<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 May 31, 1999
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
July 9, 1999: 5,805,625
<PAGE>
BCT INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS - May 31, 1999
and February 28, 1999....................................................... 2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -
for the three months ended May 31, 1999 and 1998............................ 3
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY - for the three months ended May 31, 1999.............. 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -
for the three months ended May 31, 1999 and 1998............................ 5
Notes to Condensed Consolidated Financial Statements........................ 6-7
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................................... 8-9
ITEM 3 - Quantitive and Qualitive Disclosures About Market Risk........... 9
PART II. OTHER INFORMATION AND SIGNATURES
Item 1 - Legal Proceedings.................................................. 9
Item 6 - Exhibits and Reports on Form 8-K................................... 9
Signatures.................................................................. 10
</TABLE>
<PAGE>
PART I. FINANCIAL STATEMENTS
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(000's omitted)
<TABLE>
<CAPTION>
ASSETS May 31, 1999 February 28, 1999
- ------ ------------- ------------------
<S> <C> <C>
Current assets:
Cash and cash equivalent $ 1,459 $ 1,143
Accounts and notes receivable, net 3,412 3,252
Inventory, net 2,245 2,122
Assets held for sale, net 994 1,082
Prepaid expenses and other current assets 209 199
Deferred income taxes 476 476
-------- --------
Total current assets 8,795 8,274
Accounts and notes receivable, net 6,634 6,052
Property and equipment at cost, net 431 460
Deferred income taxes 246 246
Deposits and other assets 90 90
Trademark and other intangible assets, net 278 284
-------- --------
Total assets $ 16,474 $ 15,406
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 1,029 $ 844
Notes payable 113 113
Accrued liabilities 693 753
Deferred revenue 684 311
-------- --------
Total current liabilities 2,519 2,021
Notes payable 405 433
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Total liabilities 2,924 2,454
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Preferred stock, Series A, 12% cumulative, $1 par value,
mandatorily redeemable, 810 shares authorized, 60 shares
issued and outstanding in fiscal 1999 --- 60
-------- --------
Stockholders' equity:
Common stock, $.04 par value, 25,000 shares authorized,
5,806 shares issued and outstanding (5,753 shares
in fiscal 1999) 232 230
Paid in capital 12,576 12,506
Retained earnings 1,966 1,322
-------- --------
14,774 14,058
Less: Treasury stock, at cost, 521 shares (496 in fiscal 1999) (1,224) (1,166)
-------- --------
Total stockholders' equity 13,550 12,892
-------- --------
Total liabilities and stockholders' equity $ 16,474 $ 15,406
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
May 31
1999 1998
------ ------
<S> <C> <C>
Revenues:
Royalties and franchise fees $1,457 $1,445
Paper and printing sales 3,545 3,256
Sales of Franchises --- 35
Interest and other 64 62
------ ------
5,066 4,798
------ ------
Expenses:
Cost of paper and printing sales 2,960 2,762
Selling, general and administrative 1,027 1,043
Depreciation and amortization 45 47
------ ------
4,032 3,852
------ ------
Income from continued operations before
income taxes 1,034 946
Income tax provision 362 217
------ ------
Income from continued operations 672 729
Discontinued operations:
Loss from company owned franchises
operated under a plan of disposition,
net of tax benefit of $15 and $18, respectively (28) (60)
------ ------
Net income $ 644 $ 669
====== ======
Net income per common share:
Income from continued operations $ .13 $ .14
Loss from discontinued operations (.01) (.01)
------ ------
Basic $ .12 $ .13
====== ======
Income from continued operations $ .12 $ .13
Loss from discontinued operations --- (.01)
------ ------
Diluted $ .12 $ .12
====== ======
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MAY 31, 1999
(UNAUDITED)
000's omitted
-------------
<TABLE>
<CAPTION>
Common Stock
---------------- Less:
Number of Par Paid In Retained Treasury
Shares Value Capital Earnings Stock Total
--------- ----- ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance February 28, 1999 5,753 $230 $12,506 $1,322 $ (1,166) $12,892
