<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 DECEMBER 31, 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
ORGANIZATION) NO.)
</TABLE>
11201 DANKA CIRCLE NORTH
ST. PETERSBURG, FLORIDA 33716
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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 226,352,247 Ordinary shares outstanding as of December 31,
1996.
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
Consolidated Statements of Earnings for the three months ended
December 31,1996 and 1995 (Unaudited) 3
Consolidated Statements of Earnings for the nine months ended
December 31, 1996 and 1995 (Unaudited) 4
Condensed Consolidated Balance Sheets as of December 31, 1996
(Unaudited) and March 31, 1996 5
Condensed Consolidated Statements of Cash Flows for the nine months
ended December 31, 1996 and 1995 (Unaudited) 6
Consolidated Statement of Shareholders' Equity for the nine months
ended December 31, 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 19
Item 2 - Changes in Securities 19
Item 3 - Defaults upon Senior Securities 19
Item 4 - Submission of Matters to a Vote of Security Holders 19
Item 5 - Other Information 19
Item 6 - Exhibits and Reports on Form 8-K 20
Signature 22
</TABLE>
2
<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
----------------------------------------
DECEMBER 31, DECEMBER 31,
1996 1995
------------------ -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUE:
Retail equipment sales $ 159,313 $ 124,225
Retail service, supplies and rentals 217,177 161,748
Wholesale 64,656 47,868
------------------- -------------------
Total revenue 441,146 333,841
------------------- -------------------
COSTS AND OPERATING EXPENSES:
Cost of retail equipment sales 99,360 75,610
Retail service, supplies and rental costs 115,835 86,219
Wholesale costs of revenue 53,129 39,183
Selling, general and administrative expenses 134,233 100,770
Amortization of intangible assets 5,165 3,915
Restructuring charges 35,000 8,500
------------------- -------------------
Total costs and operating expenses 442,722 314,197
------------------- -------------------
EARNINGS (LOSS) FROM OPERATIONS (1,576) 19,644
Interest expense and other, net 6,978 6,940
------------------- -------------------
EARNINGS (LOSS) BEFORE INCOME TAXES (8,554) 12,704
Provision for income taxes (3,216) 4,755
------------------- -------------------
EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM (5,338) 7,949
Extraordinary item - loss on early extinguishment
of debt, net of income tax benefit of $349,000 578 --
------------------- -------------------
NET EARNINGS (LOSS) $ (5,916) $ 7,949
=================== ===================
EARNINGS (LOSS) PER ADS:
Earnings (loss) before extraordinary item $ (0.09) $ 0.16
Extraordinary item (0.01) --
------------------- -------------------
Net earnings (loss) per ADS $ (0.10) $ 0.16
=================== ===================
WEIGHTED AVERAGE ADSs 57,787 50,939
</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 NINE MONTHS ENDED
----------------------------------------
DECEMBER 31, DECEMBER 31,
1996 1995
(UNAUDITED) (UNAUDITED)
------------------ -------------------
<S> <C> <C>
REVENUE:
Retail equipment sales $ 464,555 $ 330,371
Retail service, supplies and rentals 622,450 417,762
Wholesale 176,624 108,535
------------------- -------------------
Total revenue 1,263,629 856,668
------------------- -------------------
COSTS AND OPERATING EXPENSES:
Cost of retail equipment sales 287,332 201,108
Retail service, supplies and rental costs 331,067 221,165
Wholesale costs of revenue 145,291 89,550
Selling, general and administrative expenses 393,849 262,515
Amortization of intangible assets 14,466 9,053
Restructuring charges 35,000 8,500
------------------- -------------------
Total costs and operating expenses 1,207,005 791,891
------------------- -------------------
EARNINGS FROM OPERATIONS 56,624 64,777
Interest expense and other, net 18,843 14,474
------------------- -------------------
EARNINGS BEFORE INCOME TAXES 37,781 50,303
Provision for income taxes 14,391 19,050
------------------- -------------------
EARNINGS BEFORE EXTRAORDINARY ITEM 23,390 31,253
Extraordinary item - loss on early extinguishment
of debt, net of income tax benefit of $349,000 578 --
------------------- -------------------
NET EARNINGS $ 22,812 $ 31,253
=================== ===================
EARNINGS PER ADS:
Earnings before extraordinary item $ 0.41 $ 0.62
Extraordinary item (0.01) --
------------------- -------------------
Net earnings per ADS $ 0.40 $ 0.62
=================== ===================
WEIGHTED AVERAGE ADSs 57,706 50,680
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE> 5
DANKA BUSINESS SYSTEMS PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1996
--------------------- ----------------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 74,001 $ 38,217
Accounts receivable, net 654,612 247,479
Inventories 486,927 214,519
Prepaid expenses and other current assets 24,648 9,534
--------------------- ---------------------
