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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-K
(Mark one)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission File No.: 1-8467 _______________________
BMC INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0169210
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
TWO APPLETREE SQUARE, MINNEAPOLIS, MINNESOTA 55425
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (612) 851-6000
_______________________
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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COMMON STOCK NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
NONE
_______________________
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
As of March 27, 1996, 27,259,794 shares of Common Stock of the Registrant
were outstanding. The aggregate market value of the Common Stock as of such
date (based on the closing price of the Common Stock at that date on the New
York Stock Exchange), excluding shares deemed beneficially owned by affiliates,
was approximately $566 million.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II of this Annual Report on Form 10-K incorporate by reference
information (to the extent specific pages are referred to herein) from the
Registrant's Annual Report to Stockholders for the year ended December 31, 1995
(the "1995 Annual Report"). Part III of this Annual Report on Form 10-K
incorporates by reference information (to the extent specific sections are
referred to herein) from the Registrant's Proxy Statement for its Annual Meeting
of Stockholders to be held April 25,1996.
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PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS.
BMC Industries, Inc. is a Minnesota corporation with its executive offices
located at Two Appletree Square, Minneapolis, Minnesota 55425; telephone (612)
851-6000. Unless the context otherwise indicates, the terms "Company" or "BMC"
as used herein mean BMC Industries, Inc. and its consolidated subsidiaries.
BMC was organized in 1907 under the name Buckbee-Mears Company. Over the course
of its early history, the Company developed an expertise in photolithography and
in the chemical etching of metals. In the 1950's, BMC collaborated in the
development of chemically etched aperture masks for color cathode ray tubes.
The Company entered the optical business in 1969 with the acquisition of Vision-
Ease Lens, a manufacturer of glass multi-focal ophthalmic lenses, based in St.
Cloud, Minnesota.
In the early 1980's, the Company sought accelerated growth through acquisitions,
acquiring additional optical products operations and operations producing
electronic interconnection components and related manufacturing equipment. In
1985, the Company determined that the interest burden from acquisition-related
debt and a worsening economy in the electronics industry made it impossible to
sustain the growth strategy. Between 1985 and 1987, the Company divested
several optical products operations and all of the interconnection component
operations. Additionally, a contact lens manufacturing operation and the
Company's former European optical products businesses were divested in 1989.
The Company presently is composed of two product groups, referred to as
Precision Imaged Products and Optical Products. Precision Imaged Products is
composed of two units. Mask Operations, the group's principal business,
produces aperture masks, an integral component of every color television and
computer monitor picture tube. The Company, through its Mask Operations, is
the only independent aperture mask manufacturer located outside Asia.
Buckbee-Mears St. Paul, the second unit of Precision Imaged Products, is a
leading domestic producer of precision photo-etched parts. Precision Imaged
Products, through its Mask Operations, also is involved in the sale, design,
manufacture and installation of aperture mask manufacturing equipment and the
licensing of BMC's related proprietary process technology in developing
nations. Optical Products designs, manufactures and distributes
polycarbonate, glass and hard-resin plastic multi-focal and single-vision
ophthalmic lenses for the personal eyewear market. During the fourth quarter
of 1995, the Company, through its Vision-Ease Lens division, acquired the
assets of a glass multi-focal lens manufacturer in St. Cloud, Minnesota and
acquired a lens distributor in London, England. As of December 31, 1995, the
Company had 1,915 employees.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
Financial information about the Company's business segments for the three most
recent fiscal years is contained on pages 37-38 of the 1995 Annual Report, and
is incorporated herein by reference.
(c) NARRATIVE DESCRIPTION OF BUSINESS.
The Company's business is divided into two product groups: Precision Imaged
Products and Optical Products.
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PRECISION IMAGED PRODUCTS
Precision Imaged Products ("PIP") is composed of two units, Mask Operations and
Buckbee-Mears St. Paul, which design, manufacture and market precision etched
metal parts, including aperture masks, specialty printed circuits, precision
electroformed components and precision etched and filled glass products. The
group's Mask Operations also is involved in the sale, design, manufacture and
installation of aperture mask manufacturing equipment and the licensing of the
Company's related proprietary process technology in developing nations.
PRODUCTS AND MARKETING. PIP includes Mask Operations, composed of Buckbee-Mears
Cortland (Cortland, New York) and Buckbee-Mears Europe (Mullheim, Germany), and
Buckbee-Mears St. Paul (St. Paul, Minnesota). The Cortland and Mullheim
facilities primarily manufacture aperture masks. The St. Paul facility
manufactures precision etched metal parts, specialty printed circuits, precision
electroformed components and precision etched and filled glass products. The
St. Paul facility also operates a continuous precision parts etching line at the
Company's Mullheim facility. Four customers each accounted for more than 10% of
PIP's 1995 total revenues, while two accounted for more than 10% of the
Company's 1995 total revenues. Thomson, S.A. of France (including its U.S.
based operations) accounted for approximately 28% of the Company's 1995 total
revenues. Thomson produces televisions in North America and Europe under
various trademarks, including RCA and GE. Philips Components B.V. of the
Netherlands accounted for approximately 13% of the Company's 1995 total
revenues.
Aperture masks are photochemically etched fine screen grids found in every
color television and computer monitor picture tube. An aperture mask allows
electron beams to activate selectively the red, green or blue phosphors on
the inside face plate of the cathode ray tube, producing a color image.
Aperture masks are made from cold rolled steel or invar (a nickel alloy) and
range in size from 6 inch to 42 inch diagonal dimensions. The Company's
facilities employ an automated continuous photochemical etching process
originally developed by the Company. Aperture masks are sold directly by the
Company to color picture tube manufacturers in North America, Western and
Eastern Europe, India, and Asia. Mask Operations maintains an in-house sales
staff to sell aperture masks directly to its customers. Net sales of
aperture masks comprised 57%, 54% and 53% of the Company's consolidated total
revenues in 1995, 1994 and 1993, respectively.
During the 1980's, the Company expanded its aperture mask production capacity
by adding additional aperture mask production lines in 1984 and 1988 at its
Cortland, New York facility and in 1986 at its Mullheim, Germany facility.
In 1986, the Company also added a specialized production line at Mullheim.
The specialized line is designed to manufacture precision etched components
other than aperture masks, such as gimbal springs for use in computer disk
drives. During the fourth quarter of 1995, Buckbee-Mears St. Paul began
production on this line of several demanding precision etched components. At
its Cortland operation, the Company also manufactures small quantities of
special-purpose, very-high-resolution foil aperture masks for military
avionics use.
The Company was engaged in research and development efforts in recent prior
years aimed at developing the manufacturing and technical expertise necessary to
produce aperture masks for high definition television ("HDTV") and other large
color cathode ray tube applications ("jumbo masks"). As a result, the Company
has delivered limited quantities of prototype HDTV aperture masks to customers
engaged in HDTV research and development. Commercial production deliveries of
other jumbo masks, which are manufactured from invar and steel, have increased
significantly in the last three years due to a corresponding increase in sales
of jumbo televisions, particularly in the United States. In addition, over
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the past few years, the Company has engaged in research and development efforts
aimed at developing the manufacturing and technical expertise necessary to
produce aperture masks for high-resolution color computer monitors.
In 1993, the Company modified one of the three manufacturing lines at its
Cortland, New York facility to permit the production of high-resolution masks
for computer monitors. An initial pre-production run of high-resolution
masks was completed during the fourth quarter of 1993. During 1994, the
Company qualified as a high-resolution computer monitor mask vendor and began
its first volume shipments of the product. Due to strong demand for larger
size television aperture masks in 1995, the Company converted this line back
to television aperture mask production. In February 1994, the Company began
steps to upgrade another one of the three manufacturing lines at its Cortland
facility. The upgraded line in Cortland will serve the growing demand for
large and jumbo masks for high-performance color television tubes. The
Company expects to complete the process upgrades by the second quarter of
1996.
In February 1994, the Company initiated construction of a new production line at
its Mullheim, Germany facility. The start-up of the new production line began
in the fourth quarter of 1995. The German facility currently is working to
increase yields with a ramp into full volume production anticipated during 1996.
The new production line in the German facility will be dedicated exclusively to
the production of high-resolution computer monitor masks.
In 1995, the Company announced its plans to add two new production lines at the
Cortland, NY facility, one for television aperture masks and the other for high-
resolution computer monitor masks. The Company began engineering and
construction of this expansion in the third quarter of 1995. The Company
anticipates that the first of the two new production lines at Cortland will
become operational during the first quarter of 1997, with the second line
expected to begin production during the second quarter of 1997. These new
production lines, along with the new production line in the German facility and
the upgraded line in Cortland, will add manufacturing capacity for 13 to 14
million television aperture masks and will increase production capacity for
computer monitor masks to 10 million masks annually. The expansion is focused
particularly on the growing market for large masks (25-29 inch), medium masks
(19-23 inch) and high resolution computer monitor masks.
Products manufactured at the St. Paul, Minnesota facility include precision
etched metal parts; large size, tight tolerance specialty printed circuits up to
four by ten feet in area; precision electroformed components; and, precision
etched and filled glass products. These products are sold directly by the
Company, both by in-house sales personnel and manufacturers representatives, to
manufacturers of automotive components, filtration equipment, microwave
antennas, computers and printers, various consumer products, medical electronics
and computer aided design/computer aided manufacturing ("CAD/CAM") equipment and
military and avionics electronics.
In 1991, the Company (through its Mask Operations) largely completed delivery
and installation of aperture mask manufacturing equipment to a Chinese customer;
in 1992, acceptance testing of the equipment was completed and the customer
commenced commercial production. The Company receives royalty payments on
products produced by this customer. In 1993, the Company (through Mask
Operations) entered into a $26 million contract to deliver and install aperture
mask manufacturing equipment to another Chinese customer. The Company
anticipates successful completion of this contract during 1996, at which time
the Company will receive royalty payments on products manufactured by this
customer.
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INTELLECTUAL PROPERTY. The Company has a number of patents which are important
to the success of its PIP operations. These patents range in their expiration
dates from 1998 to 2014. The loss of any single patent would not have a
material adverse effect on the business of the Company as a whole. The Company
believes that improvement of existing products and processes and a reliance on
trade secrets and unpatented proprietary know-how are as important as patent
protection in establishing and maintaining the Company's competitive position.
At the same time, the Company continues to seek patent protection for its
products and processes on a selective basis. However, there can be no assurance
that any patents obtained will provide substantial protection or be of
commercial value. The Company generally requires its consultants and employees
to agree in writing to maintain the confidentiality of the Company's information
and (within certain limits) to assign to the Company any inventions, and any
patent or other intellectual property rights, relating to the Company's
business.
COMPETITION. Competition with respect to the products described above is
intense, with no one competitor dominating the market. The principal methods of
competition are pricing, product quality and product availability, and the
Company competes on the basis of each of these methods.
The Company is one of only five independent aperture mask manufacturers in the
world. In addition, several color picture tube manufacturers operate captive
aperture mask production facilities. State directed ventures operate in China.
The Company believes that it has approximately a 20% share of the total world
aperture mask market held by independent manufacturers. The Company is the only
independent aperture mask manufacturer with production facilities outside Asia.
Many producers compete in the market for precision etched metal parts produced
by the St. Paul facility; there is no clear market share leader. The Company
sells its precision etched metal parts to approximately 250 industrial users.
The specialty printed circuit market served by that facility includes producers
of a wide variety of end products; its size therefore is difficult to quantify.
The Company estimates that there are approximately 20 customers for specialty
circuits, primarily military and industrial users.
SUPPLIES. Each of the PIP operations have available multiple sources of the raw
materials needed to manufacture its products. The Cortland operation imports
from Japan and Germany all of its steel and invar requirements necessary in the
manufacture of its products; the Mullheim operation imports from Japan a portion
of its steel and invar requirements. Importation of such steel into the United
States is subject to restrictions imposed by U.S. federal trade legislation and
regulations, but the Company does not anticipate difficulty in obtaining this or
any other raw materials. In 1992, the Company was involved in a successful
effort to exclude aperture mask steel from products currently involved in a
dumping investigation by the U.S. International Trade Commission.
BACKLOG. As of December 31, 1995, the backlog of PIP sales orders believed to
be firm was $177 million, compared with $126 million as of December 31, 1994.
The Company expects that all of the December 31, 1995 backlog orders will be
filled within the current fiscal year. Backlog orders are based on the results
of annual price/quantity negotiations with aperture mask customers and purchase
orders in hand from other customers. Backlog orders may be changed or cancelled
by aperture mask customers without penalty.
ENVIRONMENTAL. Chemically etching metals, which is performed by all PIP
operations, requires the Company to utilize chemical substances which must be
handled in accordance with applicable laws and regulations. The etching
processes also generate wastewater, which is treated using on-site wastewater
treatment systems, and wastes, some of which are classified as hazardous under
applicable environmental laws and regulations. The Company employs systems for
either disposing of such wastes in accordance
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with applicable laws or regulations or recycling the chemicals it utilizes
through the manufacturing process. The wastes and the wastewater treatment
systems are monitored by environmental agencies to assure compliance with
applicable standards. Generation of waste does entail that the Company maintain
responsibility for the waste even after proper disposal. As of March 22, 1996,
the Company is involved in a total of eight (8) sites where environmental
investigations are occurring and final settlement has not been reached, of which
five (5) relate to the PIP division and three (3) relate to the Optical Products
division. See "Optical Products -- Environmental" for a discussion of the sites
relating to the Optical Products division.
During 1995, the Company was identified as a potentially reponsible party
("PRP") at a site for which the Environmental Protection Agency (the "EPA")
previously requested information regarding the Company's potential involvement
at the site. It is the Company's belief that its involvement at this site was
minimal and, therefore, is seeking de minimis status. Also in 1995, the
Company reached a de minimis settlement of its liability with the non-de minimis
PRP group at a site in which the Company was a PRP. This activity maintains a
total of five (5) sites, involving the Company's PIP division, where the Company
has been involved in environmental investigations and where final settlement has
not been reached.
In addition to the above sites, the Company was named previously as a defendant
in connection with real property located in Irvine, California previously
occupied by a discontinued operation of the Company's PIP division. In 1995,
the Company settled this litigation with the other parties to the lawsuit and
all claims have been dismissed with prejudice. Remediation of the site has
begun in accordance with a remediation system approved by the applicable state
regulatory agency. The settlement amount and the anticipated cost of the
remediation system are both within the $3.3 million reserved by the Company for
this matter. The Company has also been named as a defendant by parties
identified as PRP's for a site in Cortland, New York. The Company strongly
believes it has no involvement with this site and is committed to a vigorous
defense of this case. It is impossible at this time to predict the likely
outcome of this matter or the Company's exposure if this case is decided
adversely. However, it is not currently anticipated that this case, or the
Company's share of the costs of environmental remediation activities for any of
the sites discussed above will have a materially adverse effect on the financial
condition of the Company as a whole.
PIP estimates that in 1995 and 1994 it incurred approximately $5.1 and $3.4
million, respectively, in expenditures (including capital expenditures) related
to efforts to comply with applicable laws and regulations regulating the
discharge of materials into the environment or otherwise relating to the
protection of the environment. In addition, it estimates that it will make
approximately $2.0 million and $1.9 million dollars in capital expenditures for
environmental control facilities during 1996 and 1997-98, respectively.
SEASONALITY. The Company's earnings from PIP are generally lower in the first
and third quarters due to maintenance shutdowns at the Company's Cortland, N.Y.
and Mullheim, Germany facilities. Also, the seasonality of televisions, the
end product of aperture masks, affects the Company's annual earnings pattern.
OPTICAL PRODUCTS
Optical Products, operating under the Vision-Ease Lens trademark ("Vision-
Ease"), is a major U.S. manufacturer of ophthalmic lenses, including semi-
finished polycarbonate, glass and hard-resin plastic multi-focal and single-
vision lenses and finished polycarbonate single-vision lenses, with group
headquarters located in Brooklyn Park, Minnesota. Vision-Ease includes
manufacturing operations located in Brooklyn Center and St. Cloud, Minnesota and
in Ft. Lauderdale, Florida. Vision-Ease also has 13 distribution centers in the
U.S. and Canada, a sales subsidiary in Canada and a distribution subsidiary in
England.
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PRODUCTS AND MARKETING. Ophthalmic lenses are manufactured from three principal
materials: polycarbonate ("poly"), glass and hard-resin plastic. Hard-resin
plastic includes both standard plastic lenses and high-index plastic lenses.
Semi-finished lenses are sold to independent wholesale optical laboratories or
retail outlets with on-site laboratories, which then finish the lens by grinding
and polishing the back side of the lens according to the prescription provided
by the optometrist or ophthalmologist. After processing, the lens is edged and
inserted into the frame by either the wholesale laboratory or the retail optical
dispenser. The Company also factory finishes and sells to wholesale and retail
laboratories a broad range of standard power prescription poly lenses. These
finished lenses are ready to be edged and inserted into the frame without
laboratory surfacing. Vision-Ease additionally markets limited quantities of
lenses produced by third party manufacturers.
Vision-Ease manufactures finished and semi-finished single-vision and semi-
finished multi-focal poly lenses, including progressive power multi-focal
lenses, at its Brooklyn Center facility. Progressive power multi-focal lenses
provide a gradual transition from distance to near viewing without the visual
"jump" generally associated with a multi-focal lens. Due to the strong market
demand, Vision-Ease increased its polycarbonate manufacturing capacity by
approximately 40% in 1995, after nearly doubling it in both 1994 and 1993. The
Company produces semi-finished glass multi-focal and single-vision lenses at its
St. Cloud facility. The Ft. Lauderdale facility manufactures semi-finished
hard-resin plastic multi-focal (including high-index) and single-vision lenses,
including plastic progressive power multi-focal lenses, and glass progressive
power multi-focal lenses.
In 1994, the Company entered into a strategic supply agreement with a low-cost,
off-shore supplier for mid-range power standard hard-resin plastic lenses.
Under the terms of the supply agreement, Vision-Ease is committed to purchase
approximately $10.7 million dollars of lens over a four year period. This
agreement allows Vision-Ease to focus manufacturing capabilities on higher-
margin products within this segment and to be cost-competitive on mid-range,
lower-margin products.
Over the last three years, the Company has made increasing investments in lens
development work, particularly in poly lens development and other higher margin
products. The result has been the first quarter 1993 introduction of a poly
progressive lens product line and other new poly products, and the introduction
of several new products in 1994, including VersaLite-Registered Trademark- 1.0
(a thin and light single-vision lens). The Company added several new products
during 1995, including VersaLite-Registered Trademark- SunRx-Registered
Trademark- (a premium glare reducing sunglass lens). Vision-Ease will continue
to make significant investments in poly lens development.
Vision-Ease also markets the Optifacts-TM- computer software system. Optifacts-
TM- combines proprietary software and standard major manufacturer computer
hardware for use by optical wholesale laboratories. The Optifacts-TM- software
assists the laboratory in order entry, inventory tracking and related business
functions.
