<PAGE>
FORM 10-Q
UNITED STATES
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 December 25, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE, 214/450-7700
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.
OUTSTANDING AT
CLASS JANUARY 31, 1995
----- ----------------
Common Stock, $.01 par value 10,937,317
<PAGE>
BANCTEC, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
DECEMBER 25, MARCH 27,
1994 1994
------------ ---------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,443 $ 12,644
Accounts receivable, less allowance for doubtful accounts of
$1,395 at December and $1,518 at March 76,878 66,635
Inventories 49,124 48,769
Other current assets 11,740 8,667
--------- ---------
TOTAL CURRENT ASSETS 145,185 136,715
PROPERTY, PLANT AND EQUIPMENT - NET 51,142 45,384
EXCESS OF COST OVER NET ASSETS OF ACQUIRED BUSINESSES,
less accumulated amortization of $9,929 at December and $6,832
at March 87,056 88,352
OTHER INTANGIBLE ASSETS, less accumulated amortization of
$5,728 at December and $4,388 at March 1,866 3,264
OTHER ASSETS 9,281 2,555
--------- ---------
$ 294,530 $ 276,270
--------- ---------
--------- ---------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES:
Revolving credit facility $ 12,300 $ -
Current maturities of long-term debt 17,035 12,426
Trade accounts payable 10,845 12,904
Related party payable 7,065 6,635
Other accrued expenses and liabilities 37,374 31,968
Deferred revenue 20,744 23,580
Income taxes 1,183 3,117
--------- ---------
TOTAL CURRENT LIABILITIES 106,546 90,630
--------- ---------
LONG-TERM DEBT, less current maturities 47,637 50,564
--------- ---------
OTHER LIABILITIES 4,224 5,593
--------- ---------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST - 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, 10,614,667 at December and 10,743,550
at March 106 107
Additional paid-in capital 41,005 45,959
Retained earnings 96,635 84,361
Foreign currency translation adjustments (220) (721)
Unearned compensation (1,403) (1,433)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 136,123 128,273
--------- ---------
$ 294,530 $ 276,270
--------- ---------
--------- ---------
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 25, DECEMBER 26, DECEMBER 25, DECEMBER 26,
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUE:
Equipment and software $ 44,706 $ 32,252 $ 125,114 $ 85,765
Maintenance and other services 33,050 27,287 95,333 81,994
-------- -------- --------- --------
77,756 59,539 220,447 167,759
-------- -------- --------- --------
COST OF SALES:
Equipment and software 29,669 20,426 80,276 56,833
Maintenance and other services 25,271 21,493 73,468 63,240
-------- -------- --------- --------
54,940 41,919 153,744 120,073
-------- -------- --------- --------
GROSS PROFIT 22,816 17,620 66,703 47,686
-------- -------- --------- --------
OPERATING EXPENSES:
Product development 1,863 2,298 7,376 6,884
Selling, general & administrative 12,059 8,401 33,901 23,143
-------- -------- --------- --------
13,922 10,699 41,277 30,027
-------- -------- --------- --------
INCOME FROM OPERATIONS 8,894 6,921 25,426 17,659
-------- -------- --------- --------
OTHER INCOME (EXPENSE):
Interest income 62 74 155 310
Interest expense (1,548) (418) (4,075) (1,151)
Sundry-net (762) (91) (2,219) (926)
-------- -------- --------- --------
(2,248) (435) (6,139) (1,767)
-------- -------- --------- --------
INCOME BEFORE INCOME
TAXES, AND MINORITY
INTEREST 6,646 6,486 19,287 15,892
INCOME TAX PROVISION 2,984 2,535 8,293 6,269
MINORITY INTEREST 766 306 1,210 1,270
-------- -------- --------- --------
NET INCOME $ 4,428 $ 4,257 $ 12,204 $ 10,893
-------- -------- --------- --------
-------- -------- --------- --------
NET INCOME PER COMMON
SHARE $ .40 $ .38 $ 1.09 $ .97
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES- FULLY
DILUTED 11,114 11,275 11,173 11,250
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 25, DECEMBER 26,
1994 1993
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 12,204 $10,893
Adjustments to reconcile net income to cash flows
provided by (used in) operating activities:
Depreciation and amortization 17,915 12,936
Other non-cash items 171 141
Increase in accounts receivable (8,676) (5,641)
Increase in inventories (729) (10,291)
Increase in other assets (3,351) (2,959)
(Decrease) increase in trade accounts payable (3,154) 3,871
(Decrease) increase in deferred revenue (3,076) 3,068
Increase (decrease) in other accrued expenses
and liabilities 5,325 (3,331)
Minority interest in earnings (1,210) (1,270)
----------- ------------
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 15,419 7,417
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of property, plant and equipment (17,162) (15,900)
Purchase of businesses, net of cash acquired (11,086) (29,225)
----------- ------------
CASH FLOWS USED IN INVESTING ACTIVITIES (28,248) (45,125)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of current portion of long-term debt and
capital lease obligations (9,899) (5,938)
Proceeds from long-term borrowings 10,800 25,200
Proceeds from short-term borrowings 15,000 -
Payments of short-term borrowings (2,700) -
Repurchase of common stock (6,420) -
Proceeds from sales and issuances of common stock 1,324 1,037
----------- ------------
CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES 8,105 20,299
----------- ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (477) (505)
----------- ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (5,201) (17,914)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 12,644 25,326
----------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 7,443 $ 7,412
----------- ------------
----------- ------------
SUPPLEMENTAL DISCLOSURE INFORMATION:
Cash paid during the period for:
Interest $ 3,164 $ 791
Income taxes 7,372 6,047
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED DECEMBER 25, 1994
(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 third quarter
ended on December 25, 1994. Fiscal year 1994 third quarter and fourth quarter
ended on December 26, 1993 and March 27, 1994, respectively.
