<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934. For the Quarterly Period ended March 31, 1996.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934. For the transition Period from N/A to .
----- ------
Commission File No. 1-8467
BMC INDUSTRIES, INC.
--------------------
(Exact Name of Registrant as Specified in its Charter)
Minnesota 41-0169210
--------- ----------
(State of Incorporation) (IRS Employer Identification No.)
Two Appletree Square, Minneapolis, Minnesota 55425
--------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(612) 851-6000
--------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days.
X Yes No
------- --------
BMC Industries, Inc. has outstanding 27,261,994 shares of common stock as of May
10, 1996. There is no other class of stock outstanding.
Page 1 of 38
Exhibit Index Begins at Page 9.
<PAGE>
PART I: FINANCIAL INFORMATION
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
Item 1: Financial Statements
<TABLE>
<CAPTION>
MARCH 31 December 31
-------- -----------
ASSETS 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 6,988 $ 15,874
Trade accounts and notes receivable,
net of allowances 23,295 23,003
Inventories 39,938 34,772
Deferred income taxes 4,343 3,753
Other current assets 6,478 5,964
- --------------------------------------------------------------------------------
Total Current Assets 81,042 83,366
- --------------------------------------------------------------------------------
Property, Plant and Equipment 181,192 171,711
Less Accumulated Depreciation 91,613 90,302
-------- --------
Property, Plant and Equipment, Net 89,579 81,409
-------- --------
Deferred Income Taxes 5,457 5,362
Other Assets, Net 11,651 12,195
- --------------------------------------------------------------------------------
Total Assets $187,729 $182,332
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Current Liabilities
Accounts payable $20,228 $20,408
Income taxes payable 9,599 9,308
Accrued expenses and other liabilities 19,688 20,920
- --------------------------------------------------------------------------------
Total Current Liabilities 49,515 50,636
- --------------------------------------------------------------------------------
Other Liabilities 21,556 21,654
Deferred Income Taxes 1,486 1,576
Stockholders' Equity
Common stock 54,710 52,974
Retained earnings 56,804 50,962
Cumulative translation adjustment 4,949 5,749
Other (1,291) (1,219)
- --------------------------------------------------------------------------------
Total Stockholders' Equity 115,172 108,466
- --------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $187,729 $182,332
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
Page 2
<PAGE>
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31
---------------------
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenues
Net sales of primary products $68,109 $57,753
Equipment and technology sales 192 3,581
- --------------------------------------------------------------------------------
Total Revenues 68,301 61,334
- --------------------------------------------------------------------------------
Operating Costs and Expenses
Cost of sales of primary products 55,095 48,346
Cost of equipment and technology sales 166 1,911
Selling 2,558 2,275
Administrative 1,227 1,254
- --------------------------------------------------------------------------------
Total Operating Costs and Expenses 59,046 53,786
- --------------------------------------------------------------------------------
Income from Operations 9,255 7,548
- --------------------------------------------------------------------------------
Other Income and (Expense)
Interest expense (130) (77)
Interest income 119 185
Other expense (50) (67)
- --------------------------------------------------------------------------------
Earnings before Income Taxes 9,194 7,589
Income Tax Provision 3,011 2,895
- --------------------------------------------------------------------------------
Net Earnings $ 6,183 $ 4,694
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net Earnings Per Share $ 0.22 $ 0.17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number of Shares Included in Per Share Computation 28,278 28,029
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dividends Declared Per Share $0.0125 $ 0.01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
Page 3
<PAGE>
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
----------------------
1996 1995
<S> <C> <C>
- --------------------------------------------------------------------------------
Net Cash Provided by Operating Activities
Net earnings $ 6,183 $ 4,694
Depreciation and amortization 2,423 2,438
Changes in operating assets and liabilities (7,194) 494
- --------------------------------------------------------------------------------
Total 1,412 7,626
- --------------------------------------------------------------------------------
Net Cash Used in Investing Activities
Additions to property, plant and equipment (11,529) (5,547)
- --------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities
Common stock issued 1,736 66
Cash dividends paid (338) (267)
Other (78) (11)
- --------------------------------------------------------------------------------
Total 1,320 (212)
- --------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents (89) 336
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (8,886) 2,203
Cash and Cash Equivalents at Beginning of Period 15,874 14,327
- --------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 6,988 $ 16,530
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
Page 4
<PAGE>
BMC INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
1. Financial Statements
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly the financial position of the Company as of March 31, 1996,
and the results of operations and the cash flows for the periods ended
March 31, 1996 and 1995. Such adjustments are of a normal recurring
nature. Certain items in the financial statements for the period ended
March 31, 1995 have been reclassified to conform to the presentation for
the period ended March 31, 1996. Per share amounts for the period ended
March 31, 1995 have been restated to reflect a two-for-one stock split in
the third quarter of 1995. The results of operations for the three-month
period ended March 31, 1996 are not necessarily indicative of the results
to be expected for the full year. The balance sheet as of December 31,
1995 is derived from the audited balance sheet as of that date. For
further information, refer to the financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
2. Inventories
March 31, 1996 December 31, 1995
-------------- -----------------
Raw materials $15,970 $12,556
Work in process 5,756 5,772
Finished goods 18,212 16,444
-------------- -----------------
Total Inventories $39,938 $34,772
-------------- -----------------
-------------- -----------------
3. Long-term Contract
Work is continuing on a long-term contract for the construction of aperture
mask production equipment for a customer in China. At March 31, 1996, the
contract was approximately 90% complete. At March 31, 1996, no material
change had been made in the estimate of costs to complete the contract.
4. Earnings Per Share
Primary earnings per share is computed using the weighted average number of
common and common equivalent shares outstanding during the period. Common
stock equivalents include dilutive stock options using the treasury stock
method. Fully diluted earnings per share did not differ significantly from
primary earnings per share in both periods. As indicated in Note 1, per
share amounts for the period ended March 31, 1995, have been restated to
reflect a two-for-one stock split in the third quarter of 1995.
Page 5
<PAGE>
5. Legal Matters
There are no material changes in the status of the Barth Industries legal
proceeding or any other legal proceeding or environmental matter described
in the Company's Annual Report on Form 10-K for the year ended December 31,
1995.
Page 6
<PAGE>
BMC INDUSTRIES, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Total revenues for the first quarter of 1996 increased by $7.0 million or 11.4%
from the first quarter of 1995. Net sales of primary products increased $10.4
million or 17.9% from the first quarter of 1995. Net sales of the Precision
Imaged Products group, which excludes equipment and technology sales, increased
24.5% due primarily to continued improvement in sales mix toward higher-margin
larger-sized and invar color television aperture masks. Net sales of the Optical
Products group increased 5.5% due primarily to an increase in sales of
plastic eyewear lenses of 14.7% and a 3.9% increase in glass lens sales.
Cost of sales of primary products was 80.9% of net sales for the first quarter
of 1996, compared to 83.7% in the same period of 1995. The improvement occurred
in both groups and was due primarily to improved sales mix of higher-margin
products and improved yields and manufacturing efficiencies.
The provision for income taxes was 32.7% of pre-tax income in the first quarter
of 1996 compared to 38.1% for the same period in 1995. The lower effective rate
in the first quarter of 1996 was primarily due to anticipated realization of
certain deferred tax assets for which the Company had previously established a
valuation allowance and utilization of excess foreign tax credits upon the
repatriation of earnings from the Company's German subsidiary. In addition,
foreign earnings, which incur taxes at rates higher than in the U.S.,
represented a lower proportion of total earnings in 1996. The Company
anticipates that its effective tax rate for the total year of 1996 will be
lower than the 37.0% effective rate for the total year of 1995 for the
reasons described above.
FINANCIAL POSITION AND LIQUIDITY
Cash and cash equivalent balances decreased by $8.9 million during the first
three months of 1996, due primarily to $7.5 million of capital expenditures on
expansion of the Company's aperture mask manufacturing facilities and increased
inventory levels resulting from the continued increase in sales, offset
partially by cash generated from earnings. Working capital was $31.5 million at
March 31, 1996 compared to $32.7 million at December 31, 1995. The current
ratio was 1.64 at March 31, 1996, compared to 1.65 at December 31, 1995. The
ratio of total liabilities to equity declined to .63 at March 31, 1996 compared
to .68 at December 31, 1995.
In addition to $7.0 million in cash and cash equivalent balances, the Company
had $42.6 million available for borrowing under existing domestic and foreign
bank credit facilities at March 31, 1996. 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 significant increase in its
capital spending in 1996 due to approximately $60 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
Page 7
<PAGE>
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.
