10-Q 1 d10q.txt FORM 10-Q 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, 2002 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 12, 2002: 5,121,451 BCT INTERNATIONAL, INC. INDEX

PAGE NUMBER PART I. FINANCIAL INFORMATION ITEM 1 - Financial Statements CONDENSED CONSOLIDATED BALANCE SHEETS - ~~November~~May 3031, ~~2001~~2002 and February 28, ~~2001~~2002 ...................................................................... 2 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - for the three months ended ~~November~~May 3031, ~~2001~~2002 and ~~November 30, 2000 and the nine months ended November 30,~~ 2001 ~~and November 30, 2000~~ ...............................................~~.........~~ 3 CONDENSED CONSOLIDATED ~~STATEMENTS~~STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - for the ~~nine~~three months ended ~~November~~May 3031, ~~2001~~2002 ...................................~~.....................~~ 4 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - for the ~~nine~~three months ended ~~November~~May 3031, ~~2001~~2002 and ~~November~~2001 ~~30, 2000~~ ..........................~~..............................~~ 5 Notes to Condensed Consolidated Financial Statements ...................... 6 ITEM 2 -7 Management's Discussion and Analysis of Financial Condition and Results of Operations ..................................................... 87 ITEM 3 -9 Quantitive and Qualitive Disclosures About Market Risk ......... 8 PART II. OTHER INFORMATION AND SIGNATURES ITEM 6 - Exhibits and Reports on Form 8-K ................................. 8 Signatures ................................................................ 109

PART I. FINANCIAL STATEMENTS BCT INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (000's omitted)

ASSETS ~~November~~May 3031, ~~2001~~2002 February 28, ~~2001~~2002 ------ ------------~~-----~~ ----------------- (UNAUDITED) Current assets: Cash $ 4,~~328~~616 $ 14,~~799~~819 Accounts and notes receivable, net 12,~~800~~364 32,~~568~~889 Inventory, net 2,~~415~~709 21,~~352~~887 Assets held for sale, net ~~132~~90 63105 Prepaid expenses and other current assets ~~148~~145 71154 Deferred income taxes ~~321~~419 ~~321~~419 ----------- ----------- Total current assets 910,~~144~~343 810,~~174~~273 Accounts and notes receivable, net 64,~~143~~907 65,~~362~~170 Property and equipment at cost, net ~~467~~401 ~~473~~435 Deferred income taxes ~~809~~1,075 ~~925~~970 Deposits and other assets 24 24 Trademark and other intangible assets, net ~~212~~199 ~~232~~206 ----------- ----------- Total assets $ 16,~~799~~949 $ 1617,~~190~~078 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable $ ~~658~~516 $ ~~597~~432 Notes payable 86308 86560 Accrued liabilities ~~699~~701 ~~403~~871 Deferred revenue --125 ~~167~~125 ----------- ----------- Total current liabilities 1,~~443~~650 1,~~253~~988 Deferred revenue ~~353~~241 ~~417~~334 ~~Notes payable 172 236~~ ----------- ----------- Total liabilities 1,~~968~~891 12,~~906~~322 ----------- ----------- Stockholders' equity: Common stock, $.04 par value, 25,000 shares authorized, 5,828 shares issued ~~(5,822 shares in fiscal 2001)~~ 233 233 Paid in capital 12,605 12,~~597~~605 Retained earnings 3,~~565~~792 23,~~998~~490 ----------- ----------- 16,~~403~~630 1516,~~828~~328 Less: ~~treasury~~Treasury stock, at cost, 707 shares (~~686 shares in fiscal 2001) (~~1,572) (1,~~544~~572) ----------- ----------- Total stockholders' equity 1415,~~831~~058 14,~~284~~756 ----------- ----------- Total liabilities and stockholders' equity $ 16,~~799~~949 $ 1617,~~190~~078 =========== ===========

See notes to condensed consolidated financial statements. 2 BCT INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended May 31 2002 2001 ---- ---- Revenues: Royalties and franchise fees $1,380 $1,348 Paper and printing sales 3,242 3,275 Sales of Franchises 1 13 Interest and other 217 168 ------ ------ 4,840 4,804 ------ ------ Expenses: Cost of paper and printing sales 2,763 2,831 Selling, general and administrative 1,535 1,806 Depreciation and amortization 56 57 ------ ------ 4,354 4,694 ------ ------ Income before provision for income taxes 486 110 Income tax provision 184 43 ------ ------ Net income $ 302 $ 67 ====== ====== Net income per common share: Basic $ .06 $ .01 ====== ====== Diluted $ .06 $ .01 ====== ====== See notes to condensed consolidated financial statements. 3 BCT INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY THREE MONTHS ENDED MAY 31, 2002 (UNAUDITED) 000's omitted

