Danka Reports Fourth Quarter And Fiscal Year End Results, Fiscal 1998 Revenue Exceeds $3.3 Billion.LONDON--(BUSINESS WIRE)--May 7, 1998-- DANKA DANKA Don't Ask Nobody Knows Anyway BUSINESS SYSTEMS PLC: (DANKY) Fourth Quarter and Fiscal 1998 Highlights: -- Realigned management and organizational structures  This article has no lead section.To comply with Wikipedia's lead section guidelines, one should be written. , creating Danka Americas A·mer·i·cas , the See America. and Danka International -- Completed consolidation of U.S. dispatch A dispatch or dispatches can refer to:
eighteen to two -- Significant inventory reductions during the fourth quarter -- Reduced total outstanding debt for the year by $158.0 million -0-
Quarter and Year Ended March 31, 1998
Three % Fiscal %
Months Change Year Change
(in thousands, except per ADS amounts)
Revenue $839,659 --% $3,348,986 59%
Earnings from Operations
before Non-Recurring
Charges 40,175 (11)% 168,406 23%
Net Earnings before Non-
Recurring Charges 14,416 (24)% 65,433 2%
Diluted Net Earnings per ADS
before Non-Recurring
Charges $0.25 $1.13
Dan Doyle Doyle , Sir Arthur Conan 1859-1930. British writer known chiefly for a series of stories featuring the brilliant detective Sherlock Holmes, including The Hound of the Baskervilles (1902). , Chief Executive, commented on the year, "Although we experienced mixed results for fiscal 1998, I am pleased with the progress we have achieved towards becoming a unified organization. We have prioritized areas of concern and are involved in several key projects with a goal of maximizing the benefits of the integration. Effective April 1, we completed the consolidation of our U.S. dispatch call centers, marking a major step towards becoming an organization with one face and vision to the customer. I believe we have taken the appropriate steps to address the issues that emerged in fiscal 1998 and we remain committed to the Uniting Danka project." DANKA REPORTS FOURTH QUARTER AND FISCAL YEAR END RESULTS Results 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 results for its fourth quarter and fiscal year ended March 31, 1998. For the quarter ended March 31, 1998, revenue was relatively constant at $839.7 million, while earnings from operations decreased 11% to $40.2 million. Net earnings for the three months decreased to $14.4 million, or $0.25 per American Depositary Share American Depositary Share (ADS) Foreign stock issued in the US and registered in the ADR system. ("ADS") on a 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. basis, as compared to $19.0 million last year, or $0.33 per ADS on a diluted basis. Revenue for fiscal 1998 increased 59% to a record $3.3 billion, primarily due to the acquisition of Eastman Kodak's Office Imaging and outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. businesses acquired in December December: see month. 1996. Earnings from operations, before non-recurring charges, grew 23% to $168.4 million. The previously announced non-recurring charges during fiscal 1998 included an $11.0 million pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta 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. related to the integration of the Office Imaging division, and a $10.0 million provision for the anticipated shortfall Shortfall The amount by which the capital required to fulfill a financial obligation exceeds available capital. Notes: Shortfall risk is often combated with an efficient hedging strategy created by a fund, group, institution, or individual. in equipment purchases under the Kodak (company) Kodak - The photographic company responsible for Photo CD. http://kodak.com/. multi-year supply agreements. Excluding the impact of these non- non- word element [L.]not . non- pref. Not: noninvasive. recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. charges, net earnings for fiscal 1998 rose 2% to $65.4 million, or $1.13 per ADS on a diluted basis compared to $64.2 million, or $1.11 per ADS on a diluted basis for fiscal 1997, also before non-recurring charges. The fiscal 1997 non-recurring charges included a $35.0 million pre-tax restructuring charge related to the acquisition of Kodak's Office Imaging division and the transition to the Company's Market Based Approach in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , and an extraordinary item of $0.01 per ADS on a diluted basis. The Company's revenue and earnings were impacted by foreign exchange rate fluctuations during fiscal 1998. Excluding the effect of foreign currency fluctuations, total revenue would have been 3.5% higher and net earnings per ADS $0.10 higher on a diluted basis. Dan Doyle, Chief Executive, commented on the year, "Although we experienced mixed results for fiscal 1998, I am pleased with the progress we have achieved towards becoming a unified organization. We have prioritized areas of concern and are involved in several key projects with a goal of maximizing the benefits of the integration. Effective April 1, we completed the consolidation of our U.S. dispatch call centers, marking a major step towards becoming an organization with one face and vision to the customer. I believe we have taken the appropriate steps to address the issues that emerged in fiscal 1998 and we remain committed to the Uniting Danka project." Operations As previously announced in September September: see month. 