-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OOdPNU7sYLA/bcbNaK9P+JDwaOP7AypAhPa8BbKhaUzNtZ9pI/GkyF/O5zVCTa6R dUS6/eszQJNLmO0kTt4FcA== 0000853102-99-000010.txt : 19990120 0000853102-99-000010.hdr.sgml : 19990120 ACCESSION NUMBER: 0000853102-99-000010 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981030 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990119 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAY RUNNER INC CENTRAL INDEX KEY: 0000853102 STANDARD INDUSTRIAL CLASSIFICATION: BLANKBOOKS, LOOSELEAF BINDERS & BOOKBINDING & RELATED WORK [2780] IRS NUMBER: 953624280 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-19835 FILM NUMBER: 99507500 BUSINESS ADDRESS: STREET 1: 15295 ALTON PARKWAY CITY: IRVINE STATE: CA ZIP: 92718 BUSINESS PHONE: 7146803500 MAIL ADDRESS: STREET 1: 15295 ALTON PARKWAY CITY: IRVINE STATE: CA ZIP: 92718 8-K/A 1 8-KA 4 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 8-K/A AMENDMENT NO. 1 TO CURRENT REPORT ON FORM 8-K Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 30, 1998 DAY RUNNER, INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation) 0-19835 95-3624280 (Commission File Number) (I.R.S. Employer Identification No.) 15295 Alton Parkway Irvine, CA 92618 (Address of principal executive offices) Registrant's telephone number, including area code: 714/680-3500 Item 2. Acquisition or Disposition of Assets On October 30, 1998, Day Runner, Inc.(the "Registrant" or the "Company") announced that it had assumed control of Filofax Group plc ("Filofax") as a result of its previously announced cash tender offer for the outstanding shares of Filofax stock. The Registrant's offer was for (pound)2.10 per share (approximately $3.42). The Registrant owned or had received valid acceptances of its cash tender offer for approximately 87% of the outstanding shares of Filofax as of October 30, 1998. The Registrant had announced a cash tender offer for the Filofax shares on September 24, 1998 and had revised its offer on September 25, 1998 to reflect the agreement it had reached with the Board of Directors of Filofax on the terms of the cash tender offer. The Registrant acquired all the remaining outstanding shares of Filofax on December 26, 1998. This acquisition will be accounted for under the purchase method of accounting. The total purchase price of $90,422,000 was paid for in cash and Loan Notes. The Company borrowed this amount to pay for the Filofax stock under a Loan Agreement with a group of banks. Such Loan Agreement was filed as Exhibit 10.1 to the Company's 1998 Current Report on Form 8-K filed with the Commission on September 24, 1998. Currency conversions in this presentation in Item 2 have been made using an exchange rate of 1.6291 which was the exchange rate on January 12, 1999. Filofax is the leading producer of loose-leaf personal organizers for the retail market in the United Kingdom and the Filofax brand name is widely recognized in a number of other key markets around the world. In addition to its core personal organizer business, Filofax markets business forms and high-end pens. Filofax has wholly owned subsidiaries in France, Germany, Hong Kong, Scandinavia, the U.K. and the U.S. and sells primarily through retail distribution channels in each market. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Financial Statements of Business Acquired: Audited consolidated balance sheets of Filofax Group plc and subsidiaries at March 31, 1998 and 1997 and the related consolidated profit and loss accounts, cash flow statements, statements of total recognised gains and losses and reconciliation of movements in equity shareholders' funds for each of the three years in the period ended March 31, 1998. (b) Pro Forma Financial Information Introduction to Unaudited Pro Forma Condensed Combined Financial Statements Unaudited Pro Forma Combined Balance Sheet as of September 30, 1998 Unaudited Pro Forma Condensed Combined Statements of Income for the fiscal year ended June 30, 1998 and the quarter ended September 30, 1998 Notes to Unaudited Pro Forma Combined Financial Statements (c) Exhibits Item No. Exhibits 23 Consent of Independent Auditors SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. DAY RUNNER, INC. By: /s/ James E. Freeman, Jr. ------------------------- James E. Freeman, Jr. Chief Executive Officer Dated: January 15, 1999 INDEPENDENT AUDITORS' REPORT THE SHAREHOLDERS AND BOARD OF DIRECTORS FILOFAX GROUP PLC We have audited the accompanying consolidated balance sheets of Filofax Group plc and subsidiaries at March 31, 1998 and 1997 and the related consolidated profit and loss accounts, cash flow statements, statements of total recognised gains and losses and reconciliation of movements in equity shareholders' funds for each of the three years in the period ended March 31, 1998. These consolidated financial statements are the responsibility of the management of Filofax Group plc. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards in the United Kingdom which standards are substantially in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present a true and fair view, in all material respects, of the consolidated financial position of Filofax Group plc and subsidiaries at March 31, 1998 and 1997 and the consolidated results of operations and cash flows for each of the three years ended March 31, 1998, in conformity with generally accepted accounting principles in the United Kingdom. Generally accepted accounting principles in the United Kingdom vary in certain respects from generally accepted accounting principles in the United States. Application of generally accepted accounting principles in the United States would have affected the results of operations for each of the two years ended March 31, 1998, and 1997 and shareholders' equity funds at March 31, 1998 and 1997 to the extent summarised in note 26 to the consolidated financial statements. Binder Hamlyn Chartered Accountants London England June 1 1998 FINANCIAL STATEMENTS OF BUSINESS ACQUIRED Filofax Group plc Consolidated Profit and Loss Account For the Years Ended March 31, 1998 1997
Continuing Discontinued Continuing Discontinued Operations Operation Total Operations Operations Total Notes (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 ----------- ---------- ----------- ---------- ----------- --------------- ----------- Turnover 1 37,669 4,531 42,200 37,916 5,686 43,602 Cost of sales 17,184 3,659 20,843 17,162 2,927 19,033 ------ ----- ------ ------ ------ ------ Gross profit 20,485 872 21,357 20,754 2,759 23,513 Administrative expenses 14,348 2,757 17,105 15,070 2,545 17,615 ------- ------ ------ ------ ----- ------ Operating profit/(loss) 6,137 (1,885) 4,252 5,684 214 5,898 Loss on disposal of discontinued operation 24 - (5,127) (5,127) - - - ------ ------ ------ ----- ------ ------- Profit/(loss) on ordinary activities before interest 6,137 (7,012) (875) 5,684 214 5,898 Net interest (payable)/receivable 4 (7) - (7) 43 (26) 17 - ----- ----- ----- ------ -------- ------- Profit/(loss) on ordinary activities before taxation 2 6,130 (7,012) (882) 5,727 188 5,915 Taxation charge/(credit) 5 1,837 (297) 1,540 1,774 - 1,774 ------ ------- ------ ------ ------- ------ Profit/(loss) on ordinary activities after taxation 4,293 (6,715) (2,422) 3,953 188 4,141 Dividends 6 1,097 1,118 ------ ------- ----- ------ ------- ----- Retained (loss)/profit for the year 15 (3,519) 3,023 ------ ------- ------- ------ ------- ----- Earnings/(loss) per share 7 15.0p (8.4p) 13.1p 13.7p ======= ======= ======= ====== ======= ===== Table (continued) Notes -------- Turnover 1 42,711 Cost of sales 19,033 ------ Gross profit 23,678 Administrative expenses 16,933 ------ Operating profit/(loss) 6,745 Loss on disposal of discontinued operation 24 - ------ Profit/(loss) on ordinary activities before interest - Net interest (payable)/receivable 4 (182) ------- Profit/(loss) on ordinary activities before taxation 2 6,563 Taxation charge/(credit) 5 1,969 ------- Profit/(loss) on ordinary activities 4,594 after taxation Dividends 6 1,057 ------- Retained (loss)/profit for the year 15 3,537 ------- Earnings/(loss) per share 7 16.0p ------- The discontinued operation comprises the trade of Henry Ling & Son (London) Limited which was sold on 31 March 1998. No Group overhead has been attributed to the discontinued operation for the purposes of the disclosure shown above.
