-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CkEKdyMy3mGWJRp+pOxzadq2WDe8Yw3GZ724GUjVeS4LkrPe6Pd7yQ8GKAjV0Juw SJYAywLDju+isMcyB/Q9kQ== 0000319379-98-000006.txt : 19980518 0000319379-98-000006.hdr.sgml : 19980518 ACCESSION NUMBER: 0000319379-98-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980403 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PSC INC CENTRAL INDEX KEY: 0000319379 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 160969362 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-09919 FILM NUMBER: 98622234 BUSINESS ADDRESS: STREET 1: 675 BASKET RD CITY: WEBSTER STATE: NY ZIP: 14580 BUSINESS PHONE: 7162651600 MAIL ADDRESS: STREET 1: 675 BASKET ROAD CITY: WEBSTER STATE: NY ZIP: 14580 FORMER COMPANY: FORMER CONFORMED NAME: PHOTOGRAPHIC SCIENCES CORP DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q FOR QUARTER ENDED APRIL 3, 1998 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 3, 1998 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-9919 PSC INC. (Exact name of Registrant as Specified in Its Charter) New York 16-0969362 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 675 Basket Road, Webster, New York 14580 - ---------------------------------- ----- (Address of principal executive offices) (Zip Code) (716) 265-1600 -------------- (Registrant's telephone number, including area code) 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 12 months preceding (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 |_| As of May 11, 1998, there were 11,727,071 shares of common stock outstanding. ================================================================================ PSC Inc. AND SUBSIDIARIES INDEX PAGE NUMBER PART I FINANCIAL INFORMATION Item 1 -Financial Statements Consolidated Balance Sheets as of April 3, 1998 (Unaudited) and December 31, 1997........................................3 - 4 Consolidated Statements of Operations and Retained Earnings for the three months ended: April 3, 1998 (Unaudited) and April 4, 1997 (Unaudited) ...................................5 Consolidated Statements of Cash Flows for the three months ended: April 3, 1998 (Unaudited) and April 4, 1997 (Unaudited) ...................................6 Notes to Consolidated Financial Statements (Unaudited) ..................................7 - 9 Item 2 -Management's Discussion and Analysis of Financial Condition and Results of Operations ..................................10 - 11 PART II OTHER INFORMATION Item 1 -Legal Proceedings .................................................12 Item 2 -Changes in Securities..............................................12 Item 3 -Defaults upon Senior Securities....................................12 Item 4 -Submission of Matters to a Vote of Security Holders................12 Item 5 -Other Information..................................................12 Item 6 -Exhibits and Reports on Form 8-K...................................12 PART I - FINANCIAL INFORMATION Item 1: Financial Statements PSC Inc. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (All amounts in thousands)
April 3, 1998 December 31, 1997 (Unaudited) ASSETS CURRENT ASSETS : Cash and cash equivalents ........................ $ 4,050 $ 2,271 Accounts receivable, net of allowance for doubtful accounts of $1,202 and $1,169, respectively ...................... 35,305 35,094 Inventories ...................................... 19,129 17,723 Prepaid expenses and other ....................... 1,720 1,569 ----------- ---------- TOTAL CURRENT ASSETS .............................. 60,204 56,657 PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $14,338 and $13,024, respectively ........................ 35,341 35,469 DEFERRED TAX ASSETS ...................................... 22,667 23,576 INTANGIBLE AND OTHER ASSETS, net of accumulated amortization of $14,849 and $13,006, respectively ...... 55,599 57,096 ---------- ---------- TOTAL ASSETS ............................................. $173,811 $172,798 ========= ========= SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
PSC Inc. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (All amounts in thousands) (Continued)
