<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ------- SECURITIES EXCHANGE ACT OF 1934. For the Quarterly Period ended
June 30, 1997.
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 27,749,672 shares of common stock as of
August 11, 1997. There is no other class of stock outstanding.
Page 1 of 23
Exhibit Index Begins at Page 10.
<PAGE>
PART I: FINANCIAL INFORMATION
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
Item 1: Financial Statements
June 30 December 31
------- -----------
ASSETS 1997 1996
- --------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents $ 2,092 $ 2,544
Trade accounts and notes receivable,
net of allowances 31,310 24,979
Inventories 59,177 50,451
Deferred income taxes 6,356 5,372
Other current assets 10,705 8,354
- --------------------------------------------------------------------------------
Total Current Assets 109,640 91,700
- --------------------------------------------------------------------------------
Property, Plant and Equipment 268,246 220,489
Less Accumulated Depreciation 99,347 96,644
--------- ---------
Property, Plant and Equipment, Net 168,899 123,845
--------- ---------
Deferred Income Taxes 5,019 5,797
Other Assets, Net 12,258 11,627
- --------------------------------------------------------------------------------
Total Assets $ 295,816 $ 232,969
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Current Liabilities
Short-term borrowings $ 1,464 $ 1,355
Accounts payable 25,901 19,434
Income taxes payable 9,292 7,657
Accrued expenses and other liabilities 22,006 21,900
- --------------------------------------------------------------------------------
Total Current Liabilities 58,663 50,346
- --------------------------------------------------------------------------------
Long-Term Debt 54,949 16,634
Other Liabilities 18,834 19,421
Deferred Income Taxes 2,506 2,460
Stockholders' Equity
Common stock 57,776 56,551
Retained earnings 103,678 84,629
Cumulative translation adjustment 162 3,974
Other (752) (1,046)
- --------------------------------------------------------------------------------
Total Stockholders' Equity 160,864 144,108
- --------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 295,816 $ 232,969
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 Six Months Ended
June 30 June 30
----------------------------- -----------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Revenues $ 80,257 $ 68,174 $ 157,384 $ 136,475
Cost of products sold 58,398 49,691 119,543 104,952
- -----------------------------------------------------------------------------------------------------------------
Gross margin 21,859 18,483 37,841 31,523
Selling 2,737 2,559 5,574 5,117
Administrative 1,089 1,288 2,628 2,515
- -----------------------------------------------------------------------------------------------------------------
Income from Operations 18,033 14,636 29,639 23,891
- -----------------------------------------------------------------------------------------------------------------
Other Income and (Expense)
Interest expense (160) (60) (304) (190)
Interest income 56 31 98 150
Other income (expense) (33) 81 229 31
- -----------------------------------------------------------------------------------------------------------------
Earnings before Income Taxes 17,896 14,688 29,662 23,882
Income Taxes 5,907 4,846 9,790 7,857
- -----------------------------------------------------------------------------------------------------------------
Net Earnings $ 11,989 $ 9,842 $ 19,872 $ 16,025
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Net Earnings Per Share $ 0.42 $ 0.35 $ 0.70 $ 0.57
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Number of Shares Included in Per Share Computation 28,496 28,369 28,477 28,324
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Dividends Declared Per Share $ 0.015 $ 0.0125 $ 0.03 $ 0.025
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
Page 3
<PAGE>
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30
----------------------------
1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Net Cash Provided by Operating Activities
Net earnings $ 19,872 $ 16,025
Depreciation and amortization 7,088 5,127
Changes in operating assets and liabilities (11,725) (16,896)
- ---------------------------------------------------------------------------------------------
Total 15,235 4,256
- ---------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities
Additions to property, plant and equipment (54,048) (22,079)
Business acquisitions, net of cash acquired (1,817) --
- ---------------------------------------------------------------------------------------------
Total (55,865) (22,079)
- ---------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities
Net increase in short-term borrowings 211 6,020
Net increase in long-term debt 39,343 --
Common stock issued 1,225 2,356
Cash dividends paid (822) (679)
Other 294 (37)
- ---------------------------------------------------------------------------------------------
Total 40,251 7,660
- ---------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (73) (171)
- ---------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (452) (10,334)
Cash and Cash Equivalents at Beginning of Period 2,544 15,874
- ---------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 2,092 $ 5,540
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</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 June 30, 1997,
and the results of operations and the cash flows for the periods ended June
30, 1997 and 1996. Such adjustments are of a normal recurring nature.
Certain items in the financial statements for the periods ended June 30,
1996 have been reclassified to conform to the presentation for the periods
ended June 30, 1997. The results of operations for the three-month and
six-month periods ended June 30, 1997 are not necessarily indicative of the
results to be expected for the full year. The balance sheet as of December
31, 1996 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, 1996.