Purchase of treasury stock --- --- --- --- (58) (58)
Exercise of options 12 --- 12 --- --- 12
Conversion of preferred stock 41 2 58 --- --- 60
Net income --- --- --- 644 --- 644
----- ----- ------- -------- --------- -------
Balance May 31, 1999 5,806 $232 $12,576 $1,966 (1,224) $13,550
===== ===== ======= ======== ========= =======
</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>
Three months ended
May 31
1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 644 $ 669
Plus loss from discontinued operations 28 60
------ ------
Income from continued operations 672 729
Adjustments to reconcile net income to net
cash provided
(used) in operating activities:
Depreciation and amortization 45 57
Provision for doubtful accounts 18 51
Other adjustments (21) 18
Changes in operating assets and
liabilities:
Accounts and notes receivable (760) (453)
Inventory (123) 48
Assets held for sale 88 (111)
Prepaid expenses and other assets (10) 57
Deferred income taxes --- 199
Accounts payable and accrued liabilities 125 (718)
Deferred revenue 445 47
------ ------
Net cash provided by (used in) continued
operations 449 (76)
Net cash used by discontinued operations (43) (78)
--------- ------
Net cash provided by (used in) operating
activities 406 (154)
------ ------
Cash flows from investing activities:
Capital expenditures (10) (14)
------ ------
Net cash (used in) investing activities (10) (14)
------ ------
Cash flows from financing activities:
Dividend payments on preferred stock --- (2)
Principal payments on notes payable (28) (24)
Exercise of warrants for common stock --- 47
Exercise of options for common stock 6 ---
Treasury stock purchases (58) ---
------ ------
Net cash (used in) provided by financing
activities (80) 21
------ ------
Net increase (decrease) in cash and cash
equivalents 316 (147)
Cash and cash equivalents at beginning of
period 1,143 1,018
------ ------
Cash and cash equivalents at end of period $1,459 $ 871
====== ======
</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 data)
May 31, 1999
------------
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 May 31, 1999.
2. The results for the three month periods ended May 31, 1999 and 1998, are not
necessarily indicative of results that may be expected for the fiscal year.
3. For the three months ended May 31, 1999 and 1998, 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.
5. On February 28, 1999, the Company's Board of Directors approved a strategy
decision to discontinue the operations comprising its Company owned
franchises. The Company owned franchises included the 100% owned franchises
in Delray Beach, Florida and Merrimack, New Hampshire and the 70% owned
franchise in Louisville, Kentucky. On May 14, 1999, the Company executed an
agreement for the sale of the Delray Beach Company owned franchise (See Note
6). As of July 9, 1999, the sale of the 70% owned Franchise in Louisville,
Kentucky is pending final document preparation.
Net assets of the Louisville, Kentucky and Merrimack, New Hampshire
franchises of $994 are included in assets held for sale in the May 31, 1999
condensed consolidated balance sheet. Sales from Company owned franchise
discontinued operations were $800 and $600 for the three months ended May 31,
1999 and 1998, respectively. After tax losses from the date of measurement,
February 28, 1999, of $28 have been incurred through May 31, 1999 for the
Delray Beach, Florida and Louisville, Kentucky Franchises. Management intends
to sell the Merrimack, New Hampshire franchise in fiscal 2000; however, no
assurances can be made that a sale will be consummated. The results of
operations for the three months ended May 31, 1998 have been reclassified for
the company franchises designated as discontinued operations in fiscal 1999.
6. On May 14, 1999, the Company sold the Delray Beach Company owned Franchise in
exchange for a $550, ten year promissory note bearing interest of 7.5%. In
addition, the Company expects to receive approximately $75 for accounts
receivable. The transaction resulted in deferred revenue of approximately
$440, which will be recognized over the life of the promissory note.
6
<PAGE>
BCT INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
(UNAUDITED)
(000's omitted, except per share data)
7. The Company has four reporting segments (1) Franchisor Operations, (2)
Pelican Paper Products, (3) Company Owned Franchises and (4) Other
Operations. The Company evaluates the performance of its segments based on
earnings before income taxes.
