-----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, HN/kndRg9GVD4ZVMHlnzE/Coo5rhgfsooueHlRyko5HqysNkqCGCC7BAjcpk70q8 AtW1AEM5iUWt/OqBCAwtVQ== 0001047469-98-034560.txt : 19980916 0001047469-98-034560.hdr.sgml : 19980916 ACCESSION NUMBER: 0001047469-98-034560 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980801 FILED AS OF DATE: 19980915 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: SEC FILE NUMBER: 000-08141 FILM NUMBER: 98709414 BUSINESS ADDRESS: STREET 1: 605 N HIGHWAY 169 STREET 2: 12TH FL CITY: PLYMOUTH STATE: MN ZIP: 55441 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 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED AUGUST 1, 1998 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 --------------------------------------------------------------- (address of principal executive offices) TELEPHONE (612) 513-4500 FAX (612) 513-4537 INTERNET www.norstan.com - ------------------------------------------------------------------------------- (Registrant's telephone number, facsimile number, Internet address) 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 September 8, 1998, there were 10,588,581 shares outstanding of the registrant's common stock, par value $.10 per share, its only class of equity securities. 1 PART I. FINANCIAL INFORMATION ITEM 1. NORSTAN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED ------------------------------- AUGUST 1, AUGUST 2, 1998 1997 -------------- -------------- REVENUES: Global Services IT Consulting Services $ 31,675 $ 15,026 Communications Services 32,366 33,023 --------- -------- Total Global Services 64,041 48,049 Communications Solutions 50,055 45,212 Financial Services 1,754 2,181 --------- -------- TOTAL REVENUES 115,850 95,442 --------- -------- COST OF SALES: Global Services IT Consulting Services 20,903 11,062 Communications Services 21,799 23,894 --------- -------- Total Global Services 42,702 34,956 Communications Solutions 35,988 32,816 Financial Services 697 584 --------- -------- TOTAL COST OF SALES 79,387 68,356 --------- -------- GROSS MARGIN 36,463 27,086 Selling, General & Administrative Expenses 30,837 23,157 --------- -------- OPERATING INCOME 5,626 3,929 Interest Expense (1,089) (594) Interest and Other Income, Net 181 48 --------- -------- INCOME BEFORE PROVISION FOR INCOME TAXES 4,718 3,383 Provision for Income Taxes 2,052 1,387 --------- -------- NET INCOME $ 2,666 $ 1,996 --------- -------- --------- -------- NET INCOME PER SHARE - BASIC $ 0.26 $ 0.21 --------- -------- --------- -------- NET INCOME PER SHARE - DILUTED $ 0.26 $ 0.21 --------- -------- --------- -------- WEIGHTED AVERAGE SHARES - BASIC 10,192 9,456 --------- -------- --------- -------- WEIGHTED AVERAGE SHARES - DILUTED 10,418 9,584 --------- -------- --------- --------
The accompanying notes are an integral part of these consolidated financial statements. 1 NORSTAN, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
AUGUST 1, APRIL 30, 1998 1998 ----------- ---------- (UNAUDITED) (AUDITED) ASSETS CURRENT ASSETS: Cash $ 4,497 $ 1,869 Accounts receivable, net of allowances for doubtful accounts of $1,153 and $1,171 85,034 97,206 Current lease receivables 20,621 18,751 Inventories 11,370 10,008 Costs and estimated earnings in excess of billings of $19,841 and $17,335 28,527 19,091 Deferred income tax benefits 2,437 2,488 Prepaid expenses, deposits and other 6,011 2,575 Prepaid income taxes 4,187 5,533 --------- -------- TOTAL CURRENT ASSETS 162,684 157,521 --------- -------- PROPERTY AND EQUIPMENT: Furniture, fixtures and equipment 82,186 75,712 Less-accumulated depreciation and amortization (40,784) (37,713) --------- -------- NET PROPERTY AND EQUIPMENT 41,402 37,999 --------- -------- OTHER ASSETS: Lease receivables, net of current portion 36,550 34,998 Goodwill, net of amortization of $8,620 and $7,979 42,317 43,206 Other 1,741 1,884 --------- -------- TOTAL OTHER ASSETS 80,608 80,088 --------- -------- $ 284,694 $275,608 --------- -------- --------- --------
The accompanying notes are an integral part of these consolidated balance sheets. 2 NORSTAN, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts)
AUGUST 1, APRIL 30, 1998 1998 ----------- ---------- (Unaudited) (Audited) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 2,486 $ 3,257 Current maturities of discounted lease rentals 16,996 14,758 Accounts payable 21,095 24,135 Deferred revenue 20,501 19,953 Accrued - Salaries and wages 8,086 15,123 Warranty costs 1,786 1,776 Other liabilities 7,846 10,509 Billings in excess of costs and estimated earnings of $18,912 and $16,390 10,691 9,442 -------- --------- TOTAL CURRENT LIABILITIES 89,487 98,953 -------- --------- LONG-TERM DEBT, NET OF CURRENT MATURITIES 60,067 52,440 DISCOUNTED LEASE RENTALS, NET OF CURRENT MATURITIES 27,076 20,883 DEFERRED INCOME TAXES 6,075 5,661 -------- --------- SHAREHOLDERS' EQUITY: Common stock - $.10 par value; 40,000,000 authorized shares; 10,588,581 and 9,963,716 shares issued and outstanding 1,059 996 Capital in excess of par value 49,267 44,741 Retained earnings 57,045 54,048 Unamortized cost of stock (3,196) (641) Foreign currency translation adjustments (2,186) (1,473) -------- --------- TOTAL SHAREHOLDERS' EQUITY 101,989 97,671 -------- --------- $284,694 $275,608 -------- --------- -------- ---------
The accompanying notes are an integral part of these consolidated balance sheets. 3 NORSTAN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW UNAUDITED (In thousands)