2. Derivative Financial Instruments
In January 1997, the SEC issued new rules related to disclosures about
derivative financial instruments. The new rules, effective for all
financial statements issued for periods ending after June 15, 1997,
require accounting policy disclosures about derivative financial
instruments used by the Company. Effective for periods ending after
June 15, 1998, the new rules also require quantitative and qualitative
disclosures about exposures to market risk from derivative financial
instruments.
Derivative financial instruments are used by the Company to reduce
foreign exchange and interest rate risks.
Foreign Currency Exchange Options - As of June 30, 1997, the Company had
approximately $10.5 million of outstanding foreign currency exchange
options to exchange U.S. dollars for German marks at a set exchange
rate. These foreign exchange options do not expose the Company to
financial risk as the contracts provide an option to exchange the
currencies, but do not obligate the Company to make a foreign currency
exchange. Premiums paid for foreign currency exchange options are
amortized to Other Expense over the life of the options. Upon exercise
of foreign currency exchange options, gains are included in income.
Interest Rate Swap Agreement - As of June 30, 1997, the Company had
entered into an interest rate swap agreement that allows the Company to
swap a variable interest rate for a fixed interest rate of 6.365% on $15
million of notional debt for a period of two years ending March, 1999.
The notional amount of debt is not a measure of the Company's exposure
to credit or market risks and is not included in the condensed
consolidated balance sheet. Fixing the interest rate minimizes the
Company's exposure to the uncertainty of floating interest rates during
this two year period. Amounts to be paid or received under the interest
rate swap agreement are accrued and recorded as an adjustment to
Interest Expense during the term of the interest rate swap agreement.
3. Inventories
June 30, 1997 December 31, 1996
------------- -----------------
Raw materials $ 16,317 $ 15,461
Work in process 14,496 9,807
Finished goods 28,364 25,183
--------- ---------
Total Inventories $ 59,177 $ 50,451
--------- ---------
--------- ---------
<PAGE>
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 any period.
Page 5
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Currently, earnings per share calculations are performed pursuant to
Accounting Principles Board Opinion No. 15, EARNINGS PER SHARE. The
Company will be required to present earnings per share data in accordance
with Statement of Accounting Standards No. 128, EARNINGS PER SHARE,
commencing with the fourth quarter of 1997. Statement No. 128 will require
the presentation of basic earnings per share and diluted earnings per
share. Basic earnings per share is calculated as net earnings divided by
the weighted average outstanding common shares. Diluted earnings per share
includes the effect of all outstanding dilutive securities, such as stock
options, and is calculated similarly to the current fully-diluted earnings
per share. While early adoption of Statement No. 128 is not permitted, the
following pro-forma supplemental data is presented using the Statement No.
128 approach:
Three months ended Six months ended
June 30 June 30
------------------ ----------------
1997 1996 1997 1996
---- ---- ---- ----
Basic $ 0.44 $ 0.36 $ 0.72 $ 0.59
Diluted 0.42 0.35 0.70 0.57
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,
1996.
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 JUNE 30, 1997 AND 1996
Total revenues for the second quarter of 1997 increased $12.1 million or 18%
from the second quarter of 1996. Revenues of the Precision Imaged Products
group for the second quarter increased 25% due primarily to sales of large
(25" to 29") and invar television aperture masks increasing 35% and 31%,
respectively, over second quarter 1996 sales. Second quarter sales of jumbo
(30" and larger) television aperture masks slightly lagged 1996. Second
quarter 1996 jumbo sales were strong with a 42% increase over 1995 levels.
The weakening of the German mark relative to the U.S. dollar had virtually no
impact on earnings but reduced sales, as compared with the prior year
quarter, by nearly $1 million. Second quarter sales included over $2 million
of computer monitor mask sales. Net sales of the Optical Products group
increased 4% due to higher sales in all major product lines, except for
glass. Sales of high end products (polycarbonate, progressive, high index
and polarizing sun lenses) increased 15% over the same quarter in the prior
year.
Cost of sales were 73% of net sales for the second quarter of both 1997 and
1996. Improvements in product mix were offset by start-up expenses for the
new entertainment line at the Cortland, New York facility and dielot and part
qualification expenses for the computer monitor line at the Germany facility.
Also, Optical Products group profitability was impacted by a number of
one-time expenses including: expenses preparatory to the shutdown of the Ft.
Lauderdale plastic lens manufacturing facility which ceased operations in
July, expenses incidental to the new polycarbonate manufacturing, centralized
distribution and research and development facility and start-up costs for the
operation's first anti-reflective coating machine. In addition, resources
devoted to the ongoing development of new products and materials were higher
in the second quarter.
Despite an increased debt level, interest expense in the second quarter of
1997 was comparable to the prior year quarter due to the capitalization of
interest costs in connection with the Company's expansion projects.