Filofax Group plc Statement of Total Recognised Gains and Losses For the Years Ended March 31, 1998 1997 1996 Notes (pound)'000 (pound)'000 (pound)'000 ----- ----------- ----------- ----------- (Loss)/profit on ordinary activities after taxation 15 (2,422) 4,141 4,594 Exchange differences (59) 161 200 ------- ----- ------ Total recognized gains and losses for the year 16 (2,481) 4,302 4,794 ======= ===== =====
Filofax Group plc Consolidated Balance Sheet At March 31, 1998 1997 Notes (pound)'000 (pound)'000 ----- ------------ ------------ Tangible fixed assets 8 2,215 2,276 -------- -------- Stock 10 6,397 7,395 Debtors 11 5,121 5,421 Cash at bank and in hand 21 5,942 7,393 -------- -------- Total current assets 17,460 20,209 Creditors: amounts falling due within one year 12 9,189 9,869 -------- -------- Net current assets 8,271 -------- 10,340 Net assets 10,486 12,616 Capital and reserves Called up share capital 14 1,407 1,510 Share premium account 15 474 223 Capital redemption reserve 15 115 - Other reserves 15 809 1,045 Profit and loss account 15 7,681 9,838 -------- ------- Equity shareholders' funds 16 10,486 12,616 ======== ========
Approved by the Board of Directors on 1 June 1998 C.S. Brace M.D. Ball
Filofax Group plc Company Balance Sheet At March 31, 1998 1997 Notes (pound)'000 (pound)'000 ----- -------- -------- Fixed asset investments 9 12,702 18,096 -------- -------- Debtors 11 8,964 4,942 Creditors: amounts falling due within one year 12 1,014 1,021 Net current assets 7,950 3,921 ------- ------- Net assets 20,652 22,017 ======= ======= Capital and reserves Called up share capital 14 1,407 1,510 Share premium account 15 474 223 Capital redemption reserve 15 115 - Other reserves 15 8,006 13,019 Profit and loss account 15 10,650 7,265 --------- -------- Equity shareholders' funds 20,652 22,017 ========= ======== Approved by the Board of Directors on 1 June 1998 C.S. Brace M.D. Ball
Filofax Group plc Consolidated Cash Flow Statement For the Years Ended March 31, 1998 1997 1996 Note (pound)'000 (pound)'000 (pound)'000 ---- ----------- ----------- ----------- Net cash inflow/(outflow) from operating activities Continuing operations 6,384 7,577 5,560 Discontinued operation 22 (565) (334) ------- ------- ------ Net cash inflow from operating activities 20 6,406 7,012 5,226 ------- ------- ------ Returns on investments and servicing of finance Interest received 326 459 433 Interest paid (313) (456) (572) Interest element of finance lease repayments (11) (22) (23) --- ------- ------- ------- Net cash inflow/(outflow) from returns on investments and servicing of finance 2 (19) (162) ------- ------- ------- Taxation Taxation paid (2,364) (1,991) (1,630) ------- ------- ------- Capital expenditure Purchase of tangible fixed assets (943) (445) (738) Sale of tangible fixed assets 52 70 26 -------- ------- ------ Net cash outflow for capital expenditure (891) (375) (712) ---- -------- ------- ------- Acquisition Purchase of unincorporated business 23 (122) - - Payments for subsidiary undertakings acquired (net of cash) 25 - - 648 ------- ------- ------- Net cash outflow from acquisition (122) - (648) ------- ------- ------ Equity dividends paid (1,081) (1,056) (871) Net cash inflow before financing 1,950 3,571 1,203 ------- ------- ------ Financing Issue of ordinary shares (net of issue costs) 80 41 153 Purchase of own shares (3,287) - - Capital element of finance lease repayments 22 (98) (131) (91) Repayment of Loans 22 - (248) (707) ------- ------- ------ Net cash outflow from financing (3,305) (338) (645) ------- ------- ------ (Decrease)/increase in cash 22 (1,355) 3,233 558 == ====== ======= ======
ACCOUNTING POLICIES FOR THE YEAR ENDED MARCH 31, 1998 Accounting convention The accounts have been prepared using the historical cost convention and comply with all applicable UK accounting standards. Basis of consolidation The Group accounts consolidate the assets and liabilities and the results of the Company and its subsidiary undertakings. The results of businesses acquired during the year have been consolidated from the date of acquisition and the results of businesses disposed of during the year consolidated up to the date of disposal. Transactions and balances between Group undertakings have been eliminated; profit on sales to subsidiary undertakings is eliminated on consolidation until products are sold to customers outside the Group. Turnover Turnover shown in the consolidated profit and loss account represents goods invoiced during the year to external customers excluding value added tax and other sales taxes. Depreciation Depreciation is calculated by reference to the cost of fixed assets using a straight line basis at rates considered appropriate having regard to the expected useful lives of the assets, other than freehold land which is not depreciated. The annual rates of depreciation in use are: Freehold buildings 2.5 per cent. Short leasehold buildings Over period of lease Plant and machinery 15 per cent. Fixtures and equipment 15 per cent. - 33.33 per cent. Motor vehicles 25 per cent. Stocks Stocks are valued at the lower of cost and net realisable value. Deferred taxation Provision is made for taxation which is deferred as a result of timing differences arising principally between depreciation and capital allowances, to the extent that the liabilities are likely to crystallise, at the tax rate applicable at the time of reversal. Leasing commitments Rentals paid under operating leases are charged to the profit and loss account on a straight line basis over the term of the lease. Assets acquired under finance leases and hire purchase contracts are capitalised and depreciated over their useful lives. The interest element of the lease obligation is charged to the profit and loss account over the period of the lease. Pensions For defined benefit schemes, the cost of providing pension benefits is charged to the consolidated profit and loss account on a systematic basis over the period during which benefit is derived from employees' services. In the case of defined contribution schemes, employer's contributions are written off to the consolidated profit and loss account as incurred. Goodwill Goodwill acquired is written off directly to reserves in the year of acquisition. Foreign currency translation Monetary assets and liabilities denominated in foreign currencies are translated into Sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into Sterling at rates ruling at the date of the transaction. Exchange differences arising in the accounts of individual companies are taken to the profit and loss account. The accounts of subsidiary undertakings are translated into Sterling on consolidation on the following basis: (i) Profit and loss account items at the average rate of exchange during the period or, where forward contracts have been taken out to hedge the results of overseas subsidiary undertakings, at contracted rates. (ii) Assets and liabilities at the rate ruling at the balance sheet date. Exchange differences arising on the translation of the opening net investment and the results for the year are recorded as movements on reserves. References to constant exchange rate growth within the annual report and accounts represent growth within the annual report and accounts over the previous financial year excluding the effects of changes in Sterling exchange rates. Constant exchange rate numbers are calculated by retranslating the current year results of overseas subsidiary undertakings and significant foreign currency denominated earnings streams of UK subsidiary undertakings into Sterling assuming that the average exchange rates used for translation remained unchanged from those used in the previous year. NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 MARCH 1998
1. Segmental analysis The Group operates in a single business segment. All of the Group's turnover relates to the sale of consumer products. An analysis of turnover by location of customer is shown below together with growth in Sterling and at constant exchange rates. Constant Exchange Rate 1998 1997 1998 (pound)'000 (pound)'000 %Inc/(Dec) (pound)'000 %Inc/(Dec) ----------- ------------ ---------- ------------ ---------- United Kingdom 16,706 16,691 0.1 16,706 0.1 Nordic subsidiaries 5,050 5,124 (1.4) 5,751 12.2 France 2,807 3,208 (12.5) 3,495 8.9 Germany 2,726 3,069 (11.2) 3,573 16.4 USA 5,186 5,070 2.3 5,355 5.6 Overseas third party distributors 5,194 4,754 9.3 5,216 9.7 -------- -------- ------ -------- ----- Turnover from continuing operations 37,669 37,916 (0.7) 40,096 5.7 Discontinued operation - Lings 4,531 5,686 (20.3) 4,531 (20.3) -------- -------- ------ -------- ----- Group turnover 42,200 43,602 (3.2) 44,627 2.4 ======= ======= ====== ======== =====
Turnover of the discontinued operation by location of customer was as follows: United Kingdom (pound)4,429,000 (1996/97; (pound)5,548,000), Overseas third party distributors (pound)102,000 (1996/97; (pound)138,000).
