ST. PETERSBURG, Fla.- Aug. 8, 2001--Danka Business Systems PLC today announced its results for the first quarter ended June 30, 2001. The company reported an operating loss from continuing operations before extraordinary items of $1.2 million for the first quarter as compared to operating income from continuing operations before extraordinary items of $15.3 million in the first quarter of fiscal year 2001. The operating loss from continuing operations in the current year includes a $6.0 million pre-tax charge related to the exit of certain facilities. The prior year first quarter operating income from continuing operations included an $8.2 million credit for the reversal of fiscal year ended March 31, 1999 restructuring charges. On a pro forma basis, excluding these items, operating income from continuing operations was $4.8 million for the first quarter of fiscal year ending March 31, 2002 compared to operating income from continuing operations of $7.1 million in the first quarter of fiscal year ended March 31, 2001. Pro forma earnings before interest, taxes, depreciation, and amortization (EBITDA) from continuing operations was $28.1 million or 7% of revenue for first quarter of fiscal year ending March 31, 2002 compared to $41.7 million or 9% of revenue in the first quarter of fiscal year ended March 31, 2001. On June 29, 2001 the Company completed a three part financial restructuring that resulted in a substantial reduction of debt and provided the Company with financing through March 31, 2004. The three parts of the financial restructuring plan are an amended and restated bank facility, the sale of Danka Services International (DSI) for $290 million, and the exchange of $184 million of the Company's convertible subordinated notes for new extended maturity notes and cash. The net proceeds from the sale of the DSI were used to reduce bank debt and to fund a $" million cash component of the note exchange. The Company has now reduced its debt from approximately $1.2 billion at December 31, 1998 to $375 million at June 30, 2001. The operating results and the gain from the sale of DSI are presented as discontinued operations in the Company's consolidated statement of operations and the gain resulting from the note exchange is presented as an extraordinary item. Danka's Chief Executive Officer, Lang Lowrey, commented, “We are pleased to have successfully completed all aspects of our financial restructuring and to have significantly lowered our debt. I am proud of the Company's efforts in completing these transactions on time, as promised.” Net earnings for the first quarter of fiscal year ending March 31, 2002 were $126.7 million and included after tax earnings from discontinued operations of $4.2 million, a gain on the sale of DSI of $108.9 million, and an after tax extraordinary gain from the early retirement of debt from the note exchange of $26.8 million. The Company incurred a net loss from continuing operations of $0.28 and $0.17 per American Depositary Share ("ADS") in the first quarter of fiscal year 2002 and the first quarter of fiscal year 2001, respectively. Net earnings from discontinued operations were $1.83 and $0.08 per ADS in the corresponding quarters ended June 30. Net earnings from extraordinary items was $0.43 per ADS in the first quarter of fiscal year 2002. Total revenue for the first quarter of fiscal year ending March 31, 2002 declined by $69.1 million or 14.7% to $401.7 million from $470.8 million in the first quarter of fiscal year 2001. Foreign currency movements negatively impacted the Company's total revenue during the first quarter compared to prior year's first quarter by $12 million. Total revenues declined from the prior year primarily due to a decline in hardware revenue in the U.S. and due to reduced service, supplies and rentals revenue in both the U.S. and Europe. The decline in U.S. hardware revenue was primarily due to the reduced number of sales representatives partially offset by a "% increase in sales productivity. The decline in the service supplies and rental revenues from the prior year reflects the transition from analog to digital equipment. Sequentially, total revenues declined $22.8 million and included a $7 million negative impact of foreign currency movements. Danka's Chief Executive Officer, Lang Lowrey, commented "We are excited about our first quarter EBITDA and combined gross profit margins. It was important to get off to a good start since the second quarter is a historically low revenue quarter due to seasonality trends that exist in the industry. Now that the restructuring is complete, the Company will focus significant efforts on improving margins, cutting costs and enhancing profitability." The Company's combined gross profit margin was 34.8% for the first quarter of fiscal year ending March 31, 2002 compared to 18.9% sequentially and 36.6% for the prior year first quarter. The Company's prior year fourth quarter gross margin was negatively impacted by the write-off of excess and obsolete equipment, rental equipment, parts and accessories. Excluding the negative impact of these items, the pro forma gross margin for the prior year fourth quarter was 33.0%. The retail equipment margin was ".6% in the first quarter of fiscal year ending March 31, 2002 as compared to a negative margin of 5.2% sequentially and a positive 31.8% margin for last year's first quarter. Excluding the write-off of excess, obsolete and non-recoverable equipment, the pro forma retail equipment margin was ".3% in the fourth quarter of fiscal year 2001. The decline in margins from the first quarter of the prior year is due to market conditions within the industry. The retail service, supplies and rentals margin for the first quarter of fiscal year ending March 31, 2002 was 42.3% as compared to 32.8% sequentially and a pro forma prior year first quarter margin of 42.9% which excludes rental equipment write-offs. Excluding the write-off of excess and obsolete rental equipment, parts and accessories in the fourth quarter of fiscal year ended March 31, 2001, the pro forma retail service, supplies and rentals margin was 39.6%. SG&A expenses decreased by $".5 million to $135.7 million in the first quarter of fiscal year ending March 31, 2002, from $160.2 million in the first quarter of fiscal year 2001. Sequentially, SG&A expenses decreased by $42.5 million. Excluding unusual charges in both the current and the prior quarter, SG&A expenses decreased by $19.8 million sequentially. The decrease in SG&A expenses are due primarily to lower selling expense. Interest expense decreased by $10.0 million to $15.9 million for the first quarter of fiscal year 2002, from $25.9 million in the first quarter of fiscal year 2001. Sequentially interest expense has decreased by $2.0 million from $17.9 million. The sequential decrease was primarily due to lower bank waiver fees expensed under the Company's credit facility and lower interest rates.