<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 November 30, 1998
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 .
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Number of shares of common stock outstanding as of
January 4, 1999: 5,207,384
---------
<PAGE>
BCT INTERNATIONAL, INC.
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS -
November 30, 1998 and February 28, 1998........................ 2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -
for the three months ended November 30, 1998 and November 30,
1997 and the nine months ended November 30, 1998 and
November 30, 1997.............................................. 3
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY - for the nine months ended
November 30, 1998.............................................. 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-
for the nine months ended November 30, 1998 and
November 30, 1997.............................................. 5
Notes to Condensed Consolidated Financial Statements........... 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 7-8
PART II. OTHER INFORMATION AND SIGNATURES
Signatures..................................................... 9
<PAGE>
PART I. FINANCIAL STATEMENTS
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(000's omitted)
<TABLE>
<CAPTION>
ASSETS November 30, 1998 February 28, 1998
- ------ ------------------ ------------------
<S> <C> <C>
Current assets:
Cash and cash equivalent $ 903 $ 1,018
Accounts and notes receivable, net 3,924 2,482
Inventory, net 2,343 2,423
Assets held for sale, net 1,280 514
Prepaid expenses and other current assets 224 160
Deferred income taxes 462 919
-------- -------
Total current assets 9,136 7,516
Accounts and notes receivable, net 4,875 5,376
Property and equipment at cost, net 576 651
Deferred income taxes 214 214
Deposits and other assets 89 89
Trademark and other intangible assets, net 291 311
-------- -------
$ 15,181 $14,157
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 1,210 $ 1,264
Notes payable 105 105
Accrued liabilities 653 777
Deferred revenue 295 339
-------- -------
Total current liabilities 2,263 2,485
Notes payable 466 539
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Total liabilities 2,729 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
-------- -------
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) 947 (845)
-------- -------
13,483 11,632
Less: Treasury Stock, at cost, 471 shares (251 in fiscal 1998) (1,091) (559)
-------- -------
Total stockholders' equity 12,392 11,073
-------- -------
$ 15,181 $14,157
======== =======
</TABLE>
See notes to condensed consolidated financial statements.
2
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BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(000's omitted, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 30, November 30,
1998 1997 1998 1997
------ ------ ------- -------
<S> <C> <C> <C> <C>
Revenues:
Royalties and franchise fees $1,348 $1,255 $ 4,090 $ 3,745
Paper and printing sales 3,177 2,900 9,536 8,677
Company Franchise revenues 704 556 1,888 1,814
Sales of Franchises --- --- 78 ---
Interest and other 93 70 217 179
------ ------ ------- -------
5,322 4,781 15,809 14,415
------ ------ ------- -------
Expenses:
Cost of paper and printing sales 2,686 2,462 8,107 7,322
Operating costs of Company Franchises 816 614 2,142 2,117
Selling, general and administrative 1,106 986 3,147 2,926
Depreciation and amortization 45 48 137 146
------ ------ ------- -------
4,653 4,110 13,533 12,511
------ ------ ------- -------
Income before income taxes 669 671 2,276 1,904
Provision for income taxes 98 262 478 743
------ ------ ------- -------
Net income $ 571 $ 409 $ 1,798 $ 1,161
====== ====== ======= =======
Earnings per share:
Basic $ 0.11 $ 0.08 $ 0.33 $ 0.22
------ ------ ------- -------
Diluted $ 0.10 $ 0.07 $ 0.32 $ 0.21
------ ------ ------- -------
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED NOVEMBER 30, 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
Treasury stock purchases, 220,000 shares --- --- --- --- (514) (514)
Other --- --- --- --- (18) (18)
Net income --- --- --- 1,798 --- 1,798
Dividend declared on convertible
preferred stock --- --- --- (6) --- (6)
--------- ----- ------------ ------------ -------- -------
Balance November 30, 1998 5,803 $ 226 $ 12,310 $ 947 $ (1,091) $12,392
========= ===== ============ ============ ======== =======
</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>
