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, 1997.
--------- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934. For the transition Period
from N/A to .
--- -------------
Commission File No. 1-8467
BMC INDUSTRIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
Minnesota 41-0169210
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(State of Incorporation) (IRS Employer Identification No.)
Two Appletree Square, Minneapolis, Minnesota 55425
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(Address of Principal Executive Offices) (Zip Code)
(612) 851-6000
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(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
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BMC Industries, Inc. has outstanding 27,459,104 shares of common stock as of
May 10, 1997. There is no other class of stock outstanding.
Page 1 of 18
Exhibit Index Begins at Page 9.
PART I: FINANCIAL INFORMATION
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
Item 1: Financial Statements
March 31 December 31
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ASSETS 1997 1996
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Current Assets
Cash and cash equivalents $ 4,169 $ 2,544
Trade accounts and notes receivable, net of allowances 28,490 24,979
Inventories 52,034 50,451
Deferred income taxes 5,904 5,372
Other current assets 9,162 8,354
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Total Current Assets 99,759 91,700
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Property, Plant and Equipment 241,981 220,489
Less Accumulated Depreciation 96,564 96,644
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Property, Plant and Equipment, Net 145,417 123,845
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Deferred Income Taxes 5,363 5,797
Other Assets, Net 11,643 11,627
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Total Assets $ 262,182 $ 232,969
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities
Short-term borrowings $ 593 $ 1,355
Accounts payable 28,000 19,434
Income taxes payable 9,941 7,657
Accrued expenses and other liabilities 20,558 21,900
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Total Current Liabilities 59,092 50,346
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Long-Term Debt 32,642 16,634
Other Liabilities 18,803 19,421
Deferred Income Taxes 2,317 2,460
Stockholders' Equity
Common stock 57,282 56,551
Retained earnings 92,101 84,629
Cumulative translation adjustment 847 3,974
Other (902) (1,046)
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Total Stockholders' Equity 149,328 144,108
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Total Liabilities and Stockholders' Equity $ 262,182 $ 232,969
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See accompanying Notes to Condensed Consolidated Financial Statements.
Page 2
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
Three Months Ended
March 31
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1997 1996
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Revenues $ 77,127 $ 68,301
Cost of products sold 61,145 55,261
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Gross margin 15,982 13,040
Selling 2,837 2,558
Administrative 1,539 1,227
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Income from Operations 11,606 9,255
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Other Income and (Expense)
Interest expense (144) (130)
Interest income 42 119
Other income (expense) 262 (50)
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Earnings before Income Taxes 11,766 9,194
Income Taxes 3,883 3,011
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Net Earnings $ 7,883 $ 6,183
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Net Earnings Per Share $ 0.28 $ 0.22
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Number of Shares Included in Per Share Computation 28,458 28,278
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Dividends Declared Per Share $ 0.015 $ 0.0125
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See accompanying Notes to Condensed Consolidated Financial Statements.
Page 3
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31
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1997 1996
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Net Cash Provided by Operating Activities
Net earnings $ 7,883 $ 6,183
Depreciation and amortization 3,283 2,423
Changes in operating assets and liabilities 1,997 (7,194)
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Total 13,163 1,412
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Net Cash Used in Investing Activities
Additions to property, plant and equipment (26,321) (11,529)
Business acquisitions, net of cash acquired (1,817) --
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Total (28,138) (11,529)
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Net Cash Provided by Financing Activities
Net decrease in short-term borrowings (769) --
Net increase in long-term debt 16,950 --
Common stock issued 731 1,736
Cash dividends paid (411) (338)
Other 144 (78)
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Total 16,645 1,320
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Effect of Exchange Rate Changes on Cash and Cash Equivalents (45) (89)
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Net Increase (Decrease) in Cash and Cash Equivalents 1,625 (8,886)
Cash and Cash Equivalents at Beginning of Period 2,544 15,874
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Cash and Cash Equivalents at End of Period $ 4,169 $ 6,988
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See accompanying Notes to Condensed Consolidated Financial Statements.
