<PAGE>
UNITED STATES
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, 1997
Commission File No. 0-10823
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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 1, 1997: 5,458,277
<PAGE>
BCT INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C> <C>
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS -
August 31, 1997 and February 28, 1997............................... 2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -
for the three months ended August 31, 1997 and August 31, 1996 and
the six months ended August 31, 1997 and August 31, 1996............ 3
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY - for the six months ended
August 31, 1997..................................................... 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -
for the six months ended August 31, 1997 and August 31, 1996........ 5
Notes to Condensed Consolidated Financial Statements................6-7
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 8
PART II. OTHER INFORMATION AND SIGNATURES
Signatures.......................................................... 9
</TABLE>
<PAGE>
PART I. FINANCIAL STATEMENTS
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(000's omitted)
<TABLE>
<CAPTION>
ASSETS August 31, 1997 February 28, 1997
- ------ --------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalent $ 705 $ 314
Accounts and notes receivable, net of allowance for
doubtful accounts of $383 ($379 in fiscal 1997) 2,132 1,641
Inventory, net of reserve of $77 ($89 in fiscal 1997) 1,992 2,468
Assets held for sale, net 509 457
Prepaid expenses and other current assets 75 66
Net deferred tax asset 312 312
-------- --------
Total current assets 5,725 5,258
Accounts and notes receivable, net of allowance
for doubtful accounts of $779 ($769 in fiscal 1997) 4,063 3,209
Property and equipment, less allowance for depreciation
and amortization of $772 ($675 in fiscal 1997) 739 762
Net deferred tax asset 1,100 1,569
Deposits and other assets 89 94
Trademark, net of accumulated amortization of $87 ($81 in 1997) 107 113
Intangible assets, net of accumulated amortization of $100 ($93 in 1997) 217 224
-------- --------
$ 12,040 $ 11,229
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 631 $ 1,032
Notes payable 105 49
Accrued liabilities 402 291
Deferred revenue 168 272
-------- --------
Total current liabilities 1,306 1,644
Notes payable 587 215
-------- --------
Total liabilities 1,893 1,859
-------- --------
Preferred stock, Series A, 12% cumulative, $1 par value,
mandatorily redeemable, 810 shares authorized, 60 shares
issued and outstanding 60 60
-------- --------
Stockholders' equity:
Common stock, $.04 par value, 25,000 shares authorized,
5,434 shares issued and outstanding (5,410 shares in fiscal 1997) 217 216
Paid in capital 12,084 12,056
Accumulated deficit (1,655) (2,403)
-------- --------
10,646 9,869
Less: Treasury Stock, at cost, 251 shares (251 shares in fiscal 1997) (559) (559)
-------- --------
Total stockholders' equity 10,087 9,310
-------- --------
$ 12,040 $ 11,229
======== ========
</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>
Three Months Ended Six Months Ended
August 31 August 31
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Gross revenues $4,556 $4,386 $9,525 $9,146
Cost of sales 2,458 2,403 5,202 4,810
------ ------ ------ ------
2,098 1,983 4,323 4,336
Selling and administrative expense 1,498 2,540 3,090 5,014
------ ------ ------ ------
Income (loss) before income taxes 600 (557) 1,233 (678)
Income tax expense (benefit) 240 (108) 481 (138)
------ ------ ------ ------
Net income (loss) $ 360 (449) $ 752 (540)
------ ------ ------ ------
Net income (loss)
per common share $.06 $ (.07) $.12 $ (.09)
------ ------ ------ ------
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED AUGUST 31, 1997
(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 28, 1997 5,410 $216 $12,056 $ (2,403) (559) $ 9,310
Exercise of options 24 1 28 --- --- 29
Net income --- --- --- 752 --- 752
Dividend declared on convertible
preferred stock --- --- --- (4) --- (4)
--------- ----- ------------ -------- -------- -------
Balance August 31, 1997 5,434 $217 $12,084 $ (1,655) (559) $10,087
========= ===== ============ ======== ======== =======
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(000's omitted)
<TABLE>
<CAPTION>
Six months ended
August 31
1997 1996
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ 752 (540)
------ ------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Income tax benefit --- (160)
Income tax expense 481 22
Depreciation and amortization 115 233
Cost assigned to warrants issued --- 19
Provision for doubtful accounts 56 396
Changes in assets and liabilities, net of effect of
acquisitions and dispositions
(Increase) in accounts and notes receivable (975) (688)
Decrease (increase) in inventory 488 (178)
(Increase) decrease in assets held for sale (52) 232
(Increase) in prepaid expenses and other assets (9) (74)
Decrease (increase) in deposits and other assets 5 24
(Decrease) increase in accounts payable and accrued liabilities (290) 725
(Decrease) increase in deferred revenue (104) 129
------ ------
Total adjustments (285) 680
------ ------
Net cash provided by operating activities 467 140
------ ------
Cash flows from investing activities:
Increase in short-term investments --- 50
Capital expenditures (74) (178)
------ ------
Net cash (used) by investing activities (74) (128)
------ ------
Cash flows from financing activities:
Dividend payments on preferred stock (4) (16)
Principal payments on notes payable (27) (53)
Exercise of options for common stock 29 49
------ ------
Net cash (used) by financing activities (2) (20)
------ ------
Net increase (decrease) in cash and cash equivalents 391 (8)
Cash and cash equivalents at beginning of period 314 923
------ ------
Cash and cash equivalents at end of period $ 705 $ 915
====== ======
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
BCT INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(000's omitted, except per share amounts)
August 31, 1997
---------------
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, 1997.
