<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________
TO _______________
Commission file number: 0-20828
DANKA BUSINESS SYSTEMS PLC
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
ENGLAND 98-0052869
------------------------------------------------ --------------------------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
11201 DANKA CIRCLE NORTH
ST. PETERSBURG, FLORIDA 33716
------------------------------------------------ --------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 813-576-6003
NOT APPLICABLE
- --------------------------------------------------------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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 [ ]
The registrant had 226,122,247 Ordinary shares outstanding as of September 30,
1996.
<PAGE> 2
INDEX
<TABLE>
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Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
Consolidated Statements of Earnings for the three months ended
September 30,1996 and 1995 (Unaudited) 3
Consolidated Statements of Earnings for the six months ended
September 30, 1996 and 1995 (Unaudited) 4
Condensed Consolidated Balance Sheets as of September 30, 1996
(Unaudited) and March 31, 1996 5
Condensed Consolidated Statements of Cash Flows for the six months
ended September 30, 1996 and 1995 (Unaudited) 6
Consolidated Statement of Shareholders' Equity for the six months
ended September 30, 1996 (Unaudited) 7
Notes to Consolidated Financial Statements (Unaudited) 8
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 18
Item 2 - Changes in Securities 18
Item 3 - Defaults upon Senior Securities 18
Item 4 - Submission of Matters to a Vote of Security Holders 18
Item 5 - Other Information 20
Item 6 - Exhibits and Reports on Form 8-K 20
Signature 22
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
DANKA BUSINESS SYSTEMS PLC
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER AMERICAN DEPOSITARY SHARE ("ADS") AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
-------------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
- ---------------------------------------------------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUE:
Retail equipment sales $ 155,325 $ 107,676
Retail service, supplies and rentals 210,321 135,293
Wholesale 54,882 30,844
- ---------------------------------------------------- ---------------- ----------------
Total revenue 420,528 273,813
- ---------------------------------------------------- ---------------- ----------------
COSTS AND OPERATING EXPENSES:
Cost of retail equipment sales 95,208 64,459
Retail service, supplies and rental costs 112,010 71,467
Wholesale costs of revenue 45,272 25,689
Selling, general and administrative expenses 133,120 85,118
Amortization of intangible assets 4,882 2,782
- ---------------------------------------------------- ---------------- ----------------
Total costs and operating expenses 390,492 249,515
- ---------------------------------------------------- ---------------- ----------------
EARNINGS FROM OPERATIONS 30,036 24,298
Interest expense and other, net 6,832 4,256
- ---------------------------------------------------- ---------------- ----------------
EARNINGS BEFORE INCOME TAXES 23,204 20,042
Provision for income taxes 8,807 7,595
- ---------------------------------------------------- ---------------- ----------------
NET EARNINGS $ 14,397 $ 12,447
==================================================== ================ ================
NET EARNINGS PER ADS $ 0.25 $ 0.25
==================================================== ================ ================
WEIGHTED AVERAGE ADSS 57,583 50,560
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE> 4
DANKA BUSINESS SYSTEMS PLC
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER AMERICAN DEPOSITARY SHARE ("ADS") AMOUNTS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
-----------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
- ---------------------------------------------------- ----------------- ----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUE:
Retail equipment sales $ 305,242 $ 206,146
Retail service, supplies and rentals 405,273 256,014
Wholesale 111,968 60,667
- ---------------------------------------------------- ---------------- ----------------
Total revenue 822,483 522,827
- ---------------------------------------------------- ---------------- ----------------
COSTS AND OPERATING EXPENSES:
Cost of retail equipment sales 187,972 125,498
Retail service, supplies and rental costs 215,232 134,946
Wholesale costs of revenue 92,162 50,367
Selling, general and administrative expenses 259,616 161,745
Amortization of intangible assets 9,301 5,138
- ---------------------------------------------------- ---------------- ----------------
Total costs and operating expenses 764,283 477,694
- ---------------------------------------------------- ---------------- ----------------
EARNINGS FROM OPERATIONS 58,200 45,133
Interest expense and other, net 11,865 7,534
- ---------------------------------------------------- ---------------- ----------------
EARNINGS BEFORE INCOME TAXES 46,335 37,599
Provision for income taxes 17,607 14,295
- ---------------------------------------------------- ---------------- ----------------
NET EARNINGS $ 28,728 $ 23,304
==================================================== ================ ================
NET EARNINGS PER ADS $ 0.50 $ 0.47
==================================================== ================ ================
WEIGHTED AVERAGE ADSS 57,664 49,892
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE> 5
DANKA BUSINESS SYSTEMS PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1996 1996
- --------------------------------------------------------- ---------------- ---------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 21,842 $ 38,217
Accounts receivable, net 285,863 247,479
Inventories 277,417 214,519
Prepaid expenses and other current assets 11,127 9,534
- --------------------------------------------------------- ---------------- ---------------
TOTAL CURRENT ASSETS 596,249 509,749
Equipment on operating leases, net 87,165 73,303
Property and equipment, net 52,411 42,795
Intangible assets, net 473,665 435,844
Other assets 34,973 29,865
- --------------------------------------------------------- ---------------- ---------------
TOTAL ASSETS $ 1,244,463 $ 1,091,556
========================================================= ================ ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and notes payable $ 24,233 $ 30,414
Accounts payable accrued expenses 206,097 197,438
Deferred revenue 74,467 64,223
- --------------------------------------------------------- ---------------- ---------------
TOTAL CURRENT LIABILITIES 304,797 292,075
Convertible subordinated notes 200,000 200,000
Other long-term debt 220,730 118,262
Deferred income taxes and other long-term liabilities 45,109 39,376
- --------------------------------------------------------- ---------------- ---------------
TOTAL LIABILITIES 770,636 649,713
- --------------------------------------------------------- ---------------- ---------------
SHAREHOLDERS' EQUITY:
Ordinary shares, 1.25 pence stated value; 500,000,000
