<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
September 30, 1998.
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.)
ONE MERIDIAN CROSSINGS, SUITE 850, MINNEAPOLIS, MINNESOTA 55423
(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 27,164,082 shares of common stock as of
November 11, 1998. There is no other class of stock outstanding.
Exhibit Index Begins at Page 16
<PAGE>
PART I: FINANCIAL INFORMATION
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
Item 1: Financial Statements
<TABLE>
<CAPTION>
September 30 December 31
ASSETS 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 2,742 $ 2,383
Trade accounts receivable, net of allowances 42,496 29,824
Inventories 84,856 70,111
Deferred income taxes 11,315 5,881
Other current assets 8,815 13,595
- -------------------------------------------------------------------------------
Total Current Assets 150,224 121,794
- -------------------------------------------------------------------------------
Property, Plant and Equipment 280,028 283,070
Less Accumulated Depreciation 114,292 100,688
------------ ----------
Property, Plant and Equipment, Net 165,736 182,382
------------ ----------
Deferred Income Taxes 17,085 1,429
Intangible Assets, Net 65,504 2,991
Other Assets 11,261 10,811
- -------------------------------------------------------------------------------
Total Assets $ 409,810 $ 319,407
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------
Current Liabilities
Short-term borrowings $ 822 $ 1,139
Accounts payable 25,566 25,623
Income taxes payable 226 2,830
Accrued expenses and other liabilities 24,332 17,288
- -------------------------------------------------------------------------------
Total Current Liabilities 50,946 46,880
- -------------------------------------------------------------------------------
Long-Term Debt 209,713 73,426
Other Liabilities 18,559 17,718
Deferred Income Taxes 2,738 2,631
Stockholders' Equity
Common stock 47,662 62,263
Retained earnings 81,237 118,693
Accumulated other comprehensive income 1,047 (1,217)
Other (2,092) (987)
- -------------------------------------------------------------------------------
Total Stockholders' Equity 127,854 178,752
- -------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 409,810 $ 319,407
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- -------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------------------------------------------
1998 1997 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 88,584 $ 79,086 $ 253,609 $ 236,470
Cost of products sold 81,642 61,813 232,177 181,356
- -------------------------------------------------------------------------------------------------------------------------
Gross margin 6,942 17,273 21,432 55,114
Selling 4,545 3,042 11,748 8,616
Administration 1,213 1,006 4,072 3,634
Impairment of long-lived assets - - 42,800 -
Acquired research and development - - 11,000 -
- -------------------------------------------------------------------------------------------------------------------------
Income from Operations 1,184 13,225 (48,188) 42,864
- -------------------------------------------------------------------------------------------------------------------------
Other Income and (Expense)
Interest expense (3,949) (403) (9,650) (707)
Interest income 22 45 99 143
Other income (expense) (399) 71 (932) 300
- -------------------------------------------------------------------------------------------------------------------------
Earnings before Income Taxes (3,142) 12,938 (58,671) 42,600
Income Taxes (1,173) 4,063 (22,429) 13,853
- -------------------------------------------------------------------------------------------------------------------------
Net Earnings $ (1,969) $ 8,875 $ (36,242) $ 28,747
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Net Earnings Per Share:
Basic $ (0.07) $ 0.32 $ (1.34) $ 1.04
Diluted (0.07) 0.31 (1.34) 1.01
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Number of Shares Included in Per Share Computation:
Basic 26,989 27,681 26,963 27,518
Diluted 26,989 28,619 26,963 28,524
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Dividends Declared Per Share $ 0.015 $ 0.015 $ 0.045 $ 0.045
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
------------------------------------
1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Cash Provided by (Used in) Operating Activities
Net earnings (loss) $ (36,242) $ 28,747
Depreciation and amortization 15,765 10,527
Write-down of impaired long-lived assets 42,800 -
Acquired research and development 11,000 -
Deferred income taxes (21,174) (16)
Changes in operating assets and liabilities (8,560) (33,631)
- -------------------------------------------------------------------------------------------------------------------------
Total 3,589 5,627
- -------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities
Additions to property, plant and equipment (18,202) (68,203)
Business acquisitions, net of cash acquired (101,000) (1,817)
- -------------------------------------------------------------------------------------------------------------------------
Total (119,202) (70,020)
- -------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities
Decrease in short-term borrowings (292) (81)
Increase in long-term debt 133,170 60,278
Common stock issued (repurchased), net (14,601) 4,901
Cash dividends paid (1,224) (1,234)
Other (1,105) 294
- -------------------------------------------------------------------------------------------------------------------------
Total 115,948 64,158
- -------------------------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents 24 (171)
- -------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 359 (406)
Cash and Cash Equivalents at Beginning of Period 2,383 2,544
- -------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 2,742 $ 2,138
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
<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 September 30,
1998, and the results of operations and the cash flows for the periods
ended September 30, 1998 and 1997. Except for the special charges
discussed in footnote 2 and in Management's Discussion and Analysis of
Financial Condition and Results of Operations, such adjustments are of a
normal recurring nature. Certain items in the financial statements for
the periods ended September 30, 1997 have been reclassified to conform
to the presentation for the periods ended September 30, 1998. The
results of operations for the three-month and nine-month periods ended
September 30, 1998 are not necessarily indicative of the results to be
expected for the full year. The balance sheet as of December 31, 1997
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, 1997.
2. Impairment of Long-Lived Assets/Acquired Research and Development
In accordance with Statement of Financial Accounting Standards (SFAS) No.
121 (Statement No. 121), ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS, the Company recorded a charge of $26.7 million ($42.8 million
pre-tax) during the quarter ended June 30, 1998 for the write-down of
certain Precision Imaged Products (PIP) operations fixed assets, primarily
those related to the production of computer monitor masks. Statement No.
121 prescribes that an impairment loss should be recognized in the event
that facts and circumstances indicate that the carrying amount of an asset
may not be recoverable, and the estimated future undiscounted cash flows
related to the asset are less than the carrying amount of the asset. After
careful assessment of various factors relevant to these assets, including
the computer monitor mask market, management determined it was appropriate
to write-down the value of these assets and, accordingly, such assets were
written down to estimated fair value in accordance with Statement No. 121.
In addition, in accordance with generally accepted accounting principles,
the independently appraised value of acquired in-process research and
development purchased in conjunction with the Orcolite acquisition was
written-off as a charge of $6.9 million ($11.0 million pre-tax) during the
quarter ended June 30, 1998. See footnote 8 for further discussion.
3. Inventories
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------ -----------------
<S> <C> <C>
Raw materials $ 28,834 $ 24,542
Work in process 9,347 15,971
Finished goods 46,675 29,598
---------- ----------
Total Inventories $ 84,856 $ 70,111
---------- ----------
---------- ----------
</TABLE>
<PAGE>
4. Credit Facilities
During the second quarter of 1998, the Company entered into a new domestic
credit agreement, as amended in July 1998 (the Agreement), with a syndicate
of banks for secured borrowings totaling up to $250 million. Borrowings
under the Agreement bear interest at the Eurodollar Rate plus 0.5% to
1.625% (7.0625% at September 30, 1998). The rate spread is dependent upon
the Company's ratio of debt to cash flow, as defined. In addition, the
Company pays a facility fee on unborrowed funds at rates ranging from
0.225% to 0.475% (0.425% at September 30, 1998), depending on the Company's
debt to cash flow ratio. Under terms of the Agreement, the Company must
meet certain financial covenants, including maintaining a specified
consolidated net worth, leverage ratio (debt to cash flow), interest
coverage ratio and level of capital expenditures. The Company was in
compliance with all covenants under the Agreement and had borrowings of
$198 million under the Agreement at September 30, 1998.
At September 30, 1998, the Company also had long-term and short-term
borrowings of $9.5 million under the approximately $20.6 million credit
facility maintained by the Company's German subsidiary and other debt
totaling approximately $3.0 million. The German and other debt amounts are
more completely described in the Company's Annual Report on Form 10-K
for the year ended December 31, 1997.
