<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---- EXCHANGE ACT OF 1934. For the Quarterly Period ended March 31, 1999.
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 27,259,271 shares of common stock as of May
6, 1999. There is no other class of stock outstanding.
Exhibit Index Begins at Page 13
<PAGE>
PART I: FINANCIAL INFORMATION
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
Item 1: Financial Statements
<TABLE>
<CAPTION>
MARCH 31 December 31
1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1,976 $ 1,028
Trade accounts receivable, net of allowances 43,015 39,163
Inventories 83,684 82,853
Deferred income taxes 14,617 14,603
Other current assets 15,203 14,347
- --------------------------------------------------------------------------------------------------------------------------
Total Current Assets 158,495 151,994
- --------------------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment 273,491 276,630
Less Accumulated Depreciation 115,511 114,036
------------- ------------
Property, Plant and Equipment, Net 157,980 162,594
------------- ------------
Deferred Income Taxes 4,712 5,431
Intangible Assets, Net 72,291 73,178
Other Assets 7,541 6,268
- --------------------------------------------------------------------------------------------------------------------------
Total Assets $ 401,019 $ 399,465
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------------------------
Current Liabilities
Short-term borrowings $ 1,861 $ 1,929
Accounts payable 31,521 28,315
Income taxes payable 4,541 3,375
Accrued expenses and other liabilities 27,115 23,404
- --------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 65,038 57,023
- --------------------------------------------------------------------------------------------------------------------------
Long-term Debt 179,816 187,266
Other Liabilities 17,892 18,372
Deferred Income Taxes 4,604 3,547
Stockholders' Equity
Common stock 47,756 47,714
Retained earnings 89,219 86,436
Accumulated other comprehensive income (loss) (1,317) 1,113
Other (1,989) (2,006)
- --------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 133,669 133,257
- --------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 401,019 $ 399,465
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</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
March 31
----------------------------------
1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $ 84,645 $ 80,084
Cost of products sold 71,078 68,455
- ---------------------------------------------------------------------------------------------------------------------------
Gross margin 13,567 11,629
Selling 4,365 3,289
Administration 1,233 1,330
- ---------------------------------------------------------------------------------------------------------------------------
Income from Operations 7,969 7,010
- ---------------------------------------------------------------------------------------------------------------------------
Other Income and (Expense)
Interest expense (3,463) (1,383)
Interest income 5 32
Other income (expense) 390 (144)
- ---------------------------------------------------------------------------------------------------------------------------
Earnings before Income Taxes 4,901 5,515
Income Taxes 1,710 1,706
- ---------------------------------------------------------------------------------------------------------------------------
Net Earnings $ 3,191 $ 3,809
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Net Earnings Per Share:
Basic $ 0.12 $ 0.14
Diluted 0.12 0.14
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Number of Shares Included in Per Share Computation:
Basic 27,201 26,994
Diluted 27,405 27,644
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Dividends Declared Per Share $ 0.015 $ 0.015
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Cash Provided by (Used in) Operating Activities
Net earnings $ 3,191 $ 3,809
Depreciation and amortization 5,647 5,002
Changes in operating assets and liabilities 1,847 (10,990)
- ------------------------------------------------------------------------------------------------------------------------------
Total 10,685 (2,179)
- ------------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities
Additions to property, plant and equipment (2,504) (3,958)
- ------------------------------------------------------------------------------------------------------------------------------
Total (2,504) (3,958)
- ------------------------------------------------------------------------------------------------------------------------------
Net Cash (Used in) Provided by Financing Activities
Increase in short-term borrowings 248 114
Increase (decrease) in long-term debt (7,000) 22,270
Common stock issued (repurchased), net 42 (15,905)
Cash dividends paid (408) (417)
Other 17 (63)
- ------------------------------------------------------------------------------------------------------------------------------
Total (7,101) 5,999
- ------------------------------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (132) (7)
- ------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 948 (145)
Cash and Cash Equivalents at Beginning of Period 1,028 2,383
- ------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 1,976 $ 2,238
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</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 March 31, 1999,
and the results of operations and the cash flows for the periods ended
March 31, 1999 and 1998. Such adjustments are of a normal recurring nature.
Certain items in the financial statements for the period ended March 31,
1998 have been reclassified to conform to the presentation for the period
ended March 31, 1999. The results of operations for the three-month period
ended March 31, 1999 are not necessarily indicative of the results to be
expected for the full year. The balance sheet as of December 31, 1998 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, 1998.
2. Inventories
<TABLE>
<CAPTION>
MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
<S> <C> <C>
Raw materials $ 23,054 $ 24,845
Work in process 12,008 9,047
Finished goods 48,622 48,961
------------ ------------
$ 83,684 $ 82,853
------------ ------------
------------ ------------
</TABLE>
3. Derivative Financial Instruments
Derivative financial instruments are used by the Company to reduce foreign
exchange and interest rate risks.
Interest Swap Agreements - In March 1997, the Company entered into an
interest rate swap agreement that allowed the Company to swap a variable
interest rate for a fixed interest rate of 6.365% on $15,000 of notional
debt for a period of two years ended in 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 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
agreements.
<PAGE>
Cross-Currency Swap Agreement - In January 1999, the Company entered into a
cross-currency swap which provided for the Company to swap $10,000 of
notional debt for the equivalent amount of Japanese yen-denominated debt.
This swap also effectively swapped a U.S. dollar-based interest rate of
5.1% for a Japanese yen-based interest rate of 1.05%. This Japanese
yen-based debt derivative is accounted for under mark-to-market accounting
and expires in January 2002. The Company recorded as other income a gain of
$341 in the quarter ended March 31, 1999 related to this swap.
