<PAGE>
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter period ended December 26, 1993
---------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________________ to ___________________
_____________________________________________________________
Commission file number 0-9859
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BANCTEC, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 75-1559633
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4435 Spring Valley Road, Dallas, TX 75244
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(214) 450-7700
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the 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 the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Outstanding at
Class February 1, 1994
----- ----------------
<S> <C>
Common Stock, $.01 par value 10,740,812
</TABLE>
<PAGE>
BANCTEC, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS December 26, 1993 March 28, 1993
----------------- --------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 7,412 $ 25,326
Accounts receivable, less allowance for
doubtful accounts of $1,345 at December
and $1,342 at March 61,595 47,849
Inventories (Note 2) 47,679 36,934
Other current assets 7,790 6,437
-------- --------
Total current assets 124,476 116,546
Property, Plant and Equipment - Net (Note 3) 42,930 34,188
Excess of Cost Over Net Assets of Acquired
Businesses, less accumulated amortization of
$6,096 at December and $4,932 at March 62,899 39,119
Other Intangible Assets, less accumulated
amortization of $3,866 at December and
$2,598 at March 2,728 4,011
Other Assets 2,280 982
-------- --------
Total assets $235,313 $194,846
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 9,927 $ 9,846
Trade accounts payable 15,156 10,240
Related party payable 2,705 2,531
Other accrued expenses and liabilities
(Note 4) 25,565 26,945
Deferred revenue 21,465 14,561
Income taxes 2,835 2,736
-------- --------
Total current liabilities 77,653 66,859
-------- --------
Long-Term Debt, less current maturities 32,138 12,239
-------- --------
Other Liabilities 1,398 1,941
-------- --------
Commitments and Contingencies
Minority Interest 2,565 3,835
-------- --------
Stockholders' Equity:
Preferred stock-authorized, 1,000,000 shares
of $.01 par value:
Series A - no shares issued and outstanding - -
Series B - no shares issued and outstanding - -
Common stock-authorized, 45,000,000 shares of
$.01 par value; issued and outstanding,
10,685,700 at December and 10,428,400 at
March (Note 5) 107 104
Additional paid-in capital (Note 5) 45,255 43,731
Retained earnings 78,917 68,018
Foreign currency translation adjustments (1,240) (750)
Unearned compensation (1,480) (1,131)
-------- --------
Total stockholders' equity 121,559 109,972
-------- --------
Total liabilities & stockholders' equity $235,313 $194,846
-------- --------
-------- --------
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 26, December 27, December 26, December 27,
1993 1992 1993 1992
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Equipment and software $32,252 $31,037 $ 85,765 $103,881
Maintenance and other services 27,287 25,340 81,994 69,412
------- ------- -------- --------
59,539 56,377 167,759 173,293
------- ------- -------- --------
Costs of Sales:
Equipment and software 20,426 19,527 56,833 68,562
Maintenance and other services 21,493 19,771 63,240 54,938
------- ------- -------- --------
41,919 39,298 120,073 123,500
------- ------- -------- --------
Gross Profit 17,620 17,079 47,686 49,793
------- ------- -------- --------
Operating Expenses:
Product development 2,298 2,213 6,884 6,500
Selling, general and administrative 8,401 7,860 23,143 24,149
------- ------- -------- --------
10,699 10,073 30,027 30,649
------- ------- -------- --------
Income from Operations 6,921 7,006 17,659 19,144
------- ------- -------- --------
Other Income (Expense):
Interest income 74 84 310 244
Interest expense (418) (453) (1,151) (1,798)
Sundry-net (91) (1,469) (926) (2,276)
------- ------- -------- --------
(435) (1,838) (1,767) (3,830)
------- ------- -------- --------
Income Before Income Taxes, minority
interest and cumulative effect of
accounting change 6,486 5,168 15,892 15,314
Income Tax Provision (2,535) (1,975) (6,269) (5,729)
Minority Interest 306 429 1,270 577
------- ------- -------- --------
Income Before Cumulative Effect of
Accounting Change 4,257 3,622 10,893 10,162
Cumulative Effect of Accounting
Change (Note 1) - - - 835
------- ------- -------- --------
Net Income $ 4,257 $ 3,622 $ 10,893 $ 10,997
------- ------- -------- --------
------- ------- -------- --------
Net Income Per Common Share before
Accounting Change $.38 $.33 $.97 $.94
Net Income Per Common Share (Note 5) $.38 $.33 $.97 $1.01
Weighted Average Number of Common
Shares-Fully Diluted (Note 5) 11,275 11,069 11,250 10,846
