1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number
September 30, 1996 0-10737
Stuart Entertainment, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-0402207
- ------------------------ ----------------------
(State of Incorporation) (I.R.S. Employer
Identification Number)
3211 Nebraska Avenue, Council Bluffs, IA 51501
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (712) 323-1488
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of November 1, 1996 there were 6,884,374 shares of the Registrant's common
stock, $0.1 par value, outstanding.
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STUART ENTERTAINMENT, INC. AND SUBSIDIARIES
INDEX
Page No.
PART I. FINANCIAL INFORMATION:
Item 1:
Consolidated Statements of Operations for the Three and
Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . 3
Consolidated Balance Sheets as of September 30, 1996 and
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . 4-5
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . 7-10
Item 2:
Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . 11-13
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 14-15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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PART I. FINANCIAL INFORMATION
Items 1. FINANCIAL STATEMENTS
STUART ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Amounts In Thousands, Except Per Share Amounts)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
1996 1995 1996 1995
--------- -------- --------- --------
NET SALES $ 27,149 $ 27,031 $ 81,332 $ 83,916
COST OF GOODS SOLD 18,647 17,825 55,966 57,142
--------- -------- --------- --------
GROSS MARGIN 8,502 9,206 25,366 26,774
OTHER EXPENSES:
Selling, general and
administrative expenses 6,188 6,781 17,647 20,086
Amortization of goodwill 212 211 676 630
Interest expense, net 1,069 1,050 3,286 3,365
United Kingdom charge - - - 800
--------- -------- --------- --------
Other expenses, net 7,469 8,042 21,609 24,881
--------- -------- --------- --------
INCOME BEFORE INCOME TAXES 1,033 1,164 3,757 1,893
INCOME TAX PROVISION 402 645 1,334 1,657
--------- -------- --------- --------
NET INCOME $ 631 $ 519 $ 2,423 $ 236
========= ======== ========= ========
EARNINGS PER SHARE (Note 3) $ 0.09 $ 0.08 $ 0.35 $ 0.04
========= ======== ========= ========
EBITDA (Note 3) $ 3,072 $ 3,202 $ 10,203 $ 8,902
========= ======== ========= ========
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING 6,996 6,717 6,890 6,682
========= ======== ========= ========
Note: No dividends were paid or declared during the nine months ended
September 30, 1996 and 1995.
See accompanying Notes to Consolidated Financial Statements.
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STUART ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(Amounts In Thousands)
(UNAUDITED)
ASSETS September 30, December 31,
1996 1995
--------------- ------------------
CURRENT ASSETS:
Cash and cash equivalents $ 859 $ 943
Trade and notes receivables, less allowance
for doubtful accounts of $1,826 and $2,285:
Related Parties 889 1,014
Other 20,456 18,355
Inventories (Note 4) 22,252 21,982
Refundable income taxes 276 -
Deferred income taxes 1,702 1,746
Prepaid expenses and other 784 547
-------- --------
Total Current Assets 47,218 44,587
PROPERTY, PLANT AND EQUIPMENT:
Land and buildings 5,009 4,950
Equipment 29,797 29,262
-------- --------
34,806 34,212
Less accumulated depreciation (14,863) (13,095)
-------- --------
Total Property, Plant and Equipment - Net 19,943 21,117
OTHER ASSETS:
Goodwill, net of accumulated amortization
of $1,757 and $1,209 28,592 29,194
Deferred financing costs, net of accumulated
amortization of $687 and $375 1,348 1,660
Notes receivable, less allowance for doubtful
accounts of $124 759 1,261
Other assets 1,468 1,175
-------- --------
Total Other Assets 32,167 33,290
-------- --------
TOTAL ASSETS $ 99,328 $ 98,994
======== ========
See accompanying Notes to Consolidated Financial Statements.