An analysis of turnover by location of subsidiary undertaking is as follows: 1998 1997 1996 (pound)'000 (pound)'000 (pound)'000 ----------- ----------- ----------- United Kingdom (excluding Lings) 26,001 26,027 23,900 Nordic subsidiaries 5,054 5,189 6,393 France 2,867 3,260 3,126 Germany 2,726 3,069 2,385 USA 5,204 5,070 5,667 Hong Kong 4,131 3,650 4,758 -------- -------- -------- 45,983 46,265 46,229 Less: Intra-Group sales (8,314) (8,349) (8,995) --------- --------- --------- External turnover from continuing operations 37,669 37,916 37,234 Discontinued operation - Lings 4,536 5,701 5,510 Less: Intra-Group sales (5) (15) (33) --------- --------- --------- Group external turnover 42,200 43,602 42,711 ======== ======== ========
By geographical segment of origin, all of the turnover relating to the discontinued operation arose within the United Kingdom. Intra-Group sales by segment of origin for continuing operations comprise United Kingdom (pound)4,324,000 (1997: (pound)4,784,000; 1996: (pound)4,237,000), USA (pound)18,000 (1997: (pound)Nil; 1996: (pound)12,000), Nordic subsidiaries (pound)4,000 (1997: (pound)66,000; 1996: (pound)95,000) and Hong Kong (pound)3,968,000 (1997: (pound)3,499,000; 1996: (pound)4,651,000). Disclosure of segmental analysis of profit before taxation and net assets was not publicly disclosed as the directors deemed that such disclosure would be seriously prejudicial to the interests of the Group. 2. (Loss)/profit on ordinary activities before taxation
(Loss)/profit is stated after charging the following: 1998 1997 1996 (pound)'000 (pound)'000 (pound)'000 ------------ ----------- ----------- Rentals under operating leases Land and buildings 700 644 689 Other assets 479 485 445 Foreign exchange losses on borrowings and deposits 16 33 107 Auditors' remuneration for audit services 78 89 85 Auditors' remuneration for non-audit services* 64 52 41 Depreciation Owned Assets 657 746 598 Assets held under finance leases 56 104 60 *Included in the costs of acquisitions are fees to the auditors for non-audit services of (pound)2,000 (1997: (pound)Nil; 1996: (pound)30,000)
3. Employment costs 1998 1997 1996 (pound)'000 (pound)'000 (pound)'000 ------------ ----------- ----------- Ren Wages and salaries 7,918 8,335 7,020 Social security costs 1,183 1,191 1,020 Other pension costs 187 211 159 ------ ------ ------ 9,288 9,737 8,199 ===== ===== ===== 1998 1997 1996 Number Number Number ------ ------ ------ The average number of employees during the year was: Production and warehousing 191 194 132 Office, sales and management 285 284 244 --- --- --- 476 478 376 === === ===
Directors' Remuneration for the year ended 31 March 1998 Aggregate emoluments by individual director were as follows: Performance Aggregate Aggregate Aggregate Pension Base Benefits related emoluments emoluments emoluments contributions Fees Salary in kind payments 1997/98 1996/97 1995/96 1997/98 Director (pound)'000 (pound)'000 (pound)'000 (pound)/000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 - -------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ --------------- Executive: R.A. Field - 138 9 - 147 137 150 34 C.S. Brace - 88 7 - 95 92 100 22 Non-Executive: R.D. Collischon 10 - 1 - 11 11 10 - (Chairman) M.R.J. Tyndall 7 - - - 7 7 7 - Remuneration of Directors who left in 1996/97 - - - - - 73 104 - --- --- --- --- --- --- ---- --- 1997/98 17 226 17 - 260 320 371 56 === === === === ==== ==== ==== === 1996/97 24 272 24 - 320 === === === == ==== 1995/96 24 274 26 47 371 === ==== === === ==== Total remuneration was as follows: 1998 1997 1996 (pound)'000 (pound)'000 (pound)'000 ----------- ----------- ----------- Aggregate emoluments (as shown above): 260 320 371 Pension contributions 56 - 29 Gains made on exercise of share options 87 - - Compensation for loss of office - 45 - - --- -- 403 365 400 ==== ==== ==== The comparative figures for aggregate emoluments shown above exclude contributions to defined benefit pension schemes in accordance with the Company Acocunts (Disclosure of Directors' Emoluments) Regulations 1997 SI 1997/570. The two executive directors listed above each had retirement benefits accruing under a defined benefit scheme in the year ended 31 March 1997 but, from 1 April 1997, their pension arrangements were transferred to the defined contributuion section of the pension scheme.
4. Net interest (payable)/receivable 1998 1997 1996 (pound)'000 (pound)'000 (pound)'000 ------------ ----------- ----------- Bank loans and overdrafts (312) (426) (595) Finance lease interest (11) (22) (23) ----- ------ ------- (323) (448) (618) Interest receivable 316 465 436 ----- ----- ------ (7) 17 (182) ====== ===== =====
5. Taxation 1998 1997 1996 (pound)'000 (pound)'000 (pound)'000 ----------- ----------- ----------- UK corporation tax 1,082 1,468 1,810 Overseas taxation 434 306 337 Net taxation adjustments of prior years 24 0 (178) ----- ----- ----- 1,540 1,774 1,969 ===== ===== =====
UK corporation tax for the year ended 31 March 1998 is stated net of a (pound)297,000 tax credit arising in respect of the operating loss and subsequent loss on disposal of the business and net trading assets of Henry Ling & Son (London) Limited.
