Danka Announces Third-Quarter Operating Results and Next Phase of Vision 21 Initiative Designed to Reduce Costs by $60 - $73 Million Annually.ST. PETERSBURG Petersburg, city (1990 pop. 38,386), politically independent and in no county, SE Va., on the Appomattox River; inc. 1850. A port of entry and an important tobacco market, it has industries producing chemicals, pharmaceuticals, furniture, structural steel, lumber, , Fla. -- Danka Business Systems PLC (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : DANKY) today announced third-quarter results for the period ended December December: see month. 31, 2004 that include revenue of $313.8 million, gross margins of 36.1%, an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $4.2 million and net earnings of $4.5 million. The Company's net earnings were favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impacted by a $19.8 million income tax benefit, principally from tax settlements in its European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. operations. "Our third-quarter results reflect steady performance in certain areas of our business, including our overall retail equipment and related revenue and total margins, which remain relatively stable," said Todd Todd , Sir Alexander Robertus 1907-1997. British chemist. He won a 1957 Nobel Prize for his study of nucleic acids and nucleotide structures. Mavis, Danka's Chief Executive Officer. "I am most pleased with the continuing validation See validate. validation - The stage in the software life-cycle at the end of the development process where software is evaluated to ensure that it complies with the requirements. of our TechSource strategy which continues to gain momentum in the marketplace. I am also delighted to announce that this week Danka entered into an agreement with a preeminent pre·em·i·nent or pre-em·i·nent adj. Superior to or notable above all others; outstanding. See Synonyms at dominant, noted. [Middle English, from Latin prae manufacturer of printers and related office peripheral Any input, output or storage device connected externally or internally to the computer's CPU, such as a monitor, keyboard, printer, disk, tape, graphics tablet, scanner, joy stick, paddle or mouse. products to provide warranty An assurance, promise, or guaranty by one party that a particular statement of fact is true and may be relied upon by the other party. Warranties are used in a variety of commercial situations. In many instances a business may voluntarily make a warranty. , repair, maintenance and installation services on its installed base of printers and related products worldwide. Under this agreement, Danka becomes one of a select few service companies authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: to provide such services. Our TechSource strategy was further enhanced during the quarter with the acquisition of Image One, a highly regarded printer services business which provides us with strategic management and marketing expertise and access to new products and services. Further, this expands our customer base and leverages our service infrastructure. Finally, we continued to refine our market focus by divesting non-strategic businesses in Portugal Portugal (pôr`chəgəl), officially Portuguese Republic, republic (2005 est. pop. 10,566,000), 35,553 sq mi (92,082 sq km), SW Europe, on the western side of the Iberian Peninsula and including the Madeira Islands and the Azores in the and Russia Russia, officially the Russian Federation, Rus. Rossiya, republic (2005 est. pop. 143,420,000), 6,591,100 sq mi (17,070,949 sq km). ." The Company also unveiled the next phase of its Vision 21 initiative which is comprised of strategic growth investments and cost reduction initiatives designed to optimize optimize - optimisation business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets , improve customer relationships around the world and achieve annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. savings of between $60 and $73 million once fully implemented. "The worldwide Danka management team is excited about what this phase of Vision 21 will mean for our future," continued Mavis. "Our progress has continued to be impacted by inefficiencies in our business which contributes to a cost structure that remains too high. The launch of this new phase of our Vision 21 initiative represents definitive action to address these issues and will fundamentally strengthen our operating and financial performance. During this phase we will create a more customer-centric platform and improve our business processes and product delivery capabilities by eradicating a whole series of complexities in our business, from simplifying pricing and contracts to improving billing systems. We are confident these actions will provide the foundation to leverage our strategies and operations and enable us to invest more resources in our strategies as we substantially reduce operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. and our cost of goods sold Cost of goods sold The