested
during manufacturing, prior to deployment, they can only be
fully tested when deployed in specific applications. For
example, we sell beryllium-copper alloy strip products in a coil
form to some customers, who then stamp the alloy for its
specific purpose. On occasion, it is not until such customer
stamps the alloy that a defect in the alloy is detected.
Consequently, our customers may discover errors after the
products have been deployed. The occurrence of any defects,
errors, or failures could result in installation delays, product
returns, termination of contracts with our customers, diversion
of our resources, increased service and warranty costs and other
losses to us or to our customers or end users. Any of these
occurrences could also result in the loss of or delay in market
acceptance of our products and could damage our reputation,
which could reduce our sales.
8
We
have incurred significant losses in the past, and may not be
able to sustain profitability on an ongoing basis.
Although we have been profitable in 2004, 2005 and 2006 (net
income of $15.5 million, $17.8 million and
$49.6 million, respectively), we have incurred significant
losses in the past (net loss of $35.6 million in 2002 and
$13.2 million in 2003) and may not be able to sustain
this recent profitability on an ongoing basis. We have
implemented strategic initiatives designed to improve our
operating performance on an ongoing basis. We may not be able to
successfully implement or realize the expected benefits of any
of those initiatives or sustain improvements made to date. We
may not meet our strategic goals or sustain profitability if we
fail to achieve the goals of these initiatives.
Our
customers are subject to significant fluctuations as a result of
the cyclical nature of their industries and their sensitivity to
general economic conditions, which could adversely affect their
demand for our products and reduce our sales.
A substantial number of our customers are in the
telecommunications and computer, data storage, aerospace and
defense, automotive electronics, industrial components and
appliance industries. Each of these industries is cyclical in
nature, influenced by a combination of factors which could have
a negative impact on our business, including, among other
things, periods of economic growth or recession, strength or
weakness of the United States dollar, the strength of the
consumer electronics, automotive electronics and computer
industries and the rate of construction of telecommunications
infrastructure equipment and government spending on defense.
Also, in times when growth rates in our markets slow down, there
may be temporary inventory adjustments by our customers, that
may negatively affect our business.
The
demand for our products is generally affected by macroeconomic
fluctuations in the global economies in which we sell our
products. Future economic downturns, stagnant economies or
global currency fluctuations could also negatively affect our
financial performance.
Our business is dependent on continued capital spending by the
global telecommunications and computer industries, and a
decrease in capital spending for infrastructure and equipment
could affect our revenue from these markets. Our business could
be exposed to unexpected or extended downturns in capital
spending, which could adversely affect our sales. In addition, a
decrease in military, aerospace or defense-related spending
could adversely reduce demand for our products.
We may
not be able to complete our acquisition strategy or successfully
integrate acquired businesses.
We have been active over the last 24 months in pursuing
niche acquisitions for one of our subsidiaries, Williams
Advanced Materials Inc. We intend to continue to consider
further growth opportunities through the acquisition of assets
or companies and routinely review acquisition opportunities. We
cannot predict whether we will be successful in pursuing any
acquisition opportunities or what the consequences of any
acquisition would be. Future acquisitions may involve the
expenditure of significant funds and management time. Depending
upon the nature, size and timing of future acquisitions, we may
be required to raise additional financing, which may not be
available to us on acceptable terms. Further, we may not be able
to successfully integrate any acquired business with our
existing businesses or recognize any expected advantages from
any completed acquisition.
The
terms of our indebtedness may restrict our ability to pursue our
growth and acquisition strategies.
The terms of our credit facilities restrict our ability to,
among other things, borrow and make investments, acquire other
businesses and make capital expenditures. In addition, the terms
of our indebtedness require us to satisfy specified financial
covenants. Our ability to comply with these provisions depends,
in part, on factors over which we may have no control. These
restrictions could adversely affect our ability to pursue our
growth and acquisition strategies. If we breach any of our
financial covenants or fail to make scheduled payments, our
creditors could declare all amounts owed to them to be
immediately due and payable, and we may not have sufficient
available funds to repay the amounts due, in which case we may
be required to seek legal protection from our creditors.
9
We
conduct our sales and distribution operations on a worldwide
basis and are subject to the risks associated with doing
business outside the United States.
We sell to customers outside of the United States from our
United States and international operations. We have been and are
continuing to expand our geographic reach in Europe and Asia.
Shipments to customers outside of the United States accounted
for approximately 35% of our sales in 2006 and 33% in 2005 and
2004. We anticipate that international shipments will account
for a significant portion of our sales for the foreseeable
future. Revenue from
non-United
States operations (principally Europe and Asia) amounted to
approximately 23% of our sales in 2006, 25% in 2005 and 24% in
2004. There are a number of risks associated with international
business activities, including:
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burdens to comply with multiple and potentially conflicting
foreign laws and regulations, including export requirements,
tariffs and other barriers, environmental health and safety
requirements and unexpected changes in any of these factors;
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difficulty in obtaining export licenses from the United States
government;
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political and economic instability and disruptions, including
terrorist attacks;
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potentially adverse tax consequences due to overlapping or
differing tax structures; and
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fluctuations in currency exchange rates.
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Fluctuations in currency exchange rates, particularly for the
euro and the yen, have impacted our sales, margins and
profitability in the past. The fair value of our net liability
relating to outstanding foreign currency contracts was
($0.8) million at December 31, 2006, indicating that
the average hedge rates were unfavorable compared to the actual
year-end market exchange rates. Additionally, foreign and
international regulations have also impacted our sales, margins
and profitability in the past. See also Health
issues and litigation relating to machining and manufacturing of
beryllium-containing products could significantly reduce demand
for our products, limit our ability to operate and cause us to
pay material amounts in respect of product liability
claims, found on page 6 and Our
bertrandite ore mining and our manufacturing operations and our
customers businesses are subject to extensive health and
safety regulations that impose, and will continue to impose,
significant costs and liabilities, and future regulation could
increase those costs and liabilities or effectively prohibit
production or use of beryllium-containing products, found
on page 7. Further, any of these risks could continue in
the future.
A
major portion of our bank debt consists of variable-rate
obligations, which subjects us to interest rate
fluctuations.
Our credit facilities are secured by working capital and certain
assets, such as plant, property and equipment. Our working
capital
line-of-credit
includes variable-rate obligations, which expose us to interest
rate risks. If interest rates increase, our debt service
obligations on our variable-rate indebtedness would increase
even if the amount borrowed remained the same, resulting in a
decrease in our net income. We have developed a hedging program
to manage the risks associated with interest rate fluctuations,
but our program may not effectively eliminate all of the
financial exposure associated with interest rate fluctuations.
We currently have an instrument in place that has the effect of
fixing the interest rate on a portion of our outstanding debt
for two years. In addition, the appraised value of the
collateral may not allow us to take advantage of the full
capacity of our line of credit. For additional information
regarding our market risks, please refer to pages 31 and 32
of our annual report to shareholders for the period ended
December 31, 2006.
The
availability and prices of some raw materials we use in our
manufacturing operations fluctuate, and increases in raw
material costs can increase our operating costs.
We manufacture engineered materials using various precious and
non-precious metals, including gold, silver, palladium,
platinum, ruthenium, copper and nickel. The availability of and
prices for these raw materials are subject to volatility and are
influenced by worldwide economic conditions, speculative action,
world supply and demand balances, inventory levels, availability
of substitute metals, the United States dollar exchange rate,
production costs of United States and foreign competitors,
anticipated or perceived shortages and other factors. Decreased
10
availability and fluctuating prices of precious and non-precious
metals that we use in our manufacturing can increase our
operating costs. For example, prices for copper have recently
reached an all-time high due to, among other things, smelting
capacity and increased demand from China. Further, we maintain
some precious metals on a consigned inventory basis. The owners
of the precious metals charge a fee that fluctuates based on the
market price of those metals and other factors. A significant
increase in the market price of precious metals or the
consignment fee could increase our financing costs, which could
increase our operating costs. We use ruthenium for the
manufacture of perpendicular magnetic recording technology
products for the data storage market. Ruthenium is not widely
used or traded on a public market and therefore there is no
established market for hedging price exposure. Although our
selling price is generally based on our cost to purchase
ruthenium, the inventory carrying value may be exposed to market
fluctuations.
Because
we experience seasonal fluctuations in our sales, our quarterly
results will fluctuate, and our annual performance will be
affected by the fluctuations.
Because many of our European and automotive electronics
customers slow or cease operations during the summer months, we
sometimes experience weaker demand in the quarters ending in
September compared to the quarters ending in March, June and
December. We expect this seasonal pattern to continue, which
causes our quarterly results to fluctuate. If our revenue during
any quarter were to fall below the expectations of investors or
securities analysts, our share price could decline, perhaps
significantly. Unfavorable economic conditions, lower than
normal levels of demand and other occurrences in any of the
other quarters could also harm our operating results.
Natural
disasters, equipment failures, work stoppages and other
unexpected events may lead our customers to curtail production
or shut down their operations.