Vision-Ease markets its optical products to more than 600 wholesalers and
retailers in the U.S. and to more than 60 in international markets. No single
customer of Vision-Ease accounted for more than 10% of its or the Company's
total revenues in 1995. Vision-Ease utilizes independent sales representatives
to market its lens products, and the Company advertises in industry
publications. Vision-Ease also maintains an internal sales and marketing
department to coordinate all sales and promotional activities and provide
customer service.
ACQUISITIONS. Vision-Ease made two acquisitions during 1995. In November 1995,
Vision-Ease purchased the assets of Lantz Lenses, Inc. ("Lantz"), a glass multi-
focal lens manufacturer in St. Cloud, Minnesota.
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In December 1995, Vision-Ease acquired Optical Manufacturing Supplies Limited
("OMS"), a distributor of lenses in London, England. The Company believes that
the acquisition of Lantz will increase its sales of multi-focal glass products
and the acquisition of OMS will expand its direct distribution of Vision-Ease
products into Europe.
INTELLECTUAL PROPERTY. The Company has several patents protecting certain of
the products and manufacturing processes of its Vision-Ease operations. These
patents have expiration dates ranging from 1998 to 2012. The loss of any
single patent would not have a material adverse effect on the business of the
Company as a whole. The Company believes that improvement of existing products
and processes, the development of new lens products and a reliance on trade
secrets and unpatented proprietary know-how are as important as patent
protection in establishing and maintaining the Company's competitive position.
At the same time, the Company continues to seek patent protection for its
products and processes on a selective basis. However, there can be no assurance
that any patents obtained will provide substantial protection or be of
commercial value. The Company generally requires its consultants and employees
to agree in writing to maintain the confidentiality of the Company's information
and (within certain limits) to assign to the Company any inventions, and any
patent or other intellectual property rights, relating to the Company's
business.
COMPETITION. Competition in the ophthalmic industry with respect to all of the
products described above is intense, with no one firm dominating the industry.
The principal methods of competition in the industry are product offerings,
pricing, product quality and customer service, particularly with respect to
turnaround time from order to shipment. The Company competes on each of these
methods. Vision-Ease continues to investigate all low-cost manufacturing
opportunities to increase its competitiveness.
SUPPLIES. Vision-Ease has available multiple sources of the raw materials
required to manufacture all of its products, with the exception of the monomer
required in the production of standard hard-resin plastic lenses, which is
available domestically only through Pittsburgh Plate Glass Industries, Inc. and
Akzo Chemie America, the monomer required in the production of high-index
plastic lenses, available only from Daiso, a Japanese company, and photochromic
glass blanks used in producing photochromic glass lenses, which are available
domestically only from Corning Glass. Although the Company's principal
supplier of standard monomer is Akzo Chemie America, the products of
both domestic suppliers are qualified for use in the Company's production
process. Alternate offshore supplies of both standard monomer and photochromic
glass blanks are available in the event of any disruption of supplies from
domestic sources.
BACKLOG AND INVENTORY. Due to the significance to the ophthalmic industry of
rapid turnaround time from order to shipment, the backlog of sales orders is not
material. Due to the large number of stock-keeping units required, there is a
need to maintain a significant amount of inventory in order to satisfy rapid
response time.
ENVIRONMENTAL. As part of its lens manufacturing processes, the Company
utilizes hazardous chemical substances, which must be handled in accordance with
applicable laws and regulations. The lens manufacturing processes also generate
wastewater and wastes, some of which are classified as hazardous under
applicable environmental laws and regulations. The Company employs systems for
either disposing of such wastes in accordance with applicable laws and
regulations, or recycling the chemicals it utilizes through the manufacturing
process. The wastes and the wastewater treatment systems are monitored by
environmental agencies to assure compliance with applicable standards. The
wastes generated by Vision-Ease operations must be managed and disposed of
properly and the Company retains responsibility for those wastes even after
proper disposal. As of March 22, 1996, the Company is involved in a total of
eight
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(8) sites where environmental investigations are occurring and final settlement
has not been reached, of which five (5) relate to the PIP division and three (3)
relate to the Optical Products division. See "Precision Imaged Products --
Environmental" for a discussion of the sites relating to the PIP division.
In addition to the above sites, the Company has continued its site
investigations at its Fort Lauderdale facility. The Company's consultant has
begun testing at the site. Following compilation of all test results, the
Company will submit its recommendations regarding the site to the state
regulatory agency for concurrence. The Company's consultant has indicated that
it is reasonably probable that some type of remediation will be required and has
provided the Company an approximate cost range for that remediation. Based on
the consultant's estimates, and in accordance with generally accepted
accounting principles, the Company has reserved for potential remediation
costs. Because the governmental bodies have not yet identified the full extent
of any remedial actions, it is still impossible at this time to predict the
likely outcome of the Fort Lauderdale matter, as well as the additional eight
sites discussed above, or the Company's exposure if any of these cases are
decided adversely.
It is not currently anticipated that the Company's share of the costs of
environmental remediation activities for any of the sites, including the range
provided by the Company's consultant for the Fort Lauderdale facility, will have
a materially adverse effect on the financial condition of the Company.
Vision-Ease estimates that in 1995 and 1994 it incurred approximately $635,000
and $580,000, respectively, in expenditures (including capital expenditures)
related to efforts to comply with applicable laws and regulations regulating the
discharge of materials into the environment or otherwise relating to the
protection of the environment. In addition, it estimates that it will make
approximately $71,000 in capital expenditures for environmental control
facilities during 1996.
SEASONALITY. The Company's earnings from Optical Products are generally lower
in the first quarter due to the seasonality of eyeglasses, the end product of
the Company's lenses.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES.
Financial information about the Company's foreign and domestic operations and
export sales for the three most recent fiscal years is contained on page 38 of
the 1995 Annual Report, and is incorporated herein by reference.
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ITEM 2. PROPERTIES
The locations of the Company's principal production facilities are as follows:
<TABLE>
<CAPTION>
Approximate Square
Feet of Space
Location Principal Use (in thousands)
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<S> <C> <C>
Owned:
St. Cloud, MN Optical Products 94
Mullheim, Germany Precision Imaged Products 173
Cortland, NY Precision Imaged Products 152
Leased:
St. Paul, MN Precision Imaged Products 106
Ft. Lauderdale, FL Optical Products 65
Brooklyn Center, MN Optical Products 49
</TABLE>
The Company leases approximately 9,500 square feet in Minneapolis, Minnesota for
its corporate administrative offices. The Company leases approximately 6,000
square feet in Brooklyn Park, Minnesota for the administrative offices of
Vision-Ease. The Company's leases in St. Paul and Brooklyn Center expire in
February 1999 and March 1998, respectively, and its lease in Ft. Lauderdale
expires in November 1996. The Company is not renewing the Ft. Lauderdale lease.
The Company's management is evaluating its options for continuing hard resin
plastic lens production currently conducted at the Ft. Lauderdale facility,
including moving the operation to a more appropriately sized and lower cost
facility.
The Company's existing facilities are fully utilized. The Company began
construction of two new production lines at its Cortland facility in 1995.
ITEM 3. LEGAL PROCEEDINGS
With regard to certain environmental matters, See Item 1(c) "Narrative
Description of Business" and Item 7 "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Other than as noted above, there are no material pending or threatened legal,
governmental, administrative or other proceedings to which the Company is a
party or of which any of its property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter
of the fiscal year covered by this Report.
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ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company, their ages, the year first elected or
appointed as an executive officer and the offices held as of March 22, 1996 are
as follows:
<TABLE>
Caption>
Date First
Elected or
Appointed as
an Executive
Name (Age) Officer Title
- ---------- ------------ -----
<S> <C> <C>
Paul B. Burke (40) August, 1985 Chairman of the Board, President
and Chief Executive Officer
John L. Gburek (37) August, 1995 Vice President of Corporate
Development
Michael P. Hawks (43) August, 1985 Vice President of Finance and
Administration, Chief Financial
Officer and Secretary
Terry R. Nygaard (47) May, 1993 Vice President of Taxes
Jeffrey L. Wright (33) January, 1996 Corporate Controller
</TABLE>
There are no family relationships between or among any of the executive officers
of the Company. Executive officers of the Company are elected by the Board of
Directors for one-year terms, commencing with their election at the first
meeting of the Board of Directors immediately following the annual meeting of
stockholders and continuing until the next such meeting of the Board of
Directors.
Except as indicated below, there has been no change in the principal occupations
or employment of the executive officers of the Company during the past five
years.
Mr. Burke is also a director of the Company. Mr. Burke joined the Company as
Associate General Counsel in June, 1983, and became Vice President, Secretary
and General Counsel in August, 1985. In November, 1987, he was appointed Vice
President, Fort Lauderdale Operations of the Company's Vision-Ease Lens division
and in May, 1989, he was appointed President of Vision-Ease Lens. In May, 1991,
Mr. Burke was elected President and Chief Operating Officer of the Company, and
in July, 1991, he became President and Chief Executive Officer. Mr. Burke was
appointed Chairman of the Board in May, 1995.
Mr. Gburek joined the Company in January, 1993 as Vice President/General Manager
of Buckbee-Mears St. Paul. In August, 1995, he was appointed Vice President of
Corporate Development. Prior to joining the Company, Mr. Gburek served as
Director, Manufacturing Operations, LTV Aerospace and Defense Co., a subsidiary
of LTV Corporation.
10
<PAGE>
Mr. Hawks joined the Company in October, 1983 as Assistant Corporate Controller
and became Corporate Controller in August, 1985. In May, 1993, Mr. Hawks became
Treasurer and Secretary of the Company and in August, 1995, he became Vice
President of Finance and Administration, Chief Financial Officer and Secretary.
Mr. Nygaard joined the Company in July, 1984 as Director of Taxes and became
Corporate Controller in May, 1993. Mr. Nygaard was appointed Vice President of
Taxes in January, 1996.
Mr. Wright joined the Company in January, 1996. From February, 1993 to January,
1996, he served in several capacities with Employee Benefit Plans, Inc., most
recently as Vice President and Treasurer. Prior to February, 1993, Mr. Wright
worked in several audit and business advisory positions with Arthur Andersen,
L.L.P.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
"Price Range of Common Stock" on page 41 of the 1995 Annual Report is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
"Historical Financial Summary" on page 22 of the 1995 Annual Report is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
"Management's Discussion and Analysis" on pages 23-26 of the 1995 Annual
Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements and related notes on pages 27-
39 and the Report of its Independent Auditors on page 40 of the 1995
Annual Report are incorporated herein by reference, as is the unaudited
information under the caption "Selected Quarterly Data" on page 42.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
(a) DIRECTORS OF THE REGISTRANT
The information under the caption "Election of Directors" on
pages 2-5 of the 1996 Proxy Statement is incorporated herein by reference.
11
<PAGE>
(b) EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning Executive Officers of the Company is included in
this report under Item 4A, "Executive Officers of the Registrant".
(c) COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The information under the caption "Section 16 Compliance" on page 16 of the
1996 Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the caption "Executive Compensation" on pages
7-9 and "Election of Directors - Information About the Board and Its
Committees" on pages 3-4 of the 1996 Proxy Statement is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the caption "Security Ownership of Certain
Beneficial Owners and Management" on pages 5-6 of the 1996 Proxy Statement is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the caption "Certain Transactions" on pages 15-
16 of the 1996 Proxy Statement is incorporated herein by reference.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS:
The following items are incorporated herein by reference from the
pages indicated in the Registrant's 1995 Annual Report:
Consolidated Financial Statements: Page:
---------------------------------- -----
Consolidated Statements of Earnings for the Years Ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . 27
Consolidated Balance Sheets, December 31, 1995 and 1994. . . . . 28
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . 29
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . 30
Notes to Consolidated Financial Statements . . . . . . . . . . . 31-39
12
<PAGE>
Report of Independent Auditors . . . . . . . . . . . . . . . . . 40
2. FINANCIAL STATEMENT SCHEDULE:
The selected quarterly financial data (unaudited) included under the
caption "Selected Quarterly Data" on page 42 of the 1995 Annual
Report is incorporated herein by reference.
The following supplemental financial data is included herein and
should be read in conjunction with the consolidated financial
statements referenced above:
Consent of Independent Auditors (filed as Exhibit 23.1 to this Form
10-K)
Supplemental Schedule: Page:
---------------------- -----
II - Valuation and Qualifying Accounts 16
Schedules other than the one listed above are omitted because of the
absence of the conditions under which they are required or because the
information required is included in the consolidated financial
statements or the notes thereto.
3. EXHIBITS:
Reference is made to the Exhibit Index hereinafter contained on pages
18-23 of this Form 10-K.
A copy of any of the exhibits listed or referred to herein will be
furnished at a reasonable cost to any person who was a stockholder of
the Company as of March 1, 1996, upon receipt from any such person of
a written request for any such exhibit. Such request should be sent
to Investor Relations Department, BMC Industries, Inc., Two Appletree
Square, Minneapolis, Minnesota 55425.
The following is a list of each management contract or compensatory
plan or arrangement required to be filed as an exhibit to this Form
10-K pursuant to Item 14(c):
a) 1984 Omnibus Stock Program, as amended effective December 19,
1989 (incorporated by reference to Exhibit 10.1 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1989
(File No. 1-8467)).
b) 1995 Management Incentive Bonus Plan Summary (incorporated by
reference to Exhibit 10.3 to the Company's Annual Report on Form
10-K for the year ended December 31, 1994 (File No. 1-8467)).
c) 1996 Management Incentive Bonus Plan Summary (filed herewith as
Exhibit 10.3).
d) Interest Rate Supplement Program (incorporated by reference to
written description thereof on page 10 of the Company's Proxy
Statement dated March 22, 1991 (File No. 1-8467)).
13
<PAGE>
e) Revised Executive Expense Policy (effective as of January 1,
1993) (incorporated by reference to Exhibit 10.7 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991
(File No. 1-8467)).
f) BMC Industries, Inc. Supplemental Executive Retirement Plan
(incorporated by reference to Exhibit 10.10 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1988
(File No. 1-8467)).
g) First and Second Declaration of Amendment, effective March 15,
1991 and June 3, 1991, respectively, to BMC Industries, Inc.
Supplemental Executive Retirement Plan (incorporated by reference
to Exhibit 10.9 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1991 (File No. 1-8467)).
h) Third Declaration of Amendment, effective as of January 1, 1992,
to BMC Industries, Inc. Supplemental Executive Retirement Plan
(incorporated by reference to Exhibit 10.9 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992
(File No. 1-8467)).
i) Fourth Declaration of Amendment, effective as of June 30, 1992,
to BMC Industries, Inc. Supplemental Executive Retirement Plan
(incorporated by reference to Exhibit 10.10 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992
(File No. 1-8467)).
j) BMC Industries, Inc. Profit Sharing Plan 1994 Revision, as
amended (incorporated by reference to Exhibit 10.10 of the
Company's Annual Report on Form 10-K for the year ended December
31, 1994 (File No. 1-8467)).
k) BMC Industries, Inc. Savings Plan 1994 Revision, as amended
(incorporated by reference to Exhibit 10.11 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1994
(File No. 1-8467)).
l) Directors' Deferred Compensation Plan (incorporated by reference
to Exhibit 10.16 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1984 (File No. 1-8467)).
m) Form of Change of Control Agreement entered into between the
Company and Messrs. Burke, Kerr, Hawks and Nygaard (incorporated
by reference to Exhibit 10.31 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1991 (File No. 1-
8467)).
n) Change of Control Agreement Entered into between the Company and
Mr. Gburek (filed herewith as Exhibit 10.32).
o) 1994 Stock Incentive Plan (incorporated by reference to Exhibit
10.12 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993 (File No. 1-8467)).
14
<PAGE>
p) BMC Stock Option Exercise Loan Program, as revised December 14,
1994 (incorporated herein by reference to Exhibit 10.15 of the
Company's Annual Report on Form 10-K for the year ended December
31, 1994 (File No. 1-8467)).
q) BMC Industries, Inc. Benefit Equalization Plan (incorporated by
reference to Exhibit 10.14 to the Company's Annual Report on Form
10-K for the year ended December 31, 1993 (File No. 1-8467)).
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the quarter ended
December 31, 1995.
(c) EXHIBITS
The response to this portion of Item 14 is submitted as a separate section
of this report.
(d) FINANCIAL STATEMENT SCHEDULES
The response to this portion of Item 14 is submitted as a separate section
of this report.
15
<PAGE>
Schedule II
Valuation and Qualifying Accounts
Years Ended December 31
(in thousands)
<TABLE>
<CAPTION>
Additions
Balance Charged to Balance
Beginning Costs and Translation at End of
of Year Expenses Deductions Adjustment Year
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
- -----------------------------------------------------------------------------------------------------------
Allowance for doubtful
accounts $ 1,461 $ 1,206 $ 823 $ 19 $ 1,863
- -----------------------------------------------------------------------------------------------------------
Allowance for merchandise
returns 563 1,580 1,394 $ 24 773
- -----------------------------------------------------------------------------------------------------------
$ 2,024 $ 2,786 $ 2,217 $ 43 $ 2,636
- -----------------------------------------------------------------------------------------------------------
Inventory reserves $ 2,998 $ 1,068 $ 296 $ 45 $ 3,815
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
1994
- -----------------------------------------------------------------------------------------------------------
Allowance for doubtful
accounts $ 1,493 $ 800 $ 877 $ 45 $ 1,461
- -----------------------------------------------------------------------------------------------------------
Allowance for merchandise
returns
627 974 1,068 30 563
- -----------------------------------------------------------------------------------------------------------
$ 2,120 $ 1,774 $ 1,945 $ 75 $ 2,024
- -----------------------------------------------------------------------------------------------------------
Inventory reserves $ 3,238 $ 790 $ 1,131 $ 101 $ 2,998
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
1993
- -----------------------------------------------------------------------------------------------------------
Allowance for doubtful
accounts $ 1,424 $ 788 $ 684 $ (35) $ 1,493
- -----------------------------------------------------------------------------------------------------------
Allowance for merchandise
returns
578 1,018 953 (16) 627
- -----------------------------------------------------------------------------------------------------------
$ 2,002 $ 1,806 $ 1,637 $ (51) $ 2,120
- -----------------------------------------------------------------------------------------------------------
Inventory reserves $ 4,234 $ 916 $ 1,815 $ (97) $ 3,238
- -----------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on
March 29, 1996, on its behalf by the undersigned, thereunto duly authorized.
BMC INDUSTRIES, INC.
By /s/ Michael P. Hawks
-----------------------
Michael P. Hawks
Vice President of Finance and
Administration, Chief Financial
Officer and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below on March 29, 1996, by the following persons on behalf of
the Registrant and in the capacities indicated.
Signature Title
/s/ Paul B. Burke Chairman of the Board, President
- ------------------------------------ and Chief Executive Officer
Paul B. Burke (Principal Executive Officer)
/s/ Michael P. Hawks Vice President of Finance and
- ------------------------------------ Administration, Chief
Michael P. Hawks Financial Officer and Secretary
(Principal Financial Officer)
/s/ Jeffrey L. Wright Corporate Controller (Principal
- ------------------------------------ Accounting Officer)
Jeffrey L. Wright
/s/ Lyle D. Altman Director
- ------------------------------------
Lyle D. Altman
/s/ John W. Castro Director
- ------------------------------------
John W. Castro
/s/ Joe E. Davis Director
- ------------------------------------
Joe E. Davis
/s/ Harry A. Hammerly Director
- ------------------------------------
Harry A. Hammerly
/s/ S. Walter Richey Director
- ------------------------------------
S. Walter Richey
/s/ Richard A. Swalin Director
- ------------------------------------
Richard A. Swalin
<PAGE>
BMC Industries, Inc.
