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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, 2000
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
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(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
July 12, 2000: 5,822,208
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BCT INTERNATIONAL, INC.
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
ITEM 1 - Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS - May 31, 2000
and February 29, 2000............................................ 2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -
for the three months ended May 31, 2000 and 1999................. 3
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY - for the three months ended May 31, 2000... 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -
for the three months ended May 31, 2000 and 1999................. 5
Notes to Condensed Consolidated Financial Statements............. 6-7
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 8
ITEM 3 - Quantitive and Qualitive Disclosures About Market Risk.. 8
PART II. OTHER INFORMATION AND SIGNATURES
ITEM 6 - Exhibits and Reports on Form 8-K........................ 9
Signatures....................................................... 10
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PART I. FINANCIAL STATEMENTS
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's omitted)
<TABLE>
<CAPTION>
ASSETS May 31, 2000 February 29, 2000
------ ------------- ------------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalent $ 1,388 $ 1,906
Accounts and notes receivable, net 3,227 3,293
Inventory, net 2,605 2,359
Assets held for sale, net 248 268
Prepaid expenses and other current assets 260 140
Deferred income taxes 482 482
-------- --------
Total current assets 8,210 8,448
Accounts and notes receivable, net 7,232 7,275
Property and equipment at cost, net 532 529
Deferred income taxes 722 722
Deposits and other assets 89 89
Trademark and other intangible assets, net 252 258
-------- --------
Total assets $ 17,037 $ 17,321
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 970 $ 1,111
Notes payable 104 104
Accrued liabilities 768 1,349
Deferred revenue 218 218
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Total current liabilities 2,060 2,782
Deferred revenue 424 453
Notes payable 301 330
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Total liabilities 2,785 3,565
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Stockholders' equity:
Common stock, $.04 par value, 25,000 shares authorized,
5,822 shares issued 233 233
Paid in capital 12,597 12,597
Retained earnings 2,830 2,334
-------- --------
15,660 15,164
Less: Treasury stock, at cost, 591 shares (1,408) (1,408)
-------- --------
Total stockholders' equity 14,252 13,756
-------- --------
Total liabilities and stockholders' equity $ 17,037 $ 17,321
======== ========
</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
May 31
2000 1999
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<S> <C> <C>
Revenues:
Royalties and franchise fees $1,471 $1,457
Paper and printing sales 3,597 3,545
Sales of Franchises 15 ---
Interest and other 122 64
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5,205 5,066
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Expenses:
Cost of paper and printing sales 3,079 2,960
Selling, general and administrative 1,266 1,027
Depreciation and amortization 47 45
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4,392 4,032
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Income from continued operations before
income taxes 813 1,034
Income tax provision 317 362
------ ------
Income from continued operations 496 672
Discontinued operations:
Loss from company owned franchises
operated under a plan of disposition,
net of tax benefit of $15 -- (28)
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Net income $ 496 $ 644
====== ======
Net income per common share:
Income from continued operations $ .09 $ .13
Loss from discontinued operations -- (.01)
------ ------
Basic $ .09 $ .12
====== ======
Income from continued operations $ .09 $ .12
Loss from discontinued operations --- ---
------ ------
Diluted $ .09 $ .12
====== ======
</TABLE>
See notes to condensed consolidated financial statements.
3
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BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MAY 31, 2000
(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 29, 2000 5,822 $233 $12,597 $2,334 $(1,408) $13,756
Net income -- -- -- 496 -- 496
--------- ----- ------- ------ ------- -------
Balance May 31, 1999 5,822 $233 $12,597 $2,830 $(1,408) $14,252
========= ===== ======= ====== ======= =======
</TABLE>
See notes to condensed consolidated financial statements.
4
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BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(000's omitted)
<TABLE>
<CAPTION>
Three months ended
May 31
2000 1999
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 496 $ 644
Plus loss from discontinued
operations -- 28
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Income from continued operations 496 672
Adjustments to reconcile net income
to net cash provided (used) in
operating activities:
Depreciation and amortization 47 45
Provision for doubtful accounts 50 18
Other adjustments 7 (21)
Changes in operating assets and
liabilities:
Accounts and notes receivable 59 (760)
Inventory (253) (123)
Assets held for sale 20 88
Prepaid expenses and other assets (120) (10)
Deferred income taxes -- --
Accounts payable and accrued liabilities (722) 125
Deferred revenue (29) 415
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Net cash provided by (used in)
continued operations (445) 449
Net cash used by discontinued
operations -- (43)
------ ------
Net cash provided by (used in)
operating activities (445) 406
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Cash flows from investing activities:
Capital expenditures (44) (10)
------ ------
Net cash (used in) investing
activities (44) (10)
------ ------
Cash flows from financing activities:
Principal payments on notes payable (29) (28)
Exercise of options for common stock -- 6
Treasury stock purchases -- (58)
------ ------
Net cash (used in) financing
activities (29) (80)
------ ------
Net increase (decrease) in cash and
cash equivalents (518) 316
Cash and cash equivalents at
beginning of period 1,906 1,143
------ ------
Cash and cash equivalents at end of
period $1,388 $1,459
====== ======
</TABLE>
See notes to condensed consolidated financial statements.
