<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 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.)
4851 LBJ FREEWAY
DALLAS, TEXAS 75244
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
Registrant's telephone number, including area code: (972) 341-4000
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
---------------------------- -----------------------
Common Stock, $.01 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K. [X]
Aggregate Market Value of voting stock held by non-affiliates of the
Registrant at
February 28, 1997: $466,025,225
Indicate the number of shares outstanding of each of the Registrant's
classes of Common Stock, as of the latest practicable date.
NUMBER OF SHARES OUTSTANDING AT
TITLE OF EACH CLASS FEBRUARY 28, 1997
---------------------------- -------------------------------
Common Stock, $.01 Par Value 21,050,959
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from the definitive proxy
statement to be filed for the annual meeting of stockholders scheduled to be
held on May 22, 1997.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
BANCTEC, INC.
ANNUAL REPORT
ON
FORM 10-K
TWELVE MONTHS ENDED DECEMBER 31, 1996
PART I
ITEM 1. BUSINESS
GENERAL
BancTec, Inc., a Delaware corporation, ("BancTec" or the "Company") is a
systems integration and services company specializing in image-based financial
transaction processing systems, workflow and image management software
products, applications software and professional services. The Company's
systems solutions are targeted at the banking, financial services, insurance,
healthcare, government, utility, telecommunications and retail industries. The
Company also provides network management and support services for users of
local area networks ("LANs") and computer workstations and designs and
manufactures document processing equipment for value added resellers ("VARs")
and original equipment manufacturers ("OEMs"). Unless otherwise indicated, all
further references to BancTec(R) or the Company shall include its wholly owned
subsidiaries.
On October 12, 1995, the Company acquired Recognition International Inc.
("Recognition"), a Dallas-based provider of document processing systems,
imaging and workflow software, and maintenance services. The agreement
qualified as a tax-free reorganization and was accounted for on a "pooling of
interests" basis. Under the terms of the agreement, Recognition shareholders
received .59 shares of BancTec stock for each Recognition share owned.
BANCTEC PRODUCTS AND SERVICES
The Company markets its products and services to specific target markets
where it believes it has extensive business process expertise, certain
competitive advantages and is able to maintain or achieve a leadership
position.
EQUIPMENT AND SOFTWARE
WORLDWIDE FINANCIAL TRANSACTION PROCESSING SYSTEMS. During the twelve months
ended December 31, 1996, the Company derived approximately 42% of its revenues
from sales of the following products and services:
Integrated Systems Solutions. The Company offers image technology based
solutions which are used to process a variety of financial and full page
documents. The Company's integrated systems generally incorporate advanced
application software developed by the Company and may also include hardware
developed and manufactured by the Company.
The Company's ImageFIRST(R) product family provides solutions for financial
document processing applications. Remittance payment processors utilize
ImageFIRST systems to capture, digitize and process check and other document
images, including utility, telephone, retail and credit card bills, mortgage
coupons and tax notices. ImageFIRST systems are also used worldwide to process
sales drafts, financial coupons, airline tickets and other types of financial
documents. The Company also offers the TRACE(R) family of products to
organizations with requirements for systems which will process documents at
speeds in excess of 2,000 documents per minute.
The Company also offers MARS (Multiple Application Remittance System), an
image based retail lockbox software solution operating on the Company's
ImageFIRST Open Systems Architecture ("OSA") platform. The system allows users
to modify or revise business rules defining remittance processing procedures
using a Windows-based setup utility.
1
<PAGE>
The Company's imaging systems are also used by banks for high volume check
processing applications such as proof-of-deposit ("POD") and image statement
preparation. In 1997, the Company will introduce ImageFIRST TPS, a new image
check processing software solution which will be marketed to financial
institutions with assets in excess of $1 billion. Other Company products
provide image-based solutions for rejected check repair, enabling financial
institutions that handle large volumes of checks to more efficiently reprocess
items which were rejected in normal operating cycles.
A key component of the Company's integrated systems strategy is to expand
the scope of processing solutions offered to customers with the addition of
its ImageFIRST OpenARCHIVE solution, a system specifically designed for high
speed archiving of financial documents, full page documents and related
transaction data. The ImageFIRST OpenARCHIVE product is a multi-tiered
archival system that utilizes magnetic disks, optical disks and various tape
cartridge technologies for high volume image storage. ImageFIRST OpenARCHIVE
systems are currently used by document and transaction processors to
substantially increase productivity and improve customer service capabilities.
The ImageFIRST OpenARCHIVE solution is further targeted to support industry
efforts to reduce and eventually eliminate the multiple handling of checks and
documents through truncation and electronic check presentment initiatives.
The Company's financial document imaging products utilize an Open Systems
Architecture platform which enables customers to add industry standard
hardware and software components to further improve processing capabilities.
The Company typically sells its products to end-users and offers a warranty
for 30 days from the date of installation.
Community Banking Software Solutions. The Company also provides a full range
of products and services to community banks for account management and
transaction processing. Banker-II(TM) and ACCESS(TM) are software products
which integrate check sorting, platform automation, loan processing, deposit
management, ATM and teller processing and other bank operations. The Company's
PODExpress(R) software combines PC and UNIX-based software products with the
Company's reader/sorters to provide solutions for proof-of-deposit and other
check sorting applications.
Service Bureau Operations. The Company owns and operates three service
bureau facilities that provide check and data processing services primarily
for small to mid-size financial institutions. These service bureaus utilize
the Company's hardware, software, operations personnel and maintenance
services for core processing of checks and related documents and are marketed
as an outsourced alternative to in-house processing.
Electronic Payment Processing Products and Services. The Company markets
software products for electronic credit, debit and courtesy card processing,
electronic check authorization, inventory management, electronic funds
transfer ("EFT") and point of sale ("POS") applications. The Company's
products enable retailers to process consumers' electronic transactions in-
lane, in-store, at the main office or at the electronic payment switch. The
Company also markets software products relating to electronic benefits
transfer ("EBT") applications which certain states have implemented as a
replacement for traditional food stamp programs. The Company also maintains a
separate service bureau specifically for authorizing electronic funds transfer
transactions.
OEM TECHNOLOGIES AND SUPPORT PRODUCTS. During the twelve months ended
December 31, 1996, the Company derived approximately 10% of its revenues from
sales of document processing equipment to OEMs and various resellers and sales
of support products to users of the Company's systems.
Document Processing Systems, Check Sorting Systems and Electronic
Components. The Company offers low, medium and high-speed document
reader/sorters and related components that read magnetic ink character
recognition ("MICR") and optical character recognition ("OCR") data from
financial documents and sort the documents according to established patterns.
The Company markets its products to end-users, through OEM channels and to
various resellers and systems integrators throughout the world.
2
<PAGE>
In 1997, the Company will introduce a new line of document reader/sorter
products incorporating features from both the Company's and Recognition's
product lines. Enhancements will include improved gray scale image capture
capability, increased reader performance and increased speed.
Components such as microfilm cameras, microfilm modules, image cameras, MICR
encoders, ink jet components and various peripheral equipment are also
manufactured and marketed by the Company. The Company's OEM products are sold
with a 90 day warranty from the date of shipment.
Full-page Document Scanners. The Company's full line of high-speed, full-
page scanners utilize photo-optical technology, gray scale image capture
capabilities, character recognition software and high precision document
transports to scan and digitize full-sized business documents such as
invoices, statements and business forms. The Company's scanner products are
sold through distributors in the United States and abroad.
Support Products and Consumable Supplies. The Company utilizes its
telemarketing organization to sell consummable supplies that are used with the
Company's document processing equipment. The Company's CheckMender(R) IV,
HeatStrip(R) and BancStrip(TM) products are used by banks to repair checks
which cannot be processed by check sorting equipment. The Company also
provides encoding ribbons, microfilm, ink rollers and other consumable
supplies that are used with the Company's document processing equipment.
PLEXUS DOCUMENT IMAGING AND WORKFLOW SOFTWARE PRODUCTS. Through its Plexus
software division the Company offers a complete family of document imaging and
workflow software products. During the twelve months ended December 31, 1996,
the Company derived approximately 5% of its revenues from sales of Plexus
software products.
Plexus software products offer workflow, image storage, data management,
forms processing and character recognition capabilities that enable users to
automate, coordinate and streamline business processes. Plexus software
products can be deployed in organizations ranging from single sites for
departmental workflow, storage and retrieval applications to enterprise-wide
applications across multiple hardware platforms.
In 1996, the Company acquired the health claims management software product
of Resource Information Management Systems, Inc. ("RIMS"). This product is now
marketed by Plexus under the name ClaimPlex. The ClaimPlex product is targeted
as an advanced software solution designed to help healthcare organizations
streamline their claims and enrollment operations using document image
technology in a client/server environment.
Plexus software products are sold directly to end-users by its own sales
force, through other BancTec sales channels and through various VARs and
systems integrators worldwide.
MAINTENANCE AND OTHER SERVICES
EQUIPMENT MAINTENANCE PRODUCTS AND SERVICES. The Company derived
approximately 30% of its revenues during the twelve months ended December 31,
1996, from the following equipment maintenance products and services:
Installation and Maintenance of BancTec Products. A key aspect of the
Company's strategy of providing its customers with a total systems solution is
that the Company installs and maintains its own products. Standard maintenance
contracts are available which specify type of service, hours of coverage and
monthly rates. Contracts may also be tailored to meet the specific needs of
individual customers. The Company's maintenance contracts typically include
both parts and labor and generally are three to five years in duration.
Third-Party Service for Other Document Processing Equipment. The Company
provides hardware maintenance services for IBM 3800 printers and 3890 and 3890
XP reader/sorters, which are the primary products for check sorting in many
large banks. The Company also refurbishes and resells IBM 3890 and 3890 XP
reader/sorters to banks and bank service bureaus.
3
<PAGE>
NETWORK AND DESKTOP SUPPORT SERVICES. Through its established service
infrastructure, the Company offers a variety of outsourcing arrangements for
network and desktop computing support services. The Company derived
approximately 13% of its revenue during the twelve months ended December 31,
1996, from the following PC network and desktop support services:
Outsourced Network Management Services and Personal Computer Support. The
Company provides large companies with on-site or on-call LAN and PC hardware
support, systems integration services, asset management services, help desk
services and installation coordination. The Company's customer service
engineers provide on-site or on-call support for file servers, personal
computers, laptop computers, printers and other peripheral equipment.
PC Vendor Maintenance Services. The Company is a leading provider of
warranty repair service in the United States for Dell Computer Corporation,
Compaq Computer Corporation, AST Research Inc., Power Computing Co.,
PictureTel, Inc., Toshiba America Information Systems, Inc. and other
companies. The Company also provides telephone technical support for Novell
network operating systems software.
INTERNATIONAL OPERATIONS
Internationally, the Company is also a leading provider of financial
transaction processing systems, with unique applications to meet the localized
needs of its customers. Through direct sales and other channels, the Company
markets integrated systems to process a wide variety of transaction documents
including checks, remittance documents, credit vouchers, giro documents,
freight bills and airline tickets. The Company also provides comprehensive
maintenance services for its transaction processing customers.
During the twelve months ended December 31, 1996, sales to customers outside
the U.S. totaled approximately 29% of the Company's total revenues.
SERVICE PERSONNEL
At February 28, 1997, the Company employed approximately 1,500 customer
service engineers located in the United States, Canada, United Kingdom,
Scandinavia, continental Europe, Australia and Japan.
SOFTWARE ENGINEERING
Through its staff of approximately 500 software engineers and support
personnel, the Company develops and maintains application software products.
In addition, these software engineers modify and enhance standard application
software products for customers in order to meet particular operating
requirements. Enhancements are generally paid for by the customer under the
terms of a sales contract. This software engineering activity is generally
charged to cost of sales as incurred.
PRODUCT DEVELOPMENT
The Company is engaged in ongoing software and hardware product development
activities in connection with new and existing products, employing as of
February 28, 1997, approximately 150 persons for such activities.
The following table sets forth certain information regarding the Company's
product development expenditures for the indicated periods:
<TABLE>
<CAPTION>
TWELVE NINE FISCAL YEARS ENDED
MONTHS ENDED MONTHS ENDED -------------------
DECEMBER 31, DECEMBER 31, MARCH 26, MARCH 27,
1996 1995 1995 1994
------------ ------------ --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Product development
expenditures................... $17,582 $21,455 $28,072 $26,100
Percent of total revenue........ 3.2% 5.6% 5.4% 5.5%
Percent of equipment and
software revenue............... 5.6% 11.4% 10.5% 10.2%
</TABLE>
4
<PAGE>
Current expenditures are concentrated on developing new applications for the
Company's product lines and improving and expanding existing products, as
described below:
Software and Systems Devlopment
In addition to ongoing software enhancements, the Company is engaged in a
number of development projects designed to improve the Company's efficiency in
the delivery, support and maintenance of its integrated systems solutions.
These efforts include the development of a universal application software
engine, a graphics-based applications configuration and customization tool,
and development of standardized interfaces to allow greater compatibility with
third party vendor products. In addition, development projects are underway to
improve character recognition technology and to expand the Company's expertise
in electronic data capture, data mining, data warehousing and Internet-based
electronic commerce.
The Company has also focused development efforts on developing broader
market applicability for its ImageFIRST OpenARCHIVE solutions, enhancements to
its ImageFIRST TPS image-check processing solutions, incorporation of
community bank products in a Windows environment and integration of Plexus
workflow products into the Company's systems solutions.
Equipment Technology Development
In 1997, the Company plans to develop and introduce enhancements to its
transport products incorporating improved document handling, double document
detection, wide field of view optical readers, new feeder technology and
improved MICR read rates.
A key development effort is the implementation of Image Quality Assurance
("IQA") technology to improve the real-time monitoring and detection of image
quality in the Company's transport and scanner product lines. The IQA
technology is designed to ensure that the equipment has captured images that
are of acceptable quality before further processing. The Company is also
engaged in development work to improve MICR encoder throughput on its
transport product line. Enhancements to the Company's scanner product line
include better feeder technology and the addition of pockets for sorting
documents which have been scanned.
Plexus Document Imaging and Workflow Development
The Company's Plexus division is currently developing new software products
and implementing changes to several current software products to strengthen
its competitive position in the imaging and workflow software markets. For
1997, projects include new versions of all major products, including complete
support for all products under Windows NT at both the departmental and
enterprise levels, improved graphical definition tools and the creation of
product facilities for interoperability with the Internet, Lotus Notes, and
Microsoft Exchange among others. Plexus' ImageFIRST Office and ClaimPlex
application products are receiving significant feature enhancements. Also
underway are projects to further integrate Plexus software into the Company's
ImageFIRST OpenARCHIVE and banking and remittance applications product
families.
There is no assurance that the Company's development efforts will result in
successful commercial products. Many risks exist in developing new product
concepts, adopting new technology and introducing new products to the market.
SALES AND DISTRIBUTION
The Company's distribution strategy is to employ multiple sales channels to
achieve the widest possible distribution of its products. The Company's
products are sold to end-users, distributors, OEMs, VARs and systems
integrators.
Internationally, the Company also sells its products through a variety of
channels. The Company has direct sales forces in the United Kingdom, France,
Spain, Sweden, Denmark, Germany, Canada, Australia and Japan. Network
management and support services are also marketed in Canada via a separate
direct sales force.
5
<PAGE>
In fiscal 1992, the Company and Thomson-CSF ("Thomson") established a joint
venture company, ScanData Holding N.V., (now BancTec Holding N.V.) with
subsidiaries in France, Sweden, Germany and the Netherlands, which had
exclusive rights to market and service various products provided by the
Company and Thomson in specified territories, consisting of continental
Europe, Scandinavia and North Africa. On March 15, 1996, the Company purchased
Thomson's interest in ScanData Holding N.V. for cash of approximately
$7,200,000.
International sales are subject to various risks, including fluctuations in
exchange rates, import controls and the need for export licenses. See Note L
of Notes to the Consolidated Financial Statements for financial information
concerning the Company's international operations.
SIGNIFICANT CUSTOMERS
For the twelve months ended December 31, 1996, no single customer accounted
for more than 10% of the total revenue of the Company.
COMPETITION
In marketing its products, the Company encounters aggressive competition
from a wide variety of companies, some of which have substantially greater
financial and other resources than the Company. The Company believes that
product performance, quality, service and price are important competitive
factors in the markets in which it competes. Generally, the Company emphasizes
unique product features, quality and service, and flexibility to configure
unique systems from standard products in its competitive efforts. While the
Company believes that its products compete favorably based on each of these
elements, the Company could be adversely affected if its competitors introduce
innovative or technologically superior products or offer their products at
significantly lower prices than the Company. No assurance can be given that
the Company will have the financial resources, marketing and service
capability, or technological knowledge to continue to compete successfully.
BACKLOG
The Company's backlog of orders believed to be firm for its products at
December 31, 1996, and December 31, 1995 was approximately $95,470,000 and
$113,675,000, respectively.
The Company's backlog excludes contracts for recurring hardware and software
maintenance and support products. The Company is also able to fulfill many of
its customers' requests for immediate delivery, which therefore has no effect
on ending backlog. The Company's backlog is subject to fluctuation due to
various factors, including the size and timing of orders for the Company's
products and exchange rate fluctuations, and is not necessarily indicative of
the level of future revenue.
MANUFACTURING
The Company's hardware and systems products are assembled using various
standard purchased components such as PC monitors, minicomputers, encoders,
communications equipment and other electronic devices. Certain products are
purchased from sole source suppliers. The Company generally has contracts with
these suppliers that are renewed periodically. If the supply of certain
components or subassemblies were interrupted without sufficient notice, the
result could be an interruption of product deliveries. The Company has not
experienced, nor does it foresee, any difficulty in obtaining the necessary
components or subassemblies.
PATENTS
The Company owns numerous U.S. and foreign patents and holds licenses under
numerous patents owned by others. The Company also owns a number of registered
and common law trademarks in the U.S. and other countries relating to the
Company's trade names and product names.
6
<PAGE>
The validity of any patents issued or which may be issued to the Company may
be challenged by others and the Company could encounter legal difficulties in
enforcing its patent rights against infringement. In addition, there can be no
assurance that other technology cannot or will not be developed or that
patents will not be obtained by others which would render the Company's
patents obsolete. Management does not consider the Company's patents to be
essential to the ongoing operations of the Company.