Exhibit Index to Annual Report on Form 10-K
For the Year Ended December 31, 1995
Exhibit No. Exhibit Method of Filing
- ----------- ------- ----------------
3.1 Second Restated Incorporated by reference
Articles of to Exhibit 3.1 to the
Incorporation of the Company's Annual Report
Company, as amended. on Form 10-K for the year
ended December 31, 1994
(File No. 1-8467).
3.2 Amendment to the Incorporated by reference
Second Restated to Exhibit 3.2 to the
Articles of Company's Annual Report
Incorporation, on Form 10-K for the year
dated May 8, 1995. ended December 31, 1994
(File No. 1-8467).
3.3 Amendment to the Incorporated by reference
Second Restated to Exhibit 3.1 to the
Articles of Company's quarterly
Incorporation, dated report on Form 10-Q for
October 30, 1995. the quarter ended
September 30, 1995 (File
No. 1-8467).
3.4 Restated Bylaws of Incorporated by reference
the Company, as to Exhibit 3.4 to the
amended. Company's Annual Report
on Form 10-K for the year
ended December 31, 1994
(File No. 1-8467).
4.1 Specimen Form of the Incorporated by reference
Company's Common to Exhibit 4.3 to the
Stock Certificate. Company's Registration
Statement on Form S-2
(File No. 2-83809).
10.1 1984 Omnibus Stock Incorporated by reference
Program, as amended to Exhibit 10.1 to the
effective December Company's Annual Report
19, 1989. on Form 10-K for the year
ended December 31, 1989
(File No. 1-8467).
10.2 1995 Management Incorporated by reference
Incentive Bonus Plan to Exhibit 10.3 to the
Summary. Company's Annual Report
on Form 10-K for the year
ended December 31, 1994
(File No. 1-8467).
10.3 1996 Management Filed electronically.
Incentive Bonus Plan
Summary.
10.4 Interest Rate Incorporated by reference
Supplement Program. to written description
thereof on page 10 of the
Company's Proxy Statement
dated March 22, 1991
(File No. 1-8467).
18
<PAGE>
10.5 Revised Executive Incorporated by reference
Expense Policy to Exhibit 10.7 to the
(effective as of Company's Annual Report
January 1, 1993). on Form 10-K for the year
ended December 31, 1991
(File No. 1-8467).
10.6 BMC Industries, Inc. Incorporated by reference
Supplemental to Exhibit 10.10 to the
Executive Retirement Company's Annual Report
Plan. on Form 10-K for the year
ended December 31, 1988
(File No. 1-8467).
10.7 First and Second Incorporated by reference
Declaration of to Exhibit 10.9 to the
Amendment, effective Company's Annual Report
March 15, 1991 and on Form 10-K for the year
June 3, 1991, ended December 31, 1991
respectively, to BMC (File No. 1-8467).
Industries, Inc.
Supplemental
Executive Retirement
Plan.
10.8 Third Declaration of Incorporated by reference
Amendment, effective to Exhibit 10.9 to the
as of January 1, Company's Annual Report
1992, to BMC on Form 10-K for the year
Industries, Inc. ended December 31, 1992
Supplemental (File No. 1-8467).
Executive Retirement
Plan.
10.9 Fourth Declaration Incorporated by reference
of Amendment, to Exhibit 10.10 to the
effective as of June Company's Annual Report
30, 1992, to BMC on Form 10-K for the year
Industries, Inc. ended December 31, 1992
Supplemental (File No. 1-8467).
Executive Retirement
Plan.
10.10 BMC Industries, Inc. Incorporated by reference
Profit Sharing Plan to Exhibit 10.10 to the
1994 Revision, as Company's Annual Report
amended. on Form 10-K for the year
ended December 31, 1994
(File No. 1-8467).
10.11 BMC Industries, Inc. Incorporated by reference to
Savings Plan 1994 Exhibit 10.11 to the Company's
Revision, as amended. Annual Report on Form 10-K for
the year ended December 31, 1994
(File No. 1-8467).
10.12 Directors' Deferred Incorporated by reference
Compensation Plan. to Exhibit 10.16 to the
Company's Annual Report
on Form 10-K for the year
ended December 31, 1984
(File No. 1-8467).
10.13 1994 Stock Incentive Incorporated by reference to
Plan. Exhibit 10.12 to the Company's
Annual Report on Form 10-K for
the year ended December 31, 1993
(File No. 1-8467).
19
<PAGE>
10.14 BMC Stock Option Incorporated by reference
Exercise Loan to Exhibit 10.15 to the
Program, as revised Company's Annual Report
December 14, 1994. on Form 10-K for the year
ended December 31, 1994
(File No. 1-8467).
10.15 BMC Industries, Inc. Incorporated by reference
Benefit Equalization to Exhibit 10.14 to the
Plan. Company's Annual Report
on Form 10-K for the year
ended December 31, 1993
(File No. 1-8467).
10.16 Lease Agreement, Incorporated by reference
dated November 20, to Exhibit 10.9 to the
1978, between Company's Registration
Control Data Statement on Form S-2
Corporation and the (File No. 2-79667).
Company.
10.17 Amendment to Lease Incorporated by reference
Agreement, dated to Exhibit 10.24 to the
December 27, 1983, Company's Annual Report
between Control Data on Form 10-K for the year
Corporation and the ended December 31, 1983
Company. (File No. 1-8467).
10.18 Amendment to Lease Incorporated by reference
Agreement, dated to Exhibit 10.15 to the
April 9, 1986, Company's Annual Report
between Control Data on Form 10-K for the year
Corporation and the ended December 31, 1987
Company. (File No. 1-8467).
10.19 Amendment to Lease Incorporated by reference
Agreement, dated to Exhibit 10.14 to the
April 12, 1989, Company's Annual Report
between GMT on Form 10-K for the year
Corporation as ended December 31, 1989
successor in (File No. 1-8467).
interest to Control
Data Corporation)
and the Company.
10.20 Amendment to Lease Incorporated by reference
Agreement, dated to Exhibit 10.15 to the
March 19, 1990, Company's Annual Report
between GMT on Form 10-K for the year
Corporation and the ended December 31, 1989
Company. (File No. 1-8467).
10.21 Amendment to Lease Incorporated by reference
Agreement, dated May to Exhibit 10.20 to the
17, 1993, between Company's Annual Report
GMT Corporation and on Form 10-K for the year
the Company. ended December 31, 1993
(File No. 1-8467).
10.22 Amendment of Lease, Incorporated by reference
dated April 6, 1994 to Exhibit 10.23 to the
by and between GMT Company's Annual Report
Corporation and the on Form 10-K for the year
Company. ended December 31, 1994
(File No. 1-8467).
20
<PAGE>
10.23 Waiver of Condition Incorporated by reference
Precedent, dated to Exhibit 10.24 to the
July 29, 1994, by Company's Annual Report
and between GMT on Form 10-K for the year
Corporation and the ended December 31, 1994
Company. (File No. 1-8467).
10.24 Lease Agreement, Incorporated by reference
dated June 25, 1987, to Exhibit 10.17 to the
between ATS II Company's Annual Report
Associates Limited on Form 10-K for the year
Partnership and the ended December 31, 1987
Company. (File No. 1-8467).
10.25 Amendment to Lease Incorporated by reference
Agreement, dated to Exhibit 10.19 to the
December 4, 1992, by Company's Annual Report
and between ATS II on Form 10-K for the year
Associates Limited ended December 31, 1992
Partnership and the (File No. 1-8467).
Company.
10.26 Amendment to Lease, Incorporated by reference
dated December 7, to Exhibit 10.27 to the
1994, by and between Company's Annual Report
ATS II Associates on Form 10-K for the year
Limited Partnership ended December 31, 1994
and the Company. (File No. 1-8467).
10.27 Amendment to Lease, Incorporated by reference
dated February 16, to Exhibit 10.28 to the
1995, by and between Company's Annual Report
ATS II Associates on Form 10-K for the year
Limited Partnership ended December 31, 1994
and the Company. (File No. 1-8467).
10.28 Lease Agreement, Incorporated by reference
dated December 8, to Exhibit 10.32 to the
1983, between ARI Company's Annual Report
Limited Partnership on Form 10-K for the year
and the Company. ended December 31, 1983
(File No. 1-8467).
10.29 Lease, dated January Incorporated by reference
26, 1994, by and to Exhibit 10.24 to the
between 7100 Company's Annual Report
Northland Circle and on Form 10-K for the year
the Company. ended December 31, 1993
(File No. 1-8467).
10.30 Second Amendment to Incorporated by reference
Lease, dated October to Exhibit 10.31 to the
14, 1994, by and Company's Annual Report
between Lutheran on Form 10-K for the year
Brotherhood and the ended December 31, 1994
Company. (File No. 1-8467).
10.31 Form of Change of Incorporated by reference
Control Agreement to Exhibit 10.31 to the
entered into between Company's Annual Report
the Company and on Form 10-K for the year
Messrs. Burke, Kerr ended December 31, 1991
and Hawks and (File No. 1-8467).
Nygaard.
21
<PAGE>
10.32 Change of Control Filed electronically.
Agreement entered
into between the
Company and Mr.
Gburek.
10.33 Credit Agreement, Incorporated by reference
dated September 30, to Exhibit 10.33 to the
1994, by and between Company's Annual Report
The First National on Form 10-K for the year
Bank of Chicago and ended December 31, 1994
the Company. (File No. 1-8467).
10.34 Credit Agreement, Incorporated by reference
dated September 30, to Exhibit 10.34 to the
1994, by and between Company's Annual Report
Norwest Bank on Form 10-K for the year
Minnesota, National ended December 31, 1994
Association and the (File No. 1-8467).
Company.
10.35 Credit Agreement, Incorporated by reference
dated September 30, to Exhibit 10.35 to the
1994, by and between Company's Annual Report
NBD Bank, N.A. and on Form 10-K for the year
the Company. ended December 31, 1994
(File No. 1-8467).
10.36 Product Incorporated by reference
Manufacturing and to Exhibit 10.36 to the
Sales Agreement, Company's Annual Report
dated October 17, on Form 10-K for the year
1994, between ended December 31, 1994
Polycore Optical, (File No. 1-8467).
PTE. Ltd. and
Vision-Ease, a unit
of the Company,
without exhibits.
13.1 Portions of the Filed electronically.
Company's 1995
Annual Report to
Stockholders
incorporated herein
by reference in this
Annual Report on
Form 10-K.
21.1 Subsidiaries of the Filed electronically.
Registrant.
22
<PAGE>
23.1 Consent of Ernst & Filed electronically.
Young LLP,
Independent
Auditors.
27.1 Financial Data Filed electronically.
Schedule
99.1 Press Release, dated Filed electronically.
November 20, 1995.
99.2 Press Release, dated Filed electronically.
December 8, 1995.
99.3 Press Release, dated Filed electronically.
January 25, 1996.
99.4 Press Release, dated Filed electronically.
February 15, 1996.
99.5 Press Release, dated Filed electronically.
March 8, 1996
23
<PAGE>
BMC INDUSTRIES, INC.
1996 MANAGEMENT INCENTIVE PLAN
OBJECTIVES
- ----------
- To focus management's attention on division's annual profit
performance and balance sheet management.
- To recognize the extraordinary contributions of individual
managers, in years when earnings exceed "Par" performance.
GLOSSARY OF TERMS
- -----------------
"Maximum" Performance - That level of consolidated net earnings justifying
a "maximum" incentive award.
"Par" Performance - The level of consolidated net earnings, as
approved by the Board, justifying a "target
incentive award".
"Cut-in" Performance - The minimum level of consolidated net earnings,
defined as 95% of "Par", justifying an incentive
award.
"Target" Incentive - The percent (%) of base pay when a 100% incentive
award is earned.
"Minimum" Incentive - The percent (%) of base pay when a 50% incentive
award is earned.
"Maximum" Incentive - The percent (%) of base pay when a 150% incentive
award is earned.
"BMC Earnings Threshold" - The minimum level of consolidated net earnings
before a division participant in the Plan will be
eligible for an incentive award.
"Division DCE Threshold" - The "Cut-in" performance standard, expressed as
DCE, below which incentive will not be awarded.
<PAGE>
1996 MANAGEMENT INCENTIVE PLAN SUMMARY
--------------------------------------
PARTICIPANTS: Elected officers and key managers.
PERFORMANCE STANDARDS:
A. 1996 Corporate Performance Standards -
"Maximum" performance is 108.3% of the "Par" consolidated net earnings.
"Par" performance is the consolidated net earnings number, as approved
by the Board.
"Cut-in" performance is 95% of the "Par" consolidated net earnings.
B. 1996 Division Performance Standards -
The "BMC Earnings Threshold" is 75% of the 1996 Corporate "Cut-in"
performance standard.
The "DCE Threshold" is the "Cut-in" defined at the DCE line.
"Par" performance is the BUDGETED operating earnings (budgeted DCE).
AWARD LEVELS: "Target" incentive awards range from
10% to 57.25% of base salary, depending
on level of responsibility.
ORGANIZATION WEIGHTING: There is no organization weighting, i.e.,
Corporate participants earn awards based on
Corporate performance and division
participants earn awards based on division
performance.
<PAGE>
INCENTIVE OPPORTUNITY: Individual incentive awards will be prorated
and calculated based on the following, once
the applicable "Thresholds" have been
exceeded.
- 150% of "Target" incentive is earned
when reported earnings equal or exceed
"Maximum".
- 100% of "Target" incentive is earned
when reported earnings equal "Par".
- 50% of "Target" incentive is earned
when reported earnings equal "Cut-in".
- No incentive will be paid when
reported earnings fall below "Cut-in".
- Division/Corporate staff
"Discretionary Incentive Pools" will
be generated when earnings performance
exceeds "Par". The "Pool" will be 10%
of the accrued incentive dollars at
"Par". Discretionary awards will be
in addition to the incentive awards by
formula. However, such awards cannot
exceed the "Pool" and must be approved
by the CEO.
PAYMENT FORM: Cash.
<PAGE>
<PAGE>
March 15, 1996
Mr. John L. Gburek
3787 Blackhawk Ridge Place
Eagan, MN 55122
Dear John:
BMC Industries, Inc. considers the establishment and maintenance of a sound
and vital management to be essential to protecting and enhancing the best
interests of the Company and its stockholders. In this connection, the Company
recognizes that, as is the case with many publicly held corporations, the
possibility of a Change in Control may arise and that such possibility, and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the Company
and its stockholders.
Accordingly, the Board has determined that appropriate steps should be
taken to minimize the risk that Company management will depart prior to a Change
in Control, thereby leaving the Company without adequate management personnel
during such a critical period, and to reinforce and encourage the continued
attention and dedication of members of the Company's management to their
assigned duties without distraction in circumstances arising from the
possibility of a Change in Control. In particular, the Board believes it
important, should BMC Industries, Inc., or its stockholders receive a proposal
for transfer of control, that you be able to continue your management
responsibilities and assess and advise the Board whether such proposal would be
in the best interests of BMC Industries, Inc. and its stockholders and to take
other action regarding such proposal as the Board might determine to be
appropriate, without being influenced by the uncertainties of your own personal
situation.
The Board recognizes that continuance of your position with the Company
involves a substantial commitment to the Company in terms of your personal life
and professional career and the possibility of foregoing present and future
career opportunities, for which the Company receives substantial benefits.
Therefore, to induce you to remain in the employ of the Company, this Agreement,
which has been approved by the Board, sets forth the benefits which the Company
agrees will be provided to you in the event your employment with the Company is
terminated in connection with a Change in Control under the circumstances
described below.
1. DEFINITIONS. The following terms will have the meaning set forth
below unless the context clearly requires otherwise. Terms defined elsewhere in
this Agreement will have the same meaning throughout this Agreement.
<PAGE>
(a) "AGREEMENT" means this letter agreement as amended, extended or
renewed from time to time in accordance with its terms.
(b) "BOARD" means the board of directors of the Parent Corporation duly
qualified and acting at the time in question.
(c) "CAUSE" means: (i) the willful and continued failure by you to
perform substantially your duties with the Company after a demand for
substantial performance is delivered to you by the President and Chief Executive
Officer which specifically identifies the manner in which such person believes
that you have not substantially performed your duties; or (ii) your conviction
(including a plea of nolo contendere) of willfully engaging in illegal conduct
constituting a felony or gross misdemeanor under federal or state law which is
materially and demonstrably injurious to the Company. For purposes of this
definition, no act, or failure to act, on your part will be considered "willful"
unless done, or omitted to be done, by you in bad faith and without reasonable
belief that your action or omission was in, or not opposed to, the best
interests of the Company. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board (or a committee
thereof) or based upon the advice of counsel for the Company will be
conclusively presumed to be done, or omitted to be done, by you in good faith
and in the best interests of the Company. It is also expressly understood that
your attention to matters not directly related to the business of the Company
will not provide a basis for termination for Cause so long as the Board did not
expressly disapprove in writing of your engagement in such activities either
before or within a reasonable period of time after the Board knew or could
reasonably have known that you engaged in those activities. Notwithstanding the
foregoing, you will not be deemed to have been terminated for Cause unless and
until there has been delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the entire membership of the
Board at a meeting of the Board called and held for the purpose (after
reasonable notice to you and an opportunity for you, together with your counsel,
to be heard before the Board), finding that in the good faith opinion of the
Board you were guilty of the conduct set forth above in clauses (i) or (ii) of
this definition and specifying the particulars thereof in detail.
(d) "CHANGE IN CONTROL" means any of the following: (i) the sale, lease,
exchange, or other transfer of all or substantially all of the assets of the
Parent Corporation, in one transaction or in a series of related transactions,
to any Person; (ii) the approval by the stockholders of the Parent Corporation
of any plan or proposal for the liquidation or dissolution of the Parent
Corporation; (iii) any Person is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of fifty percent
(50%) or more of the combined voting power of the Parent Corporation's
outstanding securities ordinarily having the right to vote at elections of
directors; (iv) individuals who constitute the Board on the date of this
Agreement (the "Incumbent Board") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to the
date of this Agreement whose election, or nomination for election, by the Parent
Corporation's stockholders, was approved by a vote of at least a majority of the
directors comprising the Incumbent Board (either by a specific vote or by
approval of the proxy statement of the Parent Corporation in which such person
is named as a nominee for director, without objection to such nomination) will,
for purposes of this clause (iv), be deemed to be a member of the Incumbent
Board; or (v) a change in control of a nature that is determined by independent
legal counsel to the Company to be required to be reported (assuming such event
has not been "previously reported") in response to Item 1(a) of the Current
Report on Form 8-K, as in effect on the date hereof, pursuant to section 13 or
15(d) of the Exchange Act, whether or not the Parent Corporation is then subject
to such reporting requirement.
