SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
..X.. QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
..... TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period from _________to _________
Commission File Number 1-3410
AMERICAN BANKNOTE CORPORATION
(Exact name of Registrant as specified in its charter)
A Delaware I.R.S. Employer
Corporation No. 13-0460520
200 Park Avenue, New York, New York 10166-4999
Telephone - Area Code 212-557-9100
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 for the past 90 days. Yes X No
At November 8, 1996 - 19,809,380 shares of common stock were outstanding.
<PAGE>
AMERICAN BANKNOTE CORPORATION
FORM 10-Q
I N D E X
PAGE
NO.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements - Unaudited
Condensed Consolidated Balance Sheets
September 30, 1996 and December 31, 1995 . . . . . . . . 3
Condensed Consolidated Statements of Operations. . . . . . 4
For the nine months and third quarter ended
September 30, 1996 and 1995
Condensed Consolidated Statements of Cash Flows
For the nine months ended September 30, 1996 and 1995 5
Condensed Consolidated Statement of Stockholders' Equity
For the nine months ended September 30, 1996 . . . . . . 6
Notes to Condensed Consolidated Financial Statements . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . .12
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . .13
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except for share data)
<TABLE>
September December
30, 1996 31, 1995
ASSETS (Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents. . . .. . . . . . $ 15,457 $ 23,525
Marketable securities - at market. . . . . 3,265 2,952
Accounts receivable, net of allowance for
doubtful accounts of $1,485 and $816 . . . 42,291 32,058
Other receivables. . . . . . . . . . . . . 12,721 7,772
Inventories. . . . . . . . . . . . . . . . 38,919 23,243
Deferred income tax benefits . . . . . . . 6,664 5,983
Prepaid expenses . . . . . . . . . . . . . 4,743 4,755
Total current assets . . . . . . . . 124,060 100,288
Property, plant and equipment, at cost,
net of accumulated depreciation and
amortization of $60,992 and $46,915. . . 251,567 225,974
Other assets . . . . . . . . . . . . . . . 25,985 18,342
Excess of cost of investment in subsidiaries
over net assets acquired, net of accumulated
amortization of $4,806 and $3,119. . . . 84,679 34,798
$ 486,291 $ 379,402
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Revolving credit payable . . . . . . . . . $ 854
Current portions of long-term debt . . . . 7,934 $ 332
Accounts payable and accrued expenses. . . 64,727 44,983
Total current liabilities. . . . . . 73,515 45,315
Long-term debt, net of unamortized discount
of $1,035 and $1,120 . . . . . . . . . . . 265,975 194,156
Other liabilities. . . . . . . . . . . . . . 19,026 20,181
Deferred income taxes . . . . . . . . . . . 57,213 60,579
Minority interest. . . . . . . . . . . . . . 26,732 18,818
442,461 339,049
Commitments and Contingencies
Stockholders' equity
Preferred Stock, authorized 5,000,000 shares,
no shares issued or outstanding . . . . . - -
Common Stock, par value $.01 per share,
authorized 50,000,000 shares; issued
20,088,380 shares and 19,391,763 shares . 201 194
Capital surplus. . . . . . . . . . . . . . 68,458 67,091
Retained-earnings (deficit). . . . . . . . (22,670) (25,461)
Treasury stock, at cost (281,000 shares) . (1,253) (1,253)
Pension liability adjustment . . . . . . . (218) (218)
Deferred compensation. . . . . . . . . . . (637) -
Cumulative currency translation adjustment (51) -
Total stockholders' equity . . . . . 43,830 40,353
$ 486,291 $ 379,402
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(Amounts in thousands, except per share data)
<TABLE>
Nine Third
Months Ended Quarter Ended
September 30 September 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Sales . . . . . . . . . . . . . . $217,560 $153,442 $ 86,879 $56,783
Costs and expenses
Cost of goods sold. . . . . 142,793 109,512 54,223 39,414
Selling and administrative . . . 33,327 29,767 14,099 9,258
Depreciation and amortization . . 14,731 10,741 6,034 4,186
190,851 150,020 74,356 52,858
26,709 3,422 12,523 3,925
Other (expense) income
Interest expense. . . . . . . . . . (20,124) (17,293) (7,483) (5,833)
Foreign exchange loss, net. . . . . (201) (206) (65) (264)
Other, net. . . . . . . . . . . . . 711 2,920 331 1,850
(19,614) (14,579) (7,217) (4,247)
Income (loss) before taxes. . . . . 7,095 (11,157) 5,306 (322)
Income tax charge (benefit). . . . . 877 (1,217) 1,378 (787)
Income (loss) before
minority interests . . . . . . . 6,218 (9,940) 3,928 465
Minority interests . . . . . . . . . (3,427) (412) (1,700) (412)
Net Income (Loss) . . . . . . . . . $ 2,791 $(10,352) $ 2,228 $ 53
Weighted average number of common
and common equivalent shares
outstanding . . . . . . . . . . . . 20,300 19,087 20,420 19,300
Net Income (Loss) per share . . . . $ .14 $(.54) $ .11 $.00
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(Amounts in thousands)
<TABLE>
Nine Months Ended
September 30
1996 1995
<S> <C> <C>
Operating Activities
Net cash from operations, after adjustments
to reconcile net income (loss) to
net cash provided by or (used in)
operating activities. . . . . . . . . . . . $ 17,850 $ (2,649)
Marketable securities . . . . . . . . . . . (718) (1,195)
