BMC |
BMC Industries, Inc. |
NEWS RELEASE
CONTACT: | CURTIS E. PETERSEN | (NYSE: BMM) |
| (952) 851-6030 | FOR IMMEDIATE RELEASE |
BMC Industries, Inc. Reports Third-Quarter and Nine-Month 2002 Results
Third-Quarter Financial Results Consistent With Previous Guidance
Performance Improvement Expected In The Fourth-Quarter With A Return To Profitability In 2003.
October 31, 2002 - Minneapolis, Minnesota, USA - BMC Industries, Inc. (NYSE: BMM) today announced financial results for the third-quarter and nine-months ended September 30, 2002. Results are consistent with guidance provided on the company's second-quarter conference call on July 30, 2002.
Financial Results
For the third-quarter 2002, the company reported consolidated revenues of $57.4 million, down 22 percent from the $73.3 million in third-quarter 2001. The company incurred a net loss of $4.2 million, or $0.16 per diluted share, compared to a net loss of $4.1 million, or $0.15 per diluted share, in the third-quarter one year ago.
Third-quarter 2001 results included goodwill amortization expense (which has been eliminated as a result of the company adopting FAS 142). For comparative purposes and adjusting third-quarter 2001 results for this charge, the company's third-quarter 2001 pro forma net loss was $3.8 million, or $0.14 per diluted share.
For the nine-months ended September 30, 2002, consolidated revenues were $193.2 million, a decrease of 19 percent from the $237.8 million reported for the same period in 2001. Including the effects of several non-recurring items, recognized in the first-quarter 2002, the company incurred a net loss of $61.4 million, or $2.28 per share, for the first nine-months of 2002. This compares to a net loss of $9.6 million, or $0.35 per share, for the same period in 2001.
Excluding these non-recurring items, the company's pro forma net loss for the first nine-months of 2002 was $9.1 million, or $0.34 per share. This compares to pro forma net earnings, adjusted for comparative purposes, of $0.7 million, or $0.03 per share, in the first nine-months of 2001.
Management Commentary
"In the third-quarter, we continued to take steps to strengthen our businesses and return the company to profitability," said Douglas C. Hepper, chairman, president and chief executive officer of BMC Industries. "Our Buckbee-Mears group delivered results consistent with our internal expectations, as we work to right-size that business for current market conditions."
"At Vision-Ease, we have weathered a string of problems related to consolidating production into our two remaining facilities. These problems resulted in service interruptions to our customers and adversely affected sales."
"Our efforts are intensely focused on restoring confidence in our service, and taking full advantage of an improving cost structure and our aggressive product development program to provide the market with the very best polycarbonate lens value possible. Those efforts are showing results. Currently, we have succeeded in restoring our product fill rates to excellent levels. And, with implementation of a new integrated planning system in the first half of 2003, we expect to have the technology support to move our service performance to historically high levels."
"Finally, continuing improvements in manufacturing performance are increasing lens product margins, and product development initiatives will result in several new products by mid-2003."
Hepper continued, "At the same time, we continue to strengthen the financial health and infrastructure of BMC. In August, we discontinued our common stock dividend. This decision was consistent with our stated objective of reducing debt and devoting all available cash to growing the businesses and creating long-term shareholder value."
"In September, we reached agreement with our lenders on an amendment to our existing senior credit facility. This agreement extended the facility to May 2004 and reduced its aggregate size to $145 million. As a result, we reclassified the majority of our debt back to long-term status and increased our financial flexibility. BMC's total debt as of September 30, 2002 was $113.3 million, up $2.2 million from June 30, 2002, but down $28.9 million from December 31, 2001. Looking ahead, we expect a slight reduction in debt in the fourth-quarter and we expect our blended interest rate to increase approximately 2.00 percentage points over the next year as a result of this amendment."
"Earlier this month, we announced that we had entered into an agreement to settle the shareholder derivative lawsuit. While we continue to believe the lawsuit was without merit, the settlement allowed us to focus our full attention on profitably growing our businesses. Also this month, we appointed three talented individuals to our board of directors. Speaking for the management team, we look forward to working with Robert Endacott, Morris Goodwin, Jr., and Alan Longstreet."