EMPLOYEES
At February 28, 1997, the Company employed approximately 3,650 full-time
employees and considers its employee relations to be good. None of the
Company's employees are represented by a labor union. The Company has never
experienced a work stoppage.
ITEM 2. PROPERTIES
The Company owns or leases numerous facilities throughout the world to
support its operations. The Company believes that these facilities are
adequate to meet its ongoing needs. The loss of any one facility could have an
adverse impact on operations in the short term.
The Company has the option to renew all leases on principal facilities at
the end of the lease terms.
The Company relocated its manufacturing operation from Oklahoma City,
Oklahoma, and consolidated operations in a Company-owned manufacturing
facility located in the Dallas, Texas area during 1996. The Company also
closed its subassembly operation in Puerto Rico and outsourced those
requirements to third parties during 1996. The Company will continue to
manufacture the HeatStrip and BancStrip products in Puerto Rico. The Dallas
facility will be the primary location for all Company assembly and
manufacturing activities.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None
7
<PAGE>
EXECUTIVE OFFICERS OF BANCTEC
Executive officers are elected annually at the first meeting of the Board of
Directors following the annual meeting of stockholders. No family
relationships exist among the executive officers of the Company.
The executive officers of the Company are:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Grahame N. Clark, Chairman of the Board, President, and Chief
Jr................... 54 Executive Officer
John G. Guthrie....... 60 Senior Vice President
Tod V. Mongan......... 46 Senior Vice President, Secretary and General Counsel
Senior Vice President, Treasurer and Chief Financial
Raghavan Rajaji....... 50 Officer
James E. Uren......... 60 Senior Vice President
James R. Wimberley.... 56 Senior Vice President
Michael D. Kubic...... 41 Vice President, Controller, and Assistant Treasurer
Kevin L. Roper........ 42 Vice President
</TABLE>
Mr. Clark has been Chairman of the Board and Chief Executive Officer since
April 1987 and President since September 1995. Since August 1979, Mr. Clark
has been employed by the Company in various management capacities.
Mr. Guthrie has been Senior Vice President since September 1995. Since
February 1989, Mr. Guthrie has been employed by the Company in various
management capacities.
Mr. Mongan has been Senior Vice President, Secretary and General Counsel
since January 1993. Since November 1979, Mr. Mongan has been employed by the
Company in various management capacities.
Mr. Rajaji has been Senior Vice President, Treasurer and Chief Financial
Officer since September 1995. For the seven years prior to that date, Mr.
Rajaji was employed by Occidental Chemical Corporation as Senior Vice
President and Chief Financial Officer.
Mr. Uren has been Senior Vice President since September 1995. Since October
1988, Mr. Uren has been employed by the Company in various management
capacities.
Mr. Wimberley has been Senior Vice President since January 1993. Since
January 1984, Mr. Wimberley has been employed by the Company in various
management capacities.
Mr. Kubic has been Vice President, Controller, and Assistant Treasurer since
September 1993. Since August 1986, Mr. Kubic has been employed by the Company
in various management capacities.
Mr. Roper has been Vice President since May 1996. Since March 1985, Mr.
Roper has been employed by the Company in various management capacities.
8
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is listed on the New York Stock Exchange under
the symbol BTC. The common stock of the Company traded on the NASDAQ National
Market system under the symbol BTEC until December 28, 1995.
Prior to the acquisition of Recognition on October 12, 1995, Recognition's
common stock was listed on the New York Stock Exchange under the symbol REC.
At the close of business on October 12, 1995, Recognition common stock ceased
trading and each share was converted into the right to receive 0.59 of a share
of BancTec common stock. The Recognition stock prices shown below have been
adjusted to reflect this exchange ratio.
<TABLE>
<CAPTION>
BANCTEC RECOGNITION
--------------- ---------------
WELVE MONTHS ENDED DECEMBER 31, 1996T HIGH LOW HIGH LOW
- ------------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
First Quarter ended March 31, 1996........... $20 $15 -- --
Second Quarter ended June 30, 1996........... 23 1/4 15 3/4 -- --
Third Quarter ended September 30, 1996....... 21 1/4 18 1/8 -- --
Fourth Quarter ended December 31, 1996....... 23 1/8 19 5/8 -- --
<CAPTION>
NINE MONTHS ENDED DECEMBER 31,
1995
------------------------------
<S> <C> <C> <C> <C>
First Quarter ended June 25, 1995............ $17 3/4 $14 3/4 $15 1/2 $11
Second Quarter ended September 24, 1995...... 21 3/4 15 1/4 19 1/8 14 7/8
Third Quarter ended December 31, 1995(a)..... 22 3/4 18 21 3/8 16 1/2
</TABLE>
- --------
(a) Recognition ceased trading as of the close of business on October 12,
1995, therefore, Recognition's high and low prices are for the period
September 25, 1995, through October 12, 1995.
The Company has not paid any cash dividends on its common stock since its
organization and currently intends to continue a policy of retaining earnings
for the Company's operations and planned expansion of its business. The number
of stockholders of record as of February 28, 1997, was approximately 2,850.
9
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
TWELVE MONTHS NINE MONTHS RESTATED FISCAL YEARS ENDED(A)
ENDED ENDED ----------------------------------
DECEMBER 31, DECEMBER 31, MARCH 31,
1996 1995 1995 1994 1993
------------- ------------ ---------- ----------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
For the period:
Revenue................ $554,002 $383,984 $ 516,932 $ 478,116 $ 433,071
Income (loss) before
cumulative effect of
accounting change..... 37,101 (53,481) (15,608) 22,729 17,524
Net income (loss)...... 37,101 (53,481) (15,608) 22,729 18,359
Income (loss) per share
before cumulative
effect of accounting
change................ 1.76 (2.63) (0.77) 1.15 0.96
Net income (loss) per
share................. 1.76 (2.63) (0.77) 1.15 1.00
At period-end:
Total assets........... 467,295 440,348 501,758 489,488 380,633
Working capital........ 87,803 42,598 90,140 126,692 96,609
Long-term debt......... 65,891 82,972 94,181 104,220 76,020
Stockholders' equity... $204,720 $156,201 $ 206,743 $ 224,929 $ 168,792
Weighted average
shares................. 22,321 20,315 20,350 19,740 18,333
</TABLE>
- --------
(a) The Company's financial statements have been restated for fiscal years
1993 through 1995, due to a change in the reporting entity to reflect its
merger with Recognition under the pooling of interests method of
accounting. Prior to the merger, Recognition had a fiscal year-end of
October 31, and BancTec had a fiscal year-end of on or about March 31.
Since the merger was accounted for as a pooling, combined results of the
two companies are presented for all periods disclosed.
The foregoing summary reflects the acquisitions as discussed in Note C to
the Consolidated Financial Statements from their respective dates of
acquisition. All periods previously disclosed have been restated to include
Recognition since the acquisition was accounted for as a pooling of interests
(See (a) above). Additionally, the per share amounts and the weighted average
number of common shares have been restated to reflect the Company's three-for-
two common stock split on February 8, 1993, and the .59 exchange ratio for
Recognition stock.
In December 1995, the Company changed its fiscal year end from a 52/53 week
year which ended on or about March 31, to a calendar year-end of December 31.
This resulted in a nine month transitional period for December 31, 1995.
The consolidated balance sheet data as of December 31, 1996, and December
31, 1995, are those of the combined Company. The consolidated balance sheet
data for fiscal years 1995, 1994, and 1993 includes the Company as of March
26, 1995, March 27, 1994, and March 28, 1993, combined with the consolidated
balance sheet data of Recognition as of March 26, 1995, and October 31, 1993,
and 1992, respectively. The consolidated statement of operations for the
twelve months ended December 31, 1996 are those of the combined company. The
consolidated statement of operations data for the nine months ended December
31, 1995, includes the Company's results for the nine months ended December
31, 1995, combined with Recognition's results for the nine months ended
December 31, 1995. The consolidated statement of operations data for the
fiscal years ended 1995, 1994, and 1993 includes the Company's fiscal years
ended March 26, 1995, March 27, 1994, and March 28, 1993, combined with
Recognition's fiscal years ended October 31, 1994, 1993, and 1992,
respectively.
Recognition's results of operations for the five months ended March 26,
1995, are excluded from the consolidated statement of operations in order to
combine complete twelve month periods and is therefore included in the
statement of stockholders' equity for the year ended March 26, 1995. For
additional information, see Note C to the Consolidated Financial Statements.
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The supplementary income statements below were derived from the audited
income statement for the twelve months ended December 31, 1996 and proforma
unaudited information for the twelve months ended December 31, 1995 and 1994.
Management's discussion and analysis that follows is based on this
supplementary information. The Company believes the discussion is more
meaningful than a comparison of periods with dissimilar lengths and different
year-end dates.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
--------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUE:
Equipment and software................ $312,467 $ 270,256 $294,395
Maintenance and other services........ 241,535 242,284 232,685
-------- --------- --------
554,002 512,540 527,080
-------- --------- --------
COST OF SALES:
Equipment and software................ 213,293 222,544 214,753
Maintenance and other services........ 177,977 195,178 172,710
-------- --------- --------
391,270 417,722 387,463
-------- --------- --------
Gross profit........................ 162,732 94,818 139,617
-------- --------- --------
OPERATING EXPENSES:
Product development................... 17,582 26,529 26,682
Selling, general and administrative... 76,075 112,898 95,416
Goodwill amortization................. 4,990 19,732 9,020
-------- --------- --------
98,647 159,159 131,118
-------- --------- --------
Income (loss) from operations....... 64,085 (64,341) 8,499
-------- --------- --------
OTHER INCOME (EXPENSE):
Interest income....................... 1,146 2,489 2,646
Interest expense...................... (7,927) (10,009) (9,101)
Sundry-net............................ 666 257 2,279
-------- --------- --------
(6,115) (7,263) (4,176)
-------- --------- --------
Income (loss) before income taxes
and minority interest.............. 57,970 (71,604) 4,323
INCOME TAX PROVISION (BENEFIT).......... 20,869 (16,391) 13,007
MINORITY INTEREST....................... -- -- 2,565
-------- --------- --------
NET INCOME (LOSS)....................... $ 37,101 $ (55,213) $ (6,119)
======== ========= ========
</TABLE>
COMPARISON OF TWELVE MONTHS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995
Consolidated revenue for the twelve months ended December 31, 1996, of
$554.0 million increased by $41.5 million or 8.1% from the prior twelve month
period. Revenue from equipment and software increased $42.2 million due to
additional imaging software revenue and network integration revenue offset in
part by lower revenue from several mature Recognition product lines. Revenue
from maintenance and other services decreased by $0.7 million due to
expiration of several Recognition service contracts and the sale of the Xerox
printer service business. This decrease was partially offset by an increase in
network services revenue. Equipment and software revenue accounted for 56.4%
of total revenue for the twelve months ended December 31, 1996, as compared to
52.7% for the twelve months ended December 31, 1995.
11
<PAGE>
Consolidated gross profit of $162.7 million increased $67.9 million from the
prior twelve month period. When adjusted for $41.8 million of restructuring
charges taken to facilitate the Recognition acquisition (See Note C and Note D
to the Consolidated Financial Statements for a discussion of the acquisition
and charges) in the prior twelve month period, the current year gross profit
increased by $26.1 million or 19.1%. The gross profit for equipment and
software of $99.1 million increased by $23.3 million after adjusting for a
restructuring charge of $28.2 million in the prior period. This increase in
gross profit is primarily due to an increase in software revenue and a related
improvement in the software gross margin. The gross margin improved due to the
mix of software products sold and cost savings associated with the
acquisition. The gross profit for maintenance and other services of $63.6
million increased by $2.9 million after adjusting for a $13.6 million
restructuring charge. This increase in gross profit for maintenance and other
services was due to a combination of increased revenue in network services and
cost savings associated with the acquisition.
Operating expenses of $98.6 million decreased by $60.5 million compared to
the prior twelve month period. When adjusted for restructuring charges of
$43.0 million, the current year operating expenses decreased by $17.5 million.
The components of operating expenses changed as follows: Product development
expenses decreased by $8.9 million from the prior period. When adjusted for
restructuring charges of $6.6 million, the current year product development
expenses decreased by $2.3 million. This decrease was due to the elimination
of duplicate development projects and from other efficiencies resulting from
the acquisition. Selling, general and administrative expenses of $76.1 million
decreased by $36.8 million from the prior period. When adjusted for charges in
the prior period of $23.8 million, the current year selling, general and
administrative expenses decreased by $13.0 million. This decrease in sales,
general and administrative expenses resulted primarily from consolidation of
the sales organizations and elimination of duplicate corporate office staff.
Goodwill amortization of $5.0 million decreased by $14.7 million compared to
the prior twelve month period. When adjusted for restructuring charges of
$12.6 million, the current year goodwill amortization decreased by $2.1
million. The lower goodwill amortization is due primarily to assets written
off as part of the restructuring charge.
Interest income of $1.1 million was reduced by $1.3 million from the prior
year due to lower investment balances as cash was utilized for restructuring
charges, debt service and the repurchase of convertible debentures.
Interest expense of $7.9 million was reduced by $2.1 million from the prior
year due to a lower overall average balance of outstanding debt resulting from
scheduled term loan repayments and the repurchase of $8.0 million of
convertible debentures in March 1996. Additionally, the Company has
experienced lower borrowing rates during the current year.
The current period income tax provision was $20.9 million compared to an
income tax benefit of $16.4 million in the prior period. The current year
income tax provision resulted in an effective rate of 36%. The prior year
income tax benefit was affected by certain restructuring costs that were non-
deductible for tax purposes and by the geographic mix of where income and
losses were generated.
COMPARISON OF TWELVE MONTHS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
Consolidated revenue of $512.5 million in 1995 decreased by $14.5 million or
2.8% from 1994. Equipment and software revenue of $270.3 million for the
twelve months ended December 31, 1995 decreased by $24.1 million or 8.2% from
the twelve months ended December 31, 1994. This decrease was primarily due to
a reduction in Recognition revenue from network integration projects in
Canada, lower sales of Plexus software and older reader/sorters products and
smaller reductions in several other mature product lines. Revenue from
maintenance and other services of $242.3 million increased by $9.6 million or
4.1% due to continued growth in the domestic network services business and
incremental document processing maintenance revenue from new European giro
processing installations. Equipment and software revenue accounted for 52.7%
of total revenue for the twelve months ended December 31, 1995, compared to
55.9% in the twelve months ended December 31, 1994.
12
<PAGE>
Consolidated gross profit of $94.8 million decreased by $44.8 million from
the prior twelve month period. When adjusted for 1995 restructuring charges of
$41.8 million and 1994 restructuring charges of $15.5 million (See Note C and
Note D to the Consolidated Financial Statements for a discussion of the
acquisition and charges), the gross profit decreased by $18.5 million or 11.9%.
The adjusted gross profit for equipment and software of $83.0 million decreased
by $10.2 million or 10.9% due to a combination of lower revenues from the
former Recognition operations, the mix of products sold in community banking
and cost overruns on certain large systems development contracts. The adjusted
gross profit for maintenance and other services of $53.6 million decreased by
$8.3 million or 13.4%. The lower maintenance margins resulted primarily from
the loss of several high margin Recognition contracts in Europe and the United
States and an additional week of expenses in 1995.
Operating expenses of $159.2 million increased by $28.0 million. When
operating expenses are adjusted for restructuring charges of $43.0 million in
1995 and for $4.2 million in 1994, operating expenses decreased by $10.8
million or 8.5%. Product development expenses when adjusted for restructuring
charges were down $6.3 million due to a combination of the Recognition 1994
restructuring and the elimination of duplicate development projects subsequent
to the acquisition. Selling, general and administrative expenses when adjusted
for charges decreased by $2.6 million or 2.8% due to the elimination of
duplicate job functions subsequent to the merger. Goodwill amortization when
adjusted for restructuring charges decreased by $1.8 million or 20.4% due to
assets written off as part of the restructuring plan.
Other income (expense) was a net expense of $7.3 million in the twelve months
ended December 31, 1995, which was a $3.1 million increase in expense from the
prior period. Interest expense increased by $.9 million as a result of debt
added for the TDC acquisition in the first quarter of 1994. The net sundry
income decreased by $2.0 million primarily as a result of transaction gains in
1995 which did not recur in 1996.
The income tax benefit for the twelve months ended December 31, 1995, was
$16.4 million compared to an income tax provision of $13.0 million in the prior
period. The 1995 benefit was affected by certain costs that were non-deductible
for tax purposes and by geographic mix of where income and losses were
generated. The 1994 income tax provision was derived primarily from the profits
earned by the Company prior to the Recognition acquisition, while the losses
from the Recognition domestic operations were not benefited due to the
uncertainty of their realization by Recognition as a stand-alone company.
Minority interest of $2.6 million in the twelve month period ended December
31, 1994, reflects the ScanData Joint Venture partner's 49.5% share of losses
incurred in the joint venture. With the joint venture net equity position at
zero, no minority interest adjustments for sharing of losses were made during
the twelve month period ending December 31, 1995.
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, capital leasing and by sales of capital stock
through employee stock option and purchase plans. During 1995, the Company
completed the acquisition of Recognition which was accomplished through an
exchange of stock. As a result of the acquisition, the Company took a pretax
charge of $85.2 million to integrate the two companies and to cover the cost of
severance, duplicate and impaired assets, idle facilities, loss contracts and
costs incurred to complete the acquisition. This charge is reflected in both
the audited nine months ended December 31, 1995 and the unaudited proforma
twelve months ended December 31, 1995 financial statements. At December 31,
1996, the Company had accruals of approximately $5.6 million recorded in other
accrued expenses and liabilities for remaining obligations related to these
charges.