Accounts and other receivables. . . . . . . (9,774) 3,978
Inventories . . . . . . . . . . . . . . . . (7,032) 1,759
Prepaid and other . . . . . . . . . . . . . 325 (1,253)
Accounts payable and accrued expenses . . . 5,611 (4,733)
Acquisition, restructuring and
merger related accruals . . . . . . . . . (6,677) (2,673)
Net cash used in Operating Activities. . . . . (415) (6,766)
Investing Activities
Acquisition of ABAL. . . . . . . . . . . . . . (77,266) -
Capital expenditures, net . . . . . . . . . . (16,775) (5,442)
Net cash used in Investing Activities. . . . . (94,041) (5,442)
Financing Activities
Acquisition borrowings
Senior Debt . . . . . . . . . . . . . . . . 53,493 -
Subordinated Debt . . . . . . . . . . . . . 18,383 -
Other borrowings . . . . . . . . . . . . . . . 8,178 -
Minority shareholder investment. . . . . . . . 7,179 -
Revolving credit borrowings. . . . . . . . . . 854 -
Dividend to minority shareholder . . . . . . . (1,623)
Proceeds from issuance of Common Stock . . . . - 19
Payment of other long-term obligations . . . . (25) (292)
Net cash provided by or (used in)
Financing Activities . . . . . . . . . . . . 86,439 (273)
Effect of foreign currency exchange rate
changes on cash and cash equivalents . . . . . (51) (125)
Decrease in cash and cash equivalents. . . . . . (8,068) (12,606)
Cash and cash equivalents - beginning of period. 23,525 31,658
Cash and cash equivalents - end of period. . . . $ 15,457 $ 19,052
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - UNAUDITED
NINE MONTHS ENDED September 30, 1996
(Amounts in thousands)
<TABLE>
Foreign
Retained Pension Currency
Common Capital Earnings Treasury Liab. Deferred Transl. Total
Stock Surplus (Deficit) Stock Adjust. Compens. Adjust. Equity
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance -
January 1, 1996 $194 $67,091 $(25,461) $(1,253) $(218) $ - $ - $40,353
Issuance of
common shares
- acquisition
of affiliate 4 646 650
Issuance of
restricted
common shares
- deferred
compensation
plans 3 721 (637) 87
Foreign
currency
translation
adjustment
for period (51) (51)
Net income 2,791 2,791
Balance -
September 30, 1996 $201 $68,458 $(22,670) $(1,253) $(218) $(637) $(51) $43,830
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements do not contain all disclosures required by generally accepted
accounting principles. Reference should be made to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995. The
accompanying unaudited condensed consolidated financial statements
reflect all adjustments (consisting of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair statement
of the results of the interim periods presented and are not necessarily
indicative of the results which may be expected for a full fiscal year.
Results of operations for foreign subsidiaries, other than those
located in a highly inflationary country, are translated using average
exchange rates during the period, while assets and liabilities are
translated into US dollars using current rates. Resulting translation
adjustments are accumulated as a separate component of stockholders'
equity. Foreign currency transaction gains and losses are included in
earnings. For ABN-Brazil, which operates in a highly inflationary
country, currency gains and losses resulting from translation and
transactions are determined using a combination of current and
historical rates and are included in earnings.
Primary and fully-diluted income (loss) per share are the same.
Cash tax payments for the nine months ended September 30, 1996 and
1995 amounted to approximately $7.0 million and $2.3 million,
respectively. Cash interest payments for the nine months ended
September 30, 1996 and 1995 amounted to approximately $15.6 million and
$14.9 million, respectively. In addition, under interest rate swap
agreements, a cash interest payment of $0.6 million was made in the nine
months ended September 30, 1995. The agreement was terminated in the
fourth quarter of 1995.
Note B - Inventories
Inventories consist of the following (in thousands):
September December
30, 1996 31, 1995
Work in process. . . . . . . . . $ 20,776 $ 15,874
Raw materials and supplies . . . 18,143 7,369
Total inventories . . . . . . $ 38,919 $ 23,243
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note C - Long-term Debt
Long-term debt consists of the following (in thousands):
September December
30, 1996 31, 1995
10-3/8% Senior Notes, due
September 1, 2002 . . .. . . . $ 126,500 $ 126,500
11-5/8% Senior Notes, due August 1,
2002, net of unamortized
discount of $1,035 and $1,120 . . 63,965 63,880
9.35% Senior Debt, due
May 31, 2001 (a). . . . . . . . . 52,823 -
8.07% Subordinated Debt,
due May 31, 2001(a) . . . . . . . 18,133 -
Other long-term obligations (b). . . 12,488 4,108
Less current portion . . . . . . . . (7,934) (332)
Long-term debt. . . . . . . . . . $ 265,975 $ 194,156
(a) Issued in connection with acquisition of Australian subsidiary.
Reference is made to the Company's quarterly report on Form 10-Q for the
quarter ended June 30, 1996, Part I. Item 1 "Notes to Condensed
Consolidated Financial Statements - Notes E and F", in connection with
the investment in and acquisition of subsidiaries, and "Results of
Operations - Liquidity and Capital Resources" for further description of
debt.
