4
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT ON FORM 8-K
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 30, 1998
DAY RUNNER, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-19835 95-3624280
(Commission File Number) (I.R.S. Employer Identification No.)
15295 Alton Parkway
Irvine, CA 92618
(Address of principal executive offices)
Registrant's telephone number, including area code: 714/680-3500
<PAGE>
Item 2. Acquisition or Disposition of Assets
On October 30, 1998, Day Runner, Inc.(the "Registrant" or the "Company")
announced that it had assumed control of Filofax Group plc ("Filofax") as a
result of its previously announced cash tender offer for the outstanding shares
of Filofax stock. The Registrant's offer was for (pound)2.10 per share
(approximately $3.42). The Registrant owned or had received valid acceptances of
its cash tender offer for approximately 87% of the outstanding shares of Filofax
as of October 30, 1998. The Registrant had announced a cash tender offer for the
Filofax shares on September 24, 1998 and had revised its offer on September 25,
1998 to reflect the agreement it had reached with the Board of Directors of
Filofax on the terms of the cash tender offer. The Registrant acquired all the
remaining outstanding shares of Filofax on December 26, 1998. This acquisition
will be accounted for under the purchase method of accounting.
The total purchase price of $90,422,000 was paid for in cash and Loan
Notes. The Company borrowed this amount to pay for the Filofax stock under a
Loan Agreement with a group of banks. Such Loan Agreement was filed as Exhibit
10.1 to the Company's 1998 Current Report on Form 8-K filed with the Commission
on September 24, 1998. Currency conversions in this presentation in Item 2 have
been made using an exchange rate of 1.6291 which was the exchange rate on
January 12, 1999.
Filofax is the leading producer of loose-leaf personal organizers for
the retail market in the United Kingdom and the Filofax brand name is widely
recognized in a number of other key markets around the world. In addition to its
core personal organizer business, Filofax markets business forms and high-end
pens. Filofax has wholly owned subsidiaries in France, Germany, Hong Kong,
Scandinavia, the U.K. and the U.S. and sells primarily through retail
distribution channels in each market.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired:
Audited consolidated balance sheets of Filofax Group plc and
subsidiaries at March 31, 1998 and 1997 and the related consolidated
profit and loss accounts, cash flow statements, statements of total
recognised gains and losses and reconciliation of movements in equity
shareholders' funds for each of the three years in the period ended
March 31, 1998.
(b) Pro Forma Financial Information
Introduction to Unaudited Pro Forma Condensed Combined Financial
Statements
Unaudited Pro Forma Combined Balance Sheet as of September 30, 1998
Unaudited Pro Forma Condensed Combined Statements of Income for the
fiscal year ended June 30, 1998 and the quarter ended
September 30, 1998
Notes to Unaudited Pro Forma Combined Financial Statements
(c) Exhibits
Item No. Exhibits
23 Consent of Independent Auditors
<PAGE>
SIGNATURE
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 hereunto duly authorized.
DAY RUNNER, INC.
By: /s/ James E. Freeman, Jr.
-------------------------
James E. Freeman, Jr.
Chief Executive Officer
Dated: January 15, 1999
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE SHAREHOLDERS AND BOARD OF DIRECTORS
FILOFAX GROUP PLC
We have audited the accompanying consolidated balance sheets of Filofax Group
plc and subsidiaries at March 31, 1998 and 1997 and the related consolidated
profit and loss accounts, cash flow statements, statements of total recognised
gains and losses and reconciliation of movements in equity shareholders' funds
for each of the three years in the period ended March 31, 1998. These
consolidated financial statements are the responsibility of the management of
Filofax Group plc. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United Kingdom which standards are substantially in accordance with
auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
a true and fair view, in all material respects, of the consolidated financial
position of Filofax Group plc and subsidiaries at March 31, 1998 and 1997 and
the consolidated results of operations and cash flows for each of the three
years ended March 31, 1998, in conformity with generally accepted accounting
principles in the United Kingdom.
Generally accepted accounting principles in the United Kingdom vary in certain
respects from generally accepted accounting principles in the United States.
Application of generally accepted accounting principles in the United States
would have affected the results of operations for each of the two years ended
March 31, 1998, and 1997 and shareholders' equity funds at March 31, 1998 and
1997 to the extent summarised in note 26 to the consolidated financial
statements.
Binder Hamlyn
Chartered Accountants
London
England
June 1 1998
<PAGE>
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
<TABLE>
Filofax Group plc
Consolidated Profit and Loss Account
For the Years Ended March 31,
1998 1997
<CAPTION>
Continuing Discontinued Continuing Discontinued
Operations Operation Total Operations Operations Total
<S> <C> <C> <C> <C> <C> <C>
Notes (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
----------- ---------- ----------- ---------- ----------- --------------- -----------
Turnover 1 37,669 4,531 42,200 37,916 5,686 43,602
Cost of sales 17,184 3,659 20,843 17,162 2,927 19,033
------ ----- ------ ------ ------ ------
Gross profit 20,485 872 21,357 20,754 2,759 23,513
Administrative expenses 14,348 2,757 17,105 15,070 2,545 17,615
------- ------ ------ ------ ----- ------
Operating profit/(loss) 6,137 (1,885) 4,252 5,684 214 5,898
Loss on disposal of discontinued
operation 24 - (5,127) (5,127) - - -
------ ------ ------ ----- ------ -------
Profit/(loss) on ordinary activities
before interest 6,137 (7,012) (875) 5,684 214 5,898
Net interest (payable)/receivable 4 (7) - (7) 43 (26) 17
- ----- ----- ----- ------ -------- -------
Profit/(loss) on ordinary activities
before taxation 2 6,130 (7,012) (882) 5,727 188 5,915
Taxation charge/(credit) 5 1,837 (297) 1,540 1,774 - 1,774
------ ------- ------ ------ ------- ------
Profit/(loss) on ordinary activities
after taxation 4,293 (6,715) (2,422) 3,953 188 4,141
Dividends 6 1,097 1,118
------ ------- ----- ------ ------- -----
Retained (loss)/profit for the year 15 (3,519) 3,023
------ ------- ------- ------ ------- -----
Earnings/(loss) per share 7 15.0p (8.4p) 13.1p 13.7p
======= ======= ======= ====== ======= =====
Table (continued)
Notes
--------
Turnover 1 42,711
Cost of sales 19,033
------
Gross profit 23,678
Administrative expenses 16,933
------
Operating profit/(loss) 6,745
Loss on disposal of discontinued
operation 24 -
------
Profit/(loss) on ordinary activities
before interest -
Net interest (payable)/receivable 4 (182)
-------
Profit/(loss) on ordinary activities
before taxation 2 6,563
Taxation charge/(credit) 5 1,969
-------
Profit/(loss) on ordinary activities 4,594
after taxation
Dividends 6 1,057
-------
Retained (loss)/profit for the year 15 3,537
-------
Earnings/(loss) per share 7 16.0p
-------
The discontinued operation comprises the trade of Henry Ling & Son (London)
Limited which was sold on 31 March 1998. No Group overhead has been attributed
to the discontinued operation for the purposes of the disclosure shown above.
