Thursday, August 02, 2007 8:36:46 AM
DANKY .86 Danka Reports Fiscal Year 2008 First Quarter Results Market Wire "US Press Releases "
ST. PETERSBURG, FL -- (MARKET WIRE) -- 08/02/07 -- Danka Business Systems PLC (NASDAQ: DANKY) today reported operating earnings from continuing operations of $1.8 million in the fiscal year 2008 first quarter ended June 30, 2007 , compared with operating losses from continuing operations of $3.9 million in the comparable fiscal 2007 quarter and $3.0 million in the quarter ended March 31, 2007 .
The Company reported a net loss of $5.0 million in the fiscal year 2008 first quarter, versus losses of $12.2 million in the year ago quarter and $17.1 million in the quarter ended March 31, 2007 .
For the first quarter of fiscal 2008:
-- Total revenue was $106.3 million , 12.9% lower than the prior year
quarter and down 6.4% sequentially. Retail equipment, supplies and related
sales was $46.2 million for the quarter, down 14.6% from the prior year,
and down 12.5% sequentially. Service revenue was $57.2 million , down 9.1%
from the prior year, but down only 0.8% sequentially.
-- Consolidated gross margin for the quarter was 36.2%, down 90 basis
points from the prior year, but up 350 basis points from the prior quarter.
-- SG&A expenses were $36.3 million , down 9.7% from the prior year and
down 4.8% sequentially. Restructuring charges were $1.3 million , other
income was $0.9 million and tax expense was $0.7 million .
-- Net interest expense was $5.0 million , and loss from discontinued
operations was $1.0 million .
-- Subsequent to the close of the quarter, the Company redeemed all of
its outstanding 11% Senior Notes due 2010 and 10% Subordinated Notes due
2008 in connection with the previously announced $145 million financing
agreement with General Electric Capital Corporation which was completed on
June 25, 2007 .
"The story of the first quarter is the Company's positive operating earnings," said A.D. Frazier, Danka Chairman and Chief Executive Officer. "This is a first step, but an important one, on the path to positive net income. We have restructured our balance sheet in a way that meaningfully lowers the interest burden. SG&A continues to trend lower. We have achieved four consecutive quarters of stabilized service revenue. While we did not achieve the growth we expected in hardware revenue, that business remains fundamentally sound and we expect our investments in people and training to deliver higher equipment sales.
"Most important," concluded Mr. Frazier, "is that the marketplace knows Danka is there. Clients and prospects, business partners and even competitors see the changes. And that serves to drive us even harder."
Conference Call and Webcast
A conference call and Webcast to discuss Danka's first quarter results has been scheduled for today, August 2, 2007 , at 10:00a.m. ET . To access the Webcast, please go to www.danka.com. To participate in the conference call, callers in the United States and Canada (and some United Kingdom callers) can dial 800-309-1555. Other international callers should dial 706-643-7754. Reference conference ID #10126364 when prompted. A recording of the call will be available approximately two hours after it's completed through 12:00a.m. ET on August 9, 2007 . To access this recording, please call either 800-642-1687 or 706-645-9291 (conference ID #10126364), or visit Danka's website.
About Danka
Danka delivers value to clients by using its expert technical and professional services 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, and contain information relating to 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 for forward-looking statements provided for in the Private Securities Litigation Reform Act 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 plans to achieve and maintain cost savings; (iii) any inability to comply with the Sarbanes-Oxley Act 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 technology; (vii) any inability by us to procure, 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 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 incurrence of tax liabilities or tax payments beyond our current expectations, which could adversely affect our liquidity and profitability; (xvi) any inability to continue to comply with our new senior secured credit facility covenants or the 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, and the fear of additional terrorist attacks; and (xix) any negative impact of the accreted value of our outstanding preferred stock or its continued accretion; (xx) any negative impact of our continued organization as an England and Wales 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 June 30, 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, a loss on sale of subsidiary and a gain on the sale of asset; 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 and notes payable plus long-term debt and notes payable less cash and cash equivalents and restricted cash; 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, or GAAP in our statement of operations, 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, 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 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, 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. Our calculation of adjusted operating earnings (loss), free cash flow, net debt, 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, 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.