At December 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, 4) Foreign Credit Agreement and
13
<PAGE>
5) Uncommitted Lines of Credit. On February 22, 1996, the Company signed a new
credit agreement increasing its revolving credit facility to $50.0 million and
providing more favorable terms and conditions for its existing term loan. The
new credit agreement replaced the Acquisition Term Loan and Revolving Credit
Facility in place at December 31, 1995. The outstanding term loan balance as
of December 31, 1996, was $32.6 million. Pursuant to the conditions of the
term loan, payments commenced March 31, 1995, with equal quarterly payments
due through its maturity in December 1999. As of December 31, 1996, the
Company had available a $50.0 million revolving credit facility which had an
outstanding balance of $26.1 million. During the period ended December 31,
1996, the Company borrowed a maximum amount of $31.1 million against this
credit facility. As of December 31, 1996, the 7 1/4% Convertible Subordinated
Debentures due in 2011 had a balance of $43.7 million. Annual sinking fund
payments of $2.3 million commenced on April 15, 1996. In March 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. Also outstanding as of December 31, 1996, was a foreign credit
agreement in the amount of $4.9 million. Cash, cash equivalents and short-term
investments have been pledged as collateral to secure this loan. The Company
has agreements in place for lines of credit totaling $40.0 million. The lines
are uncommitted and have a maximum term of 30 days. The Company borrowed as
much as $12.0 million against these lines at various times throughout the
twelve month period ended December 31, 1996. There was no outstanding balance
on the lines of credit at December 31, 1996. See Note F to the Consolidated
Financial Statements for a further discussion of these debt instruments.
The Company has commitments for $8.5 million during 1997 for computer
hardware, software and consulting to implement a new information system for
the Company.
The Company believes that it has sufficient financial resources available to
support its anticipated requirements to fund operations and pay out the
remaining term loan cash obligations over the next year, 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.
Cash, cash equivalents and short-term investments were $27.1 million at
December 31, 1996, with approximately $4.9 million committed as collateral and
compensating balances.
Net accounts receivable increased from the December 1995 balance due to the
increased revenue in the current year and the timing of when that revenue was
recognized.
Net inventory increased due to a combination of inventory purchased to
support the move and consolidation of the Company's manufacuturing facility
and higher finished goods levels in support of several contracts with longer
development cycles.
Net goodwill increased from December 1995 due to the acquisition of
Thomson's joint venture interest offset by recurring amortization.
Net fixed assets increased primarily as a result of purchases for field
support spare parts, facility improvements, and machinery and equipment
additions to support the growth in business.
Long-term debt decreased due to a combination of an $8.0 million purchase in
March 1996 of convertible debentures in the open market and to the scheduled
quarterly payments made under the term loan agreement.
The total net deferred tax asset of $22.7 million as of December 31, 1996
decreased by $17.4 million from the prior year. This decrease was due
primarily to reversal of acquisition timing differences, inventory reserves
and utilization of net operating loss carryforwards.
Inflation has not had a material effect on the operating results of the
Company.
14
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of BancTec, Inc.:
We have audited the accompanying consolidated balance sheets of BancTec,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1996, and
December 31, 1995, and the related consolidated statements of operations, cash
flows and stockholders' equity for the year ended December 31, 1996, for the
nine months ended December 31, 1995 and for the year ended March 26, 1995. We
did not audit the consolidated financial statements of Recognition
International Inc., a company acquired during 1995 in a transaction accounted
for as a pooling of interests, for the year ended October 31, 1994, as
discussed in Note C. Such statements are included in the consolidated
financial statements of BancTec, Inc. after restatement to reflect certain
adjustments also set forth in Note C and reflect total revenues of 42 percent
for the year ended March 26, 1995 of the related consolidated totals. The
financial statements of Recognition International Inc. prior to those
adjustments were audited by other auditors whose report has been furnished to
us and our opinion, insofar as it relates to amounts included for Recognition
International Inc., is based solely upon the report of the other auditors.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of BancTec, Inc. and subsidiaries as of
December 31, 1996, and December 31, 1995, and the results of their operations
and their cash flows for the year ended December 31, 1996, for the nine months
ended December 31, 1995 and for the year ended March 26, 1995, in conformity
with generally accepted accounting principles.
Arthur Andersen LLP
Dallas, Texas
February 20, 1997
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Recognition International Inc.
In our opinion, the consolidated balance sheet and the related consolidated
statements of operations, of stockholders' equity and of cash flows (not
presented separately herein) present fairly, in all material respects, the
financial position of Recognition International Inc. and its subsidiaries
(Recognition) at October 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period
ended October 31, 1994, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of Recognition's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Dallas, Texas
December 7, 1994
16
<PAGE>
BANCTEC, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents including restricted
amounts of $717 at December 31, 1996, and $1,547
at December 31, 1995.............................. $ 22,872 $ 22,010
Short-term investments including restricted amounts
of $4,203 at December 31, 1996, and $4,851 at
December 31, 1995................................. 4,203 4,864
Accounts receivable, less allowance for doubtful
accounts of $9,627 at December 31, 1996, and
$11,571 at December 31, 1995...................... 135,138 106,189
Inventories........................................ 83,320 72,442
Current deferred tax asset......................... 22,277 16,764
Other.............................................. 7,025 9,109
-------- --------
Total current assets............................. 274,835 231,378
-------- --------
PROPERTY, PLANT AND EQUIPMENT-AT COST:
Land............................................... 3,030 2,062
Field support spare parts.......................... 97,350 101,145
Machinery and equipment............................ 62,415 63,663
Furniture, fixtures and other...................... 31,217 26,515
Buildings.......................................... 24,720 23,693
-------- --------
218,732 217,078
Less accumulated depreciation...................... 131,579 137,033
-------- --------
Net property, plant and equipment................ 87,153 80,045
-------- --------
EXCESS OF COST OVER NET ASSETS OF ACQUIRED BUSINESS,
less accumulated amortization of $24,709 at December
31, 1996, and $19,685 at December 31, 1995.......... 93,858 91,503
-------- --------
OTHER INTANGIBLE ASSETS, less accumulated
amortization of $6,814 at December 31, 1995......... -- 1,607
-------- --------
LONG-TERM DEFERRED TAX ASSET......................... 442 23,390
OTHER ASSETS......................................... 11,007 12,425
-------- --------
TOTAL ASSETS......................................... $467,295 $440,348
======== ========
</TABLE>
See notes to consolidated financial statements.
17
<PAGE>
BANCTEC, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Revolving credit facilities........................ $ 30,996 $ 21,542
Current maturities of long-term debt............... 11,334 13,593
Trade accounts payable............................. 21,303 24,243
Other accrued expenses and liabilities............. 81,956 87,098
Deferred revenue................................... 38,196 38,024
Income taxes....................................... 3,247 4,280
-------- --------
Total current liabilities........................ 187,032 188,780
-------- --------
LONG-TERM DEBT, less current maturities.............. 65,891 82,972
-------- --------
OTHER LIABILITIES.................................... 9,652 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, 20,797 shares at
December 31, 1996 and 19,919 at December 31,
1995.............................................. 208 199
Treasury stock..................................... (388) (388)
Additional paid-in capital......................... 201,006 191,709
Retained earnings (deficit)........................ 7,967 (29,134)
Foreign currency translation adjustments........... (1,612) (2,866)
Unearned compensation.............................. (2,461) (3,319)
-------- --------
Total stockholders' equity....................... 204,720 156,201
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........... $467,295 $440,348
======== ========
</TABLE>
See notes to consolidated financial statements.
18
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
TWELVE MONTHS NINE MONTHS FISCAL YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 26,
1996 1995 1995
------------- ------------ -----------
(RESTATED--
SEE NOTE A)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
REVENUE:
Equipment and software................ $312,467 $188,107 $266,750
Maintenance and other services........ 241,535 195,877 250,182
-------- -------- --------
554,002 383,984 516,932
-------- -------- --------
COST OF SALES:
Equipment and software................ 213,293 163,090 195,337
Maintenance and other services........ 177,977 159,413 185,867
-------- -------- --------
391,270 322,503 381,204
-------- -------- --------
Gross profit........................ 162,732 61,481 135,728
-------- -------- --------
OPERATING EXPENSES:
Product development................... 17,582 21,455 28,072
Selling, general and administrative... 76,075 85,908 99,619
Goodwill amortization................. 4,990 18,089 8,935
-------- -------- --------
98,647 125,452 136,626
-------- -------- --------
Income (loss) from operations....... 64,085 (63,971) (898)
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest income....................... 1,146 1,839 2,682
Interest expense...................... (7,927) (7,309) (10,021)
Sundry-net............................ 666 (1,274) 2,082
-------- -------- --------
(6,115) (6,744) (5,257)
-------- -------- --------
Income (loss) before income taxes
and minority interest.............. 57,970 (70,715) (6,155)
INCOME TAX PROVISION (BENEFIT):
Current............................... 3,434 3,401 9,211
Deferred.............................. 17,435 (20,635) 1,452
-------- -------- --------
20,869 (17,234) 10,663
-------- -------- --------
MINORITY INTEREST....................... -- -- 1,210
-------- -------- --------
NET INCOME (LOSS)....................... $ 37,101 $(53,481) $(15,608)
======== ======== ========
NET INCOME (LOSS) PER SHARE
Primary............................... $ 1.79 $ (2.63) $ (0.77)
Fully Diluted......................... $ 1.76 -- --
WEIGHTED AVERAGE SHARES
Primary............................... 20,679 20,315 20,350
Fully Diluted......................... 22,321 -- --
</TABLE>
See notes to consolidated financial statements.
19
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
TWELVE MONTHS NINE MONTHS FISCAL YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 26,
1996 1995 1995
------------- ------------ -----------
(RESTATED--
SEE NOTE A)
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)..................... $ 37,101 $(53,481) $(15,608)
Adjustments to reconcile net income to
cash flows provided by operating
activities:
Recognition net loss for the five
months ended March 26, 1995.......... -- -- (2,889)
Depreciation and amortization......... 37,850 50,631 45,802
Deferred income tax expense
(benefit)............................ 17,435 (20,635) 1,452
Loss on disposition of property, plant
and equipment........................ -- 8,693 11,063
Other non-cash items.................. 964 2,740 5,694
(Increase) decrease in accounts
receivable........................... (28,949) 23,346 (15,686)
(Increase) decrease in inventories.... (10,878) (100) 2,471
(Increase) decrease in other assets... 5,109 763 (7,993)
Decrease in trade accounts payable.... (2,940) (8,708) (882)
Increase in deferred revenue.......... 172 661 1,634
Increase (decrease) in other accrued
expenses and liabilities............. (8,918) 15,138 15,516
Minority interest in earnings......... -- -- (1,210)
Recognition change in other operating
activities for the five months ended
March 26, 1995....................... -- -- 9,286
-------- -------- --------
Cash flows provided by operating
activities.......................... 46,946 19,048 48,650
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and
equipment............................ (39,968) (29,878) (47,686)
Purchase of businesses, net of cash
acquired............................. (7,136) (138) (13,677)
Additions to capitalized software..... -- (942) (2,597)
Other................................. 661 (3,694) (182)
Recognition change in other investing
activities for the five months ended
March 26, 1995....................... -- -- (6,365)
-------- -------- --------
Cash flows used in investing
activities.......................... (46,443) (34,652) (70,507)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of current maturities of
long-term debt and capital lease
obligations.......................... (14,047) (19,361) (12,291)
Proceeds from (payments of) long-term
borrowings........................... (5,350) -- 10,800
Proceeds from short-term borrowings... 29,930 11,137 15,278
Payments of short-term borrowings..... (19,150) (7,934) (3,332)
Repurchase of common stock............ -- -- (6,994)
Proceeds from sales and issuances of
common stock......................... 9,487 1,881 4,036
Other................................. -- (117) --
Recognition change in other financing
activities for the five months ended
March 26, 1995....................... -- -- (23)
-------- -------- --------
Cash flows provided by (used in)
financing activities................ 870 (14,394) 7,474
-------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH.................................. (511) (225) 638
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS...................... 862 (30,223) (13,745)
CASH AND CASH EQUIVALENTS--BEGINNING OF
YEAR.................................. 22,010 52,233 65,978
-------- -------- --------
CASH AND CASH EQUIVALENTS--END OF
YEAR.................................. $ 22,872 $ 22,010 $ 52,233
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
20
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996, THE NINE MONTHS ENDED
DECEMBER 31, 1995, AND THE FISCAL YEAR ENDED
MARCH 26, 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL RETAINED CURRENCY
COMMON PAID-IN EARNINGS TRANSLATION TREASURY UNEARNED
STOCK CAPITAL (DEFICIT) ADJUSTMENTS STOCK COMPENSATION TOTAL
------ ---------- --------- ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 27, 1994 (includes 32,886
treasury shares)........................... $195 $192,105 $ 42,848 $(3,728) $(427) $(6,064) $224,929
Common stock issued principally under
employee stock plans....................... 5 3,992 -- -- -- -- 3,997
Common stock issued under restricted stock
plan....................................... -- 141 -- -- -- (141) --
Amortization of unearned compensation....... -- -- -- -- -- 1,290 1,290
Repurchase and retirement of common stock
(333,000 shares)........................... (3) (6,991) -- -- -- -- (6,994)
Tax benefit from exercise of stock options.. -- 314 -- -- -- -- 314
Issuance of common stock reserved for
outside directors (2,950 shares)........... -- -- -- -- 39 -- 39
Foreign currency translation adjustments.... -- -- (2) 994 -- -- 992
Recognition net loss and other activity for
the five months ended March 26, 1995....... -- 194 (2,889) -- -- 479 (2,216)
Net loss.................................... -- -- (15,608) -- -- -- (15,608)
---- -------- -------- ------- ----- ------- --------
Balance at March 26, 1995 (includes 29,936
treasury shares)........................... 197 189,755 24,349 (2,734) (388) (4,436) 206,743
Common stock issued principally under
employee stock plans....................... 2 1,879 -- -- -- -- 1,881
Common stock issued/cancelled under
restricted stock plan, net................. -- (90) -- -- -- 90 --
Amortization of unearned compensation....... -- -- -- -- -- 1,027 1,027
Tax benefit from exercise of stock options.. -- 165 -- -- -- -- 165
Foreign currency translation adjustments.... -- -- (2) (132) -- -- (134)
Net loss.................................... -- -- (53,481) -- -- -- (53,481)
---- -------- -------- ------- ----- ------- --------
Balance at December 31, 1995 (includes
29,936 treasury shares).................... 199 191,709 (29,134) (2,866) (388) (3,319) 156,201
Common stock issued principally under
employee stock plans....................... 9 9,186 -- -- -- -- 9,195
Common stock issued/cancelled under
restricted stock plans, net................ -- 636 -- -- -- (636) --
Amortization of unearned compensation....... -- -- -- -- -- 1,494 1,494
Foreign currency translation adjustments.... -- (525) -- 1,254 -- -- 729
Net income.................................. -- -- 37,101 -- -- -- 37,101
---- -------- -------- ------- ----- ------- --------
Balance at December 31, 1996 (includes
29,936 treasury shares).................... $208 $201,006 $ 7,967 $(1,612) $(388) $(2,461) $204,720
==== ======== ======== ======= ===== ======= ========
</TABLE>
See notes to consolidated financial statements.
21
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SUMMARY OF ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The principal business of BancTec, Inc., a Delaware corporation, and
subsidiaries (the "Company") is the development, manufacture and sale of
integrated financial transaction processing systems, imaging and workflow
products, application software and professional services. The Company develops
solutions for the banking, financial services, insurance, health care,
government, utility, telecommunications and retail industries. The Company
also provides network support and management services for local area networks
("LANs") and personal computers ("PCs") and designs and manufactures document
processing equipment for value added resellers ("VARs") and original equipment
manufacturers ("OEMs").
BASIS OF PRESENTATION
The Company's financial statements have been restated due to a change in the
reporting entity to reflect its merger with Recognition under the pooling of
interests method of accounting. Prior to the merger, Recognition had a year-
end of October 31, and the Company had a year-end of on or about March 31.
Since the merger was accounted for as a pooling of interests, combined results
of the two companies are presented for all periods disclosed.
The consolidated balance sheet as of December 31, 1996, and December 31,
1995, is that of the combined Company. The consolidated statement of
operations and consolidated statement of cash flows for the twelve months
ended December 31, 1996, and the nine months ended December 31, 1995, is that
of the combined Company. For the fiscal year ended March 26, 1995, the
consolidated statement of operations and the consolidated statement of cash
flows include the Company's fiscal year ended March 26, 1995, combined with
Recognition's fiscal year ended October 31, 1994. The consolidated statement
of stockholders' equity as of March 26, 1995, includes the Company's activity
for the fiscal year ended March 26, 1995, and Recognition's activity for the
year ended October 31, 1994, and five months ended March 26, 1995. The
consolidated statement of stockholders' equity for the twelve months ended
December 31, 1996, and the nine months ended December 31, 1995, is that of the
combined company.
Recognition's results of operations for the five months ended March 26, 1995
is excluded from the consolidated statement of operations in order to combine
complete twelve month periods and is therefore included in the statement of
stockholders' equity for the year ended March 26, 1995. For additional
information, see Note C.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company,
its wholly owned subsidiaries and, for periods prior to 1996, the ScanData
Joint Venture established with Thomson-CSF ("Thomson") in fiscal year 1992. In
March 1996, the Company purchased Thomson's interest in the Joint Venture. All
significant intercompany accounts and transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
22
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash equivalents are comprised of highly liquid instruments with original
maturities of three months or less. Short-term investments are similar
instruments with original maturities in excess of three months and are valued
at cost, which approximates market.
INVENTORIES
Inventories are valued at the lower of cost or market and include the cost
of raw materials, labor, factory overhead and purchased subassemblies. Cost is
determined using the first-in, first-out method.
DEFERRED REVENUE
Certain of the Company's contracts permit the Company to bill the customer
in advance of the time revenue is recognized. Deferred revenue represents
billings in excess of revenue recognized. Revenue is recognized ratably over
the contract period as the services are performed, which usually occurs within
one year of billing.
DERIVATIVE FINANCIAL INSTRUMENTS
Premiums paid for purchased interest rate cap agreements are amortized to
interest expense over the period of the agreements. Unamortized premiums are
included in other current assets or other assets on the balance sheet
depending on the amortization period.
REVENUE RECOGNITION
The Company's revenue recognition policies for its principal sources of
revenue are:
Equipment and software sales--Revenue from sales of established products is
recognized upon delivery of completed product in conformity with AICPA
Statement of Position No. 91-1, "Software Revenue Recognition." Revenue for
new products is generally recognized at the time of acceptance by the
customer. Contracts with lengthy software development periods are accounted
for in conformity with Accounting Research Bulletin No. 45, "Long-Term
Construction Contracts." Under such contracts, the excess of engineering costs
and other related miscellaneous equipment costs over advance billings on such
contracts are recorded in other current assets. All contract costs, including
equipment and software, are charged to cost of sales at the time the related
revenue is recognized. At December 31, 1996, and December 31, 1995, there were
$1,577,000 and $1,618,000, respectively, of costs in excess of advance
billings recorded in other current assets.