</TABLE>
<TABLE>
<CAPTION>
Filofax Group plc
Statement of Total Recognised Gains and Losses
For the Years Ended March 31,
<S> <C> <C> <C>
1998 1997 1996
Notes (pound)'000 (pound)'000 (pound)'000
----- ----------- ----------- -----------
(Loss)/profit on ordinary activities after taxation 15 (2,422) 4,141 4,594
Exchange differences (59) 161 200
------- ----- ------
Total recognized gains and losses for the year 16 (2,481) 4,302 4,794
======= ===== =====
</TABLE>
<TABLE>
<CAPTION>
Filofax Group plc
Consolidated Balance Sheet
At March 31,
1998 1997
<S> <C> <C>
Notes (pound)'000 (pound)'000
----- ------------ ------------
Tangible fixed assets 8 2,215 2,276
-------- --------
Stock 10 6,397 7,395
Debtors 11 5,121 5,421
Cash at bank and in hand 21 5,942 7,393
-------- --------
Total current assets 17,460 20,209
Creditors: amounts falling due within one year 12 9,189 9,869
-------- --------
Net current assets 8,271
--------
10,340
Net assets 10,486
12,616
Capital and reserves
Called up share capital 14 1,407 1,510
Share premium account 15 474 223
Capital redemption reserve 15 115 -
Other reserves 15 809 1,045
Profit and loss account 15 7,681 9,838
-------- -------
Equity shareholders' funds 16 10,486 12,616
======== ========
</TABLE>
Approved by the Board of Directors on 1 June 1998
C.S. Brace M.D. Ball
<TABLE>
<CAPTION>
Filofax Group plc
Company Balance Sheet
At March 31,
1998 1997
<S> <C> <C>
Notes (pound)'000 (pound)'000
----- -------- --------
Fixed asset investments 9 12,702 18,096
-------- --------
Debtors 11 8,964 4,942
Creditors: amounts falling due within one year 12 1,014 1,021
Net current assets 7,950 3,921
------- -------
Net assets 20,652 22,017
======= =======
Capital and reserves
Called up share capital 14 1,407 1,510
Share premium account 15 474 223
Capital redemption reserve 15 115 -
Other reserves 15 8,006 13,019
Profit and loss account 15 10,650 7,265
--------- --------
Equity shareholders' funds 20,652 22,017
========= ========
Approved by the Board of Directors on 1 June 1998
C.S. Brace M.D. Ball
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Filofax Group plc
Consolidated Cash Flow Statement
For the Years Ended March 31,
<S> <C> <C> <C>
1998 1997 1996
Note (pound)'000 (pound)'000 (pound)'000
---- ----------- ----------- -----------
Net cash inflow/(outflow) from operating activities
Continuing operations 6,384 7,577 5,560
Discontinued operation 22 (565) (334)
------- ------- ------
Net cash inflow from operating activities 20 6,406 7,012 5,226
------- ------- ------
Returns on investments and servicing of finance
Interest received 326 459 433
Interest paid (313) (456) (572)
Interest element of finance lease repayments (11) (22) (23)
--- ------- ------- -------
Net cash inflow/(outflow) from returns on
investments and servicing of finance 2 (19) (162)
------- ------- -------
Taxation
Taxation paid (2,364) (1,991) (1,630)
------- ------- -------
Capital expenditure
Purchase of tangible fixed assets (943) (445) (738)
Sale of tangible fixed assets 52 70 26
-------- ------- ------
Net cash outflow for capital expenditure (891) (375) (712)
---- -------- ------- -------
Acquisition
Purchase of unincorporated business 23 (122) - -
Payments for subsidiary undertakings acquired
(net of cash) 25 - - 648
------- ------- -------
Net cash outflow from acquisition (122) - (648)
------- ------- ------
Equity dividends paid (1,081) (1,056) (871)
Net cash inflow before financing 1,950 3,571 1,203
------- ------- ------
Financing
Issue of ordinary shares (net of issue costs) 80 41 153
Purchase of own shares (3,287) - -
Capital element of finance lease repayments 22 (98) (131) (91)
Repayment of Loans 22 - (248) (707)
------- ------- ------
Net cash outflow from financing (3,305) (338) (645)
------- ------- ------
(Decrease)/increase in cash 22 (1,355) 3,233 558
== ====== ======= ======
</TABLE>
<PAGE>
ACCOUNTING POLICIES
FOR THE YEAR ENDED MARCH 31, 1998
Accounting convention The accounts have been prepared using the historical cost
convention and comply with all applicable UK accounting standards.
Basis of consolidation The Group accounts consolidate the assets and liabilities
and the results of the Company and its subsidiary undertakings. The results of
businesses acquired during the year have been consolidated from the date of
acquisition and the results of businesses disposed of during the year
consolidated up to the date of disposal. Transactions and balances between Group
undertakings have been eliminated; profit on sales to subsidiary undertakings is
eliminated on consolidation until products are sold to customers outside the
Group.
Turnover Turnover shown in the consolidated profit and loss account represents
goods invoiced during the year to external customers excluding value added tax
and other sales taxes.
Depreciation Depreciation is calculated by reference to the cost of fixed assets
using a straight line basis at rates considered appropriate having regard to the
expected useful lives of the assets, other than freehold land which is not
depreciated. The annual rates of depreciation in use are:
Freehold buildings 2.5 per cent.
Short leasehold buildings Over period of lease
Plant and machinery 15 per cent.
Fixtures and equipment 15 per cent. - 33.33 per cent.
Motor vehicles 25 per cent.
Stocks Stocks are valued at the lower of cost and net realisable value.
Deferred taxation Provision is made for taxation which is deferred as a result
of timing differences arising principally between depreciation and capital
allowances, to the extent that the liabilities are likely to crystallise, at the
tax rate applicable at the time of reversal.
Leasing commitments Rentals paid under operating leases are charged to the
profit and loss account on a straight line basis over the term of the lease.
Assets acquired under finance leases and hire purchase contracts are capitalised
and depreciated over their useful lives. The interest element of the lease
obligation is charged to the profit and loss account over the period of the
lease.
Pensions For defined benefit schemes, the cost of providing pension benefits is
charged to the consolidated profit and loss account on a systematic basis over
the period during which benefit is derived from employees' services. In the case
of defined contribution schemes, employer's contributions are written off to the
consolidated profit and loss account as incurred.
Goodwill Goodwill acquired is written off directly to reserves in the year of
acquisition.
Foreign currency translation Monetary assets and liabilities denominated in
foreign currencies are translated into Sterling at the rates of exchange ruling
at the balance sheet date. Transactions in foreign currencies are translated
into Sterling at rates ruling at the date of the transaction.
Exchange differences arising in the accounts of individual companies are taken
to the profit and loss account.
The accounts of subsidiary undertakings are translated into Sterling on
consolidation on the following basis:
(i) Profit and loss account items at the average rate of exchange during
the period or, where forward contracts have been taken out to hedge the
results of overseas subsidiary undertakings, at contracted rates.
(ii) Assets and liabilities at the rate ruling at the balance sheet date.
Exchange differences arising on the translation of the opening net investment
and the results for the year are recorded as movements on reserves.
References to constant exchange rate growth within the annual report and
accounts represent growth within the annual report and accounts over the
previous financial year excluding the effects of changes in Sterling exchange
rates. Constant exchange rate numbers are calculated by retranslating the
current year results of overseas subsidiary undertakings and significant foreign
currency denominated earnings streams of UK subsidiary undertakings into
Sterling assuming that the average exchange rates used for translation remained
unchanged from those used in the previous year.
<PAGE>
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 31 MARCH 1998
<TABLE>
<CAPTION>
1. Segmental analysis
The Group operates in a single business segment. All of the Group's turnover
relates to the sale of consumer products. An analysis of turnover by location of
customer is shown below together with growth in Sterling and at constant
exchange rates.