(b) Principally issued in connection with acquisition of equipment
by ABN-Brazil.
Note D - Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following (in
thousands):
September December
30, 1996 31, 1995
Accounts payable . . . . . . . . . . $ 21,434 $ 11,335
Accrued expenses . . . . . . . . . . 8,779 2,893
Income taxes . . . . . . . . . . . . 2,821 1,863
Customers' advances. . . . . . . . . 2,847 7,026
Salaries and wages . . . . . . . . . 11,326 5,666
Restructuring and merger -
related accruals. . . . . . . . . 8,001 8,838
Interest payable . . . . . . . . . . 6,777 4,291
Other . . .. . . . . . . . . . . . . 2,742 3,071
Total accounts payable
and accrued expenses. .. . . $ 64,727 $ 44,983
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note E - Commitments and Contingencies
The Company is involved in various litigations (reference is made to
"Part II - Other Information, Item 1. Legal Proceedings" herein), the
adverse determination of which could have a material adverse effect on
the financial condition or results of operations of the Company in the
event that the Company's insurance was not available to cover such
claims or an award materially in excess of insurance coverage was made.
The Company believes, however, that it has good and meritorious defenses
to the litigations and intends to vigorously defend against such
actions.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
General
On June 3, 1996, the Company acquired a 55% equity interest in
American Banknote Australasia Ltd., an Australian corporation ("ABAL")
which purchased the assets and business of the Leigh-Mardon Security
Group of Australia and New Zealand ("Leigh-Mardon"). As of July 1,
1995, the Company acquired the printing business and operations of
Grafica Bradesco in exchange for a 22.5% minority interest in ABN-Brazil.
The acquisitions were accounted for as purchase transactions and the
operations of both companies have been included in earnings since
their respective acquisition dates.
COMPARISON OF RESULTS OF THE NINE MONTHS ENDED SEPTEMBER 30, 1996
WITH THE NINE MONTHS ENDED SEPTEMBER 30, 1995
ABN-Brazil's sales represent 55.8% of consolidated sales in 1996
compared with 43.1% in 1995. ABAL's sales represent 12% of consolidated
sales in 1996. Consolidated sales in 1996 increased by $64.1 million
(41.8%) primarily due to an increase in electronic transaction cards
(including stored value telephone card sales in Brazil) and document
management sales as well as the acquisition of ABAL. Offsetting these
increases was a decrease in certain domestic security printing. The
change in various components of sales may be affected by the timing of
contract awards and delivery requirements of customers.
Cost of goods sold increased $33.3 million (30.4%) from 1995 as a
result of the above increased sales. As a percentage of sales, cost of
goods sold declined to 65.6% in 1996 from 71.4% in 1995. The net
decrease in the percentage of cost of goods sold is principally due to
the cost reductions being realized from the restructuring and downsizing
of the Company's domestic printing subsidiary, which was substantially
completed in the second quarter of 1996.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - Continued
Selling and administrative expenses increased $3.6 million (12.0%)
from 1995 as a result of the effect of the acquired businesses,
partially offset by reduced corporate overhead and domestic selling
expenses. As a percentage of sales, selling and administrative expenses
declined to 15.3% in 1996 from 19.4% in 1995.
Depreciation expense increased $4.0 million in 1996 primarily as a
result of the acquired businesses and capital expenditures related to
expansion of the manufacturing capacity of ABN-Brazil.
Interest expense increased $2.8 million in 1996 primarily due to
non-recourse debt incurred in Australia to acquire Leigh-Mardon and to
fund the purchase of new equipment at ABN-Brazil.
Foreign exchange loss is a result of the Company's translation of
Brazilian local currency financial statements into dollars.
Income taxes (benefits) are calculated using estimated annual
effective tax rates for each tax jurisdiction and various assumptions
such as state and local taxes, utilization of foreign tax credits and
timing of deductions.
Minority interests represents the 22.5% minority interest in
ABN-Brazil and the 45% minority interest in ABAL since their respective
acquisition dates.
COMPARISON OF RESULTS OF THE THIRD QUARTER ENDED SEPTEMBER 30, 1996
WITH THE THIRD QUARTER ENDED SEPTEMBER 30, 1995
ABN-Brazil's sales represent 48.3% of consolidated sales in 1996
compared with 52.5% in 1995. ABAL's sales represent 22.8% of
consolidated sales in 1996. Consolidated sales in 1996 increased by
$30.1 million (53.0%) from 1995 primarily due to electronic transaction
card sales (including stored value telephone card sales in Brazil) and
the acquisition of ABAL. The change in various components of sales
may be affected by the timing of contract awards and delivery requirements
of customers.
Cost of goods sold increased $14.8 million (37.6%) from 1995 as a
result of the effect of the above increased sales. As a percentage of
sales, cost of goods sold declined to 62.4% in 1996 from 69.4% in 1995.
The decline is principally due to the cost reductions being realized from
the restructuring and downsizing of the Company's domestic printing
subsidiary, which was substantially completed in the second quarter of 1996.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - Continued
Selling and administrative expenses increased $4.8 million (52.3%)
from 1995 as a result of the effect of the acquired businesses. As a
percentage of sales, selling and administrative expenses remained
relatively constant in both years.