Maintenance--Revenue from maintenance contracts is recognized ratably over
the term of the contract.
Leasing--Revenue from operating leases of equipment and temporary end-user
software licenses are recognized ratably over the terms of the related
contract. Revenue from sales type leases is recorded as the present value of
the minimum lease payments (net of executory costs), computed at the interest
rate implicit in the lease in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 13, "Accounting for Leases."
DEPRECIATION AND AMORTIZATION
Depreciation is provided in amounts sufficient to charge the cost of
depreciable assets to operations over their estimated service lives. Such
amounts are charged to cost of sales or operating expenses in the consolidated
statements of operations, as appropriate. The straight-line method of
depreciation is used for financial reporting purposes. Accelerated methods are
used for tax purposes.
23
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Leasehold improvements and assets recorded under capital lease obligations
are depreciated over the shorter of their estimated useful life or the
remaining lease term. Field support spare parts, which are repairable
replacement parts for products maintained under service contracts, are
amortized over a useful life of three or five years. Depreciable lives for
furniture, fixtures and machinery are generally from five to seven years.
Buildings utilize a forty year life.
Intangible assets are amortized on a straight-line basis over their
estimated useful lives. The excess of cost over net assets of acquired
businesses is amortized over 10 to 40 years. Other intangible assets are
amortized over three to five years.
PRODUCT DEVELOPMENT
Company sponsored software product development costs are expensed as
incurred until technological feasibility has been established. At that time,
the software product development costs are capitalized in conformity with SFAS
No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed." At December 31, 1996, and December 31, 1995, capitalized
software costs recorded in other long-term assets were $361,000 and $542,000,
respectively. Software costs are amortized to cost of sales on a per unit
basis or on a straight-line basis over a three year period, whichever is less.
The Company performs a periodic review to determine the realization of
capitalized software. When it is determined that there is an impairment,
carrying amounts are written down to their net realizable value. The amount of
software development costs charged to expense for the twelve month period
ended December 31, 1996, the nine month period ended December 31, 1995, and in
the fiscal year ended March 26, 1995, was $181,000, $6,555,000, and
$5,983,000, respectively. Customer sponsored product development costs are
generally charged to cost of sales or the proceeds generated therefrom are
credited to product development costs by the Company.
INCOME TAXES
Deferred income taxes recognize the effect of temporary differences between
the financial reporting basis of transactions and the tax basis of the assets
and liabilities.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of the Company's foreign subsidiaries are
translated into U.S. dollars at the year-end rates of exchange. Revenue and
expenses are translated monthly at the average exchange rates for the month.
Translation gains and losses including those arising from intercompany
accounts considered to be long-term investments, are reported as a separate
component of stockholders' equity, and transaction gains and losses are
included in results of operations in sundry-net. Foreign currency transaction
losses in the twelve months ended December 31, 1996, and the nine months ended
December 31, 1995, were $835,000 and $1,246,000, respectively, and there was a
foreign currency gain in the fiscal year ended March 26, 1995 of $1,929,000.
NET INCOME PER SHARE
Net income per common and common equivalent share is based upon the weighted
average number of outstanding shares during the year. The number of
outstanding shares of common stock has been adjusted to reflect the assumed
exercise of all outstanding stock options which are dilutive, at the beginning
of the period or date of issuance, and the use of the proceeds of such assumed
exercise to repurchase, at market, common stock of the Company. The number of
outstanding shares of common stock has also been adjusted for the assumed
conversion of convertible debt. For December 31, 1995 and March 26, 1995,
fully diluted earnings per share are either anti-dilutive or do not affect
earnings per share.
24
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CONCENTRATION OF CREDIT RISK
The Company sells its products to certain customers under specified credit
terms in the normal course of business. These customers can generally be
classified as banking, financial services, insurance, government, utility,
telecommunications or retail entities. Due to the diversity of the Company's
customers, management does not consider there to be a concentration of risk
within any single classification.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with current
year presentation.
NOTE B--CHANGE IN FISCAL YEAR-END
On October 12, 1995, concurrent with the consummation of the acquisition of
Recognition, the Company changed its fiscal year-end from a 52/53 week year
which ended on or about March 31 of each year to a calendar year-end of
December 31.
NOTE C--ACQUISITIONS AND EQUITY INVESTMENTS
ACQUISITION OF RECOGNITION INTERNATIONAL INC.
On October 12, 1995, the shareholders of the Company and Recognition
approved the acquisition of Recognition by the Company. The acquisition was
effected through the merger of BTEC Merger Subsidiary, Inc., a wholly-owned
subsidiary of the Company, with and into Recognition. Under the terms of the
merger agreement, Recognition stockholders received 0.59 of a share of the
Company's common stock for each share of Recognition common stock owned, for a
total of approximately 9.1 million shares. Fractional shares were not issued;
instead former Recognition stockholders were paid a fractional share
percentage of $21.00 in cash, the closing price of a share of the Company's
common stock on the date of closing.
The merger qualifies as a tax-free reorganization and was accounted for as a
pooling of interests. Accordingly, the Company's financial statements have
been restated to include the results of Recognition for all periods presented
in accordance with Accounting Principles Bulletin ("APB") No. 16.
25
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Combined and separate results of the Company and Recognition for the period
presented are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
MARCH 26,
1995
-----------
<S> <C>
As Reported:
Revenue:
BancTec..................................................... $297,539
Recognition(b).............................................. 219,393
--------
Combined.................................................... $516,932
========
Net Income (Loss):
BancTec..................................................... $ 12,509
Recognition(b).............................................. (26,580)
Adjustment (a).............................................. (1,537)
--------
Combined.................................................... $(15,608)
========
</TABLE>
- --------
(a) Effect of conforming the method of accounting for field spares.
(b) For the fiscal year ended October 31, 1994.
OTHER ACQUISITIONS AND EQUITY INVESTMENTS
In fiscal 1992, the Company and Thomson established a joint venture company,
ScanData Holding N.V. (now BancTec Holding, N.V.), with subsidiaries in
France, Sweden, Germany and the Netherlands, which had exclusive rights to
market and service various products provided by the Company and Thomson in
specified territories, consisting of continental Europe, Scandinavia and North
Africa. On March 15, 1996, the Company purchased Thomson's interest in
ScanData Holding N.V. for cash of approximately $7,200,000.
In fiscal 1994, the Company acquired a 33% equity interest in Servibanca, a
document processing service provider located in Chile. Servibanca offers a
variety of products and services to the South American document processing
market.
The Company also uses various other distributor and OEM relationships to
market its products in Asia and other locations.
NOTE D--CHARGES
For the nine month period ended December 31, 1995, the Company incurred
pretax charges of $85,187,000 for the integration of the Company and
Recognition. The components of these charges were $17,000,000 to cover the
cost of severance, $51,687,000 for duplicate and impaired assets, $6,000,000
for loss contracts, $5,500,000 related to facilities and $5,000,000 in
transaction costs. These costs were categorized in the consolidated statement
of operations as follows: $41,838,000 in cost of sales, $6,647,000 in product
development, $23,761,000 in selling, general and administrative, $12,556,000
as amortization and $385,000 in other sundry.
As of December 31, 1996, approximately $79,587,000 (primarily professional
fees, severance and write off of impaired assets) of such costs have been paid
or otherwise charged against the $85,187,000 accrual. The remaining
obligations are currently recorded in other accrued expenses and liabilities
and are expected to be substantially paid by the end of 1997, utilizing
existing cash resources of the Company. The amounts disclosed represent
management's best estimate of the costs to be incurred and the timing of such
costs. The progress of
26
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the plan and the actual amounts incurred could vary from these estimates if
future developments differ from the underlying assumptions used by management
in developing the accrual.
Under Recognition's former restructuring plan, a pretax charge of $19,732,000
was recorded in the fiscal year ended October 31, 1994 (March 26, 1995, of the
combined Company). In order to conform the income statement presentation to
the Company's presentation, the previously reported restructuring charge has
been reclassified as follows: $15,536,000 to cost of sales, $3,693,000 to
selling, general and administrative and $503,000 for product development. At
December 31, 1996, the Company had no remaining accrual relating to this plan.
NOTE E--INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials...................................... $29,246 $18,156
Work-in-process.................................... 20,466 20,195
Finished goods..................................... 33,608 34,091
------- -------
$83,320 $72,442
======= =======
</TABLE>
NOTE F--INDEBTEDNESS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Term loans payable to banks...................... $32,614 $43,777
7 1/4% convertible subordinated debentures due
2011............................................ 43,722 51,722
Obligations under capital leases................. 889 1,066
------- -------
77,225 96,565
Less current maturities.......................... 11,334 13,593
------- -------
$65,891 $82,972
======= =======
</TABLE>
Future maturities of long-term debt, excluding capital lease obligations,
are as follows:
<TABLE>
<CAPTION>
CALENDAR YEAR
------------- (IN THOUSANDS)
<S> <C>
1997.......................................................... $10,950
1998.......................................................... 10,950
1999.......................................................... 11,714
2000.......................................................... 2,250
2001.......................................................... 2,250
Thereafter.................................................... 38,222
-------
$76,336
=======
</TABLE>
On February 22, 1996, the Company signed a new credit agreement replacing
the Acquisition Term Loan and Revolving Credit Facility in place at December
31, 1995. At December 31, 1996, the Company's credit agreement provided for a
$50,000,000 short-term revolving credit facility ("revolving credit facility")
and a $55,000,000 term loan facility ("term loan") which are unsecured. The
agreement contains restrictive covenants which, among other things, restrict
payment of dividends, limit additional debt and requires the Company to
maintain a 2.0 to 1.0 minimum cash flow coverage, maximum debt to EBITDA of
not more than 2.25 to 1.0 at
27
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the end of any fiscal quarter for the preceding twelve month period and a
maximum debt to capitalization ratio not to exceed .50 to 1.0 as of the end of
any fiscal quarter. At December 31, 1996, the Company was in compliance with
all covenants required under the agreement. The agreement permits borrowing in
foreign currency which the Company utilizes as part of its foreign currency
risk management program discussed in Note K. Therefore, the reported amounts
can include recognized but unrealized gains and losses resulting from currency
fluctuations. The revolving credit facility bears interest at the lender's
prime commercial rate or, at the Company's option, the London Interbank
Offered Rate ("LIBOR") on Eurocurrency borrowings plus 0.50%, depending on the
Company's debt to capitalization ratio, as defined. A commitment fee of 0.225%
on the unused revolving credit facility is payable quarterly. The term loan
facility bears interest at the lender's prime commercial rate or, at the
Company's option, LIBOR plus 0.75%, depending on the Company's debt to
capitalization ratio, as defined.
At December 31, 1996, the amount outstanding under the revolving credit
facility was $26,076,000 at a weighted average interest rate of 6.22%. During
the twelve months ended December 31, 1996, the Company borrowed a maximum
amount of $31,050,000 against this facility.
Principal payments against the outstanding balance of the term loan facility
commenced as of March 31, 1995. The principal, plus accrued interest, is due
in 20 equal quarterly installments until December 31, 1999. At December 31,
1996, the balance of the term loan facility was $32,614,000. The weighted
average interest rate on borrowings under the term loan facility was 6.41% at
December 31, 1996.
Also outstanding as of December 31, 1996, was a foreign credit agreement in
the amount of $4,920,000 payable in Japanese yen. Cash, cash equivalents and
short-term investments have been pledged as collateral to secure this credit
agreement.
The 7 1/4% convertible debentures are subordinated to all senior
indebtedness and are convertible into common stock at $28.39 per share. Annual
sinking fund payments of $2,250,000 were required beginning April 15, 1996. In
March 1996, the Company purchased $8,000,000 of the convertible debentures in
the open market thereby fulfilling its sinking fund obligations for the next
three years. The debentures are redeemable at the Company's option at 100% of
face value after April 16, 1996.
The Company has agreements in place for lines of credit totaling
$40,000,000. The lines are uncommitted and have a maximum term of 30 days. The
Company borrowed as much as $12,000,000 at various times throughout the twelve
month period ended December 31, 1996. There were no advances outstanding at
December 31, 1996.
At December 31, 1996, the Company was party to one interest rate cap
agreement. This agreement, which expires in May 1997, entitles the Company to
receive from a counterparty, on a quarterly basis, the amount, if any, by
which interest payments calculated using LIBOR on the notional amount of
$27,500,000 exceeds 7.0%, with a ceiling of 9.5%, above which the Company
would receive no additional amount. No payments were received in the twelve
month period ended December 31, 1996.
The fair market value of the term loan, revolving credit facility, the
subordinated debentures, lines of credit and foreign credit agreement as of
December 31, 1996, approximates their respective carrying values.
28
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Future minimum lease payments under capital lease obligations are as
follows:
<TABLE>
<CAPTION>
CALENDAR YEAR
------------- (IN THOUSANDS)
<S> <C>
1997........................................................ $453
1998........................................................ 343
1999........................................................ 163
2000........................................................ 38
----
Total minimum lease payments................................ 997
Less amount representing interest (5.9%-16.2% rate)......... 108
----
Present value of net minimum lease payments, including cur-
rent maturities of $384 at December 31, 1996............... $889
====
</TABLE>
Property, plant and equipment recorded under capital leases are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Machinery and equipment............................ $ 559 $ 977
Furniture, fixtures and other...................... 1,385 1,915
------ ------
Total--at cost..................................... 1,944 2,892
Less accumulated depreciation...................... 1,025 1,826
------ ------
$ 919 $1,066
====== ======
</TABLE>
The Company paid cash totaling $7,972,000, $7,228,000, and $8,970,000, for
interest during the twelve months ended December 31, 1996, the nine months
ended December 31, 1995, and in the fiscal year ended March 26, 1995,
respectively.
NOTE G--OTHER ACCRUED EXPENSES AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Salaries, wages and other compensation............. $17,834 $19,604
Accrued taxes, other than income taxes............. 5,961 6,391
Advances from customers............................ 21,353 16,340
Accrued invoices and costs......................... 5,252 2,949
Accrued merger charges and other costs............. 6,431 25,426
Other.............................................. 25,125 16,388
------- -------
$81,956 $87,098
======= =======
</TABLE>
29
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE H--INCOME TAXES
The domestic and foreign components of income (loss) before income taxes and
minority interest consisted of the following:
<TABLE>
<CAPTION>
TWELVE MONTHS NINE MONTHS FISCAL YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 26,
1996 1995 1995
------------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic (including Puerto Rico)..... $47,357 $(58,739) $(6,096)
Foreign.............................. 10,613 (11,976) (59)
------- -------- -------
$57,970 $(70,715) $(6,155)
======= ======== =======
The income tax provision (benefit) consisted of the following:
<CAPTION>
TWELVE MONTHS NINE MONTHS FISCAL YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 26,
1996 1995 1995
------------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal (including Puerto Rico).... $ 974 $ 3,172 $ 4,243
State.............................. -- 1,117 1,597
Foreign............................ 2,460 (888) 3,371
------- -------- -------
Total current.................... 3,434 3,401 9,211
------- -------- -------
Deferred:
Federal............................ 19,906 (19,125) 2,143
Foreign............................ (2,471) (1,510) ( 691)
------- -------- -------
Total deferred................... 17,435 (20,635) 1,452
------- -------- -------
$20,869 $(17,234) $10,663
======= ======== =======
</TABLE>
The difference between the income tax provision computed at the statutory
federal income tax rate and the financial statement provision for taxes is
summarized as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS NINE MONTHS FISCAL YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 26,
1996 1995 1995
------------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision (benefit) at U.S.
statutory rate of 35% for
all periods........................ $20,290 $(24,750) $(2,154)
Increase (reduction) in tax expense
resulting from:
Impact of foreign and Puerto Rico
income tax rates................. 100 (177) (201)
Charge/credit in lieu of taxes for
tax benefits realized from
acquisitions..................... -- 211 (1,457)
Foreign losses not providing a
current benefit.................. 879 2,247 10,523
Utilization of net operating
losses........................... (3,626) -- --
Domestic amortization of cost over
net assets of acquired business.. 1,575 1,664 1,295
Foreign goodwill amortization..... 221 221 642
State income tax, net of federal
income tax benefit............... -- (171) 486
Tax expense from foreign
subsidiaries' dividends.......... -- -- 1,226
Other............................. 1,430 3,521 303
------- -------- -------
$20,869 $(17,234) $10,663
======= ======== =======
</TABLE>
30
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company paid cash totaling $4,651,000, $2,654,000, and $13,666,000 for
income taxes during the twelve months ended December 31, 1996, the nine months
ended December 31, 1995, and in the fiscal year ended March 26, 1995,
respectively.
Deferred income taxes reflect the tax consequences on future years of
temporary differences between the tax basis of assets and liabilities and
their financial reporting basis and are included in other current assets or
other assets depending on the timing of the expected realization. The deferred
tax benefit for the periods shown represents the effect of changes in the
amounts of temporary differences during those periods.
Deferred tax assets (liabilities), as determined under the provisions of
SFAS No. 109, "Accounting for Income Taxes", were comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Gross deferred tax assets (liabilities):
Net operating losses............................. 43,792 47,418
Inventory reserves............................... 4,922 18,866
Acquisition & restructuring charges.............. 5,634 16,617
Receivable allowance............................. 2,744 2,142
Deferred revenues................................ 3,286 4,819
Deferred compensation............................ 3,053 3,218
Foreign timing differences, net.................. 2,618 2,035
Taxes paid on intercompany profits............... 585 585
Unrealized foreign exchange gains................ 468 468
Depreciation..................................... (11) 1,409
Tax deductible foreign reserves.................. 422 422
Other............................................ 2,084 (247)
-------- --------
Gross deferred tax assets........................ 69,597 97,752
Deferred tax assets valuation reserve............ (46,878) (57,598)
-------- --------
Net deferred tax asset............................. $ 22,719 $ 40,154
======== ========
</TABLE>
The Company has net operating loss carryforwards which expire as follows:
1997 through 2001, $34,413,000; 2002 through 2006, $36,451,000; 2009 through
2011, $23,616,000; and indefinite, $12,120,000.