THREE MONTHS ENDED -------------------- AUGUST 1, AUGUST 2, 1998 1997 --------- --------- OPERATING ACTIVITIES: Net income $ 2,666 $ 1,996 Adjustments to reconcile net income to net cash used for operating activities: Restructuring charges paid (359) -- Depreciation and amortization 4,054 4,438 Deferred income taxes 437 4 Changes in operating items, net of acquisition effects: Accounts receivable 13,991 (10,195) Inventories (1,281) (1,205) Costs and estimated earnings in excess of billings (9,584) (2,639) Prepaid expenses, deposits and other (3,239) (153) Accounts payable (3,435) (3,623) Deferred revenue 213 605 Accrued liabilities (10,276) (9,956) Income taxes payable 1,493 1,410 Billings in excess of costs and estimated earnings 1,294 1,505 -------- -------- NET CASH USED FOR OPERATING ACTIVITIES (4,026) (17,813) -------- -------- INVESTING ACTIVITIES: Additions to property and equipment, net (5,763) (3,557) Investment in lease contracts (9,295) (4,709) Collections from lease contracts 5,689 7,472 Other, net (287) 180 -------- -------- NET CASH USED FOR INVESTING ACTIVITIES (9,656) (614) -------- -------- FINANCING ACTIVITIES: Borrowings of long-term debt 99,158 67,183 Repayments of long-term debt (92,041) (49,562) Repayment of debt assumed in acquisition (1,267) -- Borrowing of discounted lease rentals 13,332 -- Repayments of discounted lease rentals (4,786) (3,652) Proceeds from sale of common stock 1,870 398 -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 16,266 14,367 -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 44 4 -------- -------- NET INCREASE (DECREASE) IN CASH 2,628 (4,056) CASH, BEGINNING OF PERIOD 1,869 5,147 -------- -------- CASH, END OF PERIOD $ 4,497 $ 1,091 -------- -------- -------- --------
The accompanying notes are an integral part of these consolidated financial statements. 4 NORSTAN, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AUGUST 1, 1998 UNAUDITED The information furnished in this report is unaudited and reflects all adjustments which are normal recurring adjustments and, which in the opinion of management, are necessary to fairly present 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. SUPPLEMENTAL CASH FLOW INFORMATION Supplemental disclosure of cash flow information is as follows (in thousands):
THREE MONTHS ENDED ------------------------ AUGUST 1, AUGUST 2, 1998 1997 --------- --------- Cash paid for: Interest $ 1,891 $ 1,473 Income taxes 7 41 Non-cash investing and financing activities: Stock issued in pooling-of-interests transaction $ 114 $ --
USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements. Estimates also affect the reported amounts of revenues and expenses during the periods presented. Estimates are used for such items as allowances for doubtful accounts, inventory reserves, depreciable lives of property and equipment, warranty reserves and others. Ultimate results could differ from those estimates. 5 EARNINGS PER SHARE DATA In the fiscal year ended April 30, 1998, the Company adopted Statement of Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS No. 128"), which established new guidelines for computing and presenting earnings per share data ("EPS"), and retroactively restated EPS for all prior periods. SFAS No. 128 requires presentation of basic and diluted EPS. Basic EPS is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects potential dilution from outstanding stock options and other securities using the treasury stock method. The adoption of SFAS No.128 did not have a significant effect on previously reported EPS information for the periods presented. A reconciliation of EPS calculations under SFAS No. 128 is as follows (in thousands, except per share amounts):
THREE MONTHS ENDED ----------------------- AUGUST 1, AUGUST 2, 1998 1997 --------- --------- Net income $ 2,666 $ 1,996 -------- --------- Weighted average common shares outstanding -- Basic 10,192 9,456 Effect of stock option and benefit plans 226 128 -------- --------- Weighted average common shares outstanding -- Diluted 10,418 9,584 -------- --------- Net income per share -- Basic $ 0.26 $ 0.21 -------- --------- Net income per share -- Diluted $ 0.26 $ 0.21 -------- ---------
RECENTLY ISSUED ACCOUNTING STANDARDS Effective May 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes standards for reporting in the financial statements all changes in equity during a period, except those resulting from investments by and distributions to owners. For the Company, comprehensive income represents net income adjusted for foreign currency translation adjustments. Comprehensive income as defined by SFAS No. 130, was approximately $2.0 million and $2.1 million for the three months ended August 1, 1998 and August 2, 1997, respectively. The Company adopted Statement of Position ("SOP") 98-1, "Accounting for Costs of Computer Software Developed or Obtained for Internal Use," effective May 1, 1997. The SOP requires the Company to capitalize certain costs incurred in connection with developing or obtaining internal-use software. The Company capitalized approximately $2.6 million of costs associated with internal-use software developed or obtained during the fiscal quarter ended August 1, 1998. 6 RESTRUCTURING CHARGE During fiscal year 1998, Norstan recorded a restructuring charge of $14.7 million in connection with management's plan to reduce costs, consolidate and reorganize operations, and improve operating efficiencies. Restructuring efforts focused primarily on the following: (i) consolidation of seven semi-autonomous geographic sales and service organizations into a single, more focused sales and operations organization; (ii) the consolidation of 36 warehouses and parts locations into three strategically located distribution centers; and (iii) the reorganization and integration of the Company's IT consulting services operations, including the Norstan Call Center Solutions Group, Connect and PRIMA, into a single, customer- focused organization. The restructuring charge relates primarily to the write-down of certain assets to their fair market values ($12.2 million), severance and employee benefit costs ($1.2 million) and lease termination costs ($1.3 million). ACQUISITIONS On September 30, 1997, the Company acquired PRIMA Consulting, Inc. (PRIMA) in a transaction accounted for under the purchase method. PRIMA provides IT consulting services, including information systems planning and development, consulting and programming services for collaborative computing solutions and ERP integration services. The acquisition consideration totaled approximately $27.5 million, consisting of $19.5 million in cash, $6.3 million of Norstan common stock and $1.7 million paid to certain members of PRIMA management under non-compete agreements. In addition, the Company agreed to pay up to $3.5 million in contingent consideration over a three-year period ending April 30, 2000 if certain financial performance targets are achieved. This transaction resulted in the recording of $24.9 million in goodwill and other intangible assets, which are being amortized on a straight-line basis over fifteen years and three