<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, 1998
Commission File No. 0-10823
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BCT INTERNATIONAL, INC.
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(Exact name of Registrant as specified in its Charter)
Delaware 22-2358849
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(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
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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
September 25, 1998: 5,452,384
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BCT INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C> <C>
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS -
August 31, 1998 and February 28, 1998............................... 2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -
for the three months ended August 31, 1998 and August 31, 1997 and
the six months ended August 31, 1998 and August 31, 1997............ 3
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY - for the six months ended
August 31, 1998..................................................... 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -
for the six months ended August 31, 1998 and August 31, 1997........ 5
Notes to Condensed Consolidated Financial Statements................ 6
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 7
PART II. OTHER INFORMATION AND SIGNATURES
Signatures.......................................................... 8
</TABLE>
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PART I. FINANCIAL STATEMENTS
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(000's omitted)
<TABLE>
<CAPTION>
ASSETS August 31, 1998 February 28, 1998
- ------ --------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalent $ 1,071 $ 1,018
Accounts and notes receivable, net 3,203 2,482
Inventory, net 2,440 2,423
Assets held for sale, net 705 514
Prepaid expenses and other current assets 179 160
Deferred income taxes 539 919
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Total current assets 8,137 7,516
Accounts and notes receivable, net 5,271 5,376
Property and equipment at cost, net 602 651
Deferred income taxes 214 214
Deposits and other assets 89 89
Trademark and other intangible assets, net 297 311
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$14,610 $14,157
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 979 $ 1,264
Notes payable 105 105
Accrued liabilities 490 777
Deferred revenue 386 339
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Total current liabilities 1,960 2,485
Notes payable 490 539
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Total liabilities 2,450 3,024
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Preferred stock, Series A, 12% cumulative, $1 par value,
mandatorily redeemable, 810 shares authorized, 60 shares
issued and outstanding 60 60
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Stockholders' equity:
Common stock, $.04 par value, 25,000 shares authorized,
5,803 shares issued (5,723 shares in fiscal 1998) 226 223
Paid in capital 12,310 12,254
Retained earnings (accumulated deficit) 378 ( 845)
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12,914 11,632
Less: Treasury Stock, at cost, 351 shares (251 in fiscal 1998) ( 814) ( 559)
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Total stockholders' equity 12,100 11,073
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$14,610 $14,157
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</TABLE>
See notes to condensed consolidated financial statements.
2
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BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31 August 31
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
Royalties and franchise fees $1,297 $1,230 $ 2,742 $2,490
Paper and printing sales 3,103 2,718 6,359 5,777
Company Franchise revenues 577 608 1,184 1,258
Sales of Franchises 43 --- 78 ---
Interest and other 62 63 124 109
------ ------ ------- ------
5,082 4,619 10,487 9,634
------ ------ ------- ------
Expenses:
Cost of paper and printing sales 2,659 2,265 5,421 4,860
Operating costs of Company Franchises 641 739 1,326 1,503
Selling, general and administrative 998 917 2,041 1,940
Depreciation and amortization 45 98 92 98
------ ------ ------- ------
4,343 4,019 8,880 8,401
------ ------ ------- ------
Income before income taxes 739 600 1,607 1,233
Provision for income taxes 181 240 380 481
------ ------ ------- ------
Net income $ 558 $ 360 $ 1,227 $ 752
====== ====== ======= ======
Net income per common share:
Basic $ .10 $ .07 $ .23 $ .14
====== ====== ======= ======
Diluted $ .10 $ .07 $ .21 $ .13
====== ====== ======= ======
</TABLE>
See notes to condensed consolidated financial statements.
3
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BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED AUGUST 31, 1998
(UNAUDITED)
000's omitted
-------------
<TABLE>
<CAPTION>
Common Stock Retained
---------------- Earnings Less:
Number of Par Paid In (Accumulated Treasury
Shares Value Capital Deficit) Stock Total
---------------- ------------ ------------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance February 28, 1998 5,723 $223 $12,254 $( 845) $( 559) $11,073
Exercise of warrants 76 3 44 --- --- 47
Non-cash exercise of options 4 --- 12 --- --- 12
Purchase of treasury stock --- --- --- --- ( 255) ( 255)
Net income --- --- --- 1,227 --- 1,227
Dividend declared on convertible
preferred stock --- --- --- ( 4) --- ( 4)
----- ---- ------- -------- ------- -------
Balance August 31, 1998 5,803 $226 $12,310 $ 378 $( 814) $12,100
===== ==== ======= ======== ======= =======
</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
1998 1997
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,227 $ 752
-------- --------
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 92 115
Provision for doubtful accounts 125 56
(Increase) in accounts and notes receivable ( 741) ( 975)
(Increase) decrease in inventory ( 17) 488
(Increase) in assets held for sale ( 191) ( 52)
(Increase) in prepaid expenses and other assets ( 19) ( 9)
Decrease in deposits and other assets --- 5
Decrease in deferred income taxes 380 481
(Decrease) in accounts payable and accrued liabilities ( 801) ( 290)
Increase (decrease) in deferred revenue 47 ( 104)
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Total adjustments ( 1,125) ( 285)
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Net cash provided by operating activities 102 467
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Cash flows from investing activities:
Capital expenditures ( 43) ( 74)
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Net cash (used) by investing activities ( 43) ( 74)
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Cash flows from financing activities:
Dividend payments on preferred stock ( 4) ( 4)
Principal payments on notes payable ( 49) ( 27)
Exercise of warrants/options for common stock 47 29
-------- ------
Net cash (used) by financing activities ( 6) ( 2)
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Net increase in cash and cash equivalents 53 391
Cash and cash equivalents at beginning of period 1,018 314
-------- ------
Cash and cash equivalents at end of period $ 1,071 $ 705
======== ======
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
BCT INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(000's omitted)
August 31, 1998
---------------
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, 1998.
