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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended MARCH 31, 2000 Commission file number: 0-20828
DANKA BUSINESS SYSTEMS PLC
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(Exact name of registrant as specified in its charter)
ENGLAND 98-0052869
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(State of other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
11201 DANKA CIRCLE NORTH
ST. PETERSBURG, FLORIDA 33716
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(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (727) 576-6003
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Securities registered pursuant to Section 12(g) of the Act:
ORDINARY SHARES
1.25 p each
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or an amendment to this
Form 10-K. [ ]
As of March 31, 2000, the Registrant had 234,573,862 Ordinary Shares
outstanding, including 191,112,119 represented by American Depositary Shares
("ADS"). Each ADS represents four Ordinary Shares. The ADSs are evidenced by
American Depositary Receipts. The aggregate market value of voting shares held
by non-affiliates of the Registrant as of March 31, 2000 was $366,934,763 based
on the average bid and asked prices of ADSs as quoted on the NASDAQ National
Market.
DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Part III is incorporated by reference to the
definitive Proxy Statement for the 2000 Annual Meeting of Shareholders to be
filed not later than 120 days after the close of the fiscal year covered by
this report on Form 10-K.
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DANKA BUSINESS SYSTEMS PLC
ANNUAL REPORT ON FORM 10-K
MARCH 31, 2000
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business 3
Item 2. Properties 7
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 9
PART II
Item 5. Market Price for the Registrant's Common Equity and
Related Shareholder Matters 9
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 7A. Quantitative and Qualitative Disclosure
about Market Risk 10
Item 8. Financial Statements and Supplementary Data 10
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 10
PART III
Item 10. Directors and Executive Officers of the Registrant 10
Item 11. Executive Compensation 10
Item 12. Security Ownership of Certain Beneficial Owners
and Management 11
Item 13. Certain Relationships and Related Transactions 11
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 11
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PART I
ITEM 1. BUSINESS
INTRODUCTION
Danka Business Systems PLC together with its Subsidiaries ("Danka" or
the "Company") is one of the world's largest independent suppliers of
photocopiers and related office imaging equipment solutions. Danka primarily
markets these products and related services, parts and supplies on a direct
basis to retail customers throughout 29 countries. The Company principally
distributes the products of Canon, Heidelberg, Ricoh, under its Infotec
trademark in Europe, and Toshiba. In addition to its direct retail customers,
the Company markets photocopiers and related parts and supplies on a wholesale
basis to independent dealers through its international operations. The Company
closed its U.S. wholesale operations effective March 31, 1999. In addition, the
Company sold its facsimile business, Omnifax, effective July 30, 1999.
Related to the sale of its office imaging equipment, the Company
provides a wide range of customer-related support services, maintenance and
supply contracts, training and technical support, and leasing arrangements. The
Company's focus on customer service and the contractual nature of its service
business, combined with its service contract renewals, provide a significant
source of recurring revenue.
The Company also provides worldwide document management services
through its outsourcing business, Danka Services International ("DSI").
Services provided by DSI range from on- and off-site document management
services, including the management of central reprographics departments, the
placement and maintenance of convenience copiers, print-on-demand operations
and document archiving and retrieval services.
Danka's operations are segmented into three divisions including Danka
Americas, Danka International and DSI. Danka Americas, which represented 55% of
the Company's total revenue in fiscal 2000, provides office imaging solutions
and related services and supplies on a direct basis to retail customers
throughout the United States, Canada and Latin America. Danka International,
which represented 34% of the Company's total revenue in fiscal 2000, provides
office imaging solutions and related services and supplies on a direct basis to
retail customers throughout the European and Australian markets. Danka
International also provides photocopiers, facsimiles and other related office
imaging equipment on a wholesale basis to over 750 independent dealers. Last,
as discussed above, DSI is the Company's worldwide document management
business. DSI represented 11% of the Company's total revenue in fiscal 2000 and
has operations throughout 12 countries. See Note 8 "Segment Reporting" to the
consolidated financial statements in the Company's Annual Report to
Shareholders for the Year Ended March 31, 2000 incorporated herein by reference
for additional financial information by segment and geographic area (Exhibit 13
to this Report).
Danka Business Systems PLC is a corporation organized under the laws
of England and Wales. The Company's principal operating subsidiaries are
located in North America, Europe, Australia and Latin America. The registered
office of the Company is located at Masters House, 107 Hammersmith Road, London
W14 0QH England, and its telephone number is 011-44-20-7603-1515. The Company's
operational and executive headquarters are located at 11201 Danka Circle North,
St. Petersburg, Florida 33716, and its telephone number is 727-576-6003.