The net change in the deferred tax asset valuation reserve for the twelve
months ended December 31, 1996, and for the nine months ended December 31,
1995, was a decrease of $10,720,000, and an increase of $1,551,000,
respectively. The current year's decrease is primarily attributable to
reversal of acquisition timing differences, inventory reserves and utilization
of net operating loss carryforwards. The increase in 1995 is attributable to
the increase in the net operating loss carryforwards of the Company's
subsidiaries.
Undistributed earnings of foreign subsidiaries were approximately
$17,922,000, $14,243,000 and $17,514,000 at December 31, 1996, December 31,
1995, and March 26, 1995, respectively. No taxes have been provided on these
undistributed earnings as they are considered to be permanently reinvested.
31
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE I--STOCKHOLDERS' EQUITY
EMPLOYEE STOCK AWARD PLANS
At December 31, 1996, a total of 3,340,249 shares of common stock were
reserved for issuance under the Company's stock award plans. At December 31,
1996, no shares were available for future grant; however, subsequent to year
end the Board of Directors authorized an additional 1,500,000 shares available
for future grant, 1,000,000 of which remain subject to shareholder approval.
In general, the plans provide for the granting of options or restricted shares
to key employees. A summary of the key provisions of each type of award is as
follows:
Stock Options
In general, the plans provide for the granting of options at not less than
fair market value of the stock at the grant date. Options issued vest over a
five year period, with one-fifth of the shares becoming exercisable on each
anniversary. At December 31, 1996, December 31, 1995, and March 26, 1995,
options to purchase 2,860,586, 3,515,193 and 3,337,801 shares, respectively,
were outstanding, of which options to purchase 1,405,388, 2,208,434 and
756,415 shares, respectively, were vested and could be exercised. The
outstanding stock options at December 31, 1996 have a weighted average
remaining contractual life of five years.
A summary of activity in the Company's stock option plans is as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTION PRICE EXERCISE
SHARES PER SHARE PRICE
--------- -------------- --------
<S> <C> <C> <C>
Options outstanding--March 26, 1994...... 3,088,592 $ 4.83--$28.39 $11.08
Granted.................................. 890,550 12.08-- 27.76 17.10
Exercised................................ (439,187) 4.83-- 23.53 8.13
Forfeited................................ (202,154) 5.42-- 23.53 13.40
---------
Options outstanding--March 26, 1995...... 3,337,801 4.83-- 28.39 15.19
Granted.................................. 538,050 15.38-- 19.98 17.08
Exercised................................ (149,786) 4.83-- 16.63 9.56
Forfeited................................ (210,872) 4.83-- 27.75 17.61
---------
Options outstanding--December 31, 1995... 3,515,193 4.83-- 28.39 15.75
Granted.................................. 712,500 17.25-- 22.50 21.35
Exercised................................ (913,451) 4.83-- 22.68 9.86
Forfeited................................ (453,656) 5.42-- 28.39 20.50
---------
Options outstanding--December 31, 1996... 2,860,586 $ 4.83--$28.39 $17.99
=========
</TABLE>
32
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company accounts for the stock option plans under APB Opinion No. 25,
under which no compensation has been recognized. Had compensation costs for
these plans been determined consistent with SFAS Statement No. 123,
"Accounting for Stock-Based Compensation", the Company's net income and
earnings per share would have been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
TWELVE NINE
MONTHS ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net Income:
As reported...................................... $37,101 $(53,481)
Pro Forma........................................ $36,430 $(53,630)
Primary EPS:
As reported...................................... $ 1.79 $ (2.63)
Pro Forma........................................ $ 1.76 $ (2.64)
Fully Diluted EPS:
As reported...................................... $ 1.76 $ --
Pro Forma........................................ $ 1.73 $ --
</TABLE>
Because the SFAS Statement No. 123 method of accounting has not been applied
to options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in future
years.
The fair value of each stock option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted
average assumptions and results:
<TABLE>
<CAPTION>
TWELVE MONTHS NINE MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
WEIGHTED AVERAGE 1996 1995
---------------- ------------- ------------
<S> <C> <C>
Risk free interest rate.......................... 6.2% 5.8%
Expected life.................................... 3.5 years 3.5 years
Expected volatility.............................. 40% 40%
Fair value of options granted.................... $6.92 $5.85
</TABLE>
Restricted Stock Awards
The Board of Directors periodically awards restricted stock to key employees
as compensation. Vesting is pro rata and is subject to future service.
Unearned compensation is charged for the market value of the shares on the
date of grant and is amortized to expense over the vesting period. Such amount
is shown as a reduction of stockholders' equity in the accompanying
consolidated balance sheets. During the twelve months ended December 31, 1996,
40,648 restricted shares were awarded and unearned compensation of $741,266
was recorded. During the nine months ended December 31, 1995, 22,475
restricted shares were awarded and unearned compensation of $380,936 was
recorded. During the fiscal year ended March 26, 1995, 6,203 restricted shares
were awarded and unearned compensation of $141,118 was recorded. The weighted
average price of the shares awarded during the twelve months ended December
31, 1996, the nine months ended December 31, 1995, and fiscal year ended March
26, 1995, were $18.24, $16.95 and $22.75, respectively. Vesting on such shares
ranges from 3 years to 21 years. During the twelve months ended December 31,
1996, the nine months ended December 31, 1995, and in fiscal year 1995,
$316,955, $199,607, and $227,037, respectively, was amortized to expense. Also
during the twelve month period ended December 31, 1996, and the nine month
period ended
33
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
December 31, 1995, the Company cancelled 5,730 and 31,270 shares,
respectively, reserved for key employees who are no longer with the Company.
This resulted in a reduction to unearned compensation of $105,000 and
$471,300, respectively. There were no cancellations during the fiscal year
ended March 26, 1995.
Employee Stock Purchase Plan
The Company has an employee stock purchase plan under which 479,663 shares
of common stock were reserved at December 31, 1996. The shares are offered for
sale to employees only, through payroll deductions, at prices equal to 85% of
the lesser of the fair market value of the Company's common stock on the first
day of the offering period or the last day of the exercise period. During the
twelve months ended December 31, 1996, the nine months ended December 31,
1995, and the fiscal year ended March 26, 1995, the Company issued 50,448,
21,835 and 47,630 shares, respectively, under the plan.
Stockholder Rights
On June 16, 1988, the Company adopted a Stockholder Rights Plan in which
common stock purchase rights were distributed as a dividend at the rate of one
right for each common share held as of the close of business on June 27, 1988.
Each share issued thereafter also received one right. As a result of the
three-for-two stock split, the number of rights associated with each share of
common stock has been adjusted from one right to two-thirds of a right. The
Stockholder Rights Plan was designed to deter coercive takeover tactics and to
prevent an acquirer from gaining control of the Company without offering a
fair price to all of the Company's stockholders. The rights will expire on May
24, 1998.
Each right will entitle stockholders to buy one and one-half shares of
common stock of the Company at an exercise price of $35.50. The rights will be
exercisable only if a person or group acquires beneficial ownership of 20% or
more of the Company's common stock or commences a tender or exchange offer
upon consummation of which such person or group would beneficially own 30% or
more of the common shares.
If any person becomes the beneficial owner of 35% or more of the Company's
common stock, other than pursuant to certain tender or exchange offers
described in the Plan, or if the Company is the surviving corporation in a
merger with a 20%-or-more stockholder and its common shares are not changed or
converted, or if a 20%-or-more stockholder engages in certain self-dealing
transactions with the Company, then each right not owned by such person or
related parties will entitle its holder to purchase, at the right's then
current exercise price, shares of the Company's common stock (or, in certain
circumstances as determined by the Board, cash, other property, or other
securities) having a value of twice the right's exercise price. In addition,
after any person has become a 20%-or-more stockholder, (i) if the Company is
involved in a merger or other business combination transaction in which it is
not the continuing or surviving corporation (other than a merger described in
the previous sentence or a merger that follows a certain tender or exchange
offer described in the Plan), or (ii) if the Company sells 50% or more of its
assets or earning power, each right will entitle its holder to purchase, at
the right's then current exercise price, shares of common stock of such other
person having a value of twice the right's exercise price by a stockholder.
The Company will generally be entitled to redeem the rights at $.05 per
right at any time until the fifteenth day (subject to certain limited
extensions) following public announcement that a 20% position has been
acquired.
NOTE J--EMPLOYEE BENEFIT PLANS
Through December 31, 1996, the Company had one employee savings plan for
substantially all full-time and part-time U.S. employees. The Employee Savings
Plan was available to existing Company employees prior to the acquisition of
Recognition. The ESOP Flex/Save Plan was available to existing Recognition
employees
34
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
prior to the acquisition. Effective January 1, 1996, the ESOP Flex/Save Plan
was merged with the existing Employee Savings Plan.
The Employee Savings Plan allows substantially all full-time and part-time
U.S. employees to make contributions defined by Section 401(k) of the Internal
Revenue Code. During the twelve months ended December 31, 1996, the Company
elected to contribute 69,491 shares, which was allocated based on
compensation. During the nine months ended December 31, 1995 and in the fiscal
year ended March 26, 1995, the Company contributed 2.0%, and 1.1%,
respectively, of the qualifying participant's base salary. Amounts expensed
under the plan for the periods noted were $1,177,000, $691,000, and $600,000,
respectively.
Shares allocated to the ESOP Flex/Save Plan during the nine months ended
December 31, 1995, and in the fiscal year ended March 26, 1995, were 52,118
and 69,491, respectively. Amounts expensed under this plan for the periods
noted were $827,000 and $930,000, respectively.
The Company provides no material postretirement benefits to its employees.
NOTE K--COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases certain sales and service office facilities and equipment
under non-cancelable operating leases expiring through year 2010. Total
Company rent expense for the twelve months ended December 31, 1996, the nine
months ended December 31, 1995, and the fiscal year ended March 26, 1995, was
$9,155,000, $6,772,000, and $11,479,000, respectively.
Future minimum payments under non-cancelable operating leases are
approximately as follows:
<TABLE>
<CAPTION>
CALENDAR YEAR
------------- (IN THOUSANDS)
<S> <C>
1997.......................................................... $ 7,960
1998.......................................................... 6,472
1999.......................................................... 5,033
2000.......................................................... 4,153
2001.......................................................... 2,753
Thereafter.................................................... 6,384
-------
$32,755
=======
</TABLE>
The Company has the option to renew operating leases on its facilities at
the end of the current lease terms.
LITIGATION
The Company and its subsidiaries are parties to various legal proceedings.
Although the ultimate disposition of such proceedings is not presently
determinable, in the opinion of the Company, any liability that may ensue
would not have a significant impact on the financial position or results of
operations of the Company.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are used to
manage well-defined interest rate risks.
Interest rate cap agreements are used to reduce the potential impact of
increases in interest rates on floating-rate long-term debt. As discussed in
Note F, the Company has one interest rate cap agreement in effect at
35
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
December 31, 1996, which entitles the Company to receive from a counterparty,
on a quarterly basis, the amount, if any, by which interest payments calculated
using LIBOR on the notional amount of $27,500,000 exceeds 7.0%, with a ceiling
of 9.5%, above which the Company would receive no additional amount. The LIBOR
interest rate has not exceeded 7.0% since November 25, 1994, the effective date
of the agreement. This agreement expires in May 1997.
The Company is exposed to credit losses in the event of nonperformance by the
counterparties to its interest rate cap but has no off-balance sheet credit
risk of accounting loss. The Company anticipates that its counterparties will
be able to fully satisfy their obligations under their contracts. The Company
does not obtain collateral or other security to support financial instruments
subject to credit risk but monitors the credit standing of the counterparties.
NOTE L--GEOGRAPHIC OPERATIONS
The Company operates in the following geographic areas: the United States,
Europe, and other international areas consisting primarily of Australia, Japan
and Canada. Interarea sales to affiliates are accounted for at established
transfer prices.
Sales and operating income for the twelve months ended December 31, 1996, the
nine months ended December 31, 1995, and the fiscal year ended March 26, 1995,
and identifiable assets at the end of each of those periods, classified by
geographic area, are as follows:
<TABLE>
<CAPTION>
OTHER
UNITED INTER- ELIMINA- CONSOLI-
STATES EUROPE NATIONAL TIONS DATED
-------- ------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Twelve months ended
December 31, 1996
Sales to unaffiliated
customers............. $393,635 $92,624 $67,743 $ -- $554,002
Interarea sales to
affiliates............ 36,021 3,117 38 (39,176) --
Operating income
(loss)................ 53,013 7,486 4,302 (716) 64,085
Identifiable assets.... 411,766 68,370 36,437 (49,278) 467,295
Nine months ended
December 31, 1995
Sales to unaffiliated
customers............. $285,947 $56,855 $41,182 $ -- $383,984
Interarea sales to
affiliates............ 10,096 655 -- (10,751) --
Operating loss......... (52,992) (2,987) (5,235) (2,757) (63,971)
Identifiable assets.... 351,517 69,518 37,692 (18,379) 440,348
Fiscal year ended March
26, 1995
Sales to unaffiliated
customers............. $370,809 $72,243 $73,880 $ -- $516,932
Interarea sales to
affiliates............ 18,490 2,157 1 (20,648) --
Operating income
(loss)................ (7,178) 2,684 3,605 (9) (898)
Identifiable assets.... 399,965 82,726 49,830 (30,763) 501,758
</TABLE>
NOTE M--RELATED PARTIES
In fiscal 1992, the Company and Thomson established a joint venture company,
ScanData Holding N.V. (now BancTec Holding N.V.), with exclusive rights to
market and service various products provided by the Company and Thomson in
specified territories, consisting of continental Europe, Scandinavia and North
Africa. On March 15, 1996, the Company purchased Thomson's interest in ScanData
Holding N.V. for cash of approximately $7,200,000. Included in trade accounts
payable at December 31, 1995, is $3,051,000 payable to Thomson. There was no
payable to Thomson at December 31, 1996.
36
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE N--SUMMARIZED QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------
Q1 Q2 Q3 Q4 TOTAL
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenue....................... $140,053 $133,994 $136,422 $143,533 $554,002
Gross profit.................. 40,344 40,069 40,425 41,894 162,732
Net income.................... 8,682 9,266 9,296 9,857 37,101
Fully diluted net income per
share........................ $ 0.42 $ 0.44 $ 0.44 $ 0.46 $ 1.76
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31, 1995
------------------------------------------
Q1 Q2 Q3 TOTAL
--------- --------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue.......................... $124,659 $134,322 $125,003 $383,984
Gross profit..................... 36,554 37,110 (12,183) 61,481
Net income (loss)................ 3,679 4,657 (61,817) (53,481)
Fully diluted net income (loss)
per share....................... $ 0.18 $ 0.23 $ (3.02) $ (2.63)
</TABLE>
Includes pretax charges of $85,187,000 during the third quarter. See Note D
for a further discussion of these charges.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 26, 1995
---------------------------------------------
Q1 Q2 Q3 Q4 TOTAL
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenue..................... $119,814 $135,802 $122,873 $138,443 $516,932
Gross profit................ 38,616 40,551 19,092 37,469 135,728
Net income (loss)........... 3,944 2,262 (22,359) 545 (15,608)
Fully diluted net income
(loss) per share........... $ 0.19 $ 0.11 $ (1.10) $ 0.03 $ (0.77)
</TABLE>
Includes pretax charges of $19,732,000 during the third quarter. See Note D
for a further discussion of these charges.
Due to the impact of stock prices on the computation of earnings per share,
net income per share as presented may not equal the sum of the quarters.
37
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is contained in the definitive proxy
material of the Company to be filed in connection with its 1997 annual meeting
of stockholders, except for the information regarding executive officers of
the Company which is contained in Part I of this Annual Report on Form 10-K.
The information required by this item contained in such definitive proxy
material is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is contained in the definitive proxy
material of the Company to be filed in connection with its 1997 annual meeting
of stockholders, which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is contained in the definitive proxy
material of the Company to be filed in connection with its 1997 annual meeting
of stockholders, which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is contained in the definitive proxy
material of the Company to be filed in connection with its 1997 annual meeting
of stockholders, which information is incorporated herein by reference.
38
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements: See Index to Financial Statements and
Schedules on page 42.
(b) Reports on Form 8-K:
(c) Exhibits
<TABLE>
<C> <S>
3.1 --Certificate of Incorporation.(4)
3.2 --By-Laws.(4)
4.1 --Rights Agreement dated June 16, 1988.(1)
4.2 --Indenture dated as of April 3, 1986, and First Supplemental
Indenture dated as of November 1, 1987, between Recognition
International Inc. and MBank Dallas, National Association, as
Trustee, with respect to the 7 1/4% Convertible Subordinated
Debentures due 2011.(4)
4.3 --Second Supplemental Indenture dated as of October 12, 1995,
between the Company and Texas Commerce Bank, National Association,
as successor trustee to MTrust Corp., as successor trustee to MBank
Dallas, National Association with respect to the 7 1/4% Convertible
Subordinated Debentures due 2011.(4)
10.1 --Credit Agreement dated February 22, 1996, among the Company, its
Subsidiaries and Texas Commerce Bank National Association, as
Agent.(4)
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
10.2 --BancTec, Inc. 1989 Stock Plan.(4)
10.3 --BancTec, Inc. 1994 Stock Plan.(5)
10.4 --BancTec, Inc. Deferred Compensation Plan. (6)
10.5 --BancTec, Inc. 1996 Employee Stock Purchase Plan. (6)
10.6 --Employment Agreement with Grahame N. Clark, Jr. Dated November 5,
1995.(4)
10.7 --Employment Agreement with Norton A. Stuart dated May 28, 1992.(3)
10.8 --Employment Agreement with Tod V. Mongan dated November 5, 1995.(4)
10.9 --Employment Agreement with Raghavan Rajaji dated September 27,
1995.(4)
10.10 --Form of Indemnification Agreement between the Company and each of
its Directors and Officers.(4)
10.11 --Agreement with Norton A. Stuart dated February 11, 1994.(4)
11.1 --Statement re: computation of net income per share.(6)
21.1 --Subsidiaries.(6)
23.1 --Consent of Arthur Andersen LLP.(6)
23.2 --Consent of Price Waterhouse LLP.(6)
27.0 --Selected Financial Data.(7)
</TABLE>
- --------
(1) Incorporated by reference to the Company's Form 8-A filed on July 6, 1988.
