<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- - ----- SECURITIES EXCHANGE ACT OF 1934. For the Quarterly Period ended
June 30, 1994.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- - ----- SECURITIES EXCHANGE ACT OF 1934. For the Transition Period from
N/A to .
------- -----
Commission File No. 1-8467
BMC INDUSTRIES, INC.
--------------------
(Exact Name of Registrant as Specified in its Charter)
MINNESOTA 41-0169210
----------- ------------
(State of Incorporation) (IRS Employer Identification No.)
Two Appletree Square, Minneapolis, Minnesota 55425
--------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(612) 851-6000
--------------
(Registrant's Telephone Number, Including Area Code)
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 at least the past 90 days.
X Yes No
----- -----
BMC Industries, Inc. has outstanding 6,663,921 shares of common stock as of
August 11, 1994. There is no other class of stock outstanding.
Page 1 of 12.
Exhibit Index Begins at Page 9.
<PAGE>
PART I FINANCIAL INFORMATION
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
Item 1: Financial Statements
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
------- -----------
ASSETS 1994 1993
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 19,427 $ 10,927
Trade accounts and notes receivable, net of allowances 23,251 22,711
Inventories - Note 5 32,469 27,278
Deferred income taxes 4,371 4,051
Other current assets 6,015 6,547
- - -----------------------------------------------------------------------------------------
Total Current Assets 85,533 71,514
- - -----------------------------------------------------------------------------------------
Property, Plant and Equipment 123,920 116,990
Less Accumulated Depreciation 80,676 73,985
-------- --------
Property, Plant and Equipment - Net 43,244 43,005
-------- --------
Deferred Income Taxes 6,667 8,095
Other Assets - Net 8,008 7,698
- - -----------------------------------------------------------------------------------------
Total Assets $143,452 $130,312
- - -----------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 8,913 $ 8,914
Accounts payable 12,438 9,828
Accrued expenses 23,814 18,255
- - -----------------------------------------------------------------------------------------
Total Current Liabilities 45,165 36,997
- - -----------------------------------------------------------------------------------------
Long-Term Debt 8,103 18,333
Other Liabilities 18,486 15,237
Deferred Income Taxes 942 845
Stockholders' Equity
Common stock 47,497 43,611
Other (1,165) (1,097)
Retained earnings 20,468 13,928
Cumulative translation adjustment 3,956 2,458
- - -----------------------------------------------------------------------------------------
Total Stockholders' Equity 70,756 58,900
- - -----------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $143,452 $130,312
- - -----------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
Page 2.
<PAGE>
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30 JUNE 30
-------------------- ---------------------
1994 1993 1994 1993
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Net Sales of primary products $ 53,701 $ 48,436 $ 105,946 $ 94,344
Equipment and technology sales 3,604 841 3,765 954
- - -----------------------------------------------------------------------------------------------------------------
Total Revenues 57,305 49,277 109,711 95,298
- - -----------------------------------------------------------------------------------------------------------------
Operating Costs and Expenses
Cost of sales of primary products 43,496 39,705 87,562 78,861
Cost of equipment and technology sales 2,674 43 2,944 276
Selling 2,067 1,951 4,102 3,966
Administrative 945 935 2,055 2,097
- - -----------------------------------------------------------------------------------------------------------------
Total Operating costs and expenses 49,182 42,634 96,663 85,200
- - -----------------------------------------------------------------------------------------------------------------
Income from operations 8,123 6,643 13,048 10,098
- - -----------------------------------------------------------------------------------------------------------------
Other Income and (Expense)
Interest expense (837) (1,281) (1,812) (2,680)
Interest income 127 41 211 115
Other (44) (26) 17 (7)
- - -----------------------------------------------------------------------------------------------------------------
Earnings from Continuing Operations before Income Taxes
and Cumulative Effect of Accounting Changes 7,369 5,377 11,464 7,526
Income Tax Provision 2,692 1,571 4,085 2,303
- - -----------------------------------------------------------------------------------------------------------------
Earnings from Continuing Operations before Cumulative