Danka Business Systems PLC
Consolidated Condensed Statements of Operations for the Three Months Ended
June 30, 2007 and 2006
(In thousands, except per American Depositary Share ("ADS") amounts)
(Unaudited)
Three months ended
June 30,
-----------------------------
2007 2006
------------- -------------
Revenue:
Retail equipment, supplies and related sales $ 46,162 $ 54,077
Retail service 57,229 62,941
Rentals 2,883 5,031
------------- -------------
Total revenue 106,274 122,049
------------- -------------
Cost of sales:
Retail equipment, supplies and related sales
costs 32,207 38,389
Retail service costs 34,301 37,243
Rental costs, including depreciation on
rental assets 1,319 1,184
------------- -------------
Total cost of sales 67,827 76,816
------------- -------------
Gross profit 38,447 45,233
Operating expenses:
Selling, general and administrative expenses 36,284 40,193
Restructuring charges 1,258 6,061
Loss on sale of subsidiary - 2,507
Other expense (income) (895) 416
------------- -------------
Total operating expenses 36,647 49,177
------------- -------------
Operating earnings (loss) from
continuing operations 1,800 (3,944)
Interest expense (6,880) (7,359)
Interest income 1,851 25
------------- -------------
Earnings (loss) from continuing
operations before income taxes (3,229) (11,278)
Provision (benefit) for income taxes 722 467
------------- -------------
Earnings (loss) from continuing
operations (3,951) (11,745)
Earnings (loss) from discontinued
operations, net of tax (286) (242)
Gain (loss) on sale of discontinued
operations, net of tax (719) (215)
------------- -------------
Net earnings (loss) $ (4,956) $ (12,202)
============= =============
Net earnings (loss) available to common
shareholders:
Net earnings (loss) from continuing
operations $ (3,951) $ (11,745)
Dividends and accretion on participating
shares (5,961) (5,606)
------------- -------------
Net earnings (loss) from continuing
operations available to common shareholders $ (9,912) $ (17,351)
============= =============
Basic and diluted net earnings (loss)
available to common shareholders per ADS:
Net earnings (loss) from continuing
operations $ (0.15) $ (0.27)
Net earnings (loss) from discontinued
operations (0.02) (0.01)
------------- -------------
Basic net earnings (loss) $ (0.17) $ (0.28)
------------- -------------
Weighted average basic ADSs 64,767 64,132
============= =============
Danka Business Systems PLC
Consolidated Condensed Balance Sheets as of June 30, 2007 and March 31,
2007
(In thousands except per share data)
June 30, March 31,
2007 2007
------------- -------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 8,112 $ 17,594
Restricted cash 266,586 163,979
Accounts receivable, net of allowances 40,003 44,180
Inventories 32,851 31,681
Prepaid expenses, deferred income taxes
and other current assets 11,184 17,607
------------- -------------
Total current assets 358,736 275,041
Equipment on operating leases, net 8,834 9,241
Property and equipment, net 20,683 22,637
Goodwill 93,489 93,489
Other intangible assets, net of accumulated
amortization 529 554
Other assets 20,103 16,086
------------- -------------
Total assets $ 502,374 $ 417,048
============= =============
Liabilities and shareholders’ equity
(deficit)
Current liabilities:
Current maturities of long-term debt and
notes payable $ 255,641 $ 186,078
Accounts payable 59,372 66,231
Accrued expenses and other current
liabilities 32,618 45,830
Taxes payable 12,301 8,468
Deferred revenue 4,967 5,875
------------- -------------
Total current liabilities 364,899 312,482
Long-term debt and notes payable, less
current maturities 105,049 65,215
Deferred income taxes and other long-term
liabilities 9,159 11,271
------------- -------------
Total liabilities 479,107 388,968
