-----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, F7XyIeN+QqsYqeOfBafO7VQkhJFc+qhHbhZ7jjxtwya8Acew5bXOfyacrgbDVbtv kHfLhWBzWb9zc1nBrvb4Zg== 0000912057-95-011010.txt : 19951213 0000912057-95-011010.hdr.sgml : 19951213 ACCESSION NUMBER: 0000912057-95-011010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951028 FILED AS OF DATE: 19951212 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORSTAN INC CENTRAL INDEX KEY: 0000072418 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TELEPHONE INTERCONNECT SYSTEMS [7385] IRS NUMBER: 410835746 STATE OF INCORPORATION: MN FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08141 FILM NUMBER: 95600982 BUSINESS ADDRESS: STREET 1: 6900 WEDGWOOD RD STE 150 STREET 2: P O BOX 9003 CITY: MAPLE GROVE STATE: MN ZIP: 55311 BUSINESS PHONE: 6124201100 MAIL ADDRESS: STREET 1: NORSTAN INC STREET 2: 6900 WEDGEWOOD ROAD CITY: MAPLE GROVE STATE: MN ZIP: 55311 FORMER COMPANY: FORMER CONFORMED NAME: NORSTAN RESEARCH & DEVELOPMENT CO DATE OF NAME CHANGE: 19770926 FORMER COMPANY: FORMER CONFORMED NAME: NORSTAN MANUFACTURING CO INC DATE OF NAME CHANGE: 19750918 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 28, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------ ------------ Commission File Number 0-8141 NORSTAN, INC. ---------------------------------------------------- (Exact name of registrant as specified in its charter) Minnesota 41-0835746 ------------------------------- --------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 605 North Highway 169, Twelfth Floor, Plymouth, Minnesota 55441 --------------------------------------------------------------- 612/420-1100 ---------------------------------------------------- (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 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 . ----- ----- On December 4, 1995, there were 4,246,236 shares outstanding of the registrant's common stock, par value $.10 per share, its only class of equity securities. PART I. FINANCIAL INFORMATION ITEM 1. NORSTAN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED (In thousands, except per share amounts)
Three Months Ended Six Months Ended --------------------------- ----------------------------- October 28, October 29, October 28, October 29, 1995 1994 1995 1994 ------------ ------------ ------------- ------------ REVENUES: Sale of Products and Systems $ 43,351 $ 40,551 $ 84,020 $ 74,738 Telecommunications Services 33,812 30,112 64,248 57,542 Financial Services 1,542 1,335 2,838 2,542 ------------ ------------ ------------- ------------ Total Revenues 78,705 71,998 151,106 134,822 ------------ ------------ ------------- ------------ COST OF SALES: Products and Systems 32,414 30,265 62,871 56,126 Telecommunications Services 23,402 19,114 44,356 35,771 Financial Services 583 559 1,155 1,129 ------------ ------------ ------------- ------------ Total Cost of Sales 56,399 49,938 108,382 93,026 ------------ ------------ ------------- ------------ GROSS MARGIN 22,306 22,060 42,724 41,796 Selling, General & Administrative Expenses 18,303 18,611 35,983 36,015 ------------ ------------ ------------- ------------ OPERATING INCOME 4,003 3,449 6,741 5,781 Interest Expense (450) (365) (848) (716) Interest and Other Income, Net 27 31 76 55 ------------ ------------ ------------- ------------ INCOME BEFORE PROVISION FOR INCOME TAXES 3,580 3,115 5,969 5,120 Provision for Income Taxes 1,432 1,246 2,388 2,048 ------------ ------------ ------------- ------------ NET INCOME $ 2,148 $ 1,869 $ 3,581 $ 3,072 ------------ ------------ ------------- ------------ ------------ ------------ ------------- ------------ NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE $ .48 $ .43 $ .80 $ .71 ------------ ------------ ------------- ------------ ------------ ------------ ------------- ------------ WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 4,495 4,346 4,485 4,337 ------------ ------------ ------------- ------------ ------------ ------------ ------------- ------------
The accompanying notes to the consolidated financial statements are an integral part of these statements. NORSTAN, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)
