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UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





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FORM 10-Q





QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES EXCHANGE ACT OF 1934





For the Quarter ended August 31, 2002





Commission File No. 0-10823





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BCT INTERNATIONAL, INC.


(Exact name of Registrant as specified in its Charter)





Delaware (State of
Incorporation)

22-2358849 (IRS
Employer Identification Number)





3000 NE 30th Place, 5th Floor, Fort Lauderdale, FL (Address of principal executive offices)

33306 (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 October 15,
2002: 5,828,458





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BCT INTERNATIONAL, INC.





INDEX





Page NumberPART I.

FINANCIAL INFORMATIONCONDENSED CONSOLIDATED BALANCE SHEETSAugust 31, 2002 and February 28, 2002

2CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSfor the three months ended August 31, 2002 and August 31, 2001 and the six months ended August 31, 2002 and August 31, 2001

3CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITYfor the six months ended August 31, 2002

4CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSfor the six months ended August 31, 2002 and August 31, 2001

5Notes to Condensed Consolidated Financial Statements

6-7Managements Discussion and Analysis of Financial Condition and Results of Operations

8-9PART II.

OTHER INFORMATION AND SIGNATURESSignatures

10Certifications

11-12Exhibits

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PART I.    FINANCIAL STATEMENTS





BCT INTERNATIONAL, INC.





CONDENSED CONSOLIDATED BALANCE SHEETS


(Unaudited)


(000s omitted)





August 31, 2002


February 28, 2002ASSETSCurrent assets:Cash

$
4,687


$
4,819Accounts and notes receivable, net


2,171



2,889Inventory, net


2,625



1,887Assets held for sale, net


177



105Prepaid expenses and other current assets


310



154Deferred income taxes


419



419Total current assets


10,389



10,273Accounts and notes receivable, net


5,331



5,170Property and equipment at cost, net


637



435Deferred income taxes


1,189



970Deposits and other assets


39



24Trademark and other intangible assets, net


193



206Total assets

$
17,778


$
17,078LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
732


$
432Notes payable


374



560Accrued liabilities


985



871Deferred revenue


125



125Total current liabilities


2,216



1,988Deferred revenue


228



334Notes payable


161



Total liabilities


2,605



2,322Stockholders equity:Common stock, $.04 par value, 25,000 shares authorized, 5,828 shares issued


233



233Paid in capital


12,605



12,605Retained earnings


3,907



3,49016,745



16,328Less: Treasury stock, at cost, 707 shares


(1,572
)


(1,572
)Total stockholders equity


15,173



14,756Total liabilities and stockholders equity

$
17,778


$
17,078





The accompanying notes are an integral part of these condensed consolidated
financial statements.




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BCT INTERNATIONAL, INC.





CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)


(000s omitted)





Three Months Ended August 31,

Six Months Ended August 31,2002

2001

2002

2001Revenues:Royalties and franchise fees

$
1,241

$
1,266

$
2,621

$
2,614Paper and printing sales


2,903


3,110


6,145


6,385Company-owned franchise sales


76





76


Sales of Franchises


1


9


2


22Interest and other


194


144


411


3124,415


4,529


9,255


9,333Expenses:Cost of paper and printing sales


2,523


2,696


5,286


5,527Cost of Company-owned franchise sales


19





19


Selling, general and administrative


1,620


1,434


3,155


3,240Depreciation and amortization


55


57


111


1144,217


4,187


8,571


8,881Income from continued operations before income taxes


198


342


684


452Provision for income taxes


83


133


267


176Net income

$
115

$
209

$
417

$
276Earnings per share:Basic

$
.02

$
.04

$
.08

$
.05Diluted

$
.02

$
.04

$
.08

$
.05








The accompanying notes are an
integral part of these condensed consolidated financial statements.




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BCT INTERNATIONAL, INC.





CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
EQUITY


Six Months ended August 31, 2002


(Unaudited)


(000s omitted)





Common Stock

Paid In Capital

Retained Earnings

Less: Treasury Stock


TotalNumber of Shares

Par ValueBalance February 28, 2002

5,828

$
233

$
12,605

$
3,490

$
(1,572
)

$
14,756Net income










417






417Balance August 31, 2002

5,828

$
233

$
12,605

$
3,907

$
(1,572
)

$
15,173











The accompanying notes are an integral part of these condensed consolidated financial statements.




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BCT INTERNATIONAL, INC.





CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)


(000s omitted)





Six months ended August 31,2002


2001Cash flows from operating activities:Net income

$
417


$
276Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization


111



114Provision for doubtful accounts


700



450Provision for inventory obsolescence


50



50Other adjustments






(12
)Changes in operating assets and liabilities:Accounts and notes receivable


(143
)


826Inventory


(788
)


(73
)Assets held for sale


(72
)


(3
)Prepaid expenses and other assets


(171
)


(40
)Deferred income taxes


(219
)


116Accounts payable and accrued liabilities


414



(151
)Deferred revenue


(106
)


(97
)Net cash provided by operating activities


193



1,456Cash flows from investing activities:Capital expenditures


(69
)


(51
)Net cash (used in) investing activities


(69
)


(51
)Cash flows from financing activities:Principal payments on notes payable


(256
)


(42
)Exercise of stock options






8Net cash (used in) financing activities


(256
)


(34
)Net (decrease) increase in cash


(132
)


1,371Cash at beginning of period


4,819



1,799Cash at end of period

$
4,687


$
3,170





Noncash Activities:





In July 2002, the Company entered into a capital lease in the amount of $231 for the equipment acquired to operate the Company-owned
franchise in San Carlos, California.














The accompanying notes are an integral part of these condensed consolidated financial statements.




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BCT INTERNATIONAL, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


(000s omitted)





August 31, 2002





1.  In the opinion of management, the foregoing unaided condensed consolidated financial statements contain all normal recurring adjustments necessary to present fairly the financial position of the Company as of
August 31, 2002. The balance sheet as of February 28, 2002 was derived from audited financial statements.





2.  The results for the three and six month periods ended August 31, 2002 and 2001, are not necessarily indicative of results that may be expected for the fiscal year.





3.  For the three and six months ended August 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 and six months ended August 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 enactments of changes in the tax law or rates.





5.  On July 19, 2002, the Company began operating a Company owned franchise in San Carlos, California. This franchise
replaced a franchise in San Francisco, whose franchise agreement was terminated. The Company entered into an agreement with the terminated franchise for the orderly transition of the franchise business to the new facility in exchange for forgiveness
of amounts due to the Company of approximately $658. In addition, the Company is obligated as guarantor for amounts borrowed by the San Francisco franchise owner for the purchase of the franchise in the amount of $457. The results of operations of
the San Carlos Franchise, since July 19, 2002, (a loss of $49) are included in the consolidated income statement for the three and six month periods ended August 31, 2002.





6.  On September 19, 2002, the Company exercised its option to acquire an additional 37.15% interest in TBDS, Inc., the BCT franchise in Tampa, Florida. After
exercising its option, the Company owns 56.15% of TBDS, Inc. Under the option agreement, no consideration was given for the additional ownership interest . The Company intends to operate the BCT Tampa franchise as a Company-owned franchise.




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BCT INTERNATIONAL, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Continued


(Unaudited) (000s omitted)


August 31, 2002





7.  The Company has four reporting segments (1) Franchiser 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. The table below presents information about reported segments for the three and six months ended August 31:





For the Three Months Ended August 31,





Franchiser


Pelican Paper

Company owned Franchise


Other

Total2002Revenues

$
1,242


$
2,903

$
76


$
194

$
4,415Cost of sales






2,523


19






2,542Operating expenses


1,415



154


106






1,675Income (loss) before income taxes

$
(173
)

$
226

$
(49
)

$
194

$
198Depreciation and amortization

$
30


$
25

$



$


$
55Income tax (benefit) provision

$
(73
)

$
95

$
(20
)

$
81

$
83Capital expenditures

$
15


$
12

$
258


$


$
2852001Revenues

$
1,275


$
3,110

$



$
144

$
4,529Cost of sales






2,696









2,696Operating expenses


1,344



147









1,491Income (loss) before income taxes

$
(69
)

$
267

$



$
144

$
342Depreciation and amortization

$
30


$
27

$



$


$
57Income tax (benefit) provision

$
(27
)

$
104

$



$
56

$
133Capital expenditures

$
37


$
7

$



$


$
44





For the Six Months Ended August 31,





Franchiser


Pelican Paper

Company owned Franchise


Other

Total2002Revenues

$
2,623


$
6,145

$
76


$
411

$
9,255Cost of sales






5,286


19






5,305Operating expenses


2,851



309


106






3,266Income (loss) before income taxes

$
(228
)

$
550

$
(49
)

$
411

$
684Depreciation and amortization

$
62


$
49

$



$


$
111Income tax (benefit) provision

$
(89
)

