SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: Commission File Number:
September 30,1995 0-8508
NORTHWEST TELEPRODUCTIONS,INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Minnesota 41-0641789
(State or Other Jurisdiction of (I.R.S Employer
Incorporation or Organization) Identification
Number)
4455 West 77th Street
Minneapolis, MN 55435
(Address of Principal (Zip Code)
Executive Offices)
Issuer's telephone number including Area Code: 612-835-4455
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past twelve months (or
for such shorter period that the issuer was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days.
Yes___X____ No_________
1,356,425 shares of $.01 par value common stock were outstanding
at October 31,1995
Transitional Small Business Disclosure Format (Check one):
Yes________ No___X______
<PAGE>
NORTHWEST TELEPRODUCTIONS, INC.
AND SUBSIDIARIES
INDEX
FORM 10-QSB
September, 30 1995
PART 1.
Page No.
-----------
Consolidated Balance Sheets:
September 30, 1995 and March 31, 1995
Consolidated Statements of Operations:
Three Months Ended September 30, 1995 & 1994
Six Months Ended September 30, 1995 & 1994
Condensed Consolidated Statements of Cash Flow:
Six Months Ended September 30, 1995 & 1994
Notes to Condensed Consolidated Financial
Statements
Management's Discussion and Analysis
Other Information
Exhibit Index
<PAGE>
PART 1
NORTHWEST TELEPRODUCTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30 MARCH 31
ASSETS: 1995 1995
(Unaudited) *
<S> <C> <C>
CURRENT ASSETS:
Cash $ 146,427 $ 271,258
Trade accounts receivable less doubtful accounts
reserve of $119,000 and $101,000 respectively 2,972,927 2,663,586
Inventory 235,056 212,886
Refundable income taxes 281,066 199,565
Deferred income taxes 75,000 75,000
Current portion of note receivable 99,831 99,831
Other assets 200,213 107,992
---------- ----------
TOTAL CURRENT ASSETS 4,010,520 3,630,118
PROPERTY,PLANT AND EQUIPMENT:
Land,buildings and improvements 3,574,853 3,507,677
Machinery and equipment 21,428,258 20,554,284
------------ -----------
25,003,111 24,061,961
Less accumulated depreciation 16,745,338 15,671,779
----------- ----------
8,257,773 8,390,182
GOODWILL,less accumulated amortization of $599,933
and $571,985 respectively 1,088,278 1,116,226
NOTE RECEIVABLE,less current portion 142,190 200,475
OTHER ASSETS 378,831 175,782
--------- -----------
1,609,299 1,492,483
----------- -----------
$13,877,592 $13,512,783
LIABILITIES AND STOCKHOLDERS'EQUITY:
CURRENT LIABILITIES:
Notes payable $590,000 800,000
Accounts payable 403,681 $281,131
Commissions, salaries and withholding 514,951 429,319
Miscellaneous accounts payable and accrued
expenses 58,420 208,731
Other liabilities 515,401 138,539
Payments due within one year on term obligations 1,946,919 1,806,914
---------- ---------
TOTAL CURRENT LIABILITIES 4,029,372 3,664,634
DEFERRED INCOME TAXES 813,000 813,000
LONG TERM DEBT AND CAPITAL LEASES, less current portion 2,713,484 2,202,437
OTHER LONG TERM LIABILITIES, less current portion 8,072
STOCKHOLDERS'EQUITY: Common stock 13,564 15,545
Additional paid-in capital 577,123 680,596
Retained earnings 5,722,977 6,136,571
6,313,664 6,832,712
----------- -----------
$13,877,592 $13,512,783
</TABLE>
*The balance sheet at March 31,1995 has been taken from the audited financial
statements at that date. See notes to condensed consolidated financial
statements.