VENDORS
The Company's business is dependent upon close relationships with its
vendors and its ability to purchase products from these vendors on competitive
terms. See "Equipment and Software Products" below. The Company's worldwide
product alliances include relationships with Canon, Heidelberg, Ricoh, under
its private label Infotec, and Toshiba. The sale of these products represented
over 75% of total retail equipment sales in fiscal 2000. The Company also
relies on its equipment vendors for related parts and supplies.
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EQUIPMENT AND SOFTWARE PRODUCTS
The Company's primary products include state-of-the-art digital and
color photocopiers, high-volume printing systems, added software applications,
and related parts and supplies. The photocopier industry is informally divided
into six segments. Segments one and two contain the least sophisticated
photocopiers and can produce up to 30 copies per minute; segments three and
four contain faster and more sophisticated mid-range photocopiers producing 31
to 69 copies per minute; and segments five and six contain the most
sophisticated and fastest photocopiers in the industry which run 70 to 90+
copies per minute. The principal manufacturers in segments one through four are
Canon, Konica, Minolta, Ricoh, Sharp and Toshiba. Segments five and six are
primarily dominated by Heidelberger Druckmaschnen AG ("Heidelberg"), a German
manufacturer of printing systems, and Xerox Corporation. Effective May 10,
1999, Eastman Kodak ("Kodak") sold its equipment, toner and developer
manufacturing operations to Heidelberg.
In July 1999, Danka launched worldwide distribution of its first
high-volume digital printing system, the DigiSource 9110, renamed the
Digimaster 9110 in March 2000. The Digimaster 9110 was developed by Kodak and
is designed and manufactured through a joint venture by Heidelberg and Nexpress
Solutions. In October 1999, the Company signed a five-year agreement with
Heidelberg to distribute worldwide black and white electrophotographic
equipment manufactured by Heidelberg, including the Digimaster 9110 Network
Imaging System.
The Company's other vendors have expended considerable resources in
the research, development, and creation of digital products and have introduced
new lines of digital black- and-white photocopiers and printers, including the
acclaimed Canon imageRUNNER(TM) series and a recent introduction from Toshiba.
Toshiba's new product is a black-and-white 80 page per minute copier/printer
system, which filled a significant gap in the Company's digital product
portfolio. Danka has developed and acquired certain of the expertise necessary
to support the transition to digital technology and provides training and
support to its sales professionals and field engineers for new vendor digital
product offerings through its Danka Digital Solutions Center. The use of
digital equipment is playing an important role in the industry as companies
transition from an analog standalone office environment to a digitally
connected solution.
Color photocopiers also represent a growing segment of the office
imaging market. With a color server, color photocopiers can be converted into
networkable color printers that will accept digital output from a computer as
well as hard copy inputs which can be reproduced or scanned into the computer,
thus increasing the functionality of the unit. The Company continues to expand
its color markets through its principal relationship with Canon worldwide and
Ricoh in Europe. In addition, in February 2000 the Company introduced
distribution of Toshiba's new complete color solution with full color, copier,
printer and scanner capabilities.
As a percentage of retail equipment sales, black-and-white digital and
color products sold by the Company in the U.S. represented approximately 53% in
fiscal 2000, increasing from 22% in fiscal 1999. On a worldwide basis,
black-and-white digital and color products sold by the Company in fiscal 2000,
represented approximately 42% of equipment sales compared to 25% in fiscal
1999.
In February 2000 at the Print On Demand 2000 exhibition, the Company
introduced DankaWare(TM), a growing portfolio of industry and application
specific software aimed at providing innovative, open system workflow
solutions. The Company's DankaWare solutions include alliances with Electronics
for Imaging, Inc., NetPaper.com, Network Printing Solutions and Alto Imaging
Technologies.
SERVICES
In fiscal 2000, retail service, supplies and rentals represented 66%
of the Company's total revenue. This revenue is primarily derived from its
equipment, maintenance and supply contracts ("EMS Contracts") and other
maintenance contracts. Generally, EMS Contracts are for a one-year term and are
automatically renewable. Although the Company has various payment arrangements,
most maintenance contracts are based
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upon a per copy charge. These arrangements provide the customer with scheduled
payments that can be conveniently budgeted and provide the Company with a
steady source of revenue.
Revenue generated by DSI, the Company's document management outsourcing
operations, is also included in the Company's retail service, supplies and
rentals revenue stream. Generally, DSI's outsourcing contracts are based on a
five-year term.
MARKETING, CUSTOMERS AND SALES ORGANIZATION
The Company believes that, in addition to price and product
performance and capabilities, its retail customers primarily base their
purchasing decisions on the quality of post-sales service and support, speed of
service, and the availability of financing.
The Company's retail operations target a broad range of customer
groups, including small businesses to large multinational companies,
professional firms, and governmental and educational institutions.
Additionally, the Company markets photocopiers and facsimiles on a wholesale
basis to a network of authorized independent dealers in Europe. The Company
closed its U.S. wholesale business effective March 31, 1999.