total cost of buying raw materials, and paying for all the factors that go into producing finished goods. cost of goods sold . We expect to begin seeing the impact of these actions as early as next quarter." Danka estimates that this phase of its Vision 21 program will reduce operating expenses and cost of goods sold by $60 - 73 million per year when fully implemented. The process improvements will result in a 12% decrease in the worldwide work force, facility consolidations and other related savings. The actions needed to achieve these savings will be taken in steps over the next two to three quarters and will require up to $37 million of cash. The expected payback Payback The length of time it takes to recover the initial cost of a project, without regard to the time value of money. on the cash usage is less than 12 months. The company expects to take a charge to earnings of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $20 to $35 million over the next several quarters. Other key third-quarter financial metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. : --Total third-quarter revenue was $313.8 million, a 5.2% decline from the year-ago quarter but 1.7% higher than the second quarter. Retail equipment and related revenue was essentially flat both year-over-year and sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen . Retail service revenue was 3.2% lower than the year-ago period but 3.5% higher sequentially. Adjusting for a positive currency exchange of $13.6 million during the quarter, total revenue declined by 9.3% year-over-year. --Consolidated gross margins were 36.1% of revenue, essentially flat with the year-ago quarter. Equipment and related margins remained steady at 35.6% and service margins were stable at 38.8%. --SG&A expenses were $116.4 million, compared to $108.7 million in the year-ago quarter. The current quarter included Sarbanes-Oxley compliance costs and consulting expenses related to the Vision 21 initiative which combined for over $4 million of incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. expense, as well as an unfavorable impact from currency exchange rates. The year-ago period includes a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. pension adjustment of $3 million. As a percentage of revenue, SG&A was 37.1% in the current quarter. --The operating loss was $4.2 million, compared to a loss of $10.6 million in the year-ago quarter. The year-ago quarter included a $20.0 million restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. . Net earnings were $4.5 million, compared to a net loss of $16.9 million in the year-ago quarter. The current quarter includes a one-time income tax benefit of $19.8 million resulting from favorable settlements of tax liabilities in our European operations. Including the impact of dividends on participating shares, basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. loss was $0.01 per share, compared to a loss of $0.35 per share in the year-ago period. --Free cash flow (net cash provided by operating activities less capital expenditures) was negative $18.6 million, compared to positive $21.9 million in the second quarter. Cash usage in the current quarter included a $13.2 million increase in inventory, $13.0 of million semi-annual interest payments on our outstanding notes, a $7.2 million increase in net Accounts Receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying and $2.1 million for the acquisition of Image One Corporation. Capital expenditures were $5.9 million. The company's cash balance at the end of the third quarter was $89.3 million. --For the nine-months ended December 31, 2004, total revenue was $932.8 million, compared to $987.8 million in same period last year. Gross margins were steady at 36.9%, while SG&A declined by 3%. Operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before improved to $9.6 million, compared to a year-ago loss of $4.7 million, and net earnings improved to $3.0 million, compared to year-ago loss of $35.0 million. The current year net income included a tax benefit of $19.8 million, principally due to favorable tax settlements in our European operations. The year ago period net loss included restructuring charges of $19.5 million for the nine month period and the write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of debt issuance costs of $20.6 million due to the early repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan of our credit facility. "Our overall liquidity levels remain solid even as we made strategic investments in inventory, capital expenditures and our acquisition of Image One during the quarter," noted Mark Wolfinger, Danka's Chief Financial Officer. "Although several factors, including the timing of our revenues in the U.S., resulted in an increase in our accounts receivable balance, we would expect this to be an opportunity to create additional liquidity in the future for our strategic initiatives." Conference Call and Webcast A conference call and Webcast to discuss Danka's third-quarter results has been scheduled for today, Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , February February: see month. 