The Company is organized on the basis of business activity units. Information
relating to Company owned Franchises is included in Note 5. The table below
presents information about reported segments for the 3 months ended May 31:
<TABLE>
<CAPTION>
Pelican
1999 Franchisor Paper Other Total
- --------------------------------- ---------- ------ ------- ------
<S> <C> <C> <C> <C>
Revenues $1,457 $3,545 $64 $5,066
Cost of sales --- 2,960 --- 2,960
Operating expenses 925 147 --- 1,072
------ ------ --- ------
Income before income taxes $ 532 $ 438 $64 $1,034
====== ====== === ======
Depreciation and amortization $ 18 $ 27 $-- $ 45
====== ====== === ======
Income tax provision $ 186 $ 154 $22 $ 362
====== ====== === ======
Capital expenditures $ 10 $ --- $-- $ 10
====== ====== === ======
1998
- ---------------------------------
Revenues $1,480 $3,256 $62 $4,798
Cost of sales --- 2,762 --- 2,762
Operating expenses 970 120 --- 1,090
------ ------ --- ------
Income before income taxes $ 510 $ 374 $62 $ 946
====== ====== === ======
Depreciation and amortization $ 20 $ 27 $-- $ 47
====== ====== === ======
Income tax provision $ 117 $ 86 $14 $ 217
====== ====== === ======
Capital expenditures $ 14 $ --- $-- $ 14
====== ====== === ======
</TABLE>
8. On May 1, 1999, 60,000 shares of Series A preferred stock were converted into
40,541 shares of $.04 par value common stock.
9. On June 14, 1999, the Company entered into a settlement agreement involving
litigation brought against a former franchise owner. During June 1999, the
Company received payment of $1 million in accordance with the terms of the
settlement agreement. This amount includes reimbursement of approximately $58
of accounts receivable which were previously reserved.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations
- ---------------------
Total revenues increased $268,000 for the first quarter ended May 31, 1999, as
compared to the corresponding period in the prior fiscal year. The increase in
revenue is attributable primarily to an increase in paper and printing sales
($289,000 or 9%), royalties ($12,000 or 1%) and combined with a decrease in
sales of Franchises ($35,000 or 100%). Royalties increased as a result of
increased sales by the BCT network of franchises. Paper and printing sales
increased due to the addition of rubber stamp supplies as a product line in
November 1998.
Selling and administrative expenses represented 20% and 22% of gross revenues
for the quarters ended May 31, 1999 and 1998, respectively. These expenses
decreased $16,000 as a result of a decrease in bad debt expense of $33,000 and
general and administrative expense of $27,000 combined with an increase in
salaries and employee benefits of $27,000 and travel and entertainment of
$15,000.
Income from continued operations increased $88,000 or 9%. Net income decreased
$25,000 or 4% as a result of the current year's higher effective tax rate which
resulted in an increase of $145,000 or 67% in the provision for income taxes.
The lower effective rate in the prior year resulted from the reversal of the
valuation allowance for the deferred tax asset relating to net operating loss
carryforwards.
Liquidity and Capital Resources
- -------------------------------
Cash resources increased $316,000 during the first quarter of fiscal 2000. The
Company generated $449,000 from continued operations. The Company utilized
working capital to make debt payments totaling $28,000, advanced $212,000 on
behalf of the Franchise network relating to a national account, $58,000 to
purchase treasury stock and $300,000 for accrued management incentives.
The Company plans to continue to improve its working capital and cash positions
during fiscal 2000 by continuing its efforts to (i) increase cash collections;
and (ii) marketing to new customer channels through the implementation of a
proprietary internet based ordering system while containing capital expenditures
and maintaining inventory levels.
The Company believes current reserves and 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. The Company has available a $2 million
line of credit with a bank. No advances have been made on the line.
Year 2000 Issue
- ---------------
The Year 2000 issue affects the Company's installed computer systems, network
elements, software applications and other business systems that have time-
sensitive programs, including those with embedded microprocessors, that may not
properly reflect or recognize the year 2000 and years thereafter. Because many
computers and computer applications define dates by the last two digits of the
year, "00" or other two-digit dates after the year 2000 may not properly be
identified as the year 2000 or the appropriate later year, but rather the year
1900 or a year between 1901 and 1999 (as the case may be). This error could
result in system and equipment failures or malfunctions causing disruption of
operations including among other things, a temporary inability to process
telephone calls, transactions and information, or engage in normal business
activities.
The Company has evaluated its installed computer systems, network elements,
software applications and other business systems that have time-sensitive
programs and has developed and implemented a plan to ensure their Year 2000
compliance. The Company believes that its hardware, network and software
systems, with minor modifications, will be Year 2000 compliant.
Since the Year 2000 issue may affect the systems and applications of the
Company's franchises, customers or suppliers, the Company has communicated with
its franchises, customers and suppliers to determine their overall Year 2000
readiness. Based upon responses received from its franchises, customers and
suppliers, the Company does not anticipate any material adverse impact on its
operations as a result of Year 2000 issues. No assurance can be given that the
failure by one or more of its major franchises, suppliers or customers to become
Year 2000 compliant will not have a material adverse impact on its operations.