------------- -------------
6.5% senior convertible participating shares 350,448 344,487
Shareholders’ equity (deficit):
Ordinary shares, 1.25 pence stated value 5,386 5,386
Additional paid-in capital 330,762 330,587
Accumulated deficit (663,329) (652,380)
------------- -------------
Total shareholders’ equity (deficit) (327,181) (316,407)
------------- -------------
Total liabilities and shareholders’ equity
(deficit) $ 502,374 $ 417,048
============= =============
Danka Business Systems PLC
Consolidated Condensed Statements of Cash Flows for the Three Months Ended
June 30, 2007 and 2006
(In thousands)
(Unaudited)
Three Months Ended June 30,
-----------------------------
2007 2006
------------- -------------
Operating activities:
Net earnings (loss) $ (4,956) $ (12,202)
(Earnings) loss from discontinued operations 1,005 457
------------- -------------
Earnings (loss) from continuing operations (3,951) (11,745)
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization 3,489 4,041
Deferred income taxes 364 (647)
Amortization of debt issuance costs 1 476
Non-cash stock-based compensation 176 --
(Gain) loss on sale of property &
equipment and equipment on operating
leases (916) 6
Proceeds from sale of equipment on
operating leases 29 --
Restructuring charges 1,258 6,061
Loss on sale of subsidiary, net of cash -- 2,103
Changes in net assets and liabilities:
Accounts receivable 4,177 7,246
Inventories (1,170) 1,685
Prepaid expenses and other current
assets (3,429) (964)
Other non-current assets 206 (1,024)
Accounts payable (6,859) (7,875)
Accrued expenses and other current
liabilities (17,831) (3,826)
Deferred revenue (908) (330)
Other long-term liabilities 534 (865)
------------- -------------
Net cash provided by (used in)
continuing operating activities (24,830) (5,658)
Net cash provided by (used in)
discontinued operating activities (1,005) (8,568)
------------- -------------
Net cash provided by (used in)
operating activities (25,835) (14,226)
------------- -------------
Investing activities:
Capital expenditures (1,724) (1,456)
Proceeds from sale of discontinued
Operations 12,500 --
Restricted cash (12,500) --
Proceeds from the sale of property and
equipment 1,508 --
------------- -------------
Net cash provided by (used in)
continuing investing activities (216) (1,456)
Net cash provided by (used in)
discontinued investing activities -- (1,706)
------------- -------------
Net cash provided by (used in)
investing activities (216) (3,162)
------------- -------------
Financing activities:
Borrowings under line of credit agreements 19,580 17,000
Payments under line of credit agreements (15,036) (15,922)
Payments under capital lease arrangements (147) (430)
Proceeds from debt issuance 105,000 --
Payment of debt issue costs (3,333) --
Restricted cash (89,495) --
------------- -------------
Net cash provided by (used in)
continuing financing activities 16,569 648
Net cash provided by (used in)
discontinued financing activities -- (85)
------------- -------------
Net cash (used in) provided by
financing activities 16,569 563
------------- -------------
Effect of exchange rates -- 2,737
------------- -------------
Net decrease in cash and cash
equivalents (9,482) (14,088)
Cash and cash equivalents from continuing
operations, beginning of period 17,594 24,467
Cash and cash equivalents from discontinued
operations, beginning of period -- 30,087
Cash and cash equivalents from discontinued
operations, end of period -- (19,675)
------------- -------------
Cash and cash equivalents from continuing
operations, end of period $ 8,112 $ 20,791
============= =============
Danka Business Systems PLC
Adjusted operating earnings (loss) from continuing operations for the three
months
ended June 30, 2007 and 2006
(in thousands)
