-----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, IbibYdgrq06RdZV9jqsGqa6QqM0j9EgKTaPztmfIAFI0MtLfkujNYPGG0gsbEM6O 3uEPIPL4veOlfUvecP7paA== 0000950129-96-003060.txt : 19961118 0000950129-96-003060.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950129-96-003060 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: STUART ENTERTAINMENT INC CENTRAL INDEX KEY: 0000355142 STANDARD INDUSTRIAL CLASSIFICATION: GAMES, TOYS & CHILDREN'S VEHICLES (NO DOLLS & BICYCLES) [3944] IRS NUMBER: 840402207 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10737 FILM NUMBER: 96666462 BUSINESS ADDRESS: STREET 1: 3211 NEBRASKA AVENUE CITY: COUNCIL BLUFFS STATE: IA ZIP: 51501 BUSINESS PHONE: 7123231488 MAIL ADDRESS: STREET 1: 3211 NEBRASKA AVENUE CITY: COUNCIL BLUFFS STATE: IA ZIP: 51501 FORMER COMPANY: FORMER CONFORMED NAME: BINGO KING CO INC DATE OF NAME CHANGE: 19910725 10-Q 1 STUART ENTERTAINMENT, INC. - DATED 09/30/96 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended Commission File Number September 30, 1996 0-10737 Stuart Entertainment, Inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 84-0402207 - ------------------------ ---------------------- (State of Incorporation) (I.R.S. Employer Identification Number) 3211 Nebraska Avenue, Council Bluffs, IA 51501 - ----------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, including Area Code: (712) 323-1488 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 [ ] As of November 1, 1996 there were 6,884,374 shares of the Registrant's common stock, $0.1 par value, outstanding. 2 STUART ENTERTAINMENT, INC. AND SUBSIDIARIES INDEX Page No. PART I. FINANCIAL INFORMATION: Item 1: Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . 3 Consolidated Balance Sheets as of September 30, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . 4-5 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . 6 Notes to Consolidated Financial Statements . . . . . . . . . . . . 7-10 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . 11-13 PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 14-15 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 3 PART I. FINANCIAL INFORMATION Items 1. FINANCIAL STATEMENTS STUART ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (Amounts In Thousands, Except Per Share Amounts) (UNAUDITED)
Three Months Ended Nine Months Ended September 30, September 30, ------------------------ ------------------------ 1996 1995 1996 1995 --------- -------- --------- -------- NET SALES $ 27,149 $ 27,031 $ 81,332 $ 83,916 COST OF GOODS SOLD 18,647 17,825 55,966 57,142 --------- -------- --------- -------- GROSS MARGIN 8,502 9,206 25,366 26,774 OTHER EXPENSES: Selling, general and administrative expenses 6,188 6,781 17,647 20,086 Amortization of goodwill 212 211 676 630 Interest expense, net 1,069 1,050 3,286 3,365 United Kingdom charge - - - 800 --------- -------- --------- -------- Other expenses, net 7,469 8,042 21,609 24,881 --------- -------- --------- -------- INCOME BEFORE INCOME TAXES 1,033 1,164 3,757 1,893 INCOME TAX PROVISION 402 645 1,334 1,657 --------- -------- --------- -------- NET INCOME $ 631 $ 519 $ 2,423 $ 236 ========= ======== ========= ======== EARNINGS PER SHARE (Note 3) $ 0.09 $ 0.08 $ 0.35 $ 0.04 ========= ======== ========= ======== EBITDA (Note 3) $ 3,072 $ 3,202 $ 10,203 $ 8,902 ========= ======== ========= ======== WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 6,996 6,717 6,890 6,682 ========= ======== ========= ========
Note: No dividends were paid or declared during the nine months ended September 30, 1996 and 1995. See accompanying Notes to Consolidated Financial Statements. 3 4 STUART ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1996 AND DECEMBER 31, 1995 (Amounts In Thousands) (UNAUDITED)
ASSETS September 30, December 31, 1996 1995 --------------- ------------------ CURRENT ASSETS: Cash and cash equivalents $ 859 $ 943 Trade and notes receivables, less allowance for doubtful accounts of $1,826 and $2,285: Related Parties 889 1,014 Other 20,456 18,355 Inventories (Note 4) 22,252 21,982 Refundable income taxes 276 - Deferred income taxes 1,702 1,746 Prepaid expenses and other 784 547 -------- -------- Total Current Assets 47,218 44,587 PROPERTY, PLANT AND EQUIPMENT: Land and buildings 5,009 4,950 Equipment 29,797 29,262 -------- -------- 34,806 34,212 Less accumulated depreciation (14,863) (13,095) -------- -------- Total Property, Plant and Equipment - Net 19,943 21,117 OTHER ASSETS: Goodwill, net of accumulated amortization of $1,757 and $1,209 28,592 29,194 Deferred financing costs, net of accumulated amortization of $687 and $375 1,348 1,660 Notes receivable, less allowance for doubtful accounts of $124 759 1,261 Other assets 1,468 1,175 -------- -------- Total Other Assets 32,167 33,290 -------- -------- TOTAL ASSETS $ 99,328 $ 98,994 ======== ========
See accompanying Notes to Consolidated Financial Statements. 4 5 STUART ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1996 AND DECEMBER 31, 1995 (Amounts In Thousands, Except Share Amounts) (UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY September 30, December 31, - ------------------------------------ 1996 1995 ------------- ------------ CURRENT LIABILITIES: Current portion of long-term debt (Note 5) $ 8,795 $ 7,897 Bazaar purchase price adjustment 454 710 Trade payables 12,790 12,512 Accrued payroll and other liabilities 2,832 2,867 Income taxes payable 328 543 Deferred income taxes - 40 -------- --------- Total Current Liabilities 25,199 24,569 LONG-TERM DEBT (Note 5): Related party 5,000 5,000 Other 31,175 34,586 -------- --------- Total Long-Term Debt, net of current portion 36,175 39,586 DEFERRED INCOME TAXES, net of current portion 2,642 2,594 COMMITMENTS AND CONTINGENCIES (Note 8) DEFERRED INCOME 279 205 STOCKHOLDERS' EQUITY: Common stock - $0.01 par value; 30,000,000 and 20,000,000 shares authorized; 6,884,374 and 6,753,309 shares outstanding 69 68 Additional paid-in capital 26,909 26,384 Retained earnings 7,949 5,525 Treasury stock (56,260 shares at cost) (189) (189) Cumulative translation adjustment, net of deferred taxes 295 252 -------- --------- Total Stockholders' Equity 35,033 32,040 -------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 99,328 $ 98,994 ======== =========
See accompanying Notes to Consolidated Financial Statements 5 6 STUART ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (Amounts In Thousands) (UNAUDITED)