Sales personnel turnover is common in the industry and the Company
makes a considerable effort to retain qualified sales personnel. The Company
made significant progress in fiscal 2000 to stabilize and strengthen its direct
sales force, specifically in the U.S., expanding its coverage evenly among
1,300 territories.
The Company's compensation plan is designed to provide a career path
for the Danka's sales representatives and the opportunity to move up from
selling lower segment machines and service to more complex systems. By
increasing training and providing a career path, it is the Company's goal to
minimize attrition levels. The compensation is comprised of a base salary and a
selling commission, which is based on several variables.
The Company currently utilizes a range of advertising and promotional
activities, including print media advertising campaigns, distribution of
descriptive brochures and direct mail pieces, and informational seminars and
presentations. The Company's marketing efforts are also enhanced by
manufacturers' national advertising campaigns and co-op arrangements where
appropriate and applicable. The Company also utilizes its website at
www.danka.com as a marketing tool.
LEASING
The Company has historically financed a substantial portion of its
leasing business using various funding sources. One of the largest programs to
obtain such funding is with General Electric Capital Corporation ("GE
Capital"). In April 2000, GE Capital and the Company entered into an agreement
to provide a framework for ongoing customer lease financing through March 2003.
Additionally, the Company continues to obtain financing from other funding
sources of leases not financed by GE Capital. Leasing arrangements permit the
Company to utilize its capital for other business activities. The Company has
similar arrangements for leases, which are offered to customers outside the
U.S.
TRAINING
A key element of the Company's operating philosophy is the training of
its employees in order to assist in the uniform application of the Company's
established operating procedures throughout the sales network. As described
above, the Company's compensation plan was designed to provide a career path
for its sales representatives. Upon employment, Company sales representatives
participate in an intensive information and skills training program with areas
of focus including company overview, competitive marketplace, selling skills,
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customer satisfaction, product knowledge as well as finance and business
skills. After the initial training has been successfully completed, the Company
continues to develop the skills and knowledge of its sales representatives with
new product training, self-study computer based courses and on-going sales
skills development.
Field Engineers, or service technicians, new to the Company are
immediately trained and certified in accordance with the Company's methods,
procedures, and standards. The Company's service personnel are continuously
updated and retrained either from the Company or directly from the equipment
manufacturers as new technology is developed. The Company's service training
centers are certified as manufacturers' authorized service facilities. In
addition, each Field Engineer carries state-of-the-art service tools, including
laptop computers loaded with technical information and diagnostic software.
At the Company's Digital Support Center, Danka's Network and System
Support Engineers receive ongoing, in-house training on industry standard
certifications from some of the leading technology companies, including
Microsoft Corporation, Adobe Systems, Inc., Novell, Inc. and Sun Microsystems,
Inc.
COMPETITION
The Company's business is highly competitive with a number of
competitors in most geographic markets. The Company's retail operations are in
direct competition with local and regional equipment suppliers and dealers,
manufacturers, mass merchandisers, and wholesale clubs. Depending upon the
customer, principal areas of competition may include: quality and speed of
post-sales service support; availability of competitive products, parts and
supplies; speed of delivery; product capability and performance; and the
availability of financing, leasing, or rental programs. Principal areas of
competition for wholesale operations are availability of competitive products,
price, speed of delivery, dealer support, centralized volume buying, product
performance, and the availability of financing programs. The Company closed its
U.S. wholesale operations effective March 31, 1999. The Company's remaining
wholesale operations extend across Europe. The continued ability of the Company
to offer competitive office imaging equipment and service in all segment areas
is important in both its retail and wholesale operations.
EMPLOYEES
As of March 31, 2000, the Company employed approximately 16,000
persons, of which approximately 9,500 were dedicated to service and related
service support and approximately 2,400 were devoted to generating sales. The
remaining employees were devoted to training, management, and other
administrative and support positions in the field and at corporate locations.
Some of the Company's non-U.S. employees are subject to labor
agreements that establish rates of pay, working hours, procedures for orderly
settlement of disputes and other terms and conditions of employment. The
Company considers its employee relations to be good, and believes that it
provides working conditions and wages, which are comparable with those of its
competitors.
The Company relies heavily on its senior management, and the loss of
certain Executive Officers could have an adverse effect on the Company.
Additionally, the Company's ability to successfully grow and maintain its
management and employee base is extremely important to the Company's continued
success.