authorized; 226,122,247 and 219,112,247 issued
and outstanding 4,721 4,585
Additional paid-in capital 299,646 297,378
Retained earnings 178,197 148,501
Currency translation adjustment (8,737) (8,621)
- --------------------------------------------------------- ---------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 473,827 441,843
- --------------------------------------------------------- ---------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,244,463 $ 1,091,556
========================================================= ================ ===============
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE> 6
DANKA BUSINESS SYSTEMS PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
------------------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
- --------------------------------------------------- ------------------ ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES $ 28,728 $ 23,304
Net earnings
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization 37,778 20,019
(Gain) loss on sale of property and equipment (334) 110
Proceeds from sale of rental equipment 4,909 3,640
Changes in assets and liabilities, net of effects
from the purchase of subsidiaries:
Accounts receivable (6,331) (14,450)
Inventories (43,003) (43,824)
Prepaid expenses and other current assets 516 (3,928)
Other noncurrent assets (4,081) (1,606)
Accounts payable and accrued expenses (35,737) (4,549)
Deferred revenue (3,977) (4,640)
Deferred income taxes 7,246 6,041
- --------------------------------------------------- ------------------ ------------------
NET CASH USED IN OPERATING ACTIVITIES (14,286) (19,883)
- --------------------------------------------------- ------------------ ------------------
INVESTING ACTIVITIES
Capital expenditures (39,419) (16,876)
Proceeds from sale of property and equipment 654 1,157
Net proceeds from sale of investments 0 10,854
Payment for purchase of subsidiaries, net of cash acquired (50,077) (77,463)
Payment for purchase of noncompete agreements (832) (2,667)
- --------------------------------------------------- ------------------ ------------------
NET CASH USED IN INVESTING ACTIVITIES (89,674) (84,995)
- --------------------------------------------------- ------------------ ------------------
FINANCING ACTIVITIES
Net borrowings under line of credit agreements 104,470 29,696
Principal payments on debt (14,655) (6,092)
Proceeds from stock options exercised 141 392
Dividends (4,075) (2,763)
- --------------------------------------------------- ------------------ ------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 85,881 21,233
- --------------------------------------------------- ------------------ ------------------
EFFECT OF EXCHANGE RATES 1,704 (489)
- --------------------------------------------------- ----------------- -----------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (16,375) (84,134)
Cash and cash equivalents, beginning of period 38,217 86,848
- --------------------------------------------------- ------------------ ------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 21,842 $ 2,714
=================================================== ================= ==================
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6
<PAGE> 7
DANKA BUSINESS SYSTEMS PLC
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL CURRENCY
ORDINARY PAID-IN RETAINED TRANSLATION
SHARES CAPITAL EARNINGS ADJUSTMENT TOTAL
- ----------------------------------- ----------- ------------ ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
BALANCES AT MARCH 31, 1996 $ 4,585 $ 297,378 $ 148,501 $ (8,621) $ 441,843
Net earnings 28,728 28,728
Dividends (4,075) (4,075)
Shares issued under employee
option plans 1 140 141
Distributions to former shareholders
of pooled company (324) (324)
Shares issued for acquisitions 135 2,128 5,367 7,630
Currency translation adjustment (116) (116)
- ----------------------------------- ----------- ------------ ---------- ----------- ------------
BALANCES AT SEPTEMBER 30, 1996 $ 4,721 $ 299,646 $ 178,197 $ (8,737) $ 473,827
=================================== =========== ============ ========== =========== ============
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7
<PAGE> 8
DANKA BUSINESS SYSTEMS PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying condensed consolidated balance sheet as of September 30, 1996,
consolidated statements of earnings for the three months and the six months
ended September 30, 1996 and 1995, the consolidated statement of shareholders'
equity for the six months ended September 30, 1996, and the condensed
consolidated statements of cash flows for the six months ended September 30,
1996 and 1995 are unaudited. In the opinion of management, all adjustments,
consisting of normal recurring accruals, necessary for a fair presentation of
the results of operations for the interim periods presented have been reflected
herein. The results of operations for the interim periods are not necessarily
indicative of the results which may be expected for the entire fiscal year. The
1995 consolidated financial statements presented herein have been reclassified
to conform with the 1996 presentation. The consolidated financial statements
should be read in conjunction with the consolidated financial statements and the
notes thereto included in Danka Business Systems PLC's Annual Report for the
year ended March 31, 1996.
NOTE 2. BUSINESS COMBINATIONS
During the six months ended September 30, 1996 the Company acquired the
outstanding stock or assets of various unrelated businesses. These acquisitions
were accounted for as purchases with consideration totaling approximately $50.1
million. In addition, the Company entered into noncompete agreements with
certain key owners and key employees of these businesses. The results of the
acquired companies are included in the accompanying consolidated statements of
earnings since the effective date of each acquisition. In addition, the Company
issued 6,800,000 Ordinary Shares (1,700,000 ADS equivalents) for one separate
acquisition which was accounted for as a pooling of interests. The financial
statements have not been restated as the impact would have been immaterial.
NOTE 3. ACQUISITION OF THE SALES, SERVICE AND FACILITIES MANAGEMENT OPERATIONS
OF EASTMAN KODAK COMPANY'S OFFICE IMAGING BUSINESS
On September 6, 1996, the Company executed an asset purchase agreement with
Eastman Kodak Company ("Kodak") to acquire (i) the net assets relating to the
sales, marketing, distribution and services business of Kodak's Office Imaging
and Customer Equipment Services business units and (ii) all of the issued and
outstanding stock of certain subsidiaries of Kodak which constitute the
facilities management services business known as Kodak Imaging Services
(collectively, the "Sales and Services Business"). Closing of the transaction
(the "Closing"), which is expected to occur by the end of calendar 1996, is
contingent upon shareholder approval and certain regulatory consents. The
Company will pay $684.2 million in cash to acquire the Sales and Services
Business which will be funded entirely by a new six year, $1.275 billion credit
facility. (See Note 5).