Effect of Accounting Changes 4,677 3,806 7,379 5,223
Provision for Loss Related to Discontinued Operation (less
applicable income tax benefit of $461)--(Note 2) -- -- (839) --
- - -----------------------------------------------------------------------------------------------------------------
Earnings Before Cumulative Effect of Accounting Changes 4,677 3,806 6,540 5,223
Cumulative Effect of Accounting Changes (Note 3) -- -- -- 12,131
- - -----------------------------------------------------------------------------------------------------------------
Net Earnings $ 4,677 $ 3,806 $ 6,540 $ 17,354
- - -----------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------
Earnings Per Share from Continuing Operations $ 0.69 $ 0.62 $ 1.10 $ 0.86
Loss Per Share Related to Discontinued Operation -- -- (.13) --
Cumulative Effect of Accounting Changes -- -- -- 2.01
- - -----------------------------------------------------------------------------------------------------------------
Net Earnings Per Share $ 0.69 $ 0.62 $ 0.97 $ 2.87
- - -----------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------
Number of Shares Included in Per Share Computation 6,785 6,166 6,711 6,049
- - -----------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
Page 3.
<PAGE>
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
----------------------
1994 1993
<S> <C> <C>
Net Cash Provided by (Used in) Operating Activities
Net earnings $6,540 $17,354
Depreciation and amortization 4,426 4,772
Effect of accounting changes 0 (12,131)
Changes in operating assets and liabilities 6,954 (970)
- - -----------------------------------------------------------------------------------------------
Total 17,920 9,025
- - -----------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Investing Activities
Additions to property, plant and equipment (3,064) (3,496)
Other 2 126
- - -----------------------------------------------------------------------------------------------
Total (3,062) (3,370)
- - -----------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities
Decrease in short-term borrowings 0 (13)
Repayment of long-term debt(1) (8,549) (8,860)
Common stock issued(1) 2,009 686
- - -----------------------------------------------------------------------------------------------
Total (6,540) (8,187)
- - -----------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents 182 (53)
- - -----------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 8,500 (2,585)
Cash and Cash Equivalents at Beginning of Period 10,927 9,376
- - -----------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $19,427 $6,791
- - -----------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------
<FN>
(1) IN 1994, IN ADDITION TO THE LONG-TERM DEBT REPAYMENT AND COMMON STOCK
ISSUANCE SHOWN ABOVE, $1,809 OF LONG-TERM DEBT WAS FORGIVEN AS CONSIDERATION FOR
THE EXERCISE OF WARRANTS.
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
Page 4.
<PAGE>
BMC INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly the financial position as of June 30, 1994, and the results
of operations and the cash flows for the periods ended June 30, 1994 and
1993. Such adjustments are of a normal recurring nature. Certain items in
the financial statements for the period ended June 30, 1993 have been
reclassified to conform to the presentation for the period ended June 30,
1994. The results of the operations for the three-month and six-month
periods ended June 30, 1994 are not necessarily indicative of the results
to be expected for the full year. The balance sheet at December 31, 1993
is derived from the audited balance sheet as of that date. For further
information, refer to the financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year ended
December 31, 1993.
2. In the first quarter of 1994, the Company made a provision for estimated
losses of $1,300, less applicable income tax effect of $461, related to a
discontinued operation. This provision was prompted by claims and expenses
growing out of environmental contamination and other claims related to the
discontinued operation. The environmental contamination occurred before
1980 at an operation acquired by BMC in 1983 and disposed of in 1986.
3. Effective January 1, 1993, the Company changed its method of accounting for
income taxes as required by Financial Accounting Standards Board Statement
No. 109, ACCOUNTING FOR INCOME TAXES. As permitted under the new rules,
prior years' financial statements were not restated. The cumulative effect
of adopting Statement No. 109 as of January 1, 1993 was to increase net
income by $12,855 or $2.13 per share. The principal change affecting the
Company under Statement No. 109 is a change in the recognition and
measurement criteria with respect to deferred tax assets.
