-----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, FVvw2yCqUDcGUjkJmyEbHVHGoiB5xwv7Yg4BJh0NdnzuYmjtVfpY1Se7EzJirSIJ RLRx7tv7erVp7Uk+g/+zNg== 0000912057-97-003874.txt : 19970221 0000912057-97-003874.hdr.sgml : 19970221 ACCESSION NUMBER: 0000912057-97-003874 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961227 FILED AS OF DATE: 19970210 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NU KOTE HOLDING INC /DE/ CENTRAL INDEX KEY: 0000812423 STANDARD INDUSTRIAL CLASSIFICATION: PENS, PENCILS & OTHER ARTISTS' MATERIALS [3950] IRS NUMBER: 161296153 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20287 FILM NUMBER: 97522586 BUSINESS ADDRESS: STREET 1: 17950 PRESTON RD STE 690 CITY: DALLAS STATE: TX ZIP: 75252 BUSINESS PHONE: 2142502785 MAIL ADDRESS: STREET 1: 17950 PRESTON ROAD SUITE 690 CITY: DALLAS STATE: TX ZIP: 75252 10-Q 1 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended DECEMBER 27, 1996 - ------------------------------------------------------------------------------- Commission file number 0-20287 - ------------------------------------------------------------------------------- NU-KOTE HOLDING, INC. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 16-1296153 - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 17950 PRESTON ROAD, SUITE 690, DALLAS, TEXAS 75252 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (972) 250-2785 - ------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant has (1) 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 ----- ----- Number of shares of common stock of registrant outstanding at February 5, 1997: CLASS OUTSTANDING ----- ----------- Class A common stock $.01 par value 21,775,302 NU-KOTE HOLDING, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE ---- PART I - FINANCIAL INFORMATION Consolidated Balance Sheets as of December 27, 1996 and March 31, 1996 3 Consolidated Statements of Operations and Retained Earnings for the Three Month Periods Ended December 27, 1996 and December 29, 1995 4 Consolidated Statements of Operations and Retained Earnings (Deficit) for the Nine Month Periods Ended December 27, 1996 and December 29, 1995 5 Consolidated Statements of Cash Flows for the Nine Month Periods Ended December 27, 1996 and December 29, 1995 6 Notes to Consolidated Financial Statements 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 14 PART II - OTHER INFORMATION Other Information 19 Signature Page 20 2 NU-KOTE HOLDING, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) December 27, March 31, 1996 1996 ------------ --------- ASSETS Current assets: Cash and cash equivalents $ 4,667 $ 6,540 Accounts receivable, net 71,378 94,440 Receivables from related parties 4,391 5,622 Inventories, net 108,632 115,226 Prepaid expenses 13,146 9,618 Deferred income taxes 9,266 8,122 -------- -------- Total current assets 211,480 239,568 Property, plant, and equipment, net 88,073 92,402 Other assets and deferred charges 13,038 7,430 Assets held for sale 2,065 2,065 Intangibles, net 23,217 24,950 -------- -------- Total assets $337,873 $366,415 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank loans and current portion of long-term debt $ 1,084 $ 6,358 Accounts payable 48,321 53,046 Compensation related liabilities 7,321 14,563 Other accrued liabilities 35,403 47,936 -------- -------- Total current liabilities 92,129 121,903 Long-term debt, net of current maturities 122,597 111,843 Other liabilities 15,942 17,433 Deferred income taxes 8,919 10,327 -------- -------- Total liabilities 239,587 261,506 -------- -------- Shareholders' equity: Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued Class A common stock, $.01 par value, 40,000,000 shares authorized; 22,325,302 and 22,292,008 shares issued 223 223 Class B common stock, $.01 par value, 15,000,000 shares authorized; none issued Additional paid-in capital 91,589 91,178 Retained earnings 8,476 13,042 Foreign currency translation adjustments (1,776) 692 Treasury stock, at cost, 550,000 shares (226) (226) -------- -------- Total shareholders' equity 98,286 104,909 -------- -------- Total liabilities and shareholders' equity $337,873 $366,415 -------- -------- -------- -------- The accompanying notes are an integral part of the consolidated financial statements.
3 NU-KOTE HOLDING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS FOR THE THREE MONTH PERIODS ENDED DECEMBER 27, 1996 AND DECEMBER 29, 1995 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (Unaudited) ---------------------------- December 27, December 29, 1996 1995 ------------ ------------ Net sales $ 82,923 $ 104,660 Cost of sales 67,568 74,252 ------------ ------------ Gross margin 15,355 30,408 Selling, general and administrative expenses 15,387 18,128 Research and development expenses 2,517 2,117 Restructuring expense 2,031 5,457 ------------ ------------ Operating income (loss) (4,580) 4,706 Interest expense 1,990 1,879 Other (income) expense items, net 158 (230) ------------ ------------ Income (loss) before income taxes (6,728) 3,057 Provision (benefit) for income taxes (2,699) 1,037 ------------ ------------ Net income (loss) (4,029) 2,020 Retained earnings - Beginning of period 12,505 6,641 ------------ ------------ Retained earnings - End of period $ 8,476 $ 8,661 ------------ ------------ ------------ ------------ Net income (loss) per share of common stock $ (0.19) $ 0.09 ------------ ------------ ------------ ------------ Weighted average shares outstanding 21,775,302 22,693,394 ------------ ------------ ------------ ------------ The accompanying notes are an integral part of the consolidated financial statements. 4 NU-KOTE HOLDING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT) FOR THE NINE MONTH PERIODS ENDED DECEMBER 27, 1996 AND DECEMBER 29, 1995 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (Unaudited) -------------------------- December 27, December 29, 1996 1995 ------------ ------------ Net sales $ 256,621 $ 311,592 Cost of sales 195,331 220,597 ------------ ------------ Gross margin 61,290 90,995 Selling, general and administrative expenses 48,413 55,619 Research and development expenses 7,648 6,923 Restructuring expense 7,811 9,684 ------------ ------------ Operating income (loss) (2,582) 18,769 Interest expense 6,014 5,598 Other (income) items, net (935) (769) ------------ ------------ Income (loss) before income taxes (7,661) 13,940 Provision (benefit) for income taxes (3,095) 5,184 ------------ ------------ Net income (loss) (4,566) 8,756 Retained earnings (deficit) - Beginning of period 13,042 (95) ------------ ------------ Retained earnings - End of period $ 8,476 $ 8,661 ------------ ------------ ------------ ------------ Net income (loss) per share of common stock $ (0.21) $ 0.39 ------------ ------------ ------------ ------------ Weighted average shares outstanding 21,764,239 22,587,499 ------------ ------------ ------------ ------------ The accompanying notes are an integral part of the consolidated financial statements. 