<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended August 31, 1996
Commission File No. 0-10823
-------
BCT INTERNATIONAL, INC.
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Delaware 22-2358849
--------------------------- ------------------------
(State of Incorporation) (I.R.S. Employer
Identification Number)
3000 NE 30th Place, 5th Floor, Fort Lauderdale, FL 33306
- -------------------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954) 563-1224
--------------
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 .
------- ----
Number of shares of common stock outstanding as of
October 7, 1996: 5,281,796
<PAGE>
BCT INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
<S> <C>
CONDENSED CONSOLIDATED BALANCE SHEETS-
August 31, 1996 and February 29, 1996 ......................................... 2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -
for the six months ended August 31, 1996 and August 31, 1995 and
the three months ended August 31, 1996 and August 31, 1995...................... 3
COMPUTATION OF EARNINGS (LOSS) PER SHARE - for the six months
ended August 31, 1996 and August 31, 1995 and the three months
ended August 31, 1996 and August 31, 1995....................................... 4
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY - for the six months ended
August 31, 1996................................................................. 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -
for the six months ended August 31, 1996 and August 31, 1995.................... 6
Notes to Condensed Consolidated Financial Statements............................ 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................... 8-9
PART II. OTHER INFORMATION AND SIGNATURES
Signatures...................................................................... 10
</TABLE>
<PAGE>
PART I. FINANCIAL STATEMENTS
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(000's omitted)
<TABLE>
<CAPTION>
ASSETS August 31, 1996 February 29, 1996
- ------ --------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalent $ 915 $ 923
Short-term investments --- 50
Accounts and notes receivable, net of allowance for
doubtful accounts of $729 ($408 in fiscal 1996) 2,185 2,023
Receivables from employees 2 5
Inventory, net of reserve of $180 ($105 in fiscal 1996) 2,379 2,201
Assets held for sale, net --- 281
Prepaid expenses and other current assets 132 58
Net deferred tax asset 303 211
-------- --------
Total current assets 5,916 5,752
Accounts and notes receivable, net of allowance
for doubtful accounts of $580 ($505 in fiscal 1996) 2,126 1,597
Property and equipment, less allowance for depreciation
and amortization of $601 ($500 in fiscal 1996) 1,041 1,014
Net deferred tax asset 1,563 1,604
Deposits and other assets 94 118
Trademark, net of accumulated amortization of $31 ($29 in 1996) 162 165
Intangible assets, net of accumulated amortization of $348 ($283 in 1996) 459 488
-------- --------
$ 11,361 $ 10,738
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 1,312 $ 687
Notes payable 101 64
Accrued liabilities 281 181
Deferred revenue 316 187
-------- --------
Total current liabilities 2,010 1,119
Notes payable 235 5
-------- --------
Total liabilities 2,245 1,124
-------- --------
Minority stockholder interest (28) (20)
-------- --------
Preferred stock, Series A, 12% cumulative, $1 par value,
mandatorily redeemable, 810 shares authorized, 260 shares
issued and outstanding 260 260
-------- --------
Stockholders' equity:
Common stock, $.04 par value, 25,000 shares authorized,
5,271 shares issued and outstanding (5,164 shares in fiscal 1996) 210 207
Paid in capital 11,779 11,659
Accumulated deficit (2,546) (1,991)
-------- --------
9,443 9,875
Less: Treasury Stock, at cost, 251 shares (226 shares in fiscal 1996) (559) (501)
-------- --------
Total stockholders' equity 8,884 9,374
-------- --------
$ 11,361 $ 10,738
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(000's omitted, except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
August 31 August 31
1996 1995 1996 1995
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Gross revenues $9,146 $8,500 $4,386 $4,542
Cost of sales 4,810 4,420 2,403 2,382
------ ------ ------ ------
4,336 4,080 1,983 2,160
Selling and administrative expense 5,014 3,368 2,540 1,859
------ ------ ------ ------
Income (loss) before income taxes (678) 712 (557) 301
Income tax (benefit) expense (138) 176 (108) 70
------ ------ ------ ------
Net (loss) income $ (540) $ 536 $ (449) $ 231
======= ====== ====== ======
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
BCT INTERNATIONAL, INC.