October 28, April 30, 1995 1995 --------------- --------------- (Unaudited) (Audited) CURRENT ASSETS: Cash $ 2,318 $ 1,308 Accounts receivable, net of allowances for doubtful accounts of $1,134 and $804 54,577 51,779 Current lease receivables 15,513 14,122 Inventories 11,248 11,137 Costs and estimated earnings in excess of billings of $16,958 and $16,691 11,258 10,926 Prepaid income taxes 3,707 3,634 Prepaid expenses, deposits and other 2,403 2,331 --------------- --------------- TOTAL CURRENT ASSETS 101,024 95,237 --------------- --------------- PROPERTY AND EQUIPMENT: Furniture, fixtures and equipment 67,530 64,652 Less-accumulated depreciation and amortization (34,335) (32,885) --------------- --------------- NET PROPERTY AND EQUIPMENT 33,195 31,767 --------------- --------------- OTHER ASSETS: Lease receivables, net of current maturities 25,478 26,381 Franchise rights and other intangible assets, net of amortization of $3,714 and $3,435 7,614 7,904 Other 508 420 --------------- --------------- TOTAL OTHER ASSETS 33,600 34,705 --------------- --------------- $ 167,819 $ 161,709 --------------- --------------- --------------- ---------------
The accompanying notes to the consolidated financial statements are an integral part of these balance sheets. NORSTAN, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts)
October 28, April 30, 1995 1995 ---------------- --------------- (Unaudited) (Audited) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 24 $ 93 Current maturities of discounted lease rentals 10,057 11,449 Accounts payable 13,893 16,467 Accrued - Salaries and wages 7,800 10,841 Deferred revenue 15,866 15,045 Warranty costs 1,689 1,756 Other liabilities 6,673 5,118 Income taxes payable 1,022 158 Billings in excess of costs and estimated earnings of $8,013 and $10,121 1,804 2,127 ---------------- --------------- TOTAL CURRENT LIABILITIES 58,828 63,054 ---------------- --------------- LONG-TERM DEBT, net of current maturities 27,250 16,465 DISCOUNTED LEASE RENTALS, net of current maturities 11,972 16,313 DEFERRED INCOME TAXES 9,081 8,893 ---------------- --------------- SHAREHOLDERS' EQUITY: Common stock - $.10 par value; 20,000,000 authorized shares; 4,224,541 and 4,215,441 shares issued and outstanding 422 422 Capital in excess of par value 26,213 26,031 Retained earnings 35,068 31,486 Unamortized cost of stock (162) (149) Foreign currency translation adjustments (853) (806) ---------------- --------------- TOTAL SHAREHOLDERS' EQUITY 60,688 56,984 ---------------- --------------- $ 167,819 $ 161,709 ---------------- --------------- ---------------- ---------------
The accompanying notes to the consolidated financial statements are an integral part of these balance sheets. NORSTAN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED (In thousands)
Six Months Ended ---------------------------------- October 28, October 29, 1995 1994 --------------- --------------- OPERATING ACTIVITIES: Net Income $ 3,581 $ 3,072 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,533 4,614 Deferred income taxes 113 15 Changes in operating items: Accounts receivable (2,818) (6,936) Inventories (117) (3,529) Costs and estimated earnings in excess of billings (338) (1,117) Prepaid expenses, deposits and other (72) (453) Accounts payable (2,565) 5,655 Accrued liabilities (718) (894) Billings in excess of costs and estimated earnings (322) 1,965 Income taxes payable 864 724 --------------- --------------- Net cash provided by operating activities 3,141 3,116 --------------- --------------- INVESTING ACTIVITIES: Additions to property and equipment, net (6,631) (5,717) Investment in lease contracts (9,321) (7,981) Collections from lease contracts 8,817 8,084 Other, net (81) 25 --------------- --------------- Net cash used for investing activities (7,216) (5,589) --------------- --------------- FINANCING ACTIVITIES: Borrowings under revolving credit agreements 62,330 62,890 Repayments under revolving credit agreements (51,545) (56,015) Repayments of long-term debt (69) (63) Borrowings on discounted lease rentals -- 1,698 Repayments of discounted lease rentals (5,729) (5,393) Proceeds from sale of common stock 101 -- --------------- --------------- Net cash provided by financing activities 5,088 3,117 --------------- --------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (3) 11 --------------- --------------- NET INCREASE IN CASH 1,010 655 CASH, BEGINNING OF PERIOD 1,308 755 --------------- --------------- CASH, END OF PERIOD $ 2,318 $ 1,410 --------------- --------------- --------------- ---------------