~~Three~~Common ~~Months~~Stock ~~Ended~~Less: ~~Nine Months Ended November 30, November 30, 2001 2000 2001 2000_~~ ---------- -------- --------- --~~---------~~ ~~Revenues:~~Number ~~Royalties and franchise fees $ 1,230 $ 1,334 $ 3,844 $ 4,091 Paper and printing sales 2,912 3,386 9,297 10,297 Sales~~ of ~~franchises~~Par 67Paid 6In 89Retained 30Treasury ~~Interest~~Shares ~~and~~Value ~~other~~Capital ~~181~~Earnings ~~152~~Stock ~~493~~Total ~~421~~ --------- ----------- ---------- --------- ~~4,390 4,878 13,723 14,839~~ --------- ----------- ---------- --------- ~~Expenses: Cost of paper and printing sales 2,546 2,913 8,073 8,790 Selling, general and administrative 1,305 1,520 4,545 4,073 Depreciation and amortization 56 65 170 166~~ --------- -~~----------~~ ~~----------~~Balance ~~---------~~February 328,~~907~~ ~~4,498~~2002 125,~~788~~828 ~~13,029~~$ ~~---------~~233 ~~-----------~~$12,605 ~~----------~~$ ~~---------~~3,490 ~~Income~~$ ~~from~~( ~~continued operations before provision for income taxes 483 380 935~~ 1,~~810~~572) ~~Provision~~$14,756 ~~for~~Net income ~~taxes 192 137 368 694~~ -- --~~-----~~ --~~---------~~ 302 --~~---------~~ 302 --------- ~~Income from continued operations 291 243 567 1,116 Discontinued operations: Loss from company owned franchises operated under a plan of disposition, net of tax benefit~~ --- --- --- ~~(31)~~ --------- -------~~----~~ ----------- --------- ~~Net~~Balance ~~income~~May $31, ~~291~~2002 $5,828 ~~243~~ $ ~~567~~233 $ 112,~~085~~605 ~~========= =========== =========== ========= Earnings per share: Income from continued operations~~ $ ~~0.06~~3,792 $ ~~0.05 $ 0.11 $ 0.21 Loss from discontinued operations --- --- ---~~ ( ~~0.01~~1,572) ~~--------- ----------- ----------- --------- Basic~~ $15,058 ~~0.06 $ 0.05 $ 0.11 $ 0.21~~ ========= =======~~====~~ =======~~====~~ =======~~===~~ ~~Income from continued operations $ 0.06 $ 0.05 $ 0.11 $ 0.21 Loss from discontinued operations --- --- --- ( 0.01) --------- ------------ ----------- --------- Diluted $ 0.06 $ 0.05 $ 0.11 $ 0.21~~ ========= ==~~==========~~ =======~~==== =========~~

See notes to condensed consolidated financial statements. 4 BCT INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (000's omitted)

~~Common~~Three ~~Stock~~months ended May 31 2001 2002 ---- ----~~---------------~~ ~~Less~~Cash flows from operating activities: ~~Number~~Net ofincome ~~Par~~$ ~~Paid~~302 In$ ~~Retained~~67 ~~Treasury~~Adjustments ~~Shares~~to ~~Value~~reconcile ~~Capital~~net ~~Earnings~~income ~~Stock~~to ~~Total~~net cash provided by operating activities: Depreciation and amortization 56 57 Provision for doubtful accounts 350 225 Provision for inventory obsolescence 25 25 Changes in operating assets and liabilities: Accounts and notes receivable 438 505 Inventory (847) (232) Assets held for sale 15 6 Prepaid expenses and other assets 9 (32) Deferred income taxes (105) 91 Accounts payable and accrued liabilities (86) (339) Deferred revenue (93) (58) ------- ------- Net cash provided (used) by operating activities 64 315 ------- ------- Cash flows from investing activities: Capital expenditures (15) (7) ------- ------- Net cash (used) by investing activities (15) (7) ------- -------~~-----------------------------~~ ~~Balance~~Cash ~~February~~flows ~~28,~~from ~~2001~~financing ~~5,822~~activities: $Principal ~~233~~payments $on ~~12,597~~notes $payable ~~2,998 $~~ (~~1,544~~252) ~~$ 14,284 Other transactions 6 -- 8 --~~ (2822) ~~(20)~~Exercise ~~Net~~of ~~income~~options --for --common --stock ~~567~~ -- ~~567~~8 -------- --------- Net cash (used) by financing activities (252) (14) -------- -------- Net (decrease) increase in cash (203) 294 Cash at beginning of period 4,819 1,799 -------- -------- ~~Balance~~Cash ~~November~~at ~~30,~~end ~~2001~~of ~~5,828~~period $ ~~233 $ 12~~4,~~605~~616 $ 32,~~565~~093 ~~$ (1,572) $ 14,831~~ ======== =======~~== ======== ======== ======== ========~~