5. Earnings Per Share
In 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
128, EARNINGS PER SHARE (Statement No. 128). Statement No. 128 replaced
the calculation of primary and fully diluted earnings per share with basic
and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes the dilutive effects of stock options and any
other dilutive securities. Diluted earnings per share is very similar to
the previously reported fully diluted earnings per share. For the
Company's earnings per share calculations, the basic and diluted weighted
average outstanding shares differ only due to the dilutive impact of stock
options. All earnings per share amounts for all periods have been restated
to conform to the Statement No. 128 requirements.
6. 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 fiscal years 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 September 30, 1998, there were no
outstanding foreign currency exchange options. As of December 31, 1997,
the Company had approximately $3.6 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
<PAGE>
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 Swaps - In March 1997, the Company 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% (7.74% including current spread of
1.375%) on $15 million of notional debt during a period ending March, 1999.
In August 1998, the Company entered into additional multiple interest rate
swap agreements for a total of $100 million of notional debt which provide
for the Company to swap a variable interest rate for fixed interest rates
ranging from 5.74% to 5.76% plus a specified spread depending on the swap
involved (7.12% to 7.14% including current spread of 1.375%). These swaps
expire at various dates ranging from July 1999 to August 2000.
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 period. Amounts
to be paid or received under the interest rate swap agreements are accrued
and recorded as an adjustment to Interest Expense during the term of the
interest rate swap agreement.
Cross-Currency Swaps - In October and November 1998, the Company entered
into cross-currency swaps which provide for the Company to swap $20 million
of notional debt for the equivalent amount of Japanese yen-denominated
debt. Under these swaps, the Company will also effectively swap a U.S.
dollar-based interest rate (5.5% at September 30, 1998) for a Japanese
yen-based interest rate (1.1% at September 30, 1998). These Japanese
yen-based debt derivatives will be accounted for in future periods under
mark-to-market accounting. These swaps expire in October and November
2001.
7. Comprehensive Income
As of January 1, 1998, the Company adopted SFAS No. 130, REPORTING
COMPREHENSIVE INCOME (Statement No. 130). Statement No. 130 establishes
new rules for the reporting and display of comprehensive income and its
components; however, the adoption of this Statement had no impact on the
Company's net income or stockholders' equity. Statement No. 130 requires
foreign currency translation adjustments, which prior to adoption were
reported separately in stockholders' equity, to be included in other
comprehensive income. Prior year financial statements have been
reclassified to conform to the requirements of Statement No. 130.
The components of comprehensive income, net of related tax, for the
three-month and nine-month periods ended September 30, 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------ -------------------------
1998 1997 1998 1997
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net earnings (loss) $ (1,969) $ 8,875 $ (36,242) $ 28,747
Foreign currency
translation adjustments 2,397 (1,172) 2,264 (4,984)
---------- ----------- ----------- -----------
Comprehensive income $ 428 $ 7,703 $ (33,978) $ 23,763
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
</TABLE>
<PAGE>
8. Business Acquisition
On May 15, 1998, the Company, through a wholly-owned subsidiary, acquired
the Orcolite business unit of the Monsanto Company for the cash purchase
price of $101 million. For financial statement purposes, the acquisition
has been accounted for under the purchase method of accounting with the
excess of the purchase price over the fair value of the net tangible assets
acquired recorded as intangible assets which are being amortized over
periods ranging from 7 to 30 years. In addition, as a result of the
acquisition, an $11 million (pre-tax) charge was taken after the close of
the acquisition in the second quarter of 1998 related to the write-off of
acquired in-process research and development. The following unaudited pro
forma information presents a summary of consolidated results of operations
of the Company and the Orcolite business unit as if the acquisition had
occurred at the beginning of fiscal 1997, with pro forma adjustments to
give effect to amortization of goodwill and other intangible assets,
depreciation expense on the fair value of property, plant and equipment and
interest expense on acquisition debt, together with the related income tax
effects. The pro forma adjustments do not include the $11.0 million
write-off of acquired in-process research and development mentioned above.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------ ------------------------
1998 1997 1998 1997
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues $ 88,584 $ 88,351 $ 269,718 $ 264,073
Net earnings (loss) (1,969) 7,970 (37,810) 26,244
Diluted earnings per share (0.07) 0.28 (1.40) 0.92
</TABLE>
The unaudited pro forma condensed combined financial information above is
not necessarily indicative of what actual results would have been had the
acquisition occurred at the date indicated or indicative of the results
that may be expected for the full year ended December 31, 1998. Also,
numerous business synergies are projected as a result of the acquisition,
including the following: consolidation of selling, marketing, distribution,
customer service and administrative functions; consolidation of research
and development and technical services functions; optimization of combined
production capacity; and improved purchasing leverage. The anticipated
financial impact resulting from such synergies has not been reflected in
the above pro forma financial information. See the Company's Current
Reports on Form 8-K as filed on April 3, 1998 and May 29, 1998 and Current
Report on Form 8-K/A filed on July 29, 1998, for additional information
regarding the acquisition.
9. New Accounting Standards
In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION. This statement requires
additional disclosure only, and as such, is not expected to change net
income or stockholders' equity as previously reported by the Company.
The statement is effective for the Company's fiscal year ended December
31, 1998.
In February 1998, the FASB issued SFAS No. 132, EMPLOYERS' DISCLOSURES
ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS. The statement
supersedes the disclosure requirements in SFAS No. 87, EMPLOYERS'
ACCOUNTING FOR PENSIONS, No. 88, ACCOUNTING FOR SETTLEMENTS and
CURTAILMENTS OF DEFINED BENEFIT PENSION PLANS AND FOR TERMINATION
BENEFITS, and No. 106, EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS
OTHER THAN PENSIONS. The overall objective
<PAGE>
is to improve and standardize disclosures about pensions and other
postretirement benefits and to make the required information easier to
prepare and more understandable. SFAS No. 132 eliminates certain
existing disclosure requirements, but at the same time adds new
disclosures. This statement is effective for the Company's Fiscal year
ended December 31, 1998.
In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVES
AND SIMILAR FINANCIAL INSTRUMENTS AND FOR HEDGING ACTIVITIES. The new
Statement will significantly change how companies account for
derivatives and hedging activities, including the following two key
elements: (1) all derivatives would be measured at fair value and
recognized in the balance sheet as assets or liabilities, and (2)
derivatives meeting certain criteria could be specifically designated as
a hedge. The Company is currently evaluating the impact of this
Statement on the Company. The statement is effective for the Company in
the year 2000.
10. 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,
1997.
<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 SEPTEMBER 30, 1998 AND 1997
Total revenues for the third quarter of 1998 increased $9.5 million or 12% from
the third quarter of 1997 driven primarily by additional sales resulting from
the Orcolite acquisition. Revenues of the Precision Imaged Products (PIP) group
for the third quarter decreased 5% from the prior year period. Television mask
unit sales were up 13% over third quarter 1997; however sales dollars were down
9% from the prior year period due primarily to lower invar mask sales and
overall price declines. Computer monitor mask sales increased to $7.4 million
in the third quarter of 1998 compared to $6.2 million in the third quarter of
1997. For the quarter, AK steel sales of jumbo (30" and larger) television
masks were up 18% and large (25" to 29") television masks were up 9% from the
prior year period. Invar television mask sales were down 39% for the quarter.
Revenues of the Optical Products group increased 51% over the same quarter in
the prior year driven by additional sales resulting from the Orcolite
acquisition and continued strong sales of high-end products (polycarbonate,
high-index, progressive and polarizing sun lenses). On a pro forma basis,
Optical Products group revenues increased 9% over the combined Vision-Ease and
Orcolite 1997 third quarter revenues. Sales of high-end products increased 114%
in the third quarter of 1998 compared to the third quarter of 1997. On a pro
forma basis, sales of high-end products grew 23% over the combined Vision-Ease
and Orcolite 1997 third quarter revenues.
Cost of products sold were 92% and 78% of revenues for the third quarter of 1998
and 1997, respectively. The increased cost of products sold percentage was due
primarily to the extended shutdown of three manufacturing lines at the Cortland,
New York Mask facility and continued pricing pressure in the Mask business. The
Company estimates the extended shutdown of these lines negatively impacted gross
margin by approximately $4 million during the quarter; however, this shutdown
was instrumental in allowing Mask Operations to reduce their inventory by
approximately $10 million during the third quarter. One of the three
manufacturing lines that was temporarily shutdown has now resumed operation.