1997, the Company split its worldwide operations into two geographies: Danka Americas and Danka International. Both regions exhibited positive growth in equipment sales for the fourth quarter, with the Americas slightly exceeding International. The Company's combined gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. for the fourth quarter declined from 38.1% to 36.1%. The primary reason for this decline was the reduction in the equipment margin from 36.0% to 31.3%, as well as the change in the mix of equipment and service revenue. The equipment margin decline was primarily due to the push to reduce inventories at year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. . The 8% increase in equipment sales for the fourth quarter was highlighted by strong digital product sales in the Americas high-volume segments. As the industry transitions to a digital environment, our customers are increasingly adding digital products to their document management needs. As a percentage of core copier equipment sales, digital products sold by the Company in the U.S. represent approximately 12%, increasing from about 7% last year. At the same time, although retail service, supplies and rentals revenue declined by about 4%, the gross profit margin remains strong. On a consolidated basis, excluding the Company's outsourcing business, the Company's gross profit margin on retail service, supplies and rentals revenue exceeded 42% for the fourth quarter. Selling, general & administrative expenses for the fourth quarter declined as a percentage of revenue, principally due to lower sales expense and certain efficiencies the Company is beginning to realize through its Uniting Danka project. Integration Projects In September 1997, the Company accelerated the integration of the Office Imaging business with its core operations after determining that an immediate integration was in the Company's long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. best interests. The acceleration of the Uniting Danka project impacted expected revenue and earnings for the second half of the year. Following the disappointing earnings announcement in December 1997, management reviewed all operations and integration projects, and prioritized areas of concern. The Company is now involved in several key projects designed with the goal of maximizing the future benefits of the integration, including the development and transition to a common IT system, the consolidation of real estate and the reduction of more than 1,000 people from the workforce. In April, the Company completed the consolidation of its U.S. dispatch call centers from 18 to 2 and has plans to reduce its warehouses and operating centers as well. The 1,000 plus workforce reductions, which are primarily coming from sales support, administration and management, are expected to be complete by the end of calendar 1998. Since January January: see month. , the Company has reduced the workforce by over 400 of these positions, slightly exceeding its target. The Company also continues to make investments in its IT systems as it prepares to transition the Office Imaging business away from Kodak's computer system. Dan Doyle comments, "It is our goal to link the sales, service, billing and finance efforts electronically, to support our customers on a more focused basis, as well as allow us to more effectively position Danka for the technological trends impacting the document management market." Restructuring Charges and Other Provisions During the third quarter of fiscal 1998, Danka recorded an $11.0 million pre-tax restructuring charge for severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when and termination benefits related to the integration of the Office Imaging division with Danka's existing sales and service network. The charge emanates from the Company's goal of eliminating redundancy and maximizing productivity, the extent of which became apparent during the implementation of the accelerated integration plan. The Company also recorded a $10.0 million provision during the third quarter related to the anticipated shortfall in equipment purchases under the Kodak multi-year supply agreements. Cash Flow Inventory reductions in excess of $80.0 million were particularly strong during the fourth quarter. In addition, the Company received a cash refund TO REFUND. To pay back by the party who has received it, to the party who has paid it, money which ought not to have been paid. 2. On a deficiency of assets, executors and administrators cum testamento annexo, are entitled to have refunded to them legacies of approximately $100.0 million from Eastman Kodak in September 1997 for the purchase price adjustment required under the asset purchase agreement. As a result of its cash flow, the Company reduced its total outstanding debt by $158.0 million to a balance of $943.4 million at March 31, 1998. Board of Directors As previously announced, the Board of Directors has appointed J. Ernest Riddle riddle, puzzling question, specifically one that consists of a fanciful description or definition of something to be guessed. A famous riddle was asked by the Sphinx: "What goes on four legs in the morning, on two at noon, on three at night?" Oedipus guessed the as a non-executive director A non-executive director (NED, also NXD) or outside director is a member of the board of directors of a company who does not form part of the executive management team. He or she is not an employee of the company or affiliated with it in any other way. . Since March 1997, Mr. Riddle has served as President and Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. of Norrell Services, Inc., an outsourcing, information technology and staffing services company. Mr. Riddle also has significant experience in the office imaging industry, having served in senior operating positions at Xerox Corporation (company) XEROX Corporation - http://xerox.com/. See also XEROX PARC, XEROX Network Services. for more than 25 years. Dividends The Board of Directors is recommending the payment of a final dividend of 1.56 pence