Danka Reports Fourth Quarter and Fiscal Year End Results.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.--(BUSINESS WIRE)--July 15, 1999-- 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 end March 31, 1999. During the year, the Company implemented a number of initiatives as part of a fundamental 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). of its operations. This included a significant cost reduction program and a repositioning repositioning Laparoscopic surgery The changing of a Pt's position during a procedure to improve access or visualization of the operative field, which may be linked to complications, as it changes anatomic planes of operation. Cf Laparoscopic surgery. of its product portfolio to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. the accelerating trend towards digital technology. The Company also closed under-performing operations and entered into a definitive agreement to sell its Omnifax OMNIFAX - Alternate name for NYU OMNIFAX? Early system on UNIVAC I or II. Listed in CACM 2(5):16 (May 1959). business. The Company is beginning to realize the benefits of implementing its restructuring initiatives and worldwide cost reduction program, and as previously announced, the Company expects first quarter earnings for the three months ended June June: see month. 30, 1999 to be substantially in excess of the $0.09 per American Depositary Share American Depositary Share (ADS) Foreign stock issued in the US and registered in the ADR system. ("ADS") the Company earned in the comparable first quarter last year. Larry Lar´ry n. 1. Same as Lorry, or Lorrie. K. Switzer Swit·zer n. 1. A Swiss. 2. A Swiss Guard. [Ultimately from Middle High German Sw  zer; see Swiss.] , Chief Executive Officer, commented, "Fiscal
1999 was a year of challenging times and significant changes for Danka.
While there is still work to be done, we made substantial progress
towards restructuring our operations and ended the year a stronger, more
focused company. The benefits from the progress we have made in our
restructuring initiatives are apparent and will be evident in fiscal
2000."Results For the twelve months ended March 31, 1999 revenue declined 13% to $2.9 billion. Excluding the effect of restructuring and other special charges totaling $225.5 million, the Company reported a loss from operations of $57.9 million and a net loss of $118.9 million, or $2.09 per ADS compared to net earnings of $65.4 million or $1.15 per 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 last year. The 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. , before special charges, was 34.3% for fiscal 1999 compared to 36.7% in fiscal 1998. The decline was primarily due to the significantly lower equipment and wholesale gross profit margins. The former was impacted by a number of factors including the Company's decision after a comprehensive review to write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. certain of its non-Kodak branded inventory to estimated market value as well as its continued efforts to reduce used machine and out-of-the-box inventories. The wholesale gross profit margin was primarily impacted by the closure of the Company's U.S. wholesale operations effective March 31, 1999. The closure was related to the Company's plan to focus on core, higher margin businesses. Furthermore, selling, general and administrative expenses ("SG&A") remained relatively constant, before special charges, at $979.0 million and $979.4 million in fiscal 1999 and 1998, respectively. A decline in selling expenses resulting from lower retail equipment sales was offset by higher general and administrative expenses, the majority of which occurred during the second half of the fiscal year. The Company expects to generate $100.0 million in 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. cost savings from the full implementation of its worldwide cost reduction program. With the effect of restructuring and other special charges, the Company reported a loss from operations of $283.4 million and a net loss of $294.8 million, or $5.18 per ADS for the twelve months ended March 31, 1999. Revenue for the three months ended March 31, 1999 decreased 20% to $674.1 million compared to the same quarter last year. Including the effect of restructuring and other special charges, the Company reported a loss from operations of $5.1 million and a net loss of $12.4 million, or $0.22 per ADS compared to net earnings of $0.25 per ADS last year on a diluted basis. The Company's operations during the fourth quarter were positively impacted by a net benefit of $10.7 million included in special charges and adjustments, primarily resulting from a mutual release of claims and obligations related to certain agreements previously entered into by Kodak (company) Kodak - The photographic company responsible for Photo CD. http://kodak.com/. and the Company. In connection with this agreement, liabilities totaling $23.5 million recorded during the third quarters of fiscal 1998 and 1999 were reversed during the fourth quarter of fiscal 1999. The Company's results for the fourth quarter, before special charges, were primarily impacted by declines in revenue and a lower wholesale margin. The Company's retail equipment gross profit margin, before special charges, improved considerably for the fourth quarter to 31.3% versus 12.8% in the third