Restarting the remaining two lines (one television and one computer monitor) is
contingent upon success in growing market share and improved market conditions
in the future. The Optical Products group's gross margin also decreased from
the prior year's level due primarily to expenses related to the integration of
Orcolite and amortization expense related to the Orcolite goodwill.
Selling expenses were $4.5 million or 5.1% of revenues and $3.0 million or 3.8%
of revenues for the third quarter of 1998 and 1997, respectively. The increase
is primarily due to higher selling expenses associated with the Optical Products
group, including promotional expenses related to the new premium line of
Tegra-Registered Trademark- polycarbonate lenses.
Interest expense in the third quarter of 1998 was $3.9 million compared to $0.4
million in the third quarter of 1997. This increase was due primarily to the
increased debt level and the completion of major capital projects that no longer
qualify for the capitalization of interest. The increased debt level resulted
primarily from the cash purchase of Orcolite for $101.0 million in May of 1998
and capital spending for expansion projects which were completed in 1997.
<PAGE>
The provision for income taxes was 37% and 31% of pre-tax income in the third
quarter of 1998 and 1997, respectively. The third quarter 1998 tax rate
reflects the effective rate for pre-tax losses plus the benefit of a foreign tax
credit for dividends received from the Company's German subsidiary. The third
quarter 1997 tax rate was lower because it reflects the effective tax rate on
pre-tax income less the benefit from the reduction of the deferred tax asset
valuation allowance. The tax rate for the full year of 1998 is currently
anticipated to be approximately 38%.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Total revenues for the first nine months of 1998 increased $17.1 million or 7%
from the first nine months of 1997. Revenues of the PIP group were down $4.9
million or 3% during the same period. Television mask unit sales were up 10%
over the first nine months of 1997; however sales dollars were down 14% from the
prior year due primarily to a sales mix shift from invar to AK masks and overall
price reductions. Computer monitor mask sales increased to $25.4 million in the
first nine months of 1998 compared to $11.7 million in the prior year period.
For the first nine months of 1998, AK steel sales of jumbo (30" and larger)
television masks were up 1% and large (25" to 29") television masks were up 16%
from the prior year period. Invar television mask sales were down 44% during
the same period. 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 approximately $2 million. Revenues of the Optical Products Group
increased 31% over the same period in the prior year driven by additional sales
resulting from the Orcolite acquisition and continued strong sales of high-end
products (polycarbonate, high-index, progressive and polarizing sun leases). On
a pro-forma basis, Optical Products Group revenues, which for 1998 include sales
from Orcolite subsequent to the date of acquisition, increased 9% over the
combined Vision-Ease and Orcolite 1997 same period revenues. Sales of high-end
products increased 126% in the first nine months of 1998 compared to the same
period of 1997. On a pro forma basis, sales of high-end products, which for
1998 include sales from Orcolite subsequent to the date of acquisition, grew 24%
over the combined Vision-Ease and Orcolite 1997 same period revenues.
Cost of products sold were 92% and 77% of revenues for the first nine months of
1998 and 1997, respectively. The increased cost of products sold percentage was
due primarily to Mask Operations and reflects pricing pressure in the mask
business, costs associated with the extended shutdown of three manufacturing
lines at the Cortland facility, and inventory charges. In addition, significant
start-up costs were incurred on the new computer monitor mask line in Cortland
in the first quarter of 1998.
Selling expenses were $11.7 million or 4.6% of revenues and $8.6 million or
3.6% of revenues for the first nine months of 1998 and 1997, respectively. The
increase is primarily due to higher selling expenses associated with the Optical
Products group, including promotional expenses related to the new premium line
of Tegra-Registered Trademark- polycarbonate lenses.
The impairment of long-lived assets of $42.8 million reflects the write-down of
the value of certain PIP Operations fixed assets, primarily those related to the
production of computer monitor masks. In accordance with Statement of Financial
Accounting Standards No. 121 (Statement No. 121) ACCOUNTING FOR THE IMPAIRMENT
OF LONG-LIVED ASSETS, the Company recorded a charge of $26.7 million ($42.8
million pre-tax) during the second quarter of 1998 for write-down of these fixed
assets. After careful assessment of various factors relevant to these assets,
including the computer monitor mask market, management determined it was
appropriate to write-down the value of these assets and, accordingly, such
assets were written down to estimated fair value in accordance with Statement
No. 121.
<PAGE>
In accordance with generally accepted accounting principles, the independently
appraised value of acquired in-process research and development purchased in
conjunction with the Orcolite acquisition, was written-off as a charge of $6.9
million ($11.0 million pre-tax) during the second quarter of 1998. See footnote
8 for further discussion.
Interest expense in the first nine months of 1998 was $9.7 million compared to
$0.7 million in the first nine months of 1997. This increase is due primarily
to the increased debt level, debt placement underwriting fees associated with
the Orcolite acquisition and the completion of major capital projects that no
longer qualify for the capitalization of interest. The increased debt level
resulted primarily from the cash purchase of Orcolite for $101 million and
capital spending for expansion projects which were completed in 1997.
The provision for income taxes was 38% and 33% of pre-tax income for the first
nine months of 1998 and 1997, respectively. The 1998 tax rate reflects the
effective rate for pre-tax losses plus the benefit of a foreign tax credit for
dividends received from the Company's German subsidiary. The 1997 tax rate was
lower because it reflects the standard tax rate on pre-tax income less the
benefit from the reduction of the deferred tax asset valuation allowance. The
tax rate for the full year of 1998 is currently anticipated to be approximately
38%.
FINANCIAL POSITION AND LIQUIDITY
Debt, net of cash and cash equivalents, increased $135.6 million during the
first nine months of 1998. The increased debt level was due primarily to the
$101 million acquisition of Orcolite, the $16.6 million stock repurchase in
January 1998, capital spending and increased levels of working capital. Working
capital was $99.3 million at September 30, 1998 compared to $110.6 million at
June 30, 1998 and $74.9 million at December 31, 1997. The increased working
capital from December 31, 1997 was due primarily to the Orcolite acquisition and
increased inventory and accounts receivable levels to support increased optical
sales. During the third quarter, working capital was reduced by $11.3 million,
driven by a reduction in inventories of $11.0 million, and debt was reduced by
$9.6 million. The current ratio was 2.9 at September 30, 1998 compared to 3.1
at June 30, 1998 and 2.6 at December 31, 1997. The ratio of debt to equity
increased to 1.6 at September 30, 1998 compared to 0.4 at December 31, 1997 due
to the increased debt levels, the reduction in equity resulting from second
quarter 1998 charges and the January 1998 stock repurchase.
During the nine months ended September 30, 1998, the Company had $18.2 million
of capital spending and expects a total of $20.0 to $25.0 million of capital
spending for the full year of 1998. The Company has a total of approximately
$270.0 million in revolving credit facilities. The unused portion of these
facilities, along with cash generated from operations, is currently expected to
be sufficient to meet the Company's future capital requirements related to its
existing base of business. See footnote 4 for details of current credit
facilities.
FOREIGN CURRENCY
Fluctuations in foreign currency exchange rates may affect the Company's
financial results. The Company has an overall indirect exposure to Asian
currencies, primarily the Japanese yen and the Korean won, because the Mask
Operations' most significant competitors are Japanese and Korean manufacturers.
The Company's strategy is to partially offset this business exposure through the
cross-currency swaps discussed below. 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 also represents
an element of the Company's exposure to currency rate fluctuations.
<PAGE>
This exposure is generally addressed as needed through the purchase of forward
contracts and options. As of September 30, 1998, the Company had no forward
options or contracts. Exposure to foreign currency exchange rate fluctuations
also exists with respect to transactions with and transactions within the
Company's German, Indonesian and Hungarian operations.