pence n. Chiefly British A plural of penny. pence Noun a plural of penny USAGE: Since the decimalization of British currency and the introduction of the abbreviation p, per Ordinary Share (equivalent to $0.10 per ADS), a 20% increase over last year. The dividend will be payable on July 28, 1998 to ADS holders of record as of June 26, 1998. Pending Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. Following the Company's December 16, 1997 announcement regarding the expected shortfall The introduction to this article provides insufficient context for those unfamiliar with the subject matter. Please help [ improve the introduction] to meet Wikipedia's layout standards. You can discuss the issue on the talk page. in revenue and earnings, purported pur·port·ed adj. Assumed to be such; supposed: the purported author of the story. pur·port  ed·ly adv. class action lawsuits class action lawsuitA lawsuit in which one party or a limited number of parties sue on behalf of a larger group to which the parties belong. For example, investors may bring a class action lawsuit against a brokerage firm that has actively promoted a tax were filed in federal court in Florida in the United States District Court United States District Court In the U.S., any of the 94 trial courts of general jurisdiction in the federal judicial system. Each state, as well as the District of Columbia and the Commonwealth of Puerto Rico, has at least one federal district court. against the Company and certain of its directors and officers, alleging violations of the federal securities laws. The cases are in the early stages and while it is impossible to predict the outcome of such litigation, management believes this litigation is without merit and intends to vigorously defend the lawsuits. Danka Business Systems PLC, headquartered in London, England and St. Petersburg, Florida St. Petersburg (often shortened to St. Pete) is a city in Pinellas County, Florida, United States. The city is known as a vacation destination for North American and European vacationers, as well as a politically important battleground in U.S. Presidential politics. , is one of the world's largest independent suppliers of photocopiers, facsimiles and other automated au·to·mate v. au·to·mat·ed, au·to·mat·ing, au·to·mates v.tr. 1. To convert to automatic operation: automate a factory. 2. office equipment. Danka employs over 20,000 people and provides office products and services globally in over 30 countries around the world. Danka's Ordinary shares are listed on the London Stock Exchange London Stock Exchange London marketplace for securities. It was formed in 1773 by a group of stockbrokers who had been doing business informally in local coffeehouses. and its ADSs are listed on NASDAQ. 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. Certain statements contained in this press release, or otherwise made by officers of the Company, including statements related to the progress of and anticipated benefits from the Uniting Danka Project, the Company's ability to meet challenges it faces, and the Company's future performance, are forward-looking, and contain information relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Company that is based on the beliefs of management as well as assumptions, made by, and information currently available to, management. The words "goal", "expect", "believe" and similar expressions as they relate to the Company or the Company's management, are intended to identify forward-looking statements. Such statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that might cause such differences include, but are not limited to (i) the demands that the Office Imaging ("OI") acquisition (the "Acquisition") and the unification (programming) unification - The generalisation of pattern matching that is the logic programming equivalent of instantiation in logic. When two terms are to be unified, they are compared. thereof with Danka's core operations will place on the Company's resources, infrastructure, current operations and employees, (ii) any inability by the Company to achieve substantial operating cost reductions and efficiencies in productivity from the Acquisition, the revised information technology system, the revised management structure or other similar Company wide initiatives associated with the unification, (iii) the potential for unanticipated increases in expenditures for labor, equipment, materials and supplies required to manage the increased size of the Company as a result of the Acquisition, (iv) any inability by the Company to effectively manage the increased number of employees and retain current key management personnel and other key employees added as a result of the Acquisition, who are accustomed to a different corporate culture, compensation arrangements and benefits programs, while the Company simultaneously reduces the overall size of its worldwide workforce, (v) the potential increased costs resulting from technological developments, revisions to existing information technology systems and the integration of information technologies between OI and Danka's core operations, (vi) increased competition resulting from other high volume copier distributors and the discounting of such copiers by competitors, (vii) any inability by the Company to manage and reduce its outstanding debt, meet its working capital needs and maintain compliance with the covenants of its credit facility, (viii) any inability by the Company to continue to gain access to and successfully distribute new and current products brought to the marketplace at competitive costs and prices, (ix) the ultimate amount of additional costs associated with an accelerated unification and ultimate integration and the amount and timing of the realization of the anticipated benefits from such unification and complete integration, (x) any inability by the Company to effectively manage the increased size of its inventory and product line, (xi) any inability by the Company to comply with the purchasing requirements under its supply agreements with its vendors, including Kodak, and the impact thereof, (xii) the ultimate outcome and impact of the pending class action lawsuits filed in December 1997 and January 1998, (xiii) fluctuations in foreign currencies and (xiv) other risks including those risks identified in any of the Company's filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" . The Company undertakes no obligation and does 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 hereof. 