5 NU-KOTE HOLDING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTH PERIODS ENDED DECEMBER 27, 1996 AND DECEMBER 29, 1995 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (Unaudited) --------------------------- December 27, December 29, 1996 1995 ------------ ------------ Cash flows from operating activities: Net income (loss) $ (4,566) $ 8,756 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Exchange gains (1,066) (503) Depreciation and amortization 9,849 10,123 Deferred income taxes (82) (2,827) Tax benefit from exercise of stock options 75 1,536 Other (5,187) 1,491 Changes in working capital: Accounts receivable 24,293 (3,031) Inventories 6,594 (9,338) Prepaid expenses (3,528) (3,989) Accounts payable (4,725) (8,439) Compensation related liabilities (7,242) (1,759) Other accrued liabilities (6,429) 4,687 Cash paid for restructuring (8,572) (13,198) -------- -------- Net cash used in operating activities (586) (16,491) -------- -------- Cash flows from investing activities: Purchase of property, plant and equipment (8,065) (8,139) Sale of property, plant and equipment 715 Acquisition of business (6,107) -------- -------- Net cash used in investing activities (7,350) (14,246) -------- -------- Cash flows from financing activities: Borrowings on long-term debt and other loans 100,139 46,315 Payments on long-term debt and other loans (91,632) (26,149) Exercise of stock options 338 1,838 -------- -------- Net cash provided by financing activities 8,845 22,004 -------- -------- Effect of exchange rate changes on cash (2,782) 177 -------- -------- Net decrease in cash (1,873) (8,556) Cash and cash equivalents at beginning of period 6,540 17,049 -------- -------- Cash and cash equivalents at end of period $ 4,667 $ 8,493 -------- -------- -------- -------- The accompanying notes are an integral part of the consolidated financial statements.
6 NU-KOTE HOLDING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1. THE COMPANY Nu-kote Holding, Inc. ("Nu-kote") and its wholly-owned subsidiaries are referred to collectively as the "Company". The Company is one of the leading independent manufacturers and distributors of impact and non-impact imaging supplies for office and home printing devices, including the manufacture and distribution of a full line of typewriter and printer ribbons, thermal fax ribbons, cartridges and toners for laser printers, facsimile machines and copiers, cartridges and ink for ink jet printers, specialty papers, calculator ink rolls, and carbon paper. The Company sells products primarily in the United States and Europe, directly to wholesale and retail markets, and also to original equipment manufacturers and distributors for resale under their brand names or private labels. The Company distributes through virtually all major office supply marketing channels, including wholesale distributors, office products dealers, direct mail catalogs, office supply "super stores", warehouse clubs, information processing specialists, value added resellers, and mass market retailers. The consolidated balance sheet as of December 27, 1996 and the related consolidated statements of operations and retained earnings (deficit) for the three and nine month periods and consolidated statements of cash flows for the nine month periods ended December 27, 1996 and December 29, 1995 are unaudited. However, in the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of such financial statements have been included. Interim results are not necessarily indicative of results for a full year. The financial statements and notes are presented as permitted by Form 10-Q, and do not contain all financial disclosures and details included in the Company's annual financial statements and notes. 2. NET INCOME (LOSS) PER SHARE OF COMMON STOCK Net income (loss) per share of common stock for the three and nine month periods ended December 27, 1996 and December 29, 1995 is based on the weighted average number of common shares outstanding during the period and the effect of considering common stock equivalents (stock options) under the treasury stock method. Primary and fully diluted net income (loss) per share of common stock are the same and, therefore, are not shown separately. 7 3. ACCOUNTS RECEIVABLE Accounts receivable are reflected net of allowances for doubtful accounts of $4,129 and $3,933 at December 27, 1996 and March 31, 1996, respectively. 4. INVENTORIES Inventories consist of the following: December 27, March 31, 1996 1996 ------------ --------- Raw materials $ 42,834 $ 42,291 Work-in-process 13,751 18,341 Finished goods 52,047 54,594 -------- -------- Total $108,632 $115,226 -------- -------- -------- -------- Since physical inventories taken during the year do not necessarily coincide with the end of a quarter, management has estimated the composition of inventories with respect to raw materials, work-in-process and finished goods. It is management's opinion that this estimate represents a reasonable approximation of the inventory levels at December 27, 1996. The amounts at March 31, 1996 are based upon the audited balance sheet at that date. 5. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is stated at cost and consists of the following components: December 27, March 31, 1996 1996 ------------ --------- Land $ 4,606 $ 5,323 Buildings and improvements 22,701 22,742 Machinery and equipment 93,727 90,827 -------- -------- 121,034 118,892 Less accumulated depreciation and impairment provision (32,961) (26,490) -------- -------- Total $ 88,073 $ 92,402 -------- -------- -------- -------- Depreciation expense amounted to $2,486 and $3,182 for the three month periods and $7,656 and $8,183 for the nine month periods ended December 27, 1996 and December 29, 1995, respectively. 8 6. INTANGIBLE ASSETS Intangible assets consist of amounts allocated as a result of purchases of existing businesses and are summarized as follows: Amortization December 27, March 31, Period 1996 1996 ------------ ------------ --------- Goodwill 20 years $ 9,880 $ 9,880 Covenants-not-to-compete 3-5 years 6,642 6,642 Trademark 40 years 11,306 11,306 Technology license 8 years 1,272 1,272 ------- ------- 29,100 29,100 Less accumulated amortization (5,883) (4,150) ------- ------- Total $23,217 $24,950 ------- ------- ------- ------- Covenant-not-to-compete agreements have been recorded at their net present value using estimated discount rates of 7% and 16%. The trademark has been recorded at its estimated value based upon royalty rates charged for its use, discounted at an estimated rate of return of 35%. The technology license has been recorded at its estimated fair value based on forecasted discounted cash flows using a 16% discount rate. 7. LINE OF CREDIT The Company has a line of credit in Colombia in the amount of $1,450. Borrowings against the line of credit amounted to $687 and $681 at December 27, 1996 and March 31, 1996, respectively. The line bears interest at the prevailing Colombia interest rate plus 2 percentage points. Average interest rates at December 27, 1996 and March 31, 1996 were 17.6% and 22.6%, respectively. 