<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 MARCH 31, 1996
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 MAY 6, 1996
----- -----------------
Common Stock, $.01 par value 20,316,369
<PAGE>
BANCTEC, INC.
CONSOLIDATED BALANCE SHEET
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents including restricted amounts of $746 at
March 31, 1996 and $1,547 at December 31, 1995 $ 24,846 $ 22,010
Short-term investments including restricted amounts of $4,567 at
March 31, 1996 and $4,851 at December 31, 1995 4,649 4,864
Accounts receivable, less allowance for doubtful accounts of
$10,858 at March 31, 1996 and $11,571 at December 31, 1995 130,402 106,189
Inventories 84,567 76,930
Current deferred tax asset 16,765 16,764
Other current assets 9,588 9,109
-------- --------
TOTAL CURRENT ASSETS 270,817 235,866
PROPERTY, PLANT AND EQUIPMENT - NET 76,639 75,557
EXCESS OF COST OVER NET ASSETS OF ACQUIRED BUSINESSES,
less accumulated amortization of $21,013 at March 31, 1996 and $19,685
at December 31, 1995 97,282 91,503
OTHER INTANGIBLE ASSETS, less accumulated amortization of
$6,981 at March 31, 1996 and $6,814 at December 31, 1995 1,189 1,607
LONG-TERM DEFERRED TAX ASSET 23,390 23,390
OTHER ASSETS 10,960 12,425
-------- --------
$480,277 $440,348
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving credit facility $ 42,662 $ 21,542
Current maturities of long-term debt 11,341 13,593
Trade accounts payable 27,848 24,243
Other accrued expenses and liabilities 89,460 87,098
Deferred revenue 44,002 38,024
Income taxes payable 9,385 4,280
-------- --------
TOTAL CURRENT LIABILITIES 224,698 188,780
-------- --------
LONG-TERM DEBT, LESS CURRENT MATURITIES 74,197 82,972
-------- --------
OTHER LIABILITIES 12,097 12,395
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock-authorized, 1,000 shares of $.01 par value:
Series A - No shares issued and outstanding - -
Series B - No shares issued and outstanding - -
Common stock-authorized, 45,000 shares of $.01 par value:
issued and outstanding, 20,254 at March 31, 1996
and 19,919 at December 31, 1995 202 199
Treasury stock (388) (388)
Additional paid-in capital 195,148 191,709
Accumulated deficit (20,452) (29,134)
Foreign currency translation adjustments (2,210) (2,866)
Unearned compensation (3,015) (3,319)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 169,285 156,201
-------- --------
$480,277 $440,348
======== ========
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, MARCH 26,
1996 1995
--------- ---------
<S> <C> <C>
REVENUE:
Equipment and software $ 80,604 $ 77,035
Maintenance and other services 59,449 61,408
-------- --------
140,053 138,443
-------- --------
COST OF SALES:
Equipment and software 54,797 55,418
Maintenance and other services 44,912 45,556
-------- --------
99,709 100,974
-------- --------
GROSS PROFIT 40,344 37,469
-------- --------
OPERATING EXPENSES:
Product development 3,908 5,624
Selling, general & administrative 19,809 27,057
Goodwill amortization 1,212 2,831
-------- --------
24,929 35,512
-------- --------
INCOME FROM OPERATIONS 15,415 1,957
-------- --------
OTHER INCOME (EXPENSE):
Interest income 274 778
Interest expense (2,244) (2,731)
Sundry-net 121 641
-------- --------
(1,849) (1,312)
-------- --------
INCOME BEFORE INCOME
TAXES 13,566 645
INCOME TAX PROVISION 4,884 100
-------- --------
NET INCOME $ 8,682 $ 545
======== ========
NET INCOME PER SHARE:
Primary $0.43 $0.03
Fully diluted $0.42 -
COMMON SHARES AND COMMON SHARE
EQUAVALENTS USED IN COMPUTING PER
SHARE AMOUNTS:
Primary 20,417 20,100
Fully diluted 22,154 -
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, MARCH 26,
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,682 $ 545
Adjustments to reconcile net income to cash flows
provided by (used in) operating activities:
Depreciation and amortization 8,447 11,241
Deferred income tax expense (benefit) (236) (2,792)
Loss due to disposition of property, plant
and equipment - 1,321
Other non-cash items (458) 2,256
Increase in accounts receivable (26,250) (10,538)
(Increase) decrease in inventories (8,043) 5,446
(Increase)decrease in other assets 475 (3,859)
Increase in trade accounts payable 5,563 2,194
Increase in deferred revenue 6,240 4,710