ENVIRONMENTAL
In April 1996, the Company was named as a potentially responsible party (PRP) at
a site in Zionsville, Indiana. This is the third site at this location for
which the Company has been named a PRP. The Company entered into a de minimus
settlement agreement for the prior two sites and also believes that it will be a
de minimus party at this site. The Company does not believe the eventual
outcome at this site will have a material adverse effect on the financial
condition of the Company.
There are no material changes in the status of the legal proceedings and
environmental matters described in the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
Page 8
<PAGE>
PART II: OTHER INFORMATION
ITEM 1. With regard to legal proceedings and certain environmental
matters, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on page 8 and Note 5 of the
"Notes to Condensed Consolidated Financial Statements" on page 6.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS PAGE
10.1 Engineering, Procurement and Construction Agreement
between Buckbee-Mears Cortland, a Unit of BMC
Industries, Inc. and Fluor Daniel, Inc. ............... 10
10.2 Form of Change in Control Agreement entered into
between the Company and Mr. Jeffrey L. Wright as of
March 15, 1996 (incorporated by reference to Exhibit
10.31 of the Company's Annual Report on Form 10-K for
the year ended December 31, 1991 (Form No. 1-8467))
27. Financial Data Schedule (filed only in electronic
format)
99.1 News Release, dated April 18, 1996, announcing the
first quarter 1996 operating results .................. 35
(b) REPORTS ON FORM 8-K.
The Company did not file any reports on Form 8-K during the quarter
ended March 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BMC INDUSTRIES, INC.
---------------------------------------------
Jeffrey L. Wright
Controller (Principal Accounting Officer)
Dated: May 14, 1996
Page 9
<PAGE>
ENGINEERING, PROCUREMENT AND CONSTRUCTION AGREEMENT
BETWEEN
BUCKBEE-MEARS CORTLAND
A UNIT OF BMC INDUSTRIES, INC.
AND
FLUOR DANIEL, INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE TITLE
- ------- -----
INTRODUCTION
ARTICLE I DESCRIPTION OF AGREEMENT
ARTICLE II SCOPE OF SERVICES
ARTICLE III COMPENSATION
ARTICLE IV TERMS OF PAYMENT
ARTICLE V GUARANTEES
ARTICLE VI INDEMNIFICATION
ARTICLE VII INSURANCE
ARTICLE VIII TERMINATION AND CANCELLATION
ARTICLE IX COMPLETION
ARTICLE X TRANSFER AND ACCEPTANCE
ARTICLE XI GENERAL PROVISIONS
SIGNATURE PAGE
(i)
<PAGE>
ENGINEERING, PROCUREMENT AND CONSTRUCTION AGREEMENT
THIS AGREEMENT for the performance of services is executed and made effective
as of the 29th day of June, 1995, between BUCKBEE-MEARS CORTLAND a Unit of
BMC Industries, Inc. ("Owner") and FLUOR DANIEL, INC. ("Fluor Daniel").
IN CONSIDERATION of the covenants hereinafter set forth, the parties hereto
mutually agree as follows:
ARTICLE I
DESCRIPTION OF AGREEMENT
1.1 DOCUMENTS INCLUDED
This Agreement consists of this contract document as it may be amended and
supplemented from time to time by mutual written agreement of the parties
and the following attached Exhibits:
Exhibit A: Scope of Work and Services which shall be supplemented and
further defined by the project record for the services and
finalized with the agreement on the Guaranteed Maximum
Price.
Exhibit A-1 - Mechanical and Performance Completion Definitions to
be added by amendment.
Exhibit B: Rate Schedules
US Base Compensation Ranges, Effective July 25, 1994
US Billing Codes and Job Classifications, Effective October 24, 1994
Project Management Principals Charge Schedule, Effective
October 24, 1994
US Computer Charge Schedule and Attachment 1 (VARs), Effective
October 24, 1994
US Reprographics Charge Schedule, Effective October 24, 1994
Exhibit C: Small Tools
Exhibit D: Schedule of Rental Equipment
Exhibit E: Letter dated August 8, 1995 Listing Owner's Chemicals at
the Site
1.2 ENTIRE AGREEMENT
This Agreement, as defined in Section 1.1, sets forth the full and
complete understanding of the parties as of the date first above
stated. There are no other understandings, terms or conditions
and neither party has relied upon any representation, express or
implied, not contained in this Agreement.
1
<PAGE>
1.3 CONFLICTING PROVISIONS
This Agreement and the Exhibits are to be complementary and construed in
harmony with each other. In the event of any conflict between this
Agreement and any of the Exhibits hereto, the terms and provisions of this
Agreement shall control. In the event of any conflict among the Exhibits,
the more specific shall apply.
ARTICLE II
SCOPE OF SERVICES
2.1 DESCRIPTION OF SERVICES
Fluor Daniel shall perform the engineering, procurement and/or
construction services (the "Services") in connection with Owner's
facility located in Cortland County, New York ("Project") as
described in Exhibit "A". All engineering services shall be
performed by EFDEE New York Engineers & Architects P.C. ("Engineer")
as a subcontractor to Fluor Daniel. All services performed by Engineer
shall be governed by this Agreement and all references to the providing
of engineering and/or architectural and related services shall refer to
Engineer. Notwithstanding anything herein to the contrary, the parties
agree that Exhibit A is a working document only and is attached solely
for the purpose of providing a general description of the Scope of
Services and the agreement on the Scope of Services will be finalized
and added by amendment at the time the parties agree on the Guaranteed
Maximum Price.
2.2 FLUOR DANIEL'S RESPONSIBILITIES
Fluor Daniel shall provide the following services as necessary to
specifically complete the Project, as such Services are more
specifically set forth in Exhibit A, which shall be supplemented
and further defined by the project record for the Services and
finalized with the agreement on the Guaranteed Maximum Price..
(a) Provide overall project and execution management as the general
contractor;
(b) Furnish the necessary supervisors, engineers, designers, draftsmen
and other personnel necessary for the preparation of drawings and
specifications required for the Services;
(c) Furnish the buyers, inspectors, expediters and other personnel
necessary to procure all materials, supplies and equipment necessary
to carry out and complete the Services;
(d) Furnish the supervisors, foremen, skilled and unskilled labor and all
other personnel necessary to carry out and complete the Services;
(e) Procure all machinery, equipment, materials and expendable
construction items and supplies necessary to carry out and complete
the Services;
2
<PAGE>
(f) Prepare, furnish and update the project schedules and cost estimates;
(g) Obtain and maintain in effect all licenses/permits which are required
for the Services as set forth in Exhibit "A", and which are to be
obtained by Fluor Daniel;
(h) Supply the small tools described in Exhibit "C" which are to carry
out and complete the Services;
(i) Furnish, to the extent available, Fluor Daniel major construction
tools and equipment described in Exhibit "D", and, where not
available, procure such third party construction tools and equipment
as may be necessary to carry out and complete the Services; and
(j) Appoint an individual as the Project Director who shall be authorized
to act on behalf of Fluor Daniel and with whom Owner may consult at
all reasonable times, and whose instructions, requests and decisions
will be binding upon Fluor Daniel as to all matters pertaining to
this Agreement and the performance of the parties hereunder.
(k) Fluor Daniel shall make the key personnel available until completion
of the Project, so long as they are employed by Fluor Daniel. These
personnel shall be removed from performing the Services only with the
prior written consent of Owner, which shall not be unreasonably
withheld. The key personnel shall be Robert Powell, Glen Dimick, and
Ken Nielsen.
2.3 OWNER'S RESPONSIBILITIES
Owner shall at such times as may be required by Fluor Daniel for the
successful and expeditious completion of the Services:
(a) Provide a site for the Services, suitable access thereto and an
adequate area or areas adjoining such site for Fluor Daniel's office,
warehouse, craft change rooms, shop buildings, welding facilities,
materials storage, employee parking and furnish necessary
construction utilities.
(b) Obtain all permits and licenses required to be taken out in the name
of Owner which are necessary for the performance of the Services.
The parties shall jointly develop the list of necessary licenses and
permits;
(c) Except as otherwise provided herein, start-up the facilities and
provide all personnel and supplies necessary to the start-up,
operation and maintenance thereof;
(d) Pay all property taxes assessed against the facilities; and
(e) The Owner shall appoint a project manager who shall be authorized to
act on behalf of Owner, with whom Fluor Daniel may consult at all
reasonable times, and whose written
3
<PAGE>
instructions, requests and decisions will be binding upon Owner as
to all matters pertaining to this Agreement and the performance of
the parties hereunder.
