ST. PETERSBURG, Fla.--June 10, 2005-- Danka Business Systems PLC today reported fourth quarter revenue of $300.2 million and an operating loss of $48.7 million excluding restructuring and goodwill impairment charges. For the full year, Danka reported revenue of $1.233 billion and an operating loss of $41.6 million excluding restructuring and goodwill impairment charges. The results include an increase to its U.S. trade receivables allowance for doubtful accounts of $17.8 million in the fourth quarter. Including the previously announced goodwill impairment charges of $70.9 million and restructuring charge of $12.7 million, the Company reported a total operating loss of $132.3 million for the fourth quarter and $122.6 million for the full year. "I was disappointed by our fourth quarter results, including some of the significant one-time, non-cash charges we had to take in the quarter," commented Danka Chief Executive Officer Todd Mavis. "I was encouraged by the progress we made during the quarter in executing on several elements of our ongoing Vision 21 program, including reducing worldwide headcount, facility closures and other initiatives which, when completed, are expected to reduce expenses by $60-$73 million annually when fully realized. We improved aspects of our working capital position in the quarter, including decreases in inventories of 19%, a two day improvement in Days Sales Outstanding and positive cash generation. We also put into place the foundation to create broader and more profitable relationships with our best customers, upgraded and added to our sales forces in the U.S. and U.K., and enhanced our products and services matrix in support of our high-value Managed Print Services solution. Overall, the fourth quarter capped a very difficult year for Danka," continued Mavis. "In fiscal year 2006, we must move quickly to capitalize on our market opportunities, continue refining our product offerings, ensure a cost structure that works for our business and achieve consistency in our execution." For the fourth quarter: Total revenue was $300.2 million, 13% lower than the year-ago quarter. The revenue decrease was largely driven by a 17% year over year decline in retail service revenue, mostly in the Americas Group. Contributing to the revenue decline was an $8.5 million service revenue and supplies adjustment, a $2.7 million retail equipment adjustment (both included in the $17.8 million trade receivables allowance for doubtful accounts adjustments) and a significant decline in revenue from our analog machine base. Consolidated gross margins were 27.6% of revenue, compared to 35.0% in the year-ago quarter. Margins were primarily impacted by several key factors: the $8.5 million service and supplies revenue adjustment, the reduction in service revenues related to the analog machine base, softer than expected retail equipment margins in the Americas segment, the write down of rental equipment and parts inventories and lower manufacturer purchase incentives. SG&A expenses were $133.1 million, compared to $118.9 million in the year-ago quarter. The year over year increase was largely driven by $9.2 million in external expenses for Sarbanes-Oxley compliance, a $6.6 million bad debt adjustment related to the U.S. trade receivables allowance for doubtful accounts, $2.2 million for consulting services related to the cost restructuring initiative and a $2.1 million year on year increase due to currency exchange. The operating loss was $48.7 million, excluding the $70.9 million goodwill impairment charge (related to the Company's Europe/Australia Group) and the $12.7 million cost restructuring charge. In the year-ago quarter, the Company reported an operating loss of $29.9 million, which included a $30.5 million restructuring charge. Free cash flow (net cash provided by operating activities less capital expenditures) was $8.8 million, compared to a negative $18.6 million in the third quarter. Reasons for the sequential improvement include a $22.0 million reduction in inventories and a two day decrease in Days Sales Outstanding. Capital expenditures were $8.5 million, compared to $5.9 million in the third quarter, primarily due to investments in rental equipment. For the full year ended March 31, 2005, total revenue was $1.233 billion, compared to $1.331 billion in the prior year, and gross margins were 34.7%, compared to 36.3% a year ago. SG&A of $468.4 million was essentially flat with the prior year. The Company recorded an operating loss of $41.6 million for the year, excluding goodwill and restructuring charges, compared to an operating profit of $15.5 million excluding restructuring charges in the prior year. Danka intends to timely file its Form 10-K filing for fiscal 2005. As required by Section 404 of the Sarbanes-Oxley Act, the Company will be disclosing that it has material weaknesses in internal controls relating to its information technology general controls, revenue and billing processes, inventory and rental assets custody and tracking processes, its financial statement close process and its income tax process. "We conducted an exhaustive management assessment of internal controls as required by Sarbanes-Oxley," said Mavis. "This assessment has identified several areas in which the Company's processes require improvement. The Company implemented important improvements within fiscal 2005 and will continue aggressive remediation activities throughout fiscal 2006." The Company also announced that Chief Financial Officer, Mark Wolfinger, will retire from the Company effective at the end of June. Mr. Wolfinger has been the company's CFO since 1998 and has played an integral role in guiding the company through a series of financial transactions and restructuring. "We thank Mark deeply for his many significant contributions to Danka and wish him the best in his retirement," said Mavis.