Depreciation expense increased $1.8 million in 1996 primarily as a
result of the acquired businesses and capital expenditures related to
the expansion of the manufacturing capacity at ABN-Brazil.
Interest expense increased $1.7 million in 1996 primarily due to
non-recourse debt incurred in Australia to acquire Leigh-Mardon and to
fund the purchase of new equipment at ABN-Brazil.
LIQUIDITY AND CAPITAL RESOURCES
The Company invested $7.2 million in June 1996 to acquire Leigh-Mardon.
The Company's investment was made through an unrestricted subsidiary of
the Company, American Banknote Australasia Holdings, Inc. ("ABNAH"),
as such term is defined in the Company's Senior Note indentures.
The transaction was financed by the issuance of ABAL senior debt
("Senior Debt"), of approximately $53.5 million, and the issuance of
ABAL subordinated debt ("Subordinated Debt"), of approximately $18.4
million to an affiliate of the sellers. In addition, ABAL obtained a
$4.0 million working capital facility at closing which has not been
utilized. Both the Senior and Subordinated Debt are obligations of ABAL
owned 55% by the Company and 45% by an affiliate of the sellers of the
business.
At September 30, 1996, the Company had approximately $15.5 million
in cash and cash equivalents and approximately $13.3 million of
borrowing availability under its senior secured credit agreement with
The Chase Manhattan Bank. $2.1 million of outstanding letters of credit
and $0.9 million of borrowings have been utilized under the Chase loan.
In addition, the Company's long-term debt included $126.5 million of 10
3/8% Senior Notes outstanding, $65.0 million of 11 5/8% Senior Notes
outstanding, $71.0 million of non-recourse debt at ABAL incurred to
acquire Leigh-Mardon and $12.5 million of other debt incurred in Brazil
to finance capital expenditures.
The Company recently received a contract amendment to April 1997 for
its stored-value telephone card production contract in Brazil. The
amendment provides for continued delivery of stored-value telephone
cards at a reduced average monthly rate of approximately 12% compared
to average levels for the nine months ended September 30, 1996 due to
present levels of inventory existing at the customer. ABN-Brazil's
volume of telephone cards following expiration of the present contract
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES - continued
will be based upon the size and timing of a new contract expected to
be announced during 1997 and other factors including inventory levels
and qualified vendors. The Company expects to receive a price increase
during the fourth quarter of 1996 through the end of the contract which
will partially reduce the effect on revenues of reduced deliveries.
During 1996, excluding the effect of the acquisition of ABAL,
consolidated sales for the nine month period had increased by $38.1 million
and ABN-Brazil stored value telephone cards had increased by $38 million.
Excluding the effect of the acquisition of ABAL, net sales for the third
quarter had increased by $10.4 million and ABN-Brazil stored value telephone
cards had increased by $15.3 million.
Management of the Company believes that cash flows from operations
together with its existing cash balances and credit facilities, will be
sufficient to service its working capital and debt service requirements
and fund capital expenditures for the foreseeable future.
Reference is made to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995 "Liquidity and Capital Resources."
IMPACT OF INFLATION
Reference is made to the Company's Form 10-K for the year ended
December 31, 1995 "Impact of Inflation."
To limit the effect of inflation and other currency risks on cash
balances, the Company has, from time to time, entered into foreign
currency option contracts to limit the effect of currency fluctuations
on future expected cash receipts from Brazil which are used for general
parent company purposes including debt service. The options generally
have covered periods from two to four months from the date of purchase.
Such activities may be discontinued at any time depending on, among other
things, management's views concerning future exchange rates and the cost
of such contracts.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit
Number
4.1 Waiver and Amendment to Credit Agreement dated as of
September 30, 1996, among American Bank Note Company and
American Bank Note Holographics, Inc., American Banknote
Corporation and The Chase Manhattan Bank (formerly,
Chemical Bank), as Agent. **
10.1 Employment Agreement Amendment Number 2 dated September
3, 1996 between the Company and John T. Gorman.**
27 Article 5 Financial Data Schedule **
** Filed electronically herewith
(b) Report on Form 8-K
a) Form 8-K/A filed August 16, 1996
Item 7 Financial Statements, Pro Forma Financial
Information and Exhibits
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
AMERICAN BANKNOTE CORPORATION
By: s/ John T. Gorman
John T. Gorman
Executive Vice President,
Chief Financial Officer and
Chief Accounting Officer
Date: November 14, 1996
<PAGE>
Exhibit Index
List of Exhibits Pursuant to Item 601 of Regulation S-K:
Exhibit
4.1 Waiver and Amendment to Credit Agreement dated as of
September 30, 1996, among American Bank Note Company and
American Bank Note Holographics, Inc., American Banknote
Corporation and The Chase Manhattan Bank (formerly,
Chemical Bank), as Agent. **
10.1 Employment Agreement Amendment Number 2 dated September
3, 1996 between the Company and John T. Gorman.**
27 Article 5 Financial Data Schedule **
** Filed electronically herewith
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
financial statements contained in the body of the accompanying Form 10-Q and is
qualified in its entirety by reference to such financial statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 15457
<SECURITIES> 3265
<RECEIVABLES> 43776
<ALLOWANCES> 1485
<INVENTORY> 38919
<CURRENT-ASSETS> 124060
<PP&E> 312559
<DEPRECIATION> 60992
<TOTAL-ASSETS> 486291
<CURRENT-LIABILITIES> 73515
<BONDS> 265975
0
0
<COMMON> 201
<OTHER-SE> 43629
<TOTAL-LIABILITY-AND-EQUITY> 486291
<SALES> 217560
<TOTAL-REVENUES> 217560
<CGS> 142793
<TOTAL-COSTS> 190851
<OTHER-EXPENSES> (510)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20124
<INCOME-PRETAX> 7095
<INCOME-TAX> 877
<INCOME-CONTINUING> 2791
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2791
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
<PAGE>
Exhibit 4.1 Waiver and Amendment to Credit Agreement dated as of
September 30, 1996, among American Bank Note Company and
American Bank Note Holographics, Inc., American Banknote
Corporation and The Chase Manhattan Bank (formerly,
Chemical Bank), as Agent.
