July 22, 2005
Fax (972) 821 - 4448
Room 4561
J. Cooley Clark
Chief Executive Officer
Banctec, Inc.
2701 East Grauwyler
Irving, Texas 75061
RE: Banctec, Inc.
Form 10-K
Filed on April 8, 2005
File No. 000-09859
Dear Mr. Clark:
We have reviewed the above referenced filing and have the
following comments. Please note that we have limited our review
to
only your financial statements and related disclosures and do not
intend to expand our review to other portions of your document. We
may ask you to provide us with supplemental information so we may
better understand your disclosure. Please be as detailed as
necessary in your explanation. After reviewing this information,
we
may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 10-K for the Year Ended December 31, 2004
Item 7. Mangement`s Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources, page 14
1. We note you omitted disclosure of whether you believe you have
sufficient capital resources to meet your working capital and
capital
expenditure needs. Tell us your consideration of providing a
reasonably detailed discussion of the Company`s ability or
inability
to generate sufficient cash to support its operations during the
twelve-month period following the date of the financial
statements.
Refer to Item 303(a)(1) of Regulation S-K.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Note A-Summary of Significant Accounting Policies
Revenue Recognition, page 28
2. We note your disclosure of your various hardware products,
software products and services on pages 3 and 4. Tell us if you
enter into multiple element arrangements and identify the elements
included in each type of sales transaction. Describe your
consideration of EITF 00-21 and SOP 97-2, as applicable, for
arrangements that include multiple elements. Tell us how you apply
the separation criteria in EITF 00-21 for those arrangements.
Property, Plant and Equipment, page 28
3. Tell us what is included in field support spare parts. Are
these
parts used in the installation or repair of the equipment sold?
If
so, explain why this is included in property and equipment and
depreciated over two to five years and why the parts are not
included
as part of cost of sales when used.
Stock-based Compensation, page 30
4. We note your disclosure that options granted in 2003 and 2004
were
issued at or above "market price." In light of the fact that your
common shares are not publicly traded, define for us what you mean
by
"market price." Further, please describe how you determined the
fair
value of shares underlying each of your share option grants in
2003
and 2004 including the methodology and significant assumptions
used.
Note C - Discontinued Operations, Restructuring, Impairment and
Change in Accounting Estimate
Change in Accounting Estimate, page 33
5. Explain, in detail, what facts came to your attention that lead
the Company to record a $4.3 million adjustment to deferred
revenue.
Also, explain the estimates and uncertainties that are used
accounting for deferred revenues and how you considered including
a
discussion of such estimates in your critical accounting policy
disclosures.
Note H - Taxes, page 37
6. We note that during fiscal 2003 the Company reduced the
deferred
tax asset valuation allowance by $13.8 million and during fiscal
2004
you increased the valuation allowance by $10.3 million. Please
explain in detail the facts and circumstances that caused the
Company
to record a decrease and then subsequent increase in the valuation
allowance. Also explain what is included in the $4.7 million of
permanent differences in the reconciliation of the statutory to
effective tax rate for the year ended, December 31, 2004.
Item 9A. Controls and Procedures, page 46
7. We note your discussion of internal-control weaknesses that
were
noted as a result of the Company`s 2000 and 2001 audits. With
regards to this information, please provide the following:
* Tell us when these weaknesses were last communicated to
management.
* Describe in greater detail the nature of the material weaknesses
identified in your disclosure. In this regard, also tell us the
specific steps that the company has taken, if any, to remediate
the
material weaknesses and tell us whether the company believes that
the
material weaknesses still exist at the end of the period covered
by
the report.
* You indicate that steps have been implemented to address
internal-
control weaknesses. Tell us when this was done. If the Company
continued to address these weaknesses during fiscal 2004, then
tell
us how you determined that there were no significant changes to
the
Company`s internal controls or in other factors that could
significantly affect these controls subsequent to the date of
their
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses. See Release No.
33-8238.
8. We note your statement that "within 90 days prior to the filing
of
this report," the CEO and CFO continued to evaluate the
effectiveness
of disclosure controls and believe that controls and procedures
are
effective in "making known to them material information...required
to
be included in this report." Tell us how you considered the
requirements of Item 307 of Regulation S-K whereby the conclusions
of
management regarding the effectiveness of disclosure controls and
procedures should be made as of the end of the period.
9. We also note your statement that "disclosure controls and
procedures, no matter how well designed and implemented, can
provide
only reasonable assurance of achieving an entity`s disclosure
objectives." Tell us how you considered the requirements of
Section
II.F.4 of Management`s Reports on Internal Control Over Financial
Reporting and Certification of Disclosure in Exchange Act Periodic
Reports, SEC Release No. 33-8238, available on our website at
<http.//www.sec.gov/rules/final/33-8238.htm>to indicate that your
disclosure controls and procedures are designed to provide
reasonable
assurance of achieving their objectives and that your principal
executive officer and principal financial officer concluded that
your
disclosure controls and procedures are effective at that
reasonable
assurance level.
10. We note your disclosures that "the Chief Executive Officer and
the Chief Financial Officer believe that the Company`s disclosure
controls and procedures are effective in making know to them
material
information relating to the Company required to be included in
this
report". Tell us how you officers considered Exchange Act Rule
13a-
15(e) in concluding that your disclosure controls and procedures
are
effective to ensure that information required to be disclosed by
Banctec in reports that you file under the Exchange Act is
recorded,
processed, summarized and reported within the time periods
specified
in Securities and Exchange Commission rules and forms as of the
end
of the period.
* * * * *
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. Please submit all correspondence and
supplemental
materials on EDGAR as required by Rule 101 of regulation S-T. You
may wish to provide us with marked copies of the amendment to
expedite our review. Please furnish a cover letter with your
amendment that keys your responses to our comments and provides
any
requested supplemental information. Detailed cover letters
greatly
facilitate our review. Please understand that we may have
additional
comments after reviewing your amendment and responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
You may contact David Edgar at (202)-551-3459 or the
undersigned
at (202) 551-3499 if you have any questions regarding comments on
the
financial statements and related matters.
Very truly yours,
Kathleen Collins
Accounting Branch Chief
Mr. J. Cooley Clark
Banctec, Inc.
July 22, 2005
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