Constant Exchange Rate
1998 1997 1998
<S> <C> <C> <C>
(pound)'000 (pound)'000 %Inc/(Dec) (pound)'000 %Inc/(Dec)
----------- ------------ ---------- ------------ ----------
United Kingdom 16,706 16,691 0.1 16,706 0.1
Nordic subsidiaries 5,050 5,124 (1.4) 5,751 12.2
France 2,807 3,208 (12.5) 3,495 8.9
Germany 2,726 3,069 (11.2) 3,573 16.4
USA 5,186 5,070 2.3 5,355 5.6
Overseas third party distributors 5,194 4,754 9.3 5,216 9.7
-------- -------- ------ -------- -----
Turnover from continuing operations 37,669 37,916 (0.7) 40,096 5.7
Discontinued operation - Lings 4,531 5,686 (20.3) 4,531 (20.3)
-------- -------- ------ -------- -----
Group turnover 42,200 43,602 (3.2) 44,627 2.4
======= ======= ====== ======== =====
</TABLE>
Turnover of the discontinued operation by location of customer was as follows:
United Kingdom (pound)4,429,000 (1996/97; (pound)5,548,000), Overseas third
party distributors (pound)102,000 (1996/97; (pound)138,000).
<TABLE>
<CAPTION>
An analysis of turnover by location of subsidiary undertaking is as follows:
1998 1997 1996
<S> <C> <C> <C>
(pound)'000 (pound)'000 (pound)'000
----------- ----------- -----------
United Kingdom (excluding Lings) 26,001 26,027 23,900
Nordic subsidiaries 5,054 5,189 6,393
France 2,867 3,260 3,126
Germany 2,726 3,069 2,385
USA 5,204 5,070 5,667
Hong Kong 4,131 3,650 4,758
-------- -------- --------
45,983 46,265 46,229
Less: Intra-Group sales (8,314) (8,349) (8,995)
--------- --------- ---------
External turnover from continuing operations 37,669 37,916 37,234
Discontinued operation - Lings 4,536 5,701 5,510
Less: Intra-Group sales (5) (15) (33)
--------- --------- ---------
Group external turnover 42,200 43,602 42,711
======== ======== ========
</TABLE>
By geographical segment of origin, all of the turnover relating to the
discontinued operation arose within the United Kingdom. Intra-Group sales by
segment of origin for continuing operations comprise United Kingdom
(pound)4,324,000 (1997: (pound)4,784,000; 1996: (pound)4,237,000), USA
(pound)18,000 (1997: (pound)Nil; 1996: (pound)12,000), Nordic subsidiaries
(pound)4,000 (1997: (pound)66,000; 1996: (pound)95,000) and Hong Kong
(pound)3,968,000 (1997: (pound)3,499,000; 1996: (pound)4,651,000).
Disclosure of segmental analysis of profit before taxation and net assets was
not publicly disclosed as the directors deemed that such disclosure would be
seriously prejudicial to the interests of the Group.
2. (Loss)/profit on ordinary activities before taxation
<TABLE>
<CAPTION>
(Loss)/profit is stated after charging the following:
1998 1997 1996
<S> <C> <C> <C>
(pound)'000 (pound)'000 (pound)'000
------------ ----------- -----------
Rentals under operating leases
Land and buildings 700 644 689
Other assets 479 485 445
Foreign exchange losses on borrowings and deposits 16 33 107
Auditors' remuneration for audit services 78 89 85
Auditors' remuneration for non-audit services* 64 52 41
Depreciation
Owned Assets 657 746 598
Assets held under finance leases 56 104 60
*Included in the costs of acquisitions are fees to the auditors for non-audit services of
(pound)2,000 (1997: (pound)Nil; 1996: (pound)30,000)
</TABLE>
<TABLE>
<CAPTION>
3. Employment costs
1998 1997 1996
<S> <C> <C> <C>
(pound)'000 (pound)'000 (pound)'000
------------ ----------- -----------
Ren
Wages and salaries 7,918 8,335 7,020
Social security costs 1,183 1,191 1,020
Other pension costs 187 211 159
------ ------ ------
9,288 9,737 8,199
===== ===== =====
1998 1997 1996
Number Number Number
------ ------ ------
The average number of employees during the year was:
Production and warehousing 191 194 132
Office, sales and management 285 284 244
--- --- ---
476 478 376
=== === ===
</TABLE>
<TABLE>
<CAPTION>
Directors' Remuneration for the year ended 31 March 1998
Aggregate emoluments by individual director were as follows:
Performance Aggregate Aggregate Aggregate Pension
Base Benefits related emoluments emoluments emoluments contributions
Fees Salary in kind payments 1997/98 1996/97 1995/96 1997/98
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Director (pound)'000 (pound)'000 (pound)'000 (pound)/000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
- -------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ---------------
Executive:
R.A. Field - 138 9 - 147 137 150 34
C.S. Brace - 88 7 - 95 92 100 22
Non-Executive:
R.D. Collischon 10 - 1 - 11 11 10 -
(Chairman)
M.R.J. Tyndall 7 - - - 7 7 7 -
Remuneration of Directors
who left in 1996/97 - - - - - 73 104 -
--- --- --- --- --- --- ---- ---
1997/98 17 226 17 - 260 320 371 56
=== === === === ==== ==== ==== ===
1996/97 24 272 24 - 320
=== === === == ====
1995/96 24 274 26 47 371
=== ==== === === ====
Total remuneration was as follows: 1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
----------- ----------- -----------
Aggregate emoluments (as shown above): 260 320 371
Pension contributions 56 - 29
Gains made on exercise of share options 87 - -
Compensation for loss of office - 45 -
- --- --
403 365 400
==== ==== ====
The comparative figures for aggregate emoluments shown above exclude
contributions to defined benefit pension schemes in accordance with the Company
Acocunts (Disclosure of Directors' Emoluments) Regulations 1997 SI 1997/570. The
two executive directors listed above each had retirement benefits accruing under
a defined benefit scheme in the year ended 31 March 1997 but, from 1 April 1997,
their pension arrangements were transferred to the defined contributuion section
of the pension scheme.
</TABLE>
<TABLE>
<CAPTION>
4. Net interest (payable)/receivable
1998 1997 1996
<S> <C> <C> <C>
(pound)'000 (pound)'000 (pound)'000
------------ ----------- -----------
Bank loans and overdrafts (312) (426) (595)
Finance lease interest (11) (22) (23)
----- ------ -------
(323) (448) (618)
Interest receivable 316 465 436
----- ----- ------
(7) 17 (182)
====== ===== =====
</TABLE>
<TABLE>
<CAPTION>
5. Taxation
<S> <C> <C> <C>
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
----------- ----------- -----------
UK corporation tax 1,082 1,468 1,810
Overseas taxation 434 306 337
Net taxation adjustments of prior years 24 0 (178)
----- ----- -----
1,540 1,774 1,969
===== ===== =====
</TABLE>
UK corporation tax for the year ended 31 March 1998 is stated net of a
(pound)297,000 tax credit arising in respect of the operating loss and
subsequent loss on disposal of the business and net trading assets of Henry Ling
& Son (London) Limited.