years, respectively. In June 1998, Wordlink, Inc. (Wordlink) was merged with and into a wholly owned subsidiary of the Company in a transaction accounted for under the pooling-of-interests method. Wordlink delivers network integration, groupware messaging, Internet/intranet/, e-commerce and education solutions to business clients operating in a multi-vendor network environment. The agreement provided for the conversion of all outstanding shares of Wordlink common stock and all vested options into approximately $10.3 million of Norstan common stock (420,539 shares). Unvested options to purchase shares of Worlink common stock were converted into Norstan stock options. Wordlink's stockholders' equity and operating results were not material in relation to the Company's financial statements. As such, the Company has recorded the combination without restating prior periods' financial statements. VENDOR AGREEMENTS Under its agreement with Siemens, the Company purchases communications equipment and products for field application and installation. The current distributor agreement with Siemens, which commenced in July 1993, has been renewed through July 27, 1999 while a new distribution agreement is being negotiated. BUSINESS SEGMENTS The Company adopted SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information," effective April 30, 1998. Adoption of this statement required the Company to provide the disclosure of segment information but did not require significant changes in the way geographic information was disclosed. 7 The Company operates in three business segments, Global Services, Communications Solutions, and Financial Services. Due to the Company's continuing expansion and growth in the area of IT consulting services, financial results for Global Services are now reported as (i) IT Consulting Services and (ii) Communications Services. Interim disclosures under SFAS No. 131 are as follows (in thousands):
FOR THE THREE MONTHS ENDED ------------------------------------------------------ AUGUST 1, 1998 AUGUST 2, 1997 ------------------------------------------------------ OPERATING OPERATING REVENUES INCOME REVENUES INCOME --------- --------- --------- --------- Global Services: IT Consulting Services $ 31,675 $ 1,166 $ 15,026 $ 664 Communications Services 32,366 3,487 33,023 1,861 --------- -------- --------- -------- Total Global Services 64,041 4,653 48,049 2,525 Communications Solutions 50,055 32 45,212 241 Financial Services 1,754 941 2,181 1,163 --------- -------- --------- -------- Totals $ 115,850 $ 5,626 $ 95,442 $ 3,929 --------- -------- --------- --------
FORWARD-LOOKING STATEMENTS From time to time, the Company may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, the affect of the labor strike by the Communication Workers of America against US West, technological developments, new products, Year 2000 compliance and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements including those made in this document. In order to comply with the terms of the Private Securities Litigation Reform Act, the Company notes that a variety of factors could cause the Company's actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. The risks and uncertainties that may affect the operations, performance, developments and results of the Company's business include the following: national and regional economic conditions; pending and future legislation affecting the IT and telecommunications industries; the Company's business in Canada and England; stability of foreign governments; market acceptance of the Company's products and services; the Company's continued ability to provide integrated communications solutions for customers in a dynamic industry; and other competitive factors. Because these and other factors could affect the Company's operating results, past financial performance should not necessarily be considered as a reliable indicator of future performance, and investors should not use historical trends to anticipate future period results. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Norstan is a technology services company providing IT and communications systems solutions to over 18,000 customers in the United States, Canada and England. Headquartered in Minneapolis, Minnesota, with sales and service offices located in 68 locations in the United States and Canada, the Company sells its products and services to a wide variety of customers across numerous industries. The Company provides IT consulting and communications services, communications and technology products and financing alternatives through its three business units, Global Services, Communications Solutions (formerly known as Communications Systems) and Financial Services. SUMMARY During the quarter ended August 1, 1998, the Company's net income improved over the quarter ended August 2, 1997, increasing 33.6% to $2,666,000 or $.26 per common share, compared to $1,996,000, or $.21 per common share. These per share figures reflect diluted rather than basic EPS. 9 RESULTS OF OPERATIONS The following table sets forth certain items from the Company's consolidated statements of operations expressed as a percentage of total revenues:
DOLLAR AMOUNTS AS A PERCENTAGE OF REVENUES ------------------------ PERCENTAGE THREE MONTHS ENDED CHANGE ------------------------ ------------- AUGUST 1, AUGUST 2, FISCAL 1998 1997 1999 VS. 1998 --------- --------- ------------- REVENUES: Global Services IT Consulting Services 27.3% 15.7% 110.8% Communications Services 28.0% 34.6% (2.0)% ----- ----- ----- Total Global Services 55.3% 50.3% 33.3% Communications Solutions 43.2% 47.4% 10.7% Financial Services 1.5% 2.3% (19.6)% ----- ----- ----- Total Revenues 100.0% 100.0% 21.4% COST OF SALES: 68.5% 71.6% 16.1% ----- ----- ----- GROSS MARGIN 31.5% 28.4% 34.6% SELLING, GENERAL & ADMINISTRATIVE EXPENSES 26.6% 24.3% 33.2% ----- ----- ----- OPERATING INCOME 4.9% 4.1% 43.2% Interest Expense and Other, Net (0.8%) (0.6%) 66.3% ----- ----- ----- INCOME BEFORE PROVISION FOR INCOME TAXES 4.1% 3.5% 39.5% Provision for Income Taxes 1.8% 1.4% 48.0% ----- ----- ----- NET INCOME 2.3% 2.1% 33.6% ----- ----- ----- ----- ----- -----
The following table sets forth, for the periods indicated, the gross margin percentages for Global Services, Communications Solutions and Financial Services.