INTEREST RATE SWAPS
In March 1997, the Company 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% (7.74% including current spread of 1.375%) on $15.0 million of notional
debt during the period ending March 1999. In August 1998, the Company entered
into multiple interest rate swap agreements for a total of $100 million of
notional debt which provide for the Company to swap a variable interest rate for
fixed interest rates ranging from 5.74% to 5.76% plus a specified spread
depending on the swap involved (7.12% to 7.14% including current spread of
1.375%). These swaps expire at various dates ranging from July 1999 to August
2000. These swaps are discussed more fully in footnote 6.
CROSS-CURRENCY SWAPS
In October and November 1998, the Company entered into cross-currency swaps
which provide for the Company to swap a total of $20 million of notional debt
for the equivalent amount of Japanese yen-denominated debt. Under these
swaps, the Company will also effectively swap a U.S. dollar-based interest
rate (5.5% at September 30, 1998) for a Japanese yen-based interest rate
(1.1% at September 30, 1998). These Japanese yen-based debt derivatives will
be accounted for in future periods under mark-to-market accounting. These
swaps expire in October and November 2001.
ENVIRONMENTAL
During the third quarter of 1998, the Company signed a Consent Decree among the
United States and PRPs for remediation of a site in Cortland, New York. As
disclosed in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, PRPs at the site previously filed suit against the Company
and sixteen other parties for allegedly sending waste to the site. Subject to
U.S. District Court approval, the Consent Decree will settle liability issues
for past and future EPA costs and future site remediation costs. The Company
also anticipates that the Consent Decree will result in the dismissal of the
original PRPs' lawsuit and that the Company will not incur liability for past
PRP response costs. It is not currently anticipated that the Company's share of
the costs of environmental remediation activities for this site will have a
materially adverse effect on the financial condition or results of operations of
the Company.
Other than as described above, 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, 1997.
ACQUISITIONS
On May 15, 1998, the Company, through a wholly-owned subsidiary, acquired
Orcolite, a division of Monsanto Company which produces polycarbonate and
plastic ophthalmic lenses, for $101.0 million in cash. Orcolite, headquartered
in Azusa, California had sales of $38.0 million for the twelve months ended
March 31, 1998 and is well regarded in the ophthalmic lens industry for its
manufacturing abilities, product innovation and customer service. See footnote
8 and the Company's Current Reports
<PAGE>
on Form 8-K as filed on April 3, 1998 and May 29, 1998, and Current Report
on Form 8-K/A filed on July 29, 1998, for additional information regarding
the acquisition.
MASK OPERATIONS EXTENDED SHUTDOWN
During the third quarter of 1998, the Company shut down three manufacturing
lines at the Cortland facility for an extended period of time. These shutdowns
were done in conjunction with the Company's normal summer maintenance shutdowns
to avoid additional ramp-up time. One of the three manufacturing lines that was
temporarily shutdown has now resumed operation. Restarting the remaining two
lines (one television and one computer monitor) is contingent upon success in
growing market share and improved market conditions in the future.
YEAR 2000 COMPLIANCE
The Company has computer applications at the corporate level and at each of
its operating divisions that require or have required modifications made
necessary by the upcoming year 2000. The Year 2000 ("Y2K") issue is the
result of computer programs using a two-digit format, as opposed to four
digits, to indicate the year. Such programs will be unable to correctly
interpret dates beginning in the year 2000 and, as a result, could cause
computer system failures or miscalculations. Such failures or miscalculations
could cause significant disruptions of operations, including among other
things, an inability to process transactions or engage in normal business
activities. If appropriate modifications are not made, or are not completed
in a timely manner, the Y2K issue could have a material impact on the
operations of the Company.
The Company has been addressing the Y2K issue using essentially the following
four-phased approach:
- Phase I - Identification of all computer systems within the Company
with exposure to Y2K issues
- Phase II - For each system, assessment of Y2K issue(s) and required
remediation
- Phase III - Remediation and testing of systems to be Y2K compliant
- Phase IV - Assessment of Y2K preparedness of significant third
parties
Phase I was formally completed and summarized on a Company-wide basis in
early 1998. Phase II is essentially completed for all information technology
("IT") systems and is in process and estimated to be completed by the end of
1998 or early 1999 for all non-IT systems. Non-IT systems are generally
embedded technology, such as microcontrollers. Phase III is in various stages
of completion depending on the systems involved. For IT systems, the most
significant efforts of this phase currently involve the accelerated
replacement of non-compliant IT systems within Mask Operations and the
remediation and testing of important mainframe applications and operating
systems within the Optical Products division. Y2K-compliant integrated IT
systems are currently scheduled for implementation in Mask Operations in
various phases beginning in early 1999 and continuing through the third
quarter of 1999. Y2K remediation and testing within the Optical Products
division is currently estimated to be completed by mid-1999. For non-IT
systems, phase III is currently scheduled to be completed in conjunction with
phase II by early to mid-1999. For phase IV, the Company is in the process of
identifying and assessing the Y2K preparedness of significant third parties,
including key vendors and service providers, and estimates that this phase
will be ongoing throughout the rest of 1998 and 1999.
The Company currently estimates that it will cost $3-4 million using both
internal and external resources to address the Y2K issue as discussed above,
including the cost of replacing the IT systems within Mask Operations.
Through September 30, 1998, the Company had spent less than $1 million of
this total estimate. Expenditures related to Y2K preparedness are expected to
be funded by cash flow from operations and are not currently expected to
impact other operating or investment plans.
Management currently anticipates that the above plan will appropriately
resolve the Y2K issue with respect to all material elements under the
Company's direct control. However, a number of significant risks do exist,
including the potential inability of the Company to obtain (or retain) the
proper internal and external resources to fully address all Y2K exposures at
the cost estimated, as well as the risk that key suppliers or other
significant third parties, including those in utilities, communications,
transportation, banking and government, are not prepared for the year 2000.
The Company has not yet established a contingency plan relative to the Y2K
issue but currently anticipates establishing such a plan in 1999.
<PAGE>
CAUTIONARY STATEMENTS
Certain statements included in this Discussion and Analysis of Financial
Condition and Results of Operations and elsewhere in this Form 10-Q 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, 1997, 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. In addition to those factors listed
in the Company's Form 10-K for the year ended December 31, 1997, the Company's
future performance may be subject to additional risks, including integration of
the Orcolite acquisition, lower demand for televisions and computer monitors,
further mask price declines, inability to penetrate the lead frame market,
higher operating expenses and lower yields associated with production start-up,
potential future production shut downs, negative foreign currency fluctuations
including adverse fluctuations affecting cross-currency swaps, successful
customer part qualifications, the effect of the economic uncertainty in Asia and
the impact of Y2K information system issues. 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>
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" which begins on page 10 and Note 10 of the
"Notes to Condensed Consolidated Financial Statements" on page 9.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
10.1 Form of Change of Control Agreement entered into between the
Company and Messr. Opdahl (filed herein).
27. Financial Data Schedule (filed only in electronic format).
99.1 News Release, dated October 22, 1998, announcing the third
quarter 1998 operating results (filed herein).
99.2 News Release, dated September 18, 1998, announcing quarterly
dividend (filed herein).
(b) REPORTS ON FORM 8-K.
1. The Company filed a Form 8-K, dated as of June 20, 1998, on
July 14, 1998 reporting the adoption of a Share Rights Plan.
2. The Company filed a Form 8-K/A, dated as of May 15, 1998, on
July 29, 1998, providing financial information for the business
acquired and pro forma financial information related to the
acquisition of Monsanto Company's Orcolite business unit.
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.
/s/Steven E. Opdahl
-----------------------------------------
Steven E. Opdahl
Controller (Principal Accounting Officer)
Dated: November 13, 1998
<PAGE>
EXHIBIT 10.1
August 7, 1998
BMC Industries, Inc. considers the establishment and maintenance of a sound
and vital management to be essential to protecting and enhancing the best
interests of the Company and its stockholders. In this connection, the Company
recognizes that, as is the case with many publicly held corporations, the
possibility of a Change in Control may arise and that such possibility, and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the Company
and its stockholders.