2. The results for the three month and six month periods ended August 31, 1997,
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. Fully diluted earnings per common share are not
presented for the three and six month periods ended August 31, 1997 as they
are not materially 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 $806 at February 28, 1997, which represents 30% of
the gross deferred tax assets on that date, was $806, or 36% on August 31,
1997.
5. On July 15, 1997, the Company purchased and resold certain assets of a
thermographer in exchange for a payment of $120 and a note payable of $455.
The assets consisted of certain equipment, the customer list, and a non-
compete agreement from the owners of the business. The Company resold the
assets acquired to two franchises in exchange for cash and notes receivable
amounting to $535. The remaining assets, approximately $40, are held for
sale.
6. On March 1, 1997, the Company acquired certain assets of the Boston,
Massachusetts Franchise for $75 cash and forgiveness of amounts owed the
Company ($380). This acquisition was accounted for under the purchase method
of accounting and accordingly, the purchase price was allocated to the assets
acquired based upon the estimated fair values at the date of acquisition.
The purchase price associated with the acquisition was recorded as an asset
held for sale as it is the Company's intent to resell this Franchise.
Operating results of this business acquisition have been included in the
Company's consolidated results of operations from March 1, 1997.
On August 1, 1997, the Company sold the Boston, Massachusetts Franchise and
certain assets of that franchise in exchange for a note receivable in the
amount of $408. Due to the Company's continuing involvement, no sale has been
recorded on this transaction.
7. In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (FAS 128) - Earnings per share
(EPS). The statement is effective for financial statements issued for
periods ending after December 15, 1997. FAS 128 supersedes Accounting
Principles Board Opinion No. 15 and replaces primary and fully diluted EPS
with basic and diluted EPS. Basic EPS is computed by dividing net income
available to common shareholders by the weighted average common shares
outstanding. Diluted EPS includes all dilutive potential common shares.
The Company does not expect the new standard to have a material impact on its
financial position and results of operations for fiscal 1998.
6
<PAGE>
The following illustrates the Company's proforma EPS as if FAS 128 had been
used in the six and three months ended August 31, 1997:
<TABLE>
<CAPTION>
6 Months 3 Months
Ended August 31, Ended August 31,
1997 1996 1997 1996
------ ------ ----- ------
<S> <C> <C> <C> <C>
Earnings (losses) per common share - Basic .14 (.11) .07 (.09)
- Diluted .12 (.11) .06 (.09)
</TABLE>
Diluted losses per share for the six and three months ended August 31, 1996, do
not include potential common shares because they are antidilutive.
8. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income",
effective for fiscal years beginning after December 15, 1997. This Statement
establishes standards for reporting and display of comprehensive income and
its components (revenues, expenses, gains, and losses) in a full set of
general-purpose financial statements. This Statement requires that all items
that are required to be recognized under accounting standards as components
of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. This
Statement does not require a specific format for that financial statement but
requires that an enterprise display an amount representing total
comprehensive income for the period in that financial statement.
This Statement requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position.