COMPUTATION OF EARNINGS (LOSS) PER SHARE
(UNAUDITED)
(000's omitted, except for per share amounts)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
August 31 August 31
1996 1995 1996 1995
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Primary:
Average number of
shares outstanding 4,973 4,569 4,983 4,569
Common stock equivalents --- 935 --- 1,668
------ ------ ------ ------
Totals 4,973 5,504 4,983 6,237
====== ====== ------ ======
Fully diluted:
Average number of
shares outstanding 4,973 4,569 4,983 4,569
Common stock equivalents
and dilutive securities --- 1,445 --- 1,481
====== ------ ------ ------
Totals 4,973 6,014 4,983 6,050
====== ====== ====== ======
Earnings (loss) per common
- --------------------------
share:
- ------
Net (loss) income:
Primary $ (.09) $ .07 $ (.07) $ .02
====== ====== ====== ======
Fully diluted $ (.09) $ .07 $ (.07) $ .02
====== ====== ====== ======
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED AUGUST 31, 1996
(UNAUDITED)
000's omitted
-------------
<TABLE>
<CAPTION>
Common Stock
--------------------- Less:
Number of Par Paid In Accumulated Treasury
Shares Value Capital Deficit Stock Total
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance February 29, 1996 5,164 $207 $11,659 $( 1,991) $ (501) $9,374
Exercise of options 107 3 105 --- --- 108
Issuance of warrants --- --- 19 --- --- 19
Purchase of common stock
held by employee --- --- --- --- (58) (58)
Registration costs --- --- (4) --- --- (4)
Net loss --- --- --- (540) --- (540)
Dividend declared on convertible
preferred stock --- --- --- (15) --- (15)
-------- -------- -------- -------- -------- ------
Balance August 31, 1996 5,271 $210 $11,779 $ 2,546 $ (559) $8,884
======== ======== ======== ======== ========= ======
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(000's omitted)
<TABLE>
<CAPTION>
Six months ended
August 31
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (540) $ 536
------- --------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Income tax benefit (160) (144)
Income tax expense 22 320
Depreciation and amortization 233 145
Cost assigned to warrants issued 19 19
Provision for doubtful accounts 396 ---
(Increase) in accounts and notes receivable (688) (1,139)
(Increase) in inventory (178) (312)
Decrease in assets held for sale 232 50
(Increase) in prepaid expenses and other assets (74) (91)
Decrease (increase) in deposits and other assets 24 (7)
Increase (decrease) in accounts payable and
accrued liabilities 725 (879)
Increase in deferred revene 129 ---
------- --------
Total adjustments 680 (266)
------- --------
Net cash provided by operating activities 140 270
------- --------
Cash flows from investing activities:
Increase (decrease) in short-term investments 50 (400)
Capital expenditures (178) (292)
------- --------
Net cash (used) by investing activities (128) (692)
------- --------
Cash flows from financing activities:
Dividend payments on preferred stock (16) (48)
Principal payments on notes payable (53) (149)
Exercise of options for common stock 49 ---
------- --------
Net cash (used) by financing activities (20) (197)
------- --------
Net (decrease) in cash and cash equivalents (8) (619)
------- --------
Cash and cash equivalents at beginning of period 923 1,299
------- --------
Cash and cash equivalents at end of period $ 915 $ 680
======= ========
Interest paid $ 21 $ 6
======= ========
Income taxes paid $ 28 $ 12
======= ========
</TABLE>
Noncash Activities:
- ------------------
During the second quarter ended August 31, 1996, the Company negotiated a $138
reduction of a note payable, which originated in fiscal 1996 in connection with
the acquisition of a Company Plant. The agreement resulted in a corresponding
reduction to Goodwill.
See notes to condensed consolidated financial statements.
6
<PAGE>
BCT INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(000's omitted)
August 31, 1996
---------------
1. In the opinion of management, the foregoing unaudited condensed
consolidated financial statements contain all normal recurring adjustments
necessary to present fairly the financial position of the Company as of
August 31, 1996.
2. The results for the six month and three month periods ended August 31, 1996
and 1995, are not necessarily indicative of results that may be expected
for the fiscal year.