8. LONG-TERM DEBT Long-term debt of the Company consists of the following: December 27, March 31, 1996 1996 ------------ --------- Revolving lines of credit $122,336 $ 75,919 Term loan 40,000 Other items 1,345 1,601 -------- -------- 122,994 117,520 Less current portion (397) (5,677) -------- -------- Long-term debt, net of current portion $122,597 $111,843 -------- -------- -------- -------- 9 The Company has amended and restated its credit facilities dated February 24, 1995 (the "Original Credit Agreement"). The Amended and Restated Credit Agreement (the "Amended Credit Agreement") dated October 15, 1996 consists of a five-year $200 million revolving credit arrangement. The Amended Credit Agreement is comprised of a $150 million Domestic (U.S. dollar denominated) facility and two multi-currency European facilities (the "Multi-Currency Facilities"). The Multi-Currency Facilities are denominated in Swiss Francs, British Pound Sterling, Deustchmarks and U.S. dollars. The Amended Credit Agreement provides for affirmative and negative covenants customary in an agreement of this nature and consistent with the Original Credit Agreement. Interest rates and the collateral structure for the Amended Credit Agreement are also substantially the same as the Original Credit Agreement. As of December 27, 1997, the Company was in technical default of its Amended Credit Agreement. The technical default involved the failure to meet the required ratio of Consolidated Total Debt to Consolidated EBITDA (calculated on a cumulative basis for the last four fiscal quarters). The Company has obtained a waiver of the technical default, including an amendment limiting borrowings under the Company's credit facilities to $140 million and increasing the interest rate on libor borrowings, effective for the period December 27, 1996 to March 30, 1997. The Company is currently in discussions with its lenders regarding further amendments to the terms of the Amended Credit Agreement, and expects to finalize such amendments prior to March 30, 1997. 9. INCOME TAXES Following are the approximate effective blended tax rates for significant jurisdictions: North America 40% Switzerland 22% Germany 64% United Kingdom 33% The above resulted in a worldwide effective blended tax rate of 40% for both the three and nine month periods ended December 27, 1996, respectively. 10. CONTINGENCIES Three original equipment manufacturers filed lawsuits against Nu-kote International, Inc. ("NII") alleging that certain NII ink jet replacement cartridges, refill inks and packaging infringe their trademarks, trade dress and patents and alleging, among other things, unfair competition and misleading representations. The plaintiffs are seeking injunctive relief, monetary damages, court costs and attorney's fees. The complaint in one of the cases has been amended to name Nu-kote and Pelikan Produktions A.G. as defendants. All of the cases are being vigorously contested, and in each case the Company or NII has asserted affirmative defenses and counterclaims and has requested damages and affirmative injunctive relief. All of the lawsuits are in the discovery stage. In management's opinion, 10 the ultimate resolution of these lawsuits will not have a material adverse effect on the Company's financial position, results of future operations or liquidity. In connection with Nu-kote's acquisition of the Office Supplies Division and the International Business Forms Division of Unisys Corporation ("Unisys"), Unisys agreed to retain all liabilities resulting from or arising out of any environmental conditions existing on or before January 16, 1987 at the Company's Rochester, Macedon and Bardstown facilities and, additionally, to indemnify the Company for such. State environmental agencies have alleged that environmental contamination exists at all three sites. To date Unisys has handled all remediation efforts related to these properties. As a result of the indemnification from Unisys, in the opinion of management, the ultimate cost to resolve these environmental matters will not have a material adverse effect on the Company's financial position, results of future operations or liquidity. In addition, the Company is involved in various routine legal matters. In the opinion of the Company's management, the ultimate cost to resolve these matters will not have a material adverse effect on the Company's financial position, results of future operations or liquidity. This note contains various "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934, which represent the Company's expectations or beliefs concerning the possible outcome of the various litigation matters described herein and estimates of the Company's liabilities associated with identified environmental matters. The Company cautions that the actual outcome of the various litigation matters could be affected by a number of factors beyond its control, including, without limitation, judicial interpretations of applicable laws, rules and regulations, the uncertainties and risks inherent in any litigation, particularly a jury trial, the nature and extent of any counter claims, and the scope of insurance coverage, and that the final resolution of such matters could differ materially from the Company's current evaluation of such matters. The Company further cautions that the statements regarding identified environmental matters are qualified by important factors that could cause the Company's actual liabilities to differ materially from those in the forward looking statements, including, without limitation, the following: (i) the actual nature and extent of contamination, if any; (ii) the remedial action selected; (iii) the actual cleanup level required; (iv) changes in regulatory requirements; (v) the ability of other responsible parties, if any, to pay their respective shares; and (vi) any insurance recoveries. 11 11. RESTRUCTURING EXPENSE As a result of the Pelikan Hardcopy Division acquisition, the Company merged certain of its operations with those of the Pelikan Hardcopy Division. The plan to integrate the Pelikan Hardcopy Division's operations included, among other things, closure of the Company's manufacturing, distribution and administration facility in Bardstown, Kentucky and merger of its operations into the Pelikan Hardcopy Division's facility in Franklin, Tennessee; termination of contract manufacturing and other contracts; closure of the Company's manufacturing facility in Deeside, Wales and merger of its operations with the Pelikan Hardcopy Division's operations in Scotland; consolidation of certain toner manufacturing operations of ICMI's Connellsville, Pennsylvania facility and the Pelikan Hardcopy Division's Derry, Pennsylvania facility; and consolidation of sales and administrative organizations of the two companies. The Company substantially completed the merger activities in fiscal 1996 and anticipates completion in fiscal 1997. Activity related to accrued restructuring costs during the quarters ended December 27, 1996 and December 29, 1995 are as follows: Amount Amount Accrued at Amount Accrued at Description of End of Paid in Beginning of Restructuring Expense Quarter Quarter Quarter --------------------- ---------- ------- ------------ Quarter Ended December 27, 1996: Severance $ 1,755 $ 938 $ 2,693 Lease cancellations 201 184 385 Facility maintenance and other 194 15 209 --------- -------- --------- $ 2,150 $ 1,137 $ 3,287 --------- -------- --------- --------- -------- --------- Amount Amount Accrued at Amount Accrued at Description of End of Paid in Beginning of Restructuring Expense Quarter Quarter Quarter --------------------- ---------- ------- ------------ Quarter Ended December 27, 1995: Severance $ (424) $ 434 $ 10 Lease cancellations 1,075 45 1,120 Termination of contract manufacturing and other contracts 1,006 75 1,081 Facility maintenance and other (146) 405 259 --------- -------- --------- $ 1,511 $ 9,59 $ 2,470 --------- -------- --------- --------- -------- --------- 12 Activity related to accrued restructuring costs during the nine month periods ended December 27, 1996 and December 29, 1995 are as follows: Amount Amount Accrued at Amount Accrued at Description of End of Paid in Additional Beginning of Restructuring Expense Period Period Provision Period --------------------- ---------- ------- ------------ ------------ Nine Months Ended December 27, 1996: Severance $ 1,755 $ 1,009 $ 2,693 $ 71 Lease cancellations 201 224 425 Facility maintenance and other 194 190 384 --------- -------- ---------- -------- $ 2,150 $ 1,423 $ 26,93$ 880 --------- -------- ---------- -------- --------- -------- ---------- --------
Amount Amount Accrued at Amount Accrued at Description of End of Paid in Beginning of Restructuring Expense Period Period Period --------------------- ---------- ------- ------------ Nine Months Ended December 29, 1995: Severance $ (424) $ 3,595 $ 3,171 Lease cancellations 1,075 135 1,210 Termination of contract manufacturing and other contracts 1,006 1,344 2,350 Facility maintenance and other (146) 1,780 1,634 --------- -------- --------- $ 1,511 $ 6,854 $ 8,365 --------- -------- --------- --------- -------- --------- 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS QUARTER ENDED DECEMBER 27, 1996 COMPARED TO QUARTER ENDED DECEMBER 29, 1995 Net sales for the quarter ended December 27, 1996 were $82.9 million, a decline of $21.7 million (20.8%) over the quarter ended December 29, 1995. For the quarter ended December 27, 1996, sales in North America amounted to $43.1 million, a decline of 20% as compared to sales of $54.0 million during the previous year period, and sales in Europe amounted to $39.0 million as compared to $49.7 million during the previous year period, a decline of 22%. All of the net sales decline experienced in North America ($10.9 million) was due to a 40% decline in sales of impact products, whereas the decline in sales in Europe ($10.7 million) was due to a decline in sales of both impact and non-impact products of 24% and 20%, respectively. Worldwide sales of non-impact supplies accounted for 58% of total worldwide sales for the quarter ended December 27, 1996, compared to 50% for the previous year period. Sales of non-impact product as a percentage of worldwide sales increased because sales of impact products declined by $17.1 million (33%). In North America, sales of non-impact supplies amounted to $25.1 million as compared to $24.0 million in the previous year period and represented 58% and 44%, respectively, of total North American sales. Sales of non-impact products as a percentage of North American sales increased because North American sales of non-impact products increased by $1.1 million (4.6%) and sales of impact products declined by $12.0 million (40%). Sales of non-impact supplies in Europe amounted to $23.1 million for the quarter ended December 27, 1996 as compared to $28.9 million and represented 59% of total European sales. Management expects that world-wide sales of impact products will continue to decline as the migration to the use of non-impact printing devices accelerates. In addition, even though revenue from sales of non-impact products is growing, management is evaluating its non-impact products with the intent of re-defining the core product base and eliminating unprofitable product categories. Cost of sales were $67.6 million (81.5% of net sales) for the quarter ended December 27, 1996, compared to $74.3 million (70.9% of net sales) in the prior year period. The increase in cost of sales as a percentage of net sales was due primarily to the decline in net sales of impact and toner products and the related effect on absorption of manufacturing overhead costs associated therewith. In addition, as was experienced in the previous quarter, sales of Pelikan "Easy-Click" and Nu-kote "Cartridge Plus" systems, 14 which have a higher initial product cost, also contributed to the decline in gross profit margins. The Company expects to reduce its world-wide manufacturing costs for impact products by shifting the manufacturing of such products to Mexico and China. The Company also expects that in the future, the gross profit margin for Pelikan "Easy-Click" and Nu-kote "Cartridge Plus" systems will improve due to (a) an increase in the sales volume of such products due in part from customer re-orders of refill tanks associated with these products and (b) a reduction in the raw material cost of these products resulting from the Company's recently initiated used ink jet cartridge recovery program. Research and development expenses were $2.5 million, an increase of $0.4 million over the previous year period. The increase in expenses is directly attributed to ink jet development activities in North America. Selling, general and administrative expenses were $15.4 million (18.6% of net sales) for the quarter ended December 27, 1996, a reduction of $2.7 million, as compared to $18.1 million (17.3% of net sales) for the previous year period. The decrease in actual expenditures resulted from the implementation of worldwide expense reduction programs. Restructuring cost, related primarily to the down sizing of impact product production in Europe, amounted to $2.0 million as compared to $5.5 million in the previous year period. Interest expense was $2.0 million, compared to $1.9 million for the previous year period. For the quarter ended December 27, 1996, the Company recognized a net loss of $4.0 million compared to net income of $2.0 million (1.9% of net sales) for the previous year period. The decrease in net income is directly attributable to the decrease in sales and the increased cost of goods sold discussed above. NINE MONTHS ENDED DECEMBER 27, 1996 COMPARED TO NINE MONTHS ENDED DECEMBER 31, 1995 Net sales for the nine months ended December 27, 1996 were $256.6 million, a decrease of $55.0 million (17.6%) over the nine months ended December 29, 1995. For the nine months ended December 27, 1996, sales in North America amounted to $129.5 million, a decline of 10% as compared to the previous year period. All of the net sales decline experienced in North America ($15.0 million) was due to a 29% ($22.0 million) decline in sales of impact products, as sales of non-impact products have increased $7.0 million (10%) over the previous year period. For the nine month period ended December 27, 1996, sales in Europe amounted to $124.6 million, a decline of 24% as compared to the previous year period. Sales of impact products in Europe declined $18.0 million (26%), 15 while sales of non-impact products declined $21.0 million (22%) as