$
215

$
(19
)

$
160

$
267Capital expenditures

$
26


$
16

$
258


$


$
3002001Revenues

$
2,636


$
6,385

$



$
312

$
9,333Cost of sales






5,527









5,527Operating expenses


3,068



286









3,354Income (loss) before income taxes

$
(432
)

$
572

$



$
312

$
452Depreciation and amortization

$
60


$
54

$



$


$
114Income tax (benefit) provision

$
(169
)

$
223

$



$
122

$
176Capital expenditures

$
44


$
7

$



$


$
51




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MANAGEMENTS DISCUSSION AND ANALYSIS OF


FINANCIAL CONDITION AND RESULTS OF OPERATIONS





August 31, 2002





Results
of Operations





Total revenues decreased $114,000, or 2.5% for the three months ended August 31, 2002 as
compared to the corresponding period in the prior fiscal year. The decrease in revenue is attributable primarily to decreases in (i) royalty revenue ($25,000 or 2%) and (ii) paper and printing sales ($207,000 or 6.7%). These decreases were partially
offset by increases in Orderprinting.com software licensing fees of $27,000 or 35% (the fees were increased from $4,200 to $6,000 annually), and an increase in Company-owned franchise sales of $76,000 due to the opening of a Company-owned franchise
in July 2002.





Total revenues decreased $78,000, or 1% for the six months ended August 31, 2002 as compared to the
corresponding period in the prior fiscal year. The decrease in revenue is attributable to decreases in paper and printing sales ($240,000 or 3.8%). These sales decreases were partially offset by increases in Orderprinting.com software licensing fees
of $73,000 or 52% and Company-owned franchise sales of $76,000.





Cost of paper and printing sales as a percentage
of paper and printing sales was 87% and 86%, respectively, for the three and six months ended August 31, 2002 as compared to 87% for the corresponding periods in fiscal 2002.





Selling and administrative expenses represented 37% and 34% of gross revenues for the three and six months ended August 31, 2002 as compared to 32% and 35% for the
corresponding periods in fiscal 2002. The selling and administrative expense percentage is higher for the three months ended August 31, 2002 primarily due to an additional $125,000 provision for bad debt, as well as expenses related to the opening
of the Company-owned franchise in July 2002 of $106,000.





Liquidity and Capital Resources





Cash resources decreased $132,000 during the six months ended August 31, 2002. The Company generated $193,000 from operations. During the
first six months of fiscal 2003, the Company made debt payments totaling $256,000, invested $788,000 for additional inventory and made capital expenditures of $69,000.





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.




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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%.





Item 4.    Controls
and Procedures.





Evaluation of Disclosure Controls and Procedures





Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of October 11, 2002
and believe that they are effective.





Change in Internal Controls





Not applicable.








PART II    OTHER INFORMATION AND SIGNATURES





Item
6.    Exhibits and Reports on Form 8-K





(a)  Exhibits:





99.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.99.2

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.


|
|




(b)  No reports on Form 8-K were filed by the Company
during the three month period ended August 31, 2002




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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)/s/    WILLIAM
WILKERSONWilliam Wilkerson Chairman, President & Chief Executive Officer





Date:  October 15, 2002





/s/    MICHAEL R.
HULLMichael R. Hull Vice
President & Chief Financial Officer





Date:  October 15, 2002




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CERTIFICATION OF CHIEF EXECUTIVE OFFICER





I, William Wilkerson, Chief Executive Officer
of BCT International, Inc., certify that:





(1)  I have reviewed this quarterly report on
Form 10-Q of BCT International, Inc;





(2)  Based on my knowledge, this quarterly report
dos not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods
covered by this quarterly report; and





(3)  Based on my knowledge, the financial
statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this
quarterly report.





/s/    WILLIAM A.
WILKERSONWilliam A. Wilkerson Chief Executive Officer


Date:  October 15, 2002




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CERTIFICATION OF CHIEF FINANCIAL OFFICER





I, Michael R. Hull, Chief Financial Officer of BCT International, Inc., certify that:





(1)  I have reviewed this quarterly report on Form 10-Q of BCT International, Inc;





(2)  Based on my knowledge, this quarterly report dos not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this quarterly report; and





(3)  Based on my knowledge, the financial statements, and other financial information included in
this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report.





/s/    MICHAEL R. HULLMichael R. Hull Chief
Financial Officer





Date:  October 15, 2002




12