THREE MONTHS ENDED ----------------------- AUGUST 1, AUGUST 2, 1998 1997 --------- --------- GROSS MARGIN Global Services IT Consulting Services 34.0% 26.4% Communications Services 32.7% 27.6% Total Global Services 33.3% 27.3% Communications Solutions 28.1% 27.4% Financial Services 60.3% 73.2%
10 FISCAL 1999 COMPARED TO FISCAL 1998 REVENUES. Revenues increased 21.4% to $115.9 million for the quarter ended August 1, 1998 as compared to $95.4 million for the prior year quarter ended August 2, 1997. Revenues from Global Services increased 33.3% to $64.0 million for the quarter ended August 1, 1998 as compared to $48.0 million for the similar period last year. Revenues from IT Consulting Services increased 110.8% to $31.7 million in the first quarter of fiscal year 1999 from $15.0 million in the first quarter of fiscal year 1998. This increase was generally the result of: (i) the inclusion of the first quarter results of PRIMA, acquired in September 1997; (ii) the merger with Wordlink during June 1998; and (iii) internal growth. Revenues from Communications Services decreased 2.0% to $32.4 million for the quarter ended August 1, 1998 from $33.0 in the comparable period last year. The decrease in Communications Services revenues resulted from a decrease in demand for moves, adds and changes. Revenues from Communications Solutions increased 10.7% to $50.1 million in the quarter ended August 1, 1998 from $45.2 million in the similar period last year. The increase was attributable to increased sales volumes in call centers, conferencing, voice processing products, and refurbished equipment through sales to new customers as well as growth with existing customer relationships. Revenues from Financial Services decreased 19.6% to $1.8 million in the first quarter of fiscal year 1999 from $2.2 million in the similar period last year. This decrease is the result of a non-recurring early lease termination recorded in the first quarter of fiscal 1998. GROSS MARGIN. The Company's gross margin was $36.5 million and $27.1 million for the three months ended August 1, 1998 and August 2, 1997, respectively. As a percent of total revenues, gross margin was 31.5% for the first quarter of fiscal year 1999 compared to 28.4% for the first quarter of fiscal year 1998. Gross margin as a percent of revenues for Global Services was 33.3% for the three months ended August 1, 1998 as compared to 27.3% for the similar period last year. The gross margin for IT Consulting Services increased to 34.0% for the first quarter of fiscal year 1999 from 26.4% for the same period last year. The improved margin is a result of operating efficiencies gained as the IT Consulting Services business continued to grow as well as from an increased emphasis on time-and-materials engagements. The gross margin for Communications Services increased to 32.7% from 27.6% for the comparable three month periods ended August 1, 1998 and August 2, 1997. Gross margin as a percent of revenues for Communications Solutions was 28.1% for the three months ended August 1, 1998 as compared to 27.4% for the comparable period ended August 2, 1997. Gross margin as a percent of revenues for Financial Services was 60.3% for the three months ended August 1, 1998 as compared to 73.2% for the similar period last year. 11 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased 33.2% to $30.8 million in the first quarter of fiscal year 1999 from $23.2 million in the similar period last year. As a percent of revenues, selling, general and administrative expenses increased to 26.6% for the three months ended August 1, 1998, as compared to 24.3% for the same period last year. This increase is generally the result of increased investments in the IT Consulting Services business including costs associated with the PRIMA and Wordlink acquisitions, investments in Connaissance Consulting and the opening of new consulting offices in the past six months. INTEREST EXPENSE. Interest expense was $1.1 million for the three months ended August 1, 1998 as compared to $.6 million for the same period last year. This increase was the result of higher borrowing levels in fiscal year 1999 related primarily to acquisitions. INCOME TAXES. The Company's effective income tax rate was 43.5% for the three months ended August 1, 1998 and 41% for the similar period last year. The Company's effective tax rate differs from the federal statutory rate primarily due to state income taxes and the effect of nondeductible goodwill amortization. NET INCOME. Net income was $2.7 million or $0.26 per diluted share in the first quarter of fiscal year 1999, as compared to $2.0 million or $0.21 per diluted share for the comparable period in fiscal year 1998. LIQUIDITY AND CAPITAL RESOURCES Net cash used for operating activities decreased in the first quarter of fiscal year 1999 as compared to the similar period last year as a result of a decrease in accounts receivable which was somewhat offset by increases in costs and estimated earnings in excess of billings and prepaid expenses and a decrease in accrued liabilities. Net cash used for investing activities increased in the first quarter of fiscal year 1999 as compared to the similar period in fiscal year 1998 as a result of increased capital expenditures and investments in lease contracts. CAPITAL EXPENDITURES. The Company used $5.8 million for capital expenditures during the three months ended August 1, 1998 as compared to $3.6 million in the similar period last year. These expenditures were primarily for capitalized costs incurred in connection with obtaining or developing internal use software, computer equipment, facility expansion and telecommunications equipment used in outsourcing arrangements and as spare parts. INVESTMENT IN LEASE CONTRACTS. The Company has also made a significant investment in lease contracts with its customers. The additional investment made in lease contracts in the first quarter of fiscal year 1999 totaled $9.3 million. Net lease receivables increased to $57.2 million, at August 1, 1998 from $53.7 million at April 30, 1998. The Company utilizes its lease receivables and corresponding underlying equipment to borrow funds from financial institutions 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. Discounted lease rentals totaled $44.1 million at August 1, 1998 as compared to $35.6 million at April 30, 1998. Interest rates on these credit agreements at August 1, 1998 ranged from 6.0% to 10.0%, while payments are due in varying monthly installments through August 2005. Payments due to financial institutions are made from monthly collections of lease receivables from customers. 