Two Appletree Square
BMC Industries, Inc. is a leading manufacturer in both of its core businesses: precision imaged products and optical products. Operating under the trade name Vision-Ease, BMC has the most extensive product line in the ophthalmic industry, manufacturing polycarbonate, plastic, and glass lenses. In addition, the company is the world's largest fused multi-focal glass lens manufacturer and the second largest supplier of polycarbonate lenses. But, the largest portion of BMC's revenues are derived from aperture masks. BMC is the largest independent manufacturer of the component which directs electron beams in color televisions and computer monitors. BMC pioneered the development of the photochemical machining process used to make the mask.
Roots in the Graphic Arts
Founded in 1907 by cousins Charles E. Buckbee and Norman T. Mears, Buckbee-Mears Company operated one of the Twin Cities' first photoengraving plants. The St. Paul, Minnesota, company quickly added photography to its engraving and creative art departments, and thus became a full-line graphic arts supplier. By 1927, offset printing--a photomechanical process--had been developed and Buckbee-Mears later rendered that service as well.
"It was World War II that brought Norman B. Mears to the forefront in the then-conservative family operation," wrote Dick Caldwell in a 1967 Minneapolis Star article. The younger Mears had left his farming operation in South Dakota in 1928 and joined Buckbee-Mears. He then pushed for expansion of the business into photomechanical production. Mears got a big opportunity to experiment with the process when the U. S. Navy needed grids etched on the eyepieces of military equipment. Mears not only led the successful development of a vacuum-etching production line for metal and glass reticles used in fire control (gun sights), radar, and guided missiles, but he created a new industrial division for the company.
A New Focus in the Postwar Years
The industrial skills BMC acquired during the war were transferred to the television industry in peacetime. The Radio Corporation of American (RCA) enlisted Buckbee-Mears to develop an crucial part for color television tubes. In 1963, the company perfected an automated process for the production of the "shadow mask," an extremely thin metal sheet punctured by hundreds of thousands of perfectly positioned holes which directed electron beams toward phosphorous strips that generate the color. The automated chemical etching process had evolved over a 13-year period and several generations of equipment.
Norman B. Mears became company president in 1957 and at one point owned up to 92 percent of the stock. He and Buckbee-Mears were direct beneficiaries of the wave of color television sales they helped set in motion. By 1966 about five million color televisions were sold in the United States; 99 percent of those TV sets contained a Buckbee-Mears mask. The industrial division had doubled it sales from 1965 to 1966, largely due to the shadow masks. The company went public in September 1966.
According to a 1982 Business Week article, Buckbee-Mears enjoyed a short-lived high-tech image because of its pioneering work in the television manufacturing field. Growth of the company's other division was steady but less dramatic. When Buckbee-Mears reached its 60th year of business, the graphic arts division primarily served a 13-state area and held a big share of the important Twin Cities' market.
Internal and External Changes in the 1970s
The make-up of the company began to change in the late 1960s and into the mid-1970s. Buckbee-Mears entered the ophthalmic lens business and exited the graphics arts business. Norman B. Mears stepped down from his position as company president. The business environment which had been favorable for Buckbee-Mears also began to change. Color television imports rose from 18 percent of U.S. sales in 1975 to 37 percent in 1976; major domestic television manufacturers, Westinghouse Electric Corp., Motorola Inc., Admiral, and Philco, stopped producing color picture tubes. The loss of business resulted in cutbacks at Buckbee-Mears. Nearly one-third of the workers (75) were laid off at its St. Paul aperture mask plant, and 45 salaried employees also lost their jobs. The company also had aperture mask plants in New York and West Germany.
In December 1976, Everett F. Carter replaced James Bourquin as president. Carter had come to Buckbee-Mears from GTE Sylvania Inc. in 1969, the year Bourquin succeeded Mears as president. The company lost a third of a million dollars in 1976, but became profitable again under Carter; earnings reached $4.3 million in 1979.