6. Dividends 1998 1997 1996 (pound)'000) (pound)'000) (pound)'000) ------------ ---------- ----------- Interim dividend 1.65p (1997: 1.50p; 1996: 1.35p) per share net 463 453 407 Final dividend 2.42p (1997: 2.20p; 1996: 2.0p) per share net 681 665 603 (Over)/under provision of prior year dividend (47) - 47 ------ -------- ------ 1,097 1,118 1,057 ===== ===== =====
The final dividend for the 1996/97 financial year was provided for on the basis of the number of shares in issue at 31 March 1997. The company subsequently purchased and cancelled 2,300,000 of its ordinary shares and issued 146,137 shares under share option schemes, the combined effect being to reduce the actual final dividend payment by (pound)47,000. 7. Earnings per share The calculation of basic earnings per share is based on the loss after taxation of (pound)2,422,000 (1997: Profit (pound)4,141,000; 1996: Profit (pound)4,594,000) divided by the weighted average number of shares in issue during the period of 28,686,688 (1997: 30,175,171; 1996: 28,695,485). Fully diluted earnings per share is not materially different to basic earnings per share in each year.
An alternative measure of earnings per share based only on continuing operations for 1997 and 1998 was also presented in Filofax's financial statements. Filofax directors believe this is a more appropriate measure of the underlying performance of the Group. This has been calculated as follows: 1998 1997 (pound)'000 (pound)'000 ------------ ----------- (Loss)/profit on ordinary activities after taxation (2,422) 4,141 Add: Loss on disposal of the discontinued operation 5,127 - Add: Operating loss/(profit) attributable to the discontinued operation 1,885 (188) Less: Taxation credit attributable to the discontinued operation (297) - ------ ------ Profit on ordinary activities after taxation from continuing operations 4,293 3,953 ====== ====== Earnings per share (pence) from continuing operations 15.0p 13.1p ====== ======
8. Tangible fixed assets Freehold Short Fixtures Land and Leasehold and Motor Plant and Buildings Property Equipment Vehicles Machinery Total (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 ------------ ------------ ------------ ------------ ------------ ------------- Cost At 1 April 1997 936 341 2,892 366 934 5,469 Exchange adjustments - - (55) (5) - (60) Additions - 5 415 36 379 835 Disposals - (81) (790) (133) - (1,004) ---- ---- ----- ----- ----- ----- At 31 March 1998 936 265 2,462 264 1,313 5,240 ---- ---- ----- ----- ----- ----- Depreciation At 1 April 1997 157 158 2,007 234 637 3,193 Exchange adjustments - - (30) (3) - (33) Charge for the year 15 54 432 72 140 713 Disposals - (66) (683) (99) - (848) ----- ----- ------ ------ ------ ------ At 31 March 1998 172 146 1,726 204 777 3,025 ----- ----- ------ ------ ------ ------ Net book value At 31 March 1998 764 119 736 60 536 2,215 ----- ---- ------ ---- ------ ------ At 1 April 1997 779 183 885 132 297 2,276 ----- ---- ------ ---- ------ ------ The net book value above includes (pound)26,700 (1997: (pound)245,900) in respect of assets held under finance leases and hire purchase contracts.
9. Investments in subsidiary undertakings Shares Loans Total (pound)'000 (pound)'000 (pound)'000 ------------ ------------ ------------ Cost At 1 April 1997 and 31 March 1998 15,846 2,250 18,096 ======== ======= ====== Provisions At 1 April 1997 - - - Charged for the year 5,394 - 5,394 -------- ------- -------- At 31 March 1998 5,394 - 5,394 ======== ======= ===== Net book value At 31 March 1998 10,452 2,250 12,702 -------- ------- ------- At 1 April 1997 15,846 2,250 18,096 ======== ======= ======
The provision reflects a permanent diminution in value of the investment in Elijo Limited, the immediate parent undertaking of Henry Ling & Son (London) Limited, the business and net trading assets of which were sold on 31 March 1998.
The following are the principal subsidiary undertakings of the Company as at 31 March 1998, all of which were wholly owned and have been included in the financial statements. Name Principal Activity Country of - ---- ------------------ ---------- Incorporation Filofax A/S* Supplier of stationery products Denmark Filofax AB* Supplier of stationery products Sweden Filofax GmbH* Supplier of stationery products Germany Filofax Hong Kong Limited* Supplier of stationery products Hong Kong Filofax Inc Supplier of stationery products USA Filofax Limited Supplier of stationery products England Filofax SARL* Supplier of stationery products France Drakes Office Systems Limited Supplier of stationery products England Henry Ling & Son (London) Limited** Publisher of greeting cards England Lefax Publishing Limited* Supplier of stationery products England Yard-O-Led Pencil Company Limited Manufacturer of writing instruments England Topps of England Limited Manufacturer and supplier of stationery products England Baybond Limited* Manuufacturer and supplier of stationery products England * Investment held by a subsidiary undertaking ** Renamed Elijo (London) Limited on 9 April 1998
10. Stock March 1998 March 1997 (pound)'000 (pound)'000 ---------- ----------- Raw Materials 712 362 Work in Progress 567 651 Finished goods and goods for resale 5,118 6,382 ----- ----- 6,397 7,395 ===== =====
11. Debtors March 1998 March 1997 Group Company Group Company (pound)'000 (pound)'000 (pound)'000 (pound)'000 ------------ ------------ ------------ ------------ Trade debtors 3,971 - 4,719 - Amounts due from subsidiary undertakings - 8,794 - 4,776 Other debtors 179 - 138 - Prepayments and accrued income 301 - 398 - Advance corporation tax recoverable 170 170 166 166 Amount due in respect of disposal of discontinued operation 500 - - - ------ ----- ------- ----- 5,121 8,964 5,421 4,942 ===== ===== ======= =====
12. Creditors: amounts falling due within one year March 1998 March 1997 Group Company Group Company (pound)'000 (pound)'000 (pound)'000 (pound)'000 ----------- ----------- ----------- ----------- Trade creditors 3,685 - 3,622 - Amounts due to subsidiary undertakings - 41 - 71 Corporation tax payable 1,515 - 2,386 - Advance corporation tax payable 286 286 279 279 Other taxes and social security 646 - 691 - Other creditors 136 - 102 - Accruals 2,185 6 1,971 6 Finance lease obligations 55 - 153 - Proposed dividend 681 681 665 665 ------ ----- ------ ----- 9,189 1,014 9,869 1,021 ===== ===== ===== =====
13. Obligations Under Finance Lease Agreements March March 1998 1997 (pound)'000 (pound)'000 ----------- ----------- Falling due within one year 59 168 Less: finance charges relating to future periods (4) (15) --- ----- Total obligation included within creditors falling due within one year 55 153 === =====
14. Share capital Authorised Issued and Fully Paid Up -------------------------------------------------------------- Number (pound)'000 Number (pound)'000 ------ ----------- ------ ----------- Ordinary shares of 5p At 1 April 1997 50,000,000 2,500 30,201,389 1,510 Nominal value of shares issued under share option schemes - - 235,325 12 Purchase of own shares - - (2,300,000) (115) ---------- ----- ---------- ----- At 31 March 1998 50,000,000 2,500 28,136,714 1,407 ========== ===== ========== =====
SHARE OPTIONS There were outstanding at 31 March 1998 options granted to directors and employees within the Group to subscribe for 140,006 ordinary shares under the Employee Sharesave Scheme at prices ranging from 90.4p to 205.6p. The weighted average exercise price is 173.9p. These options are normally capable of being exercised over varying periods up to July 2001. There were outstanding at 31 March 1998 options granted to directors and employees within the Group to subscribe for 1,232,925 ordinary shares under the approved and unapproved Executive Share Option Scheme at prices ranging from 30p to 234p. The weighted average exercise price is 139.2p These options are normally capable of being exercised over varying periods up to August 2007. PURCHASE OF OWN SHARES At the 1997 Annual General Meeting, shareholders gave the Company authority to purchase a maximum of 4,500,000 ordinary shares of 5p representing approximately 14.9 per cent. of the Company's issued share capital at that time. Prior to the 1997 Annual General Meeting, the Company had authority to purchase 1,506,174 ordinary shares under a resolution passed at the 1996 Annual General Meeting. During the year, the Company purchased and cancelled 1,050,000 ordinary shares under the 1996 authority and, subsequent to the 1997 Annual General Meeting, purchased and cancelled a further 1,250,000 ordinary shares under the 1997 authority. The consideration for the total of 2,300,000 ordinary shares purchased during the year was (pound)3,250,000 (representing an average price of 141.3p per ordinary share) plus (pound)37,000 of associated costs, and has been charged against the Profit and Loss Account Reserve. Advance Corporation Tax of (pound)452,750 was paid during the year in relation to these transactions. A resolution seeking renewal of the authority to purchase a further 14.9% of the Company's issued share capital will be put to the forthcoming Annual General Meeting.