TOTAL CURRENT ASSETS 1,240,188 509,749
Equipment on operating leases, net 313,610 73,303
Property and equipment, net 59,397 42,795
Intangible assets, net 480,032 435,844
Other assets 116,195 29,865
--------------------- ---------------------
TOTAL ASSETS $ 2,209,422 $ 1,091,556
===================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and notes payable $ 16,500 $ 30,414
Accounts payable and accrued expenses 361,413 197,438
Deferred revenue 80,513 64,223
--------------------- ---------------------
TOTAL CURRENT LIABILITIES 458,426 292,075
Convertible subordinated notes 200,000 200,000
Other long-term debt 1,035,665 118,262
Deferred income taxes and other long-term liabilities 42,750 39,376
--------------------- ---------------------
TOTAL LIABILITIES 1,736,841 649,713
--------------------- ---------------------
SHAREHOLDERS' EQUITY:
Ordinary shares, 1.25 pence stated value; 500,000,000
authorized; 226,352,247 and 219,112,247 issued
and outstanding 4,725 4,585
Additional paid-in capital 299,786 297,378
Retained earnings 167,496 148,501
Currency translation adjustment 574 (8,621)
--------------------- ---------------------
TOTAL SHAREHOLDERS' EQUITY 472,581 441,843
--------------------- ---------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,209,422 $ 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 NINE MONTHS ENDED
-------------------------------------------
DECEMBER 31, DECEMBER 31,
1996 1995
----------------- ---------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 22,812 $ 31,253
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 57,513 34,664
(Gain) loss on sale of property and equipment (1,372) 672
Proceeds from sale of rental equipment 8,948 5,336
Extraordinary item 927 --
Changes in assets and liabilities, net of effects
from the purchase of subsidiaries:
Accounts receivable (11,483) (28,033)
Inventories (46,004) (18,485)
Prepaid expenses and other current assets (2,670) (7,032)
Other noncurrent assets (12,653) 755
Accounts payable and accrued expenses (2,208) (5,100)
Deferred revenue (9,511) (8,034)
Deferred income taxes and other long-term liabilities 4,090 7,673
------------------ -------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,389 13,669
------------------ -------------------
INVESTING ACTIVITIES
Capital expenditures (58,621) (28,804)
Proceeds from sale of property and equipment 3,859 4,121
Net proceeds from sale of investments -- 10,854
Payment for purchase of subsidiaries, net of cash acquired (794,319) (245,586)
Payment for purchase of noncompete agreements (911) (2,708)
------------------ -------------------
NET CASH USED IN INVESTING ACTIVITIES (849,992) (262,123)
------------------ -------------------
FINANCING ACTIVITIES
Net borrowings under line of credit agreements 908,261 209,499
Principal payments on debt (18,040) (21,631)
Proceeds from stock options exercised 285 387
Dividends (4,075) (2,763)
------------------ -------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 886,431 185,492
------------------ -------------------
EFFECT OF EXCHANGE RATES (9,044) (324)
------------------ -------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 35,784 (63,286)
Cash and cash equivalents, beginning of period 38,217 86,848
------------------ -------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 74,001 $ 23,562
================== ===================
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6
<PAGE> 7
DANKA BUSINESS SYSTEMS PLC
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 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 22,812 22,812
Dividends (8,860) (8,860)
Shares issued under employee
option plan 5 280 285
Distributions to former shareholders
of pooled companies (324) (324)
Shares issued for acquisitions 135 2,128 5,367 7,630
Currency translation adjustment 9,195 9,195
------------- -------------- ------------- -------------- -------------
BALANCES AT DECEMBER 31, 1996 $ 4,725 $ 299,786 $ 167,496 $ 574 $ 472,581
============= ============== ============= ============== =============
</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 December
31, 1996, consolidated statements of earnings for the three months and the
nine months ended December 31, 1996 and 1995, the consolidated statement of
shareholders' equity for the nine months ended December 31, 1996, and the
condensed consolidated statements of cash flows for the nine months ended
December 31, 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 nine months ended December 31, 1996 the Company acquired
the outstanding stock or assets of various unrelated businesses. These
acquisitions were accounted for as purchases with consideration totaling
approximately $795.2 million (See Note 3). 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
accompanying consolidated financial statements have not been restated as
the acquisition did not have a material effect. The net equity of the
acquisition accounted for as a pooling of interests has been treated as an
addition in the Consolidated Statement of Shareholders' Equity.