(unaudited)
For the three
months ended
June 30, June 30,
2007 2006
-------- --------
Operating earnings (loss) from
continuing operations $ 1,800 $ (3,944)
Restructuring charges 1,258 6,061
Loss on sale of subsidiary - 2,507
Gain on sale of asset (923) -
-------- --------
Adjusted operating earnings (loss) from
continuing operations $ 2,135 $ 4,624
-------- --------
Danka Business Systems PLC
Free cash flow for the three months ended June 30, 2007 and 2006
(in thousands)
(unaudited)
For the three months
ended
June 30, June 30,
2007 2006
--------- ---------
Net cash provided by (used in)
continuing operations $ (24,830) $ (5,658)
Capital expenditures (1,724) (1,456)
Proceeds from sale of subsidiary 12,500 -
Restricted cash (12,500) -
Proceeds from sale of property and
equipment 1,508 -
--------- ---------
Free cash flow $ (25,046) $ (7,114)
--------- ---------
Danka Business Systems PLC
Net debt as of June 30, 2007 and March 31, 2007
(in thousands)
(unaudited)
June 30, March 31,
2007 2007
--------- ---------
Current maturities of long-term
debt and notes payable $ 255,641 $ 186,078
Long-term debt and notes payable 105,049 65,215
Less: Cash and cash equivalents and
restricted cash (274,698) (181,573)
--------- ---------
Net debt $ 85,992 $ 69,720
--------- ---------
Danka Business Systems PLC
Adjusted basic earnings (loss) available to common shareholders per ADS
(in thousands, except per ADS)
(unaudited)
For the three months
ended
June 30, June 30,
2007 2006
--------- ---------
Earnings (loss) from continuing
operations $ (3,951) $ (11,745)
Earnings (loss) from discontinued
operations (1,005) (457)
--------- ---------
Adjusted net earnings (loss) available
to common shareholders $ (4,956) $ (12,202)
========= =========
Adjusted net earnings (loss) available
to common shareholders per ADS $ (0.08) $ (0.19)
--------- ---------
Weighted average ADSs 64,767 64,132
--------- ---------
Contacts:
Danka Investor Relations
Cheley Howes
727-622-2760
The Dilenschneider Group
Rob Swadosh
212-922-0900 ext. 132
ST. PETERSBURG, FL -- (MARKET WIRE) -- 08/02/07 -- Danka Business Systems PLC (NASDAQ: DANKY) today reported operating earnings from continuing operations of $1.8 million in the fiscal year 2008 first quarter ended June 30, 2007 , compared with operating losses from continuing operations of $3.9 million in the comparable fiscal 2007 quarter and $3.0 million in the quarter ended March 31, 2007 .
The Company reported a net loss of $5.0 million in the fiscal year 2008 first quarter, versus losses of $12.2 million in the year ago quarter and $17.1 million in the quarter ended March 31, 2007 .
For the first quarter of fiscal 2008:
-- Total revenue was $106.3 million , 12.9% lower than the prior year
quarter and down 6.4% sequentially. Retail equipment, supplies and related
sales was $46.2 million for the quarter, down 14.6% from the prior year,
and down 12.5% sequentially. Service revenue was $57.2 million , down 9.1%
from the prior year, but down only 0.8% sequentially.
-- Consolidated gross margin for the quarter was 36.2%, down 90 basis
points from the prior year, but up 350 basis points from the prior quarter.
-- SG&A expenses were $36.3 million , down 9.7% from the prior year and
down 4.8% sequentially. Restructuring charges were $1.3 million , other
income was $0.9 million and tax expense was $0.7 million .
-- Net interest expense was $5.0 million , and loss from discontinued
operations was $1.0 million .
-- Subsequent to the close of the quarter, the Company redeemed all of
its outstanding 11% Senior Notes due 2010 and 10% Subordinated Notes due
2008 in connection with the previously announced $145 million financing
agreement with General Electric Capital Corporation which was completed on
June 25, 2007 .