NOTE 4. RESTRUCTURING CHARGE
During the third quarter of fiscal 1996, the Company recorded a restructuring
charge of $8.5 million, related to the restructuring of its international
operations. At September 30, 1996, approximately $0.5 million remained in
accrued liabilities, comprised of $0.4 million for the closing of duplicate
facilities, and $0.1 million for the write-off of leasehold improvements.
Management anticipates that the remaining restructuring actions for this charge
will be completed by the third quarter of fiscal 1997.
8
<PAGE> 9
NOTE 5: REFINANCING OF BANK DEBT
The Company has received a commitment letter for a new credit agreement (the
"New Credit Facility") which upon closing is expected to provide financing to
the Company in the aggregate amount of up to $1.275 billion. The New Credit
Facility, which is subject to various conditions, is expected to close in the
third quarter of fiscal 1997, have a term of six years, and contain certain
financial ratios and covenants similar to the Company's existing $400 million
credit facility ("Credit Facility Loan"). The Company intends to use the
proceeds from the New Credit Facility to purchase the Sales and Services
Business of Kodak, to refinance the existing bank indebtedness of the Company,
and for working capital and general corporate purposes. (See Liquidity and
Capital Resources).
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
THE COMPANY
Danka Business Systems PLC and its Subsidiaries (the "Company") is one
of the largest independent suppliers of photocopiers, facsimiles and other
related office equipment in North America, Europe and Australia. The Company
primarily markets these products and related service, parts and supplies on a
direct basis to retail customers. The Company also markets photocopiers,
facsimiles, and related parts and supplies on a wholesale basis to dealers. In
addition, the Company markets private label photocopiers and facsimiles and
related supplies on a direct and wholesale basis under the Company's Infotec
trademark, and facsimile equipment under its dex and Omnifax trademarks. The
Company currently has offices in 42 states, nine Canadian provinces, eight
European countries, Australia and New Zealand.
The Company is currently one of the largest independent suppliers of
Konica, Minolta, Sharp, Canon and Toshiba photocopiers and facsimile equipment.
The Company is also currently one of the largest independent suppliers of
Ricoh products in Europe.
On September 6, 1996, the Company entered into an Asset Purchase
Agreement to acquire the Sales and Services Business of Kodak (the
"Acquisition"). Subject to certain conditions, the Closing is expected to take
place on or before December 31, 1996. The Company will acquire the net assets
of the Sales and Services Business in exchange for $684.2 million in cash
payable by the Company at Closing. The consideration paid by the Company is
subject to adjustment following the Closing to the extent that the net book
value of the Sales and Services Business on the Closing date differs from
$802.0 million.
The Sales and Services Business is engaged worldwide in the direct sale
and marketing of Kodak manufactured and branded black and white and accent color
high-volume photocopiers and duplicators, as well as Kodak branded mid-volume
black and white and color photocopiers manufactured by Canon, Inc., and in some
cases, remanufactured by Kodak. The Sales and Services Business also provides
on-site repair and technical and field engineering support for equipment sold,
leased and rented to others by the Sales and Services Business and by other
photocopier distributors. In addition, the Sales and Services Business provides
customers with facilities management services, including the management of
central reprographics departments, the placement and maintenance of convenience
copiers, the operation of mail centers, the processing of statements,
print-on-demand operations and document archiving and retrieval services. The
facilities management business of the Sales and Services Business will represent
a significant increase in this type of business for the Company, but is expected
by management to complement the Company's new and existing product lines and
services primarily through its access to current and future major accounts
customers.
In conjunction with the Acquisition, the Company will enter into an
amended and restated supply agreement (the "Amended Supply Agreement") with
Kodak, pursuant to which the Company will purchase, effective upon Closing, from
Kodak its requirements for certain Kodak manufactured or remanufactured
electrophotographic equipment and accessories, spare parts, supplies and toner.
Subject to certain limitations under the Amended Supply Agreement, the Company
will have the worldwide exclusive right to distribute Kodak's currently existing
line of electrophotographic equipment for office imaging and reprographics
manufactured or remanufactured by Kodak and the related software, supplies,
accessories and spare parts and a right of first refusal to exclusively
distribute worldwide certain future electrophotographic products manufactured by
Kodak for office imaging and reprographics. The Company has agreed to fund a
total of $190.0 million (with a possible $30.0 million additional contribution)
over a period of six years for ongoing research and development. The Amended
Supply Agreement will have an initial term of ten (10) years with all major
provisions subject to renegotiation three (3) years from Closing. Any
description of the Asset Purchase Agreement or the Amended Supply Agreement set
forth herein is qualified in its entirety by reference to the terms and
conditions contained in the Asset Purchase Agreement and the form of the Amended
Supply Agreement filed as Exhibit 2.1 on November 14, 1996 in the Company's Form
8-K, which is incorporated herein by reference.
If the Acquisition is consummated, the Company will acquire in excess
of 300 new locations, add 10,400 new employees and commence business in 19 new
countries. Currently, 60% of the Sales and Services Business is conducted in
North America and 34% in Europe. Approximately 90% of the Sales and Services
Business is being operated in countries in which the Company currently conducts
its business. The Company's goal is to increase the net margins of the Sales
and Services Business through certain cost efficiencies and synergies it expects
to achieve by operating the businesses. A number of factors are important in
effecting a successful acquisition and aggregation of this size and
10
<PAGE> 11
magnitude, and there can be no assurances regarding the ultimate impact of the
Acquisition on the Company and its future business and operation results.
For the calendar year ended 1995, the Sales and Services Business
had revenues of approximately $1.8 billion. The Sales and Services Business had
net earnings in the amounts of $6 million and $22 million for calendar year 1995
and the six-month period ended June 30, 1996, respectively. The Company expects
to record a $25.0 million to $35.0 million pre-tax charge during the third
quarter of its fiscal year 1997, related to the Acquisition. While there can be
no assurances, the Company believes that the Acquisition will be accretive to
earnings within 12 months following the Closing.
