*NEWS*4TH QUARTER UNKIND TO DANKA

[Anonymous]

Fourth quarter unkind to Danka
The copier and printer company expects to report $46-million in operating
losses and $83-million in other losses and charges
If Danka Business Systems sold office copiers that ran only on red ink, it
would be in fine shape.

But competing in today’s copier industry and keeping up with new financial
requirements has proved to be a difficult and costly undertaking.

The British company, which has its U.S. headquarters in St. Petersburg,
warned Friday that it expects to report an operating loss of $46-million for its
fourth fiscal quarter.

That figure doesn’t include an estimated impairment loss of $70-million to
write down the value of its Europe/Australia unit and $13-million in
restructuring charges.

A year ago, Danka also ended its fiscal year on a low note, taking a
$51-million charge against deferred tax assets and a $31-million restructuring
charge to push its net quarterly loss to about $101-million.

The company projected fourth-quarter revenues of about $300-million compared
to $344-million in the year-ago period. It ended the quarter with $98-million in
cash, up about $9-million from the third quarter ended Dec. 31.

For the fiscal year, Danka projected revenues of about $1.233-billion with
operating losses, before restructuring and impairment charges, of $39-million.

Official results will be released by June 14, the company said.

Danka, which sells and repairs office copiers and printers, is laying off
about 12 percent of its 8,000-member work force in a cost-cutting move begun in
January. The cuts were expected to include as many as 110 of the company’s 1,100
Tampa Bay area employees.

A Danka spokesman said Friday no more cuts are planned.

In a statement, chief executive Todd Mavis called the size of the latest
operating loss disappointing. It was exacerbated, he said, by numerous one-time
charges.

“While I was disappointed with our operational performance in a few areas,”
Mavis added, “I was encouraged by the progress we made with several strategic
initiatives.”

Specifically, the CEO applauded efforts to build “dynamic relationships” with
customers so that Danka captures a bigger slice of the money those companies
spend on print.

Mavis placed part of the blame for quarterly results on the “costs and
distractions” to comply with stricter internal accounting rules under the
Sarbanes-Oxley Act of 2002.

Specifically, he cited Section 404 of the corporate-governance law. Danka
spent $9-million on Section 404 compliance last quarter and made $5-million
worth of adjustments in how it accounts for rental equipment, parts and
inventory, property tax and information technology.

Danka’s stock fell 8 cents, or 6 percent, Friday to close at $1.27 per share.
During the day, shares reached a low of $1.15, a penny above the 52-week low the
stock hit in April

[Author]

May 31, 2005 at 9:48 AM