3. Primary earnings per common share are calculated by dividing net earnings
applicable to common stock by the weighted average number of shares of
common stock outstanding and common stock equivalents, which consist of
stock options and warrants. On a fully-diluted basis, net earnings,
weighted average shares outstanding and common stock equivalents are
adjusted to assume the conversion of preferred stock from the date of
issue. For the six and three month periods ended August 31, 1996, primary
and fully-diluted earnings per common share do not include common stock
equivalents because they are anti-dilutive.
4. The Company utilizes an asset and liability approach in accounting for
income taxes that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have
been recognized in the Company's financial statements or tax returns. In
estimating future tax consequences, consideration is given to all expected
future events other than enactment's of changes in the tax law or rates.
The valuation allowance of $776 at February 29, 1996, which represents 30%
of the gross deferred tax assets on that date, was $798, or 30% on August
31, 1996. This change of the valuation allowance reduced the income tax
benefit by $22. The tax provision for the six and three months ended
August 31, 1996, includes a current and deferred tax benefit of $101 and
$59, and $96 and $20, respectively.
5. Effective August 25, 1996, the Company through its wholly-owned subsidiary,
BCT Enterprises of Georgia, Inc., sold its Company owned Plant in Marietta,
Georgia. The purchase price amounted to $450 and was financed by a note
payable to the Company in the amount of $450. The note bears interest at
8% and is subject to the following repayment terms: (1) No payments for
the first six months, (2) monthly payments of interest only for the next
six months, and (3) regular monthly payments of principal and interest
thereafter for nine years. Principal payments are based on fifteen year
amortization resulting in a balloon payment of principal at the end of year
ten. The accompanying balance sheet as of August 31, 1996, includes
deferred revenue amounting to approximately $90 relating to this
transaction. No gain was recognized at the time of the sale.
The net loss of the Company for the three months and six months ended
August 31, 1996 includes approximately $102 and $215, respectively, of
losses incurred at the Marietta, Georgia, Company Plant.
6. On August 30, 1996, the Company through its wholly-owned subsidiary, BCT
Enterprises of Riverside, Inc., entered into an asset purchase agreement
whereby it sold the Riverside, California, Company Plant assets and
franchise territory, and the Newbury Park, California, Company Plant assets
for $338. The agreement grants to the purchaser the right to operate in
the Newbury Park territory for 30 months with an option to acquire the
Newbury Park, California, franchise territory. In connection with the
transaction, the Company holds a note receivable, payable in 120 monthly
installments of principal and accrued interest at prime plus 2%. The
accompanying balance sheet as of August 31, 1996, includes deferred revenue
amounting to $82 relating to this transaction. No gain was recognized at
the time of the sale.
The net loss of the Company for the three and six months ended August 31,
1996 includes approximately $119 and $202, respectively, of losses incurred
at the Riverside, California and Newbury Park, California, Company Plant
locations.
7. Notes payable at August 31, 1996 include amounts relating to notes payable
of the Riverside, California and Marietta, Georgia, Company Plants, which
were not assumed by the buyers. As of February 29, 1996, these amounts
were included in the balance sheet as assets held for sale, net.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
August 31, 1996
---------------
Results of Operations
- ---------------------
Total revenues decreased $156,000, or 3%, for the three months ended August 31,
1996, as compared to the corresponding period in the prior fiscal year. The
decrease in revenue is attributable primarily to a decrease in franchise sales
($725,000, or 100%), and increases in (i) sales of paper products ($175,000, or
9%), (ii) print shop sales ($15,000, or 7%), (iii) royalty revenue ($27,000, or
2%) and (iv) Company Plants revenue ($352,000, or 91%).
Total revenues increased $646,000, or 8%, for the six months ended August 31,
1996, as compared to the corresponding period in the prior fiscal year. The
increase in revenue is attributable primarily to a decrease in franchise sales
of (816,000, or 97%), partially offset by increases in (i) sales of paper
products ($568,000, or 14%), (ii) royalty revenue ($125,000, or 5%), (iii) print
shop sales ($39,000, or 10%), and (iv) Company Plants revenue ($790,000, or
111%).
Cost of goods sold as a percentage of revenues was 53% and 55%, respectively,
for the six and three months ended August 31, 1996, as compared to 52% and 52%,
respectively, for the corresponding periods in fiscal 1996. Although the
percentage generally remains stable, it does fluctuate due to periodic changes
in the revenue mix.