4. Comprehensive Income
The components of comprehensive income, net of related tax, for the
three-month periods ended March 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net earnings $ 3,191 $ 3,809
Foreign currency translation adjustments (2,430) (477)
--------- ---------
Comprehensive income $ 761 $ 3,332
--------- ---------
--------- ---------
</TABLE>
Foreign currency translation adjustment for 1999 is primarily due to the
change in cumulative translation adjustment resulting from the
strengthening of the U.S. dollar against the DM/Euro during the quarter
ended March 31, 1999.
5. Business Acquisition
On May 15, 1998, the Company, through a wholly owned subsidiary, acquired
the Orcolite business unit of the Monsanto Company (Orcolite) for the cash
purchase price of $101,000. 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 seven to 30 years.
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 acquisition was written-off
as a charge of $9,500 (pre-tax) during the second quarter of 1998. The
appraised value represents the estimated fair value of in-process R&D based
on risk-adjusted cash flows related to the in-process R&D projects. At the
date of the acquisition, the development of these projects had not reached
technological feasibility, and these projects had no alternative future
uses. There is no assurance that the in-process projects, which remain in
progress, will be completed, or that they will meet either technological
or commercial success.
The consolidated statements of operations reflect the operations of
Orcolite after May 15, 1998. 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 1998, 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 $9,500 write-off of acquired
in-process research and development discussed above.
<PAGE>
<TABLE>
<CAPTION>
Three Month Period Ended March 31, 1998
---------------------------------------
<S> <C>
Revenues $ 89,092
Net earnings 2,731
Diluted earnings per share 0.10
</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. Also, the anticipated financial
impact resulting from business synergies has not been reflected in the
above pro forma financial information. Such synergies include 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.
6. Segment Information
The Company has two operating segments which manufacture and sell a variety
of products: Precision Imaged Products (PIP) and Optical Products. PIP
manufactures principally aperture masks which are photochemically etched
fine mesh grids used in the manufacture of color television tubes and
computer monitors. Optical Products manufactures ophthalmic lenses.
The following is a summary of certain financial information relating to the
two segments:
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------------------------------------------------------------------
Precision Image Products Optical Products Consolidated
-------------------------- -------------------------- ---------------------------
1999 1998 1999 1998 1999 1998
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 49,999 $ 55,272 $ 34,646 $ 24,812 $ 84,645 $ 80,084
Cost of Products Sold 45,089 50,065 25,989 18,390 71,078 68,455
------------------------------------------------------------------------------------------------------------------
Gross Margin 4,910 5,207 8,657 6,422 13,567 11,629
Gross Margin % 9.8% 9.4% 25.0% 25.9% 16.0% 14.5%
Selling 1,357 1,133 3,008 2,156 4,365 3,289
Unallocated Corporate
Administration - - - - 1,233 1,330
-----------------------------------------------------------------------------------------------------------------
Income from Oper. $ 3,553 $ 4,074 $ 5,649 $ 4,266 $ 7,969 $ 7,010
----------------------------------------------------------
----------------------------------------------------------
Operating Income % 7.1% 7.4% 16.3% 17.2% 9.4% 8.8%
Interest and Other Income
(Expense), net (3,068) (1,495)
------------ -----------
Earnings Before Income
Taxes $ 4,901 $ 5,515
------------ -----------
------------ -----------
</TABLE>
<PAGE>
7. New Accounting Standards
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. The Company is currently evaluating the impact of
adoption of this Statement which is required for the Company no later than
first quarter 2000.
8. Legal Matters
During the quarter ended March 31, 1999, no significant new legal
proceedings or environmental matters arose and there were no material
changes in the status of the legal proceedings or environmental matters
described in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
<PAGE>
BMC INDUSTRIES, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1999 AND 1998
Total revenues for the first quarter of 1999 increased by $4.6 million, or
6%, from the first quarter of 1998. Revenues of the Optical Products group
generated sales of $34.6 million in the first quarter of 1999, up 40%, or
$9.8 million, over the prior year quarter due mainly to growth in sales of
high-end products (polycarbonate, progressive and polarizing sun lenses)
resulting from the acquisition of Orcolite in May 1998. Sales of high-end
products increased 98% in first quarter 1999 over first quarter 1998 and
accounted for 54% of total Optical Products group revenue in first quarter
1999 compared to 38% in first quarter 1998. First quarter 1999 Optical
Products group revenues were up 2.4% compared to the pro forma combined
Vision-Ease/Orcolite 1998 revenues for the same period. The growth in pro
forma revenue was dampened by year-on-year declines in glass and plastic lens
sales as growth in the ophthalmic lens market continues to shift towards
polycarbonate. In the first quarter of 1999, Optical Products group sales of
high-end products (including polycarbonate) increased 9% over the pro forma
combined Vision-Ease/Orcolite 1998 revenues for the same period. Revenues of
the Precision Imaged Products (PIP) group for the first quarter decreased 10%
from the prior year quarter due primarily to a previously anticipated
temporary slowdown of BMSP and a decline in sales of AK steel entertainment
masks attributable to both volume and price reductions. Increased sales of
invar entertainment masks and monitor masks largely offset the decline in
sales of AK steel entertainment masks. Sales of invar entertainment masks in
first quarter 1999 increased 20% over first quarter 1998 and sales of monitor
masks increased 29% over the comparable quarter last year. The monitor mask
line in Cortland, which had been shut down all of the second half of 1998,
was restarted near the end of January 1999 in response to increased demand
for monitor masks from a broadened customer base. However, only a limited
amount of monitor masks sold in first quarter 1999 were produced at the
Company's Cortland facility. The Company currently expects significant
incremental sales of monitor masks as the restarted Cortland monitor mask
line reaches full production.
