<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 June 25, 1995
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 JULY 26, 1995
----- ----------------
Common Stock, $.01 par value 10,972,548
<PAGE>
BANCTEC, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
JUNE 25, MARCH 26,
1995 1995
-------- ---------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 13,427 $ 11,091
Accounts receivable, less allowance for doubtful
accounts of $1,443 at June and $1,646 at March 72,813 81,790
Inventories 51,183 51,491
Other current assets 13,196 11,911
-------- --------
TOTAL CURRENT ASSETS 150,619 156,283
PROPERTY, PLANT AND EQUIPMENT - NET 52,258 51,354
EXCESS OF COST OVER NET ASSETS OF ACQUIRED BUSINESSES,
less accumulated amortization of $11,918 at June and $10,890
at March 85,658 86,243
OTHER INTANGIBLE ASSETS, less accumulated amortization of
$6,432 at June and $6,157 at March 1,162 1,437
OTHER ASSETS 12,008 12,049
-------- --------
$301,705 $307,366
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving credit facility $ 13,132 $ 12,942
Current maturities of long-term debt 15,699 20,290
Trade accounts payable 14,412 22,430
Other accrued expenses and liabilities 38,273 42,349
Deferred revenue 26,158 26,000
Income taxes 7,095 259
-------- --------
TOTAL CURRENT LIABILITIES 114,769 124,270
-------- --------
LONG-TERM DEBT, less current maturities 42,577 42,459
-------- --------
OTHER LIABILITIES 3,206 3,509
-------- --------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST - -
-------- --------
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, 10,656,688 at June and 10,638,806
at March 107 107
Additional paid-in capital 41,508 41,409
Retained earnings 100,693 96,868
Foreign currency translation adjustments 224 91
Unearned compensation (1,379) (1,347)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 141,153 137,128
-------- --------
$301,705 $307,366
======== ========
</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
JUNE 25, JUNE 26,
1995 1994
-------- ---------
<S> <C> <C>
REVENUE:
Equipment and software $38,815 $38,590
Maintenance and other services 34,337 30,876
------- -------
73,152 69,466
------- -------
COST OF SALES:
Equipment and software 25,880 24,523
Maintenance and other services 26,210 24,161
------- -------
52,090 48,684
------- -------
GROSS PROFIT 21,062 20,782
------- -------
OPERATING EXPENSES:
Product development 1,981 2,759
Selling, general & administrative 10,247 10,854
Goodwill amortization 996 1,074
------- -------
13,224 14,687
------- -------
INCOME FROM OPERATIONS 7,838 6,095
------- -------
OTHER INCOME (EXPENSE):
Interest income 95 37
Interest expense (1,505) (1,064)
Sundry-net 167 559
------- -------
(1,243) (468)
INCOME BEFORE INCOME
TAXES, AND MINORITY
INTEREST 6,595 5,627
INCOME TAX PROVISION 2,770 2,364
MINORITY INTEREST - 439
------- -------
NET INCOME $ 3,825 $ 3,702
======= =======
NET INCOME PER COMMON
SHARE $.35 $.33
WEIGHTED AVERAGE SHARES 10,934 11,227
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 25, JUNE 26,
1995 1994
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,825 $ 3,702
Adjustments to reconcile net income to cash flows
provided by (used in) operating activities:
Depreciation and amortization 6,238 6,143
Loss due to scrapping of obsolete PP&E 322 2,790
Other non-cash items 442 47
(Increase) decrease in accounts receivable 9,894 (8,831)
(Increase) decrease in inventories 649 (2,996)
Increase in other assets (1,222) (2,641)
Decrease in trade accounts payable (9,093) (719)
Decrease in deferred revenue (16) (719)
Increase in other accrued expenses
and liabilities 2,864 415
Minority interest in earnings - (439)
------- --------
CASH FLOWS PROVIDED BY (USED IN) OPERATING
ACTIVITIES 13,903 (3,248)
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of property, plant and equipment (6,040) (7,360)
Purchase of businesses, net of cash acquired (724) (7,249)
------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES (6,764) (14,609)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of current portion of long-term debt and
capital lease obligations (4,658) (5,522)
Proceeds from long-term borrowings - 6,500
Proceeds from short-term borrowings - 15,000
Payments of short-term borrowings - -
Repurchase of common stock - (4,732)
Proceeds from sales and issuances of common stock - 555
------- --------
CASH FLOWS (USED IN) PROVIDED BY FINANCING
ACTIVITIES (4,658) 11,801
------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (145) (585)
------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,336 (6,641)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 11,091 12,644
------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $13,427 $ 6,003
======= ========
SUPPLEMENTAL DISCLOSURE INFORMATION:
Cash paid during the period for:
Interest $ 1,736 $ 830
Income taxes 564 2,700
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 25, 1995
(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 1996 first
quarter ended on June 25, 1995. Fiscal year 1995 first quarter and fourth
quarter ended on June 26, 1994 and March 26, 1995, respectively.