Nine Months Ended September 30, 1996 1995 ---------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,423 $ 236 Adjustments to reconcile net income to net cash flows from operating activities: Payment on termination of consulting agreement - (1,150) Depreciation and amortization 3,160 3,155 Amortization of debt financing fees 312 273 Provision for doubtful accounts (198) 432 Deferred income taxes 93 (550) Other noncash expenses - net (28) 959 Change in operating assets and liabilities, net: Trade receivables (2,712) (3,372) Inventories (856) (4,379) Trade payables 278 1,523 Other - net (763) 2,918 --------- --------- Net cash flows from operating activities 1,709 45 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures, net (950) (2,815) Payments received on notes receivable 1,179 711 Investment in joint ventures - (128) Acquisition of LSA - (324) Investment in distributor - (116) Acquisition of Reliable - (295) --------- --------- Net cash flows from investing activities 229 (2,967) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under Revolving Facility 2,049 6,169 Payments on Term Facility (2,278) (2,261) Payments on other long-term debt (2,316) (2,189) Payments on LSA Purchase Price Adjustment - (929) Proceeds from issuance of long-term debt - 1,140 Cost of debt financing (200) - Proceeds from issuance of stock and exercise of stock options 521 238 Costs on issuance of stock - (17) --------- --------- Net cash flows from financing activities (2,024) 1,951 Effect of currency exchange rate changes on cash of foreign subsidiaries 2 33 --------- --------- NET CHANGE IN CASH AND CASH EQUIVALENTS (84) (938) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 943 2,116 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 859 $ 1,178 ========= ========= Interest paid $ 3,107 $ 3,486 Income taxes paid $ 1,805 $ 1,377
See accompanying Notes to Consolidated Financial Statements. 6 7 STUART ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Stuart Entertainment, Inc. and subsidiaries (collectively, the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for annual financial statements. In the opinion of the Company's management, the foregoing unaudited consolidated financial statements reflect all adjustments considered necessary for a fair presentation of the results of the Company for the periods shown. Operating results for the three and nine months ended September 30, 1996 and 1995 are not necessarily indicative of the results that may be expected for the full year ending December 31, 1996. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 1995, filed with the Securities and Exchange Commission on the Company's Annual Report on Form 10-K. Certain reclassifications have been made to the 1995 financial statements to conform to those classifications used in 1996. The consolidated financial statements of the Company include estimates and assumptions related to certain assets, liabilities, revenues and expenses and the disclosure of certain contingent assets and liabilities. Actual future results may differ from such estimates. 2. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the Company, its wholly-owned subsidiaries and its indirectly wholly-owned subsidiaries (from the date they became indirectly wholly-owned). All significant intercompany transactions and balances have been eliminated in consolidation. 3. EARNINGS PER SHARE AND EBITDA The number of shares used in earnings per share calculations for the three month and nine month periods ended September 30, 1996 and 1995 are based on the weighted average number of shares of common stock outstanding and, if dilutive, common stock equivalents (stock options and warrants) of the Company using the treasury stock method. EBITDA is defined as earnings before interest, taxes, depreciation, amortization and purchase accounting adjustments. EBITDA is presented because it is a measure of an issuer's ability to service its indebtedness commonly used by investors. However, EBITDA should not be considered as an alternative to net income as a measure of operating results or to cash flows or as a substitute for measures of performance in accordance with generally accepted accounting principles. 7 8 4. INVENTORIES Inventories consisted of the following:
(Amounts in the thousands) September 30, December 31, 1996 1995 ------------- ------------ Raw Materials $ 3,612 $ 3,517 Work-In-Process 5,123 5,056 Finished Goods 13,517 13,4 09 ---------- ---------- Total $ 22,252 $ 21,982 ========== ==========
5. LONG-TERM DEBT Long-term debt consisted of the following:
September 30, December 31, (Amounts in the thousands) 1996 1995 ------------- ------------ Borrowings under Credit Agreement: Revolving Facility $ 22,987 $ 20,921 Term Facility 9,872 12,135 Subordinated note payable to Mr. Stuart 5,000 5,000 Notes payable to others 3,754 4,758 Obligations under capital leases 3,357 4,669 ---------- ---------- 44,970 47,483 Less current portion 8,795 7,897 ---------- ---------- Total long-term debt $ 36,175 $ 39,586 ========== ==========
BORROWINGS UNDER CREDIT AGREEMENT: The Company's bank credit facility is for an aggregate principal amount of up to $38,000,000, with a senior secured revolving line of credit of $23,000,000 (the "Revolving Facility") and a senior secured term loan facility of $15,000,000 (the "Term Facility"). The Revolving Facility and Term Facility are each separated into U.S. and Canadian facilities. The maximum available under the Revolving Facility was increased by $3,000,000 during 1995 to a total of $23,000,000 at December 31, 1995. Any amount outstanding under this $3,000,000 additional amount shall be paid in full at December 31, 1996. The Credit Agreement expires and all other remaining amounts outstanding are due on December 12, 1999. At September 30, 1996 and December 31, 1995, loans outstanding on the U.S. Revolving Facility totaled $11,900,000 and $11,540,000 respectively, and loans outstanding on the Canadian Revolving Facility totaled C$15,100,000 ($11,087,000) and C$12,800,000 ($9,381,000), respectively. Weighted average interest rates on the U.S. Revolving Facility and Canadian Revolving Facility at September 30, 1996 were 8.20% and 7.29%, respectively. At 8 9 September 30, 1996 and December 31, 1995, loans outstanding on the U.S. Term Facility totaled $3,250,000 and $4,000,000, respectively, and loans outstanding on the Canadian Term Facility totaled C$9,019,000 ($6,622,000) and C$11,100,000 ($8,135,000) respectively. Weighted average interest rates on the U.S. Term Facility and the Canadian Term Facility at September 30, 1996 were 8.20% and 7.27%, respectively. OBLIGATIONS UNDER CAPITAL LEASES The Company completed a lease line of credit with its primary bank. The facility provides lease financing on capitalized equipment purchased through December 31, 1996. The maximum available under this facility is $5,000,000. At September 30, 1996, $3,813,000 remained available under this facility. 