See notes to condensed consolidated financial statements. 5 BCT INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (000's omitted, except per share data) May 31, 2002 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, 2002. 2. The results for the three month periods ended May 31, 2002 and 2001, are not necessarily indicative of results that may be expected for the fiscal year. 3. For the three months ended May 31, 2002 and 2001, 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, 2002 and 2001, the number of shares used for both the basic and diluted earnings per share calculations were 5,121,000 and 5,127,000, respectively. 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 2002, and 2001, 885,000 options and 1,393,000 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 three reporting segments (1) Franchisor Operations, (2) Pelican Paper Products and (3) 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. The table below presents information about reported segments for the 3 months ended May 31:

~~Nine~~Pelican ~~months~~2002 ~~ended~~Franchisor ~~November~~Paper ~~30,~~Other ~~2001~~Total ~~2000~~---- ---------- ----- ----- ----- ~~Cash~~Revenues ~~flows~~$ ~~from~~1,381 ~~operating~~$ ~~activities:~~3,242 ~~Net~~$ ~~income~~217 $ ~~567~~4,840 $Cost 1of sales --- 2,~~085~~763 ~~Plus~~--- ~~loss~~2,763 ~~from~~Operating ~~discontinued~~expenses ~~operations~~1,436 155 --- 311,591 ---------- --------- ------- --------- Income ~~from~~(loss) ~~continued~~before ~~operations~~income ~~567~~taxes ~~1,116~~$ ~~Adjustments~~(55) to$ ~~reconcile~~324 ~~net~~$ ~~income~~217 to$ ~~net~~486 ~~cash~~========== ~~provided~~========= by======= ~~operating~~========= ~~activities: Inventory provision 75 22~~ Depreciation and amortization ~~170~~$ ~~166~~32 ~~Provision~~$ ~~for~~24 ~~doubtful~~$ ~~accounts~~--- ~~675~~$ ~~350~~56 ~~Other~~========== ~~adjustments~~========= 3======= 1========= ~~Changes~~Income intax ~~operating~~provision ~~assets and liabilities: Accounts and notes receivable 1,212~~ (~~349~~benefit) ~~Inventory~~$ (~~138~~21) ~~(170)~~$ ~~Assets~~123 ~~held~~$ ~~for~~82 ~~sale~~$ ~~---~~184 ~~251~~========== ~~Prepaid~~========= ~~expenses~~======= ~~and~~========= ~~other~~Capital ~~assets~~expenditures ~~(77)~~$ ~~(201)~~11 ~~Deferred~~$ ~~income~~4 ~~taxes~~$ ~~116~~--- ~~(110)~~$ ~~Accounts~~15 ~~payable~~========== ~~and~~========= ~~accrued~~======= ~~liabilities~~========= ~~357~~2001 ~~(846) Deferred revenue (231) (145)~~ ----~~-------~~ ~~----------~~Revenues ~~Net~~$ ~~cash~~1,361 ~~provided~~$ ~~by continued operations 2~~3,~~729~~275 85$ ~~Net~~168 ~~cash~~$ ~~used~~4,804 byCost ~~discontinued~~of ~~operations~~sales --- ~~(31)~~2,831 ---~~--------~~ ~~----------~~2,831 ~~Net~~Operating ~~cash~~expenses ~~provided~~1,724 by139 ~~operating~~--- ~~activities 2~~1,~~729~~863 54 ----------- ---------- ~~Cash flows from investing activities: Capital expenditures (144) (144)~~ -------~~----~~ ---------- ~~Net~~Income ~~cash~~before ~~(used~~income ~~in)~~taxes ~~investing~~$ ~~activities~~ (~~144~~363) ~~(144)~~$ ~~-----------~~305 ~~----------~~$ ~~Cash~~168 ~~flows~~$ ~~from~~110 ~~financing~~========== ~~activities:~~========= ~~Principal~~======= ~~payments~~========= onDepreciation ~~notes~~and ~~payable~~amortization ~~(64)~~$ ~~(89)~~30 ~~Exercise~~$ of27 ~~options~~$ ~~for common stock 8~~ --- ~~-----------~~$ ~~----------~~57 ~~Net~~========== ~~cash~~========= ~~(used~~======= ~~in)~~========= ~~financing~~Income ~~activities~~tax ~~(56)~~provision $ (89142) ~~-----------~~$ ~~----------~~119 ~~Net~~$ ~~increase~~66 ~~(decrease)~~$ in43 ~~cash~~========== ~~2,529~~========= ~~(179)~~======= ~~Cash~~========= atCapital ~~beginning~~expenditures of$ ~~period~~7 ~~1,799~~$ ~~1,906~~ ---~~--------~~ $ ---~~-------~~ ~~Cash at end of period~~ $ ~~4,328~~7 ~~$ 1,727~~ ========== ========= ======= =========