Increase in other accrued expenses
and liabilities 7,845 13,333
-------- --------
CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES 2,265 23,857
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (7,330) (10,288)
Purchase of businesses, net of cash acquired (7,136) (2,186)
Additions to capitalized software - (295)
Other 35 (419)
-------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES (14,431) (13,188)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of current portion of long-term debt and
capital lease obligations (5,363) (2,392)
Payments of long-term borrowings (5,350) -
Proceeds from short-term borrowings 22,000 5
Payments of short-term borrowings (500) (49)
Repurchase of common stock - (574)
Proceeds from sales and issuances of common stock 4,267 1,252
-------- --------
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES 15,054 (1,758)
-------- --------
EFFECT of EXCHANGE RATE CHANGES ON CASH (52) (702)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,836 8,209
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 22,010 42,997
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 24,846 $ 51,206
======== ========
SUPPLEMENTAL DISCLOSURE INFORMATION:
Cash paid during the period for:
Interest $ 1,463 $ 3,664
Income taxes 715 1,279
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION AND OTHER ACCOUNTING INFORMATION:
The Company currently uses calendar quarters for quarterly reporting. The
Company's fiscal year ends on December 31.
The consolidated balance sheet at March 31, 1996, and the consolidated
statements of operations and cash flows for the interim periods ending
March 31, 1996 and March 26, 1995, 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.
The Company's consolidated statements of operations and cash flows for the
interim period ending March 26, 1995, have been restated to reflect its
merger with Recognition International Inc., ("Recognition"), under the
pooling of interests method of accounting. The amounts disclosed include
the Company's results for the three months ended March 26, 1995, combined
with Recognition's results for the three months ended October 31, 1994.
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 and convertible subordinated debentures, when
applicable.
2. INVENTORIES CONSISTED OF THE FOLLOWING:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials $21,923 $22,644
Work-in-progress 24,790 20,195
Finished goods 37,854 34,091
------- -------
$84,567 $76,930
======= =======
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT CONSISTED OF THE FOLLOWING:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Land $ 3,030 $ 2,062
Field support spare parts 87,003 96,657
Machinery and equipment 62,750 63,663
Furniture, fixtures and other 27,459 26,515
Buildings 22,743 23,693
--------- ---------
202,985 212,590
Accumulated depreciation (126,346) (137,033)
--------- ---------
$ 76,639 $ 75,557
========= =========
</TABLE>
-5-
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(UNAUDITED)
4. OTHER ACCRUED EXPENSES AND LIABILITIES CONSISTED OF THE FOLLOWING:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Salaries, wages and other compensation $22,708 $19,604
Accrued taxes, other than income taxes 6,640 6,391
Advances from customers 19,879 16,340
Accrued invoices and costs 6,081 2,949
Accrued merger charges and other costs 20,950 25,426
Other 13,202 16,388
------- -------
$89,460 $87,098
======= =======
</TABLE>
5. CHARGES
During the nine months ended December 31, 1995, the Company incurred pretax
charges of $85,187,000 for the integration of the Company and Recognition.
During prior periods, Recognition had incurred various pretax charges to
consolidate certain operations and close its Charlotte, North Carolina
facility. At December 31, 1995, the Company had accruals of approximately
$23,400,000 recorded in other accrued expenses and liabilities for
remaining obligations related to these charges.
At March 31, 1996, the Company's remaining accruals relating to these
charges was approximately $18,400,000. The decrease from December 31, 1995
primarily resulted from the payment of termination benefits of $2,800,000
and professional fees of $1,700,000 paid during the first quarter.