2.4 CHANGES
It is the desire of the parties to keep changes in the scope of Services
at a minimum, but the parties recognize that such changes may become
necessary and agree that they shall be handled as follows.
(a) AGREED UPON CHANGES IN THE SERVICES. Owner may initiate changes
by advising Fluor Daniel in writing of the change believed to be
necessary. As soon thereafter as practicable, Fluor Daniel shall
prepare a cost estimate of the change and shall inform Owner of
the adjustment in the Fee, the GMP and/or the completion date set
forth in Section 9.2, if any, applicable thereto. Owner shall
then advise Fluor Daniel in writing of its approval or disapproval
of the change and the corresponding change to the cost estimate or
adjustment in the Fee, the GMP or Schedule. If Owner approves the
change and the corresponding change to the cost estimate or
adjustment in the Fee, the GMP or Schedule, Fluor Daniel shall
perform the Services as changed and the adjustment in the Fee, the
GMP and the completion date, if any, shall become effective.
Fluor Daniel may initiate changes by advising Owner in writing
that in its opinion a change is necessary. If Owner approves, it
shall so advise Fluor Daniel and, thereafter, the change shall be
handled as if initiated by Owner. If Owner does not approve a
change, the change shall not become effective and Owner shall
reimburse Fluor Daniel separately for the costs incurred in
preparation of the cost estimate.
(b) CONSTRUCTIVE CHANGES AND OTHER ADDITIONAL COSTS. In the event of
(1) the Owner's addition to, modification of or deletion from the
Scope of Work and Services included in the GMP; (2) A change in
the Project schedule, if any, as mutually agreed by the parties
(3) the discovery of any climatic, subsurface or other conditions
which differ from (a) those shown in or reasonably inferable from
the documents upon which the Agreement is based and/or (b) those
ordinarily encountered and generally recognized as inherent in the
locality of the Project; (4) a modification of applicable law or
the interpretation thereof by which Fluor Daniel is required to
pay increased or additional taxes, government-regulated
transportation costs, insurance or other amounts which are not
required as of the date of this Agreement; (5) delay, suspension
of, or interference with the Services by Owner or by any other
person or entity including, but not limited to, national, state
and local governments which delay is not the result of Fluor
Daniel's failure to comply with any necessary permit, license or
other requirement; (6) modification to or delay in furnishing
design criteria or other information supplied by any person or
entity other than Fluor Daniel or its subcontractors, if
performance of this Agreement depends upon such criteria or
information; and/or (7) any other increase in Fluor Daniel's
costs, or the time required for completion of the Services
4
<PAGE>
due to force majeure as set forth in Section 11.3 hereof, or a change
in applicable law then the Fee and the completion date, if any, shall
be equitably adjusted and Fluor Daniel shall be paid, and the GMP
shall be increased by an amount equal to the additional costs to
Fluor Daniel resulting therefrom.
(c) If either party disputes the existence, extent, validity or affect of
a change, then either party may notify the other party that it
desires to meet and resolve the dispute. If the dispute cannot be
resolved to the mutual satisfaction of the parties within ten (10)
business days, then either party can demand binding dispute
resolution in accordance with Section 11.15(i). Such dispute
resolution process shall commence immediately and conclude no
later than thirty (30) business days following the notice of the
dispute.
ARTICLE III
COMPENSATION
3.1 CONTRACT PRICE
Owner shall pay Fluor Daniel for the Services the Sum of a Fee and
reimbursable costs up to a guaranteed maximum amount ("GMP"). The GMP
will be developed based on the general scope of work as such work is
described in Exhibit "A". Due to the preliminary nature of the scope of
work and the incomplete nature of the current design, the parties have
mutually agreed that the GMP will be developed on more complete design and
scope. The target date for presenting the GMP to the Owner is March 15,
1996. It is the intent that the GMP would be agreed upon by April 1, 1996
and the GMP will be added to this Agreement by Amendment.
The parties have estimated the amount of the expenditures necessary to
complete Phase I and agree that such amount shall not exceed $15,000,000
without prior written permission of Owner. If the parties are unable to
agree on the GMP by April 1, 1996, then Owner shall immediately have the
right to terminate in accordance with Section 8.3, provided Owner pays
Fluor Daniel the Fee earned to date or if the Fee earned is less than
$500,000 then Owner shall pay Fluor Daniel the difference, if any, between
$500,000 and the portion of the Fee paid to Fluor Daniel through the date
of termination which shall satisfy Owner's obligation to pay the Fee for
the drawings and engineering services that had been provided prior to such
termination.
Phase I is defined as:
- Design and Engineering Required to Support the Guaranteed
Max Estimate
- Site Work and Improvements
- Process Building, Foundations and Structural Frame
- Establishment of FD's on Site Construction Office
5
<PAGE>
3.2 COSTS - Owner shall reimburse Fluor Daniel all costs and expenses as
follows:
(a) 1. HOME OR BRANCH OFFICE PERSONNEL: Base Compensation Rates of
all personnel permanently assigned to the Home or Branch
office, including operations vice presidents, for such time
as is devoted by them to the Services (including travel
time), whether such Services are performed in the office or
in the field, plus an amount equal to eighty percent (80%) of
said Base Compensation Rates as compensation for payroll
insurance and group medical and life insurance, salary
continuation, other employee benefits, insurance required in
Article VII, Section 7.1 (a), (b), (c) and (f), and the cost
referred to in Section 3.4 hereof.
2. FIELD OFFICE PERSONNEL: Base Compensation Rates of all
personnel assigned to and located at the project site field
office, for such time as is devoted by them to the Services
(including travel time), plus an amount equal to sixty (60%)
of said Base Compensation Rates as compensation for payroll
insurance and taxes, holidays and other time off with pay,
group medical and life insurance, salary continuation, other
employee benefits, insurance required in Article VII, Section
7.1 (a), (b), (c) and (f), and the costs referred to in
Section 3.4 hereof.
3. FIELD CRAFT LABOR: Direct wages for all craft or manual
labor engaged in the Services; plus payroll insurance and
taxes including Workers' Compensation and Employers'
Liability, FICA (social security), FUTA and SUI (federal and
state unemployment), and other statutory benefits, taxes, or
fees; plus an amount equal to eight percent (8%) of such
direct wages for Fluor Daniel's established Craft Benefit
Program; plus an amount equal to four and one tenth percent
(4.1%) of such direct wages for the general liability
insurance program described in Section 7.1(b) hereof.
4. PROJECT MANAGEMENT PRINCIPALS: The fixed hourly billing
rates shown in Exhibit "B", without any additional markup,
for certain key personnel and others who may be designated as
Project Management Professionals, subject to prior approval
of Owner.
(b) AGENCY PERSONNEL. Shall mean Management, technical and/or
secretarial personnel employed by a third party company who, work
temporarily on the Project at the Home Office or site office to
provide engineering, management or administrative services under
the direction of Fluor Daniel. Invoiced cost to Fluor Daniel for
any agency personnel utilized for the Services, plus an amount
equal to forty percent (40%) of the invoiced cost for such agency
personnel used in the Home Office or Field Officer to cover
facilities and supplies costs and overhead costs set forth in
Section 3.4.
(c) COMPENSATION POLICIES - Base Compensation Rates, and job
classifications shall be administered in accordance with Fluor Daniel
compensation policies and with the ranges
6
<PAGE>
and classifications attached to this Agreement as Exhibits "B" Base
Compensation shall be the actual salary or wage paid to the employee
plus thirteen percent (13%) to cover all time off with pay including
vacations, holidays, and sick leave. Hourly Base Compensation Rates
shall be determined by dividing Yearly Base Compensation by 2080.
Personnel classified as Non-except are paid time and one-half premium
for all time worked over forty (40) hours per week. Exempt employees
shall be paid straight time for all work over 40 hours per week.
(d) SUBCONTRACTS. Invoiced costs of all engineering, construction, and
services subcontracts, less any discounts or rebates.
(e) MATERIALS AND EQUIPMENT. Cost of all materials, machinery,
equipment, supplies, parts and miscellaneous services which are
provided by Fluor Daniel or its subcontractors/suppliers at the
site or at another location approved by Owner or which is
necessary for the completion of the Work, including all costs of
transportation, loading and unloading, storage, insurance, duties,
and sales or use taxes.