Our customers manufacturing operations are subject to
conditions beyond their control, including raw material
shortages, natural disasters, interruptions in electrical power
or other energy services, equipment failures, work stoppages due
to strikes or lockouts, particularly those affecting the
automotive industry, one of our major markets, and other
unexpected events. Any of those events could also affect other
suppliers to our customers. In either case, those events could
cause our customers to curtail production or to shut down a
portion or all of their operations, which could reduce their
demand for our products and reduce our sales.
Unexpected
events and natural disasters at our mine could increase the cost
of operating our business.
A portion of our production costs at our mine are fixed
regardless of current operating levels. Our operating levels are
subject to conditions beyond our control that may increase the
cost of mining for varying lengths of time. These conditions
include, among other things, fire, natural disasters, pit wall
failures and ore processing changes. Our mining operations also
involve the handling and production of potentially explosive
materials. It is possible that an explosion could result in
death and injuries to employees and others and material property
damage to third parties and us. Any explosion could expose us to
adverse publicity or liability for damages and materially
adversely affect our operations. Any of these events could
increase our cost of operations.
Equipment
failures and other unexpected events at our facilities may lead
to manufacturing curtailments or shutdowns.
The manufacturing processes that take place in our mining
operation, as well as in our manufacturing facilities, depend on
critical pieces of equipment. This equipment may, on occasion,
be out of service because of unanticipated failure, and some
equipment is not readily available or replaceable. In addition
to equipment failures, our facilities are also subject to the
risk of loss due to unanticipated events such as fires,
explosions or other disasters. Material plant shutdowns or
reductions in operations could harm our ability to fulfill our
customers demands, which could harm our sales and cause
our customers to find other suppliers. Further, remediation of
any interruption in production capability may require us to make
large capital expenditures which may have a negative effect on
our profitability and cash flows. Our business interruption
insurance may not cover all of the lost revenues associated with
interruptions in our manufacturing capabilities.
11
Many
of our manufacturing facilities are dependent on single source
energy suppliers, and interruption in energy services may cause
manufacturing curtailments or shutdowns.
Many of our manufacturing facilities depend on one source for
electric power and for natural gas. For example, Utah Power is
the sole supplier of electric power to the processing facility
for our mining operations in Utah. A significant interruption in
service from our energy suppliers due to equipment failures,
terrorism or any other cause may result in substantial losses
that are not fully covered by our business interruption
insurance. Any substantial unmitigated interruption of our
operations due to these conditions could harm our ability to
meet our customers demands and reduce our sales.
If the
price of electrical power, fuel or other energy sources
increases, our operating expenses could increase
significantly.
We have numerous milling and manufacturing facilities and a
mining operation, which depend on electrical power, fuel or
other energy sources. See Item 2.
Properties, found on page 15. Our operating expenses
are sensitive to changes in electricity prices and fuel prices,
including natural gas prices. Prices for electricity and natural
gas have continued to increase and can fluctuate widely with
availability and demand levels from other users. During periods
of peak usage, supplies of energy may be curtailed, and we may
not be able to purchase energy at historical market rates. While
we have some long-term contracts with energy suppliers, we are
exposed to fluctuations in energy costs that can affect our
production costs. Although we enter into forward fixed price
supply contracts for natural gas and electricity for use in our
operations, those contracts are of limited duration and do not
cover all of our fuel or electricity needs. Price increases in
fuel and electricity costs will continue to increase our cost of
operations.
We
have a limited number of manufacturing facilities, and damage to
those facilities could interrupt our operations, increase our
costs of doing business and impair our ability to deliver our
products on a timely basis.
Some of our facilities are interdependent. For instance, our
manufacturing facility, in Elmore, Ohio relies on our mining
operation for its supply of beryllium hydroxide used in
production of most of its beryllium-containing materials.
Additionally, our Shoemakersville, Pennsylvania, Fremont,
California and Tucson, Arizona manufacturing facilities are
dependent on materials produced by our Elmore, Ohio
manufacturing facility and our Wheatfield, New York
manufacturing facility is dependent on our Buffalo, New York
manufacturing facility. See Item 2
Properties, found on page 15. The destruction or
closure of any of our manufacturing facilities or our mine for a
significant period of time as a result of fire, explosion, act
of war or terrorism or other natural disaster or unexpected
event may interrupt our manufacturing capabilities, increase our
capital expenditures and our costs of doing business and impair
our ability to deliver our products on a timely basis. In such
an event, we may need to resort to an alternative source of
manufacturing or to delay production, which could increase our
costs of doing business. Our property damage and business
interruption insurance may not cover all of our potential losses
and may not continue to be available to us on acceptable terms,
if at all.
Our
lengthy and variable sales and development cycle makes it
difficult for us to predict if and when a new product will be
sold to customers.
Our sales and development cycle, which is the period from the
generation of a sales lead or new product idea through the
development of the product and the recording of sales, may
typically take up to two or three years, making it very
difficult to forecast sales and results of operations. Our
inability to accurately predict the timing and magnitude of
sales of our products, especially newly introduced products,
could affect our ability to meet our customers product
delivery requirements or cause our results of operations to
suffer if we incur expenses in a particular period that do not
translate into sales during that period, or at all. In addition,
these failures would make it difficult to plan future capital
expenditure needs and could cause us to fail to meet our cash
flow requirements.
12
Future
terrorist attacks and other acts of violence or war may directly
harm our operations.
Future terrorist attacks or other acts of violence or war may
directly impact our physical facilities. For example, our
Elmore, Ohio facility is located near and derives power from a
nuclear power plant, which could be a target for a terrorist
attack. In addition, future terrorist attacks, related armed
conflicts or prolonged or increased tensions in the Middle East
or other regions of the world could cause consumer confidence
and spending to decrease, decreasing demand for consumer goods
that contain our products. Further, when the United States armed
forces are involved in active hostilities or large-scale
deployments, defense spending tends to focus more on meeting the
physical needs of the troops, and planned expenditures on
weapons and other systems incorporating our products may be
reduced or deferred. Any of these occurrences could also
increase volatility in the United States and worldwide financial
markets, which could negatively impact our sales.
We may
be unable to access the financial markets on favorable
terms.
The inability to raise capital on favorable terms, particularly
during times of uncertainty in the financial markets, could
impact our ability to sustain and grow our business and would
increase our capital costs. We rely on access to financial
markets as a significant source of liquidity for capital
requirements not satisfied by cash on hand or operating cash
flow. Our access to the financial markets could be adversely
impacted by various factors, including:
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Changes in credit markets that reduce available credit or the
ability to renew existing liquidity facilities on acceptable
terms;
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A deterioration of our credit;
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Extreme volatility in our markets that increases margin or
credit requirements;
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A material breakdown in our risk management procedures; and
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The collateral pledge of substantially all of our assets in
connection with our existing indebtedness, which limits our
flexibility in raising additional capital.
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All of these factors, except a material breakdown in our risk
management procedures, have adversely impacted our access to the
financial markets at various times over the last five years.
Low
investment performance by our pension plan assets may require us
to increase our pension liability and expense, which may also
lead us to accelerate funding our pension obligations and divert
funds from other potential uses.
We provide defined benefit pension plans to eligible employees.
Our pension expense and our required contributions to our
pension plans are directly affected by the value of plan assets,
the projected rate of return on plan assets, the actual rate of
return on plan assets and the actuarial assumptions we use to
measure our defined benefit pension plan obligations, including
the rate at which future obligations are discounted to a present
value, or the discount rate. For pension accounting purposes, we
assumed an 8.5% rate of return on pension assets.
Lower investment performance of our pension plan assets
resulting from a decline in the stock market could significantly
increase the deficit position of our plans. Should the assets
earn an average return less than 8.5% over time, it is likely
that future pension expenses would increase. Investment earnings
in excess of 8.5% may reduce future pension expenses. The actual
return on our plan assets for the twelve months ending
December 31, 2006 was 12.5% and the ten-year average
annualized return as of year-end 2006 was 7.8%.
We establish the discount rate used to determine the present
value of the projected and accumulated benefit obligation at the
end of each year based upon the available market rates for high
quality, fixed income investments. An increase in the discount
rate would reduce the future pension expense and, conversely, a
lower discount rate would raise the future pension expense.
Based on current guidelines, assumptions and estimates,
including stock market prices and interest rates, we anticipate
that we will be required to make a cash contribution of
approximately $3.8 million to our pension plan in
13
2007. If our current assumptions and estimates are not correct,
a contribution in years beyond 2007 may be greater than the
projected 2007 contribution required.
We cannot predict whether changing market or economic
conditions, regulatory changes or other factors will further
increase our pension expenses or funding obligations, diverting
funds we would otherwise apply to other uses.
Our
expenditures for post-retirement health benefits could be
materially higher than we have predicted if our underlying
assumptions prove to be incorrect.
We also provide post-retirement health benefits to eligible
employees. Our retiree health expense is directly affected by
the assumptions we use to measure our retiree health plan
obligations, including the assumed rate at which health care
costs will increase and the discount rate used to calculate
future obligations. For retiree health accounting purposes, we
decreased the assumed rate at which health care costs will
increase for the next year to 8% at December 31, 2006 from
9% at December 31, 2005. In addition, we have assumed that
this health care cost increase trend rate will decline to 5% by
2010. We have used the same discount rates for our retiree
health plans that we use for our pension plan accounting.