12 CAPITAL RESOURCES. The Company has an $80.0 million unsecured revolving long-term credit agreement with certain banks. Up to $30.0 million of borrowings under this agreement may be in the form of commercial paper. In addition, sublimits also exist related to the Company's support of its leasing activities. Borrowings under this agreement are due May 31, 2001, and bear interest at the banks' reference rate (8.50% at August 1, 1998), except for LIBOR, CD and commercial-paper-based options, which generally bear interest at a rate lower than the banks' reference rate (5.9% to 6.4% at August 1, 1998). Total consolidated borrowings under this agreement at August 1, 1998 and April 30, 1998 were $59.0 million and $52.4 million. Annual commitment fees on the unused portions of the credit facility are 0.25%. Management of the Company believes that a combination of cash generated from operations, existing bank facilities and additional 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. IMPACT OF YEAR 2000 The Company has completed an assessment and will modify or replace portions of its hardware and software so that its computer systems will function properly with respect to dates in 2000 and thereafter. The Company has also had discussions with its significant suppliers to ensure that those parties have appropriate plans to remediate Year 2000 issues where their systems and products interface with the Company's systems or otherwise impact its operations or that of its customers. The Company is assessing the extent to which its operations are vulnerable should those organizations fail to properly remediate either their computer systems or their current product offerings available to the Company's customers. The Company's comprehensive Year 2000 initiative is being managed by a team of internal staff with the assistance of an outside consultant. The Company is well under way with its efforts, which are scheduled to be completed by mid-1999. The cost of the Year 2000 initiative is estimated to be approximately $2.0 million to be incurred over fiscal year 1999 and fiscal year 2000. While the Company believes its planning efforts are adequate to address its Year 2000 concerns, the Year 2000 readiness of the Company's customers, and the hardware and software offerings from the Company's suppliers and business partners may vary. Although the Company does not believe that the Year 2000 matters discussed above will have a material impact on its business, financial condition and results of operations, it is uncertain as to what extent the Company may be affected by such matters. 13 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 financial position or results of operations of the Company. ITEM 2. ISSUANCE OF UNREGISTERED SECURITIES The Company issued 420,539 unregistered shares of its common stock on June 19, 1998, in connection with the acquisition of Wordlink, Inc. ("Wordlink"). These shares had a fair market value of approximately $10,250,000 and were issued to holders of Wordlink common stock and holders of vested options to purchase Wordlink common stock in a transaction exempt from registration under Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"). Pursuant to agreements governing the acquisition of Wordlink (collectively, the "Merger Agreements"), ten percent of the shares issued are held in an escrow account as security for the payment of indemnification claims that may be brought by the Company. During the escrow period, which expires on June 19, 1999, the owners of the esrowed shares shall have all the rights of a shareholder, including the right to vote such shares; provided, however, they may not sell, transfer, pledge or otherwise encumber the escrowed shares. Under the terms of the Merger Agreements, the Company is obligated to register under the Securities Act the offer and sale of approximately 260,000 of the shares issued to effect the Wordlink acquisition. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Exhibit 10. Fourth Amendment to Credit Agreement , dated as of July 23, 1998, by and among the Company, certain banks as signatories thereto (the "Banks") and U.S. Bank National Association, as one of the Banks and as agent for the Banks (b) Reports on Form 8-K. None 14 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: September 14, 1998 By /s/ David R. Richard ------------------------------------ David R. Richard Chief Executive Officer, President and Director Date: September 14, 1998 By /s/ Kenneth S. MacKenzie ------------------------------------ Kenneth S. MacKenzie Chief Financial Officer (Principal Financial and Accounting Officer) 15 EX-10.1 2 EXHIBIT 10-1 FOURTH AMENDMENT TO CREDIT AGREEMENT THIS FOURTH AMENDMENT TO CREDIT AGREEMENT is dated as of July 23, 1998 ("this Amendment") by and among NORSTAN, INC., a Minnesota corporation (the "Borrower"), the banks which are signatories hereto (each individually, a "Bank," and collectively, the "Banks"), and U.S. BANK NATIONAL ASSOCIATION (formerly known as First Bank National Association), a national banking association, one of the Banks, as agent for the Banks (in such capacity, the "Agent"). RECITALS A. The Borrower, the First Bank National Association, Harris Trust and Savings Bank, The Sumitomo Bank, Limited, Chicago Branch ("Sumitomo") and the Agent are parties to a Credit Agreement dated as of July 23, 1996, as amended by a First Amendment dated as of October 11, 1996, a Second Amendment dated as of September 26, 1997 and a Third Amendment dated as of March 20, 1998 (as so amended, the "Credit Agreement"). B. M&I Marshall & Ilsley Bank ("M&I Bank") is the successor in interest to Sumitomo, and the parties hereto desire to confirm that M&I Bank is the successor to Sumitomo as a Bank under the Credit Agreement. C. The parties hereto desire to amend the Credit Agreement in certain respects and to amend and restate in its entirety the existing Revolving Note of Sumitomo, now held by M&I Bank as successor in interest to Sumitomo, so that said Revolving Note will reflect on its face that it is payable to M&I Bank. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: Section 1. DEFINITIONS. Capitalized terms used herein and not otherwise defined herein, but which are defined in the Credit Agreement, shall have the meanings ascribed to such terms in the Credit Agreement unless the context otherwise requires. Section 2. CONFIRMATION OF M&I BANK AS SUCCESSOR TO SUMITOMO. M&I Bank, by executing this Amendment, confirms that is the successor in interest to Sumitomo, that it has assumed and is bound by all of the rights, powers, duties, obligations and liabilities of Sumitomo as a Bank under the Credit Agreement and the other Loan Documents, including, without limitation, the Revolving Commitment and Revolving Commitment Amount of Sumitomo, and that it does hereby confirm, ratify and approve the Credit Agreement and each other Loan Document. The Borrower, U,S. Bank National Association, Harris Trust and Savings -1- Association and the Agent hereby acknowledge and consent to the assumption of Sumitomo's rights, powers, duties, obligations and liabilities under the Credit Agreement by M&I Bank. Section 3. AMENDMENTS TO CREDIT AGREEMENT. Subject to Section 6 hereof, the Credit Agreement is hereby amended as follows: (a) Section 1.1 thereof is amended by adding thereto, in alphabetical order, the following new defined terms: "CONNAISSANCE": Connaissance Consulting, LLC, a Minnesota limited liability company. "CONNAISSANCE AGREEMENT": The Master Control Agreement of Connaissance Consulting, LLC dated as of March 25, 1998 among Connaissance Consulting, Inc. (to be known as Lusenhop & Associates, Inc.) and Norstan Communications, Inc., pursuant to which Norstan Communications, Inc. agreed to acquire initially a 75% membership interest in Connaissance for capital contributions in an aggregate amount of up to $100,000, to make loans to Connaissance in an aggregate principal amount of up to $2,000,000 and, upon certain conditions, to acquire the remaining 25% of the membership interest in Connaissance on May 1, 2001. "CONNAISSANCE CONTINGENT OBLIGATION": As determined on the last day of each fiscal quarter, an amount equal to the product of one fourth (1/4) of the Consulting Revenue of Connaissance for the period of twelve consecutive calendar months ending on such day multiplied by the applicable Revenue Multiple based on the EBIT Margin for such twelve-month period in accordance with the following table:
EBIT Margin Revenue Multiple ----------- ---------------- Less than 15% 2x At least 15% but less than 20% 3x At least 20% but less than 25% 5x 25% or more 6x
"CONSULTING EBIT": As such term is defined in the Connaissance Agreement. "CONSULTING REVENUE": As such term is defined in the Connaissance Agreement. "COVENANT CASH FLOW LEVERAGE RATIO": As of the last day of any fiscal quarter, the ratio of (a) the sum (without duplication) of the aggregate principal amount of all outstanding Capitalized Lease Obligations of the Borrower and the Subsidiaries, plus that portion of Total Indebtedness bearing interest determined as of that date, plus, -2- commencing April 30, 1999, the Connaissance Contingent Obligation determined as of that date to (b) EBITDA for the four consecutive fiscal quarters ending on that date, all as determined in accordance with GAAP (but determined using the equity method of accounting with respect to NFS). "EBIT MARGIN": As of the last day of any fiscal quarter, a fraction, expressed as a percentage, the numerator of which is the Consulting EBIT for the period of twelve consecutive calendar months ending on such day and the denominator is the Consulting Revenue for such twelve-month period. "PRICING CASH FLOW LEVERAGE RATIO": As of the last day of any fiscal quarter, the ratio of (a) the sum (without duplication) of the aggregate principal amount of all outstanding Capitalized Lease Obligations of the Borrower and the Subsidiaries, plus that portion of Total Indebtedness bearing interest determined as of that date, plus, commencing on either (i) the earliest date on which both Consulting Revenue is at least $25,000,000 and EBIT Margin is at least 10% or (ii) if the Borrower's auditors determine that the Connaissance Contingent Obligation is a liability under GAAP, the date on which such liability is determined by such auditors to have been incurred, one-half of the Connaissance Contingent Obligation determined as of that date to (b) EBITDA for the four consecutive fiscal quarters ending on that date, all as determined in accordance with GAAP (but determined using the equity method of accounting with respect to NFS). (b) The definition of the term "Cash Flow Leverage Ratio" set forth in Section 1.1 of the Credit Agreement is deleted. (c) The definition of the term "EBITDA" set forth in Section 1.1 thereof is amended to read as follows: "EBITDA": For any period of determination, the sum of the consolidated net income of the Borrower before deductions for income taxes, Interest Expense, depreciation and amortization plus, for the fiscal quarter ending April 30, 1998 only, the one-time restructuring charge in the amount of approximately $14,667,000 recorded by the Borrower on April 30, 1998, all as determined in accordance with GAAP (but determined using the equity method of accounting with respect to NFS). (d) The definition of the term "Pricing Level" set forth in Section 1.1 thereof is amended to read as follows: "PRICING LEVEL": Shall mean that level of pricing in effect for any fiscal quarter determined in accordance with the following: Pricing Level IV: Shall be in effect during any fiscal quarter if the Pricing Cash Flow Leverage Ratio as of the last day of the most recently completed fiscal quarter was greater than or equal to 2.75 to 1.0. -3- Pricing Level III: Shall be in effect during any fiscal quarter if the Pricing Cash Flow Leverage Ratio as of the last day of the most recently completed fiscal quarter was no less than 2.0 to 1.0 and no greater