BMC INDUSTRIES INC/MN/ - 10-Q Quarterly Report

One Meridian Crossings, Suite 850, Minneapolis, Minnesota 55423
(Address of Principal Executive Offices) (Zip 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.

BMC Industries, Inc. has outstanding 27,074,850 share of common stock as of August 9, 2002. There is no other class of stock outstanding.

BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)

BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

	Six Months Ended
	June 30
		2002			2001
Net Cash Provided by Operating Activities
Net loss	$	(57,187	)	$	(5,405	)
Depreciation and amortization		10,760			11,887
Gain on sale of assets		(3,429	)		-
Deferred income taxes		2,565			11,909
Accounting change - goodwill write-down		52,704			-
Changes in operating assets and liabilities		23,848			(11,943	)
Total		29,261			6,448

Net Cash Provided by (Used in) Investing Activities
Additions to property, plant and equipment		(3,130	)		(8,431	)
Proceeds from sale of assets		6,034			-
Total		2,904			(8,431	)

Net Cash Provided by (Used in) Financing Activities
Decrease in short-term borrowings		(52	)		(95	)
Increase (decrease) in long-term debt		(31,064	)		1,662
Cash dividends paid		(136	)		(823	)
Other		105			193
Total		(31,147	)		937

Effect of exchange rate changes on cash and cash equivalents		65			(30	)

Net (decrease) increase in cash and cash equivalents		1,083			(1,076	)
Cash and cash equivalents at beginning of period		1,941			2,290

Cash and cash equivalents at end of period	$	3,024		$	1,214

BMC INDUSTRIES, INC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of June 30, 2002, and the results of operations and the cash flows for the six-month period ended June 30, 2002 and 2001. Such adjustments are of a normal recurring nature. Certain items in the financial statements for the periods ended June 30, 2001 have been reclassified to conform to the presentation for the periods ended June 30, 2002. The results of operations for the three and six-month periods ended June 30, 2002 are not necessarily indicative of the results to be expected for the full year. The balance sheet as of December 31, 2001 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, 2001.

In February 2002, the Company announced its plans to close the Optical Products segment's Azusa, California facility, sell the buildings and consolidate the operations into the Company's existing plants in Ramsey, Minnesota and Jakarta, Indonesia. The total restructuring-related costs recorded were $2,800 of which $2,216 has been utilized during the second quarter of 2002. The following table details the restructuring reserve charges and account balance for the quarter.

		Severance & Related Costs			Property, Plant & Equipment			Contractual Obligations and Other			Total
Charged to operations and balance at March 31, 2002	$	426		$	1,517		$	857		$	2,800
Utilized second quarter 2002		(136	)		(1,517	)		(563	)		(2,216	)
Balance, June 30, 2002	$	290		$	-		$	294		$	584

In fourth quarter 2001, the Company announced restructuring initiatives in both of its business groups. These restructuring initiatives resulted in the recording of total pre-tax, restructuring-related charges of $12,165. The charges included $6,218 classified as restructuring, with $1,180 utilized in 2001, and $5,947 of inventory and other asset write-downs classified as cost of sales. Through June 30, 2002, the Company has utilized $1,655 of the $5,038 restructuring reserve remaining at December 31, 2001, all of which is attributable to the Buckbee-Mears business segment. The Company anticipates that substantially all of the remaining restructuring reserve will be utilized by year-end 2002.

The activity of the restructuring reserve for the first six months of 2002 was as follows:

		Severance and Related Costs			Contractual Obligations and Other		Total
Restructuring reserve, December 31, 2001		3,309			1,729		5,038
Utilized first quarter 2002		(135	)		-		(135	)
Utilized second quarter 2002		(1,520	)		-		(1,520	)
Restructuring reserve, June 30, 2002	$	1,654		$	1,729	$	3,383

The Company does not expect to record any additional restructuring charges related to the initiatives discussed above.

3. Goodwill and Other Intangible Assets

In July 2001, the FASB issued Statement of Financial Accounting Standard (SFAS) No. 142, Goodwill and Other Intangible Assets, which eliminated the systematic amortization of goodwill. The Company adopted SFAS No. 142, effective January 1, 2002 and ceased amortization of its goodwill balances. However, intangible assets with finite lives continue to be amortized over their estimated useful lives.