April 3, 1998 December 31, 1997 ------------- ----------------- (Unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt ....................... $ 12,909 $ 12,406 Accounts payable ........................................ 16,803 18,000 Accrued expenses ........................................ 8,652 7,405 Accrued payroll and related employee benefits ........... 3,815 5,559 Accrued acquisition related restructuring costs ......... 957 1,175 --------- --------- TOTAL CURRENT LIABILITIES ............................. 43,136 44,545 LONG-TERM DEBT, less current maturities ........................ 95,059 96,148 OTHER LONG-TERM LIABILITIES .................................... 2,735 2,775 SHAREHOLDERS' EQUITY: Preferred shares, par value $.01; 10,000 authorized, 110 shares issued and outstanding. ($11,000 aggregate liquidation value) 1 1 Common shares, par value $.01; 40,000 authorized, 11,632 and 11,390 shares issued and outstanding ........................ 116 114 Additional paid-in capital .............................. 68,257 66,734 Retained earnings/(Accumulated deficit) ................. (34,313) (36,543) Accumulated other comprehensive income .................. (943) (739) Less treasury stock, 39 shares repurchased, at cost ................................... (237) (237) --------- --------- TOTAL SHAREHOLDERS' EQUITY ............................ 32,881 29,330 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .................................................... $ 173,811 $ 172,798 ========= ========= SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
PSC Inc. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (All amounts in thousands, except per share data) (Unaudited) Three Months Ended April 3, April 4, 1998 1997 ---- ---- NET SALES ............................................ $ 53,628 $ 54,236 COST OF SALES ........................................ 31,943 31,535 -------- -------- Gross profit ................................ 21,685 22,701 OPERATING EXPENSES: Engineering, research and development ....... 3,884 3,534 Selling, general and administrative ......... 9,738 12,983 Amortization of intangibles resulting from business acquisitions ............. 1,707 1,677 -------- -------- Income from operations ................. 6,356 4,507 INTEREST AND OTHER INCOME /(EXPENSE): Interest expense ............................ (2,876) (3,368) Interest income ............................. 65 151 Other income/(expense) ...................... (5) 116 -------- -------- (2,816) (3,101) -------- -------- Income from continuing operations before income tax provision ................... 3,540 1,406 Income tax provision ........................ 1,310 520 -------- -------- Income from continuing operations ........... 2,230 886 Discontinued operations: Loss from discontinued operations, net of tax -- 16 Net income .................................. $ 2,230 $ 870 ======== ======== NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE : Basic: Continuing operations ..................... $ 0.19 $ 0.08 Discontinued operations ................... -- -- Net income ................................ $ 0.19 $ 0.08 ======== ======== Diluted: Continuing operations ..................... $ 0.16 $ 0.08 Discontinued operations ................... -- -- -------- -------- Net income ................................ $ 0.16 $ 0.08 ======== ======== WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Basic ....................................... 11,478 11,137 Diluted ..................................... 13,799 11,278 RETAINED EARNINGS/(ACCUMULATED DEFICIT): Retained earnings/(Accumulated deficit) beginning of period ....................... ($36,543) ($39,432) Net income .................................. 2,230 870 -------- -------- Retained earnings/(Accumulated deficit), end of period ............................. ($34,313) ($38,562) ======== ======== SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. PSC INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (All amounts in thousands) (Unaudited)
Three Months Ended April 3, April 4, 1998 1997 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income ........................................................... $ 2,230 $ 870 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization ................................... 3,157 3,275 Loss on disposition of assets ................................... -- 109 Deferred tax assets ............................................. 909 905 Decrease (increase) in assets: Accounts receivable ......................................... (211) (404) Inventories ................................................. (1,406) (2,075) Prepaid expenses and other .................................. (151) (522) Increase (decrease) in liabilities: Accounts payable ............................................ (1,197) 3,696 Accrued expenses ............................................ 1,247 (2,065) Accrued payroll and commissions ............................. (1,717) (4,053) Accrued acquisition related restructuring costs ............. (218) (1,657) -------- -------- Net cash provided by (used in) operating activities ...... 