<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 September 25, 1994
---------------------------------------------------
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
---------------------------------------------------------
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 October 28, 1994
----- ----------------
<S> <C>
Common Stock, $.01 par value 10,862,584
</TABLE>
<PAGE>
BANCTEC, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
(Unaudited)
ASSETS September 25, 1994 March 27, 1994
------------------ --------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 7,489 $ 12,644
Accounts receivable, less allowance for
doubtful accounts of $1,280 at September
and $1,518 at March 74,372 66,635
Inventories 50,887 48,769
Other current assets 9,301 8,667
-------- --------
Total current assets 142,049 136,715
Property, Plant and Equipment - Net 49,669 45,384
Excess of Cost Over Net Assets of Acquired
Businesses, less accumulated amortization of
$9,004 at September and $6,832 at March 97,435 88,352
Other Intangible Assets, less accumulated
amortization of $5,300 at September and
$4,388 at March 2,294 3,264
Other Assets 3,317 2,555
-------- --------
Total assets $294,764 $276,270
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Revolving credit facility $ 13,000 $ -
Current maturities of long-term debt 18,438 12,426
Trade accounts payable 12,381 12,904
Related party payable 9,332 6,635
Other accrued expenses and liabilities 30,441 31,968
Deferred revenue 18,594 23,580
Income taxes 3,951 3,117
-------- --------
Total current liabilities 106,137 90,630
-------- --------
Long-Term Debt, less current maturities 48,472 50,564
-------- --------
Other Liabilities 5,835 5,593
-------- --------
Commitments and Contingencies
Minority Interest 766 1,210
-------- --------
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,
10,642,964 at September and 10,743,550 at March 106 107
Additional paid-in capital 42,342 45,959
Retained earnings 92,137 84,361
Foreign currency translation adjustments 429 (721)
Unearned compensation (1,460) (1,433)
-------- --------
Total stockholders' equity 133,554 128,273
-------- --------
Total liabilities & stockholders' equity $294,764 $276,270
-------- --------
-------- --------
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 25, September 26, September 25, September 26,
1994 1993 1994 1993
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue:
Equipment and software $41,818 $25,341 $ 80,408 $ 53,513
Maintenance and other services 31,407 28,001 62,283 54,707
-------- -------- -------- --------
73,225 53,342 142,691 108,220
-------- -------- -------- --------
Costs of Sales:
Equipment and software 26,084 17,359 50,607 36,407
Maintenance and other services 24,036 21,168 48,197 41,747
-------- -------- -------- --------
50,120 38,527 98,804 78,154
-------- -------- -------- --------
Gross Profit 23,105 14,815 43,887 30,066
-------- -------- -------- --------
Operating Expenses:
Product development 2,754 1,933 5,513 4,586
Selling, general and administrative 10,988 7,465 21,842 14,742
-------- -------- -------- --------
13,742 9,398 27,355 19,328
-------- -------- -------- --------
Income from Operations 9,363 5,417 16,532 10,738
-------- -------- -------- --------
Other Income (Expense):
Interest income 56 117 93 236
Interest expense (1,463) (364) (2,527) (733)
Sundry-net (942) (294) (1,457) (835)
-------- -------- -------- --------
(2,349) (541) (3,891) (1,332)
-------- -------- -------- --------
Income Before Income Taxes and
Minority Interest 7,014 4,876 12,641 9,406
Income Tax Provision 2,945 1,967 5,309 3,734
Minority Interest 5 447 444 964
-------- -------- -------- --------
Net Income $ 4,074 $ 3,356 $ 7,776 $ 6,636
-------- -------- -------- --------
-------- -------- -------- --------
Net Income Per Common Share $.36 $.30 $.69 $.59
Weighted Average Number of Common
Shares-Fully Diluted 11,301 11,262 11,328 11,252
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
September 25, 1994 September 26, 1993
------------------ ------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 7,776 $ 6,636
Adjustments to reconcile net income to cash flows
provided by (used in) operating activities:
Depreciation and amortization 12,114 8,609
Other non-cash items 114 95
(Increase) decrease in accounts receivable (5,375) 308
Increase in inventories (2,192) (4,268)
Increase in other assets (4,210) (1,736)
(Decrease) increase in trade accounts payable (224) 1,250