Cost of products sold were 84% of net sales for the first quarter of 1999,
compared to 85.5% in the same period of 1998. The decreased cost of products
sold percentage was due primarily to the increased mix of higher-margin
optical product sales versus lower-margin PIP sales. The PIP gross margin
percentage is up slightly from 1998. The 1999 PIP gross margin percentage
reflects the heavier mix of high-margin invar entertainment sales and the
impact of cost reduction initiatives, offset by overall lower pricing within
the Mask business, particularly within the monitor segment; lower
profitability at BMSP; and costs associated with the restart of the Cortland,
New York monitor mask line during first quarter 1999, which had a significant
negative impact on first quarter 1999 results. The 1998 PIP gross margin
percentage reflects the significant costs associated with the original
start-up of the Cortland monitor mask line in late 1997/early 1998. The
Optical Products gross margin percentage decreased slightly from first
quarter 1998 reflecting increased amortization expense related to the
Orcolite acquisition, partially offset by an increase in mix of high-end
product sales.
Selling expenses were $4.4 million, or 5.2%, of revenues and $3.3 million, or
4.1%, of revenues for the first quarter of 1999 and 1998, respectively. The
increase is primarily due to higher selling costs associated with the Optical
Products group, principally for expanded sales and marketing efforts
associated with high-end products and incremental costs associated with the
Orcolite acquisition.
<PAGE>
Interest expense in the first quarter of 1999 increased $2.1 million over the
prior year quarter. This increase is primarily due to the increased debt level
to fund the cash purchase of Orcolite for $101 million in May of 1998.
The provision for income taxes was 35% and 31% of pre-tax income in the first
quarter of 1999 and 1998, respectively. This increase was primarily due to a
decrease in the tax benefit associated with dividends projected to be paid by
the Company's German operation to the Parent Company which reduce the Company's
effective tax rate.
MARKET RISK
There were no significant changes in market risks from those disclosed in the
Company's Form 10-K for the year ended December 31, 1998.
FINANCIAL POSITION AND LIQUIDITY
Debt decreased approximately $7 million during the first three months of 1999
primarily due to cash flow from operations and limited investing activity.
Working capital was $93.5 million at March 31, 1999 compared to $95 million at
December 31, 1998. The current ratio was 2.4 at March 31, 1999 compared to 2.7
at December 31, 1998. The ratio of debt to capitalization was 0.58 at March 31,
1999 compared to 0.59 at December 31, 1998.
There were no significant changes in the Company's credit facilities during the
quarter ended March 31, 1999. The Company was in compliance with all covenants
related to credit facilities at March 31, 1999. The Company continues to expect
that the combination of present capital resources, internally-generated funds
and unused financing sources will be adequate to meet the Company's financing
requirements for 1999.
ENVIRONMENTAL
There were 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, 1998.
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. If appropriate modifications are not made, or are not
completed in a timely manner, the Y2K issue could have a material adverse impact
on the operations of the Company.
The Company has been addressing the Y2K issue using essentially the following
four-phase approach:
- Phase I - Identification of all significant 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
<PAGE>
completed in the third quarter of 1999 for all non-IT systems. Non-IT systems
are generally embedded technology, such as micro-controllers. 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 the Mask Operations group and the
remediation and testing of important mainframe applications and operating
systems within the Optical Products group. Y2K-compliant integrated IT systems
from SAP are currently being implemented in the Mask Operations group in various
phases beginning in early 1999 and continuing through the third quarter of 1999.
Y2K remediation and testing within the Optical Products group is currently
estimated to be completed by the third quarter of 1999. For non-IT systems,
Phase III is currently scheduled to be completed in conjunction with Phase II by
the end of third quarter 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 during the remainder of 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 the Mask Operations group.
Through March 31, 1999, the Company had spent approximately $1.5 million of this
total estimate.
The Company's current most reasonably likely worst case Y2K scenario is the
potential inability to obtain raw materials from suppliers in a timely manner or
that modification work will not proceed on schedule, causing some increase to
the total cost of achieving Y2K compliance. The impact on the Company's results
of operations if the Company or its suppliers or customers are not fully Y2K
compliant is not reasonably determinable. Since the Company is depending on its
ability to execute modification plans and its vendors to continue material
supply without interruption, there can be no assurance that unforeseen
difficulties will not arise for the Company or its customers and that related
costs will not thereby be incurred.
Management believes it has planned appropriately to resolve the Y2K issue with
respect to all material elements under the Company's direct control. A number of
significant risks do exist, however, including the potential inability of the
Company to obtain (or retain) the proper internal and external resources to
fully address all Y2K exposures in the timeframes required and at the cost
estimated, as well as the risk that key suppliers, customers 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 later in 1999.
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 and include, without limitation, any statement
that may predict, forecast, indicate or imply future results, performance or
achievements. These statements are not guarantees of future performance and
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, which reflect our opinion as of the date of
this Form 10-Q. 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, 1998, which in some cases have affected and in the future
could
<PAGE>
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>
Part II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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 9 and Note 8 of the "Notes
to Condensed Consolidated Financial Statements" on page 8.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on page 10.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
10.1 Amendment No. 3 to Amended and Restated Credit Agreement, dated
April 29, 1999, among the Company, Several Banks, Bankers' Trust
Company as Agent and a Lender, NBD Bank as Documentation Agent
and a Lender (filed herein).
10.2 First Declaration of Amendment, dated April 26, 1999, to the
BMC Industries, Inc. Savings and Profit Sharing Plan (filed
herein).
10.3 Second Declaration of Amendment, dated April 26, 1999, to
the BMC Industries, Inc. Savings and Profit Sharing Plan (filed
herein).
10.4 First Amendment, dated April 8, 1999, to the BMC
Industries, Inc. Savings Trust (filed herein).
27. Financial Data Schedule (filed only in electronic format).
99.1 News Release, dated April 27, 1999, announcing the first quarter
1999 operating results (filed herein).
