<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 November 30, 1996
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
January 7, 1996: 5,291,822
<PAGE>
BCT INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
November 30, 1996 and February 29, 1996 ............................................... 2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -
for the nine months ended November 30, 1996 and November 30, 1995 and
the three months ended November 30, 1996 and November 30, 1995 ....................... 3
COMPUTATION OF EARNINGS (LOSS) PER SHARE - for the nine months
ended November 30, 1996 and November 30, 1995 and the three months
ended November 30, 1996 and November 30, 1995.......................................... 4
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY - for the nine months ended
November 30, 1996 ..................................................................... 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -
for the nine months ended November 30, 1996 and November 30, 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
Item 1. Legal Proceedings........................................................... 9
Signatures ........................................................................... 10
</TABLE>
<PAGE>
PART I. FINANCIAL STATEMENTS
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(000's omitted)
<TABLE>
<CAPTION>
ASSETS November 30, 1996 February 29, 1996
- ------ ------------------ ------------------
<S> <C> <C>
Current assets:
Cash and cash equivalent $ 722 $ 923
Short-term investments --- 50
Accounts and notes receivable, net of allowance for
doubtful accounts of $774 ($408 in fiscal 1996) 2,391 2,023
Receivables from employees 5 5
Inventory, net of reserve of $197 ($105 in fiscal 1996) 2,422 2,201
Assets held for sale, net --- 281
Prepaid expenses and other current assets 244 58
Net deferred tax asset 303 211
-------- --------
Total current assets 6,087 5,752
Accounts and notes receivable, net of allowance
for doubtful accounts of $580 ($505 in fiscal 1996) 2,140 1,597
Property and equipment, less allowance for depreciation
and amortization of $651 ($500 in fiscal 1996) 992 1,014
Net deferred tax asset 1,554 1,604
Deposits and other assets 119 118
Trademark, net of accumulated amortization of $33 ($29 in fiscal 1996) 161 165
Intangible assets, net of accumulated amortization of $367 ($283 in
fiscal 1996) 440 488
-------- --------
$ 11,493 $ 10,738
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 1,458 $ 687
Notes payable 87 64
Accrued liabilities 172 181
Deferred revenue 299 187
-------- --------
Total current liabilities 2,016 1,119
Notes payable 224 5
-------- --------
Total liabilities 2,240 1,124
-------- --------
Minority stockholder interest (31) (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,
5,288 shares issued and outstanding (5,164 shares in fiscal 1996) 211 207
Paid in capital 11,815 11,659
Accumulated deficit (2,443) (1,991)
-------- --------
9,583 9,875
Less: Treasury Stock, at cost, 251 shares (226 shares in fiscal 1996) (559) (501)
-------- --------
Total stockholders' equity 9,024 9,374
-------- --------
$ 11,493 $ 10,738
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(000's omitted)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
November 30 November 30
1996 1995 1996 1995
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Gross revenues $13,628 $12,502 $4,482 $4,002
Cost of sales 7,182 6,491 2,372 2,071
------- ------- ------ ------
6,446 6,011 2,110 1,931
Selling and administrative expense 7,003 5,269 1,989 1,890
------- ------- ------ ------
Income (loss) before income taxes (557) 742 121 41
Income tax (benefit) expense (126) 191 12 25
------- ------- ------ ------
Net (loss) income $ (431) $ 551 $ 109 $ 16
======= ======= ====== ======
</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>
Nine Months Ended Three Months Ended
November 30 November 30
1996 1995 1996 1995
---------- --------- -------- --------
<S> <C> <C> <C> <C>
Primary:
Average number of shares
outstanding 4,992 4,652 5,028 4,817
Common stock equivalents --- 881 1,686 880
---------- --------- -------- --------
Totals 4,992 5,533 6,714 5,697
========== ========= ======== ========
Fully diluted:
Average number of
shares outstanding 4,992 4,652 5,028 4,817
Common stock equivalents
and dilutive securities --- 1,344 1,861 1,359
---------- --------- -------- --------
Totals 4,992 5,996 6,889 6,176
========== ========= ======== ========
Earnings per common share:
- --------------------------
Net Income:
Primary $ (.07) $ .07 $ .02 $ .003
---------- --------- -------- --------
Fully diluted $ (.07) $ .07 $ .02 $ .003