Decrease in deferred revenue (5,434) (452)
Increase (decrease) in other accrued expenses
and liabilities 458 (4,139)
Minority interest in earnings (444) (964)
------- -------
Cash flows provided by operating activities 2,583 5,339
------- -------
Cash Flows From Investing Activities
Net purchases of property, plant and equipment (10,898) (7,282)
Purchase of businesses, net of cash acquired (8,993) (3,290)
------- -------
Cash flows used in investing activities (19,891) (10,572)
------- -------
Cash Flows From Financing Activities
Payments of current portion of long-term debt and
capital lease obligations (7,661) (3,978)
Proceeds from long-term borrowings 10,800 -
Proceeds from short-term borrowings 15,000 -
Payments of short-term borrowings (2,000) -
Repurchase of common stock (4,828) -
Proceeds from sales and issuances of common stock 1,069 604
------- -------
Cash flows provided by (used in) financing
activities 12,380 (3,374)
------- -------
Effect Of Exchange Rate Changes on Cash (227) (56)
------- -------
Net Decrease In Cash And Cash Equivalents (5,155) (8,663)
Cash and Cash Equivalents, Beginning of Period 12,644 25,326
------- -------
Cash and Cash Equivalents, End of Period $ 7,489 $16,663
------- -------
------- -------
Supplemental Disclosure Information
Cash paid during the period for:
Interest $2,207 $ 571
Income taxes 4,327 4,018
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of presentation and other accounting information.
The Company uses a 13 week period for quarterly reporting and a 52 or 53
week fiscal year which ends on or about March 31. Fiscal year 1995 second
quarter ended on September 25, 1994. Fiscal year 1994 second quarter and
fourth quarter ended on September 26, 1993 and March 27, 1994,
respectively.
The consolidated balance sheet at September 25, 1994, and the consolidated
statements of operations and cash flows for the interim periods ending
September 25, 1994 and September 26, 1993, included herein are unaudited;
however, they reflect all adjustments which are, in the opinion of
management, 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.
The Company's results for the quarter ended September 25, 1994 reflect the
acquisitions of LeRoux, Pitts & Associates, Inc. (LPA), from August 23,
1993, Imagesolve from December 1, 1993, Advanced Computer Systems (ACS),
from December 23, 1993 and Terminal Data Corporation (TDC), from
February 28, 1994.
2. Inventories consisted of the following:
<TABLE>
<CAPTION>
September 25, March 27,
1994 1994
------------- ---------
(In thousands)
<S> <C> <C>
Raw materials $19,734 $18,395
Work-in-progress 6,101 6,562
Finished goods 29,829 28,720
Obsolescence and valuation reserves (4,777) (4,908)
------- -------
$50,887 $48,769
------- -------
------- -------
</TABLE>
3. Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
September 25, March 27,
1994 1994
------------- ---------
(In thousands)
<S> <C> <C>
Land $ 1,295 $ 1,295
Field support spare parts 50,679 44,548
Machinery and equipment 29,107 34,377
Furniture,fixtures and other 24,112 20,378
Building 4,930 4,911
-------- --------
110,123 105,509
Accumulated depreciation (60,454) (60,125)
-------- --------
$49,669 $45,384
-------- --------
-------- --------
</TABLE>
-5-
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. Other accrued expenses and liabilities consisted of the following:
<TABLE>
<CAPTION>
September 25, March 27,
1994 1994
------------- ---------
(In thousands)
<S> <C> <C>
Salaries, wages and other compensation $12,224 $16,033
Accrued taxes, other than income taxes 4,044 3,860
Advances from customers 2,253 3,279
Accrued invoices and COS 5,120 4,177
Acquisition Liabilities 2,454 815
Other 4,346 3,804
------- -------
$30,441 $31,968
------- -------
------- -------
</TABLE>
-6-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 25, 1994 AND SEPTEMBER 26, 1993
Total Revenue of $73.2M increased $19.9M or 37.3% compared to the same
period last year. Revenue from equipment and software increased $16.5M or 65.0%
primarily due to revenues resulting from the acquisitions of ACS and TDC and the
delivery of image systems to customers in both the U.S. and Europe, offset in
part by lower revenues from Reader/Sorters and non-image document processing
systems. Revenue from maintenance and other services increased $3.4M or 12.2%
due primarily to growth in third party maintenance network services and the TDC
acquisition.