Also effective January 1, 1993, the Company adopted Financial Accounting
Standards Board Statement No. 106, EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT
BENEFITS OTHER THAN PENSIONS. The cumulative effect of adopting Statement
No. 106 was to decrease net income by $724, net of tax, or $.12 per share.
Under the new rules the Company accrues the expected cost of providing
postretirement benefits other than pensions during the years that eligible
employees render service.
4. Earnings Per Share
Primary earnings per share is computed using the weighted average number of
common and common equivalent shares during the period. Common stock
equivalents include dilutive stock options and warrants using the treasury
stock method. Fully diluted earnings per share did not differ
significantly from primary earnings per share in both years.
Page 5.
<PAGE>
<TABLE>
<CAPTION>
5. Inventories. JUNE 30, 1994 DECEMBER 31, 1993
------------- -----------------
<S> <C> <C>
Raw materials $12,757 $ 8,543
Work in process 7,179 4,559
Finished goods 12,533 14,176
------- -------
Total Inventories $32,469 $27,278
------- -------
------- -------
</TABLE>
6. Long-term Contract.
Work is continuing on a long-term contract for the construction of aperture
mask production equipment for a customer in China. At June 30, 1994, the
contract was 11.5% complete. No change has been made in the estimate of
costs to complete the contract.
Page 6.
<PAGE>
BMC INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- - ---------------------
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1994 AND 1993
Total revenues for the second quarter of 1994 increased by $8.0 million or 16.3%
from the second quarter of 1993. Net sales of primary products increased $5.3
million or 10.9% from the second quarter of 1993. Net sales of the Precision
Imaged Products group increased by 11.7%, due primarily to an improvement in
sales mix related to increased sales of larger-sized and invar color television
aperture masks. Net sales of the Optical Products group increased 9.4%, due
primarily to an increase in unit sales of polycarbonate eyewear lenses.
Cost of sales of primary products was 81.0% of net sales for the second quarter
of 1994, compared to 82.0% in the same period of 1993. The improvement occurred
in both groups and was due primarily to improved sales mix and enhanced
manufacturing efficiencies.
Interest expense declined by $444,000 in the second quarter of 1994 compared to
the second quarter of 1993, due to lower average debt balances. The lower debt
levels are a result of scheduled principal payments, optional prepayments and
warrant exercise in exchange for debt forgiveness made over the last twelve
months.
The provision for income taxes was 36.5% of pre-tax income in the second quarter
of 1994 compared to 29.2% for the same period in 1993. The Company anticipates
that its effective tax rate for the total year of 1994 will be in the
approximate range of 34% to 38%.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1994 AND 1992
Total revenues for the first six months of 1994 increased $14.4 million or 15.1%
over those for the first six months of 1993. Net sales of primary products
increased $11.6 million or 12.3%. Net sales of the Precision Imaged Products
group increased by 13.2% due primarily to an increase in unit sales and
improvement in sales mix related to increased sales of larger-sized and invar
color television aperture masks. Net sales of the Optical Products group
increased 10.7%, due primarily to an increase in unit sales of polycarbonate
eyewear lenses.
Cost of sales of primary products was 82.6% of net sales in the first six months
of 1994 compared to 83.6% in the same period of 1993. The improvement occurred
in both groups and was due primarily to improved sales mix and enhanced
manufacturing efficiencies.
Interest expense declined by $868,000 in the first six months of 1994 compared
to the same period in 1993, due to lower average debt balances. The lower debt
levels are a result of scheduled principal payments, optional prepayments and
warrant exercise in exchange for debt forgiveness made over the last twelve
months.
Page 7.
<PAGE>
The provision for income taxes was 35.6% of pre-tax income in the second quarter
of 1994 compared to 30.6% for the same period in 1993. The Company anticipates
that its effective tax rate for the total year of 1994 will be in the
approximate range of 34% to 38%.