(e) "CODE" means the Internal Revenue Code of 1986, as amended.
(f) "COMPANY" means the Parent Corporation, any Subsidiary and any
Successor.
<PAGE>
(g) "CONFIDENTIAL INFORMATION" means information which is proprietary to
the Company or proprietary to others and entrusted to the Company, whether or
not trade secrets. It includes information relating to business plans and to
business as conducted or anticipated to be conducted, and to past or current or
anticipated products or services. It also includes, without limitation,
information concerning research, development, purchasing, accounting, marketing
and selling. All information which you have a reasonable basis to consider
confidential is Confidential Information, whether or not originated by you and
without regard to the manner in which you obtain access to that and any other
proprietary information.
(h) "DATE OF TERMINATION" following a Change in Control (or prior to a
Change in Control if your termination was either a condition of the Change in
Control or was at the request or insistence of any Person (other than the
Company) related to the Change in Control) means: (i) if your employment is to
be terminated by the Company for Cause or by you for Good Reason, the date
specified in the Notice of Termination; (ii) if your employment is to be
terminated by the Company for any reason other than Cause, Disability, death or
Retirement, the date specified in the Notice of Termination, which in no event
may be a date earlier than sixty (60) calendar days after the date on which a
Notice of Termination is given, unless an earlier date has been expressly agreed
to by you in writing either in advance of, or after, receiving such Notice of
Termination; or (iii) if your employment is terminated by reason of death or
Retirement, the date of death or Retirement, respectively. In the case of
termination by the Company of your employment for Cause, if you have not
previously expressly agreed in writing to the termination, then within thirty
(30) calendar days after receipt by you of the Notice of Termination with
respect thereto, you may notify the Company that a dispute exists concerning the
termination, in which event the Date of Termination will be the date set either
by mutual written agreement of the parties or by the arbitrators in a proceeding
as provided in Section 11 of this Agreement. During the period beginning on the
date you or the Company, as the case by be, receive Notice of Termination and
ending on the Date of Termination, the Company will continue to pay you your
full compensation and benefits and cause your continued participation in all
Plans, in effect immediately prior to the time the Notice of Termination is
given and until the dispute is resolved in accordance with Section 11 of this
Agreement.
(i) "DISABILITY" means a disability as defined in the Company's long-term
disability plan as in effect immediately prior to the Change in Control or, in
the absence of such a plan, means permanent and total disability as defined in
section 22(e)(3) of the Code.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(k) "GOOD REASON" means:
(i) an adverse change in your status or position(s) as an executive
of the Company as in effect immediately prior to the Change in Control,
including, without limitation, any adverse change in you status or
position(s) as a result of a material diminution in your duties or
responsibilities (other than, if applicable, any such change directly
attributable to the fact that the Company is no longer publicly owned) or
the assignment to you of any duties or responsibilities which, in your
reasonable judgement, are inconsistent with such status of position(s), or
any removal of you from or any failure to reappoint or reelect you to such
position(s) (except in connection with the termination of your employment
for Cause, Disability or Retirement or as a result of your death or by you
other than for Good Reason);
(ii) a reduction by the Company in your rate of total compensation
(including, without limitation, salary and bonuses), or an adverse change
in the form of timing of the payment thereof, as in effect immediately
prior to the Change in Control;
<PAGE>
(iii) the failure by the Company to continue in effect any Plan in
which you (and/or your family or dependents) are participating at any time
during the ninety (90)-calendar-day period immediately preceding the Change
in Control (or Plans providing you (and/or your family or dependents) with
at least substantially similar benefits) other than as a result of the
normal expiration of any such Plan in accordance with its terms as in
effect immediately prior to the ninety (90)-calendar-day period immediately
preceding the time of the Change in Control, or the taking of any action,
or the failure to act, by the Company which would adversely affect your
(and/or your family's or dependent's) continued participation in any of
such Plans on at least as favorable a basis to you (and/or your family or
dependents) as is the case on the date of the Change in Control or which
would materially reduce your (and/or your family's or dependent's) benefits
in the future under any of such Plans or deprive you (and/or your family or
dependents) of any material benefit enjoyed by you (and/or your family or
dependents) at the time of the Change in Control;
(iv) the Company's requiring you to be based anywhere other than where
your office is located immediately prior to the Change in Control, except
for required travel on the Company's business, and then only to the extent
substantially consistent with the business travel obligations which you
undertook on behalf of the Company during the ninety (90)-calendar-day
period immediately preceding the Change in Control (without regard to
travel related to or in anticipation of the Change in Control);
(v) the failure by the Company to obtain from any Successor the
assent to this Agreement contemplated by Section 5 of this Agreement;
(vi) any purported termination by the Company of your employment which
is not properly effected pursuant to a Notice of Termination and pursuant
to any other requirements of this Agreement, and for purposes of this
Agreement, no such purported termination will be effective; or
(vii) any refusal by the Company to continue to allow you to
attend to matters or engage in activities not directly related to the
business of the Company which, at any time prior to the Change in Control,
you were not expressly prohibited in writing by the Board from attending to
or engaging in.
Notwithstanding anything in the foregoing to the contrary, your termination
of employment with the Company for any reason other than death, Disability or
Retirement within the thirty (30) day period beginning on the one hundred eighty
first (181st) calendar day following a Change in Control and ending on the two
hundred tenth (210th) calendar day following a Change in Control will be
conclusively deemed to be for Good Reason.
(l) "MONTHLY BASE COMPENSATION" means your monthly base cash salary from
the Company attributable to services rendered as an employee of the Company at
the rate in effect immediately prior to the Change in Control, determined
without regard to the amount of contributions made by the Company with respect
to you under any qualified cash or deferred arrangement or cafeteria plan that
is not then includable in your income by operation of section 402(a)(8) or
section 125 of the Code and without regard to amounts deferred, whether
voluntarily or involuntarily and whether vested or nonvested, pursuant to any
Plan.
(m) "NOTICE OF TERMINATION" means a written notice which indicates the
specific termination provision in this Agreement pursuant to which the notice is
given. Any purported termination by the Company or by you following a Change in
Control (or prior to a Change in
<PAGE>
Control if your termination was either a condition of the Change in Control
or was at the request or insistence of any Person (other than the Company)
related to the Change in Control) must be communicated by written Notice of
Termination.
(n) "PARENT CORPORATION" means BMC Industries, Inc. and any Successor.
(o) "PERSON" means and includes any individual, corporation, partnership,
group, association or other "person," as such term is used in section 14(d) of
the Exchange Act, other than the Parent Corporation, a wholly-owned subsidiary
of the Parent Corporation or any employee benefit plan(s) sponsored by the
Parent Corporation or a wholly-owned subsidiary of the Parent Corporation.
(p) "PLAN" means any compensation plan (such as a stock option, restricted
stock plan or other equity-based plan), or any employee benefit plan (such as a
thrift, pension, profit sharing, medical, dental, disability, accident, life
insurance, relocation, salary continuation, expense reimbursements, vacation,
fringe benefits, office and support staff plan or policy) or any other plan,
program, policy or agreement of the Company intended to benefit employees
(and/or their families or dependents) generally, management employees (and/or
their families or dependents) as a group or you (and/or your family or
dependents) in particular.
(q) "RETIREMENT" means termination of your employment with the Company on
or after the day on which you attain the age of sixty-five (65).
(r) "SUBSIDIARY" means any corporation at least a majority of whose
securities having ordinary voting power for the election of directors is at the
time owned by the Company and/or one (1) or more Subsidiaries or any operating
division of the Company.
(s) "SUCCESSOR" means any Person that succeeds to, or has the practical
ability to control (either immediately or with the passage of time), the Parent
Corporation's business directly, by merger, consolidation or other form of
business combination, or indirectly, by purchase of the Parent Corporation's
voting securities, all or substantially all of its assets or otherwise.
2. BENEFITS UPON A CHANGE IN CONTROL TERMINATION. If your employment
with the Company is terminated for any reason other than death, Cause,
Disability or Retirement, or if you terminate your employment with the Company
for Good Reason either: (a) within the two hundred ten (210) calendar-day-
period immediately following a Change in Control; or (b) prior to a Change in
Control if your termination was either a condition of the Change in Control or
was at the request or insistence of a Person (other than the Company) related to
the Change in Control, then:
(i) PERIODIC CASH PAYMENTS. On or before the fifth calendar day of
each of the twelve (12) calendar months following the month that includes
your Date of Termination, the Company will make a cash payment to you in an
amount equal to your Monthly Base Compensation. If you die or attain age
sixty-five (65) before the end of this twelve (12) month period, such
payments will end as of and including the month during which you die or
attain age sixty-five (65). If you obtain employment at any time during
such twelve (12) month period, any "base salary" that you receive during
any given month within such period as a result of such employment will be
offset against the Company's corresponding monthly payment obligation under
this clause (i). You have no obligation, however, to mitigate damages by
seeking or accepting alternative employment during such twelve (12) month
period. For purposes of applying the foregoing, the term "base salary" is
defined as cash compensation paid at intervals no less frequent than
monthly which is not incentive based and is not paid in lieu of benefits.
<PAGE>
(ii) LIMITATION ON PAYMENTS AND BENEFITS. Notwithstanding anything in
this Agreement to the contrary, if any of the payments to be made in
connection with this Agreement, together with any other payments or
benefits which you have the right to receive from the Company or any
corporation which is a member of an "affiliated group" (as defined in
section 1504(a) of the Code without regard to section 1504(b) of the Code)
of which the Company is a member, constitute an "excess parachute payment"
(as defined in section 280G(b) of the Code), the payments to be made in
connection with this Agreement shall be reduced to the extent necessary to
prevent any portion of such payments or benefits from becoming subject to
the excise tax imposed under section 4999 of the Code; provided, that such
reduction shall be made only if the aggregate amount of the payments after
such reduction exceeds the difference between (A) the amount of such
payments absent such reduction minus (B) the aggregate amount of the excise
tax imposed under section 4999 of the Code attributable to any such excess
parachute payments arising in connection with such Change in Control. The
determination as to whether any such decrease in the payments to be made in
connection with this Agreement is necessary must be made in good faith by
legal counsel or a certified public accountant selected by you and
reasonably acceptable to the Company, and such determination will be
conclusive and binding upon you and the Company. In the event that a
reduction is necessary, you will have the right to designate the particular
payments or benefits that are to be reduced or eliminated so that no
portion of the payments or benefits to be made or provided to you in
connection with this Agreement will be excess parachute payments subject to
the excise tax under Code section 4999. The Company will pay or reimburse
you on demand for the reasonable fees, costs and expenses of the counsel or
accountant selected to make the determinations under this clause (ii).
For purposes of this Section 2, your employment with the Company will be deemed
to have been terminated on the date on which the Company or you, as the case may
be, receives Notice of Termination notwithstanding that your Date of Termination
occurs following the expiration of the two hundred ten (210) calendar-day-period
referenced in clause (a).
3. INDEMNIFICATION. Following a Change in Control, the Company will
indemnify and advance expenses to you to the full extent permitted by law and
the Company's articles of incorporation and bylaws for damages, costs and
expenses (including, without limitation, judgements, fines, penalties,
settlements and reasonable fees and expenses of your counsel) incurred in
connection with all matters, events and transactions relating to your service to
or status with the Company and any other corporation, employee benefit plan or
other entity with whom you served at the request of the Company.
4. CONFIDENTIALITY. You will not use, other than in connection with your
employment with the Company, or disclose any Confidential Information to any
person not employed by the Company or not authorized by the Company to receive
such Confidential Information, without the prior written consent of the Company;
and you will use reasonable and prudent care to safeguard and protect and
prevent the unauthorized disclosure of Confidential Information. Nothing in
this Agreement will prevent you from using, disclosing or authorizing the
disclosure of any Confidential Information: (a) which is or hereafter becomes
part of the public domain or otherwise becomes generally available to the public
through no fault of yours; (b) to the extent and upon the terms and conditions
that the Company may have previously made the Confidential Information available
to certain persons; or (c) to the extent that you are required to disclose such
Confidential Information by law or judicial or administrative process.
<PAGE>
5. SUCCESSORS. The Company will seek to have any Successor, by agreement
in form and substance satisfactory to you, assent to the fulfillment by the
Company of the Company's obligations under this Agreement. Failure of the
Company to obtain such assent at least three (3) business days prior to the time
a Person becomes a Successor (or where the Company does not have at least three
(3) business days' advance notice that a Person may become a Successor, within
one (1) business day after having notice that such Person may become or has
become a Successor) will constitute Good Reason for termination by you of your
employment.
6. FEES AND EXPENSES. The Company, upon demand, will pay or reimburse
you for all reasonable legal fees, court costs, experts' fees and related costs
and expenses incurred by you in connection with any actual, threatened or
contemplated litigation or legal, administrative, arbitration or other
proceeding relating to this Agreement to which you are or reasonably expect to
become a party, whether or not initiated by you, including, without limitation:
(a) all such fees and expenses, if any, incurred in contesting or disputing any
such termination; or (b) your seeking to obtain or enforce any right or benefit
provided by this Agreement; provided, however, you will be required to repay
(without interest) any such amounts to the Company to the extent that a court
issues a final and non-appealable order setting forth the determination that the
position taken by you was frivolous or advanced by you in bad faith.
7. BINDING AGREEMENT. This Agreement inures to the benefit of, and is
enforceable by, you, your personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
die after you become entitled to, but before you receive, any amounts payable to
you under this Agreement, all such amounts, unless otherwise provided in this
Agreement, will be paid in accordance with the terms of this Agreement to your
devisee, legatee or other designee or, it there be no such designee, to your
estate.
8. NO MITIGATION. Except as expressly provided in clause (ii) of Section
2 of this Agreement, you will not be required to mitigate the amount of any
payments the Company becomes obligated to make to you in connection with this
Agreement by seeking other employment or otherwise and the payments to be made
to you in connection with this Agreement may not be reduced, offset or subject
to recovery by the Company by any payments or benefits you may receive from
other employment or otherwise.
9. NO SETOFF. Except as provided in Section 10 of this Agreement, the
Company will have no right to setoff payments owed to you under this Agreement
against amounts owed or claimed to be owed by you to the Company under this
Agreement or otherwise.
10. TAXES. All payments to be made to you in connection with this
Agreement will be subject to required withholding of federal, state and local
income, excise and employment-related taxes which withholding shall be
consistent with the determination described in clause (iii) of Section 2 of this
Agreement.
11. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in, or required under, this Agreement must be in
writing and will be deemed to have been duly given when personally delivered or
when mailed by United States registered or certified mail, return receipt
requested, postage prepaid and addressed to each party's respective address set
forth on the first page of this Agreement (provided that all notices to the
Company must be directed to the attention of the President and Chief Executive
Officer), or to such other address as either party may have furnished to the
other in writing in accordance with these provisions, except that notice of
change of address will be effective only upon receipt.
<PAGE>
12. DISPUTES. Any dispute, controversy or claim for damages arising under
or in connection with the Agreement shall be settled exclusively by arbitration
in Minneapolis, Minnesota by three (3) arbitrators in accordance with the rules
of the American Arbitration Association then in effect. Judgement may by
entered on the arbitrators' award in any court having jurisdiction. The Company
will be entitled to seek an injunction or restraining order in a court of
competent jurisdiction (within or without the State of Minnesota) to enforce the
provisions of Section 4 of this Agreement.
13. JURISDICTION. Except as specifically provided otherwise in the
Agreement, the parties agree that any action or proceeding arising under or in
connection with this Agreement must be brought in a court of competent
jurisdiction in the State of Minnesota, and hereby consent to the exclusive
jurisdiction of said courts for this purpose and agree not to assert that such
courts are an inconvenient forum.
14. RELATED AGREEMENTS. To the extent that any provision of any other
Plan or agreement between the Company and you limits, qualifies or is
inconsistent with any provision of this Agreement, then for purposes of this
Agreement, while such other Plan or agreement remains in force, the provision of
this Agreement will control and such provision of such other Plan or agreement
will be deemed to have been superseded, and to be of no force or effect, as if
such other agreement had been formally amended to the extent necessary to
accomplish such purpose. Nothing in this Agreement prevents or limits your
continuing or future participation in any Plan provided by the Company and for
which you may qualify, and nothing in this Agreement limits or otherwise affects
the rights you may have under any Plans or other agreements with the Company.
Amounts which are vested benefits or which you are otherwise entitled to receive
under any Plan or other agreement with the Company at or subsequent to the Date
of Termination will be payable in accordance with such Plan or other agreement.
15. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement is
intended to provide you with any right to continue in the employ of the Company
for any period of specific duration or interfere with or otherwise restrict in
any way your rights or the rights of the Company, which rights are hereby
expressly reserved by each, to terminate your employment at any time for any
reason or no reason whatsoever, with or without cause.
16. CHANGE OF SUBSIDIARY STATUS. In the event that, prior to a Change in
Control: (a) a Subsidiary is sold, merged, transferred or in any other manner
or for any other reason ceases to be a Subsidiary; (b) your primary employment
duties are with the Subsidiary at the time of the occurrence of such event; and
(c) you do not, in conjunction therewith, transfer employment directly to the
Company or another Subsidiary, then this Agreement will become null and void.
17. SURVIVAL. The respective obligations of, and benefits afforded to,
the Company and you which by their express terms or clear intent survive
termination of you employment with the Company or termination of this Agreement,
as the case may be, including, without limitation, the provisions of Sections 2,
3, 4, 5, 6, 9, 10, 11 and 12 of this Agreement, will survive termination of your
employment with the Company or termination of this Agreement, as the case may
be, and will remain in full force and effect according to their terms.
18. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such modification, waiver or discharge is agreed to in a
writing signed by you and the President and Chief Executive Officer. No waiver
by any party to this Agreement at any time
<PAGE>
of any breach by another party to this Agreement of, or of compliance with, any
condition or provision of this Agreement to be performed by such party will be
deemed a waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter to this
Agreement have been made by any party which are not expressly set forth in this
Agreement. This Agreement and the legal relations among the parties as to all
matters, including, without limitation, matters of validity, interpretation,
construction, performance and remedies, will be governed by and construed
exclusively in accordance with the internal laws of the State of Minnesota
(without regard to the conflict of laws provisions of the State of Minnesota or
of any other jurisdiction), except to the extent that the provisions of the
corporate law of Minnesota may apply to the internal affairs of the Company.
Headings are for purposes of convenience only and do not constitute a part of
this Agreement. The parties to this Agreement agree to perform, or cause to be
performed, such further acts and deeds and to execute and deliver, or cause to
be executed and delivered, such additional or supplemental documents or
instruments as may be reasonably required by the other party to carry into
effect the intent and purpose of this Agreement. The invalidity or
unenforceability of all or any part of any provision of this Agreement will not
affect the validity or enforceability of the remainder of such provision or of
any other provision of this Agreement, which will remain in full force and
effect. This Agreement may be executed in several counterparts, each of which
will be deemed to be an original, but all of which together will constitute one
and the same instrument.
If this letter correctly sets forth our agreement on the subject matter
discussed above, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
By: /s/ Paul B. Burke
-------------------------
Paul B. Burke
Chairman, President & CEO
Agreed to this 16th day of
-----------
August , 1995.