<TABLE>
<CAPTION>
6. Dividends
1998 1997 1996
<S> <C> <C> <C>
(pound)'000) (pound)'000) (pound)'000)
------------ ---------- -----------
Interim dividend 1.65p (1997: 1.50p; 1996: 1.35p) per share net 463 453 407
Final dividend 2.42p (1997: 2.20p; 1996: 2.0p) per share net 681 665 603
(Over)/under provision of prior year dividend (47) - 47
------ -------- ------
1,097 1,118 1,057
===== ===== =====
</TABLE>
The final dividend for the 1996/97 financial year was provided for on the basis
of the number of shares in issue at 31 March 1997. The company subsequently
purchased and cancelled 2,300,000 of its ordinary shares and issued 146,137
shares under share option schemes, the combined effect being to reduce the
actual final dividend payment by (pound)47,000.
<PAGE>
7. Earnings per share
The calculation of basic earnings per share is based on the loss after taxation
of (pound)2,422,000 (1997: Profit (pound)4,141,000; 1996: Profit
(pound)4,594,000) divided by the weighted average number of shares in issue
during the period of 28,686,688 (1997: 30,175,171; 1996: 28,695,485). Fully
diluted earnings per share is not materially different to basic earnings per
share in each year.
<TABLE>
<CAPTION>
An alternative measure of earnings per share based only on continuing operations
for 1997 and 1998 was also presented in Filofax's financial statements. Filofax
directors believe this is a more appropriate measure of the underlying
performance of the Group. This has been calculated as follows:
1998 1997
(pound)'000 (pound)'000
------------ -----------
<S> <C> <C>
(Loss)/profit on ordinary activities after taxation (2,422) 4,141
Add: Loss on disposal of the discontinued operation 5,127 -
Add: Operating loss/(profit) attributable to the discontinued operation 1,885 (188)
Less: Taxation credit attributable to the discontinued operation (297) -
------ ------
Profit on ordinary activities after taxation from continuing operations 4,293 3,953
====== ======
Earnings per share (pence) from continuing operations 15.0p 13.1p
====== ======
</TABLE>
<TABLE>
<CAPTION>
8. Tangible fixed assets
Freehold Short Fixtures
Land and Leasehold and Motor Plant and
Buildings Property Equipment Vehicles Machinery Total
<S> <C> <C> <C> <C> <C> <C>
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
------------ ------------ ------------ ------------ ------------ -------------
Cost
At 1 April 1997 936 341 2,892 366 934 5,469
Exchange adjustments - - (55) (5) - (60)
Additions - 5 415 36 379 835
Disposals - (81) (790) (133) - (1,004)
---- ---- ----- ----- ----- -----
At 31 March 1998 936 265 2,462 264 1,313 5,240
---- ---- ----- ----- ----- -----
Depreciation
At 1 April 1997 157 158 2,007 234 637 3,193
Exchange adjustments - - (30) (3) - (33)
Charge for the year 15 54 432 72 140 713
Disposals - (66) (683) (99) - (848)
----- ----- ------ ------ ------ ------
At 31 March 1998 172 146 1,726 204 777 3,025
----- ----- ------ ------ ------ ------
Net book value
At 31 March 1998 764 119 736 60 536 2,215
----- ---- ------ ---- ------ ------
At 1 April 1997 779 183 885 132 297 2,276
----- ---- ------ ---- ------ ------
The net book value above includes (pound)26,700 (1997: (pound)245,900) in
respect of assets held under finance leases and hire purchase contracts.
</TABLE>
<TABLE>
<CAPTION>
9. Investments in subsidiary undertakings
Shares Loans Total
<S> <C> <C> <C>
(pound)'000 (pound)'000 (pound)'000
------------ ------------ ------------
Cost
At 1 April 1997 and 31 March 1998 15,846 2,250 18,096
======== ======= ======
Provisions
At 1 April 1997 - - -
Charged for the year 5,394 - 5,394
-------- ------- --------
At 31 March 1998 5,394 - 5,394
======== ======= =====
Net book value
At 31 March 1998 10,452 2,250 12,702
-------- ------- -------
At 1 April 1997 15,846 2,250 18,096
======== ======= ======
</TABLE>
The provision reflects a permanent diminution in value of the investment in
Elijo Limited, the immediate parent undertaking of Henry Ling & Son (London)
Limited, the business and net trading assets of which were sold on 31 March
1998.
<TABLE>
<CAPTION>
The following are the principal subsidiary undertakings of the Company as at 31
March 1998, all of which were wholly owned and have been included in the
financial statements.
<S> <C> <C>
Name Principal Activity Country of
- ---- ------------------ ----------
Incorporation
Filofax A/S* Supplier of stationery products Denmark
Filofax AB* Supplier of stationery products Sweden
Filofax GmbH* Supplier of stationery products Germany
Filofax Hong Kong Limited* Supplier of stationery products Hong Kong
Filofax Inc Supplier of stationery products USA
Filofax Limited Supplier of stationery products England
Filofax SARL* Supplier of stationery products France
Drakes Office Systems Limited Supplier of stationery products England
Henry Ling & Son (London) Limited** Publisher of greeting cards England
Lefax Publishing Limited* Supplier of stationery products England
Yard-O-Led Pencil Company Limited Manufacturer of writing instruments England
Topps of England Limited Manufacturer and supplier of stationery products England
Baybond Limited* Manuufacturer and supplier of stationery products England
* Investment held by a subsidiary undertaking
** Renamed Elijo (London) Limited on 9 April 1998
</TABLE>
10. Stock
March 1998 March 1997
(pound)'000 (pound)'000
---------- -----------
Raw Materials 712 362
Work in Progress 567 651
Finished goods and goods for resale 5,118 6,382
----- -----
6,397 7,395
===== =====
<TABLE>
<CAPTION>
11. Debtors
March 1998 March 1997
Group Company Group Company
<S> <C> <C> <C> <C>
(pound)'000 (pound)'000 (pound)'000 (pound)'000
------------ ------------ ------------ ------------
Trade debtors 3,971 - 4,719 -
Amounts due from subsidiary undertakings - 8,794 - 4,776
Other debtors 179 - 138 -
Prepayments and accrued income 301 - 398 -
Advance corporation tax recoverable 170 170 166 166
Amount due in respect of disposal of
discontinued operation 500 - - -
------ ----- ------- -----
5,121 8,964 5,421 4,942
===== ===== ======= =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
12. Creditors: amounts falling due within one year
March 1998 March 1997
Group Company Group Company
<S> <C> <C> <C> <C>
(pound)'000 (pound)'000 (pound)'000 (pound)'000
----------- ----------- ----------- -----------
Trade creditors 3,685 - 3,622 -
Amounts due to subsidiary undertakings - 41 - 71
Corporation tax payable 1,515 - 2,386 -
Advance corporation tax payable 286 286 279 279
Other taxes and social security 646 - 691 -
Other creditors 136 - 102 -
Accruals 2,185 6 1,971 6
Finance lease obligations 55 - 153 -
Proposed dividend 681 681 665 665
------ ----- ------ -----
9,189 1,014 9,869 1,021
===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
13. Obligations Under Finance Lease Agreements
March March
1998 1997
<S> <C> <C>
(pound)'000 (pound)'000
----------- -----------
Falling due within one year 59 168
Less: finance charges relating to future periods (4) (15)
--- -----
Total obligation included within creditors falling
due within one year 55 153
=== =====
</TABLE>
<TABLE>
<CAPTION>
14. Share capital
Authorised Issued and Fully Paid Up
--------------------------------------------------------------
<S> <C> <C>
Number (pound)'000 Number (pound)'000
------ ----------- ------ -----------
Ordinary shares of 5p
At 1 April 1997 50,000,000 2,500 30,201,389 1,510
Nominal value of shares issued under
share option schemes - - 235,325 12
Purchase of own shares - - (2,300,000) (115)
---------- ----- ---------- -----
At 31 March 1998 50,000,000 2,500 28,136,714 1,407
========== ===== ========== =====
</TABLE>
SHARE OPTIONS
There were outstanding at 31 March 1998 options granted to directors and
employees within the Group to subscribe for 140,006 ordinary shares under the
Employee Sharesave Scheme at prices ranging from 90.4p to 205.6p. The weighted
average exercise price is 173.9p. These options are normally capable of being
exercised over varying periods up to July 2001.
