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. 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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