TRADEMARKS AND SERVICE MARKS
The Company believes that its trademarks and service marks have gained
significant recognition in the office imaging and document management industry
and are important to its marketing efforts. The Company has registered various
trademarks and service marks in certain markets. The trademarks "Danka"
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and "Infotec" are among those registered marks, which are viewed as important
to the Company's ongoing business. The Company's policy is to continue to
pursue registration of its marks whenever possible and to oppose vigorously any
infringement of its proprietary rights. Depending on the jurisdiction,
trademarks and service marks are valid as long as they are in use and/or their
registrations are properly maintained, and they have not been found to become
generic. Registrations of trademarks and service marks in the United States can
generally be renewed indefinitely as long as the trademarks and service marks
are in use.
BACKLOG
The backlog of orders at March 31, 2000 and March 31, 1999 were not
material.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Form 10-K, or otherwise made by
officers of the Company, including statements related to the Company's future
performance and the Company's outlook for its businesses and respective
markets, projections, statements of management's plans or objectives, forecasts
of market trends and other matters, are forward-looking statements, and contain
information relating to the Company that is based on the beliefs of management
as well as assumptions, made by, and information currently available to,
management. The words "goal", "anticipate", "expect", "believe" and similar
expressions as they relate to the Company or the Company's management, are
intended to identify forward-looking statements. No assurance can be given that
the results in any forward-looking statement will be achieved. For the
forward-looking statements, the Company claims the protection of the safe
harbor for forward-looking statements provided for in the Private Securities
Litigation Act of 1995. Such statements reflect the current views of the
Company with respect to future events and are subject to certain risks,
uncertainties and assumptions that could cause actual results to differ
materially from those reflected in the forward-looking statements. Factors that
might cause such actual results to differ materially from those reflected in
any forward looking statements include, but are not limited to (i) any material
adverse change in financial markets or Danka, (ii) any inability to maintain
achieved cost savings, (iii) increased competition resulting from other
high-volume and digital copier distributors and the discounting of such copiers
by competitors, (iv) any inability by the Company to procure, or any inability
by the Company to continue to gain access to and successfully distribute new
products, including digital products and high-volume copiers, or to continue to
bring current products to the marketplace at competitive costs and prices, (v)
any negative impact from the loss of any key upper management personnel, (vi)
the ultimate outcome and impact of pending lawsuits, (vii) the ultimate outcome
of the notice of proposed deficiency, pursuant to the review by the Internal
Revenue Service, (viii) any inability to achieve minimum equipment leasing
commitments, (ix) fluctuations in foreign currencies and (x) the reversals by
the Appellate Court of the dismissals granted to the Company as referenced
below in Item 3: Legal Proceedings, and (xi) other risks including those risks
identified in any of the Company's other filings with the Securities and
Exchange Commission. Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's analysis only as of the
date they are made. The Company undertakes no obligation and does not intend to
update these forward-looking statements to reflect events or circumstances that
arise after the date such statements are made. Furthermore, as a matter of
policy, the Company does not generally make any specific projections as to
future earnings nor does it endorse any projections regarding future
performance, which may be made by others outside the Company.
ITEM 2. PROPERTIES
The Company's general policy is to lease, rather than own, its
business locations. The Company leases numerous properties for administration,
sales and service, and distribution functions. The terms vary under the
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respective leases and some contain a right of first refusal or an option to
purchase the underlying real property and improvements. In general, the
Company's lease agreements require it to pay its proportionate share of taxes,
common area expenses, insurance, and related costs of such rental properties.
In addition, the Company leases approximately 500 properties for its retail and
wholesale operations.
The Company owns several smaller business locations, none of which are
necessary to the success of the particular location's business. Generally,
these properties were included among the assets obtained in certain
acquisitions. In the future, the Company may dispose of such properties and
enter into leases of properties, which the Company believes may be more
desirable or more centrally located.
Management believes that the properties it occupies are, in general,
suitable and adequate for the purposes for which they are utilized.
ITEM 3. LEGAL PROCEEDINGS
In March 2000, the Company was served with a complaint, filed in the
United States District Court, Southern District of New York, alleging claims of
breach of contract and declaratory judgment, more particularly, the plaintiff,
an investment banking and securities firm, alleged that the Company failed and
refused to pay certain fees alleged due and payable pursuant to various
restructuring and financing activities engaged in by the Company during fiscal
1999 and 2000. The complaint sought damages in the approximate amount of not
less than $16.0 million. On May 15, 2000, the Company settled all claims for
$4.3 million.
In March 2000, the respective courts as referred to below entered an
order to dismiss unrelated lawsuits previously disclosed by the Company seeking
damages of a material nature.
On March 22, 2000, the United States District Court for the Middle
District of Florida, Tampa Division entered an order dismissing the
consolidated class action complaint brought against the Company and certain
former Directors and executives on or about June 18, 1998. The complaint
alleged, principally, that the Company and the other defendants issued
materially false and misleading statements related to the progress of the
Company's integration of its acquisition of Kodak's Office Imaging and
outsourcing businesses, engaged in improper accounting practices and that
certain former officers utilized insider information, in violation of Sections
10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder.
