Danka Reports Fourth Quarter, Fiscal 2007 Results.Narrows Net Loss 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 that it had narrowed its net loss to $29.2 million for the fiscal year ended March 21, 2007, compared to a loss of $85.2 million in fiscal 2006. Revenues were $450.2 million in 2007, versus $522.4 million a year ago. As previously reported, on January 31, 2007 the Company completed the sale of its European operations to Ricoh Europe B.V. For the fiscal year and fourth quarter ending March 31, 2007, European operations are included in the results from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. . On June 25, 2007, the Company completed a new financing arrangement for $145 million in term and revolver revolver: see small arms. revolver Pistol with a revolving cylinder that provides multishot action. Some early versions, known as pepperboxes, had several barrels, but as early as the 17th century pistols were being made with a revolving chamber to debt that, together with the proceeds from the sale to Ricoh of the European operations, will be used to repay existing debt and enhance working capital. The Company also successfully remediated its last material weakness under Section 404 of the Sarbanes Oxley Act and will be disclosing that it does not have any material weaknesses. For the full year ended March 31, 2007: * Total revenue 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 was $450.2 million, down 13.8% from the prior year. Retail equipment, supplies and related sales were $200.1 million, down 18.7% from 2006, while service revenue was $236.1 million, down 9.1% from 2006. * Consolidated gross margin was 34.6%, up 40 basis points from the prior year. * SG&A expenses were $159.5 million, down $43.7 million or 21.5%, versus 2006. * For the year, the Company incurred a $13.0 million 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. This included a $2.5 million loss on the sale of a subsidiary recorded in the first quarter, and a $6.0 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. recorded primarily in the second quarter. * Net interest expense was $35.2 million, up $5.7 million from the prior year as a result of the acceleration of unamortized bond discount Unamortized bond discount Par value of a bond less the proceeds received from the sale of the bond, less whatever portion has been amortized. unamortized bond discount and issuance costs in anticipation of the new financing arrangement. As a result of the sale of its European operations in Q4, as well as the sale of its Australian operations in Q2, the Company reported earnings from discontinued operations of $9.3 million and a gain on the sale of discontinued operations of $10.2 million for the year. * The Company reported a net loss of $29.2 million as compared to an $85.2 million loss in the prior year. "From a financial perspective, fiscal 2007 was about fixing the Company's liquidity and capital structure," commented Edward K. Quibell, Danka Chief Financial Officer. "While there is still work to be done, the progress achieved to date goes a long way toward completing the successful turnaround of the Company." Mr. Quibell also noted that adjusted 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 improved by $19 million -- on reduced revenue of $72 million. This was accomplished by removing unprofitable businesses and controlling costs. For the fourth quarter: * Total revenue was $113.5 million, 11.2% lower than the prior year quarter, but up 7.5% sequentially. Retail equipment, supplies and related sales were $52.7 million for the quarter, down 15.2% from the prior year, but up 16.4% sequentially. Service revenue was $57.7 million, down 7.8% from the prior year, but up 0.4% sequentially. * Consolidated gross margin for the quarter was 32.7%, up 180 basis points from the prior year, but down 120 basis points from the prior quarter. * SG&A expenses were $38.1 million, down 25.1% from the prior year and down 12.4% sequentially. * For the quarter, the Company generated a $3.0 million operating loss from continuing operations. * Net interest expense was $12.9 million, loss from discontinued operations was $2.0 million and income tax expense was $0.7 million. With the finalization Writing the table of contents (TOC) on a recordable CD or DVD disc. The finalization process ensures that the disc can be played back on most CD and DVD players. See disc-at-once. of the sale of the Company's European operations to Ricoh, Danka recorded a gain of $65.9 million which was offset by the write-off of $64.0 million in currency translation adjustment in the remaining companies. "While these results are important," said A.D. Frazier, Danka Chairman and Chief Executive Officer, "it is imperative to recognize that the Danka enterprise of today is significantly changed from the company I joined a little more than a year ago. Fiscal 2007 is a watershed watershed, elevation or divide separating the catchment area, or drainage basin, of one river system or group of river systems from another system or group of systems. The term is also often used synonymously with drainage basin. year in which the Company rationalized its business structure, strengthened its balance sheet, and enhanced its competitive position. "Danka is now leaner, far more flexible and primed to grow," Mr. Frazier continued. "Our prospects for the future are dramatically better now than they have been in a very long time. In particular, I am encouraged by the traction Traction Definition Traction is the use of a pulling force to treat muscle and skeleton disorders. Purpose Traction is usually applied to the arms and legs, the neck, the backbone, or the pelvis. we have gained in equipment sales. Q4 was the highest quarter of the year. This is not surprising; we have increased the number of sales representatives and invested in extensive training to support our consultative selling Consultative selling emphasizes customer needs and meeting those needs with solutions combining products and/or services. A consultative salesperson typically provides detailed instruction or advice on which solution best meets these needs. approach." Mr. Frazier added that service revenue remains stable. "We have a few more changes to make in our cost structure and our capital structure, yet I am confident that our customers will see a continually improving Danka," he concluded. Conference Call Scheduled A conference call to discuss Danka's fourth quarter and fiscal year 2007 results is scheduled for today, June 27, 2007, at 10:00 a.m. ET. To participate in the conference call, please dial in five-to-ten minutes prior to the start of the call and follow the operator's instructions. U.S. and Canada callers: please dial 800-309-1555. International callers: please dial 706-643-7754. Reference conference ID #4651644 when prompted. A replay of the call will be available approximately two hours after the call ends. U.S. and Canada callers: dial 800-642-1687. International callers: dial 706-645-9291. Reference conference ID #4651644 when prompted. This playback will be available through 12:00 a.m. ET on July 3, 2007. About Danka Danka delivers value to clients 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; (xvv) any incurrence of tax liabilities or tax payments beyond our current expectations, which could adversely affect our liquidity and profitability; (xvi) any inability to comply with our new senior secured credit facility covenants, financial or other representations, warranties, or maturities in our debt instruments; (xvii) any delayed or lost sales or other impacts related to the commercial and economic disruption caused by natural disasters, including hurricanes; (xviii) 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; (xix) any negative impact of the accreted value accreted value The current value of an original-issue discount bond, taking into account imputed interest that has accumulated. of our outstanding preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. and its continued 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 ; (xx) any negative impact from our continued organization as an England and Wales England and Wales are both constituent countries of the United Kingdom, that together share a single legal system: English law. Legislatively, England and Wales are treated as a single unit (see State (law)) for the conflict of laws. registered Company following the sale of our European businesses; and (xxi) 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 March, 2007 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 a 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 charge and a 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 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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