2,643 (1,921) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures, net ............................................ (1,186) (2,499) Additions to intangible and other assets ............................. (698) 146 Repayment of stock option loan ....................................... 325 -- -------- -------- Net cash used in investing activities .............. (1,559) (2,353) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of long-term debt ............................................ (585) (2,272) Payment of other long-term liabilities ............................... (40) (152) Exercise of stock options and sale of common stock ................... 1,524 90 -------- -------- Net cash provided by (used in) financing activities 899 (2,334) -------- -------- FOREIGN CURRENCY TRANSLATION ............................................. (204) (635) NET INCREASE (DECREASE) IN CASH -------- -------- AND CASH EQUIVALENTS ............................................ 1,779 (7,243) CASH AND CASH EQUIVALENTS: Beginning of period ............................................. 2,271 10,838 -------- -------- End of period ................................................... $ 4,050 $ 3,595 ======== ======== SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
PSC Inc. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED April 3, 1998 and April 4, 1997 (All amounts in thousands, except per share data) (Unaudited) (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying consolidated financial statements have been prepared by the Company without audit. In the opinion of management, these financial statements include all adjustments necessary to present fairly the Company's financial position as of April 3, 1998, the results of operations for the three months ended April 3, 1998 and April 4, 1997 and its cash flows for the three months ended April 3, 1998 and April 4, 1997. The results of operations for the three months ended April 3, 1998 are not necessarily indicative of the results to be expected for the full year. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The accompanying financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1997 annual report on Form 10-K. INVENTORIES Inventories are stated at the lower of cost or market using the first-in, first-out method. Elements of cost include materials, labor and overhead and consist of the following: April 3, 1998 December 31, 1997 ------------- ----------------- Raw materials ........ $12,239 $10,979 Work-in-process ...... 4,033 3,727 Finished goods ....... 2,857 3,017 --------- --------- $19,129 $17,723 ======= ======= (2) LONG-TERM DEBT Long-term debt consists of the following: April 3, 1998 December 31, 1997 ------------- ----------------- Senior Term Loan A ................ $44,500 $47,000 Senior Term Loan B ................ 23,750 24,000 Senior revolving credit ........... 5,500 3,000 Subordinated term loan ............ 29,502 29,488 Subordinated promissory note ...... 4,375 4,688 Other ............................. 341 378 -------- ----------- 107,968 108,554 Less: current maturities ......... 12,909 12,406 --------- --------- $95,059 $96,148 ======= ======= PSC Inc. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED April 3, 1998 and April 4, 1997 (All amounts in thousands, except per share data) (Unaudited) (3) SHAREHOLDERS' EQUITY In 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income", which requires comprehensive income and its components to be presented in the financial statements. Comprehensive income, which includes net income and foreign currency translation adjustments, was $2,026 and $235 for the three months ended April 3, 1998 and April 4, 1997, respectively. During the three month period ended April 3, 1998, employees purchased approximately 47 shares at $5.95 per share under the provisions of the Company's Employee Stock Purchase Plan. Changes in the status of options under the Company's stock option plans are summarized as follows:
January 1, 1998 Weighted January 1, 1997 Weighted to Average to Average April 3, 1998 Price Dec. 31, 1997 Price ------------- ----- ------------- ----- Options outstanding at beginning of period 3,046 $7.76 2,818 $8.33 Options granted 75 10.74 1,094 6.98 Options exercised (249) 7.33 (162) 7.51 Options forfeited/canceled (69) 10.37 (704) 9.00 ------ ----- Options outstanding at end of period 2,803 7.81 3,046 7.76 Number of options at end of period: Exercisable 1,725 1,884 Available for grant 388 394