4 at 11:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy . To access the Webcast, please go to www.danka.com. To participate in the conference call, callers in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of (and some United Kingdom callers) can dial 800-309-1555; other international callers should dial 706-643-7754. No conference number is needed. A recording of the call will be available starting approximately two hours after it's it's 1. Contraction of it is. 2. Contraction of it has. See Usage Note at its. it's it is or it has it's be ~have completed through 5:00 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. on Friday, February 11. To access this recording, please call either 800-642-1687 or 706-645-9291 then enter conference ID number 3755766, or visit Danka's website. About Danka Danka delivers value to clients worldwide by using its expert technical and professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. to implement effective document information solutions. As one of the largest independent providers of enterprise imaging systems and services, the company enables choice, convenience, and continuity. Danka's vision is to empower empower verb To encourage or provide a person with the means or information to become involved in solving his/her own problems customers to benefit fully from the convergence convergence Mathematical property of infinite series, integrals on unbounded regions, and certain sequences of numbers. An infinite series is convergent if the sum of its terms is finite. of image and document technologies in a connected environment. This approach will strengthen the company's client relationships and expand its strategic value. For more information, visit Danka at www.danka.com. Certain statements contained herein, or otherwise made by our officers, including statements related to our future performance and our outlook for our businesses and respective markets, projections, statements of our plans or objectives, forecasts of market trends and other matters, are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , and contain information relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc us that is based on our beliefs as well as assumptions made by, and information currently available to us. The words "goal," "anticipate," "expect," "believe," "could," "should," "intend" and similar expressions as they relate to us are intended to identify forward-looking statements, although not all forward looking statements contain such identifying words. No assurance can be given that the results in any forward-looking statement will be achieved. For the forward-looking statements, we claim the protection of the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. for forward-looking statements provided for in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, Section 27A of the Securities Act of 1933, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements reflect our current views 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, the following: (i) any inability to successfully implement our strategy; (ii) any inability to successfully implement our cost restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). plan to achieve and maintain cost savings; (iii) any material adverse change in financial markets, the economy or in our financial position; (iv) increased competition in our industry and the discounting of products by our competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. ; (v) new competition as the result of evolving technology; (vi) any inability by us to procure To cause something to happen; to find and obtain something or someone. Procure refers to commencing a proceeding; bringing about a result; persuading, inducing, or causing a person to do a particular act; obtaining possession or control over an item; or making a person , or any inability by us to continue to gain access to and successfully distribute new products, including digital products, color products, multi-function products and high-volume copiers, or to continue to bring current products to the marketplace at competitive costs and prices; (vii) any inability to arrange financing for our customers' purchases of equipment from us; (viii) any inability to successfully enhance, unify 1. (database, product) Unify - A relational database produced by Unify Corporation. 