quarter, which included significant inventory write-downs as mentioned above. SG&A expenses, before special charges, improved sequentially, declining 8% to $242.3 million in the fourth quarter compared to $264.0 million in the third quarter. As a percentage of total revenue, SG&A expenses in the fourth quarter declined 60 basis points to 35.9% compared to 36.5% in the third quarter. The decline is related to a reduction in selling expenses due to the lower retail equipment sales as well as a decline in general and administrative expenses related to the benefits associated with the Company's restructuring initiatives and worldwide cost reduction program. Review of Operations During the year, the Company's performance was impacted by reduced retail equipment sales in both the U.S. and international markets. Compared to fiscal 1998, retail equipment sales declined 23% for the year, which the Company believes was due to several factors. First, equipment sales in the U.S. and international markets were affected by the negative press in the third and fourth quarters regarding the Company's financial situation, which led to some price discounting. Second, the Company's product availability was constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. due to stricter credit terms Credit Terms The conditions under which credit will be extended to a customer. The components of credit terms are: cash discount, credit period, net period. with suppliers primarily during the third quarter. In addition, the Company lacked the digital product availability necessary to compete with the accelerated shift to digital products primarily in the U.S. and Australasia Australasia (ôstrəlā`zhə, –shə), islands of the South Pacific, including Australia, New Zealand, New Guinea, and adjacent islands. The term is sometimes used to include all of Oceania. . The Company took several steps in fiscal 1999 to improve its digital product portfolio. Danka entered into an alliance with Canon in September September: see month. 1998, allowing the Company to offer the complete line of Canon color copiers throughout 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. , Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and select Latin Lat·in n. 1. a. The Indo-European language of the ancient Latins and Romans and the most important cultural language of western Europe until the end of the 17th century. b. American countries List of American countries Nations:
v. as·sem·bled, as·sem·bling, as·sem·bles v.tr. 1. To bring or call together into a group or whole: assembled the jury. 2. through a joint venture by Heidelberg Digital and NexPress Solutions. As a percentage of copier equipment sales, digital and color products sold by the Company in the U.S. represented approximately 23% of equipment sales in fiscal 1999, increasing from 15% in fiscal 1998. On a worldwide basis, digital and color products sold by the Company, represented approximately 26% of equipment sales in fiscal 1999. Restructuring and Other Special Charges The Company recorded a number of special charges during the fiscal year totaling $225.5 million. This included $67.3 million directly related to the decline in the estimated market value of Kodak branded inventory and the termination of supply and research and development agreements between Danka and Kodak. The Company also wrote-off $109.5 million for the impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of goodwill and other long-lived assets. The balance of the charges were comprised of $7.9 million for other asset write-downs and $40.8 million in 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. associated with Danka's worldwide cost reduction program. Sale of Assets On June 18, 1999, the Company announced a definitive agreement to sell its facsimile business, Omnifax, to Xerox Corporation (company) XEROX Corporation - http://xerox.com/. See also XEROX PARC, XEROX Network Services. for a cash consideration of $45.0 million. The Company expects to complete the sale of Omnifax in the second quarter of fiscal 2000. Cash Flow & Financing As previously announced, on October 20, 1998 the Company received from its bank lenders a waiver The voluntary surrender of a known right; conduct supporting an inference that a particular right has been relinquished. The term waiver is used in many legal contexts. of certain financial covenants and the adverse effect of failing to comply with such covenants under its Credit Agreement through the period ending February 28, 1999, which was later extended through August 27, 1999. The Company announced an amendment to its Credit Agreement on July 14, 1999 providing the Company with financing through July 31, 2000. Terms of the amendment provide for an aggregate commitment by the lenders of $995.6 million and the availability of up to an additional $40.0 million to finance the purchase of high-volume digital copiers. The Company expects to refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. its indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. as soon as practical. The Company generated $36.6 million in operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. for fiscal 1999, greatly influenced by a reduction in inventory of nearly $88.0 million, before special charges. The Company worked diligently dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d during the