The consolidated balance sheet at June 25, 1995, and the consolidated
statements of operations and cash flows for the interim periods ending June
25, 1995 and June 26, 1994, 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.
On May 19, 1995, the Company entered an agreement with Recognition
International, Inc. ("Recognition") to acquire 100% of the outstanding
shares of Recognition in a stock for stock exchange. This transaction, which
would be accounted for as a pooling of interests, would result in the
issuance of approximately 9,100,000 shares of BancTec common stock. The
merger is subject to regulatory and shareholder approval and is expected to
be completed during the Company's second fiscal quarter.
2. INVENTORIES CONSISTED OF THE FOLLOWING:
<TABLE>
<CAPTION>
JUNE 25, MARCH 26,
1995 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Raw materials $16,586 $19,482
Work-in-progress 7,991 5,387
Finished goods 26,606 26,622
------- -------
$51,183 $51,491
======== =======
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT CONSISTED OF THE FOLLOWING:
<TABLE>
<CAPTION>
JUNE 25, MARCH 26,
1995 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land $ 1,188 $ 1,188
Field support spare parts 57,346 56,146
Machinery and equipment 29,825 28,752
Furniture, fixtures and other 22,596 22,159
Building 7,323 6,080
-------- --------
118,278 114,325
Accumulated depreciation (66,020) (62,971)
-------- --------
$ 52,258 $ 51,354
======== ========
</TABLE>
-5-
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(UNAUDITED)
4. OTHER ACCRUED EXPENSES AND LIABILITIES CONSISTED OF THE FOLLOWING:
<TABLE>
<CAPTION>
JUNE 25, MARCH 26,
1995 1995
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Salaries, wages and other compensation $17,853 $16,281
Accrued taxes, other than income taxes 1,819 3,918
Advances from customers 6,372 5,981
Accrued invoices and costs 4,869 4,723
Acquisition liabilities 2,673 3,509
Other 4,687 7,937
------- -------
$38,273 $42,349
======= =======
</TABLE>
-6-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED JUNE 25, 1995 AND JUNE 26, 1994
- ----------------------------------------------------------------
Total Revenue of $73.2M increased $3.7M or 5.3% compared to the same period last
year. Revenue from maintenance and other services increased $3.5M or 11.2% due
primarily to growth in network services maintenance. Revenue from equipment and
software showed minimal growth as increases in community banking and electronic
payment systems were offset by lower revenues from Image Systems. The lower
Image Systems revenue is due to the timing of system deliveries.
Gross profit of $21.1M improved $0.3M from the same period last year due to the
additional revenues. Gross margin decreased by one percentage point due to a
combination of lower Image Systems revenue and a higher percentage of
maintenance revenues which carry lower margins. Gross profit for maintenance
and other services increased by $1.4M due to the additional third party
maintenance network services revenues. Gross profit for equipment and software
decreased $1.1M due to the lower Image Systems revenue in the current quarter.
Operating expenses of $13.2M represented a decrease of $1.5M from the prior
year. Product development costs were $0.8M lower than last year due to
capitalization of $0.2M in software costs, lower staffing levels as a result of
the restructurings that occurred in the second half of fiscal 1995 and higher
costs in fiscal 1995 for development projects which had been accelerated into
the first quarter to meet shipment deadlines. SG&A spending was $0.6M lower
than the prior year due to lower staffing as a result of the restructuring and
lower costs for bonuses and legal fees.
Interest expense increased $0.4M from last year due to higher interest rates.
Net Sundry income of $0.2M represented a decrease of $0.4M from the prior year
due to prior year foreign currency transaction gains which did not reoccur.
Foreign currency transaction gains and losses result from the effect of exchange
rate fluctuations on recorded transactions denominated in currencies other than
the functional currency of the entity recording such transactions. The Company
utilizes foreign currency forward exchange agreements, a derivative financial
instrument, in conjunction with foreign currency borrowings, to hedge only
specific material foreign currency receivables and payables for the expected
period until settlement of such amounts. The purpose of this program is to
minimize the affect of foreign currency fluctuations on the reported results and
cash flows of the Company. However, the Company does not attempt to hedge 100%
its foreign currency exposures and as a result, foreign currency gains and
losses will be incurred by the Company. The Company has only limited
involvement with derivative financial instruments and does not currently nor
does management foresee using these in the future for trading purposes.