6. UNITED KINGDOM CHARGE In 1995, the Company signed a licensing and marketing agreement with Playprint Limited, a company headquartered in Dublin, Ireland. This agreement gave the Company the opportunity to redeploy its assets and discontinue its manufacturing operation in the United Kingdom. Under the agreement, Playprint Limited, pays royalties to the Company for use of certain of the Company's trademark, technologies and equipment for the production of bingo paper and ink markers. The Company recorded a one-time pre-tax charge of $800,000 in the second quarter of 1995 related to the estimated costs to shutdown the manufacturing facility in the United Kingdom and consolidate its activities with Playprint Limited. 7. RECENTLY ISSUED ACCOUNTING STANDARD The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based Compensation, which is effective for the Company beginning January 1, 1996. SFAS 123 requires expanded disclosure of stock-based compensation arrangements with employees and encourages (but does not require) compensation cost to be measured based on the fair value of the equity instrument awarded. Companies are permitted, however, to continue to apply Accounting Principles Board Opinion No. 25 (APB 25), which recognizes compensation cost based on the intrinsic value of the equity instrument awarded. The Company will continue to apply APB 25 to its stock-based compensation awards to employees and will disclose the required pro forma effect on net income and earnings per share in Form 10-K for its current year. 8. PURCHASE AGREEMENT On August 6, 1996, the Company signed a definitive agreement, as amended on October 10, 1996, to purchase the assets and assume certain liabilities of Trade Products, Inc. 9 10 9. SUBSEQUENT EVENTS On November 13, 1996, the Company completed the acquisition of Trade Products, Inc. (See Note 8 to Notes to Consolidated Financial Statements) for a purchase price of $37.2 million, subject to certain post-closing adjustments, plus the issuance of warrants to acquire 300,000 shares of the Company's common stock. On November 13, 1996, the Company completed a private placement in reliance on Rule 144A of the Securities Act of 1933, as amended, of $100 million aggregate principal amount of its 12.5% Senior Subordinated Notes due November 15, 2004 (the "Notes"). Interest on the Notes will be payable semi-annually on each May 15 and November 15 commencing May 15, 1997. The indenture governing the Notes imposes certain limitation on the Company's ability to, among other things, incur additional indebtedness, pay dividends or make certain other restricted payments and consummate certain asset sales. The Company will use the proceeds of the private placement to finance the acquisition of Trade Products, Inc., to repay certain existing indebtedness and for general corporate purposes. On November 13, 1996, the Company amended and restated its credit agreement (the "New Credit Agreement"). The New Credit Agreement consists of a revolving credit facility in the aggregate principal amount of $30 million, bearing interest with reference to the base rate or the LIBOR rate, at the Company's option, plus the applicable interest margin, as defined in the New Credit Agreement. The New Credit Agreement imposes certain covenants and other requirements on the Company that among other things, restricts (i) the incurrence and existence of indebtedness or contingent obligations; (ii) consolidations, mergers and sales of assets; (iii) the incurrence and existence of liens; (iv) the sale or disposition of assets; (v) investments, loans and advances; (vi) capital expenditures; (vii) the payment of dividends and repurchase of common stock; and (viii) acquisitions by the Company. The Company is also required to meet certain consolidated financial tests, including minimum level of net worth, minimum level of consolidated interest coverage, maximum consolidated leverage ratio and minimum consolidated fixed charge coverage ratio. The Company may draw amounts under the New Credit Agreement, subject to availability pursuant to a borrowing base requirement, in order to meet its working capital requirements, including issuing letters of credit. The loans will be secured by a first priority security interest in all of the Company's assets (including the acquired assets of Trade Products, Inc.), but excluding real estate and certain other specific assets of the Company. 10 11 Item 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The statements contained in this report, if not historical, are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and involve risks and uncertainties that could cause actual results to differ materially from the financial results described in such forward looking statements. These risks and uncertainties include, among others, the level and rate of growth in the Company's operations, the effect of paper costs, and the ability of the Company to achieve earnings per share growth through internal investment, strategic alliances, joint ventures and other methods. The success of the Company's business operations is in turn dependent on factors such as the effectiveness of the Company's marketing strategies to grow its customer base and improve customer response rates, the appeal of the Company's mix of products, the Company's success at entering into and collaborating with others to conduct effective strategic alliances and joint ventures, general competitive conditions within the entertainment and gaming industries and general economic conditions. Further, any forward looking statements or statements speak only as of the date on which such statement was made, and the Company undertakes no obligation to update any forward looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. Therefore, any forward looking statements should not be relied upon as a prediction of actual results. RESULTS OF OPERATIONS Comparison of Three