2. The results for the three and six month periods August 31, 1998 and 1997, are
not necessarily indicative of results that may be expected for the fiscal
year.
3. For the three and six months ended August 31, 1998 and 1997, basic 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.
Diluted 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 and convertible preferred stock.
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 return. 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 $750 at February 28, 1998, which represented 40%
of the gross deferred tax assets on that date, was $470, or 38% on August 31,
1998. The tax provision for the six months ended August 31, 1998 includes a
current tax benefit of $280.
5. In August 1998, the Company purchased 100,000 shares of treasury stock at a
price of $2.55 per share in connection with it's Stock Repurchase Plan.
6. Effective September 28, 1998, the Company executed an asset purchase
agreement whereby it acquired certain assets of the BCT Franchise in
Merrimack, New Hampshire in exchange for cash and notes and accounts
receivable due the Company amounting to approximately $737.
7. On September 18, 1998, the Company negotiated a line of credit with a bank
for $2 million. The line of credit bears interest of prime +.25%, interest
is payable monthly. No advances have been made on the line.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
August 31, 1998
---------------
Results of Operations
- ---------------------
Total revenues increased $463,000, or 10%, for the three months ended August 31,
1998 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 ($385,000, or 14%), (ii) royalty revenue ($67,000, or 5%), and a
decrease of Company Franchises revenue ($31,000, or 5%). The increase in
royalty revenue is attributable to increased sales of the BCT network of
franchises. The increase in sales of paper products is attributable to the
increase in BCT network sales and increased market share.
Total revenues increased $853,000, or 9%, for the six months ended August 31,
1998, 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 ($582,000, or 10%), (ii) royalty revenue ($252,000, or 10%), and is
offset by a decrease in Company Franchises revenue ($74,000, or 6%).
Cost of paper and printing sales as a percentage of paper and printing sales was
86% and 85%, respectively, for the three and six months ended August 31, 1998,
as compared to 83% and 84%, respectively, for the corresponding periods in
fiscal 1998. Although the percentage generally remains stable, it does
fluctuate due to periodic changes in the revenue mix.
Selling and administrative expenses represented 20% of gross revenues for the
three and six months ended August 31, 1998, and 20% for the corresponding
periods in fiscal 1998.
Liquidity and Capital Resources
- -------------------------------
Cash resources increased $53,000 during the six months ended August 31, 1998.
The Company utilized working capital to make debt payments totalling $49,000,
made capital expenditures of approximately $43,000, most of which were dedicated
to equipment, and advanced $167,000 in anticipation of the resale of a
franchise.
The Company's cash position improved as a result of increased revenues and
collections and enabled the Company to reduce accounts payable $572,000 or 28%.
The Company plans to continue to improve its working capital and cash positions
during fiscal 1999 by focusing its efforts on increasing cash collections and
implementing new product lines. During September 1998, the Company initiated a
plan to repurchase up to 500,000 shares of the Company's common stock.
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, the Company has obtained a $2 million line of
credit with a bank.
7
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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 2, 1998 /s/ James H. Kaufenberg
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James H. Kaufenberg
President & Chief
Executive Officer
Date: October 2, 1998 /s/ Michael R. Hull
--------------------- ----------------------
Michael R. Hull
Vice President & Chief
Financial Officer
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000351541
<NAME> BCT INTERNATIONAL, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1998
<PERIOD-END> AUG-31-1998
<CASH> 1,071
<SECURITIES> 0
<RECEIVABLES> 9,794
<ALLOWANCES> 1,320
<INVENTORY> 2,440
<CURRENT-ASSETS> 8,137
<PP&E> 1,718
<DEPRECIATION> 1,116
<TOTAL-ASSETS> 14,610
<CURRENT-LIABILITIES> 1,960
<BONDS> 490
0
60
<COMMON> 226
<OTHER-SE> 11,814
<TOTAL-LIABILITY-AND-EQUITY> 14,610
<SALES> 7,543
<TOTAL-REVENUES> 10,487
<CGS> 5,639
<TOTAL-COSTS> 6,747
<OTHER-EXPENSES> 1,980
<LOSS-PROVISION> 125
<INTEREST-EXPENSE> 28
<INCOME-PRETAX> 1,607
<INCOME-TAX> 380
<INCOME-CONTINUING> 1,227
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,227
<EPS-PRIMARY> .23
<EPS-DILUTED> .21
</TABLE>