-7-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(CONTINUED)
Net income of $3.8M represented an increase of $0.1M from the prior year.
Earnings per share of $0.35 improved by $0.02 from the prior year.
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 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 $4,074,000 is outstanding at June 25, 1995. The
Company continues to make scheduled payments on this term loan of $1,821,000 per
quarter until maturity in December 1995. Under the acquisition facility, the
Company borrowed $55,000,000 to fund acquisitions, of which $52,654,000 was
outstanding as of June 25, 1995. This balance includes $654,000 in recognized
but unrealized losses resulting from converting certain notes to foreign
currencies which is permitted under the revised agreement. The amount
outstanding is payable in equal quarterly payments until maturity in December
1999 as required by the agreement. Refer to Notes D and E in the Company's
Annual Report on Form 10-K for the year ended March 26, 1995 for a further
discussion of this agreement. The Company also has available a $30,000,000
revolving credit facility of which $13,132,000 was outstanding as of June 25,
1995. This balance included $832,000 in recognized losses resulting from
converting certain notes under this facility into foreign currencies. These
unrealized losses are offset by unrealized gains on intercompany borrowings. 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 June 25, 1995. Cash and cash
equivalents increased by $2.3M from the start of the fiscal year primarily due
to the collection of trade accounts receivables and a refund of $4.7M in
domestic tax payments related to the timing on repayment of intercompany
obligations.
Accounts Receivable decreased due to collection of outstanding receivables
including $8.2M from a Scandinavian customer.
The increase in Other Current Assets was primarily due to deferred software
costs on a customer installation and an increase in prepaid commissions.
Net fixed assets increased $0.9M from March due to an increase in field support
parts offset in part by normal recurring depreciation.
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(CONTINUED)
The current portion of long-term debt decreased $4.6M during the period due to
scheduled quarterly payments on the CES and acquisition credit facilities.
Trade accounts payable decreased $8.0M due to the timing of trade accounts
payable payments and a $2.6M decrease in the Company's related party payable to
Thomson.
The increase in the income tax payable primarily resulted from the refund of
domestic tax payments and the accrual of the tax provision for the current
quarter.
-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 (Electronic Filing Only)
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/ Michael D. Kubic
---------------------------------------
Michael D. Kubic
Vice President, Controller and
Assistant Treasurer
Dated: August 4, 1995
-11-
<PAGE>
EXHIBIT 11.1
BANCTEC, INC.
COMPUTATION OF NET INCOME PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 25, JUNE 26,
1995 1994
----------- -----------
<S> <C> <C>
Net Income $ 3,825,000 $ 3,702,000
=========== ===========
Shares:
Weighted average number of
shares outstanding 10,585,404 10,595,728
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 348,731 631,618
----------- -----------
Weighted average number
of shares outstanding,
as adjusted 10,934,135 11,227,346
=========== ===========
Primary net income per common
and common equivalent share $.35 $.33
==== ====
Shares assuming full dilution:
Weighted average number of
shares outstanding 10,585,404 10,595,728
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 348,731 631,618
----------- -----------
Weighted average number
of shares outstanding,
as adjusted 10,934,135 11,227,346
=========== ===========
Fully diluted net income per common
and common equivalent share $.35 $.33
==== ====
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL 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> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> MAR-27-1995
<PERIOD-END> JUN-25-1995
<CASH> 13,427
<SECURITIES> 0
<RECEIVABLES> 74,256
<ALLOWANCES> (1,443)
<INVENTORY> 51,183
<CURRENT-ASSETS> 150,619
<PP&E> 118,278
<DEPRECIATION> (66,020)
<TOTAL-ASSETS> 301,705
<CURRENT-LIABILITIES> 114,769
<BONDS> 42,577
<COMMON> 107
0
0
<OTHER-SE> 141,046
<TOTAL-LIABILITY-AND-EQUITY> 301,705
<SALES> 73,152
<TOTAL-REVENUES> 73,152
<CGS> 52,090
<TOTAL-COSTS> 52,090
<OTHER-EXPENSES> 13,224
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,505
<INCOME-PRETAX> 6,595
<INCOME-TAX> 2,770
<INCOME-CONTINUING> 3,825
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,825
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
</TABLE>