<PAGE>
NORTHWEST TELEPRODUCTIONS,INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
NET SALES $3,500,872 $3,193,972 $6,544,528 $6,419,343
COSTS AND EXPENSES:
Costs of products and services sold 2,664,969 2,431,574 5,315,650 4,937,279
Selling,general and administrative 583,474 645,980 1,229,033 1,263,090
Interest 121,176 93,253 231,816 174,609
--------- --------- --------- ---------
3,369,619 3,170,807 6,776,499 6,374,978
131,253 23,165 (231,971) 44,365
OTHER INCOME 13,371 16,223 32,872 29,743
--------- --------- --------- ---------
EARNINGS (LOSS) BEFORE TAXES ON INCOME 144,624 39,388 (199,099) 74,108
TAXES ON INCOME (INCOME TAX CREDIT) 55,000 11,000 (80,000) 22,000
-------- ------- ---------- -------
NET EARNINGS(LOSS) $89,624 $28,388 ($119,099) $52,108
NET EARNINGS (LOSS) PER SHARE (1) $.07 $.02 ($.08) $.03
<FN>
(1) Net earnings (loss) per share are based on the weighted
average number of common shares outstanding during the
periods as follows:
THREE MONTHS: SEPTEMBER 30, 1994 1,574,525
SEPTEMBER 30, 1995 1,356,425
SIX MONTHS: SEPTEMBER 30, 1994 1,574,525
SEPTEMBER 30, 1995 1,439,926
</FN>
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
NORTHWEST TELEPRODUCTIONS,INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30
1995 1994
<S> <C> <C>
CASH FLOW-OPERATING ACTIVITIES:
Net (loss) earnings $ (119,099) $ 52,108
Adjustments:
Depreciation 1,073,559 1,074,762
Amortization of goodwill 27,948 27,948
Decrease ( Increase) in trade receivables (309,341) (101,880)
Other - net 102,152 65,191
___________ __________
Net cash provided by operating activities 775,219 1,118,129
CASH FLOW - INVESTING ACTIVITIES:
Property, plant and equipment additions (941,150) (1,516,405)
CASH FLOW - FINANCING ACTIVITIES:
Advances on line of credit (210,000) 703,000
Payments on long term borrowing (798,948) (1,313,194)
Long Term Borrowing 1,450,000 800,000
Repurchase of common stock (399,950)
__________ ___________
Net cash used in financing activities 41,102 189,806
__________ ___________
NET (DECREASE) INCREASE IN CASH ($124,829) ($208,470)
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
NORTHWEST TELEPRODUCTIONS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of September 30, 1995, the consolidated
statements of operations for the three and six month periods ended
September 30, 1995 and 1994 and the condensed consolidated statements of
cash flow for the six month periods then ended have been prepared by the
Company without audit. In the opinion of management, all adjustments
necessary to present fairly the financial position, results of operations
and changes in financial position at September 30, 1995 and for all periods
presented have been made.
Certain information and footnotes disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that
these condensed consolidated financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's
March 31, 1995 annual report to shareholders. The results of operation for
the period ended September 30, 1995 are not necessarily indicative of the
results for the full year.
<PAGE>
NORTHWEST TELEPRODUCTIONS, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL REQUIREMENTS
Operating cash requirements for the first six months of fiscal 1996 were
met from cash available at March 31, 1995, cash flow from operations and
short term borrowing. During the period the Company repurchased common
stock costing $400,000, acquired $941,000 of capital assets, borrowed
$1,450,000 through amendment of the Company's term debt agreement and made
payments of $800,000 on term debt obligations.
In the opinion of management, the Company's present financial position is
such that adequate funds from operations will be available to meet
operating requirements and fund debt maturities.
RESULTS OF OPERATIONS - SIX MONTHS ENDED SEPTEMBER 30,1995 COMPARED WITH
CORRESPONDING PERIOD OF PRIOR YEAR.
SALES
Sales for the six months ended September 30, 1995 of $6,544,528 compare
with sales of $6,419,343 for the corresponding period of the prior year, a
2% increase. Sales for the first quarter were adversely impacted by reduced
Department of Defense contract production which returned to an average
level in the second quarter which also experienced an increase in other
sales.
COSTS OF PRODUCTS AND SERVICES SOLD
Cost of products and services sold for the six months ended September 30,
1995 equaled 81% of sales as compared to a cost of sales rate of 77% in the
corresponding period of the prior year. An unusually high rate of 87%
resulting from reduced sales in the first quarter, declined to a rate of
76% in the second quarter reflecting the 15% increase in sales when
compared to the first quarter.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the first six months of
fiscal 1996 totaled $1,229,033, a decrease of $34,057, or 3% over the prior
year.
INTEREST EXPENSE
Interest expense for the six months ended September 30, 1995 totaled
$231,816 compared with expense of $174,609 in the prior year. Increased
overall borrowing in the current year, along with an increase in rates on
the Company's variable rate debt, explains the increased expense.
INCOME TAX CREDIT/TAXES ON INCOME
The 40% income tax credit for the first six months of fiscal 1996 reflects
the availibility of a loss carryback. The tax provision for the first
quarter of the prior year reflects the Company's historical effective tax
rates.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH
CORRESPONDING PERIOD OF PRIOR YEAR.
<PAGE>
SALES
Sales for the quarter ended September 30, 1995 of $3,500,872 compare with
sales of $3,193,972 in the second quarter of the prior year, a 10%
increase. A return to an average level of Department of Defense contract
production along with a company wide increase in other sales accounts for
this increase.
COST OF PRODUCTS AND SERVICES SOLD
Cost of products and services sold for the quarter ended September 30, 1995
equaled 76% of sales, the same as in the second quarter of the prior year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the second quarter of
fiscal 1996 totaled $583,474, a decrease of $62,506 or 10% under the prior
year. Completion of the amortization of organizational costs and
non-compete agreements applicable to the Chicago acquisition in 1990
account for the primary portion of this decrease.
INTEREST EXPENSE
Interest for the three months ended September 30, 1995 totaled $121,176
compared with expense of $93,253 in the second quarter of the prior year.