Acquisitions Boom of the Early 1980s
Buckbee-Mears Company began the 1980s earning steady profits from its ophthalmic products and the precision metal parts operations of its industrial division. But aperture masks sales stagnated. The company planned to gradually diversify by moving from parts to subassembly to end-product manufacturing. That strategy changed dramatically when the board brought on Ryal Poppa, a high profile manager. Poppa had a number of successful turnarounds associated with his name including Pertec Corp., a Southern California computer equipment maker. His eight-year acquisition drive at Pertec had increased Pertec's annual sales from $28 to $200 million. Poppa, along with a $1 million investment in Buckbee-Mears, stepped into the CEO and chair positions in January 1982. Everett F. Carter retained his position as president, but Norman C. Mears retired from the board. (Carter resigned his position as president as well at the end of 1982.)
As he had with other businesses, Poppa acted quickly and aggressively. A new management team, a new company name, and an ambitious acquisition plan were put in place. Ryal Poppa intended to make the company, renamed BMC Industries, Inc., a major player in the electronic interconnections field. But his first acquisitions were in the optics area. Bolstered by the purchase of Camelot Industries, the optics division contributed about two-thirds of 1982 revenues.
The next year, 1983, was marked by an announcement for a joint venture with Control Data Corporation in the production of semiconductor chip equipment. Four important high-tech businesses were acquired. Total sales reached $155 million with earnings of $4.5 million. With Honeywell's Tampa operations and Advanced Controls of Irvine California included in the electronics division, Poppa was predicting sales to double in 1984. Investors were taking notice of what was happening in St. Paul. St. Paul Pioneer Press Dispatch reporter Dave Beal wrote, "Wall Street loved Ryal Poppa's big adventure; the stock doubled to $27 in just two years."
The Boom Goes Bust
But the adventure came to an end. The environment in which Poppa was trying to diversify BMC was inhospitable: the U.S. electronics industry was struggling under foreign competition and a soft consumer demand. And the new Interconics division, which served the semiconductor and electronic equipment industries, had been funded largely by debt. In December 1984, $30 million in debentures were sold to four companies to pay off some of the heavy debt load.
Return on stockholders equity fell to 2.5 percent in 1984, from over ten percent in the previous three years. Ryal Poppa left BMC early in 1985. The debenture holders sued BMC in order to rescind the notes and call in the debt. Robert J. Carlson, formerly a top executive with United Technologies Corp. and Deere & Co., joined BMC as chief executive in mid-1985. Carlson tried cost cutting measures in an attempt to keep the electronics division Poppa had built in tact. But the recession in the industry and BMC's debt were both too deep. In November 1985 BMC announced that the electronics division would be sold off. Losses in 1985 were nearly $70 million, largely due to business divestment reserves.
BMC's outlook had changed drastically from the aggressive optimism of the Poppa days; 13 high-technology operations--one-third of BMC's assets--were on the sales block, and its $100-million debt was in default. Sales of color television aperture masks and optical lenses both rose in 1986, but profits were drained by the interest on debt and from operating losses in the discontinued businesses. BMC lost another $6.5 million in 1986. Stock prices dropped as low as $3.25 a share, and the company had to ward off a takeover bid.
In 1987, BMC settled the lawsuit by agreeing to pay off the notes, and they began restructuring negotiations on the remaining debt. BMC received $65 million in new loans from institutional investors and used cash from the divestitures to pay off the $100 million debt, as well as, $5 million in interest. The company was back to its pre-Poppa product lines, optical products and precision-etched products, but still held $65 million in long-term debt accumulated from its failed diversification attempt. In terms of production, BMC made a deal with IBM for precision-etched computer parts to be made out of its West German plant. They also entered into a joint venture with an Italian plastic eyeglass lens maker, and made an aperture mask engineering and manufacturing service contract with the Soviet Union. The company also marked 1987 by moving its corporate headquarters from its long-time St. Paul location to a smaller facility in Bloomington, Minnesota.
Growth in the Early 1990s Still Hampered by Debt
Debt hampered capacity expansion in the years following BMC's restructuring, and stock prices generally bounced back and forth between the $5 and $10 per share mark. The company struggled with: production problems in the New York aperture mask plant; slow sales in the St. Paul plant where electronic components and etched glass and large printed circuit boards were made; and a general economic recession. Net earnings for 1990 dropped to $1.8 million, down 66 percent from 1989.