On March 15, 2000 the United States District Court, Southern District
of New York entered an order dismissing a complaint brought against the Company
and its attorneys in February 1999. The complaint alleged claims of breach of
contract, breach of duty of good faith and fair dealing, conversion and
violation of the Uniform Commercial Code. More particularly, the plaintiffs
allege that in December 1997, they attempted to sell approximately one million
restricted American Depositary Shares at approximately $35.00 per share and
that the Company and its attorneys wrongfully refused and/or unreasonably
delayed in registering the transfer of the plaintiffs' restricted shares. The
complaint further stated that the plaintiffs were unable to complete the sale
of shares and were later forced to sell the shares in February 1998 at
approximately $17.00 per share. The plaintiffs were attempting to recover the
difference from the Company and its attorneys.
Although both dismissals have been appealed, the Company believes that
the orders of dismissal will be upheld.
The Company is subject to legal proceedings and claims, which arise,
in the ordinary course of its business that are not expected to have a material
adverse effect upon the Company's financial position, results of operations or
liquidity.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET PRICE FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The following table sets forth the high and low sale price per American
Depositary Share ("ADS") as reported by the Nasdaq National Market and the high
and low middle market quotations (which represent an average of bid and offered
prices in pence) for the Ordinary Shares as reported on the London Stock
Exchange Official List. Each ADS represents four Ordinary Shares.
U.S. Dollars per Pence per
ADS Ordinary Share
High Low High Low
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Fiscal Year 2000:
Quarter ended June 30, 1999 $ 8.75 $ 4.25 131p 67p
Quarter ended September 30, 1999 12.38 5.50 181 89
Quarter ended December 31, 1999 14.13 8.69 207 134
Quarter ended March 31, 2000 13.75 5.00 198 85
Fiscal Year 1999:
Quarter ended June 30, 1998 $ 23.75 $ 11.50 344p 189p
Quarter ended September 30, 1998 12.88 5.75 194 85
Quarter ended December 31, 1998 6.88 1.75 92 29
Quarter ended March 31, 1999 6.00 4.13 88 63
As of March 31, 2000, 47,778,029 ADSs were held of record by 2,459 registered
holders and 43,461,743 Ordinary Shares were held of record by 3,276 registered
holders. Since some of the ADSs and Ordinary Shares are held by nominees, the
number of holders may not be representative of the number of beneficial owners.
The Company most recently paid a dividend to shareholders on July 28, 1998. The
Company is not currently permitted to pay dividends (other than payment-in-kind
dividends on its participating shares) under the Credit Agreement. Any
determination to pay cash dividends after the refinancing of the indebtedness
outstanding thereunder will be made by the Board of Directors in light of the
Company's earnings, financial position, capital requirements, credit agreements
and other such factors as the Board of Directors deems relevant.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated herein by
reference to the information under the heading "Selected Consolidated Financial
Data" in the Company's Annual Report to Shareholders for the Year Ended March
31, 2000. See Exhibit 13 to this Report.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is incorporated herein by
reference to the information under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's
Annual Report to Shareholders for the Year Ended March 31, 2000. See Exhibit 13
to this Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is incorporated herein by
reference to the information under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's
Annual Report to Shareholders for the Year Ended March 31, 2000. See Exhibit 13
to this Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated herein by
reference to the information under the headings "Consolidated Statements of
Operations", "Consolidated Balance Sheets", "Consolidated Statements of Cash
Flows", "Consolidated Statements of Shareholders' Equity" and "Notes to the
Consolidated Financial Statements" in the Company's Annual Report to
Shareholders for the Year Ended March 31, 2000. See Exhibit 13 to this Report.
As is the case with any company, prior financial condition and results of
operations are not necessarily indicative of future results.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated herein by
reference to the information under the headings "MANAGEMENT - Directors and
Executive Officers" in the Company's definitive Proxy Statement to be used in
connection with the Company's 2000 Annual Meeting of Shareholders, to be filed
not later than 120 days after the close of the fiscal year covered by this
report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by
reference to the information under the headings "MANAGEMENT - Compensation of
Executive Officers and Directors" in the Company's definitive Proxy Statement
to be used in connection with the Company's 2000 Annual Meeting of
Shareholders, to be filed not later than 120 days after the close of the fiscal
year covered by this report on Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by
reference to the information under the heading "MANAGEMENT - Security Ownership
of Management and Others" in the Company's definitive Proxy Statement to be
used in connection with the Company's 2000 Annual Meeting of Shareholders, to
be filed not later than 120 days after the close of the fiscal year covered by
this report on Form 10-K.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by
reference to the information under the heading "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS" in the Company's definitive Proxy Statement to be used in
connection with the Company's 2000 Annual Meeting of Shareholders, to be filed
not later than 120 days after the close of the fiscal year covered by this
report on Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. The following Financial Statements of the Registrant
included in Part II, Item 8, of this Report are
incorporated herein by reference as described in
Item 8:
Consolidated Statements of Operations - Years ended
March 31, 2000, 1999 and 1998
Consolidated Balance Sheets - March 31, 2000 and
1999
Consolidated Statements of Cash Flows - Years ended
March 31, 2000, 1999 and 1998
Consolidated Statements of Shareholders' Equity -
Years ended March 31, 2000, 1999 and 1998
Notes to the Consolidated Financial Statements -
Years ended March 31, 2000, 1999 and 1998
Independent Auditor's Report
2. The following Financial Statement Schedules of the
Registrant are included in Item 14(d):
Independent Auditor's Report
II - Valuation and Qualifying Accounts
All other schedules are omitted because the required
information is not present in amounts sufficient to
require submission of the schedule, the information
required is included in the financial statements and
notes thereto or the schedule is not required or
inapplicable under the related instructions.