Buckbee-Mears Group Third-Quarter Operating Highlights
Third-quarter 2002 revenues for the Buckbee-Mears group were $31.8 million, a decrease of $7.9 million, or 20 percent, from $39.7 million in the third-quarter of 2001. Overall group sales were down versus last year's third quarter due primarily to BMC's exiting the computer monitor mask business segment. Computer monitor mask sales account for $6.1 million of this quarter's sales decline.
Sales revenues from television masks were down 3 percent compared to last year's third quarter due to year-over-year price pressures and a shift in sales from higher-priced invar masks to lower-priced masks.
The Buckbee-Mears group reported operating earnings of $2.2 million during third-quarter 2002, as compared to an operating loss of $3.9 million in the third-quarter of 2001. Operating margin for third-quarter 2002 was 6.8 percent, as compared to an operating margin loss of 9.8 percent in third-quarter 2001. The group's third-quarter 2001 operating earnings, however, were negatively impacted by costs associated with reduced manufacturing activity and workforce reduction efforts during the third quarter of last year at both its Cortland, New York and Mullheim, Germany facilities.
During the third-quarter of 2002, the company announced that it had initiated arbitration proceedings in an international arbitration institute against China-based China National Electronics Import and Export Corp. ("CEIEC") and Yantai Zhenghai Electronic Shadow Mask Co., Ltd. ("Yantai"). The company seeks monetary damages and injunctive relief for alleged violations by Yantai of multiple terms of a license agreement between CEIEC, Yantai and the company's Buckbee-Mears Group. This action followed shortly after the company's favorable settlement of litigation against a German company for its unauthorized use of BMC's proprietary technology, in which the company succeeded in obtaining monetary damages for past infringement actions and a court mandated damage award in the event of any future infringement, as well as recognition of the proprietary nature of BMC's technology.
Revenues from non-mask operations were down $0.7 million quarter-over-quarter with this business segment posting a slight operating loss. During the quarter, the group announced that it would move its electroforming operations from St. Paul, Minnesota to its facility in Cortland, New York with the goal of being fully operational by the end of January 2003. When completed, the company expects the electroforming business to return to profitability. This decision is in addition to other non-mask restructuring initiatives, including the sale of the non-strategic, sheet-etching portion of this business segment and the discontinuing of company operations in St Paul and closure of the St. Paul facility in 2003.
Optical Products Group Third-Quarter Operating Highlights
Total Optical Products group third-quarter 2002 revenues were $25.6 million, down $8.0 million, or 24 percent, as compared to revenues in third-quarter 2001. Total polycarbonate lens sales declined $3.2 million as compared to third-quarter 2001. Polycarbonate production problems hampered the group's ability to fully meet customer demand, constraining sales. Lower-margin, plastic lens sales declined $2.6 million. Glass lens sales declined $0.8 million, as the market for this lens material continues to contract worldwide.
Despite the overall sales weakness, Vision-Ease experienced demand consistent with last year's third-quarter in several key premium polycarbonate product categories, including its Tegra®-coated and photochromic polycarbonate lenses. The company's sales in the third-quarter also benefited somewhat from the recent introduction of two new film-based products in association with a major retail customer.
The first of these products, announced in April, was an anti-reflective, mirror-coated polycarbonate sun lens. These prescription, polarized sunglass lenses, available in a variety of mirror-coatings, offer customers extra glare reduction as well as the latest fashion look.
The other new product, announced in August, is a new proprietary polycarbonate-polarized sun lens utilizing a unique melanin-based film. These polarized melanin sun lenses are the latest innovation in prescription sun lens technology, and combine the unique light-absorbing properties of melanin with Vision-Ease's patented polarization process for superior protection from the sun's harmful rays and enhanced visual comfort.
Vision-Ease expects the positive trends for these products to accelerate in coming quarters. The group also intends to introduce several more new products in 2003, utilizing Vision-Ease's demonstrated expertise in lens design and processing technology.
The Optical Products group reported a third-quarter 2002 operating loss of $0.1 million versus an operating profit of $2.2 million in third-quarter 2001. The decline was primarily due to lower sales of higher-margin polycarbonate lenses, and increased domestic polycarbonate manufacturing costs. Partially offsetting these items was continued strong performance from the group's Indonesian manufacturing facility, which continues to increase its polycarbonate production and substantially reduce product costs.