NOTE 3. ACQUISITION OF THE SALES, SERVICE AND FACILITIES MANAGEMENT
OPERATIONS OF EASTMAN KODAK COMPANY'S OFFICE IMAGING BUSINESS
Effective December 31, 1996, the Company acquired from Eastman Kodak
Company ("Kodak") (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"). Subject to adjustment,
the Company paid in cash a net of $688.0 million to acquire the Sales and
Services Business which was funded entirely by a new six year, $1.275 billion
credit agreement (See Note 5). Below is an unaudited pro forma summary
representing the consolidated results of operations as if the acquisition of the
Sales and Services Business had occurred at the beginning of the nine months
ended December 31, 1996, after giving effect to certain adjustments including
interest expense on the debt incurred to fund the acquisition and the related
income tax effects. The pro forma results are based on the Company's
consolidated statement of earnings for the nine months ended December 31, 1996
and the Sales and Services Business combined statement of operations for the
nine months ended September 30, 1996. Results of the Sales and Services
8
<PAGE> 9
Business for the nine months ended December 31, 1995 were not readily available
and therefore pro forma results were not presented for the nine months ended
December 31, 1995. The pro forma results do not purport to be indicative of what
would have occurred had the acquisition of the Sales and Services Business been
made as of April 1, 1996 or of results which may occur in the future.
<TABLE>
<CAPTION>
For the nine months ended
December 31, 1996
(in millions except per ADS data)
<S> <C>
Total revenue $2,559
------
Net earnings 31
------
Net earnings per ADS $0.54
======
</TABLE>
NOTE 4. RESTRUCTURING CHARGE
During the third quarter of fiscal 1997, the Company recorded a $35.0
million pre-tax restructuring charge, related to the integration of the
Sales and Services Business and the related transition to the Company's
Market Based Approach in North America. The restructuring charge includes
severance and other employee termination benefits, lease settlement costs
associated with the consolidation of duplicate facilities and the write-off
of certain fixed assets.
NOTE 5: REFINANCING OF BANK DEBT
In December 1996, the Company signed a $1.275 billion credit agreement
(the "Credit Agreement") with a syndicate of international banks and
NationsBank N.A. as agent. The Credit Agreement which has a term of six
years, contains certain financial ratios and covenants similar to the
Company's previous $400 million credit facility ("Credit Facility Loan").
The proceeds of the Credit Agreement were used to purchase the Sales and
Services Business of Kodak, to refinance the Company's outstanding debt
under the Credit Facility Loan, and for working capital and general
corporate purposes. As a result of repaying the Credit Facility Loan, the
Company recorded an extraordinary charge, net of the income tax benefit, of
approximately $0.6 million ($0.01 per American Depositary Share ("ADS"))
for the early extinguishment of debt. The extraordinary loss consisted of
the write-off of unamortized deferred finance costs. (See Liquidity and
Capital Resources).
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Danka Business Systems PLC and its Subsidiaries (the "Company")
is one of the world's largest independent suppliers of photocopiers,
facsimiles and other related office equipment. 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 is the exclusive supplier of Kodak photocopiers in
every country where the Company operates and is one of the largest
independent suppliers of Canon, Konica, Minolta, Sharp, and Toshiba
photocopiers and facsimile equipment. The Company is also currently one
of the largest independent suppliers of Ricoh products in Europe.