99.2 News Release, dated April 23, 1999, announcing the ITC ruling on
the Antidumping Petition Against certain aperture masks from
Japan and South Korea (filed herein).
(b) REPORTS ON FORM 8-K.
The Company did not file any reports on Form 8-K for the quarter ended
March 31, 1999.
<PAGE>
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: May 14, 1999
<PAGE>
EXHIBIT 10.1
THIRD AMENDMENT TO CREDIT AGREEMENT
This Third Amendment to Credit Agreement (the "THIRD AMENDMENT") dated as
of April 29, 1999 is by and among BMC Industries Inc., a Minnesota corporation
(the "BORROWER"), Bankers Trust Company, a New York banking corporation, as
administrative agent for the Lenders hereunder (in such capacity individually,
the "AGENT") and as a Lender, The First National Bank of Chicago (as assignee of
NBD Bank) as documentation agent and as a Lender and the several banks and other
financial institutions signatory below.
R E C I T A L S:
WHEREAS, the Borrower, the Agents and various lending institutions (the
"LENDERS") are parties to an Amended and Restated Credit Agreement dated as of
June 25, 1998 (as heretofore and hereafter amended, restated, supplemented or
otherwise modified, the "CREDIT AGREEMENT"), pursuant to which the Lenders have
made and may hereafter make loans, advances and other extensions of credit to
the Borrower;
WHEREAS, the Borrower has requested that the Agents and the Majority
Lenders delete SECTION 7.11 of the Credit Agreement (pursuant to which the
Borrower affirmatively agreed to refinance, amend or otherwise modify that
certain Credit Offer Letter between Buckbee-Mears Europe GmbH and Deutsche Bank
AG (Stuttgart) dated September 30, 1994 such that the facility become an
unsecured facility and to provide the related releases of security interests and
Liens to the Agent) and amend the Credit Agreement in certain other respects as
set forth herein and the Majority Lenders and the Agents are agreeable to the
same, subject to the terms and conditions hereof;
WHEREAS, this Third Amendment shall constitute a Loan Document and these
Recitals shall be construed as part of this Third Amendment;
NOW, THEREFORE, in consideration of the foregoing and the agreements,
promises and covenants set forth below, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms used but not otherwise defined in this
Third Amendment shall have the meanings ascribed to them in the Credit
Agreement.
2. AMENDMENT TO THE CREDIT AGREEMENT. Subject to the conditions of this
Third Amendment, the Credit Agreement is hereby amended as follows:
(a) DEFINITION OF SUBSIDIARY. The definition of "Subsidiary" contained
in SECTION 1.1 of the Credit Agreement is amended by deleting such
definition in its entirety and inserting in lieu thereof the following new
definition of "Subsidiary":
"SUBSIDIARY": as to any Person, any corporation, partnership
(limited or general), limited liability company, trust or other entity
of which a majority of the stock (or equivalent ownership or
controlling interest) having voting power to elect a majority of the
board of directors (if a corporation) or to select the trustee or
equivalent controlling interest, shall, at the time such reference
becomes operative, be directly or indirectly owned or controlled by
such Person or one or more of the other subsidiaries of such Person or
any combination thereof. Unless otherwise qualified, all references to
a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of Borrower.
(b) SECTION 7.11. SECTION 7.11 of the Credit Agreement is amended by
deleting such Section in its entirety and inserting in lieu thereof the
following:
"7.11 INTENTIONALLY OMITTED."
3. CONDITIONS PRECEDENT. Notwithstanding any other provision contained in
this Third Amendment or any other document, the effectiveness of this Third
Amendment is expressly conditioned upon
<PAGE>
the satisfaction of each matter set forth in this SECTION 3, all in form and
substance acceptable to the Agent in its sole and absolute discretion:
(a) THIRD AMENDMENT. The Agent shall have received a duly executed
copy of this Third Amendment signed by the Borrower, the Agent and the
Majority Lenders.
(b) WARRANTIES AND REPRESENTATIONS. All of the warranties and
representations of the Borrower contained in the Credit Agreement and in
the other Loan Documents (including, without limitation, in this Third
Amendment) shall be true and correct in all material respects on and as of
the date first written above (except those representations and warranties
made expressly as of a different date). The Borrower hereby represents and
warrants that the execution, delivery and performance of this Third
Amendment and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action and this Third
Amendment is a legal, valid and binding obligation of the Borrower
enforceable against the Borrower in accordance with its terms, except as
the enforcement thereof may be subject to (i) the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws
affecting creditors' rights generally and (ii) general principles of equity
(regardless of whether such enforcement is sought in a proceeding in equity
or at law). In furtherance of the foregoing, the Borrower hereby represents
and warrants that as of the date first written above each of the conditions
precedent contained in this SECTION 3 has been fully satisfied in
accordance with the express terms thereof.
(c) NO EVENT OF DEFAULT. Except as expressly waived herein, no Event
of Default shall have occurred and be continuing as of the date first
written above, or, will occur after giving effect to this Third Amendment
in accordance with its terms.
(d) NO LITIGATION. No litigation, investigation, proceeding,
injunction, restraint or other action shall be pending or threatened
against the Borrower or any Affiliate of the Borrower, or any officer,
director, or executive of any thereof, which restrains, prevents or imposes
adverse conditions upon, or which otherwise relates to, the execution,
delivery or performance of this Third Amendment.