There were outstanding at 31 March 1998 options granted to directors and
employees within the Group to subscribe for 1,232,925 ordinary shares under the
approved and unapproved Executive Share Option Scheme at prices ranging from 30p
to 234p. The weighted average exercise price is 139.2p These options are
normally capable of being exercised over varying periods up to August 2007.
PURCHASE OF OWN SHARES
At the 1997 Annual General Meeting, shareholders gave the Company authority to
purchase a maximum of 4,500,000 ordinary shares of 5p representing approximately
14.9 per cent. of the Company's issued share capital at that time. Prior to the
1997 Annual General Meeting, the Company had authority to purchase 1,506,174
ordinary shares under a resolution passed at the 1996 Annual General Meeting.
During the year, the Company purchased and cancelled 1,050,000 ordinary shares
under the 1996 authority and, subsequent to the 1997 Annual General Meeting,
purchased and cancelled a further 1,250,000 ordinary shares under the 1997
authority. The consideration for the total of 2,300,000 ordinary shares
purchased during the year was (pound)3,250,000 (representing an average price of
141.3p per ordinary share) plus (pound)37,000 of associated costs, and has been
charged against the Profit and Loss Account Reserve. Advance Corporation Tax of
(pound)452,750 was paid during the year in relation to these transactions.
A resolution seeking renewal of the authority to purchase a further 14.9% of the
Company's issued share capital will be put to the forthcoming Annual General
Meeting.
<TABLE>
<CAPTION>
15. Reserves
Share Capital Profit and
Premium Redemption Other Loss Total
Account Reserve Reserves Account Reserves
<S> <C> <C> <C> <C> <C>
(a) Group (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
----------- ----------- ----------- ----------- -----------
At 1 April 1997 223 - 1,045 9,838 11,106
Retained loss for the year - - - (3,519) (3,519)
Goodwill realised on disposal - - 4,777 - 4,777
Transfer between reserves - - (5,013) 5,013 -
Exchange differences - - - (59) (59)
Premium on shares issued during the year
under share option schemes 251 - - - 251
Transfer in respect of QUEST - - - (183) (183)
Purchase of own shares - 115 - (3,287) (3,172)
Goodwill written off on acquisition - - - (122) (122)
----- ----- ------ ------- ------
At 31 March 1998 474 115 809 7,681 9,079
===== ===== ====== ======= ======
</TABLE>
The transfer of (pound)5,013,000 from Other Reserves to the Profit and Loss
Account Reserve relates to the premium on shares issued in connection with the
acquisition of Elijo Limited, the immediate parent undertaking of Henry Ling &
Son (London) Limited, in 1994. As this business was disposed of on 31 March
1998, and the goodwill originally pertaining to the acquisition has become a
realised loss, the premium against which the goodwill was written off on
acquisition has also been transferred to the Profit and Loss Account Reserve.
During the year ended 31 March 1998, the Company received (pound)234,000 from
the issue of shares in respect of the exercise of options under the Employee
Sharesave Scheme administered by the Qualifying Employee share Ownership Trust
(QUEST). Employees paid (pound)51,000 to the Group for the issue of these shares
and the balance of (pound)183,000 comprised contributions to the QUEST from
subsidiary undertakings and is shown as a transfer from the Profit and Loss
Account Reserve.
<PAGE>
<TABLE>
<CAPTION>
The cumulative amount of goodwill resulting from the acquisitions (adjusted for
disposals) written off to reserves at 31 March 1998 amounted to
(pound)14,678,000 (1997 (pound)19,333,000).
Share Capital Profit and
Premium Redemption Other Loss Total
Account Reserve Reserves Account Reserves
<S> <C> <C> <C> <C> <C>
(b) Company (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
----------- ----------- ----------- ----------- -----------
At 1 April 1997 223 - 13,019 7,265 20,507
Retained profit for the year - - - 1,659 1,659
Transfer between reserves - - (5,013) 5,013 -
Premium on shares issued during the year
under share option schemes 251 - - - 251
Purchase of own shares - 115 - (3,287) (3,172)
------ ------ ----- ------ ------ -------
At 31 March 1998 474 115 8,006 10,650 19,245
====== ====== ===== ====== ====== ======
</TABLE>
As permitted by section 230 of the Companies Act 1985, the Company has not
presented its profit and loss account. The profit for the year dealt with in
the accounts of the Company amounts to (pound)2,756,000 (1996/97:
(pound)4,519,000).
16. Reconciliation of movements in equity shareholders' funds
1998 1997
(pound)'000 (pound)'000
---------- -----------
At 1 April 1997 12,616 9,391
Total recognised losses for the year (2,481) 4,302
Equity dividends (1,097) (1,118)
Goodwill realised on disposal 4,777 -
Goodwill written off on acquisition (122) -
Purchase of own shares (3,287) -
Issue of shares 80 41
-------- -------
At 31 March 1998 10,486 12,616
======== =======
17. Pension commitments
The Group operates a variety of pension arrangements for the benefit of
employees in their retirement. The pension charge for the year may be analysed
by type of pension scheme as follows:
1998 1997
(pound)'000 (pound)'000
----------- -----------
Defined benefit scheme - 67
Defined contribution schemes 187 144
----- ----
187 211
===== ====
The principal scheme is the Filofax Staff Pension Plan which provides benefits
under both defined benefit and defined contribution arrangements. As from 1
April 1997, the defined benefit section of the scheme, which provides benefits
based on final pensionable earnings, was closed to new entrants. The benefits of
deferred members and pensioners were either transferred to alternative schemes
or bought out through insurance policies, and active members had transfer values
paid to the money purchase section of the scheme.
The assets of the Filofax Staff Pension Plan are held separately from those of
the Company and its subsidiary undertakings and are invested in externally
managed funds. Under the terms of the trust deed, the scheme is administered by
the trustees who delegate certain routine tasks to external administrators.
In the year to 31 March 1997, the Group contributed to the defined benefit
section of the scheme at the rate of 10.3 per cent. of pensionable salaries,
inclusive of death in service benefit premiums, and employees contributed to the
scheme at a rate of 5 per cent. of pensionable salaries. No contributions were
made by the Company in respect of the defined benefit section of the Filofax
Staff Pension Plan in the year to 31 March 1998 and there was no charge in the
profit and loss account as no benefits accrued to members.
18. Operating lease commitments
The Group has annual commitments in respect of operating leases as follows:
<TABLE>
<CAPTION>
March 1998 March 1997
---------- ----------
Expiring: Land and Other Land and Other
Buildings Assets Buildings Assets
<S> <C> <C> <C> <C>
(pound)'000 (pound)'000 (pound)'000 (pound)'000
------------ ----------- ------------ -----------
Within one year 100 104 118 108
Within two to five years 113 152 149 325
Over five years 372 - 449 -
----- ------ ----- -----
585 256 716 433
===== ====== ===== =====
</TABLE>
19. Other commitments
Guarantees
The Group has guaranteed rentals payable by Filofax Inc. amounting
to(pound)33,000 (1997(pound)-33,000) per annum until 30 September 1999.