Nine months ended
November 30
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating
activities:
Net income $ 1,798 $ 1,161
-------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Inventory provision 145 ---
Depreciation and amortization 152 163
Provision for doubtful accounts 176 70
Changes in assets and liabilities
(Increase) in accounts and notes receivable (1,139) (1,395)
(Increase) decrease in inventory (65) 417
(Increase) in assets held for sale (766) (44)
(Increase) in prepaid expenses and other assets (64) (7)
Decrease in deposits and other assets --- 5
Decrease in deferred income taxes 457 743
(Decrease) in accounts payable and accrued liabilities (124) (448)
(Decrease) in deferred revenue (44) (11)
-------- --------
Total adjustments (1,272) (507)
-------- --------
Net cash provided by operating activities 526 654
-------- --------
Cash flows from investing activities:
Capital expenditures (77) (95)
-------- --------
Net cash (used) by investing activities (77) (95)
-------- --------
Cash flows from financing activities:
Dividend payments on preferred stock (6) (6)
Principal payments on notes payable (73) (51)
Exercise of warrants/options for common stock 47 65
Treasury stock purchases (514) ---
Other (18) ---
-------- --------
Net cash (used) provided by financing activities (564) 8
-------- --------
Net (decrease) increase in cash and cash equivalents (115) 567
Cash and cash equivalents at beginning of period 1,018 314
-------- --------
Cash and cash equivalents at end of period $ 903 $ 881
======== ========
</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)
November 30, 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 November 30, 1998.
2. The results for the three and nine month periods ended November 30, 1998 and
1997, are not necessarily indicative of results that may be expected for the
fiscal year.
3. For the three and nine months ended November 30, 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 $315, or 32% on November
30, 1998. The tax provision for the nine months ended November 30, 1998
includes a current tax benefit of $435.
5. During the three months ended November 30, 1998, the Company purchased
120,000 shares of treasury stock at an average price of $2.16 per share in
connection with its current stock repurchase plan. Under the stock repurchase
plan, the Company may repurchase up to an additional 380,000 shares of the
Company's common stock. Under a prior stock repurchase plan, the Company
purchased 100,000 shares of treasury stock at an average price of $2.55 per
share during the second quarter of fiscal 1999.
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 (the Merrimack Franchise) in exchange for cash and
notes and accounts receivable due the Company amounting to approximately
$737. The Company has included the results of operations of the Merrimack
Franchise since the acquisition, a loss of $54, in the consolidated statement
of operations. The net assets of the Merrimack Franchise are included in
assets held for sale in the accompanying consolidated balance sheet as it is
management's intent to resell the Merrimack Franchise. Prior to the
acquisition, the Company wrote off against the allowance for doubtful
accounts, $237 of receivables due from the Merrimack Franchise. As a result,
the initial net asset value for the Merrimack Franchise was $500.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
November 30, 1998
-----------------
Results of Operations
- ---------------------
Total revenues increased $541,000, or 11%, for the three months ended November
30, 1998 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 ($277,000, or 10%), an increase in Company Franchises revenue
($148,000, or 27%), and an increase in royalties of $93,000 or 7%.
Total revenues increased $1,394,000, or 10%, for the nine months ended November
30, 1998, as compared to the corresponding period in the prior fiscal year. The
increase in revenue is attributable primarily to increases in (i) paper and
printing sales ($859,000, or 10%), (ii) royalty revenue ($345,000, or 9%), and
(iii) Company Franchises revenue ($74,000, or 4%). In the current year, the
Company operated two Company Franchises during the period March 1, 1998 through
September 27, 1998 and three Company Franchises from September 28, 1998 to
November 30, 1998. In the prior year, three Company Franchises were operated by
the Company from March 1, 1998 to July 31, 1998 and two Company Franchises
thereafter.