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
December 26, 1993 December 27, 1992
----------------- -----------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $10,893 $10,997
Adjustments to reconcile net income to cash flows
provided by (used in) operating activities:
Depreciation and amortization 12,936 11,737
(Increase) decrease in accounts receivable (5,641) (9,167)
(Increase) decrease in inventories (10,291) 3,178
Increase (decrease) in trade accounts payable 3,871 (592)
Increase (decrease) in deferred revenue 3,068 2,527
Minority interest in earnings (1,270) (577)
Other (6,149) 678
------- -------
Cash flows provided by (used in) operating
activities 7,417 18,781
------- -------
Cash Flows From Investing Activities
Net purchases of property, plant and equipment (15,900) (10,827)
Purchase of businesses, net of cash acquired (29,225) (4,339)
------- -------
Cash flows provided by (used in) investing
activities (45,125) (15,166)
------- -------
Cash Flows From Financing Activities
Net proceeds from long-term borrowings 25,200 -
Payments of current portion of long-term debt and
capital lease obligations (5,938) (5,825)
Proceeds from sales and issuances of common stock 1,037 1,598
------- -------
Cash flows (provided by) used in financing
activities 20,299 (4,227)
------- -------
Effect Of Exchange Rate Changes on Cash (505) (153)
------- -------
Net Increase (Decrease) In Cash And Cash Equivalents (17,914) (765)
Cash and Equivalents, Beginning of Period 25,326 7,815
------- -------
Cash and Equivalents, End of Period $ 7,412 $ 7,050
------- -------
------- -------
Supplemental Disclosure Information
Cash paid during the period for:
Interest $ 791 $1,516
Income taxes 6,047 2,280
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of presentation and other accounting information.
The Company uses a 52 or 53 week fiscal year which ends on or about March
31 and a 13 week period for quarterly reporting. Fiscal year 1994 third
quarter ended on December 26, 1993. Fiscal year 1993 third quarter and
fourth quarter ended on December 27, 1992 and March 28, 1993, respectively.
The consolidated balance sheet at December 26, 1993, and the consolidated
statements of operations and cash flows for the interim periods ending
December 26, 1993 and December 27, 1992, included herein are unaudited;
however, they reflect all adjustments which are, in the opinion of manage-
ment, necessary for a fair presentation of the results of operations. All
such adjustments are of a normal recurring nature.
Net income per common share is based upon the weighted average number of
outstanding shares during the period. The number of outstanding shares of
common stock has been adjusted to reflect the dilutive effect of all
outstanding stock options.
Certain reclassifications have been made in prior year financial statements
to conform with current year presentation.
During fiscal 1993, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109 - Accounting for Income Taxes. BancTec elected to
reflect the cumulative effect of adopting SFAS 109 as a change in account-
ing principle as of the beginning of fiscal 1993.
2. Inventories consisted of the following:
<TABLE>
<CAPTION>
December 26, March 28,
1993 1993
------------ ---------
<S> <C> <C>
(In thousands)
Raw materials $14,971 $16,215
Work-in-progress 7,221 2,639
Finished goods 30,079 21,707
Obsolescence and valuation reserves (4,592) (3,627)
------- -------
$47,679 $36,934
------- -------
------- -------
</TABLE>
3. Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
December 26, March 28,
1993 1993
------------ ---------
<S> <C> <C>
(In thousands)
Land $ 1,289 $ 277
Field support spare parts 39,846 35,611
Machinery and equipment 33,800 29,872
Furniture,fixtures and other 18,505 15,273
Building 4,613 690
------- -------
98,053 81,723
Accumulated depreciation (55,123) (47,535)
------- -------
$42,930 $34,188
------- -------
------- -------
</TABLE>
-5-
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Other accrued expenses and liabilities consisted of the following:
<TABLE>
<CAPTION>
December 26, March 28,
1993 1993
------------ ---------
<S> <C> <C>
(In thousands)
Salaries, wages and other compensation $10,060 $12,086
Accrued taxes, other than income taxes 1,827 1,859
Advances from customers 4,065 2,666
Other 9,613 10,334
------- -------
$25,565 $26,945
------- -------
------- -------
</TABLE>
5. On February 8, 1993, the Company announced a three-for-two common stock
split payable in the form of a 50% common stock dividend. The accompanying
financial statements have been adjusted to give retroactive effect to this
stock split. Accordingly, all share and per share data, common stock and
additional paid-in capital for all periods presented have been adjusted to
reflect the stock split.