"The story of the first quarter is the Company's positive operating earnings," said A.D. Frazier, Danka Chairman and Chief Executive Officer. "This is a first step, but an important one, on the path to positive net income. We have restructured our balance sheet in a way that meaningfully lowers the interest burden. SG&A continues to trend lower. We have achieved four consecutive quarters of stabilized service revenue. While we did not achieve the growth we expected in hardware revenue, that business remains fundamentally sound and we expect our investments in people and training to deliver higher equipment sales.
"Most important," concluded Mr. Frazier, "is that the marketplace knows Danka is there. Clients and prospects, business partners and even competitors see the changes. And that serves to drive us even harder."
Conference Call and Webcast
A conference call and Webcast to discuss Danka's first quarter results has been scheduled for today, August 2, 2007 , at 10:00a.m. ET . To access the Webcast, please go to www.danka.com. To participate in the conference call, callers in the United States and Canada (and some United Kingdom callers) can dial 800-309-1555. Other international callers should dial 706-643-7754. Reference conference ID #10126364 when prompted. A recording of the call will be available approximately two hours after it's completed through 12:00a.m. ET on August 9, 2007 . To access this recording, please call either 800-642-1687 or 706-645-9291 (conference ID #10126364), or visit Danka's website.
About Danka
Danka delivers value to clients by using its expert technical and professional services 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, and contain information relating to 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 for forward-looking statements provided for in the Private Securities Litigation Reform Act 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 plans to achieve and maintain cost savings; (iii) any inability to comply with the Sarbanes-Oxley Act 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 technology; (vii) any inability by us to procure, 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 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 incurrence of tax liabilities or tax payments beyond our current expectations, which could adversely affect our liquidity and profitability; (xvi) any inability to continue to comply with our new senior secured credit facility covenants or the 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, and the fear of additional terrorist attacks; and (xix) any negative impact of the accreted value of our outstanding preferred stock or its continued accretion; (xx) any negative impact of our continued organization as an England and Wales 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 June 30, 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, a loss on sale of subsidiary and a gain on the sale of asset; 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 and notes payable plus long-term debt and notes payable less cash and cash equivalents and restricted cash; 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, or GAAP in our statement of operations, 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, 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 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, 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. Our calculation of adjusted operating earnings (loss), free cash flow, net debt, 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, 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.
Danka Business Systems PLC
Consolidated Condensed Statements of Operations for the Three Months Ended
June 30, 2007 and 2006
(In thousands, except per American Depositary Share ("ADS") amounts)
(Unaudited)
Three months ended
June 30,
-----------------------------
2007 2006
------------- -------------
Revenue:
Retail equipment, supplies and related sales $ 46,162 $ 54,077
Retail service 57,229 62,941
Rentals 2,883 5,031
------------- -------------
Total revenue 106,274 122,049
------------- -------------
Cost of sales:
Retail equipment, supplies and related sales
costs 32,207 38,389
Retail service costs 34,301 37,243
Rental costs, including depreciation on
rental assets 1,319 1,184
------------- -------------
Total cost of sales 67,827 76,816
------------- -------------