compared to the previous year period. As a percentage of total sales, worldwide sales of non-impact supplies accounted for 57% of total sales for the nine months ended December 27, 1996, compared to 49% of total sales in the nine months ended December 29, 1995. Sales of non-impact products as a percentage of worldwide sales increased because sales of impact products declined $40.0 million (27%), while sales of non-impact products declined $14.0 million (9%). Management expects that world-wide sales of impact products will continue to decline as the migration to the use of non-impact printing devices accelerates. In addition, management is evaluating its non-impact products with the intent of re-defining the core product base and eliminating non-profitable product categories. Cost of sales were $195.3 million (76.1% of net sales) for the nine months ended December 27, 1996 compared to $220.6 million (70.8% of net sales) in the prior period. As previously indicated, the increase in cost of sales percentage was due primarily to: (1) the decline in net sales of impact and toner products and the related effect on absorption of manufacturing overhead costs associated therewith; (2) sales of Pelikan "Easy-Click" and Nu-kote "Cartridge Plus" systems, which have a higher initial product cost; and (3) price reductions initiated in Europe which have not been offset by increased volumes. The Company expects to reduce its world-wide manufacturing costs as it shifts the manufacturing of such products to Mexico and China. The Company also expects that in the future, the gross profit margin for Pelikan "Easy-Click" and Nu-kote "Cartridge Plus" systems will improve due to (a) an increase in the sales volume of such products in part from customer re-orders of refill tanks associated with these products and (b) a reduction in the raw material cost of these products resulting from the Company's recently initiated used ink jet cartridge recovery program. Research and development expenses were $7.6 million, up $0.7 million as compared to the previous year period. The increase in expenses is directly attributed to increased ink jet technology spending in North America. Selling, general and administrative expenses were $48.4 million (18.9% of net sales) for the nine months ended December 27, 1996, a reduction of $7.2 million, as compared to $55.6 million (17.9% of net sales) for the previous year period. The decrease in actual expenditures resulted from the implementation of worldwide expense reduction programs. Other income, primarily due to exchange gains in Europe amounted to $0.9 million and $0.8 million, respectively. Restructuring cost, related primarily to the down sizing of world-wide impact product production, amounted to $7.8 million and $9.7 million, respectively. Interest expense was $6.0 million, compared to $5.6 million for the prior period. 16 For the nine months ended December 27, 1996, the Company recognized a net loss of $4.6 million compared to net income of $8.8 million (2.8% of net sales) for the prior period. The decrease in net income is directly attributable to the decrease in sales and the increased cost of goods sold discussed above. EFFECT OF CURRENCY EXCHANGE RATES AND EXCHANGE RATE RISK MANAGEMENT Because the Company conducts business in many countries, fluctuations in foreign currency exchange rates affect the Company's financial position and results of operations. It is the Company's policy to monitor currency exposures and enter into hedging arrangements to manage the company's exposure to currency fluctuations. As a result, the Company reported $1.1 million and $0.5 million, respectively, in exchange gains, in the nine month periods reported. LIQUIDITY AND CASH FLOW For the nine months ended December 27, 1996, cash used by operations, primarily to fund restructuring expenses and increased working capital needs, amounted to $0.6 million. Capital expenditures, primarily related to the purchase of ink jet manufacturing equipment, were $8.1 million. As of February 6, 1996, borrowings outstanding under the Company's credit facilities amounted to $131.0 million, up $13.5 million from March 31, 1996. The Company has $9.0 million available for future borrowings under its credit facilities. As of December 27, 1997, the Company was in technical default of its Amended and Restated Credit Agreement (the "Amended Credit Agreement"), as described in Note 8 of Notes to Consolidated Financial Statements. The technical default involved the failure to meet the required ratio of Consolidated Total Debt to Consolidated EBITDA (calculated on a cumulative basis for the last four fiscal quarters). The Company has obtained a waiver of the technical default, including an amendment limiting borrowings under the Company's credit facilities to $140 million and increasing the interest rate on libor borrowings, effective for the period December 27, 1996 to March 30, 1997. The Company is currently in discussions with its lenders regarding further amendments to the terms of the Amended Credit Agreement, and expects to finalize such amendments prior to March 30, 1997. If the Company is unable to amend the terms of its Amended Credit Agreement, it is likely that it will continue to be in technical default of the EBITDA covenant beyond the March 30, 1997 expiration date of the current waiver. No assurance can be given that satisfactory amendments, modifications or waivers to the terms of the Amended Credit Agreement can be negotiated. Assuming the current level of operations and the continued availability of the Company's credit facilities, as amended to date, the Company believes it will have sufficient funds available to meet its liquidity requirements for the next 12 months. 17 CAUTIONARY STATEMENT The foregoing "Management's Discussion and Analysis of Financial Condition and Results of Operations" section contains various "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which represent the Company's expectations or beliefs concerning, among other things, future operating results and various components thereof and the adequacy of future operations to provide sufficient liquidity. The Company cautions that such matters necessarily involve significant risks and uncertainties that could cause actual operating results and liquidity needs to differ materially from such statements, including, without limitation, general economic conditions, product demand and industry capacity, competitive products and pricing, manufacturing efficiencies, new product development, availability of raw materials and critical manufacturing equipment, and the regulatory and trade environment. 