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, 2003
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 July 14, 2003: 5,121,471
BCT INTERNATIONAL, INC.
| PAGE NUMBER | ||||
| PART I. FINANCIAL INFORMATION | ||||
| ITEM 1—Financial Statements |
||||
| CONDENSED CONSOLIDATED BALANCE SHEETS—May 31, 2003 and February 28, 2003 |
2 | |||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS—for the three months ended May 31, 2003 and 2002 | 3 | |||
| CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY—for the three months ended May 31, 2003 | 4 | |||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—for the three months ended May 31, 2003 and 2002 | 5 | |||
| 6-7 | ||||
| ITEM 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations |
8 | |||
| ITEM 3—Quantitative and Qualitative Disclosures About Market Risk |
8 | |||
| 8 | ||||
| PART II. OTHER INFORMATION AND SIGNATURES | ||||
| 9 | ||||
| 9 | ||||
| 10-11 | ||||
| Exhibits |
12-13 | |||
PART I. FINANCIAL STATEMENTS
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(000’s omitted)
| May 31, 2003 |
February 28, 2003 |
|||||||
| (UNAUDITED) | ||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash |
$ | 4,893 | $ | 4,276 | ||||
| Accounts and notes receivable, net |
3,089 | 3,117 | ||||||
| Inventory, net |
2,369 | 2,735 | ||||||
| Assets held for sale, net |
90 | 85 | ||||||
| Prepaid expenses and other current assets |
331 | 314 | ||||||
| Deferred income taxes |
419 | 406 | ||||||
| Total current assets |
11,191 | 10,933 | ||||||
| Accounts and notes receivable, net |
4,568 | 4,721 | ||||||
| Property and equipment at cost, net |
988 | 1,034 | ||||||
| Deferred income taxes |
1,067 | 919 | ||||||
| Deposits and other assets |
43 | 48 | ||||||
| Trademark and other intangible assets, net |
174 | 180 | ||||||
| Total assets |
$ | 18,031 | $ | 17,835 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 610 | $ | 901 | ||||
| Notes payable |
113 | 113 | ||||||
| Accrued liabilities |
671 | 462 | ||||||
| Deferred revenue |
55 | 55 | ||||||
| Total current liabilities |
1,449 | 1,531 | ||||||
| Notes payable, less current maturities |
390 | 410 | ||||||
| Deferred revenue |
314 | 335 | ||||||
| Total liabilities |
2,153 | 2,276 | ||||||
| Minority interest |
25 | 18 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock, $.04 par value, 25,000 shares authorized, 5,828 shares issued |
233 | 233 | ||||||
| Paid in capital |
12,605 | 12,605 | ||||||
| Retained earnings |
4,587 | 4,275 | ||||||
| 17,425 | 17,113 | |||||||
| Less: Treasury stock, at cost, 707 shares |
(1,572 | ) | (1,572 | ) | ||||
| Total stockholders’ equity |
15,853 | 15,541 | ||||||
| Total liabilities and stockholders’ equity |
$ | 18,031 | $ | 17,835 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
2
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended May 31 | ||||||
| 2003 |
2002 | |||||
| Revenues: |
||||||
| Royalties and franchise fees |
$ | 1,389 | $ | 1,380 | ||
| Paper and printing sales |
3,084 | 3,242 | ||||
| Sales of Franchises |
9 | 1 | ||||
| Sales Company-owned Franchises |
743 | — | ||||
| Interest and other |
195 | 217 | ||||
| 5,420 | 4,840 | |||||
| Expenses: |
||||||
| Cost of paper and printing sales |
2,667 | 2,763 | ||||
| Cost of sales Company-owned Franchises |
166 | — | ||||
| Selling, general and administrative |
2,008 | 1,535 | ||||
| Depreciation and amortization |
77 | 56 | ||||
| 4,918 | 4,354 | |||||
| Income before provision for income taxes |
502 | 486 | ||||
| Income tax provision |
190 | 184 | ||||
| Net income |
$ | 312 | $ | 302 | ||
| Net income per common share: |
||||||
| Basic |
$ | .06 | $ | .06 | ||
| Diluted |
$ | .06 | $ | .06 | ||
The accompanying notes are an integral part of the condensed consolidated financial statements.