Assumed health care cost trend rates have a significant effect
on the amounts reported for the health care plans. A 1.0%
increase in assumed health care cost trend rates would have
increased the post-employment benefits included among the
liabilities in our balance sheet by $0.7 million at
December 31, 2006.
We cannot predict whether changing market or economic
conditions, regulatory changes or other factors will further
increase our retiree health care expenses or obligations,
diverting funds we would otherwise apply to other uses.
We are
subject to fluctuations in currency exchange rates, which may
negatively affect our financial performance.
A significant portion of our sales is conducted in international
markets and priced in currencies other than the United States
dollar. Revenues from customers outside of the United States
(principally Europe and Asia) amount to 35% for 2006 and 33% for
both 2005 and 2004. A significant part of these international
sales are priced in currencies other than the U.S. dollar.
Significant fluctuations in currency values relative to the
United States dollar may negatively affect our financial
performance. While we may hedge our currency transactions to
mitigate the impact of currency price volatility on our
earnings, any hedging activities may not be successful.
Our
holding company structure causes us to rely on funds from our
subsidiaries.
We are a holding company and conduct substantially all our
operations through our subsidiaries. As a holding company, we
are dependent upon dividends or other intercompany transfers of
funds from our subsidiaries. The payment of dividends and other
payments to us by our subsidiaries may be restricted by, among
other things, applicable corporate and other laws and
regulations, agreements of the subsidiaries and the terms of our
current and future indebtedness.
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Item 1B.
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UNRESOLVED
STAFF COMMENTS
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Not applicable.
14
We operate manufacturing plants, service and other facilities
throughout the world. Information as of December 31, 2006,
with respect to our significant facilities that are owned or
leased, and the respective segments in which they are included,
is set forth below.
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Approximate
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Number of
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Location
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Owned or Leased
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Square Feet
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Manufacturing
Facilities
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Brewster, New
York(1)
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Leased
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35,000
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Buellton,
California(1)
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Leased
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35,000
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Buffalo, New
York(1)
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Owned
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97,000
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Delta,
Utah(2)
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Owned
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86,000
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Elmore,
Ohio(2)(3)
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Owned/Leased
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556,000/300,000
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Fremont,
California(3)
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Leased
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16,800
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Limerick,
Ireland(1)
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Leased
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18,000
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Lincoln, Rhode
Island(4)
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Owned
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140,000
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Lorain,
Ohio(2)
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Owned
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55,000
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Milwaukee,
Wisconsin(1)
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Owned/Leased
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99,000/7,300
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Newburyport,
Massachusetts(5)
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Owned
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30,000
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Oceanside,
California(5)
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Leased
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12,000
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Reading,
Pennsylvania(2)
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Owned
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123,000
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Santa Clara,
California(1)
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Leased
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5,800
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Singapore(1)
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Leased
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4,500
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Subic Bay,
Philippines(1)
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Leased
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5,000
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Taipei,
Taiwan(1)
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Owned
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5,000
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Tucson,
Arizona(3)
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Owned
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53,000
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Wheatfield, New
York(1)
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Owned
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29,000
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Corporate and Administrative
Offices
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Cleveland,
Ohio(2)(3)(5)
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Owned
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110,000
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Service and Distribution
Centers
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Elmhurst,
Illinois(2)
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Leased
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28,500
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Fukaya,
Japan(2)(3)(4)
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Owned
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35,500
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Singapore(2)(3)(4)
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Leased
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2,500
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Stuttgart,
Germany(2)(4)
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Leased
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24,750
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Theale,
England(2)(3)(4)
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Leased
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19,700
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Warren,
Michigan(2)
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Leased
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34,500
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(1) |
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Advanced Material Technologies and Services |
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(2) |
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Specialty Engineered Alloys |
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(3) |
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Beryllium and Beryllium Composites |
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(4) |
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Engineered Material Systems |
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(5) |
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All Other |
15
In addition to the above, there are 7,500 acres in Juab
County, Utah with respective mineral rights from which the
beryllium-bearing ore, bertrandite, is mined by the open pit
method. A portion of the mineral rights is held under lease. Ore
reserve data set forth on page 29 in the annual report to
shareholders for the year ended December 31, 2006 is
incorporated herein by reference.
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Item 3.
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LEGAL
PROCEEDINGS
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Our subsidiaries and our holding company are subject, from time
to time, to a variety of civil and administrative proceedings
arising out of our 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.
Beryllium
Claims
As of December 31, 2006, our subsidiary, Brush Wellman
Inc., was a defendant in 13 proceedings in various state and
federal courts brought by plaintiffs alleging that they have
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 negligence and various other legal theories and
seek compensatory and punitive damages, in many cases of an
unspecified sum. Spouses of some plaintiffs claim loss of
consortium.
During 2006, the number of beryllium cases remained unchanged
from 13 (involving 54 plaintiffs) as of December 31, 2005
to December 31, 2006. During 2006, one case (involving two
plaintiffs) was settled and dismissed. One purported class
action (involving one named plaintiff) was voluntarily dismissed
by the plaintiff, but was later refiled. One case (involving two
plaintiffs) was filed in 2006.
The 13 pending beryllium cases as of December 31, 2006 fall
into two categories: Nine cases involving
third-party
individual plaintiffs, with 13 individuals (and six spouses who
have filed claims as part of their spouses case and two
children who have filed claims as part of their parents
case); and four purported class actions, involving 33 named
plaintiffs, as discussed more fully below. Claims brought by
third party plaintiffs (typically employees of our customers or
contractors) are generally covered by varying levels of
insurance.
The first purported class action is Manuel Marin,
et al. v. Brush Wellman Inc., filed in Superior
Court of California, Los Angeles County, case number BC299055,
on July 15, 2003. The named plaintiffs are Manuel Marin,
Lisa Marin, Garfield Perry and Susan Perry. The defendants are
Brush Wellman, Appanaitis Enterprises, Inc., and Doe Defendants
1 through 100. A First Amended Complaint was filed on
September 15, 2004, naming five additional plaintiffs. The
five additional named plaintiffs are Robert Thomas, Darnell
White, Leonard Joffrion, James Jones and John Kesselring. The
plaintiffs allege that they have been sensitized to beryllium
while employed at the Boeing Company. The plaintiffs wives
claim loss of consortium. The plaintiffs purport to represent
two classes of approximately 250 members each, one consisting of
workers who worked at Boeing or its predecessors and are
beryllium sensitized and the other consisting of their spouses.
They have brought claims for negligence, strict
liability design defect, strict
liability failure to warn, fraudulent concealment,
breach of implied warranties, and unfair business practices. The
plaintiffs seek injunctive relief, medical monitoring, medical
and health care provider reimbursement, attorneys fees and
costs, revocation of business license, and compensatory and
punitive damages. Messrs. Marin, Perry, Thomas, White,
Joffrion, Jones and Kesselring represent current and past
employees of Boeing in California; and Ms. Marin and
Ms. Perry are spouses. Defendant Appanaitis Enterprises,
Inc. was dismissed on May 5, 2005.
The second purported class action is Neal Parker,
et al. v. Brush Wellman Inc., filed in the
Superior Court of Fulton County, State of Georgia, case number
2004CV80827, on January 29, 2004. The case was removed to
the U.S. District Court for the Northern District of
Georgia, case number 04-CV-606, on May 4, 2004. The named
plaintiffs are Neal Parker, Wilbert Carlton, Stephen King, Ray
Burns, Deborah Watkins, Leonard Ponder, Barbara King and
Patricia Burns. The defendants are Brush Wellman; Schmiede
Machine and Tool Corporation; Thyssenkrupp Materials NA Inc.,
d/b/a Copper and Brass Sales; Axsys Technologies, Inc.; Alcoa,
Inc.; McCann Aerospace Machining Corporation; Cobb Tool, Inc.;
and Lockheed Martin Corporation. Messrs. Parker, Carlton,
King, Burns and Ms. Watkins are current employees of
Lockheed. Mr. Ponder is a retired employee, and
Ms. King and Ms. Burns and Ms. Watkins are family
members. The plaintiffs have brought claims for negligence,
strict
16
liability, fraudulent concealment, civil conspiracy and punitive
damages. The plaintiffs seek a permanent injunction requiring
the defendants to fund a court-supervised medical monitoring
program, attorneys fees and punitive damages. On
March 29, 2005, the Court entered an order directing
plaintiffs to amend their pleading to segregate out those
plaintiffs who have endured only subclinical, cellular and
subcellular effects from those who have sustained actionable
tort injuries, and that following such amendment, the Court will
enter an order dismissing the claims asserted by the former
subset of claimants, dismissing Count I of the Complaint, which
sought the creation of a medical monitoring fund; and dismissing
the claims against defendant Axsys Technologies Inc. On
April 20, 2005, the plaintiffs filed a Substituted Amended
Complaint for Damages, contending that each of the eight named
plaintiffs and the individuals listed on the attachment to the
original Complaint, and each of the putative class members have
sustained personal injuries; however, they allege that they
identified five individuals whose injuries have manifested
themselves such that they have been detected by physical
examination
and/or
laboratory test. On March 10, 2006, the Court entered an
order construing Defendants Motion to Enforce the
March 29, 2005 Order as a Motion for Summary Judgment and
granted summary judgment in the Companys favor; however,
the plaintiffs have filed an appeal, and the case is now in the
U.S. Court of Appeals for the Eleventh Circuit, case number
06-12243-D.