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STUART ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(Amounts In Thousands, Except Share Amounts)
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY September 30, December 31,
- ------------------------------------ 1996 1995
------------- ------------
CURRENT LIABILITIES:
Current portion of long-term debt (Note 5) $ 8,795 $ 7,897
Bazaar purchase price adjustment 454 710
Trade payables 12,790 12,512
Accrued payroll and other liabilities 2,832 2,867
Income taxes payable 328 543
Deferred income taxes - 40
-------- ---------
Total Current Liabilities 25,199 24,569
LONG-TERM DEBT (Note 5):
Related party 5,000 5,000
Other 31,175 34,586
-------- ---------
Total Long-Term Debt, net of current portion 36,175 39,586
DEFERRED INCOME TAXES, net of current portion 2,642 2,594
COMMITMENTS AND CONTINGENCIES (Note 8)
DEFERRED INCOME 279 205
STOCKHOLDERS' EQUITY:
Common stock - $0.01 par value; 30,000,000 and 20,000,000
shares authorized; 6,884,374 and 6,753,309 shares outstanding 69 68
Additional paid-in capital 26,909 26,384
Retained earnings 7,949 5,525
Treasury stock (56,260 shares at cost) (189) (189)
Cumulative translation adjustment, net of deferred taxes 295 252
-------- ---------
Total Stockholders' Equity 35,033 32,040
-------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 99,328 $ 98,994
======== =========
See accompanying Notes to Consolidated Financial Statements
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STUART ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Amounts In Thousands)
(UNAUDITED)
Nine Months Ended
September 30,
1996 1995
----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,423 $ 236
Adjustments to reconcile net income to net
cash flows from operating activities:
Payment on termination of consulting agreement - (1,150)
Depreciation and amortization 3,160 3,155
Amortization of debt financing fees 312 273
Provision for doubtful accounts (198) 432
Deferred income taxes 93 (550)
Other noncash expenses - net (28) 959
Change in operating assets and liabilities, net:
Trade receivables (2,712) (3,372)
Inventories (856) (4,379)
Trade payables 278 1,523
Other - net (763) 2,918
--------- ---------
Net cash flows from operating activities 1,709 45
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (950) (2,815)
Payments received on notes receivable 1,179 711
Investment in joint ventures - (128)
Acquisition of LSA - (324)
Investment in distributor - (116)
Acquisition of Reliable - (295)
--------- ---------
Net cash flows from investing activities 229 (2,967)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under Revolving Facility 2,049 6,169
Payments on Term Facility (2,278) (2,261)
Payments on other long-term debt (2,316) (2,189)
Payments on LSA Purchase Price Adjustment - (929)
Proceeds from issuance of long-term debt - 1,140
Cost of debt financing (200)
-
Proceeds from issuance of stock and exercise of stock options 521 238
Costs on issuance of stock - (17)
--------- ---------
Net cash flows from financing activities (2,024) 1,951
Effect of currency exchange rate changes on cash
of foreign subsidiaries 2 33
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS (84) (938)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 943 2,116
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 859 $ 1,178
========= =========
Interest paid $ 3,107 $ 3,486
Income taxes paid $ 1,805 $ 1,377
See accompanying Notes to Consolidated Financial Statements.
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STUART ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Stuart
Entertainment, Inc. and subsidiaries (collectively, the "Company")
have been prepared in accordance with generally accepted accounting
principles for interim financial statements and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and notes required by generally
accepted accounting principles for annual financial statements.
In the opinion of the Company's management, the foregoing unaudited
consolidated financial statements reflect all adjustments considered
necessary for a fair presentation of the results of the Company for
the periods shown. Operating results for the three and nine months
ended September 30, 1996 and 1995 are not necessarily indicative of
the results that may be expected for the full year ending December 31,
1996. These financial statements should be read in conjunction with
the audited consolidated financial statements and notes thereto for
the year ended December 31, 1995, filed with the Securities and
Exchange Commission on the Company's Annual Report on Form 10-K.
Certain reclassifications have been made to the 1995 financial
statements to conform to those classifications used in 1996. The
consolidated financial statements of the Company include estimates and
assumptions related to certain assets, liabilities, revenues and
expenses and the disclosure of certain contingent assets and
liabilities. Actual future results may differ from such estimates.
2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the Company, its
wholly-owned subsidiaries and its indirectly wholly-owned subsidiaries
(from the date they became indirectly wholly-owned). All significant
intercompany transactions and balances have been eliminated in
consolidation.
3. EARNINGS PER SHARE AND EBITDA
The number of shares used in earnings per share calculations for the
three month and nine month periods ended September 30, 1996 and 1995
are based on the weighted average number of shares of common stock
outstanding and, if dilutive, common stock equivalents (stock options
and warrants) of the Company using the treasury stock method.