Page 4
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, 1997,and the results of operations and the cash flows for the
periods ended March 31, 1997 and 1996. Such adjustments are of a normal
recurring nature. Certain items in the financial statements for the period
ended March 31, 1996 have been reclassified to conform to the presentation
for the period ended March 31, 1997. The results of operations for the
three-month period ended March 31, 1997 are not necessarily indicative of
the results to be expected for the full year. The balance sheet as of
December 31, 1996 is derived from the audited balance sheet as of that
date. For further information, refer to the financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1996.
2. Inventories
March 31, 1997 December 31, 1996
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Raw materials $ 15,372 $ 15,461
Work in process 11,980 9,807
Finished goods 24,682 25,183
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Total Inventories $ 52,034 $ 50,451
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3. Earnings Per Share
Primary earnings per share is computed using the weighted average number of
common and common equivalent shares outstanding during the period. Common
stock equivalents include dilutive stock options using the treasury stock
method. Fully diluted earnings per share did not differ significantly from
primary earnings per share in both periods.
Page 5
Currently, earnings per share calculations are performed pursuant
to Accounting Principles Board Opinion No. 15, EARNINGS PER SHARE.
The Company will be required to present earnings per share data in
accordance with Statement of Accounting Standards No. 128, EARNINGS
PER SHARE, commencing with the fourth quarter of 1997. Statement
No. 128 will require the presentation of basic earnings per share
and diluted earnings per share. Basic earnings per share is
calculated as net earnings divided by the weighted average
outstanding common shares. Diluted earnings per share includes the
effect of all outstanding dilutive securities, such as stock
options, and is calculated similarly to the current fully-diluted
earnings per share. While early adoption of Statement No. 128 is
not permitted, the following pro-forma supplemental data is
presented using the Statement No. 128 approach:
Three months ended
March 31
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1997 1996
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Basic $ 0.29 $ 0.23
Diluted 0.28 0.22
4. Legal Matters
There are no material changes in the status of the Barth Industries
legal proceeding or any other legal proceeding or environmental matter
described in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
Page 6
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, 1997 AND 1996
Total revenues for the first quarter of 1997 increased by $8.8 million or 13%
from the first quarter of 1996. Revenues of the Precision Imaged Products group
for the first quarter increased 14% due primarily to sales of large (25" to 29")
and invar television aperture masks increasing 28% and 7%, respectively, over
first quarter 1996 sales. First quarter sales of Jumbo (30" and larger)
television aperture masks were strong but nevertheless were 19% lower than first
quarter 1996 sales. First quarter 1996 sales were unusually robust with a 98%
increase over 1995 levels. The weakening of the German mark relative to the
U.S. dollar had virtually no impact on earnings but reduced sales, as compared
with the prior year quarter, by nearly $3 million. First quarter sales included
over $3 million of computer monitor mask sales, including the Company's initial
sales of 15-inch monitor masks. Net sales of the Optical Products group
increased 10% due to higher sales in all product lines. Sales of high end
products (polycarbonate, progressive, high index and polarizing sun lenses)
increased 28% over the same quarter in the prior year. Optical Products'
international sales increased 27% over the prior year quarter.
Cost of sales were 79% of net sales for the first quarter of 1997, compared to
81% in the same period of 1996. The improvement occurred in both groups and was
due primarily to improved sales mix of higher-margin products and improved
yields and manufacturing efficiencies. The Optical Products group also
benefited from the acquisition of plastic lenses from a lower cost, off-shore
manufacturer.
Despite an increased debt level, interest expense in the first quarter of 1997
was comparable to the prior year's period due to the capitalization of interest
costs in connection with the Company's expansion projects.
The provision for income taxes was 33% of pre-tax income in the first quarter of
both 1997 and 1996.
FINANCIAL POSITION AND LIQUIDITY
Cash and cash equivalent balances increased $1.6 million while debt
increased $15.2 million during the first three months of 1997. The increased
debt level was due primarily to $26.3 million of capital expenditures relating
primarily to the expansion of the Company's aperture mask manufacturing
facilities and increased accounts receivable levels, offset partially by
increased accounts payable balances and cash generated from earnings. The
increased accounts receivable levels were due primarily to the increased
quarterly sales and the increased accounts payable balance was due to payables
related to the mask expansion project. Working capital was $40.7 million at
March 31, 1997 compared to $41.4 million at December 31, 1996. The current
ratio was 1.69 at March 31, 1997, compared to 1.82 at December 31, 1996. The
ratio of debt to equity increased to 0.22 at March 31, 1997 compared to 0.12
at December 31, 1996.