(2) Filed as Exhibit 10.3 to the Company's Annual Report on Form 10-K for the
year ended March 30, 1987, and incorporated herein by reference.
(3) Filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the
year ended March 28, 1993, and incorporated herein by reference.
(4) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995, and incorporated herein by reference.
(5) Filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the
year ended March 27, 1994, and incorporated herein by reference.
(6) Filed herewith.
(7) Filed electronically only.
39
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THE COMPANY HAS DULY CAUSED THIS REPORT TO
BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
BancTec, Inc.
/s/ Grahame N. Clark, Jr.
By __________________________________
GRAHAME N. CLARK, JR.CHAIRMAN OF
THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Dated: March 26, 1997
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF
OF THE COMPANY AND IN THE CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE TITLE DATE
/s/ Grahame N. Clark, Jr. Chairman of the March 26, 1997
- ------------------------------------- Board, President
GRAHAME N. CLARK, JR. and Chief Executive
Officer and
Director (Principal
Executive Officer)
/s/ Raghavan Rajaji Senior Vice March 26, 1997
- ------------------------------------- President,
RAGHAVAN RAJAJI Treasurer and Chief
Financial Officer
(Principal
Financial Officer)
/s/ Michael D. Kubic Vice President, March 26, 1997
- ------------------------------------- Controller and
MICHAEL D. KUBIC Assistant Treasurer
(Principal
Accounting Officer)
/s/ Michael E. Faherty Director March 26, 1997
- -------------------------------------
MICHAEL E. FAHERTY
/s/ Paul J. Ferri Director March 26, 1997
- -------------------------------------
PAUL J. FERRI
40
<PAGE>
SIGNATURE TITLE DATE
/s/ Rawles Fulgham Director March 26, 1997
- -------------------------------------
RAWLES FULGHAM
/s/ Thomas G. Kamp Director March 26, 1997
- -------------------------------------
THOMAS G. KAMP
/s/ A.A. Meitz Director March 26, 1997
- -------------------------------------
A.A. MEITZ
/s/ Michael A. Stone Director March 26, 1997
- -------------------------------------
MICHAEL A. STONE
/s/ Norton A. Stuart, Jr. Director March 26, 1997
- -------------------------------------
NORTON A. STUART, JR.
/s/ Merle J. Volding Director March 26, 1997
- -------------------------------------
MERLE J. VOLDING
41
<PAGE>
BANCTEC, INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Reports of Independent Public Accountants.............................. 15-16
Consolidated Balance Sheets at December 31, 1996, and December 31,
1995.................................................................. 17-18
Consolidated Statements of Operations for the twelve months ended
December 31, 1996, the nine months ended December 31, 1995, and the
fiscal year ended March 26, 1995...................................... 19
Consolidated Statements of Cash Flows for the twelve months ended
December 31, 1996, the nine months ended December 31, 1995, and the
fiscal year ended March 26, 1995...................................... 20
Consolidated Statements of Stockholders' Equity for the twelve months
ended December 31, 1996, the nine months ended December 31, 1995, and
the fiscal year ended March 26, 1995.................................. 21
Notes to Consolidated Financial Statements............................. 22-37
SUPPLEMENTAL SCHEDULES
Schedule II--Valuation and Qualifying Accounts for the twelve months
ended December 31, 1996, the nine months ended December 31, 1995, and
the fiscal year ended March 26, 1995.................................. 45
</TABLE>
All other schedules have been omitted as the required information is
inapplicable, not required, or the information is included in the financial
statements and notes thereto.
42
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of BancTec, Inc.:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements included in BancTec, Inc.'s Form 10-K,
and have issued our report thereon dated February 20, 1997. We did not audit
the consolidated financial statements of Recognition International Inc., a
company acquired during 1995 in a transaction accounted for as a pooling of
interests, for the year ended October 31, 1994, as discussed in Note C to
Notes to the Consolidated Financial Statements. Such statements are included
in the consolidated financial statements of BancTec, Inc. after restatement to
reflect certain adjustments also set forth in Note C and reflect total
revenues of 42 percent for the year ended March 26, 1995 of the related
consolidated totals. The financial statements of Recognition International
Inc. prior to those adjustments were audited by other auditors whose report
has been furnished to us and our opinion, insofar as it relates to amounts
included for Recognition International Inc., is based solely upon the report
of the other auditors. Our audits were made for the purpose of forming an
opinion on those consolidated financial statements taken as a whole. The
schedule listed in the Index to Financial Statements and Schedules is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic consolidated financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
Arthur Andersen LLP
Dallas, Texas,
February 20, 1997
43
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Recognition International Inc.
Our audits of the consolidated financial statements referred to in our
report dated December 7, 1994 appearing in the 1994 Annual Report to
Stockholders of Recognition International Inc. also included an audit of the
Financial Statement Schedules listed in Item 14(a) of such Form 10-K. In our
opinion, these Financial Statement Schedules present fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
Price Waterhouse LLP
Dallas, Texas,
December 7, 1994
44
<PAGE>
SCHEDULE II
BANCTEC, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996, THE NINE MONTHS ENDED DECEMBER
31, 1995, AND THE FISCAL YEAR ENDED MARCH 26, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ---------- ------------------- ------------- ----------
ADDITIONS
-------------------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
ALLOWANCE FOR DOUBTFUL ACCOUNTS OF PERIOD EXPENSES OTHER(A) DEDUCTIONS(B) PERIOD
- ------------------------------- ---------- ---------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Twelve months ended
December 31, 1996...... $11,571 $1,252 $ -- $(3,196) $ 9,627
Nine months ended
December 31, 1995...... $ 4,313 $8,471 $ -- $(1,213) $11,571
Fiscal year ended March
26, 1995............... $ 3,515 $1,953 $ 68 $(1,223) $ 4,313
</TABLE>
- --------
(A) Change in the allowance account for the five month period November 1,
1994, to March 26, 1995, for Recognition.
(B) Write-off of uncollectible accounts.
45
<PAGE>
Exhibit 10.4
BANCTEC, INC.
DEFERRED COMPENSATION PLAN
Originally Effective January 1, 1987
(Restated November 1, 1995 and February 20, 1997)
Preamble
- --------
This Plan is an unfunded deferred compensation arrangement maintained
primarily for a select group of management and other highly compensated
personnel, and all rights thereunder shall be governed by and construed in
accordance with the laws of the State of Texas to the degree not preempted by
the Employee Retirement Security Act of 1974, as amended ("ERISA").
ARTICLE I
Definitions
-----------
Section 1.01.
- ------------
"Account" means the account established pursuant to Section 4.01 for
each Participant.
"BancTec" means BancTec, Inc., a Delaware corporation, and its
corporate successors.
"Board" means the Board of Directors of BancTec, Inc.
"Change of Control" means a change of control as defined in the
Trust.
"Committee" means the Deferred Compensation Plan Committee. The
Committee shall consist of the Chief Executive Officer, the Chief Financial
Officer, the General Counsel and the head of the Human Resources Department, or
such other persons as the Board may appoint from time to time.
"Deferral Election Form" means the form through which a Participant
elects to defer compensation hereunder, as provided in Section 2.04.
"Deferred Obligation" means the total amount of BancTec's liability
for payment of benefits under the Plan.
-1-
<PAGE>
"Disability" means mental or physical disability of at least six months
which prevents a Participant from engaging in the principal duties of his
employment.
"Employer Contributions" means the contributions made by BancTec
pursuant to Section 3.01, as adjusted for earnings and losses.
"Investment Fund(s)" mean the funds established by the Committee
pursuant to Section 3.03 into which amounts deferred (including Employer
Contributions) hereunder shall be invested.
"Participant" means an employee of BancTec or of a Subsidiary,
designated by the Committee for participation in the benefits of the Plan, or a
person who was such at the time of his Retirement, death, disability, or
termination and who retains, or whose beneficiaries obtain benefits under the
Plan in accordance with its terms.
"Payment Schedule" means the payment schedule defined in the Trust.
"Plan" means the BancTec, Inc. Deferred Compensation Plan as it may
be amended from time to time.
"Plan Year" means the calendar year.
"Retirement" means termination of service with BancTec or a
subsidiary at or after attaining age 65.
"Subsidiary" means a company subject to the laws of the United States
of which BancTec owns, directly or indirectly, at least a majority of the shares
having voting power in the election of directors.
"Trust" means the trust established pursuant to Section 4.03(b).
"Trustee" means the trustee of the Trust.
ARTICLE II
Designation of Participants, Participant's Deferral Election,
------------------------------------------------------------
and Minimum Allowable Deferral
------------------------------
Section 2.01.
- ------------
The Committee shall meet at least once in each Plan Year and
irrevocably specify:
-2-
<PAGE>
(a) The salary grade of the employees who shall be entitled to
participate in the Plan for the subsequent Plan Year; and
(b) The minimum allowable deferral amount for the subsequent Plan
Year.
Section 2.02.
- ------------
In specifying the names of the eligible employees the Committee may
divide them into groups, and specify different minimum deferred amounts for each
group, provided that each employee entitled to participate in the Plan shall be
part of a "select group of management or highly compensated employees" within
the meaning of ERISA.
Section 2.03.
- ------------
Except as provided in Section 2.04, payment of the amount deferred by
a Participant (as adjusted for earnings and losses) shall be deferred until such
Participant's Retirement, termination of employment, disability, or death, or in
the event of an emergency or necessity, as hereinafter provided.
Section 2.04.
- ------------
Prior to the commencement of each Plan Year, a Participant may elect,
on a form provided by the Committee ("Deferral Election Form"), to defer salary,
commissions, or bonus payments for services attributable to the following Plan
Year, subject to such rules and limitations as the Committee may determine. The
Deferral Election Form shall specify the time when and form in which the
deferred amounts (as adjusted for earnings and losses) shall be paid to the
Participant. Each Deferral Election Form shall be in writing, signed by the
Participant and delivered to the Committee prior to the commencement of the Plan
Year for which it applies.
Section 2.05.
- ------------
For any Plan Year, the minimum allowable deferral for a Participant
shall be established by the Committee pursuant to Section 2.01 hereof. The
determination that the deferral election of the Participant meets this minimum
amount shall be made by the Committee prior to the commencement of said Plan
Year. The determination by the Committee on this matter shall be final.
-3-
<PAGE>
ARTICLE III
Employer Contributions
----------------------
Section 3.01.
- ------------
In addition to the Participant's deferrals made pursuant to Article
II, BancTec may, at any time, make such contributions to the Trust for the Plan
as it deems appropriate, in its complete discretion, on behalf of any
Participant specified by the Board ("Employer Contributions").
Section 3.02.
- ------------
A Participant shall vest in any Employer Contributions made on behalf
of the Participant under the following vesting schedule: one-third of any
Employer Contributions shall vest immediately upon its contribution to the
Trust; one-third shall vest on the first anniversary of the contribution; and
one-third shall vest on the second anniversary of the contribution.
Section 3.03.
- ------------
Notwithstanding the vesting schedule set forth in Section 3.02, a
Participant who is terminated for cause (as determined by the Committee in its
complete discretion) or who voluntarily terminates employment with BancTec prior
to Retirement, shall forfeit all unvested Employer Contributions. A Participant
who is involuntarily terminated from employment by BancTec, but not for cause
(as determined by the Committee in its complete discretion), or who terminates
employment from BancTec upon Retirement, shall become 100% vested in all
Employer Contributions.
Section 3.04.
- ------------
Notwithstanding the vesting schedule set forth in Section 3.02, a
Participant shall become 100% vested in all Employer Contributions upon a Change
of Control, the Participant's death, or the Participant's disability.
Section 3.05.
- ------------
All Employer Contributions will be distributed to a Participant at
age 62 or upon Retirement, whichever is later. Upon a Change of Control, all
Employer Contributions will be immediately distributed.
-4-
<PAGE>
ARTICLE IV
Future Payments and Investments
-------------------------------
Section 4.01.
- ------------
The Committee shall cause an Account(s) to be kept in the name of each
Participant and each beneficiary of a deceased Participant which shall reflect
the value of the deferred amounts and Employer Contributions, including any
earnings or losses on the deferred amount and Employer Contributions.
Section 4.02.
- ------------
Until and except to the extent that Accounts hereunder are distributed
to the Participants or beneficiaries from time to time in accordance with orders
of the Committee, the interest of each Participant and beneficiary therein shall
be the interest of a general creditor of BancTec or the Subsidiaries. Title to
and beneficial ownership of any assets, whether cash or investments, which
BancTec may set aside or earmark to meet its Deferred Obligation hereunder,
shall at all times remain in BancTec or the Trustee, and no Participant or
beneficiary shall under any circumstances acquire any property interest in any
specific assets of BancTec. The benefits provided under the Plan (and the
related Trust) shall be unfunded for tax purposes and for purposes of Title I of
ERISA.
Section 4.03.
- ------------
(a) In order to meet its Deferred Obligation hereunder, BancTec shall
each payroll period set aside or earmark funds in an amount equal
to the total amounts deferred for such period under Article II.
BancTec shall also set aside or earmark funds the Board
periodically determines as Employer Contributions under Article
III.
(b) Funds set aside or earmarked to meet BancTec's Deferred
Obligation hereunder shall be deposited in a trust established
solely for this purpose (the "Trust").
(c) The Committee shall, in its sole discretion, establish
"Investment Fund(s)" within the Trust which fund(s) may invest in
stock, bonds, other securities, certificates of deposit,
commercial paper, bank accounts, or such other financial
instruments as the Committee deems appropriate; provided,
however, that no fund shall invest primarily in any securities of
BancTec. In the exercise of the foregoing discretionary
-5-
<PAGE>
investment powers, the Committee may engage investment counsel,
which may be the Trustee, and, if it so desires, may delegate to
such counsel full or limited authority to select the securities
in which the funds are to be invested. The cost of any such
service shall be charged as an expense of administering the Plan
and paid as provided in Section 5.01.
(d) Each Participant shall recommend, on a form provided by the
Committee, the Investment Fund(s) into which his or her Account
is to be invested.
(e) Subject to all of the other provisions herein contained, and any
special rules adopted by the Committee with respect to certain
Investment Fund(s) which, by their nature, require special
treatment or are subject to particular restrictions, each
Participant may recommend once per Plan Year, by following the
procedure established by the Committee, to have all or a part of
his or her Account transferred to any one or more other
Investment Fund(s) to take effect as soon as administratively
possible. Notwithstanding a Participant's recommendations, each
Participant's Account shall be invested at the complete
discretion of the Committee.
Section 4.04.
- ------------
Except as provided in Section 3.05, the Committee shall from time to
time determine the time and manner of making distributions of benefits in case
of Retirement, termination, disability, or death of a Participant, or in the
event of an emergency or necessity affecting the personal or family affairs of
any Participant or beneficiary of a deceased Participant by such methods as it
shall find appropriate. Commencement of distribution in each case may be
deferred by the Committee, but not beyond the date specified by the Participant
on the Deferral Election Form or, if none is specified, one year after the
Retirement, disability, or death of the Participant or, in the case of a
Participant who shall have terminated employment, not beyond one year after the
effective date of such termination. In case of a Participant's death before
distribution is completed, the Account balance may be distributed in a lump sum
or on an installment basis as the Committee may determine.
-6-
<PAGE>
Section 4.05.
- ------------
Each Participant shall have the right to designate beneficiaries who
are to succeed to his or her right to receive future payments hereunder in the
event of his or her death. If a married Participant's spouse is not named as
principal beneficiary, written consent of the spouse is required to any other
beneficiary designation. In case of a failure of designation or the death of a
designated beneficiary without a designated successor, distribution shall be
made to the Participant's estate. No designation of beneficiaries shall be valid
unless made in writing signed by the Participant, dated, and filed with the
Committee. Beneficiaries may be changed without the consent of any prior
beneficiaries with the exception of Participant's spouse. The last valid
beneficiary designation filed with the Committee shall control.
Section 4.06.
- ------------
If a Participant has an unforeseeable emergency, caused by an event
beyond the Participant's control, that would result in severe financial hardship
to the Participant if a withdrawal of funds were not allowed hereunder, then the
Committee may allow an early withdrawal from the Participant's Account
hereunder, but only to the extent reasonably necessary to satisfy the emergency,
as determined by the Committee in its complete discretion.
Section 4.07.
- ------------
As soon as practicable following a Change of Control, the Trustee
shall make a lump sum payment to each Participant (subject to applicable tax
withholding requirements) in an amount determined pursuant to the last Payment
Schedule sent to the Trustee by the Committee prior to the Change of Control.
Such Payment Schedule shall be adjusted (if necessary) by the Trustee to reflect
any contributions, distributions, earnings or losses with respect to the
Accounts since the Payment Schedule was sent.
Section 4.08.
- ------------
Nothing contained herein shall be deemed to create any fiduciary
relationship between BancTec and any Participant. To the extent that any person
has a right to receive payments from BancTec under this Plan, such right shall
be no greater than the right of any unsecured general creditor of BancTec in the
event of bankruptcy.
-7-
<PAGE>
ARTICLE V
Administration
--------------
Section 5.01.
- ------------
The books and records to be maintained for the purpose of the Plan
shall be maintained by the officers and employees of BancTec or such other
persons designated from time to time by the Committee at BancTec's expense and
subject to the supervision and control of the Committee. As soon as practicable
following the end of each Plan Year, the Committee shall prepare and deliver a
Payment Schedule to the Trustee. The Committee may also prepare and deliver a
Payment Schedule to the Trustee at any other time in its complete discretion.
All expenses of administering the Plan, shall be paid by BancTec.
Section 5.02.
- ------------
To the extent permitted by law, the right of any Participant or any
beneficiary to any payment hereunder shall not be subject in any manner to
attachment or other legal process for the debts of such Participant or
beneficiary; and any such benefit or payment shall not be subject to
anticipation, alienation, sale, transfer, assignment or encumbrance.
Section 5.03.