The third purported class action is George Paz,
et al., v. Brush Engineered Materials Inc.,
et al., filed in the U.S. District Court for
the Southern District of Mississippi, case number 1:04CV597, on
June 30, 2004. The named plaintiffs are George Paz, Barbara
Faciane, Joe Lewis, Donald Jones, Ernest Bryan, Gregory Condiff,
Karla Condiff, Odie Ladner, Henry Polk, Roy Tootle, William
Stewart, Margaret Ann Harris, Judith Lemon, Theresa Ladner and
Yolanda Paz. The defendants are Brush Engineered Materials Inc.;
Brush Wellman Inc.; Wess-Del Inc.; and the Boeing Company.
Plaintiffs seek the establishment of a medical monitoring trust
fund as a result of their alleged exposure to products
containing beryllium, attorneys fees and expenses, and
general and equitable relief. The plaintiffs purport to sue on
behalf of a class of present or former Defense Contract
Management Administration (DCMA) employees who conducted quality
assurance work at Stennis Space Center and the Boeing Company at
its facility in Canoga Park, California; present and former
employees of Boeing at Stennis; and spouses and children of
those individuals. Messrs. Paz and Lewis and
Ms. Faciane represent current and former DCMA employees at
Stennis. Mr. Jones represents DCMA employees at Canoga
Park. Messrs. Bryan, Condiff, Ladner, Polk, Tootle and
Stewart and Ms. Condiff represent Boeing employees at
Stennis. Ms. Harris, Ms. Lemon, Ms. Ladner and
Ms. Paz are family members. We filed a Motion to Dismiss on
September 28, 2004, which was granted and judgment was
entered on January 11, 2005; however, the plaintiffs filed
an appeal. Brush Engineered Materials Inc. was dismissed for
lack of personal jurisdiction on the same date, which plaintiffs
did not appeal. On April 7, 2006, the U.S. Court of
Appeals for the Fifth Circuit, in case number
05-60157,
certified the question regarding whether Mississippi has a
medical monitoring cause of action to the Mississippi Supreme
Court. The case is now in the Supreme Court of Mississippi, case
number 2006-FC-007712-SCT.
As reported above, one purported class action has been
dismissed. The fourth purported class action was
Gary Anthony v. Brush Wellman Inc.,
et al., filed in the Court of Common Pleas of
Philadelphia County, Pennsylvania, case number 01718, on
March 3, 2005. The case was removed to the
U.S. District Court for the Eastern District of
Pennsylvania, case number 05-CV-1202, on March 14, 2005.
The only named plaintiff was Gary Anthony. The defendants were
Brush Wellman Inc., Gary Kowalski, and Dickinson &
Associates Manufacturers Representatives. The plaintiff
purported to sue on behalf of a class of current and former
employees of the U.S. Gauge facility in Sellersville,
Pennsylvania who had ever been exposed to beryllium for a period
of at least one month while employed at U.S. Gauge. The
plaintiff brought claims for negligence. Plaintiff sought the
establishment of a medical monitoring trust fund, cost of
publication of approved guidelines and procedures for medical
screening and monitoring of the class, attorneys fees and
expenses. Plaintiff filed a motion to remand to state court,
which the District Court denied on February 14, 2006. On
February 28, 2006, plaintiff filed a notice of appeal to
the Third Circuit Court of Appeals. On August 15, 2006, the
Court of Appeals dismissed plaintiffs appeal as improper.
On August 11, 2006, plaintiff filed a Stipulation of
Dismissal of the underlying action in the U.S. District
Court, which was approved by the Court on August 22, 2006;
however, the Court further ordered that the action was dismissed
without prejudice for plaintiff to refile. On November 15,
2006, defendant Tube Methods, Inc. filed a third-party complaint
against Brush Wellman Inc. in the U.S. District Court for
the Eastern District of Pennsylvania, case number
06-CV-04419-JKG. Tube Methods alleges that Brush supplied
beryllium-containing products to
17
U.S. Gauge, and that Tube Methods worked on these products,
but that Brush is liable to Tube Methods for indemnification and
contribution. Brush moved to dismiss the Tube Methods complaint
on December 22, 2006.
Subsequent
Events
From January 1, 2007 to March 5, 2007, one third-party
case (involving two plaintiffs) was voluntarily dismissed by the
plaintiffs. In George Paz, et al. v. Brush
Engineered Materials Inc., et al., the Supreme Court
of Mississippi issued an opinion that the laws of Mississippi do
not allow for a medical monitoring cause of action without an
accompanying physical injury on January 4, 2007. Plaintiffs
filed a motion for rehearing, which was denied by the
Mississippi Supreme Court on March 1, 2007. No new cases
were filed during the period.
Other
Claims
One of our subsidiaries, Williams Advanced Materials Inc. (WAM)
is a party to patent litigation with Target Technology Company,
LLC (Target). In first actions filed in April 2003 by WAM
against Target in the U.S. District Court, Western District
of New York, consolidated under case number 03-CV-0276A (SR),
WAM has asked the Court for a judgment declaring certain Target
patents as invalid
and/or
unenforceable and awarding WAM damages in related cases. Target
has counterclaimed alleging infringement and seeking a judgment
for infringement, an injunction against further infringement and
damages for past infringement. On August 3, 2005, the
U.S. Court of Appeals for the Federal Circuit, case number
04-1602,
affirmed the District Courts decision denying
Williams motion to enjoin Target from suing and
threatening to sue Williams customers. The case reverted
for further proceedings to the District Court, which has
dismissed, without prejudice to their refiling, all other
pending motions. Williams substitute revised supplemental
and amended complaint with a proposed stipulated order was
re-filed with the court on January 31, 2006, which the
court approved on February 2, 2006. In September 2004,
Target filed a separate action for patent infringement in
U.S. District Court, Central District of California, case
number SAC04-1083 DOC (MLGx), which action named as defendants,
among others, WAM and WAM customers who purchase certain WAM
alloys used in the production of DVDs. In the California action,
Target alleges that the patent at issue, which is related to the
patents at issue in the New York action, protects the use of
certain silver alloys to make the semi-reflective layer in DVDs,
and that in DVD-9s, a metal film is applied to the
semi-reflective layer by a sputtering process, and that raw
material for the procedure is called a sputtering target. Target
alleges that WAM manufactures and sells sputtering targets made
of a silver alloy to DVD manufacturers with knowledge that these
targets are used by its customers to manufacture the
semi-reflective layer of a DVD-9. In that action, Target seeks
judgment that its patent is valid and that it is being infringed
by the defendants, an injunction permanently restraining the
defendants, damages adequate to compensate plaintiff for the
infringement, treble damages and attorneys fees and costs.
Trial, which had been scheduled for February 2007, has been
adjourned to July 2007.
On April 17, 2003, the Company filed a complaint in the
Court of Common Pleas for Ottawa County, Ohio, case
no. 03-CVH-089,
seeking a declaration of certain rights under insurance policies
issued by Lloyds of London, certain London Market companies and
certain domestic insurers, and damages and breach of contract.
On August 30, 2006, the court granted Brushs motion
for partial summary judgment in its entirety. The parties then
stipulated to the amount of damages and prejudgment interest
resulting from those breaches of contract of approximately
$7.3 million, subject to reduction if an appellate court
modifies or amends the grant of partial summary judgment. The
defendants attempt to appeal on an interlocutory basis was
denied. The parties agreed separately to approximately
$0.5 million in damages related to claims not covered by
the partial summary judgment order. Trial of the bad faith claim
is set for December 2007. The damage award was subsequently
increased to $8.8 million as a result of the defendants
stipulating to the attorneys fees incurred in pursuing
this action. Given the uncertainty surrounding the timing and
outcome of the appeal process and the possibility for a portion
or all of the award to be reversed, we have not recorded the
impact of the award in our consolidated financial statements as
of December 31, 2006.
|
|
Item 4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
No matters were submitted to a vote of security holders during
the fiscal fourth quarter of 2006.
18
PART II
|
|
Item 5.
|
MARKET
FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Our shares of common stock are traded on the New York Stock
Exchange under the symbol BW. As of March 2,
2007 there were 1,506 shareholders of record. The
information as to stock price set forth in Note R on
page 59 of the consolidated financial statements in the
annual report to shareholders for the year ended
December 31, 2006 is incorporated herein by reference. We
did not pay any dividends in 2005 or 2006. We have no current
intention to declare dividends on our common shares in the near
term. Our current policy is to retain all funds and earnings for
the use in the operation and expansion of our business.
We did not purchase any of our shares of common stock or other
securities during the year ended December 31, 2006.
|
|
Item 6.
|
SELECTED
FINANCIAL DATA
|
Selected Financial Data on pages 60 and 61 of the annual
report to shareholders for the year ended December 31, 2006
is incorporated herein by reference.
|
|
Item 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The managements discussion and analysis of financial
condition and results of operations on pages 18 through 33
of the annual report to shareholders for the year ended
December 31, 2006 is incorporated herein by reference.
|
|
Item 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
The market risk disclosures on pages 31 and 32 of the
annual report to shareholders for the year ended
December 31, 2006 are incorporated herein by reference.
|
|
Item 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
The report of the independent registered public accounting firm
and the following consolidated financial statements included in
the annual report to shareholders for the year ended
December 31, 2006 are incorporated herein by reference:
Consolidated Balance Sheets December 31, 2006
and 2005.