Effective December 31, 1996, the Company acquired the Sales and
Services Business of Kodak (the "Acquisition"). The Company paid in cash a net
of $688.0 million for the Acquisition, subject to certain post-closing
adjustments. The purchase price was funded exclusively by the Company's Credit
Agreement, which will result in an increase in the Company's interest expense
going forward. As of December 31, 1995, the net assets of Kodak's historical
Sales and Services Business were approximately $800.0 million, and for such
year, generated revenue of $1.8 billion and net earnings before income taxes of
$25.0 million. For the nine months ended September 30, 1996, the historical
Sales and Services Business generated revenue of $1.3 billion and net earnings
before income taxes of $72.0 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, duplicators and printers,
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 Acquisition
significantly increased the scope of the Company's facilities management
business.
In connection with the Acquisition, Kodak and certain affiliates
of the Company entered into a number of agreements effective December 31,
1996 relating to the purchase, sale and service of electrophotographic equipment
and related software, supplies, accessories and spare parts manufactured
or remanufactured by Kodak (the "Supply Agreements"). Pursuant to the
Supply Agreements, the Company will purchase from Kodak its requirements
for certain Kodak manufactured or remanufactured electrophotographic
equipment and accessories, spare parts, supplies and toner. Subject to
certain limitations, the Company has 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 also agreed
to contribute a total of $190.0 million (plus an additional $30.0 million
if certain research milestones are met) to Kodak's ongoing research and
development for new electrophotographic products over a six year period.
The Company and Kodak will each appoint three representatives to serve as
members of an advisory committee which will meet on a regular basis to
discuss overall research and development progress.
In connection with the Acquisition, the Company acquired in
excess of 300 new locations, added approximately 10,400 new employees and
commenced 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 operated in
countries in which the Company was already conducting its business. The
Company's goal is to increase the net margins
10
<PAGE> 11
of the Sales and Services Business through certain cost efficiencies and
synergies it expects to achieve by operating the businesses. A number of
factors will be important in the Company's goal of successfully integrating the
acquired business into the Company. There can be no assurances that the
ultimate impact of the Acquisition on the Company and its future business and
operating results will be realized.
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's since this date, all 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.
To further the Company's goal of providing better support for its
sales and service force as well as its customers, the Company began moving
away from its traditional branch management concept to a more centralized,
market oriented support concept of administration (the "Market Based
Approach") during the first quarter of fiscal 1997. The Market Based
Approach is ultimately expected to provide for a higher quality of
customer support, increased productivity and reduced administrative costs.
The Company's goal is for the transition to be fully implemented,
excluding the Sales and Services Business, by the first half of fiscal
1998. Once complete, the Company's North American operations will consist
of approximately 22 regions with numerous markets within each region. As
a result of the transition to the Market Based Approach, the Company
experienced a short-term duplication of certain administrative and
management functions, which resulted in an increase in the selling, general and
administrative expenses during the first half of fiscal 1997. In connection
with the Market Based Approach, the Company is also in the process of rolling
out a new computer system for the North American operations which is expected to
be complete by the third quarter of fiscal 1998. The completion of these two
initiatives are intended to help facilitate additional future efficiencies in
the Company's North American operations.
Over the last three years, the Company has completed over 100
acquisitions. The acquisition of the Sales and Services Business is the
largest acquisition by the Company to date.