The provision for income taxes was 33% of pre-tax income in the second
quarter of both 1997 and 1996.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Total revenues for the first six months of 1997 increased $20.9 million or 15%
from the first six months of 1996. Revenues of the Precision Imaged Products
group increased 19% for the first six months due primarily to sales of large
(25" to 29") and invar television aperture masks increasing 31% and 18%,
respectively, over 1996 sales. For the first six months sales of jumbo (30"
and larger) television aperture masks were down 11% from 1996. 1996 jumbo
sales were very strong with a 64% increase over 1995 levels. The weakening of
the German mark relative to the U.S. dollar had virtually no impact on earnings
but reduced sales, as compared with the prior year, by over $4 million. The
first six months included over $5 million of computer monitor mask sales. Net
sales of the Optical Products group increased 7% due to higher sales in all
major product lines, except for glass. Sales of high end products
Page 7
<PAGE>
(polycarbonate, progressive, high index and polarizing sun lenses) increased
21% over the same period in the prior year.
Cost of sales were 76% of net sales for the first six months of 1997,
compared to 77% in the same period of 1996. The decline occurred primarily
in the Precision Imaged Products group and was due primarily to sales mix
changes, largely offset by line time required for new customer and part
qualification on the computer monitor line and start-up expenses for the new
entertainment line at the Cortland facility. The Optical Products group cost
of sales as a percentage of sales was consistent with the prior year.
Despite an increased debt level, interest expense in the first six months of
1997 was comparable to the prior year due to the capitalization of interest
costs in connection with the Company's expansion projects.
The provision for income taxes was 33% of pre-tax income in the first six
months of both 1997 and 1996.
FINANCIAL POSITION AND LIQUIDITY
Cash and cash equivalent balances decreased $0.5 million and debt increased
$38.4 million during the first six months of 1997. The increased debt level
was due primarily to $54 million of capital expenditures relating primarily
to the expansion of the Company's aperture mask manufacturing facilities and
increased inventory and accounts receivable levels, offset partially by
increased accounts payable balances. The increased inventory levels were due
primarily to the new television aperture mask production line which started
in the second quarter at the Cortland facility and the acquisition of
Vision-Ease Asia early in 1997. The increased accounts receivable levels were
due primarily to the increased sales. The increased accounts payable balance
was due primarily to payables related to the Cortland expansion project and
Optical Product's new polycarbonate manufacturing, centralized distribution
and research and development facility currently under construction. Due
primarily to the increases in accounts receivable and inventory, working
capital was $51.0 million at June 30, 1997 compared to $41.4 million at
December 31, 1996. The current ratio was 1.87 at June 30, 1997, compared to
1.82 at December 31, 1996. The ratio of debt to equity increased to 0.35 at
June 30, 1997 compared to 0.12 at December 31, 1996 due to the increased debt
levels.
The Company expects to incur more than $75 million of capital spending during
1997, a significant portion of which is related to completing the expansion
of the Cortland facility. The Company has $88 million in revolving credit
facilities which will provide the funds needed for capital spending related
to the Cortland expansion and the Company's new polycarbonate facility under
construction in Ramsey, Minnesota. The Company's $80 million acquisition
credit facility will provide funds in the event the Company encounters a
strategic acquisition opportunity. As of June 30, 1997, the Company had
commitments of approximately $17 million related to capital projects, a
majority of which were related to the Cortland expansion. The revolving
credit facilities along with cash generated from operations should be
sufficient to meet the Company's future capital and operating requirements.
Page 8
<PAGE>
FOREIGN CURRENCY
Fluctuations in foreign currency exchange rates, principally the German mark
and Japanese yen versus the U.S. dollar, may affect the Company's financial
results. The Company's German subsidiary has a large portion of its sales
denominated in U.S. dollars. As most of the German subsidiary's expenses are
denominated in the German mark, this represents the most significant element
of the Company's exposure to currency rate fluctuations. This exposure is
generally addressed as needed through the purchase of forward contracts and
options. As of June 30, 1997, the Company had approximately $10.5 million of
outstanding foreign exchange options to exchange U.S. dollars for German
marks at a set exchange rate. These options mature at various intervals
through March 1998.
Exposure to foreign currency exchange rate fluctuations also may exist with
respect to intercompany payables or receivables with the Company's German
subsidiary. The Company minimizes this exposure by holding such balances at
low levels.
ENVIRONMENTAL
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, 1996.
CAUTIONARY STATEMENTS
Certain statements included in this Discussion and Analysis of Financial
Condition and Results of Operations by the Company or its representatives, as
well as other communications, including reports to shareholders, news
releases and presentations to securities analysts or investors, contain
forward-looking statements made in good faith by the Company pursuant to the
"Safe Harbor" provisions of the PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. These statements relate to non-historical information which are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those presently anticipated or projected. The Company
wishes to caution the reader not to place undo reliance on any such
forward-looking statements. These statements are qualified by important
factors listed separately in "Item 1 - Business" of the Company's Form 10-K
for the year ended December 31, 1996, which in some cases have affected and
in the future could adversely affect the Company's actual results and could
cause the Company's actual financial performance to differ materially from
that expressed in any forward-looking statement. These factors should not,
however, be considered an exhaustive list. The Company does not undertake the
responsibility to update any forward-looking statement that may be made from
time to time by or on behalf of the Company.