SFAS No. 142 also required the Company to complete an impairment review of its goodwill assets. During the first quarter 2002, the Company completed its transitional impairment test using a discounted cash flow model required by SFAS No. 142 and determined that the goodwill in its Optical Products segment was impaired. As such, the Company recorded as a cumulative effect of change in accounting principle a write-off of its goodwill balance in the amount of $52,704 on which the Company recognized no tax benefit. The remaining intangible assets recorded on the accompanying condensed consolidated balance sheet at June 30, 2002 include patent costs and other intangible assets with finite lives.

A reconciliation of reported net loss adjusted to reflect the adoption of SFAS 142 as if it had been effective January 1, 2001 is provided below.

	Three Months Ended						Six Months Ended
	June 30						June 30
		2002			2001			2002			2001
Reported net loss	$	(2,302	)	$	(7,451	)	$	(57,187	)	$	(5,405	)
Add-back adjustment for accounting change		-			-			52,704
Add-back goodwill amortization, net of tax		-			304			-

		(Unaudited)
		June 30		December 31
ASSETS		2002				2001

Current assets
Cash and cash equivalents	$	3,024			$	1,941
Trade accounts receivable, net		33,812				35,024
Inventories		55,797				71,634
Deferred income taxes		10,421				10,250
Other current assets		3,910				4,197
Total current assets		106,964				123,046

Property, plant and equipment		269,975				281,916
Less accumulated depreciation		146,061				150,375
Property, plant and equipment, net		123,914				131,541
Deferred income taxes		4,233				7,166
Intangible assets, net		8,398				62,069
Other assets		6,282				7,924
Total assets	$	249,791			$	331,746
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Short-term borrowings	$	110,854			$	854
Accounts payable		23,150				19,707
Income taxes payable		6,224				7,532
Accrued expenses and other current liabilities		24,595				24,700
Total current liabilities		164,823				52,793

Long-term debt		250				141,314
Other liabilities		21,091				19,526
Deferred income taxes		1,462				1,602

Stockholders' equity
Common stock		46,886				46,786
Retained earnings		24,657				81,979
Accumulated other comprehensive loss		(9,309	)			(12,180	)
Other		(69	)			(74	)
Total stockholders' equity		62,165				116,511

Total liabilities and stockholders' equity	$	249,791			$	331,746

	Three Months Ended						Six Months Ended
	June 30						June 30
		2002			2001			2002			2001
Revenues	$	67,164		$	78,720		$	135,790		$	164,480
Cost of products sold		61,575			66,763			124,908			141,067
Gross margin		5,589			11,957			10,882			23,413
Selling expense		3,400			4,505			6,998			9,367
Administration expense		1,897			1,418			3,252			2,756
Non-recurring charges		-			-			2,800			-
Income (loss) from operations		292			6,034			(2,168	)		11,290
Other income and (expense)
Interest expense		(2,567	)		(2,749	)		(5,199	)		(5,790	)
Interest income		58			269			105			325
Other income (expense)		(1,098	)		251			2,644			1,034
Income (loss) before income taxes		(3,315	)		3,805			(4,618	)		6,859
Income tax expense (benefit)		(1,013	)		11,256			(135	)		12,264
Loss before accounting change		(2,302	)		(7,451	)		(4,483	)		(5,405	)
Cumulative effect of change in accounting principle		-			-			52,704			-
Net loss	$	(2,302	)	$	(7,451	)	$	(57,187	)	$	(5,405	)


Basic and diluted loss per share:
Before cumulative effect of change in accounting principle	$	(0.09	)	$	(0.27	)	$	(0.17	)	$	(0.20	)
Cumulative effect of change in accounting principle		-			-			(1.96	)		-
Net loss	$	(0.09	)	$	(0.27	)	$	(2.13	)	$	(0.20	)

Number of shares included in per share computation:
Basic and diluted		26,920			27,393			26,916			27,395

Dividends declared per share	$	0.0025		$	0.0150		$	0.0050		$	0.0300

X	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the Quarterly Period ended June 30, 2002.

	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition Period from ________ to________________.