<PAGE>
WAIVER AND AMENDMENT TO CREDIT AGREEMENT
WAIVER AND AMENDMENT TO CREDIT AGREEMENT dated as of
September 30, 1996 (this "Waiver and Amendment") among American
Bank Note Company, a New York corporation ("ABN"), American Bank
Note Holographics, Inc., a Delaware corporation (together with ABN,
the "Borrowers"), American Banknote Corporation, a Delaware
corporation ("ABNC"), the Guarantors (the "Guarantors") named in
the Credit Agreement (as hereinafter defined), ABN Security
Systems, Inc., a New York corporation ("ABNS"), the lenders (the
"Lenders") named in Schedule 2.01 to the Credit Agreement and The
Chase Manhattan Bank (formerly known as Chemical Bank), a New York
banking corporation, as agent (in such capacity, the "Agent") for
the Lenders.
WHEREAS, the Borrowers, ABNC, the Guarantors, the Lenders
and the Agent are party to the Credit Agreement dated as of January
29, 1996 (as amended, modified or supplemented from time to time in
accordance with its terms, the "Credit Agreement");
WHEREAS, ABN owns all of the outstanding capital stock of
ABNS, and ABNS is listed on Schedule 4.15 to the Credit Agreement
as an "inactive subsidiary" of ABNC;
WHEREAS, pursuant to an Assignment and Assumption of
Lease dated February 12, 1996 (the "Assignment") between ABNS and
AM Industries, Inc., a Tennessee corporation ("Assignor"), ABNS
acquired all of Assignor's right, title and interest in, and
assumed all of Assignor's obligations under, a Lease dated February
14, 1994 with Maury County, Tennessee, as lessor, for a building in
Maury County, Tennessee (the "Lease");
WHEREAS, in connection with the Assignment, ABNS executed
and delivered an Installment Note in the principal amount of
$50,000 payable to the order of Assignor (the "Installment Note"),
in payment of certain leasehold improvements made by Assignor at
the leased premises;
WHEREAS, in connection with the Assignment, ABN executed
and delivered a Guarantee for Assignor's benefit (the "Guarantee")
of the performance by ABNS of its obligations under the Assignment
(including its obligations under the Installment Note) and material
compliance by ABNS with the terms of the Lease; and
WHEREAS, the Borrowers have requested that the Required
Lenders amend and waive certain provisions of the Credit Agreement.
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree
as follows:
1. Defined Terms. Unless otherwise specifically defined
herein, all capitalized terms used herein shall have the respective
meanings ascribed to such terms in the Credit Agreement.
2. Amendments to Credit Agreement. Subject to the
conditions as to effectiveness set forth in Paragraph 5 of this
Waiver and Amendment, the Credit Agreement is hereby amended as
follows:
(a) ABNS shall be added to the Credit Agreement
as a "Guarantor" as such term is defined in the Credit Agreement.
ABNS by its execution and delivery of this Waiver and Amendment,
agrees to be bound by all of the terms and provisions of the Credit
Agreement applicable to Guarantors.
(b) Schedule 4.15 to the Credit Agreement is
amended as follows:
(i) by deleting the subsidiary named "ABN
Securities System, Inc." set forth as the fourth subsidiary under
the caption "Inactive Subsidiaries" on page 5 thereof;
(ii) by adding the following at the end of
page 1 thereof:
"ABN Security Systems, Inc. 100% New York"
and
(iii) By adding at the end of page two thereof
the information set forth on Schedule A attached hereto.
(c) Schedule 7.03 to the Credit Agreement is
amended by adding at the end thereof new paragraphs III, IV and V
as follows:
"III. The Indentures and the Senior Notes.
IV. The Installment Note dated February 15,
1996 executed by ABNS Security Systems, Inc., a New York
corporation ("ABNS"), in the principal amount of $50,000 payable
to the order of AM Industries, Inc., a Tennessee corporation ("AM
Industries").
V. Guarantee executed by ABN in favor of AM
Industries in connection with the Assignment and Assumption of
Lease dated February 12, 1996 between ABNS and AM Industries."
<PAGE>
(d) Section 7.06(f) of the Credit Agreement is
amended by deleting the semicolon at the end thereof and adding the
following:
", except as set forth on Schedule 7.06 annexed hereto."