-6-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1996 WITH THE COMBINED THREE MONTHS
- ------------------------------------------------------------------------------
ENDED MARCH 26, 1995 FOR BANCTEC AND THREE MONTHS ENDED OCTOBER 31, 1994 FOR
- ----------------------------------------------------------------------------
RECOGNITION
- -----------
Total Revenue of $140.1 million increased by $1.6 million or 1.2% compared to
the same reporting period in the prior year. Revenue from equipment and
software increased by $3.6 million due to additional image and community banking
software revenue offset in part by lower hardware revenue from several mature
product lines. Revenue from maintenance and other services decreased by $2.0
million as several contracts for maintenance of older Recognition systems were
not renewed. The deterioration in Recognition maintenance revenue was partially
offset by continued growth in network maintenance services.
Consolidated gross profit of $40.3 million increased by $2.9 million or 7.7%
compared to the same reporting period in the prior year primarily due to the
replacement of low margin network integration revenue with higher margin
equipment and software revenue. Gross profit from maintenance and other
services decreased by $1.3 million as a result of the loss of the higher margin
contracts noted above offset in part by the increase in network maintenance
services revenue.
Operating expenses of $24.9 million were reduced by $10.6 million from the prior
comparable period. The improvement resulted from the combination of lower
spending as a result of cost savings from the acquisition and a non-recurring
charge of $4.3 million taken in the prior year by the Company to settle a
litigation claim and for reorganization of its North American operations.
Sundry income of $0.1 million decreased by $0.5 million from the prior
comparable period due to prior period foreign currency translation gains which
did not reoccur during the current quarter.
The income tax provision of $4.9 million increased by $4.8 million over the
prior comparable period due to the increase in pretax profit. The effective
tax rate is expected to be 36% for the current year.
Net income of $8.7 million increased by $8.1 million from the prior comparable
period. Earnings per share of $0.42 increased by $0.39 from the prior
comparable period.
-7-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(CONTINUED)
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 stock purchase plans.
At March 31, 1996, the Company had the following debt instruments in place: 1)
Term loan, 2) Revolving Credit Facility, 3) 7-1/4% Convertible Subordinated
Debentures and 4) Foreign Bank Loan. The outstanding balance on the Term Loan at
March 31, 1996 was $40.8 million which is payable in quarterly installments of
$2.7 million with the final payment due on December 31, 1999. The Company has
available a revolving credit facility of $50.0 million with an outstanding
balance of $31.4 million as of March 31, 1996. This balance includes $0.3
million in recognized but unrealized losses resulting from converting certain
notes to foreign currencies which is permitted under its credit agreement. The
Company also has outstanding $43.7 million of 7-1/4% Convertible Subordinated
Debentures as of March 31, 1996. The convertible debentures are subordinated to
all senior indebtedness with annual sinking fund requirements of $2.3 million.
In March of 1996 the Company purchased $8.0 million of the convertible
debentures in the open market thereby fulfilling its sinking fund obligations
for the next three years. A foreign bank loan of $5.3 million which is secured
by cash, cash equivalents and short-term investments was also outstanding as of
March 31, 1996. Refer to Note G in the Company's Annual Report on Form 10-K for
the year ended December 31, 1995 for a further discussion of these debt
instruments.
The Company also has available uncommitted lines of credit with a group of
banks. Under this uncommitted line, the Company had outstanding $6.0 million in
obligations as of March 31, 1996.
Cash requirements for completion of the Recognition merger are expected to be
met from funds from operations.
The Company's current ratio was 1.2 to 1 as of March 31, 1996. Cash and cash
equivalents increased by $2.8 million from the start of the current fiscal year
primarily as a result of operating activities.
Accounts receivable increased by $24.2 million due to the increased revenue in
the quarter and the timing of when that revenue was recognized during the
quarter.
Inventory increased by $7.6 million due to a combination of inventory purchased
in Canada for use in a network integration project and higher finished goods
levels on several contracts with longer development cycles.
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(CONTINUED)
The excess of cost over net assets of acquired businesses increased by $5.8
million reflecting the purchase in March of the Company's joint venture
partners' remaining interest in the ScanData Joint Venture less the normal
quarterly amortization of costs.
The balance in the revolving credit facility increased by $21.1 million as a
result of funds utilized to purchase the joint venture interest, the purchase of
convertible debentures in the open market and funds used for on-going operating
needs.
Current maturities of long-term debt decreased by $2.3 million as a result of
the Company meeting its convertible debentures sinking fund obligations through
the purchase of debentures in the open market.