-------
/s/ John L. Gburek
- --------------------
John L. Gburek
<PAGE>
<TABLE>
<CAPTION>
HISTORICAL FINANCIAL SUMMARY
(in thousands, except per share amounts and statistics and ratios)
Years Ended December 31 1995 1994 1993
--------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SUMMARY OF OPERATIONS (1) Net sales of primary products. . . . . . . . . . . . . . . . . $243,951 $211,293 $189,372
Equipment and technology sales . . . . . . . . . . . . . . . 11,404 8,675 6,059
--------------------------------------------------------------------------------------------------------
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . 255,355 219,968 195,431
Cost and expenses of primary products sales. . . . . . . . . . 210,533 187,129 172,177
Cost of equipment and technology sales . . . . . . . . . . . . 6,345 6,140 3,264
--------------------------------------------------------------------------------------------------------
Earnings from continuing operations before interest
and income taxes . . . . . . . . . . . . . . . . . . . . . . 38,477 26,699 19,990
Interest (income) expense, net . . . . . . . . . . . . . . . . (467) 2,369 4,820
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 14,397 9,326 4,790
--------------------------------------------------------------------------------------------------------
Earnings from continuing operations before cumulative effect of
accounting changes . . . . . . . . . . . . . . . . . . . . . 24,547 15,004 10,380
Provision for loss related to discontinued
operation, net of tax . . . . . . . . . . . . . . . . . . . -- (839) (415)
Cumulative effect of accounting changes. . . . . . . . . . . . -- -- 12,131
--------------------------------------------------------------------------------------------------------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,547 $ 14,165 $22,096
--------------------------------------------------------------------------------------------------------
Primary earnings per share
Number of shares included in computation . . . . . . . . . . . 28,234 27,335 24,868
Earnings from continuing operations. . . . . . . . . . . . . . $ .87 $ .55 $.42
Loss from discontinued operation. . . . . . . . . . . . . . . -- (.03) (.02)
Cumulative effect of accounting changes. . . . . . . . . . . . -- -- .49
--------------------------------------------------------------------------------------------------------
Primary earnings per share . . . . . . . . . . . . . . . . . . $ .87 $ .52 $.89
--------------------------------------------------------------------------------------------------------
Fully-diluted earnings per share
Number of shares included in computation . . . . . . . . . . . 28,316 27,523 26,086
Earnings from continuing operations. . . . . . . . . . . . . . $ .87 $ .55 $.40
Loss from discontinued operation. . . . . . . . . . . . . . . -- (.03) (.02)
Cumulative effect of accounting changes. . . . . . . . . . . . -- -- .47
--------------------------------------------------------------------------------------------------------
Fully-diluted earnings per share . . . . . . . . . . . . . . . $ .87 $ .52 $.85
--------------------------------------------------------------------------------------------------------
Cash dividends per share . . . . . . . . . . . . . . . . . . . $ .0425 $ .02 $ --
--------------------------------------------------------------------------------------------------------
Depreciation expense . . . . . . . . . . . . . . . . . . . . . $ 8,040 $ 7,444 $7,780
Net cash provided by operating activities. . . . . . . . . . . 45,261 36,680 25,931
Capital expenditures . . . . . . . . . . . . . . . . . . . . . 39,196 13,537 7,870
--------------------------------------------------------------------------------------------------------
FINANCIAL POSITION Working capital. . . . . . . . . . . . . . . . . . . . . . . . $ 32,730 $ 38,769 $ 34,517
Property, plant and equipment, net . . . . . . . . . . . . . 81,409 49,858 43,005
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . 182,332 138,686 130,312
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 27,163
Stockholders'equity. . . . . . . . . . . . . . . . . . . . . . 108,466 81,788 58,900
--------------------------------------------------------------------------------------------------------
STATISTICS AND RATIOS Current ratio. . . . . . . . . . . . . . . . . . . . . . . . . 1.6 2.0 1.9
Total debt to equity ratio . . . . . . . . . . . . . . . . . . 0.0 0.0 0.5
Earnings from continuing operations before interest expense
and income taxes, as a percentage of total revenues . . . . . 15.1% 12.1% 10.2%
Return on average equity(2). . . . . . . . . . . . . . . . . . 25.8% 20.1% 20.7%
Book value per share . . . . . . . . . . . . . . . . . . . . . $ 4.01 $ 3.05 $2.59
--------------------------------------------------------------------------------------------------------
<CAPTION>
Years Ended December 31 1992 1991
-------------------------------------------------------------------------------------------
<C> <S> <C> <C>
SUMMARY OF OPERATIONS (1) Net sales of primary products. . . . . . . . . . . . . . . . . $179,541 $ 187,650
Equipment and technology sales . . . . . . . . . . . . . . . 1,289 15,535
------------------------------------------------------------------------------------------
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . 180,830 203,185
Cost and expenses of primary products sales. . . . . . . . . . 165,408 175,357
Cost of equipment and technology sales . . . . . . . . . . . . 1,465 10,005
-------------------------------------------------------------------------------------------
Earnings from continuing operations before interest
and income taxes . . . . . . . . . . . . . . . . . . . . . . 13,957 17,823
Interest (income) expense, net . . . . . . . . . . . . . . . . 6,209 7,804
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 709 1,776
-------------------------------------------------------------------------------------------
Earnings from continuing operations before cumulative effect of
accounting changes . . . . . . . . . . . . . . . . . . . . . 7,039 8,243
Provision for loss related to discontinued
operation, net of tax . . . . . . . . . . . . . . . . . . . -- --
Cumulative effect of accounting changes. . . . . . . . . . . . -- --
-------------------------------------------------------------------------------------------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,039 $ 8,243
-------------------------------------------------------------------------------------------
Primary earnings per share
Number of shares included in computation . . . . . . . . . . . 23,301 22,273
Earnings from continuing operations. . . . . . . . . . . . . . $ .30 $ .37
Loss from discontinued operation. . . . . . . . . . . . . . . -- --
Cumulative effect of accounting changes. . . . . . . . . . . . -- --
-------------------------------------------------------------------------------------------
Primary earnings per share . . . . . . . . . . . . . . . . . . $ .30 $ .37
-------------------------------------------------------------------------------------------
Fully-diluted earnings per share
Number of shares included in computation . . . . . . . . . . . 23,733 22,480
Earnings from continuing operations. . . . . . . . . . . . . . $ .30 .37
Loss from discontinued operation. . . . . . . . . . . . . . . -- --
Cumulative effect of accounting changes. . . . . . . . . . . . -- --
------------------------------------------------------------------------------------------
Fully-diluted earnings per share . . . . . . . . . . . . . . . $ .30 $ .37
------------------------------------------------------------------------------------------
Cash dividends per share . . . . . . . . . . . . . . . . . . . $ -- $ --
------------------------------------------------------------------------------------------
Depreciation expense . . . . . . . . . . . . . . . . . . . . . $ 8,011 $ 7,561
Net cash provided by operating activities. . . . . . . . . . . 15,173 30,747
Capital expenditures . . . . . . . . . . . . . . . . . . . . . 6,751 6,304
------------------------------------------------------------------------------------------
FINANCIAL POSITION Working capital. . . . . . . . . . . . . . . . . . . . . . . . $ 36,843 $ 35,797
Property, plant and equipment, net . . . . . . . . . . . . . 44,712 47,256
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . 118,942 124,618
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . 44,311 56,582
Stockholders'equity. . . . . . . . . . . . . . . . . . . . . . 37,455 30,949
------------------------------------------------------------------------------------------
STATISTICS AND RATIOS Current ratio. . . . . . . . . . . . . . . . . . . . . . . . . 2.2 2.0
Total debt to equity ratio . . . . . . . . . . . . . . . . . . 1.2 1.8
Earnings from continuing operations before interest expense
and income taxes, as a percentage of total revenues . . . . . 7.7% 8.8%
Return on average equity(2). . . . . . . . . . . . . . . . . . 20.6% 30.9%
Book value per share . . . . . . . . . . . . . . . . . . . . . $ 1.71 $1.44
------------------------------------------------------------------------------------------
</TABLE>
The number of shares and per share amounts have been adjusted for two-for one
stock splits in 1995 and 1994.
(1) 1991 net earnings included a $1,374 charge for management transition costs
and a $591 tax benefit due to a new tax treaty between the U.S. and
Germany.
(2) Excludes cumulative effect of accounting changes in 1993.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The following discussion and analysis examines the operating results of the
Company's two business segments. As used herein, "operating profit" refers to
operating profit before corporate allocations, corporate expense and interest,
as shown in Note 10 to the Consolidated Financial Statements-Segment
Information.
PRECISION IMAGED PRODUCTS
TOTAL REVENUES AND OPERATING PROFIT
COMPARISON OF 1995 AND 1994. Total revenues of the Precision Imaged Products
group were $179.2 million for 1995, an increase of $33.9 million or 23.3% from
those for 1994. $2.7 million of this increase was due to an increase in sales of
equipment and technology. Net sales (which exclude equipment and technology
sales) increased by $31.2 million or 22.8%. The improvement was primarily
attributable to a shift in the Company's product mix to higherpriced color
television aperture masks as consumers worldwide purchased larger televisions
and to increased sales of precision photo-etched parts.
Operating profit of the Precision Imaged Products group was $34.5 million
for 1995, an increase of $12.3 million or 55.2% from that realized for 1994.
This improvement included a $2.5 million increase in profits from equipment and
technology sales. The rate of operating profit as a percentage of net sales
(before equipment and technology sales and profits) was 17.5% for 1995, compared
to 14.4% for 1994. This improvement was primarily due to improved manufacturing
efficiencies and the continued shift in product mix to higher-margin large and
jumbo aperture masks and masks manufactured from invar steel and productivity
and operating improvements at Buckbee-Mears St. Paul.
COMPARISON OF 1994 AND 1993. Total revenues of the Precision Imaged Products
group were $145.3 million for 1994, an increase of $19.9 million or 15.8% from
those for 1993. $2.6 million of this increase was due to an increase in sales of
equipment and technology. Net sales (which exclude equipment and technology
sales) increased by $17.3 million or 14.4%. The improvement was primarily
attributable to a shift in the Company's product mix to higher-priced invar and
large-sized color television aperture masks as consumers worldwide purchased
larger televisions.
Operating profit of the Precision Imaged Products group was $22.2 million
for 1994, an increase Of $5.9 million or 35.8% from that realized for 1993.
This improvement included a $0.3 million decrease in profits from equipment and
technology sales. The rate of operating profit as a percentage of net sales
(before equipment and technology sales and profits) was 14.4% for 1994, compared
to 11.4% for 1993. This improvement was primarily due to improved manufacturing
efficiencies and a shift in product mix to higher-margin large and jumbo
aperture masks and masks manufactured from invar steel.
OPTICAL PRODUCTS
TOTAL REVENUES AND OPERATING PROFIT
COMPARISON OF 1995 AND 1994. Total revenues of the Optical Products group were
$76.2 million for 1995, an increase of $1.5 million or 2.0% from those for 1994.
The increase was due primarily to
<PAGE>
increased unit sales of polycarbonate eyewear lenses, which resulted from an
increase in size and share of that market. This increase was largely offset by
a reduction in unit sales of plastic and glass eyewear lenses, reflecting a
reduction in size, and the Company's share, of the plastic lens market and a
reduction in size of the glass lens market.
Operating profit of the Optical Products group was $9.7 million for 1995, an
increase of $1.4 million or 16.4% over 1994. The rate of operating profit
expressed as a percentage of total revenues was 12.7% for 1995, compared to
11.2% for 1994. The increase was primarily due to increased sales of higher-
margin polycarbonate eyewear lenses.
COMPARISON OF 1994 AND 1993. Total revenues of the Optical Products group were
$74.7 million for 1994, an increase Of $4.7 million or 6.7% from those for 1993.
The increase was due primarily to increased unit sales of polycarbonate eyewear
lenses, reflecting and increase in size and share of that market. This increase
was partially offset by a reduction in unit sales of plastic and glass eyewear
lenses, reflecting a reduction in size, and the Company's share, of the plasfic
lens market and a reduction in size of the glass lens market.
Operating profit of the Optical Products group was $8.3 million for 1994,
an increase of $10 million or $10.0% over 1993. The rate of operating profit
expressed as a percentage of total revenues was 11.2% for 1994, compared to
10.5% for 1993. The increase was primarily due to increased sales of higher-
margin polycarbonate eyewear lenses.
SELLING EXPENSES
Selling expenses were $8.6 million, $8.4 million and $7.9 million or 3.5%, 4.0%
and 4.2% of net sales before equipment and technology sales for 1995, 1994 and
1993, respectively.
ADMINISTRATIVE EXPENSES
Administrative expenses were $5.5 million, $3.8 million and $3.8 million or
2.3%, 1.8% and 2.0 % of net sales before equipment and technology sales for
1995, 1994 and 1993, respectively. The increase in administrative expenses from
1994 to 1995 was primarily attributable to increased costs associated with
directors' deferred compensation plans which are tied to the Company's stock
price which increased during 1995 and to the costs of staffing new positions
during 1995.
INTEREST INCOME (EXPENSE), NET
Net interest income (expense) was $0.5 million, ($2.4) million and ($4.8)
million for 1995, 1994 and 1993, respectively. The Company earned interest
income on cash balances and had no short-term or long-term debt during 1995.
Interest expense declined from 1993 to 1994 as a result of lower average debt
balances and the payoff of all outstanding debt in 1994.
FOREIGN CURRENCY
Fluctuations in foreign currency exchange rates, principally the German DM
versus the U.S. dollar, may affect the Company's financial results. U.S.
dollar-denominated sales of aperture masks by the Company's German subsidiary
generally represent the most significant element of the Company's exposure to
currency rate fluctuations. This exposure is generally addressed by arranging
for the subsidiary's purchase of raw materials in U.S. dollars to the extent
possible through the purchase of forward contracts.
Exposure to foreign currency exchange rate fluctuations also may exist with
respect to intercompany payables or receivables to or from the Company's German
subsidiary. The Company minimizes this exposure by holding such balances at low
levels.
In 1995, 1994 and 1993, the Company incurred minimal foreign exchange
losses.
<PAGE>
SEASONALITY
The Company's earnings are generally lower in the first and third quarters due
to maintenance shutdowns at the Company's aperture mask production facilities.
Maintenance shutdowns also occur at the Company's lens manufacturing facilities
in the third quarter. Also, the seasonality of end products in both business
segments-televisions and eyeglasses-affects the Company's annual earnings
pattern.
INCOME TAXES
Expressed as a percentage of earnings before income taxes, the Company's
effective tax rate was 37.0%, 38.3% and 31.6% in 1995, 1994 and 1993,
respectively. The higher rates in 1995 and 1994 were due primarily to improved
profitability at the Company's German subsidiary, whose earnings incur taxes at
rates higher than in the United States. Also, increased amortization of a
deferred tax asset, as the underlying tax benefits, principally net operating
loss and tax credit carryforwards, are realized, contributed to the higher rates
in 1995 and 1994.
DIVIDENDS
In 1995, the Company continued the payment of cash dividends to shareholders.
Cash dividends of one cent per share were declared in the first, second and
third quarters. The dividend was increased to one and a quarter cents per share
in the fourth quarter.
ENVIRONMENTAL
Prior to 1995, the Company had been involved in a total of eight sites where
environmental investigations were still occurring and where final settlement had
not been reached. During 1995, the Company reached a de minimis settlement of
its liability at one of the sites in which the Company was named a potentially
responsible party (PRP). Also in 1995, the Company was identified as a PRP at a
site for which the Environmental Protection Agency (EPA) previousiy requested
information from the Company. It is the Company's belief that its involvement at
this site was minimal, and it is therefore seeking de minimus status. With this
activity, the total number of potential sites involving the Company where
environmental investigations are still occurring and where final settlement has
not been reached remains at eight.
In addition to the eight sites, the Company has continued its site
investigations at its Fort Lauderdale facility. The Company's consultant has
commenced testing at the site. Following a compilation of all test results, the
Company will submit its recommendations regarding the site to the state
regulatory agency for concurrence. The Company's consultant has indicated that
it is reasonably probable that some type of remediation will be required and has
provided the Company with an approximate cost range for that remediation. Based
on the consultant's estimates, and in accordance with allowable accounting
principles, the Company has adequately reserved for potential remediation costs.
Because the governmental bodies have not yet identified the full extent of any
remedial actions, it is still impossible at this time to predict the likely
outcome of the Fort Lauderdale matter, as well as the additional eight sites
discussed above, or the Company's exposure if any of these cases are decided
adversely.
In addition to the above sites, PRP'S for a site in Cortland, New York have
alleged that the Company is a participant in depositing waste at that site. The
Company strongly believes it has no involvement with this site and is committed
to a vigorous defense of this case. It is impossible at this time to predict the
likely outcome of this matter, or the Company's exposure if this case is decided
adversely.
It is not currently anticipated that the Company's share of the costs of
environmental remediation activities for any of the sites discussed above,
including the range provided by the Company's consultant for the Fort Lauderdale
facility, will have a materially adverse effect on the financial condition of
the Company.
<PAGE>
FINANCIAL POSITION AND LIQUIDITY
Cash balances increased by $1.5 million and debt remained at zero during 1995.
Working capital was $32.7 million, and the current ratio was 1.6, at December
31, 1995, compared to $38.8 million and a current ratio of 2.0 at December 31,
1994. At December 31, 1995 and 1994, the Company had no short-term or long-term
debt.
The Company's primary cash flow activities in 1995 included generating
$45.3 million of cash flow from operating activities, using $39.2 million of
cash for property, plant and equipment additions and using $5.2 million for
acquisitions by the Optical Products group. Expansion projects at both the
Mullheim, Germany and Cortland, New York aperture mask manufacturing facilities
accounted for $25.6 million of the 1995 property, plant and equipment
additions. Significant cash flows in 1994 included generating $36.7 million of
cash from operating activities, using $13.5 million for property, plant and
equipment additions and using $22.6 million to repay long-term debt. The
primary cash flows for the Company in 1993 included generating $25.9 million of
cash from operating activities, using $7.9 million for capital spending and
using $17.5 million for repayment of long-term debt.
In addition to $15.9 million in cash and cash equivalent balances (before
deducting approximately $1.2 million in outstanding checks included in accounts
payable), the Company had $43.1 million available for borrowing under existing
domestic and foreign bank credit facilities at December 31, 1995. in addition,
the Company is currently negotiating to increase its domestic credit facilities
to finance the Company's 1996 capital spending. The Company expects a signifi-
cant increase in its capital spending in 1996 due to approximately $65 million
of capital spending relating to the two-line expansion of the Company's aperture
mask manufacturing facility at Cortland, New York. Management is confident that
it will successfully negotiate increases in its domestic credit facilities.
These increased credit facilities along with available cash balances and cash
generated from operations should be sufficient to meet the Company's future
capital and operating requirements.