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 December 31, Nine Months Ended December 31,
-------------------------------- ------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Retail equipment sales . . . . . . . . 36.1% 37.2% 36.8% 38.6%
Retail service, supplies and rental . . 49.2 48.5 49.2 48.7
Wholesale . . . . . . . . . . . . . . . 14.7 14.3 14.0 12.7
---- ---- ---- ----
Total revenue . . . . . . . . . . 100.0 100.0 100.0 100.0
Cost of revenue . . . . . . . . . . . . . 60.8 60.2 60.4 59.4
---- ---- ---- ----
Gross profit . . . . . . . . . . . . . . 39.2 39.8 39.6 40.3
Selling, general and administrative . . . 30.4 30.2 31.2 30.6
Amortization of intangible assets . . . . 1.2 1.2 1.1 1.1
Restructuring charge . . . . . . . . . . 7.9 2.5 2.8 1.0
---- --- --- ---
Earnings (loss) from operations (0.3) 5.9 4.5 7.6
Interest expense and other, net . . . . . 1.6 2.1 1.5 1.7
---- --- --- ---
Earnings (loss) before income taxes (1.9) 3.8 3.0 5.9
Provision for income taxes . . . . . . . (0.7) 1.4 1.2 2.3
---- --- --- ---
Earnings (loss) before extraordinary
item . . . . . . . . . . . . . . (1.2) -- 1.8 --
Extraordinary item - loss on early
extinguishment of debt, net of tax
benefit 0.1 -- -- --
---- ---- ---- ----
Net earnings (loss) . . . . . . . . (1.3)% 2.4% 1.8% 3.6%
==== ==== ==== ====
</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 December 31, Nine Months Ended December 31,
------------------------------- ------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Retail equipment sales . . . . . . . . . 37.6% 39.1% 38.1% 39.1%
Retail service, supplies and rentals . . 46.7 46.7 46.8 47.1
Wholesale . . . . . . . . . . . . . . . . 17.8 18.1 17.7 17.5
</TABLE>
QUARTER ENDED DECEMBER 31, 1996 COMPARED TO QUARTER ENDED DECEMBER 31, 1995:
Revenue
Revenue increased 32% to $441.1 million for the three months
ended December 31, 1996 ("third quarter of fiscal 1997") compared to
$333.8 million for the three months ended December 31, 1995 ("third
quarter of fiscal 1996"). The increase resulted from contributions from
acquisitions as well as core growth. As a percentage of revenue, retail
equipment sales declined as retail service, supplies and rentals
increased. This shift in revenue mix primarily resulted from lower retail
equipment sales in the month of December.
Gross Profit
Gross profit increased 30% to $172.8 million for the third
quarter of fiscal 1997 from $132.8 million in the third quarter of fiscal
1996. The gross profit margin as a percentage of total revenue decreased
to 39.2% for the third quarter of fiscal 1997 from 39.8% for the third
quarter of fiscal 1996. This decrease was primarily due to lower gross
profit margins in retail equipment sales, which decreased to 37.6% for the
third quarter of fiscal 1997 from 39.1% for the third quarter of fiscal
1996. The decrease in the retail equipment margin resulted primarily from
the discounting of segment 5 and 6 machines in North America. The gross
profit margin as a percentage of retail service, supplies and rentals
remained stable at 46.7%. The gross profit margin as a percentage of
wholesale sales remained relatively constant.
12
<PAGE> 13
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 33% to
$134.2 million for the third quarter of fiscal 1997. The increase
primarily related to acquisitions made after December 31, 1995. As a
percentage of revenue, selling, general and administrative expenses
remained relatively constant.
Amortization of Intangible Assets
Amortization of intangible assets increased to $5.2 million for
the third quarter of fiscal 1997 from $3.9 million for the third quarter
of fiscal 1996. The increase related to acquisitions made after December
31, 1995 for which additional intangible assets are being amortized.
Restructuring Charges
The Company recorded a $35.0 million pre-tax restructuring charge
during the third quarter of fiscal 1997, principally related to the
integration of the Sales and Services Business with the Company's existing
operations and for costs associated with the related transition to the
Market Based Approach. The restructuring charge consisted of severance
and other employee termination benefits, settlement costs associated with
the consolidation of duplicate facilities, and the write-off of certain
fixed assets.
Earnings from Operations
The company incurred an operating loss of $1.6 million for the
third quarter of fiscal 1997 as compared with earnings from operations of
$19.6 million for the third quarter of fiscal 1996. The loss was
primarily related to the restructuring charge as well as to lower combined
gross profit margins.
Interest Expense and Other, Net
Interest expense remained relatively constant at $7.0 million for
the third quarter of fiscal 1997 compared to $6.9 million for the third
quarter of fiscal 1996.