Selling and administrative expenses represented 55% and 58% of gross revenues
for the six and three months ended August 31, 1996, respectively, and 40% and
41% for the corresponding periods in fiscal 1996. Selling and administrative
expenses increased as a percentage of revenues for the current fiscal year due
primarily to the increased expenses associated with the Company Plants'
operations (a $798,000, or 108% increase over the prior year).
The increased revenues and expenses from Company Plants were due to the
operation of five Company Plants for the entire first six months of fiscal 1997
while only four Company Plants were operational for partial periods of time
during the first six months of fiscal 1996. Three of the Company Plants,
Marietta, Georgia; Riverside, California; and Newbury Park, California, were
sold at the end of the current period. Year to date losses for the Company
Plants sold amounted to $417,000. The Company Plants yielded operating losses of
$516,000 for the first six months of fiscal 1997 versus $322,000 during the
comparable period in fiscal 1996.
The Company incurred net losses of $540,000 and $449,000 for the six and three
months ended August 31, 1996, respectively, as compared to net income of
$536,000 and $231,000 for the corresponding periods in fiscal 1996. The fiscal
1997 net loss for the first six months reflects an operating loss of $678,000
and a $138,000 income tax benefit. Operating income for the first six months of
fiscal 1996 was $712,000.
Liquidity and Capital Resources
- -------------------------------
In December 1994, as a result of the exercise of most of the Series B preferred
stock warrants following the Company's call of those warrants, the Company
received a net capital infusion of $1,938,000. Through August 31, 1996,
$1,111,000 of these proceeds have been utilized in efforts to increase revenues.
The remainder of the proceeds are being invested in cash equivalents.
During the six months ended August 31, 1996, the Company utilized working
capital as well as investment income to make debt payments totalling $53,000.
During the six months ended August 31, 1996, the Company made capital
expenditures of approximately $178,000, most of which were dedicated to office
equipment, computer software and equipment, and furniture and fixtures.
8
<PAGE>
The Company's accounts and notes receivable increased $691,000, or 20%, from
February 29, 1996 to August 31, 1996. This increase is primarily attributable
to the financing of Company Plant sales as discussed in the notes to the
consolidated financial statements.
The Company believes that the August 1996 sales of three Company Plants,
discussed in the notes to condensed consolidated financial statements will
significantly improve the Company's operating results. The Company intends
to intensify its efforts to reduce the losses generated by the two remaining
Company Plants (Delray Beach, Florida and Louisville, Kentucky) during the
remainder of fiscal 1997. These two Company Plants are not being held for sale
at this time.
The Company plans to improve its working capital and cash positions during
fiscal 1997 by focusing its efforts on increasing cash collections, reducing
Company Plant losses, and developing new product lines, while containing capital
expenditures and maintaining inventories at their current levels.
The Company believes that internally generated funds will be sufficient to
satisfy the Company's working capital and capital expenditure requirements for
the foreseeable future; however, there can be no assurance that external
financing will not be needed or that, if needed, it will be available on
commercially reasonable terms.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BCT INTERNATIONAL, INC.
(Registrant)
Date: October 15, 1996 William Wilkerson
------------------------ ----------------------------------
William Wilkerson
Chairman & Chief Executive Officer
Date: October 15, 1996 Michael R. Hull
------------------------ ----------------------------------
Michael R. Hull
Vice President & Chief Financial Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1996
<PERIOD-END> AUG-11-1996
<CASH> 915
<SECURITIES> 0
<RECEIVABLES> 5,622
<ALLOWANCES> 1,309
<INVENTORY> 2,559
<CURRENT-ASSETS> 5,916
<PP&E> 1,642
<DEPRECIATION> 601
<TOTAL-ASSETS> 11,361
<CURRENT-LIABILITIES> 2,010
<BONDS> 0
260
0
<COMMON> 210
<OTHER-SE> 9,233
<TOTAL-LIABILITY-AND-EQUITY> 11,361
<SALES> 4,662
<TOTAL-REVENUES> 9,146
<CGS> 4,107
<TOTAL-COSTS> 4,810
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 418
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> (678)
<INCOME-TAX> (138)
<INCOME-CONTINUING> (540)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (540)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