Page 9
<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 9 and Note 5 of the "Notes to Condensed
Consolidated Financial Statements" on page 6.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
The Company's 1997 Annual Meeting of Stockholders was held on May 8,
1997. One matter was submitted to a vote of stockholders: Election
of certain members of the Company's Board of Directors.
(1) The nominees for election to the Company's Board of Directors, as
listed in the Company's Proxy Statement dated March 26, 1997,
were elected for two year terms at that meeting. Voting for the
individual nominees was as follows:
VOTES WITHHELD
NOMINEE VOTES FOR OR AGAINST
------- --------- --------------
Mr. John W. Castro 18,718,444 31,858
Mr. Joe E. Davis 18,717,830 32,472
The following directors did not stand for election this year
because their terms of office continued after the meeting: Mr.
Lyle D. Altman, Mr. Paul B. Burke and Mr. Harry A. Hammerly.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
(a) EXHIBITS PAGE
-------- ----
<S> <C>
10.1 First Amendment to Credit Agreement, dated June 27, 1997, by and
among the Company, Norwest Bank Minnesota, N.A. (as agent),
Norwest Bank Minnesota, N.A., First Bank National
Association and NBD Bank ................................................. 12
10.2 Second Declaration of Amendment, dated May 2, 1997, to the BMC
Industries, Inc. Profit Sharing Plan 1994 revision........................ 16
11.1 Computation of Net Earnings per Share..................................... 18
27. Financial Data Schedule (filed only in electronic format)
99.1 News Release, dated July 22, 1997, announcing the
second quarter 1997 operating results..................................... 19
99.2 News Release, dated June 6, 1997, announcing quarterly dividend........... 23
</TABLE>
Page 10
<PAGE>
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the quarter
ended June 30, 1997.
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: August 13, 1997
Page 11
<PAGE>
FIRST AMENDMENT TO
CREDIT AGREEMENT
This Amendment is agreed to as of the 27th day of June, 1997, by and
among BMC Industries, Inc., a Minnesota corporation (the "Borrower"); Norwest
Bank Minnesota, National Association, a national banking association, as Agent
under the Credit Agreement described below (in such capacity, the "Agent"); and
Norwest Bank Minnesota, National Association, a national banking association,
First Bank National Association, a national banking association, and NBD Bank,
a Michigan banking corporation, as Banks (the "Banks").
The Borrower, the Agent and the Banks are each parties to a Credit
Agreement dated as of June 5, 1996 (together with all amendments,
modifications and restatements thereof, the "Credit Agreement").
The Borrower has requested an extension of the Facility B Commitment
Termination Date, as defined in the Credit Agreement, and has requested
certain other changes to the Credit Agreement. The Agent and the Banks are
willing to grant the Borrower's request on the terms and subject to the
conditions set forth herein.
ACCORDINGLY, in consideration of the mutual covenants contained in
the Credit Agreement and herein, the parties hereby agree as follows:
1. DEFINITIONS. All terms defined in the Credit Agreement that are
not otherwise defined herein shall have the meanings given them in the Credit
Agreement.
2. AMENDMENT. The Credit Agreement is hereby amended as follows:
(a) The phrase, "(which term shall, with respect to the Borrower and
Vision-Ease, include but not be limited to obligations of the Borrower and
Vision-Ease under the Polycore Agreement so long as it remains in the form
of a take-or-pay contract)", is hereby inserted after the phrase,
"take-or-pay contract", in the definition of "Contingent Obligation", in
Section 1.1 of the Credit Agreement.
(b) The date, "June 15, 2000", in the definition of "Facility A
Commitment Termination Date" in Section 1.1 of the Credit Agreement is
hereby deleted, and the date, "June 15, 2001", is substituted therefor.
(c) The date, "June 4, 1997", in the definition of "Facility B
Commitment Termination Date" in Section 1.1 of the Credit Agreement is
hereby deleted, and the date, "June 26, 1998", is substituted therefor.
Page 12
<PAGE>
(d) The following definitions are hereby inserted in Section 1.1 of
the Credit Agreement:
"Polycore" means Polycore Optical, PTE. Ltd.
"Polycore Agreement" means the Product Manufacturing and
Sales Agreement between Vision-Ease and Polycore, setting forth
the obligation of Vision-Ease to purchase plastic lenses from
Polycore during the period through June 2001.