Income Taxes
The Company recorded a tax benefit of $3.2 million for the third
quarter of fiscal 1997 compared to income taxes of $4.8 million for the
third quarter of fiscal 1996. The tax benefit was due to the loss before
income taxes which resulted from the restructuring charge. The combined
effective income tax benefit rate for the third quarter of fiscal 1997 was
37.6% as compared with an effective income tax rate of 37.4% for the third
quarter of fiscal 1996.
Extraordinary Item
The Company recorded an extraordinary loss of approximately $0.6
million in the third quarter of fiscal 1997 related to the early
extinguishment of debt, net of the income tax benefit of $0.3 million.
The extraordinary loss consisted of the write-off of unamortized deferred
finance costs which were associated with the refinancing of debt.
Net Earnings
The Company reported a net loss of $5.9 million in the third
quarter of fiscal 1997 due to the restructuring charge and the
extraordinary item.
13
<PAGE> 14
NINE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO NINE MONTHS ENDED DECEMBER 31,
1995:
Revenue
Revenue increased 48% to $1,263.6 million for the nine months
ended December 31, 1996 compared to $856.7 million for the nine months
ended December 31, 1995. The increase resulted from 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 45% to $500.0 million for the nine months
ended December 31, 1996. The gross profit margin as a percentage of total
revenue decreased to 39.6% for the nine months ended December 31, 1996
from 40.3% for the nine months ended December 31, 1995. This decrease was
primarily due to the change in the mix of the Company's revenue and to
lower margins on retail equipment 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 retail equipment sales decreased to 38.1% for
the nine months ended December 31, 1996 compared to 39.1% for the nine
months ended December 31, 1995. The decrease in the retail equipment
gross profit margin resulted primarily from the discounting of segment 5
and 6 machines in North America during the third quarter of fiscal 1997 as
well as to the inclusion of the Company's Australian operations which have
a lower retail equipment margin. As a percent of revenue, the gross
profit margin on retail service, supplies and rentals as well as wholesale
revenue remained relatively constant.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 50% to
$393.8 million for the nine months ended December 31, 1996 from $262.5
million for the nine months ended December 31, 1995. The increase
primarily related to higher levels of acquisitions which were made after
December 31, 1995. As a percentage of total revenue, selling, general and
administrative expenses increased to 31.2% for the nine months ended
December 31, 1996 from 30.6% for the nine months ended December 31, 1995.
The increase related to the Company's aggressive hiring and training of
new sales representatives and support personnel during the first and
second quarters of fiscal 1997 as well as to costs incurred to regionally
centralize certain management and administrative functions in the
transition to the Market Based Approach.
Amortization of Intangible Assets
Amortization of intangible assets increased to $14.5 million for
the nine months ended December 31, 1996 from $9.1 million for the nine
months ended December 31, 1995. The increase related to acquisitions made
after December 31, 1995 for which additional intangible assets are being
amortized.
Restructuring Charges
The Company recorded a $35.0 million pre-tax restructuring charge
during the third quarter of fiscal 1997, principally related to the
integration of the Sales and Services Business with the Company's existing
operations and for costs associated with the related transition to the
Market Based Approach in North America. The restructuring charge
consisted of severance and other employee termination benefits, settlement
costs associated with the consolidation of duplicate facilities, and the
write-off of certain fixed assets.
Earnings from Operations
Earnings from operations decreased 13% to $56.6 million for the
nine months ended December 31, 1996 from $64.8 million for the nine months
ended December 31, 1995. As a percentage of total revenue, earnings from
operations decreased to 4.5% for the nine months ended December 31, 1996
from 7.6% for the nine months ended December 31, 1995 primarily due to the
restructuring charge and to lower combined gross profit margins.
14
<PAGE> 15
Interest expense and other, net
Interest expense increased to $18.8 million for the nine months
ended December 31, 1996 from $14.5 million for the nine months ended
December 31, 1995. Interest expense has increased due to higher levels of
borrowings during the nine months ended December 31, 1996.
Income Taxes
Income taxes decreased to $14.4 million for the nine months ended
December 31, 1996 from $19.1 million for the nine months ended December
31, 1995 due to lower levels of earnings before taxes resulting from the
restructuring charge. The combined effective income tax rate for the nine
months ended December 31, 1996 was 38.1% as compared with an income tax
rate of 37.9% for the nine months ended December 31, 1995.