4. LIMITATION OF THIRD AMENDMENT. The parties hereto agree and
acknowledge that nothing contained in this Third Amendment in any manner or
respect limits or terminates any of the provisions of the Credit Agreement or
any of the other Loan Documents other than as expressly set forth herein and
further agree and acknowledge that the Credit Agreement (as amended hereby) and
each of the other Loan Documents remain and continue in full force and effect
and are hereby ratified and confirmed. Except to the extent expressly set forth
herein, the execution, delivery and effectiveness of this Agreement shall not
operate as a waiver of any rights, power or remedy of the Lenders or the Agent
under the Credit Agreement or any other Loan Document, nor constitute a waiver
of any provision of the Credit Agreement or any other Loan Document. No delay on
the part of any Lender or the Agent in exercising any of their respective
rights, remedies, powers and privileges under the Credit Agreement or any of the
Loan Documents or partial or single exercise thereof, shall constitute a waiver
thereof. None of the terms and conditions of this Third Amendment may be
changed, waived, modified or varied in any manner, whatsoever, except in
accordance with SECTION 11.1 of the Credit Agreement.
5. COSTS, EXPENSES AND TAXES. Pursuant to SECTION 11.4 of the Credit
Agreement, the Borrower agrees to pay on demand all costs and expenses of the
Lenders and the Agent in connection with the preparation, execution and delivery
of this Third Amendment including the reasonable fees and out-of-pocket expenses
of counsel to the Agent with respect thereto.
6. EXECUTION IN COUNTERPARTS. This Third Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same
instrument.
7. GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
INTERNAL CONFLICTS OF LAWS PROVISIONS THEREOF.
8. HEADINGS. Section headings in this Third Amendment are included herein
for convenience of reference only and shall not constitute a part of this Third
Amendment for any other purposes.
* * * *
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, this Third Amendment has been duly executed as of the
date first written above.
BMC INDUSTRIES INC.
By: /s/ Jeffrey J. Hattara
Name: Jeffrey J. Hattara
Title: Vice President of Finance and
Administration, Chief Financial Officer
BANKERS TRUST COMPANY, in its individual capacity and as Administrative Agent
By: /s/ Robert R. Telesca
Name: Robert R. Telesca
Title: Assistant Vice President
THE FIRST NATIONAL BANK OF CHICAGO, in its individual capacity and
as Documentation Agent
By: /s/ Jenny A. Gilpin
Name: Jenny A. Gilpin
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION
By: /s/ David Shapiro
Name: David Shapiro
Title: Assistant Vice President
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
By: /s/ Mark H. Halldorson
Name: Mark H. Halldorson
Title: Officer
HARRIS TRUST AND SAVINGS BANK
By: /s/ Catherine C. Ciolek
Name: Catherine C. Ciolek
Title: Vice President
WACHOVIA BANK, N.A.
By: /s/ Frances W. Josephic
Name: Frances W. Josephic
Title: Vice President
<PAGE>
UNION BANK OF CALIFORNIA
By: /s/ Susan D. Biba
Name: Susan D. Biba
Title: Vice President
CREDIT AGRICOLE INDOSUEZ
By: /s/ Raymond A. Falkenberg
Name: Raymond A. Falkenberg
Title: Vice President, Manager
By: /s/ David Bouhl
Name: David Bouhl
Title: First Vice President,
Managing Director
<PAGE>
EXHIBIT 10.2
BMC INDUSTRIES, INC.
SAVINGS AND PROFIT SHARING PLAN
FIRST DECLARATION OF AMENDMENT
Pursuant to the retained power of amendment contained in Section 11.2 of the BMC
Industries, Inc. Savings and Profit Sharing Plan, the undersigned hereby amends
Section 5.1(b) of the Plan to read as follows:
(b) In addition to the investment funds maintained pursuant to Subsection
(a), the Trustee will maintain, within the Trust, the BMC Common Stock
Fund, which will be invested in shares of Company Stock except for
such amounts of cash as the Committee determines to be necessary to
satisfy short-term liquidity requirements and cash held pending
acquisition of shares of Company Stock.
The foregoing amendment is effective as of March 15, 1999 and applies to all
Participants and Beneficiaries, including Participants who terminated employment
before March 15, 1999 and Beneficiaries of Participants who died before March
15, 1999.
IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed
this 26th day of April, 1999.
BMC INDUSTRIES, INC.
Attest: /s/ JON A. DOBSON By /s/ STEFAN K. PETERSON
----------------------- ---------------------------------------
Secretary Director of Compensation, Benefits & HRIS
<PAGE>
EXHIBIT 10.3
BMC INDUSTRIES, INC.
SAVINGS AND PROFIT SHARING PLAN
SECOND DECLARATION OF AMENDMENT
Pursuant to the retained power of amendment contained in Section 11.2 of the BMC
Industries, Inc. Savings and Profit Sharing Plan, the undersigned hereby amends
Section 5.4(b)(ii) of the Plan to read as follows:
(ii) Not more than once each calendar quarter, a Participant who is an
Employee and is not eligible to make directions pursuant to Subsection
(b)(i) may elect to transfer up to 25 percent of his or her Matching
Contribution Account from the BMC Common Stock Fund to one or more of
the investment funds maintained pursuant to Section 5.1 other than the
BMC Common Stock Fund. A Participant may only make an election
pursuant to this Subsection (b)(ii) if the portion of the
Participant's Matching Contribution Account invested in the BMC Common
Stock Fund equals or exceeds 20 percent of the aggregate balance of
the Participant's Before-Tax Contribution Account, Matching
Contribution Account, After-Tax Contribution Account and Rollover
Account. The election must be made in accordance with and is subject
to Plan Rules and will be effective as soon as administratively
practicable after it is received by the Administrator or the
Administrator's designate. All Matching Contributions credited to the
Participant's Matching Contribution Account after the effective date
of such direction will continue to be invested pursuant to Subsection
(a).
The foregoing amendment is effective as of September 1, 1998.
IN WITNESS WHEREOF the undersigned has caused this instrument to be executed
this 26th day of April, 1999.
BMC INDUSTRIES, INC.