(f) CONSTRUCTION TOOLS AND EQUIPMENT. Cost to purchase or lease,
transport, fuel, store, and maintain all construction tools and
equipment required for the Services. Any tools and equipment or
other property purchased and reimbursed by Owner to perform the
Services shall become the property of the Owner. Total rental
charges for any item owned by Fluor Daniel or its subsidiaries
shall not exceed 75% of the new purchase price of that item unless
otherwise approved.
(g) TRANSPORTATION, TRAVEL AND RELOCATION EXPENSE. Cost of
transportation, travel and relocation expense for employees
engaged in the Services in accordance with Fluor Daniel's
established policies, HR120 (including supplemental letter of
September 13, 1995 to HR120, Article III D.3.a.) and HR125.
(h) INSURANCE AND BONDS. Excluding the insurance referenced in
Section 3.2 (a) 1. and 2., the cost of all project specific
insurance premiums and the cost of all deductibles and losses not
covered by insurance except Fluor Daniel's liability for property
damage and consequential damages as specifically set forth in
Article 6 and Section 11.8; cost of all performance and payment
bonds and letters of credit required by this Agreement and Fluor
Daniel's established policies. Fluor Daniel shall bond all
subcontracts in accordance with Fluor Daniel standard policy (all
subcontracts in excess of $100,000).
(i) TAXES AND DUTIES. Cost of any taxes, duties, or licenses arising out
of or applicable to this Agreement, other than taxes on net income.
(j) PERMITS AND INSPECTIONS. Cost of permits, and the cost of
inspections, required by any governmental body related to this
Agreement.
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(k) COMMUNICATION EXPENSE. Cost of postage, express and courier
services, long distance telephone, telegraph, and teletype expense
incurred for the Services. Long distance calls placed via Dial
Access WATS lines, tie-lines, Foreign Exchange or similar lines
shall be reimbursed at station-to-station rate; such calls
completed via Operator Access WATS lines shall be reimbursed at
station-to-station operator assisted rates, with person-to person
service.
(l) REPRODUCTION. Cost of printing and reproducing all technical
information and other project related documents or correspondence in
accordance with Exhibit "B" and subsequent revisions, less a discount
of 20%.
(m) COMPUTER SERVICES. Cost of computer services in accordance with
schedules in Exhibit "B" and subsequent revisions, less a discount
of 20%.
(n) OFFICE EXPENSE. Cost of miscellaneous office expenses directly
related to the Project, including but not limited to custom printed
forms, special book bindings, freight, express, and other direct
costs incurred in connection with the Services.
(o) FIELD OFFICES AND FACILITIES. Cost of establishing, operating, and
maintaining any necessary field offices, shops, fabrication
facilities, warehouses, and storage facilities, including office
furnishings, equipment, supplies, communications, utilities, and
other field operations expenses.
(p) AUDITS, MONITORING AND ACCOUNTING. Cost of periodic project
audits and similar programs monitoring the financial and control
aspects of the Services, and any project-specific accounting
functions, including but not limited to, preparation of Owner
property account records. If Fluor Daniel requests reimbursement
of project audit activities then Fluor Daniel shall provide Owner
a copy of the audit report.
(q) LITIGATION AND RELATED COSTS. The actual cost of attorneys' fees,
costs, settlements and judgments incurred in connection with any
subcontract or vendor litigation, claims or disputes (except between
Owner and Fluor Daniel) arising out of or in connection with the
performance of this Agreement.
(r) GENERAL EXPENSE. all other costs incurred directly for the Services
and required by this Agreement, which are approved by Owner.
3.3 FEE
Owner shall pay to Fluor Daniel a Fee equal to $3.5 Million, provided the
Guaranteed Maximum Price ("GMP") is no less than $65 Million or greater
than $75 Million. If the GMP is above $75 Million, the Fee shall be
increased by four percent (4%) of such portion above $75 Million and,
accordingly, if the GMP is below $65 Million, the Fee shall be reduced by
four percent (4%) of such portion below $65 Million.
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3.4 NON-REIMBURSABLE COSTS
Certain costs and expenses are not reimbursable directly to Fluor Daniel,
but are included in the percentage allowance set forth in Section 3.2 (c).
Included in these costs and expenses are the following:
(a) Fluor Corporation and its subsidiaries' Executive Officers, including
the Chairman of the Board, President, Vice Presidents (except as
provided for in Section 3.2), Secretary, Treasurer, and Controller;
(b) Fluor Corporation and subsidiary general management departments,
including Sales, Public Relations, Personnel, Law, Medical, and
Advertising personnel, when not directly engaged in the Services
as well as general office personnel, consisting of telephone and
teletype operators, guards, receptionists, mail room and
janitorial and maintenance employees;
(c) Home office general expenses, including local telephone,
depreciation, rent and maintenance of home office facilities,
rearrangements of facilities, furniture, office equipment, light,
heat, cafeteria service and parking space;
(d) General overhead expenses, consisting of the development of
engineering and construction standards and programs, personnel
training, entertainment and charity contributions; and
(e) Property taxes on Fluor Daniel's real and personal property at the
home office.
3.5 SAVINGS
At Performance Completion costs will be summarized to determine any
savings. Owner shall pay Fluor Daniel its percentage of any savings amount
upon such determination. The percentage to be shared by each party shall
be determined upon determination of the GMP.
ARTICLE IV
TERMS OF PAYMENT
4.1 FUNDING OF REIMBURSABLE COSTS AND PAYMENT OF FEE Fluor Daniel shall
invoice Owner for all incurred costs and accrued Fee every two weeks.
The Fee will be invoiced at the rate of 5% of the invoiced reimbursable
costs up to the total amount of the Fee as described in Section 3.3.
Owner shall pay Fluor Daniel by wire transfer all such invoices within
fourteen (14) days of such invoice date; provided, however, that the
Owner shall have the right to refuse to pay all or a portion of an
invoice until it can obtain executed lien releases or resolve a
dispute with Fluor Daniel regarding an invoice. Until resolution of a
dispute over an invoice, the Owner shall pay the undisputed portion of
the invoice, provided however all disputed
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invoices must be resolved within thirty (30) days or submitted to
mediation/arbitration in accordance with Section 11.15(i). Nothing
herein shall preclude Owner from disputing any costs previously paid
by Owner to Fluor Daniel.
All invoices shall be in the mutually agreed format and detail and include
the backup as reasonably requested by Owner. Owner shall not be required
to pay in excess of the GMP and Fee amounts except as such amounts are
adjusted herein.
4.2 DIRECT PAYMENTS
Owner may, however, with prior notice to Fluor Daniel, elect to make
direct payments to vendors for materials or services received by Fluor
Daniel. Any direct payments made by Owner shall, nevertheless, be deemed
Reimbursable Costs for the purpose of any Fee calculations based on
Reimbursable Costs.
4.3 INTEREST
If any payments are delinquent, interest shall accrue on such amounts
which are delinquent from the due date until Fluor Daniel is paid at an
annual rate equal to two (2%) percent above the prime rate then
currently charged by the Chase Manhattan Bank in New York, New York,
but in no event shall such rate exceed the maximum legal rate allowed
by applicable usury laws. Payment of interest shall not excuse or cure
any default or delay in payment of amounts due.
4.4 RETAINAGE
Fluor Daniel shall withhold 10% of all subcontract amounts from all
subcontractors until their respective work is completed as such
completion is approved by Owner. In addition, the Owner may retain the
last $1,000,000 of Fluor Daniel's Fee until Performance Completion of
line 4, at which time Owner shall pay $500,000 of such retainage; with
the remaining $500,000 to be paid upon Performance Completion of line 5.
ARTICLE V
GUARANTEES
5.1 FLUOR DANIEL'S SERVICES
Fluor Daniel warrants that it will perform the Services in a workmanlike
manner and in accordance with the standards of care and diligence
normally practiced by recognized engineering and construction firms in
performing Services of a similar nature. Fluor Daniel shall properly
perform, at the written request of Owner at any time within the one (1)
year period after Owner's acceptance pursuant to Section 10.2, all
corrective Services within the original scope of Services necessary to
conform to the foregoing guarantee. All costs incurred by Fluor Daniel
in performing such
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corrective services prior to completion and Final Payment shall be
reimbursable under Article III up to the GMP. For corrective services
performed after completion and Final Payment, then Fluor Daniel and
Owner shall share such costs on a 50/50 basis until all savings amounts
have been expended. All costs for corrective Services in excess of the
GMP shall be borne by Fluor Daniel.