The Company expects to finance the Acquisition with funds to be made
available at or before Closing through a credit facility provided by
NationsBank, N.A. ("NationsBank"). The Company has received a commitment letter
from NationsBank to provide the New Credit Facility in the aggregate amount of
up to $1.275 billion, which subject to certain conditions, the Company expects
to finalize and close in December 1996 prior to the Company's Extraordinary
General Meeting to be held on December 11, 1996. The borrowed funds will also
be used to refinance the existing bank indebtedness of the Company and for
working capital and general corporate purposes.
For additional information regarding the Acquisition, see the
Company's Definitive Proxy Statement filed on November 6, 1996, and the
Company's Form 8-K filed on November 14, 1996, both of which were filed with the
Securities & Exchange Commission. Also see the SPECIAL NOTE REGARDING FORWARD
LOOKING STATEMENTS contained herein, regarding forward looking statements made
by the Company in connection with the Acquisition.
Management determined for the foreseeable future, that upon closing
the Acquisition, that it will place greater emphasis on core operations with
slightly less emphasis on future acquisitions. The strategy is intended to
focus the Company on its management plan regarding the combined business with
the goal of achieving favorable synergies, cost effectiveness, and joint market
development and distribution programs designed to increase its overall margins.
Over the last three years, the Company has completed over 100
acquisitions and believes that acquisition opportunities continue to exist in
the highly fragmented North American and European automated office equipment
industry. The Acquisition, upon completion, will be the largest in the history
of the Company.
11
<PAGE> 12
The following table sets forth for the periods indicated the
percentage of total revenue represented by certain items in the Company's
Consolidated Statements of Earnings:
<TABLE>
<CAPTION>
Three Months Ended September 30, Six Months Ended September 30,
--------------------------------- ------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Retail equipment sales . . . . . . . 36.9% 39.3% 37.1% 39.4%
Retail service, supplies and rental 50.0 49.4 49.3 49.0
Wholesale . . . . . . . . . . . . . 13.1 11.3 13.6 11.6
---- ---- ---- ----
Total revenue . . . . . . . . 100.0 100.0 100.0 100.0
Cost of revenue . . . . . . . . . . . . . 60.0 59.0 60.2 59.4
---- ---- ---- ----
Gross profit 40.0 41.0 39.8 40.6
Selling, general and administrative . . . 31.7 31.1 31.7 30.9
Amortization of intangible assets . . . . 1.2 1.0 1.1 1.0
--- --- --- ---
Earnings from operations . . . 7.1 8.9 7.0 8.7
Interest expense and other, net . . . . . 1.6 1.6 1.4 1.5
--- --- --- ---
Earnings before income taxes . 5.5 7.3 5.6 7.2
Provision for income taxes . . . . . . . 2.1 2.8 2.1 2.7
--- --- --- ---
Net earnings . . . . . . . . . 3.4% 4.5% 3.5% 4.5%
=== === === ===
</TABLE>
The following table sets forth for the periods indicated the gross
profit margin percentage for each of the Company's revenue classifications:
<TABLE>
<CAPTION>
Three Months Ended September 30, Six Months Ended September 30,
--------------------------------- ------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Retail equipment sales . . . . . . . . . 38.7% 40.1% 38.4% 39.1%
Retail service, supplies and rentals . . 46.7 47.2 46.9 47.3
Wholesale . . . . . . . . . . . . . . . . 17.5 16.7 17.7 17.0
</TABLE>
QUARTER ENDED SEPTEMBER 30, 1996 COMPARED TO QUARTER ENDED SEPTEMBER 30,
1995:
Revenue
Revenue increased 54% to $420.5 million for the three months ended
September 30, 1996 ("second quarter of fiscal 1997") compared to $273.8
million for the three months ended September 30, 1995 ("second quarter of fiscal
1996"). The increase resulted from significant contributions from acquisitions
as well as core growth. Wholesale revenue as a percentage of total revenue
increased primarily due to the acquisition of Infotec in November 1995, which
wholesales the Infotec brand products to authorized independent dealers
throughout Europe.
Gross Profit
Gross profit increased 50% to $168.0 million for the second quarter
of fiscal 1997. The gross profit margin as a percentage of total revenue
decreased to 40.0% for the second quarter of fiscal 1997 from 41.0% for the
second quarter of fiscal 1996. This decrease was due to the change in the mix of
the Company's revenue, and to lower margins on equipment and service, supplies
and rental revenue. As a result of the Company's acquisition of Infotec in
November 1995, an increased percentage of the Company's total revenue is being
derived from wholesale revenue which has substantially lower gross profits than
retail revenue. The gross profit margin as a percentage of retail equipment
sales decreased to 38.7% for the second quarter of fiscal 1997 from 40.1% for
the second quarter of fiscal 1996. Additionally, the gross profit margin as a
percentage of retail service, supplies and rentals decreased to 46.7% for the
second quarter of fiscal 1997 from 47.2% for the second quarter of fiscal 1996.
These decreases were partly due to the inclusion of European and Australian
acquisitions which had lower gross margins than the Company's core operations.
As a percentage of revenue, the gross profit margin on wholesale revenue
increased to 17.5% for the second quarter of fiscal
12
<PAGE> 13
1997 from 16.7% for the second quarter of fiscal 1996. The increase was
primarily due to the acquisition of Infotec, which has higher gross profit on
its wholesale business as compared with the Company's other wholesale
operations.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 56% to $133.1
million for the second quarter of fiscal 1997. As a percentage of revenue,
selling, general and administrative expenses increased to 31.7% for the second
quarter of fiscal 1997, from 31.1% for the second quarter of fiscal 1996. These
increases related to acquisitions made after September 30, 1995, and to the
Company's aggressive hiring and training of new sales representatives and
support personnel, along with the additional investments in the required
infrastructure necessary to support the enlarged salesforce. Selling, general
and administrative expenses were also impacted by additional costs incurred to
regionally centralize certain management and administrative functions ("Market
Based Approach"). The Company is restructuring its traditional branch system
towards a Market Based Approach.