An increase in the rate of interest on the Company's variable rate debt
resulting from an increase in the reference rate, along with increased
borrowing explains the increased expense.
INCOME TAX CREDIT/TAXES ON INCOME
The 40% income tax credit for the first quarter of fiscal 1996 reflects the
availability of a loss carryback. The tax provision for the second quarter
of the prior year reflects the Company's historical effective tax rates.
<PAGE>
NORTHWEST TELEPRODUCTIONS, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 3. Legal Proceedings
-------------------
On September 17, 1993, an action (the "Shaw Litigation") was filed aginst
the Registrant's wholly-owned subsidiary, Northwest Teleproductions/Kansas City,
Inc. (the "Kansas City Subsidiary"), in the Circuit Court of Jackson County,
Missouri, at Kansas City by plaintiffs, Kansas City Post, Inc., and James L.
Shaw. On February 10, 1994, the plaintiffs amended their complant and added the
Registrant as a defendant. The plaintiffs alleged breach of an alleged contract,
promissory estoppel and misrepresentation relating to the April 1993 sales to
other parties of the assets of the Kansas City Subsidiary. The plaintiffs sought
recovery from the Registrant of the unspecified amount of damages alleged to be
in excess of $15,000 plus punitive damages of at least $2 million. On December
31, 1994, without admitting liability, the Registrant paid the plainitffs
$175,000 in settlement of the Shaw Litigation and received releases from the
plantiffs.
On January 30, 1995, an action (the "McCone Litigation") was filed against
the Registrant and its wholly-owned subsidiary, Northwest Teleproductions/Kansas
City, Inc. (the "Kansas City Subsidiary"), in the Circuit Court of Jackson
County, Missouri at Kansas City by Plaintiffs, Mark D. McCone, Daniel L.
Nussbeck and Midwest Teleproductions, Inc. (the "Buyers.") In April 1993, the
Buyers purchased the assets of the Registrant's Kansas City Subsidiary. A
plaintiff in the McCone Litigation was also named as defendant, along with the
Registrant, in the Shaw Litigation described above. The plaintiffs in the McCone
Litigation allege breach of contract and misrepresentation by the Registrant in
connection with the April 1993 sale and seek recovery of damages alleged to be
$141,629 (an amount the planiitffs allege represents revenue lost by the Buyers
as a result of the Shaw Litigation, costs and expenses incurred by the Buyers in
defending against the Shaw Litigation and amounts paid by the Buyers to settle
the Shaw Litigation). The plaintiffs in the McCone Litigation also have
requested punitive damages, attorneys' fees, costs and interest. The Registrant
believes the plainitffs' claims are without merit and presently intends to
defend its position vigorously. The matter has been scheduled for trial on
November 20, 1995.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The Annual Meeting of the Registrant's shareholders was held on
Thursday, July 27, 1995.
(b) At the Annual Meeting a proposal to set the number of directors at five
was adopted by a vote of 1,133,107 shares in favor, with 8,347 shares against,
7,879 shares abstaining and no shares represented by broker nonvotes.
(c) Proxies for the Annual Meeting were solicited pursuant to Regulation
14A under the Securities Exchange Act of 1934, there was no solicitation in
opposition to management's nominees, and the following persons were elected
directors of the Registrant to serve until the next annual meeting of
shareholders and until their successors shall have been duly elected and
qualified:
Nominee Number of Votes For Number of Votes Withheld
- ------- ------------------- ------------------------
James S. Fish 1,120,238 29,050
John G. Lindell 1,122,683 29,650
Jane K. Mauer 1,122,683 29,650
Robert C. Mitchell 1,122,683 29,650
Gerald W. Simonson 1,122,683 29,650
(d) At the Annual meeting the shareholders approved the appointment of
Deloitte & Touche LLP as independent auditors for the current fiscal year by a
vote of 1,138,120 shares in favor, with 5,304 shares against, 5,909 shares
abstaining and no shares represented by broker nonvotes.
<PAGE>
NORTHWEST TELEPRODUCTIONS, INC.
AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits.
--------
See Exhibit Index on page following signatures.
(b) Reports on Form 8-K.
-------------------
There were no reports on Form 8-K filed for the three months
ended September 30, 1995
Signatures
------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: NORTHWEST TELEPRODUCTIONS,INC.
November 13, 1995 (Registrant)
By /s/ Robert Mitchell
_____________________________________
Robert Mitchell
President
By /s/ James Steffen
_____________________________________
James Steffen
Treasurer
<PAGE>
NORTHWEST TELEPRODUCTIONS, INC.