Attest:/s/ JON A. DOBSON By /s/ STEFAN K. PETERSON
- ---------------------------- ---------------------------------------
Secretary Director of Compensation, Benefits & HRIS
<PAGE>
EXHIBIT 10.4
FIRST AMENDMENT TO
BMC INDUSTRIES, INC. SAVINGS TRUST
BMC Industries, Inc. (the "Company") and Norwest Bank Minnesota, N.A. (the
"Trustee") hereby amend the BMC Industries, Inc. Savings Trust Agreement between
the Company and the Trustee as follows:
1. Section 1.1 of the Trust Agreement is amended to read as follows:
1.1 NAME OF TRUST. The name of the Trust evidenced by this Trust Agreement
is the "BMC Industries, Inc. Savings and Profit Sharing Trust" (the
"Trust").
2. Section 3.1(f) of the Trust Agreement is amended to read as follows:
(f) The Trustee will vote or, in connection with a public or private
tender or exchange offer, tender and sell or exchange shares of the
Company's common stock held in the Trust in accordance with the
direction of the Committee or another named fiduciary pursuant to
Section 4.4.
3. Section 4.1(a) of the Trust Agreement is amended to read as follows:
(a) The Committee, acting as the named fiduciary, will direct the Trustee
to establish at least three separate investment accounts within the
Fund, each separate account being hereinafter referred to as an
"Investment Fund." One such Investment Fund will be invested in shares
of the Company's common stock except for such amounts of cash as the
Committee determines to be necessary to satisfy short-term liquidity
requirements and cash held pending acquisition of shares of the
Company's common stock. The remaining Investment Funds may be invested
in (i) shares of investment companies registered under the Investment
Company Act of 1940, (ii) collective funds maintained by a bank or
trust company, (iii) an insurance contract or contracts or pool or
pools of insurance contracts and (iv) funds managed by a registered
investment manager, bank or insurance company. The Trustee has no
authority with respect to the selection of the Investment Funds, or
for the investment management of these accounts, except as provided in
Section 4.2 respecting a Trustee managed investment account, if any.
The Trustee will transfer to each such Investment Fund such portion of
the assets of the Fund as directed by the Administrator or directly by
a participant or beneficiary, in such form as the Trustee may
reasonably require.
4. Section 4.4 of the Trust Agreement is amended to read as follows:
4.4 VOTING AND TENDER OF COMPANY STOCK; VOTING OF OTHER SECURITIES.
(a) Shares of the Company's common stock held in the Trust will be
voted by the Committee in its discretion. In connection with any
private or public tender or exchange offer for shares of the
Company's common stock, the Committee will determine in its
discretion whether to tender and sell or exchange shares of the
Company's common stock held in the Trust. The Trustee has no
discretion over the voting or tendering the Company's common
stock held in the Trust, and its responsibility over such matters
is limited to voting or tendering such stock as directed by the
Committee. The Company may appoint another entity as a named
fiduciary for the purpose of voting and/or tendering shares of
the Company's common stock for any matter, and if so, the Company
shall furnish the Trustee with written notice of such appointment
and the appointee's acceptance.
(b) Except as provided in Section 4.4(a), the voting of proxies for
any securities held by the Trust is the responsibility of the
Committee, acting as named fiduciary, unless the Trustee or an
investment manager has investment management authority over the
securities, in which case voting is the responsibility of the
Trustee or investment manager. With respect to securities over
which the Trustee does not have investment management authority,
the Trustee will make its best effort to timely delivery proxies
to the party which it reasonably believes to have investment
management authority over such securities. The Trustee may use
agents to effect such delivery. The Trustee is not responsible
for ascertaining whether, or how, the proxies were subsequently
voted or disposed of. In the event investment management
authority over any securities is
<PAGE>
transferred from the Trustee to a named fiduciary or investment
manager, such transfer of authority will include the transfer of
the power and responsibility to vote proxies under the party's
investment management authority unless the Trustee agrees in
writing to retain investment management power and responsibility
to vote proxies.
This Amendment is effective March 15, 1999.
The Company and the Trustee have caused this instrument to be executed this 8th
day of April, 1999.
BMC INDUSTRIES, INC.
By /s/ JEFFREY J. HATTARA
-------------------------------
NORWEST BANK MINNESOTA, N.A.
By /s/ PORTIA RAMOS
-------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,969
<SECURITIES> 7
<RECEIVABLES> 47,034
<ALLOWANCES> 4,019
<INVENTORY> 83,684
<CURRENT-ASSETS> 158,495
<PP&E> 273,491
<DEPRECIATION> 115,511
<TOTAL-ASSETS> 401,019
<CURRENT-LIABILITIES> 65,038
<BONDS> 0
0
0
<COMMON> 47,756
<OTHER-SE> 85,913
<TOTAL-LIABILITY-AND-EQUITY> 401,019
<SALES> 84,645
<TOTAL-REVENUES> 84,645
<CGS> 71,078
<TOTAL-COSTS> 5,598
<OTHER-EXPENSES> (390)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,463
<INCOME-PRETAX> 4,901
<INCOME-TAX> 1,710
<INCOME-CONTINUING> 3,191
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,191
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
<PAGE>
EXHIBIT 99.1
Contact: Jeffrey J. Hattara (NYSE-BMC)
(612) 851-6030 FOR IMMEDIATE RELEASE
BMC REPORTS FIRST QUARTER 1999 EARNINGS
April 27, 1999 -- Minneapolis, Minnesota - BMC Industries, Inc. reported net
income of $3.2 million, or $.12 per diluted share, for the quarter ended March
31, 1999. This compares to net earnings of $3.8 million, or $0.14 per diluted
share, in the first quarter of 1998. Total first quarter revenues increased 6%
from $80.1 million in 1998 to $84.6 million in 1999.