BMC Business Outlook
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially from those projected in this news release.
The company's outlook remains consistent with guidance previously issued by BMC in July 2002. For the year ended December 31, 2002, BMC expects to report a consolidated net loss of between $2.30 and $2.40 per diluted share, primarily as a result of the company exiting the computer monitor mask business and segments of its non-mask business, isolated polycarbonate manufacturing issues and product shortages, and overall restructuring efforts in both businesses. Excluding certain non-recurring items and before the cumulative effect of an accounting change, the company expects to incur a pro forma net loss of between $0.30 and $0.40 per diluted share.
Completion of the company's various restructuring efforts is decreasing product and operating costs throughout the organization and should allow the company to regain profitability in 2003.
About BMC Industries
BMC Industries, founded in 1907, is comprised of two business segments: Buckbee-Mears and Optical Products. The Buckbee-Mears group offers a range of services and manufacturing capabilities to meet the most demanding precision metal manufacturing needs. The group is a leading producer of a variety of precision photo-etched and electroformed components that require fine features and tight tolerances. The group is also the only North American manufacturer of aperture masks, a key component in color television picture tubes.
The Optical Products group, operating under the Vision-Ease Lens trade name, is a leading designer, manufacturer and distributor of polycarbonate, glass and plastic eyewear lenses. Vision-Ease is a technology and market share leader in the polycarbonate lens segment of the market. Polycarbonate lenses are thinner and lighter than lenses made of other materials, while providing inherent ultraviolet (UV) filtering and impact resistant characteristics.
BMC Industries, Inc. is traded on the New York Stock Exchange under the ticker symbol "BMM." For more information about BMC Industries, Inc., visit the Company's Web site at www.bmcind.com.
Safe Harbor for Forward-Looking Statements
This news release contains various "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 news release that are not statements of historical facts, including statements regarding future performance, are Forward-Looking Statements. Forward-Looking Statements may be identified by the use of words such as "anticipates", "estimates", "expects", "forecasts", "projects", "intends", "plans", "predicts", and similar expressions. Forward-Looking Statements are subject to a number of risks and uncertainties that could cause, and in certain instances have caused, actual results or outcomes to differ materially from those projected, including, among others, ability to manage working capital and align costs with market conditions; ability to maintain consistently high product fill rates at Vision-Ease; ability to increase sales of products at Vision-Ease; eventual outcome of the company's outstanding litigation; further aperture mask price declines; slowdown in growth of, or price reductions in, high-end lens products; fluctuations in currency exchange rates; rising raw material costs; ability to improve operating and manufacturing efficiencies through consolidation of facilities. These and other risks and uncertainties are discussed in further detail in BMC's Annual Report and Form 10-K for the year ended December 31, 2001 and other documents filed with the Securities and Exchange Commission.
Investor Conference Call Information
Thursday, October 31, 2002
10:00 a.m. Central Time (11:00 a.m. Eastern Time)
Call-in Number: 800-288-8974 (U.S.) or 612-332-0418 (International)
Replay Number: 800-475-6701 (U.S.) or 320-365-3844 (International)
Replay Access Code: 656017
The rebroadcast of the conference call will be available starting at 1:30 p.m. Central Time, October 31, 2002 through 11:59 p.m. Central Time, November 7, 2002.
The conference call will also be offered live, through a simulcast offered by CCBN.com and StreetEvents.com. To access this Webcast, go to the "Investor Relations" portion of the Company's Web site, www.bmcind.com, click on "Conference Calls" and then click on the CCBN icon.