AND SUBSIDIARIES
-------------------------------
EXHIBIT INDEX
TO
Form 10-QSB
For Quarter Ended September 30,1995
-------------------------------
Exhibit No. Description
10.1 Twelfth Amendment to Credit Agreement and Second
Amendment to Replacement First Term Note,
dated August 25, 1995 between Registrant and Norwest
Bank Minnesota, National Association
27 Financial Data Schedule
TWELFTH AMENDMENT TO CREDIT AGREEMENT AND THIRD
AMENDMENT TO REPLACEMENT FIRST TERM NOTE
This Amendment, dated as of August 25, 1995, is made by and between
NORTHWEST TELEPRODUCTIONS, INC., a Minnesota corporation (the "Borrower"), and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association
(the "Bank").
Recitals
A. The Borrower and the Bank have entered into a Credit Agreement dated as
of January 18, 1990, as amended by a First Amendment to Credit Agreement and
Waiver dated as of March 31, 1990, a Second Amendment to Credit Agreement dated
as of October 5, 1990, a Third Amendment to Credit Agreement dated as of July 9,
1991, a Fourth Amendment to Credit Agreement and Waiver dated as of June 15,
1992, a Fifth Amendment to Credit Agreement dated as of September 28, 1992, a
Sixth Amendment to Credit Agreement and Waiver dated as of June 14, 1993, a
Seventh Amendment to Credit Agreement, First Amendment to Replacement Revolving
Note and First Amendment to Replacement First Term Note dated as of September
14, 1993 (the "1993 Amendment"), an Eighth Amendment to Credit Agreement dated
November 2, 1993, a Ninth Amendment to Credit Agreement dated March 25, 1994, a
Tenth Amendment to Credit Agreement and Second Amendment to Replacement First
Term Note dated as of July 29, 1994 (the "1994 Amendment") and an Eleventh
Amendment to Credit Agreement, by letter dated March 28, 1995 acknowledged by
the Borrower and effective as of March 30, 1995 (as amended, the "Credit
Agreement").
B. Pursuant to the Credit Agreement, the Bank may, in its sole discretion,
make Advances to the Borrower until no later than August 31, 1995 under a demand
discretionary revolving line of credit in an amount not to exceed $1,750,000 at
any time outstanding (the "Revolving Line"). The Bank also has made two separate
term loans to the Borrower under the Credit Agreement, one having a present
principal balance of $1,215,000 (the "First Term Loan") and one having a present
principal balance of $1,675,000 (the "Second Term Loan").
C. The Borrower's obligation to pay the indebtedness to the Bank under the
Revolving Line is evidenced by the Borrower's replacement revolving promissory
note dated as of September 28, 1992, payable to the order of the Bank in the
original principal amount of $1,750,000, as amended by the 1993 Amendment (as
amended, the "Replacement Revolving Note"). The Borrower's obligation to pay the
indebtedness to the Bank for the First Term Loan is evidenced by the Borrower's
replacement term promissory note dated as of September 28, 1992, payable to the
order of the Bank in the original principal amount of $2,655,000, as amended by
the 1993 Amendment and the 1994 Amendment (as amended, the "Replacement First
Term Note"). The Borrower's obligation to pay the indebtedness to the Bank for
the Second Term Loan is evidenced by the Borrower's replacement term promissory
note dated as of July 29, 1994, payable to the order of the Bank in the original
principal amount of $2,620,000 (the "Replacement Second Term Note").
D. All of the Borrower's indebtedness to the Bank is secured pursuant to
the Security Agreement, Collateral Pledge Agreement and Assignment, each dated
as of January 18, 1990, and the Assignment dated as of February 21, 1990, given
to the Bank by the Borrower, and may now or hereafter be secured by one or more
other security agreements, assignments, pledges, mortgages or other security
documents or instruments (all of the foregoing are herein referred to
collectively as the "Security Documents"). That portion of the Borrower's
indebtedness to the Bank under the Credit Agreement that is evidenced by the
Replacement Revolving Note, the Replacement First Term Note and any
replacements, renewals, extensions or modifications of the foregoing is secured
pursuant to the Combination Mortgage, Security Agreement and Fixture Financing
Statement dated as of January 18, 1990, as amended by the First Amendment to
Combination Mortgage, Security Agreement and Fixture Financing Statement dated
as of September 14, 1993 (as amended, the "Mortgage"), and the Assignment of
Rents and Leases dated as of January 18, 1990 (the "Rent Assignment"), each
given to the Bank by the Borrower.
E. The Borrower has requested that the Bank (i) make additional term loan
advances to the Borrower under the Second Term Loan in the maximum aggregate
principal amount of $2,000,000, so that, when combined with presently
outstanding Second Term Loan Advances, the maximum amount of Advances under the
Second Term Loan shall not exceed $3,675,000; (ii) extend the date through which
it will consider making Advances under the Revolving Line to October 31, 1996;
and (iii) modify the Borrower's financial covenants under the Credit Agreement.
F. The Bank is willing to grant the Borrower's requests on the terms and
subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto agree as follows:
1. Capitalized Terms. All capitalized terms defined in the Credit Agreement
and used but not otherwise defined herein have the meanings assigned to them in
the Credit Agreement.