Accordingly, the Board has determined that appropriate steps should be
taken to minimize the risk that Company management will depart prior to a Change
in Control, thereby leaving the Company without adequate management personnel
during such a critical period, and to reinforce and encourage the continued
attention and dedication of members of the Company's management to their
assigned duties without distraction in circumstances arising from the
possibility of a Change in Control. In particular, the Board believes it
important, should BMC Industries, Inc., or its stockholders receive a proposal
for transfer of control, that you be able to continue your management
responsibilities and assess and advise the Board whether such proposal would be
in the best interests of BMC Industries, Inc. and its stockholders and to take
other action regarding such proposal as the Board might determine to be
appropriate, without being influenced by the uncertainties of your own personal
situation.
The Board recognizes that continuance of your position with the Company
involves a substantial commitment to the Company in terms of your personal life
and professional career and the possibility of foregoing present and future
career opportunities, for which the Company receives substantial benefits.
Therefore, to induce you to remain in the employ of the Company, this Agreement,
which has been approved by the Board, sets forth the benefits which the Company
agrees will be provided to you in the event your employment with the Company is
terminated in connection with a Change in Control under the circumstances
described below.
1. DEFINITIONS. The following terms will have the meaning set forth
below unless the context clearly requires otherwise. Terms defined elsewhere in
this Agreement will have the same meaning throughout this Agreement.
(a) "AGREEMENT" means this letter agreement as amended, extended or
renewed from time to time in accordance with its terms.
(b) "BOARD" means the board of directors of the Parent Corporation duly
qualified and acting at the time in question.
(c) "CAUSE" means: (i) the willful and continued failure by you to
perform substantially your duties with the Company after a demand for
substantial performance is delivered to you by the President and Chief Executive
Officer which specifically identifies the manner in which such person believes
that you have not substantially performed your duties; or (ii) your conviction
(including a plea of nolo contendere) of willfully engaging in illegal conduct
constituting a felony or gross misdemeanor under federal or state law which is
materially and demonstrably injurious to the Company. For purposes of this
definition, no act, or failure to act, on your part will be considered "willful"
unless done, or omitted to be done, by you in bad faith and without reasonable
belief that your action or omission was in, or not opposed to, the best
interests of the Company. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board (or a committee
thereof) or based upon the advice of counsel for the Company will be
conclusively presumed to be done, or omitted to be done,
<PAGE>
by you in good faith and in the best interests of the Company. It is also
expressly understood that your attention to matters not directly related to
the business of the Company will not provide a basis for termination for
Cause so long as the Board did not expressly disapprove in writing of your
engagement in such activities either before or within a reasonable period of
time after the Board knew or could reasonably have known that you engaged in
those activities. Notwithstanding the foregoing, you will not be deemed to
have been terminated for Cause unless and until there has been delivered to
you a copy of a resolution duly adopted by the affirmative vote of not less
than a majority of the entire membership of the Board at a meeting of the
Board called and held for the purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the
Board), finding that in the good faith opinion of the Board you were guilty
of the conduct set forth above in clauses (i) or (ii) of this definition and
specifying the particulars thereof in detail.
(d) "CHANGE IN CONTROL" means any of the following: (i) the sale, lease,
exchange, or other transfer of all or substantially all of the assets of the
Parent Corporation, in one transaction or in a series of related transactions,
to any Person; (ii) the approval by the stockholders of the Parent Corporation
of any plan or proposal for the liquidation or dissolution of the Parent
Corporation; (iii) any Person is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of fifty percent
(50%) or more of the combined voting power of the Parent Corporation's
outstanding securities ordinarily having the right to vote at elections of
directors; (iv) individuals who constitute the Board on the date of this
Agreement (the "Incumbent Board") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to the
date of this Agreement whose election, or nomination for election, by the Parent
Corporation's stockholders, was approved by a vote of at least a majority of the
directors comprising the Incumbent Board (either by a specific vote or by
approval of the proxy statement of the Parent Corporation in which such person
is named as a nominee for director, without objection to such nomination) will,
for purposes of this clause (iv), be deemed to be a member of the Incumbent
Board; or (v) a change in control of a nature that is determined by independent
legal counsel to the Company to be required to be reported (assuming such event
has not been "previously reported") in response to Item 1(a) of the Current
Report on Form 8-K, as in effect on the date hereof, pursuant to section 13 or
15(d) of the Exchange Act, whether or not the Parent Corporation is then subject
to such reporting requirement.
(e) "CODE" means the Internal Revenue Code of 1986, as amended.
(f) "COMPANY" means the Parent Corporation, any Subsidiary and any
Successor.
(g) "CONFIDENTIAL INFORMATION" means information which is proprietary to
the Company or proprietary to others and entrusted to the Company, whether or
not trade secrets. It includes information relating to business plans and to
business as conducted or anticipated to be conducted, and to past or current or
anticipated products or services. It also includes, without limitation,
information concerning research, development, purchasing, accounting, marketing
and selling. All information which you have a reasonable basis to consider
confidential is Confidential Information, whether or not originated by you and
without regard to the manner in which you obtain access to that and any other
proprietary information.
(h) "DATE OF TERMINATION" following a Change in Control (or prior to a
Change in Control if your termination was either a condition of the Change in
Control or was at the request or insistence of any Person (other than the
Company) related to the Change in Control) means: (i) if your employment is to
be terminated by the Company for Cause or by you for Good Reason, the date
specified in the Notice of Termination; (ii) if your employment is to be
terminated by the Company for any reason other than Cause, Disability, death or
Retirement, the date specified in the Notice of Termination, which in no event
may be a date earlier than sixty (60) calendar days after the date on which a
Notice of Termination is given, unless an earlier date has been expressly agreed
to by you in writing either in advance of, or after, receiving such Notice of
Termination; or (iii) if your employment is terminated by reason of death or
Retirement, the date of death or Retirement, respectively. In the case of
termination by the Company of your employment for Cause, if you have not
previously expressly agreed in writing to the termination, then within thirty
(30) calendar days after receipt by you of the Notice of Termination with
respect thereto, you may notify the Company that a dispute exists concerning the
termination, in which event the Date of Termination will be the date set either
by mutual written agreement of the parties or by the arbitrators in a proceeding
as provided in Section 12 of this Agreement. During the period beginning on the
date you or the Company, as the case may be, receive Notice of Termination and
ending on the Date of Termination, the Company will continue to pay you your
full compensation and benefits and cause your continued participation in all
Plans, in effect immediately prior to the time the Notice of Termination is
given and until the dispute is resolved in accordance with Section 12 of this
Agreement.
<PAGE>
(i) "DISABILITY" means a disability as defined in the Company's long-term
disability plan as in effect immediately prior to the Change in Control or, in
the absence of such a plan, means permanent and total disability as defined in
section 22(e)(3) of the Code.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(k) "GOOD REASON" means:
(i) an adverse change in your status or position(s) as an
executive of the Company as in effect immediately prior to the Change in
Control, including, without limitation, any adverse change in your status
or position(s) as a result of a material diminution in your duties or
responsibilities (other than, if applicable, any such change directly
attributable to the fact that the Company is no longer publicly owned)
or the assignment to you of any duties or responsibilities which, in
your reasonable judgement, are inconsistent with such status of
position(s), or any removal of you from or any failure to reappoint or
reelect you to such position(s) (except in connection with the
termination of your employment for Cause, Disability or Retirement or as
a result of your death or by you other than for Good Reason);
(ii) a reduction by the Company in your rate of total compensation
(including, without limitation, salary and bonuses), or an adverse
change in the form of timing of the payment thereof, as in effect
immediately prior to the Change in Control;
(iii) the failure by the Company to continue in effect any Plan in
which you (and/or your family or dependents) are participating at any time
during the ninety (90)-calendar-day period immediately preceding the Change
in Control (or Plans providing you (and/or your family or dependents) with
at least substantially similar benefits) other than as a result of the
normal expiration of any such Plan in accordance with its terms as in
effect immediately prior to the ninety (90)-calendar-day period immediately
preceding the time of the Change in Control, or the taking of any action,
or the failure to act, by the Company which would adversely affect your
(and/or your family's or dependent's) continued participation in any of
such Plans on at least as favorable a basis to you (and/or your family or
dependents) as is the case on the date of the Change in Control or which
would materially reduce your (and/or your family's or dependent's) benefits
in the future under any of such Plans or deprive you (and/or your family or
dependents) of any material benefit enjoyed by you (and/or your family or
dependents) at the time of the Change in Control;
(iv) the Company's requiring you to be based anywhere other than
where your office is located immediately prior to the Change in Control,
except for required travel on the Company's business, and then only to
the extent substantially consistent with the business travel obligations
which you undertook on behalf of the Company during the ninety
(90)-calendar-day period immediately preceding the Change in Control
(without regard to travel related to or in anticipation of the Change in
Control);
(v) the failure by the Company to obtain from any Successor the
assent to this Agreement contemplated by Section 5 of this Agreement;
(vi) any purported termination by the Company of your employment
which is not properly effected pursuant to a Notice of Termination and
pursuant to any other requirements of this Agreement, and for purposes
of this Agreement, no such purported termination will be effective; or
(vii) any refusal by the Company to continue to allow you to
attend to matters or engage in activities not directly related to the
business of the Company which, at any time prior to the Change in Control,
you were not expressly prohibited in writing by the Board from attending to
or engaging in.