Amortization of Intangible Assets
Amortization of intangible assets increased to $4.9 million for
the second quarter of fiscal 1997 from $2.8 million for the second quarter of
fiscal 1996. The increase related to acquisitions made after September 30, 1995
for which additional intangible assets are being amortized.
Earnings from Operations
Earnings from operations increased 24% to $30.0 million for the
second quarter of fiscal 1997. The increase primarily related to increased
revenue. As a percentage of revenue, earnings from operations decreased to 7.1%
from 8.9% primarily due to the lower combined gross margin percentage and the
higher selling, general and administrative expenses discussed above.
Interest expense and other, net
Interest expense increased to $6.8 million for the second quarter
of fiscal 1997 from $4.3 million for the second quarter of fiscal 1996. Interest
expense has increased due to higher levels of borrowings during the second
quarter of fiscal 1997.
Income Taxes
Income taxes increased to $8.8 million for the second quarter of
fiscal 1997 due to higher levels of earnings before tax. The combined effective
income tax rate was relatively constant at 38.0% for the second quarter of
fiscal 1997 versus 37.9% for the second quarter of fiscal 1996.
Net Earnings
Net earnings increased 16% to $14.4 million for the second quarter
of fiscal 1997 from $12.4 million for the second quarter of fiscal 1996. As a
percentage of revenue, net earnings decreased to 3.4% for the second quarter of
fiscal 1997, primarily due to the lower combined gross margin percentage and
increased selling, general and administrative expenses.
SIX MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO SIX MONTHS ENDED SEPTEMBER
30, 1995:
Revenue
Revenue increased 57% to $822.5 million for the six months ended
September 30, 1996 compared to $522.8 million for the six months ended September
30, 1995. The increase resulted from significant contributions from
acquisitions as well as core growth. Wholesale revenue as a percentage of total
revenue increased primarily due to the acquisition of Infotec in November 1995,
which wholesales the Infotec brand products to authorized independent dealers
throughout Europe.
13
<PAGE> 14
Gross Profit
Gross profit increased 54% to $327.1 million for the six months
ended September 30, 1996. The gross profit margin as a percentage of total
revenue decreased to 39.8% for the six months ended September 30, 1996 from
40.6% for the six months ended September 30, 1995. This decrease was due to the
change in the mix of the Company's revenue, and to lower margins on equipment
and service, supplies and rental revenue. As a result of the Company's
acquisition of Infotec in November 1995, an increased percentage of the
Company's total revenue is being derived from wholesale revenue which has
substantially lower gross profit than retail revenue. The gross profit margin
as a percentage of equipment sales decreased to 38.4% for the six months ended
September 30, 1996 compared to 39.1% for the six months ended September 30,
1995. As a percentage of revenue, the gross profit margin on retail service,
supplies and rentals decreased to 46.9% for the six months ended September 30,
1996 as compared to 47.3% for the six months ended September 30, 1995. These
decreases were partly due to the inclusion of European and Australian
acquisitions which had lower gross margins than the Company's core operations.
As a percentage of revenue, the gross profit margin on wholesale revenue
increased to 17.7% for the six months ended September 30, 1996 from 17.0% for
the six months ended September 30, 1995. The increase was primarily due to the
acquisition of Infotec, which has higher gross profit on its wholesale business
as compared with the Company's other wholesale operations.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 61% to
$259.6 million for the six months ended September 30, 1996. As a percentage of
revenue, selling, general and administrative expenses increased to 31.7% for the
six months ended September 30, 1996, from 30.9% for the six months ended
September 30, 1995. These increases related to acquisitions made after
September 30, 1995, and to the Company's aggressive hiring and training of new
sales representatives and support personnel, along with the additional
investments in the required infrastructure necessary to support the enlarged
salesforce. Selling, general and administrative expenses were also impacted by
the Company's restructuring of its traditional branch systems towards a Market
Based Approach.
Amortization of Intangible Assets
Amortization of intangible assets increased to $9.3 million for the
six months ended September 30, 1996 from $5.1 million for the six months ended
September 30, 1995. The increase related to acquisitions made after September
30, 1995 for which additional intangible assets are being amortized.
Earnings from Operations
Earnings from operations increased 29% to $58.2 million for the
six months ended September 30, 1995. The increase primarily related to
increased revenue. As a percentage of revenue, earnings from operations
decreased to 7.0% from 8.7% primarily due to the lower combined gross margin
percentage, and higher selling, general and administrative expenses discussed
above.
Interest expense and other, net
Interest expense increased to $11.9 million for the six months
ended September 30, 1996 from $7.5 million for the six months ended September
30, 1995. Interest expense has increased due to higher levels of borrowings
during the six months ended September 30, 1996.
Income Taxes
Income taxes increased to $17.6 million for the six months ended
September 30, 1996 due to higher levels of earnings before tax. The combined
effective income tax rate remained constant at 38.0% for the six months ended
September 30, 1996 and 1995.
14
<PAGE> 15
Net Earnings
Net earnings increased 23% to $28.7 million for the six months
ended September 30, 1996 from $23.3 million for the six months ended September
30, 1995. As a percentage of revenue net earnings decreased to 3.5% for the six
months ended September 30, 1996, primarily due to the lower combined gross
margin percentage and increased selling, general and administrative expenses.
TAXATION
As part of the Company's acquisitions of businesses, the Company
enters into noncompete and protection of trade secret agreements with certain
key management personnel of the businesses acquired. The amount paid pursuant
to these agreements is deductible for financial reporting purposes over the term
of the agreements, normally three to seven years. For U.S. federal and state
income tax purposes, agreements entered into prior to the enactment of the
Omnibus Budget Reconciliation Act of 1933 (the "Act"), are amortized over the
term of the agreement. Agreements entered into subsequent to the enactment of
the Act are generally amortized over fifteen years. Further, goodwill,
trademarks and other intangible assets purchased in asset acquisitions are
deductible over fifteen years for U.S. federal and state income tax purposes.