6. Acquisitions
On August 23, 1993, the Company acquired from NYNEX, for cash, certain
assets of LeRoux, Pitts & Associates, Inc. (LPA) of Clearwater, Florida, a
provider of point-of-sale electronic payment systems software for financial
service institutions, retailers and grocery wholesalers. The acquisition
was accounted for under the purchase method of accounting. The Company's
consolidated financial statements include LPA results from August 23, 1993
forward.
On December 2, 1993, the Company acquired for cash, Imagesolve Internation-
al, Ltd., a leading British provider of integrated systems solutions for
electronic document imaging. The acquisition was accounted for under the
purchase method of accounting. The Company's consolidated financial
statements include Imagesolve International results from December 2, 1993
forward.
On December 23, 1993, the Company acquired for cash Advanced Computer
Systems (ACS) of Dayton, Ohio, a software provider to community banks,
thrift institutions and credit unions. The acquisition was accounted for
under the purchase method of accounting. The Company's consolidated
financial statements include ACS results from December 23, 1993 forward.
The following unaudited pro forma information combines the results of
BancTec for the nine months ended December 26, 1993 and December 27, 1992
and ACS for the nine months ended September 30, 1993 and 1992 as if the
acquisition had occurred on March 30, 1992. The pro forma information is
based on the historical financial statements of BancTec and ACS for the
periods presented giving effect to the transaction under the purchase
method of accounting and reflects primarily adjustments related to
additional interest on debt, the related tax effects thereof and the
amortization of goodwill.
-6-
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Management believes that these pro forma statements may not be indicative
of the results that would have occurred if the combination had been in
effect in the periods presented, nor that these results are necessarily
indicative of future results of the combined entities. Operational
efficiencies from the consolidation of these entities are not fully
determinable, and have therefore been excluded from these pro forma results
of operations.
Unaudited pro forma results are as follows:
<TABLE>
<CAPTION>
Nine months ended
26-Dec-93 (BTEC) 27-Dec-92
30-Sep-93 (ACS) 30-Sep-92
--------- ---------
(In thousands, except per share data)
<S> <C> <C>
Revenue $191,008 $190,715
Income before cumulative effect
of change in accounting method 10,523 8,900
Net Income 10,523 9,735
Net Income per share:
Before change in accounting method $0.94 $0.82
Net Income $0.94 $0.90
</TABLE>
On October 28, 1993, the Company announced its intent to acquire for cash
Terminal Data Corporation (TDC) of Moorpark, California, a provider of
document imaging systems, page scanning devices, digital and microfilm
cameras, and storage and retrieval systems. The Company anticipates that
the acquisition will be completed during the next fiscal quarter.
-7-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Comparison of Three Months Ended December 26, 1993 and December 27, 1992
- ------------------------------------------------------------------------
Total revenue of $59.5M increased $3.2M or 5.6% compared to the same period
last year. Revenue from equipment and software increased $1.2M or 3.9% due to
increases in software and supplies. Revenue from maintenance and other services
increased $1.9M or 7.7% due to business growth in network maintenance services.
Maintenance and other services revenue accounted for 45.8% of total revenue in
the current quarter compared to 44.9% in last year's comparable period.