<PAGE>
Consolidated Statements (in thousands, except per share amounts)
of Earnings
<TABLE>
<CAPTION>
Years Ended December 31 1995 1994 1995
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES Net sales of primary products . . . . . . . . . . . . . . . $243,951 $211,293 $189,372
Equipment and technology sales. . . . . . . . . . . . . . . 11,404 8,675 6,059
--------------------------------------------------------------------------------------------
Total Revenues . . . . . . . . . . . . . . . . . . . . 255,355 219,968 195,431
--------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES Cost of sales of primary products . . . . . . . . . . . . . 196,250 174,884 160,564
Cost of equipment and technology sales. . . . . . . . . . . 6,345 6,140 3,264
Selling . . . . . . . . . . . . . . . . . . . . . . . . . . 8,592 8,396 7,865
Administrative. . . . . . . . . . . . . . . . . . . . . . . 5,545 3,792 3,841
--------------------------------------------------------------------------------------------
Total Operating Costs and Expenses . . . . . . . . . . 216,732 193,212 175,534
--------------------------------------------------------------------------------------------
Income from Operations. . . . . . . . . . . . . . . . . . . 38,623 26,756 19,897
--------------------------------------------------------------------------------------------
OTHER INCOME AND (EXPENSES) Interest income . . . . . . . . . . . . . . . . . . . . . . 1,029 760 316
Interest expense. . . . . . . . . . . . . . . . . . . . . . (562) (3,129) (5,136)
Other income (expense). . . . . . . . . . . . . . . . . . . (146) (57) 93
--------------------------------------------------------------------------------------------
Earnings from Continuing Operations before Income
Taxes and Cumulative Effect of Accounting Changes. . . . . 38,944 24,330 15,170
Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . 14,397 9,326 4,790
--------------------------------------------------------------------------------------------
Earnings from Continuing Operations before
Cumulative Effect of Accounting Changes. . . . . . . . . . 24,547 15,004 10,380
Provision for Loss Related to Discontinued Operation
(less applicable income tax benefits of $461 and $244) . . -- (839) (415)
---------------------------------------------------------------------------------------------
Earnings before Cumulative Effect of Accounting Changes . . 24,547 14,165 9,965
CUMULATIVE EFFECT OF Accounting for postretirement benefits other than pensions. -- -- (724)
ACCOUNTING CHANGES Accounting for income taxes . . . . . . . . . . . . . . . . -- -- 12,855
--------------------------------------------------------------------------------------------
Net Earnings. . . . . . . . . . . . . . . . . . . . . . . . $ 24,547 $ 14,165 $ 22,096
--------------------------------------------------------------------------------------------
PRIMARY EARNINGS PER SHARE Earnings from continuing operations . . . . . . . . . . . . $ .87 $ .55 $ .42
Loss from discontinued operation. . . . . . . . . . . . . . -- (.03) (.02)
Cumulative effect of accounting changes . . . . . . . . . . -- -- .49
--------------------------------------------------------------------------------------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . $ .87 $ .52 $ .89
--------------------------------------------------------------------------------------------
FULLY-DILUTED Earnings from continuing operations . . . . . . . . . . . . $ .87 $ .55 $ .40
EARNINGS PER SHARE Loss from discontinued operation. . . . . . . . . . . . . . -- (.03) (.02)
Cumulative effect of accounting changes . . . . . . . . . . -- -- .47
--------------------------------------------------------------------------------------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . $ .87 $ .52 $ .85
--------------------------------------------------------------------------------------------
NUMBER OF SHARES INCLUDED Common and common equivalent shares . . . . . . . . . . . . 28,234 27,335 24,868
IN PER SHARE COMPUTATION Common shares assuming full dilution. . . . . . . . . . . . 28,316 27,523 26,086
--------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
Consolidated Balance Sheets (in thousands)
<TABLE>
<CAPTION>
December 31 1995 1994
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS CURRENT ASSETS
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,874 $ 14,327
Trading accounts and notes receivable, less allowances of $2,636 and $2,024. . 23,003 24,564
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,772 28,792
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,753 5,914
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,964 5,221
-----------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 83,366 78,818
PROPERTY, PLANT AND EQUIPMENT, NET . . . . . . . . . . . . . . . . . . . . . . 81,409 49,858
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,352 3,297
OTHER ASSETS, NET. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,195 6,713
-----------------------------------------------------------------------------------------------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $182,332 $138,686
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
LIABILITIES AND CURRENT LIABILITIES
STOCKHOLDERS' EQUITY Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,408 $ 12,090
Accrued compensation and benefits. . . . . . . . . . . . . . . . . . . . . . . 11,488 11,513
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,308 5,514
Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 9,432 10,932
-----------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . 50,636 40,049
OTHER LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,654 15,835
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,576 1,014
STOCKHOLDERS' EQUITY
Common stock (shares issued of 27,066 and 26,784). . . . . . . . . . . . . . . 52,974 51,156
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,962 27,559
Cumulative translation adjustment. . . . . . . . . . . . . . . . . . . . . . . 5,749 4,336
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,219) (1,263)
-----------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY. . . . . . . . . . . . . . . . . . . . . . . 108,466 81,788
-----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . $182,332 $138,686
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
Consolidated Statements (in thousands)
of Stockholders' Equity
<TABLE>
<CAPTION> Retained Cumulative
Common Earnings Translation
Years Ended December 31, 1995, 1994 and 1993 Stock (Deficit) Adjustment Other
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1992 BALANCE . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,019 $ (8,168) $ 3,604 $ --
Net earnings. . . . . . . . . . . . . . . . . . . . . . . -- 22,096 -- --
Exercise of options, 866 shares, net of tax benefit . . . 1,592 -- -- --
Employee loans for option exercises, net of repayments . . -- -- -- (871)
Minimum pension liability adjustment. . . . . . . . . . . -- -- -- (226)
Translation adjustment. . . . . . . . . . . . . . . . . . -- -- (1,146) --
----------------------------------------------------------------------------------------------------------
DECEMBER 31, 1993 BALANCE . . . . . . . . . . . . . . . . . . . . . . . . . 43,611 13,928 2,458 (1,097)
Net earnings. . . . . . . . . . . . . . . . . . . . . . . -- 14,165 -- --
Exercise of options, 208 shares, net of tax benefit . . . 825 -- -- --
Exercise of warrants, 3,862 shares. . . . . . . . . . . . 6,720 -- -- --
Employee loans for option exercises, net of repayments . . -- -- -- (130)
Minimum pension liability adjustment. . . . . . . . . . . -- -- -- (36)
Cash dividends declared . . . . . . . . . . . . . . . . . -- (534) -- --
Translation adjustment. . . . . . . . . . . . . . . . . . -- -- 1,878 --
----------------------------------------------------------------------------------------------------------
DECEMBER 31, 1994 BALANCE . . . . . . . . . . . . . . . . . . . . . . . . . 51,156 27,559 4,336 (1,263)
Net earnings. . . . . . . . . . . . . . . . . . . . . . . -- 24,547 -- --
Exercise of options, 277 shares, net of tax benefit . . . 1,776 -- -- --
Restricted stock grants, 5 shares, net of tax benefit . . 42 -- -- --
Employee loans for option exercises, net of repayments . . -- -- -- (218)
Minimum pension liability adjustment. . . . . . . . . . . -- -- -- 262
Cash dividends declared . . . . . . . . . . . . . . . . . -- (1,144) -- --
Translation adjustment. . . . . . . . . . . . . . . . . . -- -- 1,413 --
----------------------------------------------------------------------------------------------------------
DECEMBER 31, 1995 BALANCE . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,974 $ 50,962 $ 5,749 $(1,219)
----------------------------------------------------------------------------------------------------------
</TABLE>
Common Stock: 99,000 shares of voting common stock
without par value authorized; 27,066, 26,784, and
22,714 shares issued and outstanding at December 31,
1995, 1994 and 1993, respectively.
Undesignated Stock: 500 shares authorized; none
issued. The Board of Directors is authorized to
designate the name of each class or series of the
undesignated shares and to set the terms thereof
(including, without limitation, terms with respect to
redemption, dividend, liquidation, conversion and
voting rights and preferences).
See Notes to Consolidated Financial Statements.
<PAGE>
Consolidated Statements (in thousands)
of Cash Flows
<TABLE>
<CAPTION>
Years Ended December 31 1995 1994 1993
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM NET EARNINGS . . . . . . . . . . . . . . . . . . . . . . . . $ 24,547 $ 14,165 $ 22,096
OPERATING ACTIVITIES ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization . . . . . . . . . . . . . . . 8,290 8,250 8,462
Provisions for product returns and losses
on trade receivables and inventory reserves . . . . . . . . 3,854 2,564 2,722
Deferred income taxes. . . . . . . . . . . . . . . . . . . . 613 3,844 1,639
Cumulative effect of accounting changes. . . . . . . . . . . -- -- (12,131)
Provision for loss related to discontinued operation . . . . -- 839 415
Other non-cash income and expense items. . . . . . . . . . . 191 (433) (1,325)
DECREASE (INCREASE) IN ASSETS
Trade accounts and notes receivable. . . . . . . . . . . . . 653 (2,996) (4,259)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . (5,209) (1,467) 2,888
Other current assets . . . . . . . . . . . . . . . . . . . . (626) 615 262
Other noncurrent assets. . . . . . . . . . . . . . . . . . . (1,013) (256) (1,145)
INCREASE (DECREASE) IN LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . . . 7,858 1,964 543
Income taxes payable . . . . . . . . . . . . . . . . . . . . 1,747 2,250 1,425
Accrued expenses and other current liabilities . . . . . . . (951) 7,498 3,895
Other noncurrent liabilities . . . . . . . . . . . . . . . . 5,307 (157) 444
------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES. . . . . . . . . . 45,261 36,680 25,931
------------------------------------------------------------------------------------------------
CASH FLOWS FROM Additions to property, plant and equipment . . . . . . . . . (39,196) (13,537) (7,870)
INVESTING ACTIVITIES Business acquisitions, net of cash acquired. . . . . . . . . (5,167) -- --
Proceeds from sale of property and equipment . . . . . . . . 28 312 340
Proceeds from non-trade notes receivable . . . . . . . . . . -- -- 67
------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES. . . . . . . . . . . . (44,335) (13,225) (7,463)
------------------------------------------------------------------------------------------------
CASH FLOWS FROM Repayment of long-term debt and reduction of capital lease
FINANCING ACTIVITIES obligation(1) . . . . . . . . . . . . . . . . . . . . . . . (19) (22,604) (17,508)
Common stock issued(1) . . . . . . . . . . . . . . . . . . . 1,818 2,634 1,592
Cash dividends paid. . . . . . . . . . . . . . . . . . . . . (1,074) (267) --
Employee loans for exercise of stock options, net of
repayments. . . . . . . . . . . . . . . . . . . . . . . . . (218) (130) (871)
------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES. . . . . 507 (20,367) (16,787)
------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 114 312 (130)
------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . 1,547 3,400 1,551
Cash and cash equivalents at beginning of year . . . . . . . 14,327 10,927 9,376
------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . . . . . $ 15,874 $ 14,327 $ 10,927
------------------------------------------------------------------------------------------------
</TABLE>
(1)In 1994, in addition to the long-term debt
repayment and common stock issuance shown
above, $4,911 of long-term debt was reduced
as consideration for the exercise of warrants.
See Notes to Consolidated Financial Statements
<PAGE>
Notes To Consolidated Financial Statements
(in thousands, except per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts the Company and
its subsidiaries, all of which are wholly-owned.
REVENUE RECOGNITION--Revenue related to the majority of the Company's
products is recognized upon shipment of product to the customer. The Company
accounts for long-term equipment and technology sales contracts under the
percentage-of-completion method, generally measured on the attainment of
specific contract milestones. Estimated contract earnings are reviewed
periodically as work progresses. In the event such estimates indicate a loss
would be incurred on the contract, the estimated amount of such loss would be
recognized in the period the estimated loss was determined.
CASH EQUIVALENTS--consist of highly-liquid debt instruments with a maturity
of three months or less at the date of purchase.
INVENTORIES--are stated at the lower of cost or market. Cost is determined
principally on the average cost method. Provision for potentially obsolete or
slow-moving inventory is made based on management's analysis of inventory
levels and future sales forecasts.
PROPERTY, PLANT AND EQUIPMENT--are stated at cost. Depreciation is provided
on the straight-line method over estimated useful lives of 3 to 45 years for
buildings and improvements and 3 to 15 years for machinery and equipment.
Depreciation of assets included in construction in progress does not begin
until construction is complete and the assets are placed in service.
GOODWILL--Amortization is provided on the straight-line method over estimated
useful lives of 10 to 40 years.
INCOME TAXES--Effective January 1, 1993, the Company changed its method of
accounting for income taxes as required by Financial Accounting Standards
Board (FASB) Statement No. 109, ACCOUNTING FOR INCOME TAXES. As permitted
under the new rules, prior years' financial statements have not been
restated. The cumulative effect of adopting Statement No. 109 as of January
1, 1993 was to increase 1993 net income by $12,855. Under Statement No. 109,
a deferred tax liability is recognized for temporary differences between
financial reporting and tax reporting which will result in taxable income in
future years. A deferred tax asset is recognized for temporary difference
which will result in tax deductions in future years and for net operating
loss and tax credit carryforwards. The deferred tax asset is reduced by a
valuation allowance to a net amount which the Company believes it more likely
than not will realize, based on the Company's estimates of its future
earnings and the expected timing of temporary difference reversals.
<PAGE>
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS--Effective January 1, 1993, the
Company adopted FASB Statement No. 106, EMPLOYERS' ACCOUNTING FOR
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. The cumulative effect of
adopting Statement No. 106 was to decrease 1993 net income by $724, net of
tax. 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.
EARNINGS PER SHARE--Primary earnings per common and common equivalent share
and earnings per common and common equivalent share assuming full dilution
are computed using the weighted average number of common and common
equivalent shares outstanding during the period. Common stock equivalents
include dilutive stock options and warrants using the treasury stock method.
STOCK SPLITS--On October 19, 1995, the Company declared a two-for-one split.
Stockholders of record on October 30, 1995 received one additional share of
common stock for each common share owned on that date. The Company also
declared a two-for-one stock split on August 15, 1994. Stockholders of record
on August 25, 1994 received one additional share of common stock for each
common share owned on that date. As a result, the number of outstanding
shares and earnings per share for prior periods presented have been restated
to reflect these splits.
STOCK BASED COMPENSATION--The Company follows Accounting Principals Board
Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES (APB 25) and related
interpretations in accounting for its employee stock options. Under APB 25,
when the exercise price of employee stock options equal the market price of
the underlying stock on the date of grant, no compensation expense is
recognized.
ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those estimates.
RECLASSIFICATION--Certain items in the 1994 and 1993 consolidated financial
statements have been reclassified to conform to the 1995 presentation.
2. INVENTORIES
The following is a summary of inventories at December 31:
1995 1994
- -------------------------------------------------------
Raw materials. . . . . . . . . . . . $ 12,556 $ 9,748
Work in process. . . . . . . . . . . 5,772 5,501
Finished Goods . . . . . . . . . . . 16,444 13,543
- -------------------------------------------------------
Total inventories. . . . . . . . . . $ 34,772 $ 28,792
- -------------------------------------------------------
3. OTHER LIABILITIES
The following is a summary of other current liabilities at December 31:
1995 1994
- -------------------------------------------------------
Net deferred revenue relating
to equipment contract . . . . . . . $ 1,637 $ 3,928
Environmental remediation costs. . . 1,624 2,760
Other. . . . . . . . . . . . . . . . 6,171 4,244
- -------------------------------------------------------
Total other current liabilities. . . $ 9,432 $ 10,932
- -------------------------------------------------------
The following is a summary of other liabilities at December 31:
1995 1994
- -------------------------------------------------------
Accrued foreign pension cost . . . . $ 8,272 $ 6,991
Employee retirement obligations . . 6,612 5,947
Other. . . . . . . . . . . . . . . . 6,770 2,897
- -------------------------------------------------------
Total other liabilities . . . . . . $ 21,654 $ 15,835
- -------------------------------------------------------
<PAGE>
4. PROPERTY, PLANT AND EQUIPMENT, NET
The following is a summary of property, plant and equipment, net at
December 31:
1995 1994
- ---------------------------------------------------------------------
Land and improvements. . . . . . . . . . . . . . . $ 2,575 $ 2,386
Buildings and improvements . . . . . . . . . . . . 40,801 37,143
Machinery and equipment. . . . . . . . . . . . . . 89,842 81,639
Construction in progress . . . . . . . . . . . . . 38,493 9,454
- ---------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . 171,711 130,622
Less accumulated depreciation and amortization . . 90,302 80,764
- ---------------------------------------------------------------------
Total property, plant and equipment, net . . . . . $ 81,409 $ 49,858
- ---------------------------------------------------------------------
5. DEBT AND WARRANT EXERCISE
The Company had no short-term or long-term debt outstanding at December 31,
1995 and 1994.
In the third quarter of 1994, the Company repaid all of its then
outstanding senior, subordinated and industrial development bond debt.
Existing cash balances and proceeds from the exercise of detachable warrants
to purchase shares of the Company's common stock were used for these
repayments. These detachable warrants had been issued to purchasers of the
Company's subordinated notes. All such warrant were exercised during 1994,
resulting in the issuance by the Company of 3,862 shares of common stock at
an average exercise price of $1.74 per share.
The Company maintains three identical revolving credit agreements with
three domestic banks that provide for unsecured borrowings totaling $25,000.
These agreements terminate on September 30, 1996. Borrowings under the
agreements bear interest either at the prime rate or at the LIBOR rate plus
0.50% to 0.75%. The LIBOR rate is dependent upon the Company's ratio of debt
to total capitalization. In addition, the Company pays a facility fee on
unborrowed funds at rates ranging from 0.15% to 0.20%, depending upon the
Company's debt-to-total capitalization ratio.
The Company's German subsidiary maintains short-term credit lines of $9,049
and a long-term credit line of $9,049. The short-term credit lines are
unsecured and bear interest at either 0.75% over the DM LIBOR rate or
approximately 3% over the BBD rate. The lines may be withdrawn at any time.
$5,082 of the long-term credit line is secured by land and buildings with a
net book value of $13,506 at December 31, 1995. This long-term credit line
bears interest at 0.75% over the DM LIBOR rate.
There were no borrowings outstanding under any of the credit lines at
December 31, 1995.
There were $1,322 of outstanding letters of credit at December 31, 1995.
Interest expense paid, net of amounts capitalized of $0, $137 and $309,
was $55, $2,428 and $4,319 in 1995, 1994 and 1993, respectively.
6. COMMITMENTS
The Company leases three manufacturing facilities, 19 sales, distribution or
administrative facilities and the Company headquarters. In addition, the
Company leases data processing and other equipment.