EBITDA is defined as earnings before interest, taxes, depreciation,
amortization and purchase accounting adjustments. EBITDA is presented
because it is a measure of an issuer's ability to service its
indebtedness commonly used by investors. However, EBITDA should not
be considered as an alternative to net income as a measure of
operating results or to cash flows or as a substitute for measures of
performance in accordance with generally accepted accounting
principles.
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4. INVENTORIES
Inventories consisted of the following:
(Amounts in the thousands) September 30, December 31,
1996 1995
------------- ------------
Raw Materials $ 3,612 $ 3,517
Work-In-Process 5,123 5,056
Finished Goods 13,517 13,4 09
---------- ----------
Total $ 22,252 $ 21,982
========== ==========
5. LONG-TERM DEBT
Long-term debt consisted of the following:
September 30, December 31,
(Amounts in the thousands) 1996 1995
------------- ------------
Borrowings under Credit Agreement:
Revolving Facility $ 22,987 $ 20,921
Term Facility 9,872 12,135
Subordinated note payable to Mr. Stuart 5,000 5,000
Notes payable to others 3,754 4,758
Obligations under capital leases 3,357 4,669
---------- ----------
44,970 47,483
Less current portion 8,795 7,897
---------- ----------
Total long-term debt $ 36,175 $ 39,586
========== ==========
BORROWINGS UNDER CREDIT AGREEMENT:
The Company's bank credit facility is for an aggregate principal
amount of up to $38,000,000, with a senior secured revolving line of
credit of $23,000,000 (the "Revolving Facility") and a senior secured
term loan facility of $15,000,000 (the "Term Facility"). The Revolving
Facility and Term Facility are each separated into U.S. and Canadian
facilities. The maximum available under the Revolving Facility was
increased by $3,000,000 during 1995 to a total of $23,000,000 at
December 31, 1995. Any amount outstanding under this $3,000,000
additional amount shall be paid in full at December 31, 1996. The
Credit Agreement expires and all other remaining amounts outstanding
are due on December 12, 1999.
At September 30, 1996 and December 31, 1995, loans outstanding on the
U.S. Revolving Facility totaled $11,900,000 and $11,540,000
respectively, and loans outstanding on the Canadian Revolving Facility
totaled C$15,100,000 ($11,087,000) and C$12,800,000 ($9,381,000),
respectively. Weighted average interest rates on the U.S. Revolving
Facility and Canadian Revolving Facility at September 30, 1996 were
8.20% and 7.29%, respectively. At
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September 30, 1996 and December 31, 1995, loans outstanding on the
U.S. Term Facility totaled $3,250,000 and $4,000,000, respectively,
and loans outstanding on the Canadian Term Facility totaled
C$9,019,000 ($6,622,000) and C$11,100,000 ($8,135,000) respectively.
Weighted average interest rates on the U.S. Term Facility and the
Canadian Term Facility at September 30, 1996 were 8.20% and 7.27%,
respectively.
OBLIGATIONS UNDER CAPITAL LEASES
The Company completed a lease line of credit with its primary bank.
The facility provides lease financing on capitalized equipment
purchased through December 31, 1996. The maximum available under this
facility is $5,000,000. At September 30, 1996, $3,813,000 remained
available under this facility.
6. UNITED KINGDOM CHARGE
In 1995, the Company signed a licensing and marketing agreement with
Playprint Limited, a company headquartered in Dublin, Ireland. This
agreement gave the Company the opportunity to redeploy its assets and
discontinue its manufacturing operation in the United Kingdom. Under
the agreement, Playprint Limited, pays royalties to the Company for
use of certain of the Company's trademark, technologies and equipment
for the production of bingo paper and ink markers. The Company
recorded a one-time pre-tax charge of $800,000 in the second quarter
of 1995 related to the estimated costs to shutdown the manufacturing
facility in the United Kingdom and consolidate its activities with
Playprint Limited.