Gross Profit of $17.6M increased $0.5M from last year's comparable quarter
due to growth in network maintenance services and lower reserve requirements,
offset in part by lower margins for hardware and software. Total gross margin
of 29.6% decreased by 0.7% from last year. Gross margin for equipment and
software of 36.7% decreased 0.4% due to higher software cost of sales and
unfavorable margins in the recently acquired electronic payments business. Gross
margin for maintenance and other services of 21.2% was 0.8% lower due to reduced
margins in the joint venture.
Operating expenses of $10.7M increased by $0.6M primarily due to sales and
marketing expenses associated with current year acquisitions.
Net Sundry expense of $0.4M improved by $1.4M from last year due to the
inclusion in prior year of significant foreign exchange translation losses
associated with the Swedish Bankgiro contract.
Net income for the current quarter of $4.3M improved by $0.6M from the
prior year. Fully diluted earnings per share of $.38 improved by $.05 from the
prior year.
Comparison of Nine Months Ended December 26, 1993 and December 27, 1992
- -----------------------------------------------------------------------
Total revenue of $167.8M decreased $5.5M or 3.2% from the prior year. The
decrease is due to the inclusion in the prior year of a $14.0M image processing
system sold to the Swedish Bankgiro and lower current year reader/sorter
revenue, offset in part by an increase in network services from business growth
and acquisitions. Maintenance and other services revenue increased to 48.9% of
total revenue from 40.0% for the prior year due to the growth of the network
maintenance services business.
Gross profit of $47.7M decreased by $2.1M from the prior year due to the
reduced revenue and a change in the mix of revenue to lower margin network
maintenance services. The gross margin of 28.4% decreased 0.3% due to the
change in revenue mix.
Operating expenses of $30.0M were $0.6M below last year's comparable period
due to reduced medical costs and lower management bonus accruals partially
offset by increased sales and marketing costs from current year acquisitions,
and product development costs for a new product.
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The $0.6M improvement in interest expense from the prior year is reflective
of the improvement in interest rates and a lower overall average outstanding
loan balance.
Net Sundry expense improved by $1.4M from the prior year due primarily to
lower foreign currency translation losses and current year gains on the sale of
stock held for investment.
The effective tax rate of 39.4% for the current year is 2.0% higher than
the prior year due to changes in the distribution of earnings between taxing
jurisdictions.
Minority interest reflects our joint venture partner's interest in the
losses of the ScanData joint venture during the year. The joint venture losses
are primarily the result of poor economic conditions on the European continent.
Net income before accounting change of $10.9M increased by $0.7M from the
prior year. Fully diluted earnings per share before accounting change of $.97
increased by $.03 from last year's comparable period. Net income in the prior
year included income of $0.8M or $.07 per share as a result of the cumulative
effect of the adoption of Statement of Financial Accounting Standards No. 109 -
Accounting for Income Taxes.
LIQUIDITY AND CAPITAL RESOURCES
Funds to support the Company's operations, including capital expenditures,
have been derived from a combination of funds provided by operations, long and
short-term bank financing and, to a lesser extent, by sales of capital stock
under employee stock option and purchase plans. The Company currently has three
credit facilities in place under a single credit agreement. Under the term loan
facility, the Company borrowed $51,000,000 in fiscal year 1989 to fund the
acquisition of CES, of which $15,925,000 is outstanding at December 26, 1993.
The Company continues to make scheduled payments on this term loan of $1,821,000
per quarter until maturity in March 1996. Under the acquisition facility, which
was established on October 6, 1993, the Company has available a $55,000,000
credit facility to fund planned acquisitions of which $25,200,000 was
outstanding as of December 26, 1993. Under terms of the agreement interest-only
payments are required until December 31, 1994. At that time, the outstanding
principal balance will be converted to a term loan with quarterly payments due
over the next 5 years until December 31, 1999. The Company also has available a
$20,000,000 revolving credit facility which had no outstanding balance as of
December 26, 1993. The Company believes that it has sufficient financial
resources available to support its anticipated requirements to fund operations,
and is not aware of any trends, demands or commitments which would have a
material impact on the Company's long or short-term liquidity.
The Company's current ratio was 1.6 to 1 as of December 26, 1993. Cash
decreased by $17.9M from the start of the fiscal year due to the purchase of the
Company's corporate facility in Dallas, acquisitions, payment of prior year
bonuses and growth in inventory. Accounts receivable increased $13.7M due in
large part to acquisitions and also increases in end user receivables.