<PAGE>
2. New Definition. The following definition of "Twelfth Amendment" is added
to Section 1.1 of the Credit Agreement in alphabetical order:
"`Twelfth Amendment' means the Twelfth Amendment to Credit
Agreement and Third Amendment to Replacement First Term Note dated as
of August 25, 1995, by and between the Bank and the Borrower."
3. Revolving Advance Termination Date. Section 2.02 of the Credit Agreement
is hereby amended by changing the date therein from "August 31, 1995" to
"October 31, 1996".
4. Renewal and Increase in Second Term Loan. Section 2.14 of the Credit
Agreement is amended in its entirety to read as follows:
"Section 2.14 Second Term Loan.
(a) The Bank agrees, on the terms and subject to the
conditions herein set forth, to (i) renew the $1,675,000
balance of term indebtedness outstanding as of the date of the
Twelfth Amendment, which is evidenced by the Borrower's third
replacement second term note dated as of July 29, 1994,
payable to the order of the Bank in the original principal
amount of $2,620,000, and (ii) make additional term loan
Advances to the Borrower during the period beginning on the
date of the Twelfth Amendment and ending on March 31, 1996, in
an aggregate amount not exceeding $2,000,000, to be used by
the Borrower solely to purchase new equipment for use in the
Borrower's business or to make loans to one or more of the
Subsidiaries, evidenced by the Intercompany Note of the
applicable Subsidiary, solely for the purchase of new
equipment for use in such Subsidiary's business, or to repay
Revolving Advances which have been used by the Borrower or a
Subsidiary to purchase such equipment. The Advances under this
Section 2.14 are non-revolving, and the Borrower may not
reborrow any amounts previously advanced by the Bank hereunder
and repaid by the Borrower.
(b) Each Advance under this Section 2.14 shall be in
the minimum principal amount of $50,000 and shall not exceed
the aggregate cost of equipment to be purchased by the
Borrower and its Subsidiaries with the proceeds thereof or, if
applicable, the aggregate cost of equipment purchased by the
Borrower and its Subsidiaries with the proceeds of the
Revolving Advances being repaid. As a condition to each
Advance under this Section 2.14, the Borrower shall (i)
deliver to the Bank a copy of each purchase order, contract,
<PAGE>
work order and invoice related to the equipment to be
purchased by the Borrower or a Subsidiary with the proceeds of
such Advance, or purchased with the proceeds of the Revolving
Advance being repaid, showing an aggregate cost to the
Borrower and the Subsidiaries of no less than the amount of
the requested Advance; (ii) be in compliance with each of the
conditions set forth in Section 3.02 hereof at the time of and
immediately following such Advance; and (iii) deliver to the
Bank such other documentation and information as the Bank may
require. Each request for an Advance under this Section 2.14
shall be deemed to be a representation that the statements set
forth in Section 3.02 are correct.
(c) The new Advances to be made under this Section
2.14, together with the $1,675,000 of outstanding term loan
indebtedness to be renewed hereunder, shall be evidenced by
and repayable with interest in accordance with a single term
note of the Borrower in the original principal amount of
$3,675,000 (the "Second Term Note") payable to the order of
the Bank, substantially in the form of Exhibit A to the
Twelfth Amendment. The Second Term Note shall bear interest on
the unpaid principal amount thereof from the date thereof
until fully paid at the rate therein provided.
(d) Each Advance under this Section 2.14 shall be
secured by, among other things, a purchase money security
interest in the equipment to be purchased with the proceeds
thereof and the equipment purchased with the proceeds of the
Revolving Advances being repaid."
5. Cash Flow to Current Maturities. Section 5.08 of the Credit Agreement is
amended in its entirety to read as follows:
"Section 5.08 Ratio of Cash Flow to Current Maturities. The
Borrower will achieve the ratio of Cash Flow to Current Maturities at
not less than (i) 1.15 to 1 at March 31, 1995 and (ii) 1.2 to 1 at
March 31, 1996."
6. Current Ratio. Section 5.10 of the Credit Agreement is amended in its
entirety to read as follows:
"Section 5.10 Current Ratio. The Borrower will maintain the
ratio of Consolidated Current Assets to Consolidated Current
Liabilities at not less than (i) .85 to 1 on the last day of each month
through and including February 28, 1996 and (ii) 1.0 to 1 on March 31,
1996 and on the last day of each month thereafter."
<PAGE>
7. Tangible Net Worth. Section 5.11 of the Credit Agreement is hereby
amended in its entirety to read as follows:
"Section 5.11 Tangible Net Worth. The Borrower will maintain
its Consolidated Tangible Net Worth at an amount not less than (i)
$4,650,000 on the last day of each month through and including February
28, 1996 and (ii) $5,100,000 on March 31, 1996 and on the last day of
each month thereafter."