Deferred revenue increased by $6.0 million due to a prepayment received from a
customer on a system scheduled for delivery in the second half of the current
fiscal year.
The income tax payable liability increased by $5.1 million due to the Company's
strong first quarter financial performance.
The balance in long-term debt decreased by $8.8 million as a result of the
normal scheduled quarterly debt payment and the purchase of convertible
debentures in the open market.
The additional paid-in capital in the Stockholders' Equity increased by $3.4
million primarily due to stock options exercised by former executives of the
Company.
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 adverse impact on the
Company's long or short-term liquidity.
-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
Report on Form 8-K/A was filed on May 1, 1996.
This document disclosed historical financial results of the
combination of the Company and Recognition on a quarterly basis
from January 1, 1994 to December 31, 1995.
-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: May 15, 1996
-11-
<PAGE>
EXHIBIT 11.1
BANCTEC, INC.
COMPUTATION OF NET INCOME PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, MARCH 26,
1996 1995
----------- -----------
<S> <C> <C>
PRIMARY:
- --------
Net Income $ 8,682,000 $ 545,000
=========== ===========
Shares outstanding beginning of period 19,918,735 19,723,786
Weighted average number of shares repurchased
or held in treasury stock during the year (29,936) (345,158)
Shares issued during the period and shares issued
from assumed exercise of stock options reduced
by the number of shares which could have been
purchased with the proceeds from exercise of such
options and unearned compensation on restricted
stock awards 527,792 720,885
---------- ----------
Weighted average number of shares outstanding,
as adjusted 20,416,591 20,099,513
=========== ===========
Primary net income per common and common
equivalent share $0.43 $0.03
===== =====
FULLY DILUTED:
- --------------
Net Income $ 8,682,000 $ 545,000
Add after tax interest expense applicable to the
7 1/4% convertible subordinated debentures 579,000 919,000
----------- -----------
Net Income, as adjusted $ 9,261,000 $ 1,464,000
=========== ===========
Shares outstanding beginning of period 19,918,735 19,723,786
Weighted average number of shares
repurchased during the year (29,936) (345,158)
Shares issuable during the period and shares issued
from assumed exercise of stock options reduced
by the number of shares which could have been
purchased with the proceeds from exercise of such
options and unearned compensation on restricted
stock awards 526,969 720,885
----------- -----------
Weighted average number of shares
outstanding, as adjusted excluding the 7 1/4%
convertible subordinated debentures 20,415,768 20,099,513
=========== ===========
Fully diluted income per common and common
equivalent share excluding the 7 1/4% convertible
subordinated debentures $0.43 $0.03
===== =====
Weighted average shares issuable assuming conversion
of the 7 1/4% convertible subordinated debentures 1,738,293 1,821,920
Weighted average number of shares outstanding as
adjusted 22,154,061 21,921,433
----------- -----------
Fully diluted net income per common and common
equivalent share $0.42 $0.07
===== =====
</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 THE
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS AND FOOTNOTES.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 DEC-26-1994
<PERIOD-END> MAR-31-1996 MAR-26-1995
<CASH> 24,846 0
<SECURITIES> 4,649 0
<RECEIVABLES> 141,260 0
<ALLOWANCES> (10,858) 0
<INVENTORY> 84,567 0
<CURRENT-ASSETS> 270,817 0
<PP&E> 202,985 0
<DEPRECIATION> (126,346) 0
<TOTAL-ASSETS> 480,277 0
<CURRENT-LIABILITIES> 224,698 0
<BONDS> 74,197 0
0 0
0 0
<COMMON> 202 0
<OTHER-SE> 169,083 0
<TOTAL-LIABILITY-AND-EQUITY> 480,277 0
<SALES> 80,607 77,035
<TOTAL-REVENUES> 140,053 138,443
<CGS> 54,797 55,418
<TOTAL-COSTS> 99,709 100,974
<OTHER-EXPENSES> 24,929 35,512
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,244 2,731
<INCOME-PRETAX> 13,566 645
<INCOME-TAX> 4,884 100
<INCOME-CONTINUING> 8,682 545
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 8,682 545
<EPS-PRIMARY> 0.43 0.03
<EPS-DILUTED> 0.42 0.03
</TABLE>
