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AnonymousInactiveDanka Announces
Third-Quarter Operating Results and Next Phase of Vision 21 Initiative Designed
to Reduce Costs by $60 – $73 Million AnnuallyST. PETERSBURG, Fla.—-Danka Business Systems PLC today announced third-quarter results for the period ended
December 31, 2004 that include revenue of $313.8 million, gross margins of
36.1%, an operating loss of $4.2 million and net earnings of $4.5 million. The
Company’s net earnings were favorably impacted by a $19.8 million income tax
benefit, principally from tax settlements in its European operations.
“Our third-quarter results
reflect steady performance in certain areas of our business, including our
overall retail equipment and related revenue and total margins, which remain
relatively stable,” said Todd Mavis, Danka’s Chief Executive Officer “I am most
pleased with the continuing validation of our TechSource strategy which
continues to gain momentum in the marketplace.I am also delighted to announce
that this week Danka entered into an agreement with a preeminent manufacturer of
printers and related office peripheral products to provide warranty, repair,
maintenance and installation services on its installed base of printers and
related products worldwide. Under this agreement, Danka becomes one of a select
few service companies authorized to provide such services. Our TechSource
strategy was further enhanced during the quarter with the acquisition of Image
One, a highly regarded printer services business which provides us with
strategic management and marketing expertise and access to new products and
services. Further, this expands our customer base and leverages our service
infrastructure. Finally, we continued to refine our market focus by divesting
non-strategic businesses in Portugal and Russia.”The Company also unveiled the next phase of its Vision
21 initiative which is comprised of strategic growth investments and cost
reduction initiatives designed to optimize business operations, improve customer
relationships around the world and achieve annualized savings of between $60 and
$73 million once fully implemented.“The worldwide Danka management team is excited about
what this phase of Vision 21 will mean for our future,” continued Mavis. “Our
progress has continued to be impacted by inefficiencies in our business which
contributes to a cost structure that remains too high. The launch of this new
phase of our Vision 21 initiative represents definitive action to address these
issues and will fundamentally strengthen our operating and financial
performance. During this phase we will create a more customer-centric platform
and improve our business processes and product delivery capabilities by
eradicating a whole series of complexities in our business, from simplifying
pricing and contracts to improving billing systems. We are confident these
actions will provide the foundation to leverage our strategies and operations
and enable us to invest more resources in our strategies as we substantially
reduce operating expenses and our cost of goods sold. We expect to begin seeing
the impact of these actions as early as next quarter.”Danka
estimates that this phase of its Vision 21 program will reduce operating
expenses and cost of goods sold by $60 – 73 million per year when fully
implemented. The process improvements will result in a 12% decrease in the
worldwide work force, facility consolidations and other related savings. The
actions needed to achieve these savings will be taken in steps over the next two
to three quarters and will require up to $37 million of cash. The expected
payback on the cash usage is less than 12 months. The company expects to take a
charge to earnings of approximately $20 to $35 million over the next several
quarters.Other key
third-quarter financial metrics:— Total
third-quarter revenue was $313.8 million, a 5.2% decline from the year-ago
quarter but 1.7% higher than the second quarter. Retail equipment and related
revenue was essentially flat both year-over-year and sequentially. Retail
service revenue was 3.2% lower than the year-ago period but 3.5% higher
sequentially. Adjusting for a positive currency exchange of $13.6 million during
the quarter, total revenue declined by 9.3% year-over-year.—
Consolidated gross margins were 36.1% of revenue, essentially flat with the
year-ago quarter. Equipment and related margins remained steady at 35.6% and
service margins were stable at 38.8%.—
SG&A expenses were $116.4 million, compared to $108.7 million in the
year-ago quarter. The current quarter included Sarbanes-Oxley compliance costs
and consulting expenses related to the Vision 21 initiative which combined for
over $4 million of incremental expense, as well as an unfavorable impact from
currency exchange rates. The year-ago period includes a one-time favorable
pension adjustment of $3 million. As a percentage of revenue, SG&A was 37.1%
in the current quarter.— The
operating loss was $4.2 million, compared to a loss of $10.6 million in the
year-ago quarter. The year-ago quarter included a $20.0 million restructuring
charge. Net earnings were $4.5 million, compared to a net loss of $16.9 million
in the year-ago quarter. The current quarter includes a one-time income tax
benefit of $19.8 million resulting from favorable settlements of tax liabilities
in our European operations. Including the impact of dividends on participating
shares, basic and diluted loss was $0.01 per share, compared to a loss of $0.35
per share in the year-ago period.— Free
cash flow (net cash provided by operating activities less capital expenditures)
was negative $18.6 million, compared to positive $21.9 million in the second
quarter. Cash usage in the current quarter included a $13.2 million increase in
inventory, $13.0 of million semi-annual interest payments on our outstanding
notes, a $7.2 million increase in net Accounts Receivable and $2.1 million for
the acquisition of Image One Corporation. Capital expenditures were $5.9
million. The company’s cash balance at the end of the third quarter was $89.3
million.— For
the nine-months ended December 31, 2004, total revenue was $932.8 million,
compared to $987.8 million in same period last year. Gross margins were steady
at 36.9%, while SG&A declined by 3%. Operating earnings improved to $9.6
million, compared to a year-ago loss of $4.7 million, and net earnings improved
to $3.0 million, compared to year-ago loss of $35.0 million.The current year
net income included a tax benefit of $19.8 million, principally due to favorable
tax settlements in our European operations. The year ago period net loss
included restructuring charges of $19.5 million for the nine month period and
the write-off of debt issuance costs of $20.6 million due to the early repayment
of our credit facility.“Our
overall liquidity Levels remain solid even as we made strategic investments in
inventory, capital expenditures and our acquisition of Image One during the
quarter,” noted Mark Wolfinger, Danka’s Chief Financial Officer. “Although
several factors, including the timing of our revenues in the U.S.,resulted in
an increase in our accounts receivable balance, we would expect this to be an
opportunity to create additional liquidity in the future for our strategic
initiatives -
AuthorFebruary 11, 2005 at 11:21 AM
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