8. Net Profit. Section 5.13 of the Credit Agreement is amended in its
entirety to read as follows:
"Section 5.13 Net Profit. The Borrower shall achieve
consolidated net income of the Borrower and its Subsidiaries, as
determined in accordance with generally accepted accounting principles
and after provision for income taxes ("Net Profit"), of not less than
$450,000 for the fiscal year ended March 31, 1996."
9. Capital Expenditures. Section 6.10 of the Credit Agreement is amended in
its entirety to read as follows:
"Section 6.10 Expenditures for Fixed Assets. The Borrower will
not, and will not permit any Subsidiary to, purchase, construct or
otherwise acquire fixed assets if, after giving effect to such
acquisition, the aggregate purchase price, whether paid in cash,
deferred or financed, of all fixed assets acquired by the Borrower and
the Subsidiaries combined, during the fiscal year ended March 31, 1996
will exceed $2,400,000 and during any fiscal year of the Borrower
thereafter will exceed $500,000; provided, however, that the
restriction contained in this Section is subject to the further
limitations imposed by Section 6.01."
10. Amendment to Compliance Certificate. Exhibit F to the Credit Agreement
is amended to reflect the amendments to the Borrower's financial covenants
effected by paragraphs 5, 6, 7, and 8 hereof.
11. Amendment to Replacement First Term Note. The second paragraph of the
Replacement First Term Note is amended in its entirety to read as follows:
"The principal balance of this Note remaining unpaid as of August
25, 1995 shall be paid in monthly installments of (i) $5,000 each
commencing on September 1, 1995 and on the first day of each month
thereafter through and including the date of the final scheduled
principal payment under the Borrower's Fourth Replacement Second Term
Note dated as of August 25, 1995, in the original principal amount of
$3,675,000 and payable to the order of the Bank, or any extension,
renewal or replacement thereof (such final payment is hereinafter
referred to as the "Final Second Term Note Payment"); provided,
however, that if the principal amount of the Final Second Term Note
Payment is less than $140,000, then the amount of the principal
payment that is due and payable hereunder on the date of the Final
Second Term Note Payment shall be equal to the difference between (A)
$145,000 minus (B) the principal amount of the Final Second Term Note
Payment, and (ii) $145,000 each commencing on the first day of the
month following the Final Second Term Note Payment and on the first
day of each month thereafter through and including June 1, 1998 or, if
earlier, until the principal balance of this Note shall have been paid
in full. In any event, the entire remaining principal balance of this
Note shall be due and payable in full on July 1, 1998. Interest
accruing on the principal of this Note each month shall be due and
payable on the first day of the next following month and at maturity
or earlier prepayment in full."
12. Fourth Replacement Second Term Note. The Replacement Second Term Note
will be replaced with a new promissory note (the "Fourth Replacement Second Term
Note") to be executed by the Borrower in the form of Exhibit A hereto. Upon
satisfaction of all conditions set forth in paragraph hereof, the Fourth
Replacement Second Term Note shall be the "Second Term Note" referred to in, and
shall evidence the obligation of the Borrower to repay all present and future
Advances under, Section 2.14 of the Credit Agreement, as amended hereby. The
Fourth Replacement Second Term Note shall be in substitution for and replacement
and modification of, but not in payment of, the Replacement Second Term Note.
13. Conditions Precedent. This Amendment shall be of no force or effect
until the Bank shall have received each of the following, in form and substance
satisfactory to the Bank and its counsel:
(a) the Fourth Replacement Second Term Note, duly executed on
behalf of the Borrower and dated the date hereof;
(b) a certified copy of resolutions of the Board of Directors of
the Borrower evidencing approval of this Amendment and the
transactions contemplated hereby;
(c) a certificate of the Secretary or an Assistant Secretary of
the Borrower to the effect that (i) the Borrower's articles of
incorporation and bylaws have not been amended since the last date
when certified copiesthereof were delivered to the Bank pursuant to
Section 3.01(x) of the Credit Agreement, and (ii) the Bank may
conclusively rely on the certificate most recently delivered pursuant
to Section 3.01(aa) of the Credit Agreement until it shall receive a
further certificate of the Secretary or Assistant Secretary of the
Borrower canceling or amending the prior certificate and submitting
the signatures of officers named in such further certificate; and
(d) the acknowledgment of guarantors set forth at the end of this
Amendment, duly executed on behalf of Southwest Teleproductions, Inc.
and Northwest Teleproductions/Chicago, Inc.
14. References. As of the date hereof:
(a) all references in the Credit Agreement to "this Agreement"
shall be deemed to refer to the Credit Agreement as amended by this
Amendment, and all references in the Replacement First Term Note, the
Replacement Revolving Note, the Mortgage and the Rent Assignment to the
Credit Agreement shall be deemed to refer to the Credit Agreement as
amended by this Amendment; and
(b) all references in the Replacement First Term Note to "this
Note" shall be deemed to refer to the Replacement First Term Note as
amended by this Amendment, and all references in the Credit Agreement,
the Mortgage and the Rent Assignment to the Replacement First Term Note
shall be deemed to refer to the Replacement First Term Note as amended
by this Amendment.