Months Ended September 30, 1996 and 1995 Net Sales - Net sales were $27.1 million for the three months ended September 30, 1996, an increase of $118,000 or 0.4% from $27.0 million for the three months ended September 30, 1995. The slight sales increase was attributable to a combination of the following: i) an increase in electronics and electrical equipment sales of $2.8 million, primarily due to a $2.4 million sale of System 12 (TM) electronic bingo and gaming units; ii) a decrease in sales of consumable products, including bingo paper, pulltab tickets and ink products, of $2.2 million due to market softness primarily in the United States and; iii) a decrease in sales of $479,000 related to the shutdown of Stuart Entertainment England. Cost of Goods Sold - Cost of goods sold, as a percentage of sales, was 68.7% for the three months ended September 30, 1996, an increase of 2.8% from 65.9% for the three months ended September 30, 1995. The increase in cost of goods sold percentage is primarily due to production inefficiencies related to the lower sales volume of consumable products, including bingo paper, pulltab tickets and ink products, and higher scrap adjustments, partially offset by the sale of System 12 (TM) electronic bingo and gaming units. Selling, General and Administrative Expenses - Selling, general and administrative (SG&A) expenses were $6.2 million for the three months ended September 30, 1996, a decrease of $593,000 or 8.7% from $6.8 million for the three months ended September 30, 1995. SG&A expenses, as a percentage of sales, were 22.8% for the three months ended September 30, 1996, a decrease of 2.3% from 25.1% for the three months ended September 30, 1995. The decrease in SG&A expenses was due primarily to three factors: i) the discontinued operation of Stuart Entertainment Limited in 1995; ii) consolidated synergies related to the acquisitions of Bingo Press & Specialty Limited ("Bazaar") the Reliable Corporation of America ("Reliable"); and iii) the continued impact of a cost reduction program implemented in 1995. Comparison of Nine Months Ended September 30, 1996 and 1995 Net Sales - Net sales were $81.3 million for the nine months ended September 30, 1996, a decrease of $2.6 million or 3.1% from $83.9 million for the nine months ended September 30, 1995. The decrease was attributable to a combination of the following: i) a decrease in sales of $1.2 million related to the shutdown of Stuart Entertainment Limited; and ii) a decrease in sales of consumable products of $3.9 million due to market softness primarily in the United States, this decrease was partially offset by an increase in electronics and 11 12 electrical equipment sales of $2.5 million, primarily due to a $2.4 million sale of System 12 (TM) electronic bingo and gaming units. Cost of Goods Sold - Cost of goods sold, as a percentage of sales, was 68.8% for the nine months ended September 30, 1996, an increase of 0.7% from 68.1% for the nine months ended September 30, 1995. Excluding the application of a purchase accounting adjustment recorded in the first quarter of 1995 to the finished goods of Bazaar, cost of goods sold for the nine months ended September 30, 1996 increased to 68.8% from 67.5%, partially related to production variances. Selling, General and Administrative Expenses - SG&A expenses were $17.6 million for the nine months ended September 30, 1996, a decrease of $2.5 million or 12.1% from $20.1 million for the nine months ended September 30, 1995. SG&A expenses, as a percent of sales, were 21.7% for the nine months ended September 30, 1996, a decrease of 2.2% from 23.9% for the nine months ended September 30, 1995. The decrease in SG&A expenses was due primarily to four factors: i) the discontinued operation of Stuart Entertainment Limited in 1995; ii) consolidated synergies related to the acquisitions of Bazaar and Reliable; iii) improved bad debt experience; and iv) the continued impact of a cost reduction program implemented in 1995. LIQUIDITY AND CAPITAL RESOURCES The Company's long-term debt at September 30, 1996, including the current portion thereof, totaled $45.0 million compared to $47.5 million at December 31, 1995 (see Note 5 to the Consolidated Financial Statements). Cash payments on long-term debt for the first nine months ended September 30, 1996 totaled approximately $4.6 million compared to $4.5 million for the nine months ended September 30, 1995. As of September 30, 1996, the Company had drawn all amounts available under its $23.0 million revolving line of credit facility. Approximately $615,000 was invested short-term and available for working capital purposes. See Note 9 to Notes to Consolidated Financial Statements. Capital expenditures during the nine month period ended September 30, 1996 totaled $999,000. At September 30, 1996, $3.8 million remained available under the Company's lease line of credit. Capital expenditures for fiscal 1996 are projected to be $2.0 million. The Company's capital expenditure program will continue to focus on the purchase of equipment designed to increase production capacity and/or improve manufacturing efficiency. The Company expects a larger portion of its capital expenditure requirements to be allocated to the upgrade and development of management information systems. Management believes that under the current operating plan, its existing capital resources and available financing will be sufficient to meet its operating expenses and capital expenditure requirements. See Note 9 of Notes to Consolidated Financial Statements. 12 13 CHANGE IN BALANCE SHEET ACCOUNTS Total trade and notes receivables increased $2.0 million from $19.4 million at December 31, 1995 to $21.4 million at September 30, 1996. The increase is due primarily to the $2.4 million sale of System 12(TM) electronic bingo and gaming units at the end of the third quarter of 1996. During the nine months ended September 30, 1996 trade receivables from unrelated parties totaling $454,000 were converted to notes receivable. The conversions allowed the customers to resolve temporary cash flow timing issues and proceed with their long-term growth plans. 13 14 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders An annual meeting of the stockholders of the Company (the "Meeting") was held on July 17, 1996. The following table sets forth each of the proposals that the stockholders were asked to vote upon and the results of the Meeting.