Consolidated Statements of Income Years ended
December 31, 2006, 2005 and 2004.
Consolidated Statements of Shareholders Equity
Years ended December 31, 2006, 2005 and 2004.
Consolidated Statements of Cash Flows Years ended
December 31, 2006, 2005 and 2004.
Notes to Consolidated Financial Statements.
Quarterly Data on page 59 in Note R to the
consolidated financial statements in the annual report to
shareholders for the year ended December 31, 2006 is
incorporated herein by reference.
|
|
Item 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
None.
|
|
Item 9A.
|
CONTROLS
AND PROCEDURES
|
We carried out an evaluation under the supervision and with
participation of our management, including the chief executive
officer and chief financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures
as of December 31, 2006 pursuant to
Rule 13a-15(e)
and
15d-15(e)
under the Securities
19
Exchange Act of 1934, as amended (the Exchange Act).
Based upon that evaluation, our management, including the chief
executive officer and chief financial officer, concluded that
our disclosure controls and procedures were effective as of the
evaluation date.
There have been no changes in our internal controls over
financial reporting identified in connection with the evaluation
required by
Rule 13a-15
under the Securities Exchange Act of 1934, as amended, that
occurred during the quarter ended December 31, 2006 that
have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Managements assessment on our internal control over
financial reporting is contained in Managements Report on
Internal Control over Financial Reporting on page 35 in our
annual report to shareholders for the year ended
December 31, 2006 and is incorporated herein by reference.
The Report of Independent Registered Public Accounting Firm on
Internal Control over Financial Reporting opining on
managements assessment, included in Managements
Report on Internal Control over Financial Reporting, and opining
on the effectiveness of our internal control over financial
reporting is contained on page 35 in the annual report to
shareholders for the year ended December 31, 2006 and is
incorporated herein by reference.
|
|
Item 9B.
|
OTHER
INFORMATION
|
None
20
PART III
|
|
Item 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
The information under Election of Directors in the
proxy statement for our 2007 annual meeting of shareholders, to
be filed with the Securities and Exchange Commission pursuant to
Regulation 14A, is incorporated herein by reference. The
information required by this item relating to our executive
officers is included under the caption Executive Officers
of the Registrant in Part I of this report and is
incorporated by reference into this section. The information
required by Item 10 with respect to directors, the Audit
Committee of the Board of Directors and Audit Committee
financial experts is incorporated herein by reference from the
section entitled Corporate Governance; Committees of the
Board of Directors Audit Committee and
Audit Committee Expert, Financial Literacy and
Independence in the proxy statement for our 2007 annual
meeting of shareholders to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A. The
information required by Item 10 regarding compliance with
Section 16(a) of the Securities Exchange Act is
incorporated by reference from the section entitled
Section 16(a) Beneficial Ownership Reporting
Compliance in the proxy statement for our 2007 annual
meeting of shareholders to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A.
We have adopted a Policy Statement on Significant Corporate
Governance Issues and a Code of Conduct Policy that applies to
our chief executive officer and senior financial officers,
including the principal financial and accounting officer,
controller and other persons performing similar functions, in
compliance with applicable New York Stock Exchange and
Securities and Exchange Commission requirements. These
materials, along with the charters of the Audit, Governance and
Organization, Compensation and Retirement Plan Review Committees
of our Board of Directors, which also comply with applicable
requirements, are available on our website at
www.beminc.com, and copies are also available upon
request by any shareholder to Secretary, Brush Engineered
Materials Inc., 17876 St. Clair Avenue, Cleveland, Ohio 44110.
We make our reports on
Forms 10-K,
10-Q and
8-K
available on our website, free of charge, as soon as reasonably
practicable after these reports are filed with the Securities
and Exchange Commission, and any amendments or waivers to our
Code of Conduct Policy and Statement on Significant Corporate
Governance Issues will also be made available on our website.
The information on our website is not incorporated by reference
into this annual report on
Form 10-K.
|
|
Item 11.
|
EXECUTIVE
COMPENSATION
|
The information required under this heading is incorporated by
reference from the sections entitled Executive
Compensation, 2006 Director Compensation
and Compensation Committee Interlocks and Insider
Participation in the proxy statement for our 2007 annual
meeting of shareholders to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A.
21
|
|
Item 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
The information required under this heading is incorporated by
reference from the section entitled Security Ownership of
Certain Beneficial Owners and Management in the proxy
statement for our 2007 annual meeting of shareholders to be
filed with the Securities and Exchange Commission pursuant to
Regulation 14A. The Equity Compensation Plan Information
required by Item 12 is set forth in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
Number of
|
|
|
|
|
|
Securities
|
|
|
|
Securities to be
|
|
|
|
|
|
Remaining Available
|
|
|
|
Issued Upon
|
|
|
Weighted Average
|
|
|
for Future Issuance
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Under Equity
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Compensation Plans
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
(Excluding Securities
|
|
|
|
and Rights
|
|
|
and Rights
|
|
|
Reflected in Column (a))
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation
plans approved by security holders
|
|
|
965,919
|
(1)
|
|
$
|
17.45
|
(2)
|
|
|
1,070,350
|
(3)
|
Equity compensation plans not
approved by security holders
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Total
|
|
|
965,919
|
|
|
$
|
17.45
|
|
|
|
1,070,350
|
|
|
|
|
(1) |
|
Consists of options awarded under the 1979, 1984, 1989, 1995 and
2006 Stock Incentive Plans and the 1990 and 1997 Non-employer
Director Stock Incentive Plans. This amount includes 50,284
restricted shares, 14,984 restricted stock units, and
119,311 performance restricted shares at the target level. In
addition, up to 59,656 performance shares could be issued if
performance goals are achieved above target. |
|
(2) |
|
The weighted average calculation does not include restricted
shares, restricted stock units, or performance restricted shares
as they have no exercise price. |
|
(3) |
|
Represents the number of shares of common stock available to be
awarded as of December 31, 2006. Effective May 2,
2006, all equity compensation awards are granted pursuant to the
shareholder approved 2006 Stock Incentive Plan and the 2006
Non-employee Director Equity Plan. |
|
|
Item 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
The information as to related party transactions required under
Item 13 is incorporated by reference from the sections
entitled Related Party Transactions and
Corporate Governance; Committees of the Board of
Directors Board Independence of the proxy
statement for our 2007 annual meeting of shareholders to be
filed with the Securities and Exchange Commission pursuant to
Regulation 14A.
|
|
Item 14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
The information required under Item 14 is incorporated by
reference from the section entitled Ratification of
Independent Registered Public Accounting Firm of the proxy
statement for our 2007 annual meeting of shareholders to be
filed with the Securities and Exchange Commission pursuant to
Regulation 14A.
22
PART IV
|
|
Item 15.
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
|
(a) 1. Financial
Statements and Supplemental Information
Included in Part II of this
Form 10-K
annual report incorporated by reference to the annual report to
shareholders for the year ended December 31, 2006 are the
following consolidated financial statements:
Consolidated Balance Sheets December 31, 2006
and 2005.
Consolidated Statements of Income Years ended
December 31, 2006, 2005, and 2004.
Consolidated Statements of Shareholders Equity
Years ended December 31, 2006, 2005 and 2004.
Consolidated Statements of Cash Flows Years ended
December 31, 2006, 2005 and 2004.
Notes to Consolidated Financial Statements.
Report of Independent Registered Public Accounting Firm.
(a) 2. Financial
Statement Schedules
The following consolidated financial information for the years
ended December 31, 2006, 2005 and 2004 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.
All documents referenced below were filed pursuant to the
Securities Exchange Act of 1934 by Brush Engineered Materials
Inc., file number
001-15885,
unless otherwise noted.
|
|
|
|
|
|
(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 4b to the Current Report on
Form 8-K
filed by Brush Wellman Inc. on May 16, 2000), incorporated
herein by reference.
|
|
(4a)
|
|
|
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 4a to the Current Report on
Form 8-K
filed by Brush Engineered Materials Inc. on May 16, 2000),
incorporated herein by reference.
|
|
(4b)
|
|
|
First Amendment to Rights
Agreement, dated as of December 7, 2004, by and between
Brush Engineered Materials Inc. and LaSalle Bank, N.A. as Rights
Agent (filed as Exhibit 4.1 to the Current Report on
Form 8-K
filed by Brush Engineered Materials Inc. on December 13,
2004), incorporated herein by reference.
|
|
(4c)
|
|
|
Indenture Modification between
Toledo-Lucas County Port Authority, dated as of May 30,
2003 (filed as Exhibit 4 to the Quarterly Report on
Form 10-Q
filed by Brush Engineered Materials Inc. on August 11,
2003), 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.
|
23
|
|
|
|
|
|
(4e)
|
|
|
Credit Agreement dated
December 4, 2003 among Brush Engineered Materials Inc. and
other borrowers and Bank One, N.A, acting for itself and as
agent for certain other banking institutions as lenders (filed
as Exhibit 99.1 to the Companys
Form 8-K
on December 5, 2003), incorporated herein by reference.
