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  2701
  E. Grauwyler Rd.

  Irving,
  TX 75061

  972-579-6000

August 19,
2005

VIA
Edgar Electronic Transmission

Ms. Kathleen
Collins

Accounting
Branch Chief

United
States Securities and Exchange Commission

100
F Street, N.E.

Washington,
D.C. 20002

RE:          BancTec, Inc.

Form 10K
for the year ended December 31, 2004

Dear
Ms. Collins:

This
letter contains the response of BancTec, Inc. (the “Company”) to the
comments regarding the referenced filing contained in the letter dated July 22,
2005, (the “Staff’s Letter”) from the Staff of the Securities and Exchange
Commission.  The numbered responses that
follow correspond by number to the comments in the Staff’s Letter.

Sincerely,

  /s/
  Coley Clark

  Coley
  Clark

  President
  and Chief Executive Officer

Item
7. Management’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
considerations 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.

Response

Item
303(a)(1) states as follows:  “1)
Liquidity.   Identify any known trends or
any known demands, commitments, events or uncertainties that will result in or
that are reasonably likely to result in the registrant’s liquidity increasing
or decreasing in any material way. If a material deficiency is identified,
indicate the course of action that the registrant has taken or proposes to take
to remedy the deficiency. Also identify and separately describe internal and
external sources of liquidity, and briefly discuss any material unused sources
of liquid assets.”

The
Company did state on page 14 that “The Company’s working capital
requirements are generally provided by cash and cash equivalents, funds
available under the Company’s revolving credit agreement… and by internally
generated funds from operations.”  This
paragraph went on to state “General economic conditions, decreased revenues
from the Company’s maintenance contracts, and the requirement to obtain
performance bonds or similar instruments could have a material impact on the
Company’s future liquidity.”

Although
the Company believes it has complied with the requirements of Item 303(a)(1) of
Regulation S-K, the Company has modified the language in its 10Q filing for the
second quarter of 2005, and would propose to modify future filings as follows:

“The
Company’s working capital and capital expenditure requirements are generally
provided by cash and cash equivalents, funds available under the Company’s
revolving credit agreement, as discussed below, which matures May 30,
2006, and by internally generated funds from operations.  Funds availability under the revolving credit
agreement is determined by a borrowing-base formula equal to a specified
percentage of the value of the Company’s eligible accounts receivable,
inventory and pledged cash.  General
economic conditions, decreased revenues from the Company’s maintenance
contracts, and the requirement to obtain performance bonds or similar
instruments could have a material impact on the Company’s future
liquidity.  The Company believes,
however, that these sources will be sufficient to support operations and
capital expenditure needs during the next twelve months.”

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.

Response

The
Company does enter into multiple element arrangements which could include
hardware, software, professional services and postcontract customer support
(PCS).  When the Company enters into
multiple element arrangements that involve hardware, software and/or
professional services, the Company considers the software and/or the
professional services to be essential to the functionality of the hardware and
therefore applies SOP 97-2, Software Revenue Recognition, to these
transactions.  SOP 97-2 requires that the
fee should be allocated to the elements and recognized as revenue when the
revenue recognition criteria for that element have been met.  This statement further provides that if
evidence of fair value of each element does not exist, all revenue under the
arrangement must be deferred until the earlier of when (1) such evidence
does exist, (2) all elements have been delivered, or (3) evidence of
fair value exists for the undelivered elements.
A specific exception does exist if the only undelivered element is PCS.  EITF 00-21 describes criteria for determining
if separate units of accounting exist in an arrangement involving multiple
deliverables.

Under
this guidance, in sales involving multiple element arrangements under SOP 97-2,
the Company does not account for multiple deliverables as separate units of
accounting, and is not generally able to provide evidence of the fair value of
each element, with the exception of PCS.
Therefore, revenue is recognized on the delivered elements only when the
remaining undelivered element is PCS.  As
a result, the following criteria must be met on all elements except PCS before
any revenue is recognized: (1) a contract has been executed with the
customer, (2) delivery has occurred or services have been rendered, (3) the
price is fixed and determinable, (4) collectibility is reasonably assured,
(5) contract terms and statement of work have been met, and (6) documented
proof of customer acceptance has been received.
When all these criteria have been met, revenue on all elements except
PCS is recognized.  The fair value of PCS
is determined based upon the price the Company charges for PCS in similar
arrangements (and also considers the prices the Company charges for PCS renewal
contracts), and this revenue is recognized ratably over the term of the service
contract.

FASB
Technical Bulletin 90-1,
Accounting for Separately Priced Extended Warranty and Product Maintenance Contracts,
applies to arrangements that include separately priced extended warranty or
product maintenance contracts. The guidance in that Technical Bulletin provides
for a method of allocation that is the same as the “reverse” residual method.
In arrangements that include these types of deliverables, the guidance in Technical Bulletin 90-1 remains
applicable when allocating arrangement consideration to a separately priced
extended warranty or product maintenance contract. If there are other
deliverables in the arrangement, the guidance in EITF 00-21 applies to those
other deliverables.