PROPOSAL RESULTS --------- ------- 1. A proposal to elect eight directors to the Board of Directors: Leonard A. Stuart FOR 6,297,286 AGAINST 155,722 Albert F. Barber FOR 6,297,980 AGAINST 155,028 Timothy R. Stuart FOR 6,297,286 AGAINST 155,722 Perry J. Lewis FOR 6,191,152 AGAINST 261,856 Sangwoo Ahn FOR 6,298,286 AGAINST 154,722 Ira Starr FOR 6,191,152 AGAINST 261,856 Richard D. Spizzirri FOR 6,298,286 AGAINST 154,722 Stanley M. Taube FOR 6,298,286 AGAINST 154,722
2. A proposal to approve an amendment to the Company's Certificate of Incorporation to comply with the requirements of the Colorado Limited Gaming Act. FOR 6,285,058 AGAINST 10,460 ABSTAIN 6,182 NO VOTE 151,308
14 15 3. A proposal to approve an amendment to the Company's Certificate of Incorporation increasing the number of authorized shares of common stock from 20,000,000 shares to 30,000,000 shares. FOR 6,363,005 AGAINST 78,301 ABSTAIN 11,702
4. A proposal to approve an amendment to the Company's 1994 Performance Stock Option Plan increasing the number of shares available for grant from 2,000,000 shares to 2,500,000 shares. FOR 5,194,525 AGAINST 338,766 ABSTAIN 18,700 NO VOTE 901,017
5. A proposal to ratify the Board of Directors' selection of Deloitte & Touche LLP, as the Company's independent auditors for the fiscal year ending December 31, 1996. FOR 6,442,188 AGAINST 3,302 ABSTAIN 7,518
Item 6. Exhibits and Reports on Form 8-K: a. Exhibits: Exhibit 10 Sixth Amendment to Credit Agreement dated as of August 9, 1996. Exhibit 11 Statement Regarding Computation of Per Share Earnings Exhibit 27 Financial Data Schedule b. Reports on Form 8-K: The Company filed a current Report on Form 8-K, dated August 6, 1996, under Item 7 regarding the Asset Purchase Agreement, dated August 6, 1996, among Stuart Entertainment, Inc., Trade Products, Inc. and the Shareholders of Trade Products, Inc. 15 16 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. STUART ENTERTAINMENT, INC. Date: November 13, 1996 /s/ TIMOTHY R. STUART ----------------------------------- Timothy R. Stuart President Date: November 13, 1996 /s/ PAUL C. TUNINK ----------------------------------- Paul C. Tunink Vice President and Chief Financial Officer 16 17 EXHIBIT INDEX The following Exhibits are filed herewith.
Exhibit No. Description Page - ----------- ----------- ----- 10 Sixth Amendment to Credit Agreement 18-28 dated as of August 9, 1996. 11 Statement Regarding Computation of 29 Per Share Earnings. 27 Financial Data Schedule 30
17 EX-10 2 6TH AMEND. TO CREDIT AGMT. DATED 08/09/96 1 SIXTH AMENDMENT TO CREDIT AGREEMENT This Sixth Amendment to Credit Agreement, dated as of August 9, 1996 (the "Agreement") is among Stuart Entertainment, Inc., a Delaware corporation (the "U.S. Company"), Bingo Press & Specialty Limited (formerly known as 1089350 Ontario Inc.), an Ontario corporation (the "Canadian Company"), Bank of America National Trust and Savings Association, as U.S. Agent, Bank of America Illinois, as a U.S. Lender, The Chase Manhattan Bank (National Association), as a U.S. Lender, Bank of America Canada, as Canadian Agent and a Canadian Lender, and The Chase Manhattan Bank of Canada, as a Canadian Lender. WITNESSETH WHEREAS, the U.S. Company, the Canadian Company, the U.S. Agent, the U.S. Lenders, the Canadian Agent and the Canadian Lenders are parties to that certain Credit Agreement dated as of December 13, 1994 (as amended, the "Credit Agreement") and to certain other documents executed in connection with the Credit Agreement; WHEREAS, the U.S. Company and the Canadian Company have requested certain amendments to the Credit Agreement, and the Agents and Lenders have agreed to such amendments as provided herein. NOW, THEREFORE, the parties hereto agree as follows: 1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings given to such terms in the Credit Agreement. 2. Amendments to the Credit Agreement. Subject to the satisfaction of the conditions precedent set forth in Section 3 below, the Credit Agreement is hereby amended as follows: (a) A new defined term "Account Debtor" is added to Section 1.01 of the Credit Agreement as follows: "Account Debtor" means any Person who is or who may become obligated to a Company under, with respect to, or on account of an Account Receivable. (b) A new defined term "Account Receivable" is added to Section 1.01 of the Credit Agreement as follows: "Account Receivable" means any account of a Company or any Subsidiary and any other right of a Company or any Subsidiary to payment for goods sold or leased or for services rendered, 18 2 whether or not evidenced by an instrument or chattel paper and whether or not yet earned by performance; (c) The definition of "Borrowing Base" set forth in Section 1.01 of the Credit Agreement is amended and restated in its entirety as follows: "Borrowing Base" means, as of any date of determination, the sum of (a) 80% of the net amount (less such reserves as Agents and Lenders may create from time to time in their reasonable judgment) of Eligible Accounts Receivable of each Company, plus (b) the lesser of (i) the sum o~ (A) 60% of the net amount (determined on a FIFO basis, after deduction of such reserves as Agents and Lenders may create from time to time in their reasonable judgment) of Eligible Inventory comprised of raw materials of each Company, (B) 25% of the net amount (determined on a FIFO basis, after deduction of such reserves as Agents and Lenders may create from time to time in their reasonable judgment) of Eligible Inventory comprised of work-in-process of each Company and (C) 50% of the net amount (determined on a FIFO basis, after deduction of such reserves as Agents and Lenders may create from time to time in their reasonable judgment) of Eligible Inventory comprised of finished goods for each Company and (ii) $10,000,000, plus (c) $4,000,000 from July 31, 1996 through and including December 31, 1996, $3,000,000 from January 1, 1997 through and including December 31, 1997, $2,000,000 from January 1, 1998 through and including December 31, 1998 and $1,000,000 from January 1, 1999 through and including December 31, 1999, with all Canadian Dollar values expressed in U.S. Dollars at the Closing Date Exchange Rate, minus the outstanding obligations of S.E. Michigan to Old Kent Bank. For purposes of classifying Inventory as raw materials, work-in-process or finished goods, it is assumed that until such time as Borrower converts to a perpetual inventory system acceptable to Agents in their reasonable discretion, the Inventory reported to Agents will consist of the percentage of raw materials, work-in-process or finished goods set forth on the most recent physical inventory conducted by the Companies pursuant to Section 6.13 of the Credit Agreement. The Eligible Inventory shall exclude freight charges and fully absorbed overhead. The Companies shall report to Agents any changes in the classification of Inventory as soon as such information is available, but in any event, not later than 30 days after completion of a physical inventory. (d) A new defined term "Eligible Accounts Receivable" is added to Section 1.01 of the Credit Agreement as follows: "Eligible Account Receivable" means an Account Receivable owing to any Company which meets the following requirements: (a) it is genuine and in