Cost of paper and printing sales as a percentage of paper and printing sales was
85% for the three and nine months ended November 30, 1998 as compared to 85% and
84%, respectively, for the corresponding periods in fiscal 1998. Cost of paper
and printing sales for the nine months ended November 30, 1998 include an
inventory provision in the amount of $145,000 to provide for possible losses on
paper stock purchased which was subsequently determined to be of inconsistent
quality for use in the thermography process.
Selling and administrative expenses represented 21% and 20% of gross revenues
for the three and nine months ended November 30, 1998, respectively, and 21% and
20% for the corresponding periods in fiscal 1998.
Liquidity and Capital Resources
- -------------------------------
Cash resources decreased $115,000 during the nine months ended November 30,
1998. The Company utilized working capital to make debt payments of $73,000,
made capital expenditures of $77,000 most of which related to equipment,
advanced $167,000 in anticipation of the resale of a franchise, $53,000 to
purchase a franchise and $514,000 to repurchase 220,000 shares of the Company's
common stock in accordance with its stock repurchase plans.
The Company is devoting resources to minimize the risk of potential disruption
from the "year 2000 ("Y2K") problem". This problem is a result of computer
programs having been written using two digits (rather than four) to define the
applicable year. Any information technology ("I.T.") systems that have time-
sensitive software may recognize a date using "00" as the year 1900 rather than
the year 2000, which could result in miscalculations and system failures. The
problem also extends to many "non-I.T." systems; that is, operating and control
systems that rely on embedded chip systems. In addition, like every other
business enterprise, the Company is at risk from Y2K failures on the part of its
major business counterparts, including suppliers, distributors, licensees,
franchisees and manufacturers, as well as potential failures in public and
private infrastructure services, including electricity, water, transportation
and communications. Possible system failures resulting from the Y2K problem
could primarily and adversely affect operations in the Company's distribution of
paper products. The Company has identified and implemented solutions for an
estimated 90% of Y2K issues which are reasonably within its control. Costs
incurred to date in resolving Y2K issues, which consist primarily of hardware
and software upgrades, amounted to approximately $40,000. The Company
anticipates that any future costs of Y2K compliance will not have a material
adverse affect on the Company's results of operations.
The Company plans to continue to improve its working capital and cash positions
by focusing efforts on increasing cash collections, implementing new product
lines and by assisting its Franchises in employing internet based technologies
to develop new national account markets and enhance services to existing
customers.
The Company believes that internally generated funds plus its $2 million bank
line of credit will be sufficient to satisfy the Company's working capital and
capital expenditure requirements for the foreseeable future.
7
<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, 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, including Y2K compliance issues; 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.
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: January 14, 1999 James H. Kaufenberg
--------------------- ----------------------------------------
James H. Kaufenberg
President & Chief Executive Officer
Date: January 14, 1999 Michael R. Hull
--------------------- ----------------------------------------
Michael R. Hull
Vice President & Chief Financial Officer
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000351541
<NAME> BCT INTERNATIONAL, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> AUG-01-1998
<PERIOD-END> NOV-30-1998
<EXCHANGE-RATE> 1
<CASH> 903
<SECURITIES> 0
<RECEIVABLES> 9,930
<ALLOWANCES> (1,131)
<INVENTORY> 2,343
<CURRENT-ASSETS> 9,136
<PP&E> 1,735
<DEPRECIATION> 1,159
<TOTAL-ASSETS> 15,181
<CURRENT-LIABILITIES> 2,263
<BONDS> 466
60
0
<COMMON> 226
<OTHER-SE> 12,166
<TOTAL-LIABILITY-AND-EQUITY> 15,181
<SALES> 11,424
<TOTAL-REVENUES> 15,809
<CGS> 8,628
<TOTAL-COSTS> 4,687
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 176
<INTEREST-EXPENSE> 42
<INCOME-PRETAX> 2,276
<INCOME-TAX> 478
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<NET-INCOME> 1,798
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