Notwithstanding anything in the foregoing to the contrary, your termination
of employment with the Company for any reason other than death, Disability or
Retirement within the thirty (30) day period beginning on the one hundred eighty
first (181st) calendar day following a Change in Control and ending on the two
hundred tenth (210th) calendar day following a Change in Control will be
conclusively deemed to be for Good Reason.
(l) "MONTHLY BASE COMPENSATION" means your monthly base cash salary from
the Company attributable to services rendered as an employee of the Company at
the rate in effect immediately prior to the Change in Control, determined
without regard to the amount of contributions made by the Company with respect
to you under any qualified cash or deferred arrangement or cafeteria plan that
is not then includable in your income by operation of section 402(a)(8) or
section 125 of the Code and without regard to amounts deferred, whether
voluntarily or involuntarily and whether vested or nonvested, pursuant to any
Plan.
<PAGE>
(m) "NOTICE OF TERMINATION" means a written notice which indicates the
specific termination provision in this Agreement pursuant to which the notice is
given. Any purported termination by the Company or by you following a Change in
Control (or prior to a Change in Control if your termination was either a
condition of the Change in Control or was at the request or insistence of any
Person (other than the Company) related to the Change in Control) must be
communicated by written Notice of Termination.
(n) "PARENT CORPORATION" means BMC Industries, Inc. and any Successor.
(o) "PERSON" means and includes any individual, corporation, partnership,
group, association or other "person," as such term is used in section 14(d) of
the Exchange Act, other than the Parent Corporation, a wholly-owned subsidiary
of the Parent Corporation or any employee benefit plan(s) sponsored by the
Parent Corporation or a wholly-owned subsidiary of the Parent Corporation.
(p) "PLAN" means any compensation plan (such as a stock option, restricted
stock plan or other equity-based plan), or any employee benefit plan (such as a
thrift, pension, profit sharing, medical, dental, disability, accident, life
insurance, relocation, salary continuation, expense reimbursements, vacation,
fringe benefits, office and support staff plan or policy) or any other plan,
program, policy or agreement of the Company intended to benefit employees
(and/or their families or dependents) generally, management employees (and/or
their families or dependents) as a group or you (and/or your family or
dependents) in particular.
(q) "RETIREMENT" means termination of your employment with the Company on
or after the day on which you attain the age of sixty-five (65).
(r) "SUBSIDIARY" means any corporation at least a majority of whose
securities having ordinary voting power for the election of directors is at the
time owned by the Company and/or one (1) or more Subsidiaries or any operating
division of the Company.
(s) "SUCCESSOR" means any Person that succeeds to, or has the practical
ability to control (either immediately or with the passage of time), the Parent
Corporation's business directly, by merger, consolidation or other form of
business combination, or indirectly, by purchase of the Parent Corporation's
voting securities, all or substantially all of its assets or otherwise.
2. BENEFITS UPON A CHANGE IN CONTROL TERMINATION. If your employment
with the Company is terminated for any reason other than death, Cause,
Disability or Retirement, or if you terminate your employment with the
Company for Good Reason either: (a) within the two hundred ten (210)
calendar-day-period immediately following a Change in Control; or (b) prior
to a Change in Control if your termination was either a condition of the
Change in Control or was at the request or insistence of a Person (other than
the Company) related to the Change in Control, then:
(i) CASH PAYMENTS. Within five (5) business days following the Date
of Termination, the Company will make a lump-sum cash payment to you in an
amount equal to the product of (A) your Monthly Base Compensation
multiplied by (B) twelve (12).
(ii) LIMITATION ON PAYMENTS AND BENEFITS. Notwithstanding anything
in this Agreement to the contrary, if any of the payments to be made in
connection with this Agreement, together with any other payments or
benefits which you have the right to receive from the Company or any
corporation which is a member of an "affiliated group" (as defined in
section 1504(a) of the Code without regard to section 1504(b) of the Code)
of which the Company is a member, constitute an "excess parachute payment"
(as defined in section 280G(b) of the Code), the payments to be made in
connection with this Agreement shall be reduced to the extent necessary to
prevent any portion of such payments or benefits from becoming subject to
the excise tax imposed under section 4999 of the Code; provided, that such
reduction shall be made only if the aggregate amount of the payments after
such reduction exceeds the difference between (A) the amount of such
payments absent such reduction minus (B) the aggregate amount of the excise
tax imposed under section 4999 of the Code attributable to any such excess
parachute payments arising in connection with such Change in Control. The
determination as to whether any such decrease in the payments to be made in
connection with this Agreement is necessary must be made in good faith by
legal counsel or a certified public accountant selected by you and
reasonably acceptable to the Company, and such determination will be
conclusive and binding upon you and the Company. In the event that a
reduction is necessary, you will have the right to designate the particular
payments or benefits that are to be
<PAGE>
reduced or eliminated so that no portion of the payments or benefits to be
made or provided to you in connection with this Agreement will be excess
parachute payments subject to the excise tax under Code section 4999. The
Company will pay or reimburse you on demand for the reasonable fees, costs
and expenses of the counsel or accountant selected to make the
determinations under this clause (ii).
For purposes of this Section 2, your employment with the Company will be deemed
to have been terminated on the date on which the Company or you, as the case may
be, receives Notice of Termination notwithstanding that your Date of Termination
occurs following the expiration of the two hundred ten (210) calendar-day-period
referenced in clause (a).
3. INDEMNIFICATION. Following a Change in Control, the Company will
indemnify and advance expenses to you to the full extent permitted by law and
the Company's articles of incorporation and bylaws for damages, costs and
expenses (including, without limitation, judgements, fines, penalties,
settlements and reasonable fees and expenses of your counsel) incurred in
connection with all matters, events and transactions relating to your service to
or status with the Company and any other corporation, employee benefit plan or
other entity with whom you served at the request of the Company.
4. CONFIDENTIALITY. You will not use, other than in connection with your
employment with the Company, or disclose any Confidential Information to any
person not employed by the Company or not authorized by the Company to receive
such Confidential Information, without the prior written consent of the Company;
and you will use reasonable and prudent care to safeguard and protect and
prevent the unauthorized disclosure of Confidential Information. Nothing in
this Agreement will prevent you from using, disclosing or authorizing the
disclosure of any Confidential Information: (a) which is or hereafter becomes
part of the public domain or otherwise becomes generally available to the public
through no fault of yours; (b) to the extent and upon the terms and conditions
that the Company may have previously made the Confidential Information available
to certain persons; or (c) to the extent that you are required to disclose such
Confidential Information by law or judicial or administrative process.
5. SUCCESSORS. The Company will seek to have any Successor, by agreement
in form and substance satisfactory to you, assent to the fulfillment by the
Company of the Company's obligations under this Agreement. Failure of the
Company to obtain such assent at least three (3) business days prior to the time
a Person becomes a Successor (or where the Company does not have at least three
(3) business days' advance notice that a Person may become a Successor, within
one (1) business day after having notice that such Person may become or has
become a Successor) will constitute Good Reason for termination by you of your
employment.