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
| Three Months Ended | Nine Months Ended |
| |||||||||
| September 30 |
| September 30 |
| ||||||||
|
| 2002 |
|
| 2001 |
|
| 2002 |
|
| 2001 |
|
Revenues | $ | 57,390 |
| $ | 73,339 |
| $ | 193,180 |
| $ | 237,819 |
|
Cost of products sold |
| 52,176 |
|
| 70,786 |
|
| 177,084 |
|
| 211,853 |
|
Gross margin |
| 5,214 |
|
| 2,553 |
|
| 16,096 |
|
| 25,966 |
|
Selling |
| 3,176 |
|
| 4,209 |
|
| 10,174 |
|
| 13,576 |
|
Administrative |
| 1,484 |
|
| 1,042 |
|
| 4,736 |
|
| 3,798 |
|
Non-recurring charges |
| - |
|
| - |
|
| 2,800 |
|
| - |
|
Income (loss) from operations |
| 554 |
|
| (2,698 | ) |
| (1,614 | ) |
| 8,592 |
|
Other income and (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
| (2,427 | ) |
| (3,014 | ) |
| (7,626 | ) |
| (8,804 | ) |
Interest income |
| 67 |
|
| 63 |
|
| 172 |
|
| 388 |
|
Other income (expense) |
| (166 | ) |
| (509 | ) |
| 2,478 |
|
| 525 |
|
Earnings (loss) before income taxes and accounting change |
|
(1,972 |
) |
|
(6,158 |
) |
|
(6,590 |
) |
|
701 |
|
Income tax expense (benefit) |
| 2,213 |
|
| (2,012 | ) |
| 2,078 |
|
| 10,252 |
|
Earnings (loss) before accounting change |
| (4,185 | ) |
| (4,146 | ) |
| (8,668 | ) |
| (9,551 | ) |
Accounting change |
| - |
|
| - |
|
| 52,704 |
|
| - |
|
Net earnings (loss) |
$ |
(4,185 |
) |
$ |
(4,146 |
) |
$ |
(61,372 |
) |
$ |
(9,551 |
) |
Basic and diluted earnings (loss) per share: Before cumulative effect of accounting change Cumulative effect of accounting change |
$ |
(0.16 - |
)
|
$
|
(0.15 - |
)
|
$ |
(0.32 (1.96 |
) ) |
$ |
(0.35 - |
)
|
Net earnings (loss) |
| (0.16 | ) |
| (0.15 | ) |
| (2.28 | ) |
| (0.35 | ) |
Number of shares included in per share computation: Basic and diluted |
|
26,951 |
|
|
27,101 |
|
|
26,928 |
|
|
27,296 |
|
Dividends declared per share |
$ |
- |
|
$ |
0.0150 |
|
$ |
0.0050 |
|
$ |
0.0450 |
|
-more-
BMC INDUSTRIES, INC.
PRO FORMA NET EARNINGS/(LOSS) CALCULATION
(Unaudited)
(in thousands, except per share amounts)
| Three Months Ended | Nine Months Ended |
| |||||||||
| September 30 |
| September 30 |
| ||||||||
|
| 2002 |
|
| 2001 |
|
| 2002 |
|
| 2001 |
|
Reported net earnings (loss) | $ | (4,185 | ) | $ | (4,146 | ) | $ | (61,372 | ) | $ | (9,551 | ) |
Adoption of FAS 142 (a) |
| - |
|
| 304 |
|
| 52,704 |
|
| 913 |
|
Gain on sale of non-core assets (a) |
| - |
|
| - |
|
| (2,205 | ) |
| (630 | ) |
Non-recurring charges (a) |
| - |
|
| - |
|
| 1,764 |
|
| - |
|
Tax valuation reserve adjustment |
| - |
|
| - |
|
| - |
|
| 10,000 |
|
Pro forma net earnings (loss) |
| (4,185 | ) |
| (3,842 | ) |
| (9,109 | ) |
| 732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares used in diluted EPS |
| 26,951 |
|
| 27,101 |
|
| 26,928 |
|
| 27,438 |
|
Pro forma diluted EPS | $ | (0.16 | ) | $ | (0.14 | ) | $ | (0.34 | ) | $ | 0.03 |
|
(a) Assumes tax at the Company's estimated incremental tax rate of 37%, rather than the financial statement effective tax rate, except for the $52,704 FAS 142 accounting change for which no tax benefit was assumed.