(4) NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE Basic EPS was computed by dividing reported earnings available to common shareholders by weighted average shares outstanding during the year. Diluted EPS for the three months ended April 3, 1998 and April 4, 1997 was determined on the following assumptions: 1) Warrants issued in connection with the private placement of equity were converted upon issuance on January 1, 1998, 2) Warrants issued in connection with the acquisition of Spectra were converted on January 1, 1998 and 3) Preferred Shares were converted on January 1, 1998. Options to purchase 77 and 1,299 common shares at an average price of $12.33 and $9.30 per share were outstanding for the three months ended April 3, 1998 and April 4, 1997, respectively. Warrants to purchase 975 common shares at $8.00 per share were outstanding for the three months ended April 3, 1997. These options and warrants were not included in the computation of diluted EPS since the exercise prices were greater than the average market price of Common Shares. PSC Inc. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED April 3, 1998 and April 4, 1997 (All amounts in thousands, except per share data) (Unaudited)
April 3, 1998 April 4, 1997 ------------- ------------- Income Shares Per Share Income Shares Per Share (numerator) (denominator) Amount (numerator)(denominator) Amount -------------------------------------- ----------------------------------- Basic EPS Income Available to Common shareholders .......... $ 2,230 11,472 $ 0.19 $ 870 11,137 $ 0.08 ======= ======== Effect of Dilutive securities Options .......... ........... -- 649 -- 141 Warrants ........... ......... -- 297 -- -- Preferred Shares ............ -- 1,375 -- -- ---------- ------- ------- ------ Diluted EPS Income Available to Common shareholders And assumed conversion ....... $ 2,230 13,793 $ 0.16 $ 870 11,278 $ 0.08 ======= ====== ====== ====== ====== =========
(5) DERIVATIVES The Company monitors its exposure to interest rate and foreign currency exchange risk. The Company has limited involvement with derivative financial instruments and does not use them for trading purposes. The Company uses derivative instruments solely to reduce the financial impact of these risks. Interest Rate Risk: The Company's exposure to interest rate changes relates to its long-term debt. The Company has entered into interest rate swap agreements with its senior lending banks in accordance with the terms of the senior credit agreement. The Company uses these interest rate swap agreements to reduce its exposure to interest rate changes. The differentials to be received or paid under these interest rate swap agreements are recognized as a component of interest expense in the Consolidated Statements of Operations. Foreign Currency Exchange Rate Risk: The Company's exposure to foreign currency exchange changes relates primarily to its international subsidiaries. The Company may occasionally enter into forward foreign exchange contracts as a hedge against currency fluctuations relating to these foreign transactions and commitments denominated in foreign currencies. The foreign exchange contracts generally have maturities of approximately 30 days and require the Company to exchange foreign currencies for U.S. dollars at maturity, at rates agreed to at the inception of the contracts. Gains and losses on forward contracts are offset against the foreign exchange gains and losses on the underlying hedged items and are recorded in the Consolidated Statements of Operations. Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations General The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements of the Company's December 31, 1997 annual report on Form 10-K. Results of Operations: Net Sales. Consolidated net sales during the three months ended April 3, 1998 decreased $0.6 million or 1% compared with the same period in 1997. The decrease is primarily due to effects of the stronger U.S. dollar. The translation of sales denominated in foreign currencies was negatively impacted by $1.4 million in 1998 versus 1997. International net sales increased 15% primarily due to the introduction of new products and represented approximately 52% of net sales in the first quarter of 1998 versus 45% of net sales in the first quarter of 1997. Gross Profit. Consolidated gross profit during the three months ended April 3, 1998 decreased $1.0 million or 4% compared with the same period in 1997. The decreased dollar amount is primarily due to the decrease in net sales. As a percentage of sales, gross