<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, 1999
Commission File No. 0-10823
-------
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 14, 2000: 5,820,625
<PAGE>
BCT INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS -
November 30, 1999 and February 28, 1999................................ 2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -
for the three months ended November 30, 1999 and November 30,
1998 and the nine months ended November 30, 1999 and
November 30, 1998...................................................... 3
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY - for the nine months ended
November 30, 1999...................................................... 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-
for the nine months ended November 30, 1999 and
November 30, 1998...................................................... 5
Notes to Condensed Consolidated Financial Statements................... 6-8
Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................. 9-10
PART II. OTHER INFORMATION AND SIGNATURES
Signatures............................................................. 11
</TABLE>
<PAGE>
PART I. FINANCIAL STATEMENTS
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(000's omitted)
<TABLE>
<CAPTION>
ASSETS November 30, 1999 February 28, 1999
- ------ ----------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalent $ 1,740 $ 1,143
Accounts and notes receivable, net 4,056 3,252
Inventory, net 2,423 2,122
Assets held for sale, net 395 1,082
Prepaid expenses and other current assets 237 199
Deferred income taxes 462 476
-------- --------
Total current assets 9,313 8,274
Accounts and notes receivable, net 6,861 6,052
Property and equipment at cost, net 448 460
Deferred income taxes 201 246
Deposits and other assets 89 90
Trademark and other intangible assets, net 265 284
-------- --------
$ 17,177 $ 15,406
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------
Current liabilities:
Accounts payable $ 894 $ 844
Notes payable 113 113
Accrued liabilities 620 753
Deferred revenue 719 311
-------- --------
Total current liabilities 2,346 2,021
Notes payable 350 433
-------- --------
Total liabilities 2,696 2,454
-------- --------
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,
5,821 shares issued (5,753 shares in fiscal 1999) 233 230
Paid in capital 12,594 12,506
Retained earnings 3,029 1,322
-------- --------
15,856 14,058
Less: Treasury Stock, at cost, 591 shares (496 in fiscal 1999) (1,375) (1,166)
-------- --------
Total stockholders' equity 14,481 12,892
-------- --------
$ 17,177 $ 15,406
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
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,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Royalties and franchise fees $ 1,351 $ 1,348 $ 4,125 $ 4,090
Paper and printing sales 3,458 3,177 10,594 9,536
Sales of franchises 11 --- 26 78
Interest and other 75 93 214 217
------- ------- ------- -------
4,895 4,618 14,959 13,921
------- ------- ------- -------
Expenses:
Cost of paper and printing sales 2,855 2,686 8,738 8,107
Selling, general and administrative 1,222 1,106 4,247 3,147
Depreciation and amortization 47 45 137 137
------- ------- ------- -------
4,124 3,837 13,122 11,391
------- ------- ------- -------
Income from continued operations before
legal settlement and income taxes 771 781 1,837 2,530
Income from legal settlement --- --- 941 ---
------- ------- ------- -------
Income from continued operations
before income taxes 771 781 2,778 2,530
Provision for income taxes 269 120 971 534
------- ------- ------- -------
Income from continued operations 502 661 1,807 1,996
Discontinued operations:
Loss from company owned franchises
operated under a plan of disposition
net of tax benefit (62) (90) (100) (198)
------- ------- ------ -------
Net income $ 440 $ 571 $ 1,707 $ 1,798
======= ======= ======= =======
Earnings per share:
Income from continued operations $ 0.10 $ 0.13 $ 0.34 $ 0.37
Loss from discontinued operations (0.01) (0.02) (0.02) (0.04)
------- ------- ------- -------
Basic $ 0.09 $ 0.11 $ 0.32 $ 0.33
======= ======= ======= =======
Income from continued operations $ 0.09 $ 0.12 $ 0.33 $ 0.36
Loss from discontinued operations (.01) (0.02) (0.02) (0.04)
------- ------- ------- -------
Diluted $ 0.08 $ 0.10 $ 0.31 $ 0.32
======= ======= ======= =======
</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, 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
Exercise of options 27 1 30 --- --- 31
Treasury stock purchases, 90,000 shares -- --- --- --- (209) (209)
Conversion of preferred stock 41 2 58 --- --- 60
Net income -- --- --- 1,707 --- 1,707
----- ----- -------- -------- -------- --------
Balance November 30, 1999 5,821 $ 233 $ 12,594 $ 3,029 $ (1,375) $ 14,481
===== ===== ======== ======== ======== ========
</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,
1999 1998
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,707 $ 1,798
Plus loss from discontinued operations 100 198
-------- -------
Income from continued operations 1,807 1,996
Adjustments to reconcile net income to net cash provided by
operating activities:
Inventory provision --- 145
Depreciation and amortization 137 137
Provision for doubtful accounts 705 176
Other adjustments 2 15
Changes in operating assets and liabilities:
Accounts and notes receivable (1,892) (1,139)
Inventory (301) (65)
Assets held for sale 687 (766)
Prepaid expenses and other assets (758) (64)
Deferred income taxes 59 457
Accounts payable and accrued liabilities 637 (124)
Deferred revenue (18) (44)
-------- -------
Net cash provided by continued operations 1,065 724
Net cash used by discontinued operations (100) (198)
-------- -------
Net cash provided by operating activities 965 526
-------- -------
Cash flows from investing activities:
Capital expenditures (107) (77)
-------- -------
Net cash (used in) investing activities (107) (77)
-------- -------
Cash flows from financing activities:
Dividend payment on preferred stock --- (6)
Principal payments on notes payable (83) (73)
Exercise of warrants/options for common stock 31 47
Treasury stock purchases (209) (514)
Other --- (18)
-------- -------
Net cash (used in) financing activities (261) (564)
-------- -------
Net increase (decrease) in cash and cash equivalents 597 (115)
Cash and cash equivalents at beginning of period 1,143 1,018
-------- -------
Cash and cash equivalents at end of period $ 1,740 $ 903
======== =======
</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, 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 November 30, 1999.