18 PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS See Item 3 - Legal Proceedings in the registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1996 and Note 10 of Notes to Consolidated Financial Statements for the three and nine month periods ended December 27, 1996 and December 29, 1995 included elsewhere in this report. ITEM 2 - INAPPLICABLE ITEM 3 - DEFAULTS UPON SENIOR SECURITIES As of December 27, 1997, the Company was in technical default of its Amended and Restated Credit Agreement (the "Amended Credit Agreement"), as described in Note 8 of Notes to Consolidated Financial Statements. The technical default involved the failure to meet the required ratio of Consolidated Total Debt to Consolidated EBITDA (calculated on a cumulative basis for the last four fiscal quarters). The Company has obtained a waiver of the technical default, including an amendment limiting borrowings under the Company's credit facilities to $140 million and increasing the interest rate on libor borrowings, effective for the period December 27, 1996 to March 30, 1997. The Company is currently in discussions with its lenders regarding further amendments to the terms of the Amended Credit Agreement, and expects to finalize such amendments prior to the March 30, 1997. See Note 8 of Notes to Consolidated Financial Statements and Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Cash Flow. ITEMS 4 - 5 INAPPLICABLE ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Exhibit 10.36a - First Amendment to Amended and Restated Credit Agreement and Waiver Exhibit 11.1 - Statement regarding computation of per share earnings. Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K. The registrant filed no reports on Form 8-K during the quarterly period ended December 27, 1996. 19 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. Date February 7, 1996 /s/ DAVID F. BRIGANTE -------------------------- ---------------------------------- David F. Brigante Chairman of the Board and Chief Executive Officer Date February 7, 1996 /s/ DANIEL M. KERRANE -------------------------- ---------------------------------- Daniel M. Kerrane Executive Vice President and Chief Financial Officer 20 EX-10.36 2 EXHIBIT 10.36 EXHIBIT 10.36a FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT AND WAIVER THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT AND WAIVER is dated as of the 7th day of February, 1997, and entered into among NU-KOTE HOLDINGS, INC., a Delaware corporation ("Holding"), NU-KOTE INTERNATIONAL, INC., a Delaware corporation ("Company"), the Lenders signatory hereto, BARCLAYS BANK PLC, in its capacity as documentation agent ("Documentation Agent") and NATIONSBANK OF TEXAS, N.A., a national banking association, as administrative agent and collateral agent (in such capacities, "Agent"). WITNESSETH: WHEREAS, Holding, Company, Lenders, Documentation Agent and Agent entered into an Amended and Restated Credit Agreement, dated as of October 15, 1996 ("Credit Agreement"); WHEREAS, Holding and Company have requested that Lenders waive during the period starting on December 27, 1996, to March 30, 1997, inclusive (the "Waiver Period"), the Event of Default arising from non-compliance with Section 6.6A of the Credit Agreement for the fiscal quarter ended December 27, 1996; WHEREAS, Lenders and Agent have agreed to grant the request of Holding and Company and to modify the Credit Agreement upon the terms and conditions set forth below. NOW, THEREFORE, for valuable consideration hereby acknowledged, Holding, Company, Lenders, Documentation Agent and Agent agree as follows: SECTION 1. DEFINITIONS. Unless specifically defined or redefined below, capitalized terms used herein shall have the meanings ascribed thereto in the Credit Agreement. SECTION 2. MAXIMUM OUTSTANDING. Notwithstanding anything to the contrary in the Credit Agreement, Total Utilization of Revolving Credit Commitments shall not exceed $95,000,000, starting on February 7, 1997, through the end of the Waiver Period. SECTION 3. APPLICABLE MARGIN. Notwithstanding anything to the contrary in the definition of "Applicable Margin" in Section 1.1 of the Credit Agreement, the Applicable Margin shall be 1.50% per annum, starting on February 7, 1997, through the end of the Waiver Period. SECTION 4. WAIVERS. (a) Subject to the terms and conditions hereof, Lenders hereby waive, but only during the Waiver Period, the Specified Default (hereinafter defined); PROVIDED, HOWEVER, that Lenders' waiver of the Specified Default and their rights and remedies as a result of the occurrence thereof shall not constitute and shall not be deemed to constitute a waiver of any other Event of Default, whether arising as a result of further violations of any provision of the Credit Agreement previously violated by Holding or Company, or a waiver of any rights and remedies arising as a result of such other Events of Default. As used herein, "SPECIFIED DEFAULT" shall mean the failure of Holding and Company to observe the covenant set forth in Section 6.6A of the Credit Agreement for the fiscal quarter ended December 27, 1996. At the end of the Waiver Period, the waiver of the Specified Default will automatically terminate. (b) In consideration of Lenders' waiver of the Specified Default and certain other good and valuable consideration, Holding and Company each hereby expressly acknowledge and agree that neither of them has any setoffs, counterclaims, adjustments, recoupments, defenses, claims or actions of any character, whether contingent, non-contingent, liquidated, unliquidated, fixed, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, known or unknown, against any Lender, Documentation Agent or Agent or any grounds or cause for reduction, modification or subordination of the Obligations or any liens or security interests of any Lender or the Collateral Agent. To the extent Holding or Company may possess any such setoffs, counterclaims, adjustments, recoupments, claims, actions, grounds or causes, each of Holding and Company hereby waives, and hereby releases each Lender, Documentation Agent and Agent from, any and all of such setoffs, counterclaims, adjustments, recoupments, claims, actions, grounds and causes, such waiver and release being with full knowledge and understanding of the circumstances and effects of such waiver and release and after having consulted counsel with respect thereto. SECTION 5. CONDITIONS PRECEDENT. This Amendment and Waiver shall not be effective until all proceedings of Company taken in connection herewith and the transactions contemplated hereby shall be satisfactory in form and substance to Documentation Agent, Agent and Lenders, and each of the following conditions precedent shall have been satisfied: (a) All fees and expenses, including legal and other professional fees and expenses incurred, payable on or prior to the date of this Amendment and Waiver to Agent, including, without limitation, the fees and expenses of its counsel, shall have been paid to the extent that same had been billed prior to the date of this Amendment and Waiver. (b) Agent and each Lender shall have received each of the following, in form and substance satisfactory to Agent, Lenders and Agent's counsel in their sole and absolute discretion: (1) a certificate of Holding and Company certifying (i) as to the accuracy, after giving effect to this Amendment and Waiver, of the representations and warranties set forth in Section 4 of the Credit Agreement, the other Loan Documents and in this Amendment and Waiver, and (ii) that there exists no Potential Event of Default or Event of Default, after giving effect to this Amendment and Waiver, and the execution, delivery and