<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED AUGUST 2, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
COMMISSION FILE NUMBER 0-8141
NORSTAN, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0835746
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
605 NORTH HIGHWAY 169, TWELFTH FLOOR, PLYMOUTH, MINNESOTA 55441
(address of principal executive offices)
TELEPHONE (612) 513-4500 FAX (612) 513-4537 INTERNET WWW.NORSTAN.COM
(Registrant's telephone number, facsimile number, Internet address)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X . No .
----- -----
On September 8, 1997, there were 9,456,903 shares outstanding of the
registrant's common stock, par value $.10 per share, its only class of equity
securities.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1.
NORSTAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(In thousands, except per share amounts)
THREE MONTHS ENDED
-----------------------
AUGUST 2, AUGUST 3,
1997 1996
---------- ----------
REVENUES:
Communications Systems $ 45,212 $ 49,820
Global Services 48,049 40,925
Financial Services 2,181 1,486
---------- ----------
Total Revenues 95,442 92,231
---------- ----------
COST OF SALES:
Communications Systems 32,816 36,273
Global Services 34,956 30,082
Financial Services 584 545
---------- ----------
Total Cost of Sales 68,356 66,900
---------- ----------
GROSS MARGIN 27,086 25,331
Selling, General
& Administrative Expenses
23,157 22,180
---------- ----------
OPERATING INCOME 3,929 3,151
Interest Expense (594) (241)
Interest and Other Income, Net 48 7
---------- ----------
INCOME BEFORE PROVISION FOR
INCOME TAXES 3,383 2,917
Provision for Income Taxes 1,387 1,225
---------- ----------
NET INCOME $ 1,996 $ 1,692
---------- ----------
---------- ----------
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ .21 $ .18
---------- ----------
---------- ----------
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 9,599 9,323
---------- ----------
---------- ----------
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE>
NORSTAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
AUGUST 2, APRIL 30,
1997 1997
---------- ----------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash $ 1,091 $ 5,147
Accounts receivable, net of allowances for
doubtful accounts of $1,641 and $1,783 86,280 76,027
Current lease receivables 16,156 19,595
Inventories 8,853 7,636
Costs and estimated earnings in excess of
billings of $16,259 and $11,948 14,202 11,556
Deferred income tax benefits 4,061 3,954
Prepaid expenses, deposits and other 3,080 2,925
---------- ----------
TOTAL CURRENT ASSETS 133,723 126,840
---------- ----------
PROPERTY AND EQUIPMENT:
Furniture, fixtures and equipment 97,083 93,895
Less-accumulated depreciation and amortization (51,991) (48,409)
---------- ----------
NET PROPERTY AND EQUIPMENT 45,092 45,486
---------- ----------
OTHER ASSETS:
Lease receivables, net of current portion 30,495 29,775
Goodwill, net of amortization of $6,236 and
$5,749 21,539 22,072
---------- ----------
TOTAL OTHER ASSETS 52,034 51,847
---------- ----------
$ 230,849 $ 224,173
---------- ----------
---------- ----------
The accompanying notes are an integral part of these consolidated balance
sheets.
2
<PAGE>
NORSTAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
AUGUST 2, APRIL 30,
1997 1997
---------- ----------
(Unaudited) (Audited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 1,029 $ 389
Current maturities of discounted lease rentals 13,169 13,878
Accounts payable 20,869 24,486
Deferred revenue 19,307 18,680
Accrued -
Salaries and wages 8,635 13,065
Warranty costs 2,166 2,348
Other liabilities 5,025 10,333
Income taxes payable 1,797 388
Billings in excess of costs and estimated
earnings of $15,047 and $12,829 7,295 5,789
---------- ----------
TOTAL CURRENT LIABILITIES 79,292 89,356
---------- ----------
LONG-TERM DEBT, net of current maturities 35,266 18,284
DISCOUNTED LEASE RENTALS, net of current maturities 21,124 24,043
DEFERRED INCOME TAXES 8,227 8,120
---------- ----------
SHAREHOLDERS' EQUITY:
Common stock - $.10 par value; 40,000,000
authorized shares; 9,487,003 and 9,387,458
shares issued and outstanding 949 939
Capital in excess of par value 35,405 34,556
Retained earnings 52,188 50,192
Unamortized cost of stock (572) (142)
Foreign currency translation adjustments (1,030) (1,175)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 86,940 84,370
---------- ----------
$ 230,849 $ 224,173
---------- ----------
---------- ----------
The accompanying notes are an integral part of these consolidated balance
sheets.