Gross profit 38,447 45,233
Operating expenses:
Selling, general and administrative expenses 36,284 40,193
Restructuring charges 1,258 6,061
Loss on sale of subsidiary - 2,507
Other expense (income) (895) 416
------------- -------------
Total operating expenses 36,647 49,177
------------- -------------
Operating earnings (loss) from
continuing operations 1,800 (3,944)
Interest expense (6,880) (7,359)
Interest income 1,851 25
------------- -------------
Earnings (loss) from continuing
operations before income taxes (3,229) (11,278)
Provision (benefit) for income taxes 722 467
------------- -------------
Earnings (loss) from continuing
operations (3,951) (11,745)
Earnings (loss) from discontinued
operations, net of tax (286) (242)
Gain (loss) on sale of discontinued
operations, net of tax (719) (215)
------------- -------------
Net earnings (loss) $ (4,956) $ (12,202)
============= =============
Net earnings (loss) available to common
shareholders:
Net earnings (loss) from continuing
operations $ (3,951) $ (11,745)
Dividends and accretion on participating
shares (5,961) (5,606)
------------- -------------
Net earnings (loss) from continuing
operations available to common shareholders $ (9,912) $ (17,351)
============= =============
Basic and diluted net earnings (loss)
available to common shareholders per ADS:
Net earnings (loss) from continuing
operations $ (0.15) $ (0.27)
Net earnings (loss) from discontinued
operations (0.02) (0.01)
------------- -------------
Basic net earnings (loss) $ (0.17) $ (0.28)
------------- -------------
Weighted average basic ADSs 64,767 64,132
============= =============
Danka Business Systems PLC
Consolidated Condensed Balance Sheets as of June 30, 2007 and March 31,
2007
(In thousands except per share data)
June 30, March 31,
2007 2007
------------- -------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 8,112 $ 17,594
Restricted cash 266,586 163,979
Accounts receivable, net of allowances 40,003 44,180
Inventories 32,851 31,681
Prepaid expenses, deferred income taxes
and other current assets 11,184 17,607
------------- -------------
Total current assets 358,736 275,041
Equipment on operating leases, net 8,834 9,241
Property and equipment, net 20,683 22,637
Goodwill 93,489 93,489
Other intangible assets, net of accumulated
amortization 529 554
Other assets 20,103 16,086
------------- -------------
Total assets $ 502,374 $ 417,048
============= =============
Liabilities and shareholders’ equity
(deficit)
Current liabilities:
Current maturities of long-term debt and
notes payable $ 255,641 $ 186,078
Accounts payable 59,372 66,231
Accrued expenses and other current
liabilities 32,618 45,830
Taxes payable 12,301 8,468
Deferred revenue 4,967 5,875
------------- -------------
Total current liabilities 364,899 312,482
Long-term debt and notes payable, less
current maturities 105,049 65,215
Deferred income taxes and other long-term
liabilities 9,159 11,271
------------- -------------
Total liabilities 479,107 388,968
------------- -------------
6.5% senior convertible participating shares 350,448 344,487
Shareholders’ equity (deficit):
Ordinary shares, 1.25 pence stated value 5,386 5,386
Additional paid-in capital 330,762 330,587
Accumulated deficit (663,329) (652,380)
------------- -------------
Total shareholders’ equity (deficit) (327,181) (316,407)
------------- -------------
Total liabilities and shareholders’ equity
(deficit) $ 502,374 $ 417,048
============= =============
Danka Business Systems PLC
Consolidated Condensed Statements of Cash Flows for the Three Months Ended
June 30, 2007 and 2006
(In thousands)
(Unaudited)
Three Months Ended June 30,
-----------------------------
2007 2006
------------- -------------
Operating activities:
Net earnings (loss) $ (4,956) $ (12,202)
(Earnings) loss from discontinued operations 1,005 457
------------- -------------
Earnings (loss) from continuing operations (3,951) (11,745)
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization 3,489 4,041
Deferred income taxes 364 (647)
Amortization of debt issuance costs 1 476
Non-cash stock-based compensation 176 --
(Gain) loss on sale of property &
equipment and equipment on operating
leases (916) 6
Proceeds from sale of equipment on
operating leases 29 --
Restructuring charges 1,258 6,061
Loss on sale of subsidiary, net of cash -- 2,103
Changes in net assets and liabilities:
Accounts receivable 4,177 7,246
Inventories (1,170) 1,685