Contingent liabilities
With the exception of the guarantees referred to above, and other guarantees
given in the ordinary course of business, the Group had no material unprovided
contingent liabilities at 31 March 1998.
<TABLE>
<CAPTION>
20. Reconciliation of operating profit/(loss) to net cash
inflow/(outflow)from operating activities
1998 1997
Continuing Discontinued Continuing Discontinued
Operations Operation Total Operations Operation Total
<S> <C> <C> <C> <C> <C> <C>
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
----------- ----------- ----------- ----------- ----------- -----------
Operating profit/(loss) 6,137 (1,885) 4,252 5,684 214 5,898
Depreciation 639 74 713 775 75 850
(Increase)/decrease in stocks (1,333) 1,832 499 298 (373) (75)
(Increase)/decrease in debtors (441) 326 (115) 190 (266) (76)
Increase/(decrease) in creditors 1,382 (325) 1,057 630 (215) 415
----- ---- ----- --- ---- ---
Net cash inflow/(outflow) from
operating activities 6,384 22 6,406 7,577 (565) 7,012
===== ==== ===== ===== ==== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
21. Analysis of net funds
1 April Cash Exchange 31 March
1997 Flows Movements 1998
<S> <C> <C> <C> <C>
(pound)'000 (pound)'000 (pound)'000 (pound)'000
----------- ----------- ----------- -----------
Cash at bank and in hand 7,393 (1,355) (96) 5,942
Less: finance leases (153) 98 - (55)
---- ---- ----- -----
Net funds 7,240 (1,257) (96) 5,887
===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
22. Reconciliation of net cash flow to movement in net funds
1998 1997 1996
<S> <C> <C> <C>
(pound)'000 (pound)'000 (pound)'000
---------- ----------- -----------
(Decrease)/Increase in cash as shown in cash flow statement (1,355) 3,233 558
Adjusted for:
Finance lease repayments 98 131 91
Term loan repaid - 248 707
------- ------- ----
Change in net funds resulting from cash flow (1,257) 3,612 1,356
Exchange movements (96) (176) 100
Finance lease acquired with subsidiary undertaking - - (363)
New finance leases - - (12)
Loans acquired with subsidiary undertaking - - (530)
------- ------- -----
Movement in net funds in the year (1,353) 3,436 551
Opening net funds 7,240 3,804 3,253
------- ------- -----
Closing net funds 5,887 7,240 3,804
======= ======= =====
</TABLE>
23. Purchase of unincorporated business
On 24 June 1997, the Group acquired the goodwill, intellectual property and
customer lists of `A' Time, an unincorporated business, for a cash consideration
of (pound)119,000 plus expenses of (pound)3,000.
(pound)'000
---------
Net assets acquired:
Goodwill 122
Satisfied by:
Cash 122
24. Disposal of discontinued operation
On 31 March 1998, the Group disposed of the business and net trading assets of
Henry Ling & Son (London) Limited for an initial consideration of (pound)0.5
million. The results attributable to this business have been treated as a
discontinued operation in the year to 31 March 1998 and prior year figures have
been restated accordingly.
The loss on disposal of (pound)5,127,000 includes reinstatement of
(pound)4,777,000 of goodwill originally written off to reserves on acquisition;
the balance of (pound)350,000 represents creditors and accruals arising in
respect of the disposal. The write down of net trading assets to the value shown
in the acquirer's proposed completion balance sheet has been included within the
operating loss for the year to 31 March 1998 for the discontinued operation. As
the business was sold on 31 March 1998, and the acquirer prepared the accounts
as at that date, it was not practical to distinguish between the underlying
trading results and the write downs of assets to the values shown in the
completion balance sheet.
The consideration of (pound)0.5m was received in cash on 1 April 1998. No cash
was included within the net assets disposed of.
<TABLE>
<CAPTION>
The cash flows attributable to the discontinued operation were as follows:
1997 1997 1996
<S> <C> <C> <C>
(pound)'000 (pound)'000 (pound)'000
---------- ----------- -----------
Net cash inflow/(outflow) from operating activities 22 (565) (334)
Net cash outflow from returns on investments and
servicing of finance - (26) (6)
Taxation paid (3) (111) (148)
Net cash outflow from investing activities (29) (42) (63)
---- ---- ----
Decrease in cash (10) (744) (551)
==== ==== ====
</TABLE>
25. Acquisition
On 28 July 1995 the Group acquired the whole of the issued share capital of
Topps of England Limited ("Topps") for an aggregate consideration of
(pound)6,600,000. This acquisition was funded by the issue of 2,942,623 ordinary
shares.
The following table provides an analysis of the assets and liabilities acquired
and the related acquisition adjustment in respect of this acquisition:
<TABLE>
<CAPTION>
Fair
Book Value Fair
Value Adjustments Value
<S> <C> <C> <C>
(pound)'000 (pound)'000 (pound)'000
----------- ----------- ----------
Fixed assets 1,432 (36) 1,396
Stock 1,711 (155) 1,556
Cash (559) - (559)
Debtors and prepayments 1,216 - 1,216
Creditors and accruals (1,774) (24) (1,798)
Loans (530) - (530)
------- ----- -------
1,496 (215) 1,281
------- ----- -------
Acquisition expenses (89)
-------
Goodwill written off 5,408
-------
Consideration discharged by issue of ordinary shares 6,600
-------
</TABLE>
The fair value adjustments relate primarily to the restatement of acquired
assets and liabilities to their realisable value at the time of the acquisition.
These restatements have been made in accordance with Group accounting policies.
The net cash outflow in respect of the acquisition of Topps was (pound)648,000
(including (pound)559,000 of cash and cash equivalents acquired). The
acquisition of Topps contributed (pound)1,727,000 to the Group's net operating
cashflows, payments of (pound)238,000 in respect of taxation, utilised
(pound)141,000 in respect of investing activities and payments of (pound)361,000
in respect of financing activities.
The following disclosures in respect of the pre-acquisition performance of Topps
have been given in accordance with the requirements of Financial Reporting
Standard No. 6, "Acquisitions and Mergers". In all cases the figures disclosed
have been determined in accordance with the pre-acquisition accounting policies
of Topps. In the year to 31 March 1995, the consolidated profit after taxation
of Topps and its subsidiary undertakings was (pound)498,813. In the period
immediately following Topps' previous financial year and preceding the date of
acquisition by the Company, from 1 April 1995 to 28 July 1995, consolidated
turnover was (pound)1,883,700. The operating loss during that period was
(pound)101,000, the loss before taxation was (pound)153,000, and, after the
estimated taxation credit, the loss was (pound)99,000. There were no minority
interests or other recognised gains and losses other than the profit or loss in
either period.
26. Summary of Differences Between UK and US Generally Accepted Accounting
Principles
The consolidated financial statements have been prepared in accordance with UK
Generally Accepted Accounting Principles ("UK GAAP"), which differs in certain
significant respects from US Generally Accepted Accounting Principles ("US
GAAP"). A description of the significant differences between accounting
principles that are applicable to the Company is given below:
(A) Goodwill
In each of the fiscal years ended 31 March 1998 and 31 March 1997, UK GAAP
required purchased goodwill arising on consolidation to be set against
equity shareholders' funds. Under US GAAP, goodwill arising on consolidation is
capitalised and amortised over its expected useful life and charged against
income. For the purpose of quantifying the difference between UK GAAP and US
GAAP, the expected useful life of goodwill has been assumed at 20 years.