2. (algorithm) unify - To perform unification. and effectively utilize our management information systems; (ix) any inability to record and process key data due to ineffective implementation of business processes and policies; (x) any negative impact from the loss of a key vendor or customer; (xi) any negative impact from the loss of any of our senior or key management personnel; (xii) any change in economic conditions in domestic or international markets where we operate or have material investments which may affect demand for our products or services; (xiii) any negative impact from the international scope of our operations; (xiv) fluctuations in foreign currencies; (xv) any incurrence In`cur´rence n. 1. The act of incurring, bringing on, or subjecting one's self to (something troublesome or burdensome); as, the incurrence of guilt, debt, responsibility, etc. s> Noun 1. of tax liabilities or tax payments beyond our current expectations, which could adversely affect our liquidity; (xvi) any inability to comply with the financial or other covenants in our debt instruments; (xvii) any delayed or lost sales and other impacts related to the commercial and economic disruption disruption /dis·rup·tion/ (dis-rup´shun) a morphologic defect resulting from the extrinsic breakdown of, or interference with, a developmental process. caused by terrorist attacks, the related war on terrorism Terrorist acts and the threat of Terrorism have occupied the various law enforcement agencies in the U.S. government for many years. The Anti-Terrorism and Effective Death Penalty Act of 1996, as amended by the usa patriot act , and the fear of additional terrorist attacks; and (xviii) other risks including those risks identified in any of our filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect our analysis only as of the date they are made. Except as required by applicable law, we undertake no obligation, and do not intend, to update these forward-looking statements to reflect events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or that arise after the date they are made. Furthermore, as a matter of policy, we do not generally make any specific projections as to future earnings, nor do we endorse To sign a paper or document, thereby making it possible for the rights represented therein to pass to another individual. Also spelled indorse. endorse (indorse) v. any projections regarding future performance, which may be made by others outside our company. United Kingdom Companies Act: The financial information contained in this announcement for the quarter and year ended December 31, 2004 is unaudited and does not constitute full statutory accounts within the meaning of Section 240 of the United Kingdom Companies Act 1985. This press release contains information regarding adjusted operating earnings (loss) that is computed as operating earnings before restructuring charges, free cash flow that is computed as net cash provided by (used in) operating activities less capital expenditures plus proceeds from the sale of property and equipment and net debt that is computed as current maturities of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. and notes payable plus long-term debt and notes payable less cash and cash equivalents. These measures are non-GAAP financial measures, defined as numerical numerical expressed in numbers, i.e. Arabic numerals of 0 to 9 inclusive. numerical nomenclature a numerical code is used to indicate the words, or other alphabetical signals, intended. measures of our financial performance that exclude or include amounts so as to be different than the most directly comparable measure calculated and presented in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting , or GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). in our statement of operations See Income statement. , balance sheet or statement of cash flows. Pursuant to the requirements of Regulation G, we have provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures. Although adjusted operating earnings (loss), free cash flow and net debt represent non-GAAP financial measures, we consider these measures to be key operating metrics of our business. We use these measures in our planning and budgeting processes, to monitor and evaluate our financial and operating results and to measure performance of our separate divisions. We also believe that adjusted operating earnings (loss), free cash flow and net debt are useful to investors because they provide an analysis of financial and operating results using the same measures that we use in evaluating the company. We expect that such measures provide investors with the means to evaluate our financial and operating results against other companies within our industry. We believe that these measures are meaningful to investors in evaluating our ability to meet our future debt service requirements and to fund our capital expenditures and working capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. . Our calculation of adjusted operating earnings (loss), free cash flow and net debt may not be consistent with the calculation of these measures by other companies in our industry. Adjusted operating earnings (loss), free cash flow and net debt are not measurements of financial performance under GAAP and should not be considered as an alternative to net earnings (loss) as an indicator Indicator Anything used to predict future financial or economic trends. Notes: In the context of technical analysis, an indicator is a mathematical calculation based on a securities price and/or volume. The result is used to predict future prices. of our operating performance or cash flows from operating activities as a measure of liquidity or any other measures of performance derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. in accordance with GAAP. Danka is a registered trademark and Danka @ the Desktop and TechSource are trademarks of Danka Business Systems PLC. All other trademarks are the property of their respective owners.