(superseded by Exhibit 41)
|
|
(4f)
|
|
|
Post-Closing Letter Agreement
dated December 4, 2003 among the Company, Bank One, N.A.,
as agent, and the other parties to the Credit Agreement dated as
of the date hereof, and Associated Waivers (filed as
Exhibit 4(a) to the Quarterly Report on
Form 10-Q
for the quarter ended July 2, 2004), incorporated herein by
reference. (superseded by Exhibit 41)
|
|
(4g)
|
|
|
First Amendment to Credit
Agreement dated March 1, 2004 among Brush Engineered
Materials Inc. and other borrowers and Bank One, N.A., acting
for itself and as agent for certain other banking institutions
as lenders (filed as Exhibit 4f to the Companys
Form 10-K
Annual Report for the year ended December 31, 2003),
incorporated herein by reference. (superseded by Exhibit 41)
|
|
(4h)
|
|
|
Second Amendment to Credit
Agreement dated December 22, 2004 among Brush Engineered
Materials Inc. and other borrowers and Bank One, N.A., acting
for itself and as agent for certain other banking institutions
as lenders (filed as Exhibit 99.1 to the Current Report on
Form 8-K
filed by Brush Engineered Materials Inc. on December 27,
2004), incorporated herein by reference. (superseded by
Exhibit 41)
|
|
(4i)
|
|
|
Third Amendment to Credit
Agreement dated October 5, 2005 among Brush Engineered
Materials Inc. and other borrowers and JPMorgan Chase Bank,
N.A. (formerly Bank One, N.A.), acting for itself and as agent
for certain other banking institutions as lenders (filed as
Exhibit 99.1 to the Current Report on
Form 8-K
filed by Brush Engineered Materials Inc. on October 5,
2005), incorporated herein by reference. (superseded by
Exhibit 41)
|
|
(4j)
|
|
|
Fourth Amendment to Credit
Agreement dated December 29, 2005 among Brush Engineered
Materials Inc. and other borrowers and JPMorgan Chase Bank, N.A.
(formerly Bank One, N.A.), acting for itself and as agent for
certain other banking institutions as lenders (filed as
Exhibit 99.1 to the Current Report on
Form 8-K
filed by Brush Engineered Materials Inc. on January 3,
2006), incorporated herein by reference. (superseded by
Exhibit 4l)
|
|
(4k)
|
|
|
Amended and Restated Credit
Agreement dated January 31, 2007 among Brush Engineered
Materials Inc. and other borrowers and J. P. Morgan/Chase Bank,
N.A, acting for itself and as agent for certain other banking
institutions as lenders (filed as Exhibit 99.1 to the
Companys
Form 8-K
on January 31, 2007), incorporated herein by reference.
|
|
(4l)
|
|
|
Post-closing Letter Agreement
dated December 4, 2003 among the Company, Bank One, N.A.,
as agent, and the other parties to the Credit Agreement dated as
of the date hereof, and Associated Waivers (filed as
Exhibit 4a to the Quarterly Report on
Form 10-Q
for the quarter ended July 2, 2004), incorporated herein by
reference.
|
|
(4m)
|
|
|
Precious Metals Agreement dated
March 24, 2005 between Brush Engineered Materials Inc. and
Fleet Precious Metals Inc., a corporation operating as Bank of
America Precious Metals (filed as Exhibit 99.1 to the
Current Report on
Form 8-K
filed by Brush Engineered Materials Inc. on March 31,
2005), incorporated herein by reference.
|
|
(4n)
|
|
|
First Amendment to Precious Metals
Agreement dated November 16, 2005 between Brush Engineered
Materials Inc. and Fleet Precious Metals Inc., a corporation
operating as Bank of America Precious Metals (filed as
Exhibit 99.1 to the Current Report on
Form 8-K
filed by Brush Engineered Materials Inc. on November 16,
2005), incorporated herein by reference.
|
|
(4o)
|
|
|
Second Amendment to Precious
Metals Agreement dated December 29, 2005 between Brush
Engineered Materials Inc. and Fleet Precious Metals Inc., a
corporation operating as Bank of America Precious Metals (filed
as Exhibit 99.2 to the Current Report on
Form 8-K
filed by Brush Engineered Materials Inc. on January 3,
2006), incorporated herein by reference.
|
24
|
|
|
|
|
|
(10a)*
|
|
|
Form of Indemnification Agreement
entered into by the Company and its executive officers and key
employees (filed as Exhibit 10.2 to the Current Report on
Form 8-K
filed on May 5, 2005), incorporated herein by reference.
|
|
(10b)*
|
|
|
Form of Indemnification Agreement
entered into by the Company and its directors (filed as
Exhibit 10.1 to the Current Report on
Form 8-K
filed on May 5, 2005), incorporated herein by reference.
|
|
(10c)*
|
|
|
Form of Severance Agreement for
Executive Officers (filed as Exhibit 10f to the
Companys
form 10-k
Annual Report for the year ended December 31, 2001),
incorporated herein by reference. (Superseded by
Exhibit 10d)
|
|
(10d)*
|
|
|
Form of Severance Agreement for
Executive Officers (filed as Exhibit 10.6 to the Current
Report on
Form 8-K
filed on February 13, 2007), incorporated herein by
reference.
|
|
(10e)*
|
|
|
Form of Severance Agreement for
Key Employees (filed as Exhibit 10.5 to the Current Report
on
Form 8-K
filed on May 8, 2006), incorporated herein by reference.
|
|
(10f)*
|
|
|
Form of Executive Insurance
Agreement entered into by the Company and certain employees
dated January 2, 2002 (filed as Exhibit 10g to the
Companys
Form 10-K
Annual Report for the year ended December 31, 1994),
incorporated herein by reference.
|
|
(10g)*
|
|
|
Form of Trust Agreement
between the Company and Key Trust Company of Ohio, N.A.
(formerly Ameritrust Company National Association) on behalf of
the Companys executive officers (filed as Exhibit 10e
to the Companys
Form 10-K
Annual Report for the year ended December 31, 1994),
incorporated herein by reference.
|
|
(10h)*
|
|
|
2004 Management Performance
Compensation Plan (filed as Exhibit 10.1 to the Current
Report on
Form 8-K
filed on February 7, 2005), incorporated herein by
reference.
|
|
(10i)*
|
|
|
2005 Management Performance
Compensation Plan (filed as Exhibit 10.2 to the Current
Report on
Form 8-K
filed on February 7, 2005), incorporated herein by
reference.
|
|
(10j)*
|
|
|
2006 Management Performance
Compensation Plan (filed as Exhibit 10.1 to the Current
Report on
Form 8-K
filed on February 8, 2006), incorporated herein by
reference.
|
|
(10k)*
|
|
|
2007 Management Performance
Compensation Plan (filed as Exhibit 10.1) to the Current
Report on
Form 8-K
filed on February 13, 2007), incorporated herein by
reference.
|
|
(10l)*
|
|
|
Long-term Incentive Plan for the
performance period January 1, 2003 through
December 31, 2004 (filed as Exhibit 10.3 to the
Current Report on
Form 8-K
filed on February 7, 2005), incorporated herein by
reference.
|
|
(10m)*
|
|
|
Long-term Incentive Plan for the
performance period January 1, 2004 through
December 31, 2006 (filed as Exhibit 10.2 to the
Current Report on
Form 8-K
filed on February 8, 2006), incorporated herein by
reference.
|
|
(10n)*
|
|
|
Long-term Incentive Plan for the
performance period January 1, 2005 through
December 31, 2007 (filed as Exhibit 10.5 to the
Current Report on
Form 8-K
filed on February 7, 2005), incorporated herein by
reference.
|
|
(10o)*
|
|
|
Long-term Incentive Plan for the
performance period January 1, 2007 through
December 31, 2007 (filed as Exhibit 10.2 to Amendment
No. 1 to the Current Report on
Form 8-K
filed on February 16, 2007), incorporated herein by
reference.
|
|
(10p)*
|
|
|
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.
|
|
(10q)*
|
|
|
Amendment, effective May 16,
2000, to the 1979 Stock Option Plan (filed as Exhibit 4b to
Post-Effective Amendment No. 5 to Registration Statement on
Form S-8,
No. 2-64080),
incorporated herein by reference.
|
|
(10r)*
|
|
|
1984 Stock Option Plan as amended
by the Board of Directors on April 18, 1984 and
February 24, 1987 (filed by Brush Wellman Inc. as
Exhibit 4.4 to Registration Statement on
Form S-8,
No. 33-28605),
incorporated herein by reference.
|
|
(10s)*
|
|
|
Amendment, effective May 16,
2000, to the 1984 Stock Option Plan (filed as Exhibit 4b to
Post-Effective Amendment No. 1 to Registration Statement on
Form S-8,
No. 2-90724),
incorporated herein by reference.
|
25
|
|
|
|
|
|
(10t)*
|
|
|
1989 Stock Option Plan (filed as
Exhibit 4.5 to Registration Statement on
Form S-8,
No. 33-28605),
incorporated herein by reference.
|
|
(10u)*
|
|
|
Amendment, effective May 16,
2000, to the 1989 Stock Option Plan (filed as Exhibit 4b to
Post-Effective Amendment No. 1 to Registration Statement on
Form S-8,
No. 33-28605,
incorporated herein by reference.
|
|
(10v)*
|
|
|
1995 Stock Incentive Plan (as
Amended March 3, 1998) (filed as Appendix A to the
Companys Proxy Statement dated March 16, 1998),
incorporated herein by reference.
|
|
(10w)*
|
|
|
Amendment, effective May 16,
2000, to the 1995 Stock Incentive Plan (filed as Exhibit 4b
to Post-Effective Amendment No. 1 to Registration Statement
No. 333-63357),
incorporated herein by reference.
|
|
(10x)*
|
|
|
Amendment No. 2, effective
February 1, 2005, to the 1995 Stock Incentive Plan (filed
as Exhibit 10.4 to the Current Report on
Form 8-K
filed on February 7, 2005) incorporated herein by
reference.
|
|
(10y)*
|
|
|
2006 Stock Incentive Plan (filed
as Exhibit 10.1 to the current Report on
Form 8-K
filed on May 8, 2006), incorporated herein by reference.
|
|
(10z)*#
|
|
|
Amendment No. 1, effective
January 1, 2007, to the Brush Engineered Materials Inc.