FINANCIAL POSITION AND LIQUIDITY
- - --------------------------------
Cash and cash equivalent balances increased by $8.5 million during the first six
months of 1994, due primarily to collections on an equipment contract, the
exercise of warrants and an increase in accounts payable partially offset by
capital spending and an increase in inventories. Working capital was $40.4
million at June 30 1994, compared to $34.5 million at December 31, 1993. The
current ratio was 1.9 at June 30, 1994, unchanged from December 31, 1993.
Total debt was $17.0 million at June 30, 1994, compared to $27.2 million at
December 31, 1993. The ratio of debt to equity improved to 0.2 at June 30,
1994, compared to 0.5 at December 31, 1993. The ratio of total liabilities to
equity declined to 1.0 at June 30, 1994, compared to 1.2 at December 31, 1993.
The Company had $38.3 million available for short-term borrowing under domestic
and foreign bank lines at June 30, 1994. As of June 30, 1994, the Company had
commitments of $9.0 million for capital purchases primarily related to aperture
mask expansion projects previously announced.
Management believes that sufficient cash can be generated through operations and
borrowings to finance the Company's short and long-term cash needs.
Page 8.
<PAGE>
PART II. OTHER INFORMATION
- - ---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
28.1 News Release, dated July 26, 1994, announcing second
quarter 1994 operating results...Filed herewith,
page 10.
(b) REPORTS ON FORM 8-K.
The Company did not file any reports on Form 8-K during the
quarter ended June 30, 1994.
SIGNATURES
- - ----------
Pursuant to the requirements 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.
BMC INDUSTRIES, INC.
/s/ Terry R. Nygaard
--------------------
Terry R. Nygaard
Controller (Principal Accounting Officer)
Dated: August 12, 1994
Page 9.
<PAGE>
CONTACT: Merle D. Kerr (NYSE -- BMC)
(612) 851-6020 FOR IMMEDIATE RELEASE
BMC INDUSTRIES REPORTS RECORD SECOND QUARTER RESULTS
-----------------------------------------------------
July 26, 1994 -- Minneapolis, MN -- BMC Industries, Inc. today reported net
earnings of $4,677,000 or $.69 per share for the second quarter of 1994, an
increase of $871,000 or 23% from $3,806,000 or $.62 per share in the year-
earlier period. Total revenues rose 16% in the second quarter to $57,305,000.
Earnings from continuing operations for the first six months of 1994 totaled
$7,379,000 or $1.10 per share. This represented an improvement of $2,156,000 or
41% over the $5,223,000 or $.86 per share for the first six months of the prior
year.
Paul B. Burke, BMC's president and chief executive officer, said the second
quarter results represented continued improvement in the Company's core
manufacturing operations, increased earnings from the Company's equipment and
technology business and reduced interest expense due to reduced debt. Burke
said the second quarter net income was a new quarterly record for BMC, excluding
a one-time accounting gain in 1993. He said the second quarter of 1994 marked
the thirteenth successive quarter of higher earnings in comparison to the year-
earlier period, excluding income from the sale of equipment and technology and
other non-recurring items.
Burke added that both of the Company's core manufacturing operations, Precision
Imaged Products and Optical Products, showed improved sales and improved profit
margins. He said these improvements reflected increased unit volumes, improved
operating efficiencies and the Company's ongoing focus on higher-margin growth
opportunities in its primary markets.
BMC is one of the world's largest manufacturers of aperture masks for color
picture tubes used in televisions and computer monitors. The Company is also a
leading producer of polycarbonate, glass and plastic eyewear lenses. The common
stock of the Company is traded on the New York Stock Exchange under the symbol
"BMC".
-more-
Page 10.