15. Reserves Share Capital Profit and Premium Redemption Other Loss Total Account Reserve Reserves Account Reserves (a) Group (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 ----------- ----------- ----------- ----------- ----------- At 1 April 1997 223 - 1,045 9,838 11,106 Retained loss for the year - - - (3,519) (3,519) Goodwill realised on disposal - - 4,777 - 4,777 Transfer between reserves - - (5,013) 5,013 - Exchange differences - - - (59) (59) Premium on shares issued during the year under share option schemes 251 - - - 251 Transfer in respect of QUEST - - - (183) (183) Purchase of own shares - 115 - (3,287) (3,172) Goodwill written off on acquisition - - - (122) (122) ----- ----- ------ ------- ------ At 31 March 1998 474 115 809 7,681 9,079 ===== ===== ====== ======= ======
The transfer of (pound)5,013,000 from Other Reserves to the Profit and Loss Account Reserve relates to the premium on shares issued in connection with the acquisition of Elijo Limited, the immediate parent undertaking of Henry Ling & Son (London) Limited, in 1994. As this business was disposed of on 31 March 1998, and the goodwill originally pertaining to the acquisition has become a realised loss, the premium against which the goodwill was written off on acquisition has also been transferred to the Profit and Loss Account Reserve. During the year ended 31 March 1998, the Company received (pound)234,000 from the issue of shares in respect of the exercise of options under the Employee Sharesave Scheme administered by the Qualifying Employee share Ownership Trust (QUEST). Employees paid (pound)51,000 to the Group for the issue of these shares and the balance of (pound)183,000 comprised contributions to the QUEST from subsidiary undertakings and is shown as a transfer from the Profit and Loss Account Reserve.
The cumulative amount of goodwill resulting from the acquisitions (adjusted for disposals) written off to reserves at 31 March 1998 amounted to (pound)14,678,000 (1997 (pound)19,333,000). Share Capital Profit and Premium Redemption Other Loss Total Account Reserve Reserves Account Reserves (b) Company (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 ----------- ----------- ----------- ----------- ----------- At 1 April 1997 223 - 13,019 7,265 20,507 Retained profit for the year - - - 1,659 1,659 Transfer between reserves - - (5,013) 5,013 - Premium on shares issued during the year under share option schemes 251 - - - 251 Purchase of own shares - 115 - (3,287) (3,172) ------ ------ ----- ------ ------ ------- At 31 March 1998 474 115 8,006 10,650 19,245 ====== ====== ===== ====== ====== ======
As permitted by section 230 of the Companies Act 1985, the Company has not presented its profit and loss account. The profit for the year dealt with in the accounts of the Company amounts to (pound)2,756,000 (1996/97: (pound)4,519,000). 16. Reconciliation of movements in equity shareholders' funds 1998 1997 (pound)'000 (pound)'000 ---------- ----------- At 1 April 1997 12,616 9,391 Total recognised losses for the year (2,481) 4,302 Equity dividends (1,097) (1,118) Goodwill realised on disposal 4,777 - Goodwill written off on acquisition (122) - Purchase of own shares (3,287) - Issue of shares 80 41 -------- ------- At 31 March 1998 10,486 12,616 ======== ======= 17. Pension commitments The Group operates a variety of pension arrangements for the benefit of employees in their retirement. The pension charge for the year may be analysed by type of pension scheme as follows: 1998 1997 (pound)'000 (pound)'000 ----------- ----------- Defined benefit scheme - 67 Defined contribution schemes 187 144 ----- ---- 187 211 ===== ==== The principal scheme is the Filofax Staff Pension Plan which provides benefits under both defined benefit and defined contribution arrangements. As from 1 April 1997, the defined benefit section of the scheme, which provides benefits based on final pensionable earnings, was closed to new entrants. The benefits of deferred members and pensioners were either transferred to alternative schemes or bought out through insurance policies, and active members had transfer values paid to the money purchase section of the scheme. The assets of the Filofax Staff Pension Plan are held separately from those of the Company and its subsidiary undertakings and are invested in externally managed funds. Under the terms of the trust deed, the scheme is administered by the trustees who delegate certain routine tasks to external administrators. In the year to 31 March 1997, the Group contributed to the defined benefit section of the scheme at the rate of 10.3 per cent. of pensionable salaries, inclusive of death in service benefit premiums, and employees contributed to the scheme at a rate of 5 per cent. of pensionable salaries. No contributions were made by the Company in respect of the defined benefit section of the Filofax Staff Pension Plan in the year to 31 March 1998 and there was no charge in the profit and loss account as no benefits accrued to members. 18. Operating lease commitments The Group has annual commitments in respect of operating leases as follows:
March 1998 March 1997 ---------- ---------- Expiring: Land and Other Land and Other Buildings Assets Buildings Assets (pound)'000 (pound)'000 (pound)'000 (pound)'000 ------------ ----------- ------------ ----------- Within one year 100 104 118 108 Within two to five years 113 152 149 325 Over five years 372 - 449 - ----- ------ ----- ----- 585 256 716 433 ===== ====== ===== =====
19. Other commitments Guarantees The Group has guaranteed rentals payable by Filofax Inc. amounting to(pound)33,000 (1997(pound)-33,000) per annum until 30 September 1999. Contingent liabilities With the exception of the guarantees referred to above, and other guarantees given in the ordinary course of business, the Group had no material unprovided contingent liabilities at 31 March 1998.