than 2.74 to 1.0. Pricing Level II: Shall be in effect during any fiscal quarter if the Pricing Cash Flow Leverage Ratio as of the last day of the most recently completed fiscal quarter was no less than 1.0 to 1.0 and no greater than 1.99 to 1.0. Pricing Level I: Shall be in effect during any fiscal quarter if the Pricing Cash Flow Leverage Ratio as of the last day of the most recently completed fiscal quarter was less than 1.0 to 1.0. (c) Section 6.5 of the Credit Agreement is amended in its entirety to read as follows: Section 6.5 SUBSIDIARIES. After the date of this Agreement, the Borrower will not, and will not permit any Subsidiary to, form or acquire any corporation which would thereby become a Subsidiary, unless (a) 100% of the issued and outstanding capital stock of such Subsidiary is owned by Norstan, Inc. or by a 100%-owned Subsidiary of Norstan, Inc., (b) each line of business of such Subsidiary is within the communications and information technology industries and (c) the aggregate amount of the Borrower's Investment or Investments in all such Subsidiaries shall not exceed the amounts set for in Section 6.10(l); provided, however, that Norstan Communications, Inc. shall be permitted to acquire the initial 75% of the membership interest in Connaissance contemplated by the Connaissance Agreement and on May 1, 2001 to acquire the remaining 25% of the membership interest in Connaissance in accordance with the Connaissance Agreement; and provided, further, that the Borrower shall be permitted to acquire 100% of the issued and outstanding capital stock of Wordlink, Inc. notwithstanding the Borrower's failure to comply with clauses (iii) and (iv) of Section 6.10(l) at the time of such acquisition. (d) Section 6.8 of the Credit Agreement is amended in its entirety to read as follows: Section 6.8 CAPITAL EXPENDITURES. The Borrower will not, and will not permit any Subsidiary to, make Capital Expenditures in an amount exceeding, on a consolidated basis in any fiscal year, an amount equal to (a) seven percent (7%) of the consolidated revenues of the Borrower and the Subsidiaries as reported in their consolidated financial statements for the preceding fiscal year, PLUS (b) for the fiscal year ending April 30, 1998 only, Capital Expenditures attributable to the PRIMA Acquisition, plus (c) Capital Expenditures attributable to the acquisition of membership interests in Connaissance pursuant to the Connaissance Agreement. (e) Section 6.10(k) of the Credit Agreement is amended in its entirety to read as -4- follows: 6.10(k) Loans and advances (i) by the Borrower to Norstan Communications, Inc., Norstan Network Services, Inc., Connect Computer Company, PRIMA, Norstan-UK, Norstan International, Connaissance and Wordlink, Inc. and (for purposes other than to finance lease account receivables, as specified in 6.10(j) above) to Norstan Canada, and (ii) by Norstan Communications, Inc. to Connaissance as contemplated by the Connaissance Agreement, provided that the aggregate amount of such loans and advances to Connaissance shall not exceed $2,000,000 at any time outstanding prior to the Borrower's acquisition of the remaining 25% membership interest in Connaissance pursuant to the Connaissance Agreement. (f) Clause (a) of Section 6.13 thereof is amended to read as follows: (a) Contingent Obligations existing on the date of this Agreement and described on Exhibit 6.13 and the Connaissance Contingent Obligation; (g) Section 6.17 thereof is amended to read as follows: Section 6.17 COVENANT CASH FLOW LEVERAGE RATIO. The Borrower will not permit the Covenant Cash Flow Leverage Ratio, as of the last day of any fiscal quarter, to be more than 3.00 to 1.0. Section 4. WAIVER. The Borrower has informed the Banks that it failed to satisfy its covenant under Section 6.16 of the Credit Agreement for the period ended April 30, 1998 and, for that reason, it also failed to satisfy the requirements of clauses (iii) and (iv) of Section 6.10(l) when it acquired the stock of Wordlink, Inc. Each such instance of noncompliance constitutes an Event of Default under the Credit Agreement. Upon satisfaction of the conditions set forth in Section 6 of this Amendment, the Banks hereby waive the Events of Default under the Credit Agreement described in the immediately preceding sentence for the period ended April 30, 1998. This waiver is limited to the express terms hereof and shall not extend to any other Default, Event of Default or any other period. This waiver shall not be and shall not be deemed to be a course of dealing upon which the Borrower may rely with respect to any other Default, Event of Default or request for a waiver and the Borrower hereby expressly waives any such claim. Section 5. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. To induce the Banks and the Agent to execute and deliver this Amendment (which representations and warranties shall survive the execution and delivery of this Amendment), the Borrower represents and warrants to the Agent and the Banks that: (a) this Amendment and the Amended M&I Revolving Note (as defined in Section 5 hereof) have been duly authorized, executed and delivered by it and this Amendment and the Amended M&I Revolving Note constitute the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with -5- their respective terms, subject to limitations as to enforceability which might result from bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally; (b) the Credit Agreement, as amended by this Amendment, constitutes the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, subject to limitations as to enforceability which might result from bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally; (c) the execution, delivery and performance by the Borrower of the Amendment and the Amended M&I Revolving Note (i) have been duly authorized by all requisite corporate action and, if required, shareholder action, (ii) do not require the consent or approval of any governmental or regulatory body or agency, and (iii) will not (A) violate (1) any provision of law, statute, rule or regulation or its certificate of incorporation or bylaws, (2) any order of any court or any rule, regulation or order of any other agency