3
<PAGE>
NORSTAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
UNAUDITED
(In thousands)
THREE MONTHS ENDED
----------------------
AUGUST 2, AUGUST 3,
1997 1996
---------- ----------
OPERATING ACTIVITIES:
Net income $ 1,996 $ 1,692
Adjustments to reconcile net income to net cash
used for operating activities:
Depreciation and amortization 4,438 3,478
Deferred income taxes 4 358
Changes in operating items:
Accounts receivable (10,195) (6,751)
Inventories (1,205) 1,129
Costs and estimated earnings in excess of billings (2,639) (6,062)
Prepaid expenses, deposits and other (153) (653)
Accounts payable (3,623) 4,711
Deferred revenue 605 (824)
Accrued liabilities (9,956) (5,432)
Income taxes payable 1,410 773
Billings in excess of costs and estimated
earnings 1,505 797
---------- ----------
Net cash used for operating activities (17,813) (6,784)
---------- ----------
INVESTING ACTIVITIES:
Cash paid for acquisition, net of cash acquired -- (11,794)
Additions to property and equipment, net (3,557) (4,370)
Investment in lease contracts (4,709) (3,622)
Collections from lease contracts 7,472 4,572
Other, net 180 499
---------- ----------
Net cash used for investing activities (614) (14,715)
---------- ----------
FINANCING ACTIVITIES:
Borrowings under revolving credit agreements 67,183 80,300
Repayments under revolving credit agreements (49,465) (52,650)
Repayment of debt assumed in acquisition -- (1,743)
Borrowings of long-term debt -- 105
Repayments of long-term debt (97) (88)
Repayments of discounted lease rentals (3,652) (3,150)
Proceeds from sale of common stock 398 214
---------- ----------
Net cash provided by financing activities 14,367 22,988
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 4 (5)
---------- ----------
NET (DECREASE) INCREASE IN CASH (4,056) 1,484
CASH, BEGINNING OF PERIOD 5,147 1,133
---------- ----------
CASH, END OF PERIOD $ 1,091 $ 2,617
---------- ----------
---------- ----------
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
NORSTAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 2, 1997
UNAUDITED
The information furnished in this report is unaudited and reflects all
adjustments which are normal recurring adjustments and, which in the opinion of
management, are necessary to fairly present the operating results for the
interim periods. The operating results for the interim periods presented are
not necessarily indicative of the operating results to be expected for the full
fiscal year. This report should be read in conjunction with the Company's most
recent "Annual Report on Form 10-K."
PRINCIPLES OF CONSOLIDATION -
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
FOREIGN CURRENCY -
For the Company's foreign operations, assets and liabilities are translated at
exchange rates as of the balance sheet date, and revenues and expenses are
translated at average exchange rates prevailing during the period. Translation
adjustments are recorded as a separate component of shareholders' equity.
NORSTAN FINANCIAL SERVICES, INC. (NFS) -
NFS provides financing for customers of the Company. Leases are primarily
accounted for as sales-type leases for consolidated financial reporting
purposes. Condensed unaudited statements of operations of NFS are as follows
(in thousands):
THREE MONTHS ENDED
----------------------
AUGUST 2, AUGUST 3,
1997 1996
---------- ----------
Revenues $ 2,063 $ 1,336
Interest expense (503) (419)
Other expenses (378) (361)
---------- ----------
Income before provision for income taxes 1,182 556
Provision for income taxes (485) (234)
---------- ----------
Net income $ 697 $ 322
---------- ----------
---------- ----------
5
<PAGE>
SUPPLEMENTAL CASH FLOW INFORMATION -
Supplemental disclosure of cash flow information is as follows (in thousands):
THREE MONTHS ENDED
------------------------
AUGUST 2, AUGUST 3,
1997 1996
---------- ----------
Cash paid for:
Interest $ 1,473 $ 899
Income taxes $ 41 $ 89
Noncash investing and financing activities:
Stock issued for acquisition $ - $ 2,000
Non-compete agreements related to
acquisition $ - $ 667
RECENTLY ISSUED ACCOUNTING STANDARD -
In March 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share" (SFAS No. 128), which changes the way companies calculate
their earnings per share data (EPS). SFAS No. 128 replaces primary EPS with
basic EPS. Basic EPS is computed by dividing reported earnings by weighted
average shares outstanding, excluding potentially dilutive securities. Fully
diluted EPS, termed diluted EPS under SFAS No. 128, is also to be disclosed.