========== ========= ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED NOVEMBER 30, 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 124 4 132 --- --- 136
Issuance of warrants --- --- 28 --- --- 28
Purchase of common stock
held by employee --- --- --- --- (58) (58)
Registration costs --- --- (4) --- --- (4)
Net loss --- --- --- (431) --- (431)
Dividend declared on convertible
preferred stock --- --- --- (21) --- (21)
--------- ---------- -------- ---------- ---------- ---------
Balance August 31, 1996 5,288 $211 $11,815 $(2,443) $ (559) $9,024
========= ========== ======== ========== ========== =========
</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>
Nine months ended
November 30
1996 1995
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $(431) $ 551
------------- --------------
Adjustments to reconcile net (loss) income to net cash
provided (used) by operating activities:
Income tax benefit (143) (151)
Income tax expense 17 342
Depreciation and amortization 302 245
Cost assigned to warrants issued 28 28
Provision for doubtful accounts 491 ---
Minority interest (11) ---
(Increase) in accounts and notes receivable (911) (894)
(Increase) in inventory (221) (248)
(Increase) decrease in assets held for sale 151 (209)
(Increase) in prepaid expenses and other assets (186) (55)
(Increase) in deposits and other assets (1) (45)
Increase in accounts payable and accrued liabilities 762 661
Increase in deferred revenue 112 ---
------------- --------------
Total adjustments 390 (326)
------------- --------------
Net cash (used) provided by operating activities (41) 225
------------- --------------
Cash flows from investing activities:
Decrease in short-term investment 50 381
Capital expenditures (185) (467)
Acquisition of franchisee plant --- (276)
------------- --------------
Net cash (used) by investing activities (135) (362)
------------- --------------
Cash flows from financing activities:
Dividend payments on preferred stock (21) (62)
Principal payments on notes payable (80) (160)
Exercise of options for common stock 76 ---
Expenses associated with registration of securities --- (50)
------------- --------------
Net cash (used) by financing activities (25) (272)
Net (decrease) in cash and cash equivalents (201) (409)
Cash and cash equivalents at beginning of period 923 1,299
------------- --------------
Cash and cash equivalents at end of period $ 722 $ 890
============= ==============
Supplemental Disclosure:
Interest paid $ 35 $ 7
============= ==============
Income taxes paid $ 34 $ 55
============= ==============
</TABLE>
Non-cash 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.
During the third quarter ended November 30, 1995, $550 of convertible Series A
preferred stock was converted into 372 shares of common stock.
See notes to condensed consolidated financial statements.
6
<PAGE>
BCT INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(000's omitted)
November 30, 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
November 30, 1996.
2. The results for the three month and nine month periods ended November 30,
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 nine month period ended November 30, 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 enactments 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 $796, or 30% on November
30, 1996. This change of the valuation allowance reduced the income tax
benefit by $20. The tax provision for the nine months ended November 30,
1996, includes a current and deferred tax benefit of $83 and $60,
respectively. The tax provision for the three months ended November 30,
1996 includes a current tax expense and deferred tax benefit of $17 and $1,
respectively.
5. Selling and administrative expense includes an accrual for freight charges,
which were advanced to a freight invoice audit and consolidation firm for
payment to the freight companies. The freight invoice audit and
consolidation firm filed for protection under Chapter 7 of the Bankruptcy
Code prior to remitting the funds to the freight companies. The Company
has accrued $130,000 for freight bills which should have been but were not
paid by the freight invoice audit and consolidation firm.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
November 30, 1996
-----------------
Results of Operations
- ---------------------
Total revenues increased $460,000, or 11%, for the three months ended November
30, 1996, 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 ($285,000, or 14%), (ii) print shop sales ($67,000, or 31%), and (iii)
royalty revenue ($170,000, or 15%), partially offset by a decrease in Company
Plant sales ($18,000, or 4%).