- ------------
No member of the Board or of the Committee and no officer or employee
of the Company shall be liable to any person for any action taken or omitted in
connection with the administration of this Plan unless attributable to his own
fraud or wilful misconduct; nor shall BancTec be liable to any person for any
such action unless attributable to fraud or wilful misconduct on the part of a
director, officer or employee of BancTec.
Section 5.04.
- ------------
The Committee shall have such powers as may be necessary and
appropriate to discharge its duties hereunder and shall have the complete power
and discretion to construe and interpret the Plan, to determine eligibility for
benefits hereunder, to resolve any disputes with respect to benefits under the
Plan, and to give directions to the Trustee.
-8-
<PAGE>
ARTICLE VI
Amendment of Plan
-----------------
Section 6.01.
- ------------
The Plan may be amended in whole or in part from time to time by the
Committee, subject to approval of the Board, but shall not reduce the benefit to
which any Participant has become entitled as of the date of the amendment or a
Participant's right to receive benefits existing on the date of the amendment.
Section 6.02.
- ------------
Notice of every such amendment shall be given in writing to each
Participant and beneficiary of a deceased Participant.
ARTICLE VII
Term
----
Section 7.01.
- ------------
The Plan shall commence on January 1, 1987 and continue for each Plan
Year thereafter until terminated by the Board.
Section 7.02.
- ------------
Upon the termination of the Plan, all amounts still remaining in the
Trust shall be paid in accordance with the Plan or the Participant's Deferral
Election Form as the case may be.
ARTICLE VIII
Miscellaneous Provisions
------------------------
Section 8.01.
- ------------
Nothing in this Plan shall be construed as a contract for employment or
as providing a right of any employee to continued employment with BancTec, or as
a limitation on the right of BancTec to discharge any employee, with or without
cause.
-9-
<PAGE>
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
restatement of the BancTec, Inc. Deferred Compensation Plan, BancTec hereby
executes this document, effective as of the 20th day of February, 1997.
BANCTEC, INC.
By /s/ Tod V. Mongan
------------------------
Name: Tod V. Mongan
Title: Senior Vice President
-10-
<PAGE>
Exhibit 10.5
BANCTEC, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
(effective June 1, 1996)
<PAGE>
BANCTEC, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
(effective June 1, 1996)
ARTICLE I
NATURE OF PLAN
This employee stock purchase plan is hereby established for the
purpose of providing all eligible employees of BancTec, Inc. and of its
subsidiary corporations (within the meaning of Sections 424(e) and (f) of the
Code) with the opportunity to acquire a proprietary interest in BancTec, Inc.,
increasing their interest in the Company's welfare, and encouraging them to
remain in the employ of the BancTec, Inc.
ARTICLE II DEFINITIONS
AND CONSTRUCTION
Section 2.1 Definitions. For the purpose of this Plan, the
-----------
following definitions shall apply unless the context requires otherwise:
(a) "Administration Committee" shall mean the Plan Administration
Committee as from time to time constituted pursuant to Section 6.1.
(b) "Board of Directors" shall mean the Board of Directors of
BancTec, Inc. unless otherwise indicated or the context otherwise requires.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Company" shall mean BancTec, Inc. and any of its subsidiary
corporations (within the meaning of Sections 424(e) and (f) of the Code) or any
successor thereto which shall adopt this Plan.
(e) "Compensation" shall mean the regular base salary or hourly
wages paid to a Participant during such individual's period of participation in
the Plan and which are subject to withholding for Federal income tax purposes,
plus any salary reduction contributions made by the Participant attributable to
such regular base salary or hourly wages under any Code Section 401(k) salary
deferral plan or any Code Section 125 cafeteria benefit program now or hereafter
established by the Company or any affiliate. Compensation shall not include (i)
overtime payments, bonuses, commissions based on sales, profit-sharing
distributions and other incentive-type payments and (ii) any and all
contributions made on the Participant's behalf by the Company under any employee
benefit or welfare plan now or hereafter established (other than the Code
Section 401(k) or Code Section 125 contributions described above).
-1-
<PAGE>
(f) "Effective Date" shall mean June 1, 1996; provided, however,
that if the Plan is not approved by the stockholders of the Company within the
twelve month period immediately subsequent to the date the Plan was adopted by
the Board of Directors, the Plan shall not be qualified as an "employee stock
purchase plan" under the provisions of Section 423 of the Code.
(g) "Employee" shall mean any person who, on or after the
Effective Date, is an employee (within the meaning of Sections 423 and 3401(c)
of the Code) of the Company.
(h) "Employer" shall mean the Company.
(i) "Exercise Date" shall mean the last day of the Exercise
Period.
(j) "Exercise Period" shall mean the month of December. The
Exercise Period shall be the period during which Participants may exercise their
options, in whole or in part.
(k) "Offering Period" shall mean the first 15 days of the month
of December immediately preceding the Payroll Deduction Period beginning on
January 1st, except the initial Offering Period shall be the period June 1, 1996
to June 15, 1996. The Offering Period shall be the period during which each
eligible Employee shall determine whether and to what extent he desires to
participate in the Plan by electing to authorize payroll deductions to be
effective during the Payroll Deduction Period immediately subsequent to the
Offering Period.
(l) "Option Price" shall mean the lesser of:
(i) Eighty-five percent (85%) of the fair market value of
the stock on the date the option was granted, the first day of
the Offering Period, or
(ii) Eighty-five percent (85%) of the fair market value of the
stock on the Exercise Date.
For these purposes, the fair market value of the stock on any
given date shall be determined by taking the closing price on such date of such
stock, as reported on the New York Stock Exchange ("NYSE") (or if there shall be
no trading on such date, then on the first previous date on which there is such
trading).
(m) "Participant" shall mean an Employee or former Employee to
whom an option has been granted hereunder and who has elected to participate
herein by authorizing payroll deductions.
(n) "Payroll Deduction Account" shall mean that separate account
maintained hereunder to record the amount of a Participant's wages that have
been withheld hereunder.
(o) "Payroll Deduction Period" shall mean the period January 1st
through December 31st, except that, the initial Payroll Deduction Period shall
be the period July 1, 1996 to December 31, 1996. Notwithstanding the foregoing,
the Payroll Deduction Period with respect to a given Participant shall end on
the date that the Participant receives his last paycheck from the Employer after
his employment with the Employer terminates.
-2-
<PAGE>
(p) "Plan" shall mean the BancTec, Inc. 1996 Employee Stock
Purchase Plan, as embodied herein and as amended from time to time.
(q) "Plan Year" shall mean each calendar year, which calendar
year shall be the Plan's fiscal year.
Section 2.2 Word Usage. Except when otherwise indicated by the
----------
context, any masculine terminology used herein also includes the feminine and
neuter, and vice versa, and the singular shall also include the plural, and vice
versa. The words "hereof", "herein" and "hereunder", and other similar compounds
of the word "here" shall mean and refer to the entire Plan and not to any
particular provision or section. All references to Sections or Articles shall
mean and refer to Sections and Articles contained in this Plan unless otherwise
indicated.
Section 2.3 Construction. It is the intention of the Company that
------------
the Plan be qualified as an employee stock purchase plan under the provisions of
Section 423 of the Code, and all provisions shall be construed to that result.
Moreover, the provisions of the Plan shall apply only to an Employee who is in
the employ of the Company on or after the Effective Date.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
Section 3.1 Eligibility. Options may be granted under the Plan
-----------
only to eligible Employees. An eligible Employee is any Employee whose customary
employment with the Company is at least twenty (20) hours per week and more than
five (5) months in any calendar year and who has or will have completed ninety
(90) continuous days of employment with the Company by the first day of the
Payroll Deduction Period.
Section 3.2 Election to Participate. Any Employee who is eligible
-----------------------
to participate herein may become a Participant by filing a written election to
participate with the Administration Committee and by authorizing payroll
deductions during the Offering Period under Section 4.1. An Employee may elect
to participate for less than the maximum number of shares to which he is
entitled by authorizing a payroll deduction under Section 4. 1 of a percentage
of Compensation less than the percentage determined by the Board of Directors
under Section 5.1(b).
Section 3.3 Waiver of Participation. An Employee who is otherwise
-----------------------
eligible to participate herein may waive his right to participate for any
Payroll Deduction Period by declining to authorize a payroll deduction. Such
declination must be filed in writing with the Administration Committee in the
time and manner specified thereby. The filing of a written declination shall
result in the Employee's waiver of participation only for the Payroll Deduction
Period to which it relates and shall be irrevocable with respect to such Payroll
Deduction Period. An Employee's waiver of participation for a specified Payroll
Deduction Period shall not, in and of itself, adversely impact the right of such
Employee to participate in the Plan during any subsequent Payroll Deduction
Period except those with respect to which he
-3-
<PAGE>
files additional written declinations with the Administration Committee in
accordance with the provisions of this Section 3.3.
ARTICLE IV
PAYROLL DEDUCTION AUTHORIZATION
Section 4.1 Payroll Deductions. Each Employee who is eligible and
------------------
elects, pursuant to Article III, to participate herein and who is granted
options pursuant to Section 5.1, shall authorize the making of payroll
deductions to fund the purchase of the stock he may purchase pursuant to the
option granted to him hereunder. Deductions shall be made at the regular payroll
periods applicable to the Participant and shall be credited to the Participant's
Payroll Deduction Account. A Participant may not make any additional payments
into such account. The authorized payroll deduction shall continue in effect for
the Payroll Deduction Period and for each subsequent Payroll Deduction Period,
except to the extent such rate is changed in accordance with the terms of the
Plan.
(a) Amount of Payroll Deductions. Subject to such dollar or
----------------------------
percentage limitations during an Offering Period as the Board of Directors shall
determine, if any, and to the restrictions of Section 5.3, a Participant may
authorize payroll deductions in an amount of not less than one percent (1%) nor
more than ten percent (10%) (in multiples of one percent (1%)) of his
Compensation for the Payroll Deduction Period.
(b) Change in Authorization. Except to the extent provided in
-----------------------
Section 4.1(c), a Participant may not vary the amount of his payroll deduction
for any Payroll Deduction Period. He may, by notice to the Administration
Committee, elect to change his payroll deduction rate, within the limits
specified in subsection (a) of this Section 4.1, during the immediately
following Offering Period, effective for the immediately following Payroll
Deduction Period.
(c) Discontinuance of Payroll Deductions. A Participant may
------------------------------------
revoke his payroll deduction authorization effective on the first day of any pay
period by filing a notice thereof with the Administration Committee at least
twenty (20) days in advance of the effective date of such revocation. Upon
discontinuance of payroll deductions, a Participant may withdraw the total
amount credited to his Payroll Deduction Account in accordance with the
provisions of Sections 4.2 and 4.3, or he may file written notice of his intent
to allow the funds in his Payroll Deduction Account to remain in such Account
until the Exercise Period, at which time he may elect to exercise the option in
whole or in part, in accordance with Section 5.5.
(d) Automatic Change or Discontinuance of Payroll Deductions. The
--------------------------------------------------------
Administration Committee may unilaterally change or discontinue a Participant's
payroll deduction authorization if necessary to satisfy the restrictions of
Section 5.3 or otherwise to satisfy the requirements of the Plan or Section 423
of the Code.
Section 4.2 Withdrawal of Payroll Deduction Account.
---------------------------------------
-4-
<PAGE>
(a) As of the effective date that a Participant discontinues his
payroll deduction he may withdraw the balance credited to his Payroll Deduction
Account by filing a written request therefor with the Administration Committee.
(b) Notwithstanding anything contained herein to the contrary,
any amounts remaining credited to a Participant's Payroll Deduction Account on
the last day of the Payroll Deduction Period, after taking into account the
exercise of an option, in whole or in part, if any, shall be refunded to the
Participant; except that, any payroll deductions not applied to the purchase of
shares of stock on any Exercise Date because they are not sufficient to purchase
a whole share of stock shall be held for the purchase of stock on the next
Exercise Date.
(c) Notwithstanding anything contained herein to the contrary,
any amounts remaining credited to a Participant's Payroll Deduction Account on
the day a Participant's employment with the Company terminates for any reason
shall be refunded to the Participant.
Section 4.3 Forfeiture of Right to Deduct. In the event a
-----------------------------
Participant revokes his payroll deduction authorization and withdraws the amount
credited to his Payroll Deduction Account, he shall not be permitted to
redeposit such sum at a later date, nor shall he be permitted to resume payroll
deductions until the first day of the immediately following Payroll Deduction
Period.
Section 4.4 Forfeiture of Right to Exercise Options. In the event
---------------------------------------
of a withdrawal by a Participant of the amount credited to his Payroll Deduction
Account, the Participant shall forfeit all rights to any option granted to him
with respect to the withdrawn amounts.
Section 4.5 Subsequent Participation. A Participant who revokes
------------------------
his payroll deduction authorization will not participate in any subsequent
offering until he has filed a new election with regard to such offering.
ARTICLE V
OPTIONS
Section 5.1 Grant of Options. For each Plan Year, unless the
----------------
Board of Directors determines otherwise, the Administration Committee shall make
an offering under which options to purchase Company stock are granted to all
Employees eligible to participate in the Plan pursuant to Section 3.1. Except as
provided in Sections 5.1(b) and 5.3 of the Plan, all Employees granted options
under the Plan shall have the same rights and privileges.
(a) Date of Grant. All options granted hereunder shall be granted
-------------
on the same date, which date shall be the first day of the Offering Period.
(b) Amount of Grant. Subject to the restrictions of Section 5.3,
---------------
each Employee who is eligible to participate herein and to whom the offering is
to be made shall be granted an option to purchase up to that number of whole
shares of Company stock which can be purchased at the Option Price with an
amount equal to such percentage of an Employee's Compensation, as the Board of
Directors determines, for the annual offering, but not to exceed ten percent
(10%) of an Employee's Compensation for the Plan Year.
-5-
<PAGE>
(c) Number of Shares. The number of shares of stock purchasable
----------------
by a Participant on each Exercise Date shall be the number of whole shares,
subject to Section 5.3(a), obtained by dividing the amount collected from the
Participant through payroll deduction during the Payroll Deduction Period ending
with that Exercise Date (together with any carryover deductions from the
preceding purchase period) by the Option Price in effect for that Exercise Date.
Section 5.2 Stock Subject to Plan. The stock purchased under the
---------------------
Plan shall be either authorized and unissued shares or issued shares heretofore
or hereafter reacquired by the Company. Further, if for any reason any option
granted under the Plan terminates, in whole or in part, without being exercised
in full, shares subject to such terminated option which have not been exercised
may be subjected to a new option under the Plan.
(a) Maximum Number of Shares. Options may not be granted
-------------------------
hereunder pursuant to which more than 500,000shares of Company stock may be
purchased.
(b) Adjustments Upon Changes in Capitalization. Notwithstanding
------------------------------------------
the foregoing provision, in the event of any change in the number or kind of
outstanding shares of Company stock subject to options hereunder effected
without receipt of consideration therefor by the Company, by reason of a stock
dividend, stock split, combination, exchange of shares or other
recapitalization, merger, or otherwise, in which the Company is the surviving
corporation, an appropriate and proportionate adjustment shall be made in the
number or kind of shares as to which options are or may be granted hereunder. A
corresponding adjustment changing the number or kind of shares allocated to
unexercised options or portions thereof, which shall have been granted prior to
any such change, shall likewise be made. Any such adjustment, however, in the
outstanding options shall be made without change in the total price applicable
to the unexercised portion of the option but with a corresponding adjustment, if
appropriate, in the price for each share of stock covered by the option. In the
event of a dispute concerning such adjustment, the decision of the
Administration Committee shall be conclusive. The number of shares subject to
any option granted hereunder shall be automatically reduced by any fraction
included therein which results from any adjustment made pursuant to this Section
5.2(b).
(c) Transfer of Control. Further, in the event of a sale of all
-------------------
or substantially all of the assets of the Company; a merger or consolidation
(other than a merger effecting a reincorporation of the Company in another state
or any other merger or a consolidation in which the stockholders of the
surviving corporation and their proportionate interests therein immediately
after the merger or consolidation are substantially identical to the
stockholders of the Company and their proportionate interests therein
immediately prior to the merger or consolidation) in which the Company is not
the surviving corporation; or any other transaction or series of transactions
resulting in a person or entity becoming the owner of 50% or more of the total
combined voting power of all classes of stock of the Company, then the Company
shall, at its option, either (i) substitute for the shares subject to the
unexercised portions of such outstanding options an appropriate number of shares
of each class of stock or other securities of the reorganized or merged or
consolidated corporation which were distributed to the stockholders of the
Company with respect to such shares (or, as appropriate, in the case of an
acquisition of the Company by another corporation, substitute the shares of the
acquiring corporation for the shares of the Company), or (ii) cancel all such
options as of the effective
-6-
<PAGE>
date of any such transaction by giving notice to each holder thereof or his
personal representative of its intention to do so and by permitting the exercise
of all such outstanding options, without regard to any other provisions of the
Plan, during the 30-day period immediately preceding such effective date, or
(iii) allow the options granted under the Plan to remain outstanding without any
modifications or amendments.
Section 5.3 Limitations on Grant of Options. Notwithstanding any
-------------------------------
provision contained herein to the contrary,
(a) No Employee shall be granted an option hereunder which
permits him rights to purchase stock under the Plan in excess of 500 shares for
each Offering Period in which such option is outstanding at any time;
(b) No option shall be granted to an Employee hereunder if,
immediately after such option is granted, such Employee owns stock totaling five
percent (5%) or more of the total combined voting power or value of all classes
of stock of the Company, computed in accordance with Section 423(b)(3) of the
Code; and
(c) No Employee shall be granted an option hereunder which
permits his rights to purchase stock under the Plan and under all other employee
stock purchase plans (within the meaning of Section 423 of the Code) of the
Company to accrue at a rate which exceeds $25,000 (or such other rate as may be
prescribed from time to time by the Code) of fair market value of Company stock
(determined at the time such option is granted) for each calendar year in which
such option is outstanding at any time, in accordance with the provisions of
Section 423(b)(8) of the Code.
(d) Should the total number of shares of stock which are to be
purchased pursuant to outstanding purchase rights on any particular date exceed
the number of shares then available for issuance under the Plan, the
Administration Committee shall make a pro-rata allocation of the available
shares on a uniform and nondiscriminatory basis, and the payroll deductions of
each Participant, to the extent in excess of the aggregate purchase price
payable for the stock pro-rated to such individual, shall be refunded.