profit decreased from 41.9% to 40.4% due to lower average selling prices in certain fixed position retail product lines. Engineering, Research and Development. Engineering, Research and Development (ER&D) expenses increased $0.4 million or 10%, as compared to the same period in 1997. As a percentage of sales, ER&D was 7.2% in the first quarter of 1998 versus 6.5% of net sales in the first quarter of 1997. The dollar and percentage of sales increases are due to additional investments in developing new products and enhancing existing products. Selling, General and Administrative. Selling, General and Administrative (SG&A) expenses decreased $3.2 million or 25%, as compared to the same period in 1997. As a percentage of sales, SG&A was 18.2% in 1998 versus 23.9% in 1997. As a result of efficiencies developed due to the integration of Spectra, the Company has continued to reduce its general and administrative expenses as a percentage of sales. Acquisition Related Restructuring and Other Costs. During the third quarter of 1996, the Company recorded a one-time, pretax charge of $10.0 million for the cost of restructuring its existing operations with those of Spectra which was acquired in July 1996. The restructuring program in part, provided for employee severance and benefit costs for the elimination of certain positions. As of April 3, 1998, all positions targeted in the restructuring program have been eliminated. Restructuring actions are expected to be completed by the end of 1998. The amount of the restructuring accrual at April 3, 1998 was approximately $0.9 million which relates to current contractual obligations. There have been no reallocations or reestimates to date. Interest Expense. Interest expense decreased $0.5 million versus the comparable period in 1997. The decrease is due to lower principal balances outstanding. Provision for Income Taxes. The Company recorded a $1.3 million tax provision in 1998 primarily due to an increase in pretax income. The Company's effective tax rate was 37% in both 1998 and 1997. The Company expects to record income tax expense at or about the combined federal and state statutory tax rate in 1998. Discontinued Operations. During the second quarter of 1997, the Company completed the sale of TxCOM, which was acquired as part of the Spectra acquisition, for approximately $1.0 million. A loss of approximately $0.3 million, net of tax, was recorded. Liquidity and Capital Resources: Current assets increased $3.6 million from December 31, 1997 primarily due to an increase in cash and inventory. Current liabilities decreased $1.4 million primarily due to a reduction in accounts payable and accrued payroll and related employee benefits offset in part by an increase in accrued expenses. As a result, working capital increased $5.0 million from December 31, 1997. Property, plant and equipment expenditures totaled $1.2 million for the three months ended April 3, 1998 compared with $2.5 million for the three months ended April 4, 1997. The 1998 expenditures primarily related to manufacturing equipment and new product tooling. The long-term debt to capital percentage was 74.3% at April 3, 1998 versus 76.6% at December 31, 1997. At April 3, 1998, liquidity immediately available to the Company consisted of cash and cash equivalents of $4.0 million. In connection with the acquisition of Spectra during 1996, the Company obtained new credit facilities totaling $130.0 million. The Company has $14.5 million available on these facilities. The Company believes that its cash resources and available credit facilities, in addition to its operating cash flows, are sufficient to meet its requirements for the next twelve months. PART II: OTHER INFORMATION Item 1: Legal Proceedings: The descriptions of the Company's legal proceedings with Symbol Technologies, Inc. ("Symbol"), set forth in Item 3 of the Company's Annual Report on Form 10-K for the fiscal period ended December 31, 1997 (the "Litigation") are incorporated herein by reference. A trial on the contract issues is tentatively scheduled to begin on October 13, 1998. Item 2: Changes in Securities: None Item 3: Defaults upon Senior Securities: None Item 4: Submission of Matters to a Vote of Security Holders: None Item 5: Other Information: None Item 6: Exhibits and Reports on Form 8-K (a) Exhibits: 10.1 Fourth Amendment dated as of April 8, 1998 to the Credit Agreement dated as of July 12, 1996 among PSC Scanning, Inc., as borrower, PSC Inc., as Guarantor, the financial institutions party thereto and Fleet Bank as initial Issuing Bank and administrative agent .................................................................... 