Danka Narrows Net Loss in Q4
Thursday, June 28, 2007
Press release from the issuing company
Wednesday June 27 -- ST. PETERSBURG, Fla.-- Danka Business Systems PLC today reported that it had narrowed its net loss to $29.2 million for the fiscal year ended March 21, 2007, compared to a loss of $85.2 million in fiscal 2006. Revenues were $450.2 million in 2007, versus $522.4 million a year ago.
As previously reported, on January 31, 2007 the Company completed the sale of its European operations to Ricoh Europe B.V. For the fiscal year and fourth quarter ending March 31, 2007, European operations are included in the results from discontinued operations.
On June 25, 2007, the Company completed a new financing arrangement for $145 million in term and revolver debt that, together with the proceeds from the sale to Ricoh of the European operations, will be used to repay existing debt and enhance working capital.
The Company also successfully remediated its last material weakness under Section 404 of the Sarbanes Oxley Act and will be disclosing that it does not have any material weaknesses.
For the full year ended March 31, 2007:
* Total revenue from continuing operations was $450.2 million, down 13.8% from the prior year. Retail equipment, supplies and related sales were $200.1 million, down 18.7% from 2006, while service revenue was $236.1 million, down 9.1% from 2006.
* Consolidated gross margin was 34.6%, up 40 basis points from the prior year.
* SG&A expenses were $159.5 million, down $43.7 million or 21.5%, versus 2006.
* For the year, the Company incurred a $13.0 million operating loss from continuing operations. This included a $2.5 million loss on the sale of a subsidiary recorded in the first quarter, and a $6.0 million restructuring charge recorded primarily in the second quarter.
* Net interest expense was $35.2 million, up $5.7 million from the prior year as a result of the acceleration of unamortized bond discount and issuance costs in anticipation of the new financing arrangement. As a result of the sale of its European operations in Q4, as well as the sale of its Australian operations in Q2, the Company reported earnings from discontinued operations of $9.3 million and a gain on the sale of discontinued operations of $10.2 million for the year.
* The Company reported a net loss of $29.2 million as compared to an $85.2 million loss in the prior year.
"From a financial perspective, fiscal 2007 was about fixing the Company's liquidity and capital structure," commented Edward K. Quibell, Danka Chief Financial Officer. "While there is still work to be done, the progress achieved to date goes a long way toward completing the successful turnaround of the Company."
Mr. Quibell also noted that adjusted operating earnings from continuing operations improved by $19 million -- on reduced revenue of $72 million. This was accomplished by removing unprofitable businesses and controlling costs.
For the fourth quarter:
* Total revenue was $113.5 million, 11.2% lower than the prior year quarter, but up 7.5% sequentially. Retail equipment, supplies and related sales were $52.7 million for the quarter, down 15.2% from the prior year, but up 16.4% sequentially. Service revenue was $57.7 million, down 7.8% from the prior year, but up 0.4% sequentially.
* Consolidated gross margin for the quarter was 32.7%, up 180 basis points from the prior year, but down 120 basis points from the prior quarter.
* SG&A expenses were $38.1 million, down 25.1% from the prior year and down 12.4% sequentially.
* For the quarter, the Company generated a $3.0 million operating loss from continuing operations.
* Net interest expense was $12.9 million, loss from discontinued operations was $2.0 million and income tax expense was $0.7 million. With the finalization of the sale of the Company's European operations to Ricoh, Danka recorded a gain of $65.9 million which was offset by the write-off of $64.0 million in currency translation adjustment in the remaining companies.
"While these results are important," said A.D. Frazier, Danka Chairman and Chief Executive Officer, "it is imperative to recognize that the Danka enterprise of today is significantly changed from the company I joined a little more than a year ago. Fiscal 2007 is a watershed year in which the Company rationalized its business structure, strengthened its balance sheet, and enhanced its competitive position.
"Danka is now leaner, far more flexible and primed to grow," Mr. Frazier continued. "Our prospects for the future are dramatically better now than they have been in a very long time. In particular, I am encouraged by the traction we have gained in equipment sales. Q4 was the highest quarter of the year. This is not surprising; we have increased the number of sales representatives and invested in extensive training to support our consultative selling approach."
Mr. Frazier added that service revenue remains stable. "We have a few more changes to make in our cost structure and our capital structure, yet I am confident that our customers will see a continually improving Danka," he concluded.