2006 Stock Incentive Plan.
|
|
(10aa)*
|
|
|
Form of Nonqualified Stock Option
Agreement, (filed as Exhibit 10t to the Companys
Form 10-K
Annual Report for the year ended December 31,
2004) incorporated herein by reference.
|
|
(10ab)*
|
|
|
Form of Nonqualified Stock Option
Agreement (filed as Exhibit 10.7 to the Current Report on
Form 8-K
filed on February 7, 2005) incorporated herein by
reference.
|
|
(10ac)*
|
|
|
Form of Nonqualified Stock Option
Agreement for Mr. Harnett (filed as Exhibit 10.6 to
the Current Report on
Form 8-K
filed on February 7, 2005) incorporated herein by
reference.
|
|
(10ad)*
|
|
|
Form of Special Restricted Stock
Agreement (filed as Exhibit 10w to the Companys
Form 10-K
Annual Report for the year ended December 31,
2004) incorporated herein by reference.
|
|
(10ae)*
|
|
|
Form of 2004 Special Restricted
Stock Agreement (filed as Exhibit 10x to the Companys
Form 10-K
Annual Report for the year ended December 31,
2004) incorporated herein by reference.
|
|
(10af)*
|
|
|
Form of 2007 Restricted Stock
Agreement (filed as Exhibit 10.3 to the Current Report on
Form 8-K
filed on February 13, 2007), incorporated herein by
reference.
|
|
(10ag)*
|
|
|
Form of 2005 Performance Share
Agreement (filed as Exhibit 10y to the Companys
Form 10-K
Annual Report for the year ended December 31,
2004) incorporated herein by reference.
|
|
(10ah)
|
|
|
Form of 2006 Performance
Restricted Share and Performance Share Agreement (filed as
Exhibit 10.2 to the Current Report on
Form 8-K
filed on May 8, 2006), incorporated herein by reference.
|
|
(10ai)*
|
|
|
Form of 2007 Performance
Restricted Share and Performance Share Agreement (filed as
Exhibit 10.4 to the Current Report on
Form 8-K
filed on February 13, 2007), incorporated herein by
reference.
|
|
(10aj)*
|
|
|
Form of 2006 Appreciation Rights
Agreement (filed as Exhibit 10.3 to the Current Report on
Form 8-K
filed on May 8, 2006), incorporated herein by reference.
|
|
(10ak)*
|
|
|
Form of 2007 Stock Appreciation
Rights Agreement (filed as Exhibit 10.5 to the Current
Report on
Form 8-K
filed on February 13, 2007), incorporated herein by
reference.
|
|
(10al)*
|
|
|
Supplemental Retirement Plan as
amended and restated December 1, 1992 (filed as
Exhibit 10n to the Companys
Form 10-K
Annual Report for the year ended December 31, 1992),
incorporated herein by reference.
|
|
(10am)*
|
|
|
Amendment No. 2, adopted
January 1, 1996, to Supplemental Retirement Benefit Plan as
amended and restated December 1, 1992 (filed as
Exhibit 10o to the Companys
Form 10-K
Annual Report for the year ended December 31, 1995),
incorporated herein by reference.
|
|
(10an)*
|
|
|
Amendment No. 3, adopted
May 5, 1998, to Supplemental Retirement Benefit Plan as
amended and restated December 1, 1992 (filed as
Exhibit 10s to the Companys
Form 10-K
Annual Report for the year ended December 31, 1998),
incorporated herein by reference.
|
|
(10ao)*
|
|
|
Amendment No. 4, adopted
December 1, 1998, to Supplemental Retirement Benefit Plan
as amended and restated December 1, 1992 (filed as
Exhibit 10t to the Companys
Form 10-K
Annual Report for the year ended December 31, 1998),
incorporated herein by reference.
|
26
|
|
|
|
|
|
(10ap)*
|
|
|
Amendment No. 5, adopted
December 31, 1998, to Supplemental Retirement Benefit Plan
as amended and restated December 1, 1992 (filed as
Exhibit 10u to the Companys
Form 10-K
Annual Report for the year ended December 31, 1998),
incorporated herein by reference.
|
|
(10aq)*
|
|
|
Amendment No. 6, adopted
September 1999, to Supplemental Retirement Benefit Plan as
amended and restated December 1, 1992 (filed as
Exhibit 10u to the Companys
Form 10-K
Annual Report for the year ended December 31, 2000),
incorporated herein by reference.
|
|
(10ar)*
|
|
|
Amendment No. 7, adopted May
2000, to Supplemental Retirement Benefit Plan as amended and
restated December 1, 1992 (filed as Exhibit 10v to the
Companys
Form 10-K
Annual Report for the year ended December 31, 2000),
incorporated herein by reference.
|
|
(10as)*
|
|
|
Amendment No. 8, adopted
December 21, 2001, to Supplemental Retirement Benefit Plan
as amended and restated December 1, 1992 (filed as
Exhibit 10u to the Companys
Form 10-K
Annual Report for the year ended December 31, 2000),
incorporated herein by reference.
|
|
(10at)*
|
|
|
Amendment No. 9, adopted
December 22, 2003, to Supplemental Retirement Benefit Plan
as amended and restated December 1, 1992 (filed as
Exhibit 10s to the Companys
Form 10-K
Annual Report for the year ended December 31, 2000),
incorporated herein by reference.
|
|
(10au)*
|
|
|
Key Employee Share Option Plan
(filed as Exhibit 4.1 to the Registration Statement on
Form S-8
No. 333-52141
filed by Brush Wellman Inc. on May 5, 1998, incorporated
herein by reference.
|
|
(10av)*
|
|
|
Amendment No. 1 to the Key
Employee Share Option Plan, (effective May 16, 2005) (filed
as Exhibit 4b to Post-Effective Amendment No. 1 to
Registration Statement on
Form S-8,
No. 333-52141),
incorporated herein by reference.
|
|
(10aw)*#
|
|
|
Amendment No. 2 to the Key
Employee Share Option Plan dated June 10, 2005.
|
|
(10ax)*
|
|
|
1997 Stock Incentive Plan for
Non-employee Directors, (As Amended and Restated as of
May 1, 2001) (filed as Appendix B to the
Companys Proxy Statement dated March 19, 2001),
incorporated herein by reference.
|
|
(10ay)*
|
|
|
Amendment No. 1 to the 1997
Stock Incentive Plan for Non-employee Directors, (filed as
Exhibit 10gg to the Companys
Form 10-K
Annual Report for the year ended December 31, 2003),
incorporated herein by reference.
|
|
(10az)*
|
|
|
Form of Nonqualified Stock Option
Agreement for Non-employee Directors (filed as Exhibit 10mm
to the Companys
Form 10-K
Annual Report for the year ended December 31, 2004),
incorporated herein by reference.
|
|
(10ba)*
|
|
|
1992 Deferred Compensation Plan
for Non-employee Directors (As Amended and Restated as of
December 2, 1997) (filed as Exhibit 4d to the
Registration Statement on
Form S-8,
No. 333-63353,
filed by Brush Wellman Inc.), incorporated herein by reference.
|
|
(10bb)*
|
|
|
2000 Reorganization Amendment,
dated May 16, 2000, to the 1997 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.
|
|
(10bc)*
|
|
|
Amendment No. 1 (effective
September 11, 2001) to the 1997 Deferred Compensation
Plan for Non-employee Directors (filed as Exhibit 4c to the
Companys Post-Effective Amendment No. 1 to
Registration Statement
No. 333-74296),
incorporated herein by reference.
|
|
(10bd)*
|
|
|
Amendment No. 2 (effective
September 13, 2004) to the 1997 Deferred Compensation
Plan for Non-employee Directors (filed as Exhibit 10.1 to
the Companys
Form 10-Q
Quarterly Report for the quarter ended October 1, 2004),
incorporated herein by reference.