5.2 THIRD PARTY ITEMS
Fluor Daniel shall, for the protection of Owner, obtain from all vendors,
subcontractors and construction contractors from which Fluor Daniel
procures machinery or equipment, materials or services guarantees with
respect to such machinery, equipment, materials and services, which shall
be made available to Owner to the full extent of the terms thereof. Fluor
Daniel's liability with respect to such machinery and equipment, materials
and services shall be limited to procuring guarantees from such vendors,
subcontractors or construction contractors and rendering all reasonable
assistance to Owner for the purpose of enforcing the same during Fluor
Daniel's one year warranty period.
5.3 LIMITATIONS
All warranties made by Fluor Daniel in connection with the Services are
limited to those set forth in this Article. Fluor Daniel makes no other
warranties or guarantees, express or implied. Owner's failure to allow
Fluor Daniel to promptly make such tests and perform such remedial
services as Fluor Daniel may deem appropriate shall relieve Fluor
Daniel of its warranty relative to the subject of such test or service.
In no event shall Fluor Daniel be responsible or liable for any
process performance of the Project relating to the ability of the
Project to produce in a cost effective manner, to produce usable
product or to produce product in accordance with any throughput
criteria.
ARTICLE VI
INDEMNIFICATION
6.1 PERSONAL INJURY AND PROPERTY DAMAGE LIABILITY
Fluor Daniel shall indemnify, defend and hold Owner harmless from any and
all claims, liabilities and causes of action for injury to or death of any
person, or for damage to or destruction of property (excluding, however,
the property referred to in Sections 6.2 and 6.3) to the extent resulting
from any and all negligent acts or omissions or willful misconduct of
Fluor Daniel, or its subcontractors.
6.2 PROTECTION OF THE FACILITIES
Fluor Daniel shall be responsible for and obligated to replace, repair or
reconstruct, and to furnish any material, equipment or supplies furnished
by Fluor Daniel, its subcontractors or vendors which are lost, damaged or
destroyed prior to transfer of care, custody and control of the facility
or the
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affected portion thereof to Owner, however such loss or damage shall
occur. Owner assumes all responsibility for such loss, damage or
destruction after such transfer of care, custody and control to Owner.
6.3 OWNER'S PROPERTY
As between Fluor Daniel and Owner prior to transfer and acceptance as
stated in Section 10.1, Owner assumes responsibility for all loss of or
damage to property owned by or in the custody of Owner which includes the
Work, all items to be incorporated into the Work whether at the site, in
storage or in transit as designated to Owner by Fluor Daniel (unless
otherwise the responsibility of a supplier), however such loss or damage
shall occur and agrees to maintain All Risk Builder's Risk Insurance, Fire
and Extended Perils Coverage, and, Boiler and Machinery Explosion Coverage
naming Fluor Daniel and it subcontractors as additional insured and does
hereby agree to cause its insurance underwriters to waive or permit Owner
to waive their rights of subrogation against Fluor Daniel and its
subcontractors under any such insurance which Owner may carry. If
Owner is not the sole owner of the facility or existing property at or
adjacent to the jobsite, Owner shall obtain an undertaking from the
other owners thereof sufficient to provide to Fluor Daniel the same
protection from liability for loss or damage to such property as would
be afforded to Fluor Daniel under this Section if Owner were the sole
owner. Notwithstanding the foregoing, Fluor Daniel shall be liable for
the first $20,000 in damages to Owner's property which results from the
negligent acts of Fluor Daniel, its employees or subcontractors.
6.4 LIMITATIONS
Fluor Daniel shall have no obligation to Owner with respect to any damage
or loss to property caused by the perils of war, insurrection, revolution,
nuclear reaction or other like perils as may be excluded under the scope
and limits of the insurance coverage provided pursuant to Section 7.1.
ARTICLE VII
INSURANCE
7.1 COMMITMENT
Commencing with the performance of its Services hereunder, and
continuing until such Services have been completely performed (except
with regard to "Builder's Risk" Course of Construction Insurance
specified in subparagraph (d) below), Fluor Daniel and its
subcontractors shall maintain standard insurance policies as follows:
(a) Workers' Compensation and/or all other Social Insurance in accordance
with the statutory requirements of the state, province or country
having jurisdiction over Fluor Daniel's employees who are engaged in
the Services, with Employer's Liability not less than One Million
Dollars ($1,000,000) each accident; and
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(b) Commercial General Bodily Injury and Property Damage Liability,
including Contractual and Contractor's Protective Liability. This
insurance shall cover bodily injury to or death of persons and/or
loss of or damage to property of parties other than Owner. Such
insurance shall be provided in a Combined Single Limit of One
Million Dollars ($1,000,000) for each occurrence; and
(c) Business Automobile Liability Insurance covering owned, non-owned
and hired automobile, with a combined single limit of liability
for bodily injury and/or property damage of One Million Dollars
($1,000,000) each occurrence.
(d) Owner shall provide All Risk "Builder's Risk" Insurance protecting
the respective interests of Owner, Fluor Daniel and Fluor Daniel's
subcontractors covering physical loss or damage during course of
construction and any materials or equipment while at the jobsite,
awaiting and during erection, and until transfer of care, custody and
control of the facilities, or portion thereof, to Owner pursuant to
Section 10.1. This insurance shall be maintained to cover the value
of the work at risk. This insurance shall not cover losses caused by
the perils of war or nuclear reaction as defined in the policy of
insurance nor shall it cover loss of use, business interruption or
loss of product.
(e) Ocean Marine Cargo Insurance covering any and all materials and
equipment which may be in transit to the jobsite by wet marine
bottoms, or by air transportation and/or by connecting conveyances.
Such insurance shall be maintained to cover limits at risk.
(f) Excess Liability Insurance for liability in excess of that which is
covered in Section 7.1(b) and (c) above up to the limit of
$10,000,000 per occurrence and in the aggregate.
7.2 CERTIFICATES
The foregoing insurance shall be maintained with carriers satisfactory to
Owner, and the terms of coverage shall be as evidenced by certificates to
be furnished Owner prior to commencement of Services. All renewal
certificates shall be supplied to Owner within five (5) business days of
removal. Such certificates shall provide that thirty (30) days' written
notice shall be given to Owner prior to cancellation of any policy.
7.3 Compliance by Fluor Daniel with the requirements of Article VII shall not
relieve Fluor Daniel of its liabilities and obligations under this
Agreement or resulting from performance of Services.
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ARTICLE VIII
TERMINATION AND CANCELLATION
8.1 TERMINATION BY OWNER
Should Fluor Daniel become insolvent or bankrupt, or should Fluor Daniel
refuse or neglect to supply a sufficient number of properly skilled
workmen, tools or material within Fluor Daniel's control, or should
Fluor Daniel commit a substantial breach of this Agreement, and should
Fluor Daniel thereafter fail to commence proceedings in good faith to
remedy such within ten (10) days after written demand by Owner, Owner
may terminate this Agreement and enter upon the premises and take
possession thereof and at the same time instruct Fluor Daniel to remove
from the premises all of its tools, equipment and supplies, or Owner
may take possession of any and all of such tools, equipment and
supplies for the purpose of completing the Services. Upon any such
termination, Fluor Daniel shall be compensated for all reimbursable
costs incurred for Services then performed in accordance with the
provisions of Article III plus any Fee (calculated at five (5) percent
of the reimbursable cost incurred as of the date of termination)
associated with such completed Services. Except as specifically stated
in Section 3.1, Owner shall have no liability to Fluor Daniel for any
portion of the Fee associated with Services not performed. In the
event that Owner uses any of Fluor Daniel's equipment or tools, Owner
shall return the same to Fluor Daniel in good condition and repair,
reasonable wear and tear excepted, and shall pay Fluor Daniel for the
use thereof as provided in Article III.
8.2 TERMINATION BY FLUOR DANIEL
Should Owner become insolvent or bankrupt or commit a breach or default of
any of the covenants or obligations hereunder and (a) fail to remedy
the same within ten (10) days after written notice thereof from Fluor
Daniel if the breach constitutes a failure to pay money, or (b) fail to
commence proceedings to remedy the same within ten (10) days after
written notice thereof from Fluor Daniel and thereafter to proceed
diligently in remedying the same if the breach is other than to pay
money, then Fluor Daniel may terminate this Agreement. Should Fluor
Daniel so terminate this Agreement, it shall be paid for all costs
incurred and Fee (calculated at five (5) percent of the reimbursable
cost incurred as of the date of termination) earned for Services
performed to the date of termination, including any cancellation
charges by vendors and subcontractors, and the cost of all
demobilization expense, in accordance with the provisions of Article
III.
