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