second half of the fiscal year to reduce inventory levels by minimizing purchases and selling existing inventory. The Company's efforts on cash management were highly evident in the fourth quarter in which Danka generated $62.8 million in operating cash flow and over $28.0 million in free cash flow after capital expenditures. Management Changes As previously announced on July 12, 1999, Brian L. Merriman was appointed to the Board of Directors and named Danka's 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. , worldwide. Merriman assumed the overall responsibility for the strategy and execution of the sales, service and marketing activity for Danka's global operations Global Operations is a first-person shooter computer game developed by Barking Dog Studios and published by both Crave Entertainment and Electronic Arts. It was released in March of 2002, following its public multiplayer beta version which contained only the Quebec map. . 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 office imaging equipment, supplies and services. Danka provides office products and services globally in 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. For additional information about copier, printer and other office imaging products, please visit the web site at www.danka.com. 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 integration, the Company's ability to meet challenges it faces, and the Company's future business and financial 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", "anticipate", "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. No assurance can be given that the results in any forward-looking statement will be achieved. For the forward-looking statements, the Company claims 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 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. Act of 1995. Factors that might cause such differences include, but are not limited to (i) failure to obtain one or more waivers or longer term financing beyond the July 31, 2000 waiver period to meet the Company's liquidity needs, whether through failure to perform as described in business plans provided to the Company's lenders or otherwise, (ii) increased competition resulting from other high-volume and digital copier distributors and the discounting of such copiers by competitors, (iii) any inability by the Company to manage and reduce its outstanding debt, meet its working capital needs or otherwise adequately address its liquidity challenges, (iv) any inability by the Company 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 the Company to continue to gain access to and successfully distribute new, products, including digital products and high-volume copiers, or to continue to bring current products to the marketplace at competitive costs and prices, (v) any inability by the Company to finalize fi·nal·ize tr.v. fi·nal·ized, fi·nal·iz·ing, fi·nal·iz·es To put into final form; complete or conclude: "They have jointly agreed ... a 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. supply agreement with Heidelberg, (vi) any inability by the Company to achieve projected cost savings, (vii) the refusal by any vendor to provide equipment, parts and supplies as a result of the Company's financial condition, (viii) any inability by the Company to successfully close facilities without negative impact on the Company's operations, (ix) any inability by the Company to obtain adequate funding for its leasing business, (x) any inability by the Company to bring SG&A expenditures of the Company's U.S. division into line with anticipated sales, (xi) business disruption disruption /dis·rup·tion/ (dis-rup´shun) a morphologic defect resulting from the extrinsic breakdown of, or interference with, a developmental process. resulting from year 2000 issues including unidentified noncompliance noncompliance failure of the owner to follow instructions, particularly in administering medication as prescribed; a cause of a less than expected response to treatment. noncompliance of technology, delays or difficulties in implementing new IT infrastructure, delays or difficulties in converting remaining systems and applications, and untimely third party completion of year 2000 compliance, (xii) any inability by the Company to complete the sale of its Omnifax business, (xiii) the ultimate outcome and impact of the pending class action lawsuit class action lawsuit A 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 or any other lawsuit lawsuit: see procedure; tort. , (xiv) any negative impact from the loss of any key upper management personnel, (xv) any negative impact on the Company's financial condition or results of operations caused by the Euro conversion, (xvi) any significant assessment, pursuant to the review by the Internal Revenue Service (xvii) fluctuations in foreign currencies and (xviii) other risks including those risks identified in any of the Company's other 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 they are made. 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 such statements are made. Furthermore, as a matter of policy, the Company does not generally make any specific projections as to future earnings nor does it 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 the Company. -0-
DANKA BUSINESS SYSTEMS PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per American Depositary Share ("ADS") amounts)