14 (b) Reports on Form 8-K: None 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. PSC Inc. DATE: May 14, 1998 By: /s/ Robert C. Strandberg ------------------------------- Robert C. Strandberg President and Chief Executive Officer DATE: May 14, 1998 By: /s/ William J. Woodard ----------------------------- William J. Woodard Vice President and Chief Financial Officer DATE: May 14, 1998 By: /s/ Michael J. Stachura ----------------------------- Michael J. Stachura Vice President of Finance (Principal Accounting Officer) EX-10.1 2 AMENDMENT FOUR TO CREDIT AGREEMENT Exhibit 10.1 AMENDMENT FOUR TO CREDIT AGREEMENT THIS AMENDMENT FOUR is dated as of April 8, 1998 and is made in respect of the Credit Agreement dated as of July 12, 1996 and as amended and in effect immediately prior to the date hereof (the "Credit Agreement") by and among PSC SCANNING, INC., a Delaware corporation formerly known as SpectraScan, Inc., which is the successor by merger to PSC Acquisition, Inc., (the "Borrower"), PSC INC. ("PSC"), the financial institutions party to the Credit Agreement (the "Lender Parties"), FLEET NATIONAL BANK (formerly known as Fleet Bank) as the "Initial Issuing Bank", and FLEET NATIONAL BANK, as administrative agent (the "Administrative Agent") under the Credit Agreement. Statement of the Premises The Borrower, PSC, the Lender Parties, the Initial Issuing Bank and the Administrative Agent previously entered into the Credit Agreement and the First Amendment to Credit Agreement dated as of September 27, 1996, the Amendment Two and Waiver to Credit Agreement dated as of July 4, 1997 and Amendment Three to Credit Agreement (With Consent) dated as of August 13, 1997. The Borrower has requested that the Lender Parties amend certain provisions in the Credit Agreement, and the Lender Parties are willing to do so. Statement of Consideration Accordingly, in consideration of the premises, and under the authority of Section 5-1103 of the New York General Obligations Law, the parties hereto agree as follows. Agreement 1. Defined Terms. The terms "this Agreement", "hereunder" and similar references in the Credit Agreement shall be deemed to refer to the Credit Agreement as amended hereby. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement. 2. Amendment. Effective as of April 15, 1998, the Credit Agreement is hereby amended as follows, provided that the following amendment shall not be effective with respect to each Eurodollar Rate Advance made prior to April 15, 1998 until the expiration of the current Interest Period of each such Eurodollar Rate Advance: 2.1 Section 1.01 of the Credit Agreement is amended by changing the definitions of "Applicable Margin", and "Commitment Fee Percentage", as follows: "Applicable Margin" means at any time and from time to time a percentage per annum determined by reference to the Total Debt Ratio as set forth below: Term A Facility and Term A Facility Working Capital and Working Capital Total Debt Facility Facility Eurodollar Ratio Prime Rate Advances Rate Advances Level I: a ratio greater than 3.0:1 0.500% 2.000% Level II: a ratio of 3.0:1 or less but at least 2.5:1 0.250% 1.750% Level III: a ratio of less than 2.5:1 but at least 2.0:1 0.000% 1.500% Level IV: a ratio of less than 2.0:1 0.000% 1.250% - ------------------------------------------------------------------------------- Term B Facility Term B Facility Total Debt Eurodollar Ratio Prime Rate Advances Rate Advances Level I: a ratio greater than 3.0:1 1.000% 2.500% Level II: a ratio of 3.0:1 or less but at least 2.5:1 0.750% 2.250% Level III: a ratio of less than 2.5:1 but at least 2.0:1 0.500% 2.000% Level IV: a ratio of less than 2.0:1 0.250% 1.750% The Applicable Margin for each Prime Rate Advance shall be determined by reference to the ratio in effect from time to time and the Applicable Margin for each Eurodollar Rate Advance shall be determined by reference to the ratio in effect on the first day of each Interest Period for such Advance; provided, however, that (A) no change in the Applicable Margin shall be effective until three Business Days after the date on which the Administrative Agent receives financial statements pursuant to Section 5.03(c) or (d) and a certificate of the chief financial officer of PSC demonstrating such ratio and (B) if PSC has not submitted to the Administrative Agent the information described in clause (A) of this proviso as and when required under Section 5.03(c) or (d), as the case may be, the Applicable Margin shall be at Level I for so long as such information has not been received by the Administrative Agent. "Commitment Fee Percentage" means at any time and from time to time a percentage per annum determined by reference to the Total Debt Ratio as set forth below: Total Debt Ratio Commitment Fee Percentage Level I: a ratio of greater than 3.0:1 . 