(e) A new Schedule 7.06, which reads as Schedule
7.06 annexed hereto, is added to and made a part of the Credit
Agreement.
3. Waivers to Credit Agreement. Subject to the
conditions as to effectiveness set forth in Paragraph 5 of this
Waiver and Amendment, compliance with the following covenants under
the Credit Agreement and the following Defaults or Events of
Defaults (as the case may be) are hereby waived:
(a) Notwithstanding the provisions of Section
6.12 of the Credit Agreement to the contrary, so long as ABNS
complies with paragraph 6 hereof, ABNS need not execute the
Security Documents and pledge its accounts receivable and
inventory, together with all proceeds and products thereof,
pursuant to the Security Agreement.
(b) The Agent and the Lenders hereby waive any
existing Default or Event of Default which occurred solely because
ABNS executed and delivered the Installment Note.
(c) The Agent and the Lenders hereby waive any
existing Default or Event of Default which occurred solely because
ABN executed and delivered the Guaranty.
(d) The Agent and the Lenders hereby waive any
existing Default or Event of Default which occurred solely because
of ABN's advances or capital contributions to ABNS, solely for
monies owed by ABNS under the Assignment, the Lease and the
Installment Note.
(e) The Agent and the Lenders hereby waive any
existing Default or Event of Default which occurred solely because
of the Borrowers' failure to give the Agent written notice of the
Defaults or Events of Default described in subparagraphs (b), (c)
and (d) of this Paragraph 3 as required by Section 6.06(c) of the
Credit Agreement.
<PAGE>
4. Representations and Warranties. Each of the
Borrowers hereby jointly and severally represents and warrants as
of the date hereof, after giving effect to the amendments and
waivers set forth in Paragraphs 2 and 3 of this Amendment
(including, without limitation, the inclusion of ABNS in the term
"Loan Party"), as follows (which representations and warranties
shall survive the execution and delivery of this Amendment and
Waiver):
(a) All representations and warranties contained
in the Credit Agreement and each of the other Loan Documents are
true and correct as of the date hereof with the same force and
effect as if made on such date (except to the extent that any such
representation or warranty relates expressly to an earlier date).
(b) Each of the Loan Parties has the power to
execute, deliver and carry out the terms and provisions of this
Waiver and Amendment.
(c) This Waiver and Amendment has been duly
executed and delivered and constitutes the legal, valid and binding
obligation of each Loan Party, and is enforceable in accordance
with its terms.
(d) No event has occurred and is continuing which
constitutes or would constitute, with the giving of notice or the
lapse of time or both, a Default or an Event of Default under the
Credit Agreement.
5. Conditions Precedent. Notwithstanding any term or
provision of this Waiver and Amendment to the contrary, Paragraphs
2 and 3 hereof shall not become effective until the Agent shall
have determined that each of the following conditions precedent
shall have been satisfied:
(a) All required corporate actions in connection
with the execution and delivery of this Waiver and Amendment shall
have been taken, and each shall be satisfactory in form and
substance to the Agent, and the Agent shall have received all
information and copies of all documents, including, without
limitation, records of requisite corporate action that the Agent
may reasonably request, to be certified by the appropriate
corporate person or government authorities.
(b) All fees, costs and expenses of the Agent in
connection with this Waiver and Amendment, including, without
limitation, reasonable fees, costs and expenses of counsel to the
Agent, shall have been paid in full to the persons entitled thereto
in immediately available funds.
<PAGE>
(c) All representations and warranties made by
the Borrowers contained in Paragraph 4 hereof shall be true and
correct with the same effect as though such representations and
warranties had been made on the date of effectiveness of the
amendments and waivers contained in this Waiver and Amendment after
giving effect to such amendments and waivers (unless any such
representation or warranty speaks expressly to an earlier date).
(d) Counterparts of this Waiver and Amendment
shall have been duly executed and delivered on behalf of the
Borrowers, ABNC, the Guarantors, ABNS, the Lenders and the Agent.
(e) The Agent shall have received a copy of each
of the Assignment, the Lease and the Installment Note, in each case
certified by the Secretary of ABN as a true and correct copy.
6. Activities of ABNS. Each of the Borrowers represents,
warrants, confirms, covenants and agrees that during the period
from January 29, 1996 through and including the date of this Waiver
and Amendment ABNS has not, and so long as the Credit Agreement
shall remain in effect or the principal of or interest on any Note,
any amount under any Letter of Credit, or any fee, expense or other
Obligation payable under the Credit Agreement or in connection with
any of the Transactions shall be unpaid, it will not cause or
permit ABNS to, engage in any transactions, business or other
actions or enter into any contracts, instruments or other
agreements other than the transactions and agreements and
instruments referenced in this Waiver and Amendment.
7. References to Credit Agreements. The term
"Agreement", "hereof", "herein" and similar terms as used in the
Credit Agreement, and references in the other Loan Documents to the
Credit Agreement, shall mean and refer to, from and after the
effective date of the amendments contained herein as determined in
accordance with Paragraph 5 hereof, the Credit Agreement as amended
by this Waiver and Amendment.
