Danka Reports Fiscal Year 2007 Second Quarter Operating Results.ST. PETERSBURG, 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 reported fiscal year 2007 second quarter results. On October 12, 2006, the Company announced that it had entered into a Share Purchase Agreement with Ricoh Europe B.V. to sell its European businesses to Ricoh. This divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). is anticipated to take place on or around December 31, 2006. (For a Transaction Description, please see the October 12, 2006 Press Release announcing the Divestiture). For the second quarter: * The Company's 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 from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the were $4.1 million, versus a $6.0 million loss in the prior year second quarter and a $5.5 million loss last quarter. Adjusted operating earnings from continuing operations were $4.2 million, versus a $4.4 million loss for the prior year second quarter and earnings of $9.3 million last quarter. The adjusted operating earnings exclude restructuring charges 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. and loss on the sale of a subsidiary. * Consolidated gross margin was 32.7%, which was up from 32.4% in the prior year quarter, but down from 33.7% sequentially. * SG&A expenses were $69.6 million, or 31.0% of revenue. These expenses were down 18.4%, or $15.7 million from the prior year quarter and down $5.0 million, or 6.7% sequentially. * Total revenue was $224.8 million, which was 11.1% lower than the prior year quarter and down 9.2% sequentially. Retail equipment and related sales was $78.6 million, down 18.4% from the prior year quarter and down 8.6% sequentially. Retail service revenue was $113.7 million, down 5.1% from the prior year quarter and down 6.2% sequentially. "I am pleased with our continued progress on our initiatives, which have resulted in the 2nd consecutive quarter of adjusted operating earnings. Our focus on profitability and shareholder value is driving these changes and will allow for further investment in the business. With the anticipated conclusion of the divestiture of our European operations to Ricoh, we will be able to channel all of our focus and resources on growing the US business," said A.D. Frazier, Danka's Chairman and Chief Executive Officer. For the six months: * The Company's 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. from continuing operations was $1.5 million, versus a $14.8 million loss in the first six months of the prior year. Adjusted operating earnings from continuing operations were $13.6 million, versus a $7.3 million loss in the first six months of the prior year. The adjusted operating earnings exclude restructuring charges and loss on the sale of a subsidiary. * Consolidated gross margin was 33.2%, which was up from 33.0% in the first six months of the prior year. * SG&A expenses were $144.2 million, or 30.5% of revenue and down from $183.6 million, or 34.5% of revenue in the first six months of the prior year, representing a 21.5% decrease. * Total revenue was $472.4 million, which was 11.2% lower than the same period prior year. Retail equipment and related sales was $164.6 million, down 19.2% from the prior year period. Retail service revenue was $234.9 million, down 5.6% from the prior year period. The Company also released a press release in the United Kingdom today which, under International Financial Reporting Standards International Financial Reporting Standards (IFRS) are standards and interpretations adopted by the International Accounting Standards Board (IASB). Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS). ("IFRS IFRS International Financial Reporting Standard(s) IFRS Inter Frame Relay Service IFRS Indiana Facilities Registry System "), shows the Company's European Operations as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. . Conference Call and Webcast A conference call and Webcast to discuss Danka's second quarter results has been scheduled for today, November 7, 2006, at 10:00 a.m. ET. 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 (and some United Kingdom callers) can dial 800-309-1555. Other international callers should dial 706-643-7754. Reference conference ID #9560343 when prompted. A recording of the call will be available approximately two hours after it's completed through 12:00 a.m. ET on November 12, 2006. To access this recording, please call either 800-642-1687 or 706-645-9291 (conference ID #9560343), 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 customers to benefit fully from the convergence 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, and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. 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). plans to achieve and maintain cost savings; (iii) any inability to comply with the Sarbanes-Oxley Act See SOX. of 2002; (iv) any material adverse change in financial markets, the economy or in our financial position; (v) increased competition in our industry and the discounting of products by our competitors; (vi) new competition from non-traditional competitors as the result of evolving and converging con·verge v. con·verged, con·verg·ing, con·verg·es v.intr. 1. a. To tend toward or approach an intersecting point: lines that converge. b. technology; (vii) 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 current and 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; (viii) any inability to arrange financing for our customers' purchases of equipment from us; (ix) 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; (x) any inability to access vendor or bank lines of credit, which could adversely affect our liquidity; (xi) any inability to record and process key data due to ineffective implementation of business processes and policies; (xii) any negative impact from the loss of a key vendor or customer; (xiii) any negative impact from the loss of any of our senior or key management personnel; (xiv) any change in economic conditions in markets where we operate or have material investments which may affect demand for our products or services; (xv) any negative impact from the international scope of our operations; (xvi) fluctuations in foreign currencies; (xvii) any incurrence of tax liabilities or tax payments beyond our current expectations, which could adversely affect our liquidity and profitability; (xviii) any inability to continue to comply with the financial or other representations, warranties, covenants or maturities in our debt instruments; (xix) any delayed or lost sales or other impacts related to the commercial and economic disruption caused by natural disasters, including hurricanes; (xx) any delayed or lost sales and other impacts related to the commercial and economic disruption 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; (xxi) any inability by us to remediate re·me·di·a·tion n. The act or process of correcting a fault or deficiency: remediation of a learning disability. re·me our material weakness in internal controls over financial reporting and (xxii) 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 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 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 ended September, 2006 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 from continuing operations before restructuring and loss on sale of subsidiary; 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 subsidiaries; 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 and restricted cash; adjusted 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. that is computed as total operating expenses before restructuring charges and loss on sale of subsidiary; and adjusted basic net earnings (loss) available to common shareholders per ADS that is computed as net earnings (loss) divided by weighted average basic ADSs (without taking into account dividends and accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the on participating shares). These measures are non-GAAP financial measures, defined as numerical 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 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, net debt, adjusted operating expenses and adjusted basic net earnings (loss) available to common shareholders per ADS represent non-GAAP financial measures, we consider these measures to be key operating 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. 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, net debt, adjusted operating expenses and adjusted basic net earnings (loss) available to common shareholders per ADS 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, net debt, adjusted operating expenses and adjusted basic net earnings (loss) available to common shareholders per ADS may not be consistent with the calculation of these measures by other companies in our industry. Adjusted operating earnings (loss), free cash flow, net debt, adjusted operating expenses and adjusted basic net earnings (loss) available to common shareholders per ADS are not measurements of financial performance under GAAP and should not be considered as an alternative to net earnings (loss) as an indicator of our operating performance or cash flows from operating activities as a measure of liquidity or any other measures of performance derived 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. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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