15. Representations and Warranties. The Borrower hereby represents and
warrants to the Bank that:
(a) The Borrower has all requisite power and authority,
corporate or otherwise, to execute and deliver this Amendment and the
Fourth Replacement Second Term Note and to perform all of its
obligations hereunder and thereunder, and the same have been or will be
duly executed and delivered by the Borrower and constitute, or will
constitute when executed and delivered, the legal, valid and binding
obligations of the Borrower, enforceable in accordance with their
terms.
(b) The execution, delivery and performance by the Borrower of
this Amendment and the Fourth Replacement Second Term Note have been
duly authorized by all necessary corporate action and do not and will
not (i) require any authorization, consent or approval by any
governmental department, commission, board, bureau, agency
orinstrumentality, domestic or foreign, (ii) violate any provision of
law, rule or regulation or of any order, writ, injunction or decree
presently in effect, having applicability to the Borrower or of the
articles of incorporation or bylaws of the Borrower, or (iii) result
in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which
the Borrower is a party or by which it or its properties may be bound
or affected.
(c) The Borrower acknowledges, confirms and agrees that the
Security Documents and the Guaranties, as defined in the Credit
Agreement, continue in full force and effect and unconditionally secure
payment of the indebtedness evidenced by the Credit Agreement, as
amended by this Amendment, the Replacement Revolving Note, the
Replacement First Term Note, as amended by this Amendment, and the
Fourth Replacement Second Term Note, and any note or other instrument
issued in renewal or replacement thereof or substitution therefor, and
all of the other debts, liabilities and obligations referred to
therein; and the Mortgage and the Rent Assignment continue in full
force and effect and unconditionally secure payment of all that portion
of the indebtedness under the Credit Agreement, as amended by this
Amendment, that is evidenced by the Replacement First Term Note, as
amended by this Amendment, and the Replacement Revolving Note, and any
note or other instrument issued in renewal or replacement thereof or
substitution therefor, and all of the other debts, liabilities and
obligations referred to therein.
(d) All of the representations and warranties contained in
Article IV of the Credit Agreement are correct on and as of the date
hereof as though made on and as of such date, except to the extent that
such representations and warranties relate solely to an earlier date.
16. No Other Changes. Except as explicitly amended by this Amendment, all
of the original terms and conditions of the Credit Agreement and the Replacement
First Term Note shall remain in full force and effect.
17. No Waiver. The execution of this Amendment and the Bank's acceptance of
the Fourth Replacement Second Term Note pursuant hereto shall not be deemed to
be a waiver of any Default or Event of Default, whether or not existing on the
date of this Amendment and whether or not known to the Bank, and the Bank
expressly denies any intention to waive any such Default or Event of Default on
the part of the Borrower. NOTHING CONTAINED IN THIS AMENDMENT, IN THE CREDIT
AGREEMENT OR IN ANY OTHER AGREEMENT OR INSTRUMENT SHALL PRECLUDE OR LIMIT THE
HOLDER OF THE REPLACEMENT REVOLVING NOTE FROM DEMANDING PAYMENT OF SUCH NOTE AT
ANY TIME AND FOR ANY REASON.
18. Additional Documentation; Fees; Counterparts. The Borrower hereby
agrees to execute and deliver to the Bank such other documentation as the Bank
reasonably may require to perfect and protect the Bank's interests under the
Security Documents, Guaranties, Mortgage and Rent Assignment, including without
limitation an amendment to the Mortgage, in recordable form, reflecting the
modifications effected by this Amendment. The Borrower hereby agrees to pay all
fees and disbursements of counsel to the Bank for the services performed by such
counsel in connection with such documentation and with the preparation of this
Amendment, the Fourth Replacement Second Term Note and any other documents or
instruments incidental hereto. This Amendment may be executed in any number of
counterparts and such counterparts shall be deemed to be originals and all such
counterparts, taken together, shall constitute but one and the same instrument.
REMAINDER OF PAGE INTENTIONALLY BLANK;
SIGNATURE PAGE TO FOLLOW
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
NORTHWEST TELEPRODUCTIONS, INC.
By
James N. Steffen
Its Vice President
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
By
Laurie J. Schmelz
Its Vice President
<PAGE>
ACKNOWLEDGMENT OF GUARANTORS
The undersigned Guarantors hereby agree to the terms and
conditions of the foregoing Twelfth Amendment to Credit Agreement and Third
Amendment to Replacement First Term Note and acknowledge and confirm that their
respective Guaranties dated January 18, 1990 (the "Guaranties"), guaranteeing
all present and future indebtedness of the Borrower to the Bank, (i) continue in
full force and effect with respect to all present and future indebtedness of the
Borrower to the Bank, including without limitation all indebtedness under the
Credit Agreement as amended by the foregoing Amendment and under the Replacement
Revolving Note, the Replacement First Term Note as amended by the foregoing
Amendment and the Fourth Replacement Second Term Note; and (ii) are secured
pursuant to the Subsidiary Security Agreements, as defined in the Credit
Agreement. Nothing herein or in any prior, future or other acknowledgment or
consent of the Guarantors implies or creates any obligation on the part of the
Bank to notify the Guarantors of, or obtain acknowledgments of or consents to,
any amendment to or modification, renewal, increase or creation of any present
or future indebtedness of the Borrower to the Bank, and the liability of the
Guarantors under their respective Guaranties shall be absolute and unconditional
with respect to all present and future indebtedness of the Borrower to the Bank,
whether or not any such notice, acknowledgment or consent is given or requested.