2. The results for the three and nine month periods ended November 30, 1999 and
1998, are not necessarily indicative of results that may be expected for the
fiscal year.
3. For the three and nine months ended November 30, 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. During the three months ended November 30, 1999, the Company purchased 40,000
shares of treasury stock at an average price of $1.98 per share in connection
with its stock repurchase plan. Under the stock repurchase plan, the Company
has repurchased 240,000 shares of the Company's common stock at an average
price of $2.17. On October 28, 1999, the board of directors terminated the
stock repurchase plan. 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. On February 28, 1999, the Company's Board of Directors approved a strategic
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 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 existing
accounts receivable at the date of sale. The transaction resulted in deferred
revenue of approximately $440, which will be recognized over the life of the
promissory note.
Effective August 1, 1999, the Company sold the Louisville, Kentucky franchise
in exchange for a $495, fifteen year note bearing interest which escalates to
9%. No deferred revenue was recognized on the sale as the sales price equaled
the carrying value.
Net assets of the Merrimack, New Hampshire franchise of $395 are included in
assets held for sale in the November 30, 1999 condensed consolidated balance
sheet.
Sales from Company-owned franchise discontinued operations were $275 and $704
for the three months ended November 30, 1999 and 1998, respectively, and were
$1,429 and $1,888 for the nine months ended November 30, 1999 and 1998,
respectively. Losses from Company-owned franchises for the three months ended
November 30, 1999 and 1998 were net of income tax benefits of $33 and $24,
respectively, and for the nine months ended November 30, 1999 and 1998 were
net of income tax benefits of $54 and $53, respectively. Additional losses
from the date of measurement, February 28, 1999, of $38 have been incurred
through November 30, 1999 for the Delray Beach, Florida and Louisville,
Kentucky franchises. Management intends to sell
6
<PAGE>
BCT INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Continued ...
(UNAUDITED) (000's omitted)
November 30, 1999
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 and nine months ended November 30, 1998 have been
classified for the Company-owned franchises as discontinued operations in
fiscal 1999.
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 three and
nine months ended November 30:
<TABLE>
<CAPTION>
For the Three Months Ended November 30,
Pelican
Franchisor Paper Other Total
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1999
Revenues $ 1,362 $ 3,458 $ 75 $ 4,895
Cost of sales --- 2,855 --- 2,855
Operating expenses 1,043 226 --- 1,269
---------- ---------- ---------- ----------
Income before income taxes $ 319 $ 377 $ 75 $ 771
========== ========== ========== ==========
Depreciation and amortization $ 34 $ 13 $ --- $ 47
========== ========== ========== ==========
Income tax provision $ 112 $ 131 $ 26 $ 269
========== ========== ========== ==========
Capital expenditures $ 35 $ 10 $ --- $ 45
========== ========== ========== ==========
1998
Revenues $ 1,348 $ 3,177 $ 93 $ 4,618
Cost of sales --- 2,686 --- 2,686
Operating expenses 929 222 --- 1,151
---------- ---------- ---------- ----------
Income before income taxes $ 419 $ 269 $ 93 $ 781
========== ========== ========== ==========
Depreciation and amortization $ 31 $ 14 $ --- $ 45
========== ========== ========== ==========
Income tax provision $ 63 $ 40 $ 17 $ 120
========== ========== ========== ==========
Capital expenditures $ 29 $ 5 $ --- $ 34
========== ========== ========== ==========
<CAPTION>
For the Nine Months Ended November 30,
Pelican
Franchisor Paper Other Total
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1999
Revenues $ 4,151 $ 10,594 $ 1,155 $ 15,900
Cost of sales --- 8,738 --- 8,738
Operating expenses 3,767 617 --- 4,384
---------- ---------- ---------- ----------
Income before income taxes $ 384 $ 1,239 $ 1,155 $ 2,778
========== ========== ========== ==========
Depreciation and amortization $ 101 $ 36 $ --- $ 137
========== ========== ========== ==========
Income tax provision $ 134 $ 433 $ 404 $ 971
========== ========== ========== ==========
Capital expenditures $ 85 $ 22 $ --- $ 107
========== ========== ========== ==========
</TABLE>
7
<PAGE>
BCT INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Continued ...