(e) The table in Section 5.8 is hereby amended in its entirety to
read as follows:
QUARTERS ENDING RATIO
--------------- -----
On or before June 30, 1997 0.60 to 1
July 1, 1997 through December 31, 1997 0.57 to 1
January 1, 1998 through June 30, 1998 0.55 to 1
July 1, 1998 through December 31, 1998 0.53 to 1
January 1, 1999 and thereafter 0.50 to 1
(f) The following new paragraph (h) is hereby inserted in Section 6.2
of the Credit Agreement:
(h) Obligations of Vision-Ease and the Borrower under the
Polycore Agreement, so long as the aggregate amount of such
obligations does not exceed $35,000,000.
(g) Schedules 4.4, 4.7, 4.8, 6.1, 6.2, 6.3 and 6.8 to the Credit
Agreement are hereby deleted, and Schedules 4.4, 4.7, 4.8, 6.1, 6.2, 6.3
and 6.8 attached hereto are respectively substituted therefor.
(h) Exhibit A to the Credit Agreement is hereby deleted, and Exhibit
A hereto is substituted therefor.
(i) Exhibit B to the Credit Agreement is hereby deleted, and Exhibit
B hereto is substituted therefor.
3. Renewal Notes and Replacement Notes. Simultaneously with the
execution of this Amendment, the Borrower shall execute and deliver to the
Agent its promissory notes (i) in the form of Exhibit B hereto (the "Renewal
Notes"), payable to the order of each Bank in the face amount of that Bank's
Facility B Commitment Amount and (ii) in the form of Exhibit A hereto (the
"Replacement Notes"), payable to the order of each Bank in the face amount of
that Bank's Facility A Commitment Amount. Each Bank shall accept (x) that
Bank's Renewal Note in substitution for, but not in payment of, that Bank's
existing Facility B Note and (y) that Bank's Replacement Note in substitution
for, but not in payment of, that Bank's existing Facility A Note. Each
reference in the Credit Agreement to a "Facility B Note" shall hereafter be
deemed to be a reference to the corresponding Renewal Note and each reference
in the Credit Agreement to a "Facility A Note" shall hereafter be deemed to
be a reference to the corresponding Replacement Note.
Page 13
<PAGE>
4. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents
and warrants to the Agent and the Banks as follows:
(a) The Borrower has all requisite power and authority, corporate or
otherwise, to execute and deliver this Amendment, the Renewal Notes and the
Replacement Notes, and to perform this Amendment, the Renewal Notes, the
Replacement Notes and the Credit Agreement as amended hereby. This
Amendment, the Renewal Notes and the Replacement Notes have been duly and
validly executed and delivered to the Agent by the Borrower, and this
Amendment, the Renewal Notes, the Replacement Notes and the Credit
Agreement as amended hereby constitute the Borrower's legal, valid and
binding obligations enforceable in accordance with their terms.
(b) The execution, delivery and performance by the Borrower of this
Amendment, the Renewal Notes and the Replacement Notes, and the performance
of the Credit Agreement as amended hereby, have been duly authorized by all
necessary corporate action and do not and will not (i) require any
authorization, consent or approval by any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
(ii) violate the Borrower's articles of incorporation or bylaws or any
provision of any law, rule, regulation or order presently in effect having
applicability to the Borrower, or (iii) result in a breach of or constitute
a default under any indenture or agreement to which the Borrower is a party
or by which the Borrower or its properties may be bound or affected.
(c) All of the representations and warranties contained in Article IV
of the Credit Agreement are correct on and as of the date hereof as though
made on and as of such date, except to the extent that such representations
and warranties relate solely to an earlier date.
5. CONDITIONS. The amendments set forth in paragraph 2 shall be
effective only if the Agent has received (or waived the receipt of) each of the
following, in form and substance satisfactory to the Agent and the Banks, on or
before the date hereof (or such later date as the Banks may agree to in
writing):
(a) This Amendment, duly executed by the Borrower and each of the
Guarantors below.
(b) The Renewal Notes and the Replacement Notes, duly executed by the
Borrower.
(c) A copy of the resolutions of the board of directors of the
Borrower evidencing approval of this Amendment, the Credit Agreement as
amended hereby, and the other matters contemplated hereby, certified as
accurate by the secretary of the Borrower.
(d) A certificate of the secretary of the Borrower and the Guarantors
(i) stating that there have been no amendments to or restatements of the
articles of
Page 14
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incorporation or bylaws of the Borrower or the Guarantors as furnished to
the Agent in connection with the execution and delivery of the Credit
Agreement other than those that may be attached to the certificate, and
(ii) certifying the names of the officers of the Borrower and the
Guarantors that are authorized to sign the documents to be delivered
pursuant to this Agreement, together with the true signatures of such
officers.
(e) A signed copy of the opinion of counsel for the Borrower, addressed to the
Agent and the Banks, confirming the matters set forth in paragraph 4 hereof
(other than paragraph (c) thereof), and such other matters as the Agent or any
Bank may in its sole discretion request.