-9-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Inventory growth is primarily in support of scheduled fourth quarter
shipments. Net fixed assets increased by $8.7M due to the purchase of the
Dallas facility, additional field spares to support new business, and assets
from the acquisitions, offset in part by additional depreciation.
Goodwill increased by $23.4M due to the acquisitions of LPA, ACS and
Imagesolve. Adjustments to goodwill will be made in the Company's fourth
quarter and into fiscal year 1995 as certain pre-acquisition contingencies are
resolved and the Company completes the determination of fair values of the
assets acquired and liabilities assumed.
Trade accounts payable increased by $5.1M from the start of this fiscal
year due to liabilities assumed with the acquisitions and inventory growth.
Deferred revenue increased by $6.9M due to assumed acquisition liabilities and
growth in annual prepaid contracts in the network services business.
Long term debt increased by $19.9M from the beginning of this fiscal year
due to $25.2M in additional debt to fund the ACS acquisition offset in part by
quarterly term loan payments.
-10-
<PAGE>
FORM 10-Q
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
The reader is referred to Item 3, Legal Proceedings in BancTec's
Annual Report on Form 10-K filed for the year ended March 28, 1993.
Item 2. Changes in Securities
---------------------
NONE
Item 3. Defaults Upon Senior Securities
-------------------------------
NONE
Item 4. Submission of Matters to a Vote of Securities Holders
-----------------------------------------------------
NONE
Item 5. Other Information
-----------------
NONE
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits
11.1 Computation of Net Income Per Share
b) Reports on Form 8-K
A report on Form 8-K was filed on January 7, 1994 to report the
acquisition of Advanced Computer Systems, Inc. by a wholly-owned
subsidiary of BancTec, Inc.
A report on Form 8-K was filed on February 4, 1994 to incorporate
the financial statements required by Item 7 of the Form related
to the acquisition of Advanced Computer Systems, Inc.
-11-
<PAGE>
EXHIBIT 11.1
BANCTEC, INC.
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 26, December 27, December 26, December 27,
1993 1992 1993 1992
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Income before cumulative
effect of accounting change $ 4,257,000 $ 3,622,000 $10,893,000 $10,162,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net Income $ 4,257,000 $ 3,622,000 $10,893,000 $10,997,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Shares
Weighted average number of
shares outstanding 10,515,024 10,341,426 10,456,402 10,051,587
Shares issuable from assumed
exercise of stock options and
stock purchase plan reduced by
number of shares which could
have been purchased with the
proceeds from exercise of such
options and purchase plan 697,900 685,346 661,012 715,632
----------- ----------- ----------- -----------
Weighted average number of
shares outstanding,
as adjusted 11,212,924 11,026,772 11,117,414 10,767,219
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Primary net income per common and
common equivalent share before
accounting change $.38 $.33 $.98 $.94
---- ---- ---- ----
---- ---- ---- ----
Primary net income per common and
common equivalent share $.38 $.33 $.98 $1.02
---- ---- ---- ----
---- ---- ---- ----
Shares assuming full dilution
Weighted average number of shares
outstanding 10,518,999 10,341,426 10,464,809 10,051,587
Shares issuable from assumed
exercise of stock options and
stock purchase plan reduced by
number of shares which could
have been purchased with the
proceeds from exercise of such
options and purchase plan 755,918 727,878 784,970 794,642
----------- ----------- ----------- -----------
Weighted average number of
shares outstanding,
as adjusted 11,274,917 11,069,304 11,249,779 10,846,229
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Fully diluted net income per common
and common equivalent share before
accounting change $.38 $.33 $.97 $.94
---- ---- ---- ----
---- ---- ---- ----
Fully diluted net income per common
and common equivalent share $.38 $.33 $.97 $1.01
---- ---- ---- -----
---- ---- ---- -----
</TABLE>
-12-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BANCTEC, INC.
/s/Gary T. Robinson
---------------------------------------
Gary T. Robinson
Senior Vice President, Chief Financial
Officer, and Treasurer
Dated: February 8, 1994
-13-