<PAGE>
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30 JUNE 30
-------------------- ---------------------
1994 1993 1994 1993
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Net sales of primary products $ 53,701 $ 48,436 $105,946 $ 94,344
Equipment and technology sales 3,604 841 3,765 954
- - ------------------------------------------------------------------------------------------------------------------
Total Revenues 57,305 49,277 109,711 95,298
- - ------------------------------------------------------------------------------------------------------------------
Operating Costs and Expenses
Cost of sales of primary products 43,496 39,705 87,562 78,861
Cost of equipment and technology sales 2,674 43 2,944 276
Selling 2,067 1,951 4,102 3,966
Administrative 945 935 2,055 2,097
- - ------------------------------------------------------------------------------------------------------------------
Total Operating Costs and Expenses 49,182 42,634 96,663 85,200
- - ------------------------------------------------------------------------------------------------------------------
Income from Operations 8,123 6,643 13,048 10,098
- - ------------------------------------------------------------------------------------------------------------------
Other Income and (Expense)
Interest expense (837) (1,281) (1,812) (2,680)
Interest income 127 41 211 115
Other (44) (26) 17 (7)
- - ------------------------------------------------------------------------------------------------------------------
Earnings from Continuing Operations before Income
7,369 5,377 11,464 7,526
Taxes and Cumulative Effect of Accounting Changes
Income Taxes 2,692 1,571 4,085 2,303
- - ------------------------------------------------------------------------------------------------------------------
Earnings from Continuing Operations before Cumulative
Effect of Accounting Changes 4,677 3,806 7,379 5,223
Provision for Loss Related to Discontinued Operation
(less applicable income tax benefit of $461) - (Note 1) -- -- (839) --
- - ------------------------------------------------------------------------------------------------------------------
Earnings before Cumulative Effect of Accounting Changes 4,677 3,806 6,540 5,223
Cumulative Effect of Accounting Changes (Note 2) -- -- -- 12,131
- - ------------------------------------------------------------------------------------------------------------------
Net Earnings $ 4,677 $ 3,806 $ 6,540 $ 17,354
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------
Earnings Per Share from Continuing Operations $ 0.69 $ 0.62 $ 1.1 $ 0.86
Loss Per Share Related to Discontinued Operation -- -- (.13) --
Cumulative Effect of Accounting Changes -- -- -- 2.01
- - ------------------------------------------------------------------------------------------------------------------
Net Earnings Per Share $ 0.69 $ 0.62 $ 0.97 $ 2.87
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------
Number of Shares Included in Per Share Computation 6,785 6,166 6,711 6,049
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------
</TABLE>
-more-
Page 11.
<PAGE>
Note 1 - Provision for Loss Related to Discontinued Operation
In the first quarter of 1994, the Company made a provision for estimated losses
of $1,300, less applicable income tax effect of $461, related to a discontinued
operation. This provision was prompted by claims and expenses growing out of
environmental contamination and other claims related to the discontinued
operation. The environmental contamination occurred before 1980 at an operation
acquired by BMC in 1983 and disposed of in 1986. This provision is in addition
to a provision made in the fourth quarter of 1993 which related to the same
matter.
Note 2 - Cumulative Effect of Accounting Changes
Effective January 1, 1993, the Company changed its method of accounting for
income taxes as required by Financial Accounting Standards Board Statement
No. 109, ACCOUNTING FOR INCOME TAXES. As permitted under the new rules, prior
years' financial statements were not restated. The cumulative effect of
adopting Statement No. 109 as of January 1, 1993 was to increase net income by
$12,855 or $2.13 per share. The principal change affecting the Company under
Statement No. 109 is a change in the recognition and measurement criteria with
respect to deferred tax assets.
Also effective January 1, 1993, the Company adopted Financial Accounting
Standards Board Statement No. 106, EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT
BENEFITS OTHER THAN PENSIONS. The cumulative effect of adopting Statement
No. 106 was to decrease net income by $724, net of tax, or $.12 per share.
Under the new rules the Company accrues the expected cost of providing
postretirement benefits other than pensions during the years that eligible
employees render service.
-30-
Page 12.