Prior to the enactment of the Act, goodwill on asset acquisitions was not
deductible and amounts paid for other intangible assets were deductible only to
the extent that such assets had identifiable useful lives.
A significant portion of the Company's retail operation's
photocopier and facsimile machine sales are effected through the use of leases.
These transactions are recorded as sales for financial reporting purposes.
However, for federal income tax purposes, the leases are accounted for as
operating leases and the profit is recognized over the life of the lease.
EXCHANGE RATES
Fluctuations in the exchange rate between the pound sterling and
the U.S. dollar affect the dollar equivalent of the pound sterling of the
Ordinary Shares of the Company on the London Stock Exchange and, as a
result, are likely to affect the market price of the ADSs. Additionally,
the Company declares its dividends in pounds sterling. Fluctuations in
exchange rates will affect dividend income measured in U.S. dollars
because the Depositary is required to convert pounds sterling into U.S.
dollars at the prevailing exchange rates at the time of making any
dividend payments or other distributions. The Company has significant
operations in each of the United States, Canada, Australia and various
countries in Europe. Fluctuations in exchange rates between the U.S.
dollar and each of the pound sterling, Canadian dollar, Australian dollar,
and other European country currencies, will affect the results of the
Company's international operations reported in U.S. dollars and the value
of such operations' net assets reported in U.S. dollars. The Company has
significantly increased it international business over the last few years.
Upon closing of the Acquisition, the Company's sales in foreign countries
will be substantially increased. The results of operations, financial
condition and competitive position of the Company's business may be
affected by the relative strength of its currencies in countries where its
products are currently sold and where products of the Sales and Services
Business may be sold. The Company's results of operations and financial
condition may be adversely affected by fluctuations in foreign currencies
and by translations of the financial statements of the Company's foreign
subsidiaries from local currencies into U.S. dollars.
The Company purchases most if its automated office equipment,
related parts and supplies from Japanese manufacturers. The purchase
price for most of these products is denominated in local currencies and
therefore, short term fluctuations in the local currencies relative to the
Japanese yen do not impact the Company's purchase price. However, if the
yen were to strengthen significantly against the U.S. dollar, this would
impact the yen amounts received by the Company's Japanese manufacturers as
they converted the U.S. dollars received form the Company and other
dealers into yen. As a result, these Japanese manufacturers could raise
prices. The Company has historically been successful in passing price
increases on to its customers. However, there can be no assurances that
it can continue to do so in the future. Also, since most of the Company's
service contracts are for one year periods, pricing for parts and supplies
could not be adjusted until the contract was renewed.
15
<PAGE> 16
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash flow used in operating activities was
$14.3 million and $19.9 million for the six months ended September 30,
1996 and 1995, respectively. The Company experiences increases in certain
balance sheet accounts which result primarily from acquisitions as well as
from normal working capital needs. Additionally, high levels of accrued
expenses at the end of fiscal 1996 were paid during the six months ended
September 30, 1996. Cash flow used in investing activities was $89.7
million and $85.0 million for the six months ended September 30, 1996 and
1995, respectively. The increase was due to higher levels of capital
expenditures. Net cash provided by financing activities was $85.9 million
and $21.2 million for the six months ended September 30, 1996 and 1995,
respectively. The increase was primarily due to higher levels of
borrowings.
In March 1995, the Company issued $200.0 million of 6.75%
Convertible Subordinated Notes (the "Notes") at par, in a private
placement offering, due April 2002. The Notes are convertible into the
Company's ADSs at a conversion rate of $29.125 per ADS, or into the
Company's Ordinary shares at a conversion rate of $7.281 per Ordinary
share (equivalent to approximately 34.335 ADSs or 137.339 Ordinary shares
for each $1,000 principal amount of Notes). Interest is payable
semi-annually commencing October 1995. The Notes are not subject to
sinking fund requirements.
In March 1996, the Company entered into a $400.0 million
multicurrency revolving line of credit ("Credit Facility Loan") with a
consortium of banks. The Credit Facility Loan is unsecured and guaranteed
by certain of the Company's subsidiaries. The Credit Facility Loan, which
matures in March 2001, contains negative and affirmative covenants and
agreements restricting the Company's disposition of assets, capital
expenditures, acquisitions and operations, as well as requiring the
maintenance of certain financial ratios. The adjustable rate of interest
on the Credit Facility Loan is, at the option of the Company, either (i)
the Interbank Offered Rate plus an applicable margin of between .375% to
1%, determined by certain financial ratios, for the periods of one, two,
three or six months, or (ii) the lead bank's base rate. The Company is in
material compliance with all the terms of the Credit Facility Loan. As of
September 30, 1996, the Credit Facility Loan had an outstanding balance of
approximately $219.7 million and was incurring interest at a weighted
average rate of 3.6% per annum. Therefore, subject to availability under
the covenants, $180.3 million was available for future borrowings.
The Company has received a commitment letter from NationsBank for
a new credit agreement which upon closing will provide financing to the
Company in the aggregate amount of up to $1.275 billion (the "New Credit
Facility"). The Company intends that the proceeds from the New Credit
Facility, which subject to certain conditions is expected to close in the
third quarter of fiscal 1997, will be utilized to finance the purchase of
the Sales and Services Business of Kodak, to repay all the remaining bank
indebtedness under the existing Credit Facility Loan, and for working
capital and general corporate purposes. The New Credit Facility is
expected to provide the Company with a revolving component in aggregate
amount of up to $725.0 million, and a term loan/letter of credit component
of $550.0 million. The Credit Facility is expected to be secured by (i) a
pledge of the capital stock of the Company's holding company in those
countries that the Company and NationsBank deemed material, (ii)
guarantees, as permitted under local law, of the Company's operating
companies in the material countries, and (iii) a covenant by the Company
that it will not pledge its assets except as specifically permitted under
the terms of the credit facility. The New Credit Facility is expected to
have a term of six years, and contain negative and affirmative covenants
and agreements which place restrictions on the Company regarding
disposition of assets, capital expenditures, additional indebtedness,
permitted liens and payment of dividends, as well as requiring the
maintenance of certain financial ratios. The adjustable interest rate on
the New Credit Facility is expected to be, at the option of the Company,
either: (i) the London InterBank Offered Rate plus a tiered margin based
on leverage for the periods of one, two, three or six months or (ii) an
alternative base rate, consisting of the higher of the NationsBank prime
rate or the Federal Funds Rate plus 0.5%. The Company expects to incur an
extraordinary pre-tax charge of approximately $1.0 million in its third
quarter of fiscal 1997 due to the early repayment of the aforementioned
debt expected to be refinanced.