20. Reconciliation of operating profit/(loss) to net cash inflow/(outflow)from operating activities 1998 1997 Continuing Discontinued Continuing Discontinued Operations Operation Total Operations Operation Total (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 ----------- ----------- ----------- ----------- ----------- ----------- Operating profit/(loss) 6,137 (1,885) 4,252 5,684 214 5,898 Depreciation 639 74 713 775 75 850 (Increase)/decrease in stocks (1,333) 1,832 499 298 (373) (75) (Increase)/decrease in debtors (441) 326 (115) 190 (266) (76) Increase/(decrease) in creditors 1,382 (325) 1,057 630 (215) 415 ----- ---- ----- --- ---- --- Net cash inflow/(outflow) from operating activities 6,384 22 6,406 7,577 (565) 7,012 ===== ==== ===== ===== ==== =====
21. Analysis of net funds 1 April Cash Exchange 31 March 1997 Flows Movements 1998 (pound)'000 (pound)'000 (pound)'000 (pound)'000 ----------- ----------- ----------- ----------- Cash at bank and in hand 7,393 (1,355) (96) 5,942 Less: finance leases (153) 98 - (55) ---- ---- ----- ----- Net funds 7,240 (1,257) (96) 5,887 ===== ===== ===== =====
22. Reconciliation of net cash flow to movement in net funds 1998 1997 1996 (pound)'000 (pound)'000 (pound)'000 ---------- ----------- ----------- (Decrease)/Increase in cash as shown in cash flow statement (1,355) 3,233 558 Adjusted for: Finance lease repayments 98 131 91 Term loan repaid - 248 707 ------- ------- ---- Change in net funds resulting from cash flow (1,257) 3,612 1,356 Exchange movements (96) (176) 100 Finance lease acquired with subsidiary undertaking - - (363) New finance leases - - (12) Loans acquired with subsidiary undertaking - - (530) ------- ------- ----- Movement in net funds in the year (1,353) 3,436 551 Opening net funds 7,240 3,804 3,253 ------- ------- ----- Closing net funds 5,887 7,240 3,804 ======= ======= =====
23. Purchase of unincorporated business On 24 June 1997, the Group acquired the goodwill, intellectual property and customer lists of `A' Time, an unincorporated business, for a cash consideration of (pound)119,000 plus expenses of (pound)3,000. (pound)'000 --------- Net assets acquired: Goodwill 122 Satisfied by: Cash 122 24. Disposal of discontinued operation On 31 March 1998, the Group disposed of the business and net trading assets of Henry Ling & Son (London) Limited for an initial consideration of (pound)0.5 million. The results attributable to this business have been treated as a discontinued operation in the year to 31 March 1998 and prior year figures have been restated accordingly. The loss on disposal of (pound)5,127,000 includes reinstatement of (pound)4,777,000 of goodwill originally written off to reserves on acquisition; the balance of (pound)350,000 represents creditors and accruals arising in respect of the disposal. The write down of net trading assets to the value shown in the acquirer's proposed completion balance sheet has been included within the operating loss for the year to 31 March 1998 for the discontinued operation. As the business was sold on 31 March 1998, and the acquirer prepared the accounts as at that date, it was not practical to distinguish between the underlying trading results and the write downs of assets to the values shown in the completion balance sheet. The consideration of (pound)0.5m was received in cash on 1 April 1998. No cash was included within the net assets disposed of.
The cash flows attributable to the discontinued operation were as follows: 1997 1997 1996 (pound)'000 (pound)'000 (pound)'000 ---------- ----------- ----------- Net cash inflow/(outflow) from operating activities 22 (565) (334) Net cash outflow from returns on investments and servicing of finance - (26) (6) Taxation paid (3) (111) (148) Net cash outflow from investing activities (29) (42) (63) ---- ---- ---- Decrease in cash (10) (744) (551) ==== ==== ====
25. Acquisition On 28 July 1995 the Group acquired the whole of the issued share capital of Topps of England Limited ("Topps") for an aggregate consideration of (pound)6,600,000. This acquisition was funded by the issue of 2,942,623 ordinary shares. The following table provides an analysis of the assets and liabilities acquired and the related acquisition adjustment in respect of this acquisition:
Fair Book Value Fair Value Adjustments Value (pound)'000 (pound)'000 (pound)'000 ----------- ----------- ---------- Fixed assets 1,432 (36) 1,396 Stock 1,711 (155) 1,556 Cash (559) - (559) Debtors and prepayments 1,216 - 1,216 Creditors and accruals (1,774) (24) (1,798) Loans (530) - (530) ------- ----- ------- 1,496 (215) 1,281 ------- ----- ------- Acquisition expenses (89) ------- Goodwill written off 5,408 ------- Consideration discharged by issue of ordinary shares 6,600 -------
The fair value adjustments relate primarily to the restatement of acquired assets and liabilities to their realisable value at the time of the acquisition. These restatements have been made in accordance with Group accounting policies. The net cash outflow in respect of the acquisition of Topps was (pound)648,000 (including (pound)559,000 of cash and cash equivalents acquired). The acquisition of Topps contributed (pound)1,727,000 to the Group's net operating cashflows, payments of (pound)238,000 in respect of taxation, utilised (pound)141,000 in respect of investing activities and payments of (pound)361,000 in respect of financing activities. The following disclosures in respect of the pre-acquisition performance of Topps have been given in accordance with the requirements of Financial Reporting Standard No. 6, "Acquisitions and Mergers". In all cases the figures disclosed have been determined in accordance with the pre-acquisition accounting policies of Topps. In the year to 31 March 1995, the consolidated profit after taxation of Topps and its subsidiary undertakings was (pound)498,813. In the period immediately following Topps' previous financial year and preceding the date of acquisition by the Company, from 1 April 1995 to 28 July 1995, consolidated turnover was (pound)1,883,700. The operating loss during that period was (pound)101,000, the loss before taxation was (pound)153,000, and, after the estimated taxation credit, the loss was (pound)99,000. There were no minority interests or other recognised gains and losses other than the profit or loss in either period. 26. Summary of Differences Between UK and US Generally Accepted Accounting Principles The consolidated financial statements have been prepared in accordance with UK Generally Accepted Accounting Principles ("UK GAAP"), which differs in certain significant respects from US Generally Accepted Accounting Principles ("US GAAP"). A description of the significant differences between accounting principles that are applicable to the Company is given below: (A) Goodwill In each of the fiscal years ended 31 March 1998 and 31 March 1997, UK GAAP required purchased goodwill arising on consolidation to be set against equity shareholders' funds. Under US GAAP, goodwill arising on consolidation is capitalised and amortised over its expected useful life and charged against income. For the purpose of quantifying the difference between UK GAAP and US GAAP, the expected useful life of goodwill has been assumed at 20 years. (B) Loss on Disposal of Discontinued Operation Under both UK GAAP and US GAAP, the loss on disposal of a discontinued operation includes acquired goodwill relating to the discontinued operation to the extent that goodwill has not been charged to the profit and loss account. Under UK GAAP goodwill arising has been set against shareholders' funds