or government binding upon it, or (3) any provision of any material indenture, agreement or other instrument to which it is a party or by which any of its properties or assets are or may be bound, or (B) result in a breach of or constitute (alone or with due notice or lapse of time or both) a default under any indenture, agreement or other instrument referred to in clause (iii)(A)(3) of this Section 4(c); (d) as of the date hereof, no unwaived Default or Event of Default has occurred which is continuing; and (e) all the representations and warranties contained in Section 4 of the Credit Agreement are true and correct in all material respects with the same force and effect as if made by the Borrower on and as of the date hereof. Section 6. CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT. This Amendment shall not become effective until, and shall become effective when, each and every one of the following conditions shall have been satisfied: (a) the Agent shall have received executed counterparts of this Amendment, duly executed by the Borrower and each of the Banks; (b) the Agent shall have received from each of the Guarantors a Consent and Agreement of Guarantor in the form of Attachment 1 hereto (the "Guarantor Agreements") duly completed and executed by such Guarantor; (c) the Agent shall have received a copy of the resolutions of the Board of Directors of the Borrower authorizing the execution, delivery and performance by the Borrower of this Amendment, certified by its Secretary or an Assistant Secretary, together with a certificate of the Secretary or an Assistant Secretary of the Borrower -6- certifying as to the incumbency and the true signatures of the officers authorized to execute this Amendment on behalf of the Borrower; (d) the Agent shall have received from the Borrower a Revolving Note substantially in the form of Exhibit 1.1C to the Credit Agreement (the "Amended M&I Revolving Note"), made payable to M&I Bank in the amount of M&I Bank's (formerly Sumitomo's) Revolving Commitment Amount and executed by the Borrower, which Amended M&I Note shall constitute an amendment and restatement of the existing Revolving Note of Sumitomo referred to in recital C to this Amendment; and (e) the Agent shall have received the favorable opinion of counsel to the Borrower covering the matters set forth in Exhibit B hereto, which opinion shall be in form and substance satisfactory to the Agent. Upon receipt of all of the foregoing, the Agent shall (i) notify the Borrower and the Banks that this Amendment has become effective (but the failure of the Agent to give such notice shall not affect the validity of this Amendment or prevent it from becoming effective) and (ii) deliver the Amended M&I Revolving Note to M&I Bank, whereupon the unpaid principal and accrued but unpaid interest outstanding under said existing Revolving Note of Sumitomo shall be outstanding and unpaid under the Amended M&I Revolving Note. Upon receipt of the Amended M&I Revolving Note, M&I Bank shall return to the Borrower said existing Revolving Note of Sumitomo marked "renewed but not paid" or words to similar effect. The execution and delivery of this Amendment is not intended as a novation or as a discharge of the Borrower's existing obligations under the Loan Documents, which obligations shall continue in full force and effect. Section 7. AFFIRMATION. Each party hereto affirms and acknowledges that (a) the Credit Agreement as amended by this Amendment remains in full force and effect in accordance with its terms, (b) all references to the "Credit Agreement" or any similar term contained in any other Loan Document shall be deemed to be references to the Credit Agreement as amended hereby, (c) all references to the "Banks" contained in the Loan Documents shall be deemed to include M&I Bank, and (d) all references to the "Revolving Notes" or "Notes" contained in the Loan Documents shall be deemed to include the Amended M&I Revolving Note. Section 8. GENERAL. (a) The Borrower agrees to reimburse the Agent upon demand for all reasonable expenses (including reasonable attorneys fees and legal expenses) incurred by the Agent in the preparation, negotiation and execution of this Amendment and any other document required to be furnished herewith, and to pay and save the Agent harmless from all liability for any stamp or other taxes which may be payable with respect to the execution or delivery of this Amendment, which obligations of the Borrower shall survive any termination of the Credit Agreement. -7- (b) This Amendment may be executed in as many counterparts as may be deemed necessary or convenient, and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original but all such counterparts shall constitute but one and the same instrument. (c) Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provisions in any other jurisdiction. (d) This Amendment shall be governed by, and construed in accordance with, the internal law, and not the law of conflicts, of the State of Minnesota, but giving effect to federal laws applicable to national banks. (e) This Amendment shall be binding upon the Borrower, the Agent and the Banks and their respective successors and assigns, and shall inure to the benefit of the Borrower, the Agent and the Banks and the successors and assigns of the Agent and the Banks. -8- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first above written. NORSTAN, INC. By /s/ Robert J. Vold Its Treasurer -------------------------------- U.S. BANK NATIONAL ASSOCIATION, as a Bank and as Agent By /s/ David Shapiro Its Assistant Vice President -------------------------------- HARRIS TRUST AND SAVINGS BANK By /s/ Catherine C. Ciolek Its Vice President -------------------------------- M&I MARSHALL & ILSLEY BANK By /s/ Doug Nelson & Mark Hogen Its Vice Presidents -------------------------------- [Signature Page to Fourth Amendment to Credit Agreement] S-9 EX-27 3 EX-27
5 1,000 3-MOS APR-30-1999 MAY-01-1998 AUG-01-1998 4,497 0 86,187 1,153 11,370 162,684 82,186 40,784 284,694 89,487 87,143 0 0 1,059 100,930 284,694 50,055 115,850 35,988 79,387 30,656 0 1,089 4,718 2,052 2,666 0 0 0 2,666 0.26 0.26
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