(B) Loss on Disposal of Discontinued Operation
Under both UK GAAP and US GAAP, the loss on disposal of a discontinued operation
includes acquired goodwill relating to the discontinued operation to the extent
that goodwill has not been charged to the profit and loss account. Under UK GAAP
goodwill arising has been set against shareholders' funds whereas under US GAAP
goodwill arising has been amortised over its expected useful life and charged to
income. As a consequence the goodwill included as part of the loss on disposal
under US GAAP is lower than under UK GAAP, the difference representing the
amount of goodwill previously charged against income.
(C) Stock Options
Stock options have been granted under Filofax save-as-you-earn plans at a 20%
discount to the market price at the date of grant. Under UK GAAP, the share
issues are recorded at their discounted price when the options are exercised.
Under US GAAP, the discount is regarded as employee compensation and is accrued
over the vesting period of the grants.
Stock options granted under the Filofax unapproved stock option plan are
exercisable in tranches only to the extent that certain performance criteria
have been met. Under UK GAAP, the share issues are recorded when the options are
exercised. Under US GAAP, the estimated cost of a stock performance plan is
regarded as employee compensation and is accrued over the vesting period of the
grants taking into account the likelihood of achievement of the performance
criteria.
(D) Ordinary Dividends
Under UK GAAP, dividends are provided for in the year in respect of which they
are declared or proposed. Under US GAAP, dividends and the related advance
corporation tax are given effect only in the period in which dividends are
formally declared.
(E) Cash Flow Statements
The cash flow statements have been prepared in conformity with UK Financial
Reporting Standard 1 (Revised) Cash Flow Statements. The principal differences
between this statement and cash flow statements presented in accordance with US
Financial Accounting Standard 95 are as follows:
1. Under UK GAAP, net cash flow from operating activities is determined before
considering cash flows from (a) returns on investments and servicing of
finance and (b) taxes paid. Under US GAAP, net cash flow from operating
activities is determined after these items.
2. Under UK GAAP, capital expenditure is classified separately while under US
GAAP, it is classified as an investing activity.
3. Under UK GAAP, dividends are classified separately while under US GAAP,
dividends are classified as financing activities.
(F) Comprehensive Income
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income, was issued in June 1997 and is effective for fiscal years beginning
after December 15, 1997. This statement requires that all items that are to be
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. In addition to the
(loss)/profit attributable to ordinary shareholders shown below, the
Comprehensive Statements of Income includes exchange losses arising on
consolidation of (pound)59,000 in the year ended 31 March 1998 and exchange
gains of (pound)161,000 in the year ended 31 March 1997.
Effects on Net Earnings of Differences between US GAAP and UK GAAP
<TABLE>
<CAPTION>
Year Ended Year Ended
31 March 98 31 March 97
<S> <C> <C>
(pound)'000 (pound)'000
----------------- -----------------
(Loss)/profit attributable to ordinary
shareholders in accordance with UK GAAP (2,422) 4,141
US GAAP adjustments:
Goodwill amortisation (973) (967)
Loss on disposal of discontinued operation 876 0
Share options (86) (23)
-------- ------
Net (loss)/profit attributable to ordinary
shareholders in accordance with US GAAP (2,605) 3,151
======== ======
Basic (loss)/income per ordinary share under US GAAP (9.1)p 10.4p
======== ======
Basic profit per ordinary share from continuing
operations under US GAAP 11.3p 9.8p
======== ======
Diluted (loss)/profit per ordinary share under US GAAP (9.1)p 10.3p
======== ======
Diluted income per ordinary share from continuing operations
under US GAAP 11.2p 9.7p
======== ======
Cumulative Effect on Equity Shareholders' Funds of Differences Between US GAAP and UK GAAP
As at As at
31 March 98 31 March 97
(pound)'000 (pound)'000
----------------- -----------------
Equity shareholders' funds in accordance
with UK GAAP 10,486 12,616
US GAAP adjustments:
Unamortised goodwill 11,514 16,266
Ordinary dividends 681 665
--------- --------
Equity shareholders' funds in accordance with US GAAP 22,681 29,547
========= ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Reconciliation of Cash Flow Statement of Differences Between US GAAP and UK GAAP
Year Ended Year Ended
31 March 98 31 March 97
<S> <C> <C>
(pound)'000 (pound)'000
----------------- -----------------
Net cash inflow from operating activities 4,044 5,002
Net cash outflow from investing activities (1,013) (375)
Net cash outflow from financing activities (4,386) (1,394)
------ ------
Net (decrease)/increase in cash and cash equivalents
under US GAAP (1,355) 3,233
====== ======
Net (decrease)/increase in cash and cash equivalents
under UK GAAP (1,355) 3,233
====== ======
</TABLE>
<PAGE>
INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
The following pro forma condensed combined financial statements have been
prepared from the historical financial statements of Day Runner and Filofax. As
of Decemeber 26, 1998, Day Runner acquired all of the outstanding shares of
stock of Filofax for $84,984,000 in cash and $2,438,000 of Loan Notes. This
acquisition will be accounted for under the purchase method of accounting. The
acquisition cost will be allocated among the net assets of Filofax based upon
their estimated fair market values. However, this allocation process has not yet
been completed. Accordingly, the excess purchase price over Filofax's net book
values is presented as a separate caption in the pro forma condensed combined
balance sheet.
The operations of Filofax for the twelve months ended March 31, 1998
have been combined with Day Runner's operations for the fiscal year ended June
30, 1998 and the operations for the three months ended September 30, 1998 have
been combined with Day Runner's operations for the three months ended September
30, 1998. The following pro forma condensed combined financial statements of
Filofax for the twelve months ended March 31, 1998 and the operations for the
three months ended September 30, 1998 reflect the adjustments necessary to
present the financial statements in accordance with US Generally Accepted
Accounting Principles. The pro forma condensed combined statements of income
give effect to the combination as if it had occurred on July 1, 1997. The pro
forma condensed combined balance sheet gives effect to the combination as if it
had occurred on September 30, 1998. The pro forma adjustments described in the
accompanying notes reflect preliminary estimates and assumptions that management
believes are reasonable in the circumstances. The historical balance sheet of
Filofax has been converted from Pound Sterling to US Dollars using an exchange
rate of 1.6994 (the exchange rate as of September 30, 1998). The historical
statements of income of Filofax have been converted from Pound Sterling to US
Dollars using the average exchange rate during the period (1.6516 for the fiscal
year ended June 30, 1998 and 1.6620 for the quarter ended September 30, 1998).
The pro forma condensed combined financial statements are not
necessarily indicative of what the financial position or results of operations
would have been if the combination had occurred on the above-mentioned dates.
Additionally, they are not indicative of future results of operations or
financial position. The pro forma condensed combined financial statements should
be read in conjunction with Day Runner's historical consolidated financial
statements, and notes thereto, which are included in the Company's Annual Report
on Form 10-K along with Filofax's financial statements for the year ended March
31, 1998 included herein.