8.3 CANCELLATION
Owner reserves the right to cancel the Services for any reason and at
anytime upon ten (10) days' written notice to Fluor Daniel, unless Fluor
Daniel agrees in writing to a shorter notice period. Upon receipt of such
termination notice, Fluor Daniel shall, unless the notice directs
otherwise, immediately discontinue performance of the Services and make
every reasonable effort to procure cancellation of any subcontracts or
supply agreements upon terms satisfactory to Owner. Cost of
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such assistance shall be reimbursable. Should the Services be so
cancelled by Owner without cause, Fluor Daniel shall be paid for all
reimbursable costs incurred and Fee earned for Services performed to
the date of cancellation and through demobilization, including any
cancellation charges by vendors and subcontractors, in accordance with
the provisions of Article III.
ARTICLE IX
COMPLETION
9.1 MECHANICAL AND PERFORMANCE COMPLETION
Definition of Mechanical Completion - Definition is in accordance with
Exhibit A-1.
Definition of Performance Completion - As defined in accordance with
Exhibit A-1.
Upon mutual agreement of the parties, the definition of Mechanical
Completion and Performance Completion will be added by amendment.
9.2 SCHEDULED COMPLETION
On or about March 15, 1996, Fluor Daniel shall provide to Owner a detailed
Project Scope of Work, a Guaranteed Maximum Price, a Project Schedule for
the Project and the definitions of Mechanical Completion and Performance
Completion. The parties intend to agree on these issues prior to April 1,
1996.
9.3 LIQUIDATED DAMAGES
The Project Schedule shall include a target Performance Completion date
for Line 4 of December 1, 1996. For every day after January 1, 1997
that Performance Completion of Line 4 has not be achieved, Fluor Daniel
shall pay Owner as liquidated damages $5,000 per day until such
Completion is achieved. For every day in advance of December 1, 1996
that Performance Completion is achieved, Owner shall pay Fluor Daniel a
bonus of $10,000 per day. Under no condition shall either the
liquidated damages or bonus exceed $500,000. Liquidated damages as set
forth in this Section 9.3, shall be the Owner's sole and exclusive
measure of damages in the event of Fluor Daniel's failure to achieve
Performance Completion of Line 4 by December 1, 1996.
ARTICLE X
TRANSFER AND ACCEPTANCE
10.1 CARE, CUSTODY AND CONTROL
When Fluor Daniel deems that the facilities or any portion thereof are
mechanically complete and ready for initial start-up operation, it shall
so advise Owner. Unless Owner shall advise within 10
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business days thereafter why the facilities or portions thereof are not
mechanically complete and ready for initial start-up operation, mechanical
completion shall be deemed to have occurred and the care, custody and
control thereof shall pass to Owner. In any event, the care, custody
and control of the facilities or portion thereof shall pass to Owner no
later than the time when Owner takes physical possession thereof.
Except for Fluor Daniel's warranty obligation under this Agreement,
from and after the date of the transfer of the care, custody and
control of the facilities or portion thereof, Owner shall assume all
risks of physical loss or damage to Owner's property including without
limitation the Work thereto and shall, and does hereby, release Fluor
Daniel from and will require its insurers to waive their rights of
subrogation against Fluor Daniel and its subcontractors for such loss
or damage to the facilities which may thereafter occur.
10.2 ACCEPTANCE
When Fluor Daniel deems it has completed the Services, it shall so notify
Owner in writing. Within 10 business days thereafter, Owner shall advise
Fluor Daniel in writing of any defects in the Services for which Fluor
Daniel is responsible under this Agreement. As soon as any such defects
are corrected (or as soon as the 10 day period for such notice has expired
if Owner does not advise Fluor Daniel of any such defects within the
period), Owner shall accept the Services in writing or they shall be
deemed accepted, subject to Fluor Daniel's warranty obligation hereunder.
ARTICLE XI
GENERAL PROVISIONS
11.1 INDEPENDENT CONTRACTOR
Fluor Daniel shall perform and execute the provisions of this Agreement as
an independent contractor with respect to the Services to be performed
hereunder, except that any purchase orders for process or technology
related materials and equipment will be issued and administered as agent
for Owner. Except as hereinabove noted, neither Fluor Daniel nor its
subcontractors, nor the employees of either, shall be deemed to be the
servants, employees or agents of Owner.
11.2 SAFETY AND ENVIRONMENTAL
(a) Fluor Daniel shall design the facilities for which it has design
responsibility so that they comply with the accepted industry
interpretation of applicable safety legislation, including State and
Federal Occupational Safety and Health Acts (OSHA), and with all
applicable environmental laws, rules and regulations in force at the
time of development of designs. If Owner requests changes beyond
those legally required and outside the scope of services,
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Owner and Fluor Daniel shall mutually agree upon any changes
required, and such changes shall be treated as changes in the scope
of the Services;
(b) Fluor Daniel shall perform its Services in accordance with accepted
industry interpretation of applicable laws, rules, regulations and
orders relating to environmental concerns or the safety of Fluor
Daniel's employees and shall require each construction contractor to
have an appropriate safety program covering the construction
contractor's employees;
(c) From and after transfer of care, custody and control of the
facilities or portion thereof but subject to Fluor Daniel's
warranty obligation hereunder, Owner assumes all responsibility
for compliance by the facilities or portion thereof with
applicable safety and environmental laws, rules, regulations and
orders;
(d) Owner agrees to be responsible for any claim made by any employee of
Owner against Owner or Fluor Daniel by reason of any personal injury
or death which results from Owner's violation of any State or
Federal Occupational Safety and Health Act. Similarly, Fluor Daniel
agrees to be responsible for claims made by any employee or
subcontractor of Fluor Daniel against Fluor Daniel or Owner by reason
of any personal injury or death which results from Fluor Daniel's
violation of any State or Federal Occupational Safety and Health Act.
(e) Anything herein to the contrary notwithstanding, title to, ownership
of, and legal responsibility and liability for any and all "Pre-
Existing Contamination" shall at all times remain with Owner. Pre-
Existing Contamination is any hazardous or toxic substance present
at the Project site which was not brought onto such site by Fluor
Daniel or its subcontractor. Owner releases, and agrees to
defend, indemnify and hold Fluor Daniel harmless from and against
any and all liability which may in any manner arise or in any way
be directly or indirectly caused by such Pre-Existing
Contamination.
11.3 FORCE MAJEURE
Any delays in or failure of performance by Owner or Fluor Daniel, other
than payment of money, shall not constitute default hereunder if and to
the extent such delays or failures of performance are caused by
occurrences beyond the control of Owner or Fluor Daniel, as the case
may be, including, but not limited to: Acts of God or the public enemy;
expropriation or confiscation of facilities; compliance with any order
or request of any governmental authority; act of war; rebellion or
sabotage or damage resulting therefrom; fires, floods, explosions,
accidents; riots or strikes or other concerted acts of workmen, whether
direct or indirect; or any causes, whether or not of the same class or
kind as those specifically above named, which are not within the
control of Owner or Fluor Daniel respectively, and which by the
exercise of reasonable diligence, Owner or Fluor Daniel are unable to
prevent Fluor Daniel shall notify Owner within a reasonable time of
Fluor Daniel's knowledge of a force majeure event. Fluor Daniel and
Owner shall jointly develop a plan to mitigate the effects of any force
majeure event on the Project. The Project Schedule, if any, completion
date(s), and any cost estimate(s) and/or maximum cost shall be
equitably adjusted to account for any
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force majeure delay and Fluor Daniel shall be reimbursed by Owner under
Article III for all costs incurred in connection with or arising from a
force majeure event including, but not limited to, those costs incurred
in the exercise of reasonable diligence to avoid or mitigate a force
majeure event.
11.4 TITLE TO PLANS AND SPECIFICATIONS
Drawings and specifications prepared by Fluor Daniel pursuant to this
Agreement which Owner may require Fluor Daniel to supply in accordance
with this Agreement shall become the property of Owner, Fluor Daniel
hereby assigns and conveys all of its right, title and interest in and
to any intellectual property rights which it may own in any and all
work product produced under this Agreement. Owner agrees to indemnify,
defend, and hold Fluor Daniel harmless from any liabilities arising out
of the use by Owner of such designs and specifications except for the
purpose for which they were intended.