At December 31, 1995, the approximate future minimum rental commitments
required under non-cancelable operating leases are as follows:
- -------------------------------------------------
1996 $ 1,803
- -------------------------------------------------
1997 1,362
- -------------------------------------------------
1998 629
- -------------------------------------------------
1999 97
- -------------------------------------------------
Thereafter --
- -------------------------------------------------
Total minimum lease payments $ 3,891
- -------------------------------------------------
- -------------------------------------------------
Rent expense was $2,644, $2,788, and $3,073 in 1995, 1994 and 1993,
respectively. At December 31, 1995, the Company's German subsidiary had U.S.
dollar-denominated foreign exchange forward
<PAGE>
contracts to purchase $4,500 of German marks. The contracts have maturities
ranging from three to nine months and are for the purpose of hedging the
subsidiary's U.S. dollar-denominated sales. Gains and losses on foreign
exchange contracts that are designated and effective as hedges are deferred
and recognized in sales in the same period as the hedged transactions. At
December 31, 1995, an immaterial unrealized net loss was deferred on such
contracts that relate to sales that are expected to occurr during the ensuing
year. This deferred net loss is included in other current assets.
7. STOCK OPTION PLAN
The 1994 Stock Incentive Plan (the "1994 Plan") provides for the granting of
either incentive stock options or nonqualified stock options to purchase shares
of the Company's common stock and for other stock-based awards to officers,
directors and key employees responsible for the direction and management of the
Company and to non-employee consultants and independent contractors. At
December 31, 1995, 4,129 shares of common stock were reserved for issuance under
the 1994 Plan and the 1984 Omnibus Stock Plan, which terminated on January 10,
1994. The reserved shares included 1,766 unoptioned shares available for the
granting of options and/or other stock-based awards under the 1994 Plan.
Information relating to stock options during 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
Option Price
---------------------
Number Per Share Total
of Shares Average Price
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares under option at Dec 31, 1993. . . . . 2,275 $ 2.85 $6,474
Granted. . . . . . . . . . . . . . . . . . . 334 7.19 2,400
Exercised. . . . . . . . . . . . . . . . . . (212) 2.06 (437)
Forfeited. . . . . . . . . . . . . . . . . . (39) 2.37 (93)
- ------------------------------------------------------------------------------
Shares under option at Dec 31, 1994. . . . . 2,358 3.54 8,344
Granted. . . . . . . . . . . . . . . . . . . 295 15.39 4,538
Exercised. . . . . . . . . . . . . . . . . . (277) 2.24 (621)
Forfeited. . . . . . . . . . . . . . . . . . (13) 1.91 (25)
- ------------------------------------------------------------------------------
Shares under option at Dec 31, 1995. . . . . 2,363 $ 5.18 $ 12,236
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Shares exercisable at Dec 31, 1995 . . . . . 824 $ 2.47 $ 2,033
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
All outstanding options were nonqualified options. No compensation expense
related to stock option grants was recorded in 1995, 1994 or 1993 as the option
exercise prices were equal to fair market value on the date of grant.
At December 31, 1995, there were 5 shares outstanding pursuant to other
stock-based awards under the 1994 Plan.
STOCK OPTION EXERCISE LOAN PROGRAM-The Company maintains the Stock Option
Exercise Loan Program under which holders of exercisable stock options may
obtain interest-free and interest-bearing loans from the Company to facilitate
their exercise of stock options. Such loans are evidenced by demand promissory
notes and are secured by the shares of stock. The portion of such loans directly
related to the option exercise price is classified as a reduction of
stockholders' equity. The remainder is included in current assets.
8. EMPLOYEE BENEFIT PLANS
The Company maintains a noncontributory profit sharing plan covering
substantially all of its domestic salaried employees and those domestic hourly
employees not covered by a pension plan or retirement fund described below.
Under the terms of the profit sharing plan, the Company makes an annual minimum
contribution equal to 3% of participants' wages, with the potential for an
additional discretionary contribution depending upon the Company's
profitability. Provisions of the plan include 100% vesting after five years of
continuous service and payment of benefits upon retirement, total disability,
death or termination.
The Company also maintains a 401(k) savings plan covering substantially all
of its domestic salaried employees and a majority of those domestic hourly
employees not covered by a pension plan or retirement fund described below.
Under the terms of the savings plan, the
<PAGE>
Company makes an annual minimum contribution, which is invested in Company
stock, equal to 25% of participants' before-tax contributions up to 6% of base
salary, with the potential for an additional discretionary contribution
depending upon the Company's profitability. Provisions of the plan include
vesting the Company's contributions at the rate of 25% per year of continuous
service and payment of benefits upon retirement, total disability, death or
termination.
One domestic operation has a noncontributory defined benefit pension plan
for its hourly employees. Benefits payable under the plan are based upon
various monthly amounts for each year of credited service. The Company's
funding policy meets or exceeds the funding requirements of federal laws and
regulations. The projected benefit obligation was determined using an assumed
discount rate of 7.0%. The assumed long-term rate of return on plan assets,
invested primarily in diversified portfolios comprised of debt and equity
securities, was 7.0%.
In 1989, the Company adopted a supplemental defined benefit retirement plan for
corporate and operations management over 45 years of age. In 1992, the Company
curtailed benefits payable under the Plan. The Company's funding policy is to
maintain plan assets approximately equal to the vested benefit obligation. The
projected benefit obligation was determined using an assumed discount rate of
7.0%. The assumed long-term rate of return on plan assets, invested primarily
in diversified portfolios comprised of debt and equity securities, was 7.0%.
In addition, the Company's German subsidiary has a noncontributory defined
benefit pension plan covering substantially all of its employees. Benefits
payable under the plan is not funded. However, under generally accepted
accounting principles, the liability is accrued on the Consolidated Balance
Sheet. The projected benefit obligation was determined using an assumed
discount rate and an assumed rate of increase in future compensation of 7.5% and
3.0%, respectively.
Pension costs for the above three defined benefit plans included the
following components:
<TABLE>
<CAPTION>
Years Ended December 31 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost for benefits earned
during the year. . . . . . . . . . . . . . . $ 434 $ 434 $ 436
Interest cost on projected
benefit obligation . . . . . . . . . . . . . 775 666 613
Actual return on plan assets . . . . . . . . . (710) (23) (131)
Net amortization and deferral. . . . . . . . . 572 (138 (18)
- -------------------------------------------------------------------------------
Pension costs. . . . . . . . . . . . . . . . . $ 1,071 $ 939 $ 900
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The following is a summary of the funded status of the above three defined
benefit plans and the accrued pension costs recorded in the Company's
Consolidated Balance Sheet at December 31:
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
Vested benefit obligation. . . . . . . $ (9,554) $ (8,089)
- ----------------------------------------------------------------------
Accumulated benefit obligation . . . . $(10,375) $ (8,783)
- ----------------------------------------------------------------------
Projected benefit obligation . . . . . $(11,559) $ (9,869)
Plan assets at fair value. . . . . . . . 3,291 2,716
- ----------------------------------------------------------------------
Projected benefit obligation in excess
of plan assets. . . . . . . . . . . . . (8,268) (7,153)
Unrecognized net gain. . . . . . . . . . (339) (28)
Unrecognized prior service cost. . . . . 135 147
Unrecognized transition amount . . . . . 192 204
Minimum pension liability adjustment . . (137) (450)
- ----------------------------------------------------------------------
Accrued pension costs. . . . . . . . . . $ (8,417) $ (7,280)
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
Under a contract with its union employees, another domestic operation makes, on
behalf of each active participant, fixed weekly contributions to a retirement
fund (aggregating $145, $143 and $144 in 1995, 1994 and 1993, respectively). At
December 31, 1995, the market value of this fund's assets of $13,450 exceeded
benefit obligations of $11,233 by $2,217. Pursuant to the plan, excess funded
amounts are not available to the Company.
The total cost of all profit sharing, savings and pension plans, domestic
and foreign, was $4,301, $4,605 and $3,516 in 1995, 1994 and 1993, respectively.
In addition to the defined benefit plans discussed above, the Company has
two defined benefit postretirement plans covering certain U.S. employees. One
plan provides medical benefits and the other provides life insurance benefits.
Under the medical benefits plan, the Company provides a specific dollar amount
to retired salaried employees or their surviving spouses with which to purchase
coverage through the BMC Flexible Benefits Plan. The annual increase in these
Company provided amounts is limited to 5%. The life insurance plan provides
term life insurance coverage to all retired full-time hourly employees at one
domestic operation. The Company accrues the expected cost of providing benefits
under these two plans during the years that eligible employees render service.
Neither plan is funded.
The following table shows the two plans' accrued postretirement benefit
obligation at December 31:
<TABLE>
<CAPTION>
1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit
obligation. . . . . . . . . . . . . . . . . . . $ (1,159) $ (1,038)
Unrecognized net gain. . . . . . . . . . . . . . (362) (382)
- ---------------------------------------------------------------------------
Accrued postretirement benefit obligation. . . . $ (1,521) $ (1,420)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
The assumed discount rate used in determining the accumulated postretirement
benefit obligation was 7.0%.
9. INCOME TAXES
The provision for income taxes was based on earnings (loss) before income taxes,
as follows:
<TABLE>
<CAPTION>
Years Ended December 31 1995 1994 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic . . . . . . . . . . . . . . . . . . . . . . . $ 28,362 $ 18,304 $ 13,643
Foreign. . . . . . . . . . . . . . . . . . . . . . . . 10,582 6,026 1,527
- ----------------------------------------------------------------------------------------------------
Earnings from continuing operations
before cumulative effect of
accounting changes . . . . . . . . . . . . . . . . . 38,944 24,330 15,170
Provision for loss related to
discontinued operation . . . . . . . . . . . . . . . - (1,300) (659)
- ----------------------------------------------------------------------------------------------------
Earnings before cumulative effect of
accounting changes . . . . . . . . . . . . . . . . . 38,944 23,030 14,511
Cumulative effect of change in accounting
for postretirement benefits. . . . . . . . . . . . . - - (1,148)
- ----------------------------------------------------------------------------------------------------
Earnings before income taxes . . . . . . . . . . . . . $ 38,944 $ 23,030 $ 13,363
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
The provision (benefit) for income taxes consisted of:
<TABLE>
<CAPTION>
Years Ended December 31 1995 1994 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal. . . . . . . . . . . . . . . . . . . . . . . $ 7,162 $ 722 $ 350
State. . . . . . . . . . . . . . . . . . . . . . . . 1,661 1,246 1,040
Foreign. . . . . . . . . . . . . . . . . . . . . . . 4,961 3,514 1,761
Deferred
Federal and state. . . . . . . . . . . . . . . . . . 72 3,934 1,769
Foreign. . . . . . . . . . . . . . . . . . . . . . . 541 (90) (130)
- ----------------------------------------------------------------------------------------------------
Provision for income taxes on earnings
from continuing operations before cumulative
effect of accounting changes . . . . . . . . . . . . 14,397 9,326 4,790
Tax benefit associated with provision for
loss related to discontinued operation . . . . . . . - (461) (244)
- ----------------------------------------------------------------------------------------------------
Provision for income taxes before cumulative
effect of accounting changes . . . . . . . . . . . . 14,397 8,865 4,546
Tax benefit associated with cumulative
effect of change in accounting
for postretirement benefits. . . . . . . . . . . . . - - (424)
- ----------------------------------------------------------------------------------------------------
Income tax expense before cumulative
effect of change in accounting
for income taxes . . . . . . . . . . . . . . . . . . $ 14,397 $ 8,865 $ 4,122
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Cumulative effect of change in
accounting for income taxes. . . . . . . . . . . . . $ - $ - $(12,855)
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Significant components of deferred tax assets and liabilities were as follows at
December 31:
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------------
<S> <C> <C>
FEDERAL AND STATE NET DEFERRED INCOME TAXES
Deferred tax asset
Compensation and benefit related accruals. . . $ 5,809 $ 4,463
Reserves and accruals. . . . . . . . . . . . . 3,963 4,372
Depreciation . . . . . . . . . . . . . . . . . 3,694 3,784
Other temporary differences. . . . . . . . . . 3,303 1,812
Tax credit carryforwards . . . . . . . . . . . - 3,362
Net operating loss carryforwards . . . . . . . - 1,122
- -------------------------------------------------------------------------
Total. . . . . . . . . . . . . . . . . . . . . 16,769 18,915
Deferred tax liability
Capitalized molds. . . . . . . . . . . . . . . . (1,263) (1,508)
- -------------------------------------------------------------------------
Net deferred tax asset before
valuation allowance . . . . . . . . . . . . . . 15,506 17,407
Valuation allowance. . . . . . . . . . . . . . . (6,488) (8,349)
- -------------------------------------------------------------------------
Net deferred tax asset . . . . . . . . . . . . . $ 9,018 $ 9,058
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
FOREIGN NET DEFERRED INCOME TAXES
Deferred tax liability
Depreciation . . . . . . . . . . . . . . . . . $ 2,036 $ 1,194
Other temporary differences. . . . . . . . . . 210 656
- -------------------------------------------------------------------------
Total. . . . . . . . . . . . . . . . . . . . . 2,246 1,850
- -------------------------------------------------------------------------
Deferred tax asset
Retirement benefits. . . . . . . . . . . . . . (597) (575)
Other temporary differences. . . . . . . . . . (170) (414)
- -------------------------------------------------------------------------
Total. . . . . . . . . . . . . . . . . . . . . (767) (989)
- -------------------------------------------------------------------------
Net deferred tax liability . . . . . . . . . . . $ 1,479 $ 861
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
</TABLE>
The federal and state net deferred tax asset included a current portion of
$3,656 and $5,761 at December 31, 1995 and 1994, respectively, and a long-term
portion of $5,362 and $3,297 at December 31, 1995 and 1994, respectively. The
foreign net deferred tax liability included a current asset of $97 and $153 at
December 31, 1995 and 1994, respectively, and a long-term liability of $1,567
and $1,014 at December 31, 1995 and 1994, respectively.
At December 31, 1995, future tax deductions from the reversal of temporary
differences comprise the deferred tax asset, which has been reduced by a
valuation allowance. This valuation allowance reduces the deferred tax asset to
a net amount which the Company believes it more likely than not will realize,
based on the Company's estimates of its future earnings and the expected timing
of temporary difference reversals.
The net change in the total valuation allowance for the year ended December 31,
1995 was a decrease of $1,861.
In 1995, 1994 and 1993, the income tax benefit from the utilization of net
operating loss carryforwards and, in 1995, the income tax benefit from the
utilization of tax credit carryforwards, were realized as a reduction of the
deferred tax asset.
The differences between income taxes at the U.S. federal statutory tax rate
and the effective tax rate were as follows:
<TABLE>
<CAPTION>
Year Ended December 31 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate . . . . . . . . . . . . . . . . . . 35.0% 35.0% 35.0%
Differences in taxation of
foreign earnings . . . . . . . . . . . . . . . . 4.6 5.4 7.2
State income taxes, net
of federal benefit . . . . . . . . . . . . . . . 2.5 2.6 3.9
Change in deferred tax valuation reserve . . . . . (4.8) (4.2) (14.2)
Other items. . . . . . . . . . . . . . . . . . . . (0.3) (0.5) (0.3)
- -------------------------------------------------------------------------------
Effective tax rate . . . . . . . . . . . . . . . . 37.0% 38.3% 31.6%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
Differences in taxation of foreign earnings relate primarily to taxation of
foreign earnings at rates in excess of the U.S. statutory rate. Undistributed
earnings of German, Canadian and United Kingdom subsidiaries included in
retained earnings at December 31, 1995 were approximately $13,000, $1,000 and
$850, respectively. No U.S. taxes have been provided on these undistributed
earnings because the Company expects to be able to utilize foreign tax credits
to offset any U.S. tax that would result from their distribution.
Income taxes paid were $10,333, $2,967 and $1,965 in 1995, 1994 and 1993,
respectively.
10. SEGMENT INFORMATION
The Company manufactures and sells a variety of products in two business
segments. Precision Imaged Products manufactures principally aperture masks,
photochemically etched fine mesh grids used in the manufacture of color
television tubes and computer monitors. Net sales of aperture masks comprised
57%, 54% and 53% of the Company's consolidated total revenues in 1995, 1994 and
1993, respectively. Optical Products manufactures ophthalmic lenses.
<PAGE>
The following is a summary of certain financial information relating to the two
industry segments served:
<TABLE>
<CAPTION>
Years Ended December 31 1995 1994 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL REVENUES BY SEGMENT
Precision Imaged Products(1) . . . . . . . . . . . . . $179,199 $145,301 $125,447
Optical Products . . . . . . . . . . . . . . . . . . . 76,156 74,667 69,984
- ----------------------------------------------------------------------------------------------------
TOTAL REVENUES . . . . . . . . . . . . . . . . . . . . $255,355 $219,968 $195,431
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
OPERATING PROFIT BY SEGMENT
Precision Imaged Products(1)
Before corporate allocation. . . . . . . . . . . . . . $ 34,475 $ 22,219 $ 16,364
Less corporate allocation(2) . . . . . . . . . . . . . 2,131 1,714 1,629
- ----------------------------------------------------------------------------------------------------
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . 32,344 20,505 14,735
Optical Products
Before corporate allocation. . . . . . . . . . . . . . 9,693 8,329 7,374
Less corporate allocation(2) . . . . . . . . . . . . . 905 880 908
- ----------------------------------------------------------------------------------------------------
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . 8,788 7,449 6,466
- ----------------------------------------------------------------------------------------------------
TOTAL OPERATING PROFIT . . . . . . . . . . . . . . . 41,132 27,954 21,201
Corporate expense. . . . . . . . . . . . . . . . . . . (2,655) (1,255) (1,211)
Interest income (expense), net . . . . . . . . . . . . 467 (2,369) (4,820)
- ----------------------------------------------------------------------------------------------------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES. . . . . . . . . . . . . . . . . $ 38,944 $ 24,330 $ 15,170
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS BY SEGMENT
Precision Imaged Products. . . . . . . . . . . . . . . $106,685 $ 71,505 $ 64,751
Optical Products . . . . . . . . . . . . . . . . . . . 46,094 38,583 38,385
Other. . . . . . . . . . . . . . . . . . . . . . . . . 7,196 7,463 6,596
- ----------------------------------------------------------------------------------------------------
TOTAL IDENTIFIABLE ASSETS. . . . . . . . . . . . . . . 159,975 117,551 109,732
Corporate assets . . . . . . . . . . . . . . . . . . . 22,357 21,135 20,580
- ----------------------------------------------------------------------------------------------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . $182,332 $138,686 $130,312
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION BY SEGMENT
Precision Imaged Products. . . . . . . . . . . . . . . $ 5,689 $ 5,724 $ 5,773
Optical Products . . . . . . . . . . . . . . . . . . . 2,436 1,806 2,079
Other. . . . . . . . . . . . . . . . . . . . . . . . . 165 720 610
- ----------------------------------------------------------------------------------------------------
TOTAL DEPRECIATION AND AMORTIZATION. . . . . . . . . . $ 8,290 $ 8,250 $ 8,462
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES BY SEGMENT
Precision Imaged Products. . . . . . . . . . . . . . . $ 35,316 $ 10,511 $ 6,190
Optical Products . . . . . . . . . . . . . . . . . . . 3,637 2,586 1,496
Other. . . . . . . . . . . . . . . . . . . . . . . . . 243 440 184
- ----------------------------------------------------------------------------------------------------
TOTAL CAPITAL EXPENDITURES . . . . . . . . . . . . . . $ 39,196 $ 13,537 $ 7,870
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Total revenues included $11,404, $8,675 and $6,059 from equipment and
technology sales in 1995, 1994, and 1993, respectively, while operating
profit included $5,059, $2,535 and $2,795 from such sales in 1995, 1994,
and 1993, respectively.