whereas under US GAAP goodwill arising has been amortised over its expected useful life and charged to income. As a consequence the goodwill included as part of the loss on disposal under US GAAP is lower than under UK GAAP, the difference representing the amount of goodwill previously charged against income. (C) Stock Options Stock options have been granted under Filofax save-as-you-earn plans at a 20% discount to the market price at the date of grant. Under UK GAAP, the share issues are recorded at their discounted price when the options are exercised. Under US GAAP, the discount is regarded as employee compensation and is accrued over the vesting period of the grants. Stock options granted under the Filofax unapproved stock option plan are exercisable in tranches only to the extent that certain performance criteria have been met. Under UK GAAP, the share issues are recorded when the options are exercised. Under US GAAP, the estimated cost of a stock performance plan is regarded as employee compensation and is accrued over the vesting period of the grants taking into account the likelihood of achievement of the performance criteria. (D) Ordinary Dividends Under UK GAAP, dividends are provided for in the year in respect of which they are declared or proposed. Under US GAAP, dividends and the related advance corporation tax are given effect only in the period in which dividends are formally declared. (E) Cash Flow Statements The cash flow statements have been prepared in conformity with UK Financial Reporting Standard 1 (Revised) Cash Flow Statements. The principal differences between this statement and cash flow statements presented in accordance with US Financial Accounting Standard 95 are as follows: 1. Under UK GAAP, net cash flow from operating activities is determined before considering cash flows from (a) returns on investments and servicing of finance and (b) taxes paid. Under US GAAP, net cash flow from operating activities is determined after these items. 2. Under UK GAAP, capital expenditure is classified separately while under US GAAP, it is classified as an investing activity. 3. Under UK GAAP, dividends are classified separately while under US GAAP, dividends are classified as financing activities. (F) Comprehensive Income Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, was issued in June 1997 and is effective for fiscal years beginning after December 15, 1997. This statement requires that all items that are to be required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. In addition to the (loss)/profit attributable to ordinary shareholders shown below, the Comprehensive Statements of Income includes exchange losses arising on consolidation of (pound)59,000 in the year ended 31 March 1998 and exchange gains of (pound)161,000 in the year ended 31 March 1997. Effects on Net Earnings of Differences between US GAAP and UK GAAP
Year Ended Year Ended 31 March 98 31 March 97 (pound)'000 (pound)'000 ----------------- ----------------- (Loss)/profit attributable to ordinary shareholders in accordance with UK GAAP (2,422) 4,141 US GAAP adjustments: Goodwill amortisation (973) (967) Loss on disposal of discontinued operation 876 0 Share options (86) (23) -------- ------ Net (loss)/profit attributable to ordinary shareholders in accordance with US GAAP (2,605) 3,151 ======== ====== Basic (loss)/income per ordinary share under US GAAP (9.1)p 10.4p ======== ====== Basic profit per ordinary share from continuing operations under US GAAP 11.3p 9.8p ======== ====== Diluted (loss)/profit per ordinary share under US GAAP (9.1)p 10.3p ======== ====== Diluted income per ordinary share from continuing operations under US GAAP 11.2p 9.7p ======== ====== Cumulative Effect on Equity Shareholders' Funds of Differences Between US GAAP and UK GAAP As at As at 31 March 98 31 March 97 (pound)'000 (pound)'000 ----------------- ----------------- Equity shareholders' funds in accordance with UK GAAP 10,486 12,616 US GAAP adjustments: Unamortised goodwill 11,514 16,266 Ordinary dividends 681 665 --------- -------- Equity shareholders' funds in accordance with US GAAP 22,681 29,547 ========= ========
Reconciliation of Cash Flow Statement of Differences Between US GAAP and UK GAAP Year Ended Year Ended 31 March 98 31 March 97 (pound)'000 (pound)'000 ----------------- ----------------- Net cash inflow from operating activities 4,044 5,002 Net cash outflow from investing activities (1,013) (375) Net cash outflow from financing activities (4,386) (1,394) ------ ------ Net (decrease)/increase in cash and cash equivalents under US GAAP (1,355) 3,233 ====== ====== Net (decrease)/increase in cash and cash equivalents under UK GAAP (1,355) 3,233 ====== ======
INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS The following pro forma condensed combined financial statements have been prepared from the historical financial statements of Day Runner and Filofax. As of Decemeber 26, 1998, Day Runner acquired all of the outstanding shares of stock of Filofax for $84,984,000 in cash and $2,438,000 of Loan Notes. This acquisition will be accounted for under the purchase method of accounting. The acquisition cost will be allocated among the net assets of Filofax based upon their estimated fair market values. However, this allocation process has not yet been completed. Accordingly, the excess purchase price over Filofax's net book values is presented as a separate caption in the pro forma condensed combined balance sheet. The operations of Filofax for the twelve months ended March 31, 1998 have been combined with Day Runner's operations for the fiscal year ended June 30, 1998 and the operations for the three months ended September 30, 1998 have been combined with Day Runner's operations for the three months ended September 30, 1998. The following pro forma condensed combined financial statements of Filofax for the twelve months ended March 31, 1998 and the operations for the three months ended September 30, 1998 reflect the adjustments necessary to present the financial statements in accordance with US Generally Accepted Accounting Principles. The pro forma condensed combined statements of income give effect to the combination as if it had occurred on July 1, 1997. The pro forma condensed combined balance sheet gives effect to the combination as if it had occurred on September 30, 1998. The pro forma adjustments described in the accompanying notes reflect preliminary estimates and assumptions that management believes are reasonable in the circumstances. The historical balance sheet of Filofax has been converted from Pound Sterling to US Dollars using an exchange rate of 1.6994 (the exchange rate as of September 30, 1998). The historical statements of income of Filofax have been converted from Pound Sterling to US Dollars using the average exchange rate during the period (1.6516 for the fiscal year ended June 30, 1998 and 1.6620 for the quarter ended September 30, 1998). The pro forma condensed combined financial statements are not necessarily indicative of what the financial position or results of operations would have been if the combination had occurred on the above-mentioned dates. Additionally, they are not indicative of future results of operations or financial position. The pro forma condensed combined financial statements should be read in conjunction with Day Runner's historical consolidated financial statements, and notes thereto, which are included in the Company's Annual Report on Form 10-K along with Filofax's financial statements for the year ended March 31, 1998 included herein.