It is acknowledged that Fluor Daniel may utilize manuals, computer
programs and other technical and procedural aids in connection with the
Services which are not provided by Owner and may be proprietary to
Fluor Daniel or third parties from whom Fluor Daniel has obtained
permission to utilize same. Such items shall remain the property of
Fluor Daniel and shall not be used or copied by Owner without Fluor
Daniel's express written permission."
11.5 PATENTS
Fluor Daniel shall indemnify and defend Owner against any claims for
infringement of intellectual property rights regarding any items or
processes designed by Fluor Daniel, except where such design process was
supplied by Owner.
11.6 SECRECY AGREEMENTS
Any agreements or representations between Fluor Daniel and Owner entered
into prior to the effective date hereof relating to secrecy or
confidentiality of information exchanged between Fluor Daniel and Owner
shall survive any completion of the Services hereunder, or any other
termination or cancellation of this Agreement, in accordance with the
respective terms and conditions of such other agreement or agreements.
All confidential information disclosed by Owner to Fluor Daniel, shall be
returned to Owner no later than the end of the effective date of all
confidentiality agreements.
Further, any confidential information which is not returned to Owner
shall be destroyed. Fluor Daniel shall be responsible for ensuring
compliance with this provision on the part of all subcontractors,
representatives and employees. Fluor Daniel, including all
subcontractors, representatives and employees, shall continue to keep
all Owner proprietary information obtained during the course of
performing the Services confidential at all times subsequent to the
termination date of their Agreements between Owner and Fluor Daniel.
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11.7 REPRESENTATIONS AND REMEDIES
Fluor Daniel makes no representations, covenants, warranties or
guarantees, express or implied, other than those expressly set forth
herein. IMPLIED WARRANTIES OF AND FITNESS FOR A PARTICULAR PURPOSE ARE
SPECIFICALLY EXCLUDED. The parties' rights, liabilities,
responsibilities and remedies with respect to the Services, whether in
contract or otherwise, shall be exclusively those expressly set forth
in this Agreement.
11.8 DAMAGES
Fluor Daniel's responsibility for consequential damages, including,
without limitation, liability for loss of use of the facilities which
are the subject of this Agreement or existing property, loss of
profits, loss of product or business interruption however the same may
be caused, shall be limited to $125,000 per occurrence, up to an
aggregate maximum of $500,000, for lost business income of Owner
resulting from Fluor Daniel's negligent or willful acts or omissions.
Fluor Daniel's liability is limited solely to interruption of utility
services or destruction of the production lines or facility by Fluor
Daniel which causes an interruption in the product lines. Owner hereby
releases and agrees to defend and (except to the extent of Fluor
Daniel's sole negligence) indemnify Fluor Daniel from and against any
liability arising from Owner's or Owner's assignee's ownership, use or
operation of the facilities which are the subject of this Agreement,
except only as provided in Article V. If such facilities are to be
owned or operated by a person or entity other than Owner, Owner shall
obtain agreement of such other person or entity to the foregoing.
11.9 LIENS
Fluor Daniel shall follow the directions of Owner whose preference is to
avoid the filing of liens with respect to the action to be taken by Fluor
Daniel regarding any lien filed on the facilities and Fluor Daniel shall,
if ordered by Owner, discharge such lien and the costs incurred by Fluor
Daniel in so doing shall be reimbursable under Article III.
11.10 SURPLUS MATERIALS
It is understood that in performing Services of the scope and complexity
of the Services to be performed hereunder, it is necessary and
inevitable that certain surplus material be purchased. The purchase
price and transportation costs of such surplus materials shall be
considered reimbursable costs to the same extent as any materials
incorporated into the completed facilities. Fluor Daniel shall, as
soon as it is feasible to do so, determine and advise Owner what
materials are surplus materials and thereafter shall dispose of such
materials as directed by Owner, and the reimbursable costs shall be
credited by an amount equal to the net proceeds therefrom.
11.11 AUDIT AND MAINTENANCE OF RECORDS
Owner shall have the right to audit and inspect Fluor Daniel's project
records and accounts covering costs hereunder at all reasonable times
during the course of the Services and for a period of one (1) year after
the acceptance thereof pursuant to Section 10.2 hereof; provided, however,
that the
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purpose of any such audit shall be only for verification of such costs and
compliance with this Agreement and that Fluor Daniel shall not be required
to keep records of or provide access to those of its costs covered by the
Fee, fixed rates, or of costs which are expressed in terms of percentages
of other costs.
11.12 ASSIGNMENT
This Agreement shall not be assignable by either party without the prior
written consent of the other party hereto, except that it may be
assigned without such consent to the successor of either party, or to a
person, firm or corporation acquiring all or substantially all of the
business assets of such party or to a parent corporation or wholly
owned subsidiary of either party, but such assignment shall not relieve
the assigning party of any of its obligations under this Agreement. No
assignment of this Agreement shall be valid until this Agreement shall
have been assumed by the assignee. When duly assigned in accordance
with the foregoing, this Agreement shall be binding upon and shall
inure to the benefit of the assignee.
11.13 SUBCONTRACTS
Fluor Daniel may subcontract any portion of the Services. Fluor Daniel
may have portions of the Services performed by its affiliated entities
or their employees if approved by Owner, such approval shall not be
unreasonably withheld. In either event Fluor Daniel shall be
responsible for such Services and Owner shall look solely to Fluor
Daniel as if the Services were performed by Fluor Daniel. Fluor Daniel
will develop a bid list for the Services it wishes to subcontract and
Owner shall approve the bid list, provided however, such approval shall
not be unreasonably withheld, Fluor Daniel may subcontract any services
to entities on the approved bid list. Owner shall have the right to
review all Contracts with subcontractors.
11.14 NOTICES
All notices pertaining to this Agreement shall be in writing and, if to
Owner, shall be sufficient when sent registered or certified mail to Owner
at the following address:
Buckbee-Mears Cortland
Kellogg Road
P. O. Box 189
Cortland, New York 13045
Attention: Mr. Michael Simms
Project Manager
All notices to Fluor Daniel shall be sufficient when sent registered or
certified mail to Fluor Daniel at the following address:
20
<PAGE>
Fluor Daniel, Inc.
100 Fluor Daniel Drive
Greenville, SC 29607
Attention: Mr. Robert Powell, Project Director
11.15 INTERPRETATION
(a) This Agreement shall be governed by and interpreted in accordance
with the laws of New York.
(b) Headings and titles of Articles, Sections, paragraphs and other
subparts of this Agreement are for convenience of reference only and
shall not be considered in interpreting the text of this Agreement.
Modifications or amendments to this Agreement must be in writing and
executed by duly authorized representatives of each party.
(c) Unless specifically stated to the contrary therein, indemnities
against, releases from and limitations on liability expressed in this
Agreement shall apply even in the event of the fault, negligence or
strict liability of the party indemnified or released or whose
liability is limited and shall extend to the officers, directors,
employees, agents, licensors and related entities of such party.
(d) In the event that any portion or all of this Agreement is held to
be void or unenforceable, the parties agree to negotiate in good
faith to reach an equitable agreement which shall effect the
intent of the parties as set forth in this Agreement, and all
other provisions shall remain in full force and effect.
(e) The parties agree to look solely to each other with respect to the
performance of this Agreement and the Services to be provided
hereunder. This Agreement and each and every provision hereof is for
the exclusive benefit of Owner and Fluor Daniel and not for the
benefit of any third party, and no third party shall be entitled to
rely upon or enforce the terms of this Agreement, or to be a third
party beneficiary thereof, except to the extent expressly provided in
Section 11.15 (c).
(f) The provisions of this Agreement which by their nature are
intended to survive the termination, cancellation, completion or
expiration of the Agreement, including, but not limited to, any
expressed limitations of or releases from liability, shall
continue as valid and enforceable obligations of the parties
notwithstanding any such termination, cancellation, completion or
expiration.
(g) No failure by either party to insist on performance of any term,
condition, or instruction, or to exercise any right or privilege
included in this Agreement, and no waiver of any breach shall
constitute a waiver of any other or subsequent term, condition,
instruction, breach, right or privilege.
21
<PAGE>
(h) The parties acknowledge and agree that the terms and conditions of
this Agreement, including but not limited to those relating to
allocations and assumptions of, releases from, exclusions against and
limitations of liability, have been freely and fairly negotiated.