7. RECENTLY ISSUED ACCOUNTING STANDARD
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based
Compensation, which is effective for the Company beginning January 1,
1996. SFAS 123 requires expanded disclosure of stock-based
compensation arrangements with employees and encourages (but does not
require) compensation cost to be measured based on the fair value of
the equity instrument awarded. Companies are permitted, however, to
continue to apply Accounting Principles Board Opinion No. 25 (APB 25),
which recognizes compensation cost based on the intrinsic value of the
equity instrument awarded. The Company will continue to apply APB 25
to its stock-based compensation awards to employees and will disclose
the required pro forma effect on net income and earnings per share in
Form 10-K for its current year.
8. PURCHASE AGREEMENT
On August 6, 1996, the Company signed a definitive agreement, as
amended on October 10, 1996, to purchase the assets and assume certain
liabilities of Trade Products, Inc.
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9. SUBSEQUENT EVENTS
On November 13, 1996, the Company completed the acquisition of Trade
Products, Inc. (See Note 8 to Notes to Consolidated Financial
Statements) for a purchase price of $37.2 million, subject to certain
post-closing adjustments, plus the issuance of warrants to acquire
300,000 shares of the Company's common stock.
On November 13, 1996, the Company completed a private placement in
reliance on Rule 144A of the Securities Act of 1933, as amended, of
$100 million aggregate principal amount of its 12.5% Senior
Subordinated Notes due November 15, 2004 (the "Notes"). Interest on
the Notes will be payable semi-annually on each May 15 and November 15
commencing May 15, 1997. The indenture governing the Notes imposes
certain limitation on the Company's ability to, among other things,
incur additional indebtedness, pay dividends or make certain other
restricted payments and consummate certain asset sales. The Company
will use the proceeds of the private placement to finance the
acquisition of Trade Products, Inc., to repay certain existing
indebtedness and for general corporate purposes.
On November 13, 1996, the Company amended and restated its credit
agreement (the "New Credit Agreement"). The New Credit Agreement
consists of a revolving credit facility in the aggregate principal
amount of $30 million, bearing interest with reference to the base rate
or the LIBOR rate, at the Company's option, plus the applicable
interest margin, as defined in the New Credit Agreement. The New Credit
Agreement imposes certain covenants and other requirements on the
Company that among other things, restricts (i) the incurrence and
existence of indebtedness or contingent obligations; (ii)
consolidations, mergers and sales of assets; (iii) the incurrence and
existence of liens; (iv) the sale or disposition of assets; (v)
investments, loans and advances; (vi) capital expenditures; (vii) the
payment of dividends and repurchase of common stock; and (viii)
acquisitions by the Company. The Company is also required to meet
certain consolidated financial tests, including minimum level of net
worth, minimum level of consolidated interest coverage, maximum
consolidated leverage ratio and minimum consolidated fixed charge
coverage ratio. The Company may draw amounts under the New Credit
Agreement, subject to availability pursuant to a borrowing base
requirement, in order to meet its working capital requirements,
including issuing letters of credit. The loans will be secured by a
first priority security interest in all of the Company's assets
(including the acquired assets of Trade Products, Inc.), but excluding
real estate and certain other specific assets of the Company.
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Item 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The statements contained in this report, if not historical, are forward looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995, and involve risks and uncertainties that could cause actual results to
differ materially from the financial results described in such forward looking
statements. These risks and uncertainties include, among others, the level and
rate of growth in the Company's operations, the effect of paper costs, and the
ability of the Company to achieve earnings per share growth through internal
investment, strategic alliances, joint ventures and other methods. The success
of the Company's business operations is in turn dependent on factors such as
the effectiveness of the Company's marketing strategies to grow its customer
base and improve customer response rates, the appeal of the Company's mix of
products, the Company's success at entering into and collaborating with others
to conduct effective strategic alliances and joint ventures, general
competitive conditions within the entertainment and gaming industries and
general economic conditions. Further, any forward looking statements or
statements speak only as of the date on which such statement was made, and the
Company undertakes no obligation to update any forward looking statement or
statements to reflect events or circumstances after the date on which such
statement is made or to reflect the occurrence of unanticipated events.
Therefore, any forward looking statements should not be relied upon as a
prediction of actual results.