For the three months ended
----------------------
March 31 March 31
1999 1998
--------- ---------
(Unaudited) (Unaudited)
Revenue:
Retail equipment sales $ 168,394 $ 252,529
Retail service, supplies and rentals 461,996 515,787
Wholesale 43,713 71,343
--------- ---------
Total revenue 674,103 839,659
--------- ---------
Costs and operating expenses:
Cost of retail equipment sales 115,645 173,511
Special charges, cost of retail
equipment sales (16,482) --
Retail service, supplies and rental costs 272,254 304,535
Special charges, retail service, supplies
and rental costs 1,153 --
Wholesale costs of revenue 39,599 58,142
Special charges, wholesale costs of revenue 514 --
Selling, general and administrative expenses 242,294 245,710
Special charges, general and
administrative expenses (195) --
Amortization of intangible assets 4,204 5,089
Write-off of goodwill and other
long-lived assets 1,616 --
Commitment to Kodak under R&D agreements 15,934 12,497
Restructuring charges 2,644 --
--------- ---------
Total costs and operating expenses 679,180 799,484
--------- ---------
(Loss) earnings from operations (5,077) 40,175
Interest expense and other, net 18,330 17,203
--------- ---------
(Loss) earnings before income taxes (23,407) 22,972
Provision (benefit) for income taxes (10,980) 8,556
--------- ---------
Net (loss) earnings $ (12,427) $ 14,416
--------- ---------
Basic (loss) earnings per ADS:
Net (loss) earnings per ADS $ (0.22) $ 0.25
Weighted average ADSs 57,017 56,869
Diluted (loss) earnings per ADS:
Net (loss) earnings per ADS $ (0.22) $ 0.25
Weighted average ADSs 57,017 57,565
DANKA BUSINESS SYSTEMS PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per American Depositary Share ("ADS") amounts)
For the twelve months ended
------------------------
March 31 March 31
1999 1998
----------- -----------
Revenue:
Retail equipment sales $ 755,485 $ 985,303
Retail service, supplies and rentals 1,920,821 2,068,864
Wholesale 220,914 268,569
----------- -----------
Total revenue 2,897,220 3,322,736
----------- -----------
Costs and operating expenses:
Cost of retail equipment sales 558,370 647,839
Special charges, cost of retail
equipment sales 30,709 10,000
Retail service, supplies and rental costs 1,155,325 1,237,953
Special charges, retail service, supplies
and rental costs 27,144 --
Wholesale costs of revenue 189,261 217,925
Special charges, wholesale costs of revenue 514 --
Selling, general and administrative expenses 979,008 979,381
Special charges, general and administrative
expenses 16,805 --
Amortization of intangible assets 19,714 21,232
Write-off of goodwill and other long-lived
assets 109,474 --
Commitment to Kodak under R&D agreements 53,434 50,000
Restructuring charges 40,818 11,000
----------- -----------
Total costs and operating expenses 3,180,576 3,175,330
----------- -----------
(Loss) earnings from operations (283,356) 147,406
Interest expense and other, net 74,197 64,214
----------- -----------
(Loss) earnings before income taxes (357,553) 83,192
Provision (benefit) for income taxes (62,773) 30,958
----------- -----------
Net (loss) earnings $ (294,780) $ 52,234
----------- -----------
Basic (loss) earnings per ADS:
Net (loss) earnings per ADS $ (5.18) $ 0.92
Weighted average ADSs 56,915 56,799
Diluted (loss) earnings per ADS:
Net (loss) earnings per ADS $ (5.18) $ 0.90
Weighted average ADSs 56,915 57,841
Note: Certain prior year amounts have been reclassified to conform
with the current year presentation.
DANKA BUSINESS SYSTEMS PLC
CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, March 31,
1999 1998
----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 66,095 $ 34,653
Accounts receivable, net 571,470 628,052
Inventories 356,139 482,656
Prepaid expenses, deferred income
taxes and other current assets 56,950 35,414
Assets of business held for sale 62,791 --
----------- -----------
Total current assets 1,113,445 1,180,775
Equipment on operating leases, net 264,625 294,348
Property and equipment, net 92,963 87,916
Intangible assets:
Goodwill, net 334,964 478,247
Noncompete agreements, net 2,477 6,785
Deferred income taxes and other assets 96,668 130,870
----------- -----------
Total assets $ 1,905,142 $ 2,178,941
----------- -----------
Liabilities and shareholders' equity
Current liabilities:
Current maturities of long-term debt
and notes payable $ 89,732 $ 84,490
Accounts payable 162,294 297,464
Accrued expenses and other current
liabilities 333,446 338,237
Deferred revenue 51,818 70,476
Liabilities of business held for sale 17,240
----------- -----------
Total current liabilities 654,530 790,667
Convertible subordinated notes 200,000 200,000
Long-term debt and notes payable, less
current maturities 852,415 658,892
Deferred income taxes and other
long-term liabilities 27,033 49,075
----------- -----------
Total liabilities 1,733,978 1,698,634
----------- -----------
Shareholders' equity:
Ordinary shares, 1.25 pence stated value 4,758 4,746
Additional paid-in capital 304,436 304,197
Retained earnings (deficit) (72,815) 227,917
Accumulated other comprehensive
(loss) income (65,215) (56,553)
----------- -----------
Total shareholders' equity 171,164 480,307
----------- -----------
Total liabilities and shareholders'
equity $ 1,905,142 $ 2,178,941
----------- -----------
|
|
||||||||||||||||
Bahamas 
Printer friendly
Cite/link
Email
Feedback
Reader Opinion