Each party acknowledges that in executing this Agreement they have
relied solely on their own judgement, belief, and knowledge, and
such advice as they may have received from their own counsel, and
they have not been influenced by any representation or statements
made by any other party or its counsel. No provision in this
Agreement is to be interpreted for or against any party because
that party or its counsel drafted such provision.
(i) Any dispute, controversy, claim or cause of action arising out of or
relating to this Agreement, or any breach thereof, shall be resolved
by discussion in good faith between senior officials of the parties.
If the parties are unable to resolve a dispute through good faith
discussions within 30 days and the amount in controversy is less
than $2,000,000, the parties agree to submit such dispute to
mediation by a neutral third party agreed upon by the parties.
The cost of mediation shall be borne equally by the parties. In
the event the parties are unable to resolve the dispute through
mediation within 30 days, such dispute shall be finally settled by
binding arbitration in accordance with the Construction
Arbitration Rules of the American Arbitration Association in
effect on the date of this Agreement by a single arbitrator
appointed by such Association in accordance with such Rules. The
allocation of the costs of the arbitration shall be determined by
the arbitrator. The place of arbitration shall be Syracuse, New
York. The award rendered by the arbitrator shall be final and
binding on the parties, and judgement upon the award may be
entered in any court having proper jurisdiction. If the amount of
either party's aggregate claims is equal to or greater than
$2,000,000, the parties shall resolve their dispute through
litigation, unless otherwise agreed by both parties. Fluor Daniel
hereby consents to jurisdiction in New York for any such action.
Unless otherwise designated by the Owner in writing, Fluor Daniel
shall continue to perform the Services during any dispute
resolution proceedings, provided the aggregate amount in dispute
is less than $500,000 and subject to the Owner making payment to
Fluor Daniel of undisputed costs.
11.16 SOLICITATION OF EMPLOYEES - Fluor Daniel agrees that, for a period of
two years from the date of this Agreement, it will not, directly
or indirectly, solicit for employment or for hire any employee of
the Owner or any of its affiliates with whom Fluor Daniel has had
contact or who became known to Fluor Daniel in connection with its
performance of the Services; provided, however, that the foregoing
provision shall not prevent Fluor Daniel from employing any such
person who contacts it on his/her own initiative without any
direct or indirect solicitation by or encouragement from Fluor
Daniel.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
BUCKBEE-MEARS CORTLAND FLUOR DANIEL, INC.
a Unit of BMC Industries Inc.
BY /s/William A. Guernsey BY /s/ James Whitten
---------------------------- ---------------------
TITLE President - BMC Mask Operations TITLE Vice President
------------------------------- ---------------
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,966
<SECURITIES> 3,022
<RECEIVABLES> 26,054
<ALLOWANCES> 2,759
<INVENTORY> 39,938
<CURRENT-ASSETS> 81,042
<PP&E> 181,192
<DEPRECIATION> 91,613
<TOTAL-ASSETS> 187,729
<CURRENT-LIABILITIES> 49,515
<BONDS> 0
0
0
<COMMON> 53,419
<OTHER-SE> 61,753
<TOTAL-LIABILITY-AND-EQUITY> 187,729
<SALES> 68,301
<TOTAL-REVENUES> 68,301
<CGS> 55,261
<TOTAL-COSTS> 59,046
<OTHER-EXPENSES> 50
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> 9,194
<INCOME-TAX> 3,011
<INCOME-CONTINUING> 6,183
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,183
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
<PAGE>
EX 99.1
CONTACT: Michael P. Hawks (NYSE -- BMC)
(612) 851-6030 FOR IMMEDIATE RELEASE
BMC REPORTS RECORD FIRST QUARTER EARNINGS
April 18, 1996 -- Minneapolis, MN -- BMC Industries, Inc. today reported first
quarter net earnings of $6,183,000 or $.22 per share, up 32% from earnings of
$4,694,000 or $.17 per share in the year-earlier period. First quarter total
revenues were $68,301,000, an increase of 11% from $61,334,000 in the prior year
quarter.
Paul B. Burke, BMC's chairman and chief executive officer stated "The first
quarter represents a new first quarter earnings record for BMC and is the
twentieth 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. This long run of increased quarterly earnings is a tribute
to the entire BMC team as every one of our operations contributed meaningfully
to our first quarter results."
The Company's Precision Imaged Products operation contributed significantly to
the first quarter results. Excluding sales of long-term equipment and technology
contracts, first quarter Precision Imaged Products sales increased 25% over the
first quarter of 1995. The profitability of Precision Imaged Products increased
50% when compared to the year-earlier quarter. The profitability of the
aperture mask operation increased due to the continued sales mix shift to
higher-margin products and improved operating performance. In the first
quarter, sales of invar, jumbo (30" and larger) and large (25" to 29") aperture
masks increased 53%, 98%, and 29%, respectively, over first quarter 1995 sales.
In addition, BMC's new high-resolution aperture mask line at the Company's
manufacturing facility in Germany moved up the yield curve over the course of
the quarter and is operating at planned yield levels. The Company anticipates
this new line will have a positive impact on both revenues and earnings
beginning in the second quarter of 1996. Finally, Buckbee-Mears St. Paul's
profitability in the first quarter increased 67% over the first quarter of 1995,
due primarily to increased sales, sales mix changes and production efficiencies.
BMC's Optical Products operation also contributed to the record first quarter
results. First quarter sales of Optical Products increased 5% over the first
quarter of 1995, while profitability increased 38%. The increase in sales was
driven by a 15% increase in plastic
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<PAGE>
lens sales and a 4% increase in glass lens sales. Plastic lens sales benefited
from the availability of lower cost offshore manufactured product.
Polycarbonate lens sales were up minimally at 1% over an extremely high 1995
first quarter when Optical Products experienced significant stocking orders from
major customers. The increase in Optical Products profitability in the first
quarter was driven by strong gross margin contributions from polycarbonate and
glass products.
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".
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<PAGE>
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31
----------------------
1996 1995
<S> <C> <C>
- --------------------------------------------------------------------------------
Revenues
New sales of primary products $68,109 $57,753
Equipment and technology sales 192 3,581
- --------------------------------------------------------------------------------
Total Revenues 68,301 61,334
- --------------------------------------------------------------------------------
Operating Costs and Expenses
Cost of sales of primary products 55,095 48,346
Cost of equipment and technology sales 166 1,911
Selling 2,558 2,275
Administrative 1,227 1,254
- --------------------------------------------------------------------------------
Total Operating Costs and Expenses 59,046 53,786
- --------------------------------------------------------------------------------
Income from Operations 9,255 7,548
- --------------------------------------------------------------------------------
Other Income and (Expense)
Interest expense (130) (77)
Interest income 119 185
Other income (expense) (50) (67)
- --------------------------------------------------------------------------------
Earnings before Income Taxes 9,194 7,589
Income Taxes 3,011 2,895
- --------------------------------------------------------------------------------
Net Earnings $ 6,183 $ 4,694
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net Earnings Per Share $ 0.22 $ 0.17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number of Shares Included in Per Share Computation 28,278 28,029
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
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<PAGE>
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
MARCH 31 December 31
----------------------
ASSETS 1996 1995
<S> <C> <C>
- --------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents $ 6,988 $ 15,874
Trade accounts and notes receivable,
net of allowances 23,295 23,003
Inventories 39,938 34,772
Deferred income taxes 4,343 3,753
Other current assets 6,478 5,964
- --------------------------------------------------------------------------------
Total Current Assets 81,042 83,366
- --------------------------------------------------------------------------------
Property, Plant and Equipment 181,192 171,711
Less Accumulated Depreciation 91,613 90,302
-------- --------
Property, Plant and Equipment, Net 89,579 81,409
-------- --------
Deferred Income Taxes 5,457 5,362
Other Assets, Net 11,651 12,195
- --------------------------------------------------------------------------------
Total Assets $187,729 $182,332
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Current Liabilities
Accounts payable $ 20,228 $ 20,408
Income taxes payable 9,599 9,308
Accrued expenses and other liabilities 19,688 20,920
- --------------------------------------------------------------------------------
Total Current Liabilities 49,515 50,636
- --------------------------------------------------------------------------------
Other Liabilities 21,556 21,654
Deferred Income Taxes 1,486 1,576
Stockholders' Equity
Common stock 54,710 52,974
Retained earnings 56,804 50,962
Cumulative translation adjustment 4,949 5,749
Other (1,291) (1,219)
- --------------------------------------------------------------------------------
Total Stockholders' Equity 115,172 108,466
- --------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $187,729 $182,332
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