0.500% Level II: a ratio of 3.0:1 or less but at least 2.5:1 0.375% Level III: a ratio of less than 2.5:1 but at least 2.0;1 0.375% Level IV: a ratio of less than 2.0:1 0.375% ; provided, however, that (A) no change in the Commitment Fee Percentage shall be effective until three Business Days after the date on which the Administrative Agent receives financial statements pursuant to Section 5.03(c) or (d) and a certificate of the chief financial officer of PSC demonstrating such ratio and (B) if PSC has not submitted to the Administrative Agent the information described in clause (A) of this proviso as and when required under Section 5.03(c) or (d), as the case may be, the Commitment Fee Percentage shall be at Level I for so long as such information has not been received by the Administrative Agent. 2. Effect on the Credit Agreement. Except as specifically amended above, the Credit Agreement shall remain in full force and effect and is hereby ratified and confirmed. The Borrower and PSC each acknowledge and agree that the Credit Agreement (as amended by this Amendment) and each other Loan Document to which each is a party is in full force and effect, that its Obligations thereunder and under this Amendment are its legal, valid and binding obligations enforceable against it in accordance with the terms thereof and hereof, and it has no defense, whether legal or equitable, setoff or counterclaim to the payment and performance of such Obligations. 3. Expenses. The Borrower shall pay promptly when billed all reasonable out-of-pocket expenses of each of the Lender Parties and the Agent (including, but not limited to, reasonable fees, charges and disbursements of counsel to each of the Lender Parties and the Agent) incident to the preparation, negotiation, execution, administration and enforcement of the this Amendment Four and all documents and transactions required in connection with this Amendment Four. 4. Execution in Counterparts and Effectiveness. This Amendment Four may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which shall be deemed to be an original, and all of which taken together shall constitute one and the same Amendment Four, regardless of whether or not the execution by all parties shall appear on any single counterpart. Delivery of an executed counterpart of a signature page to this Amendment Four by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. This Amendment Four will become effective (subject to the terms of Section 2 above) when the Administrative Agent shall have received counterparts of this Amendment Four which, when taken together, bear the signatures of the Borrower, PSC, the Administrative Agent and all of the Lenders. 5. Applicable Law. Pursuant to Section 5-1401 of the New York General Obligations Law, the laws of the State of New York shall govern the validity, construction, enforcement and interpretation of this Amendment Four in whole without regard to any rules of conflicts-of-laws that would require the application of the laws of any jurisdiction other than the State of New York. 6. Headings. The headings of this Amendment Four are for the purposes of reference only and shall not limit or otherwise affect the meanings hereof. IN WITNESS WHEREOF, the parties hereto have caused a counterpart of this Amendment Four to be executed and delivered by their respective representatives thereunto duly authorized, as of the date first above written. PSC INC. PSC SCANNING, INC. By: By: Title: Vice President, Chief Financial Title: Vice President and Chief Officer & Treasurer Financial Officer FLEET NATIONAL BANK, as Initial FLEET NATIONAL BANK, as Issuing Bank Administrative Agent By: By: Title: Title: FLEET NATIONAL BANK CORESTATES BANK, N.A. By: By: Title: Title: MANUFACTURERS & TRADERS KEY BANK NATIONAL TRUST COMPANY ASSOCIATION By: By: Title: Title: PILGRIM AMERICA PRIME RATE THE SUMITOMO BANK, LIMITED TRUST By: By: Title: Title: EX-27 3 FDS -- FINANCIAL DATA SCHEDULE Q1 1998
5 319379 PSC Inc. 1,000 US Dollars 3-MOS DEC-31-1998 JAN-01-1998 APR-03-1998 1 4,050 0 35,305 1,202 19,129 60,204 35,341 14,338 173,811 43,136 0 0 1 116 32,764 173,811 53,628 53,628 31,943 15,329 0 0 2,876 3,540 1,310 2,230 0 0 0 2,230 0.19 0.16
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