(2) Corporate allocations include administrative expenses incurred at the
corporate headquarters which provide benefit to the operating divisions.
Total revenues by segment are primarily from unaffiliated customers.
The following is a summary of the Company's operations in different
geographic areas:
<TABLE>
<CAPTION>
Years Ended December 31 1995 1994 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL REVENUES FROM UNAFFILIATED CUSTOMERS
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . $179,173 $159,075 $144,106
Germany. . . . . . . . . . . . . . . . . . . . . . . . 76,220 57,771 47,909
Other. . . . . . . . . . . . . . . . . . . . . . . . . 2,962 3,122 3,416
- ----------------------------------------------------------------------------------------------------
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . $255,355 $219,968 $195,431
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
TRANSFERS BETWEEN GEOGRAPHIC AREAS
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,143 $ 765 $ 1,681
Germany. . . . . . . . . . . . . . . . . . . . . . . . 16,228 558 427
Eliminations . . . . . . . . . . . . . . . . . . . . . (19,371) (1,323) (2,108)
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
NET EARNINGS
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,467 $ 11,563 $ 22,187
Germany. . . . . . . . . . . . . . . . . . . . . . . . 5,016 2,716 (76)
Other. . . . . . . . . . . . . . . . . . . . . . . . . 64 (114) (15)
- ----------------------------------------------------------------------------------------------------
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . $ 24,547 $ 14,165 $ 22,096
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . $111,731 $ 88,525 $ 83,189
Germany. . . . . . . . . . . . . . . . . . . . . . . . 50,677 29,770 28,131
Other. . . . . . . . . . . . . . . . . . . . . . . . . 1,093 973 1,340
Eliminations . . . . . . . . . . . . . . . . . . . . . (3,526) (1,717) (2,928)
- ----------------------------------------------------------------------------------------------------
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . $159,975 $117,551 $109,732
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
Transfers between geographic areas are accounted for principally at estimated
market value. Net sales to unaffiliated foreign customers from domestic
operations (export sales) in 1995, 1994 and 1993 were $40,566, $31,337 and
$31,586 or 16%, 14% and 16%, respectively, of total revenues. Precision Imaged
Products had sales to one customer of $60,738, $45,171 and $39,390 and to
another customer of $31,975, $21,647 and $19,868 in 1995, 1994 and 1993,
respectively.
<PAGE>
11. CONCENTRATIONS OF CREDIT RISK
Approximately 68% of the trade accounts and notes receivable before allowances
("receivables") of Precision Imaged Products at December 31, 1995 were
represented by six customers. Approximately 31% of the receivables of Optical
Products at December 31, 1995 were represented by 20 customers. These 26
customers represented approximately 51% of the Company's consolidated
receivables at December 31, 1995, with one customer of Precision Imaged Products
representing approximately 12% of consolidated receivables.
12. PROVISION FOR LOSS RELATED TO DISCONTINUED OPERATIONS
During 1994, the Company made a provision for environmental remediation costs
and related expenses of $1,300, less applicable income taxes of $461, pertaining
to property previously utilized by one of its discontinued operations. This
provision was in addition to a provision made in 1993 for $659, less applicable
income taxes of $244, which related to the same matter. The additional
provision was made in 1994 when new information made it apparent that the
original provision was not adequate.
13. LEGAL MATTERS
In January 1995, a U.S. District Court in Miami, Florida, awarded the Company a
$5.1 million judgment against Barth Industries (Barth) of Cleveland, Ohio and
its parent, Nesco Holdings, Inc. (Nesco). The judgment relates to an agreement
under which Barth and Nesco were to help automate the plastic lens production
plant in Fort Lauderdale, Florida. The Company has not recorded any income
relating to this judgment because Barth and Nesco have filed an appeal.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND STOCKHOLDERS, BMC INDUSTRIES, INC.
We have audited the accompanying consolidated balance sheets of BMC Industries,
Inc. as of December 31, 1995 and 1994, and the related consolidated statements
of earnings, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of BMC Industries,
Inc. at December 31, 1995 and 1994, and the comsolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with genrally accepted accounting principles.
As discussed in the notes to the consolidated financial statements, in 1993
the Company changed its methods of accounting for income taxes and
postretirement benefits other than pensions.
ERNST & YOUNG LLP
Minneapolis, Minnesota
February 16, 1996
<PAGE>
SELECTED QUARTERLY DATA
(unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995(1)
Total revenues . . . . . . . . . . . . . . . . . . . . . . $ 61,334 $ 69,647 $ 59,203 $ 65,171 $ 255,355
Gross profit . . . . . . . . . . . . . . . . . . . . . . . 11,077 15,126 11,060 15,497 52,760
Net earnings . . . . . . . . . . . . . . . . . . . . . . . 4,694 7,477 4,548 7,828 24,547
EARNINGS PER SHARE(3). . . . . . . . . . . . . . . . . . . .17 .27 .16 .28 .87
Common and common equivalent shares. . . . . . . . . . . . 28,029 28,233 28,369 28,304 28,234
- ----------------------------------------------------------------------------------------------------------------------------------
1994(2)
Total revenues . . . . . . . . . . . . . . . . . . . . . . $ 52,406 $ 57,305 $ 53,979 $ 56,278 $ 219,968
Gross profit . . . . . . . . . . . . . . . . . . . . . . . 8,070 11,135 8,185 11,554 38,944
Earnings from continuing operations. . . . . . . . . . . . 2,702 4,677 2,286 5,339 15,004
Provision for (loss) related to discontinued operation . . (839) - - - (839)
Net earnings . . . . . . . . . . . . . . . . . . . . . . . 1,863 4,677 2.286 5.339 14,165
EARNINGS (LOSS) PER SHARE(3) . . . . . . . . . . . . . . .
Earnings from continuing operations. . . . . . . . . . . . .10 .17 .08 .19 .55
Provision for (loss) related to discontinued operation . . (.03) - - - (.03)
Net earnings . . . . . . . . . . . . . . . . . . . . . . . .07 .17 .08 .19 .52
Common and common equivalent shares. . . . . . . . . . . . 26,549 27,141 27,721 27,930 27,335
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The number of shares and per share amounts have been adjusted for two-for-
one stock splits in 1995 and 1994.
(1) Total revenues for 1995 included $3,581, $5,621, $1,014 and $1,188 in the
first, second, third and fourth quarters, respectively, from equipment and
technology sales. Net earnings for 1995 included gains of $972, $1,146,
$354 and $573 in the first, second, third and fourth quarters,
respectively, from equipment and technology sales.
(2) Total revenues for 1994 included $161, $3,604, $491 and $4,419 in the
first, second, third and fourth quarters, respectively, from equipment and
technology sales. Net earnings for 1994 included gains (losses) of $(64),
$580, $209 and $895 in the first, second, third and fourth quarters,
respectively, from equipment and technology sales.
(3) Per share calculations for each of the quarters and the total years were
based on the weighted average number of shares outstanding during each
period. Accordingly, the sum of the quarters may not necessarily be equal
to the total year per share amounts. Per share amounts are primary
earnings per share which do not differ significantly from fully-diluted
earnings per share.
<PAGE>
PRICE RANGE OF COMMON STOCK
The Company's stock is traded on the New York Stock Exchange under the
ticker symbol "BMC". The table below sets forth the high and low reported sales
prices of BMC stock by quarter for the years 1995, 1994 and 1993. All per
share amounts have been adjusted for two-for-one stock splits in 1995 and 1994.
At March 1, 1996 there were approximately 1,017 stockholders of record.
<TABLE>
<CAPTION>
Price
Dividends ---------------------------------
Per Share High Low
- --------------------------------------------------------------------------------------------------------
1995
<S> <C> <C> <C>
FIRST QUARTER. . . . . . . . . . . . . . . . . $ .0100 $ 9 1/8 $ 7 11/1 6
SECOND QUARTER . . . . . . . . . . . . . . . . .0100 12 9/16 8 1/4
THIRD QUARTER. . . . . . . . . . . . . . . . . .0100 19 15/16 12 3/16
FOURTH QUARTER . . . . . . . . . . . . . . . . .0125 23 5/8 15 1/8
- --------------------------------------------------------------------------------------------------------
1994
First Quarter. . . . . . . . . . . . . . . . . $ -- $ 6 19/32 $ 4 7/8
Second Quarter . . . . . . . . . . . . . . . . - 7 3/16 5 1/4
Third Quarter. . . . . . . . . . . . . . . . . .0100 7 5/16 6 5/8
Fourth Quarter . . . . . . . . . . . . . . . . .0100 8 3/8 6 9/16
- -------------------------------------------------------------------------------------------------------
1993
First Quarter. . . . . . . . . . . . . . . . . $ -- $ 2 13/16 $ 2 15/16
Second Quarter . . . . . . . . . . . . . . . . -- 3 11/32 2 15/32
Third Quarter. . . . . . . . . . . . . . . . . -- 4 1/8 2 15/16
Fourth Quarter . . . . . . . . . . . . . . . . -- 5 11/32 3 23/32
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 21.1
SUBSIDIARIES
OF
BMC INDUSTRIES, INC.
1. Buckbee-Mears Europe GmbH
2. BMC Industries Foreign Sales Corporation
3. Optical Manufacturing Supplies Limited
4. Vision-Ease Canada, Ltd.
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form
10-K) of BMC Industries, Inc. of our report dated February 16, 1996 included
in the 1995 Annual Report to Stockholders of BMC industries, Inc.
Our auditors also included the financial statements schedule of BMC
Industries, Inc. listed in Item 14(a). This schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
We also consent to the incorporation by reference in the Registration
Statements (Form S-8, No. 33-2613, No. 33-32389 and No. 33-60937) pertaining
to the BMC Industries, Inc. 1984 Omnibus Stock Program and in the
Registration Statement (Form S-8 No. 33-55089) pertaining to the BMC
Industries, Inc. 1994 Stock Incentive Plan and the related Prospectuses of
our report dated February 16, 1996 with respect to the consolidated financial
statements incorporated herein by reference, and our report included in the
preceding paragraph with respect to the financial statement schedule included
in this Annual Report (Form 10-K) of BMC Industries, Inc.
Minneapolis, Minnesota
March 29, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 3,721
<SECURITIES> 12,153
<RECEIVABLES> 25,639
<ALLOWANCES> 2,636
<INVENTORY> 34,772
<CURRENT-ASSETS> 83,366
<PP&E> 171,711
<DEPRECIATION> 90,302
<TOTAL-ASSETS> 182,332
<CURRENT-LIABILITIES> 50,636
<BONDS> 0
0
0
<COMMON> 51,755
<OTHER-SE> 56,711
<TOTAL-LIABILITY-AND-EQUITY> 182,332
<SALES> 253,900
<TOTAL-REVENUES> 255,355
<CGS> 202,595
<TOTAL-COSTS> 216,732
<OTHER-EXPENSES> 146
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (467)
<INCOME-PRETAX> 38,944
<INCOME-TAX> 14,397
<INCOME-CONTINUING> 24,547
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,547
<EPS-PRIMARY> .87
<EPS-DILUTED> .87
</TABLE>
<PAGE>
Contact: Michael P. Hawks (NYSE--BMC)
(612) 851-6030 FOR IMMEDIATE RELEASE
BMC ACQUIRES LANTZ LENSES INCORPORATED
November 20, 1995--Minneapolis, Minnesota--BMC Industries, Inc. announced
today it has acquired the assets of Lantz Lenses Inc. located in St. Cloud,
Minnesota. Lantz Lenses is a manufacturer of glass ophthalmic lenses. This
acquisitions will increase the customer base of Vision-Ease Lens, BMC's
Optical Products Group. Vision-Ease plans to integrate Lantz Lenses'
manufacturing operation into its St. Cloud facility, but will continue to
operate its distribution centers located in Phoenix, Arizona, and Calgary,
Canada.
Paul B. Burke, BMC's Chairman, President and Chief Executive Officer, stated,
"The acquisition of Lantz Lenses' assets will enable Vision-Ease to solidify
its position as the world's number one manufacturer of fused, multi-focal
glass lenses. This combined with Vision-Ease's leadership positions in
polycarbonate lenses and plastic specialty lenses will enable Vision-Ease to
expand its high quality and service standards to a broader portion of the
ophthalmic community. As BMC continues on the path of growth and expansion,
we will continue to pursue acquisition and investment opportunities that fit
our corporate philosophy, which will in turn increase shareholder value".
BMC is one of the world's largest manufacturers of aperture masks for color
picture tubes used in televisions and computer monitors. Through Vision-Ease,
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".
<PAGE>
Contact: Michael P. Hawks (NYSE-BMC)
(612) 851-6030 FOR IMMEDIATE RELEASE
BMC ANNOUNCES QUARTERLY DIVIDEND
December 8, 1995--Minneapolis, Minnesota--BMC Industries, Inc. today announced
that its Board of Directors has approved a continuation of its quarterly cash
dividend. As previously announced, the Board has increased the quarterly
dividend from $.01 per share to $.0125 per share, which reflects a 25% increase
over the previous quarterly dividend rate.
Shareholders of record as of December 20, 1995 will receive a dividend of
$.0125 for each share owned on that date, to be paid on January 3, 1996.
BMC Industries, Inc. 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. BMC's common stock is traded on the New York Stock Exchange under the
symbol BMC.
-30-
<PAGE>
CONTACT: Michael P. Hawks (NYSE -- BMC)
(612) 851-6030 FOR IMMEDIATE RELEASE
BMC INDUSTRIES, INC.
ANNOUNCES THE ACQUISITION OF
OPTICAL MANUFACTURING SUPPLIES LIMITED OF THE U.K.
January 25, 1996 -- Minneapolis, MN -- BMC Industries, Inc. announced the
acquisition of Optical Manufacturing Supplies Limited (OMS) of London, England.
OMS is a lens distribution company with broad distribution capabilities
throughout the United Kingdom and Continental Europe. The acquisition of OMS
will significantly expand the distribution and sales capabilities of BMC's
optical products division, Vision-Ease Lens, throughout Europe.
Ray Rogers, Vision-Ease's President and General Manager, stated, "OMS has an
excellent reputation for product quality, service and reliability. We are
extremely excited about the ability to expand Vision-Ease's distribution into
Europe. This acquisition will greatly enhance our goal of providing the
complete line of Vision-Ease Lens high quality ophthalmic lenses to the European
marketplace."
Philip Nossel, former Managing Director of OMS, will assume the same title and
management responsibilities at the newly acquired company, which will operate
under the name Vision-Ease Europe.
BMC Industries, Inc. is one of the world's largest manufacturers of aperture
masks for color picture tubes used in televisions and computer monitors.
Through Vision-Ease, 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".
<PAGE>
CONTACT: Michael P. Hawks (NYSE -- BMC)
(612) 851-6030 FOR IMMEDIATE RELEASE
BMC REPORTS RECORD 1995 EARNINGS
February 15, 1996 -- Minneapolis, MN -- BMC Industries, Inc. today reported
fourth quarter 1995 net earnings of $7,828,000 or $.28 per share, up 47% from
earnings of $5,339,000 or $.19 per share in the year-earlier period. Fourth
quarter total revenues were $65,171,000, an increase of 16% from $56,278,000
a year ago.
For the year ended December 31, 1995, BMC reported record earnings from
continuing operations of $24,547,000 or $.87 per share, an increase of 64%
from $15,004,000 or $.55 per share in 1994. Total revenues rose 16% in 1995
to $255,355,000 from $219,968,000 in 1994.
The Company's Precision Imaged Products operation contributed significantly
to the fourth quarter results. Precision Imaged Products fourth quarter
sales were up 34% over the fourth quarter of 1994. This was primarily due to
the continuing shift in aperture mask sales to high-margin products. In the
fourth quarter, sales of invar, jumbo (30" large) and large (25" to 29")
aperture masks increased 134%, 78%, and 44%, respectively, over fourth
quarter 1994 sales. For the total year, these sales were up 91%, 49% and
31%, respectively. The profitability of the aperture mask operation
increased due to the sales mix shift and improved operating performance.
Precision Imaged Products also benefited from Buckbee-Mears St. Paul's record
fourth quarter results. Fourth quarter sales of etched parts increased 34%
over the prior year, while total year sales of etched parts were up 58%.
Buckbee-Mears St. Paul profitability in the fourth quarter was up almost 200%
over the fourth quarter of 1994, due primarily to the increased sales, sales
mix changes and production efficiencies.
The Company's Optical Products operation also contributed to the record
fourth quarter results. Although sales were up only 3%, profitability was up
28%. This increase was achieved despite a provision in the fourth quarter to
-more-
<PAGE>
move the Optical Products' cast resin operation in 1996 to a more
appropriately sized and lower cost facility. Outsourcing of low-margin
commodity cast resin products from the Far East has led to underutilization
of the existing cast resin facility. In the fourth quarter, sales of
polycarbonate lenses were up 8% over the fourth quarter of 1994 and for the
year ended December 31, 1995, were up 40%. The lower fourth quarter increase
in polycarbonate sales reflects a general slowdown in the U.S. consumer
eyewear market, which is reflective of retail sales in general.
International sales of polycarbonate lenses continued their strong growth, up
more than 50% over the fourth quarter of 1994 and now representing over 13%
of total polycarbonate sales. The increase in Optical Products profitability
in the fourth quarter was driven by increasing gross margin percentage
contributions for both polycarbonate and cast resin products. Although
overall sales of cast resin products decreased in the fourth quarter, sales
of high-margin, specialty products increased.
Capital spending during the twelve months ended December 31, 1995 increased
threefold to $39.2 million from the $13.5 million spent during the prior
year. Despite the increased capital spending, cash balances increased to
$15.9 million at December 31, 1995 from $14.3 million at the end of 1994, and
BMC's balance sheet at December 31 remained debt-free.
Paul B. Burke, BMC's chairman and chief executive officer stated "I am proud
to report BMC's fourth quarter and total year 1995 record results. In
addition to being another record quarter, the fourth quarter also marked the
nineteenth consecutive quarter of increased net earnings over the
year-earlier period, excluding income from the sale of equipment and
technology and other non-recurring items. These achievements are a tribute
to the entire BMC team as every one of our operations contributed
meaningfully to our improved 1995 profits."
BMC is one of the world's largest manufacturers of aperture masks for color
television tubes 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".
<PAGE>
Contact: Michael P. Hawks (NYSE-BMC)
(612) 851-6030 FOR IMMEDIATE RELEASE
BMC ANNOUNCES QUARTERLY DIVIDEND
March 8, 1996--Minneapolis, Minnesota--BMC Industries, Inc. today announced
that its Board of Directors has approved a continuation of its quarterly
cash dividend of $.0125 cents per share.
Shareholders of record as of March 20, 1996 will receive a dividend of
$.0125 for each share owned on that date, to be paid on April 3, 1996.
BMC Industries, Inc. 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. BMC's common stock is traded on the New York
Stock Exchange under the symbol BMC.
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