The consolidated balance sheet at December 25, 1994, and the consolidated
statements of operations and cash flows for the interim periods ending
December 25, 1994 and December 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 December 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>
DECEMBER 25, MARCH 27,
1994 1994
------------ ---------
(IN THOUSANDS)
<S> <C> <C>
Raw materials $21,066 $18,395
Work-in-progress 6,691 6,562
Finished goods 25,932 28,720
Obsolence and valuation reserves (4,565) (4,908)
------- -------
$49,124 $48,769
------- -------
------- -------
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT CONSISTED OF THE FOLLOWING:
<TABLE>
<CAPTION>
DECEMBER 25, MARCH 27,
1994 1994
------------ ---------
(IN THOUSANDS)
<S> <C> <C>
Land $ 1,188 $ 1,295
Field support spare parts 54,473 44,548
Machinery and equipment 29,765 34,377
Furniture, fixtures and other 21,251 20,378
Building 5,816 4,911
------- -------
112,493 105,509
Accumulated depreciation (61,351) (60,125)
------- -------
$ 51,142 $ 45,384
------- -------
------- -------
</TABLE>
-5-
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
4. OTHER ACCRUED EXPENSES AND LIABILITIES CONSISTED OF THE FOLLOWING:
<TABLE>
<CAPTION>
DECEMBER 25, MARCH 27,
1994 1994
------------ ---------
(IN THOUSANDS)
<S> <C> <C>
Salaries, wages and other compensation $ 13,772 $ 16,033
Accrued taxes, other than income taxes 4,739 3,860
Advances from customers 5,956 3,279
Accrued invoices and costs 4,779 4,177
Acquisition Liabilities 3,277 815
Other 4,851 3,804
--------- --------
$ 37,374 $ 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 DECEMBER 25, 1994 AND DECEMBER 26, 1993
Total Revenue of $77.8M increased $18.2M or 30.6% compared to the same period
last year. Revenue from equipment and software increased $12.5M or 38.6%
primarily due to revenues resulting from the acquisitions of ACS and TDC and the
delivery of image systems to domestic customers, offset in part by lower
revenues from Reader/Sorters. Revenue from maintenance and other services
increased $5.8M or 21.1% due to growth in third party maintenance network
services and the TDC acquisition.
Gross profit of $22.8M increased $5.2M or 29.5% from the same period last year
due to the additional revenues. Gross profit for equipment and software
increased $3.2M due to the additional ACS software, TDC scanners and image
systems revenues. Gross margin for equipment and software of 33.6% represented
a decrease of 3.4% from the prior year due to lower hardware margins and
increased manufacturing variances. Gross profit for maintenance and other
services increased by $2.0M due to the additional revenues and improved margins
in the document processing maintenance services.
Operating expenses of $13.9M represented an increase of $3.2M over the prior
year primarily due to additional staffing and associated costs resulting from
the acquisitions, increased medical claim payments and legal expenses.
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 $0.8M represented an increase of $0.7M over the prior
year due to increased goodwill amortization from the acquisitions.
Net income of $4.4M represented an increase of $0.2M from the prior year. Fully
diluted earnings per share of $0.40 improved by $0.02 from the prior year.
COMPARISON OF NINE MONTHS ENDED DECEMBER 25, 1994 AND DECEMBER 26, 1993
Total Revenue of $220.4M increased $52.7M or 31.4% compared to the same period
last year. Revenue from equipment and software increased $39.3M or 45.9%
primarily due to the acquisitions and additional image installations, offset in
part by lower revenues from Reader/Sorters and non-image document processing
systems. Revenue from maintenance and other services increased $13.3M or 16.3%
due to a combination of growth in third party network services and the revenue
from the TDC acquisition.