3. Exhibit index:
Exhibit
Number Description of Document
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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).
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3.1* Memorandum of Association of the Company. (Exhibit 3.1 of
Company's Registration Statement on Form 20-F, No. 0-20828,
filed on November 10, 1992 [the "1992 Registration
Statement"].)
3.2* Articles of Association of the Company. (Exhibit 4.2 to the
Company's Form 10-Q December 31, 1999 dated February 11,
2000.)
4.1* Memorandum of Association of the Company, including
paragraphs 5 and 6. (Exhibit 2.1 to 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 4.2 to the Company's Form 10-Q December 31, 1999
dated February 11, 2000.)
4.3* Form of Ordinary Share certificate. (Exhibit 4.3 of Company's
Registration Statement on Form S-1, No. 33-68278, filed on
October 8, 1993 [the "1993 Registration Statement"]).
4.4* Form of American Depositary Receipt. (Exhibit 4.4 to the 1993
Registration Statement.)
4.5* Deposit Agreement dated June 25, 1992, Amendment No. 1 dated
February 26, 1993 and Amendment No. 2 dated July 2, 1993
(Exhibit 4.9 to the 1993 Registration Statement) and
Amendment No. 3 dated August 16, 1994 between The Bank of New
York, Company and Owners and Holders of American Depositary
Receipts.
4.6* Indenture dated March 13, 1995 between the Company and The
Bank of New York, as Trustee. (Exhibit 2 to the Company's
Form 8-K dated March 21, 1995).
4.7* 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).
4.8* Registration Rights Agreement dated as of March 13, 1995
relating to $175,000,000 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 1995 Form
10-K).
4.9* Resolution No. 7 adopted by shareholders at the 1997 annual
general meeting waiving pre-emptive rights of shareholders
under certain circumstances filed with the Company's 1997
Proxy Statement.
4.11* 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 dated December 16, 1996).
4.12* First Amendment to Credit Agreement dated December 5, 1997
among Danka Business Systems PLC, Dankalux Sarl & Co., SCA,
and Danka Holding Company, Nationsbank, National Association,
each other Bank signatory thereto and Nationsbank, National
Association, as agent. (Exhibit 4.9 to the Company's Form
10-Q dated February 12, 1998).
12
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4.13* Second Amendment to Credit Agreement dated July 28, 1998
among Danka Business Systems PLC, Dankalux Sarl & Co., SCA,
and Danka Holding Company, Nationsbank, National Association,
each other Bank signatory thereto and Nationsbank, National
Association, as agent. (Exhibit 4.10 to the Company's Form
8-K July 28, 1998).
4.14* Waiver dated October 20, 1998, of certain financial covenants
contained in the Credit Agreement among Danka Business
Systems PLC, Dankalux Sarl & Co., SCA and Danka Holding
Company, NationsBank, N.A., each other Bank signatory to the
Credit Agreement and NationsBank, N.A., as agent. (Exhibit
4.11 to the Company's Form 8-K October 21, 1998).
4.15* Waiver dated February 26, 1998, of certain financial
covenants contained in the Credit Agreement among Danka
Business Systems PLC, Dankalux Sarl & Co., SCA and Danka
Holding Company, NationsBank, N.A., each other Bank signatory
to the Credit Agreement and NationsBank, N.A., as agent.
(Exhibit 4.12 to the Company's Form 8-K March 5, 1999).
4.16* Fifth Amendment to Credit Agreement dated June 15, 1999 among
Danka Business Systems PLC, Dankalux Sarl & Co., SCA, and
Danka Holding Company, NationsBank, National Association,
each other Bank signatory thereto and NationsBank, National
Association, as agent. (Exhibit 4.16 to the Company's Form
8-K July 15, 1999).