Section 5.4 Expiration of Options. The expiration date of options
---------------------
granted hereunder shall be the last day of the Payroll Deduction Period with
respect to which the options are granted hereunder.
Section 5.5 Exercise of Options. The option granted to a
-------------------
Participant may be exercised in accordance with the following:
(a) By Participant While Employed. At any time during the
-----------------------------
Exercise Period, a Participant may exercise his option, in whole or in part, by
delivering written notice of exercise to the Administration Committee or its
agent, in such form and in such manner as the Administration Committee shall
prescribe. Such written election shall become irrevocable on the Exercise Date.
If a Participant exercises his option in part, his option shall thereupon
terminate and become void to the extent of the part not exercised.
If, on the last day of the Exercise Period, a Participant has not
exercised his option in whole or in part and has not filed a written notice of
election not to exercise with the
-7-
<PAGE>
Administration Committee or its agent, such Participant shall be deemed to have
exercised his option in full on the last day of the Exercise Period.
The balance credited to a Participant's Payroll Deduction
Account, after exercising his option, or after electing not to exercise such
option, shall be paid to him in cash, except to the extent that any amount may
be carried over to the next Exercise Date as provided in Section 4.2(b).
(b) By Participant After Termination of Employment. If a
----------------------------------------------
Participant's employment with the Employer terminates for any reason, his option
hereunder shall immediately terminate and become void, and the amount credited
to such Participant's Payroll Deduction Account shall be paid to him in cash.
Section 5.6 Payment for Shares. Upon the exercise of an option,
------------------
the shares of stock shall be paid for in full by the transfer of the purchase
price from the amount credited to the Participant's Payroll Deduction Account to
an account of the Employer. The Participant or his personal representative, if
applicable, may purchase all or a part of the number of full shares which the
balance credited to the Participant's Payroll Deduction Account is sufficient to
purchase. Any balance credited to the Participant's Payroll Deduction Account
shall be paid to the Participant in cash except to the extent that any amount
may be carried over to the next Exercise Date as provided in Section 4.2(b).
Section 5.7 Transfer of Shares Upon Exercise. The shares of
--------------------------------
Company stock purchased by a Participant pursuant to the exercise of an option
hereunder shall be issued or transferred to him on the books of the Company on
the Exercise Date. Until such time, the Participant shall have none of the
rights and privileges of a stockholder in the Company with respect to shares of
stock subject to an option under the Plan. As soon as practical after the
Exercise Date, each Participant who purchases shares of Company stock will
receive a report of such Participant's account setting forth the total payroll
deductions accumulated, the number of shares purchased and the remaining cash
balance to be refunded or retained in the Participant's account, if any.
Section 5.8 Transfer of Options. No option granted under the Plan
-------------------
may be transferred except by will or the laws of descent and distribution and,
during the lifetime of the Participant to whom granted, may be exercised only by
such Participant.
Section 5.9 Modification, Extension and Renewal of Options.
-----------------------------------------------
Subject to the terms and conditions and within the limitations of the Plan and
Section 423 of the Code, the Administration Committee may modify, extend or
renew outstanding options granted under the Plan or accept the surrender of
options outstanding hereunder (to the extent not theretofore exercised) and
authorize the granting of a new option hereunder in substitution for an old
option (to the extent not theretofore exercised). However, no modification of an
option granted hereunder shall, without the consent of the Participant, alter or
impair any rights or obligations under any option theretofore granted hereunder
to such Participant under the Plan.
ARTICLE VI
ADMINISTRATION COMMITTEE
-8-
<PAGE>
Section 6.1 Appointment of Committee. The Administration
------------------------
Committee shall be comprised of all members of the Board of Directors who are
not Employees of the Company.
(a) Interested Member. Notwithstanding anything contained
------------------
herein to the contrary, no member of the Administration Committee shall be
eligible to participate in the Plan at any time during his term as a member of
the Administration Committee.
(b) Term. Each member of the Administration Committee shall serve
----
until his successor is appointed. Any member of the Administration Committee may
be removed by the Board of Directors, with or without cause, which shall have
the power to fill any vacancy which may occur.
(c) Compensation. The members of the Administration Committee
------------
shall serve without compensation for services as such, but the Company shall pay
all expenses of the Administration Committee.
Section 6.2 Powers of Administration Committee. The
----------------------------------
Administration Committee shall have the following powers and duties:
(a) To direct the administration of the Plan in accordance with
the provisions herein set forth;
(b) To adopt rules of procedure and regulations necessary for the
administration of the Plan, provided the rules are not inconsistent with the
terms of the Plan;
(c) To determine all questions with regard to rights of Employees
and Participants under the Plan, including, but not limited to, rights of
eligibility of an Employee to participate in the Plan and the amount of a
Participant's option;
(d) To enforce the terms of the Plan and the rules and
regulations it adopts;
(e) To direct the distribution of the shares of Company stock
purchased pursuant to the exercise of an option granted hereunder;
(f) To furnish the Employer with information which the Employer
may require for tax or other purposes;
(g) To engage the service of counsel (who may, if appropriate, be
counsel for the Company) and agents whom it may deem advisable to assist it with
the performance of its duties;
(h) To prescribe procedures to be followed by Participants in
exercising options;
(i) To receive from the Employer and from Employees such
information as shall be necessary for the proper administration of the Plan;
(j) To maintain, or cause to be maintained, separate Accounts in
the name of each Participant to reflect the Participant's Payroll Deduction
Account under the Plan;
-9-
<PAGE>
(k) To select a secretary, who need not be a member of the
Administration Committee; and
(l) To interpret and construe the Plan.
Section 6.3 Manner of Action. The decision of a majority of the
----------------
members of the Administration Committee appointed and qualified shall control.
In case of a vacancy in the membership of the Administration Committee, the
remaining members of the Committee may exercise any and all of the powers,
authorities, duties and discretion conferred upon the Administration Committee
pending the filling of a vacancy. The Administration Committee may, but need
not, call or hold formal meetings. Any decisions made or action taken pursuant
to written approval of a majority of the then members shall be sufficient. The
Administration Committee shall maintain adequate records of its decisions.
Section 6.4 Authorized Representative. The Administration
-------------------------
Committee may authorize any one of its members, or its secretary, to sign on its
behalf any notices, directions, applications, certificates, consents, approvals,
waivers, letters or other documents.
Section 6.5 Nondiscrimination. The Administration Committee
-----------------
shall administer the Plan in a uniform and nondiscriminatory manner.
Section 6.6 Books and Records. The Administration Committee shall
-----------------
maintain, or cause to be maintained, records which will adequately disclose at
all times the options which have been granted, to whom they have been granted,
the status of the options and the number of shares of Company stock which are
subject to options. The books, forms and methods of accounting shall be the
responsibility of the Administration Committee.
ARTICLE VII
AMENDMENT AND TERMINATION
Section 7.1 Amendment. The Company shall have the right at any
---------
time and in any manner to amend, alter or suspend the Plan.
Section 7.2 Termination. The Company shall have the right to
-----------
terminate the Plan at any time.
Section 7.3 No Alteration of Rights. Notwithstanding the
-----------------------
foregoing provisions of this Article VII, the Company shall not amend, alter,
suspend or terminate the Plan in any way which would adversely affect any
Participant's rights under any option then outstanding under the Plan.
-10-
<PAGE>
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Execution of Receipts and Releases. Any payment or
----------------------------------
any issuance or transfer of shares of Company stock to any Participant, or to
his legal representative, heirs, legatee or distributee, in accordance with the
provisions of the Plan, shall to the extent thereof be in full satisfaction of
all claims hereunder against the Plan. The Administration Committee may require
such Participant, legal representative, heir, legatee or distributee, as a
condition precedent to such payment, to execute a receipt and release therefor
in such form as it shall determine.
Section 8.2 Plan Funds. To the extent permitted by law, all
----------
amounts held by the Company for an Employee in Payroll Deduction Accounts under
the Plan may be used for any corporate purpose of the Company.
Section 8.3 No Guarantee of Interests. Neither the Administration
-------------------------
Committee nor the Employer guarantees the Company stock from loss or
depreciation.
Section 8.4 Payment of Expenses. All expenses incident to the
-------------------
design, establishment, administration, termination or protection of the Plan,
including, but not limited to, legal and accounting fees, shall be paid by the
Company or appropriate Employer.
Section 8.5 Employer Records. Records of the Employer as to an
----------------
Employee's or Participant's period of employment, termination of employment and
the reason therefor, leaves of absence, re-employment and Compensation will be
conclusive on all persons, unless determined to be incorrect.
Section 8.6 Interpretations and Adjustments. To the extent
-------------------------------
permitted by law, an interpretation of the Plan and a decision on any matter
within the Administration Committee's discretion made in good faith is binding
on all persons. A misstatement or other mistake of fact shall be corrected when
it becomes known and the person responsible shall make such adjustment on
account thereof as he considers equitable and practicable.
Section 8.7 Uniform Rules. In the administration of the Plan,
--------------
uniform rules will be applied to all Participants similarly situated.
Section 8.8 No Rights Implied. Nothing contained in the Plan or
-----------------
any modification or amendment to the Plan or in the creation of any Payroll
Deduction Account, or the issuance of any option or shares of Company stock
pursuant to such option, shall give any Employee or Participant any right to
continue employment, any legal or equitable right against the Company, any other
Employer, or any officer, director or Employee of the Company or any Employer,
except as expressly provided by the Plan.
Section 8.9 Information. The Employer shall, upon request or as
-----------
may be specifically required hereunder, furnish or cause to be furnished, all of
the information or documentation which is necessary or required by the
Administration Committee to perform its duties and functions under the Plan. The
Employer's records as to the current information the Employer furnishes to the
Administration Committee shall be conclusive as to all persons, unless
determined to be incorrect.
-11-
<PAGE>
Section 8.10 No Liability. The Employer assumes no obligation or
------------
responsibility to any of the Employees, Participants, or personal
representatives, heirs, legatees or distributees for any act of, or failure to
act, on the part of the Administration Committee.
Section 8.11 No Liability for Good Faith Determinations. Neither
------------------------------------------
the members of the Board of Directors nor any member of the Administration
Committee shall be liable for any act, omission or determination taken or made
in good faith with respect to the Plan or any option granted under it, and
members of the Board of Directors and the Administrative Committee shall be
entitled to indemnification and reimbursement by the Company in respect of any
claim, loss, damage or expense (including attorneys' fees, the costs of settling
any suit, provided such settlement is approved by legal counsel selected by the
Company, and amounts paid in satisfaction of a judgment, except a judgment based
on a finding of bad faith) arising therefrom to the full extent permitted by law
and under any directors and officers liability or similar insurance coverage
that may from time to time be in effect.
Section 8.12 Company Action. Any action required of the Company
--------------
or any Employer shall be by resolution of its Board of Directors or by a person
authorized to act by board resolution.
Section 8.13 Severability. In the event any provision of the
------------
Plan shall be held to be illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining provisions of the Plan, but shall be
fully severable and the Plan shall be construed and enforced as if the illegal
or invalid provision had never been included herein.
Section 8.14 Notice. Any notice required to be given herein by
------
the Employer or the Administration Committee shall be deemed delivered, when (a)
personally delivered or (b) placed in the United States mails, in an envelope
addressed to the last known address of the person to whom the notice is given.
Section 8.15 Waiver of Notice. Any person entitled to notice
----------------
under the Plan may waive the notice.
Section 8.16 Successors. The Plan shall be binding upon all
----------
persons entitled to options under the Plan, their respective heirs, legatees and
legal representatives, upon the Employer, its successors and assigns, and upon
the Administration Committee and their successors.
Section 8.17 Headings. The titles and headings of Articles and
--------
Sections are included for convenience of reference only and are not to be
considered in construction of the provisions hereof.
Section 8.18 Governing Law. All questions arising with respect to
-------------
the provisions of this Plan shall be determined by application of the laws of
the State of Texas except to the extent Texas law is preempted by Federal
statute. The obligation of the Company to sell and deliver stock under the Plan
is subject to applicable laws and to the approval of any governmental authority
required in connection with the authorization, issuance, sale or delivery of
such stock.
-12-
<PAGE>
EXHIBIT 11.1
BANCTEC, INC.
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
TWELVE MONTHS NINE MONTHS FISCAL YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 26,
1996 1995 1995
------------- ------------ -------------
<S> <C> <C> <C>
PRIMARY:
Net income (loss).................. $37,101,000 $(53,481,000) $ (15,608,000)
----------- ------------ -------------
Shares outstanding beginning of
period............................ 19,918,735 19,681,429 19,634,486
Weighted average number of shares
repurchased or held in treasury
stock during the year............. (29,936) (29,936) (265,603)
Shares issued during the year 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........ 790,149 663,106 980,710
----------- ------------ -------------
Weighted average number of shares
outstanding as adjusted........... 20,678,948 20,314,599 20,349,593
----------- ------------ -------------
Primary net income (loss) per
common and common equivalent
share............................. $ 1.79 $ (2.63) $ (0.77)
=========== ============ =============
FULLY DILUTED:
Net income (loss).................. $37,101,000 $(53,481,000) $ (15,608,000)
Add after tax interest expense
applicable to the 7 1/4%
convertible subordinated
debentures........................ 2,100,000 2,126,000 2,835,000
----------- ------------ -------------
Net income (loss), as adjusted..... $39,201,000 $(51,355,000) $ (12,773,000)
=========== ============ =============
Shares outstanding beginning of
period............................ 19,918,735 19,681,429 19,634,486
Weighted average number of shares
repurchased or held in treasury
stock during the year........... (29,936) (29,936) (265,603)
Shares issued during the year and
shares issuable 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........ 844,399 696,416 980,710
----------- ------------ -------------
Weighted average number of shares
outstanding as adjusted excluding
7 1/4% convertible subordinated
debentures........................ 20,733,198 20,347,909 20,349,593
=========== ============ =============
Fully diluted income(loss) per
common and common equivalent share
excluding 7 1/4% convertible
subordinated debentures........... $ 1.79 $ (2.63) $ (0.77)
----------- ------------ -------------
Weighted average shares issuable
assuming conversion of the 7 1/4%
convertible subordinated
debentures........................ 1,588,241 1,821,920 1,821,920
Weighted average number of shares
outstanding as adjusted........... 22,321,439 22,169,829 22,171,513
----------- ------------ -------------
Fully diluted net income (loss) per
common and common equivalent
share............................. $ 1.76 $ (2.32) $ (0.58)
=========== ============ =============
</TABLE>
46
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF BANCTEC, INC.
1. BancTec USA, Inc., a Delaware corporation.
2. BancTec (Management), Inc., a Delaware corporation.
3. BancTec (Export), Inc., a Virgin Islands corporation.
4. BancTec (Puerto Rico), Inc., a Delaware corporation.
5. BancTec (Canada), Inc., a Canadian corporation.
6. BancTec Limited, a U.K. corporation.
7. BancTec (Australia) Pty Limited, an Australian corporation.
8. BancTec Japan, Inc., a Delaware corporation.
9. BancTec Holding N.V., a Netherlands corporation
BancTec GmbH, a German corporation.
BancTec S.A., a French corporation.
BancTec B.V., a Dutch corporation.
BancTec AB, a Swedish corporation.
BancTec Danmark A/S, a Danish corporation.
BancTec Iberica S.A., a Spanish corporation.
47
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports dated February 20, 1997, included in this Form 10-K, into the
Company's previously filed Registration Statement Form S-3 (No. 33-28942);
Registration Statement Form S-8 (No. 33-28939); Registration Statement Form S-
8 (No. 29163); Registration Statement Form S-8 (No. 33-32824); Registration
Statement Form S-3 (No. 33-35988); Registration Statement Form S-8 (No. 33-
37377), Registration Statement Form S-3 (No. 33-49918); Registration Statement
Form S-8 (No. 33-71114) and Registration Statement Form S-8 (33-58335).
Arthur Andersen LLP
Dallas, Texas,
March 26, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTS
We hereby consent to the use of our report dated December 7, 1994, relating
to the financial statements of Recognition International Inc. and its
subsidiaries, which report appears on page 16 of this BancTec, Inc. Annual
Report of Form 10-K for the year ended December 31, 1996, which Form 10-K we
understand has in turn been incorporated by reference into BancTec's
previously filed Registration Statement Form S-3 (No. 33-28942); Registration
Statement Form S-8 (No. 33-28939); Registration Statement Form S-8 (No.
29163); Registration Statement Form S-8 (No. 33-32824); Registration Statement
Form S-3 (No. 33-35988); Registration Statement Form S-8 (No. 33-37377);
Registration Statement Form S-3 (No. 33-49918); Registration Statement Form S-
8 (No. 33-71114); and Registration Statement S-8 (No. 33-58335). We also
consent to the use of our report on the Financial Statement Schedules, which
report appears on page 44 of this Form 10-K.
Price Waterhouse, LLP
Dallas, Texas
March 26, 1997
1
<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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 MAR-26-1995
<PERIOD-END> DEC-31-1996 DEC-31-1995
<CASH> 22,872 22,010
<SECURITIES> 4,203 4,864
<RECEIVABLES> 144,765 117,760
<ALLOWANCES> (9,627) (11,571)
<INVENTORY> 83,320 72,442
<CURRENT-ASSETS> 274,835 231,378
<PP&E> 218,732 217,078
<DEPRECIATION> (131,579) (137,033)
<TOTAL-ASSETS> 467,295 440,348
<CURRENT-LIABILITIES> 187,032 188,780
<BONDS> 65,891 82,972
0 0
0 0
<COMMON> 208 199
<OTHER-SE> 204,512 156,002
<TOTAL-LIABILITY-AND-EQUITY> 467,295 440,348
<SALES> 554,002 383,984
<TOTAL-REVENUES> 554,002 383,984
<CGS> 391,270 322,503
<TOTAL-COSTS> 391,270 322,503
<OTHER-EXPENSES> 98,647 125,452
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,927 7,309
<INCOME-PRETAX> 57,970 (70,715)
<INCOME-TAX> 20,869 (17,234)
<INCOME-CONTINUING> 37,101 (53,481)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 37,101 (53,481)
<EPS-PRIMARY> 1.79 (2.63)
<EPS-DILUTED> 1.76 (2.32)
</TABLE>