BMC INDUSTRIES, INC. NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, AS AGENT
AND AS A BANK
By _______________________________ By _______________________________
Its ___________________________ Its ____________________________
FIRST BANK NATIONAL ASSOCIATION NBD BANK
By ________________________________
Its ____________________________ By ________________________________
Its ____________________________
CONSENT OF GUARANTOR
The undersigned, as a guarantor of all indebtedness of the Borrower to
the Banks under its Guaranty dated June 5, 1996, hereby consents to the
foregoing Amendment and acknowledges that all indebtedness arising under the
Credit Agreement, as amended thereby, shall constitute Indebtedness as defined
in and guarantied under that Guaranty. The foregoing confirmation shall not be
deemed to limit the terms of the Guaranty in any manner. The undersigned
acknowledges that this Consent merely confirms the terms of the Guaranty, and
that no such confirmation is required in connection with this Amendment or any
future amendment to or restatement of the Credit Agreement or any document
executed in connection with the Credit Agreement or this Amendment.
VISION-EASE LENS, INC.
By _______________________________
Its ___________________________
Page 15
<PAGE>
BMC INDUSTRIES, INC. PROFIT SHARING PLAN
1994 REVISION
SECOND DECLARATION OF AMENDMENT
Pursuant to the retained power of amendment contained in Section 11.2 of the
instrument entitled "BMC Industries, Inc. Profit Sharing Plan--1994 Revision,"
the undersigned hereby amends said instrument in the following manner:
1. Section 3.1 thereof is amended to read as follows:
"3.1 AMOUNT OF PARTICIPATING EMPLOYER CONTRIBUTION. (A) Subject to the
limitations set forth at Article IX, for each Plan Year each Participating
Employer will make a basic contribution under the Plan, from its annual
earnings or profits for the Plan Year or from its accumulated earnings or
profits, in an amount equal to three percent of the aggregate Compensation
for the Plan Year of all Participants eligible to share in the contribution
pursuant to Section 3.2; provided, that, to the extent the Participating
Employer is prevented from making all or any portion of such contribution
for any Plan Year because its current or accumulated earnings or profits
are inadequate, the Participating Employer may, in its sole discretion,
make such contribution in its entirety, or make any specified portion
thereof, notwithstanding such inadequacy.
(B) Subject to the limitations set forth in Article IX, for each Plan
Year each Participating Employer will make an additional contribution under
the Plan for each of the Participating Employer's Participating Business
Units, from its annual earnings or profits for such Plan Year or from its
accumulated earnings or profits, in the amount, if any, separately
determined by the Participating Employer's Board for each Participating
Business Unit based upon the differing annual profit performance of such
Participating Business Units.
(C) Subject to the limitations set forth at Article IX, for each Plan
Year a Participating Employer may contribute with respect to any
participating Business Unit any additional amount determined by its Board
to be advisable to assist the Plan in satisfying any requirement imposed by
the Code or Treasury Regulations."
2. Subsection 3.3(A)(3) thereof is deleted.
3. Subsection 3.3(A)(4) thereof is redesignated as Subsection 3.3(A)(3) and is
amended to read as follows:
"(3) The portion of the contribution described in Section 3.1(C) will be
allocated to each eligible Participant who received Compensation for the
Plan year with respect to services for the Participating Business Unit to
which the portion of the contribution relates (other than administrative
services with respect to which he or she is included in the Corporate
Participating Business Unit unless the contribution relates to the
Corporate Participating Business Unit) and who is not a Highly Compensated
Employee in the same proportion that his or her Compensation for the Plan
Year bears to the aggregate Compensation for the Plan Year of all eligible
Participants in the Participating Business Unit who are not Highly
Compensated Employees."
4. Article VI thereof is amended to read as follows:
"6.1 NO WITHDRAWALS FROM PROFIT SHARING ACCOUNT. No participant may
withdraw any portion of the balance of his or her Profit Sharing Account
while he or she is an Employee.
6.2 NO WITHDRAWALS FROM ROLLOVER ACCOUNT. No Participant may withdraw any
portion of the balance of his or her Rollover Account while he or she is an
Employee."
Page 16
<PAGE>
5. Appendix A thereof is deleted.
The amendments set forth above are effective January 1, 1998.
IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed by
its duly authorized officers this 2nd day of May, 1997.
BMC INDUSTRIES, INC.
Attest: /s/ Michael P. Hawks By: /s/Christine A. Wolff .