The Company has a number of other loans and credit facility
arrangements with banks, financial institutions and certain individuals,
which had an aggregate balance of $25.3 million at September 30, 1996.
This balance is primarily comprised of various cash management lines of
credit (the "Lines") in each of the countries in which the Company
operates. The Lines provide for daily liquidity of local operations in
each such country. These loans vary widely in terms and conditions. The
Company is in material compliance with all the terms under these loans.
16
<PAGE> 17
Upon completion of the Acquisition and New Credit Facility, the
Company's cash flow from operations together with the anticipated
borrowing capacity under the New Credit Facility should be adequate to
finance its operating cash requirements and capital expenditures for the
short-term future. It is further anticipated that after the closing of
the acquisition of the Sales and Services Business of Kodak, future
acquisitions and growth in the long-term future will be funded primarily
with cash flow from operations, borrowings available under the New Credit
Facility, other credit sources and, where desirable, funding from the sale
of additional debt or equity securities. While management believes that
the Acquisition and New Credit Facility will close as contemplated, should
the Acquisition not be completed as planned, capital resources utilized
for combined operations and future growth will be similar to the above in
the short and long-term except that current and future available credit
facilities would be substituted for the New Credit Facility.
SEASONALITY
The Company experiences some seasonality in its business. The
Company's revenue and net earnings during the fourth quarter are generally
higher than other quarters of its fiscal year. The Company believes that
this is due to year-end sales contests and a focus on the finalization of
transactions before year end. However, there can be no assurance that
fourth quarter results will continue to be higher in future years. The
Company's European and Canadian operations have historically experienced
lower revenues and net earnings for the three month period ended September
30 due to increased vacation time by Europeans and Canadians during July
and August. This has resulted in reduced sales activity and reduced usage
of photocopiers, facsimiles and other automated office equipment during
such period.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements contained in this Form 10-Q under "Management's Discussion
and Analysis of Financial Condition and Results of Operations" such as
statements concerning reasons for and the effect of the Acquisition on the
Company, integration of the Sales and Services Business into the Company, future
intentions and prospects arising from the Acquisition, and other statements
contained herein regarding matters that are not historical facts are "forward
looking statements" (as such term is defined in the Private Securities
Litigation Reform Act of 1995) and because such statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward looking statements. Such factors may include, among
others, the following: (i) the Company's ability to manage and operate the Sales
and Services Business, (ii) the demands that the acquisition and integration of
the Sales and Services Business will place, and the effect that such demands
will have, on the Company's resources, infrastructure and current operations,
(iii) the Company's ability to successfully operate in new international
markets, (iv) the ability of the Company to attract and retain current
management and other employees of the Sales and Services Business accustomed to
different corporate culture, compensation arrangements and benefits, (v) the
Company's ability to successfully manage the increased debt resulting from the
Acquisition, (vi) the Company's ability to achieve the minimum equipment
purchase commitments under the Amended Supply Agreement, (vii) the Company's
ability to obtain an alternative and acceptable source of high- volume equipment
and related parts and supplies in the event the Amended Supply Agreement is not
renegotiated or Kodak equipment is not competitive in the marketplace, (viii)
increased competition, (ix) fluctuations in foreign currency, (x) domestic and
foreign political developments and governmental regulations and policies, (xi)
technological developments, (xii) general economic and business conditions,
(xiii) future performance of the Sales and Services Business and the Company's
current business, (xiv) the ability of the Company to successfully implement its
growth and business strategy, and (xv) the ability of the Company to continue to
receive acceptable financing as required in the future. The Company disclaims
any duty to update in the future any of the forward looking statements contained
in this Form 10-Q.