all respects what it purports to be; (b) it arises from either (i) the performance of services by a Company, which services have been fully performed and acknowledged and/or accepted by the Account Debtor with respect thereto or (ii) the sale or lease of goods by a Company; and if it arises from the sale or lease of goods, (A) such goods comply with such Account Debtor's specifications (if any) and have been 19 3 shipped to, or delivered to and accepted by, such Account Debtor and such Company does not have knowledge that the Account Debtor has failed to accept delivery of all or a portion of such goods, and (B) such Company has possession of shipping and delivery receipts evidencing such shipment and acceptance; (c) it is evidenced by an invoice rendered to the Account Debtor with respect thereto which (i) is dated not earlier than the date of shipment or performance, (ii) in the case of accounts owing to the U.S. Company, is not unpaid more than 60 days after its due date and (iii) in the case of accounts owing to the Canadian Company, is not unpaid more than 90 days after its due date; (d) it is not owing by an Account Debtor with respect to which ten percent (10%) or more of the aggregate Accounts Receivable owing by such Account Debtor to Companies are past due; (e) it is not subject to any assignment, claim or Lien, other than a lien permitted under this Agreement; (f) it is a valid, legally enforceable and unconditional obligation of the Account Debtor with respect thereto, and is not subject to setoff, counterclaim, contra, credit or allowance (except any credit or allowance which has been deducted in computing the net amount of the applicable invoice as shown in the original schedule or Borrowing Base Certificate furnished to Agents identifying or including such Account Receivable) or adjustment by the Account Debtor with respect thereto, or to any claim by such Account Debtor denying liability thereunder in whole or in part, and such Account Debtor has not refused to accept any of the goods or services which are the subject of such Account Receivable or offered or attempted to return any of such goods; (g) there are no proceedings or actions which are then threatened or pending against the Account Debtor with respect thereto or to which such Account Debtor is a party which are reasonably likely to result in any material adverse change in such Account Debtor's financial condition or in its ability to pay any Account Receivable in full when due; (h) it does not arise out of a contract which, by its terms, forbids, restricts or makes void or unenforceable the assignment by a Company to Agents of the Account Receivable arising with respect thereto; (i) the Account Debtor with respect thereto is not an Affiliate of a Company; (j) the Account Debtor with respect thereto is a resident or citizen of; and is located within, the United States of America or Canada, unless the sale of goods giving rise to the Account Receivable is on letter of credit, banker's acceptance or other credit support terms reasonably satisfactory to Agents; (k) it is not an Account Receivable arising from a "sale on approval," "sale or return" or "consignment," or subject to any other repurchase or return agreement; 20 4 (1) it is not an Account Receivable with respect to which possession and/or control of the goods sold giving rise thereto is held, maintained or retained by a Company or any Affiliate of a Company for the account of or subject to further and/or future direction from the Account Debtor thereof; (m) it is not an Account Receivable which in any way fails to meet or violates any warranty, representation or covenant contained in this Agreement or any other Loan Document relating directly or indirectly to Accounts Receivable; (n) it arises in the ordinary course of a Company's business; (o) if the Account Debtor is the United States of America, or any department, agency or instrumentality thereof; a Company has assigned its rights to payment of such Account Receivable to Agents, pursuant to the Assignment of Claims Act of 1940, as amended; (p) if the Account Receivable is evidenced by chattel paper or an instrument, (i) Agents shall have specifically agreed in writing to include such Account Receivable as an Eligible Account Receivable, (ii) only payments then due and payable under such chattel paper or instrument shall be included as an Eligible Account Receivable and (iii) the originals of such chattel paper or instruments have been endorsed and/or assigned and delivered to Agents in a manner reasonable satisfactory to Agent; (q) it is not an Account Receivable with C.O.D. payment terms; (r) it is not an Account Receivable which is subject to a debit memo; and (t) the amount thereof does not consist of credit balances more than sixty (60) days from due date in the case of accounts owing to the U.S. Company, or more than ninety (90) days from due date in the case of the Canadian Company. (e) A new defined term "Eligible Inventory " is added to Section 1.01 of the Credit Agreement as follows: "Eligible Inventory" means Inventory of a Company, which meets the following requirements: (a) it is owned by a Company and is not subject to any prior assignment, claim or Lien, other than a Lien permitted under this Agreement; (b) if held for sale or lease or furnishing under contracts of service, it is (except as Agents may otherwise consent in writing) new and unused; (c) except as Agents may otherwise consent, it is in the possession and control of a Company or its agents; 21 5 (d) if it is in the possession or control of a bailee, warehouseman, processor, consignee or other Person other than a Company, Agents are in possession of such agreements, instruments and documents as Agents may require (each in form and content acceptable to Agents and duly executed, as appropriate, by the bailee, warehouseman, processor, consignee or other Person in possession or control of such Inventory, as applicable), including but not limited to warehouse receipts in either Agent's name, covering such Inventory; (e) it is not Inventory which has been delivered to a third party pursuant to a consignment arrangement; (f) it is not Inventory produced in violation of the Fair Labor Standards Act and subject to the "hot goods" provisions contained in Title 29 U.S.C. Section 215 or any successor statute or section; (g) it is not (i) packaging or shipping materials, (ii) goods used in connection with maintenance or repair of a Company's properties or assets or (iii) general supplies; (h) it is not Inventory which in any way fails to meet or violates any warranty, representation or covenant contained in this Agreement or any other Loan Document relating directly or indirectly to Inventory; (i) Agents have not determined in their reasonable discretion that it is unacceptable due to age, type, category, quality and/or quantity or otherwise obsolete; and (k) it is not Inventory the use of which by a Company or the manufacture or sale thereof by a Company, is subject to any licensing, patent, royalty, trademark, tradename or copyright agreement of any other Person. (f) A new defined term "Inventory" is added to Section 1.01 of the Credit Agreement as follows: 22 6 "Inventory" means any and all of a Company's and each Subsidiary's goods, (including