Prepaid expenses and other current
assets (3,429) (964)
Other non-current assets 206 (1,024)
Accounts payable (6,859) (7,875)
Accrued expenses and other current
liabilities (17,831) (3,826)
Deferred revenue (908) (330)
Other long-term liabilities 534 (865)
------------- -------------
Net cash provided by (used in)
continuing operating activities (24,830) (5,658)
Net cash provided by (used in)
discontinued operating activities (1,005) (8,568)
------------- -------------
Net cash provided by (used in)
operating activities (25,835) (14,226)
------------- -------------
Investing activities:
Capital expenditures (1,724) (1,456)
Proceeds from sale of discontinued
Operations 12,500 --
Restricted cash (12,500) --
Proceeds from the sale of property and
equipment 1,508 --
------------- -------------
Net cash provided by (used in)
continuing investing activities (216) (1,456)
Net cash provided by (used in)
discontinued investing activities -- (1,706)
------------- -------------
Net cash provided by (used in)
investing activities (216) (3,162)
------------- -------------
Financing activities:
Borrowings under line of credit agreements 19,580 17,000
Payments under line of credit agreements (15,036) (15,922)
Payments under capital lease arrangements (147) (430)
Proceeds from debt issuance 105,000 --
Payment of debt issue costs (3,333) --
Restricted cash (89,495) --
------------- -------------
Net cash provided by (used in)
continuing financing activities 16,569 648
Net cash provided by (used in)
discontinued financing activities -- (85)
------------- -------------
Net cash (used in) provided by
financing activities 16,569 563
------------- -------------
Effect of exchange rates -- 2,737
------------- -------------
Net decrease in cash and cash
equivalents (9,482) (14,088)
Cash and cash equivalents from continuing
operations, beginning of period 17,594 24,467
Cash and cash equivalents from discontinued
operations, beginning of period -- 30,087
Cash and cash equivalents from discontinued
operations, end of period -- (19,675)
------------- -------------
Cash and cash equivalents from continuing
operations, end of period $ 8,112 $ 20,791
============= =============
Danka Business Systems PLC
Adjusted operating earnings (loss) from continuing operations for the three
months
ended June 30, 2007 and 2006
(in thousands)
(unaudited)
For the three
months ended
June 30, June 30,
2007 2006
-------- --------
Operating earnings (loss) from
continuing operations $ 1,800 $ (3,944)
Restructuring charges 1,258 6,061
Loss on sale of subsidiary - 2,507
Gain on sale of asset (923) -
-------- --------
Adjusted operating earnings (loss) from
continuing operations $ 2,135 $ 4,624
-------- --------
Danka Business Systems PLC
Free cash flow for the three months ended June 30, 2007 and 2006
(in thousands)
(unaudited)
For the three months
ended
June 30, June 30,
2007 2006
--------- ---------
Net cash provided by (used in)
continuing operations $ (24,830) $ (5,658)
Capital expenditures (1,724) (1,456)
Proceeds from sale of subsidiary 12,500 -
Restricted cash (12,500) -
Proceeds from sale of property and
equipment 1,508 -
--------- ---------
Free cash flow $ (25,046) $ (7,114)
--------- ---------
Danka Business Systems PLC
Net debt as of June 30, 2007 and March 31, 2007
(in thousands)
(unaudited)
June 30, March 31,
2007 2007
--------- ---------
Current maturities of long-term
debt and notes payable $ 255,641 $ 186,078
Long-term debt and notes payable 105,049 65,215
Less: Cash and cash equivalents and
restricted cash (274,698) (181,573)
--------- ---------
Net debt $ 85,992 $ 69,720
--------- ---------
Danka Business Systems PLC
Adjusted basic earnings (loss) available to common shareholders per ADS
(in thousands, except per ADS)
(unaudited)
For the three months
ended
June 30, June 30,
2007 2006
--------- ---------
Earnings (loss) from continuing
operations $ (3,951) $ (11,745)
Earnings (loss) from discontinued
operations (1,005) (457)
--------- ---------
Adjusted net earnings (loss) available
to common shareholders $ (4,956) $ (12,202)
========= =========
Adjusted net earnings (loss) available
to common shareholders per ADS $ (0.08) $ (0.19)
--------- ---------
Weighted average ADSs 64,767 64,132
--------- ---------
Contacts:
Danka Investor Relations
Cheley Howes
727-622-2760
The Dilenschneider Group
Rob Swadosh
212-922-0900 ext. 132
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