6. FEES AND EXPENSES. The Company, upon demand, will pay or reimburse
you for all reasonable legal fees, court costs, experts' fees and related costs
and expenses incurred by you in connection with any actual, threatened or
contemplated litigation or legal, administrative, arbitration or other
proceeding relating to this Agreement to which you are or reasonably expect to
become a party, whether or not initiated by you, including, without limitation:
(a) all such fees and expenses, if any, incurred in contesting or disputing any
such termination; or (b) your seeking to obtain or enforce any right or benefit
provided by this Agreement; provided, however, you will be required to repay
(without interest) any such amounts to the Company to the extent that a court
issues a final and non-appealable order setting forth the determination that the
position taken by you was frivolous or advanced by you in bad faith.
7. BINDING AGREEMENT. This Agreement inures to the benefit of, and is
enforceable by, you, your personal and legal representatives, executors,
administrators, successors, heirs, distributes, devisees and legatees. If you
die after you become entitled to, but before you receive, any amounts payable to
you under this Agreement, all such amounts, unless otherwise provided in this
Agreement, will be paid in accordance with the terms of this Agreement to your
devisee, legatee or other designee or, if there be no such designee, to your
estate.
8. NO MITIGATION. Except as expressly provided in clause (i) of Section
2 of this Agreement, you will not be required to mitigate the amount of any
payments the Company becomes obligated to make to you in connection with this
Agreement by seeking other employment or otherwise and the payments to be made
to you in connection with this Agreement may not be reduced, offset or subject
to recovery by the Company by any payments or benefits you may receive from
other employment or otherwise.
9. NO SETOFF. Except as provided in Section 10 of this Agreement, the
Company will have no right to setoff payments owed to you under this Agreement
against amounts owed or claimed to be owed by you to the Company under this
Agreement or otherwise.
<PAGE>
10. TAXES. All payments to be made to you in connection with this
Agreement will be subject to required withholding of federal, state and local
income, excise and employment-related taxes which withholding shall be
consistent with the determination described in clause (ii) of Section 2 of this
Agreement.
11. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in, or required under, this Agreement must be in
writing and will be deemed to have been duly given when personally delivered or
when mailed by United States registered or certified mail, return receipt
requested, postage prepaid and addressed to each party's respective address set
forth on the first page of this Agreement (provided that all notices to the
Company must be directed to the attention of the President and Chief Executive
Officer), or to such other address as either party may have furnished to the
other in writing in accordance with these provisions, except that notice of
change of address will be effective only upon receipt.
12. DISPUTES. Any dispute, controversy or claim for damages arising under
or in connection with the Agreement shall be settled exclusively by arbitration
in Minneapolis, Minnesota by three (3) arbitrators in accordance with the rules
of the American Arbitration Association then in effect. Judgement may by
entered on the arbitrators' award in any court having jurisdiction. The Company
will be entitled to seek an injunction or restraining order in a court of
competent jurisdiction (within or without the State of Minnesota) to enforce the
provisions of Section 4 of this Agreement.
13. JURISDICTION. Except as specifically provided otherwise in the
Agreement, the parties agree that any action or proceeding arising under or in
connection with this Agreement must be brought in a court of competent
jurisdiction in the State of Minnesota, and hereby consent to the exclusive
jurisdiction of said courts for this purpose and agree not to assert that such
courts are an inconvenient forum.
14. RELATED AGREEMENTS. To the extent that any provision of any other
Plan or agreement between the Company and you limits, qualifies or is
inconsistent with any provision of this Agreement, then for purposes of this
Agreement, while such other Plan or agreement remains in force, the provision of
this Agreement will control and such provision of such other Plan or agreement
will be deemed to have been superseded, and to be of no force or effect, as if
such other agreement had been formally amended to the extent necessary to
accomplish such purpose. Nothing in this Agreement prevents or limits your
continuing or future participation in any Plan provided by the Company and for
which you may qualify, and nothing in this Agreement limits or otherwise affects
the rights you may have under any Plans or other agreements with the Company.
Amounts which are vested benefits or which you are otherwise entitled to receive
under any Plan or other agreement with the Company at or subsequent to the Date
of Termination will be payable in accordance with such Plan or other agreement.
15. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement is
intended to provide you with any right to continue in the employ of the Company
for any period of specific duration or interfere with or otherwise restrict in
any way your rights or the rights of the Company, which rights are hereby
expressly reserved by each, to terminate your employment at any time for any
reason or no reason whatsoever, with or without cause.
16. CHANGE OF SUBSIDIARY STATUS. In the event that, prior to a Change in
Control: (a) a Subsidiary is sold, merged, transferred or in any other manner
or for any other reason ceases to be a Subsidiary; (b) your primary employment
duties are with the Subsidiary at the time of the occurrence of such event; and
(c) you do not, in conjunction therewith, transfer employment directly to the
Company or another Subsidiary, then this Agreement will become null and void.
17. SURVIVAL. The respective obligations of, and benefits afforded to,
the Company and you which by their express terms or clear intent survive
termination of your employment with the Company or termination of this
Agreement, as the case may be, including, without limitation, the provisions of
Sections 2, 3, 4, 5, 6, 9, 10, 11 and 12 of this Agreement, will survive
termination of your employment with the Company or termination of this
Agreement, as the case may be, and will remain in full force and effect
according to their terms.
18. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such modification, waiver or discharge is agreed to in a
writing signed by you and the President and Chief Executive Officer. No waiver
by any party to this Agreement at any time of any breach by another party to
this Agreement of, or of compliance with, any condition or provision of this
Agreement to be performed by such party will be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter to this Agreement have been made by any party
which are not expressly set forth in this Agreement. This Agreement and the
legal relations among the parties as to all matters, including, without
limitation, matters of validity,
<PAGE>
interpretation, construction, performance and remedies, will be governed by and
construed exclusively in accordance with the internal laws of the State of
Minnesota (without regard to the conflict of laws provisions of the State of
Minnesota or of any other jurisdiction), except to the extent that the
provisions of the corporate law of Minnesota may apply to the internal affairs
of the Company. Headings are for purposes of convenience only and do not
constitute a part of this Agreement. The parties to this Agreement agree to
perform, or cause to be performed, such further acts and deeds and to execute
and deliver, or cause to be executed and delivered, such additional or
supplemental documents or instruments as may be reasonably required by the other
party to carry into effect the intent and purpose of this Agreement. The
invalidity or unenforceability of all or any part of any provision of this
Agreement will not affect the validity or enforceability of the remainder of
such provision or of any other provision of this Agreement, which will remain in
full force and effect. This Agreement may be executed in several counterparts,
each of which will be deemed to be an original, but all of which together will
constitute one and the same instrument.
If this letter correctly sets forth our agreement on the subject matter
discussed above, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
By _______________________________________
Paul B. Burke
Chairman, President & CEO
Agreed to this 1st day of September, 1998.
__________________________________________
Steven E. Opdahl
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,696
<SECURITIES> 46
<RECEIVABLES> 46,610
<ALLOWANCES> 4,114
<INVENTORY> 84,856
<CURRENT-ASSETS> 150,224
<PP&E> 280,028
<DEPRECIATION> 114,292
<TOTAL-ASSETS> 409,810
<CURRENT-LIABILITIES> 50,946
<BONDS> 0
0
0
<COMMON> 47,662
<OTHER-SE> 80,192
<TOTAL-LIABILITY-AND-EQUITY> 409,810
<SALES> 253,609
<TOTAL-REVENUES> 253,609
<CGS> 232,177
<TOTAL-COSTS> 69,620
<OTHER-EXPENSES> 932
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,650
<INCOME-PRETAX> (58,671)
<INCOME-TAX> (22,429)
<INCOME-CONTINUING> (36,242)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (36,242)
<EPS-PRIMARY> (1.34)
<EPS-DILUTED> (1.34)
</TABLE>
<PAGE>
EXHIBIT 99.1
Contact: Jeffrey J. Hattara (NYSE-BMC)
(612) 851-6030 FOR IMMEDIATE RELEASE
BMC REPORTS THIRD QUARTER 1998 RESULTS
October 22, 1998 -- Minneapolis, Minnesota - BMC Industries, Inc. reported a net
loss of $2.0 million, or $.07 per diluted share, for the third quarter of 1998.