performance of this Amendment and Waiver will not cause a Potential Event of Default or Event of Default; and -2- (2) such other documents, instruments, and certificates, in form and substance reasonably satisfactory to Lenders, as Lenders shall deem necessary or appropriate in connection with this Amendment and Waiver and the transactions contemplated hereby, including without limitation copies of resolutions of the board of directors of each of Holding and Company authorizing the transactions contemplated by this Amendment and Waiver. (c) Company or Holding shall have paid to Agent for the pro rata account of Lenders an amendment fee in the amount of $175,000. SECTION 6. REPRESENTATIONS AND WARRANTIES. Holding and Company represent and warrant to Lenders, Documentation Agent and Agent that (a) this Amendment and Waiver constitutes their legal, valid, and binding obligations, enforceable in accordance with the terms hereof (subject as to enforcement of remedies to any applicable bankruptcy, reorganization, moratorium, or other laws or principles of equity affecting the enforcement of creditors' rights generally), (b) there exists no Potential Event of Default or Event of Default under the Credit Agreement after giving effect to this Amendment and Waiver, (c) their representations and warranties set forth in the Credit Agreement and other Loan Documents are true and correct on the date hereof after giving effect to this Amendment and Waiver, (d) they have complied with all agreements and conditions to be complied with by them under the Credit Agreement and the other Loan Documents by the date hereof, and (e) the Credit Agreement, as amended hereby, and the other Loan Documents remain in full force and effect. SECTION 7. EXPENSES OF LENDERS. Holding and Company hereby jointly and severally agree to pay on demand all costs and expenses incurred by Agent, including costs and fees of counsel to Agent in connection with the preparation, negotiation, review and execution of this Amendment and Waiver and the other Loan Documents executed pursuant hereto and any and all amendments, modifications and supplements thereto. SECTION 8. FURTHER ASSURANCES. Holding and Company shall execute and deliver such further agreements, documents, instruments, and certificates in form and substance satisfactory to Agent, as Agent or any Lender may deem necessary or appropriate in connection with this Amendment and Waiver. SECTION 9. CONSENTS OF EUROCURRENCY BORROWERS AND EUROCURRENCY LENDERS. Each Eurocurrency Borrower and Eurocurrency Lender by its execution below consents and agrees to this Amendment and Waiver and agrees that the Eurocurrency Credit Agreement or Eurocurrency Credit Agreements to which it is a party are and shall continue to be in full force and effect and are hereby ratified and confirmed in all respects except that, upon the effectiveness of and on and after the date of this Amendment and Waiver each reference to the Credit Agreement, "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended by this Amendment and Waiver. Each Eurocurrency Borrower agrees that the collateral described in the Eurocurrency Security Documents to which it is a party shall continue to secure the payment of the indebtedness therein described. -3- SECTION 10. COUNTERPARTS. This Amendment and Waiver and the other Loan Documents may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument. In making proof of any such agreement, it shall not be necessary to produce or account for any counterpart other than one signed by the party against which enforcement is sought. Telecopies of signatures shall be binding and effective as originals. SECTION 11. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY LAW, HOLDING AND COMPANY EACH HEREBY WAIVES ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE (WHETHER A CLAIM IN TORT, CONTRACT, EQUITY, OR OTHERWISE) ARISING UNDER OR RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR ANY RELATED MATTERS, AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY. SECTION 12. GOVERNING LAW. (a) THIS AGREEMENT AND ALL LOAN DOCUMENTS SHALL BE DEEMED CONTRACTS MADE UNDER THE LAWS OF TEXAS AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF TEXAS, EXCEPT TO THE EXTENT (1) FEDERAL LAWS GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND INTERPRETATION OF ALL OR ANY PART OF THIS AGREEMENT AND ALL LOAN DOCUMENTS OR (2) STATE LAW GOVERNS UCC COLLATERAL INTERESTS FOR PROPERTIES OUTSIDE THE STATE OF TEXAS. WITHOUT EXCLUDING ANY OTHER JURISDICTION, HOLDING AND COMPANY EACH AGREES THAT THE COURTS OF TEXAS WILL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION HEREWITH. (b) HOLDING AND COMPANY EACH HEREBY WAIVES PERSONAL SERVICE OF ANY LEGAL PROCESS UPON IT. IN ADDITION, HOLDING AND COMPANY EACH AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO IT AT ITS ADDRESS DESIGNATED FOR NOTICE UNDER THIS AGREEMENT AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON RECEIPT BY IT. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF AGENT OR ANY LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. SECTION 13. ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK. SIGNATURE PAGES FOLLOW.] -4- IN WITNESS WHEREOF, this Amendment and Waiver is executed as of the date first set forth above. Holding: NU-KOTE HOLDING, INC. By: /s/ STEVEN J. DIPASQUALE ----------------------------------- Name: Steven J. Dipasquale ---------------------------------- Title: Treasurer -------------------------------- Company: NU-KOTE INTERNATIONAL, INC. By: /s/ STEVEN J. DIPASQUALE ----------------------------------- Name: Steven J. Dipasquale ---------------------------------- Title: Treasurer -------------------------------- Agent: NATIONSBANK OF TEXAS, N.A. By: /s/ WILLIAM E. LIVINGSTONE ----------------------------------- Name: William E. Livingstone, IV Title: Senior Vice President Documentation Agent: BARCLAYS BANK PLC By: /s/ BEN J. MARCIANO ----------------------------------- Name: Ben J. Marciano ---------------------------------- Title: Vice President -------------------------------- Lenders and Eurocurrency NATIONSBANK OF TEXAS, N.A. Lenders: Address: By: /s/ WILLIAM E. LIVINGSTONE 901 Main Street, 66th Floor ----------------------------------- Dallas, Texas 75202 Name: William E. Livingstone, IV Attn: Mr. William E. Livingstone, IV Title: Senior Vice President Senior Vice President BARCLAYS BANK PLC Address: By: /s/ BEN J. MARCIANO 222 Broadway ----------------------------------- New York, New York 10038 Attn: L. Peter Yetman Name: Ben J. Marciano Associate Director --------------------------------- Title: Vice President -------------------------------- ABN AMRO BANK, N.V. Address: By: /s/ LAURIE C. TUZO Three Riverway, Suite 1700 ----------------------------------- Houston, Texas 77056 Attn: Laurie C. Tuzo Name: Laurie C. Tuzo Vice President --------------------------------- Title: Group Vice President -------------------------------- By: /s/ RONALD A. MAHLE ----------------------------------- Name: Ronald A. Mahle --------------------------------- Title: Group Vice President -------------------------------- COMMERZBANK AKTIENGESELLSCHAFT, ATLANTA AGENCY Address: By: /s/ ERIC. R. KAGERER Promenade Two, Suite 3500 ----------------------------------- 1230 Peachtree Street, N.E. Atlanta, Georgia 30309 Name: Eric. R. Kagerer Attn: Harry P. Yergey --------------------------------- Vice President Title: Vice President -------------------------------- By: /s/ MARY B. SMITH ----------------------------------- Name: Mary B. Smith --------------------------------- Title: Asst. Vice President -------------------------------- CREDIT LYONNAIS, NEW YORK BRANCH Address: By: 2200 Ross Avenue, Suite 4400 W ----------------------------------- Dallas, Texas 75201 Attn: Timothy M. O'Connor Name: Assistant Vice President --------------------------------- Title: -------------------------------- DEUTSCHE BANK, A.G., NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH Address: By: 31 W. 52nd Street, 24th Floor ----------------------------------- New York, New York 10019 Attn: Gregory M. Hill Name: Vice President --------------------------------- Title: -------------------------------- By: ----------------------------------- Name: --------------------------------- Title: -------------------------------- FIRST AMERICAN NATIONAL BANK Address: By: /s/ COREY NAPIER 4th & Union Street AA-0310 ----------------------------------- Nashville, Tennessee 37238 Attn: Corey Napier Name: Corey Napier --------------------------------- Title: Vice President -------------------------------- THE FIRST NATIONAL BANK OF CHICAGO Address: By: /s/ KATHLEEN COMELLA One First National Plaza ----------------------------------- Mail Suite 0364 Chicago, Illinois 60670-0364 Name: Kathleen Comella Attn: Stephen C. Price --------------------------------- Vice President Title: Vice President -------------------------------- SOCIETE GENERALE Address: By: /s/ RICHARD M. LEWIS Trammell Crow Center ----------------------------------- 2001 Ross Avenue, Suite 4800 Dallas, Texas 75201 Name: Richard M. Lewis Attn: Richard Lewis --------------------------------- Vice President Title: Vice President -------------------------------- CONSENTED AND AGREED TO BY EUROCURRENCY BORROWERS: PELIKAN SCOTLAND LIMITED By: /s/ GERARD MCNALLY -------------------------------- Name: Gerard McNally ------------------------------ Title: Director ----------------------------- PELIKAN PRODUKTIONS AG By: /s/ HANS PAFFHAUSEN -------------------------------- Name: Hans Paffhausen ------------------------------ Title: Director ----------------------------- PELIKAN HARDCOPY (INTERNATIONAL) AG By: /s/ HANS PAFFHAUSEN -------------------------------- Name: Hans Paffhausen ------------------------------ Title: Managing Director ----------------------------- CONSENT Each of the undersigned, as Guarantors under a "Subsidiary Guaranty" and as grantors under one or more "Subsidiary Security Documents" (as such terms are defined in the Credit Agreement referred to in the foregoing Amendment and Waiver), each hereby consents and agrees to the foregoing Amendment and Waiver and agrees that (i) each Subsidiary Guaranty and Subsidiary Security Document is and shall continue to be in full force and effect and is hereby ratified and confirmed in all respects except that, upon the effectiveness of and on and after the date of such Amendment and Waiver each reference to the Credit Agreement, "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended by such Amendment and Waiver, and (ii) the collateral described in the Subsidiary Security Documents shall continue to secure the payment of the indebtedness therein described. FUTURE GRAPHICS, INC. By: /s/ STEVEN J. DIPASQUALE ----------------------------------- Name: Steven J. Dipasquale --------------------------------- Title: Asst. Chief Financial Officer -------------------------------- INTERNATIONAL COMMUNICATION MATERIALS, INC. By: /s/ STEVEN J. DIPASQUALE ----------------------------------- Name: Steven J. Dipasquale --------------------------------- Title: Asst. Treasurer -------------------------------- NU-KOTE IMAGING INTERNATIONAL, INC. By: /s/ STEVEN J. DIPASQUALE ----------------------------------- Name: Steven J. Dipasquale --------------------------------- Title: Asst. Treasurer -------------------------------- NU-KOTE IMPERIAL, LTD. By: /s/ STEVEN J. DIPASQUALE ----------------------------------- Name: Steven J. Dipasquale --------------------------------- Title: Asst. Treasurer -------------------------------- EX-11.1 3 EXHIBITI 11.1 EXHIBIT 11.1 NU-KOTE HOLDING, INC. AND SUBSIDIARIES STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) FOR THE THREE MONTHS ENDED -------------------------- DECEMBER 27, DECEMBER 29, 1996 1995 ------------ ------------ PRIMARY - ------- Shares outstanding: Weighted average number of shares outstanding 21,775 21,603 Net effect of dilutive stock options (1) 1,047 ------- ------- 21,775 22,650 ------- ------- ------- ------- Net income (loss) $(4,029) $ 2,020 ------- ------- ------- ------- Net income (loss) per common share $ (0.19) $ 0.09 ------- ------- ------- ------- FULLY DILUTED - ------------- Shares outstanding: Weighted average number of shares outstanding 21,775 21,603 Net effect of dilutive stock options (1) 1,090 ------- ------- 21,775 22,693 ------- ------- ------- ------- Net income (loss) $(4,029) $ 2,020 ------- ------- ------- ------- Net income (loss) per common share $ (0.19) $ 0.09 ------- ------- ------- ------- EXHIBIT 11.1 (CONTINUED) NU-KOTE HOLDING, INC. AND SUBSIDIARIES STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) FOR THE NINE MONTHS ENDED -------------------------- DECEMBER 27, DECEMBER 29, 1996 1995 ------------ ------------ PRIMARY - ------- Shares outstanding: Weighted average number of shares outstanding 21,764 21,498 Net effect of dilutive stock options (1) 964 ------- ------- 21,764 22,462 ------- ------- ------- ------- Net income (loss) $(4,566) $ 8,756 ------- ------- ------- ------- Net income (loss) per common share $ (0.21) $ 0.39 ------- ------- ------- ------- FULLY DILUTED - ------------- Shares outstanding: Weighted average number of shares outstanding 21,764 21,498 Net effect of dilutive stock options (1) 1,089 ------- ------- 21,764 22,587 ------- ------- ------- ------- Net income (loss) $(4,566) $ 8,756 ------- ------- ------- ------- Net income (loss) per common share $ (0.21) $ 0.39 ------- ------- ------- ------- - ---------------------- (1) The net effects for the three and nine month periods ended December 29, 1995 are based upon the treasury stock method using average market price during the periods for the primary amounts, and the higher of the average market price or the market price at the end of the period for the fully diluted amounts. For the three and nine month periods ended December 27, 1996 stock options are not considered as those periods resulted in net losses, making the stock options anti-dilutive. EX-27 4 EXHIBIT 27 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS MAR-31-1997 APR-01-1996 DEC-27-1996 4,667 0 75,769 4,129 108,632 211,480 121,034 32,961 337,873 92,129 122,597 0 0 223 98,063 337,873 256,621 256,621 195,331 195,331 63,872 0 6,014 (7,661) (3,095) (4,566) 0 0 0 (4,566) (.21) (.21)
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