17
<PAGE> 18
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual General Meeting of shareholders of Danka Business Systems
PLC was held on July 19, 1996. At the meeting, the following actions were
taken by the shareholders:
1. The payment of a final dividend for fiscal year 1996 in the
amount of 1.08 pence per Ordinary share (net) was authorized. The voting
on the resolution was as follows:
FOR 184,155,108
AGAINST 67,756
ABSTAINED -0-
2. Daniel M. Doyle was re-elected to serve as a Director of the
Company, in accordance with the Company's Articles of Association. The
voting on the resolution was as follows:
FOR 183,942,796
AGAINST 280,068
ABSTAINED -0-
3. David S. Hooker was re-elected to serve as a Director of the
Company, in accordance with the Company's Articles of Association. The
voting on the resolution was as follows:
FOR 180,833,890
AGAINST 117,116
ABSTAINED 3,271,858
4. Pierson M. Grieve was elected to serve as a Director of the
Company, in accordance with the Company's Articles of Association. The
voting on the resolution was as follows:
FOR 184,008,924
AGAINST 213,940
ABSTAINED -0-
5. KPMG was appointed as the Company's auditors for fiscal year
1997, and the Board of Directors was authorized to fix the auditor's
remuneration. The voting on the resolution was as follows:
18
<PAGE> 19
FOR 184,070,861
AGAINST 122,353
ABSTAINED 29,650
6. The authorized share capital of the Company was increased from
L.5,000,000 to L.6,250,000 by the creation of 100,000,000 Ordinary shares
of 1.25 pence each. The voting on the resolution was as follows:
FOR 183,877,023
AGAINST 345,841
ABSTAINED -0-
7. The Board of Directors of the Company was granted the
authority to allot securities up to an aggregate nominal amount of
L.912,967. The voting on the resolution was as follows:
FOR 178,848,258
AGAINST 5,374,606
ABSTAINED -0-
8. The Board of Directors of the Company was granted the
authority to allot equity securities up to an aggregate nominal amount of
L.547,781 without providing certain pre-emptive rights. The voting on the
resolution was as follows:
FOR 170,932,732
AGAINST 10,873,883
ABSTAINED 2,416,249
9. The Company was granted the authority to buy back up to 10% of
its outstanding share capital. The voting on the resolution was as
follows:
FOR 181,568,955
AGAINST 2,624,259
ABSTAINED 29,650
10. Approval of The Danka 1996 Share Option Plan and the Trust
Deed establishing The Danka Employees' Share Trust was granted. The
voting on the resolution was as follows:
FOR 176,790,807
AGAINST 7,178,464
ABSTAINED 253,593
11. Approval of The Danka 1996 Non-Employee Directors Share Option
Plan was granted. The voting on the resolution was as follows:
FOR 175,569,017
AGAINST 8,400,254
ABSTAINED 253,593
19
<PAGE> 20
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
2.1* Asset Purchase Agreement between Eastman Kodak Company and Danka Business
Systems PLC dated as of September 6, 1996, including Exhibit 5.19 (a) which
is the form of Amended and Restated Supply Agreement by and between Eastman
Kodak Company and __________________________ dated as of ___________________,
1996. (Exhibit 2.1 to the Company's Form 8-K dated November 14, 1996.)
4.1* Memorandum of Association of the Company, including paragraphs 5 and 6.
(Exhibit 2.1 of the Company's Registration Statement on Form 20-F, No. 0-
20828, filed on November 10, 1992 (the "1992 Registration Statement").
4.2* Articles of Association of the Company, including sections relating to
Shares, Variation of Rights and Votes of Members. (Exhibit 2.2 to the 1992
Registration Statement).
4.3* Deposit Agreement dated June 25, 1992, Amendment No. 1 dated February 26,
1993 and Amendment No. 2 dated July 2, 1993 (Exhibit 4.9 of the Company's
Form S-1 Registration Statement No. 33-68278 (the "1993 Form S-1")., and
Amendment No. 3 dated August 16, 1994 between The Bank of New York, the
Company and Owners and Holders of American Depositary Receipts.
4.4* Indenture dated March 13, 1995 between the Company and The Bank of New York
as Depositary and the Company. (Exhibit 2 to the Company's Form 8-K dated
March 21, 1995).
4.5* Deposit and Custody Agreement dated March 13, 1995, between The Bank of New
York as Depositary and the Company. (Exhibit 3 to the Company's Form 8-K
dated March 21, 1995).
4.6* Registration Rights Agreement dated as of March 13, 1995 relating to $175
million in Aggregate Principal Amount of 6.75% Convertible Subordinated Notes
Due 2002 by and among the Company and Prudential Securities Incorporated and
Smith Barney, Inc. and Robert W. Baird & Co. and Raymond James & Associates,
Inc. (Exhibit 4.12 to the Company's Form 10-K dated June 16, 1995).
</TABLE>
20
<PAGE> 21
<TABLE>
<S> <C>
4.7* Credit Agreement dated March 19, 1996 among Danka Business Systems PLC, Danka
Holding Company, the several financial institutions from time to time a party
to this Agreement, Bank of America National Trust and Savings Association,
Bank of America International Limited, Nationsbank, N.A., and Southtrust
National Bank of Alabama. N.A., in an amount up to $400.0 million. (Exhibit
1 to the Company's Form 8-K dated March 19, 1996).
No other instruments defining the rights of holders of long-term debt of the
Company and its subsidiary have been included as exhibits because the total
amount of obligations authorized under any such agreement does not exceed 10%
of the total assets of the Company and its subsidiaries on a consolidated
basis. The Company hereby agrees to furnish supplementally a copy of any
omitted long-term debt instrument to the Commission upon request.
27 Financial Data Schedule (for SEC purposes only)
* Document has heretofore been filed with the Commission and is incorporated by
reference and made a part hereof.
</TABLE>
(b) Reports on Form 8-K:
On November 14, 1996, the Company filed a report on Form 8-K
announcing the Company's second quarter financial results, the
agreement with Eastman Kodak Company to acquire the sales, marketing
and equipment service operations of Kodak's Office Imaging Business,
as well as Kodak's facilities management business known as Kodak
Imaging Services (the "Sales and Services Business") and the promotion
of David Snell to Chief Operating Officer.
21
<PAGE> 22
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 thereunto duly authorized.
DANKA BUSINESS SYSTEMS PLC
--------------------------------
(Registrant)
Date: November 13, 1996 /S/ David C. Snell
--------------------------------
David Snell, Finance Director
(The Chief Operating Officer,
and the Principal Accounting Officer)
22
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF DANKA BUSINESS SYSTEMS PLC AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 21,842
<SECURITIES> 0
<RECEIVABLES> 285,863
<ALLOWANCES> 12,487
<INVENTORY> 277,417
<CURRENT-ASSETS> 596,249
<PP&E> 83,303
<DEPRECIATION> 30,892
<TOTAL-ASSETS> 1,244,463
<CURRENT-LIABILITIES> 304,797
<BONDS> 440,730
0
0
<COMMON> 4,721
<OTHER-SE> 469,106
<TOTAL-LIABILITY-AND-EQUITY> 1,244,463
<SALES> 822,483
<TOTAL-REVENUES> 822,483
<CGS> 495,366
<TOTAL-COSTS> 495,366
<OTHER-EXPENSES> 9,301
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,865
<INCOME-PRETAX> 46,335
<INCOME-TAX> 17,607
<INCOME-CONTINUING> 28,728
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,728
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0
</TABLE>