The Company is required to adopt SFAS No. 128 in third quarter fiscal 1998 at
which time all prior period EPS are to be restated in accordance with SFAS No.
128. If the Company had adopted the pronouncement during this fiscal quarter,
the effect of this accounting change on reported EPS data would have been as
follows:
THREE MONTHS ENDED
----------------------
AUGUST 2, AUGUST 3,
1997 1996
---------- ----------
Primary EPS as reported . . . . . . . $ .21 $ .18
Effect of SFAS No. 128. . . . . . . . - .01
---------- ----------
Basic EPS as restated . . . . . . . . $ .21 $ .19
---------- ----------
---------- ----------
Fully diluted EPS as reported . . . . $ - $ -
Effect of SFAS No. 128. . . . . . . . .21 .18
---------- ----------
Diluted EPS as restated . . . . . . . $ .21 $ .18
---------- ----------
---------- ----------
6
<PAGE>
USE OF ESTIMATES -
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities as of the date of the financial statements.
Estimates also affect the reported amounts of revenues and expenses during the
periods presented. Estimates are used for such items as allowances for doubtful
accounts, inventory reserves, depreciable lives of property and equipment,
warranty reserves and other items. Ultimate results could differ from those
estimates.
RECLASSIFICATIONS -
Certain amounts in the fiscal 1997 financial statements have been reclassified
to conform to the fiscal 1998 presentation, with no impact on previously
reported net income or shareholder's equity.
ACQUISITIONS -
On June 4, 1996, the Company acquired Connect Computer Company (Connect), in a
transaction accounted for under the purchase method. Connect is a provider of
consulting, design and implementation services for local and wide area networks,
internets and intranets, client server applications and workgroup computing,
with offices in Minneapolis, Milwaukee, and Des Moines.
The acquisition consideration totaled approximately $15.0 million, consisting of
$12.0 million in cash, $2.0 million of Norstan common stock and $1.0 million
payable to certain members of Connect management under non-compete agreements.
In addition, the Company agreed to pay up to $4.0 million in contingent
consideration over a three year period ending April 30, 1999, if certain
financial performance targets are achieved (as of August 2, 1997, $2.0 million
of such consideration has been paid). This transaction resulted in the
recording of $16.4 million in goodwill which is being amortized on a
straight-line basis over 15 years. The Company financed the cash portions of
the acquisition through borrowings under its existing credit facility. Pro
forma information in the year of acquisition has not been disclosed as such
information was not materially different from the Company's results of
operations.
SHARE DATA AND STOCK SPLIT -
Net income per common and common equivalent share is based on the weighted
average number of shares of common stock outstanding during the year, adjusted
for the dilutive effect of common stock equivalents.
On June 20, 1996, the Company's Board of Directors approved a two-for-one stock
split effected in the form of a stock dividend. The stock split has been
retroactively reflected in the accompanying consolidated financial statements
and related notes. All share and per share data have been restated to reflect
the stock split.
7
<PAGE>
FORWARD-LOOKING STATEMENTS AND
FACTORS THAT MAY AFFECT FUTURE RESULTS -
From time to time, the Company may publish forward-looking statements relating
to such matters as anticipated financial performance, business prospects,
technological developments, new products, and similar matters. The Private
Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements including those in this Form 10-Q. In order to
comply with the terms of the safe harbor, the Company notes that a variety of
factors could cause the Company's actual results and experience to differ
materially from the anticipated results or other expectations expressed in the
Company's forward-looking statements. The risks and uncertainties that may
affect the operations, performance, developments and results of the Company's
business include the following: national and regional economic conditions;
pending and future legislation affecting the telecommunications industry; the
Company's operations in Canada; market acceptance of the Company's products and
services; the Company's continued ability to provide integrated communications
solutions for customers in a dynamic industry, as well as other competitive
factors.