Day Runner, Inc. Unaudited Pro Forma Condensed Combined Balance Sheet September 30, 1998 (dollars in thousands) Day Runner Filofax Pro Forma Pro Forma Historical Historical Adjustments(1) Combined ---------- ---------- -------------- -------- ASSETS: Cash and cash equivalents................................ $ 1,449 $ (1,200)(2) 249 Accounts receivable, net................................. 34,373 $ 15,684 50,057 Inventories.............................................. 41,665 14,707 56,372 Prepaid expenses and other current assets................ 10,636 1,613 12,249 Property and equipment, net.............................. 13,857 3,830 17,687 Intangibles and other assets............................. 9,620 19,211 60,747(1)(2) 89,578 --------- --------- -------- -------- Total................................................ $ 111,600 $ 55,045 $ 59,547 $226,192 ========= ========= ======== ======== LIABILITIES: Lines of credit.......................................... $ 1,943 $ 7,379 9,322 Accounts payable......................................... 11,913 7,653 19,566 Accrued expenses and other liabilities................... 18,828 5,296 24,124 Income taxes payable..................................... 355 3,842 4,197 Long-term debt........................................... 6 90,422(3) 90,428 --------- --------- -------- --------- Total................................................ 33,045 24,170 90,422 147,637 --------- --------- -------- --------- STOCKHOLDERS' EQUITY: Preferred stock.......................................... Common stock............................................. 14 2,228 (2,228) 14 Additional paid-in capital............................... 34,448 806 (806) 34,448 Retained earnings........................................ 70,096 33,325 (33,325) 70,096 Cumulative translation adjustment........................ 376 376 Treasury stock........................................... (26,379) (5,484) 5,484 (26,379) --------- --------- -------- --------- Total stockholders' equity........................... 78,555 30,875 (30,875)(1) 78,555 --------- --------- -------- --------- Total................................................ $ 111,600 $ 55,045 $ 57,109 226,192 ========= ========= ======== =========
Day Runner, Inc. Unaudited Pro Forma Condensed Combined Statements of Income (dollars in thousands) Fiscal Year Ended June 30, 1998 -------------------------------------------------------------- Day Runner Filofax Historical Historical Pro Forma Pro Forma 6/30/98 3/31/98 Adjustments Combined ---------- --------- ----------- --------- Net sales................................................... $ 167,841 $ 62,214 230,055 Cost of goods sold.......................................... 80,663 28,381 109,044 --------- --------- --------- Gross profit................................................ 87,178 33,833 121,011 Operating expenses.......................................... 61,609 24,062 $ 1,018(4) 86,689 --------- --------- --------- ---------- Income from operations...................................... 25,569 9,771 (1,018) 34,322 Net interest (income) expense............................... (172) 12 7,271(5) 7,111 --------- --------- --------- ---------- Income before provision for income taxes.................... 25,741 9,759 (8,289) 27,211 Provision for income taxes.................................. 9,833 2,924 (2,417)(6) 10,340 --------- --------- ---------- ---------- Income from continuing operations........................... $ 15,908 $ 6,835 $ (5,872) $ 16,871 ========= ========= ========== ========== Earnings per common share: Basic................................................ $ 1.38 1.46 ======== ======== Diluted.............................................. $ 1.27 $ 1.35 ======== ========= Weighted average number of common shares outstanding: Basic................................................ 11,533 11,533 ========= ========= Diluted.............................................. 12,523 12,523 ========= ========= See accompanying notes
Quarter Ended September 30, 1998 --------------------------------- Day Runner Filofax Historical Historical Pro Forma Pro Forma 9/30/98 9/30/98 Adjustments Combined ---------- ---------- ----------- ----------- Net sales................................................... $ 47,731 $ 18,800 66,531 Cost of goods sold.......................................... 22,680 8,263 30,943 --------- --------- --------- Gross profit................................................ 25,051 10,537 35,588 Operating expenses.......................................... 16,922 6,469 $ 255(4) 23,646 --------- --------- --------- --------- Income from operations...................................... 8,129 4,068 (255) 11,942 Net interest (income) expense............................... 33 (15) 1,818(5) 1,836 --------- --------- --------- --------- Income before provision for income taxes.................... 8,096 4,083 (2,073) 10,106 Provision for income taxes.................................. 3,076 1,227 (463)(6) 3,840 --------- --------- --------- --------- Income from continuing operations........................... $ 5,020 $ 2,856 $ (1,609) $ 6,266 ========= ========= ========= ========== Earnings per common share: Basic................................................ $ 0.42 $ 0.53 ======== ========= Diluted.............................................. $ 0.40 $ 0.50 ======== ========= Weighted average number of common shares outstanding: Basic................................................ 11,931 11,931 ========= ========= Diluted.............................................. 12,656 12,656 ========= ========= See accompanying notes
DAY RUNNER, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (1) The unaudited pro forma condensed combined financial statements give effect to the acquisition of Filofax (the "Acquisition")and the Loan Agreement.The Acquisition will be accounted for under the purchase method of accounting. The purchase price consists of approximately $84,984,000 of cash, $2,438,000 of Loan Notes and approximately $3,000,000 of estimated transaction fees and expenses and will be allocated to Filofax's assets and liabilities based on their fair values as of the closing date. An allocation of the purchase price has not yet been performed; however, the following sets forth certain preliminary allocations:
Purchase price $ 90,422,000 Net assets acquired at historical amounts (shareholders' equity at September 30, 1998) 30,875,000 ------------- Estimated excess of purchase price over net assets acquired $ 59,547,000 ============= Estimated excess of purchase price over net assets acquired $ 59,547,000 Plus goodwill included in Filofax's net assets acquired 19,211,000 ------------- Total pro forma combined goodwill resulting from the Acquisition $ 78,758,000 ============= (2) The following represents the value attributable to intangibles and other assets resulting from the Acquisition: Excess of purchase price over net assets acquired related to the Acquisition $ 59,547,000 Deferred financing fees related to the Loan Agreement 1,200,000 ------------- Total intangibles and other assets $ 60,747,000 ============= (3) To record the debt incurred on the Acquisition as follows: Purchase of Filofax stock $ 87,422,000 Transaction fees 3,000,000 ------------- Total debt $ 90,422,000 ============= (4) To record amortization of the goodwill that arose from the Acquisition over the estimated useful life of 30 years, net of Filofax's historical goodwill amortization as follows: Total pro forma combined goodwill resulting from the Acquisiiton $ 78,758,000 Life 30 ------------- Total pro forma goodwill amortization 2,625,000 Less Filofax's historical goodwill amortization 1,607,000 ------------- Pro forma goodwill amortization adjustments $ 1,018,000 =============
(5) To record interest expense on bank borrowings incurred in connection with the Acquisition and the amortization of the deferred financing fees ($1,200,000 in deferred financing fees amortized over the seven-year term of the Loan Agreement). The estimated effective rates used were based on the weighted-average of the applicable rates in effect during fiscal year ended June 30, 1998 and the quarter ended September 30, 1998. The effects of a 0.125% change in interest rates would be approximately $100,000 for the fiscal year ended June 30, 1998 and approximately $25,000 for the quarter ended September 30, 1998. (6) To provide for income taxes on pro forma adjustments and Filofax's earnings at an estimated combined effective tax rate of 38%. (7) Nonrecurring charges resulting from this transaction are estimated to be $1,600,000 and have not been reflected in the unaudited pro forma condensed combined statements of income presented herein. These costs will be expensed as incurred during the 12 months succeeding the Acquisition. EX-23 2 CONSENT OF INDEPENDENT AUDITORS CONSENT OF INDEPENDENT AUDITORS As independent public accountants, we hereby consent to the inclusion of our report included in this Form 8-K/A of our report dated June 1, 1998. It should be oted that we have not audited any financial statements of the company subsequent to March 31, 1998 or performed any audit procedures subsequent to the date of our report. Binder Hamlyn Chartered Accountants London England January 15, 1999 -----END PRIVACY-ENHANCED MESSAGE-----