The accompanying notes to the consolidated financial statements are an integral part of these statements. NORSTAN, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 28, 1995 UNAUDITED The information furnished in this report is unaudited and reflects all adjust- ments, which are normal recurring adjustments and, which in the opinion of management, are necessary to present fairly the operating results for the interim periods. The operating results for the interim periods presented are not necessarily indicative of the operating results to be expected for the full fiscal year. This report should be read in conjunction with the Company's most recent "Annual Report on Form 10-K." PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. FOREIGN CURRENCY - For the Company's foreign operations, assets and liabilities are translated at exchange rates as of the balance sheet date, and revenues and expenses are translated at average exchange rates prevailing during the period. Translation adjustments are recorded as a separate component of shareholders' equity. NORSTAN FINANCIAL SERVICES, INC. (NFS) - NFS provides financing for customers of the Company. Leases are accounted for as sales-type leases for consolidated financial reporting purposes. Condensed unaudited statements of operations of NFS are as follows (in thousands):
Six Months Ended --------------------------------- October 28, October 29, 1995 1994 ------------- ------------- Revenues $ 2,577 $ 2,394 Interest Expense (956) (1,012) Other Expenses (646) (641) ------------- ------------- Income before provision for income taxes 975 741 Provision for income taxes 390 296 ------------- ------------- Net Income $ 585 $ 445 ------------- ------------- ------------- -------------
SUPPLEMENTAL CASH FLOWS INFORMATION - Supplemental disclosure of cash flows information is as follows (in thousands):
Six Months Ended --------------------------------- October 28, October 29, 1995 1994 ------------- ------------- Cash paid for: Interest $ 1,881 $ 1,707 Income taxes $ 1,419 $ 1,264
RECENTLY ISSUED ACCOUNTING STANDARDS - Financial Accounting Standards Board (FASB) Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (Statement 121), issued in March 1995 and effective for fiscal years beginning after December 15, 1995, establishes accounting standards for the recognition and measurement of impairment of long-lived assets, certain identifiable intangibles, and goodwill either to be held or disposed of. Management believes the adoption of Statement 121 will not have a material impact on the Company's financial position or results of operations. FASB Statement No. 123, "Accounting for Stock-Based Compensation" (Statement 123), issued in October 1995 and effective for fiscal years beginning after December 15, 1995, encourages, but does not require a fair value based method of accounting for employee stock options or similar equity instruments. It also allows an entity to elect to continue to measure compensation cost under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB No. 25), but requires pro forma disclosures of net income and earnings per share as if the fair value based method of accounting had been applied. The Company expects to adopt Statement 123 in 1996. While the Company is still evaluating Statement No. 123, it currently expects to elect to continue to measure compensation cost under APB No. 25 and comply with the pro forma disclosure requirements. If the Company makes this election, this statement will have no impact on the Company's results of operations or financial position because the Company's plans are fixed stock option plans are fixed stock option plans which have no intrinsic value at the grant date under APB No. 25. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SUMMARY - During the quarter ended October 28, 1995, the Company's net income improved compared to the quarter ended October 29, 1994, increasing 14.9% to $2,148,000, or $.48 per common share, compared to $1,869,000, or $.43 per common share. For the six month period ended October 28, 1995, the Company's net income was $3,581,000, or $.80 per common share, compared to $3,072,000 or $.71 per common share, for the same period last year. RESULTS OF OPERATIONS - The Company's revenues consist of revenues from the sale of products and systems, telecommunications services and financial services. Revenues from the sale of products and systems result from the sale of new products and upgrades, as well as refurbished equipment. Revenues from telecommunications services result primarily from communications maintenance services, moves, adds and changes and long distance service. Financial services revenues result primarily from leasing activities. The following table sets forth, for the periods indicated, certain items from the Company's consolidated statements of opera- tions. SELECTED CONSOLIDATED FINANCIAL DATA