RESULTS OF OPERATIONS
Comparison of Three Months Ended September 30, 1996 and 1995
Net Sales - Net sales were $27.1 million for the three months ended September
30, 1996, an increase of $118,000 or 0.4% from $27.0 million for the three
months ended September 30, 1995. The slight sales increase was attributable to
a combination of the following: i) an increase in electronics and electrical
equipment sales of $2.8 million, primarily due to a $2.4 million sale of System
12 (TM) electronic bingo and gaming units; ii) a decrease in sales of
consumable products, including bingo paper, pulltab tickets and ink products,
of $2.2 million due to market softness primarily in the United States and; iii)
a decrease in sales of $479,000 related to the shutdown of Stuart Entertainment
England.
Cost of Goods Sold - Cost of goods sold, as a percentage of sales, was 68.7% for
the three months ended September 30, 1996, an increase of 2.8% from 65.9% for
the three months ended September 30, 1995. The increase in cost of goods sold
percentage is primarily due to production inefficiencies related to the lower
sales volume of consumable products, including bingo paper, pulltab tickets and
ink products, and higher scrap adjustments, partially offset by the sale of
System 12 (TM) electronic bingo and gaming units.
Selling, General and Administrative Expenses - Selling, general and
administrative (SG&A) expenses were $6.2 million for the three months ended
September 30, 1996, a decrease of $593,000 or 8.7% from $6.8 million for the
three months ended September 30, 1995. SG&A expenses, as a percentage of sales,
were 22.8% for the three months ended September 30, 1996, a decrease of 2.3%
from 25.1% for the three months ended September 30, 1995. The decrease in SG&A
expenses was due primarily to three factors: i) the discontinued operation of
Stuart Entertainment Limited in 1995; ii) consolidated synergies related to the
acquisitions of Bingo Press & Specialty Limited ("Bazaar") the Reliable
Corporation of America ("Reliable"); and iii) the continued impact of a cost
reduction program implemented in 1995.
Comparison of Nine Months Ended September 30, 1996 and 1995
Net Sales - Net sales were $81.3 million for the nine months ended September 30,
1996, a decrease of $2.6 million or 3.1% from $83.9 million for the nine months
ended September 30, 1995. The decrease was attributable to a combination of the
following: i) a decrease in sales of $1.2 million related to the shutdown of
Stuart Entertainment Limited; and ii) a decrease in sales of consumable products
of $3.9 million due to market softness primarily in the United States, this
decrease was partially offset by an increase in electronics and
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electrical equipment sales of $2.5 million, primarily due to a $2.4 million
sale of System 12 (TM) electronic bingo and gaming units.
Cost of Goods Sold - Cost of goods sold, as a percentage of sales, was 68.8% for
the nine months ended September 30, 1996, an increase of 0.7% from 68.1% for the
nine months ended September 30, 1995. Excluding the application of a purchase
accounting adjustment recorded in the first quarter of 1995 to the finished
goods of Bazaar, cost of goods sold for the nine months ended September 30, 1996
increased to 68.8% from 67.5%, partially related to production variances.
Selling, General and Administrative Expenses - SG&A expenses were $17.6 million
for the nine months ended September 30, 1996, a decrease of $2.5 million or
12.1% from $20.1 million for the nine months ended September 30, 1995. SG&A
expenses, as a percent of sales, were 21.7% for the nine months ended September
30, 1996, a decrease of 2.2% from 23.9% for the nine months ended September 30,
1995. The decrease in SG&A expenses was due primarily to four factors: i) the
discontinued operation of Stuart Entertainment Limited in 1995; ii) consolidated
synergies related to the acquisitions of Bazaar and Reliable; iii) improved bad
debt experience; and iv) the continued impact of a cost reduction program
implemented in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's long-term debt at September 30, 1996, including the current
portion thereof, totaled $45.0 million compared to $47.5 million at December
31, 1995 (see Note 5 to the Consolidated Financial Statements). Cash payments
on long-term debt for the first nine months ended September 30, 1996 totaled
approximately $4.6 million compared to $4.5 million for the nine months ended
September 30, 1995.
As of September 30, 1996, the Company had drawn all amounts available under its
$23.0 million revolving line of credit facility. Approximately $615,000 was
invested short-term and available for working capital purposes. See Note 9 to
Notes to Consolidated Financial Statements.