Extraordinary Item
The Company recorded an extraordinary loss of approximately $0.6
million in the third quarter of fiscal 1997 related to the early
extinguishment of debt, net of the income tax benefit of $0.3 million.
The extraordinary loss consisted of the write-off of unamortized deferred
finance costs which were associated with the refinancing of debt.
Net Earnings
Net earnings decreased to $22.8 million for the nine months ended
December 31, 1996 from $31.3 million for the nine months ended December
31, 1995, and net earnings as a percentage of total revenue decreased to
1.8% for the nine months ended December 31, 1996 due to the restructuring
charge and the extraordinary item.
TAXATION
As part of the Company's acquisitions of businesses, the Company
from time to time enters into noncompete and protection of trade secrets
agreements with certain key management personnel of the business acquired.
The amounts paid pursuant to these agreements is deductible for financial
reporting purposes over the term of the agreements, normally three to
seven years. In the case of an acquisition of a U.S. business, for U.S.
federal and state income tax purposes agreements entered into prior to
the enactment of the Omnibus Budget Reconciliation Act of 1993 (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. In the case of an acquisition of
businesses in countries other than the United States, the rules effecting
tax amortization of intangibles such as goodwill, trademarks, supply
contracts, etc., purchased in asset acquisitions vary from country to
country, although in many cases, the rules tend to allow a deduction over
periods ranging between three and ten years except in the United Kingdom where
they are generally non-deductible.
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, in the case of leases within the U.S., for federal
income tax purposes these leases are generally accounted for as operating
leases and the profit is recognized over the life of the lease.
15
<PAGE> 16
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 operates in 31
countries worldwide in which it has significant operations in each of the
United States, Canada, Australia and countries throughout Europe and South
America. The Company is subject to currency fluctuations throughout the
world and fluctuations in exchange rates between the U.S. dollar and each
of the pound sterling, Canadian dollar, Australian dollar, European
currencies and South American 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 its international business over the last few years
and most recently, with the acquisition of the Sales and Services
Business, the Company added 19 new countries. 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. 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 a significant amount of 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.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash flow provided by operating activities was
$8.4 million and $13.7 million for the nine months ended December 31, 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. Cash flow used in investing activities
was $850.0 million and $262.1 million for the nine months ended December
31, 1996 and 1995, respectively. The increase was due to the purchase of
the Sales and Services Business. Net cash provided by financing
activities was $886.4 million and $185.5 million for the nine months ended
December 31, 1996 and 1995, respectively. The increase was primarily due
to higher levels of borrowings for the purchase of the Sales and Services
Business made available through the new $1.275 billion credit agreement
discussed below.
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 December 1996 the Company signed a $1.275 billion credit
agreement (the "Credit Agreement") with a syndicate of international banks
and NationsBank N.A. ("NationsBank") as agent. The Credit Agreement which
has a term of six years, contains certain financial ratio requirements and
covenants similar to the Company's previous $400 million credit facility
("Credit Facility Loan"). The proceeds from the Credit Agreement, were
utilized to purchase the Sales and Services Business of Kodak, to repay
all the remaining bank indebtedness under the Credit Facility Loan, as
well as for ongoing working capital and general corporate purposes. The
Credit Agreement provides 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 Agreement is secured by (i) a
pledge of the capital stock of the Company's holding company in those
countries that
16
<PAGE> 17
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 Agreement. The Credit
Agreement contains 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 all of which
the Company believes it is in material compliance at this time. The adjustable
interest rate on the Credit Agreement is, 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%. Interest expense is expected to significantly rise in the near
future due to the use of proceeds from the Credit Agreement to acquire the Sales
and Services Business. As of December 31, 1996 the Credit Agreement had an
outstanding balance of approximately $1,026.7 million and was incurring interest
at a weighted average rate of 6.0% per annum. Therefore, subject to
availability under the covenants, $248.3 million was available for future
borrowings. The Company recorded an extraordinary charge during the third
quarter of fiscal 1997 related to the early extinguishment of its outstanding
debt obligations under the Credit Facility Loan. The extraordinary charge of
approximately $0.6 million, net of the income tax benefit, consisted of the
write-off of unamortized deferred finance costs.