Paul B. Burke, BMC's Chairman and Chief Executive Officer, stated, "We are
pleased with BMC's first quarter results which were achieved despite the impact
of additional costs associated with restarting our monitor mask line in
Cortland, New York. During the first quarter, we increased revenues by 6% and
improved income from operations by 14% over the prior year quarter. We believe
this quarter's performance reflects the benefits from the integration of the
Orcolite acquisition and the solid progress we have made in returning the mask
business to profitability. We are also pleased with further progress on our cash
generation and debt reduction efforts while continuing our investments in
ongoing strategic initiatives. With the Cortland monitor mask line back in
production, new initiatives beginning to show progress and debt levels
continuing to drop, we anticipate both further revenue and earnings growth over
the balance of 1999 and into 2000."
BMC's Optical Products group generated sales of $34.6 million in the first
quarter of 1999, up 40%, or $9.8 million, over the prior year quarter due mainly
to growth in sales of high-end products (polycarbonate, progressive and
polarizing sun lenses) resulting from the acquisition of Orcolite in May 1998.
Sales of high-end products increased 98% in first quarter 1999 over first
quarter 1998 and accounted for 54% of total Optical Products group revenue in
first quarter 1999 compared to 38% in first quarter 1998. First quarter 1999
Optical Products group revenues were up 2.4% compared to the pro forma combined
Vision-Ease/Orcolite 1998 revenues for the same period. This growth in revenue
was dampened by year-on-year declines in glass and plastic lens sales as growth
in the ophthalmic lens market continues to shift towards polycarbonate. In the
first quarter of 1999, Optical Products group sales of high-end products
(including polycarbonate) increased 9% over the pro forma combined
Vision-Ease/Orcolite 1998 revenues for the same period. Driven by high-end
product sales growth, the Optical Products group's operating earnings increased
34% during the first quarter of 1999 over the prior year quarter. Vision-Ease
achieved this improvement in earnings despite the impact of additional
amortization expense related to the Orcolite acquisition and increased sales and
marketing expenses of approximately $1 million over the prior year quarter.
Vision-Ease devoted considerable resources (including the sales and marketing
investment noted above) to the expansion of market acceptance of its key
high-end products, including the new Outlook(TM) progressive lens. The
Outlook(TM) lens has been specificalLy designed for the polycarbonate material
and to accommodate a broad range of frame types, including today's popular small
frame sizes. Vision-Ease engaged in qualifying and testing procedures with a
number of large potential retail users of this product and is encouraged by the
wide acceptance of this lens and the prospects for future sales. In addition,
considerable promotional expenditures were made in support of sales of the
SunRx(R) polarized prescription polycarbonate lens in advance of the peak sun
lens season. Finally, considerable effort and expense was devoted to the
<PAGE>
further testing and enhancement of Vision-Ease's proprietary lens lamination
system which makes it possible for dispensers to provide premium anti-reflective
coated multi-focal polycarbonate lenses to consumers on a same-day basis. Based
upon test results to date, Vision-Ease is on schedule for the roll-out of this
system in the second half of the year. Taken as a whole, Vision-Ease's branded
proprietary, high-end products are expected to be the engine for Vision-Ease
sales growth in the second quarter and beyond.
First quarter revenues from the Precision Imaged Products group ("PIP", which
includes both the Mask Operations and Buckbee-Mears St. Paul) decreased 10% from
$55.3 million in first quarter 1998 to $50.0 million in first quarter 1999,
primarily due to the previously anticipated temporary slowdown at BMSP and a
decline in sales of AK steel entertainment masks attributable to both volume and
price reductions. Despite these recent declines, sales of AK steel entertainment
masks continue to account for more than 50% of total mask revenues.
Increased sales of invar entertainment masks and monitor masks largely offset
the decline in sales of AK steel entertainment masks. Sales of invar
entertainment masks in first quarter 1999 increased 20% over first quarter 1998
and sales of monitor masks increased 29% over the comparable quarter last year.
Because only a limited amount of monitor masks sold in first quarter 1999 were
produced at our Cortland facility, we expect significant incremental sales of
monitor masks as the restarted Cortland monitor mask line reaches full
production. The monitor mask line in Cortland was restarted near the end of
January 1999 in response to increased demand for monitor masks from a broadened
customer base. The line start-up had a significant negative impact on first
quarter results. However, the line experienced substantial yield improvement by
the end of the quarter and BMC is optimistic regarding the line's future
earnings potential.
As previously anticipated, BMSP experienced a reduction in sales and
profitability in the first quarter of 1999 compared to prior year first quarter
results due to what we believe are temporary disruptions in the ordering
patterns of certain major customers. BMSP currently expects these economic
conditions to improve as 1999 progresses. Moreover, multiple new product sales
initiatives are underway and some are now beginning to reach realization. The
slow start, however, is expected to also slightly impact the second quarter of
1999 compared to second quarter 1998, with stronger performance expected during
the second half of 1999.
This press release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 which are intended to be covered by the safe harbors
created thereby. Statements made in this press release which are not strictly
historical, including statements regarding future performance, are
forward-looking statements and as such are subject to a number of risks and
uncertainties, including, among others, lower demand for televisions and
computer monitors; further mask price declines and imbalances of supply and
demand; successful customer part qualifications; liability and other claims
asserted against BMC; continued slowdown at BMSP; successful new product
development, introduction and acceptance; successful cost reduction and
reorganization efforts; higher operating expenses and lower yields associated
with any additional production shutdowns or start-ups; negative foreign currency
fluctuations, including adverse fluctuations affecting cross-currency swaps;
inability to partner with new BMSP customers; the impact of Y2K information
systems issues; the effect of the economic uncertainty in Asia; and a potential
economic slowdown in other parts of the world such as South America. These and
other risks and uncertainties are detailed in BMC's Annual Report and Form 10-K
for the year ended December 31, 1998.