Capital expenditures during the nine month period ended September 30, 1996
totaled $999,000. At September 30, 1996, $3.8 million remained available under
the Company's lease line of credit. Capital expenditures for fiscal 1996 are
projected to be $2.0 million. The Company's capital expenditure program will
continue to focus on the purchase of equipment designed to increase production
capacity and/or improve manufacturing efficiency. The Company expects a larger
portion of its capital expenditure requirements to be allocated to the upgrade
and development of management information systems.
Management believes that under the current operating plan, its existing capital
resources and available financing will be sufficient to meet its operating
expenses and capital expenditure requirements. See Note 9 of Notes to
Consolidated Financial Statements.
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CHANGE IN BALANCE SHEET ACCOUNTS
Total trade and notes receivables increased $2.0 million from $19.4 million at
December 31, 1995 to $21.4 million at September 30, 1996. The increase is due
primarily to the $2.4 million sale of System 12(TM) electronic bingo and gaming
units at the end of the third quarter of 1996. During the nine months ended
September 30, 1996 trade receivables from unrelated parties totaling $454,000
were converted to notes receivable. The conversions allowed the customers to
resolve temporary cash flow timing issues and proceed with their long-term
growth plans.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
An annual meeting of the stockholders of the Company (the "Meeting") was held
on July 17, 1996. The following table sets forth each of the proposals that
the stockholders were asked to vote upon and the results of the Meeting.
PROPOSAL RESULTS
--------- -------
1. A proposal to elect eight directors to the Board of Directors:
Leonard A. Stuart FOR 6,297,286
AGAINST 155,722
Albert F. Barber FOR 6,297,980
AGAINST 155,028
Timothy R. Stuart FOR 6,297,286
AGAINST 155,722
Perry J. Lewis FOR 6,191,152
AGAINST 261,856
Sangwoo Ahn FOR 6,298,286
AGAINST 154,722
Ira Starr FOR 6,191,152
AGAINST 261,856
Richard D. Spizzirri FOR 6,298,286
AGAINST 154,722
Stanley M. Taube FOR 6,298,286
AGAINST 154,722
2. A proposal to approve an amendment to the Company's Certificate of
Incorporation to comply with the requirements of the Colorado Limited Gaming
Act.
FOR 6,285,058
AGAINST 10,460
ABSTAIN 6,182
NO VOTE 151,308
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3. A proposal to approve an amendment to the Company's Certificate of
Incorporation increasing the number of authorized shares of common stock from
20,000,000 shares to 30,000,000 shares.
FOR 6,363,005
AGAINST 78,301
ABSTAIN 11,702
4. A proposal to approve an amendment to the Company's 1994 Performance Stock
Option Plan increasing the number of shares available for grant from 2,000,000
shares to 2,500,000 shares.
FOR 5,194,525
AGAINST 338,766
ABSTAIN 18,700
NO VOTE 901,017
5. A proposal to ratify the Board of Directors' selection of Deloitte & Touche
LLP, as the Company's independent auditors for the fiscal year ending December
31, 1996.
FOR 6,442,188
AGAINST 3,302
ABSTAIN 7,518
Item 6. Exhibits and Reports on Form 8-K:
a. Exhibits:
Exhibit 10 Sixth Amendment to Credit Agreement
dated as of August 9, 1996.
Exhibit 11 Statement Regarding Computation of
Per Share Earnings
Exhibit 27 Financial Data Schedule
b. Reports on Form 8-K:
The Company filed a current Report on Form 8-K, dated
August 6, 1996, under Item 7 regarding the Asset Purchase
Agreement, dated August 6, 1996, among Stuart
Entertainment, Inc., Trade Products, Inc. and the
Shareholders of Trade Products, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STUART ENTERTAINMENT, INC.
Date: November 13, 1996 /s/ TIMOTHY R. STUART
-----------------------------------
Timothy R. Stuart
President
Date: November 13, 1996 /s/ PAUL C. TUNINK
-----------------------------------
Paul C. Tunink
Vice President and Chief
Financial Officer
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EXHIBIT INDEX
The following Exhibits are filed herewith.
Exhibit No. Description Page
- ----------- ----------- -----
10 Sixth Amendment to Credit Agreement 18-28
dated as of August 9, 1996.
11 Statement Regarding Computation of 29
Per Share Earnings.
27 Financial Data Schedule 30
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