4.17* Sixth Amendment to Credit Agreement dated July 9, 1999 among
Danka Business Systems PLC, Dankalux Sarl & Co., SCA, and
Danka Holding Company, NationsBank, National Association,
each other Bank signatory thereto and NationsBank, National
Association, as agent. (Exhibit 4.17 to the Company's Form
8-K July 15, 1999).
4.18* Seventh Amendment to Credit Agreement dated December 1, 1999
among Danka Business Systems PLC, Dankalux Sarl & Co., SCA,
and Danka Holding Company, NationsBank, National Association,
each other Bank signatory thereto and NationsBank, National
Association, as agent. (Exhibit 4.18 to the Company's Form
10-Q December 31, 1999 dated February 11, 2000).
4.19* Subscription Agreement dated November 2, 1999 among Danka
Business Systems PLC, Cypress Merchant Banking Partners II
L.P., a Delaware limited partnership, Cypress Merchant
Banking II C.V., a limited partnership organized and existing
under the laws of The Netherlands, and 55th Street Partners
II L.P., a Delaware limited partnership. (Exhibit 99.1 to the
Company's Form 8-K November 2, 1999).
4.20* Amendment, dated December 16, 1999, to Subscription Agreement
dated November 2, 1999 among Danka Business Systems PLC,
Cypress Merchant Banking Partners II L.P., a Delaware limited
partnership, Cypress Merchant Banking II C.V., a limited
partnership organized and existing under the laws of The
Netherlands, and 55th Street Partners II L.P., a Delaware
limited partnership. (Exhibit 99.2 to the Company's Form 8-K
December 17, 1999).
4.21* Registration Rights Agreement dated December 17, 1999, among
Danka Business Systems PLC, Cypress Merchant Banking Partners
II L.P., a Delaware limited partnership, Cypress Merchant
Banking II C.V., a limited partnership organized and existing
under the laws of The Netherlands, and 55th Street Partners
II L.P., a Delaware limited partnership. (Exhibit 99.3 to the
Company's Form 8-K December 17, 1999).
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4.22 Eighth Amendment to Credit Agreement dated March 24, 2000
among Danka Business Systems PLC, Dankalux Sarl & Co., SCA,
and Danka Holding Company, NationsBank, National Association,
each other Bank signatory thereto and NationsBank, National
Association, as agent.
10.2* Office Building Lease dated May 1, 1992 between Daniel M.
Doyle and Francis J. McPeak, Jr., and Gulf Coast Business
Machines. (Exhibit 3.5 to the 1993 Form 20-F).
10.3* Office Building Lease dated April 1, 1990 between Daniel M.
Doyle and Francis J. McPeak, Jr., and Danka. (Exhibit 3.6 to
the 1993 Form 20-F).
10.4* Lease Agreement dated December 22, 1986, and Addendum Lease
Agreement dated March 1, 1987, between Daniel M. Doyle and
Francis J. McPeak and Danka. (Exhibit 3.7 to the 1993 Form
20-F).
10.5* U.K. Executive Share Option Scheme. (Exhibit 3.11 to the 1993
Form 20-F).
10.6* U.S. Executive Incentive Stock Option Plan. (Exhibit 3.12 to
the 1993 Form 20-F).
10.7* Form of Stock Option Agreement. (Exhibit 3.13 to the 1993
Form 20-F).
10.8* Addendum to Lease Agreement dated September 1, 1992, between
Mid-County Investments, Inc. and Danka. (Exhibit 3.38 to the
1993 Form 20-F).
10.9* Lease Agreement dated November 12, 1992 and Lease
Commencement Agreement dated April 7, 1993 between PARD, Inc.
and Danka. (Exhibit 10.41 to the 1993 Form 20-F).
10.10* Deposit Agreement dated June 25, 1992, Amendment No. 1 dated
February 26, 1993 and Amendment No. 2 dated July 2, 1993,
between The Bank of New York, Company and Owners and Holders
of American Depositary Receipts, filed as Exhibit 4.5 and
incorporated as reference.
10.14* Danka Business Systems PLC 1994 Executive Performance Plan.
(Exhibit 10.52 to the 1994 Form 10-K).
10.15* Indenture dated March 13, 1995 between the Company and The
Bank of New York, as Trustee. (Exhibit 2 to the Company's
Form 8-K dated March 21, 1995).
10.18* Purchase Agreement dated October 25, 1995 between ABN AMRO
Bank N.V. and Credit Lyonnais Bank Nederland N.V. and Danka
Europe B.V. (Exhibit 2 to the Company's Form 8-K dated
November 3, 1995).
10.20* The Danka 1996 Share Option Plan filed as Appendix 1 of the
1996 Annual Proxy Statement and approved by shareholders
under Resolution 10.
10.22* Amendments to the Danka 1996 Share Option Plan filed as
Appendix A of the 1998 Annual Proxy Statement and approved by
shareholders under Resolution 9.