8. Continued Effectiveness. Except for the
specific waivers set forth in Paragraph 3 hereof, nothing herein
shall be deemed to be a waiver of any covenant or agreement
contained in, or any Default or Event of Default under, the Credit
Agreement, and each of the parties hereto agrees that, as amended
by this Waiver and Amendment, all of the covenants and agreements
and other provisions contained in the Credit Agreement and the
other Loan Documents are hereby ratified and confirmed in all
respects and shall remain in full force and effect from and after
the date of this Waiver and Amendment.
9. Counterparts. This Waiver and Amendment may
be executed in two or more counterparts, each of which shall be an
original, and all of which, taken together, shall constitute a
single instrument. Delivery of an executed counterpart of a
signature page to this Waiver and Amendment by telecopier shall be
effective as delivery of a manually executed counterpart of this
Waiver and Amendment.
<PAGE>
10. Governing Law. This Waiver and Amendment shall be
construed in accordance with and governed by the laws of the State
of New York (other than the conflicts of laws principles thereof).
IN WITNESS WHEREOF, the parties hereto have caused this
Waiver and Amendment to be duly executed by their respective
officers thereunto duly authorized as of the day and year first
above written.
AMERICAN BANK NOTE COMPANY, as
a Borrower and Guarantor
By: S / Ward A.W. Urban
Name: Ward A.W. Urban
Title: VP & Treasurer
AMERICAN BANK NOTE HOLOGRAPHICS, INC., as
a Borrower and Guarantor
By: S / Ward A.W. Urban
Name: Ward A.W. Urban
Title: VP & Treasurer
AMERICAN BANKNOTE CORPORATION
By: S / Ward A.W. Urban
Name: Ward A.W. Urban
Title: VP & Treasurer
UNITED STATES BANKNOTE COMPANY L.P., as
a Guarantor
By: AMERICAN BANK NOTE COMPANY, its general
partner
By: S / Ward A.W. Urban
Name: Ward A.W. Urban
Title: VP & Treasurer
<PAGE>
HORSHAM HOLDING COMPANY, INC., as
a Guarantor
By: S / Ward A. W. Urban
Name: Ward A.W. Urban
Title: VP & Treasurer
ABN SECURITY SYSTEMS, INC., as a Guarantor
By: S / Ward A. W. Urban
Name: Ward A.W. Urban
Title: VP & Treasurer
THE CHASE MANHATTAN BANK (formerly known
as Chemical Bank), as Agent and a Lender
By: S / Jeffrey S. Ackerman
Name: Jeffrey S. Ackerman
Title: Vice President
<PAGE>
Schedule 7.06
ABN's investments in the stock of ABN Security Systems,
Inc., a New York corporation ("ABNS"), solely to fund monies owed
by ABNS under (a) the Assignment and Assumption of Lease dated
February 12, 1996 between ABNS and AM Industries, Inc., a Tennessee
corporation ("AM Industries"), (b) the corresponding Lease dated
February 14, 1994 with Maury County, Tennessee, as lessor, and (c)
the Installment Note executed by ABNS dated February 15, 1996
payable to the order of AM Industries.
SCHEDULE A
Stock Issuer ABN Security Systems, Inc.
ABNC Ownership of Capital Stock 100%
(Direct/Indirect)
Jurisdiction of Incorp New York
Class of Stock Common
Par Value $1.00
Stock Certificate No. 4(1)
Number of Shares 400,000
Percentage of All Capital Stock 100%
Oustanding
<PAGE>
Exhibit 10.1 Employment Agreement Amendment Number 2 dated September
3, 1996 between the Company and John T. Gorman.
<PAGE>
EMPLOYMENT AGREEMENT AMENDMENT NUMBER 2
AMENDMENT NUMBER 2 (this "Amendment") to an Employment Agreement
dated July 24, 1990 by and between AMERICAN BANKNOTE CORPORATION, a
Delaware corporation with its principal offices at 200 Park Avenue,
New York, New York 10166 (the "Company"), and JOHN T. GORMAN, an
individual residing at 11 Jeffrey Lane, East Windsor, New Jersey
08520 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is a key employee of the Company and is
engaged pursuant to the terms of an Employment Agreement, dated July
24, 1990, by and between the Company and the Executive, as amended on
August 31, 1992 (such agreement, together with such amendment are
collectively referred to herein as the "Existing Agreement");
WHEREAS, the Company deems it important and appropriate to assure
to itself the continued availability of the services of the Executive
and to induce the Executive to continue to render services to the
Company for the period set forth in this Amendment and desires to
amend the Existing Agreement pursuant to the terms hereof; and
WHEREAS, the Executive deems it in his best interest to accept
such continued employment by the Company and amend the Existing
Agreement pursuant to the terms hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereby agree as
follows:
I. Terms used but not otherwise defined herein shall have the
meaning ascribed to such terms in the Existing Agreement.
II. Paragraph 1 of the Existing Agreement is hereby amended such
that the Initial Term shall be extended from July 25, 1995 to August
31, 1999.
III. Paragraph 3 of the Existing Agreement is hereby amended such
that the Consulting Period shall be reduced from a period of two (2)
years to a period of eighteen (18) months (the "Consulting Period")
and that the consulting fee which shall be paid by the Company to the
Executive during the Consulting Period shall be a total amount equal
to 150% of the Executive's Base Salary, payable monthly.