(UNAUDITED) (000's omitted)
November 30, 1999
<TABLE>
<S> <C> <C> <C> <C>
1998
Revenues $ 4,168 $ 9,536 $ 217 $ 13,921
Cost of sales --- 8,107 --- 8,107
Operating expenses 2,806 478 --- 3,284
---------- ---------- ---------- ----------
Income before income taxes $ 1,362 $ 951 $ 217 $ 2,530
========== ========== ========== ==========
Depreciation and amortization $ 100 $ 37 $ --- $ 137
========== ========== ========== ==========
Income tax provision $ 287 $ 201 $ 46 $ 534
========== ========== ========== ==========
Capital expenditures $ 62 $ 15 $ --- $ 77
========== ========== ========== ==========
</TABLE>
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
November 30, 1999
-----------------
Results of Operations
- ---------------------
Total revenues increased $277,000, or 6.0%, for the three months ended November
30, 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 ($281,000, or 8.8%) which was the result of adding a new drop
ship program for rubber stamp supplies which began in November 1998.
Total revenues increased $1,038,000, or 7.5%, for the nine months ended November
30, 1999, 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 ($1,058,000, or 11.1%) and (ii) royalty revenue ($35,000, or 1%).
The increase in paper and printing sales resulted from the new drop ship program
for rubber stamp supplies which began in November 1998.
Cost of paper and printing sales as a percentage of paper and printing sales was
83% for the three and nine months ended November 30, 1999 as compared to 85% for
each of 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 25% and 28% of gross revenues
for the three and nine months ended November 30, 1999, respectively, and 24% and
23% for the corresponding periods in fiscal 1999. The increase for the three
months ended November 30, 1999 resulted from additional research and development
expenses related to the Company's internet based ordering system. The increase
for the nine months ended November 30, 1999 related primarily to the additional
provision for bad debt provided in the 2nd quarter of fiscal 2000. In addition,
the Company incurred severance and moving expenses associated with the change in
the President and C.E.O. position, the Vice President of Marketing position, the
addition of a Vice President of Operations and a Director of National Sales.
Losses from company owned franchises for the three and nine months ended
November 30, 1999 amounted to $95,000 and $154,000, respectively as compared to
$114,000 and $251,000, respectively for the corresponding periods in fiscal
1999. The losses related to the Delray Beach, Florida and Merrimack, New
Hampshire wholly-owned franchises and the 70% owned Louisville, Kentucky
franchise.
Liquidity and Capital Resources
- -------------------------------
Cash resources increased $597,000 during the nine months ended November 30,
1999. Net cash provided by operating activities of $965,000 were used to make
principal payments on debt of $83,000, provided for capital expenditures of
$107,000 most of which related to equipment, and $209,000 to repurchase 95,000
shares of the Company's common stock in accordance with its stock repurchase
plans. The Company terminated the stock repurchase plan effective October 29,
1999.
The Company plans to continue to improve its working capital and cash positions
by focusing efforts on 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.
Year 2000 Issue
- ---------------
The Year 2000 issue relates to 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
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUED...
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, are 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 franchisees, suppliers or customers to
become Year 2000 compliant will not have a material adverse impact on its
operations. However, as of this date, the Company is not aware of the occurrence
of a Y2K failure at any of its franchises, customers or suppliers. The cost to
the Company of developing and implementing its Year 2000 compliance plan has
amounted to approximately $65,000.
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.
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%. No advances have been made on the line.
10
<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, 2000 Peter T. Gaughn
------------------------- -----------------------------------------
Peter T. Gaughn
President & Chief Executive Officer
Date: January 14 , 2000 Michael R. Hull
------------------------- ----------------------------------------
Michael R. Hull
Vice President & Chief Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000351541
<NAME> BCT INTERNATIONAL, INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 1,740
<SECURITIES> 0
<RECEIVABLES> 12,904
<ALLOWANCES> (1,987)
<INVENTORY> 2,423
<CURRENT-ASSETS> 10,033
<PP&E> 1,645
<DEPRECIATION> 1,197
<TOTAL-ASSETS> 17,897
<CURRENT-LIABILITIES> 3,066
<BONDS> 463
0
0
<COMMON> 233
<OTHER-SE> 14,248
<TOTAL-LIABILITY-AND-EQUITY> 17,897
<SALES> 10,594
<TOTAL-REVENUES> 15,900
<CGS> 8,738
<TOTAL-COSTS> 3,644
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 705
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> 2,778
<INCOME-TAX> 971
<INCOME-CONTINUING> 0
<DISCONTINUED> (100)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,707
<EPS-BASIC> .32
<EPS-DILUTED> .31
</TABLE>