Gross profit of $23.1M increased $8.3M or 56.0% from the same period last
year due to the additional revenues and improved margins. Gross profit for
equipment and software increased $7.8M due to the additional ACS software and
TDC scanner revenues. Gross margin for equipment and software improved primarily
as a result of an increase in the higher margin software sales. Gross profit
for maintenance and other services increased by $0.5M due to the additional
revenues. Gross margin for maintenance and other services was down slightly from
last year's comparable period due to additional costs associated with the start
up of new accounts and higher field spares depreciation expense.
Operating expenses of $13.7M represented an increase of $4.3M over the
prior year primarily as a result of the increased staffing and related costs
from the acquired operations.
Interest expense increased $1.1M from last year due to a combination of
increased debt utilized to fund the acquisitions and higher interest rates.
Net Sundry expenses of $0.9M represent an increase of $0.6M over the prior
year due to increased goodwill amortization.
Net income of $4.1M represented an increase of $0.7M from the prior year.
Fully diluted earnings per share of $0.36 improved by $0.06 from the prior year.
COMPARISON OF SIX MONTHS ENDED SEPTEMBER 25, 1994 AND SEPTEMBER 26, 1993
Total Revenue of $142.7M increased $34.5M or 31.9% compared to the same
period last year. Revenue from equipment and software increased $26.9M or 50.3%
primarily due to the acquisitions and additional image installations, offset in
part by lower revenues for non-image document processing systems. Revenue from
maintenance and other services increased $7.6M or 13.8% due to a combination of
growth in network services and the TDC acquisition.
Gross profit of $43.9M increased $13.8M or 46.0% from the same period last
year due to a combination of additional revenues and improved margins. Gross
profit for equipment and software increased $12.7M due to the acquisitions,
additional image sales and improved margins on software. Gross margin for
equipment and software improved as a result of an increase in higher margin
software sales. Gross profit for maintenance and other services increased by
$1.1M due to the TDC acquisition. Gross margin for maintenance and other
services was down slightly from last year's comparable period due to new account
start up costs and higher field spare depreciation expense.
-7-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating expenses of $27.4M represented an increase of $8.0M over the
prior year as a result of the increased staffing and related costs from the
acquisitions.
Interest expense increased $1.8M primarily as a result of the increase in
debt utilized to fund the acquisitions and an increase in rates.
Net Sundry expenses of $1.5M represent an increase of $0.6M over the prior
year from additional goodwill amortization offset in part by current year
currency translation gains.
The provision for income taxes reflected an effective tax rate of 42.0% in
fiscal year 1995 compared to 39.7% in fiscal year 1994. The actual rate for all
of fiscal year 1994 was 40.0%. The increase for fiscal year 1995 is attributable
to increased nondeductible goodwill and the geographic mix of earnings.
Net income of $7.8M represented an increase of $1.1M from the prior year.
Fully diluted earnings per share of $0.69 improved by $0.10 from the prior year.
FISCAL YEAR 1995 OUTLOOK
On October 14, 1994, the Company announced that its percentage growth in
earnings per share for the current year would be similar with that of the prior
year. This announcement was included as part of the Company's press release on
second quarter results and was made as we became aware of the need to incur
several one-time charges in the second half of the fiscal year.
These one-time items are as follows. Internationally, the Company plans
to reduce certain staffing in the Scandata joint venture to improve future
profitability. This process is underway and will be completed by the end of the
current fiscal year. Also the Company is accelerating its investment in its
newly created subsidiary, BancTec Japan. This additional investment is
primarily for development of applications software targeted for the Japanese
banking market. Domestically, the Company has experienced a slowdown in shipment
of reader/sorter products to Original Equipment Manufacturer (OEM) customers and
does not anticipate an improvement in the near term. In response, the Company
has implemented certain cost reduction programs designed to reduce manufacturing
variances beginning in the second half of this fiscal year.
Finally, the Company's financial outlook also includes the impact of
higher interest expense as a result of the continued climb in rates during the
current fiscal year.
Although these one-time charges will lessen profitability in the current
year, management believes that they will be beneficial to future years results.