Page 7
The Company expects to incur more than $75 million of capital spending during
1997, a significant portion of which is related to completing the expansion
of the Cortland facility. The Company has $88 million in revolving credit
facilities which will provide the funds needed for capital spending related
to the Cortland expansion and the Company's new polycarbonate facility under
construction in Ramsey, Minnesota. The Company's $80 million acquisition
credit facility will provide funds in the event the Company encounters a
strategic acquisition opportunity. As of March 31, 1997, the Company had
commitments of approximately $25.0 million related to capital projects, a
majority of which were related to the Cortland expansion. These credit
facilities along with cash generated from operations should be sufficient to
meet the Company's future capital and operating requirements.
FOREIGN CURRENCY
Fluctuations in foreign currency exchange rates, principally the German mark
versus the U.S. dollar, may affect the Company's financial results. The
Company's German subsidiary has a large portion of its sales denominated in U.S.
dollars. As most of the German subsidiary's expenses are denominated in the
German mark, this represents the most significant element of the Company's
exposure to currency rate fluctuations. This exposure is generally addressed as
needed through the purchase of forward contracts and options. As of March 31,
1997, the Company had approximately $15 million of foreign exchange options to
exchange U.S. dollars for German marks at a set exchange rate. These options
mature at various intervals through March 1998.
Exposure to foreign currency exchange rate fluctuations also may exist with
respect to intercompany payables or receivables with the Company's German
subsidiary. The Company minimizes this exposure by holding such balances at low
levels.
ENVIRONMENTAL
There are no material changes in the status of the legal proceedings and
environmental matters described in the Company's Annual Report on Form 10-K for
the year ended December 31, 1996.
CAUTIONARY STATEMENTS
Certain statements included in this Discussion and Analysis of Financial
Condition and Results of Operations by the Company or its representatives, as
well as other communications, including reports to shareholders, news
releases and presentations to securities analysts or investors, contain
forward-looking statements made in good faith by the Company pursuant to the
"Safe Harbor" provisions of the PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. These statements relate to non-historical information which are subject
to certain risks and uncertainties that could cause actual results to differ
materially from those presently anticipated or projected. The Company wishes
to caution the reader not to place undo reliance on any such forward-looking
statements. These statements are qualified by important factors listed
separately in "Item 1 - Business" of the Company's Form 10-K for the year
ended December 31, 1996, which in some cases have affected and in the future
could adversely affect the Company's actual results and could cause the
Company's actual financial performance to differ materially from that
expressed in any forward-looking statement. These factors should not,
however, be considered an exhaustive list. The Company does not undertake
the responsibility to update any forward-looking statement that may be made
from time to time by or on behalf of the Company.
Page 8
Part II: OTHER INFORMATION
ITEM 1. With regard to legal proceedings and certain environmental matters,
see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on page 8 and Note 4 of the "Notes to Condensed
Consolidated Financial Statements" on page 6.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS PAGE
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10.1 1997 Management Incentive Bonus Plan Summary . . . . . . . . . . . . . . . 10
11.1 Computation of Net Earnings Per Share. . . . . . . . . . . . . . . . . . . 13
27. Financial Data Schedule (filed only in electronic format)
99.1 News Release, dated April 23, 1997, announcing the first
quarter 1997 operating results . . . . . . . . . . . . . . . . . . . . . . 14
99.2 News Release, dated April 7, 1997, announcing stock
repurchase program.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) REPORTS ON FORM 8-K.
The Company did not file any reports on Form 8-K during the quarter ended
March 31, 1997.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BMC INDUSTRIES, INC.
/s/ Jeffrey L. Wright
-----------------------------------------
Jeffrey L. Wright
Controller (Principal Accounting Officer)
Dated: May 14, 1997
Page 9