10.23* The Danka 1999 Share Option Plan filed as Appendix B of the
1999 Annual Proxy Statement and approved by shareholders
under Resolution 12.
14
15
13 Annual Report to Shareholders of the Company for the year
ended March 31, 2000. The portions of the Company's Annual
Report to Shareholders incorporated by reference into this
Report are included herein as exhibits.
21 List of Current Subsidiaries of the Company.
23 Consent of Independent Accountants
27 Financial Data Schedule.
27.1 Financial Data Schedule Restated and Amended (March 31, 1999
Form 10-K).
27.2 Financial Data Schedule Restated and Amended (March 31, 1998
Form 10-K).
* Document has heretofore been filed with the Commission and
is incorporated by reference and made a part hereof.
(b) Reports on Form 8-K
N/A
(c) Exhibits:
The exhibits listed in Item 14(a)(3) to
this Report are filed with this Report.
(d) Financial Statement Schedules
Independent Auditor's Report
II - Valuation and Qualifying Accounts
All other schedules are omitted since the
required information is not present or is
not present in amounts sufficient to
require submission of the schedules.
15
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INDEPENDENT AUDITOR'S REPORT
To the Members of Danka Business Systems PLC:
Under date of May 26, 2000, we reported on the consolidated balance sheets of
Danka Business Systems PLC and subsidiaries as of March 31, 2000 and 1999 and
the related consolidated statements of operations, shareholders' equity and
cash flows for each of the years in the three-year period ended March 31, 2000,
as contained in the 2000 annual report to shareholders. These consolidated
financial statements and our report thereon are incorporated by reference in
the annual report on Form 10-K for the year 2000. In connection with our audits
of the aforementioned financial statements, we also have audited the related
financial statement schedule as listed in the accompanying index. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG Audit Plc
Chartered Accountants
Registered Auditor
May 26, 2000 London, England
16
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DANKA BUSINESS SYSTEMS PLC
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
Column A Column B Column C Column D Column E
----------- ------------ ------------------------- ---------- ---------
Balance at Charged to Charged to Balance
Beginning of Costs and Other at End
Description Period Expenses Accounts(1) Deductions of Period
----------- ------------ ---------- ----------- ---------- ---------
Allowance for doubtful accounts:
Year ended March 31, 1998 $27,853 $29,928 $2,046 ($28,854)(2) $ 30,973
======= ======= ====== ======== ========
Year ended March 31, 1999 $30,973 $38,619 $ 448 ($ 8,774)(2) $ 61,266
======= ======= ====== ======== ========
($24,167)(2)
(2,700)(3)
Year ended March 31, 2000 $61,266 $ 7,789 -- ($26,867) $ 42,188
======= ======= ====== ======== ========
(1) Represents beginning balances of acquired companies.
(2) Represents accounts written off during the year, net of recoveries.
(3) Represents balance of companies sold.
17
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: June 5, 2000 DANKA BUSINESS SYSTEMS PLC
--------------------------
(Registrant)
By: /s/ LARRY K. SWITZER
-----------------------------------------
Larry K. Switzer, Chief Executive Officer
(Chief Executive Officer)
By: /s/ F. MARK WOLFINGER
-----------------------------------------
F. Mark Wolfinger, Executive Vice
President and Chief Financial Officer
(Chief Financial Officer and the
Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the Company
and in the capacities indicated on June 5, 2000.
SIGNATURE TITLE
- --------- -----
/s/ DAVID W. KENDALL Chairman and Director
- ---------------------------
David W. Kendall
/s/ LARRY K. SWITZER Chief Executive Officer and Director
- ---------------------------
Larry K. Switzer
/s/ BRIAN L. MERRIMAN President and Chief Operating Officer
- --------------------------- and Director
Brian L. Merriman
/s/ MICHAEL B. GIFFORD Director
- ---------------------------
Michael B. Gifford
/s/ RICHARD C. LAPPIN Director
- ---------------------------
Richard C. Lappin
/s/ RICHARD F. LEVY Director
- ---------------------------
Richard F. Levy
/s/ KEITH J. MERRIFIELD Director
- ---------------------------
Keith J. Merrifield
/s/ J. ERNEST RIDDLE Director
- ---------------------------
J. Ernest Riddle
/s/ SHELI Z. ROSENBERG Director
- ---------------------------
Sheli Z. Rosenberg
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/s/ JAMES L. SINGLETON Director
- ---------------------------
James L. Singleton
/s/ ANTHONY D. TUTRONE Director
- ---------------------------
Anthony D. Tutrone
/s/ C. ANTHONY WAINWRIGHT Director
- ---------------------------
C. Anthony Wainwright
/s/ JAMES F. WHITE, JR. Director
- ---------------------------
James F. White, Jr.
19