5
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BCT INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(000's omitted, except per share data)
May 31, 2000
------------
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, 2000.
2. The results for the three month periods ended May 31, 2000 and 1999, are not
necessarily indicative of results that may be expected for the fiscal year.
3. For the three months ended May 31, 2000 and 1999, 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. The Company sold the Delray Beach,
Florida and Louisville, Kentucky franchises in fiscal 2000.
Net assets of the Merrimack, New Hampshire franchise of $248 are included in
assets held for sale in the May 31, 2000 condensed consolidated balance
sheet. Sales from Company owned franchise discontinued operations were $157
and $800 for the three months ended May 31, 2000 and 1999, respectively.
Management intends to sell the Merrimack, New Hampshire franchise in fiscal
2001; however, no assurances can be made that a sale will be consummated.
6
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BCT INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
(UNAUDITED)
(000's omitted, except per share data)
6. 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
2000 Franchisor Paper Other Total
---- ---------- ------- ----- ------
<S> <C> <C> <C> <C>
Revenues $1,486 $3,597 $122 $5,205
Cost of sales -- 3,079 -- 3,079
Operating expenses 1,176 137 -- 1,313
------ ------ ---- ------
Income before income taxes $ 310 $ 381 $122 $ 813
====== ====== ==== ======
Depreciation and amortization $ 28 $ 19 $ -- $ 47
====== ====== ==== ======
Income tax provision $ 121 $ 148 $ 48 $ 317
====== ====== ==== ======
Capital expenditures $ 12 $ 32 $ -- $ 44
====== ====== ==== ======
1999
----
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
====== ====== ==== ======
</TABLE>
7
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations
---------------------
Total revenues increased $139,000 or 3% for the first quarter ended May 31,
2000, as compared to the corresponding period in the prior fiscal year. The
increase in revenue is attributable to increases in paper and printing sales
($52,000 or 1%), royalties ($14,000 or 1%), revenue from Franchise Sales
($15,000 or 100%) and other revenue ($58,000 or 91%). Sales of the franchise
network were 3.2% greater than the same period in the prior fiscal year. The
royalty revenue increase does not reflect the franchise network sales increase
because the Company ceased accruing royalty revenue from two troubled franchises
in July 1999. The paper and printing sales increase did not keep pace with the
franchise network sales increase as catalog sales decreased $57,000 or 40%
during the first quarter of fiscal 2001 as compared to the same period in the
prior year. Other revenues increased as the Company earned $43,000 in licensing
fees for Orderprinting.com(TM), an Internet based ordering application which was
introduced in January 1999. Licensing fees associated with this application
were negligible in the same period in the prior fiscal year.
Selling and administrative expenses represented 24% and 20% of gross revenues
for the quarters ended May 31, 2000 and 1999, respectively. These expenses
increased as a result of an increase in general and administrative expense of
$15,000 combined with an increase in salaries and employee benefits of $138,000
and an increase in bad debt expense of $32,000. Salaries and employee benefits
increased due to the addition of new positions to manage franchise operations,
national account relationships and to provide additional support or users for
Orderprinting.com(TM).
Income from continued operations decreased $176,000 or 26%. Net income decreased
$148,000 or 23% due to the increase in selling, general and administrative
expense.
Liquidity and Capital Resources
-------------------------------
Cash resources decreased $518,000 during the first quarter of fiscal 2001. The
Company used $445,000 from continued operations. The Company utilized working
capital to make debt payments totaling $29,000, paid accrued liabilities and
accounts payable of $722,000 and invested $253,000 for additional inventory in
anticipation of price increases by paper mills.
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 by its franchise network through the
use of Orderprinting.com(TM), 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.
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.
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUED
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 6. Exhibits and Reports on Form 8-K
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(a) No exhibits
(b) No reports on Form 8-K were filed by the Company during the period
ended May 31, 2000.
9
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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: July 13, 2000 /s/ Peter T. Gaughn
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Peter T. Gaughn
Chief Executive Officer
Date: July 13, 2000 /s/ Michael R. Hull
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Michael R. Hull
Vice President & Chief
Financial Officer
10