<PAGE>
<TABLE>
<CAPTION>
Day Runner, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
September 30, 1998
(dollars in thousands)
<S> <C> <C> <C> <C>
Day Runner Filofax Pro Forma Pro Forma
Historical Historical Adjustments(1) Combined
---------- ---------- -------------- --------
ASSETS:
Cash and cash equivalents................................ $ 1,449 $ (1,200)(2) 249
Accounts receivable, net................................. 34,373 $ 15,684 50,057
Inventories.............................................. 41,665 14,707 56,372
Prepaid expenses and other current assets................ 10,636 1,613 12,249
Property and equipment, net.............................. 13,857 3,830 17,687
Intangibles and other assets............................. 9,620 19,211 60,747(1)(2) 89,578
--------- --------- -------- --------
Total................................................ $ 111,600 $ 55,045 $ 59,547 $226,192
========= ========= ======== ========
LIABILITIES:
Lines of credit.......................................... $ 1,943 $ 7,379 9,322
Accounts payable......................................... 11,913 7,653 19,566
Accrued expenses and other liabilities................... 18,828 5,296 24,124
Income taxes payable..................................... 355 3,842 4,197
Long-term debt........................................... 6 90,422(3) 90,428
--------- --------- -------- ---------
Total................................................ 33,045 24,170 90,422 147,637
--------- --------- -------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock..........................................
Common stock............................................. 14 2,228 (2,228) 14
Additional paid-in capital............................... 34,448 806 (806) 34,448
Retained earnings........................................ 70,096 33,325 (33,325) 70,096
Cumulative translation adjustment........................ 376 376
Treasury stock........................................... (26,379) (5,484) 5,484 (26,379)
--------- --------- -------- ---------
Total stockholders' equity........................... 78,555 30,875 (30,875)(1) 78,555
--------- --------- -------- ---------
Total................................................ $ 111,600 $ 55,045 $ 57,109 226,192
========= ========= ======== =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Day Runner, Inc.
Unaudited Pro Forma Condensed Combined Statements of Income
(dollars in thousands)
Fiscal Year Ended June 30, 1998
--------------------------------------------------------------
Day Runner Filofax
Historical Historical Pro Forma Pro Forma
6/30/98 3/31/98 Adjustments Combined
---------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales................................................... $ 167,841 $ 62,214 230,055
Cost of goods sold.......................................... 80,663 28,381 109,044
--------- --------- ---------
Gross profit................................................ 87,178 33,833 121,011
Operating expenses.......................................... 61,609 24,062 $ 1,018(4) 86,689
--------- --------- --------- ----------
Income from operations...................................... 25,569 9,771 (1,018) 34,322
Net interest (income) expense............................... (172) 12 7,271(5) 7,111
--------- --------- --------- ----------
Income before provision for income taxes.................... 25,741 9,759 (8,289) 27,211
Provision for income taxes.................................. 9,833 2,924 (2,417)(6) 10,340
--------- --------- ---------- ----------
Income from continuing operations........................... $ 15,908 $ 6,835 $ (5,872) $ 16,871
========= ========= ========== ==========
Earnings per common share:
Basic................................................ $ 1.38 1.46
======== ========
Diluted.............................................. $ 1.27 $ 1.35
======== =========
Weighted average number of common shares outstanding:
Basic................................................ 11,533 11,533
========= =========
Diluted.............................................. 12,523 12,523
========= =========
See accompanying notes
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended September 30, 1998
---------------------------------
Day Runner Filofax
Historical Historical Pro Forma Pro Forma
9/30/98 9/30/98 Adjustments Combined
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales................................................... $ 47,731 $ 18,800 66,531
Cost of goods sold.......................................... 22,680 8,263 30,943
--------- --------- ---------
Gross profit................................................ 25,051 10,537 35,588
Operating expenses.......................................... 16,922 6,469 $ 255(4) 23,646
--------- --------- --------- ---------
Income from operations...................................... 8,129 4,068 (255) 11,942
Net interest (income) expense............................... 33 (15) 1,818(5) 1,836
--------- --------- --------- ---------
Income before provision for income taxes.................... 8,096 4,083 (2,073) 10,106
Provision for income taxes.................................. 3,076 1,227 (463)(6) 3,840
--------- --------- --------- ---------
Income from continuing operations........................... $ 5,020 $ 2,856 $ (1,609) $ 6,266
========= ========= ========= ==========
Earnings per common share:
Basic................................................ $ 0.42 $ 0.53
======== =========
Diluted.............................................. $ 0.40 $ 0.50
======== =========
Weighted average number of common shares outstanding:
Basic................................................ 11,931 11,931
========= =========
Diluted.............................................. 12,656 12,656
========= =========
See accompanying notes
</TABLE>
<PAGE>
DAY RUNNER, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(1) The unaudited pro forma condensed combined financial statements give
effect to the acquisition of Filofax (the "Acquisition")and the Loan
Agreement.The Acquisition will be accounted for under the purchase
method of accounting. The purchase price consists of approximately
$84,984,000 of cash, $2,438,000 of Loan Notes and approximately
$3,000,000 of estimated transaction fees and expenses and will be
allocated to Filofax's assets and liabilities based on their fair
values as of the closing date. An allocation of the purchase price has
not yet been performed; however, the following sets forth certain
preliminary allocations:
<TABLE>
<CAPTION>
<S> <C>
Purchase price $ 90,422,000
Net assets acquired at historical amounts (shareholders' equity
at September 30, 1998) 30,875,000
-------------
Estimated excess of purchase price over net assets acquired $ 59,547,000
=============
Estimated excess of purchase price over net assets acquired $ 59,547,000
Plus goodwill included in Filofax's net assets acquired 19,211,000
-------------
Total pro forma combined goodwill resulting from the Acquisition $ 78,758,000
=============
(2) The following represents the value attributable to intangibles and other
assets resulting from the Acquisition:
Excess of purchase price over net assets acquired related to the
Acquisition $ 59,547,000
Deferred financing fees related to the Loan Agreement 1,200,000
-------------
Total intangibles and other assets $ 60,747,000
=============
(3) To record the debt incurred on the Acquisition as follows:
Purchase of Filofax stock $ 87,422,000
Transaction fees 3,000,000
-------------
Total debt $ 90,422,000
=============
(4) To record amortization of the goodwill that arose from the Acquisition over
the estimated useful life of 30 years, net of Filofax's historical
goodwill amortization as follows:
Total pro forma combined goodwill resulting from the Acquisiiton $ 78,758,000
Life 30
-------------
Total pro forma goodwill amortization 2,625,000
Less Filofax's historical goodwill amortization 1,607,000
-------------
Pro forma goodwill amortization adjustments $ 1,018,000
=============
</TABLE>
(5) To record interest expense on bank borrowings incurred in connection
with the Acquisition and the amortization of the deferred financing
fees ($1,200,000 in deferred financing fees amortized over the
seven-year term of the Loan Agreement). The estimated effective rates
used were based on the weighted-average of the applicable rates in
effect during fiscal year ended June 30, 1998 and the quarter ended
September 30, 1998. The effects of a 0.125% change in interest rates
would be approximately $100,000 for the fiscal year ended June 30,
1998 and approximately $25,000 for the quarter ended September 30, 1998.
(6) To provide for income taxes on pro forma adjustments and Filofax's earnings
at an estimated combined effective tax rate of 38%.
(7) Nonrecurring charges resulting from this transaction are estimated to
be $1,600,000 and have not been reflected in the unaudited pro forma
condensed combined statements of income presented herein. These costs
will be expensed as incurred during the 12 months succeeding the
Acquisition.
CONSENT OF INDEPENDENT AUDITORS
As independent public accountants, we hereby consent to the inclusion of
our report included in this Form 8-K/A of our report dated June 1, 1998. It
should be oted that we have not audited any financial statements of the company
subsequent to March 31, 1998 or performed any audit procedures subsequent to the
date of our report.
Binder Hamlyn
Chartered Accountants
London
England
January 15, 1999