DOLLAR AMOUNTS AS A DOLLAR AMOUNTS AS A PERCENTAGE OF REVENUE PERCENTAGE PERCENTAGE OF REVENUES PERCENTAGE Three Months Ended INCREASE Six Months Ended INCREASE --------------------------- ------------- --------------------------- ------------- October 28, October 29, Fiscal October 28, October 29, Fiscal 1995 1994 1996 vs. 1995 1995 1994 1996 vs. 1995 ------------- ------------- ------------- ------------- ------------- ------------- REVENUES: Sales of Products and Systems 55.1% 56.3% 6.9% 55.6% 55.4% 12.4% Telecommunications Services 43.0% 41.8% 12.3% 42.5% 42.7% 11.7% Financial Services 1.9% 1.9% 15.5% 1.9% 1.9% 11.6% ------------- ------------- ------------- ------------- ------------- ------------- Total Revenues 100.0% 100.0% 9.3% 100.0% 100.0% 12.1% COST OF SALES 71.7% 69.4% 12.9% 71.7% 69.0% 16.5% ------------- ------------- ------------- ------------- ------------- ------------- GROSS MARGIN 28.3% 30.6% 1.1% 28.3% 31.0% 2.2% SELLING, GENERAL & ADMINISTRATIVE EXPENSES 23.2% 25.8% (1.7%) 23.8% 26.7% -- ------------- ------------- ------------- ------------- ------------- ------------- OPERATING INCOME 5.1% 4.8% 16.1% 4.5% 4.3% 16.6% Interest Expense and Other (0.6%) (0.5%) 23.3% (0.5%) (0.5%) 18.4% ------------- ------------- ------------- ------------- ------------- ------------- INCOME BEFORE PROVISION FOR INCOME TAXES 4.5% 4.3% 14.9% 4.0% 3.8% 16.6% Provision for Income Taxes 1.8% 1.7% 14.9% 1.6% 1.5% 16.6% ------------- ------------- ------------- ------------- ------------- ------------- NET INCOME 2.7% 2.6% 14.9% 2.4% 2.3% 16.6% ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
The following table sets forth, for the periods indicated, the gross margin percentages for sales of products and systems, telecommunications services and financial services.
Three Months Ended Six Months Ended -------------------------- -------------------------- October 28, October 29, October 28, October 29, 1995 1994 1995 1994 ------------ ------------ ------------- ------------ GROSS MARGIN PERCENTAGES: Sales of Products and Systems 25.2% 25.4% 25.2% 24.9% Telecommunications Services 30.8% 36.5% 31.0% 37.8% Financial Services 62.2% 58.1% 59.3% 55.6%
RESULTS OF OPERATIONS REVENUES. Revenues increased 9.3%, to $78,705,000 for the quarter ended October 28, 1995 as compared to $71,998,000 for the similar period last year. For the six months ended October 28, 1995, revenues increased 12.1%, to $151,106,000 as compared to $134,822,000 for the same period last year. Sales of products and systems increased $2,800,000, or 6.9% and $9,282,000, or 12.4% during the comparable three and six month periods ended October 28, 1995, respectively. Revenues from telecommunications services increased $3,700,000, or 12.3% and $6,706,000, or 11.7% in the comparable three and six month periods ended October 28, 1995, respectively. Revenues from telecommunications services generally have increased following the growth in the sales of telecommunications products and systems in fiscal 1995 and 1994. Revenues from financial services increased $207,000, or 15.5% and $296,000, or 11.6% during the comparable three and six month periods ended October 28, 1995, respectively. GROSS MARGIN. The Company's gross margin increased $246,000, or 1.1%, to $22,306,000 for the three months ended October 28, 1995 as compared to $22,060,000 for the three months ended October 29, 1994. For the six month period ended October 28, 1995, gross margin increased $928,000, or 2.2%, to $42,724,000 as compared to $41,796,000 for the six months ended October 29, 1994. As a percent of total revenues, gross margin declined to 28.3% for both the three and six month periods ended October 28, 1995 as compared to 30.6% and 31.0% for the three and six month periods ended October 29, 1994. Gross margin as a percent of revenues for the sale of products and systems was 25.2% for both the three and six month periods ended October 28, 1995 as compared to 25.4% and 24.9% for the comparable periods ended October 29, 1994, respectively. Gross margin as a percent of revenues for telecommunications services was 30.8% and 31.0% for the three and six month periods ended October 28, 1995 as compared to 36.5% and 37.8% for the comparable periods ended October 29, 1994, respectively. These decreases result from changes in the mix of services, increased service support costs, additional training and development costs required to support the Company's expanded line of product offerings, as well as decreased margins attributable to moves, adds and changes. Gross margin as a percent of revenues for financial services was 62.2% and 59.3% for the three and six month periods ended October 28, 1995 as compared to 58.1% and 55.6% for the three and six month periods ended October 29, 1994, respectively. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses decreased $308,000, or 1.7% for the quarter ended October 28, 1995 as compared to the quarter ended October 29, 1994. For the six months ended October 28, 1995, selling, general and administrative expenses decreased $32,000, or less than 1% as compared to the similar period last year. These decreases result from a continued effort to contain costs, as well as from a shift in administrative resources to an operational and product line support function. As a percent of revenues, selling, general and administrative expenses declined to 23.2% and 23.8% for the three and six month periods ended October 28, 1995 as compared to 25.8% and 26.7% for the similar periods ended October 29, 1994, respectively. These decreases in selling, general and administrative expenses as a percent of revenues resulted from volume related efficiencies, as sales volume increased without a proportional increase in expenses, as well as the factors discussed above. OPERATING INCOME. Operating income increased $554,000, or 16.1%, to $4,003,000 for the quarter ended October 28, 1995 as compared to $3,449,000 for the quarter ended October 29, 1994. For the six months ended October 28, 1995, operating income increased $960,000, or 16.6%, to $6,741,000, as compared to $5,781,000 for the similar period last year. As a percent of revenues, operat- ing income increased to 5.1% and 4.5% for the three and six month periods ended October 28, 1995 as compared to 4.8% and 4.3% for the similar periods ended October 29, 1994, respectively. OTHER COSTS AND EXPENSES. Interest expense increased to $450,000 and $848,000 for the three and six month periods ended October 28, 1995 as compared to $365,000 and $716,000 for the similar periods ended October 29, 1994, respectively. These increases resulted primarily from increased interest rates (8.75% and 7.75% at October 29, 1995 and October 28, 1994 respectively). Average month end revolving credit balances (excluding amounts borrowed to finance leasing activities) were approximately $23,000,000 for the six months ended October 28, 1995 as compared to approximately $21,000,000 for the six months ended October 29, 1994. The Company's effective tax rate was 40% for the three and six month periods ended October 28, 1995 and October 29, 1994. The Company's effective tax rate differs from the federal statutory rate primarily due to state income taxes. The provisions for income tax have been recorded based upon management's estimate of the annualized effective tax rate. NET INCOME. Net income was $2,148,000, or $.48 per common share, and $1,869,000, or $.43 per common share, for the quarters ended October 28, 1995 and October 29, 1994, respectively. Net income was $3,581,000, or $.80 per common share, and $3,072,000, or $.71 per common share, for the six month periods ended October 28, 1995 and October 29, 1994, respectively. LIQUIDITY AND CAPITAL RESOURCES WORKING CAPITAL. Working capital increased to $42,196,000 at October 28, 1995 from $32,183,000 at April 30, 1995. The current ratio was 1.72 to 1.0 at October 28, 1995 as compared to 1.51 to 1.0 at April 30, 1995. Net cash provided by operating activities was $3,141,000 for the six months ended October 28, 1995 as compared to $3,116,000 for the six months ended October 29, 1994. For the six months ended October 28, 1995, net income of $3,581,000, deprecia- tion and amortization of $5,533,000 and increased taxes payable of $864,000 more than offset decreased accrued liabilities of $718,000, increased accounts receivable of $2,818,000, and decreased accounts payable of $2,565,000. For the six months ended October 29, 1994, net income of $3,072,000, depreciation and amortization of $4,614,000, increased accounts payable of $5,655,000, increased billings in excess of costs of $1,965,000, and increased taxes payable of $724,000 more than offset decreased accrued liabilities of $894,000, and increased accounts receivable, inventories and costs and estimated earnings in excess of billings of $6,936,000, $3,529,000 and $1,117,000, respectively. CAPITAL RESOURCES. In October 1994, the Company entered into a $35,000,000 