|
|
(10be)*
|
|
|
Amendment No. 3 (effective
January 1, 2005) to the 1997 Deferred Compensation
Plan for Non-employee Directors (filed as Exhibit 10rr to
the Companys
Form 10-K
Annual Report for the year ended December 31,
2004) incorporated herein by reference.
|
|
(10bf)*
|
|
|
2005 Deferred Compensation Plan
for Non-employee Directors (effective January 1, 2005)
(filed as Exhibit 10.2 to the Current Report on
Form 8-K
filed by Brush Engineered Materials Inc. on December 13,
2004), incorporated herein by reference.
|
|
(10bg)*
|
|
|
2006 Non-employee Director Equity
Plan (filed as Exhibit 10.6 to the Current Report on
Form 8-K
filed 8, 2006), incorporated herein by reference.
|
|
(10bh)*#
|
|
|
Amendment No. 1 (effective
January 1, 2007) to the Brush Engineered Materials
Inc. 2006
Non-employee
Director Equity Plan.
|
27
|
|
|
|
|
|
(10bi)*#
|
|
|
Amendment No. 2 (effective
February 8, 2007) to the Brush Engineered Materials
Inc. 2006 Non-employee Director Equity Plan.
|
|
(10bj)*
|
|
|
Executive Deferred Compensation
Plan II (effective January 1, 2005) (filed as
Exhibit 10.21 to the Current Report on
Form 8-K
filed by Brush Engineered Materials Inc. on December 13,
2004), incorporated herein by reference.
|
|
(10bk)*
|
|
|
Amendment No. 1 to the
Executive Deferred Compensation Plan II (effective
January 1, 2005) (filed as Exhibit 10.3 to the Current
Report on
Form 8-K
filed by Brush Engineered Materials Inc. on February 8,
2006), incorporated herein by reference.
|
|
(10bl)*#
|
|
|
Amendment No. 2 to the
Executive Deferred Compensation Plan II (effective
January 1, 2005).
|
|
(10bm)*
|
|
|
Trust Agreement between the
Company and Fidelity Investments dated September 26, 2006
for certain deferred compensation plans for Non-employee
Directors of the Company (filed as Exhibit 99.4 to the
Current Report on
Form 8-K
filed on September 29, 2006), incorporated herein by
reference.
|
|
(10bn)*
|
|
|
Trust Agreement between the
Company and Fifth Third, dated March 10, 2005 relating to
the 2005 Executive Deferred Compensation Plan II (filed as
Exhibit 10ww to the Companys
Form 10-K
Annual Report for the year ended December 31, 2004),
incorporated herein by reference.
|
|
(10bo)
|
|
|
Trust Agreement between the
Company and Fifth Third Bank dated September 25, 2006
relating to the Key Employee Share Option Plan (filed as
Exhibit 99.3 to the Current Report on
Form 8-K
filed on September 29, 2006), incorporated herein by
reference.
|
|
(10bp)
|
|
|
Lease dated as of October 1,
1996, between Brush Wellman Inc. and Toledo-Lucas County Port
Authority (filed as Exhibit 10v to the Companys
Form 10-K
Annual Report for the year ended December 31, 1996),
incorporated herein by reference.
|
|
(10bq)
|
|
|
Amended and Restated Inducement
Agreement with the Prudential Insurance Company of America dated
May 30, 2003 (filed as Exhibit 10 to the
Companys
Form 10-Q
Quarterly Report for the quarter ended June 27, 2003),
incorporated herein by reference.
|
|
(10br)
|
|
|
Amended and Restated Supply
Agreement between RWE Nukem, Inc. and Brush Wellman Inc. for the
sale and purchase of beryllium products (filed as
Exhibit 10 to the Companys
Form 10-Q
Quarterly Report for the quarter ended September 26, 2003),
incorporated herein by reference.
|
|
(10bs)
|
|
|
Supply Agreement between the
Defense Logistics Agency and Brush Wellman Inc. for the sale and
purchase of beryllium products (filed as Exhibit 10tt to
the Companys
Form 10-K
Annual Report for the year ended December 31, 2004),
incorporated herein by reference.
|
|
(13)
|
|
|
Annual report to shareholders for
the year ended December 31, 2006.
|
|
(21)
|
|
|
Subsidiaries of the Registrant
|
|
(23)
|
|
|
Consent of Ernst & Young
LLP
|
|
(24)
|
|
|
Power of Attorney
|
|
(31.1)
|
|
|
Certification of Chief Executive
Officer required by
Rule 13a-14(a)
or 15d-14(a)
|
|
(31.2)
|
|
|
Certification of Chief Financial
Officer required by
Rule 13a-14(a)
or 15d-14(a)
|
|
(32.1)
|
|
|
Certification of Chief Executive
Officer and Chief Financial Officer required by 18 U.S.C.
Section 1350
|
|
|
|
* |
|
Denotes a compensatory plan or arrangement. |
|
# |
|
Filed herewith |
28
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.
BRUSH
ENGINEERED MATERIALS INC.
|
|
|
By: /s/ RICHARD
J. HIPPLE
Richard
J. Hipple
Chairman of the Board, President
and Chief Executive Officer
|
|
By: /s/ JOHN
D. GRAMPA
John
D. Grampa
Sr. Vice President Finance
and Chief Financial Officer
|
March 15, 2007
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/ RICHARD
J. HIPPLE*
Richard
J. Hipple*
|
|
Chairman of the Board, President,
Chief Executive Officer and Director (Principal Executive
Officer)
|
|
March 15, 2007
|
|
|
|
|
|
/s/ JOHN
D. GRAMPA
John
D. Grampa
|
|
Sr. Vice President Finance and
Chief Financial Officer (Principal Financial and Accounting
Officer)
|
|
March 15, 2007
|
|
|
|
|
|
/s/ ALBERT
C.
BERSTICKER*
Albert
C. Bersticker*
|
|
Director
|
|
March 15, 2007
|
|
|
|
|
|
/s/ JOSEPH
P.
KEITHLEY*
Joseph
P. Keithley*
|
|
Director
|
|
March 15, 2007
|
|
|
|
|
|
/s/ WILLIAM
B.
LAWRENCE*
William
B. Lawrence*
|
|
Director
|
|
March 15, 2007
|
|
|
|
|
|
|
|
Director
|
|
March 15, 2007
|
|
|
|
|
|
/s/ WILLIAM
G. PRYOR*
William
G. Pryor*
|
|
Director
|
|
March 15, 2007
|
|
|
|
|
|
/s/ N.
MOHAN
REDDY*
N.
Mohan Reddy*
|
|
Director
|
|
March 15, 2007
|
|
|
|
|
|
/s/ WILLIAM
R.
ROBERTSON*
William
R. Robertson*
|
|
Director
|
|
March 15, 2007
|
|
|
|
|
|
/s/ JOHN
SHERWIN, JR.*
John
Sherwin, Jr.*
|
|
Director
|
|
March 15, 2007
|
*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
John
D. Grampa
Attorney-in-Fact
|
|
|
|
March 15, 2007
|
29
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
BRUSH ENGINEERED MATERIALS INC. AND SUBSIDIARIES
Years ended December 31, 2006, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
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COL. A
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COL. B
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COL. C
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COL. D
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COL. E
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ADDITIONS
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Balance at
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(1)
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(2)
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Balance at
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Beginning
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Charged to Costs
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Charged to Other
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Deduction
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End of
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DESCRIPTION
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of Period
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and Expenses
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Accounts Describe
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Describe
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Period
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Year ended December 31, 2006
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Deducted from asset accounts:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Allowance for doubtful accounts
receivable
|
|
$
|
1,315,000
|
|
|
$
|
856,000
|
|
|
$
|
0
|
|
|
$
|
349,000
|
(B)
|
|
$
|
1,822,000
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|
Inventory reserves and obsolescence
|
|
$
|
2,711,000
|
|
|
$
|
1,348,000
|
|
|
$
|
1,554,000
|
(A)
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|
$
|
1,158,000
|
(C)
|
|
$
|
4,455,000
|
|
Year ended December 31, 2005
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|
|
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|
|
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|
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|
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Deducted from asset accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
receivable
|
|
$
|
1,555,000
|
|
|
$
|
161,000
|
|
|
$
|
0
|
|
|
$
|
401,000
|
(B)
|
|
$
|
1,315,000
|
|
Inventory reserves and obsolescence
|
|
$
|
3,166,000
|
|
|
$
|
1,709,000
|
|
|
$
|
0
|
|
|
$
|
2,164,000
|
(C)
|
|
$
|
2,711,000
|
|
Year ended December 31, 2004
|
|
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|
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|
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|
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|
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Deducted from asset accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Allowance for doubtful accounts
receivable
|
|
$
|
1,427,000
|
|
|
$
|
532,000
|
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$
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0
|
|
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$
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404,000
|
(B)
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$
|
1,555,000
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Inventory reserves and obsolescence
|
|
$
|
4,301,000
|
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|
$
|
870,000
|
|
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$
|
0
|
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$
|
2,005,000
|
(C)
|
|
$
|
3,166,000
|
|
Note A Beginning balance from acquisition.
Note B Bad debts written-off, net of recoveries.
Note C Inventory write-off.
30