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
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
under employee stock options 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 $9,538,000 is outstanding at September 25, 1994.
The Company continues to make scheduled payments on this term loan of $1,821,000
per quarter until maturity in September 1995. Under the acquisition facility,
the Company has borrowed $55,000,000 to fund acquisitions and such amount was
outstanding as of September 25, 1994. 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
$30,000,000 revolving credit facility of which $13,000,000 was outstanding as of
September 25, 1994. 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 1.3 to 1 as of September 25, 1994. Cash and
cash equivalents decreased by $5.2M from the start of the fiscal year due to
payments relating to prior year acquisitions, fiscal 1994 bonuses, the purchase
of a facility, the purchase of treasury stock and growth in inventory. Accounts
receivable increased $7.7M due to a longer collection cycle on image sales and
increased billings during the month of September.
Inventory growth occurred in part due to purchases of expendable field
support parts.
Net fixed assets have increased $4.3M from March due to an increase in
field support parts and the purchase of a facility.
Excess of Cost Over Net Assets of Acquired Businesses increased due to
payments relating to the TDC stock purchase and recording of acquisition
liabilities.
Short-term debt increased $13.0M due to borrowings against the revolving
credit facility to fund additional payments relating to the acquisitions,
purchase of treasury stock and purchase of a facility.
-9-
<PAGE>
FORM 10-Q
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
NONE
Item 2. CHANGES IN SECURITIES
NONE
Item 3. DEFAULTS UPON SENIOR SECURITIES
NONE
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
At the annual meeting of the stockholders held on August 18, 1994 the
following persons were elected directors of the Company:
Michael J. Faherty
Paul J. Ferri
Merle J. Volding
Item 5. OTHER INFORMATION
NONE
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
11.1 Computation of Net Income Per Share
27.0 Financial Data
b) Reports on Form 8-K
NONE
-10-
<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 and
Chief Financial Officer
Dated: November 3, 1994
-11-
<PAGE>
EXHIBIT 11.1
BANCTEC, INC.
COMPUTATION OF NET INCOME PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 25, September 26, September 25, September 26,
1994 1993 1994 1993
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Income $ 4,074,000 $ 3,356,000 $ 7,776,000 $ 6,636,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Shares
Weighted average number of
shares outstanding 10,579,689 10,498,495 10,587,983 10,479,854
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 595,712 643,085 613,160 641,767
----------- ----------- ----------- -----------
Weighted average number of
shares outstanding,
as adjusted 11,175,401 11,141,580 11,201,143 11,121,621
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Primary net income per common and
common equivalent share $.36 $.30 $.69 $.60
---- ---- ---- ----
---- ---- ---- ----
Shares assuming full dilution
Weighted average number of
shares outstanding 10,585,657 10,498,495 10,594,016 10,479,854
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 715,127 763,638 733,625 772,561
----------- ----------- ----------- -----------
Weighted average number of
shares outstanding,
as adjusted 11,300,784 11,262,133 11,327,641 11,252,415
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Fully diluted net income per common
and common equivalent share $.36 $.30 $.69 $.59
---- ---- ---- ----
---- ---- ---- ----
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, STATEMENT OF OPERATIONS AND NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS AND FOOTNOTES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-02-1995
<PERIOD-END> SEP-25-1994
<CASH> 7,489
<SECURITIES> 0
<RECEIVABLES> 75,652
<ALLOWANCES> (1,280)
<INVENTORY> 50,887
<CURRENT-ASSETS> 142,049
<PP&E> 110,123
<DEPRECIATION> (60,454)
<TOTAL-ASSETS> 294,764
<CURRENT-LIABILITIES> 106,137
<BONDS> 48,472
<COMMON> 106
0
0
<OTHER-SE> 133,448
<TOTAL-LIABILITY-AND-EQUITY> 294,764
<SALES> 142,691
<TOTAL-REVENUES> 142,691
<CGS> 98,804
<TOTAL-COSTS> 98,804
<OTHER-EXPENSES> 27,355
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,527
<INCOME-PRETAX> 12,641
<INCOME-TAX> 5,309
<INCOME-CONTINUING> 7,776
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,776
<EPS-PRIMARY> .69
<EPS-DILUTED> .69
</TABLE>