The
Company, in certain cases, sells hardware through third-party resellers.  In these cases, the Company provides no
installation services, software or professional services, but may provide PCS
for only the hardware device.  In this
case, SOP 97-2 does not apply as the only software included is imbedded operating
system software, which is incidental to the product as a whole.  In these cases, revenue on the hardware sale
portion is recognized when the first five criteria specified above are met.  As specified in FASB Technical Bulletin 90-1,
revenue related to the PCS is determined based upon the price the Company
charges for the PCS arrangement, and this revenue is recognized ratably over
the term of the service contract.  It
should be noted that the Company monitors the prices charged in these PCS
arrangements and those prices are consistent among similar transactions and
renewals of hardware PCS 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.

Response

Consistent
with what the Company believes to be industry practice, e.g., NCR Corporation
and Diebold Inc., the Company uses and separately classifies two distinct types
of parts in the maintenance service business:
repairable parts (“field support spare parts”), such as motors, drives,
etc. and non-repairable parts such as belts, rollers, etc.  The Company classifies field support spare
parts as a component of property, plant and equipment rather than inventory
because such parts are repaired and re-used over a long period of time, e.g.,
two to five years, the same period over which such parts are depreciated.  The Company classifies non-repairable parts
that are consumed in providing maintenance service as a component of
inventory.  The depreciation expense on
the field support spare parts is included in cost of sales, as is the cost
incurred to repair these parts.

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.

Response

When
the Company states that options were issued at or above “market price”, this is
intended to communicate that the strike price of the options issued is at or
above “fair value” of the underlying common stock of the company.  The fair value test is computed using a
discounted cash flow model, similar to that used for testing in relation to the
Company’s FAS 142 impairment test for goodwill, which was originally set up by
an independent valuation consultant.

Under
this income valuation approach, value is dependent on the present worth of
future economic benefits to be derived from ownership.  Future debt-free net cash flows available for
distribution are discounted at market-based rates of return to provide
indications of value.  An estimate of the
stabilized future cash flow attributable is also discounted back to present
value.  The summation of the discounted
annual cash flows plus the stabilized cash flow after capitalization and
discounting indicates the current value of the Company.  The debt-free net cash flow is the
anticipated future annual cash flow net of long-term charges and net of
requirement for future working capital infusions and capital expenditures.  Anticipated depreciation and amortization
expense is then added to the projected debt-free net income to arrive at
debt-free net cash flow.  The discount
rate used was based on a weighted average cost of capital (“WACC”)
analysis.  In determining an appropriate
discount rate utilizing the WACC analysis, consideration was given to
short-term interest rates, the yields of long-term corporate and government
bonds, and other alternative investment instruments, as well as the typical
capital structure of companies in the industry.
The discount rate determined under this method and used in the
computation was 15%.   In addition, five
years of projected cash flows were used in the calculation based on results
comparable to 2004 actual results as well as capital spending comparable to
2004 spending.

Once
this total value was determined, reductions were made for preferred stock
obligations to determine a net value which was computed on a per share basis
that was then compared to the stock option exercise price of $9.25 per
share.  In all cases the stock option
exercise price, which was set by the board of directors, was in excess of the
fair value per share price computed under the discounted cash flow methodology,
resulting in no compensation expense under the intrinsic value method.

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.

Response

The Company performs warranty and extended service
contract calls for Dell under various contracts.  Under the extended service contract program,
a Dell customer will buy an extended service contract, and a portion of the
proceeds from that contract will be remitted to BancTec to cover future repair
services under a reverse agency agreement.
BancTec records the remittance as deferred revenue, and as service calls
are run, recognizes revenue out of the deferred revenue pool.  Various estimates are used to ascertain the
per call revenue to be recognized including anticipated rates of breakdown for
various units.  Different contracts are
executed with Dell for desktop and non-desktop equipment, and these contracts
call for “true-ups” based on differences between the estimates used to
establish per call rates and the actual experienced rates of breakdown.  Note that the final actual breakdown rates
cannot be computed until the end of the contract period.

From 2000 to present, various reconciliation and
true-up activities have taken place with respect to the Dell contracts.  Prior to 2001, the contracts did not have a
true-up mechanism and revenue was recognized based on a straight-line
amortization method.  The Company worked
with Dell to begin receiving contract and incident file data in order to
reconcile between the BancTec estimates and the Dell data.  Until the contract information is received
from Dell, the Company must make estimates based on the information available
to tie a service call to a contract.  During
this period, the Company used all available information to track the individual
service calls and tie those calls to a specific contract.  The Company received the information from
Dell to true-up the desktop contracts on a consistent basis from September 2000
through December 2003.  The Company
did not begin receiving data related to non-desktop contracts until 2004.  When the data from Dell was analyzed, it was
discovered that cutoff differences in the contract year resulted in pricing
differences on the service calls.  Dell
applied a 360-day year, whereas the Company applied a 365-day year.  As a result, some service calls were estimated
at the year one contract rate instead of the higher year 2 contract rate.  Pricing and breakdown rate estimates vary
between desktop and non-desktop contracts and from year to year, therefore the
rates applied differed.  The Company’s
calculations were based on its interpretation of the arrangement; therefore,
collaboration between the Company and Dell resolved the differences in
estimates in 2004.

In June 2004, the Company recorded entries to
reflect the process of reconciling the deferred revenue accounts based on the
data provided by Dell in 2004 and reflected the adjustments as a change in
accounting estimate.  The resulting entries
record all adjustments effective for contracts expiring through March 2004.  These entries resulted in a debit to deferred
revenue and a credit to reve