-7-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(CONTINUED)
Gross profit of $66.7M increased $19.0M or 39.9% from the same period last year
due to a combination of additional revenues and improved margins. Gross profit
for equipment and software increased $15.9M due to the acquisitions, additional
image system sales and improved margins on software. Gross margin for equipment
and software improved as a result of an increased mix of higher margin software
sales. Gross profit for maintenance and other services increased by $3.1M due to
the TDC acquisition. Gross margins for maintenance and other services were
similar with last year's comparable period.
Operating expenses of $41.3M represented an increase of $11.3M over the prior
year as a result of the increased staffing and associated costs from the
acquisitions, increased medical claim payments and legal expenses.
Interest expense increased $2.9M from the prior year as a result of the increase
in debt utilized to fund the acquisitions and higher interest rates.
Net Sundry expenses of $2.2M represent an increase of $1.3M 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 43.0% in
fiscal year 1995. 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 where profit is earned.
Net income of $12.2M represented an increase of $1.3M from the prior year. Fully
diluted earnings per share of $1.09 improved by $0.12 from the prior year.
FISCAL YEAR 1995 OUTLOOK
As a result of the recent order weakness, primarily in Europe, net income for
the fourth fiscal quarter of FY 1995 is expected to be below fourth quarter
results from the previous year. However, we expect fiscal 1995 will show year-
on-year growth over fiscal 1994.
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-(CONTINUED)
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 $7,717,000 is outstanding at December 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 borrowed $55,000,000 to fund acquisitions, of which $54,750,000 was
outstanding as of December 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 $12,300,000 was outstanding as of
December 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 1.4 to 1 as of December 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 and purchases of
treasury stock and fixed assets. Accounts receivable increased $10.2M due to the
delay in collection of several large European accounts and increased billings
during the month of December.
The increase in Other Current Assets was primarily due to the current portion of
the deferred tax benefits associated with the acquisitions.
Net fixed assets increased $5.8M from March due to an increase in field support
parts and the purchase of a facility.
The increase in Other Long-term Assets resulted from recording the long-term
portion of the deferred tax benefits associated with the acquisitions.
Short-term debt increased $12.3M due to borrowings against the revolving credit
facility to fund additional payments relating to the acquisitions, purchase
treasury stock and purchase of a facility.
Other Liabilities decreased $1.4M primarily due to activity relating to the
purchase accounting liabilities.
-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
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
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: February 3, 1995
-11-
<PAGE>
EXHIBIT 11.1
BANCTEC, INC.
COMPUTATION OF NET INCOME PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 25, DECEMBER 26, DECEMBER 25, DECEMBER 26,
1994 1993 1994 1993
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net Income $ 4,428,000 $ 4,257,000 $ 12,204,000 $ 10,893,000
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
Shares:
Weighted average number of
shares outstanding 10,558,856 10,515,024 10,579,174 10,456,402
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 555,589 697,900 593,862 661,012
----------- ----------- ------------ ------------
Weighted average number
of shares outstanding,
as adjusted 11,114,445 11,212,924 11,173,036 11,117,414
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
Primary net income per common
and common equivalent share $.40 $.38 $1.09 $.98
---- ---- ----- ----
---- ---- ----- ---
Shares assuming full dilution:
Weighted average number of
shares outstanding 10,558,856 10,518,999 10,579,174 10,464,809
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 555,589 755,918 593,862 784,970
----------- ----------- ------------ ------------
Weighted average number
of shares outstanding,
as adjusted 11,114,445 11,274,917 11,173,036 11,249,779
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
Fully diluted net income per common
and common equivalent share $.40 $.38 $1.09 $.97
---- ---- ----- ----
---- ---- ----- ----
</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
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-26-1995
<PERIOD-END> DEC-25-1994
<EXCHANGE-RATE> 1
<CASH> 7,443
<SECURITIES> 0
<RECEIVABLES> 78,273
<ALLOWANCES> (1,395)
<INVENTORY> 49,124
<CURRENT-ASSETS> 145,185
<PP&E> 112,493
<DEPRECIATION> (61,351)
<TOTAL-ASSETS> 294,530
<CURRENT-LIABILITIES> 106,546
<BONDS> 47,637
<COMMON> 106
0
0
<OTHER-SE> 136,017
<TOTAL-LIABILITY-AND-EQUITY> 294,530
<SALES> 220,447
<TOTAL-REVENUES> 220,447
<CGS> 153,744
<TOTAL-COSTS> 153,744
<OTHER-EXPENSES> 41,277
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,075
<INCOME-PRETAX> 19,287
<INCOME-TAX> 8,293
<INCOME-CONTINUING> 12,204
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,204
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 1.09
</TABLE>