-more-
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
|
| (Unaudited) |
|
|
|
|
|
| September 30, |
|
| December 31, |
|
ASSETS |
| 2002 |
|
| 2001 |
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents | $ | 1,339 |
| $ | 1,941 |
|
Trade accounts receivable, net |
| 29,884 |
|
| 35,024 |
|
Inventories |
| 55,634 |
|
| 71,634 |
|
Deferred income taxes |
| 7,973 |
|
| 10,250 |
|
Other current assets |
| 4,849 |
|
| 4,197 |
|
Total current assets |
| 99,679 |
|
| 123,046 |
|
|
|
|
|
|
|
|
Property, plant and equipment |
| 271,914 |
|
| 281,916 |
|
Less accumulated depreciation |
| 150,762 |
|
| 150,375 |
|
Property, plant and equipment, net |
| 121,152 |
|
| 131,541 |
|
Deferred income taxes |
| 4,942 |
|
| 7,166 |
|
Intangibles assets, net |
| 9,103 |
|
| 62,069 |
|
Other assets |
| 6,356 |
|
| 7,924 |
|
Total assets |
$ |
241,232 |
|
$ |
331,746 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Short-term borrowings | $ | 707 |
| $ | 854 |
|
Current portion long-term debt |
| 13,000 |
|
| - |
|
Accounts payable |
| 21,841 |
|
| 19,707 |
|
Income taxes payable |
| 2,969 |
|
| 7,532 |
|
Accrued expenses and other current liabilities |
| 20,446 |
|
| 24,700 |
|
Total current liabilities |
| 58,963 |
|
| 52,793 |
|
|
|
|
|
|
|
|
Long-term debt |
| 99,604 |
|
| 141,314 |
|
Other liabilities |
| 21,320 |
|
| 19,526 |
|
Deferred income taxes |
| 2,699 |
|
| 1,602 |
|
|
|
|
|
|
|
|
Stockholders' equity |
|
|
|
|
|
|
Common stock |
| 46,921 |
|
| 46,786 |
|
Retained earnings |
| 20,472 |
|
| 81,979 |
|
Accumulated other comprehensive income (loss) |
| (8,678 | ) |
| (12,180 | ) |
Other |
| (69 | ) |
| (74 | ) |
Total stockholders' equity |
| 58,646 |
|
| 116,511 |
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity | $ | 241,232 |
| $ | 331,746 |
|
-more-
BMC INDUSTRIES, INC.
SEGMENT INFORMATION
(Unaudited)
(in thousands, except percentages)
Three Months Ended September 30, | |||||||||||||||||||||||
| Buckbee-Mears |
|
|
| Optical Products |
|
|
| Consolidated |
| |||||||||||||
|
| 2002 |
|
|
| 2001 |
|
|
| 2002 |
|
|
| 2001 |
|
|
| 2002 |
|
|
| 2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues | $ | 31,786 |
|
| $ | 39,719 |
|
| $ | 25,604 |
|
| $ | 33,620 |
|
| $ | 57,390 |
|
| $ | 73,339 |
|
Cost of products sold |
| 28,818 |
|
|
| 42,284 |
|
|
| 23,358 |
|
|
| 28,502 |
|
|
| 52,176 |
|
|
| 70,786 |
|
Gross margin |
| 2,968 |
|
|
| (2,565 | ) |
|
| 2,246 |
|
|
| 5,118 |
|
|
| 5,214 |
|
|
| 2,553 |
|
Gross margin % |
| 9.3 | % |
|
| (6.5 | )% |
|
| 8.8 | % |
|
| 15.2 | % |
|
| 9.1 | % |
|
| 3.5 | % |
Selling |
| 807 |
|
|
| 1,332 |
|
|
| 2,369 |
|
|
| 2,877 |
|
|
| 3,176 |
|
|
| 4,209 |
|
Unallocated corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
administration |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,484 |
|
|
| 1,042 |
|
Income (loss) from operations |
$ |
2,161 |
|
|
$ |
(3,897 |
) |
|
$ |
(123 |
) |
|
$ |
2,241 |
|
|
$ |
554 |
|
|
$ |
(2,698 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income % |
| 6.8 | % |
|
| (9.8 | )% |
|
| (0.5 | )% |
|
| 6.7 | % |
|
| 1.0 | % |
|
| (3.7 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital spending |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 1,827 |
|
| $ | 4,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 5,086 |
|
| $ | 5,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 5,474 |
|
| $ | 2,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9.5 | % |
|
| 3.6 | % |
-###-