11201 Danka Circle North 33 Cavendish Square St. Petersburg, FL 33716 London W1M 0DE -0-
DANKA BUSINESS SYSTEMS PLC
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per American Depositary Share ("ADS")
amounts)
For the three months ended
March 31, March 31,
1998 1997
(Unaudited) (Unaudited)
Revenue:
Retail equipment sales $ 252,529 $ 234,441
Retail service, supplies
and rentals 515,787 539,070
Wholesale 71,343 63,907
Total revenue 839,659 837,418
Costs and operating expenses:
Cost of retail equipment sales 173,511 150,055
Retail service, supplies and
rental costs 304,535 316,720
Wholesale costs of revenue 58,142 51,179
Selling, general and administrative
expenses 245,710 256,806
Amortization of intangible assets 5,089 4,920
Research and development costs 12,497 12,500
Total costs and operating expenses 799,484 792,180
Earnings from operations 40,175 45,238
Interest expense and other, net 17,203 15,142
Earnings before income taxes 22,972 30,096
Provision for income taxes 8,556 11,131
Net earnings $ 14,416 $ 18,965
Basic Earnings per ADS:
Net earnings per ADS $ 0.25 $ 0.33
Weighted average ADSs 56,869 56,644
Diluted earnings per ADS:
Net earnings per ADS $ 0.25 $ 0.33
Weighted average ADSs 57,565 57,815
-0-
DANKA BUSINESS SYSTEMS PLC CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per American Depositary Share ("ADS") amounts) For the year ended March 31, March 31, 1998 1997 Revenue: Retail equipment sales $ 985,303 $ 698,996 Retail service, supplies and rentals 2,095,114 1,161,520 Wholesale 268,569 240,531 Total revenue 3,348,986 2,101,047 Costs and 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. : Cost of retail equipment sales 657,839 437,387 Retail service, supplies and rental costs 1,237,953 647,787 Wholesale costs of revenue 217,925 196,470 Selling, general and administrative expenses 1,005,631 650,655 Amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. 21,232 19,386 Research and development costs 50,000 12,500 Restructuring charges 11,000 35,000 Total costs and operating expenses 3,201,580 1,999,185 Earnings from operations 147,406 101,862 Interest expense and other, net 64,214 33,985 Earnings before income taxes 83,192 67,877 Provision for income taxes 30,958 25,522 Earnings before extraordinary item 52,234 42,355 Extraordinary item - loss on early extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of debt, net of income tax benefit (1997: $349) -- 578 Net earnings $ 52,234 $ 41,777 Basic Earnings per ADS: Earnings before extraordinary item $ 0.92 $ 0.75 Extraordinary item -- (0.01) Net earnings per ADS $ 0.92 $ 0.74 Weighted average ADSs 56,799 56,268 Diluted Earnings per ADS: Earnings before extraordinary item $ 0.90 $ 0.73 Extraordinary item -- (0.01) Net earnings per ADS $ 0.90 $ 0.72 Weighted average ADSs 57,841 57,725 -0-
DANKA BUSINESS SYSTEMS PLC
CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, March 31,
1998 1997
Assets
Current assets:
Cash and cash equivalents $ 34,653 $ 73,875
Accounts receivable, net 628,052 758,903
Inventories 482,656 488,931
Prepaid expenses and other
current assets 35,414 39,534
Total current asset 1,180,775 1,361,243
Equipment on operating leases, net 294,348 311,069
Property and equipment, net 87,916 87,768
Intangible assets:
Goodwill, net 478,247 460,262
Noncompete agreements, net 6,785 7,100
Other assets 130,870 125,262
Total assets $ 2,178,941 $ 2,352,704
Liabilities and shareholders' equity
Current liabilities:
Current maturities of long-term debt
and notes payable $ 84,490 $ 41,385
Accounts payable 297,464 358,257
Accrued expenses and other current
liabilities 338,237 305,296
Deferred revenue 70,476 69,149
Total current liabilities 790,667 774,087
Convertible subordinated notes 200,000 200,000
Other long-term debt 658,892 859,823
Deferred income taxes and long-term
liabilities 49,075 53,063
Total liabilities 1,698,634 1,886,973
Shareholders' equity:
Ordinary shares, 1.25 pence
stated value 4,746 4,734
Additional paid-in capital 304,197 301,623
Retained earnings 227,917 186,306
Currency translation adjustment (56,553) (26,932)
Total shareholders' equity 480,307 465,731
Total liabilities and shareholders'
equity $ 2,178,941 $ 2,352,704
Note: Certain amounts in the prior period have been reclassified to
conform to the current year presentation.
CONTACT: Danka Business Systems PLC DAVID David, in the Bible David, d. c.970 B.C., king of ancient Israel (c.1010–970 B.C.), successor of Saul. The Book of First Samuel introduces him as the youngest of eight sons who is anointed king by Samuel to replace Saul, who had been deemed a failure. C. SNELL Snell , George 1903-1996. American geneticist. He shared a 1980 Nobel Prize for discoveries concerning cell structure that enhanced understanding of the immunological system, resulting in higher success rates in organ transplantation. 813-576-6003 or PAUL G. DUMOND 011-44171-399-3000 |
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