Management does not expect the new standard to have significant changes in
the disclosure requirements for the Company in 1998.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", effective for financial statements for
periods beginning after December 15, 1997. This statement establishes
standards for the way that public business enterprises report information
about operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. It also establishes
standards for related disclosures about products and services, geographic
areas, and major customers. This statement supersedes FASB Statement No. 14,
"Financial Reporting for Segments of a Business Enterprise", but retains the
requirement to report information about major customers. It amends FASB
Statement No. 94, "Consolidation of All Majority-Owned Subsidiaries", to
remove the special disclosure requirements for previously unconsolidated
subsidiaries. In the initial year of application, comparative information for
earlier years is to be restated. This Statement need not be applied to
interim financial statements in the initial year of its application, but
comparative information for interim periods in the initial year of
application is to be reported in financial statements for interim periods in
the second year of application. Management does not expect the new standard
to have a material impact on the disclosure requirements for the Company in
1998.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
August 31, 1997
---------------
Results of Operations
- ---------------------
Total revenues increased $170,000, or 4%, for the three months ended August 31,
1997 as compared to the corresponding period in the prior fiscal year. The
increase in revenue is attributable primarily to increases in (i) sales of paper
products ($353,000, or 16%), (ii) royalty revenue ($83,000, or 7%), and a
decrease of Company Franchises revenue ($266,000, or 26%) due to the sale of
three Company Franchises in August 1996.
Total revenues increased $379,000, or 4%, for the six months ended August 31,
1997, as compared to the corresponding period in the prior fiscal year. The
increase in revenue is attributable primarily to increases in (i) sales of paper
products ($634,000, or 14%), and (ii) royalty revenue ($71,000, or 3%), and is
offset by a decrease in Company Franchises revenue ($326,000, or 16%).
Cost of goods sold as a percentage of revenues was 55% for the three and six
months ended August 31, 1997, as compared to 55% and 53%, respectively, for the
corresponding periods in fiscal 1997. Although the percentage generally remains
stable, it does fluctuate due to periodic changes in the revenue mix.
Selling and administrative expenses represented 33% and 32% of gross revenues
for the three and six months ended August 31, 1997, respectively, and 58% and
55% for the corresponding periods in fiscal 1997. Selling and administrative
expenses decreased as a percentage of revenues for the current fiscal year due
primarily to decreased expenses associated with the (i) Company Franchises'
operations (a $620,000, or 35% over the prior year), and (ii) decreased salaries
and benefits expense due to staff reductions in October 1996 ($472,000 or 31%),
and (iii) reduced general and administrative expense ($839,000 or 62%).
Liquidity and Capital Resources
- -------------------------------
During the six months ended August 31, 1997, the Company utilized working
capital to make debt payments totalling $27,000, made capital expenditures of
approximately $74,000, most of which were dedicated to leasehold improvements,
equipment, and furniture, and advanced $120,000 in connection with the purchase
and resale of a thermography business.
The Company's cash position improved as a result of better inventory control and
enabled the Company to reduce accounts payable $401 or 39%.
The Company plans to continue to improve its working capital and cash positions
during fiscal 1998 by focusing its efforts on increasing cash collections and
implementing new product lines.
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.
8
<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: 10/9/97 /s/ William Wilkerson
--------------------- -----------------------------------------
William Wilkerson
Chairman & Chief Executive Officer
Date: 10/9/97 /s/ Michael R. Hull
--------------------- -----------------------------------------
Michael R. Hull
Vice President & Chief Financial Officer
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1997
<PERIOD-END> AUG-31-1997
<CASH> 705
<SECURITIES> 0
<RECEIVABLES> 7,357
<ALLOWANCES> 1,162
<INVENTORY> 1,992
<CURRENT-ASSETS> 5,725
<PP&E> 1,511
<DEPRECIATION> 772
<TOTAL-ASSETS> 12,040
<CURRENT-LIABILITIES> 1,306
<BONDS> 692
0
60
<COMMON> 217
<OTHER-SE> 9,870
<TOTAL-LIABILITY-AND-EQUITY> 12,040
<SALES> 7,035
<TOTAL-REVENUES> 9,525
<CGS> 5,202
<TOTAL-COSTS> 2,932
<OTHER-EXPENSES> 98
<LOSS-PROVISION> 56
<INTEREST-EXPENSE> 14
<INCOME-PRETAX> 1,233
<INCOME-TAX> 481
<INCOME-CONTINUING> 752
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 752
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