without limitation, goods in transit) wheresoever located, which are or may at any time be leased by a Company or any Subsidiary to a lessee, held for sale or lease, furnished under any contract or service, or held as raw materials, work-in-process, or supplies or materials used or consumed in a Company's or any Subsidiary's business, or which are held for use in connection with the manufacture, packing, shipping, advertising, selling or finishing of such goods, and all goods the sale or their disposition of which has given rise to an Account Receivable which are returned to an/or repossessed and/or stopped in transit by a Company, any Subsidiary or any Lender or any agent or bailee of any of them, and all documents of title or other documents representing the same. (g) Section 2.07(c) of the Credit Agreement is amended and restated as follows: (c) Revolving Loans in Excess of the Aggregate Revolving Commitment or Borrowing Base. If at any time, the aggregate principal amount of all outstanding Revolving Loans and the aggregate undrawn face amount of all Letters of Credit (with the amounts of the Revolving Loans to the Canadian Company and Letters of Credit issued for the account of the Canadian Company expressed in U.S. Dollars at the Closing Date Exchange Rate) exceeds the Borrowing Base, the Companies shall immediately repay such excess. (h) A new Section 2.10(e) is added to Section 2 of the Credit Agreement as follows: (e) Audit Fees. Without limiting Agents' rights under any other provision in the Loan Documents, each Company shall pay to its Applicable Agent its standard audit fees in connection with audits of such Company's books and records and such other matters as the Applicable Agent shall deem appropriate, plus all out-of-pocket expenses incurred by the Applicable Agent in connection with such audits. (i) Section 2.18 of the Credit Agreement is deleted in its entirety. (j) A new Section 5.21 is added to Section 5 of the Credit Agreement as follows: 5.21 Eligibility of Collateral. Each Account Receivable or item of Inventory which either Company shall, expressly or by implication (by inclusion on a Borrowing Base Certificate or otherwise), request Agents to classify as an Eligible Account Receivable or as Eligible Inventory, respectively, will, as of the time when such request is made, conform in all respects to the requirements of such classification set forth in the respective definitions of "Eligible Account Receivable" and "Eligible Inventory" set forth herein. (k) Section 6.01(f) of the Credit Agreement is amended and restated as follows: (f) As soon as available, but in any event no later than commencing with the month ending August 31, 1996, a Borrowing Base Certificate calculating the Borrowing Base for the 23 7 period ended on the last day of the preceding month. (I) Section 6 of the Credit is amended to insert a new Section 6.13 thereto as follows: 6.13 Inventory Reports. Such Company shall conduct a physical inventory no less frequently than semi-annually and shall provide the Agents a report on each such physical inventory promptly thereafter, together with such supporting information as the Agents shall request. 3. Conditions to Effectiveness. This Agreement shall become effective as of the date of this Agreement upon receipt by each Company of a Borrowing Base Certificate for the period ended on June 30, 1996. 4. Representations and Warranties. To induce Lenders to enter into this Agreement, each Company represents and warrants to Lenders that the execution, delivery and performance by such Company of this Agreement &e within its corporate powers, have been duly authorized by all necessary corporate action (including, without limitation, shareholder approval), have received all necessary governmental approval (if any shall be required), and do not and will not contravene or conflict with any provision of law applicable to such Company, the Organization Documents of such Company, or any order, judgment or decree of any court or other agency of government or any Contractual Obligation binding upon such Company; and the Credit Agreement as amended as of the date hereof is the legal, valid and binding obligation of such Company enforceable against such Company in accordance with its terms. 5. Miscellaneous. (a) Captions. Section captions used in this Agreement are for convenience only, and shall not affect the construction of this Agreement. (b) Governing Law. This Agreement shall be a contract made under and governed by the laws of the State of Illinois, without regard to conflict of laws principles. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. (c) Counterparts. This Agreement may be executed in any number of counterparts and by the different parties on separate counterparts, and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. (d) Successors and Assigns. This Agreement shall be binding upon the Companies, Agents and Lenders and their respective successors and assigns, and shall inure to the sole benefit of the Companies, Agents and Lenders and the successors and assigns of the Companies, Agents and Lenders. 24 8 (e) References. Any reference to the Credit Agreement contained in any notice, request, certificate, or other document executed concurrently with or after the execution and delivery of this Agreement shall be deemed to include this Agreement unless the context shall otherwise require. "Inventory" means any and all of a Company's and each Subsidiary's goods, (including without limitation, goods in transit) wheresoever located, which are or may at any time be leased by a Company or any Subsidiary to a lessee, held for sale or lease, furnished under any contract or service, or held as raw materials, work-in-process, or supplies or materials used or consumed in a Company's or any Subsidiary's business, or which are held for use in connection with the manufacture, packing, shipping, advertising, selling or finishing of such goods, and all goods the sale or their disposition of which has given rise to an Account Receivable which are returned to an/or repossessed and/or stopped in transit by a Company, any Subsidiary or any Lender or any agent or bailee of any of them, and all documents of title or other documents representing the same. (g) Section 2.07(c) of the Credit Agreement is amended and restated as follows: (c) Revolving Loans in Excess of the Aggregate Revolving Commitment or Borrowing Base. If at any time, the aggregate principal amount of all outstanding Revolving Loans and the aggregate undrawn face amount of all Letters of Credit (with the amounts of the Revolving Loans to the Canadian Company and Letters of Credit issued for the account of the Canadian Company expressed in U.S. Dollars at the Closing Date Exchange Rate) exceeds the Borrowing Base, the Companies shall immediately repay such excess. (h) A new Section 2.10(e) is added to Section 2 of the Credit Agreement as follows: (e) Audit Fees. Without limiting Agents' rights under any other provision in the Loan Documents, each Company shall pay to its Applicable Agent its standard audit fees in connection with audits of such Company's books and records and such other matters as the Applicable Agent shall deem appropriate, plus all out-of-pocket expenses incurred by the Applicable