Because these and other factors could affect the Company's operating results,
past financial performance should not necessarily be considered as a reliable
indicator of future performance, and investors should not use historical trends
to anticipate future period results.
8
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY -
During the quarter ended August 2, 1997 the Company's net income improved
compared to the quarter ended August 3, 1996, increasing 18.0% to $1,996,000, or
$.21 per common share, compared to $1,692,000, or $.18 per common share.
RESULTS OF OPERATIONS -
The Company's revenues consist of revenues from the sale of communications
systems, global services and financial services. Revenues from the sale of
communications systems result from the sale of new products and upgrades, as
well as refurbished equipment. Revenues from global services result primarily
from communications maintenance services, moves, adds and changes, network
integration services and long distance services. Financial services revenues
result primarily from leasing activities. The following table sets forth, for
the periods indicated, certain items from the Company's consolidated statements
of operations.
9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
DOLLAR AMOUNTS AS A
PERCENTAGE OF REVENUES
---------------------- PERCENTAGE
THREE MONTHS ENDED CHANGE
----------------------- ------------
AUGUST 2, AUGUST 3, FISCAL
1997 1996 1998 VS 1997
---------- ---------- ------------
REVENUES:
Communications Systems 47.4% 54.0% (9.2%)
Global Services 50.3% 44.4% 17.4%
Financial Services 2.3% 1.6% 46.8%
---------- ---------- ------------
Total Revenues 100.0% 100.0% 3.5%
COST OF SALES 71.6% 72.5% 2.2%
---------- ---------- ------------
GROSS MARGIN 28.4% 27.5% 6.9%
SELLING, GENERAL &
ADMINISTRATIVE EXPENSES 24.3% 24.1% 4.4%
---------- ---------- ------------
OPERATING INCOME 4.1% 3.4% 24.7%
Interest Expense and Other, Net (0.6%) (0.3%) 133.3%
---------- ---------- ------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 3.5% 3.1% 16.0%
Provision for Income Taxes 1.4% 1.3% 13.2%
---------- ---------- ------------
NET INCOME 2.1% 1.8% 18.0%
---------- ---------- ------------
---------- ---------- ------------
The following table sets forth, for the periods indicated, the gross margin
percentages for communications systems, global services and financial services.
THREE MONTHS ENDED
-----------------------
AUGUST 2, AUGUST 3,
1997 1996
---------- ----------
GROSS MARGIN
Communications Systems 27.4% 27.2%
Global Services 27.2% 26.5%
Financial Services 73.2% 63.3%
10
<PAGE>
RESULTS OF OPERATIONS
REVENUES. Revenues increased 3.5%, to $95,442,000 for the quarter ended
August 2, 1997, as compared to $92,231,000 for the similar period last year.
For the three month period ended August 2, 1997, sales of communications systems
decreased $4,608,000, or 9.2%, compared to the three month period ended August
3, 1996. This decrease is the result of normal fluctuations in the timing of
system orders and an exceptionally strong fourth quarter in fiscal 1997.
Revenues from global services increased $7,124,000, or 17.4%, in the three
month period ended August 2, 1997, in comparison to the similar period last
year. Revenues from global services generally have increased due to growth in
network integration services, including the acquisition of Connect Computer
Company (Connect). Revenues from financial services increased $695,000, or
46.8%, during the three month period ended August 2, 1997 as compared to the
similar period last year.
GROSS MARGIN. The Company's gross margin increased $1,755,000, or 6.9%, to
$27,086,000 for the three months ended August 2, 1997 as compared to $25,331,000
for the three months ended August 3, 1996. As a percent of total revenues,
gross margin was 28.4% and 27.5% for the three month periods ended August 2,
1997 and August 3, 1996, respectively.