<PAGE>
IV. Paragraph 4 of the Existing Agreement is hereby deleted and
replaced in its entirety with the following:
Compensation; Base Salary and Annual Bonus.
(a) Effective May 1, 1996, (the "Effective Date") and during the
remainder of the Initial Term of Employment, the Company shall pay the
Executive a base salary (the "Base Salary") of $250,000 per year,
payable in equal installments not less frequently than monthly.
(b) The Company acknowledges that for purposes of the Existing
Agreement, the Bonus for the Company's fiscal year ended December 31,
1996 pursuant to the Existing Agreement shall be satisfied by the
payment from the Company to the Executive of $40,000.
(c) Following the Effective Date and for the remainder of the
Term of Employment, the Company shall pay the Executive an annual
bonus ("the Bonus") in accordance with the Company's Challenge 2000
Program, as established by the Company in 1996. The Bonus shall be a
percentage of Base Salary at various achievement levels verse the
achievement of certain pre-established plan goals as set forth below.
Percentage of Plan Bonus as a Percentage of Salary
80-90% 0-25%
91-100% 26-50%
100-120% 51-75%
An additional 25% of Base Salary shall also be made available to
the Executive on an annual basis based upon the achievement of
specific measurable objectives, which objectives shall be mutually
agreed upon between the Company and the Executive within the first
three months of the commencement of each fiscal year during the Term.
In addition to the Bonus as described herein, the Executive shall
Participate in all other benefits made available to executive officers
of the Company, including, without limitation, a long-term incentive
award as presented by Strategic Compensation Research Associates and
outlined in a letter dated April 9, 1996 (the "Goal Letter"). Such
additional annual awards are anticipated to range between 15 and 30%
of Base Salary; however, the actual amount of such awards shall be at
the discretion of the Compensation Committee. In addition, the
Executive shall receive reimbursement of club memberships and fees
similar to those received by other executives of the Company up to a
maximum of $5,000 per fiscal year.
(d) The Board of Directors of the Company, in its sole
discretion, may increase the Base Salary and Bonus payable to the
Executive pursuant to the Existing Agreement and may make available to
the Executive other benefits in addition to those to which the
Executive is entitled hereunder.
V. The medical expense reimbursement referred to in Section
6(a) of the Existing Agreement shall be increased from $5,000 to
$7,500 and expanded to include reimbursement for financial and tax
planning.
<PAGE>
VI. The Executive agrees to surrender for cancellation the
following stock options issued to him by the Company (a) options for
20,000 shares issued on 8/8/91 at an exercise price of $4.19 per
share; (b) options for 38,00 shares issued on 10/5/92 at an exercise
price of $4.375 per share; (c) options for 28,000 shares issued on
12/8/92 at an exercise price of $6.1875 per share; and (d) options for
20,000 shares issued on 9/20/94 at an exercise price of $2.9375 per
share. In connection therewith and for consideration of the services
to be performed by the Executive, the Company shall issue to the
Executive (x) ten year options to acquire 20,000 shares at an exercise
price of $1.375 per share and (y) ten year options to acquire 70,600
shares at an exercise price of $2.250 per share (the "New Options").
The New Options shall vest in accordance with the Company's stock
option plan.
VII. The Company shall deliver 20,000 shares of restricted stock
which will vest in equal installments over five years, or earlier, if
the Company achieves certain established operating income levels as
set forth in the Goal Letter.
VIII. The Company acknowledges that as of the date hereof the
Executive has 91 unused vacation days which may be carried forward.
IX. Subject to the approval of the Company's Board of Director's
or Compensation Committee, as the case may be, Paragraph 14 of the
Existing Agreement is hereby deleted and replaced in its entirety with
the following:
In the event that any payment or benefit received or to be
received by the Executive, whether or not such payments or benefits
are received pursuant to the terms of this Agreement (such payments
and benefits being hereinafter called "Total Payments"), would be
subject (in whole or part), to the tax (the "Excise Tax") imposed
under Section 4999 of the Code, the Company shall pay to the Executive
such additional amounts (the "Gross-Up Payment") as may be necessary
to place the Executive in the same after-tax position as if no portion
of the Total Payments had been subject to the Excise Tax. In the
event that the Excise Tax is subsequently determined to be less than
the amount taken into account hereunder, the Executive shall repay to
the Company, at the time that the amount of such reduction in Excise
Tax is finally determined, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local
income tax imposed on the Gross-Up Payment being repaid by the
Executive to the extent that such repayment results in a reduction in
Excise Tax and/or a federal, state or local income tax deduction) plus
interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax
is determined to exceed the amount taken into account hereunder
(including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess
(plus any interest, penalties or additions payable by the Executive
with respect to such excess) at the time that the amount of such
excess is finally determined. The Executive and the Company shall
each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or
amount of liability for Excise Tax with respect to the Total Payments.
<PAGE>
X. The Company shall pay to or on behalf of the Executive all
legal fees and expenses incurred by the Executive in connection with
the execution of this Amendment, not to exceed $3,000.
XI. Except as set forth in this Amendment, the Existing
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment has been duly executed
this 12th day of June 1996.
AMERICAN BANKNOTE CORPORATION
By: Morris Weissman 7/10/96
Name: Chairman & CEO
Title:
JOHN T. GORMAN
s/ John T. Gorman 9/3/96