The cost to the Company of developing and implementing its Year 2000 compliance
plan has amounted to approximately $45,000.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUED
Certain information contained in this report, particularly information
regarding future economic performance and finances, plans and objectives of
management, constitutes "forward-looking statements" within the meaning of the
federal securities laws. In some cases, information regarding certain important
factors that could cause actual results to differ materially from any forward-
looking statement appear together with such statement. In addition, the
following factors, in addition to other possible factors not listed, could
affect the Company's actual results and cause such results to differ materially
from those expressed in forward-looking statements. These factors include
competition within the wholesale printing industry, which is intense; changes in
general economic conditions; technological changes; changes in customer tastes;
legal claims; the continued ability of the Company and its franchisees to obtain
suitable locations and financing for new Franchises as well as expansion of
existing Franchises; governmental initiatives, in particular those relating to
franchise regulation and taxation; and risk factors detailed from time to time
in the Company's filings with the Securities and Exchange Commission.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- ------ ----------------------------------------------------------
The Company had no outstanding balances subject to market risk during the
period covered by this report. The Company has a $2 million line of credit with
a bank which bears interest at prime + .25%.
Part II OTHER INFORMATION AND SIGNATURES
Item 1. Legal Proceedings
- ------ -----------------
Business Cards Tomorrow, Inc. v. Anuco, Inc., Robert V. Nugent, Sr. and
-----------------------------------------------------------------------
Marco Nugent. This case was filed in 1991 by the Company against two individual
- ------------
franchisees and their corporation in Broward County, Florida, Circuit Court. The
Company sued for breach of the franchisees' franchise agreement based on their
failure to submit royalty reports and failure to pay accrued royalties in the
amount of $74,251.30. The complaint also sought to recover royalties accruing
after the date of the lawsuit. The franchisees filed a counterclaim against the
Company alleging fraud, misrepresentation and breach of the franchise agreement
by the Company. Both parties also sought recovery of attorney's fees.
The case was tried before a jury in February 1997, and the jury reached a
verdict in favor of the Company awarding the Company $931,000 in accrued
royalties and interest, plus attorney's fees and post-judgement interest, and
rejecting the franchisees' counterclaim. In March 1997, the franchisees filed
for bankruptcy protection and sought to discharge the judgement in favor of the
Company. In April 1999, the bankruptcy court ruled in favor of the Company's
objection to discharge of the franchisees' debt to the Company.
In June 1999, the Company and the franchisees entered into a settlement
agreement requiring payment of $1,000,000 in cash to the Company out of a total
judgement of $1,331,000 (including attorney's fees and interest accrued since
February 1997). In June 1999, the franchisees paid the $1,000,000 cash required
under the settlement agreement, leaving a balance of $331,000 owed by Anuco,
Inc. The Company intends to aggressively pursue collection of the amount owed by
Anuco, Inc.
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) No exhibits
(b) No reports on Form 8-K were filed by the Company during the period
ended May 31, 1999.
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: July , 1999 Peter T. Gaughn
------------- -----------------------
Peter T. Gaughn
Chief Executive Officer
Date: July , 1999 Michael R. Hull
------------- -----------------------
Michael R. Hull
Vice President & Chief
Financial Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<CIK> 0000351541
<NAME> BCT INTERNATIONAL, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1999
<PERIOD-END> MAY-31-1999
<EXCHANGE-RATE> 1
<CASH> 1,459
<SECURITIES> 0
<RECEIVABLES> 11,367
<ALLOWANCES> (1,321)
<INVENTORY> 2,245
<CURRENT-ASSETS> 8,795
<PP&E> 1,546
<DEPRECIATION> (1,115)
<TOTAL-ASSETS> 16,474
<CURRENT-LIABILITIES> 2,519
<BONDS> 405
0
0
<COMMON> 232
<OTHER-SE> 13,318
<TOTAL-LIABILITY-AND-EQUITY> 16,474
<SALES> 3,545
<TOTAL-REVENUES> 5,066
<CGS> 2,960
<TOTAL-COSTS> 2,960
<OTHER-EXPENSES> 994
<LOSS-PROVISION> 18
<INTEREST-EXPENSE> 15
<INCOME-PRETAX> 1,034
<INCOME-TAX> 362
<INCOME-CONTINUING> 672
<DISCONTINUED> (28)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 644
<EPS-BASIC> .12
<EPS-DILUTED> .12
</TABLE>