Danka Business Systems PLC
Consolidated Statements of Operations for the Three Months Ended
December 31, 2004 and 2003
(In thousands, except per American Depository Share ("ADS") amounts)
(Unaudited)
For the Three Months Ended
--------------------------
December 31, December 31,
2004 2003
--------------------------
Revenue:
Retail equipment and related sales $ 111,831 $ 114,607
Retail service 151,451 156,493
Retail supplies and rentals 25,147 35,012
Wholesale 25,354 24,969
---------- ----------
Total revenue 313,783 331,081
---------- ----------
Cost of sales:
Retail equipment sales costs 72,024 74,373
Retail service costs 92,716 95,940
Retail supplies and rental costs 14,305 20,614
Wholesale costs 21,448 20,132
---------- ----------
Total cost of sales 200,493 211,059
---------- ----------
Gross Profit 113,290 120,022
Operating expenses:
Selling, general and administrative expenses 116,392 108,720
Restructuring (credits) charges (390) 20,046
Other expense 1,519 1,861
---------- ----------
Total operating expenses 117,521 130,627
---------- ----------
Operating earnings (loss) (4,231) (10,605)
Interest expense (8,154) (7,931)
Interest income 206 429
---------- ----------
Earnings (loss) before income taxes (12,179) (18,107)
Provision (benefit) for income taxes (16,635) (1,166)
---------- ----------
Net earnings (loss) $ 4,456 $ (16,941)
========== ==========
Calculation of net earnings (loss) per ADS
Net earnings (loss) $ 4,456 $ (16,941)
Dividends and accretion on participating
shares (5,111) (4,811)
---------- ----------
Loss available to common shareholders $ (655) $ (21,752)
========== ==========
Basic net earnings (loss) available to
common shareholders per ADS:
Net earnings (loss) per ADS $ (0.01) $ (0.35)
========== ==========
Weighted average ADSs 63,185 62,531
========== ==========
Diluted net earnings (loss) available
to common shareholders per ADS:
Net earnings (loss) per ADS $ (0.01) $ (0.35)
========== ==========
Weighted average ADSs 63,185 62,531
========== ==========
Danka Business Systems PLC
Consolidated Statements of Operations for the Nine Months Ended
December 31, 2004 and 2003
(In thousands, except per American Depository Share ("ADS") amounts)
(Unaudited)
For the Nine Months Ended
--------------------------
December 31, December 31,
2004 2003
--------------------------
Revenue:
Retail equipment and related sales $ 326,109 $ 342,608
Retail service 455,161 477,717
Retail supplies and rentals 81,472 97,176
Wholesale 70,020 70,328
---------- ----------
Total revenue 932,762 987,829
---------- ----------
Cost of sales:
Retail equipment sales costs 211,913 226,260
Retail service costs 270,137 284,344
Retail supplies and rental costs 48,293 57,622
Wholesale costs 57,877 56,832
---------- ----------
Total cost of sales 588,220 625,058
---------- ----------
Gross Profit 344,542 362,771
Operating expenses:
Selling, general and administrative expenses 335,322 346,322
Restructuring (credits) charges (2,459) 19,452
Other expense 2,048 1,651
---------- ----------
Total operating expenses 334,911 367,425
---------- ----------
Operating earnings (loss) 9,631 (4,654)
Interest expense (23,263) (25,753)
Interest income 814 978
Write-off of debt issuance costs - (20,562)
---------- ----------
Earnings (loss) before income taxes (12,818) (49,991)
Provision (benefit) for income taxes (15,855) (14,995)
---------- ----------
Net earnings (loss) $ 3,037 $ (34,996)
========== ==========
Calculation of net earnings (loss) per ADS
Net earnings (loss) $ 3,037 $ (34,996)
Dividends and accretion on participating
shares (15,108) (14,216)
---------- ----------
Loss available to common shareholders $ (12,071) $ (49,212)
========== ==========
Basic net earnings (loss) available to
common shareholders per ADS:
Net earnings (loss) per ADS $ (0.19) $ (0.79)
========== ==========
Weighted average ADSs 62,938 62,474
========== ==========
Diluted net earnings (loss) available to
common shareholders per ADS:
Net earnings (loss) per ADS $ (0.19) $ (0.79)
========== ==========
Weighted average ADSs 62,938 62,474
========== ==========
Danka Business Systems PLC
Consolidated Balance Sheets as of December 31, 2004 and March 31, 2004
(In Thousands)
December 31, March 31,
2004 2004
------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 89,254 $ 112,790
Accounts receivable, net 251,594 246,996
Inventories 118,722 93,295
Prepaid expenses, deferred income taxes
and other current assets 18,345 16,862
---------- ----------
Total current assets 477,915 469,943
Equipment on operating leases, net 24,202 29,478
Property and equipment, net 54,821 65,888
Goodwill, net 302,821 282,430
Other intangible assets, net 2,472 2,340