Total revenues increased $1,126,000, or 9%, for the nine months ended November
30, 1996, 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 ($852,000, or 14%), (ii) royalty revenue ($295,000, or 9%), (iii) print
shop sales ($105,000, or 6%), and (iv) Company Plants sales ($771,000, or 64%),
partially offet by a decrease in franchise sales of (809,000, or 92%).
Cost of goods sold as a percentage of revenues was 53% and 53%, respectively,
for the nine and three months ended November 30, 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 51% and 44% of gross revenues
for the nine and three months ended November 30, 1996, respectively, and 42% and
47% 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 (i) increased expenses associated with the Company Plants'
operations (a $591,000, or 42% increase over the prior year), and (ii) a
$130,000 provision for freight charges discussed in Note 5.
The Company Plants yielded operating losses of $725,000 for the first nine
months of fiscal 1997 versus $645,000 during the comparable period in fiscal
1996. These losses were higher in fiscal 1997 because a higher weighted average
number of Company Plants were operated by the Company in fiscal 1997 as compared
to fiscal 1996. Three of the five Company Plants were sold in August 1996.
The Company incurred net losses of $431,000 for the nine months ended November
30, 1996, and earned $109,000 for the three months ended November 30, 1996, as
compared to net income of $551,000 and $16,000 for the corresponding periods in
fiscal 1996. The net loss for the first nine months of fiscal 1997 reflects an
operating loss of $557,000. Operating income for the first nine months of
fiscal 1996 was $742,000.
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 November 30, 1996,
$1,505,000 of these proceeds have been utilized in efforts to increase revenues.
The remainder of the proceeds are being invested in cash equivalents.
During the nine months ended November 30, 1996, the Company utilized working
capital as well as investment income to make debt payments totalling $80,000.
During the nine months ended November 30, 1996, the Company made capital
expenditures of approximately $185,000, 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 $911,000, or 25%, from
February 29, 1996 to November 30, 1996. This increase is primarily attributable
to the financing of Company Plant sales.
The Company plans to improve its working capital and cash positions during the
remainder of fiscal 1997 and fiscal 1998 by focusing its efforts on increasing
cash collections, reducing losses at the two remaining Company Plants, 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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- ------- -----------------
Varrieur v. BCT International, Inc.
In December 1996, the Company and Varrieur entered into a settlement
agreement whereby Varrieur dismissed with prejudice its claim against the
Company and the Company dismissed with prejudice its claim against Varrieur.
The parties exchanged mutual general releases. No payment or other
consideration was given as part of the settlement.
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: January 14, 1997 William Wilkerson
---------------- -------------------
William Wilkerson
Chairman & Chief Executive Officer
Date: January 14, 1997 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-28-1997
<PERIOD-START> SEP-1-1996
<PERIOD-END> NOV-30-1996
<CASH> 722
<SECURITIES> 0
<RECEIVABLES> 5,890
<ALLOWANCES> 1,354
<INVENTORY> 2,619
<CURRENT-ASSETS> 6,087
<PP&E> 1,643
<DEPRECIATION> 651
<TOTAL-ASSETS> 11,493
<CURRENT-LIABILITIES> 2,016
<BONDS> 0
260
0
<COMMON> 211
<OTHER-SE> 9,372
<TOTAL-LIABILITY-AND-EQUITY> 11,493
<SALES> 7,012
<TOTAL-REVENUES> 13,628
<CGS> 6,159
<TOTAL-COSTS> 7,182
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 491
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> (557)
<INCOME-TAX> (126)
<INCOME-CONTINUING> (431)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (431)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