This compares to net earnings of $0.31 per diluted share in the third quarter of
1997. Total third quarter revenues increased 12% from $79.1 million in 1997 to
$88.6 million in 1998.
Paul B. Burke, BMC's Chairman and Chief Executive Officer, stated, "Our focus in
the third quarter was to continue the assimilation of the Orcolite acquisition,
reduce costs and inventory at Mask Operations and generate solid cash flow. We
successfully decreased our inventory balance by $11.0 million and reduced our
debt balance $9.6 million in the third quarter. We expect further inventory and
debt reductions in the fourth quarter as we continue our focus on cash flow and
balance sheet management."
BMC's Optical Products operation generated sales of $36.6 million in the third
quarter compared to $24.3 million in the prior year quarter, an increase of 51%.
On a proforma basis, revenues increased 9% over the combined Vision-Ease and
Orcolite 1997 third quarter revenues. Sales of high-end products
(polycarbonate, high-index, progressive and polarizing sun lenses) grew 114%
over the prior year quarter. On a proforma basis, high-end sales grew 23%.
High-end sales accounted for 60% of total Optical Products' revenue in the third
quarter compared to 42% in the year earlier period. Sales of glass and
commodity plastic lenses were somewhat slower than anticipated. Operating
earnings increased 13% over the prior year quarter, even as the Optical Products
division continued to invest heavily in the sales and marketing area, incurred
expenses related to the integration of Orcolite and recognized amortization
expense related to the Orcolite goodwill.
Vision-Ease continued work on key strategic development initiatives during the
third quarter. They will be launching a new polycarbonate progressive lens in
the fourth quarter to meet significant demand in the marketplace for
high-quality polycarbonate progressive lenses. The Company expects to see the
sales impact from these lenses later in the fourth quarter and into 1999. They
also continued development of their polycarbonate lens lamination system. The
system will be tested at various retail lens dispensing locations in the fourth
quarter. The Company expects full rollout of the system in 1999.
- more -
<PAGE>
Third quarter revenues from the Precision Imaged Products division (PIP,
including both the Mask Operations and Buckbee-Mears St. Paul) decreased 5% from
$54.8 million in 1997 to $52.0 million in 1998. Computer monitor mask sales
were up 19% over the prior year period, moving from $6.2 million last year to
$7.4 million in the current quarter. Total television mask unit sales increased
13%. Television mask revenues, however, decreased 9% due primarily to lower
invar mask sales and overall price declines. Sales of jumbo (30" and larger)
and large (25" to 29") masks made of AK steel were up 18% and 9%, respectively.
Sales of invar television masks were down 39% compared to the prior year
quarter. As stated in previous earnings releases, the Company expects the soft
market for invar television masks to continue through the end of the year.
The PIP division incurred an operating loss of $2.6 million in the third quarter
primarily due to the extended shutdown of three manufacturing lines at the
Cortland facility and continued pricing pressure in the mask business. The
Company estimates the extended shutdown of these lines negatively impacted
profits by approximately $4.0 million, however, this shutdown was instrumental
in allowing Mask Operations to reduce their inventory by approximately $10.0
million. One of the three manufacturing lines that was temporarily shutdown has
now resumed operation. Restarting the remaining two lines (one television and
one computer monitor) is contingent upon success in growing market share and
improved market conditions in the future.
Buckbee-Mears St. Paul (BMSP) is continuing on course for another record year in
1998 for both revenues and earnings. BMSP is working on numerous product
development initiatives with a variety of customers that could substantially
increase revenues and profits in future years.
Statements made in this press release which are not historical, including
statements regarding future performance, are forward looking statements and as
such are subject to a number of risks, including integration of the Orcolite
acquisition, lower demand for televisions and computer monitors, further mask
price declines, inability to penetrate the lead frame market, foreign currency
fluctuations, successful customer part qualifications and the continued effect
of the economic slowdown in Asia. These and other risks and uncertainties are
detailed in the Company's Form 10-K for the year ended December 31, 1997 and
Form 10-Q to be filed for the quarter ended September 30, 1998.
BMC Industries, Inc. is a leading producer of polycarbonate, glass and plastic
eyewear lenses. The Company is also one of the world's largest manufacturers of
aperture masks for color picture tubes used in televisions and computer
monitors. BMC's common stock is traded on the New York Stock Exchange under the
symbol BMC.
- more -
<PAGE>
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
- -------------------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 88,584 $ 79,086 $ 253,609 $ 236,470
Cost of Products Sold 81,642 61,813 232,177 181,356
- -------------------------------------------------------------------------------------------------------------------------------
Gross Margin 6,942 17,273 21,432 55,114
Selling 4,545 3,042 11,748 8,616
Administrative 1,213 1,006 4,072 3,634
Impairment of long-lived assets - - 42,800 -
Acquired research and development - - 11,000 -
- -------------------------------------------------------------------------------------------------------------------------------
Income from Operations 1,184 13,225 (48,188) 42,864
- -------------------------------------------------------------------------------------------------------------------------------
Other Income and (Expense)
Interest expense (3,949) (403) (9,650) (707)
Interest income 22 45 99 143
Other income (expense) (399) 71 (932) 300
- -------------------------------------------------------------------------------------------------------------------------------
Earnings before Income Taxes (3,142) 12,938 (58,671) 42,600
Income Taxes (1,173) 4,063 (22,429) 13,853
- -------------------------------------------------------------------------------------------------------------------------------
Net Earnings $ (1,969) $ 8,875 $ (36,242) $ 28,747
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
Net Earnings Per Share:
Basic $ (0.07) $ 0.32 $ (1.34) $ 1.04
Diluted (0.07) 0.31 (1.34) 1.01
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
Number of Shares Included in Per Share Computation:
Basic 26,989 27,681 26,963 27,518
Diluted 26,989 28,619 26,963 28,524
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- more -
<PAGE>
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
September 30 June 30 December 31
1998 1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Cash and cash equivalents $ 2,742 $ 2,969 $ 2,383
Trade accounts receivable, net 42,496 45,077 29,824
Inventories 84,856 95,881 70,111
Deferred income taxes 11,315 8,724 5,881
Other current assets 8,815 9,775 13,595
- ----------------------------------------------------------------------------------------------------------------
Total Current Assets 150,224 162,426 121,794
- ----------------------------------------------------------------------------------------------------------------
Property, plant and equipment 280,028 271,775 283,070
Less accumulated depreciation 114,292 110,381 100,688
- ----------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net 165,736 161,394 182,382
- ----------------------------------------------------------------------------------------------------------------
Deferred income taxes 17,085 19,099 1,429
Other assets, net 76,765 77,114 13,802
- ----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 409,810 $ 420,033 $ 319,407
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- ----------------------------------------------------------------------------------------------------------------
Short-term borrowings $ 822 $ 979 $ 1,139
Accounts payable 25,566 24,458 25,623
Income taxes payable 226 415 2,830
Accrued expenses and other current liabilities 24,332 25,955 17,288
- ----------------------------------------------------------------------------------------------------------------
Total Current Liabilities 50,946 51,807 46,880
- ----------------------------------------------------------------------------------------------------------------
Long-term debt 209,713 219,164 73,426
Other liabilities 18,559 17,570 17,718
Deferred income taxes 2,738 3,757 2,631
Stockholders' equity
Common stock 47,662 46,543 62,263
Retained earnings 81,237 83,613 118,693
Cumulative translation adjustment 1,047 (1,350) (1,217)
Other (2,092) (1,071) (987)
- ----------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 127,854 127,735 178,752
- ----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 409,810 $ 420,033 $ 319,407
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
-30-
<PAGE>
EXHIBIT 99.2
Contact: Jeffrey J. Hattara (NYSE-BMC)
(612)851-6030 FOR IMMEDIATE RELEASE
BMC ANNOUNCES QUARTERLY DIVIDEND
September 18, 1998 -- Minneapolis, Minnesota - BMC Industries, Inc. today
announced that its Board of Directors has approved a continuation of its
quarterly cash dividend of $.015 per share.
Shareholders of record as of September 30, 1998 will receive a dividend of $.015
for each share owned on that date, to be paid on October 14, 1998.
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-