6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Total revenues increased $36,000 or 1% for the first quarter ended May 31, 2002, as compared to the corresponding period in the prior fiscal year. Royalty revenues increased $32,000 or 2% due to an increase in sales by the BCT network of franchises. Interest and other revenue increased $49,000 or 29% as a result of an increase in the annual licensing fees for Orderprinting.com(TM) from $4,200 to $6,000. These increases were offset by decreases in paper and printing sales of $33,000 or 1% and a decrease in revenue from sales of Franchises of $12,000 or 92%. Cost of paper and printing sales as a percentage of paper and printing sales was 85% and 86%, respectively, for the quarters ended May 31, 2002 and 2001. Fluctuations in this percentage result primarily from changes in the sales mix. Selling, general and administrative expenses represented 32% and 38% of gross revenues for the quarters ended May 31, 2002 and 2001, respectively. These expenses were higher in fiscal 2002 primarily as a result of severance costs associated with the departure of the former President and Chief Operating Officer ($300,000) which were recorded in the quarter ended May 31, 2001. Liquidity and Capital Resources Cash resources decreased $203,000 during the first quarter of fiscal 2003. The Company generated $64,000 from operations. The Company made debt payments totaling $252,000. The Company invested $847,000 for additional inventory during the first quarter of fiscal 2003. The Company believes current cash 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. 7 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 LIBOR + 2.35%. Part II OTHER INFORMATION AND SIGNATURES 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, 2002. 8 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 12, 2002 William Wilkerson ---------------------- ---------------------------------------- William Wilkerson Chief Executive Officer Date: July 12, 2002 Michael R. Hull ---------------------- ---------------------------------------- Michael R. Hull Vice President & Chief Financial Officer 9

For the Three Months Ended November 30, Pelican Franchisor Paper Other Total ---------- ----- ----- ----- 2001 Revenues $ 1,297 $ 2,912 $ 181 $ 4,390 Cost of sales --- 2,546 --- 2,546 Operating expenses 1,215 146 --- 1,361 ------------ ----------- ---------- ---------- Income before income taxes $ 82 $ 220 $ 181 $ 483 ============ =========== ========== ========== Depreciation and amortization $ 31 $ 25 $ --- $ 56 ============ =========== ========== ========== Income tax provision $ 31 $ 89 $ 72 $ 192 ============ =========== ========== ========== Capital expenditures $ 82 $ 11 $ --- $ 93 ============ =========== ========== ========== 2000 Revenues $ 1,340 $ 3,386 $ 152 $ 4,878 Cost of sales --- 2,913 --- 2,913 Operating expenses 1,430 155 --- 1,585 ------------ ----------- ---------- ---------- Income (loss) before income taxes $ (90) $ 318 $ 152 $ 380 ============ =========== ========== ========== Depreciation and amortization $ 35 $ 30 $ --- $ 65 ============ =========== ========== ========== Income tax (benefit) provision $ (32) $ 115 $ 54 $ 137 ============ =========== ========== ========== Capital expenditures $ 2 $ 10 $ --- $ 12 ============ =========== ========== ========== For the Nine Months Ended November 30, Pelican Franchisor Paper Other Total ---------- ----- ----- ----- 2001 Revenues $ 3,933 $ 9,297 $ 493 $ 13,723 Cost of sales --- 8,073 --- 8,073 Operating expenses 4,283 432 --- 4,715 ------------ ----------- ---------- ---------- Income (loss) before income taxes $ (350) $ 792 $ 493 $ 935 ============ =========== ========== ========== Depreciation and amortization $ 91 $ 79 $ --- $ 170 ============ =========== ========== ========== Income tax (benefit) provision $ (138) $ 312 $ 194 $ 368 ============ =========== ========== ========== Capital expenditures $ 126 $ 18 $ --- $ 144 ============ =========== ========== ========== 2000 Revenues $ 4,121 $ 10,297 $ 421 $ 14,839 Cost of sales --- 8,790 --- 8,790 Operating expenses 3,766 473 --- 4,239 ------------ ----------- ---------- ---------- Income before income taxes $ 355 $ 1,034 $ 421 $ 1,810 ============ =========== ========== ========== Depreciation and amortization $ 96 $ 70 $ --- $ 166 ============ =========== ========== ========== Income tax provision $ 136 $ 397 $ 161 $ 694 ============ =========== ========== ========== Capital expenditures $ 22 $ 122 $ --- $ 144 ============ =========== ========== ==========

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