Agent in connection with such audits. (i) Section 2.18 of the Credit Agreement is deleted in its entirety. (j) A new Section 5.21 is added to Section 5 of the Credit Agreement as follows: 5.21 Eligibility of Collateral. Each Account Receivable or item of Inventory which either Company shall, expressly or by implication (by inclusion on a Borrowing Base Certificate or otherwise), request Agents to classify as an Eligible Account Receivable or as Eligible Inventory, respectively, will, as of the time when such request is made, conform in all respects to the requirements of such classification set forth in the respective definitions of "Eligible Account Receivable" and "Eligible Inventory" set forth herein. (k) Section 6.01(f) of the Credit Agreement is amended and restated as follows: 25 9 (f) As soon as available, but in any event no later than commencing with the month ending August 31, 1996, a Borrowing Base Certificate calculating the Borrowing Base for the period ended on the last day of the preceding month. (I) Section 6 of the Credit is amended to insert a new Section 6.13 thereto as follows: 6.13 Inventory Reports. Such Company shall conduct a physical inventory no less frequently than semi-annually and shall provide the Agents a report on each such physical inventory promptly thereafter, together with such supporting information as the Agents shall request. 3. Conditions to Effectiveness. This Agreement shall become effective as of the date of this Agreement upon receipt by each Company of a Borrowing Base Certificate for the period ended on June 30, 1996. 4. Representations and Warranties. To induce Lenders to enter into this Agreement, each Company represents and warrants to Lenders that the execution, delivery and performance by such Company of this Agreement &e within its corporate powers, have been duly authorized by all necessary corporate action (including, without limitation, shareholder approval), have received all necessary governmental approval (if any shall be required), and do not and will not contravene or conflict with any provision of law applicable to such Company, the Organization Documents of such Company, or any order, judgment or decree of any court or other agency of government or any Contractual Obligation binding upon such Company; and the Credit Agreement as amended as of the date hereof is the legal, valid and binding obligation of such Company enforceable against such Company in accordance with its terms. 5. Miscellaneous. (a) Captions. Section captions used in this Agreement are for convenience only, and shall not affect the construction of this Agreement. (b) Governing Law. This Agreement shall be a contract made under and governed by the laws of the State of Illinois, without regard to conflict of laws principles. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. (c) Counterparts. This Agreement may be executed in any number of counterparts and by the different parties on separate counterparts, and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. (d) Successors and Assigns. This Agreement shall be binding upon the Companies, 26 10 Agents and Lenders and their respective successors and assigns, and shall inure to the sole benefit of the Companies, Agents and Lenders and the successors and assigns of the Companies, Agents and Lenders. (e) References. Any reference to the Credit Agreement contained in any notice, request, certificate, or other document executed concurrently with or after the execution and delivery of this Agreement shall be deemed to include this Agreement unless the context shall otherwise require. (f) Continued Effectiveness. Notwithstanding anything contained herein, the terms of this Agreement are not intended to and do not serve to effect a novation as to the Credit Agreement. The parties hereby expressly do not intend to extinguish the Credit Agreement. Instead, it is the express intention of the parties hereto to reaffirm the indebtedness created under the Credit Agreement and secured by the Collateral. The Credit Agreement is amended hereby and each of the Loan Documents remain in full force and effect.(f) Continued Effectiveness. Notwithstanding anything contained herein, the terms of this Agreement are not intended to and do not serve to effect a novation as to the Credit Agreement. The parties hereby expressly do not intend to extinguish the Credit Agreement. Instead, it is the express intention of the parties hereto to reaffirm the indebtedness created under the Credit Agreement and secured by the Collateral. The Credit Agreement is amended hereby and each of the Loan Documents remain in full force and effect. 27 11 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. STUART ENTERTAINMENT, INC. BINGO PRESS & SPECIALTY LIMITED By By ------------------------------------- ---------------------------------- Its Its ------------------------------------ -------------------------------- BANK OF AMERICA NATIONAL TRUST BANK OF AMERICA CANADA, as AND SAVINGS ASSOCIATION, as U.S. Canadian Agent Agent By By ------------------------------------- ---------------------------------- Its Its ------------------------------------ -------------------------------- BANK OF AMERICA ILLINOIS, as a U.S. BANK OF AMERICA CANADA, as a Lender Canadian Lender By By ------------------------------------- ---------------------------------- Its Its ------------------------------------ -------------------------------- THE CHASE MANHATTAN BANK THE CHASE MANHATTAN BANK OF (NATIONAL ASSOCIATION), as a U.S. CANADA, as a Canadian Lender Lender By By ------------------------------------- ---------------------------------- Its Its ------------------------------------ -------------------------------- 28 EX-11 3 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT NO. 11 STUART ENTERTAINMENT, INC. AND SUBSIDIARIES STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (Amounts In Thousands, Except Per Share Amounts) (UNAUDITED)
Three Months Ended Nine Months Ended September 30, September 30, ----------------------- --------------------- 1996 1995 1996 1995 -------- -------- -------- -------- Shares of common stock outstanding at beginning of period (1) 6,808 6,695 6,697 6,539 Weighted-average shares issued during the period 5 - 60 95 Weighted-average shares assumed issued under stock option plans and exercise of warrants during the period (assuming the treasury stock method) 183 22 133 48 ------- ------- ------- ------- Average common and common equivalent shares outstanding 6,996 6,717 6,890 6,682 ======= ======= ======= ======= Net income $ 631 $ 519 $ 2,423 $ 236 ======= ======= ======= ======= Earnings per share $ 0.09 $ 0.08 $ 0.35 $ 0.04 ======= ======= ======= =======
(1) This represents total outstanding shares of common stock less treasury shares. See Notes to Consolidated Financial Statements. 29 EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENTS OF OPERATIONS AND CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND THE CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q. 1 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 859 0 23,171 1,826 22,252 47,218 34,806 14,863 99,328 25,199 36,175 0 0 69 34,964 99,328 81,332 81,332 55,966 18,374 0 198 3,433 3,757 1,334 2,423 0 0 0 2,433 .35 .35
-----END PRIVACY-ENHANCED MESSAGE-----