SOUTHWEST TELEPRODUCTIONS, INC.
By
Its
NORTHWEST TELEPRODUCTIONS/CHICAGO, INC.
By
Its
<PAGE>
Exhibit A to
Twelfth Amendment to
Credit Agreement
and Third Amendment
to Replacement First Term Note
FOURTH REPLACEMENT SECOND TERM NOTE
$3,675,000 Minneapolis, Minnesota
August 25, 1995
For value received, the undersigned, NORTHWEST TELEPRODUCTIONS, INC., a
Minnesota corporation, hereby promises to pay to the order of NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, a national banking association (the "Bank"), at
its Calhoun-Isles office at 1455 West Lake Street, Minneapolis, Minnesota, or at
any other place designated at any time by the holder hereof, in lawful money of
the United States of America and in immediately available funds, the principal
sum of Three Million Six Hundred Seventy-Five Thousand Dollars ($3,675,000) or,
if less, the aggregate principal amount of all advances made by the Bank under
Section 2.14 of the Credit Agreement dated as of January 18, 1990, as amended by
the amendments dated as of March 31, 1990, October 5, 1990, July 9, 1991, June
15, 1992, September 28, 1992, June 14, 1993, September 14, 1993, November 2,
1993, March 25, 1994, July 29, 1994, March 30, 1995 (letter amendment dated
March 28, 1995) and of even date herewith, by and between the undersigned and
the Bank (as so amended and as hereafter amended, restated or supplemented, the
"Credit Agreement"), together with interest on the principal amount hereunder
remaining unpaid from time to time computed on the basis of the actual number of
days elapsed and a 360-day year, from the date hereof until this Note is fully
paid at an annual rate which shall be at all times equal to three quarters
percent (.75%) over the rate of interest publicly announced by the Bank from
time to time as its "base rate" of interest (or any similar successor rate),
which rate shall change when and as that base rate or successor rate changes.
The principal balance of this Note shall be due and payable in monthly
installments as follows: (i) seven (7) monthly installments of $130,000 each,
beginning on September 1, 1995 and on the first day of each month thereafter
through and including March 1, 1996, (ii) monthly installments of $140,000 each,
beginning on April 1, 1996 and on the first day of each month thereafter through
and including October 1, 1997 or, if earlier, until the principal balance of
this Note shall have been paid in full. In any event, the entire remaining
principal balance of this Note shall be due and payable in full on November 1,
1997. Interest accruing on the principal of this Note each month shall be due
and payable on the first day of the next following month and at maturity or
earlier prepayment in full.
<PAGE>
This Note is issued pursuant to, and is subject to, the Credit Agreement,
which, among other things, provides for acceleration of the maturity hereof upon
the occurrence of an Event of Default (as defined in the Credit Agreement).
This Note is issued, in part, in substitution for and replacement and
modification of, but not in payment of, the Third Replacement Second Term Note
of the undersigned dated as of July 29, 1994 in the maximum principal amount of
$2,620,000 and payable to the order of the Bank.
This Note is secured by a security agreement, pledge agreement and
assignment, each dated as of January 18, 1990, and an assignment dated as of
February 21, 1990, from the undersigned to the Bank, and may now or hereafter be
secured by one or more other security agreements, mortgages, deeds of trust,
assignments or other instruments or agreements.
NORTHWEST TELEPRODUCTIONS, INC.
By
James N. Steffen
Its Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 146,427
<SECURITIES> 0
<RECEIVABLES> 3,091,927
<ALLOWANCES> 119,000
<INVENTORY> 235,056
<CURRENT-ASSETS> 4,010,520
<PP&E> 25,003,111
<DEPRECIATION> 16,745,338
<TOTAL-ASSETS> 13,877,592
<CURRENT-LIABILITIES> 4,029,372
<BONDS> 2,713,484
<COMMON> 13,564
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 13,877,592
<SALES> 0
<TOTAL-REVENUES> 3,500,872
<CGS> 2,664,969
<TOTAL-COSTS> 2,664,969
<OTHER-EXPENSES> 571,474
<LOSS-PROVISION> 12,000
<INTEREST-EXPENSE> 121,376
<INCOME-PRETAX> 144,624
<INCOME-TAX> 55,000
<INCOME-CONTINUING> 89,624
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 89,625
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