Gross margin as a percent of revenues for the sale of communications
systems was 27.4% for the three month period ended August 2, 1997, and 27.2% for
the comparable period ended August 3, 1996. Gross margin as a percent of
revenues for global services was 27.2% for the three month period ended August
2, 1997, and 26.5% for the comparable period ended August 3, 1996. The
respective increases in gross margin as a percent of revenues for communications
systems and global services were generally the result of changes in the mix of
products sold and services provided. As consulting and professional services
related to network integration become a more integral component of Norstan's
business, global services' margins should continue to increase. Gross margin as
a percent of revenues for financial services was 73.2% for the three month
period ended August 2, 1997, and 63.3% for the similar period ended August 3,
1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $977,000, or 4.4%, for the quarter ended
August 2, 1997 as compared to the quarter ended August 3, 1996. As a percent of
revenues, selling, general and administrative expenses increased to 24.3% for
the three month period ended August 2, 1997 as compared to 24.1% for the similar
period ended August 3, 1996.
OPERATING INCOME. Operating income increased $778,000, or 24.7%, to
$3,929,000 for the quarter ended August 2, 1997 as compared to $3,151,000 for
the quarter ended August 3, 1996. As a percent of revenues, operating income
increased to 4.1% for the three month period ended August 2, 1997 as compared to
3.4% for the similar period ended August 3, 1996.
11
<PAGE>
OTHER COSTS AND EXPENSES. Interest expense increased to $594,000 as
compared to $241,000 for the three month periods ended August 2, 1997 and August
3, 1996, respectively. This increase was primarily a result of higher borrowing
levels under revolving credit agreements.
The Company's effective tax rate was 41.0% for the three month period ended
August 2, 1997 as compared to 42.0% for the similar period ended August 3, 1996.
The Company's effective tax rate differs from the federal statutory rate
primarily due to the effect of non-deductible goodwill amortization and state
income taxes. The provisions for income taxes have been recorded based upon
management's estimate of the annualized effective tax rate.
NET INCOME. Net income was $1,996,000, or $.21 per common share, and
$1,692,000, or $.18 per common share, for the quarters ended August 2, 1997 and
August 3, 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL. Working capital increased to $54,431,000 at August 2,
1997 from $37,484,000 at April 30, 1997. The current ratio was 1.69 to 1.0 at
August 2, 1997 as compared to 1.42 to 1.0 at April 30, 1997. Operating
activities used net cash of $17,813,000 and $6,784,000 for the three months
ended August 2, 1997 and August 3, 1996, respectively.
CAPITAL RESOURCES. In July 1996, the Company entered into a $40,000,000
unsecured revolving long-term credit agreement with certain banks. Up to
$15,000,000 of borrowings under this agreement may be in the form of commercial
paper. In addition, up to $8,000,000 and $6,000,000 may be used to support the
leasing activities of Norstan Financial Services, Inc. (NFS) and Norstan Canada
Inc. (Norstan Canada), respectively. Borrowings under this agreement are due
July 31, 1999, and bear interest at the banks' reference rate (8.50% at August
2, 1997), except for LIBOR, CD and commercial paper based options which
generally bear interest at a rate lower than the banks' reference rate. Total
consolidated borrowings under this agreement were $34,995,000 and $17,920,000 at
August 2, 1997 and April 30, 1997, respectively. There were no borrowings on
account of NFS or Norstan Canada at August 2, 1997 or April 30, 1997.
Borrowings by the Company in fiscal 1998 and 1997 have been for working capital
and general corporate purposes, as well as to invest in property and equipment.
In addition, during fiscal 1997, borrowings were made to finance the acquisition
of Connect.
Net capital expenditures for the three months ended August 2, 1997 were
$3,557,000 and $4,370,000 for the similar period last year. These expenditures
were primarily for the purchase of telecommunications equipment which is used as
spare parts and for outsourcing arrangements, computer equipment and other
facility expansion. At August 2, 1997, there were no outstanding material
commitments for future capital expenditures. The Company also has a significant
investment in lease contracts with its customers. The investment in lease
contracts totaled $4,709,000 for the three months ended August 2, 1997 and
$3,622,000 for the similar period last year. Net lease receivables decreased to
$46,651,000 at August 2, 1997 as compared to $49,370,000 at April 30, 1997.