-------------------------- -------------------------------------
Secretary Director of Compensation and Benefits
Page 17
<PAGE>
EXHIBIT 11.1
COMPUTATION OF NET EARNINGS PER SHARE
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED MARCH 31 ENDED JUNE 30
1997 1996 1997 1996
----------------------- -----------------------
<S> <C> <C> <C> <C>
PRIMARY
Net Earnings $ 11,989 $ 9,842 $ 19,872 $ 16,025
--------- -------- --------- ---------
--------- -------- --------- ---------
Shares of common stock and common stock equivalents:
Weighted average shares outstanding 27,463 27,265 27,437 27,216
Dilutive effect of stock options and warrants outstanding (1) 1,033 1,104 1,040 1,108
--------- -------- --------- ---------
Total 28,496 28,369 28,477 28,324
--------- -------- --------- ---------
--------- -------- --------- ---------
Net Earnings Per Share $ 0.42 $ 0.35 $ 0.70 $ 0.57
--------- -------- --------- ---------
--------- -------- --------- ---------
FULLY DILUTED
Net Earnings $ 11,989 $ 9,842 $ 19,872 $ 16,025
--------- -------- --------- ---------
--------- -------- --------- ---------
Shares of common stock and common stock equivalents:
Weighted average shares outstanding 27,463 27,265 27,437 27,216
Dilutive effect of stock options and warrants outstanding (2) 1,062 1,111 1,066 1,130
--------- -------- --------- ---------
Total 28,525 28,376 28,503 28,346
--------- -------- --------- ---------
--------- -------- --------- ---------
Net Earnings Per Share $ 0.42 $ 0.35 $ 0.70 $ 0.57
--------- -------- --------- ---------
--------- -------- --------- ---------
</TABLE>
(1) The dilutive effect of outstanding stock options and warrants is calculated
based on the treasury stock method using the average market price for the
period.
(2) The dilutive effect of outstanding stock options and warrants is calculated
based on the treasury stock method using the greater of the average market
price or the ending market price for the period.
Page 18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,014
<SECURITIES> 78
<RECEIVABLES> 34,396
<ALLOWANCES> 3,086
<INVENTORY> 59,177
<CURRENT-ASSETS> 109,640
<PP&E> 268,246
<DEPRECIATION> 99,347
<TOTAL-ASSETS> 295,816
<CURRENT-LIABILITIES> 58,663
<BONDS> 0
0
0
<COMMON> 57,776
<OTHER-SE> 103,088
<TOTAL-LIABILITY-AND-EQUITY> 295,816
<SALES> 156,233
<TOTAL-REVENUES> 157,384
<CGS> 119,543
<TOTAL-COSTS> 119,543
<OTHER-EXPENSES> (229)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 304
<INCOME-PRETAX> 29,662
<INCOME-TAX> 9,790
<INCOME-CONTINUING> 19,872
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,872
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.70
</TABLE>
<PAGE>
CONTACT: Michael P. Hawks (NYSE -- BMC)
(612) 851-6030 FOR IMMEDIATE RELEASE
BMC REPORTS RECORD SECOND QUARTER EARNINGS
July 22, 1997 -- Minneapolis, MN -- BMC Industries, Inc. today reported record
second quarter net earnings of $11,989,000 or $0.42 per share, up 22% from
earnings of $9,842,000 or $0.35 per share in the year-earlier period. Second
quarter revenues increased 18% from $68.2 million in the second quarter of 1996
to $80.3 million in the second quarter of 1997.
Net earnings for the first six months of 1997 totaled $19,872,000 or $0.70 per
share. This represented an improvement of $3,847,000 or 24% over the
$16,025,000 or $0.57 per share recorded for the first six months of the prior
year. Revenues for the first six months of 1997 were 15% higher than the same
period in the prior year.
The second quarter of 1997 represented another quarterly earnings record for BMC
and its twenty-fifth 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. Once again, each division contributed to this
significant accomplishment.
The Company's Precision Imaged Products operation (PIP includes both the Mask
Operations and Buckbee-Mears St. Paul) posted record second quarter results.
Second quarter sales and profits increased 25% over the prior year quarter. The
profitability of Mask Operations increased primarily due to the continued sales
mix shift to higher margin products, including high resolution computer monitor
masks. Sales of large (25 - 29 inches) and invar television aperture masks
increased 35% and 31%, respectively, over second quarter 1996 sales. Jumbo mask
sales slightly lagged 1996, which was a difficult comparison following a 42%
increase over the second quarter of 1995. The further weakening of the German
mark relative to the U.S. dollar had virtually no impact on earnings but reduced
sales, as compared with the prior year quarter, by nearly $1 million. Finally,
second quarter etching sales of Buckbee-Mears St. Paul increased 27% over the
prior year, due to strong growth in the electronics, medical, filtration and
automotive markets.
Second quarter Precision Imaged Products sales included over $2 million of
high resolution computer monitor mask sales. High resolution mask sales were
depressed by a number of factors including: line time required for new customer
and part qualification, a continued market surplus
-more-
Page 19
<PAGE>
of 14-inch monitor tubes due to an inventory build at the end of 1996 and the
devotion of over two weeks of line time to invar television mask production
due to a customer emergency. The line is performing at expectations and we
expect sales to grow significantly over the balance of the year as we receive
new customer and part approvals.