unsecured revolving long-term credit agreement with certain banks. Under this agreement, the total credit facility of $35,000,000 is reduced by $750,000 per fiscal quarter effective January 31, 1995. As of October 28, 1995, the total capacity of the credit facility was $32,000,000. Borrowings under this agree- ment are due May 2, 1998 and bear interest at the banks' reference rate (8.75% and 9.00% at October 28, 1995 and April 30, 1995, respectively), except for LIBOR, CD and commercial paper based options which generally bear interest at a rate lower than the bank's reference rate. The Company is able to borrow up to $15,000,000 of this credit facility in the form of commercial paper. In addition, Norstan Financial Services, Inc. (NFS) is able to borrow up to $8,000,000 of this facility from Norstan, Inc. Total consolidated borrowings under this agreement were $27,250,000 and $16,465,000 at October 28, 1995 and April 30, 1995, respectively. There was $3,393,000 borrowed for the account of NFS at October 28, 1995, and $322,000 borrowed for the account of NFS at April 30, 1995. Borrowings by the Company in fiscal 1996 and 1995 have been for working capital and general corporate purposes, to invest in property and equipment, as well as to borrow funds for NFS. Net capital expenditures for the six months ended October 28, 1995 were $6,631,000 and $5,717,000 for the similar period last year. These expenditures were primarily used for telecommunications equipment used as spare parts, computer equipment and facility expansion. At October 28, 1995, there were no outstanding material commitments for future capital expenditures. The Company has also made a significant investment in lease contracts with its customers. The investment made in lease contracts totaled $9,321,000 for the six months ended October 28, 1995 and $7,981,000 for the similar period last year. Net lease receivables increased to $40,991,000 at October 28, 1995 as compared to $40,503,000 at April 30, 1995. Norstan Financial Services, Inc. (NFS) and Norstan Canada Inc. utilize their lease receivables and corresponding underlying equipment to borrow funds from financial institutions at fixed rates on a nonrecourse or recourse basis by discounting the stream of future lease payments. Proceeds from discounting are presented on the consolidated balance sheet as discounted lease rentals. Interest rates on these credit agreements range from 6% to 10%, and payments are generally due in varying monthly installments through October 2000. Payments due financial institutions on a monthly basis are made from monthly collections of lease receivables from customers. Discounted lease rentals consisted of the following (in thousands):
October 28, April 30, 1995 1995 ------------ ------------ Nonrecourse borrowings $ 19,036 $ 24,712 Recourse borrowings 2,993 3,050 ------------ ------------ Total discounted lease rentals 22,029 27,762 Less-current maturities (10,057) (11,449) ------------ ------------ $ 11,972 $ 16,313 ------------ ------------ ------------ ------------
In addition to the recourse as described previously, recourse to Norstan, Inc. relative to discounted lease rentals was limited to $929,000 as of October 28, 1995 and $986,000 as of April 30, 1995. Management of the Company believes that a combination of cash to be generated from operations, existing bank facilities and available borrowing capacity, in aggregate, are adequate to meet the anticipated liquidity and capital resource requirements of its business. Sources of additional financing, if needed, may include further debt financing or the sale of equity or other securities. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is involved in legal actions in the ordinary course of its business. Although the outcomes of any such legal actions cannot be predicted, in the opinion of management there is no legal proceeding pending against or involving the Company for which the outcome is likely to have a material adverse effect upon the consolidated finan- cial position or results of operations of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) On September 20, 1995, the annual meeting of shareholders of the Company (the "Annual Meeting") was held. (b) At the Annual Meeting, the following directors were elected: Paul Baszucki Winston E. Munson Richard Cohen Gerald D. Pint Sidney Cohen Stanley Schweitzer Arnold Lehrman Dr. Jagdish N. Sheth Connie M. Levi Herbert F. Trader Max A. Mayer (c) The following items were voted upon at the Annual Meeting: (1) Election of Directors:
Name Votes For Votes Withheld ---- --------- -------------- Paul Baszucki 3,560,449 169,438 Richard Cohen 3,555,847 174,040 Sidney Cohen 3,557,984 171,903 Arnold Lehrman 3,586,985 142,902 Connie M. Levi 3,586,775 143,112 Max A. Mayer 3,558,239 171,648 Winston E. Munson 3,559,337 170,550 Gerald D. Pint 3,586,950 142,937 Stanley Schweitzer 3,587,085 142,802 Dr. Jagdish N. Sheth 3,584,921 144,966 Herbert F. Trader 3,587,550 142,337
Abstentions and Broker non-votes relating to the Election of Directors - 86,317 (2) The Norstan, Inc. 1995 Long-Term Incentive Plan was approved. A total of 2,313,498 shares were voted for ap- proval of the Norstan, Inc. 1995 Long-Term Incentive Plan, 774,503 shares were voted against, and there were a total of 728,203 abstentions and/or broker non-votes. (3) The Norstan, Inc. Restated Non-Employee Directors' Stock Plan was approved. A total of 2,831,348 shares were voted for approval of the Norstan, Inc. Restated Non-Employee Directors' Stock Plan, 282,837 shares were voted against, and there were a total of 702,019 abstentions and/or broker non-votes. (4) The shareholders approved the appointment of Arthur Andersen LLP as independent auditors for the fiscal year ending April 30, 1996. A total of 3,713,074 shares were voted for the appointment of Arthur Andersen LLP, 6,396 shares were voted against, and there were a total of 96,734 abstentions and/or broker non-votes. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Exhibit 11. Statement Regarding Computation of Earnings Per Share. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter for which this report is filed. S I G N A T U R E S 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. NORSTAN, INC. ------------------------- Registrant Date: December 11, 1995 By /s/ Paul Baszucki ------------------------- Paul Baszucki Co-Chairman of the Board and Chief Executive Officer Date: December 11, 1995 By /s/ Richard Cohen ---------------------------- Richard Cohen Vice Chairman of the Board and Chief Financial Officer (Principal Financial and Accounting Officer) S I G N A T U R E S 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. NORSTAN, INC. ----------------------- Registrant Date: December 11, 1995 By ------------------------- Paul Baszucki Co-Chairman of the Board and Chief Executive Officer Date: December 11, 1995 By ------------------------- Richard Cohen Vice Chairman of the Board and Chief Financial Officer (Principal Financial and Accounting Officer) EX-11 2 EXHIBIT 11 EXHIBIT 11 NORSTAN, INC. AND SUBSIDIARIES STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE (In thousands, except per share amounts)
Three Months Ended Six Months Ended -------------------------------- -------------------------------- October 28, October 29, October 28, October 29, 1995 1994 1995 1994 ------------ ------------ ------------ ------------ Primary earnings per share Weighted average number of issued shares outstanding 4,222 4,071 4,220 4,071 Effect of: 1986 Long-Term Incentive Plan 218 227 212 220 Restated Non-Employee Directors' Stock Option Plan 49 42 48 40 Employee Stock Purchase Plan 6 6 5 6 ------------ ------------ ------------ ------------ Shares outstanding used to compute primary earnings per share 4,495 4,346 4,485 4,337 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Net income $ 2,148 $ 1,869 $ 3,581 $ 3,072 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Primary earnings per share $ .48 $ .43 $ .80 $ .71 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Fully diluted earnings per share - Weighted average number of shares used for primary earnings per share 4,495 4,346 4,485 4,337 Effect of: 1986 Long-Term Incentive Plan --- 5 5 3 Restated Non-Employee Directors' Stock Option Plan --- 1 1 1 Employee Stock Purchase Plan --- 2 1 1 ------------ ------------ ------------ ------------ Shares outstanding used to compute fully diluted earnings per share 4,495 4,354 4,492 4,342 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Net income $ 2,148 $ 1,869 $ 3,581 $ 3,072 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Fully diluted earnings per share $ .48 $ .43 $ .80 $ .71 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
EX-27 3 EXHIBIT 27
5 1,000 6-MOS APR-30-1996 MAY-01-1995 OCT-28-1995 2,318 0 55,711 1,134 11,248 101,024 67,530 34,335 167,819 58,828 39,222 422 0 0 60,266 167,819 84,020 151,106 62,871 108,382 35,907 0 848 5,969 2,388 3,581 0 0 0 3,581 .80 .80
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