12
<PAGE>
In June 1996, the Company acquired all of the common stock of Connect, a
provider of consulting, design and implementation services. The acquisition
consideration totaled approximately $15.0 million, consisting of $12.0 million
cash, $2.0 million of Norstan common stock and $1.0 million payable to certain
members of Connect management under non-compete agreements. In addition, the
Company has agreed to pay up to $4.0 million in contingent consideration over a
three year period ending April 30, 1999, if certain financial performance
targets are achieved (as of August 2, 1997, $2.0 million of such consideration
has been paid). This transaction resulted in the recording of $16.4 million in
goodwill, which is being amortized, on a straight-line basis over 15 years.
Norstan Financial Services, Inc. (NFS) and Norstan Canada Inc. utilize
their lease receivables and corresponding underlying equipment to borrow funds
from financial institutions at fixed rates on a nonrecourse or recourse basis by
discounting the stream of future lease payments. Proceeds from discounting are
presented on the consolidated balance sheets as discounted lease rentals.
Interest rates on these credit agreements range from 6% to 10%, and payments are
due in varying monthly installments through June 2003. Payments due financial
institutions on a monthly basis are made from monthly collections of lease
receivables from customers.
Discounted lease rentals consisted of the following (in thousands):
AUGUST 2, APRIL 30,
1997 1997
---------- ----------
Nonrecourse borrowings $ 33,709 $ 37,329
Recourse borrowings 584 592
---------- ----------
Total discounted lease rentals 34,293 37,921
Less-current maturities (13,169) (13,878)
---------- ----------
$ 21,124 $ 24,043
---------- ----------
---------- ----------
In addition to the recourse as described previously, recourse to Norstan,
Inc. relative to discounted lease rentals was limited to $410,000 as of August
2, 1997 and $418,000 as of April 30, 1997.
Management of the Company believes that a combination of cash to be
generated from operations, existing bank facilities and available borrowing
capacity, in aggregate, are adequate to meet the anticipated liquidity and
capital resource requirements of its business. Sources of additional financing,
if needed, may include further debt financing or the sale of equity or other
securities.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in legal actions in the ordinary course of its
business. Although the outcomes of any such legal actions cannot be
predicted, in the opinion of management there is no legal proceeding
pending against or involving the Company for which the outcome is
likely to have a material adverse effect upon the consolidated
financial position or results of operations of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 11. Statement Regarding Computation of Earnings Per Share.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this
report is filed.
14
<PAGE>
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.
NORSTAN, INC.
-----------------------------
Registrant
Date: September 15, 1997 By /s/ David R. Richard
----------------------
David R. Richard
Chief Executive Officer,
President and Director
Date: September 15, 1997 By
----------------------
Kenneth S. MacKenzie
Chief Financial Officer
(Principal Financial and Accounting
Officer)
15
<PAGE>
EXHIBIT 11
NORSTAN, INC. AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
THREE MONTHS ENDED
------------------------
AUGUST 2, AUGUST 3,
1997 1996
----------- ----------
PRIMARY EARNINGS PER SHARE -
Weighted average number of
common shares outstanding 9,456 8,816
Effect of:
1995 Long-Term Incentive Plan 41 -
1986 Long-Term Incentive Plan 88 381
Restated Non-Employee Directors'
Stock Plan 14 114
Employee Stock Purchase Plan - 12
----------- ----------
Shares outstanding used to compute
primary earnings per share 9,599 9,323
----------- ----------
----------- ----------
Net income $ 1,996 $ 1,692
----------- ----------
----------- ----------
Primary earnings per share $ .21 $ .18
----------- ----------
----------- ----------
FULLY DILUTED EARNINGS PER SHARE -
Weighted average number of shares
used for primary earnings per share 9,599 9,323
Effect of:
1995 Long-Term Incentive Plan 35 -
1986 Long-Term Incentive Plan 12 -
Restated Non-Employee Directors'
Stock Plan 2 -
Employee Stock Purchase Plan 4 -
----------- ----------
Shares outstanding used to compute
fully diluted earnings per share 9,652 9,323
----------- ----------
----------- ----------
Net income $ 1,996 $ 1,692
----------- ----------
----------- ----------
FULLY DILUTED EARNINGS PER SHARE $ .21 $ .18
----------- ----------
----------- ----------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
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