The new television line in Cortland started-up in the second quarter and
performance exceeded expectations. Initial shipments from this new line
occurred during the second quarter. The new monitor line in Cortland is
scheduled for third quarter start-up, with de-bugging of the line currently
taking place.
BMC's Optical Products operation also produced record second quarter results.
Second quarter sales increased 4% over the prior year quarter, while
profitability increased 5%. Sales growth occurred in each major product
line, except for glass. Sales of high end products (polycarbonate,
progressive, high index and polarizing sun lenses) showed strong growth,
increasing 15% over the year-earlier period. Profitability was impacted by a
number of one-time expenses including: expenses preparatory to the shutdown
of the Ft. Lauderdale plastic lens manufacturing facility which ceased
operations in July, expenses incidental to the new polycarbonate
manufacturing, centralized distribution and research and development facility
and start-up costs for the operation's first anti-reflective coating machine.
In addition, resources devoted to the ongoing development of new products
and materials were higher in the second quarter. Construction of the new
facility remains on schedule for completion in the third quarter of 1997.
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
supplier of polycarbonate, glass and plastic eyewear lenses. The common
stock of the Company is traded on the New York Stock Exchange under the
symbol "BMC".
-more-
Page 20
<PAGE>
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ----------------------
1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 80,257 $ 68,174 $ 157,384 $ 136,475
Cost of products sold 58,398 49,691 119,543 104,952
- -----------------------------------------------------------------------------------------------------------------------
Gross margin 21,859 18,483 37,841 31,523
Selling 2,737 2,559 5,574 5,117
Administrative 1,089 1,288 2,628 2,515
- -----------------------------------------------------------------------------------------------------------------------
Income from Operations 18,033 14,636 29,639 23,891
- -----------------------------------------------------------------------------------------------------------------------
Other Income and (Expense)
Interest expense (160) (60) (304) (190)
Interest income 56 31 98 150
Other income (expense) (33) 81 229 31
- -----------------------------------------------------------------------------------------------------------------------
Earnings before Income Taxes 17,896 14,688 29,662 23,882
Income Taxes 5,907 4,846 9,790 7,857
- -----------------------------------------------------------------------------------------------------------------------
Net Earnings $ 11,989 $ 9,842 $ 19,872 $ 16,025
- -----------------------------------------------------------------------------------------------------------------------
Net Earnings Per Share $ 0.42 $ 0.35 $ 0.70 $ 0.57
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Number of Shares Included in Per Share Computation 28,496 28,369 28,477 28,324
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
-more-
Page 21
<PAGE>
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
JUNE 30 DECEMBER 31
ASSETS 1997 1996
- --------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents $ 2,092 $ 2,544
Trade accounts and notes receivable, net of allowances 31,310 24,979
Inventories 59,177 50,451
Deferred income taxes 6,356 5,372
Other current assets 10,705 8,354
- --------------------------------------------------------------------------------
Total Current Assets 109,640 91,700
- --------------------------------------------------------------------------------
Property, Plant and Equipment 268,246 220,489
Less Accumulated Depreciation 99,347 96,644
-------- --------
Property, Plant and Equipment, Net 168,899 123,845
-------- --------
Deferred Income Taxes 5,019 5,797
Other Assets, Net 12,258 11,627
- --------------------------------------------------------------------------------
Total Assets $295,816 $232,969
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Current Liabilities
Short-term borrowings $ 1,464 $ 1,355
Accounts payable 25,901 19,434
Income taxes payable 9,292 7,657
Accrued expenses and other current liabilities 22,006 21,900
- --------------------------------------------------------------------------------
Total Current Liabilities 58,663 50,346
- --------------------------------------------------------------------------------
Long-Term Debt 54,949 16,634
Other Liabilities 18,834 19,421
Deferred Income Taxes 2,506 2,460
Stockholders' Equity
Common stock 57,776 56,551
Retained earnings 103,678 84,629
Cumulative translation adjustment 162 3,974
Other (752) (1,046)
- --------------------------------------------------------------------------------
Total Stockholders' Equity 160,864 144,108
- --------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 295,816 $ 232,969
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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Page 22
<PAGE>
Contact: Michael P. Hawks (NYSE-BMC)
(612)851-6030 FOR IMMEDIATE RELEASE
BMC ANNOUNCES QUARTERLY DIVIDEND
June 6, 1997--Minneapolis, Minnesota--BMC Industries, Inc. today announced
that its Board of Directors has approved a continuation of its quarterly cash
dividend of $.015 cents per share.
Shareholders of record as of June 18, 1997 will receive a dividend of $.015
for each share owned on that date, to be paid on July 2, 1997.
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 23