An $18.6 million aperture mask equipment and technology deal with a Chinese company sent BMC earnings upward again in the beginning of 1991. Paul Burke moved up to the position of president; Carlson retained his positions as chairman and CEO. Burke had joined BMC in 1983 as an associate general counsel and at age 29 was appointed general counsel by Carlson. Burke played an instrumental role in the successful divestiture and debt restructuring, and then requested a move to the operations side of the company in 1987. He managed a turnaround at the Florida Vision-Ease Lens plant and became president of the $75-million division two years later. Carlson left BMC in July 1991 and was succeeded by Burke, then 35 years old. Sales for the year reached $203.2 million with record earnings of $8.2 million.
BMC continued to make steady progress toward increasing sales and profits and reducing debt. In 1993 BMC made another deal with a Chinese firm for aperture mask equipment and technology: this time for $26 million. The company was moving away from the manufacturing of the lower-end aperture masks it was licensing, to higher-margin, high-resolution computer monitors and televisions. The precision-etched products division, which made the aperture masks and specialty photo-etched glass and metal parts, provided just under two-thirds of BMC's sales. Eyewear lens sales through the optical products division provided the other third.
BMC debt was down to $32 million toward year-end 1993 and stock price had doubled from the previous year to about $16 per share. A breakthrough deal with a Japanese television manufacturer in 1994 and rising worldwide demand for high-end aperture masks had pushed BMC plants to near capacity. BMC also saw progress in its optical products division in 1994, polycarbonate lens sales jumped 44 percent compared with industry growth of 25 percent. In September of 1994 BMC paid off its debt, giving the company room for capital investment.
Expansion Begins in the Mid-1990s
In 1995 BMC accelerated expansion of its aperture masks production lines, announcing plans for two additional television and one additional computer mask lines. Japanese firms were its only competitors in the high-end market, and they were being hurt by the strong yen which drove up their prices relative to BMC's. The company's other business segment was also doing well with its higher-margin product; in the fast-growing polycarbonate lens market BMC ranked second in sales behind Gentex Optics of Massachusetts. Riccardo A. Davis wrote in July 1995, "BMC has produced 16 consecutive quarters of increased earnings as it has focused on higher margin masks and lenses." In October 1995 BMC stock was split two-for-one.
Buckbee-Mears St. Paul (BMSP), a business area that had been struggling for survival in the early 1990s, increased earnings by 200 percent in 1995 due to increased sales, sales mix changes, and improved production efficiencies. As a world-leader in the field of photo-chemical machining BMSP provided thinner, more detailed pieces, and a greater range of sizes than stamped metal parts. Its products were used in automotive, electronics, medical, office, consumer, industrial, military and aerospace applications.
The year 1995 also marked a milestone for the company that began as Buckbee-Mears. Norman B. Mears had retired from the board in 1994, leaving the company without Mears's family leadership for the first time. Company-wide profits for 1995 were $24.5 million on total sales of $255.4 million. The precision imaged products group, which included aperture masks and BMSP, brought in 70 percent of BMC's consolidated revenues. The aperture masks alone provided 58 percent total revenue. Optical products brought in 30 percent.
BMC had expanded its polycarbonate lens production capacity in 1993, 1994, and 1995. In 1996, the company announced plans for a $10 million state-of-the-art facility for polycarbonate manufacturing, as well as, centralized distribution, and research and development. (Polycarbonate lens--thinner, lighter, and more impact resistant than plastic or glass lens--were manufactured through a highly automated injection process.) While polycarbonate lenses were the fastest growing segment of the U.S. market, it was actually the smallest segment among BMC's three lens types. BMC held more than 50 percent of the domestic fused multifocal glass lens market and was a major supplier internationally. BMC, like other U.S. manufacturers, began contracting overseas for more labor intensive hard-resin lenses, which held about half of the U.S. market.
BMC Industries, Inc.'s future hopes were centered on the continued growth in its core businesses. The company planned to continue to shift the mask operation product mix toward high-margin products where there was tight industry-wide supply. Polycarbonate lens sales were expected to grow as the U.S. population aged. Even the much smaller etched products division anticipated growth in response to increased miniaturization in electronics field. But BMC had acquisitions in mind, not only in its core markets, but for development of a third major business area in electronics, metal fabrication or plastics.
Principal Operating Units:Vision-Ease Lens; BMC Mask Operations; Buckbee-Mears St. Paul (BMSP).
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