Deferred income taxes 7,981 7,688
Other assets 25,215 25,801
---------- ----------
Total assets $ 895,427 $ 883,568
========== ==========
Liabilities and shareholders' equity (deficit)
Current liabilities:
Current maturities of long-term debt and
notes payable $ 4,185 $ 3,212
Accounts payable 168,464 135,460
Accrued expenses and other current
liabilities 94,080 128,963
Taxes payable 36,134 47,200
Deferred revenue 44,082 45,090
---------- ----------
Total current liabilities 346,945 359,925
Long-term debt and notes payable, less current
maturities 239,848 240,761
Deferred income taxes and other long-term
liabilities 65,201 68,029
---------- ----------
Total liabilities 651,994 668,715
---------- ----------
6.5% senior convertible participating shares 294,716 279,608
Shareholders' equity (deficit):
Ordinary shares, 1.25 pence stated value 5,268 5,194
Additional paid-in capital 328,876 328,070
Accumulated deficit (354,657) (342,586)
Accumulated other comprehensive loss (30,770) (55,433)
---------- ----------
Total shareholders' equity (deficit) (51,283) (64,755)
---------- ----------
Total liabilities and shareholders' equity
(deficit) $ 895,427 $ 883,568
========== ==========
Danka Business Systems PLC
Consolidated Statements of Cash Flows for the Nine Months Ended
December 31, 2004 and 2003
(In Thousands)
(Unaudited)
December 31, December 31,
2004 2003
------------------------
Operating activities:
Net earnings (loss) $ 3,037 $ (34,996)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation and amortization 29,532 39,274
Deferred income taxes 837 (14,352)
Amortization of debt issuance costs 1,487 4,993
Write-off of debt issuance costs - 20,562
(Gain) loss on sale of property and
equipment and equipment on operating leases (1,395) 1,959
Proceeds from sale of equipment on operating
leases 3,220 2,790
Restructuring (credits) charges (2,459) 19,452
Changes in net assets and liabilities:
Accounts receivable, net (4,052) 16,440
Inventories (25,161) 4,900
Prepaid expenses and other current assets (1,464) 3,345
Other non-current assets 5,061 2,412
Accounts payable 32,589 (19,696)
Accrued expenses and other current
liabilities (43,691) 1,230
Deferred revenue (1,099) 2,706
Other long-term liabilities (3,422) 1,254
--------- ---------
Net cash (used in) provided by
operating activities (6,980) 52,273
--------- ---------
Investing activities:
Capital expenditures (16,292) (35,872)
Purchase of subsidiary (2,110) -
Proceeds from sale of subsidiary 209 -
Proceeds from the sale of property and
equipment 313 706
--------- ---------
Net cash used in investing activities (17,880) (35,166)
--------- ---------
Financing activities:
Net borrowings (payments) under line of
credit agreements 506 (112,960)
Net (payments) proceeds under capital lease
arrangements (1,794) 2,436
Principal payments of debt - (48,867)
Proceeds from debt - 170,905
Proceeds from stock options exercised 880 -
Payment of debt issue costs - (10,767)
--------- ---------
Net cash (used in) provided by
financing activities (408) 747
--------- ---------
Effect of exchange rates 1,732 5,708
--------- ---------
Net (decrease) increase in cash and
cash equivalents (23,536) 23,562
Cash and cash equivalents, beginning of period 112,790 81,493
--------- ---------
Cash and cash equivalents, end of period $ 89,254 $ 105,055
========= =========
Danka Business Systems PLC
Adjusted operating earnings (loss) for the three and nine months ended
December 31, 2004 and 2003
(In Thousands)
(Unaudited)
For the Three For the Nine
Months Ended Months Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2003 2004 2003
------- --------- -------- --------
Operating earnings (loss) $ (4,231) $(10,605)$ 9,631 $ (4,654)
Restructuring (credits) charges (390) 20,046 (2,459) 19,452
-------- --------- -------- --------
Adjusted operating earnings $ (4,621) $ 9,441 $ 7,172 $ 14,798
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Danka Business Systems PLC
Free cash flow for the three and nine months ended December 31, 2004
and 2003
(In Thousands)
(Unaudited)
For the Three For the Nine
Months Ended Months Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2003 2004 2003
--------- --------- -------- --------
Net cash provided by operating
activities $(10,907) $ 8,321 $ (6,980)$ 52,273
Capital expenditures (5,933) (4,785) (16,292) (35,872)
Purchase of subsidiary (2,110) - (2,110) -
Proceeds from sale of subsidiary 209 - 209 -
Proceeds from the sale of
property and equipment 139 4 313 706
-------- -------- -------- --------
Free cash flow $(18,602) $ 3,540 $(24,860)$ 17,107
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Danka Business Systems PLC
Net Debt as of December 31, 2004 and March 31, 2004
(In Thousands)
(Unaudited)
Dec. 31, March 31,
2004 2004
-------- ---------
Current maturities of long-term
debt and notes payable $ 4,185 $ 3,212
Long-term debt and notes payable 239,848 240,761
Less: Cash and cash equivalents (89,254) (112,790)
-------- ---------
Net Debt $154,779 $131,183
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