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 $25.4 million at December 31, 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.
The Company's cash flow from operations together with the
borrowing capacity under the Credit Agreement are expected to be adequate
to finance its operating cash requirements and capital expenditures for
the short-term future. It is further anticipated that future acquisitions
and growth in the long-term future will be funded primarily with cash flow
from operations, borrowings available under the Credit Agreement, other
credit sources and, where desirable, funding from the sale of additional
debt or equity securities.
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. The Sales and Services Business, however,
typically has lower revenue during the Company's fourth quarter. 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.
17
<PAGE> 18
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 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 Supply
Agreements, (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 Supply Agreements are 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, (xv) the ability of the
Company to continue to receive acceptable financing as required in the
future, and (xvi) there can be no assurances that the implementation of the
Company's Market Based Approach and new computer system will result in
additional efficiencies. The Company disclaims any duty to update in the
future any of the forward looking statements contained in this Form 10-Q.
18
<PAGE> 19
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.
An Extraordinary General Meeting of shareholders of Danka Business
Systems PLC was held on December 11, 1996. At the special meeting, the
following action was taken by the shareholders:
Approval of the acquisition of i) the sales, marketing, distribution
and equipment service operations of Eastman Kodak's Office Imaging and
Customer Equipment Services businesses and ii) the facilities management
services business of Eastman Kodak Company known as "Kodak Imaging
Service". The voting on the resolution was as follows:
FOR 191,722,039
AGAINST 1,024,259
ABSTAINED - 0 -
ITEM 5. OTHER INFORMATION.
Not applicable.
19
<PAGE> 20
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.)
2.2* Amendment No. 1 to Asset Purchase Agreement between Eastman Kodak Company and
Danka Business Systems PLC dated December 20, 1996 (Excluding schedules and
similar attachments). (Exhibit 2.2 to the Company's Form 8-K dated January
15, 1997).
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).
4.8* Credit Agreement dated December 5, 1996, by and among Danka Business Systems
PLC, Dankalux Sarl & Co. SCA, Danka Holding Company, the several financial
institutions from time to time a party and NationsBank, N.A., as agent
(Exhibit 4 to the Company's Form 8-K December 16, 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)
</TABLE>
* Document has heretofore been filed with the
Commission and is incorporated by reference and
made a part hereof.
(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.
On December 16, 1996, the Company filed a report on Form 8-K announcing the
Company's New Credit Facility dated December 5, 1996 with NationsBank, N.A. as
agent and the approval by the Company's shareholders of the acquisition of the
Sales and Services Business.
On January 3, 1997, the Company filed a report on Form 8-K announcing the
Company's closing of the acquisition of the Sales and Services Business and the
Consent of Price Waterhouse LLP dated December 23, 1996.
On January 15, 1997, the Company filed a report on Form 8-K reporting the
acquisition of the Sales and Services Business.
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: February 12, 1997 /s/ DAVID C. SNELL, Finance Director
------------------------------------
David C. Snell, Finance Director
(The Chief Operating Officer, and the
Principal Accounting Officer and Duly
Authorized 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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 74,001
<SECURITIES> 0
<RECEIVABLES> 654,612
<ALLOWANCES> 26,149
<INVENTORY> 486,927
<CURRENT-ASSETS> 1,240,188
<PP&E> 473,952
<DEPRECIATION> 100,945
<TOTAL-ASSETS> 2,209,422
<CURRENT-LIABILITIES> 458,426
<BONDS> 1,235,665
0
0
<COMMON> 4,725
<OTHER-SE> 467,856
<TOTAL-LIABILITY-AND-EQUITY> 2,209,422
<SALES> 1,263,629
<TOTAL-REVENUES> 1,263,629
<CGS> 763,690
<TOTAL-COSTS> 763,690
<OTHER-EXPENSES> 443,315<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,843
<INCOME-PRETAX> 37,781
<INCOME-TAX> 14,391
<INCOME-CONTINUING> 23,390
<DISCONTINUED> 0
<EXTRAORDINARY> 578
<CHANGES> 0
<NET-INCOME> 22,812
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0
<FN>
<F1>Includes $35,000 restructuring charge.
</FN>
</TABLE>