BMC Industries, Inc. is a leading producer of polycarbonate, glass and plastic
eyewear lenses. BMC is also one of the world's largest manufacturers of aperture
masks for color picture tubes
<PAGE>
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
March 31
--------------------
1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $ 84,645 $ 80,084
Cost of Products Sold 71,078 68,455
- ----------------------------------------------------------------------------------------------------------------------------
Gross Margin 13,567 11,629
Selling 4,365 3,289
Administrative 1,233 1,330
- -------------------------------------------------------------------------------------------------------------------------
Income from Operations 7,969 7,010
- ----------------------------------------------------------------------------------------------------------------------------
Other Income and (Expense)
Interest expense (3,463) (1,383)
Interest income 5 32
Other income (expense) 390 (144)
- ----------------------------------------------------------------------------------------------------------------------------
Earnings before Income Taxes 4,901 5,515
Income Taxes 1,710 1,706
- ----------------------------------------------------------------------------------------------------------------------------
Net Earnings $ 3,191 $ 3,809
- ----------------------------------------------------------------------------------------------------------------------------
Net Earnings Per Share:
Basic $ 0.12 $ 0.14
Diluted 0.12 0.14
- ----------------------------------------------------------------------------------------------------------------------------
Number of Shares Included in Per Share Computation:
Basic 27,201 26,994
Diluted 27,405 27,644
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- more -
<PAGE>
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
MARCH 31 December 31
1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 1,976 $ 1,028
Trade accounts receivable, net 43,015 39,163
Inventories 83,684 82,853
Deferred income taxes 14,617 14,603
Other current assets 15,203 14,347
- ----------------------------------------------------------------------------------------------------------------------------------
Total Current Assets 158,495 151,994
- ----------------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment 273,491 276,630
Less accumulated depreciation 115,511 114,036
- ----------------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net 157,980 162,594
- ----------------------------------------------------------------------------------------------------------------------------------
Deferred income taxes 4,712 5,431
Intangibles and other assets, net 79,832 79,446
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 401,019 $ 399,465
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- ----------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings $ 1,861 $ 1,929
Accounts payable 31,521 28,315
Income taxes payable 4,541 3,375
Accrued expenses and other current liabilities 27,115 23,404
- ----------------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 65,038 57,023
- ----------------------------------------------------------------------------------------------------------------------------------
Long-term debt 179,816 187,266
Other liabilities 17,892 18,372
Deferred income taxes 4,604 3,547
Stockholders' equity
Common stock 47,756 47,714
Retained earnings 89,219 86,436
Accumulated other comprehensive income (1,317) 1,113
Other (1,989) (2,006 )
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 133,669 133,257
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 401,019 $ 399,465
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- more -
<PAGE>
BMC INDUSTRIES, INC.
SEGMENT INFORMATION
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31
------------------------------------------------------------------------------------------------------
Precision Imaged Products Optical Products Consolidated
--------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 49,999 $ 55,272 $ 34,646 $ 24,812 $ 84,645 $ 80,084
Cost of Products Sold 45,089 50,065 25,989 18,390 71,078 68,455
- -------------------------------------------------------------------------------------------------------------------
Gross Margin 4,910 5,207 8,657 6,422 13,567 11,629
Gross Margin % 9.8% 9.4% 25.0% 25.9% 16.0% 14.5%
Selling 1,357 1,133 3,008 2,156 4,365 3,289
Unallocated Corporate
Administration - - - - 1,233 1,330
- -------------------------------------------------------------------------------------------------------------------
Income from Operations $ 3,553 $ 4,074 $ 5,649 $ 4,266 $ 7,969 $ 7,010
- -------------------------------------------------------------------------------------------------------------------
Operating Income % 7.1% 7.4% 16.3% 17.2% 9.4% 8.8%
Capital Spending $ 2,504 $ 3,958
Depreciation and
Amortization $ 5,647 $ 5,002
EBITDA $ 14,006 $ 11,868
EBITDA % 16.5% 14.8%
</TABLE>
-30-
<PAGE>
EXHIBIT 99.2
Contact: Jeffrey J. Hattara (NYSE-BMC)
(612) 851-6030 FOR IMMEDIATE RELEASE
BMC INDUSTRIES, INC. ANNOUNCES THE ITC RULING ON ITS
ANTIDUMPING PETITION AGAINST CERTAIN APERTURE
MASKS FROM JAPAN AND SOUTH KOREA
April 23, 1999 - Minneapolis, Minnesota - BMC Industries, Inc. announced that
the United States International Trade Commission ("ITC") ruled 4-2 against
proceeding with BMC's antidumping duty petition filed against Japanese and South
Korean aperture mask manufacturers. Although the Department of Commerce
initially determined that BMC made sufficient allegations of below cost pricing
to support its dumping claim, the ITC could not beyond a reasonable doubt
connect the dumping to BMC's financial injury.
Jeffrey J. Hattara, BMC's Chief Financial Officer, stated, "We believe that
certain internal and external market conditions that affected BMC's 1998
financial performance clouded the ITC panel's ability to connect the dumping
activities to injury to our financial performance. As we resolve those internal
issues and market factors change, however, we believe we would have the ability
to more directly connect any below cost pricing to financial injury. We will
continue to monitor competitor pricing and take further action, if necessary, to
combat any dumping activities."
This press release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 that are intended to be covered by the safe harbors created
thereby. Statements made in this press release which are not strictly
historical, including statements regarding future performance, are
forward-looking statements and as such are subject to a number of risks and
uncertainties. Other risks and uncertainties are detailed in BMC's Form 10-K for
the year ended December 31, 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. BMC 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-
+