3
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
THREE MONTHS ENDED MAY 31, 2003
(UNAUDITED)
000’s omitted
| Common Stock |
Paid In Capital |
Retained Earnings |
Less: Treasury Stock |
Total | ||||||||||||||
| Number of Shares |
Par Value |
|||||||||||||||||
| Balance February 28, 2002 |
5,828 | $ | 233 | $ | 12,605 | $ | 4,275 | $ | (1,572 | ) | $ | 15,541 | ||||||
| Net income |
— | — | — | 312 | — | 312 | ||||||||||||
| Balance May 31, 2002 |
5,828 | $ | 233 | $ | 12,605 | $ | 4,587 | $ | (1,572 | ) | $ | 15,853 | ||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
BCT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(000’s omitted)
| Three months ended May 31 |
||||||||
| 2003 |
2002 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 312 | $ | 302 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
77 | 56 | ||||||
| Provision for doubtful accounts |
225 | 350 | ||||||
| Provision for inventory obsolescence |
25 | 25 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts and notes receivable |
27 | 438 | ||||||
| Inventory |
341 | (847 | ) | |||||
| Assets held for sale |
(5 | ) | 15 | |||||
| Prepaid expenses and other assets |
(17 | ) | 9 | |||||
| Deferred income taxes |
(161 | ) | (105 | ) | ||||
| Accounts payable and accrued liabilities |
(82 | ) | (86 | ) | ||||
| Deferred revenue |
(21 | ) | (93 | ) | ||||
| Net cash provided by operating activities |
721 | 64 | ||||||
| Cash flows from investing activities: |
||||||||
| Capital expenditures |
(84 | ) | (15 | ) | ||||
| Net cash (used) in investing activities |
(84 | ) | (15 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Principal payments on notes payable |
(20 | ) | (252 | ) | ||||
| Net cash (used) in financing activities |
(20 | ) | (252 | ) | ||||
| Net increase (decrease) in cash |
617 | (203 | ) | |||||
| Cash at beginning of period |
4,276 | 4,819 | ||||||
| Cash at end of period |
$ | 4,893 | $ | 4,616 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
BCT INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(000’s omitted, except per share data)
May 31, 2003
| 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, 2003. |
| 2. | The results for the three month periods ended May 31, 2003 and 2002, are not necessarily indicative of results that may be expected for the fiscal year. |
| 3. | For the three months ended May 31, 2003 and 2002, 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. |
For the three months ended May 31, 2003 and 2002, the number of shares used for both the basic and diluted earnings per share calculations were 5,121. All of the stock options outstanding for both periods were excluded from the diluted earnings per share calculation as their impact was anti-dilutive. In 2003 and 2002, 814 options and 885 options, respectively, were excluded.
| 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. | The Company has four reporting segments (1) Franchisor Operations, (2) Pelican Paper Products (3) Other Operations and (4) Company-owned Franchises. 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. The table below presents information about reported segments for the three months ended May 31:
| 2003 |
Franchisor |
Pelican Paper |
Other |
Company Owned Franchises |
Total | ||||||||||||
| Revenues |
$ | 1,398 | $ | 3,084 | $ | 195 | $ | 743 | $ | 5,420 | |||||||
| Cost of sales |
— | 2,667 | — | 166 | 2,833 | ||||||||||||
| Operating expenses |
1,267 | 155 | — | 663 | 2,085 | ||||||||||||
| Income (loss) before income taxes |
$ | 131 | $ | 262 | $ | 195 | $ | (86 | ) | $ | 502 | ||||||
| Depreciation and amortization |
$ | 31 | $ | 22 | $ | — | $ | 24 | $ | 77 | |||||||
| Income tax provision (benefit) |
$ | 50 | $ | 99 | $ | 74 | $ | (33 | ) | $ | 190 | ||||||
| Capital expenditures |
$ | 8 | $ | 2 | $ | — | $ | 74 | |||||||||